Holding

The appellant had established a prima facie case for injunction; time is not deemed the essence of a contract for immovable property, the arbitration clause survives, and interim relief to maintain status quo pending arbitration is warranted.

Summary

The appellant, N. Srinivasa, entered into an agreement to purchase a plot of land from M/s Kuttukaran Machine Tools Ltd. After paying a large advance, the respondent failed to execute the sale deed, sought a higher price, and attempted to sell the property to a third party. The appellant filed an application under Section 9 of the Arbitration and Conciliation Act, 1996 and Order 39 Rules 1‑2 read with Section 151 CPC for an injunction to restrain the respondent from alienating the property. The trial court granted a status‑quo injunction; the High Court set it aside, conditioning the respondent to deposit a fixed sum. On appeal, the Supreme Court held that the appellant had made out a prima facie case, that time is not presumed to be the essence of a contract for immovable property, and that the arbitration clause remains effective. Consequently, the Court reinstated the interim injunction, directing the respondent to keep the balance amount in a fixed deposit until the arbitrator’s award, and set aside the High Court order.

Issues considered

Whether time is the essence of the contract for sale of immovable property and its breach bars an injunction.
Whether an interim injunction maintaining status quo is appropriate pending arbitration under the Arbitration and Conciliation Act, 1996.
Whether the arbitration clause survives a breach and the disputes must be decided by the arbitrator.
Whether the respondent can be restrained from alienating or creating third‑party interests in the property during arbitration.
Whether the condition of depositing the balance amount in a fixed deposit is a valid interlocutory measure.

Legislation cited

Arbitration and Conciliation Act, 1996s. 11, s. 34(1), s. 9
Code of Civil Procedure, 1908s. 151, s. Order 39 Rule 1, s. Order 39 Rule 2

Subjects

ArbitrationInterim injunctionSale of immovable propertyTime as essenceStatus quoFixed depositContract lawCPCArbitration and Conciliation Act

Judgment

'
.{2009] 2 S.C.R. 852
'
A N. SRINIVASA
v.
MIS KUTTUKARAN MACHINE TOOLS LTD.
Civil Appeal Nos. 1098 of 2009
B _
1
• FEBRUARY 18, 2009
[TARUN CHATTERJEE AND DALVEER BHANDARI, JJ]
·, •,

Arbitration and Conciliation Act, 1996/Code of Civil
Procedure, 1908 : ~

c s. 910. 39 rr. 1 and 2 - Agreement for sale of immovable
property - Sale aeed ·not executed within stipulated time - .. I

Vendor seeking time from the vendee .....; Thereafter, vendor
. I

refusing to perform its part of contract - On apprehension of
of
. creation third party interest in disputed property, applications
by vendee for injunction and interim injunction from· transfer, ~
0
?lieQation and 'creation bf third party interest - Plf?a of vendor
)
I '
that time being essence of the contract, ·it was not bound to t~
execute the deed - Grant of interim injunction by trial court - l

Denied by High Court - 'on appeal, held: Trial Court rightly !;1111

granted interim injunction - Issues in respect of the contract I
.....
E· were to be decided in arbitration proceedings - Interim '
l
y

_measures were necessary till the conclusion of arbitration
proceedings in order to prevent irreparable loss and injury to
vendee ~ In a contract relating to immovable property, time J
cannot be essence of contract - Direction to the vendee to
·-r-
F ' deposit the balance amountin fixed deposit in favour of vendor
to be kept with the arbitrator - Contract.
Respondent entered into agreement to sell a plot of
land with the appellant. Amount towards advance was
G. paid to the respondent at the time of execution of the ·
agreement. Balance amount was to be paid at the time of
registration of the sale deed. When the appellant came to " j,.
know that the respondent was trying to sell off the property -~.,:~ -
to some other party, he approached the responden,t for)~~~;;.
H 852 . • -~(""
·.
' ' '
.,
N. SRINIVASAV M/S KUTTUKARAN MACHINE · 853
TOOLS LTD.

