JUDGMENT :

Mr. Anant Ramanath Hegde, J. - This appeal under Section 37 (1)(b) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Act, 1996' for short) has been filed by the respondents in the proceeding under Section 9 of the Act. In terms of the order dated.29.10.2022 the application is allowed and the respondents are directed to furnish cash security of Rs.50.00 crores along with interest @ 18% per annum from the date of payment. The respondents have also been restrained from alienating or creating any third-party interest over petition properties (hereinafter referred to as 'schedule properties') till the disposal of arbitration proceedings.

2. The parties to the proceeding are referred to as appellants and respondents, as per their designation before this Court.

3. Brief facts necessary for adjudication of the case can be summarised as under:

- the appellants and respondent No.1 entered into a Memorandum of Understanding (MOU) on 06.10.2018 to develop scheduled properties. Thereafter, on 04.12.2018 a supplementary agreement was executed modifying certain terms and conditions of the MOU.

4. On 10.10.2018 the respondents paid Rs.25.00 crores to the appellants as security deposit. Later, on 3.12.2018, respondents paid Rs.25.00 crores to the appellants. In all Rs.50.00 crores is paid towards security deposit. The payment of Rs.50.00 crores is not in dispute. The appellants acknowledge the receipt of Rs.50.00 crores.

5. Alleging violation of the terms and conditions of the MOU as well as supplementary agreement, the respondents filed petition under Section 9 of the Act, 1996 praying some interim measures before the commencement of the arbitral proceedings. The appellants opposed the Section 9 petition and urged that there is no arbitration clause and prayed for dismissal of the petition on merits.

6. It is relevant to note that in a petition filed under Section 11 of the Act, 1996, this Court has kept open the question of the existence of an arbitration clause to be decided by the arbitrator.

7. After hearing the parties, the District Court allowed the application and directed the appellants to furnish cash security of Rs.50.00 crores along with interest @ 18% per annum from the date of payment.

8. Aggrieved by the said order, the appellants are in appeal.

9. Heard Sri D.R. Ravishankar, learned Senior Counsel for the appellants and Sri G. L. Vishwanath, learned Senior Counsel for the respondents.

10. Learned Senior Counsel appearing for the appellants submitted that the question relating to the maintainability of the proceeding before the arbitrator is kept open, and that being the position, the impugned order could not have been passed. It is urged that in view of the supplementary agreement dated 04.12.2018, the earlier agreement dated 06.10.2018 stands superseded in respect of the matters contained in the supplementary agreement, and the arbitration clause is not found in the supplementary agreement dated 04.12.2018, as such the dispute is not arbitrable and Court acting under Section 9 of the Act, 1996 does not have the jurisdiction to entertain the petition.

11. The claim for payment of interest @ 18% per annum is nothing but the claim for damages as such there cannot be an order to furnish the security for the amount claimed by way of damages.

12. Learned Senior Counsel appearing fo