1

R
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 24TH DAY OF JULY, 2024
PRESENT
THE HON'BLE MRS JUSTICE ANU SIVARAMAN
AND
THE HON'BLE MR JUSTICE ANANT RAMANATH HEGDE
MISCELLANEOUS FIRST APPEAL NO. 2978 OF 2024 (AA)

BETWEEN:

M/S DEVTREE CORP. LLP.

A LIMITED LIABILTY PARTNERSHIP
A COMPANY REGISTERED UNDER THE
COMPANIES ACT,
HAVING REGD. OFFICE AT 1140,
SECTOR -15B, SECTOR 15
CHANDIGARH 160015
REPRESENTED BY MR. ANAND KULKARNI
…APPELLANT
(BY SRI. UDAY HOLLA, SENIOR COUNSEL FOR
SRI. HIRAN KRISHNASWAMY, ADV.)

AND:

M/S BHUMIKA NORTH GARDENIA,

A PARTNERSHIP FIRM HAVING
OFFICE AT NO.435, BALAJI GOKULA,
4TH D MAIN, 12TH CROSS, WOC ROAD,
MAHALAKSHMIPURA, B'LORE - 86
REP. BY R ASHWATHAPPA
…RESPONDENT

(BY SRI. C.K.NANDA KUMAR, SENIOR COUNSEL A/W

SRI. SUSHAL TIWARI, ADV. FOR C/RESPONDENT)

THIS MFA IS FILED U/S 37(1)(b) OF THE

ARBITRATION AND CONCILIATION ACT, 1996, PRAYING
TO QUASH AND SET ASIDE THE IMPUGNED ORDER
DT.15.04.2024 IN AA NO.15002/2024 ON THE FILE OF THE
 2

V ADDL. DISTRICT JUDGE, SESSION JUDGE, BENGALURU

RURAL, SITTING AT DEVANAHALLI, ALLOWING THE
PETITION FILED U/SEC. 9 OF ARBITRATION AND
CONCILIATION ACT, 1996.

THIS APPEAL HAVING BEEN HEARD AND RESERVED

FOR JUDGMENT ON 10TH JULY, 2024 AND COMING ON FOR
PRONOUNCEMENT OF JUDGMENT THIS DAY, ANANT
RAMANATH HEGDE J., PRONOUNCED THE FOLLOWING:

CORAM: HON'BLE MRS JUSTICE ANU SIVARAMAN

AND
HON'BLE MR JUSTICE ANANT RAMANATH HEGDE

CAV JUDGMENT
(PER: HON'BLE MR JUSTICE ANANT RAMANATH HEGDE)

The following questions have come up for

consideration in this appeal:

(a) Whether a person who is not a party to the

arbitration agreement, and purchases the

property from a person who is a party to the

agreement, is bound by the arbitration clause

that is binding on his vendors?

(b) Whether a person who purchases the property

which is the subject matter of a proceeding

under Section 9 of the Arbitration and

Conciliation Act, 1996 (for short 'Act of 1996')

is bound by the principle of lis pendens?

 3

2. The appellant Company which is the respondent

in Section 9 proceeding under the Act of 1996 and

against which an interim order is passed, is in appeal

on the premise that Section 9 proceeding is not

maintainable against it as it is not a party to the

arbitration agreement.

3. The respondent in this appeal, which is the

applicant in Section 9 proceeding is defending the

impugned order. Respondent contends that the

appellant is “claiming through or under a party” who is

bound by the arbitration agreement and alleged

purchase by the appellant is during the pendency of

Section 9 proceeding, as such the appellant is

amenable to the jurisdiction under the Act of 1996.

4. Certain relevant facts noticed from the pleadings

are as under:

• On 16.10.2020, the respondent entered into a

registered agreement to purchase certain

immovable properties with the owners.

 4

• Out of Rs.16,14,37,500/-, the sale

consideration amount, Rs.80.00 lakhs is

claimed to have been paid as advance.

