Swan Corp Limited vs Subramanya Construction And Development
- Court
- Bombay High Court
CNR No : HCBM020325182026
2026:BHC-OS:22868
carbpl32517-2026-J.doc
AGK
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
COMM ARBITRATION PETITION (L) NO.32517 OF 2026
1. Swan Corp Limited (Formerly
Swan Energy Limited)
2. Cardinal Energy and Infrastructure
Private Limited
ATUL
GANESH
KULKARNI
3. Pegasus Ventures Private Limited
… Petitioners
Vs.
Digitally signed by
ATUL GANESH
KULKARNI
Date: 2026.10.22
12:01:01 +0530
1. Subramanya Constructions and
Developments Co. Limited
2. Prakruthi Infrastructure and
Development Co. Limited
3. Arjun Balasubramanyam
4. Chandregowda alias Chandrappa
… Respondents
Mr. Siddhesh Bhole with Mr. Ashwin Pimpale i/by SSB
Legal Advisory for the Petitioner.
Mr. Ashish Kamat, Senior Advocate with Mr. Karl
Tamboly, Mr. Ankit Lohia, Ms. Kausar Banatwala, Ms.
Tanya Sheth, and Ms. Harshita Bajla i/by Mr. Tushar
Goradia for Respondent Nos.1 to 3.
Mr. Zal Andhyarujina, Senior Advocate with Ms. Ankita
Singhania, Mr. Vishal Thaker, Mr. Mulanshu Vora, Ms.
Adish Shah, and Mr. Yash Sinha i/by V. Thaker’s for
Respondent No.4.
CORAM : AMIT BORKAR, J.
RESERVED ON : OCTOBER 15, 2026
PRONOUNCED ON : OCTOBER 22, 2026
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JUDGMENT:
1. By filing the present Arbitration Petition under Section 9 of
the Arbitration and Conciliation Act, 1996, the Petitioners seek to
secure their claim for the Enhanced Settlement Amount of
Rs.278,00,00,000/- from the Respondents. For this purpose, they
seek disclosure of the assets of the Respondents and an injunction
restraining the Respondents from selling, transferring, creating any
charge over, or creating any third-party interest in their assets,
until the disputes are decided.
2. According to the Petitioners, the facts leading to the filing of
the present Petition are as follows. On 10 February 2012,
Petitioner No.1 entered into a Memorandum of Understanding
dated 10 February 2012 (hereinafter referred to as the “MoU”)
with the Respondents on the basis of the representations made by
the Respondents. Thereafter, the parties amicably settled their
disputes, and the settlement was recorded in the Minutes of the
Meeting dated 14 August 2019. By an order dated 23 November
2022, this Court appointed former Judge of this court, as the sole
Arbitrator to decide the disputes arising out of the MoU.
Subsequently, on 2 January 2024, the Arbitrator allowed an
application filed under Order I Rule 10 of the Code of Civil
Procedure, 1908, and permitted Petitioner Nos.2 and 3 to be
joined as parties to the arbitral proceedings. The disputes between
the parties were settled amicably, resulting in the execution of
Consent Terms dated 22 February 2026. On 16 March 2026, the
Arbitrator passed a Final Arbitral Award in accordance with the
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said Consent Terms and disposed of the arbitral reference.
3. On 18 August 2026, the Respondents filed an application
before the Arbitrator, seeking, among other reliefs, an extension of
two months for payment of the Settlement Amount from 7
September 2026. The Arbitrator heard the application on 20
August 2026. Thereafter, on 24 August 2026, the Arbitral Tribunal
passed an order permitting the parties to approach this Court for
appropriate reliefs. The Respondents accordingly filed Commercial
Arbitration Petition (L) No.29704 of 2026. However, by a
Judgment and Order dated 7 September 2026, this Court
dismissed the said Petition filed under Section 9 of the Arbitration
and Conciliation Act, 1996. By a letter dated 7 September 2026,
the Petitioners informed the Arbitrator, who was acting as the
Escrow Agent, that the payment required under the Consent Terms
had not been received. They accordingly requested the release of
the documents kept in escrow. Consequently, the original Master
General Powers of Attorney (MGPAs) and other documents were
released and handed over to the Petitioners on the same date. On
7 September 2026, the Respondents addressed a letter to the
Arbitrator, requesting him not to release, hand over, register or
otherwise deal with the Master GPAs until the Appeal was decided.
However, by an email dated 7 September 2026 addressed to
Respondent Nos.1 and 2, the Arbitrator, in his capacity as the
Escrow Agent, recorded that an Event of Default had occurred in
terms of the Consent Terms and that the Petitioners were entitled
to receive the documents kept in escrow immediately. Thereafter,
by a letter dated 10 September 2026, the Petitioners called upon
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the Respondents to cooperate in registering the Master GPAs and
handing over possession of the Scheduled Properties. The
Petitioners sent a reminder email on 11 September 2026. The
Respondents replied to the Petitioners' letter dated 10 September
2026 on 12 September 2026. In these circumstances, the
Petitioners have filed the present Petition.
4. Mr. Bhole, learned Advocate appearing for the Petitioners,
submitted that the liability of the Respondents has been
determined under the Consent Terms and the Consent Award.
According to him, this liability is not limited to the Scheduled
Properties alone. Respondent Nos.1 and 2 have personally
undertaken to pay the Settlement Amount, while the Master GPAs
have been given as security for payment of that amount. He
therefore submitted that the Petitioners have enforceable rights
under the Consent Terms and that those rights must be protected.
Mr. Bhole submitted that the Respondents have received money
from transactions relating to the Scheduled Properties but have
failed to deposit that money as required under the Consent Terms.
He pointed out that Respondent No.1 received Rs.19.75 crore by
way of demand drafts between 12 May 2026 and 20 May 2026
under the Sameera Term Sheet relating to the Mysore Lands.
However, the amount was not deposited as required by Clause
1.12 of the Consent Terms. According to him, the Respondents
have claimed that the money was paid to HLFL, but they have not
produced any document to support this claim. He submitted that
the alleged demand drafts amounting to Rs.15 crore, said to have
been obtained from the sale of Mysore Lands-1, were never
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handed over to the Petitioners.
5. Mr. Bhole submitted that Respondent No.1 has merely stated
in its Reply that the Petitioners' allegation is “not corroborated”.
According to him, this is an evasive response because the
Petitioners have pleaded the receipt and non-deposit of the
amount, and the Respondent has not answered that allegation. Mr.
Bhole submitted that a letter dated 4 September 2026 issued by
Siddhasiri to Respondent No.1 in respect of 39 Acres 24 Gunthas
of the Mysore Lands was not disclosed. Under that letter, a No
Objection Certificate was sought from Petitioner No.1. He pointed
out that the Respondents had offered the same land under the
Sameera Term Sheet and received Rs.19.75 crore between 12 May
2026 and 20 May 2026. According to him, the Respondents could
not offer the same land to two different entities without disclosing
the earlier transaction. He submitted that such conduct amounts to
a breach of Clause 10 of the Consent Terms. Mr. Bhole submitted
that Respondent No.1 refused to cooperate by its letter dated 12
September 2026. He pointed out that the revocation notices issued
by Respondent No.4 to Respondent No.1 through Mr. K. N.
Balasubramanyam were accepted without any protest. According
to him, these circumstances are relevant while considering the
conduct of the Respondents and their refusal to comply with the
Consent Terms.
6. Mr. Bhole submitted that the Respondents' contention that
the Enhanced Settlement Amount of Rs.278 crore is a condition
imposed merely to compel payment, or is otherwise unenforceable
under Section 74 of the Indian Contract Act, 1872, amounts to an
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indirect challenge to the Consent Award, which has not been
challenged earlier. He pointed out that the extension of time was
sought by the Respondents themselves. According to him, Clauses
1.12 and 1.13 of the Consent Terms permitted certain dealings
with the properties subject to the conditions stated therein, and
those permissions came to an end when the Event of Default
occurred. He submitted that any defect relating to payment of
stamp duty can be cured and cannot defeat the Petitioners' rights.
He contended that the Respondents' objection concerning
encumbrances over the Chennai property had been rejected.
7. In respect of Respondent No.2, Mr. Bhole submitted that
Respondent No.2 is jointly liable with Respondent No.1 to pay the
Settlement Amount and the Enhanced Settlement Amount. He
adopted his earlier submissions in this regard. He submitted that
the Respondents suppressed the Jones Term Sheet dated 6 August
2026 relating to the Chennai Land and did not disclose it either
before the Arbitrator or in their own Section 9 Petition, although
the same land was offered to Oaktree as security. He pointed out
that the Respondents were seeking to obtain the release of the
Kovilambakkam Land in Chennai by offering an advance payment
of Rs.45 crore against the relevant tranche, although an amount of
Rs.195 crore was payable earlier under the agreed schedule.
According to him, this amounts to a clear breach of Clauses 1.5
and 1.11 of the Consent Terms. He submitted that the demand
draft of Rs.45 crore dated 22 September 2026, which the
Respondents claim to have prepared, was obtained after the Event
of Default and after the filing of the present Petition. The demand
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draft is allegedly held by a third party and is subject to the
condition of obtaining a No Objection Certificate. He submitted
that, if the Respondents intend to rely on this amount, it must be
deposited in Court unconditionally. Mr. Bhole submitted that the
Jones Term Sheet refers to 3.78 acres of land, whereas only 2.78
acres are held against the agreed value of Rs.15 crore per acre,
which the Consent Terms describe as “binding and
unchallengeable”. According to him, the Jones Term Sheet has
increased the stated value to Rs.62.50 crore per acre. He pointed
out that, at page 615 of the Reply, the Respondents have offered
Rs.45 crore on this basis. He submitted that this arrangement is
only an attempt to secure the release of the Chennai Land at
Kovilambakkam without following the payment schedule
prescribed under Clauses 1.1 to 1.4 of the Consent Terms. In
respect of Respondent No.3, Mr. Bhole submitted that Respondent
No.3 is bound by the Consent Terms and the Consent Award. He
pointed out that Respondent No.3 signed the Consent Terms in
confirmation of his obligations and executed the MGPA in respect
of his Mysore Lands. He submitted that Respondent No.3
confirmed the Consent Terms and undertook before the Arbitral
Tribunal to comply with them. According to him, the Consent
Award is binding upon the confirming parties, including
Respondent No.3. Mr. Bhole submitted that, after the Event of
Default occurred, the confirming parties were required to register
the MGPAs and were not entitled to obstruct the Petitioners from
taking possession of the properties. He pointed out that the
Petitioners called upon Respondent No.3 to comply with these
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obligations by letters dated 10 and 11 September 2026. However,
in his letter dated 15 September 2026, Respondent No.3 called
upon the Petitioners to “refrain from taking any steps”. According
to Mr. Bhole, this conduct is contrary to the obligations undertaken
under the Consent Terms.
8. Mr. Bhole relied upon the conduct of the person who is a
Director of Respondent Nos.1 and 2. He submitted that the said
Director executed the Sameera Term Sheet in respect of his own
Mysore Lands and on behalf of Respondent No.4, under which an
amount of Rs.19.75 crore was received. Thereafter, the same lands
were again offered through Siddhasiri by the letter dated 4
September 2026. He pointed out that the said Director signed the
Jones Term Sheet on behalf of Respondent No.2. According to him,
these transactions show how the properties given as security are
being dealt with by the Respondents. Mr. Bhole submitted that
Respondent No.4, who owns adjoining Mysore Lands, has created
third-party rights in respect of the properties. He apprehended that
Respondent No.3 may create similar rights. According to him,
unless the existing position is protected, the security provided
under Clauses 3.2 and 3.3 of the Consent Terms and the restriction
imposed by Clause 10 would become ineffective. He therefore
submitted that the sale proceeds received from the Scheduled
Properties form part of the security available to the Petitioners and
must be deposited. In respect of Respondent No.4, Mr. Bhole
submitted that Respondent No.4 is bound by the Consent Terms
and the Arbitral Award. He pointed out that Respondent No.4
signed the Consent Terms through Mr. K. N. Balasubramanyam,
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who was authorised to sign on behalf of Respondent No.1.
