2009 (12) TMI 1038 - HC - Indian Laws

Summary

Issues Involved:
1. Jurisdiction of the court under Section 9 of the Arbitration and Conciliation Act, 1996.
2. Rights of non-parties to an arbitration agreement in Section 9 proceedings.
3. Validity of the Development Agreement and related resolutions.
4. Authority of the Society's General Body decisions.
5. Appointment of a Court Receiver and interim measures.

Detailed Analysis:

1. Jurisdiction of the court under Section 9 of the Arbitration and Conciliation Act, 1996:
The court examined whether it had jurisdiction to pass orders under Section 9 of the Arbitration and Conciliation Act, 1996, especially against individuals who were not parties to the arbitration agreement. The court noted that Section 9 empowers a party to an arbitration agreement to seek interim measures from the court, and such measures can be sought before, during, or after the arbitration proceedings but before the enforcement of the arbitral award. The court emphasized that its power under Section 9 is broad and not constrained by the Code of Civil Procedure, allowing it to pass orders for the preservation, interim custody, or sale of any goods, securing the amount in dispute, or any other interim measures of protection as deemed just and convenient.

2. Rights of non-parties to an arbitration agreement in Section 9 proceedings:
The appellants argued that they could not be made parties to the Section 9 petition as they were not parties to the arbitration agreement. The court held that while Section 9 can be invoked only by a party to the arbitration agreement, it does not limit the court's jurisdiction to pass orders only against parties to the arbitration agreement or proceedings. The court can pass orders affecting third parties if they are claiming under a party to the arbitration agreement. The court cited the Kerala High Court's decision in Shoney Sanil v. Coastal Foundations (P) Ltd., which held that Section 9 could be invoked against third parties claiming under a party to the arbitration agreement.

3. Validity of the Development Agreement and related resolutions:
The appellants challenged the Development Agreement and the related resolutions passed by the Society's General Body. The court noted that the General Body had unanimously decided to redevelop the building and had appointed the respondent as the developer. These decisions were not challenged until the filing of the Section 9 petition. The court emphasized that the majority decision of the General Body binds all members, including the appellants, and that the appellants' challenge to the Development Agreement's terms and conditions could not negate the binding effect of the General Body's decisions.

4. Authority of the Society's General Body decisions:
The court reiterated that once a person becomes a member of a cooperative society, they lose their individuality and must abide by the society's decisions. The General Body's decisions are supreme and bind all members. The appellants, being members of the Society, were bound by the General Body's decision to redevelop the property and appoint the respondent as the developer. The court cited the Supreme Court's decision in Daman Singh v. State of Punjab, which held that a member of a cooperative society has no independent rights except those given by the statute and bye-laws.

5. Appointment of a Court Receiver and interim measures:
The court upheld the appointment of a Court Receiver to take possession of the property and hand over vacant possession to the respondent for redevelopment. The court found it just and convenient to appoint the Court Receiver and pass further orders for the preservation, protection, and improvement of the property. The court noted that the respondent had already incurred substantial expenses and that the project was stalled due to the appellants' obstruction. The court emphasized that the relief sought by the respondent did not permanently take away the appellants' rights in their flats, as they would be accommodated in newly constructed flats upon redevelopment.

Conclusion:
The court dismissed the appeal, finding no merit in the appellants' arguments. It held that the appellants were bound by the General Body's decisions and that the court had jurisdiction to pass interim measures under Section 9, even affecting non-parties to the arbitration agreement if they were claiming under a party to the agreement. The court affirmed the appointment of a Court Receiver and the interim measures granted by the learned Single Judge.