Andhra HC (Pre-Telangana)
I.Sudershan Rao And Others vs Evershine Builders Private Limited ... on 20 June, 2012
Bench: Goda Raghuram, N.Ravi Shankar
THE HON'BLE SRI JUSTICE GODA RAGHURAM AND THE HON'BLE SRI JUSTICE N.RAVI SHANKAR CIVIL MISCELLANEOUS APPEAL No.1362 of 2011 20-06-2012 I.Sudershan Rao and others Evershine Builders Private Limited Mumbai and another Counsel for the Appellants: Sri K.Ramakrishna Reddy Counsel for the Respondents : Sri Sunil Ganu <Gist : >Head Note : ? Cases referred 1. (2005)2 Supreme Court Cases 367 2. (2004)1 Supreme Court Cases 540 3. 2010(3) R.A.J. 363 (Del) 4. 2010(1) R.A.J. 659 (Guj) 5. 2008 (2) ALD 693 6. 2004(3) ALD 228 (DB) JUDGMENT:
(per THE HON'BLE SRI JUSTICE N.RAVI SHANKAR) Appellants in this miscellaneous appeal who are 33 in number are respondents 1 to 33 in Arbitration O.P. (AOP) No.750 of 2011 on the file of the court of II Additional District Judge, Ranga Reddy District at L.B.Nagar, Hyderabad (trial court). The cause title of the appeal shows that appellants 1 to 31 are represented by their General Power of Attorney holders who are appellants 32 and 33. That application (AOP) was filed under Section 9 of the Arbitration and Conciliation Act, 1996 (for short Act), for an interim relief/measure after passing of the award and pending disposal of three applications which were already filed under Section 34 of the Act challenging that award.
2. This appeal is filed questioning an ex parte order dated 02.09.2011 granted by the trial court in the aforesaid AOP restraining them by way of a temporary injunction as an interim measure from alienating or creating any third party interest or encumbrance over the AOP schedule property or changing its nature. This interim order was granted upto 29.09.2011. Nothing is placed on record to show whether the said ex parte interim order of the trial court was extended further. Appellants did not file any application or move the trial court otherwise by filing counter to have the said ex parte order vacated, but presented this appeal on 13.09.2011 and interim suspension of the impugned order was granted by this court on 13.12.2011. AOP schedule property is an extent of 17 acres of land morefully described in the AOP schedule which is the disputed property. It is necessary to note the respective cases of the parties and hereafterwards they shall be referred to as they are arrayed in the AOP.
3. M/s.Evershine Builders Private Limited, which is the first respondent in this appeal, is the petitioner in the AOP. It is the admitted case of the respective parties that M/s.Evershine Builders entered into a memorandum of understanding dated 31.03.2006 with appellants 32 and 33 viz., Burugapalli Sivarama Krishna and Burugupalli Nagamuneswari and the second respondent herein viz., S.C.Mohan Reddy for purchase of the AOP schedule property for a consideration of Rs.105 crores and paid Rs.1 crore as advance. As disputes arose between the parties, the matter was referred to arbitration. The arbitral tribunal eventually passed the award dated 12.01.2008 refusing the relief of specific performance claimed by the first respondent, but granted damages to the tune of Rs.4 crores.
4. The first respondent, aggrieved by the award to the extent of refusing the relief of specific performance, filed O.P.No.713 of 2009 in the trial court questioning the award. The second respondent S.C.Mohan Reddy filed O.P.No.328 of 2011 questioning the award of damages and appellants 32 and 33 also filed O.P.No.329 of 2011 questioning the award of damages. All the three O.Ps. are filed under Section 34 of the Act and are pending in the trial court. It is not necessary for us to go into the merits of the grievances of the several parties arising out of the award, as these have to be decided by the trial court in the three OPs.
5. While so, the first respondent filed AOP No.750 of 2011 for interim relief of temporary injunction or an interim order, independently under Section 9 of the Act complaining that the appellants herein are trying to alienate the disputed property in favour of third parties either by selling or otherwise encumbering it and if that is allowed, its interests would suffer irreparably as its claim for specific performance is pending adjudication in O.P.No.713 of 2009 and therefore an injunction is necessary till the disposal of the three AOPs. In AOP No.750 of 2011, the trial court granted an ex parte interim order/injunction as requested by the first respondent till 29.09.2011. It is this order which is questioned in this appeal.
