2015 Supreme(Del) 735

High Court of Delhi
V. KAMESWAR RAO, J.

VLS Finance Ltd. – Appellant
Versus
Bms It Institute Private Limited & Others – Respondents
O.M.P. (I) No. 114 of 2015 & IA No. 7506 of 2015
Decided On : 05-05-2015

Headnote:

ARBITRATION - Section 9 - Security for the amount awarded - Application for - Maintainability - Whether the petition under Section 9 of the Arbitration and Conciliation Act, 1996 is maintainable against a third party who was not a party to the arbitration agreement - Held, yes - The petition under Section 9 of the Act is maintainable against a third party who was not a party to the arbitration agreement.

Fact of the Case:

The petitioner and the respondent Nos.1 to 10 had entered into two agreements dated July 12, 2007 and September 24, 2007. In terms of these agreements, the petitioner invested an amount of Rs. 24.92/- Crores in the equity capital of respondent No.1. It is the case of the petitioner that the investment made by the petitioner in respondent No.1 was fraudulently diverted and misappropriated by respondent Nos.2 to 10 through respondent No.11 by means of unsecured loans. The petitioner decided to exit the respondent No.1 and called upon respondent Nos.2 to 10 to pay the contractually agreed exit consideration. The said respondents failed to pay the exit consideration to the petitioner which led to the initiation of arbitration proceedings by the petitioner against respondent Nos.1 to 10. The Arbitral Tribunal directed respondent Nos.2 to 10 to jointly and severally pay to the petitioner a sum of Rs. 93,62,77,987/-inclusive of interest as on March 31, 2015, with future interest @ 15% p.a. The petitioner filed the present petition under Section 9 of the Arbitration and Conciliation Act, 1996 seeking the following reliefs: (i) Direct the Respondent Nos. 2 to 10 to jointly deposit in a no lien interest bearing account in a scheduled bank a sum of Rs.93,62,77,987/- as security for the amount awarded under the award dated 02.03.2015; (ii) Alternatively to prayer (i), direct the Respondent Nos. 2 to 10, jointly and severally, to furnish a bank guarantee from a scheduled bank for a sum of Rs.93,62,77,987/- and direct them to furnish further bank guarantees monthly to secure the interest accrued on the awarded amount each month until execution of the award dated 02.03.2015; (iii) Restrain the Respondent Nos. 2 to 10 from dealing with any of their movable and immovable properties as mentioned in Annexures P-4 (Colly), P-6 (Colly) and P-11 (Colly) including, in particular, those set out in paragraph 22 of the petition pending execution of the award dated 02.03.2015; (iv) Restrain the Respondent No.1 from creating any kind of third party rights or encumbrances or dealing in any manner whatsoever with its share (i.e. 47.5%) of constructed area in terms of the Conveyance Deed dated 10.06.2013 and appoint a Court Receiver for the said share of Southend under the Conveyance Deed dated 10.06.2013 pending the execution of the award dated 02.03.2015; (v) Restrain the Respondent No.1 from creating any kind of third party rights or encumbrances or dealing in any manner whatsoever with its share (i.e. 44%) of constructed area in Property bearing no. C- 20, 1A/10, Block 'C' Sector 62 NOIDA in terms of the Collaboration Agreement with Premia Structures Ltd. and appoint a Court Receiver for the said share of BMS; (vi) Extend and confirm the orders dated 27.04.2012 and 04.09.2012 passed in OMP No. 383/2012 and order dated 15.01.2015 passed in OMP Nos.570/2013 and 1197/2014; (vii) Pass ex-parte ad interim orders in terms of the above prayers and confirm the same upon return of notice; (viii) Pass such other order or orders as this Hon'ble court may deem fit and proper in the facts and circumstances of the case.

Finding of the Court:

The Court held that the petition under Section 9 of the Act is maintainable against a third party who was not a party to the arbitration agreement. The Court observed that the provisions of Order 38 Rule 5 CPC are included within the scope and purview of Section 9 of the Act.

Issues: Whether the petition under Section 9 of the Arbitration and Conciliation Act, 1996 is maintainable against a third party who was not a party to the arbitration agreement.

Ratio Decidendi: The Court relied on the judgment of the Supreme Court in Indowind Energy Limited Vs. Wescare (I) Ltd. and Anr, (2010) 5 SCC 306, wherein it was held that a petition u/S 9 of the Act presupposes an existence of an agreement containing arbitration clause. There being no privity of contract between the petitioner and respondent No. 12, the petition qua respondent No. 12, which is an independent entity under the Companies Act, would not become a single entity in the transaction between the respondent No. 1 and the petitioner. The respondent No. 12 having no interest in the subject matter of the dispute is not amenable to the jurisdiction of the Court.

Final Decision: The Court allowed the petition and directed the respondent Nos.2 to 10 to jointly and severally deposit in a no lien interest bearing account in a scheduled bank a sum of Rs.93,62,77,987/- as security for the amount awarded under the award dated 02.03.2015.