The High Court · 2025

...Respondent Arbitration Apprication Under section 11 (5) & (6) of Arbitration and ^ conciliation Act' 1996 praying that in the stated in accompanying affidavit rhe High court may be preased to uppoiniln Arbitrator to adjudicate the disputes which arose under tire Devetopmeni cum GpA dated 01.10.2014 entered into between tfre iretitioner and the Respondent to adjudicate the disputes in respect of the fairure of the respondent to compry with the terms and conditions under the said Development ngreement. Counsel for the petitioner : Mr. Ashok Kumar Agarwal, "ircrm.tinces 'Agreement representing M/s Lex Arjava LLp Counsel for the Respondents : Mr.V.S.Sudhakar The Court made the fottowing : JUDGMENT '6 THE HONOURABLE SRIJUSTICE B. VIJAYSEN REDDY ARBITRATT ON APPLICATION No.303 OF 2024 JUDGMENT:

1.1. The appticant and her two sisters Mrs' Sukhdeep Kaur Mehta and Mrs. Gagancleep Kaur Anand are joint owners of the property bearing MunicipalHouseNo.8.2-699l1(old)and8-2-699111A(New)consistingof Ground and First Floor, admeasuring 554 square yards' fbming part of Survey No.346 situated at Bhola Nagar, Road No'12' Jubilee Hills (presently Banjara Hills) Hyderabad (hereinafter referred to as 'schedule properly').

1.2. The applicant along with her two sisters has entered into a registered Development Agreement cum General Power of Attomey bearing document No.3778 of 2Ol4 dated 01'10'2014 (DAGPA) with the respondent for construction of a commercial complex in the schedule property.

1.3. As per the terms and conditions of the DAGPA, it was agreed that the parties will share built up area in the ratio ctf 35o/o : 65%o i.e., 65Yo to the orvners and 35Yo to the developer' Grievance of the applicant is that the respondent obtained permission for construction of a building on the schedule properly vide Pefut No.53569,tIOlC2lClR- 2 AYRJ. AA Nojof of2024 - 10/2016 dated 14.08 2019 from the Greater Hyderabad Municipal Corporation, Hyderabad, (GHMC) for construction of two cellars for parking, ground and four upper floors. But, the respondent constructed ground and three upper floors only raising the height of the ground floor and has failed to construct the fourth floor as per the sanctioned plan. It is stated that the construction was to be completed by the respondent within a period of twenty four (24) months with a grace period of six (6) months i.e., 30 months in total, from the date of approval by the GHMC. In case, the respondent fails to complete the building and fails to deliver their built up area share to the applicant and her sisters within the stipulated period, the respondent wiil be liable to pay Rs.2,00,000/- (Rupees two rakhs only) per month to the appricant and her two sisters who are entitled to l/3.d each i.e., Rs.66,666.66 paise.

1.4. It is submitted that as per Clause 4 of the DAGpA, the respondent is liable to pay an amount of Rs.36,66,666.30 paise (Rupees thirty six lakhs sixty six thousand and six hundred and sixty six and thirty paise only) to the applicant for delay of 55 months i.e., from 14.0g.2019 till May 2024 in compreting the construction and the liabirity of payment of { I l G, Rs.66,666.66 Per month continues from Ol '06 '2024 onwards titl J BVRJ, \A No303 of 2024 construction of fourth floor'

1.5. The case of the applicant is that (i) there was delay by the respondent in obtaining the sanctioned plan' and (ii) the respondent has not handed ovet 65%oof the fourth floor to the applicant and her sisters'

1.6. It is submitted that the respondent has entered into supplementary agreement on 07'06'2018 to which the applicant is not a signatory. Signature of the applicant in the said supplementary agreement dated 07.06'2018 is a tbrged one' as such' the same is not binding her' By forging signature of the applicant in the supplementary agreement dated 0T.06.2013,therespondentcausedmentalagony'anxietyanddisturbance to the applicant, as such, the respondent is tiable to pay Rs' 1 '00 crore to the applicant towards damages' In addition to that the respondent is liable to pay property tax in respect of the subject building'

1.7. The applicant has issued legal notice dated 06'05'2024 to the respondent invoking arbitration clause and nominated Justice Vilas V. Afzulpurkar. Fonner Judge of the erstwhile High Court forthe State of Telangana and the State of Andhra Pradesh' as Arbitrator for deciding the 4 BT/RJ. AA NoJ03 of 2024 disputes between the appricant and the respondent. Even after service of notice, the respondent neither replied nor agreed for appointment of Arbitrator. Hence, this application.

2.1. The case of the respondent is that the subject building was constructed in accordance with the sanctioned pian and Occupancy Certificate (OC) was issued by the GHMC in respect of the subject building comprising of ce[[ar, sub-cellar, ground floor, mezzanine floor and three upper floors; thus, five (5) floors have been constructed which is as per the sanctioned plan and OC was accordingly issued.

