Bangalore District Court
Sri H.M.Ramakrishna Reddy vs Sri B.M.Karunesh on 26 May, 2020
1
Com.AS.No.111/2014
+IN THE COURT OF LXXXII ADDL. CITY CIVIL & SESSIONS
JUDGE, BANGALORE CITY. (CCH.NO.83)
Dated: This the 26th day of May 2020.
PRESENT : Sri. Jagadeeswara.M., B.Com, LL.B.,
LXXXII Addl.City Civil & Sessions Judge, Bangalore.
Com.AS No.111/2014
Petitioners 1. Sri H.M.Ramakrishna Reddy,
aged about 65 years
S/o Late H.V.Muniyappa Reddy
2. Smt. Komalamma
aged about 54 years
W/o H.M.Ramakrishna Reddy
3. Smt. Babitha
aged about 40 years
D/o H.M.Ramakrisha Reddy
4. Sri R. Venugopal
aged about 37 years
S/o H.M.Ramakrisha Reddy
5. Smt. R.Malathi
aged about 35 years
D/o H.M.Ramakrisha Reddy
6. Sri R.Anil Kumar
aged about 32 years
S/o H.M.Ramakrisha Reddy
7. Smt.H.M. Ramakka
aged about 63 years
D/o Late H.V.Muniyappa Reddy
Residing at No.31, Appa Reddy Palya
2
Com.AS.No.111/2014
Indiranagar post, Indiranagar
Bangalore-560 036
8. Smt. H.M.Saraswathi
aged about 60 years
D/o Late H.V.Muniyappa Reddy
Previously residing at No.307
9th Main, 1st Block, HRBR Layout
Kalian Nagar, Bangalore-560 102
9. Sri H.M.Mohan Reddy
aged about 58 years
S/o Late H.V.Muniyappa Reddy
10. Smt.H.M.Latha
aged about 34 years
D/o Late H.M.Mohan Reddy
11. Sri H.M. Prakash
aged about 54 years
S/o H.V.Muniyappa Reddy
12. Sri Chethan
aged about 22 years
S/o H.M.Prakash
13. Smt. H.M.Bharathi
aged about 52 years
D/o Late H.V.Muniyappa Reddy
No.9 to 13 are residing at
Halanayakanahalli village
Varthu Hobli
Bangalore East Taluk
14. Smt.M.Shyla
aged about 50 years
D/o Late H.V.Muniyappa Reddy
3
Com.AS.No.111/2014
Previously residing at No.12/6
Gajanana Nilaya (behind GNR Plaza)
80 feet Road, 6th Block Koramangala
Bangalore-560 095
Presently residing at No.625
Sri Narayana Krupa
17th "A" Main, 6th Block
Koramangala, Bagalore- 560 095
(By Indo Legal Inc. - Advocates)
- Versus -
Respondents 1. Sri B.M.Karunesh
S/o ate B.M.Madaiah
Major, Partner
M/s Adarsh Developers
No.10, Vital Mallya Road
Bangalore - 560 001
2. Justice S.Venkataraman (Retd.)
Sole Arbitrator,
No.161, 3 'F' Cross, IV Main,
3rd Stage, 2nd Block,
Basaveshwaranagar,
Bangalore - 560 079
(R1 by Sri. Shyam Koundinya A.S. -
Advocate)
JUDGMENT
This petition is filed U/Sec.34 of Arbitration and Conciliation Act 1996 requesting to set aside the Arbitral Award dated 23.7.2014 passed by the Sole learned Arbitrator, who is respondent No.2 herein, in the 4 Com.AS.No.111/2014 Arbitration matter related to CMP No.52/2011.
1(a). Petitioners herein were the Claimants and respondent No.1 herein was the respondent in the Arbitral proceedings. Hon'ble Justice Sri. S.Venkataraman(Retd.) was the Sole Arbitrator, who is respondent No.2 of this petition.
2. Brief facts of the case are as under:
Petitioners are the owners of the agricultural lands bearing different survey numbers totally measuring 30 acres 32 guntas situated at Srirampura village, Sarjapur Hobli, Anekal Taluk, Bangalore District. The respondent No.1 is a partner of Adarsha Developers. Respondent No.1 herein entered into a registered Joint Development Agreement (JDA) dated 5.1.2007 (marked as Ex.C.1 in the arbitral proceedings) with the petitioners herein and owners of several other pieces of lands near and about the above said property, to form a residential layout, which totally measured 74 acres 22½ guntas. In pursuance of the terms of the JDA dated 5.1.2007, the petitioners and other owners also executed a registered General Power of Attorney dated 5.1.2007 (marked as Ex.C.2 in the arbitral proceedings) in favour of the respondent No.1 and one B.M.Jayashankar. Both JDA and GPA were registered on 30.04.2007. As per the JDA dated 5.1.2007, the respondent No.1 has to obtain all clearances and conversion required for development at his own cost and he was required to prepare necessary plans, drawings, designs, license and sanctioned plan et., for the formation 5 Com.AS.No.111/2014 of residential layout. The owners of the land would not revoke the permission so granted till completion of the project. All expenses to form layout shall be born by the respondent No.1. The owners of the land agreed to cover the balance area to the developer. Respondent No.1 had agreed to deliver to the owners of the developed plot to the extent of 14,000sq.ft., per acre of the land given for development and paid a sum of Rs.1,44,00,000/- to the owners as refundable security deposit free of interest by separate cheques and also agreed to deliver possession of the owners developed plots to them within 24 months from the date of registration of the JDA. In the event of any default in delivery of the owners' share beyond 24 months, the respondent No.1 agreed to pay penalty of Rs.50,000/- per acre per month. Petitioners issued legal notice dated 2.11.2010 (marked as Ex.C.3 in the Arbitral proceedings) to the respondent No.1 and Sri. B.M.Jayashankar alleging that they had not carried out any acts or obligations under the JDA and General Power of Attorney till that date, that they had failed to obtain either conversion of the lands from the agricultural to residential purpose or to secure a sanctioned plan and that on account of the serious breaches committed by them, the JDA and General Power of Attorney stood canceled/terminated and calling upon them to pay damages of Rs.50,000/- per acre per month.
