* THE HONOURABLE SRI JUSTICE A.GOPAL REDDY and THE HONOURABLESRI JUSTICE K.S.APPA RAO + C.M.A.334 of 2011 % Date of Order: 20-09-2011 1. Between: # T.D.Srinivasan and another ..Appellants and $ M/s. AMR Malind Infra Pvt. Ltd. ..Respondent ! Counsel for the petitioners : Sri D.Prakash Reddy Sr. Counsel ^ Counsel for the respondents :Sri N.Subba Reddy Sr. Counsel < GIST > HEAD NOTE ? Cases Referred: 1 AIR 1999 SC 2102 = (1999) 5 SCC 651 2 (2009) 5 SCC 678 3 (2007) 7 SCC 125 4 (2007) 6 SCC 798 5 2011 (3) ALD 228 (DB) 6 AIR 2003 Delhi 214 7 AIR 1975 A.P.187 THE HONOURABLE SRI JUSTICE A.GOPAL REDDY and THE HONOURABLE SRI JUSTICE K.S.APPA RAO C.M.A.No.334 of 2011 Date of judgment: 20—09—2011 Between: T.D.Srinivasan and another ..Appellant and M/s. AMR Malind Infra Pvt. Ltd. ..Respondent The Court made the following Judgment: THE HONOURABLE SRI JUSTICE A.GOPAL REDDY and THE HONOURABLE SRI JUSTICE K.S.APPA RAO C.M.A.No.334 of 2011 Judgment: (Per Honourable Sri Justice A.Gopal Reddy) This Civil Miscellaneous Appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (for short “the Act”) is directed against the order dated 31-12-2010 of the I Additional District Judge, Rangareddy District in allowing O.P.No.51 of 2010 filed under Section 9 of the Act directing the appellants/respondents not to alienate the petition schedule property or otherwise create third party interest or change its nature, pending initiation and conclusion of Arbitral Proceedings. Respondent/petitioner—Private Limited Company having expertise in undertaking development of residential and commercial complex entered into registered Development Agreement-cum- General Power of Attorney (GPA) dated 24-08-2006 with the appellants/respondents agreeing to construct residential/commercial complex in an extent of Ac.2.20 gts. and Ac.0.35 gts. of agricultural land, forming part of Sy.No.538 of Gundlapochampally village owned and possessed by the appellants/respondents, having purchased under a registered sale deeds dated 22-05-2006 and 15-07-2006 respectively. In the said Development Agreement the appellants/respondents (hereinafter referred to as ‘owners’) agreed to transfer 75% undivided share of land in the schedule property proportionate to the super built up area falling to the share of the respondent/petitioner (herein after referred to as ‘developer’) to be constructed over the schedule property by the developer, the developer undertakes to construct and deliver 96,000 square feet of the super built up area to the owners from all encumbrances as per Condition No.5 of the Development Agreement. The cost of construction of such owners constructed area shall be borne by the developer. The selection of the constructed area of the owner shall be decided with the consent of owners and the developer shall execute supplementary agreement sharing the constructed area and land. The owners shall be given first preference for the selection of the constructed area and also execute supplementary agreement showing the demarcation and allocation of the area with floor plans. The developer should not proceed with the construction without executing supplementary agreement for demarcation and allocation of areas. The final allocation of undivided share to the owners shall be computed after sanction and release of plans by the civic authorities. In the event that construction is not started within nine months after receiving plan sanction from civic authorities, this joint Development Agreement-cum-GPA stands cancelled. The owners have equal access to common facilities, electricity, water, gas, parks, road and other common amenities at no cost to owners. The common facilities shall stretch to the abutting lands also. It is the responsibility of the developer to get the land use of the petition schedule property converted and submit the plans of the complex within 15 days from the concerned departments. Under Condition No.9.3 of the Development Agreement, the developer is at liberty to take the development of abutting lands also and in such an event the allocation of the built up area to the owners will be in the first block/phase in that particular slot as the entire building complex is being constructed in block/phase wise manner. Condition No.17.1 of the said Agreement provides that in the event of breach of the terms and conditions of the Agreement by either party, the aggrieved party shall be entitled to specific performance and also to recover all the losses and expenses incurred as consequences of such breach from the party committing the breach. Condition No.18.1 of the Agreement provides for the resolution of the disputes between the parties with regard to the said agreement or under the agreement or relating to interpretation of any of the terms and conditions of the said agreement by referring to a sole arbitrator to be appointed by the parties under the provisions of the Act. The seat of such Arbitral Tribunal shall be Hyderabad. The developer purchased an extent of Ac.2.00 of agricultural land situated in Sy.No.173 of Dhoolapally village, Qutubullapur Mandal under a registered sale deed dated 16-11-2006 abutting to the property agreed to be developed. The said property has no access to the main road except the developed property. The developer filed the impugned O.P. stating that it approached Hyderabad Urban Development Authority (HUDA) in December, 2007 for conversion of the property belonging to the owners into residential houses, as the same was earmarked for agricultural use in the master plan. The HUDA required No Objection Certificate (NOC) from Andhra Pradesh Industrial Infrastructure Corporation (APIIC) as the said property was reserved to be given to the proposed works of the Volks Wagon. The APIIC issued NOC in January, 2008. Meanwhile, HUDA prepared