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Southern Agrifurane Industries Limited, Chennai v/s M/s. Yessir Holdings and Investments Private Limited, Chennai & Another

    OSA No.142 of 2006 & CMP No.6124 of 2006

    Decided On, 29 September 2009

    At, High Court of Judicature at Madras


    For the Appellant: M. Sundar, Advocate. For the Respondents: S.R. Rajagopal, Advocate.

Judgment Text

(Prayer: Original side appeal preferred under Order XXXVI Rule 1 of O.S. Rules read with Clause 15 of the Letters Patent against the fair and decreetal order dated 3.4.2006 made by this Court in O.A. No.1104 of 2005.)

M. Chockalingam, J.

Challenge is made to an order of the learned Single Judge of this Court in O.A. No.1104 of 2005 under Sec.9 of the Arbitration and Conciliation Act, 1996, whereby the appellant herein sought for an order of interim injunction restraining the respondents from transferring/alienating the shares/assets of the 2nd respondent, particularly assets in the form of The Aruna Hotel and Aruna Central Buildings at No.144/145, Sterling Road, Nungambakkam, Chennai 600 034, pending finality and disposal of the intended arbitration proceedings between the parties in accordance with clause 17 of the Memorandum of Understanding dated 22.4.2004, entered into between the parties.

2. The case of the appellant before the learned Single Judge where he sought the interim relief under Sec.9 of the said Act and also before this Court is that the appellant company decided to purchase the hotel which belonged to the respondents; that a Memorandum of Understanding (MOU) was actually entered into between the parties on 22.4.2004, whereby the consideration was fixed at Rs.35,40,00,000/-, out of which Rs.1 crore was actually paid by way of advance; that thereafter, Rs.25 lakhs has also been paid; that it was also understood that as and when Rs.5 crores was tendered by the appellant, the respondents should hand over possession of the hotel; that even though it was tendered, the respondents were not ready and willing to do the same; that under the circumstances, a letter was addressed on 9.2.2005; that despite receipt of the same, there was no reply; that at that juncture, there arose a necessity to invoke the arbitral clause namely clause 17 as found in the MOU; that an arbitrator was actually appointed by the Court; that now the proceedings are pending before the arbitrator; that under the circumstances, there arose a necessity for filing an application under Sec.9 of the said Act seeking interim injunction pending the arbitral proceedings since the appellant had got reliable information that the respondents are likely to transfer the interest and shares in the company; that if it is allowed to be done and even if the arbitral proceedings end in favour of the appellant, he could not enjoy the fruit of the same, and hence interim injunction has got to be granted and accordingly the appellant has made the application.

3. The respondents' side was given an opportunity to file counter.

4. The learned Single Judge after hearing the submissions made and also looking into the materials available was of the opinion that no prima facie case was made out by the appellant under Sec.9 of the Act to make an order of injunction and accordingly dismissed the application. Aggrieved, the appellant has brought forth this appeal before this Court.

5. Advancing arguments on behalf of the appellant apart from reiterating the very same contentions put forth before the learned Single Judge, the learned Counsel would further add that the entire arbitral proceedings almost reached final stage; that when the appeal was heard, the First Bench of this Court was pleased to pass an order to maintain status-quo, after considering the circumstances; that if any disturbance is made to that order, or if interim injunction is refused, then it will cause prejudice and hardship; that even the proceeding before the Arbitrator was actually for the relief of specific performance in respect of the very same property; that under the circumstances, the respondents should be restrained from dealing with the property; that it is a fit case where Sec.9 of the said Act has got to be invoked by granting interim order; but, the learned Single Judge has not considered that aspect of the matter and has refused to do so, and under the circumstances, interim order has got to be granted.

6. Contrary to the above contentions, it is contended by the learned Counsel for the respondents that even as per the MOU, the total sale consideration was found to be Rs.35.40 crores; that Rs.1 crore was paid as advance; that the alleged additional payment of Rs.25 lakhs was not the actual payment in respect of the transaction in question; but, it was on the strength of a promissory note executed by the second respondent in favour of the appellant and hence it will not form part of the consideration; that having paid only Rs.1 crore, the appellant has failed to perform any part of the contract, but on the contrary has invoked the arbitral clause; that now the arbitral proceedings are pending before the arbitrator; that what is now available in the hands of the appellant is only the agreement; that the same will not clothe him any right in the property or seeking for an interim injunction; that apart from that, there is a specific clause in the MOU that if there is default in performance of the duty on the part of the respondents, the appellant is entitled only to the advance amount along with interest; that the respondents are ready and willing to pay the same; that actually the advance along with interest was tendered, but it was refused to be received; that it is pertinent to point out that the learned Single Judge has elaborately discussed the matter and found that there was no prima facie case for grant of interim injunction and under the circumstances, dismissed the application, and hence the order of the learned Single Judge has got to be sustained.

7. After looking into the materials available and in particular the order under challenge, this Court is able to see that the matter has been elaborately discussed by the learned Single Judge. It should not be forgotten for a while that admittedly there was a MOU between the parties and the consideration was also fixed at Rs.35.40 crores and an advance amount has also been paid. It is a case where the appellant has not approached the civil Court for specific performance since there was a clause namely clause 17, stipulated in the MOU dated 22.4.2004, which specifically reads as follows:

"In the event of any dispute between the parties the same shall be referred to Arbitration and the provisions of the Arbitration and conciliation act 1996 shall apply in this regard. The Jurisdiction shall be Courts in Chennai only."

8. Now, admittedly, the matter is referred to arbitration, and the arbitration proceedings are also pending. It remains to be stated that the arbitral proceedings almost reached the final stage. Once the appellant has asked for the relief of specific performance and the matter is also pending before the arbitrator, this Court is of the considered opinion that if the property in question namely the subject matter of the arbitration proceedings, is allowed to be dealt with by the respondents, it would naturally complicate the situation. The Court is always inclined to avoid multiplicity of proceedings. In order to avoid the avoidable litigation and also multiplicity of proceedings, the better approach could be to maintain status-quo, which has already been done by the First Bench of this Court in its earlier order. Whether the appellant is entitled for the relief of specific performance has got to be decided by the Arbitrator in the arbitral proceedings by a proper decision. Now, at this juncture, this Court is of the considered opinion that what has been elaborately discussed by the learned Single Judge is actually in respect of the factual position and the contentions put forth by the parties, which could be done by the arbitral tribunal where the proceedings are pending, and awaiting decision thereon, the Court is not expected to enter into the field.

9. At this juncture, the only question which requires for consideration in the application under Sec.9 of the Act is to preserve the property till the disposal of the arbitral proceedings. Once it is an admitted fact that the arbitral proceedings are pending and the subject matter before the arbitrator is whether the appellant is entitled for specific performance or not, till those proceedings are over, the property h

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as got to be preserved. The First Bench has already given an order of status-quo to be maintained. It is also made clear by the learned Counsel for the respondents that the property has not been dealt with, and they have no inclination to do so. Hence an order directing the parties to maintain the status-quo till the disposal of the arbitral proceedings in no way, in the considered opinion of the Court, would cause any hardship to the parties. On the contrary, if not an order is made, there is all possibility of any further litigation. In order to avoid the avoidable litigation and also to preserve the property in question, status-quo has got to be maintained till the disposal of the arbitral proceedings and the circumstances would also warrant so. Accordingly, status-quo is ordered till the disposal of the arbitral proceedings, and this original side appeal is disposed of. No costs. Consequently connected CMP is closed.