1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION ARBITRATION APPEAL NO.24 OF 2009 M/s.Rock Enterprises .. Appellant Versus Sansara Hotels India Pvt.Ltd. & Ors. .. Respondents Mr.P.K.Dhakephalkar, Senior Advocate i/b. Mr.amol Mhatre for the appellant Mr.J.J.Bhatt, Senior Advocate with Sagar Divekar, Faraz Alam Sajar, Hilaur Vaswani i/b. M/s.Wadia Ghandy & Co. for respondent No.1 Mr.Fredun D’ Vitre, Senior Advocate with Farhan Dubash i/b. M/s.Sonal Doshi & Co. for respondent No.2 Mr.Ranjit Shetty with Shailesh Paria i/b. Hariani and Co. for respondent Nos. 3 and 5. CORAM : S.C.DHARMADHIKARI, J. Reserved on : 23rd April 2010. Pronounced on : 11th June 2010. ORAL ORDER:- 1] Heard. Admit. Respondents waive service. By consent heard forthwith. This Appeal under Section 37 of the Arbitration & Conciliation Act, 1996 (for short the Act), challenges an order dated 6th July 2009 passed by the learned District Judge, Pune in Arbitration Petition No.215 of 2009. 2 2] The appellant before me is original second respondent to this arbitration petition. The first respondent to this appeal is the original petitioner. The second respondent to this appeal is the original respondent No.1 whereas respondent Nos. 3 to 5 to this appeal are the original respondent Nos. 3 to 5 in the subject arbitration petition. 3] The arbitration petition was filed invoking the jurisdiction of the learned Dist.Judge under section 9 of the Act. The first respondent to this appeal applied for various measures including interim for an injunction restraining the respondents from dealing with, disposing of, alienating, encumbering making construction and/or creating any third party rights in any manner whatsoever in respect of the suit property or any part thereof. 4] By the order under challenge, the learned Dist.Judge has restrained all the respondents to the arbitration petition, including the appellants before me, from dealing with, disposing of, alienating, constructing or creating any third party rights in respect of the property till the disposal of the arbitral proceedings. In these terms, the arbitration petition came to be partly allowed. 3 5] Aggrieved by this order, the original second respondent, appellant herein has filed this appeal. 6] Mr.Dhakephalkar, learned Senior Counsel appearing on behalf of the appellants contended that the claim of first respondent (M/s.Sansara) is that, it had acquired development rights in respect of the suit property vide development agreement dated 21st March 2007. It is contended in the said petition that the present appellant, first respondent to the arbitration petition viz., M/s. Vascon – Original respondent Nos. 3 and 5 had entered into a joint venture agreement on 15th June 2004. They formed association of persons for development of the said property and pursuant to the joint venture agreement, an irrevocable power of attorney was executed by the appellant – respondent No.2, in fafvour of the Director of respondent No.3, which is a private limited company. Thereafter, on 31st July 2006, the appellant as well as original respondent Nos. 3 to 5 executed a development agreement in favour of respondent No.2 viz., M/s. Vascon for development of the suit property. Subsequently, on 21st March 2007, the subject agreement was executed between Sansara and M/s.Vascon, to which present appellant and original 4 respondent Nos. 3 to 5 were allegedly consenting and/or confirming parties. 7] Mr.Dhakephalkar submits that the case of the first respondent is that it was agreed that M/s.Vascon was to obtain necessary permission and sanction from appropriate authorities for construction of apartment hotel with 2 FSI and M/s.Sansara had an option to rescind the agreement in case of failure of M/s.Vascon to obtain necessary sanction for the said FSI. Mr.Dhakephalkar submits that alternatively a right was conferred on Sansara to procure this FSI at the cost of M/s.Vascon. It is this agreement which allegedly provides for referring disputes to arbitration. It is also the case of Sansara that they paid a sum of Rs.48.5 Crores but the allegation is that the present appellant created obstruction in development of the suit property and any construction thereon. There was a construction contract dated 21st January 2008. It is alleged that in or about February 2008, the present appellant forcibly entered the property and attempted to take possession thereof by obstructing and stopping on- going construction activity. It is alleged that due to this event, first respondent Sansara called upon M/s.Vascon – original respondent No.2 to comply with its part of the obligation but M/s.Vascon by a letter dated 7th 5 July 2008, expressed its inability to obtain the approvals and sanctions as required under development agreement and stated that Sansara is free to exercise its option as provided by clauses 5.1 and 5.2 of the agreement. There is continuous correspondence and that is how ultimately the agreement between Sansara and M/s.Vascon was rescind by Sansara and it called upon M/s.Vascon to make payment of the amount, which requisition not being complied with, that the arbitration was sought to be commenced. 