ATS Infrastructure Limited v. Vishnu Vaibhav Industries Private Limited

7. Clause 9 of ICDA is of the widest amplitude and broad enough to cover "any dispute, controversy, claim or disagreement of any kind whatsoever"i.e., disputes under the other connected Agreements as well.

8. It is asserted that in the absence of a composite reference of disputes to arbitration, it would lead to multiplicity of proceedings and consequent possibility ofconflicting decisions even though the subject matter and issues involved are similar. It is evident that the parties always intended the Agreements to together have a common function ofenabling the transaction between the Raheja Family and the ATS Group. These disputes under the Agreements ought to be resolved together in a composite reference under Clause 9 ofICDA. It is pertinent to mention that the disputes under three Agreements be compositely referred to arbitration under Clause 9 of the ICDA.

9. It is further submitted that the respondent No.l created an ICD in favour of the petitioner for Rs. 3.675 crores in terms of the ICDA. Furthermore,the petitionerfurnished post-dated cheques to respondentNo.I in good faith and in view of the long-standing relationship between the parties. Certain disputes have arisen between the parties in regard to the aforesaid transactions, owing to which the petitioner and the Raheja Family were in talks to reach a holistic, amicable settlement. However, while the talks were going on,the respondent No.l wrongly deposited the post-dated cheques despite no sums being due. Thereafter,the respondentNo. 1 issued a purported statutory Notice dated 20^^ October, 2020 under Section 138 read with Section 141 of the Negotiable Instruments Act, 1881 and the ARB.P. 760/2020& connected matters Page5of13 respondent No.l also wrongly claimed that the petitioner was guilty of purported acts under the Negotiable Instruments Act, 1881 inter alia cheating and fraud.

10. It is submitted that the post-dated cheques were issued by the petitioner in good faith and since,no amounts were due,the same could not have been represented bytherespondentNo.I for encashment.

11. The petitioner vide its Letter dated 3L' October, 2020 replied the Notice dated 20'^ October, 2020 ofthe respondent No. 1, whereby all the allegations made were denied bythe petitioner.The petitionerfurther stated thatin the absence ofrespondentNo.1 taking steps stated in the petitioner s Notice dated 3L'October,2020 within7daysfrom the receiptofthe Notice, it was evident that there were serious commercial differences and disputes betweenthe parties underthe Agreementwhich would need resolution and it was further clarified thatfailing this,the Notice dated 31 October,2020 be treated as the Notice invoking arbitration.

12. Learned counsel on behalf of the petitioner has countered the argumentofrespondentand assertedthatin allthreepetitions,Mr.Vaibha^ Raheja is a common party, the nature oftransactions are the same and all three Agreements were entered into on the same date i.e.,27 June,2017. The transactions are intertwined and interconnected and in the MoUs are in fact, governed by the terms and conditions contained in the umbrella agreementi.e.,ICDA. Itisfurthersubmitted that allthe communicationsin respect ofthree Agreements took place together and all communications, letters and correspondences were in reference to all three Agreements. Therefore,they werecommontransactions and acommonreference mustbe made of all the disputes to the Arbitrator. The petitioner nominated Mr. ARB.P.760/2020&connectedmatters Page6of13 (% Justice H.R. Malhotra (Retd.) as the Sole Arbitrator for adjudication of all the disputes and requested the respondent No. 1 to consent to his name. However,the respondent No. 1 vide its Letter dated 3L'November, 2020 categorically refused to refer the disputes that had arisen between the parties to arbitration. Hence,the present petition has been filed for appointment of the Arbitrator.

13. Learned counsel on behalfofthe respondent has submitted thatICDA tVi dated 27 June, 2017 contains Clause 9 which specifically provides for arbitration and the matter is referable to arbitration. However, in the other two petitions i.e., ARB.P.761/2020 and ARB.P.764/2020,the parties had entered into MoUs dated 27"^ June,2017 which are independentAgreements and ICDA was not a composite or an umbrella Agreement governing the MoUs which are subjeet matter ofthe other two petitions.

14. Learned counsel for the respondent has referred to Clause 10 ofMoU which provides for governing law on the dispute resolution which specifically provides that "the Agreement and the Allotment Letter shall be governed and incorporated and construed in accordance with law and the Courts of Uttar Pradesh shall havejurisdiction". It is thus submitted that MoUs are independent contracts and are not part ofICDA. Since two MoUs do not contain any arbitration clause, those two arbitration petitions eannot be referred to arbitration.

