Delhi High Court
Mohd Akhtar vs Suman Jain & Ors. on 8 August, 2013
Author: Rajiv Sahai Endlaw
*IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 8th August, 2013
+ CS(OS) 836/2012
MOHD AKHTAR ..... Plaintiff
Through: Mr. Mukesh Kumar Verma with Ms.
Suruchi Mittal & Mr. S. Nigam,
Advs.
Versus
SUMAN JAIN & ORS. ..... Defendants
Through: Mr. Sudhanshu Batra, Sr. Adv. with
Mr. Sanjeev Ralli, Adv. for D-1&2.
Mr. Yogesh Saini, Adv. for D-3 to 7.
SI Vijay Kaushik, PS Fatehpur Beri,
New Delhi.
CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW
RAJIV SAHAI ENDLAW, J
IA No.7836/2012 (of the defendants no.1&2 under Section 8 of the
Arbitration and Conciliation Act, 1996).
1. The plaintiff has instituted the present suit inter alia pleading:-
(i). that the plaintiff is the owner in possession of ancestral land
situated in Village Gadaipur, Tehsil Mehrauli, New Delhi;
(ii). however possession of the said land was taken over by
Custodian of Evacuee Properties and an application for
restoration of the said land unto the plaintiff was filed but
CS(OS) No.836/2012 Page 1 of 19
which was dismissed; that a Revision Petition against the said
order was preferred which was allowed and direction issued for
determining the status of the land; however no steps in
pursuance to the said order were taken though the plaintiff
continued to represent and pursue the matter;
(iii). that the plaintiff ultimately filed W.P.(C) No.17687-89/2006 in
this Court for restoration of his land and in the alternative for
compensation in lieu thereof;
(iv). that the defendants no.1&2 (defendant no.2 Shri V.K. Jain is
the husband of the defendant no.1) on coming to know of the
claims of the plaintiff to the land and taking benefit of the fact
that the plaintiff and his family members were/are totally
illiterate, started making relations with the plaintiff with a mala
fide intention to usurp the entire land of the plaintiff and
represented to the plaintiff that they will use their contacts for
restoration of the land unto the plaintiff;
(v). that the plaintiff trusted the defendants no.1&2 and agreed to
put thumb impression on certain documents as demanded by the
defendants no.1&2 and also agreed, for a sale consideration of
CS(OS) No.836/2012 Page 2 of 19
Rs.90 lacs, to transfer rights in certain land to the defendants
no.1&2;
(vi). that the defendants no.1&2 made the plaintiff put his thumb
impression on various papers got prepared by them by
representing to the plaintiff that the same were required to
pursue the matter to re-claim certain other land;
(vii). that no copies of the documents were given to the plaintiff;
(viii). that though the agreement to sell for Rs.90 lacs was for transfer
to the defendants no.1&2 of land which was not in possession
of the plaintiff but the defendants no.1&2 played a fraud by
inserting the Khasra numbers of the land of which the plaintiff
was in possession and which was of much higher value;
(ix). that the consent of the plaintiff to put thumb impression on all
such documents was obtained by playing fraud;
(x). that the amount of Rs.90 lacs also was not paid to the plaintiff
in the manner agreed and was paid bit by bit;
(xi). that vide order dated 9 th September, 2010 in W.P.(C) No.17687-
89/2006 supra, permanent injunction protecting the possession
of the plaintiff of the land of which he was in possession was
CS(OS) No.836/2012 Page 3 of 19
granted till adjudication of the claims of the plaintiff by the
Assistant Custodian;
(xii). that after the aforesaid order, the defendant no.2 acting as the
attorney of the plaintiff moved a petition before the Assistant
Settlement Commissioner without even informing the plaintiff
and obtained an order dated 26th August, 2011;
(xiii). that the defendants no.1&2 thereafter filed a petition under
Separation of Interest (Evacuee) Act, 1950 again without
informing the plaintiff though as attorney of the plaintiff, for
mutation of the land in the name of the defendant no.1 and
obtained a decree separating the interest of the plaintiff from the
composite property;
(xiv). that on the basis of the said order, the defendants no.1&2
obtained the mutation of the land in the name of the defendant
no.1;
(xv). that the plaintiff upon coming to know of all the fraud aforesaid
committed by the defendants no.1&2 contacted the defendant
no.2 and asked for all the documents but the defendant no.2
refused; and,
CS(OS) No.836/2012 Page 4 of 19
(xvi). that the plaintiff thereafter obtained copies of all the documents
and learnt the details of fraud played by the defendants no.1&2.
