Vls Finance Ltd. vs Bms It Institute Private Limited & ...
2015 Latest Caselaw 3568 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI
                                Judgment reserved on April 23, 2015
                               Judgment delivered on May 05 , 2015

+                  O.M.P.(I) 114/2015 & IA No. 7506/2015

VLS FINANCE LTD.
                                                ..... Petitioner
                                Through:      Mr. Jayant K. Mehta, Mr.
                                              Nikhil Rohtagi, Mr. Saurabh
                                              Dev, Mr. Karam Singh, Mr.
                                              Sumit Khosla & Mr. Ashok
                                              Kumar Sharma, Advocates
                          Versus
BMS IT INSTITUTE PRIVATE LIMITED & ORS
                                 ..... Respondents
                        Through: Mr. Anil Airi, Mr. Ravi
                                 Krishan     Chandna,    Ms.
                                 Sadhna Sharma, Mr. Aman
                                 Madan & Mr. Gaurav Seth,
                                 Advocates for respondent
                                 Nos. 2, 3 & 10.
                                 Mr. Ashish Aggarwal & Mr.
                                 Arjun Sehgal, Advocates for
                                 respondent Nos. 4 to 9.
                                 Mr. A.K. Singla, Senior
                                 Advocate with Mr. Amit
                                 Saxena & Mr. Harsh Shahi,
                                 Advocates for respondent
                                 Nos. 11 & 12.
CORAM:
HON'BLE MR. JUSTICE V.KAMESWAR RAO

V.KAMESWAR RAO, J.

1. The present petition is filed under Section 9 of the Arbitration &

Conciliation Act, 1996 („Act‟ in short) seeking the following reliefs:-

"(i) Direct the Respondent Nos. 2 to 10 to jointly deposit in a no lien interest bearing account in a scheduled bank a sum of Rs.93,62,77,987/- as security for the amount awarded under the award dated 02.03.2015;

(ii) Alternatively to prayer (i), direct the Respondent Nos. 2 to 10, jointly and severally, to furnish a bank: guarantee from a scheduled bank for a sum of Rs.93,62,77,987/-

and direct them to furnish further bank guarantees monthly to secure the interest accrued on the awarded amount each month until execution of the award dated 02.03.2015;

from dealing with any of their movable and immovable properties as mentioned in Annexures P-4 (Colly), P-6 (Colly) and P-11 (Colly) including, in particular, those set out in paragraph 22 of the petition pending execution of the award dated 02.03.2015;

(iv) Restrain the Respondent No.12 from creating any kind of third party rights or encumbrances or dealing in any manner whatsoever with its share (i.e. 47.5%) of constructed area in terms of the Conveyance

Deed dated 10.06.2013 and appoint a Court Receiver for the said share of Southend under the Conveyance Deed dated 10.06.2013 pending the execution of the award dated 02.03.2015;

(v) Restrain the Respondent No.1 from creating any kind of third party rights or encumbrances or dealing in any manner whatsoever with its share (i.e. 44%) of constructed area in Property bearing no. C- 20, 1A/10, Block 'C' Sector 62 NOIDA in terms of the Collaboration Agreement with Premia Structures Ltd. and appoint a Court Receiver for the said share of BMS;

(vi) Extend and confirm the orders dated 27.04.2012 and 04.09.2012 passed in OMP No. 383/2012 and order dated 15.01.2015 passed in OMP Nos.570/2013 and 1197/2014;

(vii) Pass ex-parte ad interim orders in terms of the above prayers and confirm the same upon return of notice; and

(viii) Pass such other order or orders as this Hon'ble court may deem fit and proper in the facts and circumstances of the case."

Facts:

2. The petitioner and the respondent Nos.1 to 10 had entered into two

agreements dated July 12, 2007 and September 24, 2007 (hereinafter

called "the Agreements"). In terms of these agreements, the petitioner

invested an amount of `24.92 Crores in the equity capital of respondent

No.1 on the terms and conditions contained therein including right to exit

respondent No.1 at a pre-determined formula for computing exit

consideration. The petitioner‟s investment in respondent No.1 was to be

used entirely and solely for the purposes of the respondent No.1‟s project

over a plot of leasehold land at Noida. It is the case of the petitioner that

the investment made by the petitioner in respondent No.1 was

fraudulently diverted and misappropriated by respondent Nos.2 to 10

through respondent No.11 by means of unsecured loans. The petitioner

decided to exit the respondent No.1 and called upon respondent Nos.2 to

10 to pay the contractually agreed exit consideration. The said

respondents failed to pay the exit consideration to the petitioner which

led to the initiation of arbitration proceedings by the petitioner against

respondent Nos.1 to 10.

3. In the year 2012 i.e. before the arbitration proceedings, the

petitioner filed OMP 383/2012 under Section 9 of the Act before this

Court.

4. In this OMP the petitioner had also impleaded respondent No.11-

NPMG Developers Ltd. and respondent No.12-Southend Infrastructure

Pvt. Ltd., as according to the petitioner they are the entities owned and

controlled by respondent Nos.2 to 10. No reply was filed by any of the

respondents to this OMP. This Court in OMP 383/2012 passed an ex-

parte interim order against respondent Nos.2 to 12 on April 27, 2012

which was confirmed on September 04, 2012 whereby the said

respondents were restrained from alienating, selling, transferring,

mortgaging, encumbering, disposing of or in any manner dealing with

their immovable properties. On April 27, 2012 the respondents in the

OMP were also directed to file their affidavits of assets and bank

balances. Thereafter on September 04, 2012 the Court directed

respondent Nos. 2 to 10 to file affidavits of their assets before the

Arbitral Tribunal. It is the contention of learned counsel for the petitioner

that the orders of this Court in OMP 383/2012 for filing affidavits of their

assets were filed belatedly before the Arbitral Tribunal, which were not

accepted by the Arbitral Tribunal. It directed to file proper affidavits.

Pursuant thereto only respondent Nos.2, 3 and 10 had filed affidavits.

5. A contempt petition, Contempt Case (Civil) No.736/2012 was filed

in this Court for disregarding the orders dated April 27, 2012 and

September 04, 2012.

6. In the mean time, the respondent No.1 through respondent No.2-

Mr.D.K. Gupta entered into an arrangement with M/s Premia Structures

Ltd. (PSL) whereby it had given the leasehold plot of land at Noida for

development. It is the stand of the petitioner that a plot valued by the

respondents at over `100 Crores was given to PSL for just `5 Crores.

7. It is also the case of the petitioner that the arrangement between the

respondent No.1 and PSL was arrived at the back of the petitioner, the

petitioner filed OMP 570/2013 wherein this Court on May 30, 2013

directed status quo till the next date of hearing as to title or possession of

the leasehold land of the respondent No.1 i.e. C-20, 1A/10, Block-C,

Sector-62, Noida, U.P.

