2011 Supreme(Del) 455

IN THE HIGH COURT OF DELHI
Manmohan Singh, J.
Appellants: Alpha Tiger Cyprus Investments No. 3 Ltd. and Anr.
Vs.
Respondent: Mr. Shakti Nath and Ors.
OMP 99/2011 and CS(OS) No. 394/2011
Decided On: 04.07.2011

Headnote:

ARBITRATION - SECTION 9 PETITION - JURISDICTION - TERRITORIAL JURISDICTION - NOIDA - DELHI - ARBITRATION AGREEMENT - NOVATION - SETTLEMENT AGREEMENT - VALIDITY - ARBITRATION CLAUSE - INCORPORATION - SCOPE OF POWERS OF ARBITRAL TRIBUNAL - INTERIM RELIEF - INJUNCTION - RESTRAINING RESPONDENTS FROM DEALING WITH PROPERTY - PERSONAL PROPERTIES - SALE OF COMPANY/PROJECT LAND - THIRD PARTY INTEREST - UNDERTAKING - PAYMENT OF INSTALMENTS - ARBITRAL TRIBUNAL'S JURISDICTION - DISMISSAL OF SUIT.

Fact of the Case:

Petitioners and Respondents entered into a Shareholders Agreement and a Share Subscription and Purchase Agreement for co-development of a special economic zone. Disputes arose between the parties leading to ICC arbitration. The parties executed a settlement agreement and agreed to keep the arbitration in abeyance. Petitioners alleged that Respondents breached the settlement agreement and sought to terminate the Revised Galaxia Agreements. Petitioners invoked arbitration clause and appointed their nominee arbitrator. Respondents refused to participate in the arbitration proceedings. Petitioners filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 seeking interim relief to restrain the Respondents from dealing with the Galaxia Project land and creating third party rights on the assets of the Respondents. Respondents filed a suit for declaration and injunction against the Petitioners claiming that the arbitration agreement was null and void and seeking to restrain the Petitioners from initiating/re-opening the Galaxia Arbitration. Petitioners filed an application under Section 45 of the Arbitration and Conciliation Act, 1996, praying that the suit filed by the Respondents is not maintainable.

Finding of the Court:

1. The settlement agreement did not novate the Galaxia agreements and the arbitration clause contained in the Galaxia agreements was valid, binding and subsisting between the parties. 2. The Respondents were estopped from contending that the arbitration agreement was null and void, inoperative or incapable of being performed as they had themselves first invoked the arbitration under the Galaxia Agreements and submitted to the jurisdiction of the ICC. 3. The Court had jurisdiction to entertain the petition as the agreements provided that the same was executed at New Delhi and the parties had also agreed to the venue of arbitration at New Delhi. 4. The Petitioners were not entitled to the relief of restraining the Respondents from creating third party interest in the personal properties of the Respondents No. 1 to 4 as the Respondents had undertaken to remove all encroachments and dismantle the concrete batching plant within two weeks and had also deposited the overdue installment to the Noida Authority.

Issues: 1. Whether the settlement agreement novated the Galaxia agreements and rendered the arbitration clause null and void? 2. Whether the Court had jurisdiction to entertain the petition? 3. Whether the Petitioners were entitled to the relief of restraining the Respondents from creating third party interest in the personal properties of the Respondents No. 1 to 4?

Ratio Decidendi: 1. The settlement agreement did not novate the Galaxia agreements as it expressly kept the provisions of the Galaxia Agreements alive and binding on the parties. The arbitration clause contained in the Galaxia agreements was valid, binding and subsisting between the parties as per Clause 2.1 read with Clause 4.5 of the settlement agreement. 2. The Court had jurisdiction to entertain the petition as the agreements provided that the same was executed at New Delhi and the parties had also agreed to the venue of arbitration at New Delhi. The relief sought by the Petitioners did not involve determination of any right in the immovable property. 3. The Petitioners were not entitled to the relief of restraining the Respondents from creating third party interest in the personal properties of the Respondents No. 1 to 4 as the Respondents had undertaken to remove all encroachments and dismantle the concrete batching plant within two weeks and had also deposited the overdue installment to the Noida Authority.

Final Decision: The petition under Section 9 of the Arbitration and Conciliation Act, 1996 was allowed. The application under Section 45 of the Arbitration and Conciliation Act, 1996 was also allowed. The suit filed by the Respondents was dismissed. The Respondents were restrained from dealing/parting with possession/disposing/selling/transferring/encumbering or creating third party rights directly or indirectly on the Galaxia Project land and were also restrained from allowing any encroachment in future or making any construction or setting up any plant without the leave of the Arbitral Tribunal.