Telangana High Court
M/S. Ira Square Township Llp vs Sri Amir Shareef on 21 March, 2025
Author: P.Sam Koshy
Bench: P.Sam Koshy
THE HON'BLE SRI JUSTICE P.SAM KOSHY
AND
THE HON'BLE SRI JUSTICE NAMAVARAPU RAJESHWAR RAO
CIVIL MISCELLANEOUS APPEAL No.318 of 2024
JUDGMENT:
(per the Hon'ble Sri Justice P.Sam Koshy)
The instant is an appeal filed under Section 39 of the
Arbitration and Conciliation Act, 1996 (for short, 'the Act')
assailing the order dated 11.01.2024, in Arb.O.P.No.184 of 2022,
passed by the XI Additional Chief Judge, City Civil Courts,
Hyderabad.
2. Heard Mr. Dama Seshadri Naidu, learned Senior Counsel
representing Ms. Madhavi Priya Mantena, learned counsel for the
appellants, and Mr. A. Venkatesh, learned Senior Counsel
representing Mr. G. Kalyan Chakravarthy, learned counsel for the
respondents.
3. Vide the impugned order, the Trial Court allowed the
petition filed under Section 9 of the Act by granting an ad-
interim injunction in favour of respondent Nos.1 to 4 herein, who
are the petitioners before the Trial Court, and had passed the
order restraining the appellants and respondent Nos.5 to 7
herein from alienating the property covered under Memorandum
of Understanding (for short, 'MoU') dated 08.09.2021 and also
the property covered under Development Agreement-cum-
General Power of Attorney (for short, 'DAGPA') dated 03.12.2021
i.e. schedule 'A' property and further interfering with the
possession of respondent Nos.1 to 4 herein over the schedule 'B'
property.
4. The facts which led to filing of the instant appeal are that
the respondent Nos.1 to 3 herein are the owners of the land
admeasuring Ac.0.39 guntas in Survey No.64/A/E out of Acs.4-
00 guntas in Survey No.61. So also Ac.0.39 guntas in Survey
No.64/A/E out of Acs.4-00 guntas in Survey No.61/AA/2, total
admeasuring Ac.1.08 guntas out of Acs.4-00 guntas in Survey
No.61 and the land admeasuring Ac.0.36 guntas in Survey
No.61/U/2 and Ac.0.37 guntas in Survey No.61/UU/1 out of
Acs.4-00 guntas in Survey No.61; all of which situates at
Kongarkalan Village, Imbrahimpatnam Mandal, Ranga Reddy
District.
5. All the aforesaid properties were purchased by the
respondent Nos.1 to 3 herein respectively vide registered sale
deeds separately executed on 25.07.2019. The respondent No.4
herein Mr. Syed Usman was the vendor of the property sold to
the respondent Nos.1 to 3. The said sale deeds executed on
25.07.2019 have gone unchallenged till date. Meanwhile, the
respondent Nos.1 to 4 entered into a MoU on 08.09.2021 with
appellant No.1. As per the said MoU, the appellant No.1
(respondent No.1 before the Trial Court) had agreed for payment
of ₹8,50,00,000/- as full and final consideration for surrender
and title over the land purchased by the respondent Nos.1 to 3
vide registered sale deeds dated 25.07.2019, those which are
reflected in the preceding paragraphs.
6. It was agreed that as part consideration of the transaction,
the appellant No.1 would pay an amount of ₹2,50,00,000/-by
way of cheque and cash to the respondent Nos.1 to 3 herein,
who in turn, have agreed to handover the possession of the
property and relinquish their claims and rights over the said
property. It was further agreed between the parties that they
shall pay the balance ₹6,00,00,000/- as agreed in terms of the
MoU on the date of the execution of DAGPA. However, even
before the MoU could be finalized, the appellant No.1 and
respondent Nos.5 to 7 herein entered into a DAGPA on
03.12.2021 entrusting the aforementioned subject land to be
developed by constructing residential villas with a recreation
facility center. The DAGPA was executed without fulfilling the
further consideration that was to be paid by appellant No.1 to
respondent Nos.1 to 4 and the appellant No.1 and respondent
Nos.5 to 7 were planning to raise constructions on the said
subject land. It was in this context that a petition under Section
9 of the Act was filed by respondent Nos.1 to 4 for an injunction
against the appellant No.1 and respondent Nos.5 to 7 herein and
also restraint from alienating the property covered under the
MoU i.e. schedule 'A' property and also from interfering with the
possession of the respondent Nos.1 to 4 in respect of schedule
'B' property.
