M/S. Meenakshi Infrastructures Pvt Ltd vs Sri. Y.Anthi Reddy,
2025 Latest Caselaw 425 Tel

Telangana High Court

M/S. Meenakshi Infrastructures Pvt Ltd vs Sri. Y.Anthi Reddy, on 4 June, 2025

Author: T. Vinod Kumar

Bench: T. Vinod Kumar

      THE HON'BLE SRI JUSTICE T. VINOD KUMAR

       ARBITRATION APPLICATION No. 138 of 2018

ORDER:

The present Arbitration Application is filed under Section

11(5) & (6) of the Arbitration and Conciliation Act, 1996

(hereinafter 'the Act, 1996') for appointment of an arbitrator to

resolve the disputes between the parties.

2. Heard Sri. Srinivas Velagapudi, learned counsel for the

applicant, Sri. Raj Kumar Grandhi, learned counsel for the

Respondent No.1, Sri. C. Raghu learned Senior Counsel appearing

for Respondent No.2, Sri. J. Prabhakar, learned Senior Counsel

appearing for Respondent No. 3, Sri. M. Pramod, learned counsel

for Respondent No. 4, Sri. R. Harish, learned counsel for

Respondent No. 5 and Sri. P. Suresh Kumar learned counsel for

Respondent No. 6. Perused the Record.

3. The applicant contends that it had entered into a

Development Agreement-cum-General Power of Attorney (for

short 'DGPA') on 31.07.2007 vide Document No. 12233 of 2007

with respondent No.5, for development of land admeasuring

Ac.10-20 Gts in Sy. No. 16 of Guttala Begumpet Village,

Serilingampally Mandal, Ranga Reddy District; that at the request

of the Respondents, the Applicant herein had paid a sum of Rs.

1,95,00,000/- (Rupees One Crore and Ninety Five Lakhs only)

towards regularization charges for occupyin surplus land; and that

the subject land was regularized vide G.O. No. 494 dated

26.03.2008.

4. The applicant contends thereafter it was learnt that the

property is involved in civil disputes and for the said reason the

Applicant waited patiently for the Respondent to resolve the claims

of third parties, so that it can give effect to the DGPA.

5. It is contended by the Applicant that it had belatedly realized

that the Respondent with an intention to deceive the Applicant had

executed a unilateral Cancellation of Development Agreement -

cum - General Power of Attorney on 31.12.2016 bearing

Document No. 35 of 2017. The applicant contends that on larning

of the above, it had issued a legal notice dated 07.04.2017

demanding the Respondents to discharge their obligations under

the DGPA dated 31.07.2007; and that a reply notice dated

20.04.2017 was issued by the Respondents denying the Applicants

claims.

6. It is contended that, resultantly the applicant had preferred

W.P. No. 12042 of 2018 before this Court seeking a declaration

that the unilateral cancellation of DGPA by the Respondents was

illegal; and that this Court by order dated 24.04.2018 had granted

an interim order directing parties to maintain status quo.

7. It is contended that subsequently, the Applicant had issued

the notice dated 06.11.2018 invoking Clause 22 of the DGPA dated

31.07.2007 appointing Mr. V. Vimalanand, as its Arbitrator. This

arbitration application was filed by the Applicant as the

Respondents vide reply notice dated 22.11.2018 had refused to

refer the disputes to arbitration.

8. It is contended that since, the respondents did not come

forward to submit the dispute to Arbitration, the present application

is filed.

9. Per Contra, learned Senior Counsel appearing for

Respondent No. 2 raised the following grounds in objection to the

present application:

i. Firstly, Clause 3 of the DGPA dated 31.07.2007, the

Applicant was to obtain approval from

HUDA/Serilingampaly Municipality for the proposed

construction, and complete the construction before 24

months from the date of obtaining such permission/approval.

However, for reasons best known to the Applicant, no action

was taken in pursuance of the DGPA dated 31.07.2007. It is

further contended that no explanation is offered by the

Applicant explaining the delay caused for 10 years i.e., from

31.07.2007 to 07.04.2017.

ii. Secondly, apart from making a single-lined allegation in the

application, no details of alleged third-party disputes over

the property are given by the applicant to establish the same.

iii. Thirdly, though a legal notice dated 07.04.2017 was issued

by the Applicant, the same neither questions nor demands for

discharge of duties by the Respondent under the DGPA

dated 31.07.2007.

iv. Fourthly, it is contended that the arbitration clause 22 in the

DGPA dated 31.07.2007 is void under Section 21 of the

Indian Contract Act, 1872, as the same mentions reference of

disputes under the Arbitration and Conciliation Act, 1940

(for short 'the Act, 1940').

v. Fifthly, it is contended that the disputes relating to

cancellation of a deed are not arbitrable.

vi. Lastly, it is contended that this application was filed after

obtaining an interim order in W.P. No. 12042 of 2018,

therefore, the applicant by instituting parallel proceedings his

resorted to forum shopping for obtaining favorable orders.