• On 03.02.2023, the vendors issued a notice to

the respondent, cancelling the agreement for

sale dated 16.10.2020, and also informed that

Rs.80.00 lakhs received towards advance

consideration amount is repaid to the present

respondent.

• On 04.03.2023, the respondent issued a reply

to the notice dated 03.02.2023, insisting on

the specific performance of the agreement for

sale.

• On 17.05.2023, the appellant takes out a

paper publication expressing its intention to

purchase the properties.

• On 31.07.2023, the respondent filed an

application under Section 9 of the Act of 1996,

seeking interim measures against the vendors.

(In this proceeding only the present

 5

respondent and owners are parties, and the

appellant is not a party)

• 02.11.2023, respondent initiated proceedings

under Section 21 of the Act of 1996 against

the vendors.

• On 28.11.2023, Section 9 application is heard

and reserved for orders.

• On 20.12.2023, the appellant purchased the

properties from vendors of the respondent.

• On 02.01.2024, Section 9 Court passed an

order against the vendors restraining them

from alienating the schedule properties.

• On 27.01.2024, the respondent filed a Section

9 application against the appellant (pendente

lite purchaser) and in terms of the impugned

order dated 15.04.2024, Section 9 Court

restrained the appellant from alienating the

properties.
 6

5. Sri Udaya Holla, the learned Senior counsel

urged that Section 9 application is not maintainable on

the following grounds:

• Under Section 7 of the Act of 1996, the

arbitration agreement to be valid, must be in

writing and signed by the parties. The

appellant is not a party to the agreement

dated 16.10.2020 and, as such is not bound

by the arbitration clause in the agreement

dated 16.10.2020.

• Section 2(1)(h) of Act of 1996 defines

the expression "Party" as a party to an

arbitration agreement and the appellant is

not a party to the agreement.

• The order in an earlier proceeding by

the Court under Section 9 of the Act of 1996,

against the appellant’s vendors does not bind

the appellant as Section 52 of the Transfer of

Property Act, 1882(for short "Act of 1882)

does not apply to Section 9 proceeding.

 7

• The appellant has acquired an

independent title over the properties under

the sale deed dated 20.12.2023 and the

appellant not being a party to the agreement

dated 16.10.2020, cannot be subjected to

the jurisdiction under the Act of 1996.

• Even on merits, the respondent having

received entire advance consideration of the

agreement resulting in cancellation of the

agreement for sale, cannot maintain a claim

for specific performance. Thus, no case is

made out to grant interim measures.

6. Learned Senior counsel Sri C.K. Nandakumar,

appearing for the respondent raised the following

contentions:-

• The registered agreement for sale dated

16.10.2020 in specific terms declares that the

agreement binds the legal representatives,

assignees, and the successors of the vendors.

The appellant does not have any independent

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right than what was possessed by its vendors.

Since the appellant is claiming through the

vendors who were bound by the valid

arbitration agreement, Section 9 application is

maintainable against the appellant.

• The appellant had the notice of the agreement

dated 16.10.2020 and the arbitration clause in

the agreement, as the agreement is duly

registered.

• The appellant claims to have purchased the

properties during the pendency of Section 9

proceedings. The appellant is bound by an

earlier order passed against the vendors as

the doctrine of lis pendens applies. Thus, the

appellant cannot take a stand contrary to the

earlier order which binds the appellant.

• Section 8(1) of the Act of 1996, recognises

“any person claiming through or under him”.

Thus, the appellant is bound by the arbitration

clause which is binding on the vendors.

 9

Regarding question (a)

7. Both learned Senior counsel appearing for the

appellant and the respondent heavily relied on the

judgment of the Hon'ble Apex Court in Cox and Kings

Limited Vs SAP India Private Limited and

Another1. Said judgment is delivered by the

Constitution Bench of the Hon'ble Apex Court to

consider whether the phrase "claiming through or

under" in Section 8 would include, the "Group of

Companies" doctrine, and whether the "Group of

Companies Doctrine" as expounded in Chloro

Controls India(P) Ltd. Vs Severn Trent Water

Purification Inc.2, is a valid law.