2. The plaintiff on the said pleas, has claimed the following reliefs in the
suit:-
(a). of declaration that the documents dated 13 th May, 2010 being
Agreement to Sell, Will, Receipts, No Objection Certificate and
GPA alleged to have been executed by the plaintiff in favour of
the defendants no.1&2 and registered Assignment Deeds, have
been obtained and got executed by the defendants no.1&2 by
playing a fraud on the plaintiff;
(b). for declaration that the defendants no.1&2 do not have any right
on the basis of the documents aforesaid in the land of the
plaintiff;
(c). for declaration that the order obtained by the defendants no.1&2
under the Separation of Interest (Evacuee) Act, 1950 is null and
void as the Court of the Sr. Civil Judge, Delhi has transgressed
his limit and gone beyond the order of the Competent Authority
in favour of the plaintiff;
(d). for declaration that the plaintiff is the owner of the land;
CS(OS) No.836/2012 Page 5 of 19
(e). for permanent injunction restraining the defendants from
dealing with the suit land or dispossessing the plaintiff;
(f). for mandatory injunction directing not only the defendants
no.1&2 but also defendant no.5 Tehsildar Hauz Khas, Mehrauli
to correct the revenue records;
(g). for possession of land of which the defendants no.1&2 have
taken possession, against refund by the plaintiff of the entire
amount of Rs.90 lacs; and,
(h). for damages for unauthorized use and occupation of the land.
3. The defendants no.1&2 though have not filed the written statement,
have filed this application for reference to Arbitration pleading:-
(I). that the reliefs claimed in the plaint are in substance and
primarily against the defendants no.1&2 who are the
beneficiary of the documents executed by the plaintiff from
time to time and the impleadment of the other defendants in the
suit is not material;
(II). that there is a arbitration clause in the Agreement to Sell dated
13th May, 2010 executed by the plaintiff;
CS(OS) No.836/2012 Page 6 of 19
(III). that the reliefs of declaration and cancellation of documents are
in relation to Agreement to Sell, General Power of Attorney,
Will, Assignment Deeds and other documents;
(IV). that though the Assignment Deeds do not have any arbitration
clause but is in pursuance to Agreement to Sell which contains
an arbitration clause;
(V). that the Agreement to Sell containing the arbitration clause is
the basic and main document and all other documents including
the Assignment Deeds are consequential and subsequent
thereto;
(VI). that rather the Assignment Deed expressly records the same to
be in pursuance to the Agreement to Sell;
(VII). that all the documents qua which relief is claimed by the
plaintiff relate to the land which is subject matter of Agreement
to Sell containing an arbitration clause;
(VIII).that there is an element of continuity of transaction starting
from the Agreement to Sell, going up to the execution of the
Assignment Deeds; and,
CS(OS) No.836/2012 Page 7 of 19
(IX). that the reliefs sought in the suit are within the scope of the
Arbitration Agreement and have to be adjudicated by the
Arbitral Tribunal to be constituted in terms of the arbitration
clause.
4. The application is accompanied with the copy of the Agreement to
Sell dated 13th May, 2010 by the plaintiff in favour of the defendant no.1 and
containing a clause as under:-
"That the present deed would be fully honoured by
both the parties and in no manner either of the parties
can be permitted to deviate from the terms and conditions
of the present agreement and in case either of the parties
fails to perform the terms and conditions of the present
document or any dispute arises between the parties, the
same would be resolved by way of Arbitration &
Conciliation Act, 1996. The second party would have
right to appoint the Arbitrator which would be
acceptable to the first party and the said arbitrator would
adjudicate the dispute if any between the parties in
accordance with the law." (emphasis added)
5. The plaintiff has contested the application by filing a reply pleading:-
(a). that the case of the plaintiff being that a fraud has been played
by the defendants no.1&2 on him in the matter of execution of
the documents, the matter cannot be referred to arbitration;
CS(OS) No.836/2012 Page 8 of 19
(b). that the entire subject matter of the suit is not the subject matter
of the Arbitration Agreement. Reference in this regard is made
to Sukanya Holdings Pvt. Ltd. Vs. Jayesh H. Pandya AIR
2003 SC 2252;
(c). that the disputes subject matter of the suit are beyond the
competence of the Arbitrator. Reference is made to Haryana
Telecom Ltd. Vs. Sterlite Industries (India) Ltd. AIR 1999 SC
2354;
(d). that the case of the plaintiff is not only of fraud by the
defendants no.1&2, in the matter of obtaining thumb
impression of the plaintiff but also in obtaining orders from the
Court of competent officer under the Separation of Interest
(Evacuee) Act and which aspects cannot be adjudicated by
Arbitrator;
(e). that all the parties to the suit are not parties to the arbitration
agreement and the cause of action cannot be split up;
(f). that the reliefs are claimed not only against the defendants
no.1&2 but against the other defendants also and the other
CS(OS) No.836/2012 Page 9 of 19
defendants are necessary and proper parties to the adjudication
of the said disputes;
(g). reference is made to Alankar Global Pvt. Ltd. Vs. Dinesh
Kumar Mathur 137 (2007) DLT 164 and Celebi Delhi Cargo
Terminal Management India Pvt. Ltd. Vs. Aryan Cargo
Express Pvt. Ltd. 187 (2002) DLT 54; and,
(h). that the document containing the arbitration clause being
forged, creates no rights in favour of the applicants/ defendants
no.1&2. Reference is made to Yogi Agarwal Vs. Inspiration
Clothes & U AIR 2009 SC 1098, Sukanya Holdings Pvt. Ltd.
