Delhi High Court: Relief Under Section 9 Of Arbitration Act Available Against Non-Parties To Family Settlement

Delhi High Court: Relief Under Section 9 Of Arbitration Act Available Against Non-Parties To Family Settlement

Justice Neena Bansal Krishna of the Delhi High Court has ruled that plaintiffs are not precluded from seeking remedies under Section 9 of the Arbitration and Conciliation Act, 1996, even against individuals or entities who are not parties to a Family Settlement from which the dispute arises. However, the court found the application for an ad interim injunction unmaintainable due to ongoing arbitration proceedings and a pending application under Section 12A of the Commercial Courts Act.

The case revolves around disputes stemming from a Family Settlement concerning properties in Karol Bagh, New Delhi. Plaintiff No.1, Pawan Gupta, who owns 26.40% shares in Defendant No.7, a company holding the contested properties through its subsidiaries, claimed ownership of the Karol Bagh properties under the Family Settlement. The plaintiffs argued they had been in legal possession of the showroom since October 2024.

In 2022, arbitration proceedings resulted in an order restraining Defendant Nos. 4 to 12 from transferring or creating third-party rights over the properties. However, in 2024, the plaintiffs discovered a charge created on the properties without disclosure. This led to a commercial suit seeking to declare the charge, created through a Debenture Trust Deed and related documents, null and void. The plaintiffs also sought an injunction against Defendant Nos. 1 to 3 and requested the return of the properties' original title deeds.

The plaintiffs contended that the remedy under Section 17 of the Arbitration Act was unavailable as Defendant Nos. 1 to 3 were not parties to the Family Settlement. The defendants opposed the suit, arguing that the matter should be addressed under the Companies Act before the National Company Law Tribunal and that the lack of urgency undermined the need for bypassing pre-litigation mediation under Section 12A of the Commercial Courts Act.

The court observed that while Defendant Nos. 1 to 3 were not parties to the Family Settlement, the properties in question were part of the arbitration proceedings involving Defendant Nos. 4 to 7. It relied on the precedent set in Blue Coast Infrastructure Development P. Ltd. v. Blue Coast Hotels Ltd. and Anr. to conclude that Section 9 relief could be sought even against non-parties. Despite this, the court found no grounds for granting an ad interim injunction at this stage.

The matter is scheduled for further hearing on January 7, 2025.