Villa Realcon LLP v. Chandresh Parbat Gothi

16. According to Chandresh, the Consent Decree and the 2019 MoU are interconnected and Chandresh would have never given up his rights even in respect of the Allotted Land but for the promise of his share in the balance entitlement that would potentially come from CIDCO. The 2019 MoU recorded that Chandresh would be entitled to approximately 26,175 square meters in terms of the balance entitlement and Chandresh would transfer and assign his share out of it to Villa Realcon and Villa Modern on an as-is-where-is and as-is-what-is basis. In return for his relinquishment of entitlement in favour of Villa Realcon and Villa Modern, they were to allot to Chandresh free of cost, the Additional Developed Area. Since Villa Realcon and Villa Modern agreed to pay the amounts owed by Chandresh to Abhijeet and D’Silva, Chandresh was absolved and exonerated of such liability to pay the aforesaid sum.

17. Chandresh pleaded that various approvals for the building plan and requisite compliances were meant to be sought and obtained by Villa Realcon and Villa Modern on their own. The consensus and confirmations from Abhijeet and D’Silva in this regard, were also meant to be the responsibility of Villa Realcon and Villa Modern.

18. Disputes and differences broke out between the parties in connection with the Consent Decree read with the 2019 MoU. Chandresh would specifically plead in Suit 130 that the 2019 MoU explicitly recorded that even if no additional land was allotted by CIDCO to Abhijeet, the allotment of the Additional Developed Area, as contracted in the 2019 MoU, which was to be developed on the Allotted Land, would need to be complied with by Villa Realcon and Villa Modern. It is stated by Chandresh that Suit 44 had been disposed of in terms of the Consent Decree while the 2019 MoU was executed only seven months later on February 21, 2019. However, it is claimed, since the understanding set out in the 2019 MoU had already been reached even at the time of the Consent Decree, building plans had already been approved by the local authorities on February 22, 2019, which, coincidently, fell just one day after the execution of the 2019 MoU.

19. Chandresh has pleaded that Abhijeet filed Writ Petition NO. 5146 of 2019 in this Court seeking a direction that the balance entitlement claimed by him be allotted. An order was passed on August 27, 2019 noting that the State of Maharashtra would hear his representation afresh and pass a fresh order. Eventually, the State of Maharashtra directed CIDCO to maintain status quo on the development of even the Allotted Land. The PMC stayed the sanction that had been given to the building proposal and therefore no construction activity was taken up even on the Allotted Land.

20. Chandresh called upon the Villa Realcon and Villa Modern to abide by the commitments under the Consent Decree and the 2019 MoU and it is pleaded by Chandresh that these parties did not deny their obligations. However, they stated that since development had not even started and development activity on even the Allotted Land had been put on hold, the time for making such allotment of any developed area had not arrived. Therefore, as and when the ability to discharge the obligations would come about, they would comply with all their obligations.

21. Eventually, the State of Maharashtra lifted the status quo order on the construction and development of the Allotted Land and confirmed the allotment already made in favour of Abhijeet. However, it was held that Abhijeet had no further entitlement to land. Chandresh claims to be unaware of whether the rejection of the balance entitlement forms subject matter of any challenge in any court by Abhijeet.

22. The decision of the State Government to lift the status quo order on development of the Allotted Land and the decision that there was no entitlement to any additional land, was conveyed by a letter dated January 15, 2024 (“January 2024 Order”). Chandresh has pleaded that while the January 2024 Order affects the rights perceived to be enjoyed by all the parties, it has paved the way for development and construction on the Allotted Land. Work on the Allotted Land had commenced, and Chandresh demanded that he must be allotted free of cost the Additional Developed Area as contracted in the 2019 MoU.

