The Madhya Pradesh High Court has clarified that invocation of an arbitration clause under Section 11 of the Arbitration and Conciliation Act, 1996 does not necessarily require formal termination of the underlying agreement. In a dispute involving a Rs. 6 crore security deposit and alleged attempts to alienate the subject property, the Court held that disputes arising from non-performance, third-party notices, or enforcement actions can trigger arbitration even if the contract remains technically in force. This judgment provides critical guidance for parties seeking to resolve disputes through arbitration without waiting for formal termination, particularly in cases involving financial stakes and external legal complications.
Background & Facts
The Dispute
The petitioner, Optimus Infrabuild LLP, entered into a development agreement dated 07.10.2024 with the respondent, Health Bridge Agro Private Limited (formerly Jayshri Gayatri Foods Pvt. Ltd.), for the development of 0.612 hectares (6,164 sq. mtrs.) of land. The respondent assured the petitioner of clear title to the land, including the dismissal of pending securitization proceedings before the Debt Recovery Tribunal (DRT), Jabalpur. Relying on these assurances, the petitioner paid a security deposit of Rs. 6 crores and commenced pre-construction activities, including engaging architects and surveyors.
Key Facts
- Development Agreement: Executed on 07.10.2024, with the respondent obligated to ensure clear title to the land.
- Security Deposit: Rs. 6 crores paid by the petitioner under the agreement.
- Assurances by Respondent: Clear title and dismissal of securitization proceedings (S.A. No. 65/2021) pending before DRT, Jabalpur.
- Enforcement Directorate Action: On 30.01.2025, the ED conducted searches at the premises of the respondent company and its directors in Bhopal, Sehore, and Morena. Subsequently, an FIR was registered, and a charge-sheet was filed by the Economic Offences Wing (EOW), Bhopal.
- Public Notices by Respondent:
- 27.04.2025: Notice published in Dainik Bhaskar inviting objections to the proposed sale of the subject land to a third party.
- 01.04.2025: Another notice inviting objections to the sale of a house/office at E-4, Arera Colony, Bhopal, indicating an intent to flee the country.
- Third-Party Payment: The respondent received Rs. 14 crores from a third party for the sale of the subject land.
- Legal Notice by Petitioner: On 08.05.2025, the petitioner issued a notice invoking the arbitration clause (Clause 33 of the agreement). The respondent failed to respond.
Procedural History
- 14.05.2025: Petitioner filed an application under Section 9 of the Act, 1996 before the Commercial Court, seeking interim relief to restrain the respondent from alienating the subject property.
- 20.08.2025: Commercial Court granted interim relief.
- 08.05.2025: Petitioner issued notice invoking arbitration under Clause 33 of the agreement. No response was received from the respondent.
- I.A. No. 2405/2026: Filed by the petitioner to place on record authorization for Mr. Dayaprakash Kumawat (dated 08.05.2025) and earlier authorization for Dinesh Patidar.
- Present Application: Filed under Section 11 of the Act, 1996 for appointment of an arbitrator.
Relief Sought
The petitioner sought the appointment of an arbitrator to resolve disputes arising from the development agreement
