Arbitration Clause Can't Be Ousted By Specific Performance Clause In Contract: Punjab & Haryana High Court

The Punjab and Haryana High Court has held that a clause allowing a civil suit for specific performance does not override a clear arbitration clause between parties, appointing an arbitrator to resolve a land dispute after rejecting objections of coercion and invalidity.

Justice Jasgurpreet Singh Puri said, “When in an agreement, there exists a specific clause pertaining to arbitration, which remains undisputed then the mere fact that there is some other clause providing entitlement to file a suit for specific performance cannot oust the relevance and operation of the arbitration clause."

The order came on a plea by VCA Estate Private Limited, seeking the appointment of an arbitrator in its dispute with Baldev Raj and others over an agreement to sell land.

The agreement recorded that Rs.15.93 lakh had been transferred to Baldev Raj and others. It contained two separate provisions. One allowed the buyer to seek specific performance before a civil court. Another required dispute to be resolved through arbitration at Yamuna Nagar by a mutually appointed sole arbitrator.

When differences arose over execution of the sale, VCA Estate invoked the arbitration clause and proposed names for appointment. Baldev Raj and others did not agree, prompting the company to move the High Court.

The original agreement was produced before the Court during the hearing and was not disputed by Baldev Raj and others.

They opposed the plea, claiming the agreement had been signed under coercion and that its terms were never genuinely accepted. They also pointed to incorrect phone numbers in the document to suggest manipulation. At the same time, they said they were willing to return Rs 15.93 lakh received under the agreement.

The court declined to go into these objections, holding that such issues fall within the domain of the arbitral tribunal and cannot be examined at the stage of appointing an arbitrator.

“At the reference stage, the Court would not hold a mini trial because the scope and subject matter of the same lie with the Arbitrator and not before the reference Court. The existence of the aforesaid two conditions, i.e. prima facie existence of the arbitration clause and its invocation thereof, is only to be seen-nothing more, nothing less," the court said.

Rejecting the argument that the buyer should instead pursue a civil suit for specific performance, the court held that the arbitration clause remained enforceable.

Allowing the plea, the court appointed Justice Sneh Prashar (Retd.) as the sole arbitrator to adjudicate the dispute. The parties have been directed to appear before her on a date to be fixed, and the proceedings will follow the statutory framework, including disclosure requirements and timelines prescribed under the law

For Petitioner (M/s VCA Estate Private Limited): Advocate Ambanshu Sahni.

For Respondent (Baldev Raj and others): Advocate Deepak Basatia.