8. The Hon’ble Apex Court in the said case, also

answered two more incidental questions of significance

as can be easily noticed in paragraph No.17 of the

judgment extracted below:

17. The arguments advanced by the advocates

on both sides of the aisle indicate that this
Constitution Bench has been primarily called

1
(2024) 4 SCC 1
2
(2013)1 SCC 641
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upon to determine the validity of the Group of

Companies doctrine in Indian arbitration
jurisprudence. However, there are other broad
ancillary issues which have been raised by the
learned counsel. These include : (i) whether
the Arbitration Act allows joinder of a non-
signatory as a party to an arbitration
agreement; and, (ii) whether Section 7 of
the Arbitration Act allows for determination
of an intention to arbitrate on the basis of
the conduct of the parties. This Bench will
address the issues arising out of the order of
reference as well as the abovementioned
ancillary issues in due course.
(emphasis supplied)

Thus, some of the principles expounded in the said

judgment will have a bearing on the outcome of this

appeal. The conclusions in Cox and Kings supra,

relevant to the present case, in paragraphs No.170.1,

170.2 170.3, 170.9, and 230.4 are extracted below.

170.1. The definition of “parties” under Section

2(1)(h) read with Section 7 of the Arbitration Act
includes both the signatory as well as non-
signatory parties;
170.2. Conduct of the non-signatory parties
could be an indicator of their consent to be
bound by the arbitration agreement;
170.3. The requirement of a written arbitration
agreement under Section 7 does not exclude the
possibility of binding non-signatory parties;
 11

170.9. The persons “claiming through or under”

can only assert a right in a derivative capacity;
230.4. The expression “claiming through or
under” in Sections 8 and 45 is intended to
provide a derivative right; and it does not enable
a non-signatory to become a party to the
arbitration agreement. The decision in Chloro
Controls tracing the Group of Companies doctrine
through the phrase “claiming through or under”
in Sections 8 and 45 is erroneous. The
expression “party” in Section 2(1)(h) and Section
7 is distinct from “persons claiming through or
under them”. This answers the remaining
questions referred to the Constitution Bench.

9. In terms of paragraph No.170.1 referred to

above, it is concluded that the definition of “party”

under Section 2(1)(h) read with Section 7 of the Act,

1996, includes both signatories as well as a non-

signatory party. In paragraph No.170.2, it is

concluded that the conduct of a non-signatory party

could be an indicator to be bound by the agreement.

In paragraph No.170.3, it is held that the requirement

of a written arbitration agreement does not exclude

the possibility not the non-signatory being bound by

the arbitration clause.

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10. Paragraph No.170.9 speaks about the

limitations of a person who seeks to assert his right as

a person “claiming through or under” the agreement.

It is relevant to note that said paragraph recognises

the derivative right of a signatory to the arbitration

agreement.

11. Paragraph No.230.4 also concurs with the

view in the paragraph discussed supra.

12. This being the position, the contention that

as per the law laid down in Cox and Kings supra,

only a party who has signed the arbitration agreement

can be a party to the arbitration proceeding or Section

9 proceeding is not acceptable. If a non-signatory to

the arbitration agreement is “claiming through or

under” the party to the arbitration agreement or if he

has a derivative right under a party to the agreement,

then such party is bound by the arbitration clause.

13. Even assuming that the law laid down in

Cox and Kings supra, is confined to the “Group of

Companies” doctrine, and has no application to the

 13

case on hand, de horse the law in Cox and Kings

supra, for reasons discussed below, the respondent is

entitled to enforce the arbitration clause in the

agreement dated 16.10.2020 against the purchaser

from his vendors, as Section 8 (1) of the Act of 1996

provides for it.

14. At this juncture, it is necessary to refer to

Section 8 (1) of the Act of 1996.