7. Subsequently, the Section 9 petition filed before the Trial
Court was registered as Arb.OP.No.184 of 2022. Notices were
issued and since there was no representation on behalf of the
appellants herein, the Trial Court proceeded to decide the
petition and allowed the same vide the impugned order dated
11.01.2024 restraining the appellants as also respondent Nos.5
to 7 herein from alienating the property covered under MoU
dated 08.09.2021 and also the property covered under the
DAGPA dated 03.12.2021 i.e. schedule 'A' property and also
restrained the aforesaid parties from interfering with the
possession of respondent Nos.1 to 3 herein over the suit
schedule property.
8. It is this order which has been challenged by the appellants
herein who are the respondent Nos.1 and 2 before the Trial
Court.
9. The grounds on which the present appeal has been filed is,
firstly the notices have not been effectively served upon the
appellants i.e. the addresses provided in the Section 9 petition
and the addresses in the notices issued were insufficient.
Secondly, the notices so issued are contrary to the provisions of
Section 9(2) of the Act.
10. It was the contention of the learned Senior Counsel for the
appellants that the notices which were issued to the appellants
have not been effectively served can also be established from
the fact that there was a clear infraction of all the procedures so
prescribed under Order V Rules 17, 18, 19 and 20 of the Civil
Procedure Code, 1908 (for short, the 'CPC'). It was the further
contention of the learned Senior Counsel for the appellants that a
plain reading of the impugned order would show that the Trial
Court has not given any reasons which led to passing of the
interim injunction order. According to the learned Senior Counsel
for the appellants, the entire impugned order is only a narration
of facts and is abruptly passing of the interim injunction order
without discussing the principles which are required to be fulfilled
before an order of injunction is passed. It is by now well settled
that while granting an order of injunction the concerned Court
has to mandatorily consider the prima facie establishment of a
case, the balance of convenience and the irreparable loss caused
in the event if injunction order is passed. The impugned order
lacks these basic ingredients required while allowing the
injunction petition, and for the said reason also the same
deserves to be set aside / quashed.
11. The learned Senior Counsel for the appellants has also
challenged the impugned order on the ground highlighting the
conduct of the appellants inasmuch as the appellants earlier have
filed a writ petition i.e. W.P.No.2164 of 2020 before the High
Court challenging the action on the part of the Tahasildar /
respondent No.2 in the writ petition so far as mutating the
names of the third parties by removing the names of the
petitioners from the revenue records. The learned Single Judge
initially vide order dated 21.06.2023 disposed of the writ petition
directing respondent Nos.1 and 2 i.e. the State of Telangana as
also the Tahasildar, Imbrahimpatnam, to implement the
proceedings issued by the Tahasildar vide order dated
25.04.2019 within a period of four (04) weeks from the date of
receipt of a copy of the order. Subsequently, a Review Petition
was filed i.e. Review I.A.No.1 of 2024 in W.P.No.2164 of 2020.
The said I.A. came up for hearing on 16.04.2024 and the learned
Singh Judge after hearing the parties, directed the respondents
to maintain status quo in all aspects so far as the suit schedule
property is concerned, and also so far as the interference of the
possession over schedule 'B' property is concerned. In the teeth
of all such developments, there could not have been yet another
arbitration proceedings initiated by the respondent Nos.1 to 4
herein.
12. Thus, for all the aforesaid grounds and reasons, the
learned Senior Counsel for the appellants contended that the
order of interim injunction granted by the Trial Court deserves to
be vacated and the appellants be granted liberty to proceed with
the developments on the suit schedule property in accordance
with the MoU as also in accordance with the DAGPA.
