IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 11.03.2011 CORAM THE HON'BLE MRS. JUSTICE R.BANUMATHI and THE HON'BLE MR. JUSTICE M.M.SUNDRESH O.S.A.NOS.25 and 26 of 2011 1.Mr.V.Sekar 2.M/s.Yercaud Coffee Curing Works Limited, rep.by its Managing Director, Mr.V.Sekar Regd.Office at No.3/22, Kondappanaickenpatti Salem – 636 008. 3.Mr.S.Krishnan .... Appellants in both O.S.As Vs. M/s.Akash Housing, a Partnership firm, represented by its Partner Mr.Sureshkumar No.15-D, Valmiki Street T.Nagar, Chennai- 600 017. .... Respondent in both O.S.As Prayer: Original Side Appeal No.25 of 2011 is filed under Order XXXVI Rule 9 of Original Side Rules read with Clause 15 of Letters Patent against the order dated 3.12.2010 made in O.A.No.40 of 2010 on the file of this Court. Original Side Appeal No.26 of 2011 is filed under Order XXXVI Rule 9 of Original Side Rules read with Clause 15 of Letters Patent against the order dated 3.12.2010 made in O.A.No.41 of 2010 on the file of this Court. For Appellants : Mr.K.M.Vijayan,Sr.Counsel for M/s.K.M.Vijayan Associates For Respondent : Mr.V.C.Janarthanan https://hcservices.ecourts.gov.in/hcservices/ COMMON JUDGMENT R.BANUMATHI.,J. These two appeals arise out of the order dated 3.12.2010 made in O.A.Nos.40 and 41 of 2010 on the file of this Court, whereby the learned single Judge has allowed application – O.A.No.40 of 2010 filed under Section 9 of Arbitration and Conciliation Act, 1996 and also the other application – O.A.No.41 of 2010 granting interim injunction restraining the appellants from in any manner alienating, encumbering or otherwise dealing with the schedule properties situated at Kondappanaickenpatti village, Salem Taluk. 2. The brief facts are that the appellants are the owners of the lands measuring 4.62 acres (S.Nos.175/3B, 177/1, 178, 180/2A); 12.44 acres (S.Nos.177/3, 179, 180/8) and 1.26 acres of land (S.Nos.177/2, 180/7) situated in Kondappanaickenpatti village, Salem Taluk. The appellants and respondent – Akash Housing represented by its Partner Suresh Kumar entered into a joint development agreement dated 17.5.2006 under which the respondent undertook development activities such as levelling/filling/clearing/cutting of trees and erection of compound wall in the lands measuring 18.32 acres. The Managing Director of M/s.Vijay Shanthi Builders represented by its Managing Director had entered into an independent and separate agreement dated 17.5.2006 with the appellants and the said Company has undertaken to develop the integrated township/gated community by forming a lay out and constructing row houses for the purpose of sale of houses to third parties. In both the agreements, parties are stated to have agreed to share the profits in the ratio of 65:35. 3. Certain modifications to the joint development were considered necessary, which culminated in the execution of supplementary agreement on 11.6.2008. Total consideration for the works to be done by the respondent/Akash Housing was earlier fixed at Rs.25,00,000/- per acre and by the said supplementary agreement, the same was modified. The case of respondent is that in terms of clause 5 of the supplementary agreement dated 11.6.2008, the appellants shall pay the entire consideration of Rs.4,91,17,500/- within 24 months from the date of supplementary agreement. There arose certain disputes and difference of opinion between the parties and the parties resorted to resolve their disputes through conciliation and a Memorandum of Understanding (MOU) came to be entered into between the appellants and the respondents in the presence of Senior Counsel Mr.K.M.Vijayan on 22.8.2009. 4. Case of respondent is that in pursuance of the said MOU dated 22.8.2009 they proceeded to undertake the work in the schedule mentioned property. On 5.1.2010 the respondent came to know that the appellants have cancelled the power of attorney executed by them on https://hcservices.ecourts.gov.in/hcservices/ 13.10.2009 in favour of Vijay Shanthi Builders and that the appellants are attempting to sell the properties directly to third parties to get rid off the obligations to pay the amount of a sum of Rs.5 Crores owned by them under the supplementary agreement dated 11.6.2008. As per the development agreement dated 17.5.2006, in the event of any disagreement between the parties, the same shall be settled by arbitration as per the Arbitration and Conciliation Act, 1996. Alleging that the appellants are taking steps to alienate the property in favour of the third parties and that the respondent is contemplating arbitration proceedings, the respondent had filed Petition under Section 9 of the Arbitration and Conciliation Act, 1996, (hereinafter referred to as "1996 Act"). In the said petition, the respondent had sought for injunction restraining the appellants from alienating the property. 