Delhi High Court

Supreme Housing And Hospitality ... vs Srs Private Investments Pawai ... on 10 March, 2017

*       IN THE HIGH COURT OF DELHI AT NEW DELHI

%                          Reserved on : December 08, 2016
                           Pronounced on: March 10, 2017
+       FAO(OS)(Comm)102/2016
        SUPREME HOUSING AND HOSPITALITY PVT.LTD.&
        ORS.                                  ..... Appellants
             Through: Mr. P.Chadambaran, Senior Advocate, Mr.
                      Dayan Krishnan, Senior Advocate with
                      Karan Luthra and Ms. Niyati Kohli,
                      Advocates.

                             versus

        SRS PRIVATE INVESTMENTS PAWAI LTD.& ANR.
                                              ...... Respondents
             Through: Mr. Arun Kathpalia, Senior Advocate with
                      Ms. Himanie Kotoch and Mr. Samaksh
                      Goel, Advocates.

CORAM:
HON'BLE MS. JUSTICE INDIRA BANERJEE
HON'BLE MR. JUSTICE ANIL KUMAR CHAWLA

                               JUDGMENT

INDIRA BANERJEE, J

1. This appeal is against a judgment and order dated 03.10.2016,

passed by the learned Single Judge allowing the application

being OMP(I) (Comm). No. 216 of 2016, filed by the

respondent No.1 under Section 9 of the Arbitration and =====================================================================. FAO(OS)(Comm). No.102/2016

Conciliation Act 1996, hereinafter referred to as the 1996 Act,

and confirming the interim orders dated 27.05.2016 and

08.09.2016 whereby the appellants had inter alia been

restrained from encumbering, alienating or creating third party

rights in respect of the assets and properties of the respondent

No.1 including the Supreme Business Park in Mumbai outside

the jurisdiction of this High Court.

2. The appellants and the respondents entered into an Investment

Agreement dated 13.02.2002, pursuant to which, the respondent

no.1 had subscribed to certain "investor securities" representing

37.36% of the share capital of the appellant No.1, hereinafter

referred to as the appellant company.

3. Subsequently the appellants and the respondents agreed that the

respondent no.1 would be allowed partial exit from the

appellant Company. The appellants and the respondents,

therefore, executed a Share Purchase Agreement dated

19.03.2015, pursuant to which, the appellants agreed to

purchase securities held by the respondent No.1 for a total =====================================================================. FAO(OS)(Comm). No.102/2016

consideration of Rs. 1,620,000,000/- which was payable in

three tranches from April, 2015 to September, 2015.

4. Some of the Clauses of the Share Purchase Agreement are set

out hereinbelow for convenience:-

"2.2. Prior to and in anticipation of execution of this Agreement, the Investor has, as recorded in the letter agreement dated November 22, 2013, sold to the Promoter, the Transferee as referred to in Clause 15.1, 34,472,094 FCD A at a price of Rs.10 each amounting to Rs.344,720,940 and 2,975,059 FCD C at a price of Rs.69 each amounting to Rs.205,279,060 for an aggregate amount of Rs.55,00,00,000/- (Rupees Fifty Five Crore Only). Further, on May 31, 2014, the Investor has sold to the Promoter, the Transferee as referred to in Clause 15.1, 75,314 Equity Shares at a price of Rs.1195 each amounting to Rs.90,000,230 and 5,00,000 FCD C at a price of Rs.54 each amounting to Rs.270,000,000 for an aggregate amount of Rs.360,000,230.

9.1. In terms of the Investment Agreements, in addition to the other rights of the Investor as contained therein, the Investor has an affirmative vote on certain matters as enumerated in the Investment Agreements, whether such matters are tabled at a meeting of the Board of Directors or general body meeting. In view of the Investor having agreed to sell all its Investor Securities to the Promoter and/or its nominees all the affirmative voting rights of the Investor under the =====================================================================. FAO(OS)(Comm). No.102/2016

Investment Agreements shall stand withdrawn and revoked, save and except as provided below, upon the successful Closing of SBP Consideration Amount, and thereafter the Investor shall have limited affirmative voting rights only on matters stipulated hereinafter including those actions that may have any relation to the development of the R Zone (or PTC).

