2023 (7) TMI 1562 - HC - Indian Laws

Arbitrator's interim order on Joint Venture Agreement specific performance upheld, status quo maintained on property title

Delhi HC dismissed appeal challenging arbitrator's interim order regarding Joint Venture Agreement specific performance. Court upheld arbitrator's ... Joint Venture Agreement (JVA) is capable of specific performance or not - alleged failure on the part of the respondent nos.2 to 8 to execute the sale deeds, as contemplated in the Joint Venture Agreement - HELD THAT:- The impugned order does directs the appellant and the respondent nos.2 to 8 to maintain status quo in respect of title and possession of the land in question and refrain from changing the character of the property so that no further third party right/equity are created in respect thereof. No fault whatsoever can be found with these directions - Further, the impugned order directs that if the appellant chooses to carry on factory operations or other commercial activity on the three acres of land comprising of the property in question, it will not be open to the appellant to claim any special equity by reasons thereof. The learned Sole Arbitrator has clarified in the impugned order itself that all the observations made therein are prima facie and shall not operate to the prejudice of any of the parties at any subsequent stage of proceeding. The entire matter is still at large before the learned Sole Arbitrator. It has been informed by respective counsel, that the parties are in the process of adducing evidence before the learned Sole Arbitrator. The impugned order does not foreclose the right of any of the parties to the arbitration to place relevant material on record and/or take every contention as may be available under law before the learned Sole Arbitrator, at the time of final arguments. As such, the various legal contentions raised by the learned counsel for the appellant regarding the Joint Venture Agreement being not capable of specific performance and/or as to whether the appellant’s rights, as an alleged bonafide purchaser can be interdicted or not, are all issues which are yet to be determined by the learned Sole Arbitrator. The law is also well settled that this court while exercising jurisdiction under Section 37 of the Act would be loathe to interfere with an interim measure of protection granted by an Arbitral Tribunal, particularly when the order passed under Section 17 is well reasoned and based on a thorough and minute examination of the matter, as in the present case. Conclusion - JVA was capable of specific performance, subject to the final determination by the arbitrator. Appeal dismissed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment include:Whether the Joint Venture Agreement (JVA) dated 30.08.2019 is capable of specific performance.Whether the interim order under Section 17 of the Arbitration and Conciliation Act, 1996, directing the maintenance of status quo on the disputed property, was justified.Whether the appellant, as a bona fide purchaser, has rights that supersede those of the respondent no.1 under the JVA.Whether the respondent no.1 was entitled to injunctive relief despite alleged delay and laches.Whether the balance of convenience and irreparable harm considerations favored the respondent no.1 or the appellant.2. ISSUE-WISE DETAILED ANALYSISIssue: Specific Performance of the JVAThe JVA was challenged on the grounds that it was an agreement to enter into a partnership, which is generally not specifically enforceable. The appellant argued that the JVA was determinable and incapable of specific performance under Sections 14(b) and (d) of the Specific Relief Act, 1963. However, the court noted that the agreement had not been terminated by the respondent nos.2 to 8, and the terms of the JVA were clear and precise, suggesting a subsisting contract. The court referenced the amendment of Section 10 of the Specific Relief Act, which mandates specific performance of contracts, subject to certain provisions, indicating that specific performance is no longer discretionary.Issue: Interim Order under Section 17 of the ActThe interim order directed the maintenance of status quo concerning the title and possession of the disputed property. The appellant contended that such an order caused grave hardship and was unjustified, given their status as a bona fide purchaser. The court found that the order was necessary to protect the subject matter of arbitration and prevent the creation of third-party rights that could render the arbitration proceedings infructuous. The court emphasized that the order was based on a thorough examination of the facts and was not arbitrary or unconscionable.Issue: Bona Fide Purchaser Status of the AppellantThe appellant claimed to be a bona fide purchaser who had invested significantly in the property. The court observed that the sale deeds in favor of the appellant were executed after the arbitration proceedings had commenced, suggesting collusion between the appellant and respondent nos.2 to 8. The court held that the appellant's rights as a purchaser were subservient to those of the respondent no.1 under the doctrine of lis pendens as per Section 52 of the Transfer of Property Act.Issue: Delay and LachesThe appellant argued that the respondent no.1 delayed invoking arbitration and seeking interim relief, which should preclude injunctive relief. The court found no undue delay, noting that the respondent no.1 acted promptly after discovering the transfer of property and filed for interim measures in a timely manner.Issue: Balance of Convenience and Irreparable HarmThe court evaluated the balance of convenience and irreparable harm, concluding that allowing the appellant to alter the status quo would irreparably harm the respondent no.1's rights under the JVA. The court noted that the appellant's investments were made with knowledge of the ongoing arbitration, and thus, did not outweigh the respondent no.1's contractual rights.3. SIGNIFICANT HOLDINGSThe court upheld the interim order under Section 17, emphasizing the necessity of maintaining the status quo to protect the integrity of the arbitration process. It affirmed that the JVA was capable of specific performance, subject to the final determination by the arbitrator. The court dismissed the appeal, reinforcing the principle that interim orders by arbitral tribunals should not be interfered with unless palpably arbitrary or unconscionable.Key legal reasoning included the interpretation of the Specific Relief Act post-amendment, which mandates specific performance, and the application of the doctrine of lis pendens to prioritize the respondent no.1's rights over those of the appellant. The court reiterated that the interim order was based on a prima facie assessment and did not prejudice the final outcome of the arbitration.