Bombay High Court: In rival petitions before a Single Judge Bench of Arif S. Doctor, J., filed by partners, i.e., petitioner and respondents 1 and 2 of respondent 3, a construction company (“Firm”), owing to certain differences, where the petitioner contended that the respondents 1 and 2 were dealing with the business of the Firm to his detriment. The contending parties had referred their case to arbitration as per the Partnership Deed between them, for which a Sole Arbitrator was appointed by the Court. The instant Court had issued a status quo order, effective till the final decision of the Arbitral Tribunal. The Court noted that the petitioner had blatantly violated the status quo order by commencing construction at a Firm’s property. Therefore, the Court dismissed the petitioner’s petition. However, the respondent’s petition for the appointment of a Court Receiver to safeguard the Firm property was allowed.
Background
Due to the petitions arising from the same order, the commonality of the parties and the issues for determination, both petitions were heard together by the Court. In the present case, Commercial Arbitration Petition (L) No. 33385 of 2023 was filed under Section 9 of the Arbitration and Conciliation Act, 1996 (“Act”) and Arbitration Petition No. 100 of 2024 was filed under Section 37 of the Act. The Court referred the parties as they were arrayed in Commercial Arbitration Petition (L) No. 33385 of 2023.
As petitioner contented that the respondents 1 and 2 were dealing with the business of the Firm in a manner detrimental to him, therefore, he invoked arbitration under their Partnership Deed, and later filed a petition under Section 9 of the Act for the appointment of a Court Receiver, and under Section 11 of the Act, for the appointment of an Arbitrator. In 2020, the instant Court appointed a Sole Arbitrator (“Arbitrator”), and the respondent 1 was directed to abide by the Partnership Deed, until a final award was rendered (“status quo order”).
The petitioner contended that the respondent 1 soon after the passing or the status quo order, proceeded to commence construction activities at a Virar property, to which the status quo order applied as well. The petitioner submitted that the respondent 1’s conduct and brazen disregard for the status quo order left him with the only option of application for a Court Receiver under Section 9 of the Act, to safeguard the Virar property.
Court’s Analysis and Judgment
The Court stated that the scope of judicial interference under Section 37(2)(b) of the Act was now more than well settled. Referring to Elster Instromet B.V. v. Mrunal Gandhi, 2024 SCC OnLine Bom 350; Max Healthcare Institute Ltd. v. Touch Healthcare (P) Ltd., 2023 SCC OnLine Bom 2715; Karanja Terminal & Logistics (P) Ltd. v. Sahara Dredging Ltd., 2023 SCC OnLine Bom 594; and Raymond Ltd. v. Akshaypat Singhania, 2019 SCC OnLine Bom 227, the Court observed that the following were well-settled:
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The Court will not interfere in the exercise of discretion by the Tribunal, except then the Tribunal has acted arbitrarily, or has violated the principles of law on the grant or refusal of interlocutory injunctions;
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The Court cannot reassess the material based on which the Tribunal has arrived at its decision, as far as the Tribunal has considered the material with a plausible view;
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The Court cannot interfere with the exercise of discretion by the Tribunal, if exercised judiciously and reasonably;
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The interpretative matters of a contract lie primarily within the domain of the Tribunal;
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The Court cannot constantly interfere with and micromanage the proceedings pending before the Tribunal.
The Court perused the Tribunal order and found that the Tribunal had reached its decision based on the material on record and said that the view taken by the Tribunal was a plausible view, which could not be said to be arbitrary or capricious in any manner. Therefore, the Court viewed that to reassess the material on record was unrequired.
The Court further found that the Tribunal’s order included the disputed Virar property, and to permit the respondent 1 to construct upon the Virar property would not only be contrary to the Partnership Deed, but also against his earlier statement.
The Court noted that the respondent 1 had not even attempted to demonstrate the basis on which he entered into a Development Agreement in respect of the Virar property, for which the consideration flowed from the Firm, and which was recorded as an asset in the balance sheet of the Firm. Therefore, the Court found in the light of the above that there was no question of interference with the Tribunal order, and therefore, dismissed Arbitration Petition No. 100 of 2024.
As regards to Commercial Arbitration Petition (L) No. 33385 of 2023, the Court noted that the same shall be allowed, since the respondent 1 was not allowed to alter the status quo order in respect of the Virar property without a leave of the Court or the Tribunal. However, the record had borne that the respondent 1 had acted with impunity and in brazen disregard of the Tribunal’s order.
The Court referred to Arcelormittal Nippon Steel (India) Ltd. v. Essar Bulk Terminal Ltd., (2022) 1 SCC 712, wherein the Supreme Court held that Sections 9(1) and 9(3) of the Act do not denude the Court of its power to grant an interim relief when an Arbitral Tribunal is constituted, if an efficacious remedy is unavailable under Section 17 of the Act.
In the instant case, the Court noted that the petitioner sought the appointment of a Court Receiver due to the respondent 1’s breach of the status quo order. The Court further noted that the Respondent 1 has acted in brazen disregard of the Tribunal’s order, thus, the Court found it entirely just and convenient as an interim measure of protection to safeguard and preserve the Virar property, to appoint the Court Receiver High Court, Bombay as the Receiver of the Virar property. Hence, Commercial Arbitration Petition (L) No. 33385 of 2023 was allowed.
[Ambrish H. Soni v. Chetan Narendra Dhakan, 2024 SCC OnLine Bom 2280, decided on 16-07-2024]
Advocates who appeared in this case :
For the petitioner: Dr. Uday Warunjikar and Sumit Kate, Advocates
For the respondent: Rashmin Khandekar, Pranav Nair and Anand Mishra, Advocates
Buy Arbitration and Conciliation Act, 1996 HERE
