Interim Order 8

Order Details: COPY OF ORDER
Pdf Text: In The Court of Sh. Sanatan Prasad,
District Judge-02, (East),
Karkardooma Courts, Delhi.
CS No.780/2024
In the matter of :-
M/s. Jaina Properties Pvt. Ltd. …..Plaintiff
Versus,
Ms. Saru Kapoor & Anr. …..Defendants
Application U/s 8 of A&C The Act, r/w Section 151, CPC, filed by the
defendants, seeking stay/dismissal of the Suit.
Present: Sh. Akshay Dhawan, Ld. Counsel for the plaintiff.
Sh. Mukesh Anand, Ld. Counsel for the defendants.
O R D E R
05.04.2025
1. In the present suit, filed by the plaintiffs, i.e., M/s. Jaina Properties Pvt.
Ltd., a Corporate Body, the reliefs of possession, damages and injunction/(s),
are sought, against the individual defendants/respondents/applicants, namely,
Ms. Saru Kapoor and Sh. Dinesh Kapoor, on the basis of separte, individual
allotment agreement/Flat Buyers’ Agreements, respectively.
2. The applicants/defendants, have, sought appointment of
Arbitrator/initiation of Arbitration Proceedings, by making a reference, in the
present matter, mainly on the submissions, that, as per the averments, made
and case pleaded by the plaintiff, in its plaint, that admittedly, as per Clauses
in the Lease Deed, the plaintiff company is bound to pay the ground rent and
other charges, viz., e-ground rent, interest, penalty etc., every six months, in
advance to DDA, i.e., lessor, an statutory authority, without demand being
raised by the lessor, which is disputed by the defendants and admittedly, this
fact is on record, that the defendants, in whose favour the plaintiff has
executed Flat Buyers’ Agreement, were not party to the said Lease Deed,
however, the plaintiff, while referring to the said Agreement, made in faovur
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of the defendants, mentioned that all the terms and conditions of the Lease
Deed, as well as, Agreement, are mandatory and binding upon the defendants
and thus, in Clause XI of the said Agreement, it was mentioned that the flat
buyer will abide by the terms & conditions of the Lease Deed, executed by
the lessor, in favour of the plaintiff, thereby, claiming that the terms &
conditions of the Lease Deed, executed by the lessor, are also applicable to
the defendants, admittedly, the defendants are not party to the said Lease and
there is an arbitration clause VI. in the Lease Deed, which refers to
arbitration in case of any disputes arising out of it. The applicants/defendants
stoutly submitted and deny any liability to pay any ground rent charges, as
demanded by the plaintiff, as per the terms and conditions of the Lease Deed,
and also that there cannot be any cancellation of the Flat/Storage Space,
allotted to the defendants, in this regard. Thus, such an action is illegal.
3. It, appears, that the Clause VI of the Lease deed, dated 09.08.1988 goes
to read as under :-
“VI. In the event of any question, dispute or difference arising under
these presents or in connection therewith (except as to any matters, the decision
of which is specifically provided by these presents), the same shall be referred
to the Sole Arbitrator of the Lt. Governor or any other person appointed by
him. It will be no objection that the arbitrator is a Govt. Servant and that he
has to deal with the matter to which, the Lease relates, or that in the course of
his duties as Government Servant, he has expressed views to all or any matters
in disputes and difference. The award of the arbitrator shall be final and
binding on the parties.
The arbitrator may with the consent of the parties, enlarge the time from
time to time for making and publishing the award.
Subject as aforesaid, the Arbitration Act, 1940 and rules thereunder, any
modification thereof for the time being in force, shall be deemed to apply to the
arbitration proceedings under this clause”, Further, the clause XI of the Flat
Buyers’ Agreement, (common to both the allottes/applicants/defendants), goes
to read as under :-
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“XI. The Flat Buyer will abide by the terms and conditions of the Lease
Deed entered into with the “Delhi Development Authority” and “Builders” in
respect of the aforesaid flat”.
4. It is, also, submitted that in terms of the Clause XI of the above,
commonly, applicable agreement, there is an inherent dispute regarding the
payment of any ground rent and so called cancellation of the Flat/(s),/Storage
Space/(s), of the applicants/defendants and since there is an arbitration clause
in the Lease Deed, as claimed by the plaintiff, that the terms and conditions
thereof, are, applicable, to the defendants, in the Flat Buyers’ Agreement, and
as such, the Court, has, no jurisdiction to entertain the present suit, which is,
mandatorily, to be referred to the arbitration, as per the settled law, by the
Hon’ble Supreme Court of India.
