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2020 (6) TMI 452 - HC - Indian LawsArbitration agreement - Applicability on the party who is not the signatory of the agreement - Scope of Section 9 of the Arbitration and Conciliation Act, 1996 - Securing of money received from the sale proceeds of the auction of the hotel in Goa - Bidding Process - whether the relief claimed by the Petitioner for directing Respondent No. 2 to deposit the amount of ₹ 85 crores along with accrued interest, lying in the banks in the form of FDRs, in the custody of Respondent No.2, in this Court and a further direction not to disburse the same to Respondent No.1, can be granted? HELD THAT - the scope of power of a Court under Section 9 of the Act is not limited to parties to an Arbitration Agreement and the Court can issue interim directions even against a third party. The distinction between the powers under Section 9 of the Act and Section 17 of the Act has a clear rationale. An Arbitrator is a creature of the contract between the parties and therefore cannot venture outside the contract to issue directions to parties who are non-parties to the Arbitration Agreement. This limitation is not applicable to a Court exercising power under Section 9 of the Act. As brought out by IFCI, pursuant to Order dated 27.08.2018, SEBI has already written to IFCI seeking release of the money and the same is pending due to a communication of Respondent No.1 that it would be taking steps in the pending writ petition against the release of money. Petition filed by Respondent No.1 in Bombay High Court for redemption of his property is still pending and its claims are yet to be adjudicated against Respondent No.2. Therefore, at present it cannot be argued by the Petitioner that Respondent No.2 is holding the sum of ₹ 85 Crores as a Custodian of Respondent No.1, so as to be entitled to the reliefs sought herein. The objection raised by Respondent No.2 on its being a non-party and non-signatory to the Arbitration Agreement, becomes irrelevant and does not require any further adjudication - Reliefs sought by the petitioner cannot be granted by this Court - Petition dismissed.
Issues Involved:
1. Maintainability of the petition under Section 9 of the Arbitration and Conciliation Act, 1996 against a non-party to the arbitration agreement. 2. Entitlement of the petitioner to interim relief for securing the amount lying with Respondent No. 2. 3. The legal standing of Respondent No. 2 in relation to the arbitration agreement between the petitioner and Respondent No. 1. 4. The impact of pending litigations and previous court orders on the current petition. Issue-wise Detailed Analysis: 1. Maintainability of the petition under Section 9 of the Arbitration and Conciliation Act, 1996 against a non-party to the arbitration agreement: The court examined whether Section 9 of the Act allows for interim measures against a non-party to the arbitration agreement. It was noted that while Section 9 can be invoked by a party to the arbitration agreement, it does not limit the jurisdiction of the court to pass orders only against parties to the arbitration agreement. The court cited precedents, including the Bombay High Court judgment in Girish Mulchand Mehta and the Delhi High Court judgment in Gatx India Pvt. Ltd., which clarified that interim measures could be directed against third parties if necessary to protect the subject matter of arbitration. 2. Entitlement of the petitioner to interim relief for securing the amount lying with Respondent No. 2: The petitioner sought directions for securing the amount of ?85 crores lying with Respondent No. 2. The court noted that Respondent No. 2 had admitted that this amount was lying in fixed deposits and did not belong to it, having already appropriated its dues from the sale proceeds of the Goa property. However, the court found that the rights to this sum were contested in other pending litigations, including a representative suit and a writ petition in the Bombay High Court. The court concluded that granting the petitioner’s request would conflict with existing court orders and ongoing proceedings. 3. The legal standing of Respondent No. 2 in relation to the arbitration agreement between the petitioner and Respondent No. 1: Respondent No. 2 argued that it was not a party to the arbitration agreement and therefore, the petition was not maintainable against it. The court acknowledged that Respondent No. 2 was neither a party nor a signatory to the arbitration agreement. However, it emphasized that under certain circumstances, interim orders could be passed against third parties if they held the subject matter of the arbitration in trust or on behalf of the parties to the arbitration agreement. 4. The impact of pending litigations and previous court orders on the current petition: The court highlighted that the sum of ?85 crores was subject to previous court orders, including an order from the Delhi High Court directing Respondent No. 2 not to disburse the amount without further instructions. Additionally, SEBI had sought the release of this amount, and Respondent No. 1 had filed a writ petition in the Bombay High Court seeking redemption of the Goa property. The court found that any direction to secure the amount in the current petition would conflict with these pending litigations and previous orders, which had not been challenged or set aside. Conclusion: The court dismissed the petition, stating that the reliefs sought by the petitioner could not be granted due to the existing legal context and the pending litigations. The court also dismissed the pending application associated with the petition.
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