Patna High Court - Orders
Dr.Priya Ranjan Kumar Singh vs M/S Chitra Deve. & Mark. &Ors on 16 April, 2009
Author: Mihir Kumar Jha
Bench: Mihir Kumar Jha
IN THE HIGH COURT OF JUDICATURE AT PATNA
MA No.659 of 2008
Dr.Priya Ranjan Kumar Singh, Son of late Kameshwar Prasad
Singh, Resident of Mohalla-Patliputra, P.S.-Patliputra, town
and District Patna.
-----Opp. Party/Appellants
Versus
1. M/s Chitra Developers and Marketing Private Limited,
through its Director, Sri Vikas Kumar, Son of Sri
Someshwar Lal, having its Office at 307, Adharshila
Complex, South Gandhi Maidan, town and district Patna.
2. Sri Vikas Kumar, son of Sri Someshwar Lal, Director M/S
Chitra Developers and Marketing Private Limited, resident
of Flat No. 613 B Lotus apartment, Road No. 1F, New
Patliputra Colony, P.S. Patliputra, town and district
Patna.
------Applicants/Respondents.
-------------
For the Appellants : Mr. Tarakant Jha, Sr. Adv.
: Mr. Anjani Kr. Sinha, No. 1 Adv.
For the Respondent No. 1 : Mr. V. Nath, Adv.
: Mr. Ajay K. Singh, Adv.
: Mr. Md. Walique Rahman, Adv.
For the Respondent No. 2 : Dr. K.N. Singh, Sr. Adv.
: Mr. Satish Kr., Adv.
: Mr. Radha Mohan Pandey, Adv.
--------------
P R E S E N T
HON'BLE MR. JUSTICE MIHIR KUMAR JHA
Mihir Kumar Jha,J This Miscellaneous Appeal is directed
against the order dated 29.09.2008 passed in
Miscellaneous Case No. 171 of 2008 allowing
the prayer of the applicants/respondents under
Section 9 of the Arbitration and Consolidation
Act (hereinafter to be referred to as „the
Act‟) restraining the opposite party appellant
from interfering in the work of construction
2
of the respondents in accordance with the
development agreement dated 1.9.2002.
2. Facts required to be noticed for the
purposes of this appeal lie in a narrow
compass. The appellant being the owner of the
land had entered into a development agreement
with the respondents on 1.9.2002 for the
purposes of getting a multistoried building
constructed. Such clause of development
agreement in fact was also acted upon by the
parties, inasmuch as, a plan for multistoried
building was also approved by Patliputra
Housing Co-operative Society on 3.5.2007 and
arrangement for loan from Housing and Urban
Development Corporation (HUDCO) was also made
wherein HUDCO had sanctioned the loan in the
month of September, 2007. There is also no
dispute that it was in terms of the aforesaid
development agreement that a plan was
submitted to Patna Regional Development
Authority (PRDA) and PRDA had also accorded
approval of such plan on 24.12.2007. Clause-12
of the aforesaid development agreement reads
as follows:-
"That the builders will construct
the total super builtup floor area of the
3
land owner share as detailed in schedule-
A of this agreement within 3(Three) years
from the date of the sanction of the
final plan of the proposed multi storied
building/apartment/flats by the competent
authorities with a further grace period
of 6(Six) months, provided the delay is
not caused due to hindrance from
Government bodies/natural calamities/land
owners/defects in land documents etc.
which may be beyond the control of the
builders."
3. Though the construction of
multistoried building by the respondents under
the aforementioned agreement was to be
completed by 24.12.2010, it is said that on
6.6.2008, the appellant had entered into some
sort of memorandum of understanding with
another builder „Apana Awas Construction‟ and
pursuant thereto, a separate development
agreement was also executed by the appellant
on 16.8.2008 for construction of the same
building and the same land with the aforesaid
Apana Niwas Construction. There is also no
dispute between the parties that the second
development agreement was executed on
16.8.2008 without annulling the first
development agreement of the appellant with
the respondents dated 1.9.2002.
4
4. It was at this stage that the
respondents had approached the civil court by
filing an application under Section 9 of the
Act on 19.9.2008 wherein after giving the
details of the earlier development agreement
and making further statement as with regard to
the incurring liabilities by the respondents
for completion of the multistoried building,
it was stated in paragraph no.13 and 14 of the
application that the appellant had started
negotiating with other persons and was likely
to create third party interest in the land,
the subject matter of development agreement.
