1

IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 1ST DAY OF JULY, 2022

BEFORE

THE HON’BLE MR. JUSTICE SACHIN SHANKAR MAGADUM

WRIT PETITION NO.12297 OF 2016 (GM-CPC)

BETWEEN:

MASTERS MANAGEMENT CONSULTANTS

(INDIA) PRIVATE LTD
HAVING ITS REGISTERED OFFICE AT 70,
NAGINDAS MASTER ROAD, FORT,
MUMBAI-400023
AND ITS ADMINISTRATIVE OFFICE AT
NEW UDYOG MANDIR NO.2,
KAMANWALA CHAMBERS, UNIT #7,
MOGUL LANE, MAHIM (W), MUMBAI-400016.
REPRESENTED BY ITS REGIONAL MANAGER-
SOUTH AND AUTHORISED SIGNATORY
MR.VISHNU PRASADA RAO,
AGED ABOUT 59 YEARS,
S/O MR.BHIMASHANKARA RAO PALADUGU,
RESIDING AT B-8/F3, VIJAYANAGAR COLONY,
HYDERABAD-500057, TELANGANA, INDIA.

...PETITIONER

(BY SRI.ADITYA VIKRAM BHAT, ADVOCATE)

AND:

1. NITESH ESTATES LIMITED

HAVING ITS REGISTERED OFFICE AT
 2

NITESH TIME SQUARE, 7TH FLOOR,

NO.8, M.G.ROAD, BENGALURU-560001.
KARNATAKA, INDIA.
REPRESENTED BY ITS MANAGING DIRECTOR,
MR.NITESH SHETTY.

2. NITESH RESIDENCY HOTELS PRIVATE LIMITED

HAVING ITS REGISTERED OFFICE AT
25-A, 2ND FLOOR, IMPERIAL COURT,
CUNNINGHAM ROAD, BENGALURU-560052.
KARNATAKA, INDIA.
REPRESENTED BY ITS MANAGING DIRECTOR,
MR.NITESH SHETTY.

…RESPONDENTS

(BY SRI.CHINMAY J MIRJI, ADVOCATE FOR R1;

SRI.KIRAN.J, ADVOCATE FOR C/R2)

THIS PETITION IS FILED UNDER ARTICLE 227 OF THE

CONSTITUTION OF INDIA PRAYING TO SET ASIDE THE ORDER
DATED 05.02.2016 PASSED IN I.A.NO.2 FILED BY THE
RESPONDENTS UNDER SECTION 8 OF THE ARBITRATION AND
CONCILIATION ACT, 1996 READ WITH ORDER VII RULE 11(d) OF
CPC IN ORIGINAL SUIT BEARING NO.9055/2013 BEFORE THE VII
ADDL. CITY CIVIL AND SESSIONS JUDGE, AT BANGALORE (CCH-
19) AT ANNEXURE-A.

THIS PETITION HAVING BEEN HEARD AND RESERVED FOR

ORDERS ON 16.06.2022, COMING ON FOR PRONOUNCEMENT OF
ORDERS THIS DAY, THE COURT MADE THE FOLLOWING:
 3

ORDER

The captioned writ petition is filed by the plaintiff feeling

aggrieved by the order dated 05.02.2016 passed by the

learned Judge on I.A.No.2 filed under Section 8 of the

Arbitration and Conciliation Act, 1996 (for short 'the Act')

wherein the learned Judge has ordered for return of plaint and

the same is under challenge.

2. For the sake of brevity, the parties are referred to

as per their rank before the Court below.

3. The plaintiff has instituted a suit for recovery of

sum of Rs.1,66,99,728/- along with interest at the rate of

18% per annum. The plaintiff claims that it has entered into a

project management and construction management

agreement with defendant No.2, the owner, and defendant

No.1 who appears to be the developer. The plaintiff claims

that this agreement was entered into on 30.05.2012. The

plaintiff claims that in terms of clause 4.1 of the agreement,

 4

he is entitled for a sum of Rs.5,05,00,000/- plus service tax as

per the agreement. The plaintiff has specifically pleaded that

in terms of the agreement, he has rendered service as

enumerated under the agreement and accordingly invoices are

raised in terms of payment schedule under clause 4.1 of the

agreement. On these set of pleadings, the suit for recovery is

instituted by the present plaintiff herein seeking recovery of

the above said amount.

