The Bombay High Court on April 22, 2021, in the case of Tirupati Shopping Centre Premises Co-operative Society Limited (“Petitioner”) v. Shabayesha Construction Company Private Limited (“Respondent”), decided upon the scope of arbitrability of disputes and that whether an order of `deemed conveyance’ under Section 11 of the Maharashtra Ownership of Flats Act, 1963 (“MOFA”) conclusively determines the title of a property. Further, the Bombay High Court also enumerated the pre-requisites for challenging an order passed by an arbitral tribunal by filing a writ petition.
The Respondent executed agreements for sale with the unit purchasers and agreed to form a society with the timeline prescribed under Rule 8 of the Maharashtra Ownership of Flats (Regulation of the Promotion of Construction, Sale Management and Transfer) Rules, 1964 (“MOFA Rules”). Respondent covenanted that it would execute the conveyance of the property within 4 (four) months of the registration of the society. The Respondent failed to execute a deed of conveyance in favour of the Petitioner society. In and around March 2018, the Petitioner filed an application before the competent authority under Section 11 of the MOFA for unilateral deemed conveyance. On August 10, 2018, the competent authority passed an order allowing the application and granted deemed conveyance. The Respondent did not challenge the said order. The Respondent invoked arbitration under the arbitration clause forming part of the agreement entered between the parties. The Respondent filed a statement of claim before the arbitral Tribunal against the Petitioner, inter-alia, praying for various reliefs. The Petitioner filed an application under Section 16 of the Act praying for dismissal of the claim for want of jurisdiction. The same was opposed by the Respondent. The arbitral Tribunal passed an order rejecting the application filed by the Petitioner and held that the arbitral Tribunal has jurisdiction to entertain and adjudicate upon the claims of the Respondent. Subsequently, a writ petition was filed challenging this order of the arbitral Tribunal.
Petitioner’s submissions/ contentions:
The Competent Authority, being a quasi-judicial authority, has already passed an order granting deemed conveyance of the property which has attained finality. The arbitral Tribunal cannot examine the validity or nullity of a quasi-judicial order passed under a statute. Such claim for specific performance can be maintained only before the Court and not before the arbitral Tribunal. The said order passed by the Competent Authority would act in rem. Since the arbitral Tribunal committed a fundamental and patent error in the order, the writ petition filed under Article 226 and 227 of the Constitution of India, 1950 is maintainable.
Respondent’s submissions/ contentions:
Before the arbitral Tribunal, the Respondent prayed for declaration that the agreement entered between the parties is valid, subsisting and binding on the Petitioner and has prayed for specific performance of certain obligations. The Respondent also sought for monetary reliefs. The prayers sought by the Respondent were in personam and not in rem. No prayers would affect the vesting of title in the Petitioner. The Respondent was entitled to have these issues adjudicated before the arbitral Tribunal. The Respondent also prayed for damages in addition to or in alternate to the reliefs of specific performance and therefore contended that the arbitral Tribunal did have jurisdiction to entertain the claim and adjudicate in accordance with law. It was also submitted that the order passed by the Competent Authority under Section 11 of MOFA does not adjudicate upon the title and such order is subject to final adjudication by a civil court. Consequently, all proceedings which can be decided by a civil court can also be decided by the arbitral Tribunal unless specifically barred for want of jurisdiction. Reliefs sought in the statement of claim are not barred from adjudication by the arbitral Tribunal. Though the order in respect of the title in a property operates in rem, the other arrangements which are subsidiary rights can still be adjudicated upon by the arbitral Tribunal.
Findings of the Court:
The Bombay High Court dismissed the writ petition on the following grounds:
a. An arbitral tribunal has jurisdiction to decide all the claims which can be decided by a civil court unless the same is barred, either, expressly or by necessary implication.
b. Civil or commercial disputes, whether contractual or non-contractual, which can be decided by a court, are in principle capable of being adjudicated and resolved by arbitral tribunals unless the jurisdiction of the arbitral tribunals is excluded, either expressly or by necessary implication.
c. The Competent Authority under MOFA is empowered to pass an order for deemed conveyance. However, such an order of deemed conveyance is subject to the final adjudication of title in the appropriate civil proceedings either before the civil court or arbitral tribunal since, there is no such provision under MOFA that, an order passed by the Competent Authority under Section 11 of MOFA is final in all respect and bars the civil court or the arbitral tribunal from deciding the issue of title independently.
d. A writ petition cannot be preferred against orders passed by an arbitral tribunal except in cases where there is exceptional rarity or where the arbitral tribunal patently lacks inherent jurisdiction.
Please find attached a copy of the judgment.
This has been contributed by Ranjit Shetty (Senior Partner) and Jonathan Jose (Senior Associate, Designate).
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