- i execution of the deed. Respondent refused to perform A ·
its part of the contract until and unless the appellant paid
the sale consideration higher than as was initially agreed
upon.
Appellant filed an application u/s 9 of Arbitration and - ·
Conciliation Act, 1996 for injunction and under 0. 39 r. 1 B
and 2 r/w s. 151 CPC for temp.orary injunction seeking'
restraint to the respondent from alienating, altering or
creating any third party interest in respect-of the property.
Respondent took the plea that since time was essence of
the contract and the appellant having failed to perform C
his part of the obligation of the contract, respondent was
not bound to execute the sale deed. Trial Court allowed
the applications on the ground that there were serious
issues required to be tried before the arbitrator; and that
the appellant had successfully made out prima facie case o
for grant of injunction sought by him. Appeal was filed
before High Court. In the meantime, arbitrator was also
appointed. High Court set aside the order of trial court
subject to conditic;>n that the respondent deposited the
amount received as advance in fixed deposit, till the E ..
disposal of the dispute before the arbitrator. Hence the
present appeal.
Partly allowing the appeal, the Court
HELD. 1.1 The appellant, in the facts and circums-
tances of the case, had successfully made out a prima F
facie case for grant of injunction in the manner granted.
by the· trial court. The respondent has not de.nied the
agreement for sale. The only ground taken by the
respondent is that since time was the essence of the
contract and the appellant had failed to perform his part ·G
of the contract within the time specified in the said
agreement for sale, the question of grant of injunction from
transferring, alienating or creating an1 third party interest
in respect of the property in dispute would not arise at all.
[Para 11] [861-8] H
854 SUPREME COURT REPORTS [2009]2 S.C.R.

A·· 1.2 Trial Courtwasjustified in directing the parties to
maintain status quo in the matter of transferring, alienating
or creating any third party interest as prima facie it has
been proved that the respondent was trying to sell the
property in dispute to a third party, thus alienating the
B riglitS'ofthe property.in dispute, which would have caused
frreparable damage to the appellant. [Para 12] [863-D]
1.3 High Court by vacating the order of status quo
granted by the trial court, practically, had limited the scope ...
of the arbitration to the extent that the right of the appellant
c to receive back the amount with or without compensation
would be taken 'away, if ultimately his allegations are found
to ·be true·. 'Though, the appellant has been denied the •;
be~efit. •of injunction but since the application was u/s. 9

b
of Arbitration and Conciliation Act, 1996 for interim
measur~, to sec_u·re the interest of the appellant in the event ,
of his succeeding to an award before the arbitrator, it
would be i.n the interest of justice to put the appellant on
terms. [Para 11] [861-F] ·
I ..
1.4 If an order restraining the respondent from
E creating any,third party interest or from transferring the
property in dispute is not granted till an award is passed,
the appellant shall suffer irreparable loss and injury and
the entire award if passed in his favour, would become ).
totally· negated. [Para 11] [862-E]
F·
Mahaiwal Khewaji Trust .(Regd.),,.Faridkot vs: Baldev
Dass AIR 2005 SC 104 - relied on.
2.1 In a contract for sale of immovable property,
normally it is presumed that time is not the essence· of the
•
G contract. Even if .there is an express stipulation to that
effect, the· said presumption can be rebutted. To find out
. whether tinie was essence of the contract, it is better to
• ...
refer to the terms arid conditions of the contract itself.
[Para 11] [862-D-E]
H
N. SRINIVASA V. M/S KUTTUKARAN MACHINE 855
TOOLS LTD.