Since the paragraph nos. 13 & 14 are the only
two relevant paragraphs which were capable of
inviting an interim order under Section 9 of
the Act, they are quoted hereinbelow:-
"13. That the applicants state that
when they have reached such an advance
stage with the project, the opposite party,
with ill motive and for the purpose of
mounting undue pressure for extorting more
money and profit has started negotiating
with other persons and is likely to create
third party interest in the land subject
matter of the development agreement and has
stopped co-operating in the proceeding of
the project.
14. That the intention of the
opposite party has been mala fide and in
5
order to make undue gain and profit at
higher amount he is out to frustrate the
agreement with the applicant by alienating
transferring or encumbering the plece of
land given to the applicant for development
and it has been necessary to preserve the
subject matter till the dispute is decided
in arbitration."
5. From a perusal of the said
application filed by the respondents before
the court below, it would be clear that not a
word was said in the said application as with
regard to either the memorandum of
understanding dated 6.6.2008 between the
appellant and Apna Awas Construction or the
development agreement between the same parties
dated 16.8.2008, while making the prayer for
grant of interim relief of the following
nature:-
"It is, therefore, prayed that Your
honour may graciously be pleased to admit
this applicant, issue notice to opposite
party, and after hearing the parties be
further pleased to grant interim relief
to the applicants for preservation of the
property of the project under the
development agreement and to restrain the
opposite party from creating third party
interest in the land subject matter of
the development agreement, by alienating,
transferring or encumbering, the same in
any manner."
6
6. From the records, it appears that
when the said miscellaneous case was filed
before the District Judge on 19.9.2008, the
same was registered and directed to be put up
with office note before the District Judge on
22.9.2008. On 22.9.2008, when the case was
placed for admission before the District
Judge, he had admitted the same and had
directed for issuance of notice to the
opposite party appellant fixing 26.9.2008 for
hearing and had transferred the case to the
court of Additional District & Sessions Judge,
FTC IV, Patna for disposal. The transferee
court appears to have received the record on
25.9.2008 and had directed the case to be
placed on the date fixed by the District Judge
i.e. 26.9.2008. On 26.9.2008, the Additional
District Judge, FTC IV, Patna had again
adjourned the case for hearing on 29.9.2008
and on 29.9.2008 it had only after hearing the
counsel for the respondents passed the
impugned order relevant portion whereof reads
as follows:-
"4. I perused the above said
development agreement and the documents
produced on behalf of the applicant. On
careful perusal of the clause 8, 12 and 28
7
of the aforesaid development agreement
executed and registered between the
applicant and the opposite party it is
clearly apparent that there is eminent
danger of the property being the subject
matter of arbitration agreement to be
alienated, destroyed or its nature might be
changed by the opposite party. Thus I find
that the applicant has been able to satisfy
to invoke the jurisdiction under Section of
the Arbitration and Conciliation Act. I am
also of the view that there is prima facie
case and balance of convenience in the
favour of the applicant.
5. On considering the above facts
and circumstances I direct the applicant to
take steps for initiation of arbitration
proceeding in accordance with law within
one year and in the meantime the opposite
party is hereby restrained from interfering
in the work of the applicant likely to be
done according to the development
agreement. The opposite party is also
restrained from creating and third party
interest in the property by sale, transfer,
mortgage or any agreement with stranger."