According to him, Respondent No.4 personally confirmed the
Consent Terms, undertook to comply with them and executed an
irrevocable General Power of Attorney dated 7 March 2026. He
therefore submitted that Respondent No.4 cannot avoid the
obligations arising from the Consent Award by merely contending
that he was not a party to the proceedings. Mr. Bhole submitted
that Respondent No.4 made a statement before the Arbitrator on
16 March 2026 that the entire extent of 41 Acres 23 Gunthas was
free from encumbrances and third-party rights. However, in his
own suit, Respondent No.4 has stated that an agreement for sale
dated 2 March 2026 had been executed in respect of 12 Acres 06
Gunthas. He has referred to sale deeds dated 10 April 2026 in
respect of 11 Acres 06 Gunthas and 1 Acre 09 Gunthas. According
to Mr. Bhole, these transactions show that third-party rights had
been created even before or shortly after the Consent Award was
passed. He therefore submitted that Respondent No.4 made an
incorrect statement before the Arbitral Tribunal and has acted in
breach of the Award. Mr. Bhole submitted that, even in 2024, an
extent of 7 Acres 15 Gunthas was stated to be under joint
development. In paragraph 18 of his suit, Respondent No.4 has
stated that he is in the process of allotting that land to prospective
purchasers. According to Mr. Bhole, Respondent No.4 has not held
how these dealings are consistent with his obligation not to create
third-party rights in any form in respect of the land. He submitted
that the statement made by Respondent No.4 was not limited to
the absence of encumbrances. It covered dealings with the
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property in any manner whatsoever. Mr. Bhole pointed out that, in
his Reply dated 8 October 2026, Respondent No.4 has stated that
the Petitioners inspected the property on 26 February 2026.
According to Respondent No.4, this inspection showed that the
Petitioners were aware of whether any third-party interest had
been created. Mr. Bhole submitted that such an inspection cannot
establish that the Petitioners knew about the transactions referred
to in the suit. He pointed out that Respondent No.4 has not
produced any document with his Reply to show that the contents
of paragraph 18 of the suit were disclosed to the Petitioners.
9. Mr. Bhole submitted that Respondent No.4 has taken
inconsistent positions in his Reply. In paragraphs 2, 3(a) and 3(b),
Respondent No.4 has stated that he was not required to pay any
amount to the Petitioners or arrange for the generation of funds
for their payment. He has contended that he is not a party to the
Consent Terms. However, in paragraphs 10 and 11 of the same
Reply, Respondent No.4 has stated that Clauses 1.12 and 1.13 of
the Consent Terms contemplate dealings with the Scheduled
Properties for raising money to be paid to the Petitioners. He has
stated that, to secure the release of his properties, he entered into
an agreement and earmarked the amount received for payment to
the Petitioners. Mr. Bhole submitted that these statements must be
considered along with the letter at page 735 of the Rejoinder
Affidavit, in which Respondent No.4 called upon the Petitioners
not to take any steps in respect of the Scheduled Properties
because an Appeal and a Section 11 application were pending
before this Court. According to him, these statements show that
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Respondent No.4 cannot avoid the obligations arising from the
Consent Terms while simultaneously seeking to prevent the
Petitioners from enforcing their rights.
10. Mr. Bhole submitted that the General Powers of Attorney
were purportedly revoked on 18 September 2026, that is, one day
after the present Petition was filed. According to him, the MGPAs
were executed in connection with an interest created in favour of
the Petitioners and cannot be revoked in a manner that prejudices
that interest. He relied upon Section 202 of the Indian Contract
Act, 1872, in support of his submission that an agency coupled
with an interest cannot be terminated to the prejudice of that
interest. Mr. Bhole submitted that Respondent No.4 filed O.S.
No.440 of 2026 before the Civil Court at Srirangapatna, despite
the parties having agreed to the exclusive jurisdiction of the courts
at Mumbai. According to him, the suit is based on an alleged event
dated 12 September 2026, which has been wrongly presented as
giving rise to a cause of action. He submitted that Respondent
No.4 obtained an ex parte order dated 24 September 2026 by
placing incorrect facts before the Court. Mr. Bhole contended that
Respondent No.4 is acting on behalf of Respondent No.1 and is
being used as a front to prevent the Petitioners from enforcing
their rights. Mr. Bhole submitted that the Petitioners' claim is not
limited to recovery of money. According to him, the Petitioners
intend to initiate arbitral proceedings to enforce their rights in the
immovable properties, which, as they contend, have accrued or
become vested in them because of the Respondents' default in
paying the amounts agreed under the Consent Terms. Inviting my
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attention to paragraph 18 at page 627, he submitted that an
amount of Rs.125 crore generated from the sale deeds dated 10
April 2026 was earmarked for deposit with the Petitioners.
However, according to him, the Petitioners' representative
informed the Respondents that they would have to pay
Rs.29,28,75,000/- in one instalment instead of paying Rs.15 crore.
25. Inviting my attention to Clause 10 of the Consent Terms, Mr.
Bhole submitted that the said clause prohibits the Respondents
from creating third-party rights in respect of the properties covered
by the Consent Terms, except for the dealings permitted under
Clauses 1.12 and 1.13. He submitted that, once the Respondents
defaulted in making payment, the consequences provided under
Clauses 3.1 to 3.5 of the Consent Terms became applicable.
11. Mr. Bhole invited my attention to the communication at page
163, which was addressed by the Petitioners to the Arbitrator in
accordance with Clause 3.2 of the Consent Terms, seeking release
of the original Master GPA. He submitted that the Arbitrator
examined the matter, recorded that an Event of Default had
occurred under the Consent Terms and stated that the Petitioners
were entitled to receive the documents kept in escrow
immediately. Thereafter, the Petitioners called upon the
Respondents to remain present for registration of the documents.
However, the Respondents replied that the said communication
was unnecessary and ought not to have been issued. With regard
to Respondent No.4, Mr. Bhole invited my attention to paragraph
22(b) of the Petition. He submitted that the Petitioners have
alleged that the Respondents are acting together and have taken
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steps to defeat the Petitioners' rights. He referred to paragraph 6 of
the Rejoinder, which deals with the term sheet executed by
Respondent No.1 as the Lead Intended Seller through its Director,
Mr. Arjun Balasubramanyam. The term sheet was executed on
behalf of Confirming Party No.2, represented by M/s. Subramanya
Construction and Development Co. Limited through Mr. Arjun
Balasubramanyam. Mr. Bhole pointed out that Mr. Arjun
Balasubramanyam is a Director of Respondent Nos.1 and 2 and is
Confirming Party No.1. He had executed the Sameera Term Sheet
both in his personal capacity and on behalf of Confirming Party
No.2 in respect of the Mysore Lands. According to Mr. Bhole, these
facts show that the lands belonging to Confirming Party No.2 are,
in substance, controlled and dealt with by the Respondents, and
that Confirming Party No.2 is acting only as a front for them.
12. Mr. Bhole invited my attention to the non-binding term sheet
dated 6 June 2026, annexed as Exhibit-D to the Reply filed by
Respondent No.1. He submitted that the said term sheet was
signed on behalf of Intended Seller Nos.2, 3 and 4 by Mr. Arjun
Balasubramanyam. He relied upon paragraphs 10, 11 and 12 of
the Reply filed by Respondent No.4 to contend that Respondent
No.2 is acting as a front for the other Respondents. According to
him, the restriction contained in Clause 10 of the Consent Terms
against creating third-party rights applies to Respondent No.4. He
relied upon Clauses 2.2(ii) and 1.8 of the Consent Terms to
support his submission that the Consent Terms are binding upon
Respondent No.4 as well. Mr. Bhole submitted that the increase in
the Settlement Amount from Rs.240 crore to Rs.278 crore cannot
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be treated as a condition imposed merely to compel the
Respondents to make payment. According to him, the enhanced
amount was agreed upon as a legitimate measure of compensation
for breach of the Consent Terms, and the Petitioners are entitled to
seek enforcement of that obligation. He submitted that, even if the
enforceability of the enhanced amount is left open for
consideration, the Respondents have admittedly failed to pay the
original Settlement Amount of Rs.240 crore within six months, as
required under the Consent Terms. He therefore contended that
the Event of Default has occurred, and the consequences
prescribed under the Consent Terms have been triggered. Mr.
Bhole lastly submitted that the statement made by Respondent
No.4 before the Arbitrator that no third-party rights had been
created in respect of the property was incorrect. According to him,
Respondent No.4 had created third-party rights before making that
statement, and this fact is recorded in the proceedings before the
Arbitrator. He submitted that this conduct must be considered
while deciding whether Respondent No.4 can be permitted to rely
upon the defence that he misunderstood his obligations. On these
grounds, Mr. Bhole submitted that the Petitioners have established
a case for grant of the reliefs sought in the present Petition.
13. Mr. Kamat, learned Senior Advocate appearing for
Respondent Nos.1 to 3, submitted that the Consent Terms
permitted Respondent Nos.1 to 3 to sell the properties for
arranging the amount of Rs.240 crore payable to the Petitioners.
He submitted that the condition increasing the amount from
Rs.240 crore to Rs.278 crore was inserted merely to put pressure
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on the Respondents to make payment and was unenforceable. He
submitted that Respondent Nos.1 to 3 were ready to accept an
arrangement under which a Court Receiver could be appointed in
respect of the properties covered by the Consent Terms. The Court
Receiver could sell those properties and recover the amount of
Rs.240 crore for payment to the Petitioners. The disputed
additional amount of Rs.38 crore could be deposited in this Court,
and the question whether that amount was payable could be
decided by the Arbitral Tribunal. He submitted that the Consent
Terms did not prescribe any fixed schedule for payment of
instalments during the period of six months. According to him,
paragraphs 20 and 21 of the Petition showed that the Petitioners
were seeking recovery of money from Respondent Nos.1 to 3.
Their claim could be adequately secured by accepting the
arrangement suggested by the Respondents for appointment of a
Court Receiver. In support of his submission that the Court should
exercise its equitable jurisdiction where a contract or a decree
passed on the basis of a compromise contains a penal condition
inserted merely to put pressure on a party, Mr. Kamat relied upon
the judgments in the cases of Deepchand Mini vs. Ticamchand
Mini, 1973 SCC OnLine Cal 88; Jamotibai Satyanarayan Bajaj vs.
Abdul Razzak, 2006 SCC OnLine Bom 1056; Kailash Nath
Associates v. Delhi Development Authority, (2015) 4 SCC 136; and
Authorised Officer, Central Bank of India vs. Shanmugavelu,
(2024) 6 SCC 641.
14. In support of his submission that the parties are not bound
by an agreed valuation if the valuation is erroneous, Mr. Kamat
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relied upon the judgments in Mihir Chakraborty vs. Multi Tech
Computers (P) Limited, (2001) 106 Comp Cas 150; Renuka Datla
(Dr.) vs. Solvay Pharmaceutical B.V., (2004) 1 SCC 149; G.L.
Sultania vs. Securities & Exchange Board of India, (2007) 5 SCC
133; and Nafan B.V. vs. SAF Yeast Co., (2016) 199 Comp Cas 644.
On the question of the doctrine of election, he relied upon the
judgment in Irreo Grace Realtech (P) Ltd. vs. Abhishek Khanna,
(2021) 3 SCC 241. In support of his submission that admissions
made in pleadings are judicial admissions and carry greater weight
than admissions made as evidence, he relied upon Nagindas
Ramdas vs. Dalpatram Iccharam alias Brijram , ( 1974) 1 SCC 242.
15. Mr. Kamat relied upon Kishorsinh Ratansinh Jadeja vs.
Maruti Corporation, (2009) 11 SCC 229, and Best Seller Retail
India Private Limited vs. Aditya Birla Nuvo Limited & Others,
(2012) 6 SCC 792, in support of his submission that the principles
governing interim relief require the Court to consider all relevant
circumstances and that an injunction need not be granted merely
because a prima facie case is made out. On the question of
injunction being an equitable relief, the grant of which depends
upon the Court's discretion, he relied upon Gujarat Bottling Co.
Limited & Ors. vs. Coca Cola Co. & Ors., (1995) 5 SCC 545, and
Mandalli Rangana & Ors. vs. T. Ramachandra & Others, (2008) 11
SCC 1. He relied upon the judgments in Radha Sundar Dutta vs.