23. According to Chandresh, Villa Realcon and Villa Modern turned hostile and took the position that they would abide by the allotment of the Developed Area as provided in the Consent Terms but would not allot the Additional Developed Area as mentioned in the 2019 MoU. Chandresh has pleaded that the right to the Additional Developed Area is a clean and clear obligation under the 2019 MoU, regardless of whether any additional land was to be allotted by CIDCO. This contention is said to have been rebuffed by Villa Realcon and Villa Modern. This led to issuance of a legal notice by Chandresh on June 20, 2024, after which Suit 130 was filed.

24. The prayers in the suit primarily seek declaration that the 2019 MoU is a legal, valid, subsisting and an enforceable agreement contracted in its terms, for provision of the Additional Developed Area of 25,015 square feet area to Chandresh in any eventuality whatsoever. Chandresh sought a restraint on constructed area admeasuring 25015 square feet out of the building proposed to be constructed. Interim reliefs in terms of prohibition on creating any third-party interests on the properties being developed were also sought.

25. In addition, prayer clause (d) sought a direction to CIDCO and its officers who are arrayed as Defendant Nos. 3 to 8, to recall the January 2024 Order and to allot the balance entitlement of land and to conduct a fresh hearing and give an opportunity of hearing to Chandresh as well (“CIDCO-related Prayer”).

26. Finally, a prayer is also made against Abhijeet and D’Silva seeking a restraint on them providing any further approval of any development proposal that may be made by Villa Realcon and Villa Modern, without taking cognizance of Chandresh’s grievances in the matter.

27. Villa Realcon filed an application under Section 8 of the Act pointing out that since the 2019 MoU contained an arbitration agreement, Suit 130 could not have been filed, and the disputes and differences ought to have been referred to arbitration. The Impugned Order rejected the Section 8 Application. Impugned Order:

28. The Impugned Order records that the 2019 MoU indeed contains an arbitration clause. However, on the premise that CIDCO and its officials were made parties to Suit 130, and that they are not signatories to the 2019 MoU, the Impugned Order holds that such parties not being signatories, and the cause of action arising from a combination of the Consent Decree and the 2019 MoU, the cause of action pursued in Suit 130 could not be segregated to refer only a part of the cause of action to arbitration.

29. The Impugned Order notes that the suit involves “complex and interlinked issues involving both the parties to the MOU as well as non signatories and therefore the matter is not fit for reference to arbitration”. Analysis and Findings:

30. I have heard at length, Mr. Vineet Naik, Learned Senior Advocate for Villa Realcon and Dr. Virendra Tulzapurkar, Learned Senior Advocate for Chandresh. With their assistance, I have examined the material on record including the Consent Terms, the 2019 MoU and the Plaint in Suit 130.

31. Going purely by the case disclosed and pleaded in the Plaint and the two underlying instruments namely the Consent Decree and the 2019 MoU, it is apparent that the subject matter of the disputes between the parties relates to the allotment of the Additional Developed Area contracted under the 2019 MoU to be provided by Villa Realcon and Villa Modern to Chandresh. It is also common ground that the alleged non-compliance with the Consent Decree forms subject matter of execution proceedings.

32. The core subject matter of Suit 130 involves interpretation of the terms of the 2019 MoU under which the parties are said to have contracted that the Additional Developed Area is said to be handed over to Chandresh by Villa Realcon and Villa Modern. It is Chandresh’s own case that such obligation under the 2019 MoU is to be discharged regardless of whether CIDCO allots any further land under the 12.5% Scheme. Therefore, it is writ large on the face of the Plaint that the core cause of action pursued is for enforcement of the 2019 MoU.

33. It is also clear from Chandresh’s own pleadings that he cannot be called upon to ensure or procure that any additional land is actually allotted by CIDCO to Abhijeet under the 12.5% Scheme in addition to the Allotted Land, for such land to thereby be made available to Villa Realcon and Villa Modern. Chandresh had also confirmed that subject to Chandresh complying with all the respective obligations under the Consent Terms and the 2019 MoU, there would be no claim whatsoever in respect of the land in the event D’Silva committed a breach of his obligations under the Consent Terms. Yet, Chandresh has also reserved the right to litigate against D’Silva in the event of any breach by D’Silva with respect to the Consent Decree. Under the 2019 MoU, prima facie, it is clear that Chandresh has claimed to have assigned all entitlements in respect of the land forming part of the Allotted Land as well as the land expected to be allotted.