Respondent No.1 did not send any reply to this notice. Petitioners sent another legal notice dated 6.1.2011 (marked as Ex.C.4 in the arbitral 6 Com.AS.No.111/2014 proceedings) invoking arbitration clause of the Joint Development Agreement. As the respondent did not respond to the notice, the petitioners approached Hon'ble High Court of Karnataka by way of filing application under Sec.11(5) of the Arbitration & Conciliation Act 1996 in CMP No.52/2011 requesting to appoint an Arbitrator to adjudicate the dispute. This petition was allowed on 19.11.2011 and Hon'ble Justice Sri.S.Vekataraman(Retd)., was appointed as Sole Arbitrator who commenced Arbitration proceedings.
2(a). Petitioners being claimants in the arbitration proceedings, filed their claim statement and sought for declaration that the JDA and GPA dated 05.01.2007 stood rescinded/terminated and for recovery of liquidated damages/penalty of Rs.7,21,30,000/- with interest at 18% per annum on the ground that the developer did not act upon the JDA and GPA within reasonable time since developer did not secure the land conversion order and also sanctioned plan and there by committed breach of terms of JDA and GPA and due to this reason JDA and GPA stood canceled. The terms of JDA are unconsiderable. They again approached developer/respondent No.1 and after re-negotiations, developer had paid additional sums of money to them and developer agreed to treat the additional amount paid and also amount already paid under JDA, as non-refundable deposit. At the time of making such additional amount, developer obtained their signatures on supplementary agreement to change the terms of registered 7 Com.AS.No.111/2014 JDA and GPA.
2(b). Respondent No.1 herein, who was also respondent in the arbitral proceedings, filed his counter statement with counter claim in the Arbitral proceedings requesting to dismiss claim statement and to allow counter claim for specific performance of JDA. In the said counter statement it was contended that subsequent to the JDA, a supplementary agreement dated 15.1.2007 (marked as Ex.R.2 in the arbitral proceedings) came to be executed between the parties to the JDA including the petitioners/claimants. As per the Supplemental agreement, non-refundable deposit of Rs.12 Lakhs per acre was to be paid to the owners and the period of handing over the developed area to the owners was to be 24 months from the date of sanction of the plan and accordingly respondent has paid a sum of Rs.2,95,62,500/- towards the revised non-refundable security deposit by way of Cheques which have been encashed by the owners. The refundable security deposit paid under the JDA was to be treated as part of non-refundable security deposit and it was agreed that balance of non-refundable security deposit amounting to Rs.73,97,500/- was to be paid on obtaining sanctioned plan and at the time of starting of the layout work. Respondent No.1 had applied for change of land use on 6.8.2009 and the same was approved on 24.4.2010 against payment of Rs.52,05,000/-. The registered GPA is irrevocable as the same has been executed for valuable consideration. The claimants cannot seek any 8 Com.AS.No.111/2014 damages in view of the extension of time for delivery of developed area and that the time has not yet arrived. The JDA is superseded by the supplementary agreement to the extent of revised terms. As per the Government notification dated 26.06.2007, an extent of 15 acres 27 guntas was earmarked as "Green Park Zone" and the remaining area was earmarked as "High Tech Zone" and only 15 acres 3 guntas has been permitted change in land use from High Tech Zone to residential. Thus, out of the total 30 acres 32 guntas of land belonging to the claimants, only an extent of 15 acres 3 guntas was available for development as per the terms of JDA. But the petitioners/claimants insisted upon giving the ratio of sharing as per the JDA in the developed area taking into consideration the entire extent of their lands. The claimants/petitioners themselves are guilty of delay and lapses in implementation of the JDA. Petitioners/claimants inordinately delayed in getting mutation effected and in getting the land records changed to their names in 2010 only and on account of the delay the respondent could not approach the authorities for necessary approvals and sanction. The JDA is indivisible and the rights and obligations of the parties to the agreement cannot be split into to pieces or set aside. The claim is bad for mis-joinder of unwanted and improper parties and accordingly sought for dismissal of the petition and also sought for declaration that the act of claimants in canceling the JDA and General Power of Attorney is illegal and for a direction to the claimants/petitioners 9 Com.AS.No.111/2014 herein to perform their part of obligations under JDA and GPA. The respondent is/was always ready and willing to perform his part of the obligations as per the JDA. The claimants/petitioners have filed rejoinder to the objection statement filed by the respondent.
