Karnataka High Court
M/S Mvr Constructions vs M/S V M R Constructions on 21 February, 2024
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WP No. 4604 of 2018
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 21ST DAY OF FEBRUARY, 2024
BEFORE
THE HON'BLE MRS JUSTICE M G UMA
WRIT PETITION NO. 4604 OF 2018 (GM-CPC)
BETWEEN:
M/S. MVR CONSTRUCTIONS,
A REGISTERED PARTNERSHIP FIRM REGISTERED
UNDER THE PROVISIONS OF INDIAN
PARTNERSHIP ACT 1932,
AND HAVING ITS OFFICE AT NO. 23,
ARCHANA COMPLEX, J.C. ROAD,
BANGALORE.
REPRESENTED BY ITS PARTNER
MR. K.V. SHIVA KUMAR,
AGE ABOUT 70 YEARS,
S/O. SRI. K. VISWANTHAIAH SETTY.
...PETITIONER
(BY SRI. IMRAN PASHA, ADVOCATE)
AND:
Digitally signed
by PAVITHRA
N
Location: high
1. M/S. V.M.R CONSTRUCTIONS,
court of A REGISTERED PARTNERSHIP FIRM REGISTERED
karnataka
UNDER THE PROVISIONS OF INDIAN PARTNERSHIP
ACT 1932, AND HAVING ITS OFFICE AT NO. 20,
18TH MAIN, PADMANABHA NAGAR,
OPP. DECCAN INTERNATIONAL SCHOOL,
CHIKKALLSANDRA MAIN ROAD,
BANGALORE-560 061,
REPRESENTED BY ITS MANAGING PARTNER
MR. V. RAGHUNATHA NAIDU.
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WP No. 4604 of 2018
2. MR. S.R. RAMAMURTHY SETTY,
AGED ABOUT ABOUT 74 YEARS,
S/O LATE. S RATHNAIAH SETTY,
NO. 349, 12TH CROSS, 2ND BLOCK, JAYANAGAR,
BANGALORE-560 011.
3. M/S. ENGINEERING PROJECTS (INDIA) LTD.,
BANGALORE OFFICE NO. 519,
2ND FLOOR, 8TH MAIN ROAD, SADASHIVANAGAR,
BANGALORE-560 080.
REPRESENTED BY ITS GENERAL MANAGER.
4. BRUHATH BANGALORE MAHANAGARA PALIKE,
N.R SQURE, BANGALROE-560 002,
REPRESENTED BY ITS COMMISSIONER.
5. BANK OF INDIA,
J C ROAD BRANCH, BANGALORE-560 002,
BY ITS BRANCH MANAGER.
...RESPONDENTS
(BY SRI. SRIDHAR CHAKRAVARTHI .M.V, ADVOCATE FOR R1,
SRI. H.C. SUNDARESH, ADVOCATE FOR R3,
SRI. OMKAR KAMBI, ADVOCATE FOR R4(NOC),
R2 & R5 SERVED UNREPRESENTED)
THIS W.P. IS FILED UNDER ARTICELS 227 OF THE
CONSTITUTION OF INDIA, PRAYING TO-DIRECT TO SET
ASIDE THE ORDER DTD 25.11.2017 PASSED ON IA NO.10 BY
THE COURT OF THE XXVI ADDL. CITY CIVIL AND SESSIONS
JUDGE (CCH NO.20) MAYOHALL, BANGALORE IN
O.S.NO.27293/2011, AS PER ANNX-M AND IN REVERSAL OF
THE SAME, BE PLEASE TO DISMISSED IN IA.NO.10 AS AT
ANNX-D, FILED UNDER SECTION 8 OF THE ARBITRATION
AND CONCILIATION ACT, 1996 BY THE DEFENDANT
NO.1/RESPONDENT NO.1 AND ETC.
THIS PETITION COMING ON FOR PRELIMINARY
HEARING IN 'B' GROUP THIS DAY, THE COURT MADE THE
FOLLOWING:
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WP No. 4604 of 2018
ORDER
The plaintiff in OS No.27293 of 2011 on the file of
learned XXVI Additional City Civil and Sessions Judge,
(CCH No.20), Mayohall, Bangalore, is seeking grant of writ
of certiorari to quash the order dated 25.11.2017 allowing
IA No.10 filed by respondent No.1 to refer the dispute to
the Arbitrator under Section 8 of the Arbitration and
Conciliation Act, 1996 (for short, hereinafter referred to as
'Act').
2. Heard Sri Imran Pasha, learned counsel for the
petitioner; Sri Sridhar Chakravarthi, learned counsel for
the respondent No.1; Sri H.C.Sundaresh, learned counsel
for the respondent No.3 and Sri Omkar Kambi, learned
counsel for the respondent No.4 and perused the record.