34. On the face of it, the subject matter of the disputes and differences between Chandresh on the one hand and Villa Realcon and Villa Modern on the other squarely fall within the ambit of the 2019 MoU. The 2019 MoU builds further upon the Consent Decree and entails allotment of the Additional Developed Area, all of which is to be developed and constructed on the Allotted Land. The Consent Decree is the subject matter of execution proceedings. The Additional Developed Area is covered by the 2019 MoU, which admittedly and without doubt contains an arbitration clause. In these circumstances, it would follow that all disputes and differences between Chandresh on the one hand and Villa Realcon and Villa Modern on the other, would form subject matter of the arbitration agreement between the parties.

35. This brings one to the issue of the cause of action against CIDCO. Indeed, Chandresh as dominus litus is entitled to fashion the manner of prosecution of his claim. However, there is no connection between Chandresh’s purported claim against CIDCO and his claims against Villa Realcon and Villa Modern. On the contrary, it is Chandresh’s own case that regardless of what CIDCO does with allotting any additional land, Chandresh’s entitlement to the Additional Developed Area is crystallised and binding. Therefore, the entitlement claimed against Villa Realcon and Villa Modern has nothing to do with the purported claim against CIDCO.

36. It is in this light that the relief purportedly sought against CIDCO is to be considered. The prayer is to direct CIDCO to recall the January 2024 Order, which is not even an order of CIDCO. This letter is not part of the record because it is an annexure to the Plaint and has not been attached to the Appeal, but on a request from the Court, the parties handed a copy across the bar. The January 2024 Order is a letter from the Government of Maharashtra to CIDCO and not a letter by CIDCO for it to be recalled by CIDCO. What is apparent is that the Plaint is therefore a product of clever drafting of plugging in CIDCO and making a purported prayer against CIDCO, which only serves to suggest that a non-signatory to the arbitration agreement is also a party to Suit 130, and thereby sidestep the arbitration agreement.

37. The core ground raised by Dr. Tulzapurkar to resist this Appeal is that when a reference of a proceedings filed before the Section

8 Court is made to arbitration, the proceedings as filed in that Court ought to be capable of being referred to arbitration. If it is found that the Plaint as it stands cannot be referred to arbitration but only a part of what is pursued in the Suit, howsoever material a part of the suit it may be, the reference must not be made. Therefore, he would submit, the Impugned Order does not call for interference.

38. I am afraid this is another means of indicating that the cause of action purported to be covered by the suit cannot be “fragmented” when considering an application under Section 8 of the Act. This is precisely the law that had been declared in Sukanya Holdings[1], which has been overcome by the amendment effected to Section 8 of the Act in 2015, explicitly with a non-obstante provision that consideration of the reference would be notwithstanding any judgement of the Supreme Court or any other Court. It is now declared in multiple judgements of multiple courts that the very objective of the amendments effected in 2015 was to overcome the position obtaining in Sukanya Holdings as is also seen in the Law Commission report whose recommendation for the amendment led to Section 8 being amended.

39. In Lindsay International[2], a Learned Single Judge of the Calcutta High Court has discussed the issue threadbare under Section C (paragraphs 24 to 35) to hold that without doubt, Sukanya Holdings is no longer a relevant factor for the Section 8 Court. It was held that the Section 8 Court is not even mandated to adjudicate on the “bifurcability Sukanya Holdings (P) Ltd. v. Jayesh H. Pandya & Anr. – (2003) 5 SCC 531 Lindsay International Private Ltd. & Ors. Vs. Laxmi Niwas Mittal & Ors. – 2022 SCC OnLine Cal 171 of the causes of action of the presence of parties who are necessary parties to the action but not to the arbitration”. It was explicitly held that Sukanya Holdings would not be good law for any suit filed after October 23, 2015, when the amended Section 8 took effect.