2(c). Counter claim filed by the respondent No.1 in the arbitral proceedings for specific performance of JDA was not pressed. Learned Arbitrator framed necessary points/issues in the arbitral proceedings and after giving opportunity to the parties to place their oral and documentary evidence and after hearing them, passed Arbitral Award on 23.7.2014 rejecting the claim of the claimants. Aggrieved by the same, the petitioners have filed this petition under Sec.34(2) of Arbitration & Conciliation Act 1996 requesting to set aside the Arbitral Award.
3. Now, grounds urged in this petition may be summarized as under:
a) The impugned Award is wholly erroneous and contrary to the public policy of India, incomplete, erroneous and without any basis and hence, is liable to be set aside.
b) The learned Arbitrator did not take note of all the fact that payment schedule shown in the alleged supplementary agreement did not in any manner tally with the actual payment made by the respondent.
c) The learned Arbitrator has wholly erred and wrongly assumed for himself that changing of delivery period terms from 24 months from the date of 10 Com.AS.No.111/2014 registration of the JDA to 24 months from the date of sanctioned plan was beneficial to the respondent, which finding is prejudicial to the claimants and against settled principles of law.
d) The learned Arbitrator erroneously ignored the evidence of PW.1 and totally failed to note that if really Supplemental Agreement(Ex.R.2) had come into existence on 5.1.2007, the respondent could not have got the JDA (Ex.C.1) dated 5.1.2007 registered subsequently on 30.4.2007 without any modification of the terms as per Ex.R.2.
e) The learned Arbitrator wholly erred in supporting an inaction resulting in avoidance of stamp duty as well as avoidance of payment of registration fees, which is highly deplorable and liable to be set aside.
f) The learned Arbitrator failed and neglected to note the manner of dealings of the respondent. This conduct of the learned Arbitrator is highly prejudicial and against the claimants.
g) The learned Arbitrator erred in not relying upon the settled principles of law as laid down by the Hon'ble Supreme court of India, wherein it is clearly and without any ambiguity held that the terms of a registered document can be altered, rescinded or variable only by subsequent registered document and not otherwise.
h) The findings of the learned Arbitrator is totally incorrect and is an application in-apposite application of settled proposition of law and this erroneous finding goes to the root of the matter in question and hence vitiates the entire Award of the learned Arbitrator.
i) The learned Arbitrator erred in holding that the time is not the essence 11 Com.AS.No.111/2014 of contract and in not considering any of the judgments of the Hon'ble Supreme court wherein it is held that the principle that the time is not the essence of contract in case of immovable properties needs to be revisited and that in all cases it cannot be stated the time is not the essence of contract. Hence, the impugned Award is liable to be set aside.
j) The finding of the learned Arbitrator that in view of the alleged supplementary agreement modifying the registered JDA with regard to time for delivery of developed area, the claim for liquidated damages cannot be allowed is wholly perverse, baseless and suffers from various other infirmities.
By raising the above grounds, petitioners has requested to set aside the impugned Award.
4. From the above, the following points have arisen for my consideration:
1. Whether finding recorded in the Arbitral Award that petitioners/claimants have executed supplementary agreement at Ex.R.2 dated 15.01.2007 to the developer modifying certain terms of JDA and GPA dated 05.01.2007 is liable to be set aside on the ground of patent illegal and against to the public policy of India ?
2. Whether supplementary agreement dated 15.01.2007 is inadmissible for want of registration ?
3. Whether finding recorded in the Award that the JDA and GPA dated 05.01.2007 are not rescinded/terminated as contended by the petitioners/claimants, is patently illegal and against to the materials on record and it is opposed to public policy of Indian and it is liable to be set aside ?12
Com.AS.No.111/2014
4. What order ?
5. Learned advocate for petitioner has produced copies of entire arbitral records in this case on 15.10.2019.
6. I have heard arguments of both sides and I have carefully gone through the notes of arguments placed by both sides, reasonings and findings in the Arbitral Award and entire arbitral records.
7. My findings on the said points are as under :
Point No.1 : Negative Point No.2 : Negative Point No.3 : Negative Point No.4 : As per final order for the following :
REASONS
8. Point No.1 : It is agreement of learned advocate for petitioners that signatures of petitioners on alleged supplemental agreement at Ex.R.2 is admitted fact. But factually petitioners never executed alleged Supplementary Agreement at Ex.R.2 in favour of respondent No.1 modifying certain terms of JDA. After the petitioners realised that the terms of JDA were unconscionable, they again approached the respondent No.1 and after re-negotiations, the respondent No.1 paid additional sums of money to them and agreed to treat the same as well as the amount already paid under JDA, as non-refundable deposit. At that time respondent No.1 obtained signatures of the petitioners on several blank papers stating that 13 Com.AS.No.111/2014 they were required for various purposes. Subsequently by misusing blank signed papers, respondent No.1 has fabricated alleged Supplementary Agreement at Ex.R.2. Petitioners have clearly explained as to how their signatures are found in alleged Supplementary Agreement at Ex.R.2. But it is observation of learned Arbitrator that petitioners have not explained as to how their signatures are found in Ex.R.2. Further it is also submission of learned advocate for petitioners that factually though dated 05.01.2007 is shown in JDA at Ex.P.1 and GPA at Ex.P.2, but those JDA and GPA were executed and registered on 30.04.2007. Therefore there was no cause or occasion or chance for the petitioners to execute alleged Supplementary Agreement at Ex.R.2 on 15.01.2007. Since respondent No.1 did not act upon the JDA and GPA within reasonable time and he neither secured the land conversion order nor secured the sanctioned plan, he committed breach of the terms of agreement and in order to over come from this he has fabricated alleged Supplementary Agreement at Ex.R.2. Accordingly it is submission of learned advocate for petitioners that finding recorded by the learned Arbitrator in this regard is against to the materials on record and therefore it is patently illegal and liable to be set aside.