4. The defendants, on receipt of summons, tendered

appearance requesting the Court to refer the dispute to

arbitration by invoking arbitration clause as provided in clause

12 of the agreement. The said contention was strongly

resisted by the plaintiff by filing detailed objections. The

present plaintiff specifically pleaded at para 5 of the objection

that the arbitration contemplated under the agreement is a

non-binding arbitration and contrary to the provisions of the

Act. The plaintiff further claims that in absence of valid

arbitration agreement between the parties, neither parties are

 5

obligated to commence arbitration under the Act in order to

resolve the disputes arising out of or in connection with the

agreement. Referring to clause 12.2 of the agreement,

plaintiff specifically contended that the said clause clearly

indicates that parties intended to refer the disputes to a non-

binding arbitration. Therefore, contended that a non-binding

arbitration is not a valid arbitration agreement in terms of the

Act.

5. The learned Judge having examined the rival

contentions has proceeded to allow the application filed under

Section 8 of the Act and consequently, plaint is returned. The

learned Judge while allowing the application was of the view

that clause 12 in the agreement clearly provides alternate

dispute resolution mechanism and therefore, plaintiff has to

take recourse in terms of clause 12 of the agreement. It is in

this background, learned Judge was of the view that the

plaintiff without invoking clause 12 of the agreement has

approached this Court and therefore, the learned Judge found

 6

that it was necessary to refer the matter to the dispute

resolution mechanism relegating the parties to seek redressal

of their dispute in terms of agreement dated 30.05.2012. It is

this order which is under challenge.

6. Shri Aditya Vikram Bhat, learned counsel appearing

for the petitioner/plaintiff reiterating the grounds urged in the

writ petition would vehemently argue and contend before this

Court that the order of the learned Judge is contrary to law

and also contrary to the material placed before the learned

Judge. Referring to the relevant clause 12.2 of the

agreement, he would contend that the learned Judge has

virtually misread the relevant clause incorporated in the

agreement. Referring to clause 12.2, he would contend that

agreement to refer the dispute to non-binding arbitration is

not an arbitration for the purpose of Section 7 of the Act and

therefore, he would contend that the defendants are not

entitled to invoke Section 8 of the Act at all.

 7

7. To buttress his arguments, he has referred to the

meaning of "non-binding" by referring to 'Advanced Law

Lexicon'. To demonstrate that the order under challenge is

contrary to said proposition of law relating to non-binding

arbitration agreement, he has placed reliance on the judgment

rendered by this Court in the case of Durha Constructions

Private Limited vs. Bateman Engineering (India) Private

Limited1. To strengthen his hands, he has further placed

reliance on the judgment rendered by the Hon'ble Apex Court

in the case of K.K.Modi vs. K.N.Modi and Others2.

Referring to the judgment rendered by the Co-ordinate Bench

of this Court in the case of Durha Constructions (supra), he

would point out that the words used in the arbitration clause

should disclose a determination. He would further point out

that the clause in the agreement should clearly demonstrate

that the parties have agreed by way of an agreement

consenting for referral of dispute to an Arbitrator and further,

1
ILR 2012 Kar 1242
2
(1998) 3 SCC 573
 8

they should agree that the decision of the Tribunal in respect

of the disputes will be binding on them.

8. Placing reliance on the principles laid down by the

Co-ordinate Bench in the above said judgment, he would

further contend that mere use of words "arbitration" or

"arbitrator" in the clause will not in itself make an arbitration

agreement. He has also placed reliance on the judgment

rendered by the Hon'ble Apex Court in the case of Jagdish

Chander vs. Ramesh Chander and Others3. Placing

reliance on para 8 of the said judgment, he would contend

that where a clause relating to settlement of disputes,

contains words which specifically exclude any of the attributes

of an arbitration agreement or contains anything that detracts

from an arbitration agreement, it cannot be termed as an

arbitration agreement. If the clause in the agreement gives

an indication that a party who is not satisfied with the decision

of the authority, may seek redressal of his grievance before

3
(2007) 5 SCC 719
 9

the Civil Court, then it cannot be termed as an arbitration

agreement. Therefore, he would contend that the judgment

rendered by the Hon'ble Apex Court in the case Jagdish

Chander (supra), if applied to the present set of facts, then it

is quite clear that the present plaintiff is entitled to institute a

suit before the competent civil Court seeking recovery of

money and clause 12.2 would come to the aid of the plaintiff

and therefore, the jurisdiction of competent civil Court would

not stand excluded as claimed by defendants.