40. Dr. Tulzapurkar would press into service the decision of the Supreme Court in Vinod Kumar Sachdeva[3] to point to how the Supreme Court reversed a reference to arbitration by taking note of the fact that the cause of action pursued in one of the two underlying plaints involved reliefs being sought against a bank not to disburse any financial assistance, with the bank not having been party to the arbitration agreement. The first suit was evidently filed before 2015 while the second suit is identified as one filed in 2015 but the orders do not indicate the date on which it was filed. That apart, on facts, the reliefs sought in those proceedings against the third party bank was an integral and interwoven element in the disputes between the parties.

41. In sharp contrast, in the instant case, there is no interlinkage of the cause of action pursued by Chandresh against Villa Realcon and Villa Modern with the purported cause of action against CIDCO. On the contrary, Chandresh’s own pleading indicates that regardless of what Vinod Kumar Sachdeva (Dead) Through Legal Representatives Vs. Ashok Kumar Sachdeva & Ors. – (2023) 20 SCC 190 CIDCO does, there is a clear and segregated cause of action under the 2019 MoU to which CIDCO is not a party. The law on segregation of elements of a suit has been dealt with in a seminal discussion by a Learned Single Judge of this Court in the case of Taru Meghani[4] to hold that the litigant has the right to legitimately join more than one cause of action in the same proceedings invoking Order II, Rule 3 of the Code of Civil Procedure, 1908 (“CPC”), but the Court has the power to separate causes of action invoking Order II, Rule 6 of the CPC, when the joinder of multiple causes of action in one suit may embarrass or delay the trial or make it inconvenient. To take the benefit of the detailed discussion already made in Taru Meghani, the following portions are extracted below:

17. In the aforesaid backdrop, the crucial question which wrenches to the fore is, whether the effect and force of the aforesaid arbitration clause gets diluted on account of inclusion in the suit, of a claim in respect of a dispute which is not governed the arbitration clause……

18. The question posed by the facts of the instant case, however, is required to be considered from the perspective of the legislative object contained in section 8 of the Act. It is trite that the language of section 8 is peremptory in nature. In the cases where there is an arbitration clause in the agreement, the Court is enjoined to refer the dispute to arbitration in terms of the arbitration agreement and the Court would Taru Meghani, Through his Constituted Attorney Ms. Shraddha Khandhadia and Others vs. Shree Tirupati Greenfield (Shree Tirupati Greenfield Developers) and Others – 2020 SCC OnLine Bom 110 have no jurisdiction to adjudicate the dispute after such an application seeking a reference under section 8 of the Act. Can this salutary object of the Act be defeated by adding a claim over and above the claim in respect of the matter which is squarely covered by arbitration agreement?

19. In the facts of the case, the question which crops up for consideration is whether there would be splitting of cause of action in the event the arbitration agreement in the MOU is given effect to. There appears a fine distinction between splitting of a single cause of action into parts, each being made a subject matter of a distinct proceedings and the separation of causes of caution which are joined together, albeit in conformity with the provisions of the Code of Civil Procedure, 1908(‘the Code’).

20. The plaintiffs are within their rights in joining multiple causes of action against the defendants. In fact, the provisions contained in the Code envisage such joining of several causes of action by the plaintiffs against the defendants…….

21. A conjoint reading of the aforesaid provisions would indicate that Rule 3 provides for joinder of causes of action and permits the plaintiffs to unite in the same suit, several causes of action against the same defendants. The remedy for any possible embarrassment, delay or inconvenience on account of the joinder of causes of action in one suit is provided in Rule 6. It authorizes the Court to order separate trials or make other order as may be expedient in the interest of justice, where the joinder of causes of action in one suit, though permissible under Rule (3)(1), would result in embarrassment, inconvenience or delay.