-~ 1 2.2 The High Court had failed to appreciate that in A
the contract relating to immoveable property, time cannot
be the essence of contract. In any event even in such a
case, the arbitration clause would survive and the dispute
would be required to be resolved. That being the position,
pending disposal of the arbitration proceeding, interim 8
measure to safeguard the interest was required to be
taken. Since the appellant was required to furnish the nil
encumbrance certificate till the date of transaction to show
that there was no charge over the property and further
since the property was to be kept vacant at the time of the
execution of the sale deed, time cannot be held to be the C
essence of the contract in the facts and circumstances of
the case and accordingly, the interim measure was
necessary to prevent irreparable loss and injury. [Para 13]
[864-8-D]
D
2.3 The disputes raised by the parties can only be
determined by the sole arbitrator and when admittedly,
an arbitrator has been ~ppointed to decide such dispute,
the parties should be directed to maintain status quo in
the matter of transferring, alienating or creating any third
party interest in the same till the award is passed by the E
sole arbitrator. [Para 17] [866-E]
3. Considering the fact that some time would be
required for the arbitrator to pronounce his award wherein
the question whether time was the essence of the contract
or not would be required to be determined and if the F
parties are directed to maintain status quo in respect of
the property in dispute, till such award is passed, and for
that reasons, the respondent would not be entitled to
transfer, alienate the property in dispute during the
pendency of the Arbitration proceeding and considering G
the balance of convenience and inconvenienc'e of the
parties, it is proper to direct the appellant to deposit the
balance amount in fixed deposit for a minimum period of
six months initially in favour of the respondent and renew
the same till the disposal of dispute before the Arbitrator. H ,
856 SUPREME COURT REPORTS [2009] 2 S.C.R.

A· The original fixed~eposit receipt shall be kept with the , --
arbitrator. In the event of failure of deposit of the aforesaid
. amoun\, the order of status quo, shall automatically stand
vacated and the order of the High Court, vacating the order
. of status-quo, shall immediately come into operation.
B [Para 18] (866:-F-H; 867-A-B]
Case Law Reference
AIR 2005 SC 104 Relied on. Para 11
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
C 1098 of 2009 · '

From the,Judgement and Order dated 16.04.2007 passed
by the Hon'ble High Court of Karnatak at Bangalore iri M.F.A.
No. 1201.4 of,2006 (AA)wherein the Hon'ble High Court partly
·· allowed the appeal ·
0
R.F. Nariman, Joseph P~okkatt. Nikhil Majithia, Prashant
Kumar, (M/SAP.& J ~hambers) for the Appellant.
DushyantA. Dave T. Raja, Gopal Singh, for the Respondent.
E The Judgement of the Court was delivered by
TARUN CHATTERJEE, J.
1. Leave granted. ) .
·. '
2. This appeal has been filed at the instance of the
F appellant by special-leav~ against the jud_gment and-final order
_of the High Court of Karnataka at BangaloreinM.F.A No. 120~4/
2006 (AA), dated 16th ofApril 2007, setting aside .the order
· dated 23rd of September, 2006 passed by the VI Additional-City
Civil J1:1dge, Bangalore, and vacating the order of status quo
G · granted on condition that the respondent shall depgsit a sum of
Rs.2,50,000,00/- [Rupees two crores fifty lacs] within the time : .
specified in the impugned order.
· 3. The facts leading to the filing of this appeal may ~e
H summarized as follows :
N. SRINIVASA V. M/S KUTTUKARAN MACHINE 857,
TOOLS LTD. [TARUN CHATTERJEE, J.]