master plan showing the said property as affected by water body based on satellite images. For which both the developer and the owners filed objections in November, 2007. The developer paid a sum of Rs.38 lakhs and Rs.50 lakhs to the owners towards refundable advance, which were handed over to N.Srinivas Rao. The HUDA converted the land use of the said property into residential and in the month of August, 2008 released a master plan earmarking the said property for residential use. According to the developer—Company their Managing Director discussed the matter with the vendor of the second respondent and explained the reasons for delay in commencing the construction in September and December, 2008 and revised plans were sent to the owners through Srinivas Rao. While so, the first respondent (owner) addressed an e- mail to the Managing Director of the developer—Company stating that it is three years since the joint Development Agreement has been signed and original completion date of the project is approaching in the month of August, 2009 and requesting the developer to provide formal written progress report covering activities completed to the date and approximate major milestones for future activities which will help the owners what lies ahead of them and assist them in completing planning activities on their side. On receipt of e-mail, the Managing Director of the developer—Company and the first respondent (owner) discussed the matter at length on 17-07-2009 and pursuant to the same, the first respondent (owner) sent an e-mail dated 21-07-2009 to the Managing Director of the developer—Company confirming that the requested schedule with all milestone will be available within two weeks by 01-08-2009 and that he would get back if further discussions are needed. While the e-mails are exchanged between the parties, the owners filed caveats in all the Courts in the month of December, 2009 and got the Development Agreement-cum-GPA cancelled by executing Cancellation Deed dated 06-12-2009 at Millburn, New Jersey and presented the same for registration through their attorney in the office of the Sub-Registrar, Medchal. While so, when some activity was reported on 31-12-2009 in the property agreed to develop, the authorised representative of the developer—Company visited the spot and asked the workers to vacate the same. As they failed to vacate the premises, a complaint was lodged in Pet Basheerbad Police station complaining that the owners committed breach of contract. The developer is initiating arbitral proceedings by issuing a notice for appointment of sole Arbitrator. Pending initiation and finalization of arbitral proceedings, if the said property is not protected by appropriate orders, the owners may alienate the said property or create third party interest moved the Court under Section 9 of the Act directing the owners not to alienate the said property or otherwise create third party interest or change its nature pending initiation and conclusion of Arbitral Proceedings and other reliefs. The claim of the developer has been contested by the owners by filing written statement inter alia contending that petition as such is not maintainable and the Court will not have jurisdiction to entertain the petition and the developer is also guilty of suppression vari and suggestion falsi. It was contended that in view of cancellation of Development Agreement, no rights have been accrued to the developer as it has abandoned the Development Agreement-cum- GPA. Therefore, the owners reserve their right to seek damages against the developer due to its failure to perform their part of obligation under the Agreement. The land at present is in the same position as it was at the time of entering Development Agreement. The question of invoking the jurisdiction of arbitration does not arise as the owners abandoned the Development Agreement. It was denied that the developer purchased an extent of Ac.2.00 of land abutting the subject property pursuant to Development Agreement. It is contended that the abutting property purchased by the developer was never part of the Development Agreement-cum-GPA and cannot be part of any claim. In fact, after the owners purchased the subject property in the year 2006, the developer has purchased an extent of Ac.2.00 abutting the subject lands after the Development Agreement was entered, with which the owners are not at all concerned nor they gave consent for purchase of two acres or land. It is denied that HUDA required NOC from APIIC, as the subject property was reserved to be given to the proposed works of Volks Wagon. There is no notification issued by the Government to that effect with regard to the above proposal for acquisition by APIIC and also denied about sending of plans for approval of owners on 25-01-2007. Sri N.Srinivas Rao though he is the own brother of the first respondent (owner), is also the business associate of the Managing Director of the developer—Company and for that purpose he was made as the joint authorised signatory in the Development Agreement- cum-GPA. Further, N.Srinivas Rao and the developer—Company have other business dealings with respect to other properties and in the month of June, 2007 the developer informed the owners that the subject property was affected by water body and the owners filed their objections before the HUDA. For proving that the developer resolving the dispute of water body, no proof is placed to show that there exists any real water body issue with regard to the subject property except informing by phone and e-mail. It is specifically denied that in the month of November, 2007 developer paid Rs.38 lakhs to the owners as refundable advance which was handed over to N.Srinivas Rao and further denied in the month of March, 2008 developer paid a sum of Rs.50 