8] Mr.Dhakephalkar submits that as far as the present appellant is concerned, it is a registered partnership firm and owner of the suit property. The appellant entered into a single joint venture agreement on 15th June 2004 with Just Homes Pvt.Ltd. The intention of parties while executing this joint venture agreement was to develop the property. It is the submission of Mr.Dhakephalkar that despite clear terms of this agreement, M/s.Just Homes – original respondent No.3 fraudulently incorporated some terms and conditions behind the back of the appellant. The power of attorney was restricted and it gave authority to M/s.Just Homes Pvt.Ltd. only to obtain necessary permission for construction, payment of taxes, protection of property etc. The appellant never 6 intended to nor it actually gave any powers with regard to sale of the property or part thereof. Thus, the specific case of the appellant is that original respondent Nos. 3 and 4 exceeded their powers with malafide intention of grabbing the property and executed development agreement with M/s. Vascon on 31st July 2006. 9] That document viz., the development agreement dated 31st July 2006 would reveal that the appellant, M/s.Just Homes, M/s.Vascon and Mariegold are consenting parties. Mr.Dhakephalkar submits that it appears that one S.P.Nair signed the document as power of attorney holder of the appellant and as duly authorised director of M/s.Just Homes. Similarly on behalf of original respondent No.5, Mariegold, Mr.Nair has signed as Director/ authorised signatory. Mr.Dhakephalkar submits that other documents and correspondence produced on record shows that Mr.Nair signed the same as Director of M/s. Vascon. Mr.Dhakephalkar submits that although the development agreement dated 31st July 2006 recites that a sum of Rs.85 Crores was paid as consideration, not a single rupee has been paid to the appellant. Thus, behind the appellant’s back and without their knowledge, this development agreement has been executed by respondent Nos. 2 to 5. They have perpetrated fraud on the 7 appellant. One and the same person has signed the alleged development agreement. He is the same person who has also signed the development agreement in fabvour of Sansara dated 21st March 2007. In such circumstances, the arbitration proceedings cannot be said to be maintainable. Further, without in any manner scrutinising the documents and satisfying himself about the claim of M/s.Sansra which is a pure money claim and that too against M/s. Vascon so also there being no authority to create any charge on the property, the learned Dist. Judge should have refused the interim injunction. Mr.Dhakephalkar submits that there is no privity of contract between the appellant and M/s.Sansara. The property belongs to the appellant. Inviting my attention to the prayers of arbitration petition, Mr.Dhakephalkar submits that the reliefs that are claimed by M/s.Sansara are against M/s.Vascon. In any event, there is only a money claim as against the appellant. In such circumstances and when there is a serious doubt as to whether the claim of M/s.Sansara is secured by any charge or right in respect of the immovable property belonging to the appellant, the interim injunction as granted could not have been issued. The order is, therefore, palpably erroneous, illegal and unsustainable. It deserves to be set aside. Mr.Dhakephalkar places reliance upon a decision of the Supreme Court, 8 reported in 2005 (11) SCC 520 (Bank of India Vs. Abhay D. Narottam and Ors). Mr.Dhakephalkar submits that the Supreme Court has held that without a transfer of interest, there is no question of there being a mortgage. The same principle would apply to charge under section 100 of the Transfer of Property Act 1882. In such circumstances, when there is nothing on record to indicate that the eclaim of M/s.Sansara is secured as above, the order under challenge deserves to be quashed and set aside. 10] On the other hand, Mr.Bhatt, learned Senior Counsel appearing for respondent No.1 supported the impugned order. Mr.Bhatt submits that all three ingredients which are necessary for grant of an interim injunction have been satisfied in this case. The learned Dist. Judge has rightly concluded that M/s.Sansara – original petitioner has made out a prima facie case. Balance of convenience is in favour of Sansara and irreparable loss and injury will be caused in case, interim injunction as prayed is not granted. 