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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS.  7047­7049 OF 2019 [Arising out of SLP (Civil) Nos. 4213­4215 of 2019]

M/s Avinash Hitech City 2 Society & Ors. .. Appellants

Versus

Boddu Manikya Malini & Anr. Etc.      .. Respondents

J U D G M E N T

M. R. Shah, J.

1. Leave granted.

2. Feeling aggrieved and dissatisfied with the impugned

common  judgment and order  dated 22.11.2018 passed by  the

High Court of Judicature at Hyderabad for the State of Telangana

and the State of Andhra Pradesh in C.M.A. Nos. 1257, 1379 and

1380 of 2017 by which the High Court has dismissed the said

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appeals and has confirmed the order passed by the learned

Principal District Judge, Ranga Reddy rejecting applications

under  Section 8  of the  Arbitration and Conciliation  Act,  1996

filed by the appellants herein and has refused to refer the dispute

between the parties to the Arbitrator, the original applicants have

preferred the present appeals.

3. The facts leading to the present appeals in nutshell are as

under:

3.1 That the original land­owners of the land admeasuring 25

acres and 68 cents in aggregate forming part of Survey Nos. 30,

34,  35 and 38 situated at  Gachibowli  Village,  Serilingampally,

Rangareddy District  executed 17 development agreements cum

power of attorney in favour of one Phoenix Infocity Private

Limited for developing an integrated complex comprising of

residential units, commercial and office spaces and service

apartments on the project land.   Subsequently, the owners

constituted themselves into three societies registered under the

Andhra Pradesh Societies Registration Act, 2001, namely Avinash

Hitech  City 2  Society (appellant no. 1), Ganga Hitech City 2

Society and Vignesh Hitech City 2 Society.   That the said

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societies applied for and were granted co­developer status in

respect of the SEZ Project.   It appears that thereafter the parties

to each of the Development Agreements executed Supplementary

Development Agreements to their respective Development

Agreement.   That, in terms of the Development Agreements and

the Supplementary Development Agreements, the constructed

space in the proposed buildings were to be shared in the ratio of

37.5 : 62.5 between the owners and the developer.  Accordingly,

the developer  was allotted 11 commercial complexes and the

owners were allotted 4 commercial complexes.   It seems that the

respondents are the owners who have been allotted a share in

building H1B and also are the members of the appellant no. 1

Society.   It appears that, thereafter, an Addendum to the

Supplementary  Development  Agreement  was  executed  by  inter

alia  the  appellants  and  the  respondents (excluding the lessee,

HCL  Technologies Limited) on  12.03.2010.  Clause 19 of the

Addendum provides for the  mechanism  to resolve the  dispute

between the parties (which shall be dealt with hereinbelow).

Clause 13 of the Addendum is with respect to the collection of

lease rents in respect of the extends leased out in a given

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building earmarked as the share of the owners till the

completion.       Clause 16 empowers the societies to determine

and collect monthly maintenance charges from the owners and

Clause 18 provides that the owners are liable to pay the

proportionate share of common expenses for upkeep and

maintenance to the societies.     

3.2 A cold shell of building H1B was completed by the developer

and appellant no. 1 Society converted the same to warm shell by

setting up the air conditioning facilities, back­up generators and

back­up power implementation, building management system

implementation, electrical works and civil works and the funds

for the same were raised by appellant no. 1 Society by way of

bank loans.   Thereafter, various spaces in building H1B were

leased out to HCL Technologies Ltd. and the rents were collected

by appellant no. 1 Society.    

3.3 That, thereafter, the respondents filed a petition under

Section 23 of the Andhra Pradesh Societies Registration Act,

2001 (for short ‘the Societies Registration Act’) before the

Principal District Judge, Ranga Reddy District making an

allegation that their purported share in the rentals were not

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being paid to them and prayed for a direction to appellant no. 1

Society to produce  the entire accounts  for the rental  amounts

received  by it from  the tenants along  with  audit reports and

minute books from 2011 to 2015.   The respondents also prayed

that appellant no. 1 Society be directed to pay amounts already

due to the respondents, being their purported share in the rental

amounts.   That, thereafter  another  petition  was filed  by the

respondents praying that the Court split appellant no. 1 Society

into  two different societies  claiming to have “lost  all faith and

confidence on the integrity” of the executive committee of

appellant no. 1 Society and claiming that their interest could no

longer be protected by appellant no. 1 Society.    That,

thereafter, third application was filed by the respondents before

the learned District Judge under Section 23 of the Societies

Registration Act and prayed for a mandatory injunction against

the appellants herein directing them to  inter alia  distribute the

rents purportedly received by appellant no. 1 Society.    