Mohd. Jahadur Rahim, 1958 SCC OnLine SC 2; Sunil Kumar
Chandra vs. Spire Techpark Private Limited, (2023) 1 HCC (Del)
391; Bharat Sher Singh Kalsia vs. State of Bihar, (2024) 4 SCC 2;
and BPL Limited vs. Morgan Securities & Credits Private Limited,
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(2026) 3 SCC 1, in support of his submissions on the issues arising
in the Petition.
16. Mr. Andhyarujina, learned Advocate appearing for
Respondent No.4, submitted that the expression “party” has been
defined in the Consent Terms. According to him, the definition
identifies the Petitioners and Respondent Nos.1 to 3 as the parties,
while Respondent No.4 signed the Consent Terms only as a
confirming party. He submitted that relief under Section 9 of the
Arbitration and Conciliation Act, 1996, can be granted against a
third party only when that person claims through or under a party
to the arbitration agreement. According to him, Respondent No.4
does not fall within that category. Inviting my attention to the
definition clause at page 67, he submitted that the Petitioners and
Respondent Nos.1 to 3 are described as the parties to the Consent
Terms. He submitted that Clauses 1.6 and 2.1 prescribe the only
obligations imposed upon Respondent No.4 under the Consent
Terms. Except for those specific obligations, Respondent No.4
cannot be treated as a person claiming through or under a party to
the arbitration agreement. He submitted that Clause 20, which
refers to the acceptance of statements and undertakings contained
in the Consent Terms, must be understood only with reference to
the obligations undertaken by Respondent No.4. Therefore,
according to him, no relief can be granted against Respondent
No.4 in the present Petition. In support of his submissions, Mr.
Andhyarujina relied upon the judgment in Ningbo Aux Imp & Exp
Co. Limited vs. Amstrad Consumer India Pvt. Ltd., 2026 SCC
OnLine Bom 441.
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REASONS AND FINDINGS:
Background and the agreed settlement:
17. The disputes between the parties arose from their earlier
business arrangement and were referred to arbitration. During
those proceedings, the parties settled their disputes by signing
Consent Terms dated 22 February 2026. Thereafter, the learned
Sole Arbitrator passed the Arbitral Award dated 16 March 2026 in
accordance with those Consent Terms. The earlier arbitration was
brought to an end on the basis of the written settlement. The
settlement stated the amount to be paid, the properties to be
released after payment, the security to be given and what would
happen if the payment was not made. Clause 1.1 of the Consent
Terms records the obligation to make payment in the following
words:
“The Claimants irrevocably agree to pay Swan or its
nominees, a sum of Rs.240,00,00,000/- (Rupees Two
Hundred Forty Crores Only) hereinafter referred to as
‘Settlement Amount’, within 6 (six) months from the date
hereof (i.e., on or before 23.08.2026) without any interest
towards full and final settlement and closure of all the
claims.”
18. Clause 1.5 states:
“It is agreed between the Parties that the entire Settlement
Amount shall be strictly paid within 6 (six) months, i.e. by or
before 23.08.2026 from the date of execution of these
Consent Terms. It is clarified that the Claimants shall strictly
adhere to the sequence of the tranches as mentioned in 1.2,
1.3 and 1.4 above and shall not have the option to alter the
sequence.”
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19. These clauses show that the Claimants had agreed to pay the
full Settlement Amount under the Consent Terms. The release of
the properties was linked with payment. The properties were not
to be released without the required payment being made. Clause
1.5 makes it clear that one side could not change the payment date
or the order of payment according to its own convenience. At the
same time, the Consent Terms allowed the Claimants to arrange
money through transactions with developers or purchasers and by
obtaining financial facilities against the Scheduled Properties.
However, they had to follow the conditions stated in the Consent
Terms while doing so.
20. The Award dated 16 March 2026 extended the payment date
up to 6 September 2026. The documents before this Court show
that the Petitioners did not receive the Settlement Amount, or any
payment under the relevant clauses, within the extended period.
On 7 September 2026, the Petitioners informed the learned
Arbitrator that no payment had been received and asked for the
Master General Powers of Attorney and the other documents kept
in escrow to be released to them. On the same date, the learned
Arbitrator, acting as Escrow Agent, recorded that an Event of
Default had occurred under the Consent Terms and that the
Petitioners were entitled to receive the documents kept in escrow.
Those documents were released to the Petitioners. The
Respondents have not produced any receipt or other material
before this Court to show that the Settlement Amount, or any part
of it, was paid before the extended date. Their explanation is that
payment was delayed because the Petitioners did not clear the
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encumbrances over the Chennai Lands. They have not shown that
the amount was paid within the required time. This is important
because the parties had agreed in the Consent Terms about what
would happen if payment was not made. They had not left this
matter to be discussed or decided afresh later. Discussions with
lenders, the expectation of receiving a loan or the possibility of a
future transaction cannot be treated as payment of the Settlement
Amount. Such circumstances may explain the efforts made by the
parties and why payment was delayed. But they do not show that
the payment obligation under the Consent Terms and the Award
was fulfilled.
Effect of Clauses 1.1 to 1.14 of the Consent Terms:
21. The Consent Terms have to be read together. Clauses 1.1 to
1.14 deal with the Settlement Amount, the time and order of
payment, release of properties in proportion to the amounts paid,
deposit of title documents and permission to raise loans or enter
into transactions with developers or proposed purchasers. These
clauses show that the parties had considered that the Claimants
could arrange the money by using the Scheduled Properties. But
they had provided that the money received from such transactions
would be used in the agreed manner. The title documents were to
be released in proportion to the properties only after the required
payment and other conditions were fulfilled. Clause 1.12 allowed
the Claimants to enter into MOUs or agreements with developers
or proposed purchasers. However, the full amount applicable to
the concerned property under Clauses 1.2, 1.3 and 1.4 had to be
deposited with the learned Arbitrator. After the payment was
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received, the Petitioners had to be informed and the original title
documents relating to the relevant portion of land had to be
released. Clause 1.13 allowed the Claimants to borrow money or
obtain financial facilities against the Scheduled Properties. This
was subject to the agreed arrangement for releasing the loan
amount and releasing the relevant title documents in proportion to
the payment. Clause 1.14 provided that the learned Arbitrator had
to be informed when the money was credited. The documents and
cancelled Master GPAs would be released in the manner stated in
the Consent Terms. These clauses gave the Claimants different
ways of arranging the money. However, they did not say that the
last date for payment would be extended. In simple words, the
Consent Terms gave the Claimants different ways to arrange the
Settlement Amount. They could obtain finance or enter into
transactions relating to the properties. But the money had to be
arranged within the agreed period and the order of payment
instalments had to be followed. signing a term sheet with a lender
or proposed purchaser does not mean that the money has been
disbursed and paid to the Petitioners. If the parties wanted the
payment period to be extended whenever a lender needed more
time, they could have included such a condition in the Consent
Terms. No such condition has been shown to this Court.
22. The Respondents rely upon their financing arrangements and
the efforts made to obtain the Settlement Amount. The record
refers to an indicative Term Sheet dated 25 March 2026 with
Oaktree Opportunities and another term sheet dated 14 July 2026.
The Respondents rely upon the non-binding Term Sheet dated 6
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June 2026 with Sameera Estates, relating to proposed transactions
concerning approximately 150 acres of land. They say that they
were genuinely trying to arrange the money and were pursuing
these transactions so that payment could be made. These
documents do show that the Respondents were making efforts to
obtain finance and proceed with property transactions. However,
they do not show that the Settlement Amount was paid by 6
September 2026. Making genuine efforts to arrange finance and
making payment are two different things. The first may explain the
efforts made by the Respondents, but it cannot replace the second.
Clauses 3.1 to 3.5 and the consequences of default:
23. The parties had agreed that, if the Settlement Amount was
not paid, the Petitioners could start proceedings for recovering it.
They had agreed that a separate arrangement would become
applicable if the payment was not made within the agreed time.
This arrangement is important because it shows what the parties
had decided would happen if there was a default and what steps
the Petitioners could take thereafter. Clause 3.1 provides that if the
Claimants “fail, avoid or otherwise neglect” to pay the Settlement
Amount within six months from the date of the Consent Terms, an
“Event of Default” would take place. In that situation, the amount
payable would increase to Rs. 278 Crores, which is called the
“Enhanced Settlement Amount”. The clause says that any amount
paid has to be adjusted in the manner provided there. The words
used in Clause 3.1 are important. The parties have not said that
the Enhanced Settlement Amount would become payable only if
the Claimants intentionally refused to pay or if it was proved that
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they never wanted to make the payment. The words used are “fail,
avoid or otherwise neglect”. These words cover a situation where
the payment is not made within the agreed time. There may be
different reasons for such failure. The money may not be available,
the finance may have been delayed, a property transaction may
not have been completed, or some other difficulty may have
arisen. The reason for non-payment may have to be examined on
the facts and under the Consent Terms. However, a party cannot
escape the agreed consequence merely by saying that efforts were
being made to arrange the money. The first thing to be seen is
whether the payment was made within the agreed period.
24. There is a difference between having a duty to make
payment and making efforts to arrange money for that payment. A
person may approach lenders, discuss matters with proposed
purchasers, sign term sheets and take other steps for arranging the
required funds. These steps may show that the person was trying
to fulfil the obligation. But, unless the contract says that such steps
will extend the time for payment, they cannot be treated as if the
payment has been made. The Consent Terms permitted the
Claimants to arrange finance and enter into transactions relating
to the Scheduled Properties. These facilities were provided to help
them make the payment. They did not remove the obligation to
pay by the agreed date.
25. In the present case, the extended date for making payment
was 6 September 2026. The material before the Court shows that
the Settlement Amount of Rs. 240 Crores was not paid within that
period. The Respondents rely upon the efforts made by them to
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arrange finance and the alleged delay in removing the
encumbrances over the Chennai Lands. These submissions have to
be considered, but they do not change the language of Clause 3.1.
The effect of the alleged delay has to be examined in accordance
with the contractual provisions and the relevant Court orders.
Unless there is a legal basis to hold that the payment date was
extended or that the default clause could not apply, the fact that
discussions for arranging finance were still going on cannot
prevent the consequence under Clause 3.1 from arising.
26. The principle that parties are generally bound by the
agreement made by them is relevant. In Nabha Power Ltd. v.
Punjab State Power Corporation Ltd. , (2018) 11 SCC 508, the
Supreme Court held that the terms of a contract must be
understood in their proper context. The Court cannot add a
condition which the parties had never agreed upon. The contract
may be read as a whole to understand the intention of the parties,
but the Court cannot make a new agreement for them merely
because one party now finds it difficult to follow the agreed terms.
Applying this principle, the Court cannot add a condition to Clause
3.1 that default would arise only if the Claimants were unwilling
to pay, or that the payment period would get extended whenever a
lender required more time. Such a condition cannot be read into
the clause unless the Consent Terms or some other established
basis supports it.
27. The relevant part of Clause 3.2 provides that:
“Upon occurrence of the Event of Default, the Respondents
shall send a written intimation to the Hon’ble Arbitrator to
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release the original Master GPAs whether the amounts are
not received as per the Tranches and seek directions against
the Claimants and Confirming Parties to register the Master
GPAs immediately.”