6. Sri K.Ramakrishna Reddy, learned senior counsel appearing for appellants raised four points in support of his contention that the impugned order cannot be sustained. The first is that after passing of an award by the arbitral tribunal, Section 9 of the Act has no application and a court cannot grant any interim relief under the said provision. Therefore AOP No.750 of 2009 is not maintainable and the impugned order is illegal. The second is that having regard to the Andhra Pradesh Arbitration Rules, 2000 (for short the Rules), framed by the High Court of Andhra Pradesh under Section 82 of the Act, when applications under Section 34 are pending, an independent application for any interim relief under Section 9 of the Act is not maintainable and it ought to have been filed only as an interlocutory application as stipulated under Rule 8 of the Rules. The third is that when the arbitral tribunal has refused the relief of specific performance and merely granted damages, it was not open to the second respondent again to move an application for temporary injunction to restrain the appellants from alienating the property and in any event it was also not open for the court to grant an ex parte relief in that behalf without notice to the appellants. The fourth point is that the impugned order which is an ex parte one does not contain any reasons and therefore is contrary to law.
7. On the other hand, Sri Sunil Ganu, learned counsel for the second respondent pointed out that none of the contentions of the appellants can be accepted. He argued that the impugned order is only an ex parte interim order which was granted only upto 29.09.2011 and therefore the appellants should have approached the trial court for vacating the same and that this appeal is not maintainable. We will refer to his argument to the extent necessary while answering the points raised on behalf of the appellants and we will consider the point raised by Sri Sunil Ganu also seperately.
8. Thus, the first point to be considered is whether Section 9 of the Act has no application to a situation where the award is passed and consequently the present AOP is not maintainable. Section 9 of the Act provides for grant of interim relief by the court and the object of this provision is too well known to require any mention here. The opening words of Section 9 read "a party may, before or during arbitral proceedings or at any time after the making of the arbitral award but before it is enforced in accordance with Section 36, apply to a court" and the section then sets out various types of interim reliefs which can be sought by a party. It is clear that the words "at any time after the making of the arbitral award but before it is enforced in accordance with Section 36" clearly show that the interim reliefs stipulated in the said section can be sought even after the passing of the award but before it becomes enforceable.
9. Section 36 of the Act enacts that an arbitral award becomes enforceable like a civil court decree, where the time for filing an application under Section 34 of the Act for setting it aside has expired or when such an application if already filed, is dismissed by the court. In the present case, AOP.Nos.713 of 2009, 328 of 2011 and 329 of 2011 which are filed against the award in question are still pending and therefore in view of Section 36, it follows that the award has not become enforceable. In the above circumstances and in the light of the plain language of Section 9, Sri Ramakrishna Reddy's contention under this point cannot be accepted.
10. Sri Ramakrishna Reddy relied upon two decisions of the Supreme Court, one in National Buildings Construction Corpn. Ltd. v. Lloyds Insulation India Ltd.1 and the other in National Aluminium Co. Ltd. v. Pressteel & Fabrications (P) Ltd.2. We have gone through the two decisions and are of the considered view that they do not deal with Section 9 and its scope at all and they cannot be considered an authority for the proposition that Section 9 has no application for grant of interim reliefs after the passing of the award. A perusal of the said two decisions would show that they are an authority for the proposition that a part of the award cannot be enforced in view of Section 36 of the Act even though it is not challenged, as the whole award is made unenforceable when an application is made under Section 34 challenging the other part of the award and is pending. As Sri Ramakrishna Reddy placed heavy reliance upon the above two decisions, we propose to set out the facts and the conclusions reached by the Supreme Court in the said two decisions.
11. In National Buildings Construction Corpn. Ltd. (1 supra), the facts are these. The appellant and the respondent (before the Supreme Court) entered into an agreement under which the respondent was to supply certain material and make construction. Disputes having arisen between them, they were referred to arbitration and both parties filed claims and counter claims. Ultimately, the arbitrator by his award held that Rs.13,97,072.24 ps. was due to the respondent and Rs.9,85,316/- was due to the appellant. The arbitrator then held that the respondent was entitled to recover a sum of Rs.4,11,756/- which was the difference between the aforesaid two amounts.
12. The respondent challenged that part of the award which went in favour of the appellant, and at the same time sought execution of the award for Rs.13,97,072.24 ps. in his favour and succeeded in the High Court. On appeal, the Supreme Court held that since the award was a composite one dealing with both the claims, it was unenforceable as a whole in view of Section 36 of the Act, since the application by the respondent under Section 34 of the Act for setting aside that portion of the award which was in favour of the appellant, was pending.
