Madras High Court
M/S.Shri Chennai Mines vs M.Durai on 1 November, 2021
Arb.O.P. No. 200 of 2021
and
O.A.Nos.591 to 593 of 2021
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated: 01.11.2021
CORAM
THE HONOURABLE MR.JUSTICE N. SATHISH KUMAR
Arb.O.P. No. 200 of 2021
and
O.A.Nos.591 to 593 of 2021
M/s.Shri Chennai Mines,
Represented by its partner,
Mr.P.Subramani,
No.5, Ramesh Nagar,
West Tambaram,
Chennai - 600045. . . . Petitioner
Versus
1.M.Durai,
2.D.Kaliammal,
3.R.Krishnswamy,
4.Kaarthi C.N.
5.Nandhini,
6.V.Vijayakumar
7.Chitra . . . Respondents
PRAYER: Petition filed under Section 11(5) of Arbitration and Conciliation
Act, to appoint a Arbitrator to decide the disputes and differences between the
Petitioner and Respondent in terms of the Memorandum of Understanding cum
Agreement dated 02.04.2014.
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For Petitioner : Mr.AR.L.Sundaresan
Senior Counsel
for Mrs. Revathi Manivannan
For Respondents : Mr.V.Raghavachari
for R1 and R2
: Mr.S.G.Ramesh Kumar
for R3 to R7
-----
ORDER
This Arbitration Original Petition has been filed to appoint Arbitrator to
decide the disputes and differences between the Petitioner and Respondent in
terms of the Memorandum of Understanding cum Agreement dated 02.04.2014.
2. O.A.Nos.591 to 593 of 2021 have been filed to grant interim
injunction restraining the respondents, their men, agents or any person claiming
through them or under them from in any manner, from carrying on any business
activity in the schedule property which would undermine the value of the
schedule property morefully described in the schedule to the Judges summons
pending disposal of the arbitration proceedings.
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3. It is the case of the petitioner that by Memorandum of Understanding
cum Agreement, dated 02.04.2014, respondents 1 and 2 had agreed to sell the
property for a total sale consideration of Rs.6,30,00,000/-. The respondents 1
and 2 received a sum of Rs.2,40,00,000/- towards the sale consideration. As
there was a suit in O.S.No.114 of 2014 is pending, further four months time
was sought by the respondents, to convey a clear title and execute a sale deed.
Even after the expiry of four months, the respondents do not come forward to
complete the sale and conveyance.
4. When the matter stood thus, during 2017, first and second
respondents have approached the petitioner and sought for further payment of
Rs.40,00,000/-. Accordingly, the petitioner had paid the abovesaid sum on
07.06.2017 and 17.02.2018. Eventhough the petitioner was ready and
willing to pay the balance sum of Rs.3,50,000/-, the respondents 1 and 2 were
delaying the execution of sale deed on one pretext or another.
5. O.S.No114 of 2014 was filed for recovery of money in the above suit.
The respondents 1 and 2 had filed an application under Section 8 of the
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Arbitration Conciliation Act, for referring the dispute to the arbitration, as the
petitioner has came to know that the respondents 3 to 7 had purchased the
property in collusion with the respondents 1 and 2. Under such circumstances,
the petitioner has filed the instant Arbitration Original Petition, praying for the
relief as stated therein.
6. Heard Mr.AR.L.Sundaresan, learned Senior Counsel for the petitioner
and Mr.V.Raghavachari, learned Senior counsel for the respondents 1 and 2.
7. Mr.S.G.Ramesh Kumar, learned counsel takes notice for the
respondents 3 to 7.
8. Despite service of notice to the respondents, none appeared. Hence,
vide, order, dated 8/10/2021, this Court has passed an interim order.
9. Mr.V.Raghavachari, learned counsel appearing for the respondents 1
and 2 submitted that the application is not maintainable as the petitioner has not
proved that the partnership is a registered one. Immovable property situates
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within the jurisdiction of the District Court, Krishnagiri. Therefore, as per
Section 2 (e) of the Arbitration Conciliation Act, 1996, Application under
Section 9 of the Act, ought to have been filed only before the District Court
Krishnagiri.
10. The learned Senior Counsel further submitted that the petitioner
carried out the quarrying operation to an extent of 35,994 metric tonnes of rock,
without any permission, which resulted in imposing a penalty to the tune of
Rs.2,59,12,800/-, vide Proceedings dated 23/10/2014, by the District Collector,
Krishnagiri. When the same issue was brought to the notice of the agreement
holder, instead of paying the amount, he has given up the contract and has filed
the suit for recovery of advance money before the Additional District Court,
Hosur in O.S.No.15 of 2021. Therefore, it is his contention that when the
enforcement of the contract for specific performance itself has given up and the
suit has been filed for recovery of money alone, interim order could not have
been granted, whatsoever claimed against the third party who purchased the
property for valuable consideration.