3.4 In the light of the arbitration Clause 19 of the Addendum,

the appellants filed petitions under Section 8 of the Arbitration

and Conciliation Act, 1996 seeking the appointment of an

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arbitrator in accordance with Clause 19 of the Addendum.   All

the three applications came to be dismissed by the learned

District Judge on the ground that the disputes between the

parties in the petition under Section 23 of the Societies

Registration Act are not covered under Clause 19 of the

Addendum.   

3.5 Aggrieved by the order of the learned District Judge

dismissing the application under Section 8 of the Arbitration and

Conciliation Act, the appellants herein preferred three separate

appeals before the High Court.   By the impugned common

judgment and order dated 22.11.2018, the High Court has

dismissed the said appeals.  Hence, the present appeals.   

4. Shri Jayant Bhushan, learned Senior Advocate appearing

on behalf of the appellants has vehemently submitted that, in the

facts and circumstances of the case, the High Court has

materially  erred  in  dismissing the  appeals  and confirming the

order passed by the learned District Judge dismissing the

applications filed under Section 8 of the Arbitration and

Conciliation Act, 1996.   It is vehemently submitted by Shri

Jayant Bhushan, learned Senior Advocate appearing on behalf of

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the appellants that the High Court has failed to appreciate

Clause 19 of the Addendum to the Supplementary Development

Agreement dated 12.03.2010 in proper perspective while

dismissing the applications of the appellants under Section 8 of

the Arbitration and Conciliation Act, 1996.

4.1 It is vehemently submitted by the learned Senior Advocate

appearing on behalf of the appellants that the dispute between

the appellants and the respondents is the quantum of the share

claimed by the respondents in the lease rents collected by

appellant no. 1 Society.  It is submitted that the respondents are

claiming their share in the rent collected  by appellant no.  1

Society relying upon the relevant provisions of the Development

Agreements and the Supplementary Development Agreements

and the Addendum.   It is submitted that, therefore, the dispute

can be said to be arising out of the agreements executed between

the parties and the Addendum.    It is submitted that, therefore,

Clause 19 of the Addendum shall be squarely applicable.   It is

further submitted that Clause 19 of the Addendum is very clear

and, as per Clause 19, any dispute between the owners,

including the dispute relating to the Addendum and all questions

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relating to its interpretation  shall  be  construed in  accordance

with the laws of India.   It further provides that, except as

otherwise specifically provided in the Agreement, in the event of

any dispute  or  difference arising among  the  parties  out  of, in

connection with or relating to this agreement, shall be governed

by  Clause  19  of the  Addendum and  Sub­clauses (a) to (g) of

Clause 19 shall be applicable.   It is submitted that therefore the

dispute between the parties for which the respondents filed the

application  under  Section  23  of the  Societies  Registration  Act

before the District Judge shall be squarely covered within Clause

19 and therefore the High Court ought to have allowed the

appeals and ought to have referred the dispute to Arbitrator as

per Clause 19 of the Addendum.    

4.2 It is further submitted by the learned Senior Advocate

appearing on behalf of the appellants that the High Court has

materially erred in observing and holding that in the event of any

dispute which involves two or more owners of the space in the

same building only, Clause 19 shall be applicable.   

4.3 It is vehemently submitted by Shri Jayant Bhushan, learned

Senior Advocate for the appellants that appellant no.1 Society is

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a co­developer and has received the rent as per Clause 13 of the

Agreement.   It is submitted that in any case when the

respondents are claiming their share  in the rent collected and

received by the appellant and the dispute is sharing of the rent of

the space rented, certainly Clause 19 of the Addendum shall be

applicable.    

4.4 It is further submitted by the learned Senior Advocate

appearing on behalf of the appellants that the High Court has

materially erred in considering Sub­clause (e) of Clause 19 of the

Addendum only and has materially erred in not considering the

entire Clause 19 of the Addendum and the intention of the

parties to the Agreement/Addendum.

4.5 Making the  above submissions, it is  prayed to  allow  the

present appeals and quash and set aside the impugned common

judgment and order passed by the High Court and consequently

allow the three applications filed under Section 8 of the

Arbitration and Conciliation Act and refer the dispute between

the parties for which the respondents filed an application under

Section 23 of the Societies Registration Act to Arbitration.