18.1 This Agreement shall be governed by, and construed in accordance with, the laws of India. Subject to Clauses 18.2 and 18.3, the Parties shall submit all disputes, controversies or differences arising out of in connection with this Agreement to the exclusive jurisdiction of the Courts at Delhi.

                 18.4        The place of arbitration shall be
                 Delhi."

5. The appellant allegedly failed to pay consideration in terms of

the Share Purchase Agreement, whereupon, the respondent

No.1 invoked the Arbitration Clause in the Share Purchase

Agreement and filed the application being OMP(I) (Comm)

No.216/2016, against the appellants and the respondent No.2

under Section 9 of the 1996 Act, which has given rise to the

judgment and order under appeal.

=====================================================================. FAO(OS)(Comm). No.102/2016

6. On 27.05.2016, the learned Single Judge passed an interim

order in the said application restraining the appellants from

acting on any of the affirmative voting matters, without the

prior approval of the respondent No.1 and also from alienating,

encumbering or creating any third party rights in respect of the

assets of the appellant Company.

7. On 08.09.2016, the learned Single Bench passed an interim

order restraining the appellants from making any further

payments to its related parties.

8. The appellants raised an objection to the application of the

respondent on the ground that this High Court lacked territorial

jurisdiction to entertain and decide the same.

9. By the judgment and order impugned, the learned Single Bench

rejected the objection of the appellants to the jurisdiction of this

High Court to entertain the application, and granted interim

reliefs as prayed for therein.

=====================================================================. FAO(OS)(Comm). No.102/2016

10. Mr. P. Chidambaram, Senior Advocate appearing on behalf of

the petitioner submitted that this Court did not have territorial

jurisdiction to entertain the said application, which gave rise to

the judgment and order impugned.

11. Mr. Chidambaram rightly argued that an application under

Section 9 of the 1996 Act could only be entertained by the

Principal Civil Court of Original Jurisdiction and/or the High

Court in exercise of its Ordinary Original Civil Jurisdiction,

that had jurisdiction to decide the questions forming the subject

matter of the arbitration, as if the same had been the subject

matter of a suit, in view of the definition of Court in Section

2(1) (c) of the 1996 Act. This proposition is unexceptionable.

12. Mr. Chidambaram argued that the respondent No.1 was

claiming rights in immovable property. In support of such

submission Mr. Chidambaram referred to some of the pleadings

in the petition under Section 9, which are extracted

hereinbelow:-

=====================================================================. FAO(OS)(Comm). No.102/2016

(i) "The Petitioner states that the Respondent does not have any means or ability to repay the Petitioner except by sale and/or leveraging of the said Supreme Business Park. The Petitioner states that the said Share Purchase Agreement read with the R-Zone Term Sheet and the Investment Agreement creates a specific right, title and interest of the Petitioner in the said Supreme Business Park, which right, title and interest continues to subsist until the Respondents make the necessary payments as detailed hereinabove. ..." (Paragraph 9)

(ii) "In the light of the aforesaid, the Petitioner is constrained to file the present Section 9 petition, inter alia, to protect the right, title and interest of the Petitioner in the Supreme Business Park pending the outcome of the arbitration proceedings to be initiated between the parties as also to protect the affirmative voting rights of the Petitioner in this regard." (Paragraph 40)

(iii) "... pass an order of injunction restraining the Respondent... ,from alienating, encumbering or creating any third party rights in respect of any assets of the Respondent No.1 including but not limited to the Supreme Business Park and/or avail any new credit facilities from any lender by creating any rights over the Supreme Business Park..." (Paragraph 52b)

13. Mr. Chidambaram further argued that, in addition to the interest

in the immovable property situated in Mumbai, the Respondent

No.1 was claiming Affirmative Voting Rights as enshrined

under the Investment Agreement dated 13.02.2007.

14. In support of his submission, Mr. Chidambaram drew the

attention of the court to the following reliefs claimed by the

Respondent No.1, which he submitted, were of relevance: =====================================================================. FAO(OS)(Comm). No.102/2016

i. "...an order of injunction restraining the Respondent...to pass any board and/or shareholders resolution and/or act upon any matter set out in Clause 12.10. of the Investment Agreement including but not limited to matters referred in Clause 12.10.