10. In support of the above contention, reliance is placed on the

decisions in Vidya Drolia v. Durga Trading Corpn1, and Deccan

Paper Mills Vs. Regency Mahavir Properties 2.

11. In addition to the aforesaid contentions, learned Senior

Counsel appearing for Respondent No. 3, contends that the notice

dated 06.11.2018 invoking clause 22 of the DGPA dated

31.07.2007 does not raise any disputes for making reference under

Section 21 of the Act, 1996. It is further contended that the

(2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549

(2021) 4 SCC 786

Applicant having invoked the extraordinary jurisdiction of this

Court under Article 226 of the Constitution of India, cannot ride on

two horses by also invoking the arbitration clause.

12. In the alternative, learned Senior Counsel appearing for

Respondent No. 3 contends that the arbitration clause under the

DGPA dated 31.07.2007 would confer a right to the applicant only

after the Writ Petition filed by it questioning the cancellation of

DGPA is decided, as the same was cancelled vide Doc No. 35 of

2017 dated 31.12.2016. Therefore, it is contended that the present

application is premature at best.

13. In support of the aforesaid contentions reliance is placed on

the decisions in Union of India Vs. Cipla.,3, Chetak Construction

Ltd. Vs. Om Prakash 4, Udyami Evam Khadi Gramodyog Welfare

Sanstha Vs. State of U.P. 5, K. Jayaram & Ors Vs. Bangalore

Development Authority & Ors 6, Emaar India Vs Tarun

Aggarwal 7, Indian Oil Corporation Vs NCC Ltd 8, Sukanya

(2017) 5 SCC 262

(1998) 4 SCC 577

(2008) 1 SCC 560

(2022) 12 SCC 815

(2022) SCC OnLine SC 1328

2022 LiveLaw SC 616

Holdings Vs Jayesh H Pandya 9 and Pawan Bagaria Vs

Gontermann10

14. In rejoinder, learned counsel for the Applicant contends that

both the notice dated 06.11.2018 and the present application

contain clear details of the disputes. It is further contended that as

the relief sought in W.P. No. 12042 of 2018 is only against the

state authority for entertaining the unilateral cancellation of the

DGPA dated 31.07.2007, and since, the present application is filed

seeking reference of all disputes between the parties, the same does

not constitute as a parallel proceeding.

15. I have taken note of their respective contentions.

16. At the outset, it is to be noted that when an agreement

contains a covenant to resolve the disputes by referring to

Arbitration, the power of the High Court under Section 11 of the

Act, 1996 are extremely limited, and the court is ordinarily to

relegate parties to arbitration. However, in all cases where the

agreement provides for arbitration, disputes cannot be

(2003) 5 SCC 531

(2004) SCC OnLine CAL 154

mechanically referred to the doorstep of an arbitrator. The Court

while making a reference is required to apply its mind to the

preliminary issues, more particularly when the opposite party raises

an objection with regard to the existence of an arbitration clause,

the claims being moonshine and ex-facie barred by limitation. The

Supreme Court in Vidya Drolia (supra), held as under:

"244. Before we part, the conclusions reached, with respect to Question 1, are:

244.1. Sections 8 and 11 of the Act have the same ambit with respect to judicial interference.

244.2. Usually, subject-matter arbitrability cannot be decided at the stage of Section 8 or 11 of the Act, unless it is a clear case of deadwood.

244.3. The court, under Sections 8 and 11, has to refer a matter to arbitration or to appoint an arbitrator, as the case may be, unless a party has established a prima facie (summary findings) case of non-existence of valid arbitration agreement, by summarily portraying a strong case that he is entitled to such a finding.

244.4. The court should refer a matter if the validity of the arbitration agreement cannot be determined on a prima facie basis, as laid down above i.e. "when in doubt, do refer".

