M/S RAMPRASTHA PROMOTERS DEVELOPERS PVT LTD v. M/S RHINE POWER PVT LTD

15. Learned Senior Counsel for the Appellant further submitted that, in view of Section 5 of the Act, judicial interference in ongoing arbitration proceedings is limited and impermissible except in circumstances recognised by law. In support of this submission, reliance was placed on the following decisions of the Supreme Court: (a) SBP & Com. v. Patel Engineering Ltd., (2005) 8 SCC 618, [Paragraph Nos.45 and 46] (b) Deep Industries Ltd. v. ONGC, (2020) 15 SCC 706, [Paragraph Nos. 16 and 17]

(c) Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd.,

16. The learned Senior Counsel for the Appellant submitted that the maintainability of the Writ Petition ought to have been decided as a preliminary issue; however, the Impugned Judgment records no finding whatsoever on that aspect, despite a specific objection having been raised by the Appellant in that regard.

17. The learned Senior Counsel for the Appellant further submitted that stalling the Arbitration Proceedings forecloses adjudication of the truth on merits, converts interim observations into irreversible consequences, and permits the contempt jurisdiction, which is collateral and penal in nature, to dictate the course of adjudication of civil and contractual rights, which is impermissible in law.

18. The learned Senior Counsel for the Appellant also submitted that the learned Single Judge failed to appreciate that the Arbitration is the only forum in which disputed questions of fact, contractual interpretation, and the conduct of the parties can be tested through pleadings, evidence, and crossexamination. It was further submitted that any order that halts or delays the Arbitration Proceedings causes permanent prejudice to the Appellant by foreclosing its defence and converting interim observations into irreversible findings.

19. The learned Senior Counsel for the Appellant further submitted that the Impugned Judgment does not specifically safeguard against the risk of foreclosing the Appellant’s defence before the Arbitration Tribunal and, therefore, fails to protect the Appellant’s substantive right to a fair adjudication.

20. The learned Counsel for the Respondent submitted that, although the scope of interference under Articles 226 and 227 of the Constitution of India with respect to ongoing Arbitration Proceedings is undoubtedly narrow, such power may nevertheless be exercised in cases of exceptional rarity where a party is left remediless under the statute or where clear bad faith on the part of one of the parties is demonstrated, as held in Bhaven Construction (supra). It was further submitted that, having itself placed reliance on Bhaven Construction (supra), the Appellant cannot contend that there is an absolute bar on the jurisdiction of this Court to interfere in Arbitration Proceedings.

21. The learned Counsel for the Respondent submitted that the question of maintainability of the Writ Petition or the jurisdiction of this Court has not been raised in the present Appeal and was sought to be urged for the first time during oral submissions. It was further submitted that the circumstances in which the Writ Petition was allowed by the learned Single Judge constitute a case of “exceptional rarity”, inasmuch as the Respondent had been left remediless on account of the admitted violation of the Section 9 Order, which, according to the Respondent, constitutes clear bad faith on the part of the Appellant. It was accordingly submitted that the present Appeal is liable to be dismissed.

22. The learned Counsel for the Respondent submitted that the Respondent’s claim before the Arbitration Tribunal for specific performance of the Agreement to Sell dated 27.09.2018 is premised on the Tribunal’s jurisdiction being available to grant such a relief. It was submitted, however, that since the Property protected by the Section 9 Order had been dealt with in violation thereof, the Appellant had acted in clear bad faith and engineered a situation in which the Respondent’s primary claim for specific performance of the Agreement to Sell dated 27.09.2018 could not, at present, be effectively granted by the learned Arbitration Tribunal and that, as a result, the Respondent had been left remediless.