8. Power to refer parties to arbitration

where there is an arbitration agreement.-
(1) A judicial authority, before which an action
is brought in a matter which is the subject of
an arbitration agreement shall, if a party to
the arbitration agreement or any person
claiming through or under him, so applies
not later than the date of submitting his first
statement on the substance of the dispute,
then, notwithstanding any judgment, decree or
order of the Supreme Court or any Court, refer
the parties to arbitration unless it finds that
prima facie no valid arbitration agreement
exists.

15. On a reading of Section 8(1) extracted

above, it is evident that not only a party to the

arbitration agreement but also a person claiming

through or under a party can apply to refer the matter

 14

to arbitration if a proceeding is brought before judicial

authority. This provision expressly recognises the right

of the “party or anyone claiming through or under

him” to the agreement to seek the resolution of a

dispute through arbitration. If a party or a person

claiming through or under a party to an arbitration

agreement can apply to refer the matter to arbitration,

the converse also applies, i.e., anyone claiming

through or under the party to the arbitration

agreement can be subjected to the jurisdiction of the

Arbitral Tribunal.

16. The agreement dated 16.10.2020 contains a

binding arbitration clause. The appellant/purchaser

being the assignee, steps into the shoes of the

vendors of the agreement dated 16.10.2020, and

takes the properties from vendors with all rights and

obligations attached to them. The transferee is not

bound by the obligations only if the person in whose

favour the obligations exist, agrees to waive such

 15

obligations. No such waiver is claimed or asserted by

the appellant.

17. During the course of the hearing, an

important question was posed by my esteemed sister

as to what would be the consequence in case, the

proceeding to enforce the obligations under the

agreement dated 16.10.2020 against the vendors,

ends in an award in favour of the respondent. The

learned Senior counsel for the appellant submitted

that such an award does not bind the appellant. Said

contention is not tenable. Since the sale transaction in

favour of the appellant during the pendency of Section

9 proceeding is subject to the outcome of Section 9

proceeding, and said proceeding being a step-in-aid to

the proceeding to be initiated before the Arbitral

Tribunal, the appellant who is a pendente lite

purchaser during Section 9 proceeding cannot be

permitted to say the award does not bind him.

Accepting such contention in effect amounts to

unilateral termination of the ‘arbitration agreement’

 16

and consequently renders the award of the Tribunal as

unenforceable. It will also defeat the very object

behind Section 8 of the Act of 1996.

18. For the reasons assigned above, this Court is

of the view that the appellant Company being a person

who is not a party to the arbitration agreement, and

being the purchaser of the properties from a person

who is a party to the arbitration agreement, is bound

by the arbitration clause binding on its vendor. It is

not open to the appellant to contend that the

arbitration agreement which is binding on its vendors

is not binding on the appellant on a specious plea that

it is not a signatory to the arbitration agreement.

Regarding question (b)

19. Admittedly, the appellant purchased the

properties when the vendors were parties in a pending

(earlier) proceeding, under Section 9. The question is

whether the transaction is hit by the lis pendens

principle.

Section 52 of the Act of 1882 reads as under:

 17

52.Transfer of property pending suit

relating thereto.—During the pendency in any
Court having authority within the limits of India
excluding the State of Jammu and Kashmir or
established beyond such limits by the Central
Government, of any suit or proceeding which is
not collusive and in which any right to
immoveable property is directly and specifically
in question, the property cannot be transferred
or otherwise dealt with by any party to the suit
or proceeding to affect the rights of any other
party thereto under any decree or order which
may be made therein, except under the
authority of the Court and on such terms as it
may impose.

Explanation.—For the purposes of this section,

the pendency of a suit or proceeding shall be
deemed to commence from the date of the
presentation of the plaint or the institution of
the proceeding in a Court of competent
jurisdiction, and to continue until the suit or
proceeding has been disposed of by a final
decree or order and complete satisfaction or
discharge of such decree or order, has been
obtained, or has become unobtainable by
reason of the expiration of any period of
limitation prescribed for the execution thereof
by any law for the time being in force.