244.5. The scope of the court to examine the prima facie validity of an arbitration agreement includes only:

244.5.1. Whether the arbitration agreement was in writing? or

244.5.2. Whether the arbitration agreement was contained in exchange of letters, telecommunication, etc.?

244.5.3. Whether the core contractual ingredients qua the arbitration agreement were fulfilled?

244.5.4. On rare occasions, whether the subject-matter of dispute is arbitrable?"

17. In so far as the question of whether the arbitration clause is

rendered invalid as it states that disputes shall be referred under the

Act, "1940" instead of the Act, "1996" is no longer res integra.

The Hon'ble Supreme Court in Purushottam Vs. Anil and Ors 11,

has held that an incorrect reference to the Act, 1940 does not

render the entire agreement invalid and that the provisions of the

Act, 1996 would apply to such agreements. The relevant

observations are as under:

"16. The correct approach, according to us, would be in promoting the object of implementing the scheme of alternative dispute resolution as was rightly submitted in MMTC Ltd.(Supra). It would be farfetched to come to the conclusion that there could be no arbitration at all. As is clear from MMTC Ltd. (Supra) what is material for the purposes of the applicability of 1996 Act is the agreement between the parties to refer the disputes to arbitration. If there be such an arbitration agreement which satisfies the requirements of Section 7 of 1996 Act, and if no arbitral proceeding had commenced before 1996 Act came into force, the matter would be completely governed by the provisions of 1996 Act. Any reference to 1940 Act in the arbitration agreement would be of no

(2018) 8 SCC 95

consequence and the matter would be referred to arbitration only in terms of 1996 Act consistent with the basic intent of the parties as discernible from the arbitration agreement to refer the disputes to arbitration.

17. Viewed thus, the High Court was not right in observing that there could be no arbitration at all in the present case. In situations where the relevant Clause made reference to the applicability of "the provisions of the Indian Arbitration Act and Rules made thereunder" as was the case in MMTC Ltd. (Supra), on the strength of Section 85(2)(a) the governing provisions in respect of arbitral proceedings which had not commenced before 1996 had came into force would be those of 1996 Act alone. On the same reasoning even if an arbitration agreement entered into after 1996 Act had come into force were to make a reference to the applicable provisions of those under Indian Arbitration Act or 1940 Act, such stipulation would be of no consequence and the matter must be governed under provisions of 1996 Act. An incorrect reference or recital regarding applicability of 1940 Act would not render the entire arbitration agreement invalid. Such stipulation will have to be read in the light of Section 85 of 1996 Act and in our view, principles governing such relationship have to be under and in tune with 1996 Act. As observed earlier, the requirements of "arbitration agreement" as stipulated in Section 7 of 1996 Act stand completely satisfied in the present matter nor has there been any suggestion that the agreement stood vitiated on account of any circumstances in the realm of undue influence, fraud, coercion or misrepresentation. In the circumstances, the attempt must be to sub-serve the intent of the parties to resolve the disputes by alternative disputes resolution mechanism. The High Court was, therefore, completely in error."

(emphasis supplied)

18. Further, the issue of limitation can be looked into at the

referral stage, if the claims appear to be stale and ex-facie

deadwood. The Supreme Court in BSNL's case (supra), while

relying on Vidya Drolia's case has observed as under:

"36. In a recent judgment delivered by a three-judge bench in Vidya Drolia v. Durga Trading Corporation MANU/SC/0939/2020 : (2021) 2 SCC 1, on the scope of power Under Sections 8 and 11, it has been held that the Court must undertake a primary first review to weed out "manifestly ex facie non-existent and invalid arbitration agreements, or non-arbitrable disputes." The prima facie review at the reference stage is to cut the deadwood, where dismissal is bare faced and pellucid, and when on the facts and law, the litigation must stop at the first stage. Only when the Court is certain that no valid arbitration agreement exists, or that the subject matter is not arbitrable, that reference may be refused.

...

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. Paragraph 148 of the judgment reads as follows:

148. Section 43(1) of the Arbitration Act states that the Limitation Act, 1963 shall apply to arbitrations as it applies to court proceedings. Sub-section (2) states that for the purposes of the Arbitration Act and Limitation Act, arbitration shall be deemed to have commenced on the date referred to in Section 21.

