Madras High Court Upholds Closure Of Contempt Case After Arbitration Proceedings Were Allowed To Lapse

The Madras High Court has dismissed an appeal against the closure of a contempt petition alleging that a property was sold in violation of an interim injunction obtained under the Arbitration and Conciliation Act, 1996.

A division bench of Justices Anita Sumanth and Sunder Mohan noted that while arbitral proceedings had continued until 2018, the appellant had taken no steps thereafter to revive them. In those circumstances, the Bench found no reason to interfere with the order closing the contempt petition.

"Having not chosen to pursue the arbitration, and literally abandoning the same, we are of the considered view that nothing would be gained by his continuing interest in the contempt petition alone. The effect of any order passed in the contempt petition would only be to punish the contemnors," the bench observed.

The dispute arose after Clasic Farms (Chennai) Limited claimed that a land agent engaged by it to negotiate land purchases had received money in connection with those transactions. Subsequent disputes between the parties led to arbitration proceedings.

Pending arbitration, the company approached the High Court under Section 9 of the Arbitration and Conciliation Act seeking interim protection. On December 15, 2008, the Court granted an interim injunction restraining the land agent from alienating or otherwise dealing with certain properties. The injunction was later extended until further orders.

According to the company, one of those properties was sold on November 11, 2010 despite the subsisting injunction. It thereafter initiated contempt proceedings, alleging wilful disobedience of the court's order.

The contempt petition was closed by a Single Judge in September 2021 on the ground that arbitration had not been invoked for more than thirteen years.

In appeal, the company argued that the finding was factually incorrect and that the arbitration continued until 2018.

The bench accepted that contention and held that the finding regarding non-invocation of arbitration was incorrect.

However, it observed that the company had allowed the arbitration to lapse after 2018 and had not taken steps to pursue the matter before another arbitrator.

The bench also found no material to show that the purchaser of the property had knowledge of the injunction before the purchase. Holding that interference with the order closing the contempt petition would be unwarranted and "hyper-technical," it dismissed the appeal and affirmed the closure of the contempt proceedings.

For Appellant (Clasic Farms (Chennai) Limited): Advocate E. Sathish Kumar.

For Respondent No. 2 (N. Ravishankar): Advocate A.R. Nixon.