Prima Facie Case Alone Does Not Entitle A Party To Relief Under Section 17 Of The A&C Act: Delhi High Court

The Delhi High Court has ruled that a prima facie case alone does not entitle a party to relief under Section 17 of the Arbitration and Conciliation Act, 1996 (A&C Act) for interim measures. The Single Bench of Justice Sanjeev Narula observed that there were highly disputed questions of fact involved in the dispute relating to the interpretation of the agreement between the parties. Holding that the possible extent of the claim likely to be awarded to the claimant vide the arbitral award cannot be a foregone conclusion, the Court set aside the order passed by the Arbitral Tribunal directing the counter-claimant to secure a certain amount in an application filed under Section 17 of the A&C Act by the claimant for interim measures. The respondent/ claimant Rajesh Kumar Pasricha entered into two agreements with the appellant Splendor Buildwell Pvt. Ltd., i.e., a Space Buyer's Agreement and a Memorandum of Understanding (MoU), for purchase of certain property. As per the MoU, the appellant was required to complete the construction of the building within a specified period, failing which, the appellant was bound to pay a certain sum of money, labelled as 'assured return', to the respondent till the time the said property was leased out to a prospective lessee, as provided under the MoU. When the appellant failed to make the said payment or lease out the said property as per the MoU, the respondent invoked the arbitration clause and the Arbitral Tribunal was appointed. In an application filed under Section 17 of the A&C Act for interim measures before the Arbitral Tribunal, the respondent sought to restraint the appellant from creating third-party interest in respect of the said property, and also sought to secure its claim of payment as provided under the MoU. The Arbitral Tribunal allowed the application and directed the appellant to secure a certain amount by way of fixed deposit receipts (FDR) or by an irrevocable bank guarantee. Against the order of the Arbitral Tribunal directing the appellant to secure the said amount, the appellant filed an appeal before the Delhi High Court. The appellant Splendor Buildwell Pvt. Ltd. submitted before the High Court that the amount claimed by the respondent was highly disputed and that the said aspect could only be adjudicated after the parties were afforded an opportunity to lead evidence. The appellant added that an order under an application filed under Section 17 cannot be passed mechanically, merely on the ground that 25 cases were pending against the appellant with respect to the same project, or on the ground that there was a likelihood that the appellant might go into liquidation. The appellant averred that merely finding a just and valid claim or a prima facie case would not entitle an applicant to an order of attachment before the judgment, unless it was also established that the opposite party was attempting to remove or dispose of its assets with the intention of defeating the decree that may be passed. The respondent Rajesh Kumar Pasricha contended that a strong prima facie case existed in favour of him, and that there was sufficient material available on record which indicated that in case the said amount was not secured, the award that would be passed in favour of the respondent would be a mere paper award. The Court noted that as per the relevant clause of the MoU, the appellant had assured a return to the respondent in case the building was not completed within 12 months from the date of the execution of the MoU. The Court observed that the appellant had contended that the building was completed within the specified time and that the same was evident from the Completion Certificate issued by the concerned persons supervising the construction of the building. Hence, the appellant had averred that it was not liable to pay the assured returns as provided under the MoU. The Court observed that the respondent had disputed the contention of the appellant and had argued that the building was not completed within the time stipulated in the MoU. The Court noted that the Arbitrator had granted relief to the respondent in the application filed by him under Section 17, on the ground that the appellant had applied for an Occupation Certificate with respect to the said property one year after the stipulated time, as provided under the MoU. The Court held that in its prima facie opinion, under the MoU there was no linkage between the payment of assured return with the procurement of an Occupation Certificate. The Court ruled that there were highly disputed questions of fact involved in the case relating to the interpretation of the event which triggered the liability of the appellant to pay the assured return under the MoU. Hence, the Court held that the liability of the appellant to pay the assured return could not be assumed with absolute certainty. The Court...

Prima Facie Case Alone Does Not Entitle A Party To Relief Under Section 17 Of The A&C Act: Delhi High Court

Parina Katyal

Tags