9. On the other hand learned advocate for respondent No.1 has supported the finding recorded by the learned arbitrator in this regard with the submission that this finding in the Award is based on proper appreciation of materials on record and there is no scope for this court to 14 Com.AS.No.111/2014 set aside such finding by re-appreciating facts and materials on record.
10.After having heard both sides in this regard, I have carefully gone through the materials on record. At this stage itself, it is relevant to note that Section 34(2) of the Arbitration & Conciliation Act 1996, relating to grounds to set aside Arbitral Award, reads as under:
" (2) An arbitral award may be set aside by the Court only if -
(a) the party making the application furnishes proof that -
(i) a party was under some incapacity; or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
provided that, if the decision on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the Court finds that -
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
(Explanation 1 - For the avoidance of any doubt, it is clarified that an 15 Com.AS.No.111/2014 award is in conflict with the public policy of India, only if,-
(i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or
(ii) it is in contravention with the fundamental policy of Indian law; or
(iii) it is conflict with the most basic notions of morality or justice.
Explanation 2 - For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.) (2-A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the court, if the court finds that the award is vitiated by patent illegality appearing on the face of the award;
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciation of evidence."
11. It is held by Hon'ble Apex Court in ( 1989)1 SCC 411 (Puri Construction Private Limited Vs. Union of India) that the Court deciding objections against the award cannot examine correctness of the award on merits by re-appreciating evidence. When a court is called upon to decide the objections raised by a party against an Arbitration Award, the jurisdiction of the court is limited, as expressly indicated in the Arbitration Act, and it has no jurisdiction to sit in appeal and examine the correctness of the award on merits with reference to the materials produced before the Arbitrator. The court cannot sit in appeal over the views of the Arbitrator by re-examining and re-assessing the materials. Further, it is also held by Hon'ble Apex Court in (2015)5 SCC 698 (Navodaya Mass Entertainment 16 Com.AS.No.111/2014 Limited Vs. J.M Combines) that re-appraisal of material on record by the court and substituting its own view in place of arbitrator's view, not permissible in absence of perversity, merely because two views are possible. Once the Arbitrator has applied his mind to the matter before him, court cannot re-appraise said matter as if it were an appeal. Even if two views are possible, view taken by the Arbitrator would prevail. Further, it is held by Hon'ble apex Court in (2019) 9 SCC 798 ( State of Jharkhand & Ors. Vs. HSS Integrated SDN & Anr.), as under:
"6.1 In progressive-MVR after considering the catena of decisions of this Court on the scope and ambit of proceedings under Section 34 of the Arbitration Act, this Court has observed and held that even when the view taken by the Arbitrator is a plausible view, and/or when two views are possible, a particular view taken by the Arbitral Tribunal which is also reasonable should not be interfered with in a proceeding under Section 34 of the Arbitration Act.
6.2. In Datar Switchgear Ltd., this Court has observed and held that the Arbitral Tribunal is the master of evidence and the findings of fact which are arrived at by the Arbitrators on the basis of the evidence on record are not to be scrutinised as if the Court was sitting in appeal. In Para 51 of the judgment, it is observed and held as under : (SCC pp.169-70) "51. Categorical findings are arrived at by the Arbitral Tribunal to the effect that insofar as Respondent 2 is concerned, it was always ready and willing to perform its contractual obligations, but was prevented by the appellant from such performance. Another specific finding which is returned by the Arbitral Tribunal is that the appellant had not given the list of locations and, therefore , its submission that Respondent 2 had adequate lists of locations available but still failed to install the contract objects was not acceptable. In fact, on this count, the Arbitral Tribunal has 17 Com.AS.No.111/2014 commented upon the working of the appellant itself and expressed its dismay about lack of control by the Head Office of the appellant over the field offices which led to the failure of the contract. These are findings of facts which are arrived at by the Arbitral Tribunal after appreciating the evidence and documents on record. From these findings it stands established that there is fundamental breach on the part of the appellant in carrying out its obligations, with no fault of Respondent 2 which had invested whopping amount of Rs.163 crores in the project. A perusal of the award reveals that the Tribunal investigated the conduct of the entire transaction between the parties pertaining to the work order, including withholding of DTC locations, allegations and counter-allegations by the parties concerning installed objects. The Arbitrators did not focus on a particular breach qua particular number of object/class of objects. Respondent 2 is right in its submission that the fundamental breach, by its very nature, pervades the entire contract and once committed, the contract as a whole stands the entire contract and once committed, the contract as a whole stands abrogated. It is on the aforesaid basis that the Arbitral Tribunal has come to the conclusion that the termination of contract by Respondent 2 was in order and valid. The proposition of law that the Arbitral Tribunal is the master of evidence and the findings of fact which are arrived at by the Arbitrators on the basis of evidence on record are not to be scrutinised as if the Court was sitting in appeal now stands settled by a catena of judgments pronounced by this Court without any exception thereto."