23. The learned Counsel for the Respondent submitted that unless the contempt committed by wilful disobedience of Section 9 Order is purged by the Respondent by restoring the status quo once the sale in favour of third parties is declared as null and void by the Court in the Contempt Petition, it would not be possible for the Arbitration Proceedings to proceed. The learned Counsel for the Respondent relied upon the decision of the Supreme Court in Balwantbhai Somabhai Bhandari v. Hiralal Somabhai Contractor (Deceased) Represented by LRs and Others, (2023) 17 SCC 545, wherein it is held that any interference in the course of justice is an affront to the majesty of law and the conduct of interference is punishable as contempt of Court. It was further held that although the transfer of the suit property pendente lite may not be termed as void ab initio yet when the Court is looking into such transfers in contempt proceedings, the Court can definitely declare such transactions to be void in order to maintain the majesty of law. Apart from punishing the contemnors for his contemptuous acts, the majesty of law may demand that appropriate directions be issued by the Court so that any advantage secured as a result of such contemptuous conduct is completely nullified. This may include issue of directions either for reversal of transactions by declaring such transactions to be void or passing appropriate directions to the authorities concerned to ensure that the contemptuous conduct on part of the contemnor does not continue to inure to the advantage of the contemnor or anyone claiming under him. It was further held that the beneficiaries of any contemptuous transactions have no locus to be heard in the contempt proceedings on the ground that they are bona fide purchaser of the property without notice and, therefore, are necessary parties. Contempt is between the Court and the contemnor and no third party can involve itself into the same.

24. The learned Counsel for the Respondent submitted that the Respondent has specifically prayed in the Contempt Petition for declaring the sale of 15 flats out of the Property by the Appellant in violation of Section 9 Order as void and sought reversal of the said transactions. Accordingly, unless the outcome of the Contempt Petition is known, the Arbitration Proceedings cannot continue as if this Court in Contempt Petition declares the transaction of sale as void, the relief of specific performance of sale of the Property by the Appellant shall become available and the Respondent would not be compelled to seek and prove damages in lieu thereof.

25. The learned Counsel for the Respondent further submitted that the learned Arbitration Tribunal had expressed its inability to stay the Arbitration Proceedings on the ground that the Act contains no provision authorising such stay and that, therefore, the Respondent had been left remediless under the statutory framework. It was accordingly submitted that the intervention made by the Impugned Judgment in the Arbitration Proceedings was justified and clearly warranted.

26. The learned Counsel for the Respondent submitted that the Arbitration Proceedings, in which the Respondent’s principal claim is for specific performance of the Agreement to Sell, ought to proceed further only upon final adjudication of the Contempt Petition pending before this Court. It was submitted that, in the absence of a stay of the Arbitration Proceedings, the Arbitration Tribunal could at best render a contingent award, and that such a course would prejudice the Respondent, as recognised in the Impugned Judgment.

27. We have duly considered the rival submissions advanced on behalf of the Parties. It is well settled that the writ jurisdiction is sparingly exercised to interdict ongoing arbitration proceedings. Interference in the exercise of supervisory writ jurisdiction is warranted only in exceptionally rare circumstances, since proceedings under the Act are governed by a selfcontained statutory code, as recognised by the Supreme Court in Kandala Export v. OCI Corporation, (2018) 14 SCC 715.

28. Accordingly, the sole question that arises for consideration in the present Appeal is whether the facts of the case disclose such exceptional circumstances as would justify the exercise of writ jurisdiction by the learned Single Judge to stay the further conduct of the arbitration proceedings between the Parties.

29. It is an admitted position between the Parties that Section 9 Order passed by this Court continues to remain in force by virtue of its extension by the learned Arbitration Tribunal. During the subsistence of Section 9 Order, the Appellant alienated 15 flats forming part of the Property in respect whereof the relief of specific performance has been claimed in the Arbitration Proceedings. The Respondent has sought only the relief of specific performance before the learned Arbitration Tribunal and has not claimed the damages as an alternative relief. The case set up by the Respondent in the Writ Petition was that, by acting in breach of the Section

9 Order, the Appellant rendered the relief of specific performance sought before the learned Arbitration Tribunal largely illusory, unless the contempt was purged and the flats transferred in violation of the Section 9 Order were restored, as per the decision of the Supreme Court in Balwantbhai Somabhai Bhandari (supra), wherein it was held as follows: “117. We may summarise our final conclusion as under:

117.1. We hold that an assurance in the form of an undertaking given by a counsel/advocate on behalf of his client to the court; the wilful breach or disobedience of the same would amount to "civil contempt" as defined under Section 2(b) of the 1971 Act.

117.2. There exists a distinction between an undertaking given to a party to the lis and the undertaking given to a court. The undertaking given to a court attracts the provisions of the 1971 Act whereas an undertaking given to a party to the lis by way of an agreement of settlement or otherwise would not attract the provisions of the 1971 Act. In the facts of the present case, we hold that the undertaking was given to the High Court and the breach or disobedience would definitely attract the provisions of the 1971 Act.

