Court Under S.9 Of Arbitration Act Can Grant Interim Measure To Protect Property From Being 'Wasted' While Hearing Appeal U/S 37: Delhi High Court

The Delhi High Court Bench of Chief Justice Manmohan and Mr. Justice Tushar Rao Gedela held that the court in the exercise of powers under Section 37 of the Arbitration Act, is not obligated to consider the merits or otherwise of the facts as stated by the litigants.

Suffice it to state that the High Court under Section 9 of the Act is empowered to exercise jurisdiction as an interim measure to protect the property, items or goods from being wasted.

Brief Facts

The present appeal was filed under section 37 of the arbitration act by BCC Developers, the appellants. In this appeal, an interim order passed by a single judge was challenged in which the appellants were restrained from alienating the property which was the subject matter of an agreement to sell executed on August 5, 2023. This agreement was entered into between the appellant and Bhupender Singh and another, the respondents in which the property was sold for a consideration of Rs. 8.21 crore.

The respondent paid an advance amount of Rs. 1.65 crore towards the completion of the agreement. The remaining payment had to be made in instalments. When the respondents failed to make the first two instalments, the agreement was terminated by the appellant on January 3, 2024. The appellant also forfeited the amount of Rs. 65 lakhs and returned the amount of 1 crore to the respondent.

Thereafter a petition under section 9 of the arbitration act was filed by the respondent seeking to prevent the appellant from disposing of the property.

The appellant argued that since the respondent failed to make the required payment, the action of termination of contract and forfeiture of amount was justified. They further contended that the property did not overlap in any manner with the disputed property for which a suit was pending before the Judicial Additional Collector in Behrod, Rajasthan. The respondent argued that the appellants had already sold 84% part of the property during the pendency of the section 9 petition and at that time no interim measure was in operation.

Court's Analysis

The court observed that the court is justified to grant interim reliefs under section 9 of the arbitration act to protect the subject matter of the suit from being wasted or disposed of. The court further observed that the order passed by the single judge was based on a prima facie finding of overlapping properties and forfeiture of Rs. 65 lakh. The interim measures passed were justified.

The court further noted that matters with respect to payment default and others facts should be decided by the arbitral tribunal and not by the court under section 9 of the arbitration act. The court further observed that at this stage, the role of the court is to assess whether a prima facie case exists for granting interim protection and if such protection is not granted whether it would cause an irreparable harm.

The court agreed with the conclusion drawn by the single judge wherein the appellant was restrained from transferring the property. The court noted that the respondent had raised genuine concerns of ownership and subsequent attachment of the property due to ongoing civil proceedings in the court. The court further noted that this overlap between the parties raised apprehensions that the transfer of the property could seriously affect the rights of the respondent.

The court further observed that a significant part of the property had already been sold by the appellant in the absence of interim protection. The court apprehended that if the appellant is not further injuncted from transferring the remaining property, the purpose of the arbitration proceedings would be defeated. Therefore, the remaining property had to be protected by passing an interim order under section 9 of the act.

The court further rejected the argument of appellant pertaining to delay in commencing the arbitral proceedings and observed that appropriate remedies were available under the arbitration act.

The court further referred to the Supreme Court judgment in Ambalal Sarabhai Enterprise Ltd vs KS Infraspace LLP Ltd., AIR 2020 SC 307 wherein triple tests while granting interim relief were laid down. Firstly, there has to be a prima facie case. Secondly, if the protection is not granted, irreparable harm would be caused. Lastly, whether balance of convenice exists in favour of the party seeking the relief. The court observed that these tests were satisfied by the impugned order passed by the single judge.

The court concluded that this Court finds that the learned Single Judge has in fact satisfied himself about the principles encompassing the triple test before grant of any interim order. In that view of the matter, this Court does not find any violation of law by the learned Single Judge.

Accordingly, the court held that there is no merit in this appeal and the same is dismissed along with the pending applications.

Case Title: - BCC DEVELOPERS & PROMOTERS PVT. LTD v. BHUPENDER SINGH & ANR

Case Reference: FAO(OS) 144/2024, CM APPL. 59974/2024, CM APPL. 59975/2024 & CM APPL. 59976/2024

Court: Delhi High Court

Judgment Date: 09/10/2024

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