7. Mr. Tara Kant Jha, learned senior
counsel appearing on behalf of the appellant
while assailing the aforesaid impugned order
has submitted that the court below has been
totally misguided in exercise of its power
under Section 9 of the Act, inasmuch as, it
has not even cared to look into the relevant
provision of development agreement which
8
itself provide for adjudicating the dispute
between the parties through an arbitration. In
this context, he has submitted that in the
whole of the application, there was no
averment that the respondents had ever
communicated its intention in writing to refer
the matter to the arbitrator and therefore,
the appellant and respondents being bound by
the terms of the agreement, the respondents
could not have been favoured with the impugned
order even by way of interim relief. He has
further submitted that assuming that power
under Section 9 can be invoked even before the
dispute has been referred to the arbitrator,
even then such exercise of power under Section
9 has to be based on some materials and an
interim order cannot be passed merely for
asking. Mr. Jha has also explained that when
nothing was done by the respondents even after
a lapse of a period of almost one year from
the date of approval of the plan by the
Patliputra Cooperative Society despite full
cooperation extended by the appellant to the
respondent, the appellant in the interest of
the property and requirement of the building
9
in question had proceeded to execute another
development agreement with M/s Apna Awas
Construction on 16.8.2008 after giving due
intimation to the respondents. He has summed
up his submission that the court below while
passing the impugned order has virtually
allowed the application of the respondents
under Section 9 of the Act, by an interim
order itself and that too without even
affording an opportunity of hearing to the
appellant and its indulgence to the
respondents by giving them period of grace of
one year only for enabling them to invoke the
clause of the arbitration cannot be
countenanced in law.
8. Mr. V. Nath, learned counsel for the
respondent no.1 and Dr. K.N. Singh, learned
senior counsel for the respondent no.2,
however, have submitted that there is no
infirmity in the impugned order passed by the
court below, inasmuch as, the appellant was
not justified in executing the second
development agreement on 16.8.2008 without
cancelling of the subsisting first development
agreement with the respondents. In this
10
context, Mr. Nath has also defended the
impugned order of the court below by taking a
plea that there was no way requirement in law
that a party to this agreement containing
clause of arbitrating cannot seek interim
relief under Section 9 of the Act without
invoking the arbitration clause.
9. In the opinion of this Court, this
appeal is fit to be allowed only on the ground
that the impugned order amounts to virtually
allowing the application filed by the
applicant-respondents as a whole even without
hearing of the appeal, inasmuch as, for one
year which the appellant has been restrained
from interfering in the work of the
respondents likely to be done according to
their development agreement and by giving this
period of one year to the respondents only for
initiation of the arbitration proceedings.
This however is against the spirit of Section
9 of the Act, which reads as follows:-
"9. Interim measures, etc. by
court.- 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
11
court:-
(i) for the appointment of a guardian
for a minor or a person of unsound
mind for the purposes of arbitral
proceedings; or
(ii) for an interim measure of
protection in respect of any of the
following matters, namely:-
(a) the preservation, interim custody
or sale of any goods which are the
subject-matter of the arbitration
agreement;
(b) securing the amount in dispute in
the arbitration;
(c) the detention, preservation or
inspection of any property or thing
which is the subject-matter of the
dispute in arbitration, or as to which
any question may arise therein and
authorizing for any of the aforesaid
purposes any person to enter upon any
land or building in the possession of
any party, or authorizing any samples
to be taken or any observation to be
made, or experiment to be tried, which
may be necessary or expedient for the
purpose of obtaining full information
or evidence;
(d) interim injunction or the
appointment of a receiver;
(e) such other interim measure of
protection as may appear to the court
to be just and convenient,
And the court shall have the
12
same power for making orders as it has
for the purpose of, and in relation
to, any proceedings before it."
10. From a bare reading of Section
9 of the Act, it would be clear that only by
way of interim measure of protection, the
court can pass an order for the preservation
of the property even by granting interim
injunction but it cannot choose to enforce the
agreement nor it can in exercise of power
under Section 9 pass an order which may have
the effect of permanent injunction. In other
words, an interim under Section 9 can only be
by way of interim measure of protection for
preservation and/or interim custody of the
subject matter of the arbitration agreement in
terms of Section 9(ii)(a) of the Act. Thus
when Thus, when in the impugned order, the
court below has restrained the appellants from
interfering with the work of the respondents
likely to be done according to the development
agreement, it has proceeded to enforce the
development agreement between the parties. It
cannot be the scope of an order under Section
9 of the Act. Moreover, when the court below
by the impugned order has granted time limit
13
of one year to the respondents for invoking
arbitration clause and at the same time has
restrained the appellant from interfering in
the work of the petitioner, the same no longer
remains in the domain of an interim measure or
an interim injunction as contemplated under
Section 9 of the Act and acquired shape of
almost a permanent injunction.
11. This Court in fact is dismayed,
shocked and surprised as to how the court
below and from which provision of law could
grant period of one year for allowing the
respondents to invoke the arbitration clause
and initiate the arbitration proceeding.