13. The Supreme Court after setting out the facts and legal position in para 6 of the judgment held as follows after considering the principle or ratio laid down in the case of National Aluminium Co. Ltd. (2 supra) which is the second decision relied upon by Sri Ramakrishna Reddy.
"6. We are of the view that the award clearly states that after an adjustment of accounts, the only amount payable by the appellant to the respondent was Rs.4,11,756. How the arbitrator arrived at this figure is not for us to see. For the purposes of Section 36 of the Act, the court cannot be called upon to go behind the awarded amount and deal with the processes by which the amount was arrived at. There is on record only one award for the amount of Rs.4,11,756. Even though the respondent claims that the application under Section 34 was filed in respect of part of the award, it is in fact only a process by which the arbitrator has arrived at the awarded amount. This would mean that the award as a whole cannot be enforced under Section 36 of the Act. As held by the Court in National Aluminium Co. Ltd. (SCC p.546, para 10) "... the mandatory language of Section 34 (Section 36) of the 1996 Act, that an award, when challenged under Section 34 within the time stipulated therein, becomes unexecutable. There is no discretion left with the court to pass any interlocutory order in regard to the said award except to adjudicate on the correctness of the claim made by the applicant therein. Therefore, that being the legislative intent, any direction from us contrary to that, also becomes impermissible."
14. The Supreme Court in substance refused to enforce a partial award which was in favour of the party who sought its enforcement, on the ground that when an application is filed under Section 34 of the Act questioning the award, the whole of the award becomes unenforceable or inexecutable and held that it cannot exercise its jurisdiction even under Article 142 of the Constitution, in the face of the language of Section 36 of the Act.
15. In para 11 of the judgment in National Aluminium Co. Ltd. (2 supra), the Supreme Court dealt with certain recommendations by the Law Commission and expressed the hope that Section 34 should be amended to provide for enforcement of that portion of the award which is not under challenge; and observed as follows.
"11. However, we do notice that this automatic suspension of the execution of the award, the moment an application challenging the said award is filed under Section 34 of the Act leaving no discretion in the court to put the parties on terms, in our opinion, defeats the very objective of the alternate dispute resolution system to which arbitration belongs. We do find that there is a recommendation made by the Ministry concerned to Parliament to amend Section 34 with a proposal to empower the civil court to pass suitable interim orders in such cases. In view of the urgency of such amendment, we sincerely hope that necessary steps would be taken by the authorities concerned at the earliest to bring about the required change in law."
16. The observations in the above two decisions about lack of power in the court to pass interlocutory order with respect to the award relate only to the enforcement of a part of the award when the other part alone is challenged under Section 34 and when that challenge is pending, but not with reference to the power of the court under Section 9 of the Act which speaks of granting interim relief even after passing of the award. Thus the above observations do not support the contention of Sri Ramakrishna Reddy.
17. On the other hand, a decision of the Delhi High Court in Veda Research Laboratories Ltd. v. Survi Prosects3 and of the Gujarat High Court in Chunilal Kapoorchanji Shah v. Yuvraj Industries Limited4 relied upon by Sri Sunil Ganu, support the view that interim reliefs under Section 9 can be granted even after passing of the award but before it becomes enforceable as stipulated in Section 36 of the Act. We respectfully agree with the said view. As will be presently seen under point No.2, even Rule 8 of the Rules is against the appellant on this point. Accordingly, for the aforesaid reasons, this point is decided against the appellants.
18. That takes us to the second point of the appellants which is whether an independent application for an interim relief/measure is not maintainable when an application under Section 34 of the Act is pending and that the second respondent should have filed such an application as an interlocutory application as stipulated in the Rules.
19. Rule 8 of the Rules is relevant. The object of these rules is to prescribe the procedure regarding filing of applications under the Act before the concerned courts. Rule 8 reads as follows.
"8. Every application shall, if the Court is satisfied that the same is in order, be numbered and registered as a Original Petition (Arbitration), for short 'O.P.(Arbn)'.
Provided that
(a) An application under Section 9 of the Act, if filed in a pending petition in the court, shall be registered as an Interlocutory Application (I.A.).
(b) Any other application of procedural or interim nature pending main proceedings shall be numbered as CMP in the High Court and I.A. in any other Court.
(c) As application filed under Section 36 may be registered as Execution Petition (Arbitration), for short 'E.P.(Arbn)'."
