Negotiable Instruments: Exhaustive Coverage by Adv Roma Bhagat. Register Now!
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  • Existence of contingent contract cannot be decided in the limited jurisdiction of the courts under section 11 of the Arbitration act. 
  • Contingent contract under section 31 of the contract act is a dispute to be referred to arbitration says the Telangana High Court. 
  • Section 31 of the contract Act defines contingent contracts as happening or not happening of an event and collateral to the consequence of the event. 
  • Arbitration is a form of alternative resolution of a dispute outside the courts. 
  • The arbitration application was filed under section 11 of the Arbitration and Conciliation act, 1996.
  • Mr Kishore Rai, counsel for applicant and M/s Joshi law chambers for respondents were heard.
  • The applicant is a developer who entered in an agreement with the respondent to build a property.
  • As per the conditions decided the applicant  had to complete fifty percent of the construction of the accumulated share. 
  • However, the applicant states that before the sanction could be completed, in the final stages a dispute arose between the parties thus the applicant not getting a sanction.
  • The applicant invoked the clause of arbitration to the respondent. However, they were returned endorsing “not claimed”.
  • The court observed that the agreement would have commenced only after the sanction which was never obtained and therefore the agreement could not be acted upon.
  • Telangana HC – It is relevant to note that the scope of interference of the court under section 11 for arbitration is very limited. The court cannot decide upon the cases which are to be decided upon by an arbitrator. 
  • Whether the agreement was acted upon, whether the sanction was rejected by the respondents was to be decided by the arbitrator according to the clause mentioned in the agreement in case of arrival of a dispute between the parties.
  • Therefore, the present arbitration application was allowed. 
  • As a sequel, the miscellaneous applications, if any, pending in the Arbitration Application shall stand closed.
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