Section 9 of the Act does not say so and
Section 11 of the Act containing the
provision with regard to appointment of
arbitrators by the Court also does not lay
down a period of one year required for
appointment of arbitrator. Thus, the embargo
created under the impugned order for a period
of one year was wholly impermissible in law
and against the provision of Section 9 of the
Act. An interim measure as envisaged under
Section 9 of the Act for protection of the
14
property in question under the development
agreement of the appellant and respondents did
not require a period of one year for invoking
the arbitration clause.
12. That apart, this Court could
have understood that if there was a case of
such emergency though there was none as per
the averments made in the application filed by
the respondents in this case, which could have
at best directed for maintaining status quo as
with regard to the land in question being the
subject matter of the development agreement
till service of notice and appearance of the
appellant but an order directly restraining
the appellant for a period of one year and in
fact till the initiation of arbitration
proceeding for the purposes of such restraint
order for its being continued in terms of
Section 17 of the Act was highly undesirable
and in fact wholly beyond the scope of Section
9 of the Act. The heavens was not going to
fall if even a third party interest was
created by the appellant, inasmuch as, the
rights of the parties even in that respect
were well covered by the provision of
15
development agreement dated 1.9.2002.
13. The subsequent discovery of the
respondents as with regard to the memorandum
of understanding dated 6.6.2008 of the
appellant with the Apna Awas Construction and
the consequential development agreement dated
16.8.2008 cannot come to the rescue of the
impugned order wherein the court below was not
even apprised with regard to these facts,
inasmuch as, the court below had passed the
impugned order without taking into
consideration these facts. The respondents, in
fact were themselves unaware about the same as
is clear from the reading of their application
under Section 9 of the Act. In that view of
the matter, while this Court has only noticed
such events from the counter affidavit filed
by the respondents but then they cannot be
looked into for justifying the impugned order,
inasmuch as, they were not the basis for
passing its order.
14. As noted above, the impugned
order in fact has virtually allowed the
application of the petitioner and has given an
all time or a permanent protection instead of
16
an interim measure of protection as
contemplated under Section 9 of the Act which
is only by way of temporary measure in the
cases in which arbitral proceeding is yet to
commence. The scope of Section 9 in fact was
gone into by the Apex Court in the case of
Firm Ashok Traders & Anr. Vs. Gurumukh Das Saluja
& Ors. reported in 2004(3)SCC 155 wherein while
holding that the reliefs which the court may
allow to a party under clause (i) & (ii) of
Section 9 of the Act flow from the power
vested in the court, exercisable by reference
to contemplated, pending or completed arbitral
proceeding, it has been laid down that the
Court is conferred with the same power for
making the specified orders as it has for the
purpose of and in relation to any proceeding
before it, though the venue of the proceeding
in relation to which the power under Section 9
is sought to be exercised is the Arbitral
Tribunal. The law in this regard to the scope
of order under Section 9 has been explained by
the Apex Court in the following words:-
"17. There are two other factors
which are weighing heavily with us and
which we proceed to record. As per the law
laid down by this Court in Sundaram Finance
17
Ltd. an application under Section 9 seeking
interim relief is maintainable even before
commencement of arbitral proceedings. What
does that mean? In Sundaram Finance Ltd.
itself the Court has said: (SCC p. 488,
para 19)
It is true that when an
application under Section 9 is filed
before the commencement of the
arbitral proceedings, there has to be
manifest intention on the part of the
applicant to take recourse to the
arbitral proceedings.
Section 9 permits application being
filed in the court before the commencement
of the arbitral proceedings but the
provision does not give any indication of
how much before. The word "before" means,
inter alia, "ahead of; in presence or sight
of; under the consideration or cognizance
of". The two events sought to be
interconnected by use of the term "before"
must have proximity of relationship by
reference to occurrence; the later event
proximately following the preceding event
as a foreseeable or "within-sight"
certainty. The party invoking Section 9 may
not have actually commenced the arbitral
proceedings but must be able to satisfy the
court that the arbitral proceedings are
actually contemplated or manifestly
intended (as Sundaram finance Ltd. puts it)
and are positively going to commence within
a reasonable time. What is a reasonable
time will depend on the facts and
circumstances of each case and the nature
of interim relief sought for would itself
18
give an indication thereof. The distance of
time must not be such as would destroy the
proximity of relationship of the two events
between which it exists and elapses. The
purpose of enacting Section 9, read in the
light of the Model Law and UNCITRAL Rules
is to provide "interim measures of
protection". The order passed by the court
should fall within the meaning of the
expression "an interim measure of
protection" as distinguished from an all-
time or permanent protection.
