Section 17 relief under the Arbitration and Conciliation Act requires proof of both a prima facie case and potential asset dissipation, which was not adequately demonstrated.

JUDGMENT

Sanjeev Narula, J. (Oral)--The Appellant [being the Counter-Claimant in arbitration], is aggrieved with the Order dated 08th November, 2021 [hereinafter, `Impugned Order'] passed by the Sole Arbitrator, deciding the Respondent's [Claimant in arbitration] application under Section 17 of the Arbitration and Conciliation Act, 1996 [hereinafter, `the Act'], whereby, inter alia, directions have been passed to secure an amount of Rs.1,42,35,279.50/- by way of fixed deposit receipts [hereinafter, `FDR'] or an irrevocable bank guarantee.

BACKGROUND:

2. Briefly stated, the facts giving rise to the instant appeal are as follows:

2.1. Appellant No. 1 is a property developer and Appellant No. 2 is the owner of the underlying land. The Respondent entered into two agreements with Appellant No. 1, both dated 04th October, 2017, viz. a Space Buyer's Agreement [hereinafter, `SBA'] and a Memorandum of Understanding [hereinafter, `MoU'] to purchase Units no. 601 to 606 (admeasuring a super area of 5385 Sq. Ft.), sixth floor, Tower D, Spectrum One, Sector-58, Village Behrampur, Tehsil Sohna, District Gurgaon, Haryana [hereinafter, `Property'] for a total consideration of Rs.1,61,55,000/-.

2.2. Clause 4 of the MoU provides that construction shall be completed within 12 months from the date of MoU, failing which, Appellant was to pay a minimum assured return at the rate of Rs.71.50/- per sq. ft. per month from 06th October 2018 till the time the Property is leased out to a prospective lessee. Upon Appellant's failure of neither leasing out the Property nor make such payment, disputes arose. Respondent approached this court under Section 9 of the Act, wherein, with the consent of the parties, the Arbitral Tribunal was appointed, with a direction to treat the said petition as an application under Section 17 of the Act before the Tribunal. [Order dated 28th May 2015 in O.M.P. (I) (COMM) 121/2021]

2.3. Respondent's claim in arbitration is for specific performance of the Agreements by directing the Appellant to execute sale deeds in his favour, and for payment of the amount of assured contractual returns under the MoU, among others. By way of interim application under Section 17 of the Act, the Respondent inter alia sought restraint against the Appellant from creating third-party interest in respect of the Property, and also sought to secure its claim of Rs.1,42,35,279.50/- towards assured returns, which were allowed. It is noted that though the Impugned Order also restrains the Appellant from creating third-party rights during the pendency of arbitral proceedings, the said direction is not the subject matter of challenge in the present appeal.

CONTENTIONS OF THE PARTIES:

3. Mr. Sudhir Nandrajog, Senior Counsel for the Appellant, impugns the order on the following grounds:

3.1. The merits of the claim of the Claimant cannot be the sole criteria for issuing a direction for securing the amount in dispute.

3.2. The amount claimed by the Respondent is highly disputed, which aspect can only be adjudicated after parties are afforded an opportunity to lead evidence.

3.3. The Arbitrator has not viewed the Section 17 application in light of the requirements under Order XXXVIII Rule 5 of the Code of Civil Procedure, 1908 [`CPC']. The broad principles to be followed for deciding Section 17 are akin to Section 9 of the Act, and both are again akin to Order XXXVIII Rule 5 of CPC. Interim measures under Section 17 cannot be passed mechanically, merely on a presumption that there are 25 cases pending against the Appellant with respect to the same project, or that there is a likeli