22. …….. If a Court is empowered to order separate trial when it finds that the joinder of causes of action would embarrass or delay the trial or it is otherwise inconvenient, a fortiori a Court cannot be said to be divested of the authority to direct separation of causes of action when the joinder of causes of action, in pursuance of an enabling provision like Rule 3 has the effect of defeating the provisions of a special law, like section 8 of the Act.

23. The aforesaid legal position is required to be considered coupled with the approach which is expected of the Court where an application seeking reference of the dispute to arbitration on the strength of an arbitration clause is preferred. Such an application, in substance, constitutes a plea of statutory exclusion of the jurisdiction of the court……. A useful reference in this context can be made to the judgment of the Supreme Court in the case of Sundaram Finance Limited v. T. Thankam, wherein the Supreme Court delineated the approach expected of the Civil Court in dealing with an application under section 8 of the Act, in Paragraph 13: “13. Once an application in due compliance of Section 8 of the Arbitration Act is filed, the approach of the civil court should be not to see whether the court has jurisdiction. It should be to see whether its jurisdiction has been ousted. There is a lot of difference between the two approaches. Once it is brought to the notice of the court that its jurisdiction has been taken away in terms of the procedure prescribed under a special statue, the civil court should first see whether there is ouster of jurisdiction in terms or compliance of the procedure under the special statute. The general law should yield to the special law - generalia specialibus non derogant. In such a situation, the approach shall not be to see whether there is still jurisdiction in the civil court under the general law. Such approaches would only delay the resolution of disputes and complicate the redressal of grievance and of course unnecessarily increase the pendency in the court.”

24. In the light of the aforesaid exposition of the legal position, I am of the considered view that the broad submission on behalf of the plaintiffs that the reference of the dispute to arbitration as regards the first transaction, would entail the bifurcation of the subject matter of the suit and, thus, it is impermissible in law, cannot accepted in an unqualified manner. The submission is fraught with the danger of defeating an arbitration agreement by simply adding a cause of action the plaintiff may have against the defendants, which is not covered by the arbitration agreement. If such a course is readily accepted, it has the propensity to give a long leash to the plaintiff to circumvent the arbitration agreement by uniting a cause of action which is beyond the purview of the arbitration agreement. It would have the effect of denuding section 8 of the Act of its force and vigour. Such an interpretation would also derogate from the object which the Arbitration and Conciliation Act, 1996 is intended to achieve; of minimum judicial intervention where parties have agreed to arbitrate the dispute.

25. In the peculiar facts of the case, in my view, the Court would be justified in referring the dispute to arbitration in respect of first transaction, as it is squarely covered by the arbitration clause and all the conditions of section 8 of the Act are fulfilled, and exercising its power under Order II Rule 6 of the Code to direct the plaintiffs to institute a separate suit in respect of the second tranch of Rs. 19 lakhs. [Emphasis Supplied]

42. One cannot declare the law in clearer conceptual terms. The analysis extracted above squarely applies to the facts of the instant case, and I am in respectful agreement with the same. One need not even go into whether Chandresh indeed has a cause of action against CIDCO when the Plaint itself pleads that Abhijeet may have the right to pursue action against CIDCO as he had by filing a Writ Petition earlier.

43. The scope of jurisdiction of the Section 8 Court involves examining the existence of an arbitration agreement (this has been confirmed in the Impugned Order); comparing the subject matter of the arbitration agreement and the subject matter of the suit; taking a view as to whether the arbitration agreement covers the subject matter of the suit; and refusing to refer the dispute to arbitration only if there is a prima facie view that the arbitration agreement does not exist.

