Arbitrability of Torts in India : Krishan Gopal v. Praveen Rajput
An arbritration agreement is a written contract in which two or more parties agrees to settle their disputes outside of court . The arbritration agreement is ordinarily a clause in larger contract
Whereas an arbitration clause is a clause in a contract that requires a party to resolve their disputes as an arbitral process.
In the case of Krishan Gopal v. Parveen Rajput : The plaintif entered into a collaboration argument dated 14th february , 2013 with the defendant in respect of suit property . At the time of the agreement, the property had only a single storey. As per the agreement , the defendant had agree to construct the still parking on the ground floor as also construct the upper ground floor, first floor , second floor and third floor . In consideration of the said construction ,the defendant was to become the owner of only first floor and second floor with roof on terrace rights . The argument was a detailed argument . The demolition of the building was to be done by the defendant . The defendant agreed to pay to plaintiff a sum of Rs 68,80,000.
The Construction of the property was to be completed within a period of 12 months with a clause that if construction is not completed with in a stipulated period ,a sum of Rs 2% on the total cost of construction was to be paid as penalty per month till possession is handed over.
The agreement contained an arbitration clause which is reproduced below:
" That if at any time dispute arises between the parties in connection with the construction of building on use of materials and articles in the building and any other matter of the building the same shall be referred to Arbitrator to be appointed with the concurrence of both parties. Arbritration for resolutions for dispute shall be in accordance with the provisions of the Arbritration and Concillation Act, 1996".
As the construction work came to halt sometime in 2014-15 . The plaintiff had claimed that defendant was using sub-standard material and not installing a well Known brand lift.
The plaintiff had moved out of his own property , got the work complete out of his own funds. The defendant also entered into an agreement for sale , for sale of the 2nd floor and received a sum of Rs46 Lakhs from the third party , due to this the third party filed the litigation against the plaintiff.
The plaintiff had terminated the agreement with the defendant and filed a suit before the court claiming exemplary and punitive damage and also of passing mandatory injunction in his favour.
As the matter came up for hearing the defendant mentioned about the arbitration clause in his written statement and emphasized that the parties ought to be referred to arbitration.
- The defendant didn't file a application under sec 8 of the Arbitration and Concillation Act, 1996 seeking reference.
- He has failed to filed the original or certified copy of the agreement.
- He has already filed the written statement and the affidavit of admission /denial , hence the defendant has waived the right to seek reference to arbitrator.
- Plaintiff has claimed the punitive and exemplary damages also the mandatory injunction which cannot be granted by a arbitrator.
- Damages being sought by the plaintiff being in nature of tortious claim and not arising out of agreement, the disputes are not arbitrable .
- Agreement has been terminated and the arbritration clause does not exist.
- Though , the agreement is terminated the Arbritration Clause survive between the parties.
- There is a Arbitration clause in this agreement and the dispute ought to be referred to Arbitration.
- The dispute are liable to be referred to Arbitration , unless the party has waived the right to invoke the Arbitral Clause.
Issue : Whether such a dispute is liable to referred to Arbitration in the respect of plaintiff's contention?
The High Court of Delhi states the matter issues wise which are as follows
- A formal application under Section 8 of the Act , seeking reference of disputes to arbitration is not required.Thus the agreement is an admitted document and the existence of the arbitration clause in it , being also admitted
- The Court while relying on Booz Allen & Hamilton Inc. vs SBI Home Finance Ltd. Observed that it a settled position of law that a party expressing an intention to arbitrate is sufficient. And the defendant here had not waived his right to seek arbitration .
- The honourable Court has also stated that even if the agreement has come to an end , the arbitration clause is not perished. [ Hema khattar and Arn.
- On referring and distinguishing the judgement of ( Bougainvillea case ) the court observed that the terms of present agreement between plaintiff and defendant is quite detailed and clear. Infact under the agreement , compensation is also dealt with. The only fact that the compensation may have been provided for delay in construction doesn't itself mean that the plaintiff cannot claim any damages over and above the penalty stipulated.
- The court stated that the exemplary/punitive damages is an issue to be determined by the Tribunal. An arbitral tribunal has all the trapping of civil court , including power to award all forms of damages and injunctions.
The court mentioned that plaintiff cannot be permitted to avoid the arbitration by arguing that there is a tortious claim for exemplary damages.
Thus the court had came to a conclusion that the claims raised by the plaintiff in this suit being arbitral in nature but the same are liable to be referred to an independent Arbitrator and he would be entitled to raise all his claims before the Arbitral Tribunal.