Karnataka High Court
Shri.Sanjay S/O Gangadhar Kulkarni vs Shri Pankaj S/O. Gurunath Kulkarni on 8 January, 2024
Author: Suraj Govindaraj
Bench: Suraj Govindaraj
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CMP No. 100009 of 2018
IN THE HIGH COURT OF KARNATAKA,
DHARWAD BENCH
DATED THIS THE 8TH DAY OF JANUARY, 2024
BEFORE
THE HON'BLE MR JUSTICE SURAJ GOVINDARAJ
CIVIL MISC PETITION NO. 100009 OF 2018
BETWEEN:
SHRI.SANJAY
S/O GANGADHAR KULKARNI
AGE:58,
OCC:BUSINESS,
R/O. CHIDAMBAR NAGAR,
BELAGAVI-590001.
...PETITIONER
(BY SRI. SHIVARAJ S BALLOLLI .,ADVOCATE)
AND:
1. SHRI PANKAJ
S/O. GURUNATH KULKARNI
AGE 45 YEARS,
YASHAVANT
OCC SERVICE,
NARAYANKAR
2. SMT KAVERI
Digitally W/O. GURUNATH KULKARNI
signed by
YASHAVANT AGE:75 YEARS,
NARAYANKAR
OCC: HOUSEHOLD WORK,
3. SMT PREETI W/O.
SHANKAR RAO
AGE:42 YEARS,
OCC: SERVICE,
R/O. 675, 4TH B CROSS,
10TH MAIN, 4TH BLOCK,
KORAMANGALA,
BENGALURU-560034.
...RESPONDENTS
(BY SRI. SANGRAM S KULKARNI., ADVOCATE FOR R1 TO R3)
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CMP No. 100009 of 2018
THIS CIVIL MISCELLANEOUS PETITION IS FILED UNDER
SECTION 11(6) OF THE ARBITRATION AND CONCILIATION ACT,
1996 PRAYING TO APPOINT AN ARBITRATOR AS CONTEMPLETED
UNDER THE AGREEMENT DATED 11.07.2011 AT ANNEXURE-A AND
ETC.
THIS CIVIL MISCELLANEOUS PETITION, COMING ON FOR
ADMISSION, THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
1. The petitioner is before this Court seeking for the
following reliefs:
a. To appoint an arbitrator as contemplated under the
Agreement dated 11.07.2011 at Annexure-A;
b. Pass any such other order(s) as this Hon'ble Court
may deem fit in the facts and circumstances of the
case and in the interests of justice and equity.
2. The petitioner and the respondents had entered into
an agreement on 11.07.2011 to develop the entire
property covered under R.S. No.971 then bearing
No.971/1, 971/2 and 971/3 and numbered as CTS
No.3928, 3929, 3929/1, 3929/2 and 3929/5 totally
measuring 26 acers 29 guntas as a composite
development. The respondents being owners of
1/15th undivided interest in the said property, the
development was agreed to be made of the entire
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property over which certain others belonging to the
family of the respondents had an interest and the
development subject matter of the agreement was to
be shared in the ratio of 60% to the owners and 40%
to the developers. In furtherance of the said
agreement, an irrevocable General Power of Attorney
also came to be executed in favour of the petitioner
on 11.07.2011. The petitioner alleging that the
respondents had not complied with their obligations
under the agreement, had issued a notice on
16.03.2018 invoking the arbitration clause
nominating its Arbitrator calling upon the
respondents to agree to the same.
3. The respondents replied vide notice dated
30.03.2018 contending that the there is no subsisting
agreement and further that the property was not
available for development, the property having been
sold to certain other persons, the agreement could
not implemented. It is aggrieved by the same, that
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the petitioner is before this Court seeking for the
aforesaid relief for appointment of an Arbitrator.
4. Sri.Shivaraj S. Ballolli., learned counsel for the
petitioner would submit that there being an
agreement between the petitioner and respondents
to develop the property, the respondents have sold
their interest to one M/s.Dhammanagi and Sanu
Developers Pvt. Ltd., and by doing so, they sought to
frustrate the agreement. The petitioner having an
interest in the property and development thereon
would be entitled for claiming damages on account of
the breach committed by the respondents which is
required to be referred to Arbitration.
5. Sri.Sangram S Kulkarni., learned counsel appearing
for the respondents would however submit that;
5.1. The petitioner had entered into various
agreements with different family members of
the respondents, one set of the family members
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and sold their interest to an extent of
71.6875% of the aforesaid properties in favour
of M/s.Dhammanagi and Sanu Developers Pvt.