8. The petitioner‟s case is also that the respondent Nos.2 to 10 in

violation of orders dated April 27, 2012 and September 04, 2012

encumbered the only immovable asset of respondent No.12 being plot of

land at B-319, Okhla Industrial Area, Phase-I, New Delhi by a

Conveyance Deed dated June 10, 2013 in favour of M/s Wonder Space

Properties Pvt. Ltd. and also they are reducing their shareholding in

respondent No.12 with a view to render the petitioner unsecured and

remediless. The petitioner filed a Contempt Case No.970/2013 against

respondent No.12 and Wonder Space Properties Pvt. Ltd. In the said

contempt petition the respondent No.12 filed an application being IA

No.10835/2014 in OMP 383/2012 seeking clarification that the order

dated September 04, 2012 was not operating against it since it was not a

party in the arbitration proceedings. It may be noted here that during the

hearing of the IA 10835/2014 the respondent No.12 volunteered to

provide an unconditional bank guarantee of `123 Crores. The respondent

No.12 failed to furnish the unconditional bank guarantee. The application

was dismissed on September 01, 2014. A further OMP No.1197/2014

was filed by the petitioner

9. On September 30, 2014, this Court injuncted respondent No.2 to

10 from dealing and/or transferring their shareholding in respondent

No.1, respondent Nos.11 & 12. Additionally the respondent Nos.1, 11 &

12 were also injuncted from recording any transfer of shares held by

respondent No.2 to 10 in them. By the same order the respondents were

directed to file their affidavits of shares held by them in respondent

Nos.1, 11 & 12.

10. The OMP Nos.570/2013 and 1197/2014 were disposed of vide

order dated January 15, 2015, wherein this Court has said as under:-

"13. In the circumstances, the Court directs that

the interim order passed by the Court on 30th May 2013 in OMP No. 570 of 2013 directing the maintenance of the status quo with respect to the title and possession of the property at C-20, IA/10, Block-C, Sector 62, Noida, U.P., will not continue qua Respondents 13 and 14 but will continue qua Respondents 1 to 10 till one month after the pronouncement of the arbitral Award.

14. OMP No. 570 of 2013 is disposed of in the above terms.

15. As far as OMP No. 1197 of 2014, the Court continues the interim order passed by it on 30th September, 2014 till one month after the pronouncement of the Arbitral Award in the present proceedings. If the petitioner is aggrieved by non-compliance with such order it will be open to the petitioner to take such other remedies as may be available to it in accordance with law.

16. OMP No. 1197 of 2014 is disposed of."

11. As far as OMP No.1197/2014 the Court continues the interim

order passed by it on September 30, 2014 till one month after the

pronouncement of the arbitral award.

12. It may be noted here that the arbitration proceedings which were

held simultaneously resulted in an award dated March 02, 2015, wherein

the Tribunal has directed respondent Nos.2 to 10 to jointly and severally

pay to the petitioner a sum of `93,62,77,987/-inclusive of interest as on

March 31, 2015, with future interest @ 15% p.a. It is the apprehension of

the petitioner that the respondent Nos.2 to 10 neither have meaningful or

adequate security securing the award amount payable by respondent

Nos.2 to 10 jointly and severally. According to the petitioner, they have

consistently encumbered and dealt with their movable and immovable

properties to defeat the claims of the petitioner.

13. The respondent No.1, 2, 3 & 10 have filed their reply, so also

respondent Nos.4 to 9. Respondent No.12 filed an application under

Order 1 Rule 10 CPC seeking its discharge from the petition. The

petitioner filed a common rejoinder to the reply filed by the respondents

and also a separate reply to the application filed by respondent No.12

under Order 1 Rule 10 CPC.

14. In the application, the stand of the respondent No. 12 is as under:

"4. The applicant/respondent no. 12 submits that the name of the applicant is liable to be struck off from the array of the parties as Respondent no. 12 is neither a necessary nor a proper party nor any relief can be claimed against respondent no. 12 on the following facts and circumstances :

i. The respondent no. 12 is a Company incorporated under the Companies Act, 1956 and having its registered office at B-319, Okhla Industrial Area, Phase I, New Delhi. Respondent no. 12 as such is an independent legal entity, distinct from its shareholders. ii. The Respondent no. 12 on its own and as a absolute owner had purchased the property bearing plot no. B-319, Okhla Industrial Area, Phase -I, New Delhi on l/11/2006 i.e. much prior to the agreement executed between petitioner and respondent no. 1 to

10. iii. The applicant/respondent no. 12 has various other shareholders having more than

73. 770/o shareholding in the said Company other than Respondent no. 2 & 3. The respondents 4 to 10 are not even shareholders of Respondent no. 12 Company.

iv. The applicant/respondent no. 12 Company is a third party to the agreement between petitioner and respondent no. 1 to 10 and is neither a signatory nor a privy to the same. v. That there is no arbitration agreement between petitioner and respondent no. 12. vi. The applicant/respondent no. 12 was not a party in the arbitration proceedings which were initiated by the petitioner and no award has been passed or could have been passed against respondent n. 12 applicant. vii. That merely because respondent no. 2 & 3 hold 26.33°/o shareholding are shareholders. holding a certain number of equity in the Company does not mean that respondent no. 12 has become a party to the disputes between petitioner and respondent no. 1 to 10.

viii. It is submitted that since the shareholders themselves have no right in the properties of

the respondent no. 12 Company, the question of their any creditor having any right in the properties of respondent no. 12 Company through the said shareholders does not arise. ix. The petitioner by filing the petition under Section 9 of the Act cannot enlarge the scope of Section 9 by claiming any relief against properties /assets of a third party or claiming any independent right against respondent no.

5. The applicant/respondent no. 12 submits that as per the award dated 2/3/15, the petitioner has right, if any against respondent no. 2 to 10. Since respondent no. 2 to 10 have themselves no right or entitlement in the assets owned and possessed by respondent no.

12 and respondent no. 4 to 10 are not even the shareholders, no order can be passed under Section 9 against the applicant/respondent no. 12 on any ground whatsoever.

Respondent no. 12 has no liability towards respondent no. 2 to 10 nor any amounts are due or payable by respondent no. 12 to the said respondents. Respondent no. 12 is not holding any asset for and on behalf of respondent no. 2 to 10.

6. The applicant/respondent no. 12 as such submits that respondent no. 12 is liable to be deleted from array of parties and petition under Section 9 as against applicant/respondent no. 12 is liable to be dismissed".

In view of the aforesaid submission in the application, the

respondent No. 12 sought its deletion.

15. In the reply, the respondent Nos. 4 to 9 has taken a stand that the

respondent No. 1 company is the owner of the property bearing No.C-20,

1A/10, Block No. C, Sector 62, Noida, U.P. measuring 34275 sq. meters.

It had entered into an collaboration agreement dated March 1, 2013 with

Premia Projects Ltd. and Premia Structures Ltd. for construction and

development of Noida plot and the share of the respondent in the project

is 44%. It is also stated that respondent Nos. 4 to 9 own 47,55,000 shares

in the respondent No. 1 company being 24.06% of the entire

shareholding of the respondent No. 1 company and the respondent Nos.

2, 3 & 10 owned 94,05,000 shares which are valued at `75 Crores. There

is an adequate security to protect the interest of the petitioner. The

respondents have no objection if the order of this Court in OMP

1197/2014 restraining the respondent Nos. 2 to 10 from dealing in the

shares of the respondent No. 1 company is further continued to secure the

interest of the petitioner. It is also the stand of respondent Nos.4 to 9 that

the respondent No. 2 is controlling the respondent No. 1 company. The

agreements in question were never signed by any of the respondents at

any time. They were assured that they need not worry about the

proceedings or their investment in respondent No. 1 company. According

to them, they are not the promoters of the respondent No. 1 company and

are only the investors, having no control over the affairs of the

respondent No. 1. They plead ignorance about the agreements in

question. They would also state that they have already filed affidavits on

March 27, 2015. They would also state that they are not the

shareholders/directors of respondent No.11 company and as such the

allegation of diversion of funds of respondent No. 12 company are totally

frivolous and mischievous.