11] Mr.Bhatt submits that the learned Dist. Judge had before him the detailed case set out in the arbitration petition by the original petitioner M/s.Sansara who is first respondent to this appeal. In that arbitration 9 petition, M/s.Sansara had contended that original respondent No.5 Mariegold owned and possessed a piece of land admeasuring 45 acres and 25 gunthas situate at Vadgaon Sheri, Dist. Pune. This is known as larger plot viz., Mariegold property. There was a suit filed in respect of this property being Suit No.2175 of 1996 in this Court. That suit was compromised and consent terms dated 17th March 1997 were filed under which a portion admeasuring 49126 sq.mtrs. was allotted to present appellant M/s.Rock Enterprises. Thus, the appellant entered into a joint venture agreement dated 15th June 2004 for developing a portion of the land admeasuring 36120 sq.mtrs. from and out of the Rock property. The agreement recites that the original respondent Nos. 2 and 3 would form an association known as Just Homes Associates (respondent No.4). Respondent Nos. 2 and 3 would jointly develop the joint venture property. It was specifically agreed that M/s.Just Homes Pvt.Ltd can on behalf of the original respondent No.4 as well, mortgage, dispose of or lease or otherwise deal with the joint venture property. The sale price, lease rent and other terms negotiated and finalised by M/s.Just Homes would be final and binding on M/s.Rock and they will not dispute it. It is agreed that business of Just Homes Associates would be managed by M/s.Just Homes Pvt.Ltd., and the appellant would have no objection to 10 this arrangement and they will not interfere with the day to day management of the project. Mr.Bhatt submits that the relevant clauses of this agreement were reproduced in the arbitration petition and even a copy of the said development agreement was produced. It is, thereafter, that M/s. Vascon approached original respondent Nos. 2 to 4 and there were negotiations which culminated in the development agreement dated 31st July 2006 and even the pertinent clauses thereof would show that prima facie the appellant before this Court relinquished, released their rights in favour of M/s. Vascon and that they have no right, title or interest in the property. Accordingly, possession was handed over to M/s.Vascon and M/s.Vascon was authorised to sell, lease and mortgage the property. Mr.Bhatt invites my attention to the relevant clauses of this agreement and submits that, thereafter, the original petitioner Sansara issued two public notices in Times of India and Prabhat on 24th December 2006. Partner of the original second respondent, appellant before this Court, aided and assisted M/s.Sansara in clearing minor objections which were received in response to this public notice and, thereafter, their Advocates M/s.Hariani and Company representing M/s.Rock, Just Homes and Just Home Associates forwarded title certificates. Thus, after perusing all these documents, that M/s.Sansara agreed to acquire rightts 11 of M/s.Vascon and accordingly the Development Agreement dated 31st March 2007 to which others joined as consenting parties came to be executed and registered. Mr.Bhatt submits that all through out M/s.Rock i.e. Appellant before this Court have been aware of the rights created in favour of Sansara and they have agreed to the arrangement. Therefore, the obstruction created by the appellant was rightly termed as illegal and unlawful and this was a collusive act on behalf of all the signatories to this agreement. It is in such circumstances and after detailed correspondence that the agreement dated 21st March 2007 was rescinded and M/s. Vascon was called upon to refund the amounts paid. 12] Mr.Bhatt submits that when there was admitted obligation to pay back the sums received and there was an arbitration agreement between parties that Sansara decided to initiate arbitration proceedings but in the meanwhile, huge amount being due and payable that, it was submitted that till the arbitral proceedings are concluded, the property covered by the development agreement dated 21st March 2007 should not be dealt with. Mr.Bhatt submits that the agreement itself creates charge over the property and, therefore, the injunction as claimed has been rightly granted. 12 13] Mr.D’Vitre, learned Senior Counsel appearing on behalf of M/s. Vascon submits that the arbitral proceedings so also the disputes and the rights and contentions therein apart, M/s. Vascon do not feel aggrieved by the order of the learned Dist. Judge. There is no appeal filed by M/s. Vascon. In such circumstances he submits that the present appeal be dismissed. 