Case Note & Summary
The petitioners, four individuals, entered into a Memorandum of Understanding (MOU) with the respondent, a developer, on 29 July 2011 for development of property. Under the MOU, the petitioners agreed to construct rehabilitation and free sale buildings at their own cost, in consideration for which they would receive 53% to 55% of the constructed area. The petitioners also agreed to pay Rs.1.5 crores per month to the respondent for transit accommodation and permissions. Clause 6 of the MOU provided that if the petitioners defaulted in payment, the respondent would refund the entire amount received plus construction costs within 120 days. The petitioners paid Rs.12.5 crores but alleged that the respondent failed to obtain necessary permissions, leading to disputes. The petitioners filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996, seeking an order directing the respondent to deposit Rs.12.5 crores with interest or furnish security, and for appointment of a Court Receiver. The court considered the submissions and held that a prima facie case exists, balance of convenience is in favour of the petitioners, and irreparable loss would be caused if interim relief is not granted. The court directed the respondent to deposit Rs.12.5 crores in court within four weeks or furnish bank guarantee, and appointed a Court Receiver for the property. The petition was disposed of accordingly.
Headnote
A) Arbitration - Interim Measures - Section 9 of the Arbitration and Conciliation Act, 1996 - Prima Facie Case - The petitioners sought deposit of Rs.12.5 crores and appointment of Court Receiver based on an MOU for development of property. The court held that a prima facie case exists for grant of interim relief to protect the petitioners' interest pending arbitration. (Paras 1-20)
B) Arbitration - Balance of Convenience - Section 9 of the Arbitration and Conciliation Act, 1996 - The court found that the balance of convenience is in favour of the petitioners as the respondent may dissipate assets, causing irreparable loss. (Paras 15-25)
C) Arbitration - Irreparable Loss - Section 9 of the Arbitration and Conciliation Act, 1996 - The court held that if interim relief is not granted, the petitioners would suffer irreparable loss as the amount advanced may not be recoverable. (Paras 20-30)
Issue of Consideration
Whether the petitioners are entitled to an interim order under Section 9 of the Arbitration and Conciliation Act, 1996, directing the respondent to deposit Rs.12.5 crores or furnish security, and for appointment of a Court Receiver in respect of the property.
Final Decision
The court allowed the petition and directed the respondent to deposit Rs.12.5 crores in this Court within four weeks or furnish a bank guarantee of like amount. The Court Receiver was appointed in respect of the property described in Exhibit A to the petition. The petition was disposed of with liberty to apply for further relief in the arbitration.
Law Points
- Section 9 of the Arbitration and Conciliation Act
- 1996
- Interim measures
- Prima facie case
- Balance of convenience
- Irreparable loss
Case Details
2013 LawText (BOM) (04) 50
Arbitration Petition No. 221 of 2013
Mr. D.D. Madan, Senior Advocate a/w. Mr. Naushad Engineer i/b. M/s. Dhruve Liladhar & Co. for Petitioners; Mr. Nitin Thakkar, Senior Advocate a/w. Ms. Tanvi Gandhi and Mr. Samish Gala i/b. M/s. Markand Gandhi & Co. for Respondents
Mr. Badal Mittal, Mr. Sunil Mittal, Mr. Kishore Mittal, Mr. Aasim Merchant
Lakadawala Developers Private Limited
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Nature of Litigation
Petition under Section 9 of the Arbitration and Conciliation Act, 1996 seeking interim measures pending arbitration.
Remedy Sought
Petitioners seek an order directing respondent to deposit Rs.12.5 crores with interest or furnish security, and appointment of Court Receiver over the property.
Filing Reason
Dispute arising from MOU dated 29 July 2011 regarding development of property; petitioners paid Rs.12.5 crores but respondent allegedly failed to obtain permissions; petitioners seek refund under Clause 6.
Issues
Whether the petitioners have made out a prima facie case for grant of interim relief under Section 9 of the Arbitration and Conciliation Act, 1996.
Whether the balance of convenience lies in favour of the petitioners and whether they would suffer irreparable loss if interim relief is not granted.
Submissions/Arguments
Petitioners argued that they paid Rs.12.5 crores under the MOU, but respondent failed to obtain permissions, entitling them to refund under Clause 6.
Respondent contended that the petitioners defaulted in monthly payments and that the MOU was terminated, denying any liability to refund.
Ratio Decidendi
Under Section 9 of the Arbitration and Conciliation Act, 1996, the court can grant interim measures to protect the subject matter of the arbitration. A prima facie case, balance of convenience, and irreparable loss are relevant considerations. Here, the petitioners established a prima facie case for refund under Clause 6 of the MOU, and the balance of convenience favoured granting relief to prevent dissipation of assets.
Judgment Excerpts
By this petition filed under section 9 of the Arbitration and Conciliation Act, 1996, the petitioners seek an order against the respondent to deposit a sum of Rs.12.5 crores alongwith interest or such other solvent security to the extent of the said sum with interest and for appointment of the Court Receiver in respect of the property described in Ex.A and injunction in respect thereof.
Clause 6 of the said MOU provided that in the event of default on the part of the petitioners in making payment of the said amount of Rs.1.50 crores every month on or before the 7th day of every month then in that event, the respondent shall refund the entire amount received by the respondent from the petitioners and the costs of construction incurred by petitioners on the property till the date of default within 120 days from the date of respondent entering into agreement or arrangement.
Procedural History
The petition was filed under Section 9 of the Arbitration and Conciliation Act, 1996. It was reserved on 24 April 2013 and pronounced on 29 April 2013.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 9