16. The respondent Nos. 2, 3 & 10 have also filed their reply.

According to them, the petitioner has mala-fidely impleaded respondent

Nos. 1, 11 & 12. The respondent No. 1 was party to the agreement dated

July 12, 2007 executed between the petitioner, respondent Nos. 1 & 2

and 10. No award has been passed against the respondent No. 1. The

claim against the respondent No.1 need to be rejected. The petitioner

cannot enlarge the relief granted under the award so as to claim any

interim orders against respondent No. 1 or its assets. As regards

respondent Nos. 11 & 12 are concerned, they are third party to the

contract dated July 12, 2007. There is no arbitration agreement between

the petitioner and respondent Nos. 11 & 12. The said respondents were

also not the party before the Arbitral Tribunal and no relief has been

granted against the said respondents. Under the garb of Section 9 of the

Act, the petitioner cannot enlarge the scope of Arbitral Award and seek

orders against the said respondents. It is also their case that the petitioner

is adequately secured as the petitioner till date is holding 56 lakhs shares

of the respondent No. 1 company equivalent to 28% of the total issued

and paid up capital. The petitioner itself has valued the said shares in

2007 at `24.92 Crores. The award at present is not executable and as

such, no other and further security of any nature is required than the

property in question which is the subject matter of the dispute. It is also

averred that the petitioner, till date, recorded shareholders of the

company cannot seek any security for the alleged sale consideration

while also being the owner of the said security/property.

17. The respondents have also taken a stand that the respondents

Nos.1, 11 & 12 are independent entities and the said entities cannot be

owned and controlled by any person, such a contention is contrary to the

fundamental principles of law governing the companies. According to

them, a Shareholder or a Director has no right in the assets of the

company by virtue of their shareholding. They would also state that one

of the Directors of the petitioner company M.P.Mehrotra was actively

involved in negotiation and preparation of the collaboration agreement

executed by the respondent No. 1 with the Premia Group. The said

Director duly signed as a witness to the collaboration agreement dated

March 1, 2013.

18. The respondent No. 1 in its reply has broadly taken the same pleas

as has been taken by respondent Nos.2, 3 & 10 and are not repeated for

the sake of brevity.

19. Mr.Ravi Gupta, learned Senior Counsel for the petitioner initially

arguing for the petitioner has drawn my attention to various documents to

contend that the petitioner does not have adequate security securing the

award dated March 02, 2015. He would also state that the respondents

have consistently disregarded and violated the orders passed by this

Court and the Arbitral Tribunal so as to alienate, encumber, devalue their

assets to render the petitioner unsecured and remediless. He would

submit that the present petition is in the nature of an application under

Order 39 Rule 1 or Order 38 Rule 5 of CPC but not objections under

Order 21 Rule 58 against an execution petition. He would state that the

petitioner‟s attempt is to show a prima facie case for seeking order(s) as

prayed for in the present petition. He has taken me through various

documents to show the attempt of respondent Nos.2 to 10 to reduce their

shareholding in the respondent No.12. He would refer to page Nos. 152

and 153 of the documents to show the shareholding of respondent Nos.2

to 10 in respondent No.12. According to him, the shareholders at serial

Nos.1,3,4,5,7 & 8 are related to each other. According to him, between

the persons named at pages 152 and 153, owned 98.88% of the

shareholding as on September 30, 2009 and 25th September, 2010, which

shareholding has been reduced to 87.16% with two fresh allotments made

to M/s Lalwani Holidays and M/s.Chaurasiya Holidays as on September

26, 2011. According to him, the shareholding of the persons in total

reduced to 67.30%. He has also drawn my attention to number of shares

held by Dinesh Kr. Gupta-respondent No.2 in the present petition,

whereby as on September 23, 2013 he held 2,63,250 shares which got

reduced to 1,89,250 as on June 24, 2014 and the total number of shares

also got reduced to 57.30%. He has also drawn my attention to page 174

of the documents which is part of the affidavit filed by Mr.D.K. Gupta on

January 14, 2015, wherein he did not mention the date on which he has

held the shares of the respondent Nos.1, 11 & 12. He has also referred to

the affidavit filed in these proceedings on January 27, 2015 [para 3(iii)]

to highlight that in the affidavit he has stated that he is holding 1,89,250

shares in respondent No.12 company. It is not known which figure is

correct. He has once again referred back to page 174 to highlight that if

the shares are counted on the basis of share certificates then the figure

comes to 2,63,250. According to him, between the period January 14,

2015 to March 27, 2015 in a matter of two months it appears that

Mr.D.K. Gupta has sold the shares despite the order dated September 30,

2014 of this Court restraining the respondent No.2 from dealing with the

shares in respondent Nos.1, 11 & 12 and the said order having continued

by this Court on January 15, 2015 till one month after the pronouncement

of the arbitral award and the arbitral award having pronounced on March

02, 2015, which shows that before the expiry of one month his

shareholding of the respondent No.12 got reduced.

20. He would also state that a conveyance deed dated June 10, 2013

for development rights was executed by the respondent No.2 on behalf of

respondent No.12 with a Wonder Space Properties Pvt. Ltd. with regard

to the land admeasuring 5.1588 acres situated at B-319, Okhla Industrial

Area, Phase-1, New Delhi, despite order dated April 27, 2012 which was

confirmed by the order dated September 04, 2012 wherein the respondent

Nos.2 to 12 were restrained from alienating, selling, transferring,

mortgaging, encumbering, disposing of or in any manner dealing with

their immovable properties. The said order having been continued on

September 04, 2012 till such time an application is filed before the

learned Arbitrator for appropriate interim relief including

variation/modification of the interim order dated April 27, 2012 passed

by the Court and no such application having been filed and the order

having continued, such an agreement on the face of it, is a contemptuous

act. According to him, this is the only asset of the respondent No.12

company. He would refer to page 212, which is part of agreement dated

June 10, 2013 to highlight that the parties were to share revenue and the

share of the respondent No.12 was 47.5%. He would also state that the

respondent No.12 had received an amount of `178 Crores as a deposit

out of which `133.50 Crores was only refundable. He would also state

that the affidavits which have been filed by the respondents from time to

time are misleading.

21. According to him, after the agreement had come to the knowledge

of the petitioner, the petitioner filed CCP 970/2013 against respondent

No. 12 and M/s. Wonder Space, wherein this Court on January 09, 2014

had passed the order directing the M/s Wonder Space to maintain status

quo with regard to the development rights. Subsequently, on an

application filed by M/s Wonder Space, the interim order dated January

09, 2014 was vacated.

22. He would also refer to an application filed by the respondent No.

12, IA 10835/2014 in OMP 383/2012, seeking clarification of order dated

April 27, 2012. He has drawn my attention to order dated July 22, 2014

in OMP 383/2012, wherein, the respondent No. 1 has agreed to furnish

an unconditional bank guarantee of a schedule bank in the sum of `123

Crores for and on behalf of the respondent Nos. 1 to 10 in favour of the

Registrar General of this Court. He had also drawn my attention to order

dated July 31, 2014 to state that the respondent No. 1 had not furnished

the bank guarantee as was agreed to. According to him, the application

for clarification of order dated September 4, 2012 was dismissed. In the

end, it was his submission that in terms of the award dated March 2,

2015, there is a direction against the respondent Nos. 2 to 10 to purchase

from the petitioner 56 lakhs equity shares on paying jointly and severally

the sum of `84,28,27,987/- due till the date of claim statement i.e.