5. The appellants have filed counter stating that the respondent having filed application under Section 9 of the 1996 Act, M/s.Vijay Shanthi Builders has also filed Civil Suit in C.S.No.36 of 2010 on the very same cause of action. It is averred that the appellants had already sent communications to invoke arbitration and conciliation proceedings and without even replying to the same the respondent had filed the application under Section 9 of the 1996 Act. The appellants further averred that the respondent had not invoked the arbitration clause and therefore the benefit of Section 9 of the 1996 Act should not be allowed to go to the respondent for obtaining interim orders. The appellants further averred that the respondent did not commence the development work nearly for three years even after the time schedule and the third party purchasers with the appellants have started demanding the return of advance money and the appellants, being land owners and very reputed persons in Salem District, are put to lot of embarrassment with third party agreement holders. According to the appellants, only due to the failure on the part of Vijay Shanthi Builders to commence the work, the power of attorney was cancelled on 5.1.2010. According to the Appellants, the respondent split the work into two agreements only for record sake and income-tax and other purposes. The crux of the two agreements is 65:35 ratio between the respondent and the appellants and no separate consideration for any development was separately agreed. Without invoking the arbitration clause, the respondent is not entitled to the interim injunction. 6. The learned single Judge held that in pursuance to the joint development agreement and subsequent agreement entered into between the parties and also in terms of MOU dated 22.8.2009, the respondent had put up compound wall and levelled the ground for the purpose of putting up construction. Placing reliance upon JINDAL VIJAYANAGAR STEEL (JSW STEEL LTD.) VS. JINDAL PRAXAIR OXYGEN CO.,LTD. ((2006) 11 SCC 521), the learned single Judge held that the Chartered High Courts including the Madras High Court could entertain the arbitral proceedings in the High Court, provided a part of cause of action has arisen within the territorial jurisdiction of the Court. Observing that non-appointment https://hcservices.ecourts.gov.in/hcservices/ of arbitrator itself is not sufficient to refuse the relief and pointing out that there is likelihood of appellants entering into the alienated properties or entering into joint development agreement with third parties, the learned single Judge allowed O.A.Nos.40 and 41 of 2010 and granted injunction. The learned single Judge dismissed the application – A.No.134 of 2010 for appointment of Commissioner. However, the learned single Judge directed the respondent to initiate arbitration proceedings within one month from the date of the order. Challenging the said order, the present appeals are filed. 7. Challenging the impugned orders, Mr.K.M.Vijayan, learned Senior Counsel appearing for the appellants interalia made the following submissions: ●The joint development agreement and supplementary agreement relates to immovable properties situated in Kondappanaickenpatti village, Salem District. Since the dispute relates to immovable properties, Madras High Court is not the principal civil Court of Original Jurisdiction and petition filed under Section 9 is not maintainable in the Original Side of Madras High Court. ●There is no manifest intention on the part of the respondent to have recourse to arbitration proceedings. ●Respondent has initiated two parallel proceedings by filing suit for specific performance in C.S.No.36 of 2010 and simultaneously filing the application under Section 9 of the 1996 Act and the respondent represented by its Partner Suresh Kumar is pursuing two parallel proceedings and grant of interim injunction would frustrate the very arbitration. 8. Countering the argument, the learned counsel for the respondent Mr.V.C.Janarthanan interalia made the following submissions: ●Even though the immovable properties are situated in Kondappanaickenpatti village, Salem District, under Section 2(1)(e) of the 1996 Act, principal civil Court of original jurisdiction is High Court, Madras. ●Suit for land has got nothing to do with Section 9 of the Arbitration Act, the amount payable to the respondent is quantifiable and therefore de hors the suit filed by Vijay Santhi Builders, application filed under Section 9 is maintainable. 