7. As held by this Court in a catena of decisions, the award passed by the Arbitral Tribunal can be interfered with in the proceedings under Sections 34 and 37 of the Arbitration Act only in a case where the finding is perverse and/or contrary to the evidence and/or the same is against the public policy. (See Associate Builders v. DDA, etc)"
12. By keeping in the mind the above proposition of law of Hon'ble 18 Com.AS.No.111/2014 Apex Court and also the nature of the provision of Section 34(2) of the Arbitration & Conciliation Act 1996, it is necessary to go through the materials on record to find out as to whether petitioner has made out grounds as contemplated under said Section 34(2) of the Act to set aside the Arbitral Award.
13. At this stage itself it is material to note that the submission of learned advocate for petitioners that JDA and GPA were executed on 30.04.2007 cannot be accepted for the reasons that the say of the petitioners in para No.1 of their claim statement filed before the Arbitral Tribunal is as under :-
"The petitioners submit that the respondent had entered into a Joint Development Agreement dated 05.01.2007 (executed on 30.04.2007) with them and 7 others vide document bearing No.VRT-1-00638-2007-08 in C.D.No.VRTD3 registered in the office of Sub-Registrar, Varthur on 30.04.2007 ..........."
In the same was it is say of the petitioners in para No.2 of their claim statement as :-
"The petitioners had also executed a General Power of Attorney dated 05.01.2007 registered Document No.VRT-4- 00029-2007-08 in C.D.No.VRTD3 dated 30.04.2007 in the office of the Sub-Registrar, Vartur infavour of the respondent and Sri.B.M.Jayashankar ..........."
14. Petitioners had issued lawyer's notice dated 02.11.2010 to respondent No.1. They produced copy of said notice at Ex.C.3 in the Arbitral Proceedings. It was stated in para No.1 of said notice as under :-
19Com.AS.No.111/2014 "Our client states that you have entered into a Joint Development Agreement dated 05.01.2007 (executed on 30.04.2007) with them and 7 others vide document bearing No.VRT-1-00638-2007-08 in C.D.No.VRTD3 registered in the office of Sub-Registrar, Varthur on 30.04.2007 ..........."
In the same way it was stated in para No.2 of said notice as under:-
"Our clients had also executed a General Power of Attorney dated 05.01.2007 registered Document No.VRT-4-00029- 2007-08 in C.D.No.VRTD3 dated 30.04.2007 in the office of the Sub-Registrar, Vartur infavour of you and Sri.B.M.Jayashankar ..........."
15. It is undisputed fact that JDA and GPA at Ex.C.1 and 2 were executed on same day itself i.e., petitioners executed GPA Ex.C.2 infavour of respondent No.1 and Sri.B.M.Jayashankar on the day when themselves and respondent No.1 had entered into JDA at Ex.C.1 for development of their lands by forming residential layout. Both in the para No.2 of the claim statement filed before the Arbitral Tribunal and also in para No.2 of the lawyer's notice at Ex.C.3, it is the admission of the petitioners that they executed GPA on 05.01.2007 in favour of petitioners and Sri.B.M.Jayashankar and it was registered on 30.04.2007 in the office of Sub-Registrar. This GPA admittedly witnesses as executed in pursuance of JDA at Ex.C.1 was entered into between petitioners and others with respondent No.1.
16. Therefore it is clear that petitioners and other land owners had entered into JDA with respondent No.1 on 05.01.2007 on which date they 20 Com.AS.No.111/2014 had admittedly executed GPA at Ex.C.2 in favour of respondent No.1 and Sri.B.M.Jayashankar. It is also relevant to note that JDA at Ex.C.1 starts with the wordings as under :-
"IN WITNESS WHEREOF we have signed and executed on this 5th day of January 2007 before the following witnesses ......."
17. In the lawyer's notice admittedly issued by the petitioners to respondent No.1 as per Ex.C.1, in para No.6 it was stated as under :-
"6. Our clients had chosen to retain the schedule property. Kindly treat the aforesaid Joint development agreement dated 05.01.2007 and the General Power of Attorney dated 05.01.2007 as cancelled/terminated."
18. From the above noted materials on record it is manifest and clear that JDA at Ex.C.1 was entered into executed and GPA at Ex.C.2 was executed on say day on 05.01.2007 and subsequently they were registered on 30.04.2007. There is no acceptable pleading and proof of the petitioners that JDA and GPA at Ex.C.1 and 2 were executed on 30.04.2007 and not on 05.01.2007. Learned Arbitrator has properly appreciated the materials on record in this regard and has rightly held that JDA at Ex.C.1 and GPA at Ex.C.2 were executed on 05.01.2007 and then they were registered on 30.04.2007.