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5. Shri Joy Basu, learned Senior Advocate appearing on behalf

of the contesting respondents has opposed the present appeals

and has supported the impugned common judgment and order

passed by the High Court.

5.1 It is vehemently submitted by the learned Senior Advocate

appearing on behalf  of the  respondents  that, in the facts  and

circumstances of the case and considering the relevant sub­

clauses of Clause 19 of the Addendum, the High Court has

rightly not interfered with the order passed by the learned

District Judge while not referring the dispute to Arbitration and

not appointing the Arbitrator.   

5.2 It is vehemently submitted by learned Senior Advocate

appearing on behalf  of  the respondents that on fair reading of

Clause 19 of the Addendum, only the disputes and differences

arising between the Owners  [Sub­clause  (c)  of  Clause 19]; the

dispute which involves two or more societies or owners who are

the members of the different societies [Sub­clause (d) of Clause

19];  or the dispute which  involves  two or  more owners of the

space in the  same building [Sub­clause (e) of  Clause  19],  are

required to be referred to Arbitration and to the Arbitral Tribunal

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comprising of the sole arbitrator.   It is  submitted that, in the

present case, the dispute between the respondents and the

appellants cannot be said to be between the owners or between

the two or more societies.  It is submitted that even the opening

part of Clause 19 specifically refers to any dispute between the

owners.  It is submitted that therefore the High Court has rightly

observed and held that the dispute between the respondents and

the appellants shall not fall in any of the Sub­clauses of Clause

19.  It is submitted that no error has been committed by the High

Court and the learned District Judge.   

5.3 Making the above submissions, it is prayed to dismiss the

present appeals.

6. We have heard the learned counsel appearing on behalf of

the respective parties at length.   At the outset, it is required to

be noted that the dispute between the parties for  which the

respondents have initiated proceedings under Section 23 of the

Societies Registration Act is with respect to sharing of the rent of

the leased space.  It is required to be noted that appellant no. 1

Society claims to be the co­developer.  It cannot be disputed and

it is not in dispute that owners, societies and developers are the

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parties to the Development Agreements, Supplementary

Development  Agreements  and  the  Addendum.     According to

appellant no. 1­co­developer, after execution of the Development

Agreements, Supplementary Development Agreements and the

Addendum, a cold shell in building H1B was completed by the

developer and appellant no. 1 Society (as co­developer), converted

the same to warm shall by setting  up the air conditioning

facilities, back­up generators and back­up power

implementation,  building  management system implementation,

electrical works and civil works and the funds for the same were

raised by appellant no. 1 Society by way of bank loans.   That,

thereafter,  various spaces in  building  H1B were leased out to

HCL Technologies Limited and one other and they recovered the

rent from the lessee.   As per Clause 13 of the

Addendum/Agreement which sets out that the societies would be

the “sole authorities” to collect/receive the lease rents in respect

of the extends leased out in a given building earmarked as the

share of the owners in the completion and pool the entire revenue

generated from each of the buildings by way of lease rents and

distribute the same to the owners,  pro­rata to their  respective

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shares in the build­up space in the project after addressing the

liabilities towards loans.   Therefore, the dispute between the

respondents and the appellants with respect to the sharing of the

rent with respect to the leased space can be said to be related to

the Addendum and/or in connection with or relating to the

Addendum.     

7. Clause 19 of the Addendum, which is the arbitration clause

and provides how to settle the dispute between the parties, reads

as under:

“The owners agree  that  any dispute between  the Owners, including the dispute relating to this Addendum and all questions relating to its interpretation shall be construed in accordance with the laws of India, without reference to its principles of  conflicts  of law.  Except  as  otherwise  specifically provided in this Agreement, the following provisions apply in the event of any dispute or difference arising among the Parties out of, in connection with or relating to the Agreement (The ‘Dispute’).

(a) The Dispute shall be deemed to have occurred, when one Party serves on the other Party/ies a notice stating the nature of the Dispute (‘Notice of Dispute’).

(b) The Parties hereto agree that they will use all reasonable efforts to resolve among themselves, any Dispute between them through negotiations.

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(c) Any Dispute and differences whatsoever arising between the Owners which could not be resolved by Parties through negotiations, within a period of thirty (30) days from the service of the Notice of Dispute, the same shall be referred to and shall finally be settled by arbitration in accordance with the (Indian) Arbitration and Conciliation Act, 1996, and all the proceedings shall be conducted in English  and  a  daily transcript in  English  shall  be prepared.