15. Learned counsel on behalf of the respondent has further submitted that even though three Agreements, which are the subject matter of three th petitions, had been arrived at on the same date i.e.,27 June,2017 and there may have been joint negotiations condueted or common correspondences exchanged between the parties, but these are three independent Agreements ARB.P. 760/2020& connected matters Page 7of13 andICDA is notan umbrellaagreementas hasbeen argued. Theintention of the parties in two MoUs dated 21" June, 2017 was not to refer the disputes arising under two Agreements as is evident from Clause 10 respectively oftwo MoUs where it has been specifically provided that in case of disputes,the Courts of Uttar Pradesh shall have thejurisdiction. There is no arbitration clause in two MoUs which are subject matter of ARB.P.761/2020and ARB.P.764/2020and thesetwo petitionscannotbe referredtoarbitration.SinceICDAhasavalid arbitrationagreement,thereis noobjectiontopetitionbearingNo.ARB.P.760/2020beingallowedandan Arbitrator being appointed inthe said petition.

16. Learned eounsel for the respondent has placed reliance on MA. Vnamp.p.rs & rnntmctors Prh>nfP limited vs Som Datt Builder Limited (2009)7see696insupportofhis assertions.

17. Submissions heard.

18. Admittedly,leDA dated June, 2017 was entered into between Vishnu Vaibhav Industries Private Limited through its authorized signatory Mr.Vaibhav Raheja and M/s. ATS Housing Private Limited. As per the^ termsofthis Agreement,Vishnu Vaibhav IndustriesPrivateLimitedtermed asthe Depositorhad agreedto lendto ATSInfrastructureLimited asum of Rs.3,67,50,000/-andsuchamountsas maybereferredtoastheICD. Itwas agreed that their respective rights and obligations with regard to their relationship shall be interpreted, acted upon and governed solely m accordancewiththetermsand conditionsofthisAgreement.Italso contains Clause9for referral ofdisputesto Arbitration.

19. The MoU dated 27" June, 2017 in petition bearing No. ARB.P. 761/2020 was between M/s. ATS Housing Private Limited(as developer) Page8of13 %ty and Ms. Vani Raheja (as seller) and M/s. ATS Infrastructure Limited (as purchaser). The said Agreement pertained to purchase of four apartments along with two parking space in its Group Housing Residential Scheme located at Plot No. S-l/Al, Sector 150, Noida, Uttar Pradesh for which a sum ofRs.2,00,47,500/- was paid to the developer vide Cheque No.000056 dated 23'^'^ June,2017 drawn on HDFC Bank,IMT Manesar,Haryana. In the said Agreement, Clause 10 provided for Governing Law and Dispute Resolution which reads as under: "10. GoverningLaw and Dispute Resolution- This Agreement and the Allotment Letters shall be governed and interpreted by, and construed in accordance with the Laws of India, the courts of Uttar Pradesh shall have exclusive jurisdiction in respectofall matters relating to or arising outof this Agreementand the AllotmentLetters."

20. Specific covenants ofthe developer, covenants ofthe seller and the covenants ofpurchaser were agreed between the parties in terms ofClauses 3,4and 5 respectively.

21. Likewise, MoU dated 21^ June,2017 in petition bearing No.ARB.P. 764/2020 was entered into between ATS Housing Private Limited, Vaibhav Raheja and M/s. ATS Infrastructure Limited for purchase ofthree flats on paymentofRs. 1,50,35,625/-. Covenants ofthe developer,the covenants of the seller and the covenants of purchaser were specifically spelled out in Clauses 3,[4] and 5 respectively. Clause 10 provided for Governing Law and th Dispute Resolution, which is similar to the earlier referred MoU dated 27 June,2017in petition bearing No.ARB.P.761/2020.

22. It is evident from the aforementioned terms and conditions specified in three documents that ICDA was a standalone document and was in no ARB.P. 760/2020& connected matters Page9of13 way concerned or connected with other two MoUs dated 27"June,2017 entered intobytheATSHousingPrivateLimited with Ms.VaniRahejaand Mr. Vaibhav Raheja respectively. The parties to three Agreements are different;it may be that Mr.Vaibhav Rahejaand Ms.VaniRaheja may be holdinginterestinVishnuVaibhavIndustriesPrivateLimitedbeingpartofa family,but it is a settled proposition oflaw that Company has aseparate entity from itsDirector and Mr.Vaibhav Rahejaand Ms.VaniRahejahad entered intotwo MoUsrespectively Intheirindependentcapacity. Itcannot besaidthatthepartiestotheAgreementsorthetransactionswhichwerethe subject matter ofall three documents,are the same. Merely because the correspondence was carried outjointly would not be a ground to holdthat ICDA isan umbrellaAgreementgoverningthetermsandconditionsofother two MoUs.