19. It was contended by the respondent No.1 in his counter statement filed before the Arbitral Tribunal that on 15.01.2007 petitioners had executed Supplementary Agreement modifying certain terms of JDA, at 21 Com.AS.No.111/2014 Ex.C.1. He produced original Supplementary Agreement before the Arbitral Tribunal and same was marked as Ex.R.2 in the cross examination of PW-1. Though petitioners have denied execution of Supplementary Agreement at Ex.R.2, but they have admitted their signatures on this Ex.R.2 with the say that after themselves realised that the terms of JDA were unconscionable, they again approached the respondent No.1 and after re-negotiations, the respondent No.1 paid additional sums of money to them and agreed to treat the same as well as the amount already paid under JDA, as non-refundable deposit. At that time respondent No.1 obtained their signatures on several blank papers stating that they were required for various purposes. Subsequently by misusing blank signed papers, respondent No.1 has fabricated alleged Supplementary Agreement at Ex.R.2.
20. It is submission of learned advocate for petitioners that petitioners have denied execution of Supplementary Agreement at Ex.R.2 and respondent No.1 has not placed his evidence to prove execution of alleged Supplementary Agreement at Ex.R.2 and as such adverse inference has to be drawn against respondent No.1. On the other hand it is submission of learned advocate for respondent No.1 that there is no need to place oral evidence of respondent No.1 to prove execution Supplementary Agreement since petitioners have admitted their signatures and except the modification of time to complete project and deliver land owners 22 Com.AS.No.111/2014 developed share, petitioners have admitted rest of modifications such as they agreed to receive additional sums and this additional sum and also amount already paid to them under JDA was agreed to be treated as non- refundable deposit. These circumstances of the case and materials on record clearly proved execution of Supplementary Agreement at Ex.R.2. Accordingly it is submission of learned advocate for respondent No.1 that the finding recorded in the Award in this regard is based on the proper appreciation of facts and materials on record and there is no scope for this court to re-appreciate materials on record.
21. After having heard both sides in this regard, I have carefully gone through the materials on record and also reasonings and findings of learned arbitrator. It is relevant to note that as per the terms of JDA at Ex.C.1, the developer/respondent No.1 had paid a sum of Rs.1,44,00,000/- to the owners as interest free refundable security deposit by separate Cheques. Under clause 10 of JDA, the developer has agreed to deliver possession of the owners developed plots to them within 24 months from the date of registration of the JDA and in the event of any default in delivery of the owners share with the agreed time of 24 months, the developer shall pay penalty of Rs.50,000/- per acre per month. It is undisputed fact that the JDA at Ex.C.1 was registered on 30.04.2007.
21(a). It is contention of developer/respondent No.1 that subsequent to the JDA a supplementary agreement dated 15.01.2007 came to be 23 Com.AS.No.111/2014 executed between the parties to the JDA including claimants. As per that supplemental agreement (Ex.R.2) non-refundable security deposit at Rs.12 lakhs per acre was to be paid by the respondent to the owners and the period of handing over the developed area to the owners is extended to 24 months from the date of sanction of the plan. In pursuance of that supplemental agreement, the respondent has paid Rs.2,95,62,500/- towards the revised non-refundable security deposit all by way of cheques which have been encashed by the claimants and the other owners. The refundable security deposit paid under Ex.C.1 JDA is now treated as part of non- refundable security deposit. It is agreed that balance of non-refundable security deposit amounting to Rs.73,97,500/- is to be paid on obtaining sanctioned plan and at the time of starting of the layout work. The JDA is superseded by the supplemental agreement to the extent of the revised terms. All other terms remained unaltered.
22. As rightly observed in the Award, the petitioners have denied execution of Supplementary Agreement at Ex.R.2, but they have admitted their signatures in each page of Ex.R.2 and except the modification of time to complete project, they have admitted that they agreed to receive additional sums and this additional sums and also the sums already paid under JDA as refundable security deposit, are now treated as non- refundable deposit.
23. It is material to note that relevant contents of Supplementary 24 Com.AS.No.111/2014 Agreement at Ex.R.2 are as under :-
"2. The First Party herein had entered into a Joint Development Agreement on 05.01.2007 of the aforesaid Schedule Property. The Parties have renegotiated of certain terms of development and therefore are desirous of recording the changes in the aforesaid Joint Development Agreement.
NOW THESE AGREEMENT WITNESSES AS FOLLOWS:
That in pursuance of the foregoing and subject to the mutual discussions undertaken by the Owners and the Developer under this Agreement, the Owners and the Developer hereby agree to add certain terms and conditions to the Principal Joint Development Agreement dated 05.01.2007 with respect to the property described in the schedule below as follows:-
1. The Developer shall deliver the Owner's Developed Plot Area within 24 months from the date of sanction of plan.
2. The Parties had mutually agreed that the total refundable interest free security deposit payable shall be Rs.1,44,00,000/-
(Rupees One Crore Forty Four Lakhs only) has been paid by the Developer to the Owners on execution of the Joint Development Agreement dated 05.01.2007 by way of various Cheques, the receipt of which the Owners had acknowledged.
3. Whereas the owners have re-negotiated the terms of payment with the Developer accordingly now the Developer has agreed to pay a total non-refundable interest free security deposit of Rs.12,00,000/- per Acre (Rupees Twelve Lakhs Only per Acre) out of which the developer has paid Rs.1,44,00,000/- (Rupees One Crore Forty Four Lakhs only) on signing of the Joint Development Agreement which will be treated as non-refundable security deposit of Rs.3,00,000/- per Acre (Rupees Three Lakhs per Acre) 1½ month from the date of registration of Joint Development Agreement and General Power of Attorney in the following manner."
