22 September 2021 | DLF Home Developers Limited v. Rajapura Homes Private Limited and another | Arbitration Petition (Civil) No. 17 of 2020 | DLF Home Developers Limited v. Begur Omr Homes Pvt. Ltd and another | Arbitration Petition (Civil) No. 16 of 2020 | NV Ramana CJ and Surya Kant J | Supreme Court of India | 2021 SCC OnLine SC 781

Ridgewood partnered with DLF in 2007. To the extent relevant here, the parties formed two joint venture companies. One was called Rajapura Homes and was supposed to develop residential projects in Bangalore. The other was Begur Omr Homes to develop residential protects in Kanchipuram (Tamil Nadu) as well as Bangalore.

The agreement gave the investor Ridgewood an exit mechanism via a put option (broadly, the party having the right (like Ridgewood) can “put” its shareholding on the table and the other party (like DLF) had to buy them on a specified price. Later, Ridgewood transferred its shareholding in the joint venture companies to its affiliates Resimmo and Clogs Holdings.

At some point, Resimmo and Clogs exercised the put option, but DLF was unable to provide the exit. The matter was settled. It was decided that DLF would transfer its shareholding in the joint venture companies to Ressimo. For this, the parties executed two share purchase agreements. As part of the settlement, the share purchase agreements further provided for execution of construction agreements under which DLF had to complete the construction of the Rajapura and Begur projects. On the conclusion of the construction obligations, DLF was to notify Resimmo. If Resimmo accepted the completion, it had to invest INR 75 crores more into the joint venture companies (DLF being the indirect beneficiary of that sum). The construction agreement provided for an arbitration in accordance with the ACA and New Delhi as the seat and venue.

There was third agreement at play. For the construction DLF was to get fee in accordance with the calculation set out under a fee computation agreement executed among the respondents.

Disputes arose when Resimmo did not accept DLF’s notice of completion. DLF gave notice of arbitration under the construction agreements. Resimmo took the position that the dispute had arisen under the share purchase agreement.

DLF filed two separate petitions (for each joint venture company/construction agreement) to appoint one sole arbitrator under both the construction agreements.

In deciding, first, the court made some observations on the jurisdiction under Section 11 ACA:

1. Despite the omission of Section 11(6-A) ACA, the legislative intent behind thereto continues to be a guiding force for the courts while examining an application under Section 11 of the Act. [Ed. This is an incorrect observation. The omission has not yet been brought into effect.]
2. Such a review is not intended to usurp the jurisdiction of the arbitral tribunal but is aimed at streamlining the process of arbitration. Therefore, even when an arbitration agreement exists, it would not prevent the court to decline a prayer for reference if the dispute in question does not correlate to the said agreement.

Then the court examined under which provision the dispute was covered. For that it said, “the two groups of agreements will have to be read in harmony and reconciled.” It concluded that the dispute was referable under the construction agreement because:

1. Notwithstanding certain overlaps, their object and field of operation is different and distinct in nature.
2. What would be the purpose of having a separate arbitration clause 11 under the RCMA/SCMA?
3. Moreover, if on appreciation of the facts and law, the arbitrator finds that the ‘real dispute’ stems from the Share Purchase Agreements the arbitrator shall be free to wind up the proceedings with liberty to the Parties to seek redressal under the rules of SIAC.

Then turning briefly to the issue of joinder the court ruled as follows:

1. The fact remains that the RCMA and SCMA, though interlinked and connected, are still two separate agreements and the genesis of the disputes lies in separate and distinct facts
2. Save where the parties have resolved to the contrary, it would be inappropriate to consolidate the proceedings originating out of two separate agreements.
3. However, since the Fee Agreement provides that the “Fee” can only be calculated after taking into consideration various financial components of both the Rajapura Homes Projects and the Southern Homes Project, it would be necessary for the sake of avoiding wastage of time and resources, and to avoid any conflicting awards that the disputes are referred to a sole Arbitrator.

Finally, the court left it to the wisdom of the sole arbitrator to decide whether the disputes should be consolidated and adjudicated under one composite award or otherwise. The modalities and manner in which the two separate arbitral proceedings shall be conducted shall also be resolved by the sole arbitrator.

Read the decision here: