GALAXY PROPERTIES PRIVATE LIMITED Vs. PURAVANKARA PROJECTS LIMITED

JUDGEMENT

(1.) INTRODUCTORY :- Whether the Share Purchase Agreement entered into between the Appellant, along with its subsidiary companies, with the Respondent, on the basis of the original as well as modified Memorandum of Understanding (MOU) for the purpose of acquiring the property purchased by the Appellant in the name of its subsidiaries viz., Nile and Vaigai, by way of share transfer, instead of executing sale deeds and registering them before the Registration Department (with a view to avoid stamp duty) are linked and interconnected, so as to enable the Appellant to make use of the provision for arbitration incorporated in the MOU and to approach the Court for interim measure of protection under Section 9 of the Arbitration and Conciliation Act is the core issue that arises for our consideration in this intra- court appeal.

(2.) BRIEF facts:- The Respondent-Puravankara Projects Limited and Appellant-Galaxy Properties Private Limited entered into a Memorandum of Understanding dated 22.11.2006 ( "MOU ") for a project of acquiring 1000 acres of lands from Appellant Company. Under the MOU, Respondent agreed to acquire 1000 acres from the Appellant or from their subsidiaries/associates at Rs.38 lakhs per acre for the first 450 acres and at the rate of Rs.35 lakhs per acre for the remaining 550 acres. Thereafter, Appellant and Respondent entered into an amended MOU dated 22.11.2007 fixing the rate at Rs.50 lakhs per acre for the entire 1000 acres.

(3.) IN June 2009, Respondent represented that they were not in a position to proceed with the project as there was a crunch in the real estate market due to global recession and that the monies are blocked in some other project. It was mutually agreed between the Appellant and Respondent not to proceed with the transaction and as per the mutual agreement, Appellant returned back Rs.10 crores. According to the Appellant, Respondent agreed to reconvey the shares of Nile and Vaigai infavour of Appellant or their nominees and that Appellant has to refund the consideration received out of share transfer agreements of Nile and Vaigai. After receiving back the advance of Rs.10.00 crores along with interest totalling Rs.14.08 crores from the Appellant, Respondent has not kept up their promise on coming forward to reconvey the shares of Nile and Vaigai and this caused great hardship to the Appellant. In response to the e-mail sent by the Appellant dated 01.4.2011, Respondent sent letter on 02.4.2011 stating that they have taken steps to launch the project and that they would build a compound wall and the Appellant is not to disturb their possession. The case of Appellant is that Respondent having committed fundamental breach by not acquiring 1000 acres and having received back Rs.10 crores together with interest totalling of Rs.14.08 crores, Respondent cannot take advantage of their own wrong and claim right over the shares of Nile and Vaigai and the stand of Respondent in their letter dated 02.4.2011 is an act of breach of trust. The Appellant contended that they purchasedlands for Rs.81 lakhs and Rs.83 lakhs respectively per acre in the name of Nile and Vaigai and Respondent cannot snatch those lands for Rs.50 lakhs per acre causing them huge loss. Share Purchase Agreements dated 22.11.2007 form integral part of MOU dated 22.11.2006 and amended MOU dated 22.11.2007. According to the Appellant, even though, shares of Nile and Vaigai has been transferred infavour of Respondent, Appellant is in possession of the lands and that Appellant has always been ready and willing to refund the amount received in the Share Purchase Agreements dated 22.11.2007 with interest at the rate of 12% per annum. Clause 12 of MOU (22.11.2006) contains arbitration clause and after issuing notice dated 18.7.2011 and stating that Respondent is trying to alienate the properties and that they have a prima facie case and balance of convenience is infavour of them, Appellant filed application under Section 9 of Arbitration and Conciliation Act seeking interim injunction restraining the Respondent, their men, agents, servants and everyone claiming under them or acting on their behalf from in any way alienating or encumbering the lands mentioned in the Petition schedule.