TaxTMI 
TaxTMI 
2011 (3) TMI 1496
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....or the undivided share in the land, apartment and car parking space was agreed as Rs.55,89,368. The agreement contemplating the entire price being paid in instalments, that is 10% on booking, 85% in seven instalments upto 15.3.2008 and 5% at the time of delivery. Clause (14) of the said agreement dated 16.10.2006 provided for settlement of disputes by arbitration. 3. On the request of the first respondent, the appellant (earlier known as `BHW Home Finance Ltd.') sanctioned a housing loan of Rs.52 lakhs to the first respondent for purchase of the said apartment in terms of a loan agreement dated 21.12.2006 entered into between the first respondent as the borrower and the appellant as the lender. The said loan agreement contained the terms of the loan, rate of interest, provisions for amortization, consequences of delay in payment of EMIs, security for repayment, and general covenants of borrower. Clause (11) thereof provided for settlement of all disputes (that is, all matters, questions, disputes, differences and/or claims arising out of and/or concerning and/or in connection and/or in consequences of breaches, termination or invalidity thereof or relating to the Agreement) by a....
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.... laid down in the Arbitration and Conciliation Act, 1996 and shall be governed by the laws in A.P. subject to the authorized arbitration clauses. The venue of the Arbitration proceedings shall be Hyderabad and the language shall be in English. All the proceedings are subject to the exclusive jurisdiction of the courts at Hyderabad limits." On the execution of the sale deed dated 21.2.2008 and construction agreement dated 21.2.2008, the earlier agreement for sale dated 16.10.2006 apparently lost its relevance, as the land-owners went out of the picture on execution of the sale deed regarding the undivided share and a fresh construction agreement dated 21.2.2008 was executive regarding completion of the apartment by the developer. 6. The first respondent issued a notice dated 31.7.2009 to the developer, alleging delay in construction and delivery of the apartment and called upon it to pay Rs.54,778 per month as compensation for the period of delay, that is from the due date of completion (16.10.2008) till date of actual completion and delivery of the apartment. By another letter dated 15.9.2009 addressed to the developer, first respondent invoked the arbitration clause containe....
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....at may be demanded by the appellant in respect of the entire transaction. e) The developer and the appellant were liable to pay the first respondent all the expenditure incurred/to be incurred towards legal and other miscellaneous charges. f) The developer and the appellant were liable to compensate him for his financial and mental suffering. g) The developer and the appellant were liable to pay commercial rate of interest to the first respondent on the amounts found due from the due date till payment. The first respondent relying upon clause (7) of the construction agreement dated 21.2.2008, sought appointment of a sole arbitrator to adjudicate upon the disputes between him and the developer and the appellant in respect of purchase of the apartment. 8. The said petition was resisted by the appellant. The appellant contended that it had nothing to do with the dispute between first respondent and developer; that for the first time, the first respondent had chosen to make allegations against the appellant in the petition under section 11 of the Act, apparently in collusion with the developer, to avoid payment of EMIs due to the appellant; and that the petition under se....
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....developer (second respondent) are concerned, the designate of the Chief Justice was justified in appointing an arbitrator. But the question is whether the appellant, a non-party to the construction agreement containing the arbitration agreement as per clause (7), could be roped in, as a party to such arbitration. 12. In Jagdish Chander vs. Ramesh Chander [2007 (5) SCC 719] this court held : "The existence of an arbitration agreement as defined under Section 7 of the Act is a condition precedent for exercise of power to appoint an arbitrator/Arbitral Tribunal, under Section 11 of the Act by the Chief Justice or his designate. It is not permissible to appoint an arbitrator to adjudicate the disputes between the parties in the absence of an arbitration agreement or mutual consent." In Yogi Agarwal vs. Inspiration Clothes & U [2009 (1) SCC 372], this court observed : "When Sections 7 and 8 of the Act refer to the existence of an arbitration agreement between the parties, they necessarily refer to an arbitration agreement in regard to the current dispute between the parties or the subject-matter of the suit. It is fundamental that a provision for arbitration, to constitu....
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.... as a party to the petition under section 11 of the Act, the court should either delete such party from the array of parties, or when appointing an Arbitrator make it clear that the Arbitrator is appointed only to decide the disputes between the parties to the arbitration agreement. 14. The arbitration agreement relied upon by the first respondent to seek appointment of arbitrator, is clause (7) of the construction agreement dated 21.2.2008. The appellant was not a party to the said construction agreement dated 21.2.2008 containing the arbitration agreement. It is no doubt true that the loan agreement dated 21.12.2006 between the first respondent as borrower, and the appellant as the creditor, also contains an arbitration clause (vide Article 11) providing for resolution of disputes in regard to the said loan agreement by arbitration. But the developer was not a party to the loan agreement. There is no arbitration agreement between the developer and the appellant. The disputes between the first respondent and the developer cannot be arbitrated under Article 11 of the Loan Agreement. The first respondent invoked the arbitration agreement contained in clause 7 of the construction ....