September 30, 2012 with simple interest @ 15% p.a. on the sum of

`24,92,00,000/- from 01.10.2012 till the date of payment. The said

award has now swelled to `93,62,77,987/- as on the date of the petition.

He would state that the reliefs sought for by the petitioner are in the

alternative and the same be considered by this Court appropriately.

23. Mr. A.K.Singla, learned Senior Counsel for the respondent No. 1

would broadly submit that in view of the directions given by the Arbitral

Tribunal in favour of the petitioner, the present petition under Section 9

of the Act is liable to be dismissed as against the respondent No. 12 being

not maintainable. He would also state that a petition u/S 9 of the Act

presupposes an existence of an agreement containing arbitration clause.

There being no privity of contract between the petitioner and respondent

No. 12, the petition qua respondent No. 12, which is an independent

entity under the Companies Act, would not become a single entity in the

transaction between the respondent No. 1 and the petitioner. The

respondent No. 12 having no interest in the subject matter of the dispute

is not amenable to the jurisdiction of the Court. He relied upon the

judgment of the Supreme Court in the case of Indowind Energy Limited

Vs. Wescare (I) Ltd. and Anr, (2010) 5 SCC 306. He also relies upon

the judgment of the Privy Council on a proposition that a company is

always distinct from the persons composing it. (Refer "Aveline Scott

Bitchan Vs. James J. Millar" reported as AIR 1931 Privy Council 203).

He would also state, mere impleadment of respondent No.12 in earlier

petitions filed by the petitioner under Section 9 would not entitle the

petitioner to continue impleadment in the instant petition and the

direction given in the award in view of the judgment of this Court in

Alpha Tiger's case decided by this Court on January 15, 2015 cannot be

implemented against the respondent No.12. Additionally, it is his

submission, in view of the record of proceedings taken in earlier OMPs,

no relief either prayed for or pursued against it, the doctrine of estoppel

bars maintainability of instant petition. He would state, even though

order dated April 27 2012 was passed before the commencement of the

arbitration proceedings but the order dated September 4, 2012 excludes

the applicability of the order on the respondent No. 12. He would rely

upon the order dated August 24, 2012 passed in the contempt petition,

more specifically, para 16 of the order. He would also state, that in OMP

570/2013, even though, respondent No. 12 was impleaded but no relief

was prayed for. He also states that petition for interim relief against

respondent No. 12 is barred in view of Section 11 of CPC, Explanation

(V). He states, no relief on the principles of Order 21 Rule 41 CPC on

the plea that respondent Nos.2 and 3 have shareholding in respondent No.

12 is available to the petitioner as the award would not be executable in

terms of Order 21 Rule 30 CPC but the same would be covered by Order

21 Rule 32 CPC. He seeks dismissal of the petition.

24. Similarly, Mr.Anil Airi, learned counsel for the respondent

Nos.1,2, 3 & 10 would submit that the reliefs claimed in the present

petition by the petitioner cannot be granted as are contrary to each other.

He would state that the petitioner in the proceedings under Section 9 after

the passing of the award cannot enlarge the scope of the award; claim or

seek reliefs, which were not subject matter of the arbitration; claim reliefs

against any party, who was before the Arbitral Tribunal but no relief was

claimed in the arbitration proceedings; claim relief against the third party

to the arbitration agreement, arbitration proceedings and award and

against their assets; claim relief under Section 9 of the Act which would

amount to enforcement of the award; nor the petitioner can claim relief

which were passed on petitions under Section 9 of the Act filed before or

during the arbitration proceedings. According to him, this Court in its

order dated January 15, 2014 restricted the interim order till one month

after the passing of the award or till passing of the award. He states that

the passing of the order before or during the arbitral proceedings is on

different considerations on the averments or claims raised when the Court

is not aware of the reliefs/award to be passed by the Tribunal. The

petitioner has to satisfy this Court in this petition that it is entitled to the

interim order and not enforcement after the passing of the award.

25. He would state that the arbitral award was passed by the Tribunal

against respondent Nos. 2 to 10 only and the award is for only specific

performance of the agreement with respect to the movable property i.e.

the shares, whereby the Tribunal has directed respondent Nos. 2 to 10 to

purchase from the petitioner 56 lakhs equity shares by paying jointly and

severally a particular sum. According to him, no relief can be granted

against the respondent No. 1 as there is no award against the respondent

No. 1; no relief was sought in the arbitration against respondent No. 1; no

averment in the petition that respondent No. 1 owes money to respondent

Nos. 2 to 10; even if the award becomes executable, the said

decree/award is incapable of execution against the respondent No. 1 or its

assets; the company is an independent entity distinct from its

shareholders or directors and competent to hold the property in its own

name; the shareholders of the company irrespective of their quantum of

shareholding have no right in the assets of the company; Order 2 Rule 2

CPC is applicable to the arbitration and all such reliefs which were not

claimed by the petitioner in the arbitration are now barred and cannot be

raised as such petitioner‟s right against respondent No. 1 stands

extinguished; the petitioner has no prima facie case in its favour against

respondent No. 1. He would state, that, the plea raised against the

respondent No. 1 is to create prejudice. Further, he would state, that any

order against respondent No. 1 would stall the development of the

projects and extreme prejudice would be caused to respondent No. 1 as

the same would reduce the value of the property, bring business of

respondent No. 1 to halt, and the petitioner is aware that the development

of the project would have a positive bearing on the shares. He would

state that the property of the respondent No. 1 is not the subject matter of

the dispute nor any award has been passed against it; no execution can be

filed against the respondent No. 1 as respondent No. 1 is not a judgment

debtor.

26. Insofar as reliefs claimed against respondent Nos. 2, 3 & 10 are

concerned, it is his submission that the award in question is an award

granting specific performance of an alleged agreement to sell the

movable property i.e. equity shares. As per the award the respondent no.

2 to 10 are liable to purchase 56 lacs shares held by petitioner as

shareholder of respondent no. 1 company for the consideration

determined by the arbitral tribunal. The said Award on the face of it is

barred by law i.e. is against the public policy of India and liable to be set

aside and for which the respondent would initiate appropriate

proceedings. He would also state, from the bare look of the award it is

apparent that it is unconscionable and illegal as Arbitral Tribunal has

determined the value of the shares as more than `84,28,27,987/- in March

2015 on an investment of `24.92 crores in July 2007. The respondents

shall raise such and all other and further objections to the said award in

the appropriate application. According to him, the Award in question is

not a money award as the alternate relief sought by the Petitioner was not

granted by the Arbitral Tribunal and cannot be enforced as such. The

subject matter of the arbitration is 56 lakhs shares held by the Petitioner

and which according to the Petitioner, respondent nos. 2 to 10 are liable

to purchase at the consideration determined by the Arbitral Tribunal. The

said subject matter of the arbitration i.e. equity shares, are protected and

are preserved as the Petitioner till date is the recorded owner of the said

shares. The said 56 lakhs shares are 28% of the equity of the Company.

The Arbitral Tribunal has valued the said 56 lakhs shares for the sum of

`84,28,27,987/-. The petitioner is holding on to the said shares and is

recorded owner of the same. The petitioner as such is well protected and

no additional security is required or can be sought.

27. According to him, since the award is not a money award, there is

no requirement for the Petitioner either to approach this Court to secure

any amount in dispute or for any such other interim order. He would also

state, there is no averment that the respondents 2 and 3 are not people of

means. It is submitted that the respondent no. 2 and 3 own sufficient

immovable properties and list as submitted by the petitioner in the

petition [ para 22] supports the said fact. The petition does not contain

any averment which would satisfy the requirement of Order 38 rule 5 of

CPC.

