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High Court of Judicature at Bombay
ANOOP V. MOHTA, J.
Sharad Shah
Versus
Sonata Realty Private Limited
Arbitration Petition No. 42 of 2011
Decided on : 14-03-2013
Arbitration Act - Invocation of Section 9 - Summary of Acts and Sections: Arbitration and Conciliation Act, 1996 (Section 9), Maharashtra Ownership Flats (Regulation of the Promotion of Construction, Sale, Management and Transfer) Act, 1963, Civil Procedure Code (Order 39 Rule 1 and 2) - The court discussed the invocation of Section 9 of the Arbitration Act and the relevant provisions of the Maharashtra Ownership Flats Act and Civil Procedure Code. The court highlighted the importance of honoring court orders and the need for a full trial to adjudicate the disputes.
Fact of the Case:
The Petitioner invoked Section 9 of the Arbitration Act, seeking reliefs including prohibitory injunction, receiver, and security against the Respondent. The dispute arose from negotiations for joint development of properties, leading to termination of the Memorandum of Understanding (MOU) and subsequent legal actions.
Finding of the Court:
The court found that the dispute was subject to arbitration and that the rights and liabilities of the parties should be determined through the arbitration proceedings. The court dismissed the Petition, modified the injunction orders, and granted liberty to the parties to apply for appropriate relief before the Arbitral Tribunal.
Issues: The main issues included the invocation of Section 9 of the Arbitration Act, the validity of the MOU, termination of the contract, creation of third party rights, and the need for appointment of a receiver.
Ratio Decidendi: The court held that the dispute should be resolved through arbitration, and the rights and liabilities of the parties should be determined through the arbitration proceedings. The court emphasized the importance of honoring court orders and the need for a full trial to adjudicate the disputes.
Final Decision: The Petition was dismissed, the injunction orders were modified, and the court granted liberty to the parties to apply for appropriate relief before the Arbitral Tribunal. The court maintained the injunction order for the smaller property and vacated the injunction order for the larger property. The court also allowed the continuation of existing orders for a further six weeks.
The Petitioner has invoked Section 9 of the Arbitration and Conciliation Act, 1996 (for short, “the Arbitration Act”) on 21 December 2010, against the Respondent and prayed for reliefs; prohibitory injunction-receiver and security. A prayer is also made to prevent termination of the Memorandum of Understanding (for short, “the MOU”) and the Power of Attorney dated 2 February 2009.
2. The Respondent is the owner of the land admeasuring 9827 square meters and bearing Survey No. 41/1A bearing CTS No. 1C/3A situated at Village Oshiwara, Taluka Andheri, “the larger property” (Exhibit “A”); and the land admeasuring 3500 square meters and bearing Survey No. 41/1A bearing CTS No. 1C/3A at Village Oshiwara, Taluka Andheri, “the smaller property” (Exhibit “B”).
3. In the month of December 2008, negotiations commenced between the Petitioner and the Respondent for joint development of the larger property. On 2 February 2009, the MOU was executed whereby, the Petitioner “agreed” to finance to the Respondent a sum of Rs.15 crore, on depositing original title deeds of the property admeasuring 3500 square meters and executed for the same a Power of Attorney also.
4. The Respondent, on 4 June 2009, an another MOU for a joint development of the larger property was entered into with “Shree Shubh Builders Private Limited” (for short, “Shubh Builders/Third party) which was to take effect on or after 23 June 2009. This MOU entered into with “consent” and “within knowledge” of the Petitioner.
5. On 8 June 2009, the Respondent terminated the MOU dated 2 February 2009, as per clause 5 and 9, as the Petitioner financed only Rs.5 crore against Rs.15 crore and further failed to even negotiate the term and conditions for development of the larger property by the end of May 2009.
6. The Petitioner, on 3 July 2010 and 16 August 2010, for the first time, after lapse of 17 months, objected the action of the Respondent. Both the letters were not replied by the Respondent as the Petitioner personally approached the Respondent and “assured” that he has no intention to litigate and on receipt of the premises worth Rs.5 Crore in any of the projects of Shubh Builders/Third party, he would return the mortgaged documents also. On 21 December 2010, the Petitioner filed the present Petition.
7. This Court, on 22 December 2010, has passed the order. The operative part of the same is as under:-
“1. [........]
2. In the circumstances, stand over to 17.1.2011. Till further orders, the respondent shall not hereafter dispose of, alienate, encumber, part with possession of or create any third party rights in respect of the properties described in Annexures “A” and “B” to the petition or any construction thereof. The development/construction can, however, proceed subject to the above injunction and subject to the respondent not claiming any equity for anything that may be done hereafter.”
8. On 23 December 2010, 14 January 2011, 27 January 2011 and 8 February 2011, pursuant to the order, the Petitioner requested the Respondent to fix up a date and time for inspection of the suit properties, to furnish with details of allotment letters or any other document whereby the Respondent “created third party right/s”, if any, in respect of the suit properties and the amounts accepted. However, the Respondent did not reply or furnish the information sought for in the letters.
9. On 5/15 April 2011, Shubh Builders/Third party filed Chamber Summons No. 665 of 2011 to implead as a party Respondent No. 2 in the Arbitration petition. On 20 April 2011, the Petitioner filed a reply to the Chamber Summons and objected it.
10. By order dated 15 June 2011, the Court passed the order.
The relevant part of the same is as under:-
“5. In the circumstances, the application for intervention is dismissed. There shall be an order in terms of the ad-interim order dated 22.12.2010 with a clarification that the same will not affect the rights, if any, of the applicant in any manner whatso
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