(r), (v), (.iii) and (xxvi) of the Investment Agreement."

        ii.      "...an order of injunction restraining the
                Respondent          ...from       passing     any    Board

Resolution/Shareholder Resolution at any Board meeting, calling the Board of Directors/Shareholders of the Respondent No.1 without due notice to the Petitioner and without granting the Petitioner an opportunity to exercise its Affirmative Voting Rights."

15. Mr. Chidambaram argued that in either of the cases forming the

"subject matter of the arbitration", the appropriate court for

adjudication of the present dispute had to be the courts in

Mumbai, in view of the express jurisdiction clause in the

Investment Agreement.

16. Mr. Chidambaram further argued that the pleadings of the

Respondent No.1, the reliefs sought, a perusal of the Investment

Agreement, the Term Sheets and the Share Purchase Agreement

("SPA") reflect that the investments of the Respondent No. 1

were with a view to develop the Supreme Business Park

=====================================================================. FAO(OS)(Comm). No.102/2016

Property at Powai, Mumbai. The Delhi High Court did not

have the jurisdiction to entertain a dispute pertaining to land in

Mumbai.

17. In support of his argument, Mr. Chidambaram cited the

judgment of the Supreme Court in Sumer Builders Private

Limited v. Narendra Gorani reported at (2016) 2 SCC 582

(Paragraph 32) where the Hon'ble Court has been pleased to

hold as follows:

"32. The seminal issue is whether on the factual score which has been exposited, the application filed under Section 9 of the 1996 Act before the High Court of Bombay can be regarded as a money claim. On a studied scrutiny of the agreement and the MoU it is clear as day that the development agreement indubitably had created certain interests in the land in favour of the appellant. The assertions made in the application along with the relief clause when react in entirety and appreciated in a holistic manner, it becomes luminescent that the core dispute pertains to possession of the land, for the appellant claims to he in exclusive possession and the respondent, per contra, has asseverated that it had taken over possession. It can irrefragably be stated that any order passed under Section 9 of the 1996 Act will have the impact on the land. It is difficult to accede to the submission that it will not conceptually fall within the category of "suit for land" as engrafted under Clause 12 of the Letters Patent... Hence, the conclusion arrived at by the Division Bench on the basis of the scrutiny of documents that the dispute is embedded with regard to the possession of the land because the =====================================================================.

FAO(OS)(Comm). No.102/2016

fundamental claim pertains to certain constructed space on the land and, therefore, it would conceptually fall within the conception of "suit for land" appearing in Clause 12 of the Letters Patent is unexceptionable. Prayer (a) quoted above seeks restraint by a temporary order or injunction from entering upon the property. It is difficult to accept the submission that it is a money claim and, therefore, the Bombay High Court would also have the territorial jurisdiction and accordingly we unhesitatingly repel the same."

18. Mr. Chidambaram argued that the subject matter of the dispute

in this case, is the Supreme Business Park situated at Mumbai

as well as the Investor‟s claims to participate in the

development of the Residential Zone, if made available in

future. In view of the judgment of the Hon‟ble Supreme Court

in Sumer Builders (Supra), the appropriate court to adjudicate

the dispute is the principal Court in Mumbai, having original

jurisdiction.

19. Mr. Chidambaram submitted that the cause of action for

initiation of arbitral proceedings, therefore, falls within the

ambit of the principles enshrined in Section 16(d) of the Civil

Procedure Code. Mr. Chidambaram submitted that Section

16(d) of the Civil Proccedure Code applied when a suit was =====================================================================. FAO(OS)(Comm). No.102/2016

related to interest or right in an immovable property. In such

circumstances, a suit could only be filed before a Court having

territorial jurisdiction over the subject matter, that is, the

immovable property, irrespective of the fact that a part or

even the entire cause of action might have arisen outside the

jurisdiction of the court where the immovable property was

situated. In support of his submission, Mr. Chidambaram

cited the judgment of a Division Bench of this Hon'ble

Court dated 20.07.2007, in FAO(OS) No.4 of 1998,

Prakash Kaur v. K.G. Ringshia (Paragraph 10).