5. The plaintiff/respondent, has, submitted a reply to the above application,
to which, even rejoinder has been filed and parties have also submitted
synopsis of submissions/written submissions and arguments and Sh. Mukesh
Anand, Ld. Counsel for the applicants/defendants, have, also submitted brief
notes, therein, culling out the effects of the decisions of the Hon’ble Supreme
Court of India in Coax & Kings Ltd. v. SAP India Pvt. Ltd., (Arbitration
Petition(Civil) No.38 of 2020). DOD : 09.09.2024, by Hon’ble Mr. Justice
Dr. D.Y.Chandrachud, also concurring opinion of the Hon’ble Justice
P.S.Narasimha and its key takeaways. He has also relied on the authorities,
delivered by the Hon’ble High Court of Delhi, in Arbitration Petition
No.809/2019, titled as, Isha Kedia v. Milan R. Parekh, DOD : 07.10.2022,
also by Hon’ble High Court of Bombay, in case titled as, Cardinal Energy
& Infrastructure .. v. Subramanya Construction & Development Co.
Ltd., 2024 SCC Online Bom 964, further, by the Hon’ble High Court of
Delhi, in Arbitration Petition No.38/2024, titled as, KKH v. Finvest Pvt.
Ltd. & Anr. v. Jonas Haggard & Ors., DOD : 21.10.2024, on the other
hand, Sh. Akshay Dhawan, Ld. Counsel for the plaintiff/non-applicant has
relied on the decisions of Hon’ble Supreme Court of India, in Himangni
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Enterprises v. Kamaljeet Singh Ahluwalia, DOD : 12.10.2017, also by the
Hon’ble High Court of Gujarat, at Ahmedabad, in R/Civil Revision
Application No.123/2019, titled as Devshibhai Govindbhai Limbani &
Ors. v. Dhavalbhai Bhogilal Vyas & Ors., DOD : 10.12.2024, further, by
the Hon’ble High Court of Gauhati, in case No. Arb.A./8/2024, titled as M/s.
J.M.B.Construction & 2 Ors. v. Dr. Somesh Dhar & 3 Ors., DOD :
30.01.2025.
6. I have heard elaborated arguments by the Ld. Counsels for the parties and
gone through the authorities, relied on, by them, respectively, also, carefully,
perused the written submissions, made by them and brief notes, again, entire
material, available on record and the crux of the matter is that Sh. Anand
intends to plead on the strength of Clause VI. of the Lease Agreement for
ouster of the jurisdiction of the Civil Courts, by incumbent mandatory
appointment of the Arbitrator, in the scenario of making a reference
compulsorily, on the other hand, the crux of the authorities, relied on, by Sh.
Dhawan, is to the effect that the Civil Courts have jurisdiction to verify, if
there is an existence of veritable Arbitration Agreement between the parties,
as stipulated under the A&C Act, 1996. Further, the concept of parties, as
defined under Section 2(1)(h) of the Act, is, entirely, different from the
concept of ‘the parties/parties, claiming through, or, under a party’, to the
Arbitration Agreement.
7. The very basis of the contention, advanced by Sh. Anand, is by making
application of the doctrine of ‘Group of Companies’, and again, that too, in
the teeth and facing horizon of single economic unit and further, the inherent
jurisdiction of the Court to lift the corporate veil, or alter ego of a
Corporation, for taking appropriate view and thus, the law, as applicable, in
such a situation, emerges out, as detailed in the paragraph No.40 of the
decision Cardinal Energy & Infrastructure (supra), while quoting therein
the paragraph No.171 of the decision Coax & Kings Ltd., (supra), as
under :-
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"171. In case of joinder of non-signatory parties to an arbitration
agreement, the following two scenarios will prominently emerge :
first, where a signatory party to an arbitration agreement seeks
joinder of a non-signatory party to the arbitration agreement; and 6-
carbpl-2603-2024.doc second, where a non-signatory party itself
seeks invocation of an arbitration agreement. In both the scenarios,
the referral court will be required to prima facie rule on the existence
of the arbitration agreement and whether the non -signatory is a
veritable party to the arbitration agreement. In view of the
complexity of such a determination, the referral court should leave it
for the arbitral tribunal to decide whether the non-signatory party is
Indeed a party to the arbitration agreement on the basis of the factual
evidence and application of legal doctrine. The tribunal can delve
into the factual, circumstantial, and legal aspects of the matter to
decide whether its jurisdiction extends to the non-signatory party. In
the process, the tribunal should comply with the requirements of
principles of natural justice such as giving opportunity to the non-
signatory to raise objections with regard to the jurisdiction of the
arbitral tribunal. This interpretation also gives true effect to the
doctrine of competence-competence by leaving the issue of
determination of true parties to an arbitration agreement to be
decided by arbitral tribunal under Section 16.”; Further, the Hon’ble
Court has also drew the following conclusions :-
“H. Conclusions
172. In view of the discussion above, we arrive at the following conclusions:
a. The definition of "parties" under Section 2(1)(h) read with Section
7 of the Arbitration Act includes both the signatory as well as non-
signatory parties; b. Conduct of the non-signatory parties could be
an indicator of their consent to be bound by the arbitration
agreement;
c. The requirement of a written arbitration agreement under Section
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7 does not exclude the possibility of binding non-signatory parties;
d. Under the Arbitration Act, the concept of a "party" is distinct and
different from the concept of "persons claiming through or under" a
party to the arbitration agreement;
e. The underlying basis for the application of the group of companies
doctrine rests on maintaining the corporate separateness of the
group companies while determining the common intention of the
parties to bind the non-signatory party to the arbitration agreement;
f. The principle of alter ego or piercing the corporate veil cannot be
the basis for the application of the group of companies doctrine;
g. The group of companies doctrine has an independent existence as
a principle of law which stems from a harmonious reading of Section
2(1)(h) along with Section 7 of the Arbitration Act;
h. To apply the group of companies doctrine, the courts or tribunals,
as the case may be, have to consider all the cumulative factors laid
down in Discovery Enterprises (supra). Resultantly, the principle of
single economic unit cannot be the sole basis for Invoking the group
of companies doctrine;
i. The persons "claiming through or under" can only assert a right in
a derivative capacity;
j. The approach of this Court in Chloro Controls (supra) to the extent
that it traced the group of companies doctrine to the phrase
"claiming through or under is erroneous and against the well-
established principles of contract law and corporate law;
k. The group of companies doctrine should be retained in the Indian
arbitration jurisprudence considering its utility in determining the
Intention of the parties in the context of complex transactions
Involving multiple parties and multiple agreements;
l. At the referral stage, the referral court should leave it for the
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arbitral tribunal to decide whether the non- signatory is bound by the
arbitration agreement; and
m. In the course of this judgment, any authoritative determination
given by this Court pertaining to the group of companies doctrine
should not be interpreted to exclude the application of other
doctrines and principles for binding non-signatories to the
arbitration agreement."; And after due application of the principles of
law, as above, and further law laid down by the Hon’ble Supreme
Court of India, in the case of Oil & Natural Gas Corporation Ltd.
v. Discovery Enterprises Pvt. Ltd., [5(2022) 8 SCC 42], I am of the
clear view that none of the circumstances for the application of the
doctrine of ‘Group of Companies’, that too, in the teeth and facing
horizon of the single economic unit, in the present case, are available,
inasmuch as, the existence of the Arbitration Clause, in the Lease
Deed, dated 09.08.1988, is concerned, cannot be stretched for making
it applicable to various flat buyers, who might keep changing faces by
different allotment to different persons and the Arbitration Clause in
question, was solely intended to be made, applicable to the parties to
the Lease Deed, alone and even if, the plaintiff seeks to make all the
relevant clauses of the Lease Deed, applicable to the allottee(s),/flat
buyers, for different unit, in terms of the Clause XI of the Flat
Buyers’ Agreement, as being consequences, flowing from his
corresponding obligation to the Lessor, yet, existence of reading such
a veritable Arbitration Clause in the Flat Buyers’ Agreement, would
go too far, and as such, the existence of an Arbitration Agreement, as
stipulated in Clause VI, between the Lessee and the Lessor, cannot be
stretched-up, in the allotment/Flat Buyers’ Agreement, by any stretch
of imagination and thus, the present application, is wholly
misconceived and any attempt to incorporate & read the same
obviously, shall be far fetched and will amount to going too, far –
even on the application of the doctrine of ‘Group of Companies’, that
too, in the teeth and facing horizon of the single economic unit, if at
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all to be considered, and, has, clearly, been, made with a view to
delay the proceedings, by the defendants, in the suit and as such, the
application, is liable for rejection and is accordingly, dismissed with
no order as to costs.
8. Put up on 29.04.2025 for written statement/reply with copy to other side
in advance and against receipt. No further opportunity shall be allowed to the
defendants, as they have been served, as early as, on 26.12.2024, itself and
considerable time has already gone by, therefore, the defendants are
forewarned, accordingly.
Announced in the open
Court on 05.04.2025
( Sanatan Prasad )
District Judge-02
(East)/KKD/Delhi.
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