3. Learned counsel for the petitioner contended
that the petitioner as a plaintiff filed the suit in OS
No.27293 of 2011, seeking mandatory injection against
defendant No.3, to direct him to deposit the amount in
Escrow account held with defendant No.5. The defendants
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before the Trial Court have filed their written statement.
When the matter was posted for plaintiff's evidence,
defendant No.1 filed an application-IA No.10 under Section
8 of the Act, seeking to refer the matter to the Arbitrator
and dismiss the suit. Plaintiff raised several objections by
filing the objection statement and contended that
defendant Nos.3 to 5 are not the parties to the Joint
Venture Agreement as the same was entered into only
between plaintiff and defendant Nos.1 and 2. Relief sought
by the plaintiff against defendant Nos.3 and 5 cannot be
granted by the Arbitrator. It is also contended that cause
of action arose in favour of the plaintiff cannot be split up
against different defendants. It is the contention taken by
the plaintiff that jurisdiction of the Civil court is not barred
to seek such a relief of mandatory and permanent
injunction. It is specifically contended that when defendant
Nos.3 to 5 are not parties to the Joint Venture Agreement,
the matter cannot be referred to the Arbitrator. None of
these objections were considered by the Trial Court, but it
proceeded to allow the application casually by referring to
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the Arbitration Clause found in the agreement and to
dismiss the suit. Being aggrieved by the same, the
petitioner is before this court.
4. Learned counsel for the petitioner further
submits that, when defendant Nos.3 to 5 are not parties to
the agreement and when the plaintiff has made out a
specific cause of action against all the defendants, the
matter could not have referred to the Arbitrator. The suit
is of the year 2011 and defendants have filed written
statement and the matter was posted for evidence. At that
time, the Trial Court could not have dismissed the suit. It
is not the opinion of the Trial Court that, the suit of the
plaintiff is not maintainable before the Civil Court. Under
these circumstances, he prays for quashing the impugned
order by allowing the petition.
5. Per contra, Learned counsel for the respondents
opposing the petition submitted that, admittedly, there
was Joint Venture Agreement entered into between
plaintiff and defendant Nos.1 and 2. Parties have agreed
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to refer the dispute to the Arbitrator under the provisions
of Act. The Act does not bar inclusion of a third party for
determination of the claim of each of the parties before
the Arbitrator. The specific stand in that regard was taken
by the defendant No.1 while filing the written statement,
however, later filed the application under Section 8 of the
Act. The Trial court considered all these facts and
circumstances and proceeded to pass the impugned order.
There is no illegality and perversity in the order passed by
the Trial Court. Hence, he prays for dismissal of the
petition.
6. Learned counsel for the respondent No.1 places
reliance on the decision of the Hon'ble Supreme Court in
the case of Oil and Natural Gas Corporation Ltd. and
another vs. Discovery Enterprises Pvt. Ltd. and
another1 and contended that, even a third party to the
agreement can be impleaded as party before the Arbitrator
AIR 2022 SC 2080
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and there is no bar for referring the dispute to the
Arbitrator.
7. Further, learned counsel for the respondents
places reliance on the decision of the Co-ordinate Bench of
Delhi High Court in Vistrat Real Estates Pvt Ltd., vs.
Asian Hotels North Limited2 and submits that, in
Domestic Arbitration, even when the third party is not the
signatory to the Arbitration Agreement, he can be joined in
the arbitration. Accordingly, prays for dismissal of the
petition.
8. The petitioner as plaintiff has filed suit seeking
permanent injunction and also for mandatory injunction
against the defendant No.3 to perform the terms of the
letter of undertaking dated 11.07.2008 and directing to
credit all the payments which are to be released to the
defendant No.1 to the Escrow account held with defendant
No.5. It also sought for perpetual injunction against the
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defendant No.1 from diverting the amount released to it
by defendant No.3 to any account other than Escrow
account maintained with defendant No.5. It also sought for
perpetual injunction against defendant No.5 from
alienating the suit schedule property till such time the
payments are released by the defendants 3 and 4, who
inturn have undertaken to credit all payments released to
it by defendant No.1 directly to the Escrow account of
defendant No.5.
9. Admittedly, defendant No.1 entered into a Joint
Venture Agreement with the plaintiff and defendant No.2.
It is also not in dispute that neither defendant No.3 and
nor defendant Nos.4 and 5 are the parties to the said Joint
Venture Agreement. Even though learned counsel for the
respondent No.1 referred to the agreement dated
25.02.2008 produced as per Annexure-H and same was
entered into between defendant No.1 and defendant No.5,
for which, neither the plaintiff nor defendant Nos.3 and 4
are parties.
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10. The Joint Venture Agreement dated 25.02.2008
(Annexure-G) was entered into between the plaintiff and
defendant Nos. 1 and 2. Clause VIII refers to the
Arbitration and it reads as under:
"Any dispute inters-se among the parties that may
arise under this Joint Venture Agreement shall be
settled Mutually alternatively by appointment of an
Arbitrator under the Provisions of Arbitration and
Reconciliation Act."
