J U D G M E N T

(Judgment of the Court was made by R.SUBRAMANIAN, J.)

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, lock- in 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 2nd respondent had surplus left in its hand. Therefore, the said surplus should be directed to be retained with the 2nd respondent so as to en