The Delhi High Court, on August 23, observed that when the petitioner was barred from seeking specific performance of the Memorandum of Understanding (MOU) between the two parties, the petitioner could not be held entitled to relief under Section 9 of the Arbitration and Conciliation Act 1996.

The instant petition was preferred under Section 9 of the Arbitration Act to preserve the property which is the subject matter of the dispute.

As per the petitioner, the parties entered into an MOU, according to which property had to be developed by the petitioner at its own cost in lieu of being paid 30% of the sale proceeds. The petitioner paid an advance sum of Rs. 1 crore to the respondents and the remaining part of the initial deposit were ready and available with the petitioner. However, the respondents did not take the same and began to avoid the petitioner.

The petitioner alleged that the respondents started avoiding him and started negotiating with other parties. This, as per the petitioner, was in breach of their agreement. 

After examining the MOU in question, the Court noted that the entire rights in the property, including possession and right to sell, remained with the respondents. The possession of the petitioner was only constructive for the purposes of construction. The Power of Attorney was also given for limited purposes of achieving construction. The cost of construction was provided in the MOU. The Court said that it was also clear from the MOU that all taxes including Capital Gain Tax had to be borne by the respondents.

The Court referred to Section 16(c) of the Specific Relief Act which provided that specific performance of a contract could not be enforced in favour of a person who failed to prove that he had performed or was always ready and willing to perform the essential terms of the contract, which were to be performed by him.

Single judge bench of Justice Mini Pushkarna observed that, "this Court is of the prima facie view that the petitioner has failed to prove that it was ready and willing to perform its obligations under the MOU at the relevant time. There is nothing on record to demonstrate that the petitioner had the relevant balance in its account at the relevant time to make payment to the respondents."

The Court dismissed the petition for relief and kept other questions relating to the breach of MOU open for the Arbitral Tribunal to decide.

The petitioner was represented by Advocates Mandeep Singh Vinaik, Anjali Sharma, Deepak and SK Sagar.

Respondent was represented by Advocate Jaspreet singh and Manu bhardwaj led by  Advocate Kunal Tandon.

[Royal Orchids vs. Kuldip Singh Kohli & Anr. (2022)]