9. Per contra, Shri Chinmay J.Mirji, learned counsel

appearing for the respondents/defendants would straight away

take this Court to the operative portion of the order and

question the very maintainability of the writ petition before

this court. Referring to the operative portion of the order, he

would point out that the learned Judge has returned the plaint

and therefore, the order under challenge is appealable under

the provisions of Order 43 of CPC. Though he would fairly

concede to the contentions raised by the plaintiff in regard to

 10

maintainability of the suit but, however, he would submit to

this Court that the impugned order cannot be tested before

this Court under Article 227 of the Constitution of India as

plaintiff has an efficacious remedy by way of a miscellaneous

appeal under the provisions of Order 43 of CPC and therefore,

he would request this Court to dismiss the writ petition as not

maintainable.

10. By way of reply, learned counsel appearing for the

plaintiff would straight away place reliance on a reported

judgment rendered by the Division Bench of this Court in

W.A.No.2505/2015. Referring to the Division Bench judgment

of this Court, he would straight away take this Court to para

11 of the said judgment and contend that against an order

passed under Section 8 of the Act, no appeal lies and

therefore, aggrieved party can seek redressal of his grievances

by approaching a writ Court under Article 227 of the

Constitution of India.
 11

11. Heard learned counsel appearing for the plaintiff

and learned counsel appearing for the defendants. Perused

the order under challenge. I have also given my anxious

consideration to the judgments cited by the learned counsel

appearing for the plaintiff.

12. On meticulous examination of the material on

record, the following points would arise for consideration:

1) Whether the impugned order passed by

the learned Judge on an application filed under
Section 8 of the Act can be questioned by invoking
the writ jurisdiction under Article 227 of the
Constitution of India?
2) Whether the finding of the learned Judge
that plaintiff and defendant Nos.1 and 2 in terms
of arbitration clause incorporated at clause 12 of
the agreement have to seek redressal of their
dispute by referring the dispute to an Arbitrator in
terms of clause 12 of the agreement dated
30.05.2012 is palpably erroneous?
 12

Re: Point No.1:

13. Insofar as maintainability of the writ petition is

concerned, the law in that regard is no more res integra.

Learned counsel appearing for the defendants has laid more

emphasis on the operative portion of the order. The operative

portion of the order under challenge indicate that plaint is

returned. The defendants claim that this order is passed

under the provisions of Order 7 Rule 11(d) of CPC and plaint is

returned and therefore, the plaintiff has a remedy of an

appeal. It would be useful for this Court to cull out para 11 of

the reported judgment rendered by the Division Bench of this

Court in the case of Jagdish Chander (supra) and the same

reads as under:

"11. The existence of an arbitration agreement

as defined under Section 7 of the Act is a condition
precedent for exercise of power to appoint an
arbitrator/Arbitral Tribunal, under Section 11 of the
Act by the Chief Justice or his designate. It is not
permissible to appoint an arbitrator to adjudicate the
disputes between the parties, in the absence of an
 13

arbitration agreement or mutual consent. The

designate of the Chief Justice of Delhi High Court could
not have appointed the arbitrator in the absence of an
arbitration agreement."

14. If the ratio laid down by the Division Bench at para

11 which is culled out supra is examined, then the objections

raised by the defendants in regard to maintainability of the

writ petition cannot be acceded to. Admittedly, the application

is filed under Section 8 of the Act. At para 11, the Division

Bench has held that where an application filed under Section 8

of the Act is rejected, no appeal is provided under the Act and

therefore, aggrieved party is entitled to seek redressal of his

grievance by knocking the doors of a writ Court under Article

227 of the Constitution of India. Therefore, this Court is of the

view that the writ petition is very much maintainable before

this Court. Accordingly, point No.1 formulated by this Court is

answered in the affirmative.

 14

Re: Point No.2:

15. Before I advert to point No.2, it would be useful for

this Court to refer to clauses 12.1 and 12.2 of the agreement.