28. According to him, merely because before and during the arbitral

proceedings certain interim orders were passed does not mean similar

orders can be sought post award. In post award Section 9 petition the

award also has to be looked into, to ascertain the relief granted by the

Tribunal, which the Court hearing the application under Section 9 before

and during the arbitration proceedings had not the advantage of going

through. The reliefs sought by the petitioner are seeking enforcement of

the award whereas no enforcement can be sought at this stage when the

award is incapable of enforcement. He relies upon the judgment of this

Court reported as 2009 (3) Arb. LR 315 (Delhi) Value Advisory Services

vs. ZTE Corporation & Ors, 2006 (4) Scale 39 Punjab State Industrial

Development Corporation vs. PNFC Karamchari Sangh & Anr., CPI

India Ltd. vs. BPTP Ltd. (FAO(OS) 538,507, 5082012 decided on

November 09, 2012),

29. According to Mr.Ashish Aggarwal, learned counsel for the

respondent Nos. 4 to 9, it is a settled proposition of law that for the

purpose of Section 9 of the Arbitration and Conciliation Act, guidance

should be taken from Order XXXVIII Rule 5 of CPC. He submits that

admittedly under Order XXXVIII Rule 5 CPC, the defendant may be

called upon to furnish security in case the following conditions are

satisfied:

a. The court is satisfied that the defendant with intend to obstruct or delay the execution of any decree:

i. Is about to dispose off the whole or any of his property or ii. Is about to remove the whole or any part of his property from the local limits of the jurisdiction of the court

30. He states that none of the aforesaid conditions are applicable qua

the respondent nos.4 to 9. According to him, even the allegations of the

petitioner are qua the respondent nos.2 and 3. He states that the

averments of the petitioner do not point out to any wrong doing

whatsoever on the part of the respondent nos.4 to 9. He would state, the

respondent nos.4 to 9 have filed detailed affidavit of assets in the present

petition on March 27, 2015. The said answering respondents had earlier

also filed affidavits of their assets dated December 10, 2012 before the

Ld. Tribunal and the earlier affidavits are from pages 87 to 98 of the

paper book filed by the petitioner. Admittedly, none of the respondent

no.4 to 9 have dealt with any of the assets as detailed in their earlier

affidavits and all the said respondents have further stated in their present

affidavits dated 27.03.2015 that they have not dealt with the assets

specified in the affidavit dated 27.03.2015 in any manner after the

passing of the order dated 27.04.2012 in OMP No.383 of 2012. He

would also state that the petitioner is sufficiently secured as the share of

the respective parties in the equity share capital of the respondent no.1

company is as under:

                   Petitioner                       28% approx.
                   Respondent nos.4 to 9            24.06%
                   Respondent nos.2, 3 & 10         47.64%

                             XXX XXX

31. According to him, a bare perusal of the agreement dated

12.07.2007 would reflect that respondent Nos. 4 to 9 have not signed the

same. He relied upon the judgment of the Division Bench of this Court in

FAO(OS) 203/2014, decided on September 01, 2014. He would also rely

upon the judgment reported as 2007 (7) SCC 125 Aadhunik Steel vs.

Orissa Magnese & Minerals Pvt. Ltd. and 2008 (2) SCC 302 Raman

Tech & Process Engineering Company & Anr. vs. Solanki Traders.

32. In rejoinder to the submission made by the counsel Mr.A.K.Singla,

Sr. Advocate for the respondent No. 12, the stand of Mr.Jayant Mehta is

that respondentNo.12 has not filed any reply to the OMP. Instead, it has

only filed an application for its deletion from the array of parties. An

injunction upon respondent Nos.2 to 10 without any restraint on the asset

and substratum of respondent No.12 would mean that the value of the

shareholding of respondent Nos.2 to 10 in respondent No.12 is

unprotected. This would allow the respondents, who have consistently

acted unfairly and fraudulently, to render the injunction upon their

shareholding meaningless and valueless. Respondent No.12 is not only

an alter-ego of respondent Nos.2 to 10 but was also a party to OMP

Nos.383/2012; 570/2013 and 1197/2014. It did not file any reply to OMP

No.383/2012. In the said OMP, this Court passed orders dated

27.04.2012 and 04.09.2012, both of which injuncted respondent No.12.

In fact, the order dated 04.09.2012 was passed in its presence. However,

no such issue was raised by it. The order dated 04.09.2012 attained

finality. Respondent No.12 filed an I.A. No.10835/2014 in OMP No.

383/2012 on the same ground as made in its application under Order 1

Rule 10 CPC in the present case. Moreover, in the said I.A., it

volunteered to pledge its property to secure the petitioner and in the

course of its submissions, proposed to furnish an unconditional bank

guarantee. The I.A. was, however, dismissed by this Court by the order

dated 01.09.2014, which order also attained finality. As a consequence,

the orders dated 27.04.2012 and 04.09.2012 continued to bind respondent

No.12. The respondents are also facing proceedings for perjury under

Section 340 Cr.PC (vide IA No 10677/2014 in OMP no. 383/2012) for

making false averments in its I.A. No. 10835/2014. Respondent No.12

was a party in OMP No.1197/2014 in which this Court passed an interim

order dated 30.09.2014 in its presence. It did not file any reply in this

OMP as well. The order dated 30.09.2014 was continued by the order

dated 15.01.2015. Respondent No.12 did not challenge any of these two

orders. They also attained finality. The manner of directorship and

shareholding of respondent No.12 leaves no doubt that it is the

respondent Nos.2 to 10 who are in control of its affairs. In essence,

respondent No.12 is nothing but a quasi-partnership owned and

controlled by respondent Nos.2 to 10. In fact, its property was sought to

be given by respondent Nos.2 to 10as collateral security for the loans

sanctioned to respondent No.1. The petitioner is not seeking to attach or

appropriate the property of respondent No.12. However, if respondent

No.12 further alienates / encumbers or deals with its sole immovable

property, its substratum would be lost and the value of the shareholding

of respondent Nos.2 to 10 in respondent No.12 would be adversely

affected. Therefore, in order to ensure that the value of the shareholding

of respondent Nos. 2 to 10 in respondent No.12 is not wasted or lost or

otherwise dealt with so as to leave the petitioner and the award dated

02.03.2015 completely unsecured, respondent No.12‟s presence and an

injunction against it is necessary. It is well settled that proceedings under

Section 9 of the Act are maintainable against a party who may not be

party to the arbitration agreement. The reliance by respondent No.12 on

the judgment dated 04.12.2014 passed by a Single Judge of this Court in

I.A. No.4181/2012 in Cont Cas (C) No.970/2013 is misplaced. The said

judgment was passed not on any application of respondent No.12 but on

the application of Wonder Space Properties Pvt. Ltd. Moreover, the

principle and indeed only issue decided by the said judgment is whether

in exercise of contempt jurisdiction, this Court is empowered to pass an

interim order against a party, which was not subjected to any order. In

fact, it was not the case of respondent No.12 that it was neither a party to

nor bound by the order dated 04.09.2012. Such a case could never have

been allowed to be set up inter alia in view of dismissal of its application

being I.A. No.10835/2014 in OMP No.383/2012. In other words,

respondent No.12 could not set up a case which stood rejected by another

judicial order. The order dated 4.12.2014 has been obtained by

concealing and suppressing the order dated 01.09.2014 in I.A. No.