2.2. The applicant has filed suit in O.S. No.3 l0 of 2O24on the file of the Hon'ble XXVI Additional Chief Judge, City Civil Court, Hyderabad, for partition and separate possession of the subject property and the same is pending adjudication. The suit has been filed making a false craim of partition, even though the subject property was partitioned between the builder and the applicant and her sisters by virtue of registered Supplementary Development Agreement bearing document No.2109 of. 2023 dated' 27'03.2023 wherein respective shares of alr the parties have been demarcated. The applicant approached this Court with unclean hands. -7 Ir ) B\ru, \A No.3o3 ot 2024 ,. The applicant is not entitled to any relief' much [ess' compensation at the rate of Rs.66,66 6.661- per month as alleged in the application'

2.3.Thisrespondentwasexclusivelygiven2g63squarefeetinthe first floor instead of giving shares in each individual floors' The respondent opted exclusive share in the first floor' as such' there is no need for any separate demarcation in the secoud and third floors' The sisters of the applicant do not have any dispute with the respondent so far as their shares are concerned' The applicant has not made her sisters as parry respondents to this application which shows that she has not approached this Court with clean hands' The respondent has paid property tax to the extent of his share as per Clause 15 of the DAGPA

2.4. Theallegation that fourth floor is not completed is incorrect' ln fact, if additional floor is constn'rcted' respondent would stand to benefit as he will be entitted to 33%o share in the additional floor' However' the respondent cannot construct additional floor as it will be in deviation of the sanctioned plan The applicant having filed suit in O.S No 3l0 of 2024 and chosen to go before the civil CourL cannot seek reference to the Arbitrator as she has waived her right to pursue arbitral proceedings' Thus, the instant arbitration application is not maintainable' 6 B!.R,I. AA No.303 ot 20r.r :.

3. Heard Mr. Ashok Kumar Agarwal, learned counsel, representing M/s. Lex Arjava LLp, leamed counsel for the applicant, and Mr. V.S. Sudhakar, learned counsel for the respondent, and perused the material on record

4. The learned counsel flor the applicant submitted that maintainability of arbitral proceedings is a point to be decided by the learned Arbitrator. The dispute before the civil court and the claim under arbitration notice are distrnct and separate. The DAGpA contains arbitration clause. As dispute has arisen between the parties, arbitration clause has been validly invoked and thus this Court having limited jurisdiction under section l l(6) of the Arbitration and conciliation Act 1996 (for short 'Act') has to allow the arbitration application leaving the contentious issues open to be decided by the learned Arbihator.

5. The leamed counsel for the respondent placed reliance on the decision of the Hon'ble Supreme Court in Sukanya Holdings (p) Ltd. V. Jayesh rr. Pandyar and also the High court of Delhi in shree cement Limited v. Trehan Farms pvt. Ltd.,2 and submitted that merely because there is arbihation agreement between the parties, it cannot be said that the ' lzoo:) s scc sr r ' zorc izt Dtt m ---< ,\ 7 B\'RJ, AA No 303 of 2024 sr:it perse is not maintainable Even if the parties agreed for arbitration' when one party institutes civil suit, if the other party does not raise objection of arbitration as required under Section 8(t) of the Act' the arbitration agreement is deemed to have been waived' The suit for partition was instituted by the applicant herself and though the relief therern 'is for partition and separate possession in substratum' the clairn in the partition suit and in the arbitration notice is one and the same Assuming that the claim in the suit and arbihation notice are distinct and scparate' still the irstant application is not maintainable as the provisions of the Act does not permit sptitting of claims. Therefore, the arbitration apptication is liable to be dismissed.

