In a landmark decision on December 15, the Supreme Court ruled in favor of arbitration in a property dispute involving the cancellation of a deed. The Court rejected the argument that the dispute was not arbitrable since it involved an action in rem, asserting that the cancellation of a deed is, in fact, an action in personam and therefore falls within the purview of arbitration.
The case revolved around the cancellation of a Conveyance Deed and registered Development Agreements. Notably, these documents lacked an explicit arbitration clause. However, the Court emphasized that the Tripartite Agreements, dated 31.03.2007 and 25.07.2008, laid the foundation for all subsequent agreements between the parties, including those at the center of the current dispute. These Tripartite Agreements contained a broad arbitration clause, leading the Court to affirm the decision to refer the matter to arbitration.
Justices Aniruddha Bose and Sudhanshu Dhulia asserted, “The broad language of the ‘arbitration clause’ in the two Tripartite Agreements would cover the dispute raised by the appellants before the Civil Court, and hence the case has been rightly referred for arbitration.”
The appellants, who were the plaintiffs in a civil suit, sought a declaration of the nullity of the Conveyance Deed and the valid termination of registered Development Agreements. In response, the defendants, the present respondents, invoked Section 8 of the Arbitration & Conciliation Act, 1996, arguing that the matter should proceed to arbitration based on the arbitral clause in the Tripartite Agreements.
After the trial court and the Bombay High Court supported the referral to arbitration, the case reached the Supreme Court. The Court, acknowledging the limited role of a court in arbitration matters, examined the arbitration clause in the Tripartite Agreements, emphasizing the 2015 amendments to the Arbitration & Conciliation Act.
“The court only has to see whether a valid arbitration agreement exists,” the Court noted.
Addressing the appellant’s claim that the dispute was non-arbitrable, the Court cited precedents such as Booz Allen and Hamilton Inc. v. SBI Home Finance Limited and Others, (2011) 5 SCC 532, and Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC, asserting that the case did not fall into any category where arbitration was inappropriate.
The Court also dismissed objections regarding the nature of the dispute as an action in rem, relying on Deccan Paper Mills v. Regency Mahavir Properties (2021) 4 SCC 786, and rejected claims of fraud for lack of substantiation.
In conclusion, the Supreme Court declined to interfere with the lower courts’ findings and dismissed the appeal in the case of SUSHMA SHIVKUMAR DAGA vs. MADHURKUMAR RAMKRISHNAJI BAJAJ, Diary No.- 1164 – 2022.