Limitation law is procedural and normally disputes, being factual, would be for the arbitrator to decide guided by the facts found and the law

applicable. The court at the referral stage can interfere only when it is manifest that the claims are ex facie time-barred and dead, or there is no subsisting dispute. All other cases should be referred to the Arbitral Tribunal for decision on merits. Similar would be the position in case of disputed "no-claim certificate" or defence on the plea of novation and "accord and satisfaction". As observed in Premium Nafta Products Ltd. [Fili Shipping Co. Ltd. v. Premium Nafta Products Ltd., MANU/UKHL/0067/2007 : 2007 UKHL 40 : 2007 Bus LR 1719 (HL)], it is not to be expected that commercial men while entering transactions inter se would knowingly create a system which would require that the court should first decide whether the contract should be rectified or avoided or rescinded, as the case may be, and then if the contract is held to be valid, it would require the arbitrator to resolve the issues that have arisen.

...

37. The upshot of the judgment in Vidya Drolia is affirmation of the position of law expounded in Duro Felguera and Mayavati Trading, which continue to hold the field. It must be understood clearly that Vidya Drolia has not resurrected the pre-amendment position on the scope of power as held in SBP & Co. v. Patel Engineering (supra). It is only in the very limited category of cases, where there is not even a vestige of doubt that the claim is ex facie time-barred, or that the dispute is non-arbitrable, that the court may decline to make the reference. However, if there is even the slightest doubt, the Rule is to refer the disputes to arbitration, otherwise it would encroach upon what is essentially a matter to be determined by the tribunal."

19. On the issue of commencement of the period of limitation, it

is relevant to refer to Genten Infra Projects Private Limited vs.

Balagoni Balraj Goud, in Arbitration Application No.5 of 2021

wherein this Court held that the period of limitation starts to run

from the day right to sue accrues. In other words, right to sue

accrues when a claim made by one party is refused by the other

party. The view expressed by this Court was affirmed by the

Hon'ble Supreme Court in S.L.P.(C). No. 14292 of 2023 dated

31.03.2023.

20. The Hon'ble Supreme Court in B and T AG Vs. Ministry of

Defence12, held that the right to sue accrues from the breaking point

at which any reasonable party would abandon efforts for arriving at

a settlement. The relevant observations are as under:

"44. The aforesaid observations make it very clear that what is important for the Court is to find out what was the "Breaking Point" at which any reasonable party would have abandoned efforts at arriving at a settlement and contemplated referral of the dispute for arbitration.

57. In Law of Arbitration by Justice Bachawat at p. 549, commenting on Section 37, it is stated that subject to the Act 1963, every arbitration must be commenced within the prescribed period. Just as in the case of actions the claim is not to be brought after the expiration of a specified number of years from the date when the cause of action accrues, so in the case of arbitrations the claim is not to be put forward after the expiration of a specified number of years from the date when the claim accrues. For the purpose of Section 37(1) "action" and "cause of arbitration" should be construed as arbitration and cause of arbitration. The cause of arbitration arises when the claimant becomes entitled to raise the question, that is, when the claimant acquires the right to require arbitration. An application Under Section 11 of the Act 1996 is governed by Article 137 of the Schedule to the Act 1963 and must be made within 3 years from the date

MANU/SC/0601/2023

when the right to apply first accrues. There is no right to apply until there is a clear and unequivocal denial of that right by the Respondent. It must, therefore, be clear that the claim for arbitration must be raised as soon as the cause for arbitration arises as in the case of cause of action arisen in a civil action."

21. The position of law emerging from the above decision is

that, a dispute arises when either of the parties fail to perform their

respective obligations. However, the right to sue/right to apply gets

deferred to the day when a party reasonably abandons all efforts of

bona fide negotiations. Such a day is the breaking point from

which limitation runs.

22. Further, this Court in Terra Infra Development Limited Vs.

NCC Limited13, held silence of a party to another party's claim

amounts to refusal/denial. The view expressed by this Court was

affirmed by the Hon'ble Supreme Court in S.L.P.(C). No. 13650 of

2022 14.

23. The facts at hand shall be examined in the light of the settled

position of law discussed as above. It is the case of the Applicant

herein that, after regularization of the subject property for

MANU/TL/1125/2022

MANU/SCOR/95032/2022

occupying surplus land on 26.03.2008, third party civil disputes

were discovered by them. It is to be noted that, as rightly pointed

out by the Respondents, no details of pending proceedings/claims

made by alleged third parties are disclosed by the Applicant till

date. Further, though it is the Applicant's case that they had

approached the Respondents regarding the same, and that the

Respondents had assured them to clear the said disputes, no record

of communication between the parties is placed before this Court.

