Order In Section 9 Of Arbitration Act Based On Settlement Is Enforceable As Decree : Delhi High Court

The Delhi High Court bench of Justice C. Hari Shankar has held that an order passed under Section 9 of the Arbitration and Conciliation Act, 1996, based on a settlement agreement, is enforceable as a decree in accordance with Section 36 of the Code of Civil Procedure. Section 36 of the CPC pertains to the "Application to orders" and addresses the execution of decrees and orders. It states that the provisions governing the execution of decrees will also apply to the execution of orders. This means that orders passed by a court, which are not formal decrees but still require enforcement, can be executed in the same manner as a decree. Brief Facts: The matter pertained to petitions where the disputes between the parties were referred to mediation by the Delhi High Court Mediation and Conciliation Centre which facilitated the drafting of Settlement Agreements to resolve the issues. The petitions before the High Court sought the enforcement of these Settlement Agreements, which share identical terms. In 2014, Almond Infrabuild Private Limited & Anr. (Respondents) initiated a Group Housing Residential Project named "ATS Tourmaline," which operated under a guaranteed buyback and subvention scheme. Each investor received a residential unit and had the option to exit the project after 33 to 36 months by selling the unit back to Respondent 1 at a rate of ₹1,500 per sq. ft. above the booking price of ₹8,000 per sq. ft. As the project developer, Respondent 1 agreed to these buyback terms. The Petitioners, Anand Gupta and Anuradha Vinod Gupta, invested in this project leading to the execution of a Memorandum of Understanding (MOU) with Respondent 1. Clause 8 of the MOU outlined that the Petitioners could request the buyback of their unit within the stipulated timeframe. If the repurchase price was delayed beyond 30 days, Respondent 1 would be liable to pay interest at 18% per annum. Further, until the repurchase price was fully paid, Respondent 1 was responsible for paying the EMIs and other related costs directly to the bank, indemnifying the Petitioners. On 15 December 2016, Petitioner 1 expressed interest in exercising the buyback option and requested confirmation and payment by March 2017. Respondent 1 confirmed the binding nature of the MOU terms but subsequently suggested either taking possession of the unit or allowing more time for compliance with the MOU. The Petitioners were also asked to provide their bank loan details for facilitating EMI repayments. As the deadline for payment approached on 1 April 2018, the petitioners inquired about the payment schedule but received no response. By January 2019, the Respondents defaulted on EMI payments which prompted the Petitioners to send a detailed legal notice on 1 April 2019. This notice alleged fraud and default on the buyback obligations demanding the payment of the buyback amount, accrued interest, and repayment of outstanding bank loans totaling ₹1.97 crores. With no compliance from the Respondents, the Petitioners filed an application under Section 96 of the Arbitration and Conciliation Act, 1996 as the MOU provided for arbitration in dispute resolution. The case was settled through mediation and the application was subsequently disposed of. Orders from the High Court included directions for the Respondents to file affidavits of their assets and were restrained from alienating them to the extent of the amount payable to the petitioners. The High Court also granted time for the Respondents to propose a payment schedule and ensure no further obligations on the petitioners' part. Subsequent court orders involved discussions about proposals for settlement, including assurances on EMI payments and arrangements for property sales. Most recently, on 27 February 2024, the Respondents assured timely EMI payments and readiness to sell the flats, while the Petitioners agreed to sign the Agreement to Sell provided indemnification and settlement of liabilities as per the Samadhan Agreement. The arguments in these petitions were heard on 10 July 2024 and orders were reserved. Observations by the High Court: The High Court began with the Respondents' contention that the order dated 18 November 2020, sought to be executed, was neither an "award" nor a "decree," and thus not executable under Section 36 of the Arbitration Act. The Respondents argued that since the execution petitions were filed under Order XXI Rule 109 read with Section 151 of the CPC, and not under Section 36 of the Arbitration Act, the Petitioners' request for enforcement was misplaced. In response, the High Court referred to a precedent set by the Division Bench of the High Court in the case of Angle Infrastructure Pvt Ltd v Ashok Manchanda. The decision in Angle Infrastructure held that an order passed in a petition under Section 9 of the Arbitration Act, based on a settlement reached through mediation,...

Order In Section 9 Of Arbitration Act Based On Settlement Is Enforceable As Decree : Delhi High Court

Rajesh Kumar

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