The respondent became the owner of Plot No.19..:A, II A
Phase, Industrial Area, (carved Survey No. 40 and 41,
Chokkasandra Village, Yeshwanthpur Hobli, Bangalore North .
Taluk), measuring about 10568 square meters (hereinafter "
referred fo as the 'property in dispute') by a sale-deed dated
11th of November 2001 executed by the Karnataka Industrial B .
Area Development Board. The appellant and the respondent -
entered into an agreement for sale of the property in dispute on
21st of December 2005 for a sum of Rs.6,99,04,079/- in which
an advance of Rs.2,00,00,250/- (Two Crore Two Hundred Fifty
Only) was paid to the respondent~at the time of executing the c
agreement for sale. One of the stipulation in the agreement for.
· sale was that the balance amount of the.consideration money · ~
· shall be paid to the respondent at the time of registration of the
Sale Deed which shall be executeo within sixty days from the
.date of execution of the agreement for sale. The agreement for D
sale specifically mentioned that it was the obligation of the
respondent to keep the title good till the execution and
registration of the sale deed and further to keep thej)roperty in
dispute free from all encumbrances· or ctiarges. It was also
agreed that the respondentshall pay (!II rates, taxes and cesses
. in regard to the property in dispute upto the date of sale and all E
dues prior to the Sale Deed. It was further .agreed that in case ,.
of dispute, the same should be referred toArpitration under the
provisions of Arbitration and Co~ciliation Act, .1996 (in short the ·
'Act'). The respondent borrowed funds from.KSllDC and various
other finahcral institutions fm installation of ·\1arious kinds. of F
rtlachifleries in the factory thereby created equitat;>le mortgage
by way of d~posit of title deeds with various financial institutions.
It was clearly understood that at the time of registration of the
sale deed, vacant and peaceful physical possession of property
in dispute would be delivered by the respondent to the appellant G
and that the re~pondentwould be bound to remove all plants
and machineries from their factory in order to deliver. possession
to the appellant after clearing all its dues to the various financial.
institutions and keep the title deed ready. For the purpose of
execution of the sale deed, the appellant started doubting its H
858 SUPREME COURT REPORTS [2009) 2 S.C.R.

A bona-fide and, therefore, by a letter/notice dated 18th of February
2006
\
called upon the respondent to execute the sale deed so
that the vacant possession of the property in dispute could be
delivered to him. On 20th of February 2006, the appellant
received a letter from the respondent asking him to complete
s the sale transaction on the very next day i.e. on 21st of February
2006. After the receipt of the letter mentioned above, the
appellant approached the respondent and requested the
respondent to perform their part ·af the obligation. The
respondent assured the appellant that they wou.ld require some
c more time to remove the machineries from the property in ;
c
dispute ~s they were in large numbers and very huge in size.
They also informed the appellant that they required some more
time to mak~ alternative arrangement of other premises where
their plants and machineries could be kept as they were very
expensive and involved a lot of money. As the appe!lant had
0
already paid an amount of Rs.2,00,00,250/- to the respondent,
he had no choice but to keep quiet. The appellant, however,
having believed the version of the respondent that they had
difficulty in shifting all the machineries within a short notice kept
quiettill he realized that the intention of the respondent was not
E honest as he found that the respondent was trying to sell the
property in dispute to some other party at a much higher price.
Having found that the respondent was not interested to execute
.the sale deed as agreed upon, he approached the respondent
st
on 21 of June, 2006 to execute the sale deed, when he also
F · intimated the respondent that he was ready and willing to
perform his part of the contract to execute the sale deed, the
respondent refused to perform its part of the contract and
informed that they would not execute the sale deed until and •
unless the appellant agreed to pay a· higher sale consideration
G. over and above what was agreed to between the parties. Having
found that the respondent was trying to sell the property in dispute
to a third party at a higher price, the appellant filed an application
under Section 9 of the Act on 23rd of June 2006, before the City
Civil Judge, Bangalore, for injunction restraining the ·respondent
H from alienating, altering or creating any third party interest in
N. SRINIVASA V. M/S KUTTUKARAN MACHINE 859
. TOOLS LTD. [TARUN CHATIERJEE, J.]

