Madhya Pradesh HC Upholds Continuation Of Court-Granted Interim Relief After Arbitral Tribunal Formation

The Madhya Pradesh High Court has upheld an interim order restraining parties from alienating disputed property in an arbitration matter and held that the interim injunction shall continue during the pendency of arbitration proceedings.

“we are of the view that the learned trial Court was right in exercising its jurisdiction under Section 9 of the Act, 1996 considering the fact that the sole arbitrator was appointed and arbitral tribunal was constituted after the learned trial Court had applied its mind and had entertained the application filed under Section 9 and at that time, the respondent did not had any other efficacious remedy.”

A Division Bench of Justice Vijay Kumar Shukla and Justice Alok Awasthi was dealing with an appeal filed by MPM Homes Developers LLP and its partners against Amarjot Developers and Finance Pvt. Ltd.

The dispute arose from sale deeds executed in 2019, following which Amarjot Developers instituted a civil suit seeking cancellation of the deeds. The matter was later referred to arbitration, after which Amarjot Developers approached the Commercial Court seeking interim protection before the arbitral tribunal was constituted.

The Commercial Court restrained MPM Homes Developers from alienating the property or creating third-party rights for a limited period.

MPM Homes Developers argued that the dispute was purely monetary and that granting an injunction effectively nullified a registered sale deed at an interim stage. It also contended that the claim was barred by limitation.

Rejecting these submissions, the High Court held that the Commercial Court had rightly exercised jurisdiction, noting that at the time the application was entertained, no equally efficacious remedy was available.

Referring to the law on interim relief, the Court observed that once an application is taken up for consideration, it can proceed to be adjudicated even if the arbitral tribunal is constituted subsequently.

While dealing with the dispute, the Court held that non-payment of part of the sale consideration does not invalidate a registered sale deed and that the seller's remedy lies in recovery of the balance amount.

“Even if part of the consideration remains unpaid or cheques are not encashed, ownership validly transfers to the buyer, and the seller's remedy lies not in seeking cancellation of the registered instrument but in pursuing recovery of the balance amount.”, it observed.

On the issue of limitation, the court declined to give a finding, holding that it is a mixed question of law and fact requiring evidence.