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11. The learned Senior Counsel further submitted that the petitioner has
claimed 12% of interest as damages in the above suit. Hence, it is the
contention that once the suit is filed for mere recovery of money and damages,
no injunction can be granted.
12. The learned Senior counsel further submitted that as far as
appointment of arbitrator is concerned, he has no objection, since, they had
already filed an application under Section 8 of the Act.
13. Mr.Ramesh Kumar, learned counsel appearing for the respondents 3
to 7 submitted that the instant petition cannot be referred to the arbitrator
because the respondents 3 to 7 were not parties to the contract.
14 . Where as the learned Senior counsel appearing for the petitioner
submitted that as far as the injunction is concerned, cause of action arose within
the jurisdiction of this Court and substantial portion of the amount has been
paid within the jurisdiction of this Court. Hence, this Court has a jurisdiction
to entertain the application under Section 9 of the Act.
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15. It is his further contention that even the 3rd parties who were not
signatories to the agreement can be referred to the arbitration and interim
injunction can be granted against the 3rd parties with whom the property vest, in
order to preserve the property and secure the money payable to the petitioner.
Merely because the suit is filed, it cannot be said that the arbitration is not
maintainable.
16. It is his further contention that there is no bar under law to seek the
relief of specific performance by way of amendment. Therefore, the third party
who has purchased the property during the existence of agreement also to be
referred for arbitration. He has submitted that the Court can grant interim relief
under Section 9 of the Act, even against the third party with whom the property
vest which are the subject matter of the agreement.
17. By referring to a judgment of the Hon'ble Division Bench, in 2013
(4) CTC 154 EMBASSY PROPERTY DEVELOPMENTS LIMITED Vs.
JUMBO WORLD HOLDINGS LIMITED, learned Senior Counsel appearing
for the petitioner submitted that Section 9 of the Arbitration and Conciliation
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Act, is enacted only with the intention of preserving and protecting the subject
matter of Arbitral proceedings, even if it is in the hands of third parties. Hence
interim relief could be granted even against the third parties.
18. The learned Senior Counsel also submitted that as the properties
were purchased during the existence of agreement as the respondents 1 and 2
have filed an application under Section 8 of the Act to refer the dispute. There
is no legal bar for seeking specific performance before the Arbitrator.
Therefore, at this stage, the respondents 3 to 7 are necessary parties to prove
whether they are bonafide purchasers or not. Therefore, they are also a
necessary party to the arbitration. Hence they can also be referred to the
arbitration.
19. Now, it is the specific contention of the learned Senior Counsel
appearing for the respondents 1 and 2 that the suit has already been filed for
recovery of money before the Additional District Court, Krishnagiri.
Therefore, once the right of enforcement of the contract has given and specific
performance has not sought by the petitioner, there cannot be any injunction
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against the third party who had already purchased the property for valuable
consideration.
20. Admittedly, the respondents 3 to 7 are not a party to the agreement.
The contract was entered between the petitioner herein and the respondents 1
and 2 on 2/4/2014 for sale of the properties for a total sale consideration of
Rs.6 crores. Though it is stated by the petitioner that they had paid a sum of
Rs.2,18,00,000/-, the respondents 1 and 2 have disputed certain payments and
endorsement available on record are also disputed by them.
21. Be that as it may. There is a contract between the parties to refer the
dispute to the arbitration. Nine months time is granted originally. However,
the contract has not been performed before the said period. In the meanwhile,
heavy penalty has been imposed by the District Collector, Krishnagiri, as
against the respondents 1 and 2 for carrying out the quarrying in the property
and a sum of Rs.2,59,12,800/- was imposed as penalty. This actually triggered
the actual dispute.
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22. The agreement itself clearly shows that the possession was handed
over on the date of agreement to the purchaser. However, the penalty has been
imposed on the owner of the properties by the District Collector. Now the
contract though provides for reference to the arbitration in respect of any
dispute, the respondents 3 to 7 were not a party to the agreement. They have
purchased the property at a later point of time. The parties have agreed to sell
the property within a period of nine months and extended mutually for a further
time. The applicant has filed the suit only in the year 2021 in O.S.No.15 of
2021 on the file of the Principal District Court, Krishnagiri and transferred to
the First Additional District Court, Hosur for recovery of advance amount of
Rs.2,80,00,000/- and interest at the rate of 12% as damages. Despite knowing
that the respondents 1 and 2 are making an attempt to sell the property, the
petitioner has given up the right to enforce the contract. The filing of the suit in
the year 2021 after much delay and giving up the relief of specific performance
itself indicate that they are not interested in pursuing the agreement for
enforcement of the contract. In the meanwhile, property is already transferred
to the third party.