24. As per terms of JDA at Ex.C.1, developer paid Rs.1,44,00,000/-
25Com.AS.No.111/2014 to the owners, which is equivalent to Rs.3,00,000/- per acre, as interest free refundable deposit and time of 24 months was fixed from the date of registration of JDA to deliver developed share of owners with default clause to pay penalty of Rs.50,000/- per acre per month by the developer to the owner in case of default to deliver owners developed share within 24 months. In the Supplementary Agreement at Ex.R.2, the amount of Rs.1,44,00,000/- already paid by the developer to the owners as refundable deposit is shown in point No.2 (noted supra). The rest of point Nos.1 and 3 of Supplementary Agreement (noted supra) are to the effect modifying time limit of 24 months from the date of sanction of plan to deliver owner's developed share and payment of additional sums in all Rs.12,00,000/- per acre, including Rs.1,44,00,000/- and to treat this amount as non-refundable security deposit. As per the terms of this Supplementary Agreement, the modifications of certain terms of JDA, as found in Supplementary Agreement, was made with re-negotiating. In para No.11 of the claim statement filed by the Arbitral Tribunal, the petitioners have contended that there was no written agreement executed at that point of time of re- negotiation, but they have admitted that they met respondent No.1 and re- negotiation was done in which developer/respondent No.1 agreed and paid additional sums of money to them as non-refundable security deposit and further the refundable security deposit paid earlier was also considered as non-refundable.
26Com.AS.No.111/2014
25. As noted above, it is say of the petitioners in their claim statement filed before the Arbitral Tribunal that respondent No.1 obtained their signatures on some blank sheets by saying that they were required for various purpose and subsequently he misused it and fabricated alleged Supplementary Agreement at Ex.R.2. It is relevant to note that this say of the petitioners has not been substantiated for the reasons that they have not stated this fact in their notices at Exs.C.3 and 4 issued to the respondent No.1. Petitioners have not taken any other legal steps for alleged fabrication of Supplementary Agreement at Ex.R.2. As rightly noted in the Award, except extension of time, the petitioners have admitted rest of contents of Supplementary Agreement at Ex.R.2. They have admitted re- negotiation held between themselves and respondent No.1 They have admitted additional sums paid by the respondent No.1 as non-refundable security deposit. They have admitted that respondent No.1 agreed to treat the sums already paid under JDA at Ex.C.1 towards refundable security deposit, as non-refundable security deposit. These admissions are the contents of Supplementary Agreement at Ex.R.2 modifying certain terms of JDA at Ex.C.1.
26. Apart from the above materials on record, it is also relevant to note that in the JDA at Ex.C.1, respondent No.1 had agreed to pay Rs.1,44,00,000/- as refundable security deposit which is equallant to Rs.3,00,000/- per acre. But subsequently after re-negotiations it is 27 Com.AS.No.111/2014 admitted fact that respondent No.1 has agreed to pay non-refundable deposit of Rs.12,00,000/- per acre less the amount already paid under JDA. Ex.R.2 indicates the balance payable to the owners including petitioners, which shall be paid after sanction of plan is obtained. The plea of respondent No.1 that Rs.73,97,500/- is still remained to be paid is not disputed by the petitioners. Petitioners have not explained why the entire balance was not paid. But explanation in this regard is found in Supplementary Agreement It is undisputed fact that petitioners have encashed the Cheques issued by the respondent No.1 towards non- refundable deposit even by August and September 2009. Original period of 24 months fixed under Ex.C.1 expired on 30.04.2009. If the petitioners had not agreed for extending the time for delivery of their developed share to 24 months from the date of sanction of plan and if the respondent No.1 had to make delivery on or before 30.04.2009 as per the terms of JDA at Ex.C.1, then it is highly impossible that petitioners would accept and encash Cheques towards non-refundable security deposit even after 30.04.2009. As rightly observed in the Award the say of the petitioners that their signatures were obtained on blank papers and then respondent No.1 fabricated Ex.R.2 is nothing but improbability for the reasons that signatures of 20 persons including petitioners and other land owners are in the proper places on each page of stamp papers of Supplementary Agreement at Ex.R.2 without giving any scope for suspect.
28Com.AS.No.111/2014
27. It is further submission of learned advocate for petitioners that the time of 24 months fixed in Ex.R.2 is uncertain and indefinite and there was no chance for the petitioners to extend such time indefinitely for delivery of their share of developed property. It is material to note that there is no acceptable force in this submission of learned advocate for petitioners for the reasons that there are no materials to hold that modified from extends time indefinitely. Period of 24 months fixed in the JDA has been retained, but as per the terms of Ex.R.2 the said period has to be reckoned not from the date of registration of JDA but from the date of sanction of plan. Obtaining of such sanction of plan is mandatory to commence the development work. The respondent No.1 is partner of firm involved in developing properties. Several lands were taken for developing. Under JDA respondent No1 had paid refundable security deposit of Rs.1,44,00,000/- to the land owners which is equivalent of about Rs.2,00,000/- to 3,00,000/- per acre and it appears due to this reason in the JDA the period of 24 months from the date of registration of JDA was fixed to deliver the developed share to the land owners with penalty clause to pay damages in case of default. But under the modified terms, respondent No.1 has agreed to pay Rs.12,00,000/- per acre to the owner as non-refundable deposit. Accordingly more than Rs.2,00,00,000/- has been paid as non-refundable deposit. Due to this reason it is made to reckon the period of 24 months from the date of sanction of plan, instead of from the 29 Com.AS.No.111/2014 date of registration of JDA, to deliver the developed share to the owners. As rightly observed in the award, if respondent No.1 does not take steps to obtain sanction of plan within reasonable time then it is open to the petitioners to take appropriate legal steps in that regard.