Ltd., vide sale deed dated 23.01.2015, another
sale deed came to be executed on 6.02.2015 of
which the petitioner is also a party as a
assigner and all the rights and title of the
assigner has been transferred to the said
M/s.Dhammanagi and Sanu Developers Pvt.
Ltd. Thus, the petitioner himself having
transferred interest of over a portion of the
property to the M/s.Dhammanagi and Sanu
Developers Pvt. Ltd., the entire property is no
longer capable of being developed as single
composite block.
5.2. The assignment by the petitioner once made,
the petitioner cannot now contend that the
petitioner has an interest in the property under
the aforesaid agreement which is required to be
referred to arbitration, the Petitioner himself
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having transferred a portion of the land and
frustrating the transaction no damages can also
be claimed by the Petitioner.
5.3. Apart therefrom he submits that even in terms
of the agreement, which is the subject matter
of the above petition, the transaction was to be
completed within a period of three years from
the date of agreement i.e., 11.07.2011 in terms
of the clause relating to limitation therein. The
said three years having expired in the years
2014 notice having been issued on 16.03.2018
is hopelessly barred by the law of limitation and
as such there is nothing which survives for
being referred to arbitration.
5.4. On these grounds, he submits that the above
petition requires to be dismissed.
6. In reply, Sri.Shivaraj S. Ballolli in respect of
limitation would submit that the limitation clause
eschews the period taken for litigation, the litigation
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having been withdrawn in the year 2017, the notice
issued in the year 2018 is within time.
7. Heard Sri.Shivaraj S Ballolli, learned counsel for the
petitioner and Sri.Sangram S Kulkarni, learned
counsel appearing for respondents. Perused papers.
8. The Hon'ble Apex Court in NTPC Ltd. v. SMPL Infra
Ltd.1 at paragraphs 25 to 28 held as under:
25. Eye of the Needle: The above-referred
precedents crystallise the position of law that the
pre-referral jurisdiction of the courts under Section
11(6) of the Act is very narrow and inheres two
inquiries. The primary inquiry is about the existence
and the validity of an arbitration agreement, which
also includes an inquiry as to the parties to the
agreement and the applicant's privity to the said
agreement. These are matters which require a
thorough examination by the referral court. The
secondary inquiry that may arise at the reference
stage itself is with respect to the non arbitrability of
the dispute.
26. As a general rule and a principle, the arbitral
tribunal is the preferred first authority to determine
and decide all questions of non-arbitrability. As an
exception to the rule, and rarely as a demurrer, the
referral court may reject claims which are manifestly
and ex-facie non-arbitrable. Explaining this position,
flowing from the principles laid down in Vidya Drolia
[(2021)2SCC1], this Court in a subsequent decision
in Nortel Networks [(2021) 5 SCC 738] held:
2023 INSC 334
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"45.1 ...While exercising jurisdiction under
Section 11 as the judicial forum, the court
may exercise the prima facie test to screen
and knockdown ex facie meritless, frivolous,
and dishonest litigation. Limited jurisdiction of
the courts would ensure expeditious and
efficient disposal at the referral stage. At the
referral stage, the Court can interfere "only"
when it is "manifest" that the claims are ex
facie time-barred and dead, or there is no
subsisting dispute..."
27. The standard of scrutiny to examine the non-
arbitrability of a claim is only prima facie. Referral
courts must not undertake a full review of the
contested facts; they must only be confined to a
primary first review and let facts speak for
themselves. This also requires the courts to examine
whether the assertion on arbitrability is bona fide or
not. The prima facie scrutiny of the facts must lead
to a clear conclusion that there is not even a vestige
of doubt that the claim is non-arbitrable. On the
other hand, even if there is the slightest doubt, the
rule is to refer the dispute to arbitration.
28. The limited scrutiny, through the eye of the
needle, is necessary and compelling. It is intertwined
with the duty of the referral court to protect the
parties from being forced to arbitrate when the
matter is demonstrably non-arbitrable. It has been
termed as a legitimate interference by courts to
refuse reference in order to prevent wastage of
public and private resources31. Further, as noted in
Vidya Drolia [(2021)2SCC1], if this duty within the
limited compass is not exercised, and the Court
becomes too reluctant to intervene, it may
undermine the effectiveness of both, arbitration and
the Court32. Therefore, this Court or a High Court, as
the case may be, while exercising jurisdiction under
Section 11(6) of the Act, is not expected to act
mechanically merely to deliver a purported dispute
raised by an applicant at the doors of the chosen
arbitrator33, as explained in DLF Home Developers
Limited v. Rajapura Homes Pvt. Ltd.
