Karnataka High Court
Sri. Sharada Vidyaniketan vs Thubarahalli Foundation Trust on 20 June, 2025
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MFA No. 6325 of 2023
HC-KAR
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 20TH DAY OF JUNE, 2025
BEFORE
THE HON'BLE MR JUSTICE C.M. POONACHA
MISCELLANEOUS FIRST APPEAL NO. 6325 OF 2023 (AA)
BETWEEN:
1. SRI. SHARADA VIDYANIKETAN
A SOCIETY REGISTERED UNDER
THE KARNATAKA SOCIETIES ACT,
HAVING OFFICE AT
NO 102, KRISHNA PRASAD APARTMENT,
DATTATREYA TEMPLE ROAD
MALLESWARAM,
BENGALURU 560003
REP BY ITS SECRETARY,
SRI Y N SHARMA
2. SRI Y N SHARMA
S/O LATE H A SHARMA
AGED ABOUT 55 YEARS,
SECRETARY OF SRI SHARADA VIDYANIKETAN,
NO. 102, KRISHNA PRASAD APARTMENT,
DATTATREYA TEMPLE ROAD
Digitally MALLESWARAM,
signed by BENGALURU 560003
NIRMALA
DEVI 3. SRI DHANAJAYA G
Location: S/O GANGADHARAIAH
HIGH COURT AGED ABOUT 45 YEARS,
OF JOINT SECRETARY OF SRI
KARNATAKA SHARADA VIDYANIKETAN,
NO 102, KRISHNA PRASAD APARTMENT,
DATTATREYA TEMPLE ROAD
MALLESWARAM,
BENGALURU 560003
4. SRI H B SRINIVAS
S/O BASAVARAJU,
AGED ABOUT 35 YEARS,
R/A NO 53, T HOSAHALLI,
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MFA No. 6325 of 2023
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KASABA HOBLI, KUNIGAL TALUK,
TUMAKURU DISTRICT
...APPELLANTS
(BY SRI. UDAYA HOLLA, SENIOR COUNSEL FOR
SRI. T SUNIL S RAO, ADVOCATE)
AND:
THUBARAHALLI FOUNDATION TRUST
REGISTERED UNDER THE INDIAN TRUST ACT,
HAVING OFFICE AT NO. 3 AND 4,
GIDDENS LAYOUT, WHITEFIELD,
BENGALURU 560066
REPRESENTED BY ITS CHAIRMAN
MR L R SHIVARAMEGOWDA,
AGED ABOUT 65 YEARS,
S/O LATE RAMEGOWDA
...RESPONDENT
(BY SRI. Y R SADASHIVA REDDY, SENIOR COUNSEL FOR
SRI. MURALI D, ADVOCATE)
THIS MFA IS FILED U/S.37(1)(b) OF THE ARBITRATION AND
CONCILIATION ACT, 1996, PRAYING TO SET ASIDE THE ORDER
DT.22.11.2022 PASSED IN A.A.NO.42/2022 ON THE FILE OF THE
LXIX ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, BENGLAURU
CITY, (CCH-70), APPLICATION FILED BY THE RESPONDENT U/O.39
RULES 1 AND 2 OF CPC, VIDE ANNEXURE-B AND ETC.
THIS APPEAL, COMING ON FOR ADMISSION, THIS DAY,
JUDGMENT WAS DELIVERED THEREIN AS UNDER:
CORAM: HON'BLE MR JUSTICE C.M. POONACHA
ORAL JUDGMENT
The present petition is filed under Section 37(1)(b) of the
Arbitration and Conciliation Act, 19961 calling in question the
Hereinafter referred to as 'Act of 1996'
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order dated 22.11.2022 passed in AA No.42/2022 by the CCH
70 LXIX Additional City Civil and Sessions Judge, Bengaluru2.
2. The relevant factual matrix in a nutshell, leading to
the present appeal is that the appellant is an institution, which
has been allotted a property, by the Government of Karnataka
vide registered Lease Deed dated 08.07.2004, wherein it had
constructed a building. The appellants being desirous of
starting an educational institution and having obtained
affiliation from the requisite statutory authorities, entered into
a Memorandum of Fee Sharing Agreement3 dated 06.03.2017
with the respondents, whereunder the respondent had paid a
sum of `1.00 crore and was required to make further periodic
payments. The respondent was permitted to use the property
of the appellants for the purpose of running an educational
institution.