20. The doctrine of lis pendens is based on a

sound public policy. It applies in a situation where the

right over an immovable property is directly or

substantially in question in a suit or proceeding which

is not collusive. In such a situation, if any transfer of

 18

immovable property which is the subject matter of the

suit or proceeding takes place, such transfer shall not

affect any decree or order to be made in the said suit

or proceeding.

21. The contention that Section 9 proceeding

under the Act of 1996 is not a suit, hence Section 52

has of the Act of 1882 has no application, cannot be

accepted. The ‘proceeding’ under Section 9 of the Act

of 1996 (not being collusive) involving a direct or

substantial question relating to an immovable property

satisfies all the requirements of Section 52 of the Act

of 1882. Thus, the "proceeding" under Section 52 of

the Act of 1882, applies to a proceeding under Section

9 of the Act of 1996, if such proceeding involves a

direct or substantial question relating to a right in an

immovable property.

22. The lis pendens doctrine envisaged under

Section 52 of the Act of 1882 is based on public policy.

Under the said doctrine, the transfer of property

involved in a suit or proceeding is not altogether

 19

barred. However, the transfer of property, if takes

place, will not affect the outcome of the suit or the

proceeding and any such transfer will be subject to the

outcome of the suit or proceeding.

23. In addition, it is also to be noticed that the

agreement between the respondent and its vendors is

duly registered in the office of the Sub-registrar. The

agreement for sale between the respondent and

vendors is deemed to be within the knowledge of the

appellant in view of Section 3 of the Act of 1882. The

said agreement specifically provides that the

agreement binds the assignees and the successors. In

the instant case, the appellant claims to have

purchased the properties during the pendency of

Section 9 proceeding.

24. For the reasons recorded, this Court is of

the view that the appellant is bound by the result of

Section 9 proceeding as the doctrine of lis pendens

applies to Section 9 proceeding under the Act of 1996

as well.
 20

25. Learned Senior counsel for the appellant

urged that on merits, the respondent is not entitled to

an interim order as he has received the advance

consideration amount from the vendors and the

agreement for sale ceases to exist or atleast, he

cannot enforce it.

26. It is relevant to note that the earlier Section

9 proceeding in AA.No.15001/2023 against the

vendors initiated by the present respondent has

attained finality. The interim measure is granted in

favour of the respondent in said AA.No.15001/2023 is

operating against the vendors. Since the vendors

claim to have sold the properties to the appellant

during the pendency of Section 9 proceeding in

AA.No.15001/2023, the appellant-Company having

stepped into the shoes of its vendors is bound by the

said interim measure passed against its vendors.

27. Though it is urged by the learned Senior

counsel appearing for the appellant that the

respondent has surrendered his claim over the

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properties by receiving Rs.80,00,000/- paid towards

advance, the said contention cannot be considered at

this stage for the simple reason that the vendors of

the appellant have already suffered an interim order in

earlier Section 9 proceeding. The said order has

attained finality and will be operative as indicated in

the said order. Since, the appellant is claiming under

his vendors who have already suffered an interim

order in respect of the same properties, the appellant

being the pendente lite purchaser, cannot be heard to

oppose the application under Section 9.

28. The remedy for the appellant is to seek

appropriate measures before the Arbitral Tribunal as

the arbitration agreement signed by the vendors of the

appellant binds the appellant as well.

29. It is urged by the learned Senior counsel

appearing for the appellant by placing reliance on the

judgment of the Kerala High Court in SHONEY SANIL

Vs Coastal Foundations (P) Ltd & Ors.3 to contend

3
2006 SCC ONLINE KER 38
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that the purchaser is not bound by the arbitration

clause in the prior agreement between his vendor and

third party.