14] With the assistance of the learned Senior Counsel appearing for parties, I have perused the memo of appeal and all annexures thereto so also the impugned order. The principles that are to be applied while deciding an application under section 9 of the Act are by now well settled. In a decision reported in A.I.R. 2007 S.C. 2563 (Adhunik Steels Ltd. Vs. Orissa Manganese and Minerals Pvt.Ltd), this is how the same are summarised by the Hon’ble Supreme Court in paras 10 and 13. “10. It is true that section 9 of the Act speaks of the Court by way of an interim measure passing an order for protection, for the preservation, interim custody or sale of any goods, which are the subject- matter of the arbitration 13 agreement and such interim measure of protection as may appear to the court to be just and convenient. The grant of an interim prohibitory i9njunction or an interim mandatory injunction are governed by well known rules and it is difficult to imagine that the legislature while enacting Section 9 of the Act intended to make a provision which was dehors the accepted principles that governed the grant of an interim injunction. Same is the position regarding the appointment of a receiver since the section itself brings in, the concept of “just and convenient” while speaking of passing any interim measure of protection. The concluding words of the section, “and the court shall have the same power for making orders as it has for the purpose and in relation to any proceedings before it” also suggest that the normal rules that govern the court in the grant of interim orders is not sought to be jettisoned by the provision. Moreover, when a party is given a right to approach an ordinary court of the country without providing a special procedure or a special set of rules in that behalf, the ordinary rules followed by that court would govern the exercise of power conferred by the Act. On that basis also, it 14 is not possible to keep out the concept of balance of convenience, prima facie case, irreparable injury and the concept of just and convenient while passing interim measures under section 9 of the Act.” “13. Injunction is a form of specific relief. It is an order of a court requiring a party either to do a specific act or acts or to refrain from doing a specific act or acts either for a limited period or without limit of time. In relation to a breach of contract, the proper remedy against a defendant who acts in breach of his obligations under a contract is either damages or specific relief. The two principal varieties of specific relief are, decree of specific performance and the injunction (See David Bean on Injunctions). The Specific Relief Act, 1963 was intended to be “An act to define and amend the law relating to certain kinds of specific reliefs.” Specific Relief is a relief in specie. It is a remedy which aims at the exact fulfilment of an obligation. According to Dr.Banerjee in his Tagor Law Lectures on Specific Relief, the remedy for the non performance of a duty are (1) compensatory (2) specific. In 15 the former, the Court awards damages for breach of the obligation. In the latter, it directs the party in default to do or forbear from doing the very thing, which he is bound to do or forbear from doing. The law of specificc relief is said to be, in its essence, a part of the law of procedure, for, specific relief is a form of judicial redress. Thus, the Specific Relief Act, 1963 purports to define and amend the law relating to certain kinds of specific reliefs obtainable in civil courts. It does not deal with the remedies connected with compensatory reliefs except as incidental and to a limited extent. The right to relief of injunctions is contained in part III of the Specific Relief Act. Section 36 provides that preventive relief may be granted at the discretion of the court by injunction temporary or perpetual. Section 38 indicates when perpetual injunctions are granted and section 39 indicates when mandatory injunctions are granted. Section 40 provides that damages may be awarded either in lieu of or in addition to injunctions. Section 41 provides for contingencies when an injunction cannot be granted. Section 42 enables, notwithstanding anything contained in section 41, particularly clause (e) providing that 16 no injunction can be granted to prevent the breach of a contract the performance of which would not be specifically enforced, the granting of an injunction to perform a negative covenant. Thus, the power to grant injunctions by way of specific relief is covered by the Specific Relief Act, 1963.” 15] From a reading of the arbitration petition and some of the documents, including relevant clauses of the development agreement, it appears to me that the learned Dist.Judge refered to clause 28.2 of the development agreement dated 21st March 2007 and the letter dated 12th December 2008 under which M/s.Sansara rescinded the agreement by invoking clause 5.1 of the same. Therefore, the learned Dist. Judge concluded that prima facie there is a dispute between parties with regard to refund of the amounts paid by M/s.Sansara. These disputes were projected and at the same time the learned Judge noted the objection of the present appellant – original respondent No.2 that it is not party to the development agreement dated 21st March 2007 and, therefore, there could not be any arbitral proceedings against it. However, to my mind the learned