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9. It is in the background of the said judgment of the
Hon'ble Apex Court that the present matter would
have to be considered.
10. In view of the aforesaid judgment of the Hon'ble
Apex Court, a Referral Court exercising jurisdiction
under Section 11(6) of the Arbitration and
Conciliation Act, 1996, though has a limited
jurisdiction, the Referral Court would have to
examine with respect the non-arbitrability of the
dispute. The Hon'ble Apex Court has held that the
Referral Court may reject claims which are manifestly
and ex-facie non-arbitrable. In this regard, prima
facie view of the facts would have to be looked into.
In the event of a prima facie scrutiny of the facts
leading to a clear conclusion that the claim is non-
arbitrable, then referral to arbitration is required to
be refused.
11. Admittedly, the agreement is one for development of
the entire property measuring 26 acres 29 guntas
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covered under CTS No.3928, 3929, 3929/1, 3929/2
and 3929/5. Thus, the entire property was required
to be developed as a Single Composite Block. The
respondents have only undivided 1/15th shares in the
said property i.e., 6.660%, it is this property that is
subject matter of the agreement in question which is
a small portion of the entire property which was to be
developed as a composite block.
12. A sale deed dated 23.01.2015 having been executed
in favour of M/s.Dhammanagi and Sanu Developers
Pvt. Ltd., as regards 71.6875% in the said property
by certain other owners ahs infact and in effect
frustrated the contract, the respondents not having
any role to play in that sale.
13. Another sale deed was executed on 6.02.2015 to an
extent of 4.6875% of the undivided interest in the
said property of which the petitioner is a part thereof,
whereunder the petitioner assigned all his right, title
and interest, this would indicate that the petitioner
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knowing fully well that by way of such assignment
the entire property could not be developed a Single
Composite Block has voluntarily on receipt of
consideration executed such assignment.
14. Whether the petitioner is party to the sale deed
dated 23.01.2015 or not, the petitioner is a party to
a sale deed dated 6.02.2015 and an extent of
4.6875% has been sold under this sale deed in
favour of the very same M/s.Dhammanagi and Sanu
Developers Pvt. Ltd.
15. In view of the petitioner himself having sold a portion
of the property by way of a registered sale deed in
favour of M/s.Dhammanagi and Sanu Developers Pvt.
Ltd., to an extent of 4.6875% of the entire land and
the petitioner being fully aware that an extent of
71.6875% of the entire land has been transferred in
favour of M/s.Dhammanagi and Sanu Developers Pvt.
Ltd., by certain other persons having interest in the
land, an extent of 86% of the interest in the land has
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been transferred to the M/s.Dhammanagi and Sanu
Developers Pvt. Ltd., with whom the petitioner has
no agreement or contract.
16. The respondents also having transferred their 1/15th
interest amounting to 6.660%, way back in the year
2015, but subsequent to the above sale deeds.
17. Thus nearly 86% of the land having been transferred,
the petitioner holding only an agreement as regards
undivided 1/15th right of the respondent, the entire
land being required to be developed and the same
not capable of being developed, ex-facie it is required
that there is no purpose which would be served by
way of arbitration. Since the relief sought for specific
performance cannot be granted nor can damages be
awarded since the respondents have nothing to do
with the sales which have frustrated the agreement,
infact the petitioner is a party to the second sale
deed.
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18. Insofar as any other reliefs are concerned, I am of
the considered opinion that the petitioner himself
having assigned all his interest over a portion of the
property was clearly aware of the fact that the
petitioner could now no longer develop the entire
property measuring 26 acres 29 guntas as a Single
Composite Property/block. After execution of such
sale deed on 6.02.2015, the issuance of notice by the
petitioner on 16.03.2018 to my considered opinion is
an exercise in futility since the demand made in the
said notice could never be fulfilled even by the
petitioner since, the petitioner himself has lost right
towards the land that he had assigned. This notice
having been issued after more than three years, after
the sale in favour of M/s.Dhammanagi and Sanu
Developers Pvt. Ltd., I am of the considered opinion
that the said notice is also barred by limitation.
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19. In that view of the matter, no grounds being made
out, the petition stands dismissed at the admission
stage.
Sd/-
JUDGE
LN
