Enforcement of Arbitration in Development Agreements: Supreme Court Ruling
The case of M/S. Asian Avenues Pvt Ltd. vs. Sri Syed Shoukat Hussain revolves around the enforcement of an arbitration clause in a development agreement. The Supreme Court of India, in its ruling on April 28, 2023, reinstated the order of the Trial Court that directed arbitration as per the agreement terms.
The dispute originated from a Development Agreement-cum-General Power of Attorney executed on October 23, 2008, between the parties. The respondent-plaintiff, claiming ownership of the disputed property, sought cancellation of the agreement and possession of the suit property after a disagreement arose between the parties. The appellant, however, contended that the dispute should be referred to arbitration under the agreement’s arbitration clause.
Background of the Case
The respondent-plaintiff filed a suit requesting a court decree for the cancellation of the Development Agreement and delivery of possession. The appellant, invoking the arbitration clause in the agreement, applied for the dispute to be referred to arbitration.
The Trial Court ruled in favor of the appellant and exercised its power under Section 8 of the Arbitration and Conciliation Act, 1996, directing the parties to arbitration. However, the High Court overturned this decision, reasoning that the adjudication of the agreement’s cancellation was an action in rem and hence not subject to arbitration.
Arguments by the Parties
Appellant’s Submissions
The appellant’s counsel argued that the High Court had erroneously relied on a prior decision that treated the cancellation of a development agreement as an action in rem. The counsel cited the Supreme Court ruling in Deccan Paper Mills Company Limited v. Regency Mahavir Properties [(2021) 4 SCC 786], which stated that an action under Section 31 of the Specific Relief Act, 1963 is not an action in rem.
The counsel emphasized that the arbitration clause in the agreement mandated that all disputes arising from the agreement must be referred to arbitration. The High Court’s interference, therefore, was unwarranted.
Respondent’s Submissions
The respondent’s counsel contended that the arbitration clause was inapplicable since the suit sought cancellation of the agreement under Section 31 of the Specific Relief Act. According to the respondent, such issues can only be adjudicated by a competent civil court, not through arbitration.
Supreme Court’s Analysis and Ruling
The Supreme Court examined the arbitration clause, which stipulated:
“All the disputes arising out of or in connection with this agreement shall be initially resolved by mutual discussions among the developer and landowner or the nominated representatives of both the parties. In case of disputes not resolved by mutual discussions, the same shall be referred to arbitration in accordance with the provisions of the Arbitration and Conciliation Act 1996.”
The Court held that the question of whether the Development Agreement stood canceled or could be lawfully canceled was directly related to the agreement and, therefore, fell within the arbitration clause’s scope.
Relying on its decision in Deccan Paper Mills, the Court reaffirmed that an action for cancellation of an instrument under Section 31 of the Specific Relief Act is not an action in rem. Consequently, the High Court’s reasoning was incorrect, and the Trial Court’s order referring the matter to arbitration was legally sound.
Final Judgment
The Supreme Court allowed the appeal, setting aside the High Court’s order and restoring the Trial Court’s ruling. The parties were directed to proceed with arbitration as per the agreement.
Judges: Abhay S. Oka and Rajesh Bindal
Judgment Date: April 28, 2023
Petitioner Name: M/S. Asian Avenues Pvt Ltd..Respondent Name: Sri Syed Shoukat Hussain.Judgment By: Justice Abhay S. Oka, Justice Rajesh Bindal.Place Of Incident: Not Specified.Judgment Date: 28-04-2023.
Don’t miss out on the full details! Download the complete judgment in PDF format below and gain valuable insights instantly!
Download Judgment: ms.-asian-avenues-p-vs-sri-syed-shoukat-hus-supreme-court-of-india-judgment-dated-28-04-2023.pdf
Directly Download Judgment: Directly download this Judgment
See all petitions in Arbitration Awards
See all petitions in Dispute Resolution Mechanisms
See all petitions in Arbitration Act
See all petitions in Enforcement of Awards
See all petitions in Settlement Agreements
See all petitions in Judgment by Abhay S. Oka
See all petitions in Judgment by Rajesh Bindal
See all petitions in allowed
See all petitions in supreme court of India judgments April 2023
See all petitions in 2023 judgments
See all posts in Arbitration and Alternate Dispute Resolution Category
See all allowed petitions in Arbitration and Alternate Dispute Resolution Category
See all Dismissed petitions in Arbitration and Alternate Dispute Resolution Category
See all partially allowed petitions in Arbitration and Alternate Dispute Resolution Category