3. Various disputes arose between the parties
culminating in the appellants instituting AA No.103/2020 before
the Trial Court under Section 9 of the Act of 1996. Thereafter,
the appellants also instituted CMP No.180/2021 before this
Hereinafter referred to as 'Trial Court'
Hereinafter referred to as 'MOU'
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Court under Section 11 (5) of the Act of 1996 for appointment
of an Arbitrator. This Court vide order dated 21.06.2021
allowed the said CMP and appointed an Arbitrator. Thereafter,
the appellants filed IA.No.1/2024 in CMP No.180/2021 for
appointment of a Substitute Arbitrator. This Court noticing that
in the communication dated 22.08.2023 made by the
Arbitration and Conciliation Centre, Bengaluru4, the file was
treated as closed because the appellants did not file statement
of claim and that the Arbitrator appointed was omitted from the
panel of Arbitrators, vide order dated 22.07.2024 refused to
appoint a Substitute Arbitrator and disposed of the said
application. Thereafter, the respondent instituted AA
No.42/2022 before the Trial Court under Section 9 of the Act of
1996. The Trial Court by its order dated 22.11.2022, has
disposed of the application and passed the following order:
"ORDER
The respondents are hereby directed not to
interfere in the suit schedules premises unless the
order in AA No.103/2020 is passed concerning the
relief of injunction sought in this case on merits.
Case disposed accordingly.
Hereinafter referred to as 'Centre'
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Further the respondents are directed to act
in accordance with the Arbitration Tribunal orders
if any instituted as per the agreement between
the parties in an arbitration proceedings."
4. Being aggrieved, the present appeal is filed.
5. The respondent in the present appeal was served
through paper publication and IA.No.1/2023 for condonation of
delay was allowed vide order dated 15.04.2025. Thereafter,
this Court vide order dated 16.04.2025 allowed IA No.2/2023
and granted stay of the order dated 22.11.2022 passed in AA
No.42/2022. The respondent has filed IA No.2/2025 seeking for
vacating of the said order of stay.
6. At this stage, the arguments of both the learned
counsel were heard on the merits of the appeal.
7. Learned Senior counsel, Sri Udaya Holla, appearing
along learned counsel Sri Sunil S.Rao, for the appellants would
contend that pursuant to the order dated 22.11.2022 which is
impugned in the present appeal, the respondent not having
instituted any arbitration proceedings or given any notice of
arbitration, the said order does not in any manner subsist after
3 months of its passing. That as per Section 9(2) of the Act of
1996 and Rule 9(4) of the High Court of Karnataka Arbitration
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(Proceedings before the Courts) Rules, 20015 the respondent
was required to initiate arbitral proceedings within 3 months,
which admittedly not having been done, the impugned order is
required to be set aside. It is further contended that the MOU
entered into between the parties is null and void since as
required under Section 107(1) and (4) of the Karnataka
Education Act, 19836, the same was required to be intimated to
the requisite statutory authorities. Hence, he seeks for allowing
of the above appeal and granting of the reliefs sought for.
8. Per contra, learned Senior counsel Sri Sadashiva
Reddy appearing along with learned counsel Sri Murali D for the
respondent would contend that in the present appeal, the
appellants have deliberately given the address of the old
Trustee of the respondent and hence the respondent was not
served with the notice of the present appeal. That consequent
to the interim order dated 16.04.2025 granted by this Court,
when the appellants interfered with the functioning of the
educational institution of the respondent, the respondent
became aware of the present proceedings and the interim order
granted by this Court and hence, the application for vacating of
Hereinafter referred to as 'Rules of 2001'
Hereinafter referred to as 'Education Act'
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the interim order was filed. It is further contend that
admittedly, pursuant to the execution of the MOU, the
respondent has been running the educational institution in the
property belonging to the appellants and the appellants have
not averred the date from which the possession of the
institution has been resumed by the appellants and hence by
misusing the interim order of this Court, the smooth functioning
of the educational institution by the respondent is being
disturbed by the appellants. That although the appellants had
filed CMP No.180/2021, the appellants had not filed a claim
petition in the said proceedings, the arbitration proceedings
were closed. That the arbitration proceedings having been
initiated prior to the filing of CMP No.180/2021, the question of
initiating arbitration proceedings once again would not arise.
Hence, he seeks for dismissal of the above appeal.
9. After the submissions of both the learned counsels
had concluded, upon a query by this Court as to whether both
the parties would be agreeable for the appointment of an
Arbitrator, the appellants and respondent have filed memos
dated 20.6.2025 in that regard.