(d) In the event of any dispute which involves two or more Societies or Owners who are the members of two different Societies, the arbitral tribunal shall comprise of three or more arbitrators. In such a situation, each party to the dispute shall appoint one arbitrator,  who  shall be from  the office  bearers of their respective Societies and the two or more arbitrators so appointed shall appoint a presiding arbitrator, who shall be one of the office bearers of the Hitech City­2 Owners Welfare Association (HOWA) and the Chairman of  the arbitral  tribunal; and the venue of arbitration shall be in Hyderabad, India.

(e) In the event of any dispute which involves two or more Owners of the space in the same building, the arbitral tribunal shall comprise of the sold arbitrator. In such a situation, each party to the dispute shall refer the matter to the office bearers of their respective  Society  which shall  be the  arbitral tribunal; and the venue of arbitration shall be in Hyderabad, India.

(f)      The Parties are debarred from exercising any right or filing any application to any court or tribunal having jurisdiction in connection with matters involving substantial questions of law arising during any arbitration.

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(g) The Parties here by submit to the Arbitrator’s award and the award shall be enforceable in any competent court of law.”

7.1 On reading Clause 19 of the Addendum as a whole, it

appears that in the event of dispute  or  difference  among the

parties out of, in connection with or relating to the agreement,

the same shall be referred to arbitration.   However, sub­clauses

(c), (d) and (e) provide for different procedure in the event of any

disputes  and  differences  between the  owners;  between two  or

more societies or owners who are the members of two different

societies and between two or more owners of the space in the

same building.  Sub­clause (c) of  Clause  19  provides that  any

disputes or differences whatsoever arising between owners, which

could not be resolved by the parties through negotiations, within

a period of 30 days from the service of the notice of dispute, the

same shall be referred to and shall finally be settled by the

arbitration in accordance with the (Indian) Arbitration and

Conciliation Act, 1996.  Sub­clause (d) of Clause 19 provides that

in the event of any dispute which involves two or more societies

or owners who are the members of  two different societies,  the

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arbitral tribunal shall comprise of three or more arbitrators.   It

further provides, “who shall be appointed as a presiding

arbitrator; who shall be the Chairman of the arbitral tribunal and

the  venue  of the arbitration”.    Sub­clause (e) of  Clause  19

provides that in the event of any dispute which involves two or

more owners of the space in the same building, the arbitral

tribunal shall comprise of the sole arbitrator and, in such a

situation, each party to the dispute shall refer the matter to the

office bearers of their respective Society which shall be the

arbitral tribunal and the venue of arbitration shall be in

Hyderabad.   

7.2 As observed hereinabove, Clause 19 shall be applicable in

the event of any dispute and difference arising among the parties

out of, in connection with or relating to the agreement.   As

observed hereinabove, the developers, owners, societies and the

original owners and even subsequent societies formed are parties

to the agreement and the Addendum.   It is also required to be

noted and, as observed hereinabove, the dispute is with respect

to sharing of the rent of the leased space and it can be said that

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the respondents  are  also  claiming the share relying  upon  the

Development Agreements; Supplementary Development

Agreements and the Addendum.   Therefore, the dispute can be

said to in connection with or relating to the Agreements also.

7.3 Considering the  above facts  and circumstances,  both  the

High Court and the learned District Judge have committed grave

error in not referring the dispute between the appellants and the

respondents to the arbitration.  We are of the opinion that Clause

19 of the Addendum to the Supplementary Development

Agreement shall be squarely applicable and therefore the

disputes between the respondents and the appellants for which

the respondents initiated proceedings under the Societies

Registration Act,  are required to be referred to  the Arbitration

and/or to the Arbitral Tribunal.

8. In view of the above and for the reasons stated above, all

these appeals are allowed.  The impugned common judgment and

order dated 22.11.2018 passed by the High Court in C.M.A. Nos.

1257, 1379 and 1380 of 2017 is hereby quashed and set aside.

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The order passed  by the learned  District Judge rejecting the

applications submitted by the appellants under Section 8 of the

Arbitration and Conciliation Act, 1996 are also hereby quashed

and set aside.   Consequently, the applications submitted by the

appellants  under Section 8 of the Arbitration and Conciliation

Act, 1996 are hereby allowed and the disputes between the

respondents and the appellants are hereby directed to be referred

to the Arbitration.   No costs.

..................................J. (ARUN MISHRA)

New Delhi                                              ...................................J. September 6, 2019                                (M. R. SHAH)