Introduction:

The Karnataka High Court, in the case of Ramu Nagabathini v. Developer Group India Private Limited (Writ Petition No. 15658 Of 2024), ruled on whether third-party rights in a real estate project subject to arbitration could be adjudicated under writ jurisdiction. The bench, comprising Justice Krishna S Dixit and Justice Ramachandra D. Huddar, held that disputed third-party rights arising from sale deeds in such a case cannot be decided by the court in writ jurisdiction. The case revolved around the “North Gardens Project” at Nandi Hills, where the petitioner, a third-party buyer, challenged an interim order passed by an arbitrator that restricted the sale of plots, arguing that it impacted third-party stakeholders not part of the arbitration agreement.

Arguments of Both Sides:

The petitioner contended that arbitration had evolved beyond a private dispute and had become a matter in rem, impacting multiple third-party purchasers. He argued that the arbitration proceedings, originally concerning the developer and the land aggregator, could not bind those who were not signatories to the agreement. The petitioner further submitted that his property rights were jeopardized without a fair opportunity to be heard, which violated principles of natural justice. He emphasized that matters involving third-party rights and non-arbitrable subjects should be resolved by a civil court rather than through arbitration. Additionally, the petitioner challenged the arbitrator’s interim order under Section 17 of the Arbitration and Conciliation Act, 1996, which prevented further sales, thereby creating uncertainty regarding the validity of existing sale deeds.

Conversely, the respondents contended that the writ petition was not maintainable under Articles 226 and 227 of the Constitution, as it involved disputed facts requiring substantive evidence unsuitable for writ jurisdiction. They asserted that the petitioner lacked any statutory or constitutional right to challenge the arbitration process. The respondents also highlighted that the arbitration proceedings were being conducted under the court’s supervision, as per orders passed in CMP.No.91/2019, and were not a private arrangement as alleged by the petitioner. They argued that the petitioner was aware of the arbitration and should have taken steps to participate in it instead of approaching the writ court. Lastly, the respondents noted that any challenge to an arbitral award should be pursued under Section 34 of the Arbitration Act, and if the petitioner sought to assert his rights, he could file a civil suit under Section 9 of the CPC.

Court’s Judgment:

The Karnataka High Court upheld the respondents’ arguments and dismissed the writ petition. The court observed that the challenge to arbitration proceedings was not maintainable under writ jurisdiction, as it entailed disputed facts requiring in-depth examination. The court emphasized that the petitioner had not demonstrated any statutory or constitutional rights to invoke writ jurisdiction and that his claims were based on unverified sale deeds executed between himself and third parties. Additionally, the court underscored that arbitration proceedings were being conducted under judicial supervision and that the petitioner could seek remedies under the Arbitration Act or file a civil suit to establish his rights. Accordingly, the court dismissed the petition, reaffirming that third-party rights impacted by arbitration must be pursued through appropriate legal channels rather than through writ jurisdiction.