Arbitration Can Be Invoked Against Party Deleted From Section 9 Application: Bombay High Court

The bench of Justice Manish Pitale held that a party applying forinterim measures under Section 9 may wish to delete certain parties, if itfinds that the interim measures sought in the facts and circumstances of thecase are limited to only a few of the parties to the proceedings.

The parties executed an agreement, granting respondentno. 1- M/s.Regency Mahavir Properties,the rights to develop the property belonging to the petitioner-Deccan Paper Mills Co. Ltd.

After a dispute arosebetween the petitioner and the respondents under the said agreement, thepetitioner filed an application under Section 9 of the A&C Act before theDistrict Court. During the pendency of the Section 9 application, thepetitioner filed a pursis, deleting respondent no. 3- Atul IshwardasChordia, from the proceedings initiated under Section 9. The District Courtallowed the application and passed an interim order against respondent no.1.

Subsequently, thepetitioner invoked the arbitration clause contained in the agreement and fileda petition under Section 11(6) of the A&C Act before the Bombay High Court,seeking appointment of a sole arbitrator.

The respondent no. 3-Atul Ishwardas, submitted before the Bombay High Court that the petitioner haddeleted respondent no.3 from the array of parties in the application filedunder Section 9. Further, it averred that while doing so, the petitioner hadspecifically stated that respondent no. 3 had no concern with developmentactivities of the said property. Thus, it contended that since there was nodispute between the parties, the arbitration clause was wrongly invoked againstthe 3^rd respondent.

Further, the 3^rdrespondent argued that the petitioner had subsequently executed a second arbitrationagreement, which had the effect of modifying the original arbitration clause.Since the subsequent arbitration agreement was not signed by respondent no. 3,it argued that the petitioner cannot invoke arbitration.

The petitioner DeccanPaper Mills contended that merely because respondent no. 3 was dropped by thepetitioner from the proceedings initiated under Section 9, it did not amount toan admission on the part of the petitioner that there was no dispute betweenthem.

The High Court refutedthe contentions made by the 3^rd respondent that once an applicationis preferred under Section 9, during the course of which the applicant choosesto delete one of the parties, the arbitration proceedings can never be invokedagainst such a party.

The Court observed that aparty applying for interim measures under Section 9 may wish to delete certainparties, if it finds that the interim measures sought in the facts and circumstancesof the case are limited to only a few of the parties to the proceedings.Further, it noted that the Court under Section 9 may grant interim measuresonly against some of the impleaded parties and not against others.

The bench added that ifthe contention of the 3^rd respondent is accepted, it would lead toincongruous results, where despite the existence of an arbitration agreementbetween the parties, the applicant would not be able to invoke arbitrationagainst a party, merely because it was deleted from the proceedings underSection 9. The Court held that such an interpretation runs contrary to theobjects and purpose of the A&C Act.

While noting thatrespondent no. 3 had not signed the subsequent arbitration agreement, the Courtobserved that the petitioner, in its letter invoking arbitration, hadspecifically referred to the original arbitration clause.

The Court thus allowedthe petition, appointed a sole arbitrator and referred the parties toarbitration.

Case Title: Deccan PaperMills Co. Ltd. versus M/s. Regency Mahavir Properties & Ors.

Dated: 16.12.2022 (BombayHigh Court)

Counsel for thePetitioner: Ms. Meena H. Doshi

Counsel for theRespondents: Mr. Drupad Patil, Mr. S. S. Patwardhan a/w. Ms. Mrinal Shelar

Citation: 2022 LiveLaw (Bom) 520  

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