20. It is true that the Proviso (a) to Rule 8 says that an application under Section 9 of the Act, if filed in a pending petition, shall be registered as interlocutory application. It is also true that the words "pending petition"
can be construed as a petition under Section 34 also. The question is whether this Proviso (a) is mandatory. It may be noted that Section 9 of the Act which is the statutory provision does not stipulate that an application filed under it in a pending petition under Section 34 should be registered in the court as an interlocutory application in such a pending petition. This apart Rule 8 does not say what will be the consequence if Proviso (a) is violated, that is to say whether such application must be dismissed in limine on that ground alone.
21. In our considered view, proviso (a) is only a procedural devise to ensure that an application filed under Section 9 in a petition pending under Section 34 is conveniently disposed of as an application connected to such a petition and also to bring to the notice of the court, if necessary, about the urgency in the matter and press for even an expeditious disposal of both the matters. Rule 8 or Section 9 of the Act cannot however be construed as laying down that an independent application under Section 9 is not maintainable when a petition under Section 34 is pending.
22. In Veda Research Laboratories Ltd's case (3 supra), an application under Section 9 of the Act in a pending petition under Section 34, was filed as an interlocutory application. A preliminary objection was taken that such an application has to be filed as an independent application, but that objection was overruled and the interlocutory application was held maintainable. It is the other way in the present case. The learned Senior Counsel for appellants then invited our attention to a decision of this court in Gulf Oil Corporation Limited vs. Singareni Collieries Company Limited5 in support of his contention under this point. That decision is an authority for the proposition that applications filed for interim reliefs under Section 9 of the Act have to be disposed of expeditiously as such applications are filed only for interim reliefs either before or during the pendency of arbitration proceedings or after the passing of the award. The said decision therefore does not support the case of appellants.
23. It can thus be said that an application under Section 9, when a petition is already pending under Section 34 in the same matter, may be filed as an independent application or by way of an interlocutory application. Mere violation of Proviso (a) to Rule 8 is not fatal as that provision has to be construed as only directory and not mandatory. Of-course, in certain cases an independent application under Section 9 may be filed suppressing the material facts relating to the passing of the award and its consequences and in such a case the court may interfere and do justice by passing appropriate orders. In AOP No.750 of 2011, the second respondent has pleaded all the facts relating to the petitions pending under Section 34 of the Act and his grievance and thus there is no suppression of facts. For the aforesaid reasons, this point is also decided against the appellants.
24. The third point is whether the trial court in an application under Section 9 after the passing of the award should not have granted an ex parte interim injunction or an ex parte interim order restraining appellants from alienating the disputed property when the relief of specific performance was refused.
25. The fourth point raised on behalf of the appellants is whether the impugned order is invalid on the ground that it does not contain reasons. Having regard to the controversy, we are of the opinion that the above third and fourth points can be answered together.
26. Section 9 relating to interim measures/reliefs is silent about the criteria and procedure which should be kept in view by the court while granting interim reliefs. However, Section 9 itself reads that the court while dealing with applications for interim reliefs shall have the same power of making orders as it has for the purpose of, and in relation to, any proceedings before it. A perusal of various interim reliefs including interim injunctions which can be granted under Section 9 of the Act would show that they are similar to those enumerated in Order XXXIX of the Code of Civil Procedure, 1908 (for short the Code), and can be termed to be in the nature of supplemental proceedings contemplated under Section 94 of the Code which are always taken in aid of final adjudication of a matter. Even sub-section (1) of section 37 of the Specific Relief Act, 1963, which is the law governing injunctions says that temporary injunctions are regulated by the Code. It therefore follows that interim injunctions to be granted under Section 9 are governed by the criteria and the guiding factors stated in Order XXXIX of the Code. No dispute has been raised on this aspect by either side.
27. It may then be noted that clause (c) of Section 9(ii) of the Act provides for grant of an interim measure or relief for detention, preservation or inspection of any property which is the subject-matter of dispute in the arbitration. As the disputed property is the subject-matter of arbitration, the trial court could exercise the power even to grant a temporary injunction for preservation of that property as the word "property" can be construed as covering immovable property. It follows that the trial court was within its power to grant a temporary injunction for preservation or protection of that property provided it adheres to Order XXXIX of the Code which governs grant of temporary injunction read with Section 94(c) of the Code which deals with supplemental proceedings. Hence the power of the court to pass the impugned order cannot be doubted.