6. Section 8 of the Act reads as under: "8. Power to refer parties to arbitration where there is an arbitration agreement. - (1) A judicial authority, before which an actlon rs brought in a matter which is the subject of an arbitration agreen-rent shall' if a party to the arbitration agreement or any person claiming through or under him, so applies not later than the date of submitting his first statement on the substance of the dispute' then, notwithstanding any judgment, decree or order of the Supreme Court or any Court, refer the partles to arbitration /- 8 BYRJ. AA No-J03 of202{ a\ unless it finds that prima facie no valid arbitration agreement exlsts (2) The application referred to in sub-section (l) shall not be entertained unless it is accompanied by the original arbitration agreement or a duly certified copy thereoC Provided that where the original arbitration agreement or a certified copy thereof is not available with the party applying for reference to arbitration under sub-section (l), and the said agreement or certrfied copy is retained by the other party to that agreement, then, the party so applyrng shall file such application along with a copy of the arbitration agreement and a petition praying the Court to call upon the other party to produce the original arbitration agreement or its duly certified copy before that Court. (3) Notwithstanding that an application has been made under sub-section (l) and that the issue is pending before the judicial authority, an arbitration may be commenced or continued and an arbitral award made. 7 In Shree Cement Limited's case (Supra 2), the High Court of Delhi held as under "8. I have hereinabove observed that the impugned order is patently illegat, inasmuch as the Arbitration Act, though a law within the meaning of Order 7 Rule I I (d) of CpC but is not an absolute bar to the marntainability ol a suit. The said Ac! vide Section 8 thereof mandates the Judicial Authority 9 AVRJ. AA No.3ol or 202{ before r.vhich an action is brought in a matter which is the subject matter ol an arbrtration agreement to refer the parties to arbrtration, only if a party to the arbitration agreement or any person claiming through him or under hrm applies. not later than when submitting his first statement on the substance ol the drspute. If no such application under Section 8 rs filed, at the stage provided therefor, the suit will proceed notwthstanding the arbitratron agreement between the partres and the Crvil Court would not be denuded of its..yurisdiotion to try the suit Save for Section 8, there is no other provision in the Arbrtration Act, for it to be said that the very existence of an arbitration clause is a bar to the maintainabilify olthe surt. What follows is, that the existence of an arbitration clause does not come in the way of institution of the suit and only il the defendant(s), upon being served with the summons oi the suit, apply under Section 8, would be question of the non- marntainability of the suit and referring the party to arbitratron would arisc. 9

10. I have, dealing with the said subject rn Roshan Lal Gupta r. Parasram Holdings P\4. Ltd. held- "lt is not as if the civil court per se does not have jurisdrction to entertain a suit emanating lrom a transaction subject matter ofarbitration agreement A civil court cannot dismiss a suit instituted before it, even though found to be subject matter ofan arbitration agreement, at the threshold It i l0 BI'RJ. AA No.303 of2024 is always open to the defendant to the suit to waive, give up and abandon the plea olarbrtration and rf that were to happen then the suit wilI continue belore the civil court. The manner in which the defendant in a suit which is the subject matter of an arbitration agreement is to set up the plea ofarbitration has been prescribed in Section 8 of the Act. Such a plea has to be rarsed not later than when submitting the first statement on the substance of the dispute. If such a plea is not raised while submitting the first statement on the substance of the dispute, the defendant is thereafter barred lrom raising such a plea and if that be the position then it cannot be argued that even though the plea is not raised in the manner prescribed in Section 8 ofthe Act, it is open to the defendant thereafter also to contend that the suit rs barred by virtue ofsection 5 olthe Act-"" 8 In Sukanya Iloldings' case (Supra l), the Hon,ble Supreme Court held as under: "12. For interpretation ofsection g, Section 5 would have no bearing because it only contemplates that in the matters govemed by Part I of the Act, the judicial authority shall not intervene except where so provided in the Act Except Section 8, there is no other provision rn the Act that in a pending suit, the dispute is required to be referred to tl.re arbitrator. Further, the matter is not required to be reGrred to the Arbitral Tribunal, if (1) the parties to the arbitration agreement have not filed any such application lor referring the dispute to the arbitrator; (2) in a pending suit, such application is not filed II BI'RJ, AA No.l03 of 2024 belor e submitting first statement on the substance of the dispute; or (3) such apphcation is not accompanied by the original arbitration agreement or duly certifred copy tltereof' This would, therefore, mean that the Arbitration Act does not oust the .lurisdiction ofthe civrl court to decide the dispute tn a case where parties to the arbitration agreement do not take appropriate steps zrs contemplated under sub-sections (l) and (2) ofsection 8 of the Act.

13. Secondly, there is no provision rn the Act that when the subject-matter ol the suit includes subject-matter of the arbitration agreement as well as other disputes' the rnatter is required to be referred to arbitration There is also no prorision lor splitting the cause or parties and referring the sub.;ect-matter of the suit to the arbitrators'

14. Thirdty, there is no provision as to what is required to be clone irt a case where some parties to the suit are not parties to the arbttration agreement. As against this, under Sectron 24 of the Arbitration Act, 1940, some of the parties to a srrtt could apply that the matters in difference between them be relerred to irbitration and the court may refer the same to arbitration provided that the same can be separated from the rest ol the subject-matter of the suit The section also provrded that the surt would continue so far as it related to parties who trave not loined in such aPPlication

15. The relevant language used in Section 8 is "in a matter wtrich is the subject of an arbitration agreement"' The court is required to refer the parties to arbitration' < t2 BVRJ, AA No.303 of202{ Therefore, the suit should be in respect of..a matter,,which the parties have agreed to refer and which comes within the ambit of arbitration agreement. Where, however, a sult ts commenced - "as to a matter,, wirich lies outsrde the arbitratron agreement and is also between some ofthe parties who are not parties to the arbitration agreement, there is no question of application of Section 8. The words ..a matter,, indicate that the entire subject-matter of the suit should be subject to arbitration agreement.

