Notice Under Section 21 Of A&C Act Issued; Court Not Barred From Exercising Jurisdiction Under Section 9: Bombay High Court

The Single Bench of Justice G.S. Kulkarni reiterated that when an application under Section 9 has already been taken up for consideration, the question of examining whether the remedy under Section 17 is efficacious or not would not arise.

A Development Agreement was executed between the petitioner- Relcon Infroprojects Ltd., and the respondent no. 1 Cooperative Housing Society- Ridhi Sidhi Sadan. The petitioner was appointed as a developer for carrying out the redevelopment of the building of the Society.

Subsequently, the petitioner and the Society entered into a Supplemental Development Agreement, making modifications to the Development Agreement, which was executed by the majority members of the Society.

Consequently, the petitioner took steps to proceed with the redevelopment work. After the respondent no. 2 to 4, who are the members of the Society, and respondent no. 6, failed to cooperate in the redevelopment work and refused to vacate their flats, the petitioner filed an application for interim measures under Section 9 of the A&C Act before the Bombay High Court, seeking a direction to the parties to handover the possession of their respective flats.

The petitioner Relcon Infroprojects submitted before the High Court that the Development Agreement and the Supplementary Development Agreement was executed between the petitioner, the Society and its majority members with respect to the redevelopment work of the premises of the Society.

The petitioner averred that the said Supplementary Agreement being executed by the majority members of the Society, the respondent members of the Society could not oppose the redevelopment work on the ground that they were aggrieved by the terms of the said Supplemental Development Agreement.

The petitioner added that the obstruction made to the redevelopment work by the respondent members was prejudicial to the interests of other members of the Society who had already vacated their respective flats and were willing to cooperate with the redevelopment work. Hence, the petitioner submitted that since substantial amounts were spent by the petitioner to commence the redevelopment work, the stalling of the project by the respondent members would adversely affect the petitioner and the majority members of the Society.

The respondent no. 2 submitted before the High Court that he had already invoked the arbitration clause by issuing notice to the petitioner and the Society, and since no reply was received to the said notice, the respondent no. 2 had filed an application under Section 11 of the A&C Act before the High Court for appointment of an arbitral tribunal. Thus, the respondent no. 2 contended that the petitioner and the Society had no real intention to commence arbitration and hence, a relief under Section 9 of the A&C Act ought not to be granted.

The respondent no. 2 prayed that appropriate orders be passed on the Section 11 application filed by him, and that the proceedings under Section 9 be converted into an application under Section 17 of the A&C Act, to be adjudicated by the arbitral tribunal.

Section 9 (3) of the A&C Act provides that once the arbitral tribunal has been constituted, the Court shall not entertain an application for interim measures under Section 9(1), unless the Court finds that circumstances exist which may not render the remedy provided under Section 17 efficacious.

The Court noted that after the petition under Section 9 of the A&C Act was filed before the High Court and a notice on the petition was served on the respondent members, the respondent member had issued the notice invoking the arbitration clause.

Holding that it is a settled law that minority members cannot obstruct the will and the decision of the majority members of the Society, the Court rejected the contention of the respondent members that merely because a notice under Section 21 of the A&C Act to refer the disputes to arbitration was issued by the respondent member, the High Court ought not to exercise jurisdiction under Section 9 of the A&C Act and that the Court must refer the dispute between the parties to arbitration.

"The insistence on behalf of respondent no. 2 and 4 is that merely because a notice under section 21 of the Act to refer the disputes to arbitral tribunal was issued, the sequel to it would be that the Court ought not to exercise jurisdiction under section 9 and refer the disputes to arbitration. Such a contention as urged on behalf of respondent nos. 2 and 4 is totally unfounded to say in the least. Such contention is not only against the principles of law governing the powers of the Court to pass appropriate interim orders under section 9, as the facts and circumstances of the case may warrant, however, it goes contrary to the very statutory provision.", the Court said.

The Bench observed that the Supreme Court in the case of Arcelor Mittal Nippon Steel India Ltd. versus Essar Bulk Terminal Limited (2021) had ruled that if the arbitral tribunal is yet to be constituted, the Court is obliged to exercise power under Section 9 of the A&C Act, and that whether the Court grants interim relief or not is a different issue. Noting that the bar of Section 9(3) operates after an arbitral tribunal is constituted, the Apex Court had held that when an application under Section 9 has already been taken up for consideration and is in the process of consideration or has already been considered, and subsequently an arbitral tribunal is constituted, the question of examining whether the remedy under Section 17 is efficacious or not would not arise.

Rejecting the contention of the respondent members that the petitioner or the Society were not willing to take the matter to arbitration, the Court held that the respondent members cannot take an adverse position, which is against the intention of the majority members of the Society, and obstruct the redevelopment work, considering the dilapidated condition of the premises of the Society.

The Court thus allowed the petition and directed the respondent members to handover the possession of their respective flats to the petitioner.

Case Title: Relcon Infroprojects Ltd. & Anr. versus Ridhi Sidhi Sadan, Unit of Shree Ridhi Co.op. Housing Society Ltd. & Ors.

Dated: 15.07.2022 (Bombay High Court)

Counsel for the Petitioners: Mr. Karl Tamboly a/w. Akanksha Mishra, Jiu Rathod i/b. Dinanath Tiwari

Counsel for the Respondents: Mr. Sarosh Bharucha a/w. Mr. Ameet Mehta, Ms. Jayashri Manjrekar, Ms. Smriti Pal i/b. M/s. Solicis Lex for respondent no.1. Mr. Anil D'souza a/w. Valentine Mascorenhas for respondent nos. 2 and 4. Mr. Vaibhav Charalwar a/w. Ms. Shweta R. Rathod i/b. Elixir Legal Services for respondent no. 3. Mr. Udayan Jain for respondent no. 6.

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