·~ 1 respect of the property in dispute. With the application, the A
appellant also filed an application under Order 39 Rule 1 and 2
read with Section 151 CPC for temporary injunction restraining
the respondent from transferring, alienating or creating any third
party interest in the same.
4. The respondent entered appearance and denied the B
material allegations made in the application for injunction. ltwas
the specific case of the respondent that since time was the
...r essence of the contract and the appellant having failed to perform
his part of the obligation of the contract, the respondent was not
bound to execute the sale deed and therefore, the agreement c
r+'
for sale was cancelled by the respondent. Accordingly,· it was
alleged by the respondent that the application for injunction must
be rejected.
5. The Addi. City Civil Judge at Bangalore by his order
D
dated 23rd of September 2006 allowed the application filed by
the appellant, inter a/ia, on a finding that "there are serious issues
to be tried before the arbitrator and that the appellant has
successfully made out a prima facie case for grant of injunction
in the manner prayed for in the application." The learned Addi.
City Civil Judge, Bangalore, while disposing of the application E
for injunction, came to a finding prima facie that the respondent
intended to sell the property in dispute to some other persons
~ at a higher price as it was found that the intending purchasers
were frequently visiting for the purpose of purchasing the property
in dispute. The Addi. City Civil Judge, Bangalore, therefore, held F
prima facie that the respondent was likely to sell the property in
dispute and if it was sold, it would make the award of the learned
Arbitrator infructuous for which, the appellant shall suffer
irreparable loss and injury. Accordingly, upon the aforesaid
findings, the Addi. City Civil Judge, Bangalore disposed of the G
application for injunction directing the parties to maintain status
quo in the matter of transferring, alienating and creating any
third party interest in respect of the property in dispute.
6. It is against this order of Addi. City Civil Judge,
H
860 SUPREME COURT REPORTS [2009] 2 S.C.R.

A Bangalore, an appeal was filed by the respondent under Section
34 (1) of the Act before the High Court. ·---- -~
7. Before proceeding further, it may be kept on record that
in the meantime, an application was filed under Section 11 of
the Act by the appellant before the High_ Court forappoiritment
B . of an Arbitrator. The High Court by its order dated 2ih of
February 2007 appointed a retired Judge of the High Court as
the sole Arbitrator to decide the disputes raised by the parties. -
; ' '

-8. The appeal filed by the _respondent against the order of
c the Addi. City Civil Judge, Bangalore directing the parties to
m~aintain status quo, was taken up for hearing by-the High Court
and the High Court, by its impugned order, set aside the order
of the AddL City CivilJudge, Bangalore and made a final order
in the follo~ing manner :
D -"1 .AppeaUs ~llowed in part.
- --· · 2. The order dated 23.9.2006 passed by the VI Addi. City
·civil Judge, Bangalore City in A.A.No.48/06 is set aside
- - subject to the condition that the appellant deposits a.sum
' of RS.2;50,00,000/- (Rupees two ·crores and fifty lakhs)
E only in,fixed deposit for a·minimum period of six months_
initially in a nationalized bank and renew the sa.me till the
- · disp<?sal of dispute before the Arbitrator. The original fixed
deposit receipt shall be s_urrenderectlo the arbitrator._
, -.: 1~-,h~Jne facts. and cir~umstances_, there shaWbe-n6-order
F
as ·to' 'costs." · , ·
;;it

9. It is this order of the High Court,·which was challenged
·by way of a Special Leave-Petition, which on grant of leave,
was heard in the presence of the learned counsel forlne paf!Jes.
G
1O. We have heard the learned counsel for the parties and Jr
examined the impugned_ order as well as the order of the_ trial
court and also the allegations made in the application for
injunction and the objections thereto in depth and in detail. The
H imp_ugn_ed order of the High Court would ·show that if the
N. SRINIVASA V. M/S KUTTUKARAN MACHINE 861
TOOLS LTD. [TARUN CHATTERJEE, J.]