10835/2014. In any event, the petitioner has appealed against the order

dated 4.12.2014, which is pending adjudication. Any alienation made in

violation of court order is void, illegal, against public policy and abuse of

process of law. Wrongdoer/Violators cannot take benefit of one‟s own

wrong. Party violating court order is not entitled to plead equity. It is

also well settled legal proposition that 'fraud vitiates all' and can be raised

at any stage of proceedings.

33. In rejoinder to the submission made on behalf of respondent No. 1,

the stand of Mr.Jayant Mehta is, respondent No.1 has already allowed

respondent Nos.2 to 10 to misappropriate the investment of the petitioner.

This has been clearly found by the Arbitral Tribunal. Respondent No.1

has already given away its sole asset and substratum to M/s.PSL. This

was done to ensure that the value of respondent Nos.2 to 10‟s

shareholding in respondent No.1 is artificially and fraudulently devalued.

An asset claimed to be worth over `100 crores was given for `5 crores

with one-side terms leaving little prospect of any foreseeable benefit to

respondent No.1. Unless the substratum of respondent No.1 is protected

from further misappropriation, the value of respondent Nos.2 to 10‟s

shareholding in respondent No.1 would further reduce. In this regard, the

foregoing submissions are reiterated. Respondent No.1 further argued

that Arbitral Tribunal has valued the share price in terms of the award.

This is a false submission. The Arbitral Tribunal has not valued the

shares but awarded the amount based upon the exit formula provided in

the Agreement.

34. Similarly, in rejoinder to the submissions made on behalf of

respondent Nos. 2 to 10, Mr.Jayant Mehta would contend, the

submissions of respondent Nos.2 to 10 are also untenable and completely

fallacious. Respondent Nos.2 to 10 admittedly have a liability of over

`95 crores towards the petitioner under the award dated 02.03.2015. This

liability is increasing with each passing day on account of future interest.

They have neither pleaded nor shown as to in what manner the petitioner

is meaningfully and adequately secured. Only conjectures and surmises

are pleaded and argued. In fact, they have consistently acted with utter

disdain to the judicial process and in a manner so as to overreach the

process of law to render the petitioner unsecured and remediless. They

have used the instrumentalities of respondent Nos.1, 11 and 12 to commit

fraud upon the petitioner. In view of foregoing, respondent Nos.2, 3 and

10 have filed false and misleading affidavits before the Arbitral Tribunal

and this Court. Respondent Nos.4 to 9 have gone further and completely

disregarded the orders passed by this Court and Arbitral Tribunal. The

effort of respondent Nos.2 to 10 is to overreach the award dated

02.03.2015 including by making factual submissions contrary thereto,

which is impermissible. Section 9 provides for a petition post award. In

fact, with the award dated 02.03.2015, there is most and pressing need for

meaningful and adequate security to the petitioner. The provisions of

Order 38 Rule 5 CPC are included within the scope and purview of

Section 9 of the Act.

35. According to him, respondent Nos.2 to 10 have sought to contend

that an injunction upon their immovable properties would secure the

petitioner. This is a dishonest argument. It is a matter of record that they

have avoided to submit the original title deeds of any of their properties.

The actual state, encumbrance and possession over any of their properties

is, therefore, extremely doubtful. In fact, this argument is nothing short of

red-herring. He would state, the records of respondent No.12 as filed with

the ROC show that it has given to respondent Nos.2 and 3 substantial

amounts as advances for properties. Respondent Nos. 2 and 3 have not

disclosed this fact in their affidavit of assets. Which of their properties is

proposed to be conveyed to respondent No.12 is unknown. A similar

doubt as to exact and precise state of affairs of the properties of other

respondents remains.

36. He would also state, the submissions of respondent Nos.2 & 3 in

essence, is that the order dated 15.01.2015 provides adequate security to

the petitioner. This is false. There is no mechanism contemplated or

provided by the said order to ensure that the value of the shareholding of

respondent Nos.2 to 10 in respondent Nos.1, 11 and 12 as well as in other

companies is not diminished in value. As regards BMS-respondent No.1

the order pertains to its share of developed area. Till date, there is no

development on its leasehold land. Thus, its share is only a pipedream.

He would also state, during pendency of the arbitration proceedings,

respondent No. 2 sold 221,000 shares held by him in respondent No.12.

As per his own affidavit filed in these proceedings, the value of his

present shareholding of 189,250 shares is `120 crores. That being so,

from the sale of 2,21,000 shares he has received a sum of `140 crores.

Therefore, respondent No.2, on his own showing, ought to have sufficient

liquid assets to provide an adequate, meaningful and liquid security to the

petitioner, as has been prayed in the OMP. According to him, the

reference to Order 21 Rule 46, CPC, in their legal submissions, is neither

invoked nor has any relevance to the present proceedings. The petitioner

is not seeking any garnishee order. Instead, what has been sought is

security in accordance with Section 9 of the Act so as to ensure that the

award dated 02.03.2015 is not rendered infructuous. He denied that

subject matter of award dated 02.03.2015 are the shares and not any

property. This is misleading argument. The subject matter of award dated

02.03.2015 are not the shares but the contractual liability of respondent

Nos.2 to 10 to pay the exit consideration to the petitioner. He would

submit that the reliance of the respondents on the judgment in Indowind

Energy Limited v. Wescare (India) Limited and another, (2010) 5 SCC

306 is misplaced in that the said judgment arose from a proceeding under

Section 11 and dealt with an issue as to whether a non-party to the

arbitration agreement can be bound by it. No such issue arises in the

present case. This judgment does not deal with Section 9 which covers

within its scope a relief against a third party. According to him, the

reliance of the respondents on the judgment of this Court in Value

Advisory Services v. ZTE Corporation and Ors., 2009 (3) Arb. LR 315

(Delhi) and Alpha Tiger Cyprus Investments Ltd. & Anr. v. Shakti Nath

& Ors. [OMP (I) No.17/2015, decided on 11.02.2015] is equally

misplaced. The said judgments support the petitioner. Value Advisory

provides that Section 9 covers within its sweep a relief against a third

party including for deposit of money. Alpha Tiger similarly holds that

Section 9 is available to the petitioner. He would also state, the reliance

of respondents of the judgment of this Court in C.V. Rao & Ors. v.

Strategic Port Investments KPC Limited & Ors. [FAO (OS) 203/2014,

decided on 01.09.2014] is also misplaced inasmuch as in that case there

was no prior history of litigation and nothing was shown to support an

apprehension of injury. He would, therefore, pray that this Court may

direct respondent Nos.2 to 10 to furnish a meaningful and adequate liquid

security either by depositing the amount awarded under the award dated

02.03.2015 or by securing the same through the means of an

unconditional bank guarantee. They may also be restrained from

alienating any of their movable or immovable properties. As a corollary,

respondent Nos.1, 11 and 12 are also liable to be enjoined from

encumbering and/or dealing with any of their movable and immovable

properties.

37. Before I deal with the submissions made by the learned counsel for

the parties, I may point out when the matter was listed on March 26, 2015

this Court recording the statement made by the counsels for respondent

Nos.1 to 10 had passed the following order:-

"Mr. Anil Airi Advocate for Respondent No. 1, 2, 3 & 10, Mr. Nikilesh, Advocate for Respondent No. 4 to 9, Mr.Amit Saxena, Advocate for Respondent No. 11 and Ms.Sanghitra Sawant, Advocate for Respondent No. 12 accept notice.