13. Per contra, the learned Senior Counsel for the respondents
contended that it is a case where admittedly an MoU was entered
into between the parties on 08.09.2021 and in the MoU itself the
details of the transaction as consideration for transfer of the
property and the rights over the said property was reflected.
However, except for signing amount of ₹.2,50,00,000/- that was
to be paid was made, thereafter there has been no further
payment made by the appellants towards the balance of
payment agreed upon. Meanwhile, according to the respondents,
the appellants further entered into a DAGPA, and in terms of
DAGPA, the appellants started the development activities at the
suit schedule property much to the detriment of the respondents
entitlement of the consideration agreed upon as per the MoU. It
was in this context that the respondents in addition to moving a
petition under Section 11(6) of the Act before the High Court for
appointment of an Arbitrator, also moved a petition under
Section 9 of the Act before the Trial Court seeking for an interim
injunction atleast till the arbitration proceedings conclude.
14. During the course of arguments, the learned Senior
Counsel for the respondents informed the Court that the High
Court has already allowed the Section 11(6) petition and an
Arbitrator has also been appointed and the arbitration
proceedings have already been commenced between the parties.
Thus, according to the learned Senior Counsel for the
respondents, now that the arbitration proceedings have
commenced, let the Arbitrator itself conclude the proceedings
and pass the Award at the earliest which would be in the interest
of all the parties, rather than considering vacating of the interim
injunction at this juncture which may put the respondents in an
disadvantageous position.
15. However, the learned Senior Counsel for the appellants
contended that since they are into the business of development
of the suit schedule property, huge amounts of money has been
taken as loan from the Bank and they have to pay monthly EMIs
along with high rate of interest. Now that the arbitration
proceedings have commenced, let the Arbitrator take a call in
respect of the entitlement of the respondents and the Award
would be binding upon the parties. Till then, let the
developments on the suit schedule property be not stalled, as
that would put the appellants to a substantial financial burden
and the cost of the development work would get substantially
increased in due course of time unless it is executed at the
earliest.
16. Having heard the learned counsel for the parties and on
perusal of records, some of the admitted factual matrix of the
case are that respondent Nos.1 to 3 being the actual owners of
the property which they had purchased from respondent No.4.
The other admitted position is that of the execution of MoU on
08.09.2021 between the respondent Nos.1 to 4 on one side and
the appellants herein on the other side. There is also no dispute
so far as the initial payment of ₹2,50,00,000/- by the appellants
to respondent Nos.1 to 3 as the signing amount at the time of
signing of the MoU. However, there is no prima facie strong
material to show the payment of the balance of amount by the
appellants in terms of the MoU.
17. Clauses 6 and 12 of the MoU entered into between the
parties, reads as under, viz.,
"6. That the parties also agree and undertake that
payment of consideration is a pre-condition for giving
effect to all the covenants contained in this Memorandum
of Understanding and the Development Agreement cum
General Power of Attorney. In case of failure to honour any
of the cheques above mentioned, the money already paid
shall be forfeited and the parties of the First Part shall be
entitled to seek cancellation of the Development
Agreement cum General Power of Attorney.
12. In case of any dispute arising out of or in connection
with this agreement shall be dealt with by way of
arbitration. The place, seat and venue of arbitration shall
be at Hyderabad. The courts at Hyderabad shall have
exclusive jurisdiction. The language of arbitration shall be
English. The proceedings of arbitration shall be governed
by the provisions of The Arbitrator and Conciliation Act,
1996 along with any other statutory amendments already
made or to be made. The decision of the arbitrator shall be
final and binding on the parties."
A plain reading of clause 6, would go to show that there
was some pre-condition already narrated in the MoU, which
otherwise becomes binding upon the parties. Likewise,in clause
12 there is a specific provision for redressal of disputes by way of
arbitration.
