GLS Foils Products Pvt. Ltd. v. FWS Turnit Logistic Park LLP & Ors.

(C) Pass any other order which this Hon'ble Court may deem fit and proper in the facts and circumstances of the case.”

13. The relief sought by the respondent no.1/claimant in the statement of claims, filed before the learned Sole Arbitrator is as under: “In view of the foregoing, the Claimant respectfully prays that the Hon’ble Arbitral Tribunal may be graciously pleased to:

Agreement dated 30.08.2019, and directing the Respondents to execute their respective Sale Deeds qua the Disputed Property in favour of the joint venture entity that would be set up in terms of the Joint Venture Agreement dated 30.08.2019; OR IN THE ALTERNATIVE

Claimant a total sum of Rs.14.14 Crore as loss of profit in terms of Claim 2, along with pas and pendente lite interest, calculated at 18% simple interest per annum, from 01.01.2020 till the date of Award;

Claimant a total sum of Rs.15,50,000/- (Rupees Fifteen Lakh Fifty Thousand Only) as Refund of initial deposit in terms of Claim-3, along with past and pendente lite interest, calculated at 18% simple interest per annum, from the date of each payment till the date of Award;

14. The Section 17 application came to be disposed of vide the impugned order dated 09.06.2022 wherein the learned Sole Arbitrator has inter-alia, held as under:

SUBMISSIONS ON BEHALF OF APPELLANT

15. Learned counsel for the appellant has strenuously contended that the impugned order results in grave hardship to the appellant and is required to be vacated forthwith. It has been emphasized by learned counsel for the appellant that the appellant is a bonafide purchaser with consideration and has invested a huge amount in carrying out development/construction on the property in question. It is further contended that the appellant has availed a loan facility of Rs.80 Crores from Punjab National Bank and only after taking necessary approvals and permissions from the concerned authorities did it proceed to carry out the construction work for the purpose of setting up of a factory on the property in question. The possession of the property in question is stated to be with the appellant.

16. It is further contended that the respondent no.1 belatedly invoked the arbitration clause as incorporated in the Joint Venture Agreement dated 30.08.2009. However, even after filing the petition under Section 11 of the Act on 07.03.2020, no steps were taken by the respondent no.1 to effect service on the respondent nos.[2] to 8. It is contended that the sale deeds in favour of the appellant were executed on 19.03.2020 and 11.06.2020, i.e. prior to the service being affected of the Section 11 petition on the respondent nos.[2] to 8. It is stated that the part consideration, alleged to have been paid by the respondent no.1 is miniscule, as compared to the consideration paid by the appellant and the investment undertaken by the appellant.

17. It has been emphasized that the petition under Section 9 of the Act was filed by the respondent no.1 almost after two years from 31.12.2019 i.e. the date set out in the Joint Venture Agreement for transfer of the property to the newly incorporated LLP.

18. It is contended that the respondent no.1 did not even incorporate the LLP in a timely manner and as such the very purpose of the Joint Venture Agreement stood defeated in the absence of an incorporated LLP with the participation of the respondent nos.[2] to 8.

19. It is a case of learned counsel for the appellant that: i. The respondent no.1 has miserably failed to make out a prima facie case for grant of an injunction; ii. The respondent no.1 was not entitled to any injunctive relief in view of delay and latches; and iii. Interim orders could not have been passed against the appellant, since the appellant was not even a party to the Joint Venture Agreement on the basis of which rights are sought to be asserted by the respondent no.1.

20. In addition, it is contended that the Joint Venture Agreement is not capable of specific performance at all since it is in the nature of an agreement to enter into a partnership. It is submitted that the legal position is settled that such an agreement can never be specifically be enforced. In this regard, reliance has been placed on the following authorities: i. Gopal L Raheja and Another v. Vijay B. Raheja and Others;1 ii. ‘The Treatise on the Specific Performance of Contract’2; iii. ‘American Jurisprudence’3; iv. Faqir Chand Gulati v. Uppal Agencies Pvt. Ltd. &Ors;4 v. North-Eastern Handloom and Handicraft v. Sports Station India Pvt. Ltd.[5] and vi. Indian Rly. Catering and Tourism Corporation Ltd. And Ors. V. 2007 SCC OnLineBom 399 Rt Hon Sir Edward Fry, 6th Edition, First Indian Reprint, 1997 2nd Edition, Vol 46, 1994