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23. Only when the suit for enforcement of the contract is filed, the
subsequent purchasers are required to be made as parties to find out whether
they are the bonafide purchaser or not. When the contract itself is not enforced
and mere suit for recovery of money alone is filed, whether the subsequent
purchaser is a bonafide party or not is not at all relevant. Therefore, when the
suit itself is filed for recovery of money merely because an application has been
filed under Section 8 of the Act by the respondents 1 and 2, the same cannot be
taken advantage by the petitioner, to refer the entire dispute for arbitration so
that they include the claim of specific performance. Such claim in fact is barred
under law. Therefore, this Court is of the view that when the respondents 3 to
7 are not a party to the agreement and the contract itself is not sought to be
enforced against them at the first instance, now they cannot be directed to go
for arbitration.
24. The main issue revolving around between the petitioner and the
respondents 1 and 2 relate to the money claim. When such being a position,
this Court is of the view that for arbitral proceedings, respondent Nos.3 to 7 are
not at all necessary parties. Though much has been argued, relying on the
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judgment of the Hon'ble Division Bench of this Court, in 2013 4 CTC – 134, to
contend that interim order can be passed against the third party with whom the
property vest which is the subject matter of the agreement, this Court has
granted interim order under Section 9 of the Act to the third party with whom
the property vest in relation to the agreement. This Court also held that there
must be a nexus between the said persons and between vendors, to grant any
relief against third party who are not a party to the contract. Admittedly, in
this case, no materials are available to show that there is a nexus between the
purchaser, viz, the respondents 3 to 7 and the parties herein. When such being
a position, this Court is of the view that the respondents 3 to 7 cannot be
referred to the arbitration when they are not signatory to the agreement. There
is no agreement between the parties. It is for the petitioner to work out his
remedy separately. In fact, the plea of specific performance is also not been
sought for by them at the first instance. Therefore, it is only a futile exercise to
refer the parties who purchased the property who are also not parties to the
contract.
25. As far as the appointment of arbitrator is concerned, as there is no
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dispute between the parties viz., the petitioner and respondents 1 and 2, this
Court is inclined to appoint Mr.Justice N.Kirubakaran, Former Judge of Madras
High Court, as an Arbitrator, to enter into reference.
26. Accordingly,
i) Mr.N.Kirubakaran, Former Judge of Madras High
Court, NB 2 Greenways Road, Raja Annamalaipuram,
Chennai 600 028. (Mobile No.9445025454) is appointed
as a Sole Arbitrator to enter upon reference and adjudicate
the matter.
ii). Learned Arbitrator appointed herein, shall after
issuing notice to the parties and upon hearing them, pass
an award as expeditiously as possible, preferably within a
period of six months from the date of receipt of the Order.
iii). Learned Sole Arbitrator appointed herein shall
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be paid fees and other incidental charges, fixed by him and
the same shall be borne by the parties equally.
27. As far as interim order is concerned, it is to be noted that copy of the
plaint filed before this Court would indicate that the suit for recovery of money
alone is sought and interest of 12% is claimed as damages. When the damage
is already claimed and recovery of money is also claimed, this Court is inclined
to hold that the injunction cannot be granted against the third parties who have
purchased the property.
28. It is also to be noted that admittedly, possession of the property as
per the contract was taken by the petitioner in the year 2014. Thereafter, heavy
penalty was imposed on the innocent vendors to the tune of Rs.2,59,00,000/-.
That cannot be ignored altogether. Therefore, this Court is not expressing any
view on that in the procession. In fact, further injunction will lead to
irreparable injury only against the respondents not in favour of the petitioner.
Further the very contract itself clearly show that their address of partnership
firm is at West Tambaram, which is outside the jurisdiction of the Court. as per
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the very address given in the agreement. In such a view of the matter, as the
very relief of specific performance is not asked at the first instance and the third
party who had already purchased the property and they are not a party to the
contract and there was no nexus between the third party and the petitioner and
others, this Court is not inclined to grant any interim measures.
29. In the result, Arbitration Original Petition is allowed. Orders passed
by this Court, on 8/10/2021, stands vacated and the Original Application
Nos.591 to 593 are dismissed.
01.11.2021
Index : Yes / No
Internet: Yes
Speaking/non speaking order
psa/mvs
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N. SATHISH KUMAR, J
psa/mvs.
Arb.O.P. No. 200 of 2021
and
O.A.Nos.591 to 593 of 2021
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1/11/2021
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