18. Admittedly there seems to be some disputes between the
appellants as also the respondent Nos.1 to 3 herein so far as the
payment of the balance of amount for relinquishing their rights
over the subject land in dispute. Further, respondent Nos.1 to 4
having resorted the provision of MoU for redressal of their
disputes invoking the arbitration clause is also an admitted
position. The request for appointment of an Arbitrator stands
allowed by the High Court and the Arbitrator has been appointed
and who has now seized of the proceedings. There is also no
quarrel so far as respondent Nos.1 to 4 having approached the
Trial Court for interim protection invoking Section 16 of the Act.
The said Section 9 proceedings were initiated way back in the
year 2022 i.e. three years back and the said Section 9 petition
stood allowed as early as on 11.06.2024. While allowing the
Section 9 petition, the Trial Court made the following
observations, which for ready reference is reproduced hereunder,
viz.,
"...On the other hand petitioners filed the relevant
documents to establish their case. Since the respondents
remained exparte an adverse inference can be drawn
against them that the plea of petitioners is correct. If the
respondents continued with the development work,
pending disposal of writ petition filed by the petitioners, it
will cause huge loss to the petitioners. More over the
consideration amount which was admitted by the
respondent No.1 and 2 was not paid to the petitioners
according to petitioners. Prima facie case, and balance of
convenience is in favour of petitioners. If injunction is not
granted the petitioners will sustain loss. In these
circumstances this court feels it is just an proper to grant
ad interim injunction against the respondent from
alienating the property covered under Memorandum of
understanding, I.e 'A' and 'B' schedule property, and also
from interfering with the possession of petitioners in
respect of 'B' schedule property.
In the result this petition is allowed restraining the
respondents 1 to 5 by way of ad-interim injunction from
alienating the property covered under MOU dt 8-9-21 and
also the property covered under DAGPA dt: 3-12-21 vide
doc No.2256/2022 I.e 'A' schedule property, and the
respondents further restrained from interfering with the
possession of the petitioners over the 'B' schedule
property."
The said interim protection under Section 9 of the Act is
still in operation for almost over fourteen months. Meanwhile,
the arbitration proceedings itself is progressing before the
Arbitrator.
19. In the said admitted factual matrix, what is to be
appreciated at this juncture is, should the interim order granted
by the Trial Court in the Section 9 petitionwarrants interference?
20. One cannot brush aside the fact that in the event if the
interim protection is not continued, the appellants would
continue with the construction, carry out the sale of all the
properties and subsequently, if the arbitration case stands
decided in favour of the respondents, they would find it difficult
to reap the fruits of the award so passed. At the same time, we
are also conscious of the fact that continuation of the interim
protection would stall the entire development and construction
activities, which would result in the project getting delayed and
the parties, particularly the appellants being put to unnecessary
financial burden of paying EMIs and interest for the protracted
period.
21. In the said circumstances, what is striking the conscious of
this Bench is to strike a balance so that the interest of both the
parties stands protected. In terms of the MoU, the balance of
amount payable by the appellants to respondent Nos.1 to 4 was
₹6,00,00,000/-. Now in case if the interim protection is
continued, the appellants will be put to substantial loss
financially as that could delay the project incurring financial
implications. In case, the interim stay is vacated, the respondent
Nos.1 to 4 would be put to considerable detriment upon the
appellants alienating the suit schedule property and receiving
sale consideration upon each alienation. Therefore, in the opinion
of this Bench and in the larger interests of justice, it would be
appropriate if the interim stay so far as restraint from alienating
the suit schedule property is ordered to be vacated subject to the
appellants providing solvent security to the satisfaction of the XI
Additional Chief Judge, City Civil Courts, Hyderabad, for an
amount of ₹6,00,00,000/- and permitting the appellants herein
to carry out the development activities.
22. Accordingly, with the aforesaid observation and direction,
the instant Civil Miscellaneous Appeal stands partly allowed.
23. As a sequel, miscellaneous applications pending if any,
shall stand closed. However, there shall be no order as to costs.
_____________
P.SAM KOSHY, J
___________________________
NAMAVARAPU RAJESHWAR RAO, J
Date: 21 .03.2025
GSD