-, respondent deposits a sum of Rs.2,50,00,000/-, the order of A
status quo granted by the Addi. City Civil Judge, Bangalore in
the matter of transferring, alienating, altering and creating any
third party interest, shall stand vacated and the application for
injunction filed by the appellant shall. stand rejected.
11. In our view, the appellant, in the facts and circumstances B
of the case, had successfully made out a prima faCie case for.
grant of injunction in the manner granted by the Addi. City Civil
..J Judge, Bangalore. It is nofin dispute that the appellant and the
respondent had entered into an agreement for sale of the
property in dispute inter alia on the terms and conditions already c
mentioned herein earlier. The respondent has not denied such ·
agreement tor sale. The only ground taken by the respondent is
Jhat since ~ime was the essence of the contract and the appellant
had failed)o perform his part of the contract within. the time
speci.fied in the said agreement for sale, the question of grant D
of injunction from transferring, alienating or creating any third
party interest in respect of the property in dispute would not arise
at all. At the same time, it must be kept in mind that it would be
open to the respondent to transfer,,alienate or create any third
party interest in respect of the property in dispute before passing E
the award by the sole Arbitrator in which o"ne of the main issues
.(
would be whether time was the essence of the contract or not. It
is evident from the impugned order of the High Court that by
~
.vacating the order of status quo granted by the trial ·court,
~~~c~_ic.~~~~·.~~~ ~~gh c~~rt.~~? ~imited the s?.?.~7.P! t,~1~ 1 ~r~im~tton F
to tfie extent tttat the nght of the appellant to rece1ve back the
amount with or without cempensation wollld 1 q~ 1 !aken .away; if ·
ultimately his allegations are found to be true. Thou~h, the·
. appellant has been denied the benefit of injunction but since
the application_was under Section 9 of the Act for interim
measure, to secure the interest of the appellant in the event of
G
...
his succeeding to an award before the arbitrator, it would be in ·
the interest of justice to put the appellant on terms. It is also
evident from the impugned order that the High Court has made
it clear that the observations in the same shall not be understood
H
862 SUPREME COURT REPORTS [2009] 2 S.C.R.

A to have limited the power of the arbitrator to consider the
disputes on all its aspects including grant of specific
performance of the contract, but by vacating the interim relief to
the appellant, the High Court had made the entire arbitration
proceeding infructuous and by dint of vacation of the. interim
s order of the trial Court, the respondent shall be in a position to
transfer, alienate the property in dispute to a third party by which
third party right shall be created and the appellant shall suffer
enormous injury. Furthermore, if, at this stage, the respondent
is permitted to transfer, alienate or create any third party interest
c in respect of the property· in dispute, then the award, if passed
in favour of the appellant by the Arbitrator, would become
nugatory and it would be difficult for the a·ppellant to ask the
. I
respondent to execute the sale deed when a third party interest
has already been created by sale of the property in dJspute and
by: possession delivered to the third party. In a contract for sale
D of immovable property, normally it is presumed that time is not
'the ess~nce. of the contract. Even if there is an expr~ss stipulation
to that effect, the said presumption can be rebutted. It is well
settled that to find out whether time was essence of the contract,
~- it is better to refer to the terms and conditions of the contract
E itself. Further more, .the High Court, in our view, has failed to
appreciate that by the impugned order they have also limited
the scope of arbitration if ultimately the allegations made by the
appellant are found to be true. That is. to say, if an order
. restraining the respondent from creating any third partY interest
F or from transferring the property in dispute is not granted till an
'award is passed, the appellant shall suffer irreparable loss and
injury and the entire award if passed in his favour, would become
totally negated. In this connection, it is imperative to refer to a
judgment of this Court in the case of Maharwal Khewaji Trust
G (Regd.), Faridkot vs. Baldev Dass [AIR 2005 SC 104 in para
10] 1 which observed as follows:
"Unless and until a case of irreparable loss or damage
is made out by a party to a suit, the court should not
permit the nature of the property being changed which
H
N. SRINIVASA V. M/S KUTTUKARAN MACHINE 863
TOOLS LTD. [TARUN CHATTERJEE, J.]

-....... a/so includes alienation or transfer of the property which A
may lead to loss or damage being caused to the party
who may ultimately succeed and may further lead to