(emphasis supplied)
This Clause makes it clear that only the dispute that
arise interse between the parties are agreed to be settled
by referring it to the Arbitrator.
11. Learned counsel for the respondents places
reliance on the decision of the Hon'ble Supreme Court in
the case of Oil and Natural Gas Corporation Ltd.
(supra), wherein the facts and circumstances of the case
are entirely different. The parties to the agreement have
referred the dispute to the Arbitrator and Arbitrator had
even passed an order. In the appeal under Section 37 of
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the Act, the contention was raised that the appellant who
instituted the appeal against the interim award passed by
the Arbitrator was not a party to the Arbitration
Agreement and he must be deleted from array of parties.
The Hon'ble Supreme Court considered the rival
contentions and held that, signed and written agreement
to settle the dispute either present or future to the
Arbitration, does not exclude the possibility of Arbitration
Agreement binding the third party, it is held that the non-
signatory is bound by the operation of the 'group of
companies' doctrine as well as, by operation of general
rules of private law, principally on assignment, agency,
and succession. But in the present case, it is not the case.
Therefore, I do not find any reason to apply the dictum
laid down by the Hon'ble Supreme Court in the said case.
12. In the judgment relied upon by the learned
counsel for the respondents in the case of Vistrat Real
Estates (supra), the Co-ordinate Bench of Delhi High
Court referred to the decision of the Hon'ble Supreme
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Court in the case of Chrolo Controls India Private Ltd.,
vs. Severn Trent Water Purification Inc. and Others3
which was basically an international arbitration referring to
Section 45 of the Act and held that even third parties who
are not signatories to the arbitration agreement can be
joined in the arbitration. On facts of the case, before Delhi
High Court, the petitioner who initiated the arbitration
proceedings contended that, the petitioner had transferred
and assigned all rights and title in the premises to the
IndusInd Bank Limited along with perpetual right to use
the car parking area and he sought for recovery of the
security deposit of Rs.15 crores deposited by the
petitioner pursuant to the security deposit agreement
entered into between the petitioner and the respondent. In
terms of the Refundable Security Deposit, the agreement
which provides for arbitration, the petitioner in that case
had invoked arbitration, which was resisted by the other
party. The court held that, since the petitioner had invoked
(2013) 1 SCC 641,
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the provisions of Security Deposit Agreement, the party
who is not a signatory to the said agreement could join in
arbitration.
13. In the present case, the plaintiff has already
filed suit before the Civil Court against the defendant
Nos.1 to 5, having specific cause of action against each
one of them. When admittedly the defendant Nos.3 to 5
are not parties to the arbitration agreement, the Court
cannot direct them to be parties to the arbitration
proceedings as per the terms of the Joint Venture
Agreement entered into between the plaintiff and
defendant Nos.1 and 2.
14. The plaintiff is seeking mandatory injunction
against the defendant No.3 and permanent injunction
against the defendant No.1 and 5. Cause of action alleged
by the plaintiff is against the all defendants and the same
cannot be split up for the purpose referring the dispute to
the Arbitrator on the basis of Clause VIII in the Joint
Venture Agreement entered into between defendants 1
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and 2 and plaintiff. When defendants 3 to 5, against whom
the plaintiff is seeking relief are not parties to the Joint
Venture Agreement, it cannot be said that the dispute is to
be arbitrated by referring to Arbitrator. The jurisdiction of
the Civil Court under Section 9 of the CPC is not barred
when there is no Arbitration Agreement between the
parties to the litigation. Hence, I am of the opinion that,
when Section 7 of the Act, refers to "arbitration
agreement" means an agreement by the parties to submit
to arbitration all or certain disputes which have arisen or
which may arise between them, I do not find any reason
to hold that Joint Venture Agreement between plaintiff and
defendant Nos.1 and 2 to bind defendants 3 to 5, who are
not parties to the agreement. Under such circumstances,
the Trial Court could not have allowed the application to
refer the dispute to the Arbitrator.
15. I have gone through the impugned order
passed by the Trial Court. The Trial Court has passed a
cryptic order without considering the contentions of the
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parties including the objections raised on application-IA
No.10. Therefore, impugned order suffers from legality
and perversity, which calls for interference of this Court.
Accordingly, I pass the following:
ORDER
i) Writ Petition is allowed;
ii) Order dated 25.11.2017 passed on IA No.10 in
OS NO. 27293 of 2011 by the XXVI Additional
City Civil and Sessions Judge, (CCH No.20),
Mayohall, Bangalore is set aside. As a result the
suit is restored on file.
iii) The suit is of the year 2011. Therefore, the
Trial Court is directed to expedite the matter and
dispose of the same, in a time bound manner
with the co-operation of both the parties.
Sd/-
JUDGE
SB
