Legal Heirs Of Deceased Party To Arbitration Agreement Comes Under "Legal Representatives" Under Section 2(1)(g) Of Arbitration Act: Telangana High Court

The bench held that it encompasses persons who manage or claim to inherit the deceased's estate.

The issue before the High Court was whether an objection under Section 8 of the Arbitration Act could be sustained by the legal heir or representative of the deceased. To address this, the High Court first examined Section 40 of the Arbitration Act, which explicitly states that the death of a party does not discharge an arbitration agreement. Instead, such agreements remain enforceable by or against the deceased's legal representative.

The High Court referred to Section 2(1)(g) of the Arbitration Act which defines "legal representative" to include individuals who represent the deceased's estate or intermeddle with it. It held that the broad definition encompasses persons who manage or claim to inherit the deceased's estate.

It noted that the deceased occupied the premises during his lifetime and after his death the appellant/defendant continued to occupy it. The property was registered in deceased's name, and both taxes and maintenance charges were paid by him during his lifetime and subsequently by the appellant/defendant.

Considering Section 40 and the definition of "legal representative," the High Court held that the arbitration agreement's enforceability was not extinguished by deceased's death. It held that the legal representative's role includes those who intermeddle with the deceased's estate or inherit it. The High Court referred to the decision of the Supreme Court in Ravi Prakash Goel v. Chandra Prakash Goel where it was held that the arbitration agreement remains valid and enforceable by the deceased's legal representatives.

Further, the High Court referred to Supreme Court decision in Sundaram Finance Limited v. T. Thankam which clarified that a civil court should not question its jurisdiction if the jurisdiction is barred by a special statute. Instead, the court should verify compliance with procedural requirements under the special statute.

Brief Facts:

The matter pertained to a flat in Innovation Residency which was constructed by the Respondent, M/s. Innovation Builders. A suit was filed by Parvez Adi Debara (Appellant) seeking recovery of possession and damages for the flat. The Appellant claimed ownership through inheritance as a legal heir of Rashid H. Debara who had allegedly entered into an agreement for the flat.

The Respondent argued that the Appellant unlawfully entered and occupied the flat. It was discovered that the flat had been left unsold and occupied by the Appellant. Following this, a legal notice was sent to the Appellant demanding possession of the flat. When this demand was ignored, the Respondent filed the suit for recovery.

The Appellant contended that his late uncle Rashid H. Debara entered into an agreement of sale for the flat, paying an advance and completing the payment. The Appellant argued that Rashid H. Debara, who was issueless and passed away in 1996, was in possession of the flat. Following his uncle's death, the Appellant inherited the property and continued to maintain it.

The Appellant filed a petition under Section 8 of the Arbitration and Conciliation Act, 1996 and sought to resolve the dispute through arbitration as stipulated in clause 10 of the agreement.

The Additional Chief Judge of the City Civil Court dismissed the petition on the grounds that the agreement of sale was not between the Respondent and the Appellant. Feeling aggrieved, the Appellant approached the High Court and challenged the decisions of the Civil Court.

Observations by the High Court:

The High Court held that the lower court's rejection of the Section 8 petition, based on the appellant/defendant's non-party status to the sale agreement, was incorrect. It held that the lower court should have considered whether the arbitration clause applied and if the appellant/defendant was a legal representative under Section 2(1)(g).

Consequently, the High Court set aside the lower court's order and allowed the parties to invoke the arbitration clause as per the agreement of sale.

Case Title: Sri Parvez Adi Debara vs M/s. Innovation Builders

Case Number: CIVIL MISCELLANEOUS APPEAL No.289 of 2023

Advocate for the Appellant: Manjari S Ganu

Advocate for the Respondent: Vedula Srinivas and Vedula Chitralekha

Date of Judgment: 24.07.2024

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