20. Mr. Chidambaram submitted that in this case the disputes raised

in the pleadings of the Respondent No.1 in the application

under Section 9 of the 1996 Act read with the reliefs claimed

therein touches upon the right, title and interest in immovable

property i.e. the Supreme Business Park situated at Mumbai.

Therefore, the principle enunciated in Section 16(d) of the

Civil Procedure Code would be applicable to the present

arbitration proceedings. In support of his submission, Mr. =====================================================================. FAO(OS)(Comm). No.102/2016

Chidambaram cited the judgment of the Federal Court in

Moolji Jaitha and Co. v. Khandesh Spinning and Weaving.

Mills Co. Ltd. reported in AIR 1950 FC 83 and the judgment of

the Supreme Court in Harshad Chima Lal Modi v. DLF

Universal Limited and another reported at (2005) 7SCC 791

(Paragraphs 15,16, 20, 21 and 26).

21. Mr. Chidambaram also cited the Judgment of the Calcutta High

Court in New Age Realty Pvt. Ltd Vs. Karthikeya Ancillaries

Pvt. Ltd. and another reported in AIR 2011 Calcutta 229

(Paragraph 7,8,12,21,22 and 25) where it was held that the High

Court at Calcutta could not entertain a Section 11 application as

the land forming subject matter of the Development Agreement

was situated at Coimbatore.

22. Mr. Chidambaram argued that the judgment of this Court in

Sumer Builders (Supra) encapsulates an exception to the

principle stated in the case of Bharat Aluminum Company

and others v. Kaiser Aluminum Technical Services Inc.

and others reported in 2012(9) SCC 552. Since the order =====================================================================. FAO(OS)(Comm). No.102/2016

passed by the Court under Section 9 has an impact on the

land situated in Mumbai, the appropriate Courts for

institution of this Section 9 application would be the

Courts in Mumbai.

23. Mr. Chidambaram submitted that even applying the principles

enunciated in the judgment of the Hon'ble Supreme Court in

Bharat Aluminium (Supra), the subject matter of the Section 9

application is the Investment Agreement dated 13.09.2007 as

the Respondent No.1 is claiming Affirmative Voting Rights

enshrined under Clause 12.10 of the Investment Agreement.

24. Mr. Chidambaram submitted that since the rights claimed and

the reliefs claimed by the Respondent No.1 in the application

under Section 9 of the 1996 Act, pertain to the Investment

Agreement, the Mumbai Courts alone would have the

jurisdiction to entertain the dispute, since Clause 18.1 of the

Investment Agreement, pertaining to dispute resolution

provides:-

=====================================================================. FAO(OS)(Comm). No.102/2016

"All arbitration proceedings shall be conducted in the English language and the place of arbitration shall be in Mumbai. ..."

25. Mr. Chidambaram also drew our attention to Clause 27 of the

Investment Agreement which provides:-

"This Agreement is governed by and shall be construed in accordance with Indian law. The courts in Mumbai shall have jurisdiction" (Page 217)

26. Mr. Chidambaram argued that the entire cause of action relating

to the present transaction had arisen at Mumbai since;

a. The Investment Agreement dated 13.02.2007 had been

executed in Mumbai;

b. The registered office of the Appellant No.1 was in Mumbai and

the business of the Appellants related to the development of an

IT Business Park in Mumbai;

c. The Appellant Nos. 2 and 3 and the Respondent No.2 are at

Mumbai;

=====================================================================. FAO(OS)(Comm). No.102/2016

d. The entire investment under the Investment Agreement was

advanced to the Appellant No.1 at Mumbai and all investor

funds were paid in Mumbai;

e. All the other agreements including the Term Sheet dated

15.1.2011 (Clause 6); Term Sheet dated 19.07.2013 (Clauses

12 and 13); R Zone Term Sheet (Clause 13) and the Draft of

the Share Purchase Agreement contain a jurisdiction clause

in terms whereof only Courts in Mumbai might exercise

jurisdiction and arbitration was to be held in Mumbai.

