Issue Whether Third Party Is Required To Be Impleaded In Proceedings Is For Arbitrator To Decide: Delhi High Court

The Delhi High Court has observed that the issue as to whether any third party is required to be impleaded in the proceedings is covered by the Doctrine of Competence-Competence and that it will be for the Arbitrator to decide the said issue.

Justice Mukta Gupta observed thus:

"Therefore, once a valid arbitration agreement exists between the parties, the issue whether the petitioner is entitled to any relief in the absence of a third party to the agreement or that third party is required to be impleaded in the proceedings, is covered by the Doctrine of Competence-Competence and it will be for the Arbitrator to decide the said issue."

The Court was dealing with a plea seeking appointment of an Arbitrator under Section 11(6) of the Arbitration and Conciliation Act, 1996.

According to the petitioner, the petitioner purchased the ground 7th, 8th, 9th, 10th, 11th and 12th floors of New Tower, Bhikaji Cama Place, R. K. Puram, New Delhi along with the respective car parking areas at the Hyatt Complex from the respondent vide four registered Sale Deeds dated 12th May, 2014 along with perpetual right to use car parking area.

The petitioner had transferred and assigned all rights and title in the premises to IndusInd Bank Limited along with perpetual right to use car parking area. Thereafter, the petitioner sought refund of the security deposit of Rs. 15 Crores deposited by the petitioner pursuant to Refundable Security Deposit Agreement entered into between the petitioner and the respondent.

Since, the claim of the petitioner now was in terms of the Refundable Security Deposit Agreements dated 12th May, 2014, Clause 7 whereof provided for an arbitration, the petitioner invoked arbitration and thereafter filed the present petition.

According to the petitioner, demand notice was issued vide the letter dated 3rd July, 2021, which was not responded by the respondent and, thereafter, the petitioner issued notice dated 25th August, 2021 giving 30 days time for resolution of the disputes failing which the invocation of the arbitration in terms of the Agreements. Even the said notice dated 25th August, 2021 was not replied by the respondent.

Though no reply affidavit was filed to the petition despite time having been granted, the claim of the respondent before the Court was that in view of the third party intervention as the property had been sold off by the petitioner to some other party and the respondent had to take the refundable security deposit money from the said third party, the so called dispute cannot be referred to arbitration as the third party was not a signatory to the Refundable Security Deposit Agreements, Clause 7 whereof provides for reference of disputes to arbitration.

Thus, relying on the relevant judgments on the subject, the Court found no merit in the objection taken by the respondent.

"Consequently, Justice Usha Mehra, a former Judge of this Court is requested to arbitrate the disputes between the parties," the Court ordered.

The Court said that the Arbitrator would be entitled to charge fees as per the Schedule IV of the Act or as agreed by the Arbitrator pursuant to the consent of the counsels for the parties.

"The learned Arbitrator is requested to furnish the requisite disclosure under Section 12(2) of the Act within one week of entering into the reference," the Court said.

The plea was accordingly disposed of.

Case Title: VISTRAT REAL ESTATES PRIVATE LIMITED v. ASIAN HOTELS NORTH LTD

Citation: 2022 LiveLaw (Del) 357

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