Case Note & Summary
The appellant, M/s KLR Group Enterprises, filed a Commercial Appeal under Section 13(1-A) of the Commercial Courts Act, 2015, read with Section 37(1)(b) of the Arbitration and Conciliation Act, 1996, challenging the order dated 13.02.2024 and 16.02.2024 passed by the X Additional District and Sessions Judge, Bengaluru Rural (Commercial Division), in Com.A.A.No.3/2024. The trial court had dismissed I.A.No.3 filed by the appellant seeking an ad-interim ex-parte injunction restraining the respondents from interfering with the appellant's peaceful possession and development of the schedule property. The appellant had entered into a sale agreement with the respondents' predecessor-in-interest, and an arbitral award was passed directing specific performance of the agreement. The respondents challenged the award under Section 34 of the Arbitration Act, and during the pendency of that challenge, the appellant sought interim protection under Section 9. The trial court refused the injunction on the ground that the award was under challenge and the appellant had not made out a prima facie case. The High Court held that the trial court erred in its approach. The court observed that an award for specific performance creates a right in rem and the award-holder acquires a vested right to the property. The court under Section 9 has wide powers to pass interim orders to protect the subject matter of the arbitration, including after the award is passed. The court noted that the appellant had a prima facie case, the balance of convenience was in favour of granting injunction, and irreparable injury would be caused if the injunction was refused. The High Court set aside the trial court's order and granted an interim injunction restraining the respondents from interfering with the appellant's possession and development of the property until the disposal of the Section 34 application. The court directed the trial court to dispose of the Section 34 application expeditiously, preferably within six months.
Headnote
A) Arbitration Law - Interim Relief under Section 9 - Power of Court - The court under Section 9 of the Arbitration and Conciliation Act, 1996, has wide powers to pass interim orders to protect the subject matter of the arbitration, including after the award is passed, pending challenge under Section 34. The court can grant an injunction to preserve the status quo and prevent the award from becoming a nullity. (Paras 10-15) B) Specific Performance - Arbitral Award - Right in Rem - An arbitral award directing specific performance of a sale agreement creates a right in rem in favour of the award-holder, akin to a decree for specific performance. The award-holder acquires a vested right to the property, which can be protected by interim orders under Section 9. (Paras 16-20) C) Injunction - Prima Facie Case, Balance of Convenience, Irreparable Injury - While considering an application for interim injunction under Section 9 of the Arbitration and Conciliation Act, 1996, the court must examine whether the applicant has a prima facie case, the balance of convenience is in favour of granting injunction, and whether irreparable injury would be caused if injunction is refused. The trial court erred in holding that the appellant had no prima facie case merely because the award was under challenge. (Paras 21-25) D) Commercial Courts Act, 2015 - Appeal under Section 13(1-A) - Maintainability - An appeal under Section 13(1-A) of the Commercial Courts Act, 2015, read with Section 37(1)(b) of the Arbitration and Conciliation Act, 1996, lies against an order refusing to grant interim relief under Section 9. The appeal is maintainable as the order refusing injunction is a 'judgment' within the meaning of the Act. (Paras 5-9)
Issue of Consideration
Whether the trial court erred in refusing to grant an ad-interim ex-parte injunction under Section 9 of the Arbitration and Conciliation Act, 1996, to restrain the respondents from interfering with the appellant's possession and development of the property, pending disposal of the application under Section 34 of the Act to set aside the arbitral award.
Final Decision
The High Court allowed the appeal, set aside the orders dated 13.02.2024 and 16.02.2024 passed by the X Additional District and Sessions Judge, Bengaluru Rural (Commercial Division) in Com.A.A.No.3/2024, and granted an ad-interim ex-parte injunction restraining the respondents from interfering with the appellant's peaceful possession and enjoyment of the schedule property and development works until the disposal of the proceedings in Com.A.A.No.3/2024. The trial court was directed to dispose of the Section 34 application expeditiously, preferably within six months.
Law Points
- Section 9 of the Arbitration and Conciliation Act
- 1996
- grants wide powers to courts to pass interim orders to protect the subject matter of arbitration
- including after the award is passed
- an award for specific performance of a sale agreement creates a right in rem
- the court under Section 9 can grant injunction to protect the award-holder's possession pending challenge under Section 34
- the principles for grant of interim injunction under Order 39 Rules 1 and 2 CPC apply to Section 9 applications
- a prima facie case
- balance of convenience
- and irreparable injury are relevant considerations.
