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IN THE HIGH COURT OF JUDICATURE AT MADRAS
THE HONOURABLE MR.JUSTICE R.SUBRAMANIAN, THE HONOURABLE MR.JUSTICE R.SAKTHIVEL
Sri Kauvery Medical Care (India) Ltd. - Appellant
Versus
M/s.CeeDeeYes Health Care Services (P) Limited and ors. - Respondents
OSA(CAD).No.154 of 2023 and C.M.P.No.26352 of 2023
Decided On : 15-02-2024
ARBITRATION - INTERIM MEASURES - Arbitration and Conciliation Act, 1996 - Sections 9, 17 - The court discussed the provisions of Sections 9 and 17 of the Arbitration and Conciliation Act, 1996, emphasizing that while Section 9 allows for interim measures by the court, Section 17 empowers the arbitral tribunal to grant similar measures. The court interpreted Section 9(3) as not imposing an absolute bar on its jurisdiction, allowing for intervention if the remedy under Section 17 is found to be inefficacious. The court concluded that since the remedy under Section 17 was deemed inefficacious in this case, it was appropriate for the court to exercise its jurisdiction under Section 9.
Fact of the Case:
The applicant entered into a Letter of Intent and subsequently a memorandum of understanding with the 1st respondent for leasing and later purchasing a property for hospital purposes. After a lock and seal notice was issued by the Chennai Metropolitan Development Authority, the applicant sought to cancel the agreement and demanded a refund of the advance paid. Arbitration proceedings commenced due to claims and counterclaims between the parties. The applicant filed an application under Section 9 of the Arbitration and Conciliation Act, seeking interim measures against a third party, the 2nd respondent, which was not a party to the arbitration agreement.
Finding of the Court:
The court found that the learned Single Judge was incorrect in relegating the parties to the Arbitrator under Section 9, as the remedy under Section 17 was not efficacious due to the involvement of a third party not bound by the arbitration agreement. The court emphasized that the arbitrator cannot pass orders against non-signatories to the arbitration agreement.
Issues: Whether the court can exercise its jurisdiction under Section 9 of the Arbitration and Conciliation Act when the remedy under Section 17 is found to be inefficacious, particularly in relation to a third party not bound by the arbitration agreement.
Ratio Decidendi: The court held that the bar under Section 9(3) is not absolute and can be overridden if the remedy under Section 17 is deemed inefficacious. It reaffirmed that arbitrators cannot issue orders against third parties who are not signatories to the arbitration agreement.
Final Decision: The appeal was allowed, the order of the learned Single Judge was set aside, and the matter was remitted to the learned Single Judge for a decision on the merits, acknowledging that the remedy under Section 17 was inefficacious.
JUDGMENT :
R.SUBRAMANIAN, J.
Prayer: Original Side Appeal filed under Section 13 of the Commercial Courts Act, 2015, against the impugned order dated 22.08.2023 passed by the learned judge in Arb.Appln.No.55 of 2023.
The appeal is at the instance of the applicant in Arbitration Application No.55 of 2023 filed under Section 9(1)(ii)(e) of the Arbitration and Conciliation Act, 1996, seeking a direction to the third party to the arbitration agreement to bring on record the applicant's charge over the 1st respondent's property at Door No.383, Velacherry Tambaram Main Road, Velacherry, Chennai-600042 and to secure the interest of the applicant to the tune of Rs.3,13,84,043/- with interest at 18% per annum.
2.The said application came to be filed in the following backdrop:-
The applicant and the 1st respondent entered into a Letter of Intent (LOI) on 08.05.2017, under which, it was agreed that the applicant will take on lease the property belonging to the 1st respondent for the purposes of running a Hospital. The Letter of Intent also fixed the period of lease, lockin period and the quantum of rent etc. There was an addendum to the letter of intent on 26.10.2017, which effected certain changes in the nature of the obligations of the parties. Thereafter, certain events intervened wherein, the Chennai Metropolitan Development Authority issued a lock and seal notice for the building in question on 17.05.2018. Subsequently, on 19.05.2019, the appellant and the 1st respondent entered into a memorndum of understanding in and by which, the applicant agreed to purchase the property in question for a total consideration of Rs.80,00,00,000/-. The said memorandum of understanding also provided that the applicant has paid a sum of Rs.1,88,73,281/- as advance and after acknowledging a payment of Rs.7,70,000/- towards various expenses by the applicant, the balance amount payable by the applicant was fixed at Rs.78,03,56,719/-. The said amount was also agreed to be paid in two instalments.
3.The memorandum of understanding also provided for the parties entering into a definitive agreement, which can either be a share purchase agreement for transfer of the share holdings of the 1st respondent or a registered sale agreement for outright sale of the property in favour of the applicant. The applicant chose to cancel the memorandum of understanding on 24.08.2019 pointing out the fact that the Chennai Metropolitan Development Authority had issued a lock and seal notice and hence, the agreement between the parties became incapable of performance. By the same letter dated 24.08.2019, the applicant sought for refund of advance paid to the tune of Rs.1,96,43,281/-. This was followed up by another demand dated 27.09.2019 and lawyer's notice dated 23.01.2020. The 1st respondent, on its part, issued a notice on 25.08.2020 claiming damages at Rs.4,50,00,000/-. The said notice claiming damages was replied to by the applicant on 08.09.2020. This led to commencement of arbitration proceeding between the parties and a retired District Judge was appointed as an Arbitrator by this Court in Arbitration Case.No.320 of 2020. Claims and counter claims were lodged before the Arbitrator and the arbitration proceedings are under way. In the meanwhile, the 2nd respondent which is an Asset Reconstruction Company had issued an E-auction notice on 08.04.2021. There was another notice for E-auction issued by the 2nd respondent on 12.08.2021.
4. Contending that, as a person who had advanced monies for purchase of the property, it would be entitled to a statutory charge under Section 55(6)(b) of the Transfer of Property Act, the applicant filed the instant application seeking a direction to the 2nd respondent to set a part a sum of Rs.3,13,84,043/- out of the sale proceeds after adjusting the claim or money that is due to the 2nd respondent. It was also claimed that the property was sold for a consideration, which was over and above the amount due to the 2nd respondent and therefore, the
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