Whether a dispute relating to specific performance of contract can be referred to arbitration?
Under Section 7 of the Arbitration and Conciliation Act, 1996, an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, is called an arbitration agreement.
Therefore, all disputes in respect of a defined legal relationship, whether contractual or not can be subjected to arbitration.
In the case of Olympus Superstructures (P) Ltd. v. Meena Vijay Khetan, (1999) 5 SCC 651 : AIR 1999 SC 2102, the Supreme Court has held that:
“…the right to specific performance of an agreement of sale deals with contractual rights and it is certainly open to the parties to agree — with a view to shorten litigation in regular courts — to refer the issues relating to specific performance to arbitration. There is no prohibition in the Specific Relief Act, 1963 that issues relating to specific performance of contract relating to immovable property cannot be referred to arbitration. Nor is there such a prohibition contained in the Arbitration and Conciliation Act, 1996 as contrasted with Section 15 of the English Arbitration Act, 1950 or Section 48(5)(b) of the English Arbitration Act, 1996 which contained a prohibition relating to specific performance of contracts concerning immovable property.”
In the above case, the Supreme Court further held that merely because there is need for exercise of discretion in case of specific performance, it cannot be said that only the civil court can exercise such a discretion. In this regard, the Supreme Court approvingly quoted the following observations of Calcutta High Court in the case of Keventer Agro Ltd. v. Seegram Comp. Ltd. [Apo 498 of 1997 & Apo 449 of (401) dated 27-1-1998 (Cal)]:
“… merely because the sections of the Specific Relief Act confer discretion on courts to grant specific performance of a contract does not mean that parties cannot agree that the discretion will be exercised by a forum of their choice. If the converse were true, then whenever a relief is dependent upon the exercise of discretion of a court by statute e.g. the grant of interest or costs, parties could be precluded from referring the dispute to arbitration.”
In view of the above decision of the Supreme Court, there should be no doubt that a dispute relating to specific performance of a contract can be referred to arbitration.
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