23. Section 7 of A&C Act, 1996 defines "arbitration agreement". Sub-sections(1)and(5)ofSection7arerelevantwhiehread asunder; "7. Arbitration Agreement- (1) In this Part, arbitration agreement' means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractualor not.

XXXX XXXX XXXX XXXX XXXX (5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement ifthe contractis in writingandthe reference^ issuch asto make that arbitration clause partofthe contract.

24. Learned counsel for the respondent has placed reliance on MP Knmneers eg: Contractors Private Limited(supra), wherein after making a referenceto Section[7],itwasobservedthatwordingofSection7(5)ofA&C,.. Page10of13 Act,1996 makes it clearthat a mere reference to a document would not have the effect ofmaking an Arbitration Clausefrom that document,a part ofthe contract. The reference to the document in the contract should be such that it shows the intention to incorporate the Arbitration clause contained in the document into the contract. If the legislative intent was to import an Arbitration Clause from another document merely on reference to such document in the contract, sub-section(5)would not contain the significant later part which reads: "andthe reference issuch as to make thatarbitration clause part ofthe contract", but would have stopped with the first part which reads: "the reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement ifthe contract is in writing...". It was concluded that Section 7(5) requires a conscious acceptance ofthe Arbitration Clause from another document by the parties as a part oftheir contract, before such Arbitration Clause can be read as a partofthe contractbetween the parties.

25. It was further observed that there is a difference between reference to another document in a contract and incorporation ofanother document in a contract, by reference. In the first case, the parties intend to adopt only specific portions or part ofthe referred document for the purposes ofthe contract. In the second case, the parties intend to incorporate the referred doeumentin entirety,into the contract. Therefore,when there is a reference to a document in a contract,the court has to consider whether the reference to the document is with the intention of incorporating the contents ofthat document in entirety into the contract, or with the intention of adopting or borrowing specific portions of the said document for application to the contract. It was also observed that a general reference to another contract ARB.P. 760/2020& connected matters Page 11 of13 will not be sufficientto incorporatethe Arbitration Clausefrom the referred contract into the contract under consideration. There should be a special reference indicating a mutual intention to incorporate the Arbitration Clause from another document into the contract. The exception to the requirement ofspecial reference is where the referred document is not another contract, but a standard form of terms and conditions of trade associations or regulatory institutions which publish or circulate such standard terms and conditions for the benefit ofthe members or others who want to adoptthe same.

26. It is thus evident from the observations made in M.R. Engineers & Contractors Private Limited (supra) that a general reference to another contract will not be sufficient to incorporate the arbitration clause from the referred contract into the contract under consideration.

27. In the present case,in fact,two MoUs are independent ofICDA and do not contain any reference whatsoever to ICDA. Moreover, there is a specificintention ofnotreferringthe disputes arisingthereinto arbitrationas it clearly provides in Clause 10 thatthe disputes shall be referable to the^ Courts in Uttar Pradesh.

28. It thus leads to necessary conclusion that there is no Arbitration Clause in writing in petitions bearing No. ARB.?.761/2020 and ARB.?. 764/2020 which arethesubjectmatterofthe MoUsdated27^^June,2017.

29. The respondent, on being put a specific query, declined to agree to arbitration in the petitions bearing No. ARB.?. 761/2020 and ARB.P. 764/2020 and claimedthatthese disputes are notamenableto arbitration.

30. In these circumstances, the petitions bearing No. ARB.P. 761/2020 and ARB.P.764/2020 are hereby dismissed, since there is no arbitration ARB.P. 760/2020& connected matters clause.

31. Considering the facts and submissions made,the petition bearing No. ARB.P. 760/2020 is hereby allowed and Ms. Justice Sunita Gupta (Retd.), Delhi High Court, Mobile No.9910384628,is hereby appointed as the Sole Arbitratorto adjudicate the disputes between the parties.

32. This subjectto the learned Arbitrator making the necessary disclosure under Section 12(1) ofthe A&C Act, 1996 and not being ineligible under Section 12(5)ofthe A&C Act,1996.

33. The petition bearing No.ARB.P.760/2020 is accordingly disposed of.