Mr. Chidambaram also argued that:

(i) Clause 5 of the Investment Agreement dated 13.02.2007

shows that the entire Investments were to be made for

development of the land in terms of the Development

Agreement and that the Investors would be required to

subscribe to the Securities in accordance with the funding set

out in the Development Agreement for development of the

FSI and the Future FSI.

=====================================================================. FAO(OS)(Comm). No.102/2016

(ii) Term Sheet dated 15.01.2007 pertains to the additional

Development Potential of the Property and the apportionment

of the FSI. The Plan annexed to the Term Sheet also reflects the

Proposed Residential-Zone Development Areas.

(iv) Term Sheet dated 19.07.2013 sets out tentative understanding

between the Appellants and the Respondent No.1 in relation to

the development of the Residential Zone summarizes revised

terms.

(v) While the Share Purchase Agreement is being canvassed as an

Agreement only for sale of Securities by the Investors the

same provides for the Investors participation in relation to the

Residential FSI and other connected matters; Clauses 3.2.1, 5

and 6).

In support of his submission that the Respondent No.1

was, in fact, seeking to invoke the Investment Agreement, Mr.

Chidambaram drew the attention of this Court to Clause

10.5.2 of the Share Purchase Agreement and submitted =====================================================================. FAO(OS)(Comm). No.102/2016

that the parties intended to modify the Affirmative

Voting Rights, as provided under Clause 12.10 of the

Investment Agreement and only the limited Affirmative

Voting Rights as contained in Clause 9 of the Share

Purchase Agreement continued to subsist. In any case, the

relief as claimed by the Respondent No.1 in the application

under Section 9 of the 1996 Act is in respect of the

Affirmative Voting Rights under clause 12.10 of the

Investment Agreement. The submission of the Respondent

No.1 that it is only seeking to invoke the Share Purchase

Agreement is therefore not correct.

27. Mr. Chidambaram finally submitted that consequences of

default, if any on the part of the Appellants and the remedies

available to the Respondent No.1 have been specifically

provided under Clause 10.2 of the Share Purchase

Agreement. The application under Section 9 of the 1996 Act

having been filed, without resorting to specific remedies

=====================================================================. FAO(OS)(Comm). No.102/2016

provided under the agreement, the application was liable to

be rejected.

28. Mr. Kathpalia appearing on behalf of the respondents submitted

that the contention of the appellants, that this High Court lacked

territorial jurisdiction to decide the dispute was contrary to the

clear provisions of the Share Purchase Agreement.

29. Mr. Kathpalia referred to Clause 18.1 of the Share Purchase

Agreement, which inter alia provides:-

"The parties shall submit all disputes, controversies or differences arising out of and in connection with this agreement to the exclusive jurisdiction of the Courts at Delhi."

30. Relying on the aforesaid provisions, Mr. Kathpalia submitted

that it was patently clear that Courts in Delhi had exclusive

jurisdiction under the Share Purchase Agreement. Mr.

Kathpalia argued that the Share Purchase Agreement had been

executed in Delhi. In terms of the said agreement, and in

particular Clause 18.4 thereof, the parties had agreed that the

place of arbitration would be Delhi. The non-judicial Stamp

=====================================================================. FAO(OS)(Comm). No.102/2016

Papers for the agreement were purchased in Delhi. The

appellant No.3 was a resident of Delhi. It was thus not correct

to contend that this Court lacked jurisdiction.

31. Mr. Kathpalia further argued that the subject matter of the

Share Purchase Agreement pertained to the sale of securities

held by the respondent No.1 to the appellants. Clause 2.2 of the

Share Purchase Agreement provides for the Schedule of

payments required to be made by the appellants to the

respondent No.1. Mr. Kathpalia argued that the Share Purchase

Agreement did not relate to immovable property. It rather

related to the sale and purchase of securities.

32. Mr. Kathpalia referred to Clause 2.2 of the Share Purchase

Agreement, set out hereinbelow for convenience.

