Case Note & Summary
The appellant, M/s. Universals Enterprises, filed an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, against an order of the learned Single Judge dated 28.01.2016, which refused to grant ad-interim relief in a Section 9 petition. The appellant had entered into an agreement dated 29.12.2008 with the respondent, Deluxe Laboratories Pvt. Ltd., for a joint venture to construct a building on a plot in Worli, Mumbai. Under the agreement, the appellant was entitled to 40% of the total built-up area, aggregating to 73,200 sq. ft. The respondent failed to comply with the agreement despite a legal notice dated 15.03.2014, prompting the appellant to file a Section 9 petition seeking an injunction restraining the respondent from selling or creating third-party rights over the flats. The learned Single Judge impounded the agreement for insufficient stamp duty and directed its adjudication by the Collector of Stamp, but did not grant any ad-interim relief. The appellant contended that the Single Judge erred in not granting interim protection pending the stamp duty adjudication. The Division Bench held that the appeal was maintainable under Section 37, as the refusal of ad-interim relief amounted to a refusal of interim relief. The court noted that the agreement was not void but only impounded, and the arbitration agreement remained valid. The court found that the appellant had made out a prima facie case, the balance of convenience was in favor of granting injunction, and irreparable loss would be caused if the respondent alienated the property. Accordingly, the court allowed the appeal, set aside the impugned order to the extent it refused ad-interim relief, and granted an injunction restraining the respondent from selling, disposing of, or creating third-party rights over the flats in the building, pending the disposal of the Section 9 petition. The court also directed the Prothonotary to forward the agreement to the Collector for stamp duty adjudication and listed the matter after ten weeks.
Headnote
A) Arbitration Law - Interim Relief under Section 9 - Maintainability of Appeal under Section 37 - The appeal under Section 37 of the Arbitration and Conciliation Act, 1996 is maintainable against an order refusing ad-interim relief under Section 9. The court held that the learned Single Judge ought to have considered the grant of ad-interim relief pending adjudication of stamp duty, as the agreement was not void but only impounded for stamp duty. (Paras 2-4) B) Stamp Act - Impounding of Agreement - Effect on Arbitration Proceedings - An agreement that is insufficiently stamped is not void ab initio but is inadmissible in evidence until stamp duty and penalty are paid. The court held that the impounding of the agreement does not preclude the court from granting interim relief under Section 9 of the Arbitration Act, as the arbitration agreement itself is not rendered invalid. (Paras 5-7) C) Arbitration Law - Prima Facie Case for Interim Relief - The appellant made out a prima facie case based on the agreement dated 29.12.2008, which entitled the appellant to 40% of the built-up area. The balance of convenience was in favor of granting injunction to prevent alienation of flats pending arbitration, as irreparable loss would be caused if the respondent disposed of the property. (Paras 8-10)
Issue of Consideration
Whether the learned Single Judge erred in not granting ad-interim relief under Section 9 of the Arbitration and Conciliation Act, 1996, pending adjudication of stamp duty on the agreement, and whether the appeal under Section 37 is maintainable.
Final Decision
The appeal is allowed. The impugned order dated 28.01.2016 is set aside to the extent it refused ad-interim relief. The respondent is restrained from selling, disposing of, or creating third-party rights over the flats in the building constructed on the plot bearing C.S. No. 136(part), 2/136 (part) and 110 (part) of Lower Parel Division at Manjrekar Marg, Gandhi Nagar, Worli, Mumbai 400 018, pending the disposal of Arbitration Petition No.1279 of 2015. The Prothonotary is directed to forward the authenticated copy of the agreement to the Collector of Stamp, Mumbai, for adjudication of stamp duty and penalty within one week. The matter to be placed before the learned Single Judge after ten weeks.
Law Points
- Section 9 of Arbitration and Conciliation Act
- 1996
- Section 37 of Arbitration and Conciliation Act
- Maharashtra Stamp Act
- Interim relief pending arbitration
- Impounding of unstamped agreement
- Prima facie case
- Balance of convenience
- Irreparable loss
