After 21 Years Without Promised Premises, Bombay HC Bars Third-Party Rights In Land Tied To Doctors’ ₹60-Lakh MoU

Under a Memorandum of Understanding dated 27 June 2005, the appellants paid the respondents ₹60 lakh in consideration for delivery of 4,360 square feet of commercial premises to be constructed on the subject property.

Delivery was due within 24 months of receipt of an IOD or within such other period as the parties might agree. The respondents had neither obtained the IOD nor returned the money or delivered the premises.

The appellants alleged that the respondents were seeking to transfer rights in the property to third parties.

After the appellants’ Section 9 petition was dismissed by a Single Judge, they appealed. An arbitrator had been appointed by the time the appeal was heard.

Whether the appellants were entitled to an injunction restraining the respondents from creating third-party rights in the subject property pending arbitration.

Whether the proposed transfer of rights in the property would frustrate the appellants’ claim for specific performance and justify interim protection under Section 9 of the Arbitration and Conciliation Act, 1996.

Section 9 of the Arbitration and Conciliation Act, 1996 empowers the court to grant interim measures to preserve the subject matter of an arbitration; the Court stated that such protection is intended to preserve the dispute’s subject matter.

The Court also reproduced Sections 215 and 420 of the Indian Penal Code, concerning specified conduct relating to stolen property and cheating that dishonestly induces delivery of property, respectively, and relied on them in expressing a prima facie view about the respondents’ intention.

The Court considered the unpaid ₹60 lakh, the non-delivery of the promised premises, and the respondents’ failure to obtain an IOD.

Although the appellants had no direct rights in the land itself, the Court reasoned that transferring rights in it could defeat their claim to specific performance of the agreement to receive the premises, leaving them to pursue damages.

It therefore considered preservation of the property necessary under Section 9.

The Court additionally expressed a prima facie view that the respondents had intended to cheat the appellants, while noting that it need not assess the evidentiary value of the respondents’ contention at that stage.

The judgment identifies those clauses as seeking, among other reliefs, protection against the creation of third-party rights in the subject property.

The Court stated that it had considered but refrained from directing criminal proceedings under Article 226 of the Constitution.