M/S Khiviraj Motors vs M/S The Guanellian Society

Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 4926 OF 2011

[Arising out of SLP [C] No.3835 of 2010]

Khivraj Motors ... Appellant

Vs.

The Guanellian Society ... Respondent

J U D G M E N T

R.V.RAVEENDRAN, J.

Leave granted. Heard.

2. The appellant alleges that a joint development agreement dated

18.2.2007 was entered into between "Father A.John Bosco, President, The

Gaunellian Society" as the owner, and the appellant as the developer, in

regard to three acres of land and that clause 18 of the said agreement

provided for settlement of disputes arising out of the said agreement by

arbitration. It is further alleged by the appellant that on 20.2.2007, the said

Father A. John Bosco, President, The Guanellian Society, executed a power

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of Attorney in favour of the appellant in connection with the development of

the said property with power to enter into agreements of sale and also to

transfer and convey an extent of 70% undivided share in the said property.

3. The Gaunellian Society, (`Society' for short) the respondent herein, at

its Extraordinary Meeting held on 10.1.2008, passed a resolution that the

Managing Committee of the Society had not authorized its President to deal

with the property and therefore the joint development agreement and general

power of attorney executed by him were null and void and not binding on

the Society. On 17.4.2009 the respondent Society filed an application under

section 11 of the Arbitration and Conciliation Act, 1996 (`Act' for short) for

appointment of an arbitrator for resolution of the disputes between the

Society and the appellant.

4. The appellant resisted the said petition alleging that the application by

the Society was not maintainable for the following reasons :

(a) the lands was purchased and owned by Father A.John Bosco, in his

individual capacity and not as the President of the Society;

(b) Father A. John Bosco entered into the joint development

agreement in respect of the property in his individual capacity and

not as the President of the Society.

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(c) Though the joint development agreement contained a provision for

arbitration, as the respondent society was not a party to the joint

development agreement containing the arbitration agreement, the

petition under section 11 by the Society was not maintainable.

5. A designate of the Chief Justice of the Karnataka High Court by order

dated 26.10.2009 allowed the said application and appointed a retired

District Judge as the sole arbitrator. The High Court held that the joint

development agreement was executed between the Society and the appellant

and that Father A.John Bosco had signed the said agreement, only in his

capacity as the President of the Society and not in his individual capacity

and therefore the application under section 11 of the Act by the Society was

maintainable.

6. The said order is contested by the appellant, inter alia, on the

following grounds :

(i) The joint development agreement was entered into between Father

A.John Bosco, as the owner of the property and the appellant, as developer.

As the Society was not a party to the joint development agreement, there is

no privity of contract between the Society and the appellant. The arbitration

clause in the said agreement could not therefore be invoked by the Society

for resolving any dispute relating to the joint development agreement.

4 (ii) Even if the Society is a party to the joint development agreement, as

the Society had alleged that the appellant had adopted unfair means and

exercised undue influence over Father A.John Bosco to get the joint

development agreement executed by him, it would not be appropriate for an

arbitral tribunal, a private forum, to adjudicate upon such serious allegations.

The civil court alone should decide such serious allegations so that the

appellant could vindicate itself.

The appellant also attempted to raise several other contentions relating to

title and merits of the dispute, which are wholly alien to the scope of the

proceedings under Section 11 of the Act and therefore need not be

considered.

7. In the special leave petition, the appellant specifically contended that

the Society was not a signatory or party to the joint development agreement.

Though, a typed copy of the joint development agreement is produced as an

annexure to the special leave petition, it did not show who signed the joint

development agreement as owner of the property. In view of the said

averment in the special leave petition, this Court directed notice on the

petition on 15.2.2010. The respondent society has produced alongwith its

counter, a photocopy of the registered joint development agreement dated

18.2.2007 and the registered power of attorney dated 28.2.2007 executed in

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favour of the appellant. The appellant does not dispute the correctness of the

said copies produced by the respondent society.

8. An examination of the photocopy of the joint development agreement

shows clearly that it was not executed by Father A.John Bosco in his

individual capacity. The document describes `Father A.John Bosco,

President, Gaunellian Society' as the first party or the owner. The signature

of the first party/ owner on each page of the document is as under:

"For The Gaunellian Society

[Sd/- Fr. A.John Bosco]

President"

The said agreement is also signed by Mr. Pushpchand Chordia as the power

of attorney holder of the partners of the appellant. There are only the said

two signatories to the agreement, that is the Society represented by its

President and the appellant represented by its Attorney Holder. Fr. A.John

Bosco has not executed the joint development agreement in his personal

capacity. The power of attorney is also executed by the Society. Thus the

respondent Society is the first party under the joint development agreement

and not Father A.John Bosco. We may also note that if Father A. John

Bosco was executing the joint development agreement in his personal

capacity, there was no need for him to describe himself as the "President of

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the Gaunellian Society" and sign the document for and on behalf of the

Gaunellian Society, as its President. Therefore the application under section

11 of the Act filed by the Society against the respondent was maintainable as

the petitioner and the respondent in the application under section 11 were

parties to the joint development agreement containing a provision (Clause

18) for settlement of disputes arising out of the agreement by arbitration.

9. The appellant has raised a contention that the owner of the property is

not the Society and that Father A.John Bosco in his personal capacity was

the owner and that he had entered into a joint development agreement and

executed a power of attorney in his personal capacity in favour of the

appellant. But as noticed above, Father A.John Bosco has neither executed

the joint development agreement nor the power of attorney in his individual

capacity and the executant is "The Gaunellian Society" represented by its

President Father A.John Bosco. If the contention of the appellant that the

owner is Father A. John Bosco, and not "The Gaunellian Society", is taken

to its logical conclusion, the effect would be that there is no joint

development agreement or power of attorney by the owner of the property in

favour of the respondent and the joint development agreement and the power

of attorney signed by a party who is not by the owner would be worthless

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papers. Be that as it may. We have referred to this aspect only to show the

absurdity of the contention raised by the appellant.

10. The respondent Society has no doubt contended that the contract was

concluded with unconscionable and unfair terms and that the Managing

Committee of the Society had not authorized its President -- Father A.John,

Bosco to enter into any such joint development agreement. These allegations

no doubt relate to the validity of the joint development agreement, but will

have no bearing on the validity of the arbitration agreement (Clause 18 of

the agreement), which is an independent agreement incorporated and rolled

into the joint development agreement. The Arbitrator will examine the

validity and binding nature of the joint development agreement. There is

nothing in the claims and contentions of the Society which excludes the

operation of the arbitration agreement or necessitates rejection of the request

for appointment of an arbitrator.

11. The appeal is therefore dismissed with costs of Rs.25,000/- payable by

the appellant to the respondent. We find that the arbitration has been delayed

for nearly one and a half years on account of the pendency of this special

leave petition. We therefore request the Arbitrator to proceed with the matter

expeditiously.

8 12. We make it clear that what we have considered is the limited question

as to who is the executant of the agreement. We have not pronounced upon

the question whether Father A.John Bosco was authorized to execute such a

joint development agreement. Nor have we considered the contentions

relating to the title to the property.

................................J.

(R V Raveendran)

New Delhi; ..............................J.

July 4, 2011. (A K Patnaik)