IMPORTANT POINT
A non-signatory purchaser claiming through a party to an arbitration agreement is bound by that agreement, and the doctrine of lis pendens applies to prevent property transfers during arbitration proceedings.

JUDGMENT :

ANANT RAMANATH HEGDE, J.

1. The following questions have come up for consideration in this appeal:

(a) Whether a person who is not a party to the arbitration agreement, and purchases the property from a person who is a party to the agreement, is bound by the arbitration clause that is binding on his vendors?

(b) Whether a person who purchases the property which is the subject matter of a proceeding under Section 9 of the Arbitration and Conciliation Act, 1996 (for short ‘Act of 1996’) is bound by the principle of lis pendens?

2. The appellant Company which is the respondent in Section 9 proceeding under the Act of 1996 and against which an interim order is passed, is in appeal on the premise that Section 9 proceeding is not maintainable against it as it is not a party to the arbitration agreement.

3. The respondent in this appeal, which is the applicant in Section 9 proceeding is defending the impugned order. Respondent contends that the appellant is “claiming through or under a party” who is bound by the arbitration agreement and alleged purchase by the appellant is during the pendency of Section 9 proceeding, as such the appellant is amenable to the jurisdiction under the Act of 1996.

4. Certain relevant facts noticed from the pleadings are as under:

(i) On 16.10.2020, the respondent entered into a registered agreement to purchase certain immovable properties with the owners.

(ii) Out of Rs.16,14,37,500/- the sale consideration amount, Rs.80.00 lakhs is claimed to have been paid as advance.

(iii) On 03.02.2023, the vendors issued a notice to the respondent, cancelling the agreement for sale dated 16.10.2020, and also informed that Rs.80.00 lakhs received towards advance consideration amount is repaid to the present respondent.

(iv) On 04.03.2023, the respondent issued a reply to the notice dated 03.02.2023, insisting on the specific performance of the agreement for sale.

(v) On 17.05.2023, the appellant takes out a paper publication expressing its intention to purchase the properties.

(vi) On 31.07.2023, the respondent filed an application under Section 9 of the Act of 1996, seeking interim measures against the vendors. (In this proceeding only the present respondent and owners are parties, and the appellant is not a party)

(vii) 02.11.2023, respondent initiated proceedings under Section 21 of the Act of 1996 against the vendors.

(viii) On 28.11.2023, Section 9 application is heard and reserved for orders.

(ix) On 20.12.2023, the appellant purchased the properties from vendors of the respondent.

(x) On 02.01.2024, Section 9 Court passed an order against the vendors restraining them from alienating the schedule properties.

(xi) On 27.01.2024, the respondent filed a Section 9 application against the appellant (pendente lite purchaser) and in terms of the impugned order dated 15.04.2024, Section 9 Court restrained the appellant from alienating the properties.

5. Sri Udaya Holla, the learned Senior Counsel urged that Section 9 application is not maintainable on the following grounds:

(i) Under Section 7 of the Act of 1996, the arbitration agreement to be valid, must be in writing and signed by the parties. The appellant is not a party to the agreement dated 16.10.2020 and, as such is not bound by the arbitration clause in the agreement dated 16.10.2020.

(ii) Section 2(1)(h) of Act of 1996 defines the expression “Party” as a party to an arbitration agreement and the appellant is not a party to the agreement.

(iii) The order in an earlier proceeding by the Court under Section 9 of the Act of 1996, against the appellant’s vendors does not bind the appellant as Section 52 of the Transfer of Property Act, 1882 (for short “Act of 1882) does not apply to Section 9 proceeding.

(iv) The appellant has acquired an independent title over the properties under the sale deed dated 20.12.2023 and the appellant not being a party to the agreement dated 16.10.2020, cannot be subjected to the jurisdiction under the Act of 1996.

(v) Even on merits, the responden