28. The clause provides that, after following this step, the
Respondents may exercise the powers given under the Master
GPAs without referring to the Claimants and Confirming Parties in
any manner. They may convey the properties mentioned in
Schedules I, II and III, according to their choice, to the extent of
the value required for the Enhanced Settlement Amount. They may
deal with the properties in other ways permitted by the clause. Any
amount paid has to be deducted while calculating the amount
which may be recovered. This provision has to be read with the
remaining part of Clause 3.2 and the clauses which follow it. The
first part explains the steps to be followed after default. The
Respondents have to give written intimation to the learned
Arbitrator for release of the original Master GPAs and seek the
necessary directions for their registration. Thereafter, the powers
given under the Master GPAs may be exercised according to the
Consent Terms. Thus, the clause provides both a procedure which
has to be followed and a right which may be exercised. The
procedure relates to release and registration of the Master GPAs,
while the right relates to using the Scheduled Properties for
recovering the Enhanced Settlement Amount. Both parts of the
clause have to be given effect. If it is read to mean that the
Petitioners can only send a letter to the learned Arbitrator but
cannot exercise the powers under the Master GPAs, the purpose of
the clause would be defeated. On the other hand, if it is read to
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mean that the Petitioners can take over every property without
following the agreed procedure, the requirement relating to
release and registration of the Master GPAs would become
meaningless. The proper way is to read the clause as a whole and
give effect to all its parts. Default brings the agreed arrangement
into operation, but the powers under that arrangement must be
exercised in the manner stated in the Consent Terms and the
relevant documents. The words “without any reference to the
Claimants and Confirming Parties in any manner whatsoever” must
be understood in the context in which they are used. The parties
intended that, after default and after following the agreed
procedure, the Claimants should not be able to stop the security
arrangement merely by refusing to give fresh consent or by not
cooperating in steps which they had agreed to take. If fresh
consent from the Claimants were required at every stage, the
protection agreed upon would depend on whether the defaulting
party was willing to cooperate. The security arrangement would
then become uncertain precisely when it was intended to operate.
At the same time, these words do not permit the Petitioners to
ignore the terms of the Master GPAs, the agreed valuation, the
registration requirements or any binding order passed by a
competent Court. The words must be read along with the entire
arrangement. They remove the need to obtain fresh consent from
the Claimants for exercising rights which had been agreed upon
after default. They do not remove the procedure which the parties
retained. This distinction is important so that the Petitioners can
exercise their rights without being given powers wider than those
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granted under the Consent Terms. Another important part of
Clause 3.2 is that the properties may be conveyed only to the
extent of the value required for the Enhanced Settlement Amount,
after giving credit for any amount paid. The clause does not permit
the Petitioners to recover property of unlimited value merely
because default has occurred. The property used and the extent of
recovery must remain connected with the amount recoverable
under the Consent Terms. The agreed valuations in Clause 3.5
provide the basis for calculating the value of the property which
may be used for this purpose. The Petitioners may rely upon the
agreed arrangement, but they must act within its limits. The
Respondents may say that the Scheduled Properties are worth
more than the amount claimed, or that they were trying to arrange
finance by using those properties. These circumstances do not
make Clause 3.2 ineffective. The clause provides that the
properties may be used for recovery if payment is not made. The
relevant question is not merely whether the Claimants had assets
or were trying to raise money. The question is whether they
fulfilled the agreed payment obligation and, if they did not,
whether the Petitioners can use the security arrangement in
accordance with the Consent Terms.
29. Clause 3.3 provides:
“Upon the occurrence of an Event of Default and release of
the Master GPAs by the Hon’ble Arbitrator in terms of Clause
2.2, the Claimants shall, forthwith and without any act,
consent or documentation, so as to satisfy the Enhanced
Settlement Amount (after adjustment of amounts paid, if
any) that would be payable to the Respondents and/or their
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nominee(s), the Claimants hereby irrevocably authorize the
Respondents to take possession of the Scheduled Property in
exercise of the powers under the Master GPAs and the
Claimants agree not to object, obstruct or resist such taking
over of possession by the Respondents by following the
procedure detailed in 3.2 clause above.”
30. The words used in Clause 3.3 show that the parties intended
the Master GPAs to form part of the arrangement. They were not
meant to remain as documents lying in escrow without being used.
The clause connects the occurrence of an Event of Default and the
release of the Master GPAs with the authority to take possession of
the Scheduled Property. It records the Claimants’ agreement that
they would not object to, obstruct or resist the taking of possession
when the agreed procedure was followed. This wording is
important because the parties appear to have expected that, after
default, the Claimants might refuse to cooperate when the security
rights were being exercised. The clause seeks to prevent such
refusal from defeating the arrangement which the parties had
agreed upon. The word “irrevocably” indicates that the authority
was intended to operate according to the agreed conditions and
was not to be withdrawn merely because the circumstances
changed after the settlement. Of course, the effect and
enforceability of each Master GPA have to be examined according
to its own terms and the applicable law. But the intention
expressed in Clause 3.3 cannot be ignored while considering the
rights claimed by the Petitioners after default. This clause must be
read with Clause 3.2. Clause 3.2 provides for written intimation,
release of the Master GPAs and the steps required for registration.
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Clause 3.3 then deals with the exercise of the authority to take
possession after default and release of the Master GPAs. The two
clauses are connected. Clause 3.3 cannot be read as giving an
independent right to take possession without considering the steps
stated in Clause 3.2. Equally, Clause 3.2 cannot be read as dealing
only with the custody of documents and having no connection
with the authority to take possession under Clause 3.3. The
purpose of this arrangement is to enable the Petitioners to recover
the Enhanced Settlement Amount by using the properties
identified in the Consent Terms, subject to the agreed valuation
and adjustment of payments. Clause 3.3 does not allow the
Petitioners to recover more than the amount due under the
contractual arrangement. The words “after adjustment of amounts
paid, if any” are important. They show that the payments made
must be calculated before deciding how much property would be
required to satisfy the amount. The arrangement must be applied
in a manner which protects the Petitioners’ right to recover, while
ensuring that recovery remains within the amount and procedure
agreed upon by the parties.
31. Clause 3.4, as referred to in the Consent Terms, records that
the Claimants cannot refuse or challenge the agreed action, and
that the Respondents in whose favour powers under the Master
GPAs were given may exercise those powers to complete
registration according to the agreed procedure. This provision
supports the view that the security arrangement was not intended
to depend upon fresh approval from the Claimants after default. It
would not be consistent with the ordinary meaning of these
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clauses to hold that, even after default, the Claimants could
prevent the Petitioners from taking any step under the Master
GPAs by refusing to sign or cooperate with the documents required
to complete the agreed process. However, the words “shall not be
entitled to refuse or challenge” cannot be understood as taking
away the power of a competent Court to examine a genuine
dispute about the meaning, validity or lawful operation of the
contractual provisions. At this stage, the Court is not required to
decide every possible question about ownership of the properties,
the rights of third parties or the validity of a particular document.
The question is whether the security arrangement exists and
whether the default gives the Petitioners a prima facie right to seek
protection while the disputes are decided. On the material
available, Clauses 3.2, 3.3 and 3.4 support the Petitioners’ case
that the security was intended to be acted upon after default,
subject to the procedure and limits stated in the Consent Terms.
Clause 3.5 records the agreed valuation of the properties for this
purpose. This includes Rs. 2.25 Crores per acre for Sarjapur
converted land, Rs. 1.50 Crores per acre for Chennai Land and Rs.
1.50 Crores per acre for Anagalli, Mysore land, as stated in the
relevant provisions relied upon before this Court. These agreed
values are important because the parties did not leave the
valuation of the properties open for decision after default. They
recorded the values to be used for the security and recovery
arrangement. These values help in calculating how much property
may be required to satisfy the Enhanced Settlement Amount and
reduce the possibility of a fresh dispute about valuation when the
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security has to be used. However, the agreed valuation does not
mean that the Petitioners can take property of any value without
making the necessary calculation. The property to be dealt with
must be identified by applying the agreed rate and calculating the
amount recoverable after making the required adjustments. If the
amount can be satisfied from only part of the Scheduled
Properties, the arrangement must be applied in a manner which
matches that amount. The purpose is to recover the Enhanced
Settlement Amount.
32. These clauses show that the parties had agreed upon a
security arrangement which could be used if the payment
obligation was not fulfilled. Default does not only increase the
amount claimed. It brings into operation the agreed mechanism
concerning the Master GPAs, possession and transfer of the
Scheduled Properties. These provisions were included in the
Consent Terms, and the Award was passed in accordance with
those terms. On the material available, the Respondents cannot
ignore these consequences merely by saying that they were trying
to arrange payment. The difference between a promise to pay and
a promise supported by security is important. In a money claim, a
creditor may have to prove the claim and then follow the remedies
available for recovery. Here, the parties agreed that, if payment
was not made within the specified period, the Enhanced
Settlement Amount would apply and the Petitioners could invoke
the Master GPAs and use the Scheduled Properties according to the
procedure stated in the Consent Terms. The security arrangement
was a part of the agreement. It cannot be treated as an
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unimportant document having no effect on the rights of the
parties. The fact that the Consent Terms were followed by an
Arbitral Award is relevant. The parties did not leave the settlement
as a understanding which was never placed before the learned
Arbitrator. The Consent Terms were placed before the learned
Arbitrator, and the Award dated 16 March 2026 was passed in
accordance with them. The earlier disputes were thus brought to
an end on the basis of the settlement. The parties provided for
what would happen in case of a future default and for arbitration
of disputes arising under the Consent Terms. The contractual
provisions have to be understood against this background.
33. In Byram Pestonji Gariwala v. Union Bank of India , (1992) 1
SCC 31, the Supreme Court in paragraph 43 explained the binding
nature of a compromise and observed:
“A judgment by consent is intended to stop litigation
between the parties just as much as a judgment resulting
from a decision of the court at the end of a long drawn out
fight. A compromise decree creates an estoppel by
judgment.”
34. This principle is relevant because the Consent Terms contain
the settlement which the parties agreed upon to resolve their
disputes. They decided the amount to be paid, the period within
which payment was to be made, the properties to be released
against payment and the consequences if payment was not made.
The Court must give effect to this arrangement according to its
terms unless a ground recognised by law is established for refusing
to do so. A party cannot accept the benefit of a settlement and
later behave as if the obligations placed upon it had never been
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agreed upon. This does not mean that a consent award can never
be challenged on any ground recognised by law. It means that the
agreed terms cannot be ignored because one party later finds their
consequences difficult or inconvenient.
35. The Respondents say that they were trying to arrange the
Settlement Amount and that the delay occurred because the
Petitioners did not remove the encumbrances over the Chennai
Lands in time. This argument does not justify ignoring the
consequences stated in Clauses 3.1 to 3.5. There is a difference
between explaining why default took place and showing that, in
law, no default took place. The Respondents’ efforts to arrange
finance may explain the reason for the delay. But, to show that
there was no default, they must establish that the Consent Terms
or some other applicable legal rule prevented the Event of Default
from arising. The mere existence of term sheets or continuing
discussions with a lender does not establish that the payment
deadline was extended.
36. The earlier Judgment dated 7 September 2026 is important.
The Respondents had earlier approached this Court seeking to stop
the Petitioners from invoking the default clauses. They had relied
upon the argument that delay in removing the encumbrances over
the Chennai Lands affected the financing process. That argument
was considered and the earlier Petition was dismissed. The present
Court cannot proceed as if that decision does not exist. Unless the
decision is stayed, set aside or otherwise changed by a competent
order, its effect has to be respected. The Respondents may pursue
any challenge available to them in law, but repeating the same
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argument does not establish that the payment deadline was
extended. It must be remembered that the Petitioners are not
asking this Court to give them property without considering the
amount agreed upon. Their case is that default has brought the
security into operation and that the assets should be protected so
that the agreed remedy remains effective. Any relief arising from
default must remain within the Consent Terms, including the
Enhanced Settlement Amount, the agreed valuations and
adjustment of payments made. However, these limits do not mean
that the security arrangement has no effect at all.
37. In Essar House Private Limited v. Arcelor Mittal Nippon Steel
India Limited , (2022) 20 SCC 178, the Supreme Court held that
the power under Section 9 is not restricted by every technical
requirement which applies to attachment before judgment under
Order XXXVIII Rule 5 of the Code of Civil Procedure. The Court
has to consider the facts of the case and whether interim
protection is needed to preserve the subject matter of the
arbitration and prevent the remedy from becoming ineffective. The
Court must still exercise this power carefully and cannot grant
protection merely because a claim has been made. In the present
case, the agreed security arrangement, the non-payment of the
Settlement Amount and the disputes concerning the Scheduled
Properties are relevant circumstances supporting the need to
preserve the assets while the disputes are resolved. At the same
time, these clauses must be applied according to their own terms.