21. Alternatively, it has been contended that the Joint Venture Agreement is in the nature of an agreement to enter into a further agreement and even on that count there can be no specific performance. In this regard reliance has been placed on the following judgments: i. Dresser Rand SA v. BindalAgroChern Ltd;7 ii. Speech Software Technologies (India) Pvt. Ltd. V. Neos Interactive Ltd.;8 and iii. Devinder Kumar Sharma v. Mohinder Singh.[9]

22. Finally, it is contended that the balance of convenience is in favour of vacating of the impugned order, passed by the learned Sole Arbitrator and to allow the appellant to have unhindered rights in respect of the land in question without any inference by the respondent no.1. SUBMISSIONS ON BEHALF OF RESPONDENT NO.1

23. On the contrary, learned counsel for the respondent no.1 has contended that the respondent nos.[2] to 8 colluded with the appellant for the purpose of creating third party rights in the subject matter of arbitration after commencement of arbitration on 04.02.2020 (the date on which the notice of invocation of arbitration was issued by the respondent no.1).

24. It has been strenuously contended that the appellant is not a bonafide purchaser since the appellant bought the land with full knowledge of the aforesaid prior background and the Joint Venture Agreement dated 30.08.2019. It is contended that the relief of specific performance as sought MANU/DE/0033/2012

2012 SCC OnLine Del 4442 by the respondent no.1 in the arbitration proceedings will be rendered infructuous if protective and injunctive orders are not passed qua the property in question.

25. It has been emphasized that the order passed by the learned Sole Arbitrator is a well-reasoned order taking into account all aspects of the matter and the contentions raised by the appellant and there is no warrant to interfere with the same especially since the arbitration proceedings are stated to be at an advanced stage. It is contended that the respondent no.1/claimant have made out a strong prima facie case before the learned Sole Arbitrator; the balance convenience is also in favour of the respondent no.1.

26. Elaborate reliance has been placed on the findings of the Arbitral Tribunal as recorded at paragraphs 74 - 80 and 85 of the impugned order dated 09.06.2022.

27. It has been emphasized that the legal position, as laid down in a series of judgments is to the effect that the scope of interference with an interim measure of protection issued under Section 17 of the Act, is minimal while entertaining an appeal under Section 37(2)(b) of the Act. In this regard reliance has been placed on the following judgments: i. L&T Finance vs. DM South India Hospital Pvt. Ltd.;10 ii. Dinesh Gupta &Ors vs. Anand Gupta &Ors.;11 iii. Sanjay Arora &Ors. Vs. Rajan Chadha &Ors.;12 and iv. World Window Infrastructure Pvt. Ltd. Vs. Central Warehousing Corporation.13 2021 SCC OnLine Del 5571 MANU/DE/1727/2020 MANU/DE/2643/2021 MANU/DE/3207/2021

28. It has been emphasized that there is no impediment to specific performance in the present case and the necessary evidence in this regard is being adduced before the learned Sole Arbitrator. In the circumstances, it is contended that there is no occasion or justification whatsoever to interfere with the impugned order dated 09.06.2022. Submissions on behalf of Respondent nos.[2] to 8

29. Notably, the respondent nos.[2] to 8 have not filed any appeal against the order dated 09.06.2022. However, in the written submissions filed on behalf of respondent nos.[2] to 8, the said respondents have supported the plea raised by the appellant and have contended as under: i. the Joint Venture Agreement is incapable of specific performance; ii. the balance of convenience was against grant of interim relief; and iii. the impugned order does not properly appreciate the legal and factual position, while granting the interim order in favour of the respondent no.1.