44. From a reading the pleadings in the Plaint and the cause of action as disclosed in the plaint, the substratum of the suit evidently entails adjudication of disputes and differences relating to the 2019 MoU. The MoU indeed contains an arbitration clause. In these circumstances, I am unable to agree with the finding in the Impugned Order that the case involves any complicated interlinkages between the action sought against Villa Realcon and Villa Modern, and the action purportedly pursued against CIDCO. In fact, Chandresh who had received his rights from D’Silva who in turn had received his rights from Abhijeet, has explicitly reserved the right to pursue against D’Silva. Indeed, Chandresh is not left remediless and has considered the existence of avenues available to him. The joining of the causes of action is a material inconvenience and has the effect of exercise of the right to join separable causes of action to defeat the legislative objectives of Section 8 of the Act.

45. In these circumstances, the Appeal deserves to be allowed, referring the disputes and differences between Chandresh and Villa Realcon and Villa Modern to arbitration. If the parties are unable to agree on an arbitrator, an appropriate application may be made under Section 11 of the Act. Directions and Order:

46. In the result the following order is passed:a) The Impugned Order is quashed and set aside and Suit 130 is directed to be returned to Chandresh, with refund of Court fees in accordance with the rules; b) Disputes and differences between Chandresh and Villa Realcon and Villa Modern are declared as being covered by the arbitration agreement contained in the 2019 MoU; c) Chandresh is at liberty to pursue such action against CIDCO as he may perceive to be his entitlement, in whichever forum he is advised to pursue it; d) The aspect of costs for this round of litigation is left open for the parties to agitate in the arbitration proceedings for the Arbitral Tribunal to consider.

47. The Appeal finally disposed of in the aforesaid terms. Interim Applications, if any, shall also stand disposed of in these terms.

48. After the judgment was pronounced, the parties have expressed their willingness to proceed to arbitration to avoid one more round under Section 11 of the Arbitration Act. In these circumstances, taking the consent of the parties on board, an Arbitral Tribunal is also appointed in the following terms:- A] Justice Jai Narayan Patel (Retired), former judge of this Court, is hereby appointed as the Sole Arbitrator to adjudicate upon the disputes and differences between the parties arising out of and in connection with the Agreement referred to above. The contact particulars of the arbitrator are set out below: Office Address:- Raheja Chambers, 2nd floor, Near Tulsiani, Nariman Point, Mumbai – 400 021. B] A copy of this Order will be communicated to the Learned Sole Arbitrator by the Advocates for the Appellant within a period of one week from the date on which this order is uploaded on the website of this Court. The Appellant shall provide the contact and communication particulars of the parties to the Arbitral Tribunal along with a copy of this Order; C] The Learned Sole Arbitrator is requested to forward the statutory Statement of Disclosure under Section 11(8) read with Section 12(1) of the Arbitration Act to the parties within a period of two weeks from receipt of a copy of this Order; D] The parties shall appear before the Learned Sole Arbitrator on such date and at such place as indicated, to obtain appropriate directions with regard to conduct of the arbitration including fixing a schedule for pleadings, examination of witnesses, if any, schedule of hearings etc. At such meeting, the parties shall provide a valid and functional email address along with mobile and landline numbers of the respective Advocates of the parties to the Arbitral Tribunal. Communications to such email addresses shall constitute valid service of correspondence in connection with the arbitration; E] All arbitral costs and fees of the Arbitral Tribunal shall be borne by the parties equally in the first instance, and shall be subject to any final Award that may be passed by the Arbitral Tribunal in relation to costs.

49. Needless to say, nothing contained in this order is an expression of an opinion on merits of the matter or the relative strength of the parties. All issues on merits are expressly kept open to be agitated before the Arbitral Tribunal appointed hereby.

50. The parties shall approach the Learned Arbitrator within a period of one week from the upload of this order on the website of this Court and seek directions including any interlocutory arrangements that may desire.

51. All actions required to be taken pursuant to this order shall be taken upon receipt of a downloaded copy as available on this Court’s website. [SOMASEKHAR SUNDARESAN, J.]