The occurrence of an Event of Default does not mean that
ownership of every Scheduled Property stands transferred to the
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Petitioners. The Consent Terms provide for release of the Master
GPAs, exercise of the powers given under them and completion of
the required registration procedure. The right to take possession
and convey the property is subject to the agreed procedure, the
valuations and adjustment of payments, if any, as stated in the
Consent Terms. Therefore, the Petitioners’ right is to exercise the
agreed security powers and complete the required steps. It is not a
declaration by this Court that all the properties stand transferred
merely because the payment date has passed.
38. This distinction is necessary because the occurrence of an
Event of Default and completion of a transfer are two different
stages under the Consent Terms. The first stage concerns failure to
make payment within the agreed period and the resulting
operation of the default provisions. The next stage concerns
release of the Master GPAs, the steps required for registration,
exercise of the powers given under those documents and
identification of the property required to satisfy the amount. The
arrangement has to be given effect by following these steps. It
would not be correct to treat the mere passing of the payment
deadline as if every step required by the parties had been
completed. The wording of Clauses 3.2 and 3.3 supports this
approach. Clause 3.2 provides for written intimation to the learned
Arbitrator and release of the original Master GPAs. Clause 3.3
refers to the occurrence of an Event of Default and release of the
Master GPAs before setting out the authority to take possession.
The reference to release forms part of the agreed sequence. The
Court must respect this sequence instead of treating the entire
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security mechanism as transfer of ownership at the time of default.
There is a difference between taking steps under a power of
attorney and the effect of transferring immovable property. The
terms of the relevant document, the nature of the authority given
and the applicable registration requirements have to be
considered. The present Petition does not require the Court to
decide every question about ownership of each property or the
effect of each Master GPA. At this stage, it is enough to observe
that the Consent Terms contain a security arrangement which the
Petitioners claim they are entitled to invoke, and that the Court
may preserve the assets while the effect and operation of that
arrangement are considered by the appropriate forum. This limited
approach protects the rights of persons who may claim interests in
the Scheduled Properties. If any property has been conveyed to a
third party, or if a third party claims right, that issue cannot be
decided merely by referring to the default clause without
examining the relevant documents. The Petitioners’ rights cannot
be defeated by creating a disputed third-party interest after
default. Equally, an interim order cannot decide the ownership
rights of a person who has not had an opportunity to present their
case before the Court. For the same reason, the Petitioners’ claim
that they are entitled to exercise powers under the Master GPAs
must be kept separate from a declaration that they have acquired
ownership of every property listed in Schedules I to III. The first
claim is, prima facie, supported by the default provisions, subject
to their terms and the applicable law. The second would require
examination of the particular properties, the relevant documents,
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the procedure followed and any competing rights. The material
available does not displace the prima facie conclusion that the
payment deadline was not met and that the default provisions
were invoked according to the procedure stated in the Consent
Terms. The Petitioners are entitled to rely upon the written
communication and release of the Master GPAs as part of the
factual basis for seeking interim protection. In the circumstances of
this case, the Respondents’ objections concerning the Chennai
Lands do not justify refusing all protective relief. The Court must
preserve the assets and the effectiveness of the security
arrangement, while ensuring that the Petitioners exercise their
rights only within the limits of the Consent Terms, the Master GPAs
and the law. For these reasons, the material available supports the
conclusion that the Event of Default was asserted after the
payment deadline had passed, that the Petitioners took the steps
contemplated by Clause 3.2 to obtain release of the Master GPAs,
and that the Respondents have not established a basis for treating
the payment date as extended because of the alleged delay
concerning the Chennai Lands. The consequences of default under
Clauses 3.1 to 3.5 must be given effect according to their terms,
subject to the remaining disputes which may be decided by the
competent arbitral forum.
The Respondents' objection that the default clauses are
unenforceable:
39. The Respondents have argued that the default clauses,
particularly the provision relating to payment of the Enhanced
Settlement Amount and the consequences of default, are intended
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to put pressure upon them ( in terrorem ) and cannot be enforced in
law. According to them, the additional amount mentioned in the
Consent Terms cannot be recovered merely because it is stated in
the agreement. This objection has to be considered. Whether the
entire amount mentioned in the agreement can be recovered, or
whether it is in the nature of a penalty, will depend upon the
agreement, the circumstances in which it was made and the
applicable law. However, merely because this objection has been
raised, it does not follow that the whole of the Consent Terms,
including the provisions made for securing performance of the
settlement, has no legal effect.
40. The legal position has to be examined with reference to
Section 74 of the Indian Contract Act, 1872. This section deals
with cases where a contract states an amount to be paid if a breach
takes place, or provides some other condition by way of penalty.
The Court cannot direct payment of the entire amount mentioned
in the contract in every case merely because a breach has occurred.
It has to consider what would be reasonable compensation under
the law, having regard to the terms of the contract and the
circumstances in which the breach took place. At the same time, it
would be wrong to say that every amount agreed to be paid upon
default is a penalty, or that such a clause cannot be enforced
because its financial effect upon the defaulting party may be
serious. In Fateh Chand v. Balkishan Das , AIR 1963 SC 1405, the
Supreme Court held that Section 74 applies where the contract
states an amount which is to be paid if a breach occurs. The Court
has to consider what would be reasonable compensation. A party
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cannot recover the stated amount merely by pointing to the figure
written in the contract, without examining the legal requirements
governing such recovery. This principle was considered in ONGC
Ltd. v. Saw Pipes Ltd. , (2003) 5 SCC 705, where the Supreme
Court held that the terms of the contract, the nature of the
obligation and the difficulty in proving the actual loss are relevant
while deciding whether the amount mentioned in the contract can
be granted as reasonable compensation. However, this decision
does not mean that every amount written in a contract must be
allowed. The terms of the particular contract and the requirements
of Section 74 still have to be examined. In Kailash Nath Associates
v. Delhi Development Authority , (2015) 4 SCC 136, the Supreme
Court again held that Section 74 deals with the grant of reasonable
compensation. The amount mentioned in the contract does not
become recoverable in full merely because the other party has
committed a breach. The nature of the contractual condition and
the circumstances in which compensation is claimed have to be
examined. These decisions show that the Respondents’ objection
concerning the Enhanced Settlement Amount raises a legal
question which must be decided according to law. It cannot be
answered merely by referring to the amount mentioned in the
Consent Terms. However, the question before this Court in the
present Petition is not whether the Petitioners must receive the
entire Enhanced Settlement Amount of Rs. 278 Crores, or whether
some part of that amount may have to be reduced or dealt with
differently under Section 74 of the Indian Contract Act. The
question is whether, on the basis of the Consent Terms and the
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Award, some protective measures are required so that the assets
against which the Petitioners seek relief are not dealt with in a
manner which may make the remedy through arbitration
ineffective. These are separate questions and should not be mixed
up.
41. The Respondents are entitled to raise all objections available
to them in law before the forum competent to decide disputes
arising under Clause 14 of the Consent Terms. These questions will
have to be decided on their own merits. However, until such a
decision is made, the mere fact that the Respondents dispute the
effect of the default provisions cannot be a sufficient reason to
refuse every interim measure intended to preserve the assets. If
this approach is accepted, a party could defeat the purpose of
interim protection by disputing the final amount recoverable, even
though the settlement and the alleged default still require
adjudication. It must be kept in mind that the Petitioners rely upon
a written settlement which was recorded in an Arbitral Award.
Their claim is not based merely upon an unpaid demand or an
alleged oral understanding. The Consent Terms state the amount
payable, the period within which payment has to be made and the
consequences which may follow if default occurs. Whether every
consequence mentioned in those terms can be enforced in the
manner claimed by the Petitioners is a different question. For the
present purpose, the existence of these contractual provisions and
the Award is a relevant circumstance while considering whether
the assets should be preserved until the dispute is decided.
Therefore, the Respondents’ objection that the default provisions
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operate in terrorem is not being decided in this Petition. This Court
is not holding that the Enhanced Settlement Amount must be
recovered in full, nor is it holding that the objection under Section
74 has no merit. The limited conclusion is that this objection does
not require the Court to treat the entire security arrangement as
having no effect. If protective relief is otherwise justified, it can be
granted without deciding the amount which may be recovered.
The relief now sought is only to protect and preserve the assets
while the arbitral remedy is being pursued. It does not award Rs.
278 Crores to the Petitioners. Nor does it decide that every asset of
the Respondents can be taken over without accounting for
payments, valuations, and the procedure mentioned in the Consent
Terms. The Petitioners rely upon a written settlement recorded in
an Arbitral Award and upon the default arrangement contained in
that settlement. Until the arbitral forum decides the disputes
concerning the operation and effect of these clauses, it would not
be proper to treat the agreed security as having no meaning
merely because its operation is now disputed.
42. There is an important difference between granting interim
protection and allowing a claim for recovery. While deciding a
Petition under Section 9 of the Arbitration and Conciliation Act,
1996, the Court need not decide every dispute concerning the
interpretation of the contract, the amount which may be payable
or the rights which may be enforced after the arbitration is
completed. The purpose is to consider whether protection is
required so that the rights claimed by a party do not become
ineffective before the competent forum decides the dispute. Of
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course, the Court must examine whether there is a proper basis for
granting such protection. A claim for money alone does not entitle
a party to an injunction against all the assets of the opposite party.
There must be material showing why protection is necessary and
how the proposed order is connected with the claim arising out of
the arbitration. In Essar House Private Limited , the Supreme Court
considered the nature of the power exercised under Section 9. The
decision makes it clear that the principles governing interim
measures under Section 9 should not be applied rigidly as if the
Court were deciding an ordinary suit for injunction. The Court has
to consider the circumstances of the case, the nature of the claim
and the protection required to ensure that the arbitral remedy
remains effective. But this power is not without limits. The relief
must serve the purpose for which Section 9 was enacted and must
be supported by the material placed before the Court.
43. In the present case, the Petitioners do not rely only upon a
demand for money. They rely upon the Consent Terms, the Award
passed in accordance with those terms, the agreed period for
payment and the provisions stating what is to happen in case of
default. According to them, the payment obligation was not
fulfilled within the agreed period and the security arrangement
was intended to come into operation. The Respondents dispute the
legal effect of these provisions and say that the Enhanced
Settlement Amount cannot be enforced in the manner claimed by
the Petitioners. These rival arguments require adjudication. But the
existence of this dispute does not mean that no protective order
can be passed in the meantime. The reason is that if the assets
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against which the Petitioners seek protection are transferred or
otherwise dealt with while the proceedings are pending, it may
become difficult to give effect to a final decision in their favour. If
the Petitioners succeed, they may find that the assets which could
have been available to satisfy their claim are no longer available,
or that rights of third parties have been created in the meantime.
On the other hand, if the interim order is limited to the assets of
Respondent Nos. 1 and 2 and permits genuine transactions subject
to safeguards, the Respondents may still be able to carry on their
ordinary business. The Court must balance the need to preserve
the Petitioners’ possible remedy with the need to avoid imposing
restriction upon the Respondents. The interim protection must be
limited to what is required for the purpose for which it is granted.
It must preserve the assets and the relevant information about
them, while leaving the final questions of liability, calculation,
valuation, and enforceability open for decision by the competent
forum. The Court need not decide those questions merely to
ensure that the subject matter of the dispute remains protected in
the meantime.
44. The Respondents’ objection must be considered along with
Clause 1.10. That clause recognises that the Award passed in
accordance with the Consent Terms will be final and binding, and
that the Petitioners can seek its enforcement, including through
execution and by enforcing the security arrangements recorded in
the Consent Terms. This supports the view that the security was
intended to provide a practical means of protecting the Petitioners’
rights. Whether the final recovery has to be adjusted or limited in a
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particular manner can be decided according to the Consent Terms
and the Award. This question is not a reason to refuse every
interim measure which preserves the available assets. Clause 1.10
is relevant because it forms part of the same arrangement under
which the parties settled their disputes and agreed upon the
consequences of non-payment. It cannot be read from the other
provisions of the Consent Terms. At the same time, the other
provisions cannot be read in a manner which makes Clause 1.10
meaningless. The proper approach is to read the settlement as a
whole and understand what the parties intended to achieve
through the payment obligation, the Award and the security
arrangement.