supra and also to India Household and Healthcare Ltd. Vs. LG
Household and Healthcare Ltd. (2007) 5 SCC 510.
6. The applicants/ defendants no.1&2 have filed a voluminous rejoinder,
also referring to Branch Manager Mega Leasing & Finance Ltd. Vs.
Potluri Madhvi Lata (2009) 10 SCC 103 and Booz Allen and Hamilton
Inc. Vs. SBI Home Finance Limited (2011) 5 SCC 532 and containing
averments on the merits of the disputes but which cannot be the subject
matter of adjudication here.
CS(OS) No.836/2012 Page 10 of 19
7. The counsels for the parties were heard and granted liberty to cite
judgments on the following two aspect:-
"(i) Whether the dispute as to challenge to a document
containing a Arbitration Clause is arbitrable
especially when the challenge is inter alia on the
ground of fraud.
(ii) Whether the dispute as to the setting aside of an
Assignment Deed executed in pursuance to an
Agreement to Sell containing a Arbitration Clause is
arbitrable.
8. Written synopsis along with copies of judgments have been filed by
both the counsels, relying on the following judgments:-
A. Judgments cited by the counsel for the plaintiff:-
M.R. Engineers & Contractors Private Ltd. Vs. Som
Datt Builders Ltd. 2009 (3) RAJ 448 (SC) - laying down
that a general reference to another contract would not
have the effect of incorporating the arbitration clause
from the referred document into the contract between the
parties and arbitration clause from another contract can
be incorporated into the contract only by a specific
reference to arbitration clause.
N. Radhakrishnan Vs. M/s Maestro Engineers (2009) 4
RAJ 690 SC - laying down that allegations of fraud and
serious malpractice on the part of the respondents can
only be settled in Court and cannot properly be gone into
by the Arbitrator.
Virender Singal Vs. Delhi Express Travels Pvt. Ltd.
2012 (3) RAJ 590 (Del) - laying down that the power to
adjudicate the validity of the transaction and the
allegations of fraud have not been vested in the
Arbitrator.
B. Judgments cited by the defendants no.1&2:-
P. Anand Gajapathi Raju Vs. P.V.G. Raju (2000) 4 SCC
539;
Rashtriya Ispat Nigam Ltd. Vs. Verma Transport Co.
(2006) 7 SCC 275;
M/s. Agri Gold Exims Ltd. Vs. M/s. Sri Lakshmi Knits
& Wovens JT 2007 (2) SC 602; and,
Branch Manager, Magma Leasing and Finance Ltd.
Vs. Potluri Madhavilata (2009) 10 SCC 103.
All on the scope and effect of Section 8 of the Arbitration
Act, 1996.
Kotak Mahindra Bank Ltd. Vs. Sundram Brake Linings
Ltd. 2008 (Suppl.1) Arbitration Law Reporter 132
(Madras);
Bombay Gas Co. Ltd. Vs. Parmeshwar Mittal AIR 1998
Bombay 118;
Abdul Kadir Shamsuddin Vs. Madhav Prabhakar Oak
AIR 1962 SC 406;
Oval Investment P. Ltd. Vs. India Bulls Financial
Services Ltd. 165 (2009) DLT 230 (DB);
Navin Kumar Vs. Standard Restaurant 103 (2003) DLT
209;
Prem Sagar Khanna Vs. Ravi Khanna AIR 2002 Delhi
98;
Shukaran Devi Vs. Om Prakash Jain 133 (2006) DLT
297; and,
Rajbaboo Nishchal Vs. Ajay Kumar Verma 154 (2008)
DLT 568.
All in support of the contention that objections
containing allegations of fraud against the documents
containing arbitration clause do not make the disputes
arising from the said documents non-arbitrable.