Dist. Judge rightly held that this aspect cannnot be gone into in 17 the present proceedings and it would be open for the appellant to raise appropriate pleas before the appropriate forum. The learned Judge referred to the recitals of the development agreement. He held that there are consenting as well as confirming parties thereto besides M/s.Sansara and M/s.Vascon. There is an indemnity which has been given by them towards any loss caused to Sansara on account of any claim, demand etc. The learned Dist. Judge has held that M/s. Vascon was at liberty to sell, mortgage and dispose of so also otherwise deal with the property. The learned Dist. Judge has referred to the joint venture agreement to which admittedly the appellant is party. Further, the learned Judge refers to the power of attorney executed by the appellant in favour of M/s.Just Homes India Pvt.Ltd. The learned Judrge in para 17 of his order has specifically referred to this power of attorney and particularly clause (g) thereof and prima facie concluded that pursuant to this single joint venture agreement, irrevocable power of attorney is executed and clause 14 of the power of attorney gave power to execute all agreements, deeds, conveyance etc. for the purpose of development and for compliance with the provisions of Maharashtra Ownership Flats Act. 16] In para 18 of the order under challenge the learned Dist. Judge has 18 noted that execution of the development agreement, single joint venture agreement dated 15th June 2004 is not disputed by the appellant before me. However, it raised dispute with regard to the execution of the subsequent agreement. To satisfy himself, the learned Dist. Judge permitted M/s.Sansara to produce the development agreement between M/s.Just Homes and M/s.Vascon wherein the present appellant, original respondent No.2 is shown as confirming party through the power of attorney holder, S.P.Nair. There was irrevocable power of attorney executed in favour of Mr.Nair. It is in furtherence of this development agreement between M/s.Vascon and Rock and Just Homes so also irrevocable power of attorney that M/s. Vascon executed the development agreement dated 21st March 2007. This is a prima facie conclusion drawn by learned Dist. Judge. He has further held that all parties are alleging collusion. Further, the learned Dist. Judge has noted that there is a objection raised by the present appellant with regard to the authority given to original respondent No.1 M/s. Vascon. He observed that there is a dispute inter se between the present appellant and M/s.Just Homes. Thus, on perusal of the record, the learned Dist. Judge prima facie concluded that the appellant M/s.Rock Enterprises was aware of the entire transaction at least by August 2008. In spite of the said position all 19 that M/s.Rock has stated in the reply that it reserves its rights to take action against other respondents. In such circumstances and when the original petitioner Sansara demonstrated that it has paid Rs.48.50 Crores to M/s.Vascon, which money is liable to be refunded on account of rescission of the agreement dated 21st March 2007, which refund is not forthcoming, that the learned Judge protected M/s.Sansara’s rights by granting limited injunction in its favour. This injunction is granted after the learned Judge in para 21 of his order concluded that the appellant before me, though claiming to be not concerned with the Agreement dated 21st March 2007, yet, the record demonstrates that it is consenting party thereto. Therefore, when the agreement creates a charge over the suit property insofar as refund of the amount, then, I do not see how it can be urged that prima facie satisfaction of the learned Judge is vitiated. Mr.Dhakephalkar has not been able to point out any legal infirmity or error in the order under challenge. Further, he is unable to point out any perversity either. 17] At this stage, neither the learned Judge nor me are concerned with the merits of the disputes. The order of the learned Judge does not conclude all objections raised by the appellant, including that there is no 20 privity of contract as between them and M/s.Sansara. These are prima facie observations and do not conclude the rights of the parties. 18] Additionally, to satisfy myself I had permitted the parties to refer to compilation of documents. Development agreement dated 21st March 2007 has been produced by the Counsel for my perusal. The recital thereto, after the details pertaining to the Registration, would demonstrate that although the agreement is between M/s.Vascon and Sansara Hotels India Pvt.Ltd., yet, M/s.Just Homes Associates which is an association of persons consisting of the appellant and original respondent No.3, so also the appellant and original respondent No.5 are shown as consenting and confirming parties. The recitals in the agreement, could be referred to at this prima facie stage. Merely because they