30. In the said case, the Kerala High Court has

taken a view that the auction purchaser is not a party

to the agreement, as such, he is not bound by the

arbitration clause. It is relevant to note that in the said

judgment, the Kerala High Court has also opined that

a Section 9 application can be filed against a party to

the arbitration agreement and at best against any

person claiming under him. Admittedly, the appellant

is a person claiming under the original vendor who had

entered into an agreement for sale with the

respondent.

31. The judgment in BRAHMAPUTRA

REALTORS (P) LTD. vs G G TRANSPORT (P) LTD.4

rendered by the Gauhati High Court does not come to

the aid of the appellant as can be noticed from the

facts of the said case that three persons who are not

4
(2013)6 GAUHATI LAW REPORTS 14
 23

parties to any of the agreements were made parties to

the proceeding under Section 9 of the Act of 1996. In

that case, admittedly three persons did not claim

under the parties to the agreement. Whereas the

appellant is claiming under the party to the agreement

and also a pendente lite purchaser.

32. In SHONEY SANIL, BRAHMAPUTRA

REALTORS, supra and VIJAY ARAVIND JARIWALA

Vs UMANG JATIN GANDHI5, the agreements in

question were prior to the 2016 amendment to Section

8 (1) of the Act of 1996. In the case on hand, the

agreement is dated 16.10.2020, after the amendment

to Section 8(1) of the Act of1996 which incorporated

the expression “party or anyone claiming through or

under him”. Thus, the cases relied on by the appellant

are easily distinguishable.

33. In the case of MASHREQ BANK PSC Vs

INDIAN OVERSEAS BANK AND OTHERS6, the

parties were not claiming under a party to the

5
2022 SCC ONLINE GUJ 2648
6
2021 SCC ONLINE GUJ 2678
 24

arbitration agreement. Moreover, the judgments cited

on behalf of the appellant were rendered before Cox

and Kings supra.

34. This Court has also perused the reasons

assigned in the impugned order. Section 9 Court has

concluded that the appellant being the purchaser of

the properties from a party who had already entered

into an agreement for sale with the respondent,

cannot be termed as a third party. This Court finds no

error in the said reasoning. However, it is noticed that

the interim restraint order is passed till the conclusion

of the arbitral proceeding.

35. The learned Senior counsel for the appellant

during the course of the hearing submitted that the

appellant has moved an application to implead itself as

a party to the petition under Section 11 of the Act of

1996, where the respondent is seeking constitution of

the Arbitral Tribunal. Learned Senior counsel for the

respondent submitted that the respondent has

 25

objection for the appellant to be a party to the

arbitration proceeding. This Court has noticed that

Section 9 Court has granted interim measure till the

conclusion of proceedings before the Arbitral Tribunal.

36. Under the circumstances narrated above,

this Court deems it appropriate to restrict the

operation of the interim restraint order for 45 days

from the date of service of notice on the parties to the

proceeding by the Arbitral Tribunal.

37. The parties are entitled to move for

appropriate interim measure before the Arbitral

Tribunal. The finding and observations made in this

order are only confined to the interim application and

same is not binding on the Tribunal. All contentions on

merit, including whether arbitration clause is binding

on the appellant are kept open to be decided by the

Tribunal.

38. Hence the following:

 26

ORDER
(i) The appeal is allowed-in-part modifying the
interim measure dated 15.04.2024, in A.A.No.
15002/2024 before V Additional District Judge
Bengaluru Rural.

(ii) The interim measure dated 15.04.2024, in AA

No. 15002/2024 shall remain in force for 45 days
from the date of receipt of notice issued by the
Arbitral Tribunal on the parties to the proceeding
before the Arbitral Tribunal or till any interim
measures/orders passed by the Arbitral Tribunal
on an application by either of the parties,
whichever is earlier.

(iii) The Arbitral Tribunal shall pass appropriate

orders on interim measures if any, sought by the
parties to the proceeding, keeping in mind the
observations made in paragraph No.37.

(iv) No order as to cost.

Sd/-
(ANU SIVARAMAN)
JUDGE

Sd/-
(ANANT RAMANATH HEGDE)
JUDGE

chs/brn