28. Coming to the argument of Sri Ramakrishna Reddy on the third point, it is true that the arbitral tribunal refused the relief of specific performance, but its award is under challenge in the application filed by the second respondent under Section 34 of the Act and that has still to be decided. It cannot be presumed at this stage that the award will be confirmed by the trial court. What should be noted is that whether the refusal of relief of specific performance by the arbitral tribunal is right has to be decided by the court. In such a situation, the trial court cannot be faulted for exercising power under Section 9 to grant temporary injunction to preserve the disputed property till adjudication of the second respondent's petition under Section 34 of the Act. No provision or precedential authority has been brought to our notice to hold that just because the arbitral tribunal refused the relief of specific performance, the court under Section 9 has no power to pass an order for preservation of the property though of-course that will be subject to the final orders which may be passed by the court in the petition or application under Section 34 with respect to the award.
29. Then coming to the fourth point, it may be noted that a perusal of the impugned order would show that it is not bereft of reasons. The trial court mentioned about the award and grant of damages in favour of the second respondent while refusing the relief of specific performance. The trial court also referred to the interim order dated 12.01.2008 passed by the arbitral tribunal directing both parties not to create any third party rights in the disputed property. This was passed under Section 17 of the Act. That interim order of the arbitral tribunal, as observed by the trial court, rightly came to an end with the passing of the award.
30. The trial court then considered the contention of the second respondent that appellants were making efforts to alienate the property and create encumbrances in favour of third parties and also changing the nature of the property and referred to certain photographs filed by the second respondent regarding construction activity and certain brochures said to have been printed by "Srinivasa Constructions" and held that the second respondent made out a prima facie case. It also observed that balance of convenience and irreparable loss were also prima facie in favour of the second respondent. Holding so, it granted the ex parte interim injunction or order, but limited that order only upto 29.09.2011. It can therefore be said that the trial court recorded reasons having regard to the controversy in the matter as contemplated under Rule 3 for granting an ex parte interim injunction and even for dispensing with notice, and to repeat, it restricted the order upto 29.09.2011 i.e. for a limited period while ordering notice to appellants. It cannot therefore be said that the impugned order is contrary to Rule 3 of Order XXXIX of the Code. Of-course the merits of the matter and the passing of final order in AOP No.750 of 2011 have yet to be finally decided by the trial court. For the aforesaid reasons, points 3 and 4 are also decided against appellants.
31. That takes us to the last and fifth point which is whether, as argued by Sri Sunil Ganu, the appellants should have approached the trial court itself under Order XXXIX of the Code for vacating the impugned order which is an ex parte one and whether this appeal is not maintainable.
32. The above question has been answered by a Division Bench of this court in Innovative Pharma Surgicals v. P.M. Devices (P) Ltd.6. In the said decision this court considered the relevant clauses of Order XLIII which deals with appeals from orders, Order XXXIX of the Code and the previous case law on the point and held that though appeal is not strictly prohibited it should not be resorted to as a matter of course except under extraordinary circumstances such as non-compliance of statutory provisions or in rarest of rare circumstances. It proceeded to explain what are the rarest of rare cases and held that an order which is perverse, biased or vitiated by lack of jurisdiction would fall under that category. In para 24 of the judgment the court observed as follows.
"24. The immediate remedy that is available to the opposite party in case of issuing temporary injunction without issuing notice, is under the provisions of Order 39, Rule 4 C.P.C which enables the Original Court to vary or set aside or discharge the ex parte order. In the light of the above provisions and also the legal propositions, no appeal lies, as a matter of course, against an ex parte order, except in extraordinary circumstances or the rarest of the rare cases where the order is perverse or bias or suffers from lack of jurisdiction, but it is not the case of the petitioner."
33. We respectfully agree with the above view. In the present case, the trial court has given reasons for granting ex parte interim injunction/order. Thus it cannot be said that this is a case where the impugned order can be said to be perverse or biased and it cannot also be said that the impugned order suffers from lack of jurisdiction. In view of the circumstances, though an appeal is otherwise maintainable, the appellants should have approached the trial court for vacating the impugned order especially when it was restricted only upto 29.09.2011 and invited it to pass a final order on merits in the application under Section 9.
34. Accordingly, for the conclusions reached by us under the aforesaid five points, this appeal must fail and is dismissed with costs. The parties shall now workout their remedies before the trial court in AOP.No.750 of 2011. The trial court shall now proceed to dispose of AOP.No.750 of 2011 itself finally by giving due opportunity to both sides and without being influenced by any observations made in this order.
_______________________ GODA RAGHURAM, J _______________________ N. RAVI SHANKAR, J 20th June, 2012