ANALYSIS AND CONCLUSION

30. A perusal of the impugned order dated 09.06.2022, reveals that the learned Sole Arbitrator has considered the matter in minute detail and dealt with the contentions raised by the appellant herein. As regards the contention of the appellant, regarding the delay on the part of the respondent no.1/claimant in invoking the arbitration and/or filing the petition under Section 9 of the Act, it has been held in the impugned order as under:

31. There appears no infirmity in the aforesaid conclusion by the learned Sole Arbitrator.

32. The learned Sole Arbitrator has rightly taken note of the fact that the sale deeds were executed in favour of the appellant by the respondent nos.[2] to 8 after the notice invoking arbitration was issued by the respondent no.1 on 10.02.2020, which is the date on which arbitral proceedings have commenced in terms of Section 21 of the Act

33. The learned Sole Arbitrator has rightly taken note of the fact that the transfer in favour of the appellant was prima facie, a product of collusion between the respondent nos.[2] to 8 and the appellant. In this regard reference may be made to the following observations in the impugned order passed by the learned Sole Arbitrator: “76. The Respondents No. 1 to 7 also appear to be parties in collusion with the Respondent No. 8 in supressing material facts from the Court. Reply to Section 11 Petition was admittedly filed by the Respondents No.1 to 7 on 03.11.2021 (after one and half years of filing of petition), but there was not a whisper in the said reply about the creation of any third-party rights in the Disputed Property. It was only when the Claimant filed its Section 9 Petition (which was later converted to Section 17 Petition before this Tribunal) that the Respondents revealed that they had created thirdparty rights in the said Disputed Property subsequent to the filing of Section 11 petition by the Claimant. No justification is forthcoming on the record as to why Respondents No. 1 to 8 concealed and hid this material fact from the Hon'ble High Court. Instead, the Respondents No. 1 to 7 took the plea in the Section 11 Petition that the Claimant was not the party with whom they had entered into a JVA on 30.08.2020 (which plea was rightly brushed aside by the Hon'ble High Court in its order dated 20.12.2021).”

34. With regard to the contention that the Joint Venture Agreement dated 30.08.2019 is determinable and that interim relief would fall foul of Section 14 (b) and (d) of the Specific Relief Act, 1963 it has been held in the impugned order as under:

35. In para-82 of the impugned order, learned Sole Arbitrator has also taken note of the amendment of Section 10 of the Specific Reliefs Act (by Act 18 of 2018), as a result of which the grant of relief for specific performance is no longer discretionary. Reference in this regard is rightly made to the decision of the Supreme Court in the case titled as B. Santoshamma v. D. Sarala,14 wherein it has been held as under:

69. After amendment with effect from 1-10-2018, Section 10 of the SRA provides: “10. Specific performance in respect of contracts.—The specific performance of a contract shall be enforced by the court subject to the provisions contained in sub-section (2) of Section 11, Section 14 and Section 16.”

70. After the amendment of Section 10 of the SRA, the words “specific performance of any contract may, in the discretion of the court, be enforced” have been substituted with the words “specific performance of a contract shall be enforced subject to …”. The court is, now obliged to enforce the specific performance of a contract, subject to the provisions of sub-section (2) of Section 11, Section 14 and Section 16 of the SRA. Relief of specific performance of a contract is no longer discretionary, after the amendment.

71. An agreement to sell immovable property, generally creates a right in personam in favour of the vendee. The vendee acquires a legitimate right to enforce specific performance of the agreement.”

36. It is also pertinent to note that in the statement of claim filed on behalf of respondent no.1/claimant before the learned Arbitrator, the respondent no.1 has primarily sought specific performance of the Joint Venture Agreement dated 30.08.2019 and directions against the respondent nos.[2] to 8 to execute their respective sale deeds qua the property, as contemplated in the Joint Venture Agreement.

37. In case the interim measure of protection, as sought in the application under Section 17 of the Act is not granted and the appellant is permitted to deal with the property in question, then the main relief sought in the statement of claim would be rendered infructuous. The contention that the appellant has invested huge amounts of money in purchasing the land/property in question from the respondent nos.[2] to 8 and carrying out the construction thereon cannot defeat the prior rights of the respondent no.1.

38. This has also been rightly noticed in paras 79 and 80 of the impugned order as under:

39. After considering the entire gamut of circumstances, the impugned order does directs the appellant and the respondent nos.[2] to 8 to maintain status quo in respect of title and possession of the land in question and refrain from changing the character of the property so that no further third party right/equity are created in respect thereof. No fault whatsoever can be found with these directions.