2.2 The Parties have further agreed that the Investor will sell, and the Promoters will purchase, certain additional Investor Securities, in the following manner:

      Particulars Date of Purchase                   Consideration Amount

      3.             On or prior to April 30,        850,000,000
                           2015 ("SBP

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FAO(OS)(Comm). No.102/2016

                            Consideration Date
                           1")
      4.             On or prior to September       770,000,000
                           30, 2015
                     Total Amount Payable as        1,620,000,000("SBP
                           on September 30,               Consideration
                           2015                           Amount")"

33. Mr. Kathpalia also argued that in the application under Section

9 of the 1996 Acct, the respondent No.1 sought to secure the

share purchase consideration amount along with interest

thereon. There was no prayer for possession or title. All reliefs

sought were to ensure that the assets of the Company were not

decapitated to defeat the claims of the appellants.

34. Mr. Kathpalia next argued that the appellants were trying to

mislead this Court by emphasising on Clause 27 of the

Investment Agreement dated 13.02.2007. Mr. Kathpalia argued

that the claim of the appellants that the respondents had

invoked rights under the Investment Agreement was

misconceived and contrary to Clause 9.1 of the Share Purchase

=====================================================================. FAO(OS)(Comm). No.102/2016

Agreement, the relevant portion whereof is set out

hereinbelow:-

9.1. ... In view of the Investor having agreed to sell all its Investor Securities to the Promoter and/or its nominees, all the affirmative voting rights of the Investor under the Investment Agreements shall stand withdrawn and revoked, save and except as provide below, upon the successful Closing of SBP Consideration Amount, and thereafter the Investor shall have limited affirmative voting rights only on the matters stipulated hereinafter including those actions that may have any relation to the development of the R Zone (or PTC)."

Further, Clause 16.8 clearly provides as follows: "16.8 Entire Agreement: This Agreement constitutes the entire agreement between the Parties with respect to the subject matter herein, i.e. the sale and purchase of the Investor Securities, and the exit of the Investor from the Company on terms contemplated herein. ...

Provided however that the provisions of the Investment Agreements and/or the Development Agreements and/or the R Zone Term Sheets which are not contrary to the provisions of this Agreement, shall subsist and remain binding upon the Parties; until payment of SBP Consideration Amount; and (b) of the obligations, covenants, representations and warranties of each of the Promoters, the Owner and the Company under the Investment Agreements; the R Zone Term Sheets

=====================================================================. FAO(OS)(Comm). No.102/2016

and the Development Agreements respectively, shall continue to bind each of them."

35. Mr. Kathpalia argued that the Investment Agreement cannot be

relied upon to confer jurisdiction on the Court of Mumbai,

when it was clear from Clause 16.8 of the subsequent Share

Purchase Agreement that only terms, which were not contrary

to the provisions of the Share Purchase Agreement, would

subsist and remain binding upon the parties.

36. Mr. Kathpalia argued that a simple reading of the Share

Purchase Agreement clearly demonstrates that the jurisdiction

Clause in the Share Purchase Agreement overwrites all

conflicting clauses in other agreements.

37. Mr. Kathpalia submitted that the argument of the appellants that

the respondent No.1 was trying to enforce its rights in the land

at Supreme Business Park located in Bombay was without

merit. The application under Section 9 of the 1996 Act, sought

to secure amounts due to the respondent No.1 under the Share

Purchase Agreement.

=====================================================================. FAO(OS)(Comm). No.102/2016

38. Mr. Kathpalia submitted that the prayers for orders restraining

the respondents from alienating, encumbering or creating any

third party rights over any of the assets, including Supreme

Business Park was for the purpose of ensuring that the

respondent No.1‟s rights under the Share Purchase Agreement

did not stand defeated.

39. By the order impugned, the learned Single Bench rejected the

arguments of the appellants that this High Court lacked

territorial jurisdiction to entertain the application under Section

9 of the 1996 Act.

40. The learned Single Bench, in effect and substance, accepted,

and, in our view, rightly, the submission of the respondent,

being the applicants under Section 9 of the 1996 Acct, that the

application had been filed for securing the dues of the

respondent towards consideration for shares transferred by the

respondent No.1 in terms of the Share Purchase Agreement.

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41. Dealing with the objection of the appellants to the territorial

jurisdiction of the Delhi High Court, to entertain the application

under Section 9 of the 1996 Act, the learned Single Bench

referred to Clause 18 of the Share Purchase Agreement and in

particular Clause 18.1, which provided that the parties would

submit all disputes with regard to the Share Purchase

Agreement, to the exclusive jurisdiction of Courts in Delhi.

