Delhi High Court Refuses Stay on Property Sale in Arbitration Appeal

New Delhi: In a significant ruling concerning arbitration disputes and property rights, the High Court of Delhi, presided over by Justices Rekha Palli and Saurabh Banerjee , has declined to grant an interim stay restraining the respondent from selling or dealing with a suit property during the pendency of an appeal under Section 37 of the Arbitration and Conciliation Act, 1996.

The appeal was filed by Rudra Buildwell Pvt. Ltd. against Realworth India Pvt. Ltd., challenging an order dated October 29, 2024, passed by a Single Judge. The Single Judge had rejected the appellant's application under Section 34 of the Act, which sought to set aside an Arbitral Award dated April 12, 2022. The arbitral award had directed the respondent (Realworth India) to refund a sum of Rs. 5 crores received towards sale consideration, along with interest at 6% per annum, effectively denying the appellant's claim for specific performance of an Agreement to Sell from December 30, 2009.

The core of the dispute originated from the Agreement to Sell. The appellant argued that the Single Judge's order was "wholly perverse" and went beyond the Arbitrator's findings. They contended that since 100% sale consideration had already been transferred, it was a case where specific performance ought to have been granted, especially as they had approached the court within the prescribed period for commencing arbitration to seek this relief.

However, the primary focus of the order dated December 9, 2024, was on the appellant's application seeking a stay on the alienation of the property. The appellant sought to restrain the respondent from selling, transferring, or parting with possession of the suit property during the appeal.

The respondent vehemently opposed the stay application, highlighting that both the learned Arbitrator and the learned Single Judge had concurrently found that the appellant was not entitled to specific performance of the agreement. Senior Counsel for the respondent argued that, in light of these concurrent findings, the appeal itself might not be maintainable, and the respondent's right to deal with their property should not be curtailed.

The High Court carefully considered the submissions. The bench noted the crucial fact of the concurrent findings by both the Arbitrator and the Single Judge against the appellant's claim for specific performance. Furthermore, the court pointed out a significant delay on the part of the appellant in initiating arbitration proceedings. Despite a 72-day period specified in the Agreement to Sell for executing the Sale Deed, the appellant initiated arbitration only after a period of 2 years and 10 months, during which time they admittedly made no correspondence with the respondent.

The appellant's claim that possession of the property, purportedly handed over at the time of the agreement, was later "forcibly taken" by the respondent was also raised. While the appellant's counsel sought to link this alleged forcible taking to a specific period (just prior to an order dated November 1, 2012), the respondent's counsel denied this, stating their consistent case was that possession was never handed over to the appellant. The court, however, deemed it unnecessary to express an opinion on this disputed aspect at this stage of deciding the stay application.

Based on these considerations – the concurrent findings denying specific performance, the significant unexplained delay in initiating proceedings, and the disputed facts regarding possession – the High Court concluded that the balance of convenience did not lie in favour of the appellant. Consequently, the court found no reason to issue directions restraining the respondent from dealing with the suit property during the pendency of the appeal.

While denying the specific restraint order, the court clarified a vital legal principle that would govern the parties: the Doctrine of lis pendens would be applicable to the present case. This means that any transaction involving the suit property during the pendency of the appeal would be subject to the final outcome of the litigation, effectively protecting the appellant's interests to some extent without imposing an outright prohibition on the respondent.

The application for stay was thus disposed of, and the main appeal is now listed for further hearing on March 27, 2025. Both parties have been granted liberty to file short written submissions, not exceeding five pages each, referencing the findings in the impugned order and the award, at least one week before the next date.