The same are culled out as under:

"12.1 In the event of disputes, controversies,

differences of opinion and claims arising out of or in
connection with this Agreement or in any way relating
hereto or any term, condition or provisions herein
mentioned or the construction or interpretation
thereof or otherwise in relation hereto (hereinafter
referred to as the 'Dispute') the Parties shall first enter
into negotiations in good faith through their authorized
representatives in an attempt to prevent the need for
arbitration or litigation. A party may develop this
negotiation process by giving to the other written
notice of the existence of a Dispute with a request to
meet within 10 (ten) days at an agreed time and place
to resolve the matters in Dispute.

12.2 Notwithstanding the above, if, within 15

(fifteen) days after such meeting, the Parties have not
succeeded in negotiating a resolution of the Dispute,
the Dispute will be immediately submitted to non-
binding arbitration under the Arbitration and
 15

Conciliation Act, 1996 (hereinafter referred to as the

"Rules") by an arbitrator appointed in accordance with
the Rules. The arbitration shall be conducted in
English and at a mutually agreeable venue in India. If
the parties are unable to satisfactorily resolve the
dispute pursuant to such non-binding arbitration,
either party may initiate litigation. The prevailing
party in any litigation arising out of or related to this
Agreement shall be entitled to recover its reasonable
attorneys' and paralegals' fees and costs through all
trial and appellate levels of litigation, and in any
settlement, mediation, bankruptcy or administrative
proceedings."

16. It would be also useful for this Court to cull out the

definition of 'non-binding' as defined in Advanced Law Lexicon

and the same is culled out as under:

"Non-binding: A document that carries no formal legal

obligations, but it may carry moral obligations."

17. On reading of clauses 12.1 and 12.2 coupled with

definition of 'non-binding', this Court would find that there is

absolutely no intention on the parties to enter into arbitration

 16

agreement and if there is no intention on the part of the

parties to the agreement to refer their disputes to Arbitrator

for adjudication and if there is no willingness to be bound by a

decision of such Tribunal, the present suit instituted before the

Court is very much maintainable. The impugned order under

challenge has to be examined in the light of the principles laid

down by the Hon'ble Apex Court in the case of Jagdish

Chander (supra). The Hon'ble Apex Court in the judgment

cited supra was of the view that mere clause in an agreement

will not make it an arbitration agreement where a further

clause is found in the agreement indicating a further fresh

consent of the parties for reference to arbitration. The Hon'ble

Apex Court was of the view that the main attribute of an

arbitration agreement is consensus of the parties to refer the

dispute to an arbitration. Therefore, the principles laid down

by the Hon'ble Apex Court in the case of Jagdish Chander

(supra) are squarely applicable to the present case on hand.

 17

18. Clause 12.2 clearly contemplates that dispute will

be immediately submitted to non-binding arbitration under the

Act. It further contemplates that if parties are unable to

satisfactorily resolve the disputes pursuant to such non-

binding arbitration, either party may initiate litigation. It is in

the background of clause 12.2, this Court is of the view that

the agreement cannot be termed as an arbitration agreement.

Therefore, clause 12.2 clearly demonstrates that the parties

are at liberty to ventilate their grievances by initiating

litigation before the Civil Court and therefore, clause 12.2

clearly detracts from an arbitration agreement and therefore,

the agreement which is the subject matter of the suit cannot

be treated as an arbitration agreement. The present

agreement does not impliedly either spells out or

contemplates a clause providing reference of dispute to

arbitration.
 18

19. In the light of long line of authorities rendered by

the Hon'ble Apex Court, clause 12.2 clearly demonstrates that

there is no arbitration agreement between the parties and the

clause incorporated in the agreement does not contain the

attributes that are required to be present for an agreement to

be considered as an arbitration agreement. Therefore, the

Court below grossly erred in returning the plaint by invoking

Section 8 of the Act. Therefore, the order under challenge is

not at all sustainable. Accordingly, point No.2 formulated

above is answered in the affirmative.

20. Hence, I pass the following:

ORDER

(i) The writ petition is allowed;

(ii) The impugned order dated 05.02.2016

passed on I.A.No.2 in O.S.No.9055/2013 is set
aside and the plaint is restored to file;
 19

(iii) The parties are relegated to seek

adjudication of their rights in the pending suit
bearing O.S.No.9055/2013;

(iv) All contentions are kept open.

Sd/-
JUDGE

CA