A.K. Raju Vs. Avni Kumar 104 (2003) DLT 904 - in
support of the contention that Assignment Deeds
executed pursuant to and in continuation of the
Agreement to Sell containing an arbitration clause would
be covered and governed by the arbitration clause in the
Agreement to Sell.
Kotak Mahindra Bank Ltd. Vs. Sunadram Brake
Linings Ltd. 2008 (Suppl.1) Arbitration Law Reporter
132 (Madras) - also to contend that mere impleadment of
some parties in the suit and who are not parties to the
Arbitration Agreement does not take the matter beyond
arbitration.
9. Though detailed case law as aforesaid has been relied on but in my
view, the matter is in a narrow compass.
10. As the bare perusal of the arbitration clause supra on the basis
whereof the application is filed would show, the arbitration agreed to
thereunder is in a situation if either of the parties fails to perform the terms
and conditions of the Agreement to Sell or any dispute arises between the
parties. The Arbitration Agreement between the parties is not all pervasive
as is often the case, but is limited to arbitration of disputes arising from
failure of either party to perform the terms and conditions of the Agreement
to Sell. Though the arbitration clause is also with respect to "any dispute
arising between the parties" but the said dispute would draw colour from
failure to perform the terms and conditions of the Agreement to Sell and thus
the dispute referred to therein can only be a dispute relating to failure of
either party to perform the terms and conditions of the agreement and would
not include a dispute as to the very nature, character or interpretation of the
transaction between the parties.
11. The dispute raised in the suit is not relating to failure of either of the
parties in performance of the terms and conditions of the Agreement to Sell
but to the very foundation of the transaction between the parties.
12. When the parties have limited adjudication by arbitration to disputes
arising from failure of performance of the terms and conditions of the
Agreement to Sell, it is not for this Court to expand the scope thereof, to also
cover a challenge to the very transaction between the parties.
13. The Supreme Court in Gaya Electric Supply Co. Ltd. Vs. The State of
Bihar AIR 1953 SC 182 has held that if the arbitration agreement is broad
and comprehensive and embraces any dispute between the parties "in respect
of" the agreement or "in respect of anything arising out of the agreement"
and one of the parties seeks to avoid the contract, the dispute is referable to
arbitration if the avoidance of the contract arises out of the terms of the
contract itself; where however the party seeks to avoid the contract for
reasons de hors it, the arbitration clause cannot be resorted to as it goes
along with other terms of the contract. It was further held that an arbitration
clause is a written submission agreed to by the parties in a contract and like
every written submission, must be considered according to its language and
in the light of circumstances in which it was made. In the facts of that case,
it was held that where the clause conferred jurisdiction on arbitrator on the
question of valuation, questions relating to breach of contract or its
rescission were outside the reach of the clause and the arbitrator had not
been conferred power to pronounce thereon and the Court could not be on
the basis of such a clause be deprived of jurisdiction to decide thereon.
14. Not only so, as far as performance of the agreement containing the
arbitration clause is concerned, the same stands concluded by execution of
assignment deeds in performance thereof. The said assignment deed does
not contain any arbitration clause. The same also fortifies the conclusion
that the arbitration agreed to and intended by the parties, was qua disputes if
any arising qua performance of respective obligations under the agreement
to sell only and once the agreement to sell fructified into the assignment
deed and thus exhausted itself, the parties did not feel the need to provide for
arbitration as the parties had not agreed to arbitration of "all disputes in
relation to or concerning the transaction".
15. Moreover, the relief claimed in the suit, of declaration of the order in
the proceedings under the also Separation of Interest (Evacuee) Act, 1950 as
null and void cannot be granted by the Arbitrator and the said relief is so
intertwined to the other reliefs claimed in the suit that the segregation
thereof is not possible.
16. There is also considerable merit in the plea of the plaintiff that serious
allegations of fraud as have been made in the matter of execution of
documents containing the arbitration clause cannot be subject matter of
arbitration.
17. The application therefore fails and is dismissed.
CS(OS) No.836/2012.
18. The defendants no.1&2 have not filed their written statement as yet.
Rather it is the plea of the plaintiff that the defence of the defendants no.1&2
is liable to be struck off and the application under Section 8 of the
Arbitration and Conciliation Act which has been dismissed today was filed
merely to avoid closure of the right to file the written statement.
19. Be that as it may, since the application under Section 8 has remained
pending for a considerably long time, it is deemed expedient to grant one
last opportunity of four weeks to the defendants no.1&2 to file the written
statement.
20. In light of the above, CM No.17783/2012 of the plaintiff under Order
8 Rule 10 CPC is infructuous and is disposed of.
21. List before the Roster Bench on 16th September, 2013.
RAJIV SAHAI ENDLAW, J
AUGUST 08, 2013
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