After hearing the counsels for some time, the learned counsels for respondents No. 1, 2, 3 & 10 and Respondent No. 4 to 9 submit that their clients shall not sell, encumber, create third party rights with regard to immovable properties mentioned in paragraphs no. 22(i) to (iv), (vi), (vii), (ix), (x), (xii),

(xiii) & (xiv).

Learned counsels for Respondent no. 2 to 10 also submit that the order dated 30.09.2014 in OMP No. 1197/2014 would continue to bind respondent no. 2 to

10. Similarly, the order dated 15.01.2015 of this court in OMP No. 570/2013 and OMP No. 1197/2014 would also continue to bind respondent nos. 1 to 10. Learned counsel for respondent no. 1 to 10 shall file appropriate affidavit in this regard. Mr. Anil Airi shall bring the same to the court and ensure that an advance copy is served on Mr. Jayant Mehta, Advocate during the course of the day.

Renotify on 27th March, 2015".

38. In terms of the order passed on March 26, 2015 the respondent

Nos.2 to 10 had filed their affidavits. On March 27, this Court passed the

following order:-

"Learned counsel for respondent Nos. 1, 2, 3 & 10 and

learned Senior Counsel for respondent Nos.4 to 9, on instructions, state that these affidavits are in terms of the order passed by this Court on 26th March, 2015. These affidavits are taken on record. Let these affidavits be scanned and uploaded on the computer. Learned counsel for respondent Nos.1 to 3 & 10 and learned Senior Counsel for respondent Nos.4 to 9 state that the direction in para 13 of the order dated January 15, 2015 of this Court in OMP Nos. 570/2013 and 1197/2014 shall bind the said respondents till the next date of hearing. They would also state that even the order dated September 30, 2014 passed by this Court in OMP 1197/2014, wherein it was directed that the respondent Nos.2 to 10 shall not deal with the shares in respondent Nos.1, 11 & 12, shall also bind the respondent Nos.2 to 10. Learned counsels for respondent Nos.1 to 10 state that the restraint order passed by this Court in OMP 383/2012 on April 27, 2012 relates to the same properties which are mentioned in their affidavits.

It is made clear that till the next date of hearing, the respondent Nos.2 to 10 shall not sell, encumber, alienate, deal with the properties listed by them in their respective affidavits and also the equity shares of various companies mentioned in the said affidavits. The statements made by learned counsel for respondent Nos.1 to 3 & 10 and learned Senior Counsel for respondent Nos.4 to 9 relating

to order dated January 15, 2015 in OMP No. 570/2013 and OMP No. 1197/2014 and September 30, 2014 in OMP 1197/2014 are taken on record".

39. Insofar as the prayers made by the petitioner in the petition are

concerned, Mr.Jayant Mehta, during his submissions has conceded that

there is no contradiction in the prayers as the same are in the alternative.

The said statement is taken on record.

40. On a reading of the orders passed by this Court in various petitions

including the contempt petition, the following is noted.

(1) The respondent Nos. 2 to 12 were restrained from alienating, selling,

transferring, mortgaging, encumbering, disposing of or in any manner

dealing with their immovable properties (vide order dated April 27,

2012)

(2) The order was continued till such time the Arbitrator passes an order

on an application filed by either of the party for modification/variation of

the order. No such application was filed. In other words, the order dated

April 27, 2012 continued till the award was passed by the Arbitral

Tribunal on March 2, 2015, but not against respondent No. 12 in view of

order dated December 4, 2014 in CCP 970/2013.

(3) The bank guarantee agreed to be furnished by respondent No. 1 of

`123 Crores was not honoured.

(4) Status quo order with respect to title and possession of property

bearing No. C-20, 1A/10, Block C, Sector 62, Noida (U.P).

(5) The respondent Nos. 2 to 10 were restrained from dealing with shares

in respondent No. 1, 11 and 12 and no transfer will be registered by

respondent No. 1, 11 and 12 (Ref. order dated September 30, 2014 in

OMP 1197/2014)

(6) The status quo order with respect to title and possession of the

property bearing No. C-20, 1A/10, Block C, Sector 62, Noida (UP) was

continued qua respondent Nos. 1 to 10 till one month after the

pronouncement of the Arbitral award.

(7) The order dated September 30, 2014 continued till one month after

the pronouncement of the Arbitral Award.

41. In the award, the Arbitral Tribunal has directed as under:

"I. Directing respondents No. 2 to 10 to purchase from the claimant 56,00,000 (Fifty Six Lakhs) equity shares on paying jointly and severally the sum of Rs. 84,28,27,987/- (Rupees Eight Four Crores Twenty Eight Lakhs Twenty Seven Thousand Nine Hundred and Eighty Seven only) due till the date of claim statement (30.09.2012) with simple interest at the rate of 15% per annum on the sum of Rs.24,92,00,000/- (Rupees Twenty

Four Crores and Ninety Two Lakhs only) from 01.10.2012 till the date of payment.

II. Directing the parties to bear their respective costs."

42. In this petition, the endeavour of the petitioner is to secure the

amount of `84,28,27,987/- granted by the Tribunal with 15%. This

amount, according to the petitioner has swelled to `93,62,77,987/- on the

date of filing of the petition. There is no dispute, when a petition under

Section 9 of the Act is filed, a party has to establish a prima facie case to

seek the relief as prayed for.

43. There is also no dispute that the principles underlying in CPC for

grant of interlocutory remedies must furnish a guide to Court when it

determines an application under Section 9 of the Act. It has also been

held that underlying basis of order 38 Rule 5 CPC has to be borne in

mind while deciding an application under Section 9(ii)(b) of the Act. In

so far as the judgment of the Division Bench in C.V. Rao (supra) is

concerned, it is seen that the Division Bench after analysing the law in

respect of Section 9 of the Act was of the view that the Single Judge had

not gone into the question whether there is a danger of defeating,

delaying or obstructing the execution of the arbitral award by the

appellants and whether the facts and circumstances of the case warrant

preservation of the property which is the subject-matter of the arbitration

clause under the investment agreement. The Division Bench has also

held that even if prima facie case is made out, the same will not entitle an

interim measure or protection unless it is also established that the

appellants are intending to defeat the right of the party (respondent No.1

in that case) to enforce the arbitral award. The Court was of the view that

the impugned order of the Single Judge of prohibitory injunction would

not only harm the reputation and goodwill of the appellants in that case

and its shareholders, but it will cripple the company leading to its

eventual shut down. The Court was also of the view that the impugned

order of the learned Single Judge had the effect of allowing the main

OMP itself. Suffice it to state, the facts in the case in hand are different

from the facts in C.V. Rao (supra) and the judgment would not be

applicable to the case in hand keeping in view the past litigation between

the parties, the impugned orders passed by this Court from time to time,

the award which has been rendered by the learned Arbitrator. The learned

counsel for the respondent Nos.4 to 9 had referred to many judgments in

respect of grant of interim relief under Section 9 of the Act. I do not think

that this Court needs to go into those judgments in view of the settled

position of law.

44. The question which arises is in view of the stand taken on behalf of

respondent Nos.1, 11 & 12, can a relief be claimed against a third party,

who is not a party to the agreement containing arbitration clause or party

to the arbitration proceedings or even if a party to the agreement no relief

was claimed nor granted by the Arbitral Tribunal. This question had

come up for consideration before this Court on more than one occasion.