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10. The submissions of both the learned counsels have
been considered and the material on record has been perused.
The question that arises for consideration is, whether the order
dated 22.11.2022 passed by the Trial Court is liable to be set
aside?
11. Having regard to the primary contention put forth
on behalf of the appellants that the respondent has not
complied with Section 9(2) of the Act of 1996 and Rule 9(4) of
the Rules of 2001, it is pertinent to notice the said relevant
provisions.
12. Section 9(2) of the Act of 1996 states as follows:
"9. Interim measures, etc., by Court.--
(2) Where, before the commencement of the arbitral
proceedings, a Court passes an order for any interim
measure of protection under sub-section (1), the arbitral
proceedings shall be commenced within a period of
ninety days from the date of such order or within such
further time as the Court may determine."
(emphasis supplied)
12.1 Rule 9(4) of the Rules states as follows:
"Rule 9: Application for interim measure, etc.:
(4) In the case of an Application for interim measure
made before initiating arbitral proceedings, if the arbitral
proceedings are not initiated within three months from
the date of the presentation of the Application under
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section 9, any interim order granted shall stand vacated
without any specific order being passed by the Court to
that effect."
(emphasis supplied)
13. It is clear from a plain reading of Section 9(2) that
the arbitral proceedings is to be commenced within a period of
90 days from the date of an order passed under Section 9 or
within such time as the Court may determine. It is forthcoming
from a reading of Rule 9(4) that if the arbitral proceedings are
not initiated within 3 months from the date of presentation of
the application under Section 9, any interim order granted shall
stand vacated without any specific order being passed by the
Court to that effect.
14. In the case of Sundaram Finance Ltd., v. NEPC
India Ltd.,7 relied upon by the appellants, the Hon'ble
Supreme Court, considering Section 9 of the Act of 1996 held
as follows:
19. "................. Once it is so satisfied, the court will
have the jurisdiction to pass orders under Section 9
giving such interim protection as the facts and
circumstances warrant. While passing such an order and
in order to ensure that effective steps are taken to
commence the arbitral proceedings, the court while
exercising jurisdiction under Section 9 can pass a
conditional order to put the applicant to such terms as it
(1999) 2 SCC 479
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may deem fit with a view to see that effective steps are
taken by the applicant for commencing the arbitral
proceedings. What is apparent, however, is that the
court is not debarred from dealing with an application
under Section 9 merely because no notice has been
issued under Section 21 of the 1996 Act."
(emphasis supplied)
15. A Division Bench of this Court in the case M/s
Paton Constructions Pvt.Ltd., v. M/s. Lorven Projects
Ltd., & Anr.,8, while considering Rule 9(4) of the Rules of 2001
and Section 9(2) of the Act of 1996 held as follows:
"3. In this case, the application under Section 9 of the
Act was presented on 13.11.2013. It is stated by
Learned Counsel for the appellant that the arbitral
proceedings in respect of the dispute were not initiated
within three months from 13.11.2013, the date of
presentation of the application. Hence, in our opinion,
the Order dated 21.12.2013 granting the interim
measure, which is impugned in this appeal, stood
automatically vacated on the expiry of three months
from the date of presentation of the application.
Therefore, no further order to set it aside is necessary.
4. ........... As per the above sub-Section, where a
Court passes an order for any interim measure under
Section 9(1) of the Act before commencement of the
arbitral proceedings, the arbitral proceedings shall be
commenced within the period stated in the sub-Section.
Commencement of the arbitral proceedings within the
period stated in Section 9(2) of the Act is made
mandatory by Parliament. The intention of Parliament in
making commencement of the arbitral proceedings
within the period stated in sub-Section (2) mandatory is
to see that an order for any interim measure passed
under Section 9(1) shall not continue to be in force
ILR 2017 KAR 3016
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indefinitely in the absence of the arbitral proceedings.
Therefore, commencement of the arbitral proceedings
within the period stated in sub-Section (2) is a
requirement for the legal effectiveness of the order
passed for any interim measure under Section 9(1)
of the Act. Hence, if the arbitral proceedings in respect
of the dispute are not commenced within the period
stated in Section 9(2) of the Act, the order granting
any interim measure under Section 9(1) of the Act shall
automatically stand vacated on the expiry of the said
period. Though this is not expressly stated in the sub-
Section, it is clearly implied in the purpose of the
mandate of the sub-Section. Any other interpretation of
sub-Section (2) will defeat the intention of Parliament in
making commencement of the arbitral proceedings
within the period stated in the sub-Section mandatory.