lakhs towards refundable advance and between November, 2007 and March, 2008 the developer paid another sum of Rs.5.5 lakhs towards refundable advance to the owners through N.Srinivas Rao. It is categorically asserted that no amounts were paid or given to the owners and if at all any payments are made to Srinivas Rao that might be in connection with the other transaction and has nothing to do with the Development Agreement-cum-GPA. As the developer failed to perform its part of obligation arising under the Development Agreement, it was informed on different occasions between 2008 and 2009 that non-performance would result in cancellation of Development Agreement-cum-GPA. In spite owners provided adequate time to demonstrate the progress, as there was no progress, they left with no other option but to cancel the Development Agreement-cum-GPA. Further, possession of the land was never handed over to the Developer—Company, which is evident from Condition No. 1.1 of the Development Agreement-cum-GPA. The details of the owners asking the developer to demonstrate progress etc. have been explained in the counter, which are not necessary for the purpose of deciding the issue involved in the appeal and subsequent events. Suffice it to say on cancellation of the Agreement the above OP has been filed. The learned I Additional District Judge through the impugned award was of the view that if Condition No.5 and Condition No.9.3 are to be read conjointly, it would envisage and forcing the developer— Company to develop the abutting lands, they are at liberty to take the advantage of abutting land also and the common facilities including the roads shall be stretched from the petition schedule property to the abutting lands also. In view of arbitration under Condition No.18 of the Agreement, which shall bind both the parties to approach Arbitral Tribunal for settlement of their claims including the controversy, whether two acres of land purchased by the developer—Company have any access through the petition schedule property, is a matter once again to be decided by the Arbitral Tribunal. If no interim arrangement is made, that too where Arbitral Tribunal has no powers to grant the relief of injunction, there is every possibility of alienating the schedule property or creating rights to third parties or change the nature of the schedule property in the event of that developer—Company would be put to immense loss, as such developer—Company is entitled to have the relief of interim injunction the relief cannot be for indefinite period. If there is any delay on the part of the developer—Company in getting appointment of Arbitral Tribunal to take up the present matter or upon taking cognizance by the Arbitral Tribunal, if the lapses are on the part of the developer—Company, then interim injunction is liable to be vacated on moving petition by the owners. Holding so allowed the OP granting injunction as aforementioned. Questioning the said order the present appeal has been filed. Sri D.Prakash Reddy, learned senior counsel for the appellants/owners contends that under the Development Agreement- cum-GPA executed in favour of the respondent/developer the owners never parted with the possession, and possession remains with the owners. The finding recorded by the trial court in paragraph-13 that the plea of the owners running contra to the terms and conditions of the Development Agreement-cum-GPA and the interpretation put forth by the lower court that Condition No.5 and Condition No. No.9.3 have to be read conjointly is erroneous; in spite of specific plea taken by the owners in the counter at para-5 that N.Srinivas Rao is business associate of the developer—Company and denied payment of amount of Rs.38 lakhs, Rs.50 lakhs and Rs.5.5 lakhs through Srinivasa Rao and the same might have been in connection with other transaction; the developer failed to substantiate the said payment of Rs.93.5 lakhs. Admittedly, the cheques were not issued in the name of owners nor there is any condition in the Agreement that the developer should give security deposit. Therefore, once the developer took a false plea of payment of Rs.93.5 lakhs and failed to substantiate the same not entitled to equitable relief of injunction. In the counter filed by the developer in CMA it is stated about payment of cheques through Srinivasa Rao towards refundable advance, but the same is contrary to the averments made in para-7 of the counter wherein it is stated as the owners could not come up with the required expenditure needed to clear, as requested by the owners they have extended financial support of Rs.93.5 lakhs under the expenditure of owners head to Srinivasa Rao to complete the process. The said plea is contrary to Condition No. 2.1 of the Development Agreement. Therefore, it is absurd to contend that the amounts were deposited to clear the land for development purpose. It is specifically pleaded in the counter filed by the owners in OP that Srinivasa Rao who made as Chief General Manager/Managing Director of the developer—Company, and the same has not rebutted by filing any reply. The developer failed to satisfy the three cardinal principles viz. prima facie case, balance of convenience and irreparable injury for grant of injunction. The conduct of parties is an important factor, which has to be taken into consideration for granting equitable relief of injunction. In view of Section 41(e) of Specific Relief Act, 1963 where a false plea has taken by the developer about payment of Rs.93.5 lakhs, they are not entitled to injunction. Sri N.Subba Reddy, learned senior counsel for the respondent/developer contends that in view of explicit Condition No.17 of the Development Agreement-cum-GPA that the aggrieved party shall be entitled to specific performance of the