45. In Nabha Power Limited , the Supreme Court held that a
contract must be understood by reading its terms together and
giving effect to the intention which can be understood from the
language used by the parties. The Court cannot rewrite a contract
merely because one party finds the agreed terms inconvenient
after a dispute has arisen. Equally, the Court cannot add an
obligation which the parties never agreed to undertake. The
language of the contract, its structure and the connection between
its different clauses must guide its interpretation. Applying this
principle, Clause 1.10 cannot be ignored while considering the
Petitioners’ request for interim protection. If the parties had
contemplated that the Award could be enforced and that the
security arrangements recorded in the Consent Terms would be
available, those provisions must be considered. The fact that the
Respondents now dispute the legal effect of the Enhanced
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Settlement Amount does not show that the security provisions
were never intended to operate. The Court has to distinguish
between a dispute about how far a particular provision can be
enforced and an argument that the entire agreed arrangement
should be ignored even while considering interim protection. At
the same time, Clause 1.10 does not answer every objection raised
by the Respondents. The statement that the Award is final and
binding does not mean that every disputed consequence of default
must be accepted without examining the relevant terms and the
law. In particular, whether the Enhanced Settlement Amount can
be recovered in full, whether credit must be given for amounts
paid and whether the security can be enforced against a particular
property must be decided according to the Consent Terms and the
applicable law. Clause 1.10 supports the Petitioners’ argument that
the settlement was intended to be enforceable, but it does not
allow the Court to ignore the legal requirements governing
recovery.
46. The difference between the existence of a right and the
extent of that right is important in this case. The Petitioners rely
upon the Award and the Consent Terms as the basis of their claim.
The Respondents dispute the consequences which the Petitioners
seek to draw from the default provisions. Until these disputes are
decided, the Court has to consider whether the rights claimed by
the Petitioners require protection in the meantime. If the assets are
preserved and the necessary information is disclosed, the
competent forum will be in a better position to decide the disputes
without the additional difficulty of assets having been transferred
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or encumbered during the intervening period. There is no conflict
between preserving the assets now and deciding the amount
recoverable later. The Court can direct disclosure of assets and
impose a restriction upon dealings which may defeat the security,
without declaring that Rs. 278 Crores is payable. This approach
protects the Petitioners against the risk of their remedy becoming
ineffective, while avoiding unnecessary interference with
legitimate business activities. For these reasons, the objection
regarding the legal effect of the Enhanced Settlement Amount does
not justify refusing all interim protection. Clause 1.10, read with
the remaining provisions of the Consent Terms and the Award,
supports the conclusion that the parties intended the settlement
and the agreed security arrangement to have practical effect.
However, the final enforceability and calculation of the amount
remain open for decision. The present order is intended only to
preserve the position and protect the effectiveness of the arbitral
remedy. It does not decide that the Petitioners are entitled to Rs.
278 Crores, permit double recovery or authorise taking of any
asset contrary to the Consent Terms or the applicable law.
Proposal for appointment of Receiver:
47. I have considered the submission made by Mr. Kamat,
learned Senior Advocate appearing for Respondent Nos. 1 to 3. His
proposal is put forward as a practical solution, but its different
parts cannot be separated and accepted individually. It is one
combined proposal. Under it, the Court Receiver would sell the
properties, realise Rs. 240 Crores for payment to the Petitioners,
keep the disputed amount of Rs. 38 Crores deposited in this Court
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and release the properties which are said to be worth more than
Rs. 278 Crores. If this proposal is accepted, all these steps have to
be considered together, because the sale, the amount paid to the
Petitioners, the amount deposited in Court and the release of the
remaining properties are connected with one another.
48. The suggestion made by Mr. Kamat for appointment of a
Receiver has to be considered by seeing the rights which are given
to the parties under the Consent Terms. Appointing a Receiver
does not mean that the agreement between the parties is affected.
The Court can appoint a Receiver to protect the properties, so that
their value does not reduce, and no third-party rights are created
while the proceedings are pending. However, such appointment
cannot be made in a way that the rights agreed between the
parties under Clauses 1.10 and 3.1 to 3.5 are taken away or
stopped. Clause 1.10 provides how the powers under the Master
GPAs can be used and how the properties can be registered when
the agreed default takes place. Clauses 3.1 to 3.5 provide what will
happen when such default takes place. This includes the claim for
the Enhanced Settlement Amount, use of the Master GPAs, the
arrangement for possession of the scheduled properties and the
agreed valuation. All these clauses are connected with each other
and are part of the same agreement. Therefore, they have to be
read together. If a Receiver is appointed with power to take
exclusive possession of the scheduled properties and to stop the
Petitioners from using the powers given under the Master GPAs, it
may affect the arrangement which the parties have agreed for
enforcing their rights. The properties may come under a different
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arrangement before the rights and obligations under the Consent
Terms are decided. Such a result should not follow only because
the Court feels that appointment of a Receiver is required for
interim protection. At the same time, the Petitioners cannot say
that because Clauses 1.10 and 3.1 to 3.5 are included in the
Consent Terms, the Court has no power to protect the properties
involved in the dispute. The right under the agreement to seek
transfer or possession after default does not mean that the Court
cannot take any interim steps to protect the properties. What has
to be seen is whether the proposed step only protects the
properties and keeps the agreed arrangement as it is, or whether it
brings a different arrangement and prevents the Petitioners from
using the rights which the parties had agreed to give them. In my
view, it would not be proper to appoint a Receiver with powers to
take exclusive possession, manage, sell or otherwise deal with the
scheduled properties, if such powers prevent or seriously affect the
Petitioners in exercising their rights under the Master GPAs as
provided in the Consent Terms. If it is found necessary to appoint a
Receiver, the powers given to the Receiver should be limited to
protecting the properties, preventing damage or loss and
maintaining accounts. The Receiver should not be given power to
transfer the properties, change the agreed valuation, decide the
Enhanced Settlement Amount or otherwise interfere with the
arrangement agreed between the parties for enforcing their
contractual rights. I am, therefore, not inclined to appoint a
Receiver with powers which would take away or stop the rights
created under Clauses 1.10 and 3.1 to 3.5. The rights of the
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Petitioners under these clauses, including whether the Enhanced
Settlement Amount and the agreed arrangement for possession
and transfer can be enforced, will have to be decided in the
appropriate proceedings. The question of appointing a Receiver
has to be considered only for protecting the properties and not for
replacing the arrangement which the parties have clearly agreed
between themselves.
Grant of relief against Respondent No. 4:
49. I have considered the submissions made by Mr. Bhole for the
Petitioners and Mr. Andhyarujina for Respondent No.4. The issue
concerning Respondent No.4 will have to be considered with
reference to prayer clauses (d)(ii) and (d)(iii) of the Petition.
Under prayer clause (d)(ii), the Petitioners are asking for a
direction to Respondent No.4 to maintain status quo in respect of
41 Acres 23 Guntas of land forming part of Mysore Lands-1 and
Mysore Lands-2. Under prayer clause (d)(iii), they are asking for a
direction to Respondent No.3 and/or Respondent No.4 to deposit
the amount received from the sale and/or transfer of the
scheduled properties at Mysore. Thus, the question is not only
whether Respondent No.4 has to pay the Settlement Amount
under the Consent Terms, but whether he can be directed to
protect the properties and the amounts received from their sale or
transfer, since these properties form part of the arrangement made
under the Consent Terms.
50. Mr. Andhyarujina is right to the extent that Respondent No.4
cannot be treated as having agreed to pay the Settlement Amount
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of Rs.240 Crores or the Enhanced Settlement Amount of Rs.278
Crores. The Consent Terms define the "Parties" as the Petitioners
and Respondent Nos.1 and 2. Respondent No.4 is described as a
confirming party, but his name is not included in the definition of
the "Parties". The arbitration clause refers to disputes "arising
between the Parties". Respondent No.4 says that his only obligation
was to execute and deposit the undated Master GPA under Clause
1.6, and that he has performed the same. Therefore, merely
because he is described as a confirming party, he cannot be made
personally responsible for paying the amount which Respondent
Nos.1 and 2 had agreed to pay. The Consent Terms cannot be
understood as putting a monetary liability on Respondent No.4
which he had not agreed to take upon himself. However, it is
difficult to accept that Respondent No.4 has no connection with
the arrangement made under the Consent Terms. His lands form
part of the scheduled properties and his name is shown as a
confirming party in the Consent Terms. It is his case that the
Consent Terms were signed on his behalf by Mr. K.N.
Balasubramanyam under the General Power of Attorney dated 5
September 2006. His name appears "in confirmation of their
obligation as stated herein", which refers to the obligation relating
to execution and deposit of the Master GPA. The Master GPA was
intended to form part of the arrangement concerning the
scheduled properties. Therefore, though Respondent No.4 cannot
be made liable to pay the Settlement Amount merely because he is
a confirming party, his role in relation to the properties and the
obligations undertaken on his behalf will have to be considered
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while deciding what order is required to protect the subject matter
of the dispute. Mr. Bhole has pointed out that Mr. Arjun
Balasubramanyam is a Director of Respondent Nos.1 and 2, is
Confirming Party No.1 and has signed the Sameera Term Sheet in
his personal capacity and on behalf of Confirming Party No.2. He
has relied upon the non-binding term sheet dated 6 June 2026,
which was signed on behalf of Intended Seller Nos.2, 3 and 4 by
Mr. Arjun Balasubramanyam. According to the Petitioners, these
circumstances show that the properties belonging to Confirming
Party No.2 are being dealt with by the other Respondents and that
the transactions are connected with each other. These
circumstances do raise a question about how the properties and
the amounts received in relation to them have been dealt with.
However, merely because one person has signed documents in
different capacities, it cannot by itself be concluded that
Respondent No.4 is only a front for the other Respondents. To
reach such a conclusion, the documents, the authority under which
they were signed and the manner in which the transactions were
carried out will have to be examined.
51. Respondent No.4 has stated that the term sheet dated 6 June
2026 was non-binding, that no conveyance was made under it and
that the transaction was subject to the Petitioners giving a no-
objection. He has stated that the amount of Rs.19.5 Crores was
received as a refundable security deposit and was used for
payment of the HLFL loan to clear the charge over the land. The
Petitioners dispute this explanation and say that the amount
received in relation to the scheduled properties was not paid to
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them as required under the Consent Terms. At this stage, it would
not be proper to decide whether the amount of Rs.19.5 Crores was
sale consideration, a refundable deposit or an amount used in the
manner stated by Respondent No.4. However, merely saying that
the amount was received as a refundable deposit does not settle
the question whether the transaction or the use of that amount has
affected the rights of the Petitioners under the Consent Terms. The
material on record will have to be examined to see where the
amount came from, which property it related to, who received it
and for what purpose it was used. Mr. Bhole has relied upon the
statement made by Respondent No.4 before the learned Arbitrator
that no third-party rights had been created in respect of the
property. According to Mr. Bhole, this statement was not correct
because third-party rights had been created. Respondent No.4,
however, says that he understood the statement to mean that no
mortgages, charges or other encumbrances had been created and
that the Petitioners knew about the layout and development on the
land. He has relied upon the inspection which is stated to have
taken place on 26 February 2026. These issues are disputed
between the parties. Therefore, the dispute about the development
carried out, the agreements entered into and the rights claimed by
purchasers is relevant for deciding what protection is required in
the present Petition and how far such protection can be given.
52. In this connection, Mr. Andhyarujina has relied upon the
judgment in Ningbo Aux Imp & Exp Co. Limited . The principle
considered in that judgment is that, in an appropriate case, the
power under Section 9 of the Arbitration and Conciliation Act,
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1996, may extend to a third party where it is necessary to protect
the subject matter of the arbitration or secure the amount in
dispute. However, this power cannot ordinarily be used to interfere
with the independent rights of a third party who does not claim
through or under a party to the arbitration. Section 9 cannot be
used indirectly to make a third party liable for an amount which
cannot be recovered from that person under the award. This
principle will have to be applied by keeping the facts of the present
case in view. Here, Respondent No.4 is not being treated as
personally liable to pay the Settlement Amount. His connection
with the dispute is that he is a confirming party and the Master
GPA relates to the scheduled properties. The Petitioners' request
for interim protection will have to be considered within these
limits, and not by assuming that Respondent No.4 is liable for all
the obligations undertaken by Respondent Nos.1 and 2. The
submission of Respondent No.4 that the entire area of 41 Acres 23
Guntas cannot be covered by a general order of status quo needs
to be considered. According to him, some portions of the property
have been developed and purchasers and allottees have acquired
interests in the sites. He has pointed out that his suit, O.S. No.440
of 2026, is pending and that an injunction has been passed in that
suit. He disputes the description of certain lands given in the
schedule to the prayer. If an order is passed covering the entire
area without considering these matters, it may affect persons who
are not before this Court. It may interfere with the order passed in
the pending suit. The purpose of interim relief under Section 9 is
to protect the subject matter of the dispute. It is not to disturb
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rights which third parties may have acquired or to pass an order
which does not agree with an order operating in another
proceeding.