117.3. Although the transfer of the suit property pendente lite may not be termed as void ab initio yet when the court is looking into such transfers in contempt proceedings the court can definitely declare such transactions to be void in order to maintain the majesty of law. Apart from punishing the contemnor, for his contumacious conduct, the majesty of law may demand that appropriate directions be issued by the court so that any advantage secured as a result of such contumacious conduct is completely nullified. This may include issue of directions either for reversal of the transactions by declaring such transactions to be void or passing appropriate directions to the authorities concerned to ensure that the contumacious conduct on the part of the contemnor does not continue to enure to the advantage of the contemnor or any one claiming under him.

117.4. The beneficiaries of any contumacious transaction have no right or locus to be heard in the contempt proceedings on the ground that they are bona fide purchasers of the property for value without notice and therefore, are necessary parties. Contempt is between the court and the contemnor and no third party can involve itself into the same.

117.5. The apology tendered should not be accepted as a matter of course and the court is not bound to accept the same. The apology may be unconditional, unqualified and bona fide, still if the conduct is serious, which has caused damage to the dignity of the institution, the same should not be accepted. There ought not to be a tendency by courts, to show compassion when disobedience of an undertaking or an order is with impunity and with total consciousness.”

30. In view of the above, the Court while adjudicating the Contempt Petition, would be competent to determine whether the sale transactions undertaken by the Appellant during the subsistence of the Section 9 Order constituted wilful disobedience thereof and, upon so finding, to declare such transactions void and to issue appropriate directions to nullify the consequences of the contempt committed by the Appellant. It is, therefore, necessary that the Contempt Petition be decided prior to the Arbitration Proceedings proceed on merits.

31. The contention advanced on behalf of the Appellant that the Section 9 Order had been obtained by misrepresentation or fraud is of no relevance for the purposes of the present Appeal, particularly since the Appellant never challenged Section 9 Order. Consequently, while deciding the Contempt Petition, this Court cannot go behind the Section 9 Order or reopen the basis on which it came to be passed. The limited scope of the Contempt Petition is to determine whether the Appellant has committed wilful disobedience of the Section 9 Order and, if so, the consequences that must follow therefrom.

32. The submission that the learned Arbitration Tribunal must first determine whether the Section 9 Order had been procured by misrepresentation before the Contempt Petition can be adjudicated is misconceived, particularly when it is not in dispute that the said order was subsisting at the time when the flats forming part of the Property were sold. It is well settled that, even where an order alleged to have been breached in contempt proceedings is subsequently modified or set aside, a person who has violated such order during the period of its operation remains liable for the disobedience committed during its subsistence. In that view of the matter, the circumstances in which the Section 9 Order came to be passed, including the allegation that the Respondent had obtained the injunction by misrepresentation, are wholly irrelevant for the purposes of adjudicating the

33. The law regarding this Court’s power to exercise the writ jurisdiction to stay the ongoing Arbitration Proceedings is settled by the Supreme Court in Deep Industries (supra) which holds that:

34. Further, in Bhaven Construction (supra) it is held that: “18. In any case, the hierarchy in our legal framework, mandates that a legislative enactment cannot curtail a constitutional right. In Nivedita Sharma v. COAI [Nivedita Sharma v. COAI, (2011) 14 SCC 337: (2012) 4 SCC (Civ) 947], this Court referred to several judgments and held:

allow judicial interference beyond the procedure established under the enactment. This power needs to be exercised in exceptional rarity, wherein one party is left remediless under the statute or a clear “bad faith” shown by one of the parties. This high standard set by this Court is in terms of the legislative intention to make the arbitration fair and efficient.”