24. Further, it is pertinent to note that the Applicant did not take any

steps in that regard until after the unilateral cancellation of the

DGPA in 2017. Admittedly, as per the legal notice dated

07.04.2017 the Applicant claims to be patiently waiting for the

Respondents to resolve said third party disputes for more than 10

years. This Court finds the said plea to be moonshine, as it is

common prudence that a party waiting for so long would raise a

dispute, more particularly the applicant being a business

establishment of a considerable size and standing. It would be too

creative for this Court to assume that the Applicant had indeed

raised a dispute, in the absence of placing a single communication

between the parties for the period between 26.03.2008 and

31.12.2016 i.e., before the unilateral cancellation of DGPA.

Therefore, this Court is of the view that the said plea was raised

only for the purpose of this Application.

25. Further, it is of consequence to refer to Clause 22 of the

DGPA dated 31.07.2007, in order to examine the its arbitrability.

The said clause is as under:

"22. Both the parties mutually agree that in the event of any doubt or dispute arising between the parties herein, the matter shall be referred to the mutually agreed arbitrator and the award passed by the arbitrator shall be binding on each party and the provisions of the Arbitration Act, 1940 shall be applicable."

26. The Hon'ble Supreme Court in Asian Avenues Pvt. Ltd. Vs.

Syed Shoukat Hussain15 held that as cancellation relates to an

issue arising out of the agreement, the same must be referred to

arbitration. The relevant observations are as under:

"7. The dispute, whether the Development Agreement stands cancelled or whether the agreement can be lawfully cancelled, is a dispute arising out of or in connection with the Development Agreement. Therefore, as per the arbitration clause, if the issue concerning cancellation is not mutually resolved, the same must be referred to arbitration.

(2024) 6 SCC 630

8. The only ground on which the High Court has interfered is that the adjudication pursuant to invocation of Section 31 of the Specific Relief Act is an adjudication in rem. However, in the case of Deccan Paper Mills Company Limited MANU/SC/0599/2020(2021) 4 SCC 786, this Court has categorically held that it is impossible to hold that an action instituted Under Section 31 of the Specific Relief for cancellation of an instrument is an action in rem. In view of the applicability of the arbitration Clause to the dispute subject matter of the suit filed by the Respondent, the learned Trial Judge was justified in passing an order Under Section 8 of the Arbitration Act by directing that the dispute be referred to the arbitration."

27. However, in the facts at hand, the Applicant herein against

the action of respondents cancelling the DGPA had first invoked

the extraordinary jurisdiction of this Court under Article 226 of the

Constitution of India by filing W.P. No. 12042 of 2018 and had

also obtained a favorable interim relief instead of invoking

Arbitration Clause contained therein. On the other hand a perusal

of the averments would reveal that the subject matter of the

disputes raised is the same as the present application. That apart,

the relief that can be granted in the Writ Petition, if the same is

allowed would be identical to the relief that can be sought and

obtained for before the Arbitral Tribunal. Thus, it is to be seen that

though the applicant was aware of the existence of the arbitration

agreement in the DGPA dated 31.07.2007, the applicant had

elected to file the aforesaid Writ Petition. Therefore, the applicant

having chosen a particular path and also obtained interim order

therein, which is continue to subsist as of date, allowing the present

application would result in parallel proceedings being continued at

the same time, which is impermissible in law (See: State of

Himachal Pradesh and Ors. Vs. Surinder Singh Banolta 16).

28. The High Court of Bombay through Justice D. Y.

Chandrachud (as his lordship then was) in Archetype India

Construction Consultants Private Limited Vs. The Bombay

Dyeing and Mfg. Co. Limited 17, held that an arbitration application

cannot be preferred without filing an application of Section 8(1) of

the Act, 1996, before the Court where the first remedy was

preferred, as they are parallel proceedings. It is of consequence to

note that the facts at hand are similar to the facts considered in

Archetype India's case (supra).

29. In light of the foregoing discussion, the present arbitration

application is dismissed.

(2006) 12 SCC 484

MANU/MH/0901/2012

Pending miscellaneous petitions if any shall stand closed. No order as to costs.

___________________ T. VINOD KUMAR, J Date: 04.06.2025 VSV/MRKR

THE HON'BLE SRI JUSTICE T. VINOD KUMAR

ARBITRATION APPLICATION No. 138 of 2018

4TH June, 2025 vsv/mrkr