The main legal point established in the judgment is that a fraudulent transfer of property can be voided, and an arbitration award has the force of a decree. Additionally, the relevant rules would not be applicable to a transferee pendente lite.

Anand Byrareddy, J: Heard Shri Padmanabha Mahale, learned Senior Advocate, appearing for the Counsel for the petitioner and the learned Counsel for respondent No.1.

2. The brief facts as would be relevant for the consideration of this writ petition are as follows:

The petitioner is a Co-operative Society and a Government of India undertaking. It is stated that respondents 2 to 4 were due to their banker – M/s. Vysya Bank, a large sum of money. Since the Bank was seeking to take coercive measures to recover the amount, respondents 2 to 4 are said to have entered into a Memorandum of Understanding with the petitioner as on 6.7.2001, whereby the petitioner agreed to meet the liability of the Bank and discharge the loan to the extent of 50.00 lakh on behalf of respondents 2 to 4 and the petitioner in turn, would have a charge on the schedule property. Further, the agreement indicated that the petitioner was entitled to 5000 Sq.ft. area, with a right to construct a building by the petitioner at its cost, consisting of ground floor of 3500 Sq.ft. of super built up area and Mezzanine floor of 1500 Sq.ft. area, on a long term of 90 years at the agreed rent in terms of the Memorandum of Understanding. It was also agreed that the petitioner would be entitled to interest at the rate of 22% from respondent No. 1, on Rs.50.00 lakhs paid to the aforesaid Bank, from 6.7.2003 till the date of handing over of possession of 5000 sq.ft. of land to the petitioner. It was also agreed that steps such as submission of plan for sanction to the Competent Authority and commencement of construction in accordance with the plan and such other sanctions, as may be necessary, would be obtained by the respondents. It was agreed that any dispute arising between the parties would be referred to arbitration under the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act’ for brevity). In the face of this agreement, it transpires that, respondent no.3 with an intention to deprive the petitioner of the subject property, had gifted one-third of the property in favour of the first respondent, under a gift deed dated 10.12.2001. This was not brought to the knowledge of the petitioner and was done without the knowledge of the petitioner. The petitioner after having learnt that the respondents were scouting for lucrative offers from third-party purchasers in respect of the schedule property notwithstanding the above said arrangement, the petitioner was constrained to invoke Section 9 of the Act, seeking an order of injunction against the respondents from dealing with the schedule property. An interim order was granted by the City Civil Court, Bangalore, in case No. AA 36/1952 initiated by the petitioner, and the order was confirmed after hearing both the parties as on 5.3.2003.

The petitioner thereafter approached this Court seeking appointment of a sole Arbitrator for resolution of the dispute under the provisions of the Act and the arbitration proceedings commenced before the appointed Arbitrator on 20.4.2005. Respondents 2 to 4, participated in the proceedings. Ultimately, an award was passed in favour of the petitioner on 20.4.2005. This was challenged before a competent Court in an arbitration suit in AS 23/2005 and the same was dismissed, ultimately, by an order dated 22.1.2007. The petitioner thereafter learnt that even during the pendency of these proceedings, the respondents had executed a registered sale deed dated 25.6.2008 and sold the entire property in favour of one M/s. Rajesh Exports. The petitioner thereafter had initiated execution proceedings before the City Civil and Sessions Judge, Bangalore, in execution Case No. 1287/2008 as on 4.8.2008, to enforce the award.

Respondents 2 to 4 had challenged the order of the Civil Court dated 22.1.2007, passed in AA 23/2005 before this Court by way of an appeal in MFA 8634/2007. This Court dismissed the appeal as on 24.9.2008 after the matter was contested on merits.

Thereaft