JUDGMENT
1. The Petitioner was the Defendant in the original suit who had made an application for reference of the dispute between the parties to arbitration U/s.8 of the Arbitration Act. The learned Judge, City Civil Court, Dindoshi, Mumbai rejected the said application on 4th January, 2013 which order has been challenged in this Writ Petition.
2. The parties entered in to an agreement for flat purchase. The Respondent herein/the Plaintiffs in the suit (Plaintiffs) entered into an agreement on 12 June, 2008 for purchase of certain commercial premises for the consideration mentioned thereunder. The agreement was executed under provisions of Maharashtra Ownership of Flat Act, 1963 (MOFA). The Plaintiffs as the purchaser of the commercial premises also would be a flat purchaser in view of the definition of flat U/s.2(a-1) of MOFA. The agreement provided inter-alia a clause relating to the reference of the disputes between the parties being the flat purchaser and the developer to arbitration under clause 61 thereof.
3. Consequently when the Plaintiffs sued to enforce the agreement and the various provisions of MOFA as flat purchasers, the Petitioner, who was Defendant No. 1 in the suit, took out its application for referring the dispute to arbitration.
4. Defendant No. 1 relied upon the judgment in the case of P. Anand Gajapathi Raju v. PVG Raju, AIR 2000 Supreme Court 1886, that Section 8 is peremptory and therefore it is obligatory upon the Court to refer the parties to arbitration in terms of the arbitration agreement, which has been upheld in the case of Hindustan Petroleum Corpn. Ltd. v. Pinkcity Midway Petroleums., AIR 2003 Supreme Court 2881, that it is mandatory for the Court to refer the dispute for arbitration once the arbitration clause is accepted by the parties.
5. However, the suit was filed not between the parties to the arbitration agreement only. The Plaintiffs indeed sued the developer for orders and direction to comply with the statutory obligations under the MOFA set out in the plaint and for injunction restraining development, construction and other activities by the developer, Defendant No. 1 but also sued the Mumbai Municipal Corporation (MMC) to issue stop work notice and stop of development activities and revoke and cancel the amended plans for further development and construction of the building.
6. All the parties to the suit were, therefore, not the parties to the arbitration agreement. Defendant Nos. 2 and 3 were outside the agreement.
7. As held in the case of Sukanya Holdings P. Ltd. v. Jayesh H. Pandya, (2003) 5 SCC 531 in paragraph 13 of the judgment that there was no provision for splitting case of parties and refer the subject matter of the suit to the arbitrators and hence it held that unlike U/s.24 of the Arbitration Act, 1940 the matter not between all the parties to the arbitration agreement could not be referred to arbitration because the entire subject matter of the suit should be subject to the arbitration agreement. All the parties to the action were required to be parties to the agreement upon which alone the matter in dispute would be referred to the arbitration. Hence despite the primacy of the arbitration as a forum for alternative resolution for disputes, if all the parties to the suit were not parties to the arbitration the matter could not be referred to arbitration U/s.8 of the Arbitration and Conciliation Act, 1996 (Arbitration Act, 1996) because the matter of reference could not be bifurcated under that provisions of Section 8 of the Arbitration Act, 1996. The case of Sukanya (Supra) has been considered in the Chloro Controls India P. Ltd. v. Severn Trent Water Purification INC, (2013) 1 SCC 641 but left unaltered, whilst holding that that case referred to Section 45 of the Arbitration Act which fell under Part II thereof unlike the case of Sukanya (Supra) which fall under Part I and therefore did not apply to it, it was also observed in Paragraph 95 of the judgment that unlike Section 24 of the Arbitration Act, 1940 which allowed reference to arbitration by some of the parties, Section 8 was not framed so and hence the judgment in the case of Sukanya (Supra) was left at that.
8. Consequently though the judgment in the case of P. Anand (Supra) laid down four parameters for reference to arbitration U/s.8, the later judgment in the case of Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., AIR 2011 Supreme Court 2507 laid down five such parameters including that all the parties to the suit are the parties to the arbitration agreement. Consequently since the Defendant Nos. 2 and 3 the MMC and its officer were not parties to the arbitration agreement, the learned Judge rightly rejected the application.