18. Under the A&C Act, 1996,
unlike the predecessor Act of 1940, the
Arbitral Tribunal is empowered by Section
17 of the Act to make orders amounting to
interim measures. The need for Section 9,
in spite of Section 17 having been enacted,
is that Section 17 would operate only
during the existence of the Arbitral
Tribunal and its being functional. During
that period, the power conferred on the
Arbitral Tribunal under Section 17 and the
power conferred on the court under Section
9 may overlap to some extent but so far as
the period pre- and post- the arbitral
proceedings is concerned, the party
requiring an interim measure of protection
shall have to approach only the court. The
party having succeeded in securing an
interim measure of protection before
arbitral proceedings cannot afford to sit
and sleep over the relief, conveniently
forgetting the "proximately contemplated"
or "manifestly intended" arbitral
proceedings itself. If arbitral proceedings
are not commenced within a reasonable time
19
of an order under Section 9, the
relationship between the order under
Section 9 and the arbitral proceedings
would stand snapped and the relief allowed
to the party shall cease to be an order
made "before" i.e. in contemplation of
arbitral proceedings. The court approached
by a party with an application under
Section 9, is justified in asking the party
and being told how and when the party
approaching the court proposes to commence
the arbitral proceedings. Rather, the
scheme in which Section 9 is placed
obligates the court to do so. The court may
also while passing an order under Section 9
put the party on terms and may recall the
order if the party commits breach of the
terms."
15. There is yet another compelling
reason for this Court to interfere with the
impugned order, inasmuch as, the same is also
in clear violation of the principle of natural
justice. It has to be noted that the District
Judge by his order dated 22.9.2008 while
admitting the case had already issued notice
to the appellant before transferring it to the
Additional District Judge, FTC-IV for its
disposal but the Additional District Judge,
FTC-IV without even making enquiry or
recording the fact as with regard to the
service of notice on the appellant, had
20
proceeded to pass the impugned order which
virtually has decided the whole case filed by
the respondents. The submission of Mr. Nath
that the power under Section 9 of the Act is
akin to the power of the Court under Order
XXX1X, Rule 1 & 2 of the C.P.C., inasmuch as,
Section 9 also provides for an interim measure
of protection by way of interim injunction
akin Section 9(ii)(d) of the Act has to be
also appreciated in the backdrop of the three
situations as contemplated under Section 9 of
the Act. Such exercise of power by way of
interim measure under Section 9 in itself
envisages that the same can be exercised by a
court either before commencement of
arbitration proceeding or during arbitration
proceeding or even at any time after making of
the arbitral award but before its enforcement
under Section 36 of the Act.
16. In the opinion of this Court,
whereas Section 9(ii)(b) and (c) of the Act
would only govern the cases during pendency of
arbitrary proceeding or at any time after
making of the arbitral award, the provision
under Section 9(ii)(a)(d) and (e) would be
21
applicable even before commencement of the
arbitral proceeding. A question, however,
would arise that when the parties are bound by
an agreement containing arbitration clause and
one of them approaches the court for an order
under Section 9 by way of interim measure even
before invoking arbitration clause and/or
commencement of the arbitral proceedings, can
the court proceed to decide the matter even
without notice to the other party? The answer
in fact again is found under Section 9 of the
Act itself where the court has been vested
with the same power for making orders as it
has for the purposes and in relation to any
proceeding before it. In other words as even
in other proceedings including a proceeding
for grant of ad-interim injunction an order
cannot be passed without affording an
opportunity of hearing to the other party, the
court even for exercise of power under Section
9(ii((a)(d( & (e) of the Act is mandatorily
required to give opportunity of hearing to the
other party against whom relief of interim
measure has been sought under Section 9 of the
Act.
22
17. This aspect of the matter in
fact has been settled by the Apex Court in the
case of Arvind Construction Co. (P) Ltd. Vs.