9. The appellants are the land owners in S.Nos.175/3B, 177/1, 178, 180/2A, 177/3, 179, 180/8, 177/2 and 180/7 situated in Kondappanaickenpatti village, Salem Taluk. The respondent – Akash Housing represented by its Partner Mr.Suresh Kumar entered into a development agreement on 17.5.2006 under which the respondent agreed to carry out the developmental activities such as https://hcservices.ecourts.gov.in/hcservices/ levelling/filling/clearing/cutting of trees and construction of compound wall in the above said immovable property. On the same day i.e., 17.5.2006, M/s.Vijay Shanthi Builders represented by its Managing Director entered into a joint development agreement under which M/s.Vijay Shanthi Builders agreed to develop the properties – prepare layout plans, plan for construction, co-ordinate with the various agencies for the purposes of obtaining necessary permits for constructing villas/bungalows that are to be constructed over the property. In both the agreements, sharing of profit between the appellants and the respondent from out of the property was agreed to be shared at the ratio of 65:35 basis. In both the development agreements, the parties agreed that 'in the event of any disagreement/dispute between the parties, the same shall be resolved through arbitration in terms of Arbitration and Conciliation Act, 1996, the venue of arbitration being Chennai. By the supplementary agreement dated 11.6.2008, the terms of agreement were modified. As per the terms of the supplementary agreement, the appellants has to pay a sum of Rs.4,91,17,500/- towards clearing of trees, bushes and constructing compound wall covering the land. Subsequently there was a MOU entered between the parties dated 22.8.2009. There was also exchange of E-Mails between the parties. 10. Re. Contention – Jurisdiction of Original Side of High Court, Madras:- Contending that the joint development agreement pertains to the dispute in respect of immovable property, learned Senior Counsel Mr.K.M.Vijayan contended that the single Judge erred in rejecting the contention of the appellants that Original Side of High Court, Madras had no jurisdiction to entertain a petition under Section 9. The learned Senior Counsel inter alia made the following submissions: ●Madras High Court had no jurisdiction to entertain an application to enforce a contract of sale of immovable property wholly outside the jurisdiction and therefore it cannot also entertain any petition under Section 9 of the Arbitration Act, where it deals with immovable properties situated outside the original jurisdiction of the High Court. ●Jurisdiction under Section 2(1)(e) of the Arbitration Act depend upon a place, where the parties reside, dwell or carry on business, but has jurisdiction to decide the question where the subject matter of the dispute is situated. Section 2(1)(e) speaks about the "principal civil Court of Original Jurisdiction" forming subject matter of the arbitration only if the same had been subject matter of the suit. ●The learned single judge ought to have appreciated that for a Court to exercise jurisdiction under Section 9 of the https://hcservices.ecourts.gov.in/hcservices/ Act, "the Court" must be a "Court" as defined under Section 2(1)(e) of the Act and where the cause of action has arisen. 11. Contending that the parties have agreed that the venue of arbitration shall be in Chennai, the learned counsel for respondent Mr.V.C.Janarthanan submitted that the dispute raised by both parties emanates from the development agreement dated 17.5.2006, supplementary agreement dated 11.6.2008 and also MOU dated 22.8.2009, which were executed in Chennai and therefore Original Side of the Madras High Court has jurisdiction to entertain petition under Section 9. In support of his contention, the learned counsel placed reliance upon JINDAL VIJAYANAGAR STEEL (JSW STEEL LTD.) VS. JINDAL PRAXAIR OXYGEN CO.,LTD. ((2006) 11 SCC 521) and DYNASTY DEVELOPERS PVT.LTD. VS. JUMBO WORLD HOLDINGS LIMITED, (2008(1) CTC 580). Learned counsel further contended that respondent – Akash Housing has independent claim quantified as claim Rs.4,91,17,500/- in the supplemental agreement and therefore the dispute cannot be said to be pertaining to the immovable properties. 12. We have carefully considered the rival contentions. Arbitration Agreement is required to be filed in a Court having jurisdiction. "Court" has been defined in the Arbitration Act, 1996 under Section 2(1)(e), which reads as follows: (e) "Court" means the principal civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any civil court of a grade inferior to such principal civil Court, or any Court of Small Causes." On a plain reading of the definition of “court” under Section 2(1) (e) of the 1996 Act, it is evident that the arbitration petition can be filed before: (i) A Principal Civil Court of original jurisdiction in district; (ii) A High Court in exercise of its original civil jurisdiction… having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit. 13. Section 2(1)(e) of Arbitration Act, 1996 expressly recognises that not only District Courts, but also the High Courts exercising original civil jurisdiction would have jurisdiction under 1996 Act. The Act thus recognises that the Chartered High Courts exercising original https://hcservices.ecourts.gov.in/hcservices/ civil jurisdiction would exercise the jurisdiction. While considering the question of jurisdiction, we are concerned with the original jurisdiction of the Madras High Court, which is a Chartered High Court. The High Court gets its original jurisdiction by virtue of clause 12 of "Letters patent", which reads as under: "Original jurisdictions as to suits.