42. As argued by Mr.Kathpalia the Investment Agreement has been

superseded by the Share Purchase Agreement. However some

rights such as affirmative voting rights as provided in the

Investment Agreement are to continue till such time as

consideration as paid in terms of the Share Purchase

Agreement.

43. Some of the terms of the Investment Agreement have been

made part of the terms of the Share Purchase Agreement.

Exercise of affirmative voting rights until such time as

consideration for the shares is paid in full has been made a

condition of the Share Purchase Agreement, executed in Delhi =====================================================================. FAO(OS)(Comm). No.102/2016

and conferring exclusive jurisdiction on Courts in Delhi to

adjudicate disputes arising out of the said agreement.

44. It is well settled that when two or more Courts have territorial

jurisdiction to adjudicate a dispute, the parties may mutually

agree to submit their disputes to the jurisdiction of one or more

Courts to the exclusion of others. However, parties cannot by

consent confer jurisdiction on a Court, which inherently lacks

jurisdiction.

45. The question before this Court is, whether the proposed

arbitration proceedings are in pith and substance proceedings in

the nature of a money suit for realization of the consideration

due and payable to the respondent no.1 by the appellants for

transfer of the securities held by it in the appellant company, in

terms of the Share Purchase Agreement or whether the

proceedings were in the nature of a suit for land situate in

Mumbai. If the proceedings were in the nature of a suit for

land, only Courts within whose jurisdiction, the land is situate

would have jurisdiction to entertain the proceedings. The =====================================================================. FAO(OS)(Comm). No.102/2016

Courts in Delhi would then lack jurisdiction and the jurisdiction

clause in the Share Purchase Agreement would be

unenforceable.

46. In Adcon Electronics Pvt. Ltd. Vs. Daulat reported in (2001) 7

SCC 698, the Supreme Court held:

"15. From the above discussion it follows that a „suit for land‟ is a suit in which the relief claimed relates to title to or delivery of possession of land or immovable property. Whether a suit is a „suit for land‟ or not has to be determined on the averments in the plaint with reference to the reliefs claimed therein; where the relief relates to adjudication of title to land or immovable property or delivery of possession of the land or immovable property, it will be a „suit for land‟. We are in respectful agreement with the view expressed by Mahajan, J. in Moolji Jaitha case."

47. In M/s Moolji Jaitha & Co. Vs. The Khandesh Spinning and

Weaving Mills reported in AIR 1950, Federal Court 53,

Mahajan J observed:-

"...If an attempt is made to find a comprehensive definition of the phrase, it will eventually be discovered that it has created further complications. I therefore content myself by saying that where the nature of the suit is such that in substance it involves a controversy about =====================================================================.

FAO(OS)(Comm). No.102/2016

land or immovable property and the court is called upon to decide conflicting claims to such property and a decree or order is prayed for which will bring about a change in the title to it, that suit can be said to be in respect of land or immovable property; but where incidentally in a suit, the main purpose of which or the primary object of which is quite different, some relief has to be given about land, the title to it not being in dispute in the real sense of the term, then such a suit cannot fall within the four corners of this expression."

48. Some of the pleadings in the petition filed by the respondent

no.1, to which reference has been made, make it clear that the

proceedings are essentially for recovery of the consideration

payable to the respondent no.1 for securities transferred by the

respondent no.1 in terms of the Share Purchase Agreement.

49. The reliefs claimed in respect of Supreme Business Park in

Mumbai are incidental to the main relief of recovery of

consideration for transfer of securities in terms of the Share

Purchase Agreement. In the absence of any interim order, any

money award made and published by the Arbitral Tribunal

would remain a paper award impossible to execute.

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50. As observed by Majahan, J in Moolji Jaitha (supra):-

"...In my opinion, if the suit is for specific performance and a decree for possession of the land sold is claimed, such a suit would certainly be a suit for land; but if the suit is simpliciter for specific performance, i.e., for the enforcement of the contract of sale and for execution of a conveyance, in that event there can be no good ground for holding that such a suit is a suit for determination of title to land or that the decree in it would operate on the land."