40. Further, the impugned order directs that if the appellant chooses to carry on factory operations or other commercial activity on the three acres of land comprising of the property in question, it will not be open to the appellant to claim any special equity by reasons thereof.

41. The above directions passed by the learned Arbitrator are unexceptionable and there is no rationale to interfere with the same. The said directions are absolutely necessary to ensure that the claim raised by the respondent no.1, are not rendered infructuous, in the event of the learned Sole Arbitrator holding in favour of the respondent No.1 (claimant) as regards grant of specific performance. Importantly, the learned Sole Arbitrator has clarified in the impugned order itself that all the observations made therein are prima facie and shall not operate to the prejudice of any of the parties at any subsequent stage of proceeding. The entire matter is still at large before the learned Sole Arbitrator. It has been informed by respective counsel, that the parties are in the process of adducing evidence before the learned Sole Arbitrator. The impugned order does not foreclose the right of any of the parties to the arbitration to place relevant material on record and/or take every contention as may be available under law before the learned Sole Arbitrator, at the time of final arguments. As such, the various legal contentions raised by the learned counsel for the appellant regarding the Joint Venture Agreement being not capable of specific performance and/or as to whether the appellant’s rights, as an alleged bonafide purchaser can be interdicted or not, are all issues which are yet to be determined by the learned Sole Arbitrator.

42. At this stage, in these proceedings, it would not be appropriate to render any findings/conclusion with regard to the aforesaid issues since the learned Sole Arbitrator is seized of the same. Needless to say, the learned Sole Arbitrator shall take into account the contentions of the appellant at the stage of passing of the final award. However, in the meantime, it would be wholly inappropriate if the appellant is allowed to disrupt the status quo in respect of the property in question.

43. The law is also well settled that this court while exercising jurisdiction under Section 37 of the Act would be loathe to interfere with an interim measure of protection granted by an Arbitral Tribunal, particularly when the order passed under Section 17 is well reasoned and based on a thorough and minute examination of the matter, as in the present case.

44. In this regard reference may be made to the observations made by this Court in Dinesh Gupta & Ors vs. Anand Gupta & Ors.(supra), wherein it has been held as under:

45. Also in L&T Finance vs. DM South India Hospital Pvt. Ltd.(supra), it has been held by this Court as under:

46. In Sanjay Arora & Ors. Vs. Rajan Chadha & Ors.(supra), this court held as under: “This Court has already opined, in Dinesh Gupta v. Anand Gupta MANU/DE/1727/2020 and Augmont Gold Pvt. Ltd. v. One97 Communication Ltd that the considerations guiding exercise of appellate jurisdiction under Section 37(2) (b) are, fundamentally, not really ·different from those which govern exercise of jurisdiction under Section 34 of the 1996 Act.”

47. In World Window Infrastructure Pvt. Ltd. Vs. Central Warehousing Corporation(supra) it has been held as under: “29. The restraints which apply on the court while examining a challenge to a final award under Section 34 equally apply to a challenge to an interlocutory order under Section 37(ii)(b). In either case, the court has to be alive to the fact that, by its very nature, the 1996 Act frowns upon interference, by courts, with the arbitral process or decisions taken by the arbitrator. This restraint, if anything, operates more strictly at an interlocutory stage than at the final stage, as interference with interlocutory orders could interference with the arbitral process while it is ongoing, which may frustrate, or impede, the arbitral proceedings”

48. As such, on an overall conspectus of the peculiar factual background of the present case and the legal position as enunciated in the aforesaid cases, there is no warrant to interfere with the impugned order dated 09.06.2022.

49. As noticed in the impugned order itself, the conclusions arrived at by the Arbitral Tribunal and the directions given are based on a the prima facie consideration of the matter; all rights, objections and pleas of the parties are left open to be finally decided by the learned Sole Arbitrator.

50. The present appeal is, accordingly, dismissed. There shall be no orders as to costs. JULY 10, 2023/cl SACHIN DATTA, J