53. In my view, therefore, the request to maintain status quo
cannot be granted as a general direction covering the entire 41
Acres 23 Guntas without considering the portions in respect of
which third-party rights are claimed to have been created. The
protection will have to be limited to those portions of the
scheduled properties which are identified and are covered by the
arrangement under the Consent Terms and the relevant Master
GPA. Any order passed for this purpose must not change or
interfere with the injunction operating in O.S. No.440 of 2026. At
the same time, subject to these limits, rights should not be created
in the remaining identified portions in a manner which may defeat
the protection claimed by the Petitioners, except for transactions
which are permitted under the Consent Terms and are carried out
according to the conditions mentioned therein. Such an order
would protect the subject matter of the dispute without deciding
the disputed question of title or the other rights of Respondent
No.4.
54. As regards prayer clause (d)(iii), the Petitioners are asking
for a direction to deposit the amount received from the sale and/or
transfer of the scheduled Mysore properties. This request will have
to be considered separately from the question of whether
Respondent No.4 is personally liable. He cannot be directed to
deposit the entire Settlement Amount or the Enhanced Settlement
Amount merely because he is a confirming party. However, if any
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amount by way of sale consideration from a completed sale or
transfer of the scheduled properties has been received and is still
held by Respondent No.3 or Respondent No.4, that amount may
require protection so that the Petitioners' claim is not defeated by
its use or transfer. For this purpose, it will be necessary to identify
the amount received, the property to which it relates and the
person who holds or controls it. A direction to deposit an amount
cannot be made merely on the basis of an allegation, particularly
when it is not shown that the amount was received by the person
against whom the direction is sought or that it relates to the
scheduled property. The explanation given by Respondent No.4
regarding the refundable security deposit of Rs.19.5 Crores and its
use for discharging the HLFL loan will have to be considered while
deciding how far a direction for deposit can be made. The
Petitioners can seek protection of identifiable amounts arising from
the scheduled properties which have not been paid to them in
accordance with the Consent Terms. However, these interim
proceedings cannot be used to decide the disputed nature of the
security deposit or to impose personal monetary liability upon
Respondent No.4. The proper course would be to direct the
concerned Respondent to disclose the amounts received from any
completed sale or transfer of the scheduled Mysore properties, the
person who received those amounts and the manner in which they
were used. If any amount is found to be sale or transfer proceeds
from the scheduled properties and is still available with the
concerned Respondent, that amount shall be deposited, after
giving credit for any amount paid to the Petitioners and without
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affecting rights acquired by third parties.
55. I am, therefore, unable to accept the submission of Mr.
Andhyarujina that no protective order can be passed in relation to
the lands of Respondent No.4 merely because his name is not
included in the definition of the "Parties" under the arbitration
clause. At the same time, the submissions of Mr. Bhole cannot be
accepted to the extent that they seek to make Respondent No.4
personally liable for the Settlement Amount or to obtain a general
order affecting all his lands and the rights of persons claiming
through completed transactions. Prayer clause (d)(ii) can be
considered only as a limited measure to protect the identified and
unsold portions of the scheduled properties, subject to the existing
order in O.S. No.440 of 2026 and the rights of existing purchasers
and allottees. Prayer clause (d)(iii) can be granted only in respect
of identifiable sale or transfer proceeds received from the
scheduled properties and still available with the concerned
Respondent, after accounting for amounts paid to the Petitioners.
These directions would protect the subject matter of the dispute,
while leaving the final rights and liabilities of Respondent No.4
open for determination in appropriate proceedings.
Grant of relief against Respondent No. 3:
56. So far as Respondent No.3 is concerned, Mr. Bhole has
submitted that he is bound by the Consent Terms and the Consent
Award. According to him, Respondent No.3 signed the Consent
Terms confirming his obligations and executed the MGPA in
respect of his Mysore Lands. He has pointed out that Respondent
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No.3 confirmed the Consent Terms and gave an undertaking before
the learned Arbitral Tribunal to follow them. On this basis, Mr.
Bhole submits that the Consent Award is binding upon the
confirming parties, including Respondent No.3, and therefore, he
cannot now go back from the obligations which he had accepted
under the arrangement. Mr. Bhole has submitted that after the
Event of Default took place, the confirming parties were required
to register the MGPAs and could not prevent the Petitioners from
taking possession of the properties as provided under the Consent
Terms. He has pointed out that the Petitioners had called upon
Respondent No.3 to comply with these obligations by their letters
dated 10 and 11 September 2026. However, by his letter dated 15
September 2026, Respondent No.3 called upon the Petitioners to
“refrain from taking any steps”. According to Mr. Bhole, this stand
of Respondent No.3 is not in accordance with the obligations
which he had accepted under the Consent Terms. Therefore, it will
have to be considered whether the obligations undertaken by
Respondent No.3 and the terms of the Consent Award require
protection to be granted in respect of his scheduled Mysore Lands,
as asked for under prayer clause (d)(i).
57. Mr. Bhole has referred to the transactions relating to the
Sameera Term Sheet and the Jones Term Sheet. He has pointed out
that the Director of Respondent Nos.1 and 2 executed the Sameera
Term Sheet in respect of his own Mysore Lands and on behalf of
Respondent No.4, under which an amount of Rs.19.75 crore was
received. Thereafter, according to Mr. Bhole, the same lands were
again offered through Siddhasiri by the letter dated 4 September
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2026. He has pointed out that the said Director signed the Jones
Term Sheet on behalf of Respondent No.2. According to Mr. Bhole,
these transactions show how the properties forming part of the
security arrangement are being dealt with by the Respondents.
These submissions raise questions about the manner in which the
scheduled properties have been dealt with and the amounts
received in relation to them. However, each transaction will have
to be considered by looking at the documents and other material
placed on record. Merely because the Petitioners have relied upon
these transactions, it cannot be concluded, without examination,
that every transaction was against the Consent Terms or that
Respondent No.3 was personally responsible for all such dealings.
58. In the present Petition, prayer clause (d)(i) seeks a direction
to Respondent No.3 to maintain status quo in respect of 29 Acres
01 Guntha forming part of Mysore Lands-2, as more particularly
described in the schedule to that prayer. Prayer clause (d)(iii), on
the other hand, seeks a direction to Respondent Nos.3 and/or 4 to
deposit the amount received from the sale and/or transfer of the
scheduled Mysore properties. Both these prayers will have to be
considered separately. While deciding what protection is required
for the scheduled lands of Respondent No.3, it will have to be seen
whether he is bound by the obligations accepted under the
Consent Terms and the Consent Award. At the same time, the
direction cannot be wider than what is necessary to protect the
subject matter of the dispute. It will have to be seen whether
purchasers or other third parties have already acquired any rights
in the properties, so that the interim order does not unnecessarily
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affect persons who are not before this Court. If Respondent No.3
has undertaken obligations under the Consent Terms regarding
execution, registration, or use of the MGPA, his stand asking the
Petitioners to “refrain from taking any steps” will have to be
considered in the light of those obligations and the Consent
Award. However, merely because Respondent No.3 is a confirming
party, it cannot be said that he had agreed to pay the entire
Settlement Amount of Rs.240 Crores or the Enhanced Settlement
Amount of Rs.278 Crores. What obligations he had actually
accepted will have to be seen from the Consent Terms, the MGPA
and the relevant terms of the Consent Award. For the present
purpose, the question is whether the identified lands of
Respondent No.3 require protection against dealings which may
affect or defeat the arrangement made under the Consent Terms.
59. So far as the prayer for deposit of amounts is concerned, it
will have to be seen whether any amount received from the sale or
transfer of the scheduled Mysore properties is still available with
Respondent No.3 or Respondent No.4. The receipt of Rs.19.75
crore under the Sameera Term Sheet, as pointed out by Mr. Bhole,
is a matter which requires consideration. However, before any
direction for deposit is made, it will be necessary to find out the
amount received, the property to which it relates, the person who
received it and the manner in which it was used. An amount
cannot be directed to be deposited merely because an allegation
has been made, without considering the explanation given and the
material available on record. If any identifiable amount received
from the sale or transfer of the scheduled properties is still
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available with the concerned Respondent, a direction to deposit
that amount can be considered, after giving credit for any amount
already paid to the Petitioners and without affecting rights already
acquired by third parties.
60. Therefore, the submissions made by Mr. Bhole concerning
Respondent No.3 cannot be rejected merely because he is
described as a confirming party. His execution of the MGPA, the
obligations which he is stated to have accepted under the Consent
Terms and the Consent Award, and his subsequent letter dated 15
September 2026 are all relevant while considering the protection
sought under prayer clause (d)(i). However, the relief will have to
be limited to the identified scheduled lands and the amounts
shown to have been received from their sale or transfer. The actual
nature and extent of the obligations of Respondent No.3, as well as
the effect of the transactions relied upon by the Petitioners, will
have to be considered from the relevant documents and the
material placed on record. At this stage, it would not be proper to
decide disputed issues beyond what is necessary for granting
interim protection.
The objection concerning encumbrances over the Chennai Lands:
61. The Respondents say that they were ready and willing to pay
the Settlement Amount, but payment was delayed because the
encumbrances over the Chennai Lands, which were proposed to be
given as security to the lender, were not removed in time. They
rely upon the correspondence starting from 22 June 2026, the
later communications about removing the mortgages and the fact
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that the relevant Discharge Deeds were registered only on 18
August 2026. According to them, the lender could not complete its
due diligence and release the money before the extended payment
date because the encumbrances were still there. They therefore say
that the Petitioners should not be allowed to take advantage of a
situation which, according to the Respondents, was caused by the
Petitioners’ own actions or failure to act. This argument cannot be
considered as if the question of extending the agreed payment date
is being raised for the first time. The Respondents had earlier
approached this Court under Section 9. They had asked for an
order preventing the Petitioners from acting under the default
clauses and for more time to make payment. In the Judgment and
Order dated 7 September 2026 passed in Commercial Arbitration
Petition (L) No. 29704 of 2026, this Court considered the same
argument about the Chennai Lands. In paragraph 37, the Court
recorded:
“For all these reasons, I find that the basis of the Petitioners’
case, namely that the Respondents’ delay in clearing the
encumbrances over the Chennai Land postponed the
Petitioners’ obligation to make payment, has not been
established. The Petitioners have not shown any provision in
the Consent Terms or any other right which gives them the
declarations, extension, and restraints sought in the
Petition.”
62. The earlier Petition was dismissed. The record now before
this Court shows that the Respondents challenged that judgment in
appeal. However, no interim order staying the operation of that
judgment has been shown to this Court. Therefore, unless the
earlier judgment is stayed or set aside, the Respondents cannot say
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that the payment date was extended because of the issue
concerning the mortgages. The present Petition is different in
relation to the relief sought. It has been filed by the parties in
whose favour the security was agreed, and the payment deadline
has passed. However, the Respondents’ attempt to explain the
default by relying upon the same issue of mortgages has to be
considered in a manner consistent with the earlier order. The fact
that the formalities for removing the encumbrances took time and
affected the lender’s process does not extend the payment period.
The Award had extended the payment date up to 6 September
2026. No document has been placed before me to show that the
parties mutually changed that date thereafter. The Respondents
may have made genuine efforts to arrange finance. But making
genuine efforts to arrange money is not the same as obtaining an
extension of the agreed payment period.