agreement, which has not been referred to by the trial court. Therefore, it is not open to contend that the developer is not entitled for specific performance of the Agreement. The arbitrator has to decide the merits and demerits of the case including whether the developer is entitled to specific performance or not. Therefore, this Court cannot make any observation with regard to the merits of the case nor can record a finding that specific performance cannot be granted under Section 14(1) of the Specific Relief Act, 1963 which has to be necessarily decided by the arbitrator. In support of the same, reliance is placed on the judgment of the Supreme Court in OLYMPUS SUPERSTRUCTURES PRIVATE LIMITED v. MEENA VIJAY KHETAN[1] and M.P.HOUSING BOARD v. PROGRESSIVE WRITERS AND PUBLISHERS[2]. The developer in para-7 of the application categorically stated the delays, which were caused for undertaking the development and the payment of amount by the developer to the owner of Rs.38 and 50 lakhs by way of cheques towards refundable advance. Between November, 2007 and March, 2008 another sum of Rs.5.5 lakhs was paid to Srinivas Rao. Once the developer is entitled to specific performance of the agreement as per Condition No. 17 of the Development Agreement, property, which is the subject matter of Development Agreement, has to be preserved and if the owners are allowed to create third party rights, same will cause prejudice and multiplicity of proceedings. In view of the same, it is incumbent on the court to preserve the property and for the said purpose reliance is placed on the judgment of the Supreme Court in ADHUNIK STEELS LTD v. ORISSA MANGANESE AND MINERALS PVT. LTD.[3] He lastly contended that if this Court feels no finding has been recorded about encashment of cheques paid to the owners, matter could be remitted to the court below for fresh disposal. In view of rival submissions, as referred to above, the point that arises for consideration in this appeal is: “Whether the developer is entitled to seek injunction restraining the owners from alienating the property covered by Development Agreement or otherwise create third party rights pending initiation of arbitral proceedings under Section 9(1)(b) of the Act.” In OLYMPUS SUPERSTRUCTURES PRIVATE LIMITED (1 supra) the Supreme Court considered the issue whether Section 34(2)(b)(i) of the Arbitration and Conciliation Act, 1996 prohibits reference of a dispute with regard to specific performance of contract to Arbitration, the ratio laid down by the Punjab, Bombay and Calcutta High Courts, where the above three Courts have taken a view that arbitrator can grant specific performance relating to immovable property under an award; whereas the Delhi High Court taken a view that the arbitrator cannot grant specific performance. The Supreme Court approved the ratio laid down by the Punjab, Bombay and Calcutta High Courts is the correct one and the view taken by the Delhi High Court is incorrect. It was further held that the right to specific performance of an agreement of sale deals with contractual rights and it is certainly open to the parties to agree with a view to shorten litigation in regular Courts to refer the issues relating to specific performance to arbitration. There is no prohibition in the Specific Relief Act, 1963 that issues relating to specific performance of contract relating to immovable property cannot be referred to arbitration. Nor is there such a prohibition contained in the Arbitration and Conciliation Act, 1996 as contrasted with Section 15 of the English Arbitration Act, 1950 or Section 48(5)(b) of the English Arbitration Act, 1996 which contained a prohibition relating to specific performance of contracts concerning immoveable property. In the case of M.P.HOUSING BOARD (2 supra) the issue, which fell for consideration before the Supreme Court, was whether referring of the dispute and of the award passed by the arbitrator for enforcing the agreement with certain conditions is justified or not as confirmed by the trial Court and High Court. Rejecting the contention the Supreme Court held that when there has been quantification of the costs of the construction of the building and incorporation of the same in the third agreement the same could not be re-determined by the arbitrator by rewriting the terms of the agreement entered into between the parties. It was also held that there is no dispute with the proposition that the intention of the parties is to be gathered from the words used in the agreement. If the words are clear, there is very little that the Court can do about it. The same was decided on different sets of facts. In ADHUNIK STEELS LTD. (3 supra) while considering the scope of Section 9 of the Act for grant of injunction the Supreme Court held it would not be correct to say that the power under Section 9 of the Act is totally independent of the well known principles governing the grant of an interim injunction that generally govern the courts in that connection and to see whether the High Court was justified in refusing the interim injunction on the facts and in the circumstances of the case. In ARVIND CONSTRUCTIONS CO. PVT. LTD v. KALINGA MINING CORPORATION[4] the Supreme Court while considering the scope of Section 9 of the Act for grant of interim order held 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, 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 XVIII Rule 5 of 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 governing the grant of interim injunctions and other orders of interim protection or the appointment of a receiver. This Court in WOCKHARD HOSPITALS LIMITED v. KAMINENI HOSPITALS LIMITED[5] while upholding the orders of the civil court in dismissing the O.Ps. filed by the appellant seeking various relief in the form