In Value Advisory Services (supra), on which reliance was placed by

Mr.Anil Airi, Advocate, this Court after analysing the provisions of CPC,

was of the view when a third party denies the liability and such denial

raises disputed questions of fact which cannot be adjudicated without

trial the Court in such cases in its discretion can on a prima facie view of

the matter, either refuse to exercise powers under Section 9 of the Act or

pass appropriate order(s) to protect the interest of all parties concerned. It

is a different issue, in the said case the Court refused to exercise the

power under Section 9 of the Act. In a more recent judgment this Court

in Dorling Kindersley (India) Pvt. Ltd. vs. Sanguine Technical

Publishers & Ors. 2013 (3) Arb. LR 52 (Del.) held that the Court is not

powerless to pass an interim order affecting a third party under the

provisions of Section 9 of the Act. There may arise various situations

wherein the Court may have to pass an interim order affecting third

parties. One of such situation is where the order is passed against the

party who is claiming or deriving title through the party to an agreement.

In such cases, if the endeavour is made by the party to the agreement to

frustrate the contract, or resile from contractual obligations, the Court

may pass interim orders to prevent abuse of the process, and affect the

third party right. The Court followed the Division Bench judgment of the

Bombay High Court in Girish Mulchand (supra) and held that the power

under Section 9 of the Act has to be invoked by a party to the arbitration

agreement. However, Section 9 nowhere limits the Court‟s power or

jurisdiction to pass an order under this provision. On the contract, Section

9 provides that the Court shall have the same powers to pass interim

order as it has for any other proceeding. Thus, it cannot be said that

Section 9 puts any impediment on the jurisdiction of the Court in passing

interim measures or orders affecting third parties. The Court can

conveniently proceed to pass interim orders, which may affect a third

party who is deriving title from the party to the agreement, unlike a third

party having an independent right.

45. The aspect of grant of interim relief under Section 9, post award is

also well settled. In Alpha Tiger Cyprus Investments Ltd. & Anr.

(supra), this Court was considering an application filed under Section 9,

post award. The facts as noted by this Court were, there was an interim

order in favour of the petitioner throughout the arbitral proceedings. The

award was also in favour of the petitioner. The question arose whether

pending the enforcement of the arbitral award which is proposed to be

challenged under Section 34 of the Act, can the Court exercise

jurisdiction under Section 9 of the Act? The Court noticing that the

petitioner is seeking an interim order requiring the respondents to

maintain status quo in relation to an immovable property and is not

praying for the deposit of the whole or part of the awarded amount, had

upheld, the maintainability of a petition of the act prior to the

enforcement of the award under Section 36 of the Act. The Court went on

to direct that the interim order passed by the Court to this effect, the

respondents shall not create any third party right, interest in respect of the

property till either the disposal of the petition under Section 34 of the Act

if filed or in the event that the petition is dismissed or no such petition is

filed in accordance with law till the enforcement of the award in a

petition under Section 36 of the Act. In Veda Research Laboratories Vs.

Survi Prosects 2009 (111) DRJ 566, this Court while considering a

similar question was of the view that the language of Section 9 is clear in

empowering the Court to make interim measures even after the award is

passed, till it is enforced. The Court could justifiably exercise the power,

despite the pendency of the petition under Section 34, if the facts and

circumstances necessitated the same. In the said case, the Court was also

of the view, since the Arbitral Tribunal has passed a unanimous award, it

was decided to be sufficient for the purposes of making out a prima facie

case. The mere pendency of the application under Section 34 would not

be an impediment to the grant of interim relief since the scope of

interference under Section 34 is limited. The Court after satisfying itself

that the balance of convenience and irreparable hardship was established,

granted an order of injunction restraining the petitioner from alienating,

encumbering, or parting with the possession of the factory premises.

46. A cumulative reading of the judgments referred above, it is clear

that while considering a petition under Section 9 of the Act, the Court is

within its right to pass order against the third party. It is also clear that

when the jurisdiction of the Court is invoked post award by way of

petition under Section 9, interim protection can be granted. The

argument of the counsel for the respondents that some of them not being

parties before the Arbitral Tribunal, the petition under Section 9 would

not be maintainable, need to be rejected. The judgment of the Supreme

Court in the case of Indowind Energy Limited (supra), as relied upon by

Mr.Singla, would not be applicable in the facts of this case wherein this

Court is concerned with a petition under Section 9 of the Act and not

under Section 11 of the Act. The Court should restrain itself from

passing an order which has the effect of implementing the award. Such

order, if made, would frustrate the challenge to the award under Section

34. The order should be such which would secure the interest of the

party having the award in its favour so as to seek effective

implementation, in the eventuality, the challenge to the award is rejected.

47. In the case in hand, it is noted that this Court vide order dated

April 27, 2012 in OMP 383/2012 passed a restraint order against

respondent Nos. 2 to 12, which was continued even on September 4,

2012 from alienating, selling, transferring, mortgaging, encumbering,

disposing of or in any manner dealing with the immovable properties.

The clarification application filed by the respondent No. 12 was

dismissed. That apart, the respondent No. 1 through respondent No. 2,

entered into an agreement with PSL whereby a lease hold plot of land at

Noida, was given for development to PSL. That apart, vide order dated

April 27, 2012, initially, the respondents were directed to file their

affidavits indicating the list of their moveable and immovable properties

including bank balances.

48. Thereafter, on September 4, 2012, this Court directed the

respondent Nos. 2 to 10 to file their affidavits of their assets before the

Arbitral Tribunal. The respondent Nos. 2 to 10 did not file the affidavits

of their assets. A contempt petition No. 736/2012 was filed. The

affidavits filed were disregarded by the Arbitral Tribunal, as they were

lacking particulars. It is noted, only respondent Nos. 2, 3 and 10 had

filed affidavits. That apart, in OMP 1197/2014, this Court vide its order

dated September 30, 2014 injuncted respondent Nos. 2 to 10 from

dealing with or transferring their share holding in respondent No.1,

respondent No.11 and respondent No.12 and additionally, respondent No.

1, respondent No. 11 and respondent No. 12 were injuncted from

recording any transfer of the shares held by respondent Nos. 2 to 10 in

them. According to the petitioner, the shareholding shown by respondent

No. 2 was false and contrary to the record in that the annual return of

respondent No. 12 showed that respondent No. 2 held only 1,89,250

shares on June 24, 2014 whereas the affidavit shows 263250 shares. The

plea of error taken was also contested by the petitioner on the ground that

the aggregate of the share certificates in the last column of the affidavit is

263250.

49. Further considering the fact that the award also being in favour of

the petitioner there is indeed a prima facie case in favour of the

petitioner, balance of convenience is also in favour of the petitioner and

keeping in view the earlier orders passed by this Court in the litigation

between the parties, this Court is of the view that in the facts of this case,

the following interim measures need to be granted in favour of the

petitioner:

(i) The respondent Nos.2 to 10 shall not sell, encumber, alienate and deal

with the properties and equity shares of various companies listed by them

in their respective affidavits filed on March 27, 2015.

(ii) The respondent Nos.2 to 10 shall maintain status quo with respect to

title and possession of the property at C-20, 1A/10, Block-C, Sector-62,

Noida, U.P.

(iii) The respondent Nos.2 to 10 shall not deal with the shares of

respondent Nos.1, 11 & 12 and also with respect to shares of respondent

Nos.2 to 10 no transfer will be registered by respondent Nos.1, 11 & 12.

50. The aforesaid directions shall continue till either the disposal of the

petition under Section 34 of the Act, if filed, or in the event that petition

is dismissed or no such petition is filed in accordance with law, till the

enforcement of the award in a petition under Section 36 of the Act. The

petition is disposed of.

51. No costs.

(V.KAMESWAR RAO) JUDGE

MAY 05, 2015 km/akb