51. The law which emerges from the judgments referred to above is

that when the primary object of the suit is different, some relief

in respect of land would not bring the suit within the four

corners of the expression suit for land. In this case the primary

object of the Section 9 application is to secure consideration

payable to the respondent under the Share Purchase Agreement

for transfer of shares and to enforce certain rights conferred on

the respondent by the Share Purchase Agreement, which

continues the application of certain provisions of the

Investment Agreement till full payment of the consideration for

sale of shares.

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52. The suit is essentially for enforcement of the Share Purchase

Agreement, under which the parties have agreed to submit to

the jurisdiction of Courts in Delhi. It cannot also be said that

no part of the cause of action arose in Delhi within the Original

Side jurisdiction of the Court, since the agreement was

executed in Delhi within the jurisdiction of this High Court.

53. The judgments of the Supreme Court in Sumer Builders Pvt.

Ltd. Vs. Narendra Gorani reported in (2016) 2 SCC 582 and the

judgment of Calcutta High Court in Debendra Nath

Chowdhury Vs. Southern Bank Ltd. reported in 1960 SCC Cal

109 are distinguishable on facts since disputes arose out of a

development agreement requiring adjudication of disputes

regarding proportional allocation, of immovable property,

possession title, in relation to immovable property extent and

quality of construction on land.

54. The learned Single Bench also noticed, and very rightly, that

the seat of arbitration was in Delhi. In Bharat Aluminium

Company and Ors. (supra) the Supreme Court held: - =====================================================================. FAO(OS)(Comm). No.102/2016

"We are of the opinion, the term "subject matter of the arbitration" cannot be confused with "subject matter of the suit". The term "subject matter" in Section 2(1)(e) is confined to Part I. It has a reference and connection with the process of dispute resolution. Its purpose is to identify the courts having supervisory control over the arbitration proceedings. Hence, it refers to a court which would essentially be a court of the seat of the arbitration process. In our opinion, the provision in Section 2(1)(e) has to be construed keeping in view the provisions in Section 20 which give recognition to party autonomy. Accepting the narrow construction as projected by the learned counsel for the appellants would, in fact, render Section 20 nugatory. In our view, the legislature has intentionally given jurisdiction to two courts i.e. the court which would have jurisdiction where the cause of action is located and the courts where the arbitration takes place. This was necessary as on many occasions the agreement may provide for a seat of arbitration at a place which would be neutral to both the parties. Therefore, the courts where the arbitration takes place would be required to exercise supervisory control over the arbitral process. For example, if the arbitration is held in Delhi, where neither of the parties are from Delhi, (Delhi having been chosen as a neutral place as between a party from Mumbai and the other from Kolkata) and the tribunal sitting in Delhi passes an interim order under Section 17 of the Arbitration Act, O.M.P.(I) 1996, the appeal against such an interim order under Section 37 must lie to the Courts of Delhi being the Courts having supervisory jurisdiction over the arbitration proceedings and the tribunal. This would be irrespective of the fact that the obligations to be =====================================================================. FAO(OS)(Comm). No.102/2016

performed under the contract were to be performed either at Mumbai or at Kolkata, and only arbitration is to take place in Delhi. In such circumstances, both the Courts would have jurisdiction, i.e., the Court within whose jurisdiction the subject matter of the suit is situated and the courts within the jurisdiction of which the dispute resolution, i.e., arbitration is located."

55. As observed by the learned Single Bench, the aforesaid

judgment has been followed by a Division Bench of this Court

in Ion Echange (India) Ltd. Vs. Panasonic Elecctric Works

Co. Ltd. Reported in 208 (2014) DLT 597 (DB). Relying on

the aforesaid judgments, the learned Single Bench rightly found

that the objection of the appellants to the maintainability of the

Section 9 application, in this High Court, bereft of any merit.

56. The rights of the respondent under the Investment Agreement

stood altered and modified by the Share Purchase Agreement.

The right of the respondent under the Investment Agreement is

to stand revoked and withdrawn upon closing of the

consideration amount under the Share Purchase Agreement.