Kalinga Mining Corporation & Ors. reported in
2007(6)SCC 798, relevant portion whereof reads
as follows:-
"-----The argument that the
power under Section 9 of the Act is
independent of the Specific Relief Act
or that the restrictions placed by the
Specific Relief Act cannot control the
exercise of power under Section 9 of
the Act cannot prima facie be accepted.
The reliance placed on Firm Ashok
Traders v. Gurumukh Das Saluja in that
behalf does not also help much, since
this Court in that case did not answer
that question finally but prima facie
felt that the objection based on
Section 69(3) of the Partnership Act
may not stand in the way of a party to
an arbitration agreement moving the
court under Section 9 of the Act. The
power under Section 9 is conferred on
the District Court. No special
procedure is prescribed by the Act in
that behalf. It is also clarified that
the court entertaining an application
under Section 9 of the Act shall have
the same power for making orders as it
has for the purpose and in relation to
any proceedings before it. Prima facie,
23
it appears that the general rules that
governed the court while considering
the grant of an interim injunction at
the threshold are attracted even while
dealing with an application under
Section 9 of the Act. There is also the
principle that when a power is
conferred under a special statute and
it is conferred on an ordinary court of
the land, without laying down any
special condition for exercise of that
power, the general rules of procedure
of that court would apply. The Act does
not prima facie purport to keep out the
provisions of the Specific Relief Act
from consideration. No doubt, a view
that exercise of power under Section 9
of the Act is not controlled by the
Specific Relief Act has been taken by
the Madhya Pradesh High Court. The
power under Section 9 of the Act is not
controlled by order 18 Rule 5of the
Code of Civil Procedure is a view taken
by the High Court of Bombay. But, how
far these decisions are correct,
requires to be considered in an
appropriate case. Suffice it to say
that on the basis of the submissions
made in this case, we are not inclined
to answer that question finally. But,
we may indicate that we are prima facie
inclined to the view that exercise of
power under Section 9 of the Act must
be based on well-recognized principles
24
governing the grant of interim
injunctions and other orders of interim
protection or the appointment of a
Receiver.----"
18. The reliance placed by Mr. Nath
on the judgment of the Apex Court in the case
of M/s Sundaram Finance Ltd. Vs. M/s NEPC India
Ltd. reported in AIR 1999 SC 565 is also
misplaced, inasmuch as, in paragraph no.20, it
has been clarified that when an application
under Section 9 of the Act is filed before the
commencement of the arbitral proceeding, there
has to be manifest intention on the part of
the applicant to take recourse to the arbitral
proceeding if, at the time when the
application under Section 9 of the Act is
filed, the proceedings have not commenced
under Section 21 of the 1996 Act.
19. The concept of issuance of
notice under Section 21 of the Act is
altogether different than a notice for
exercise of power under Section 9 of the Act
against a party against whom interim measure
is sought by the other party. Section 21 of
the Act talks with regard to the commencement
of the arbitral proceedings and in the present
25
case, it is an admitted position that neither
there was any written request by the
respondent to the appellant to take recourse
to arbitration proceedings nor such of the
respondents intention could be gathered from
any averment made by them in their application
under Section 9 of the Act before rushing to
the court for grant of interim protection. In
the entire petition filed before the court
below under Section 9 of the Act, there is no
whisper that the respondents had either
invoked the arbitration clause of the
arbitration or there was such an intention on
their part. Mr. Nath in fact very fairly had
also conceded the absence of such written
notice by the respondent to the appellant. He,
however, has tried to place his reliance on
paragraph no.16 of the application to contend
that the intention of the respondents as with
regard to invoking arbitration clause can be
inferred from the same. In fairness to the
aforesaid submission of Mr. Nath, it would be
necessary to also quote paragraph no.16 of the
application which reads as follows:-
"16. That the applicants persuaded the
opposite party to resolve the dispute through
26
arbitration but some how or other, he is
avoiding the same. The applicants are going
to take steps for initiation of arbitration
proceeding and appointment of Arbitrator, so
that the dispute be resolved amicably."