multiplicity of proceedings. In the instant· case no suet'?
case of irreparable loss is made out except contending
that the legal proceedings are likely to take a long time, B
therefore, the respondent should be permitted to put the
scheduled property to better use. We do not think that in
the facts and circumstances of this case, the lower
>
appellate court and the High Court were justified in
permitting the respondent to change the nature of the c
property by putting up construction as a/so by permitting
the alienation of the property, whatever may be conditions
on which the same is done."
12. Going by the ratio of the abovementioned decision, it
is clear that the VI Addi. City Civil Judge, Bangalore, was justified D
in directing the parties to maintain status quo in the matter of
transferring, alienating or creating any third party interest as
prima facie it has been proved that the respondent was trying
to sell the property in dispute to a third party, thus alienating the
rights of the property in dispute, which would have caused E
irreparable damage to the appellant.
13. From a bare perusal of the findings of the High Court
~ reversing the order of the trial Court and rejecting the application
for injunction, it would be evident that the appellant had failed to
make out a prima facie case for grant of an order of injunction F
in his favour. But in view of our discussions made hereinabove,
we are of the view that the Additional City Civil Judge, Bangalore
was fully justified in directing the parties to maintain status quo
as to the nature and character of the property in dispute till the
award is passed by the Sole Arbitrator as we have already held G
-I that if the order of the status quo is not granted and respondent
is permitted to sell the property in dispute to a third party,
complications will arise and the third party interest will be created,
for which the award, if any, passed in favour of the appellant
ultimately, would become nugatory. As noted herein earlier, one H
864 SUPREME COURT REPORTS [2009] 2 S.C.R. ..
A of the main issues for the purpose of deciding the application r ___,__.
for injunction was whether time was the essence of the contract
· or. not. By the impugned order, the High Court had failed to ·
appreciate thatin the contract relating to immoveable property,
time cannot be the essence of contract. In any event even in
B such a case, the arbitratiop clause would survive and the dispute
would be required to be resolved. That being the position,
pe_nding disposal of the arbitration proceeding, interim measure
to safeguard the interest was required to be taken. The High
i.<.
Court also, in our view, had failed to appreciate the material on
c record as the agreement and the correspondences produced
by the parties to the effect that since the appellant was required
to furnish the nil encumbrance certificate till the date of
transaction to show that there was no charge over the property ·
and fu~her since the property was to be kept vacant at the time
of the execution of the sale deed, time cannot be held to be the
D ,;
essence of the contract in the facts and circumstances of the
case and accordingly, the interim measure was necessary to
prevent irreparable loss and injury. However, the question
whether the time was the essence of the contractor not"is· to be
decided by the Arbitrator in the arbitration proceeding and for
E that reason only the High Court had also left open such issue to ;
!

be decided by the learned Arbitrator and in this connection, the
High (;ourt observed as follows :-
~
. ·"As such the contentions with regard to survivability of
F the arbitration clause and the dispute as to whether time
is the essence of the contract are issues which are within
the realm of the Arbitrator and accordingly, we do not
wish to pronounce on the same and therefore, we do not
see reason to refer to the arguments and case law referred
in this regard."
G
14. Since the High Court had not at all gone into the question ...
regarding whether time was the essence Of the contract OJ not,
it is not necessary for us to go into the question as the same
shall be decided by the Arbitrator while passing the award. As
H . noted herein earlier, the respondent while opposing the
~ N. SRINIVASA V. M/S KUTTUKARAN MACHINE 865
-f TOOLS LTD. [TARUN CHATTERJEE, J.]
--

-... .,,, application for grant of injunction, pleaded that the prayer of the A
appellant for grant of injunction in respect of the property in
dispute should be refused because admittedly, the time to
execute the deed by the appellant had expireq in the meantime.
As we have already held that one of the main issues to be
.....
...
I
decided by the Arbitrator is Whether time was the essence of
the contract or not, which was not decided by the High Court
B

while reversing the order of the Additional City Civil Judge,
Bangalore and in view of the fact that there is no dispute that a
sum of Rs. 2,00;00,250/- (Two Crores and Two Hundred Fifty)
