Kumar Urban Development Private Limited, Pune And Anr. vs. Atul Ashok Chordia And Anr.

Facts

The Appellants are aggrieved by an order of the District Court rejecting their application under Section 9 of the Arbitration and Conciliation Act, 1996, for interim measures. The dispute arises from a Share Purchase Agreement dated March 21, 2018, where Appellants agreed to sell 100% equity shares of Respondent No. 3 (then KUL Developers Private Limited) to Respondent Nos. 1 and 2. A significant portion of the consideration was reserved for an access road. Disputes arose concerning the construction of this access road and the payment of consideration. Appellants claimed the road was complete and sought payment of Rs. 25 Crores or allotment of flats as per Clause 9.2 of the agreement. Respondents contended the road was not completed as per schedule. Appellants apprehended that Respondents were disposing of project flats, jeopardizing their option to claim consideration via flats.

Held

The Court held that the Appellants failed to make out a prima facie case for the grant of interim measures. The Court found that the Appellants' communications, particularly dated February 3, 2020, July 30, 2020, and August 1, 2021, prima facie indicated they had exercised the option of demanding monetary compensation of Rs. 25 Crores. Their subsequent reference to the option of seeking consideration via allotment of project flats in a letter dated October 14, 2021, demonstrated a conduct of 'approbating and reprobating,' meaning they were taking inconsistent positions. The Court relied on the principle that a party cannot blow hot and cold simultaneously to benefit from an agreement. The District Court's rejection of the application was deemed not an error, as it was a possible view based on the facts. The Court noted that a cheque for Rs. 25 Crores held by an Escrow Agent sufficiently secured the Appellants' interests. The Court directed the Respondents to deposit a fresh undated cheque for Rs. 25 Crores with the Escrow Agent within four weeks.

Key Issues

1. Whether the Appellants made out a prima facie case for the grant of interim measures, specifically restraining the Respondents from selling, alienating, or creating third-party rights in project flats and sales shares, pending arbitration? The Appellants argued that they were entitled to interim measures to prevent Respondents from disposing of project flats, thereby foreclosing their option under Clause 9.2 of the agreement to claim consideration by allotment of flats. They contended that the Respondents' actions would deprive them of exercising this option. The Respondents argued that the Appellants had already exercised their option by demanding monetary consideration of Rs. 25 Crores, and their subsequent attempt to claim flats constituted 'approbating and reprobating' (blowing hot and cold), disentitling them to equitable relief. They also contended that the Appellants had failed to complete their obligations regarding the access road.