35. Accordingly, the scope of interference by this Court with ongoing arbitration proceedings is extremely limited and may be invoked only in exceptional circumstances, namely where a party is left remediless under the statutory framework or where clear bad faith on the part of a party is demonstrated. In the present case, the Respondent has specifically sought, in the Contempt Petition, a declaration that the transfers of the 15 flats out of the Property are null and void, together with restoration of the status quo ante by reversion of possession handed over to third parties or to persons claiming through them. Unless the said relief is first adjudicated, which this Court in the exercise of its contempt jurisdiction is competent to grant in terms of Balwantbhai Somabhai Bhandari (supra), the Respondent would be effectively left remediless in pursuing its claim for specific performance before the learned Arbitration Tribunal. Further, the facts of the present case disclose clear bad faith on the part of the Appellant, inasmuch as, while disputing the Respondent’s entitlement to seek specific performance of the Agreement to Sell, the Appellant has at the same time admitted to having sold 15 flats forming part of the Property, thereby rendering the relief of specific performance liable to be frustrated. In these circumstances, the exceptional conditions contemplated in Bhaven Construction (supra) stand satisfied. The learned Single Judge was, therefore, justified in exercising writ jurisdiction and in directing that the further arbitration proceedings between the Parties shall await the outcome of the Contempt Petition.

36. As regards the contention advanced on behalf of the Appellant that the Respondent is not entitled to seek the relief of specific performance before the learned Arbitration Tribunal, the same pertains to the merits of the dispute pending before the learned Arbitration Tribunal and would fall for consideration only after the Contempt Petition has been finally adjudicated by this Court. Consequently, no prejudice can be said to be occasioned to the Appellant merely because the Impugned Judgment is not interfered with in the present Appeal, since the Appellant shall remain at liberty to urge all contentions available to it before the learned Arbitration Tribunal upon adjudication of the Contempt Petition.

37. The learned Single Judge has acknowledged that writ jurisdiction to interdict the ongoing arbitration proceedings is to be exercised only in exceptionally rare situations. However, the Impugned Judgement provides cogent and persuasive reasons for invoking writ jurisdiction in the peculiar facts and circumstances of the present case,. The Impugned Judgment correctly proceeds on the basis that compelling the Respondent to continue with the Arbitration Proceedings, while requiring it to alter its position by pursuing damages in lieu of specific performance, would be manifestly unjust so long as the Contempt Petition remains pending. Equally, if this Court, while deciding the Contempt Petition, were ultimately to hold that there was no wilful disobedience of the Section 9 Order, such determination would also have a direct bearing on the nature of the relief that may be pursued in the Arbitration Proceedings. It is, therefore, both appropriate and expedient that the outcome of the Contempt Petition be awaited since the issues arising therein are inextricably connected with the Arbitration Proceedings.

38. The submission advanced on behalf of the Appellant that no prejudice would be caused to the Respondent if the Arbitration Proceedings were permitted to continue, on the ground that the Respondent is not left remediless in view of the security allegedly available in its favour, cannot be accepted. The Respondent has not sought damages in the Arbitration Proceedings. The question of compensating the Respondent for any loss suffered by reason of an alleged breach of the Agreement to Sell would arise only if the relief of specific performance were ultimately held to be unavailable by the learned Arbitration Tribunal. Such a consequence, however, cannot be permitted to be precipitated by the Appellant’s alleged contemptuous conduct in rendering the relief of specific performance incapable of being granted. This situation can be appropriately addressed only by ensuring that the Arbitration Proceedings do not continue in parallel with the Contempt Petition and that the Contempt Petition is decided before the Arbitration Proceedings continue further.

39. In view of the foregoing, we concur with the approach adopted by the learned Single Judge in the Impugned Judgment, whereby liberty was granted to the Respondent to seek adjournment before the learned Arbitration Tribunal and it was directed that the further Arbitration Proceedings shall await the outcome of the Contempt Petition.

40. In our considered view, the directions in the Impugned Judgement do not trench upon or impermissibly interfere with the Arbitration Process; rather, it preserves the rights of the Parties by deferring the Arbitration Proceedings until clarity emerges as to what remedies may properly be pursued before the learned Arbitration Tribunal.

41. In that background, the insistence of the Appellant that the Arbitration Proceedings must continue notwithstanding the pendency of the Contempt Petition cannot be accepted, particularly when the Appellant, as respondent in the arbitration, has not itself sought any substantive relief by way of counterclaim. We, therefore, find no infirmity in the Impugned Judgment.

42. Accordingly, the Impugned Judgment is upheld and the present Appeal, along with the pending Applications, stands dismissed. There shall be no order as to costs.

TEJAS KARIA, J DEVENDRA KUMAR UPADHYAYA, CJ APRIL 20, 2026