16. The next question which requires consideration rs - even if there rs no provision for partly referring the dispute to arbitration, whether such a course is possible under Section g of the Act. In our view, it would be difficult to give an interpretation to Section 8 under which bifurcation of the cause of action, that is to say, the subject_matter of the surt or in some cases bifurcation of the suit between parties who are parties to the arbitration agreement and others is possibte. This would be laying down a totally new procedure not contemplated under the Act. If bifurcation ol the subject- matter of a suit was contemplated, the legislature would have used appropriate language to permit such a course. Since there is no such indication in the language, it foliows that bifurcation of the subject-matter of an action brought before a judicial authority is not allowed

17. Secondly, such bifurcation ofsuit in hvo parts, one to be decided by the Arbitral Tribunal and the other to be decided by the civil court would rnevitably delay the proceedings. The whole purpose of speedy disposal of dispute and decreasing 1 I3 BVRJ' A-A No 301 ot 2024 the cost of Iitlgatron would be frustrated by such procedure lt would also increase the cost of litigation and harassment to the parties and on occasiolls there is possibility of conflicting judgments and orders by wo different forums " 9. From a reading of Section 8 of ttre Act and the decisions referred supra. it is clear that fiturg ol suit in connection with a dispute having' arbifiation agreement per se is not baned' When a proceeding is initiated before a Forum or a Civil Court' the contesting party is requiled to raise objection as regards existence of arbitration clause at the time of filing fust statement under Secdon 8(1) of the Act' In the present case' frling of apptication under Secdon 8(1) of the Act does not arise as the respondent did not hle any suit as such so as to give scope to the applicant to raise objection under Section 8(1) of the Act lnterestingly' the applicant herself has frled the suit Thus' on the anatogy of waiver of arbitradon clause under Section 8(l) of the Act' the applicant having herself instituted the suit has waived her right to seek reference of dispute to arbiffation' 10' The suit is frled alleging that the builder - defendant' who is respondent herein' has constnrcted ground + three floors instead of ground + four floors lt is fufiher stated in paragraph No 4 of the plaint that the appticant is proceeding with arbitration for whilh separate legal notice has t4 AA BVRJ, 3fi of 202{ ^n been issued. If was also contended in the suit that supplementa_ry agreement d.ated 07 06.20 l g was not signed by the applicant and her signature on it was a forged one. The subsequent supplementary agreement bearing document No.2l09 of 2023 dated, 27.03.2023 was executed suppressing the earlier supplementary agreement dated 07.06 20lg The applicant has hurriedly asked to sign the subSequent supplementary agreement dated 27.03.2023 wherein shares of the parties have not been demarcated by metes and bounds. The applicant issued legal notice dated 06.05.2024 calling upon defendant Nos.l to 3, who are sisters of the applicant and the respondent herein, to execute supplementary agreement to partition the suit schedule properties. Assuming that the craim in the suit and that arbitration are distinct and separate, bifurcation of claims / cause of action is not permissible in view of the law laid down by the Supreme Court in paragraph Nos.13 to 17 in Sukanya Holdings, case (Supra l). Further, the appricant has arso not chosen to make her sisters as parties to this application and even on this ground also, the application is riabre to be dismissed ll. For the aforesaid reasons, the arbitration application IS dismissed. No order as to costs. i5 BVRJ, A No.303 of2024 Asasecluelthereto,miscellaneousapplications'ifany'pendingin the arbitration application stand closed SD/. A.V.s.s.c.s .M. SARMA .,uTREGISTRAR //TRUE COPY/I onef air".plf :?[iJ"tJ:.:[,Jt"l'':^x?"Yl'": To, CTION OFFICER i ;\AN REDDY r) . l3[3313.',i',,I*i?iffif *]ffi4[i"f"|.i,J[u.-l1,,,,o'*andcompanv i trl" una"t Secrelary' t Affairs, New Delhr +. rn" ii LR copies , - -..rtes Association Library, High court for the state of t ilffiil'H,rf 3""",T;;,'ai"s' ; HYderabad

6. Two CD CoPtes SVS/gh \{ - J HIGH COURT 5 DATED:1 5t04t2026 aT. r- o [1 rt\. ?tt15 -Z ,.',2', (..' _'-,,/ :: - i..'-i-:-.:(- r; ORDER ARBAPPL.No.303 of 2024 /:,, _-f{ DISMISSING THE ARBITRATION APPLIGATION .@s %tujU