Source: Delhi High Court  

Why in News? 

The Delhi High Court has ruled that an order under Section 9 of the Arbitration and Conciliation Act, 1996, based on a settlement agreement, is enforceable as a decree under Section 36 of the Code of Civil Procedure, 1908 (CPC). This decision clarifies that such orders can be executed like decrees, ensuring they hold the same legal weight for enforcement purposes. 

• Justice C. Hari Shankar held in the matter of Anand Gupta & Anr. v. M/S. Almond Infrabuild Private Limited & Anr (2024).    

What was the Background of Anand Gupta & Anr. v. M/S. Almond Infrabuild Private Limited & Anr. ? 

• In 2014, Almond Infrabuild Private Limited & Anr. (Respondents) launched a Group Housing Residential Project called "ATS Tourmaline." 
• The project operated under a guaranteed buyback and subvention scheme, offering investors residential units with an option to exit after 33 to 36 months. 
• The buyback terms stipulated that Respondent 1 would repurchase units at ₹1,500 per sq. ft. above the initial booking price of ₹8,000 per sq. ft. 
• Anand Gupta and Anuradha Vinod Gupta (Petitioners) invested in the project and executed a Memorandum of Understanding (MOU) with Respondent 1 on 26^th  March 2014. 
• Clause 8 of the MOU detailed the buyback and subvention scheme, including provisions for interest payments and indemnification. 
• On 15th December 2016, Petitioner 1 expressed intent to exercise the buyback option, requesting confirmation and payment by March 2017. 
• Respondent 1 initially confirmed the binding nature of the MOU but later suggested alternative options or requested more time for compliance. 
• As the payment deadline of 1thApril 2018 approached, the Petitioners sought information about the payment schedule but received no response. 
• By January 2019, the Respondents had defaulted on EMI payments to the bank. 
• On 1 April 2019, the Petitioners sent a detailed legal notice alleging fraud and default on buyback obligations, demanding payment of the buyback amount, accrued interest, and repayment of outstanding bank loans. 
• Due to non-compliance with their demands, the Petitioners filed an application under Section 96 of the Arbitration and Conciliation Act, 1996, as per the dispute resolution clause in the MOU. 
• The matter was subsequently settled through mediation facilitated by the Delhi High Court Mediation and Conciliation Centre, resulting in Settlement Agreements. 
• The current petitions before the Delhi High Court seek enforcement of these Settlement Agreements, which contain identical terms for resolving the disputes between the parties. 

What were the Court’s Observations? 

• The High Court, relying on the precedent set in Angle Infrastructure Pvt Ltd v Ashok Manchanda, held that an order based on a settlement agreement reached through mediation, while not an award or decree per se, is executable under Section 36 of the CPC in the same manner as a decree. 
• The Court rejected the Respondents' objection to the execution petition's maintainability, affirming that the principle established in Angle Infrastructure remains applicable despite the enactment of the Mediation Act, 2023. 
• Addressing the issue of territorial jurisdiction, the Court distinguished between the execution of arbitral awards and court orders, holding that the execution petition was maintainable before the High Court as it was the court that passed the original order. 
• The Court found the terms of the Settlement Agreement to be clear and unambiguous, rejecting the Respondents' argument that their obligations were contingent on the sale of the apartment. 
• Given the Respondents' failure to adhere to their financial obligations under the Settlement Agreement, the Court held them jointly and severally liable for the total settled amount along with interest at 18% per annum. 
• The Court ordered the Respondents to deposit the entire amounts payable to the petitioners within two weeks and attached the agricultural properties offered as collateral until full payment of dues. 
• The Court applied the same reasoning and conclusions to multiple related petitions with identical issues of fact and law, allowing them in terms of the judgment rendered in OMP (Enf) (Comm) 148/2021. 

What is Section 9 of the Arbitration and Conciliation Act, 1996? 

• Timing of Application:  
  • Section 9 allows a party to apply for interim measures before the commencement of arbitral proceedings, during the proceedings, or after the arbitral award is made but before its enforcement under Section 36. 
• Jurisdiction:  
  • The application for interim measures must be made to a court, which has the power to grant such measures as it deems appropriate. 
• Types of Interim Measures:  
  • The court may grant various types of interim measures, including:  
    • Appointing a guardian for a minor or person of unsound mind for arbitration purposes. 
    • Preserving, providing interim custody, or ordering the sale of goods that are the subject matter of the arbitration agreement. 
    • Securing the amount in dispute in the arbitration.  
    • Detaining, preserving, or inspecting any property or thing that is the subject matter of the dispute.  
    • Authorizing entry upon land or building for inspection or evidence gathering purposes.  
    • Granting interim injunctions or appointing receivers.  
    • Any other interim measure of protection that the court considers just and convenient. 
• Court's Powers:  
  • The court has the same powers for making orders under Section 9 as it does for any proceedings before it. 
• Time Limit for Commencing Arbitration: 
  •  If the court grants an interim measure before the commencement of arbitral proceedings, the arbitration must begin within 90 days from the date of the order, or within such further time as the court may determine. 
• Restriction on Court's Intervention:  
  • Once the arbitral tribunal is constituted, the court shall not entertain an application under Section 9, unless it finds that the remedy provided under Section 17 (interim measures ordered by arbitral tribunal) would not be efficacious. 
• Scope of Interim Measures:  
  • The court has broad discretion to grant any interim measure it deems just and convenient, allowing for flexibility in addressing the specific needs of each case.