has been paid by the appellant to the respondent at the time of c
execution of the agreem~nt for sale and in view of the fact that
there is no dispute that the parties had entered into an agreement
for sale on certain terms and conditions, out of which one of the
conditions was whether the time was the essence of the contract
or not which shall be decided by the Sole Arbitrator, we do not
D
- find any ground as to why the order directing the status quo in
the matter of transferring, alienating or creating any third party
interest passed by the Additional City Civil Judge, Bangalore
shall not be maintained till the award is passed by the Arbitrator.
That apart, the survivability of the Arbitration clause in the
agreement was also questioned by the respondent in their E
objection to the application for injunction but since that question
' has also been kept open for the decision of the Arbitrator by the
High Court as well, we have no hesitation in our mind to hold
that since .the said question shall also be decided by the
Arbitrator while deciding the disputes between the parties, there F
is no ground why the order of status quo granted- by the trial
court shall not be maintained till the award is passed by the
Arbitrator.
15. It is well settled that even .if an agreement ceases to
G
exist, the Arbitration clause remains in force and any dispute
pertaining to the agreement ought to be resolved_ according to
the conditions mentioned in the Arbitration clause. Therefore,
in our view, the High Court was not justified in setting aside the
-order of the trial Court directing the parties to maintain status
H
866 SUPREME COURT REPORTS [2009] 2 S.C.R.

A quo in the matter of transferring, alienating or creating any third lr _.. .......J

party interest in the same till the award is passed by the sole
Arbitrator.

~'
16. It was not disputed by the High Court in the impugned
order.. .that
... the respondent wa3 trying
, .
to sell off the property in
B dispute to some other third party which, in our view, would also
cause enormous loss and hardship to the ,appellant. It is not in
disp~te that the appellant had paid a sum of Rs.2,00,00,250/-
(Two Crores ~nd Two Hundred Fifty) as advance to the •
respondent at the time of executing the agreement for sale. At
c the same time, it may not be out of place to mention that it was
the specific case of the appellant that the respondent had failed
to hand over vacant possession of the property in dispute within
the period specified in the agreement and. for that reason only,
he could not perform his part of the contract.
D )
17. lri view of our discussions made herein above, we are
of the view that the disputes raised by the parties can only be
determined by the sole Arbitrator and when admittedly, an
Arbitrator ·has been appointed to decide such dispute, the
parties should be directed to maintain status quo in the· matter
E of transferring, alienating or creating any third party interest in l
(

the same till the award is passed by the sole Arbitrator.
18. At the same time, considering the fact that some time
would be required for the Arbitrator to pronounce his award
t
f
F wherein the question whether time was the essence of the l
contract or not would be required to be determined and if the I
parties are directed to maintain status quo in respect of the
property in dispute, till such award is passed, and for that
l
reasons, the respondent would not be entitled to transfer, alienate i
I

the property in dispute during the pendency of the Arbitration
G
proceeding and considering the balance of convenience and
:j
,..
inconvenience of the parties, we feel it proper to direct the -~
appellant to deposit the balance amount of Rs.4,99,03,829/- ·J
"\
(FourGrores Ninety Nine Lacs Three Thousand Eight Hundred
Twenty Nine) within a period of three months from the·date of ~ . :'
H

)
l
~
N. SRINIVASA V. M/S KUTTUKARAN MACHINE 867
TOOLS LTD. [TARUN CHATIERJEE, J.]

. supply of a copy of this order to the VI Additional City Civil Judge, A
Bangalore, in fixed deposit for a minimum period of six months __
initially in a nationalized bank in favour of the respondent and
re.new the same till the disposal of dispute before the Arbitrator.
The original fixed deposit receipt shall be kept with the arbitrator.
In the event of failure of deposit of the aforesaid amount, the B
order of status quo, as granted by the VI Additional City Civil
Judge, Bangalore and affirmed by us, shall automatically stand
vacated and the order of the High Court, vacating the order of
status quo, shall immediately come into operation.
19. In the ligflt·of the discussions made hereinabove, we C
set aside the order of the High Court and restore the order of
the VI Additional City Civil Judge, Bangalore subject to the·
conditions mentioned hereinabove.
20. For the reasons aforesaid, the appeal is allowed to
the extent indicated above. There will be no order as to costs. D

K.K.T. Appeal party allowed

·•