No Bar To Avail Remedy U/S 9 Of Arbitration Act Even Against Non-Parties To Subject Matter Of Dispute: Delhi High Court

The Delhi High Court bench of Justice Neena Bansal Krishna has held that the Plaintiffs are not barred from availing the remedy under Section 9 of the Arbitration and Conciliation Act, 1996 even against individual(s)/entities who are not party to the Family Settlement out of which the dispute arose. The application for ad interim injunction was held to be not maintainable due to pending Arbitration proceedings in regard to the Family Settlement and a pending Application under Section 12A of the Commercial Courts Act. Facts Plaintiff No.1, Pawan Gupta, is a promoter Director of Defendant No.7, a company, and owns 26.40% of its shares. Defendant Nos. 4 to 6 are subsidiaries of Defendant No.7, holding properties at Karol Bagh, New Delhi, which the Plaintiffs claimed ownership over based on a Family Settlement. The Plaintiffs contended that they have been in legal possession of the Karol Bagh showroom since 01.10.2024. The dispute arose from family disagreements and legal proceedings regarding the Family Settlement. A Petition was filed in 2022 under the Arbitration Act for interim relief. The Court restrained Defendant Nos. 4 to 12 from transferring or creating third-party rights in the Karol Bagh property. In 2024, the Plaintiffs discovered that a charge had been created on the property without disclosure. The Plaintiffs filed the Commercial Suit under Section 34 of the Special Relief Act, 1963 and Section 151 of the CPC to seek a declaration that the security/mortgage created by Defendant Nos. 4, 5, and 6 through a Debenture Trust Deed dated 30.03.2022 and three Memorandums dated 19.04.2022 (pertaining to the Karol Bagh property) be declared null and void. The Plaintiffs also sought an injunction restraining Defendant Nos. 1 to 3 from acting on these documents and direction to deliver the original title deeds of the Karol Bagh property. Submissions Mr. Arvind Nayar, Senior Adv. on behalf of the Plaintiffs contended that the alternate remedy of Section 17 to seek Interim Protection in the arbitration proceedings is not available for the simple reason that Defendant Nos.1 to 3 are not a party to the Family Settlement and therefore, are not amenable to the arbitration proceedings. Mr. Siddharth Yadav, Senior Advocate on behalf of Defendant Nos.1 to 3 opposed the maintainability of the Suit on the following grounds: The entire dispute in regard to the Family Settlement inter-se the Plaintiffs and Defendant Nos.4 to 12 is pending before the Arbitrator. Till the Application under Section 12A of the Commercial Courts Act, seeking exemption from Pre-Institution Mediation is decided, the Suit cannot be entertained.the alleged transactions have been undertaken by the Companies. The Plaintiffs at best are shareholders. Being the shareholders, they could have approached the NCLT under Sections 241 to 246 of the Companies Act, 2013.The cause of action arose in 2022. Still, no steps were taken by the Plaintiff. Thus, there is no urgency to exempt the Plaintiff from first availing the pre-litigation mediation. Observations The court noted that the Application under Section 12A of the Commercial Courts Act is yet to be adjudicated. It noted that the cause of action reflected that there was no immediate urgency. The issue of whether the suit was only maintainable under the Companies Act before the NCLT was also raised. The court observed that even though Defendant Nos.1 to 3 may not be a party to the Family Settlement but because the Subject properties are subject-matter of adjudication to which Defendant Nos.4 to 7 are a party, there is no bar to avail the remedy under Section 9 of the Arbitration and Conciliation Act, 1996 even against Defendant Nos.1 to 3 as has been held in the case of Blue Coast Infrastructure Development P. Ltd vs. Blue Coast Hotels Ltd and Anr, AIR Online 2020 Del. 862. The court held that no ad interim injunction was made out at the stage. The matter is listed on 07.01.2025. Case Title: Mr. Pawan Gupta & Anr. vs. Miton Credentia Trusteeship Services Limited & Ors.Citation: 2025 LiveLaw (Del) 10 Case Numbers: CS(COMM) 1213/2024, I.A. 49931/2024 (for interim injunction), I.A. 49934/2024 (Exemption), I.A. 49935/2024 (seeking enlargement of time for court fees) Fore Plaintiffs: Mr. Arvind Nayar, Senior Advocate along with Mr. Jai Sahai Endlaw, Mr. Karan Khanna, Mr. Himanshu Satija and Ms. Divya Narayanan, Advocates. For Defendants: Mr. Siddhartha Yadav, Senior Advocate along with Mr. NPS Chawla, Mr. Sujoy Datta, Mr. Suresh Kant Baxy, Mr. Vibhor Kapoor, Ms. Kinjal Goyal and Mr. Shubham Raghuwanshi, Advocates for D1 to D3. Ms. Meenakshi Arora, Senior Advocate with Mr. Gaurav H Sethi, Mr. Abhinav Tyagi, Mr. Rahul Pawar, Advocates for D8- D13. Date of Decision: 27.12.2024Click Here To Read/Download The Order

No Bar To Avail Remedy U/S 9 Of Arbitration Act Even Against Non-Parties To Subject Matter Of Dispute: Delhi High Court

Tazeen Ahmed

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