Whether Claim Is Barred By Res Judicata Cannot Be Decided By Court At S.11 Stage Of Arbitration Act: P&H High Court

Brief Facts

This petition has been filed under Section 11 of the Arbitration and Conciliation Act, 1996 (for short “the Arbitration Act”) for appointment of an independent sole arbitrator to adjudicate the dispute between the parties.

The petitioner submitted that vide allotment letter dated 12.04.2013, Annexure P3, petitioner was allotted a Group Housing plot in Sector 41, Faridabad and Clause 16 thereof provided that all disputes and differences between the parties shall be referred to the sole arbitration of the Commissioner, Municipal Corporation, Faridabad (MCF).

That in view of Section 12 (5) of the Arbitration Act, the Commissioner, MCF cannot be appointed as an Arbitrator, learned Senior counsel has requested for the appointment of an independent and impartial arbitrator.

Per contra, the respondent submitted that before approaching this Court by way of present petition, petitioner had filed a complaint before the Real Estate Regulatory Authority (RERA) on 08.03.2020, which was partly accepted vide order dated 24.11.2022, Annexure R9.

That the petitioner had two remedies and having chosen to avail the remedy under Real Estate (Regulation and Development) Act, 1996 (for short “the RERA Act”), he was debarred from invoking Section 11 of the Arbitration Act and that once the RERA had adjudicated upon the matter, the findings recorded by it are binding upon the petitioner and the present petition is barred by the doctrine of res judicata.

Court's Analysis

The court noted that the dispute in the present petition has emanated from a notice dated 03.12.2019 served by the respondent upon the petitioner whereby the respondent demanded payment of the first, second and third installments, which according to the respondent became payable on 15.08.2018, 15.02.2019 and 15.08.2019.

By this letter petitioner was called upon to deposit the amount within a period of 15 days, failing which, it was informed that further action would be taken as per the terms and conditions of the allotment letter. While sending a reply to this letter, petitioner by notice invoked the arbitration clause, the court noted.

The court while examining the reliefs sought both under RERA and the present petition, noted that when both the above reliefs are examined jointly, it is apparent that both the disputes are entirely different. The petitioner had approached RERA for directing the respondent to register the petitioner as a promoter under the RERA Act, besides seeking a direction to the respondent to complete the infrastructure work and to pay interest on the amount deposited as penalty, etc.

The dispute whereby appointment of an arbitration has been sought is on account of the demand of the installments by the respondent. It therefore cannot be said that the disputes before both the authorities are the same and having chosen one remedy, the petitioner is debarred from invoking Section 11 of the Arbitration Act. The first arguments raised by the counsel for the respondent is, therefore, rejected, the court noted.

The court further noted that the Supreme Court in Indian Oil Corp. Ltd. Versus M/s SPS Engineering Ltd., 2011 has held that the question whether a claim is barred by res judicata, does not arise for consideration in a proceedings under Section 11 of the Act. Such an issue will have to be examined by the arbitral tribunal.

The Supreme Court in the above has further observed that the limited scope of Section 11 of the Act does not permit such examination of the maintainability or tenability of a claim either on facts or in law. It is for the arbitral tribunal to examine and decide whether the claim was barred by res judicata. There can be no threshold consideration and rejection of a claim on the ground of res judicata, while considering an application under Section 11 of the Act.

Similarly, in Parsvnath Developers Limited & Anr. Versus Rail Land Development Authority, 2020, High Court of Delhi has observed that the issue of res judicata or estoppel or claims being barred under the principles of Order 2, Rule 2, CPC touch upon the merits of the claim and can be decided only by the Arbitral Tribunal. The power under Section 11 (6) of the Arbitration Act is only restricted to examining the existence of the arbitration clause and the objection raised by the respondent requiring the High Court to examine whether the disputes sought to be raised are overlapping with the claims raised before other fora cannot be sustained,the court noted.

Accordingly, the present petition was allowed and the arbitrator was appointed.

Case Title: M/s Rise Projects Private Limited Versus Municipal Corporation, Faridabad

Case Reference: ARB-108-2020

Judgment Date: 11/11/2024

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