5. As stated above, the order which is impugned
herein, stood automatically vacated on the expiry of
three months from 13.11.2013, the date of presentation
of the application under Section 9 of the Act in view of
Rule 9(4) of the Rules. Hence, no further order to set it
aside is necessary.
Appeal disposed of."
(emphasis supplied)
16. The judgment of the Division Bench of this Court in
the case of M/s Paton Constructions Pvt.Ltd.,8 has also
been followed by another Division Bench of this Court in the
case of Sri M.Rajesh v. M/s Metro Cash and Carry9.
17. It is clear from the dicta as laid down by the
Hon'ble Supreme Court and the Division Bench of this Court as
noticed above that the applicant in the proceedings under
Section 9 of the Act of 1996 is required to initiate arbitration
Judgment dated 14.7.2021 passed in MFA No.7207/2017
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proceedings within the time as stipulated under Section 9(2) of
the Act of 1996 and Rule 9(4) of the Rules of 2001 and if such
arbitration proceedings are not initiated, the order passed in
the proceedings under Section 9 of the Act of 1996 would
automatically stand vacated on the expiry of 3 months.
18. In the present case, admittedly, CMP No.180/2021
has been instituted by the appellants. However, despite the
arbitral tribunal having been constituted, no arbitration
proceedings have taken place. It is forthcoming from the
records that pursuant to the respondent having filed AA
No.42/2022, neither has notice been issued by the respondent
nor has effective steps been taken in order to commence the
arbitral proceedings.
19. At this juncture, it is relevant to note that the MOU
between the parties is admitted. Various disputes have arisen
between the parties pertaining to the terms of the MOU. The
appellants having instituted AA No.103/2020 and CMP
No.180/2021 and the respondent having instituted AA
No.42/2022, it is clear that both the parties would admit the
arbitration clause stipulated in the MOA. Further, vide the
memos dated 20.6.2025 filed by the appellants and the
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respondent, both the parties have no objection for the
commencement of the arbitral proceedings.
20. It is pertinent to note here that in the memo dated
20.6.2025 the appellants have placed on record that they
should be allowed to continue the management of the
educational institution as it has been doing so. Learned counsel
for the respondent opposes the same on the ground that
consent is given by the respondent only for the commencement
of arbitral proceedings.
21. It is pertinent to place on record the unfortunate
situation wherein various civil and criminal proceedings have
been initiated between the parties with respect to the
functioning of an educational institution. In this context, it is
deemed necessary for this Court to also pass orders with
regard to the commencement of the arbitration proceedings
since despite institution of CMP No.180/2021 and orders being
passed in that regard, the arbitral proceedings have not
commenced.
22. In view of the aforementioned, following the dicta
as laid down by the Division Bench of this Court in the case of
M/s Paton Constructions Pvt.Ltd.,8, it is held that the
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interim order dated 22.11.2022 passed in AA No.42/2022
automatically stood vacated on the expiry of 3 months from
22.11.2022. Accordingly, the question is answered partly in the
affirmative.
23. Having regard to the fact that both the parties have
consented for commencement of arbitration proceedings, both
the parties shall appear before the Director, Arbitration and
Conciliation Centre, Bangalore on 26.06.2025 at 3.00 pm.
24. Pursuant to the appearance of the parties, the
Director of the Centre, shall initiate proceedings for
appointment of an Arbitrator as contemplated under the
Arbitration and Conciliation Centre Rules, 2012.
25. It is open to both the parties to arrive at a
consensus as to an Arbitrator to be appointed and intimate the
same to the Director of the Centre on the date of their
appearance.
26. Both the parties shall be at liberty to file
appropriate interim applications in the arbitral proceedings.
This order shall not debar the parties from making an
application seeking appropriate interim orders, if the need
arises.
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27. Having regard to the fact that the above appeal has
been disposed of holding that the order dated 22.11.2022
passed in AA No.42/2022 has automatically stood vacated
having regard to the mandate as contemplated under Section
9(2) of the Act of 1996 and Rule 9(4) of the Rules of 2001, the
contentions of the parties on merits have not been considered
and no finding with regard to the same has been recorded.
28. Accordingly, the above appeal is disposed of. All
contentions of the parties on the merits of the matter are kept
open.
Sd/-
(C.M. POONACHA)
JUDGE
ND
