The judges 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 the litigation in the regular civil 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 contracts relating toimmovable property cannot be referred to arbitration. Nor is there a prohibition contained in the Arbitration & 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 contain a prohibition relating to specific performance of contracts relating to immovable property.

The judges rejected the argument that specific performance of contracts relating to immovable property cannot be granted by an arbitrator since the Specific Relief Act gives a discretion to the civil courts to grant specific performance or not. That exercise of discretion by judicial courts cannot be replaced by the exercise of the discretion by a forum which the parties have chose, like that of an arbitrator. The apex court agreed with the reasoning of the Calcutta High Court in the case of Keventer Agro Ltd vs Seegram Company Ltd that if this argument that judicial discretion rules out arbitration were accepted then parties could never refer theissues of costs or interest to arbitration. With this the judges upheld the Calcutta High Court decision, the Punjab High Court decision in Laxmi Narayan vs Raghubir Singh and the Bombay High Court decision in Fertiliser Corporation of India vs Chemical Construction Corporation.

With this the apex court has now given a choice to flat purchasers to move either the civil for specific performance by a builder for the construction and handing them possession of their flats or to go in for arbitration. Of course, recourse to arbitration is possible only if the agreement with the builder or promoter contains an arbitration clause. Whether this will now result in builders making flat purchasers sign on contracts that do not have an arbitration clause, remains to be seen.

In another far-reaching step for purchasers of flats or houses the apex court has gone further and held that specific performance will be granted not only on the construction of the flats but also for the interior designing of the flats. Orcourse for this there must be an agreement for interior designing that provides for arbitration.

These issues arose from three agreements in 1994 under which M/s Olympus Structures agreed to sell flat Nos 101-102, 201-202 and 301-302 on the first, second and third floors of the proposed building Wembley at Playground Road, Vile Parle (East), Bombay, to the Meena Vijay Khetan and others. The consideration for these flats was Rs 76 lakh, Rs 72 lakh and Rs 74 lakh respectively. The possession of the flats was to be handed over along with the amenities by October 30, 1994. The terms of the contract provided a time schedule for payments and time was the essence of the contract. Failure to pay would entail termination of the agreement. Termination was subject to a 15 days notice during which period the purchasers were to be given an opportunity to set right the breaches. The disputes arose when the builder contended that there were defaults in payment and the purchasers contended that there was no progress in theconstruction. As there was no reply to the queries of the purchasers about the construction stage the purchasers refused to make further payments and invoked the arbitration clause in the agreement.

Simultaneously with these agreements for the purchase of flats three agreements for the interior designing were signed. These referred to the type of doors, corridors, fixtures, flooring, bathroom tiles and fittings, the kitchen, the toilets and the electric wiring that the builder was to put in the flats. Although these agreements were not specifically referred to arbitration yet the arbitrator directed specific performance of the interior designing agreements. The Supreme Court upheld this as being covered by the words "any other mater in any way connected with this agreement." So the next time you buy a house or a flat read the contract carefully and insist on an arbitration clause being put in there of the widest possible amplitude. In case of disputes it will save you the long tortuous hassle of courts thatare expensive to approach and are timeless in their processes of giving a decision.