9. It has been contended on behalf of the Appellant herein (the Defendant/Developer) that joining the Municipality was malafide act. It was made to prevent the matter being sent to arbitration. MMC was not a necessary party. The required statutory notice U/s.527 of the MMC Act was not given. In paragraph 20 of the plaint, the Plaintiff averred that the notice was not necessary as the cause pleaded did not arise from any action of Defendant No. 2. It was, therefore, argued that additional Defendant Nos. 2 and 3 as party Defendants lack bonafides and the plaint filed against the MMC had itself to be rejected as held in the case of Sadu Vithal Joshi v. The Municipal Corporation, 1986 (3) Bom.C.R 628 and the dispute should have been referred to arbitration.
10. Though it may be stated that a Court should not countenance any act indirectly done which could not have been done directly and which would constitute malafides or frivolity, it would require the plaint to be first rejected against the parties who were needlessly added upon holding that they indeed were so added and then alone the reference of all the dispute to arbitration could have been made in view of the Judgment in the case of Sukanya (Supra) r/w. the Judgment in the case of Chloro Controls (Supra).
11. To this extent the rejection of the application is correct.
12. However, it has been held by the learned Judge in the impugned order that a suit filed for enforcing the provisions of MOFA U/s.4, 20, 11, 12 etc. gave it exclusive jurisdiction. Though the jurisdiction of Court remained under MOFA, the observation that it would exclude any matter being referred to arbitration therein may not be correct. The observation of the learned Judge in paragraph 15 of the order that because specific proforma of the agreement has been provided under MOFA, which does not contemplate an arbitration clause and the duty of the Court is to follow the mandate under the Act, there is nothing for arbitrator to do in the matter and hence no matter under MOFA could be referred to arbitration is seen to be incorrect.
13. Section 4(1) of MOFA requires an agreement to be entered into by developer/promoter with the flat purchaser upon receiving 20% of the sale price. section 4(1a) of mofa enjoins that the agreement prescribed under sub section 1 shall contain inter-alia the particulars specified in clause ‘a’ of that section along with the copies of documents specified in clause ‘b’ of the section. They would mean that whatever are the particulars to be specified by way of the legislative provision are mandatory. These are inter-alia the particulars to be specified. Hence other particulars may be specified in the agreement. That would be the contract between the parties. The parties would be free to enter in to any such additional contract by way of such additional clauses, of course, provided they are not against the provision of MOFA or otherwise against the provisions of any other law. In this case the parties entered in to an agreement having arbitration clause. That agreement is not an illegality. In fact it is a welcome measure. It would bring to an end of the dispute by the alternative method of resolution for disputes more expeditiously than by adjudication in a Court of law. The parties are, therefore, free to and have the liberty to enter in to any agreement inconsonance with the Arbitration Act, 1996 to have been resolved thereunder. If any suit is by and between parties to such agreement alone it would have to be mandatorly referred to arbitration as agreed by them upon a reference being made under the statutory mandate contained in Section 8 of the Arbitration Act, 1996 and the law laid down with regard to its application upon court in the case of P. Anand (Supra) and HPC (Supra).
14. Mr. Naidu was right in referring to judgment in the case of Jayantilal Investments v. Madhuvihar Co-Op. HSG Soc.(2007) 9 SCC 220 holding in paragraph 17 thereof that the agreement between promoter-flat purchaser must comply with form 5 which includes a form of agreement which could be modified and adapted in each case depending upon the facts and circumstances of each case so far as it includes the mandatory clauses.
15. However, in this case the suit is not filed by and between only the parties to the arbitration agreement. It is correctly filed against other parties also as well be seen from another order of this Court in AO No. 514 of 2013 passed today. Consequently all the five mandates in the case of Booz Allen (Supra) for reference of the Court would not be satisfied in this case.
16. Consequently the impugned order, so far as it considers the aforesaid judgments including the judgment in the case of HPC (Supra) and P Anand (Supra), cannot be faulted, the view of the learned Judge in paragraph 15 notwithstanding. Hence the rejection is proper. The dispute cannot be referred to arbitration upon the suit being filed since the Suit is justifiably filed against Defendant Nos. 2 and 3 also for reliefs which have come to be correctly granted and upheld in AO No. 514 of 2013.
17. Consequently the impugned order of rejection of the Petitioner's application is confirmed.