20. From reading of the aforesaid
paragraph, it would be clear that the
initiation of arbitration proceeding can only
be made when a request for the dispute to be
referred to arbitration is received by the
respondents and therefore, such request for
reference to the arbitrator has to be in
writing which is being capable to be received
by the another party. This Court, therefore,
is satisfied that the respondents had even
before communicating the nature of dispute
muchless their intention to refer the matter
to the arbitrator had taken a hasty step by
filing an application under Section 9 of the
Act. The manifest intention of a party of
taking recourse to arbitration in fact can be
gathered only when there is a dispute in
existence and a demand by a party to the other
for reference of the dispute to the
arbitrator. In the present case, when not a
word was said by the respondents in their
27
application under Section 9 of the Act as with
regard to the execution of either the
memorandum of understanding or the agreement
of the appellant with the Apna Awas
Construction, there was in fact also no
dispute in existence and as quoted above,
everything was only speculative in nature on
the basis of which the respondents had made
only on evasive statement as with regard to
starting negotiation by the appellant with
other unknown persons for creating third party
interest. Such speculative statement was
therefore not capable of being translated into
an impugned order of the nature which has been
passed in this case by the court below.
21. That apart, when this Court
would find that the court below did not even
look into the aspect that the notice issued to
the appellants in the application filed by the
respondents under Section 9 had not been
served and consequently, the impugned order
was passed by acting upon the one sided
version of the respondent and without hearing
the appellants, it would find it very
difficult to sustain the impugned order. It is
28
quite elementary that no court would pass an
order prejudicial to the interest of a party
or a person without at least affording an
opportunity of hearing. In the present case,
the fact that the whole application under
Section 9 was decided within a span of ten
days from the date of its being admitted by
itself would be demonstrative of the fact that
the respondents have procured the order from
the court without ensuring service of notice
on the appellants.
22. Thus on the basis of aforesaid
factual and legal analysis, this Court is
satisfied with the impugned order which has
been passed even without hearing the appellant
imposing more or less a permanent nature of
restraint against him, cannot be sustained
being in excess of and contrary to the
provisions of Section 9 of the Act.
23. At this stage, counsel for the
respondents have submitted that a request case
no. 4/2009 has been also recently filed by the
respondents in this Court in the month of
March, 2009 for appointment of arbitrator in
terms of Section 11 of the Act and therefore
29
the impugned order should not be interfered
with till the disposal of the Request Case. In
the considered opinion of this Court while it
is not called upon to say any thing about the
merit of such claim of the respondents in
pressing their application under Section 11 of
the Act in the aforesaid request case no.
4/2009, this much becomes clear that the
respondents have invoked the arbitration
clause as with regard to the dispute in hand
relating to appellant entering into another
development agreement with Apna Awas
Construction on 16.8.2008 which may amount to
termination of the agreement of the appellant
with the respondents. The respondents in their
application under Section 9 of the Act stated
that they had advanced certain money to the
appellant as also they had collected certain
money by way of advance from third parties for
sale of flats in the proposed multistoried
buildings. They had also stated that building
materials have been collected by the
respondents for making construction.
24. Considering all these aspects
of the matter, it would be necessary for this
30
Court to provide some sort of interim
protection till the final decision on the
pending request case no. 4 of 2009 is taken by
this Court, inasmuch as, if an arbitrator is
appointed on the order of this Court, he will
have thereafter sufficient powers to pass any
interim order under Section 17 of the Act. On
the other hand, if the prayer of the
respondents for appointment of arbitrator is
rejected, he may take recourse under ordinary
law for claiming damage against the appellant.
25. This Court in the light of the
aforesaid admitted facts as also by taking
into account the judgment of the Kolkata High
Court in the case of Partha Sarathi Ghosh Vs.
Maa Construction & Ors. reported in AIR 2008
Kolkata 171 having almost similar facts as with
regard to situation arising out of a
development agreement between the owner of the
land and the builder, would direct the parties
to maintain status quo till the disposal of
request case no. 4 of 2009. In the aforesaid
period, neither the appellant nor the
respondents shall change the physical nature
of the land in question in any manner which is
31
the subject matter of their development
agreement dated 1.9.2002.
26. With the aforementioned
observations and directions, this appeal is
allowed and the impugned order passed by the
court below is set aside. There would be,
however, no order as to costs.
Patna High Court (Mihir Kumar Jha, J.)
Dated 16th April, 2009
AFR/R/Rishi