63. I am not convinced by the Respondents’ argument that no
Event of Default occurred. The agreed amount was not paid by the
extended date. Therefore, the consequences stated in Clauses 3.1
to 3.5 of the Consent Terms became applicable, subject to the
terms and legal effect of those clauses. This does not mean that
every issue which may arise in the fresh arbitration has been
decided. This includes the question of the final amount which can
be recovered or whether any adjustment is required. For deciding
the present Petition, it is enough to say that the material before
this Court gives a strong prima facie basis to proceed on the
footing that a default occurred under the Consent Terms.
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Maintainability and scope of relief under Section 9:
64. It is true that the earlier arbitration came to an end on 16
March 2026, when the Award was passed. However, Clause 14 of
the Consent Terms provides for arbitration of disputes arising
under those terms. The present dispute concerns the alleged
default, the Enhanced Settlement Amount, the operation of the
Master GPAs and the protection of the Petitioners’ claim. The
record shows that steps have been taken to appoint an arbitrator to
decide disputes arising under the Consent Terms. Therefore, the
present Petition cannot be treated as not tenable merely because
the earlier arbitration came to an end. The disputes now raised
arise from the later contractual arrangement and the arbitration
clause contained in it. Section 9 gives the Court power to grant
interim measures when they are necessary to preserve the subject
matter, secure the amount in dispute and protect the effectiveness
of the arbitration proceedings. This power is not granted merely
because one party has made a monetary claim or payment has not
been made. The Court must consider the nature of the claim, the
conduct of the parties, the security agreed between them, the
possibility of recovery becoming difficult and the effect of the
proposed order on the other side. In Essar House Private Limited ,
the Supreme Court considered the Court’s power under Section 9.
It held that the relevant principles have to be applied according to
the facts and circumstances of each case. Every technical
requirement under the Code of Civil Procedure cannot be treated
as an absolute bar. However, the power must still be exercised on
the material before the Court and with suitable safeguards.
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65. The Respondents rely upon the principles of Order XXXVIII
Rule 5 of the Code of Civil Procedure. They say that the Petitioners
have not produced specific material to show that the Respondents
intend to defeat or obstruct the claim. According to them, asking
for details of all assets, investments, bank accounts and income-tax
returns would amount to an unnecessary inquiry into their
financial affairs. They point out that the original title documents of
the Scheduled Properties are with the Petitioners and that the
value of the properties covered by the Consent Terms is more than
enough to secure the Petitioners’ claim. These objections have to
be considered and cannot be rejected merely because the
Petitioners are claiming a large amount. However, the present case
is not an ordinary monetary claim where the parties have not
agreed to any security. Here, the parties made a specific security
arrangement and agreed about the consequences if the Settlement
Amount was not paid. The Respondents rely upon term sheets
relating to properties to show that they were trying to arrange the
money. At the same time, these documents show that transactions
concerning the Scheduled Properties were being considered or
discussed. The Respondents refer to a proposed transaction with
Sameera Estates concerning approximately 150 acres, of which
around 70 acres formed part of the Scheduled Properties. They
refer to the use of a refundable security deposit while dealing with
an existing lender. They say that these steps were genuine and
were taken to make payment possible. This Court is not required
to conclude that the financing efforts were dishonest merely
because they were made. However, it can be seen that transactions
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concerning properties and interests relevant to the Petitioners’
claim were being considered. Therefore, the present position of
those properties and interests needs to be disclosed and protected.
66. There is a dispute concerning a transaction and an advance
said to relate to part of the Anagalli lands. The Petitioners rely
upon this to say that properties forming part of the security may be
dealt with even though the Settlement Amount remains unpaid.
Respondent No. 4 disputes this and says that the transactions were
not part of any plan to defeat the Petitioners’ rights. He says that
the Petitioners had inspected his land and knew about its layout
and development. I am not treating this disputed allegation as
proved in the present Petition. However, the different versions
given by the parties, the term sheets concerning property
transactions, the default and the dispute about the security
arrangement, when considered together, show that the Petitioners’
apprehension cannot be dismissed as a statement without any
supporting material.The Respondents say that the properties
mentioned in the Consent Terms are worth more than the
Petitioners’ claim and that the original title documents are with the
Petitioners. However, the Petitioners are entitled to know whether
those assets are still available and whether any encumbrances,
transactions or third-party rights have affected them. Disclosure
will show the actual position. Without such disclosure, neither the
Petitioners nor the Court can safely assume that the properties
which were available as security when the Consent Terms were
signed are still available in the same condition and without any
dealings. The details of assets mentioned in the Consent Terms are
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relevant, but they cannot replace disclosure of the present position
after the payment deadline has passed, and a dispute has arisen
about the security.
67. Prayer (c) seeks an injunction against Respondent Nos. 1 and
2, whether acting or through their directors, officers, servants,
agents or persons claiming through them. The Petitioners want
them to be restrained from selling, transferring, alienating,
disposing of, encumbering, parting with possession of or creating
any third-party right, title, or interest in their movable or
immovable assets. The purpose is to secure the Enhanced
Settlement Amount of Rs. 278 Crores. The Respondents say that
there is no specific material to show that they are removing or
disposing of their assets with the intention of defeating the
Petitioners’ claim. They rely upon their efforts to arrange finance,
the term sheets and the steps taken to clear the encumbrances.
They say that the Petitioners are trying to secure a monetary claim
even though the Consent Terms provide sufficient security. They
argue that a general restriction on their assets would be excessive
and would interfere with the agreed arrangement, under which
they were permitted to deal with the Scheduled Properties to
arrange the Settlement Amount.
68. The objection that the relief should not be excessive has to
be considered. The Court should not impose a restriction which
destroys the arrangement made by the parties or prevents
legitimate steps required to give effect to the Consent Terms.
However, this does not mean that no protection can be granted
after the default has occurred. The security arrangement was made
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to protect the Petitioners if payment was not made. The Petitioners
have produced material showing that transactions concerning the
Scheduled Properties were being pursued, and there is a dispute
about the present position of certain property interests. Therefore,
the possibility that the Petitioners may face greater difficulty in
securing their claim cannot be ignored. Some protection is
necessary until the arbitral forum considers the disputes between
the parties. The injunction sought will not decide whether the
Petitioners are entitled to the Enhanced Settlement Amount. It will
not make the Petitioners owners of any property. It will only stop
Respondent Nos. 1 and 2 from creating third-party rights or
dealing with their assets in a manner which may make the
Petitioners’ claim ineffective. Considering the amount claimed, the
security arrangement agreed between the parties, the failure to
pay within the extended period and the material showing that
property transactions were being pursued while the amount
remained unpaid, such protection is justified in the facts of this
case.
69. I am not convinced that the injunction should be refused
merely because the Respondents may have made efforts to arrange
finance. The point is that the parties had agreed upon a fixed date
for payment and had provided for what would happen in case of
default. If finance was not made available within the agreed time,
the Respondents cannot, only for that reason, insist that the
Petitioners should remain without protection against dealings with
the assets. The Respondents may raise their legal and factual
defences in arbitration, including any permissible objection
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regarding the Enhanced Settlement Amount or the extent of the
security. Until those issues are decided, the Court must ensure that
the subject-matter of the dispute is not put beyond effective
protection. However, the injunction must remain within proper
limits. It will apply to Respondent Nos. 1 and 2 in respect of assets
owned by them, standing in their names or under their control. It
will not give the Petitioners any right to take possession of
property beyond the rights available under the Consent Terms and
the Master GPAs. It will not prevent the Petitioners from taking
lawful steps to exercise the powers provided under Clauses 3.2 and
3.3, subject to the relevant Master GPA, the agreed valuation
arrangement and the procedure required for registration. The
purpose of the injunction is to preserve the assets which are
available. It is not intended to stop the Petitioners from using the
security mechanism which the parties had agreed upon.
70. For the reasons recorded above, the following order is
passed:
(a) Prayer clause (a) is granted. Respondent Nos. 1 and 2
shall, within seven days from the date of this order, file and
serve an affidavit disclosing their assets and the details
thereof, including all bank accounts and encumbrances,
immovable properties and encumbrances, movable
properties and encumbrances, and details of investments
including demat accounts, shares, stocks, mutual funds,
bonds, cryptocurrency, liquid funds and the encumbrances
on the same;
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(b) Prayer clause (b) is granted. Respondent Nos. 1 and 2
shall, within seven days from the date of this order, disclose
and furnish their income-tax returns for the last three
financial years;
(c) Prayer clause (c) is granted against Respondent Nos. 1
and 2. Pending commencement and conclusion of the
arbitral proceedings, Respondent Nos. 1 and 2, whether or
through their directors, officers, servants, agents or any
person claiming through or under them, are restrained from
selling, transferring, alienating, disposing of, encumbering,
parting with possession of or creating any third-party right,
title or interest in their movable or immovable assets, in a
manner which may defeat or frustrate the Petitioners' claim
to the Enhanced Settlement Amount of Rs. 278,00,00,000/-,
except with prior leave of this Court or the competent
arbitral forum;
(d) The injunction granted under prayer clause (c) shall
not be read as preventing the Petitioners from exercising
such rights as are available to them under Clauses 3.2 and
3.3 of the Consent Terms and the Master GPAs in accordance
with law. Any action concerning property claimed by
Respondent No. 4 shall remain subject to the terms of the
relevant Master GPA, the agreed valuation and registration
mechanism, the rights of third parties and the order dated 24
September 2026 passed in O.S. No. 440 of 2026. Nothing in
this order varies or vacates that civil court order;
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(e) It is clarified that the present order does not determine
the final liability of Respondent Nos. 1 and 2, the final
enforceability of the Enhanced Settlement Amount, or the
independent title and possession rights claimed by
Respondent No. 4. Those questions shall remain open to be
considered by the competent forum in accordance with law;
(f) As regards prayer clause (d)(ii), Respondent No. 4
shall maintain status quo in respect of the identifiable and
unsold portions of the scheduled Mysore properties, to the
extent of 41 Acres 23 Guntas, which are covered by the
Consent Terms and the relevant Master GPA. This direction
shall not affect rights, if any, already acquired by purchasers
or allottees under completed transactions. It shall remain
subject to the orders passed in O.S. No. 440 of 2026 and
shall not operate so as to vary or interfere with any
subsisting injunction granted in that suit;
(g) As regards prayer clause (d)(iii), Respondent Nos. 3
and 4 shall, within two weeks from the date of this order, file
an affidavit disclosing:
(i) the details of amounts received from any sale or
transfer of the scheduled Mysore properties;
(ii) the person or entity from whom each amount
was received;
(iii) the property and transaction to which each
amount relates; and
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(iv) the manner in which each amount has been dealt
with, including whether it has been paid to the
Petitioners, utilised towards discharge of any
encumbrance or loan, or remains available with the
concerned Respondent.
(h) Any amount established to be sale or transfer proceeds
of the scheduled Mysore properties and remaining available
with the concerned Respondent shall be deposited in this
Court within two weeks thereafter, subject to credit for any
amount already paid to the Petitioners. This direction shall
not extend to amounts which are not shown to relate to the
scheduled properties or which are not held by the
Respondent against whom the direction is sought;
(i) As regards prayer clause (d)(i), Respondent No.3 shall
maintain status quo in respect of the identified and unsold
portions of the scheduled Mysore Lands-2, to the extent of
29 Acres 01 Guntha specified in the said prayer, subject to
the rights already acquired by purchasers or allottees under
completed transactions and subject to any subsisting order
passed in any pending proceeding concerning the said
properties;
(j) The rights of existing purchasers and allottees, the
effect of any completed transactions, and the rival
contentions regarding the amounts received and their
utilisation are kept open. Nothing in this order shall be
construed as a final determination of title, ownership or the
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enforceability of Clauses 1.10 and 3.1 to 3.5 of the Consent
Terms’
(k) All other contentions are kept open for consideration in
the arbitral proceedings.
(l) The Petition is disposed of in the above terms. There
shall be no order as to costs.
71. At this stage, learned Senior Advocates appearing for
respective Respondents requests for stay of this Judgment.
However, considering the reasons recorded in this Judgment, the
request for stay stands rejected.
(AMIT BORKAR, J.)
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