—And we do further ordain that the said High Court of Judicature at Madras, in exercise of its ordinary original civil jurisdiction, shall be empowered to receive, try, and determine suits of every description if, in the case of suits for land or other immovable property, such land or property shall be situated, or in all other cases, if the cause of action shall have arisen, either wholly, or, in case the leave of the Court shall have been first obtained, in part, within the local limits of the ordinary original jurisdiction of the said High Court: or if the defendant at the time of the commencement of the suit shall dwell or carry on business, or personally work for gain, within such limits; except that the said High Court shall not have such original jurisdiction in cases falling within the jurisdiction of the Small Cause Court at Madras, in which the debt or damage, or value of the property sued for does not exceed hundred rupees.” 14. On behalf of the appellants, placing reliance upon judgment of a learned single judge - KIRLOSKAR CONSTRUCTION AND ENGINEER LTD. VS. FAST TRACK ASSOCIATES, (2009(5) CTC 97), the learned Senior Counsel Mr.K.M.Vijayan submitted that merely because the parties agreed to have arbitration at Chennai cannot confer jurisdiction of Madras High Court under Section 9 unless the dispute involved in contract, which is the subject matter of arbitration, can be decided by way of a suit within the jurisdiction of that Court. The contention of the appellants is that since the dispute pertains to immovable properties, under Section 2(1)(e), the Madras High Court would not have the jurisdiction to decide the question under arbitration agreement. The learned counsel would contend that clause 12 of Letters Patent makes a clear distinction between immovable properties and other disputes. According to the appellants, since the entire agreement relates to land and since Section 2(1)(e) stipulates "principal civil Court of original jurisdiction", the Court must have jurisdiction to decide the question as a subject matter of suit and the original side of Madras High Court cannot entertain petition under Section 9 of the Act pertaining to the immovable properties situated in Salem District. 15. In KIRLOSKAR CONSTRUCTION AND ENGINEER LTD. VS. FAST TRACK ASSOCIATES, (2009(5) CTC 97), the subject matter of arbitration agreement was relating to laying of road in Haryana and Uttar Pradesh and the contract was signed at Panipet by parties. Parties conferred jurisdiction to Courts at Delhi, though no part of cause of action had https://hcservices.ecourts.gov.in/hcservices/ arisen at Delhi. Parties also agreed that place of arbitration to be at Chennai. Considering the question whether Madras High Court has jurisdiction to entertain application under Section 9, the learned single judge held that the parties' decision to have arbitration at Chennai cannot confer jurisdiction on Madras High Court. In the said decision, the learned single judge took the view that even if an arbitration award is made in Chennai, in view of the express agreement between the parties, conferring jurisdiction in Delhi - the Courts at Delhi, the award can be challenged under Section 34 will be that competent Court having jurisdiction - "Delhi Courts". On the said facts, the learned single judge held that Madras High Court cannot be termed as "Court" to entertain application under Section 9 of the Act. 16. In our considered view, the view of learned single judge in KIRLOSKAR CONSTRUCTION AND ENGINEER LTD. VS. FAST TRACK ASSOCIATES, (2009(5) CTC 97) is not a correct interpretation of Section 2(1)(e) of the 1996 Act. By perusal of the judgment, we also find that the attention of the learned single judge has not been drawn to the decision of the First Bench of this Court in DYNASTY DEVELOPERS PVT.LTD. VS. JUMBO WORLD HOLDINGS LIMITED, (2008(1) CTC 580), where the First Bench has held that the petition filed under Section 9 cannot be equated to that of a suit. In DYNASTY DEVELOPERS PVT.LTD. VS. JUMBO WORLD HOLDINGS LIMITED, (2008(1) CTC 580), challenge was to an order of a single judge, who took the view that to maintain an application under Section 9 of the Act, leave of the Court has to be obtained. Whether or not the leave of the Court is required to initiate proceedings under Section 9 of the Arbitration and Conciliation Act was the question before the First Bench. Holding that no leave is required to initiate proceedings under Section 9 and that application under Section 9 of the Arbitration act and suit cannot be treated on the same footing, referring to various judgments, the First Bench of this Court in the above referred judgment has held as under: "19. ........ According to the learned Judge the leave would be necessary in case this Court has jurisdiction over the part of the cause of action only and as no suit could be filed without leave, no application under the Act under the similar circumstances could be entertained without leave under Clause 12 of the Letters Patent. The analogy of 'suit' given in Section 2(1)(e) of the Act only gives us guideline to find out the right court. The word 'suit' acts as an indicator and points out which court will be competent court to entertain the application under the Act. Section 2(1)(e) does not treat an 'application' under the Act as a 'suit' and the application under the Act remains an application. As a matter of fact, if a civil suit is filed covering the subject matter of an arbitration agreement, the Act makes it obligatory for the Court to refer the parties to arbitration in terms of the arbitration agreement. Therefore, it cannot be contended that https://hcservices.ecourts.gov.in/hcservices/ the Act intended that an application under the Act and the civil suit should be treated on the same footing. It has been consistently held that the applications under the Arbitration Act cannot be equated with civil suit. (See Bhagwat Singh Vs. State of Rajasthan, AIR 1964 SC 444, Usmanali Khan Vs. Sagarmal, AIR 1965 SC 1798, Firm Ashok Traders Vs. Gurumukh Das Saluja, (2004) 3 SCC 155). The procedure for obtaining leave is applicable only to a suit and not to an application under the Arbitration Act. In our opinion, if a part of the cause action has arisen within the jurisdiction of this Court, the application under the Arbitration Act can be instituted in this Court and in that event leave under Clause 12 of the Letters Patent is not necessary." (underlining added) 17. In the case on hand, though the development agreement relates to levelling/clearing/cutting of trees/erecting of compound wall, etc., Section 9 petition emanates out of the development agreement as well as the supplementary agreement dated 11.6.2008 under which the development cost is said to have been quantified at Rs.4,91,17,500/-. As discussed infra, the development agreement with Akash Housing and joint development agreement between the appellants and Vijay Shanthi Builders for construction of Villas/bungalows are strongly connected with each other. 18. In the joint development agreement with Vijay Shanthi Builders, parties have agreed that the venue of arbitration shall be Chennai. In the supplementary agreement, since the development cost is said to have been quantified, (which is disputed by the appellants), Section 9 petition cannot be equated to a suit for immovable property. The development agreement, supplementary agreement and the MOU were executed in Chennai and the parties have agreed that in case of any disagreement the same shall be settled by arbitration. Applying the ratio of the decision of First Bench of this Court in DYNASTY DEVELOPERS PVT.LTD. VS. JUMBO WORLD HOLDINGS LIMITED, (2008(1) CTC 580), we find that the Original Side of Madras High Court has jurisdiction to entertain the petition under Section 9. The learned single judge was right in holding that the original Side of Madras High Court has jurisdiction to entertain the petition under Section 9 of the Act. 19. The learned Senior Counsel Mr.K.M.Vijayan nextly contended that there is no manifest intention on the part of the respondent to have recourse to arbitration agreement. The learned Senior Counsel for appellants contended that before appointment of arbitrator Section 9 application cannot be treated lightly and interim order cannot be given unless it is shown that there is a manifest intention to move the arbitration. It was further submitted that in the application, the https://hcservices.ecourts.gov.in/hcservices/ respondent did not make any averment on its manifest intention to appoint arbitrator, which the learned single Judge did not keep in view. 20. The scope of the words "before arbitral proceedings" has been clarified by the Supreme Court in SUNDRAM FINANCE LT;D. VS. NEPC INDIA LTD., ((1999) 2 SCC 479) and it is now well settled that the powers of the Court under Section 9 can be invoked even before arbitration proceedings have commenced as long as there is manifest intention to initiate arbitral proceedings. In ASHOK TRADERS VS. GURUMUKH DAS SALUJA, ((2004) 3 SCC 155 = AIR 2004 SC 1433), the Supreme Court has held as under: "17. 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. ((1999) 2 SCC 479) 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 give an indication thereof. The distance of time must not be such as would destroy the proximity of relationship of the two events between