28. The above discussed circumstances of the case and materials on record, even in the absence of oral evidence placed by the respondent No.1, clearly prove that petitioners have executed Supplementary Agreement at Ex.R.2. Therefore adverse inference cannot be drawn against respondent No.1 due to non-placing of his oral evidence. Finding recorded in this regard by the learned Arbitrator is based on proper appreciation of facts and materials on record and this finding is not patently illegal or perverse or opposed to public policy of India. There is no scope for this court under Sec.34(2) of Arbitration and Conciliation Act 1996 to sit in the appeal against this finding of Award and set it aside. For these reasons this Point No.1 is answered in the 'Negative'.
29. Point No.2 :- It is submission of learned advocate for petitioners that admittedly JDA at Ex.C.1 is registered document. The terms of such registered document can be modified through another registered document only. It is shown in Supplementary Agreement at Ex.R.2 that certain terms of registered JDA at Ex.C.1 are modified. Admittedly Ex.R.2 is not registered document. Therefore Supplementary Agreement at Ex.R.2 is inadmissible for want of registration. But learned arbitrator has wrongly 30 Com.AS.No.111/2014 admitted Ex.R.2 and placed reliance on it to record such findings in the impugned award.
30. On the other hand it is submission of learned advocate for respondent No.1 that already all rights in immovable properties with regard to development work etc., have been created in the parties through registered JDA at Ex.C.1. Supplementary Agreement at Ex.R.2 is not compulsorily registrable since under this document no transfer of interest in the properties is effected. Accordingly it is submission of learned advocate for petitioners that Ex.R.2 is admissible in the absence of its registration.
31. After having heard both sides in this regard I have carefully gone through the materials on record. As could be seen from the Award, petitioners had contended in the Arbitral Tribunal that JDA and GPA though are dated as 05.01.2007 but they were registered on 30.04.2007 and Supplementary Agreement at Ex.R.2 is dated as 15.01.2007 and if parties had intention to give effect to such modification as found in Ex.R.2, could have inserted in the JDA itself which was registered much subsequent to Ex.R.2 and the terms of the registered document can be modified subsequently through registered document only. Learned Arbitrator has considered this say of the petitioners with the materials on record and relevant provision of applicable law and also reported judgments placed and after considering the same it is observed in the Award that JDA and 31 Com.AS.No.111/2014 GPA were executed on 05.01.2007 though they were registered on 30.04.2007 and as per Sec.47 of the Registration Act a registered document takes effect from the date of its execution and not from the date of its registration. Thus JDA has come into effect on 05.01.2007 and Supplementary Agreement is dated 15.01.2007 which is later one and it can modify the terms of JDA notwithstanding the registration of JDA on 30.04.2007. Supplementary Agreement is not compulsorily registrable as under this document no transfer of interest in the property is effected.
32. It is undisputed fact rights in the lands relating to development work have been created in the registered JDA with certain terms and conditions including the term relating to amount payable by the developer to the owners of the land as refundable security deposit and also time of 24 months to be reckoned from the date of registration of JDA to deliver the developed share to the land owners. It is relevant to note that under Supplementary Agreement only the terms regarding the date from which the period of 24 months has to be reckoned and the nature of amount of deposit to be made by the respondent No.1 as security deposit are sought to be modified. This modification does not change the nature of JDA not it creates any right in the parties in immovable property nor it divest any right created by the JDA in immovable property. Therefore Supplementary Agreement at Ex.R.2 is not compulsorily registrable document. Learned arbitrator has considered these matters properly and has recorded correct 32 Com.AS.No.111/2014 finding in this regard. This finding recorded in the Award is not patently illegal and there is no scope for this court under Sec.34(2) of Arbitration and Conciliation Act 1996 to set aside finding recorded in this record in the Award. For these reasons Point No.2 is answered in the 'Negative'.
33. Point No.3 :- It is submission of learned advocate for petitioners that JDA was entered into in the year 2007. Already more than 13 years are lapsed. There is no progress in the development work in the lands of JDA. Time was essence of contract as per terms of JDA. By considering lapse of time, the JDA and GPA at Exs.C.1 and 2 are automatically rescinded/terminated. Petitioners have clearly stated this fact in their notice issued to respondent No.1 as per Ex.C.3. But learned Arbitrator has wrongly held that time was not essence of the contract and JDA does not contemplate automatic termination or cancellation on breach committed by the developer. Further it is also submission of learned advocate for petitioners that learned Arbitrator has erroneously observed that since time is not the essence of the contract petitioners cannot straight away terminate the contract on the ground of breach committed by the developer and petitioners have to fix reasonable time for completion and to inform the same to the developer and then in the event of non-performance by the developer within the fixed time, the contract would be terminated and since this has not been followed up, the petitioners case that the JDA and GPA stand rescinded/terminated is untenable. This observation and finding in 33 Com.AS.No.111/2014 the award is patently illegal and liable to be set aside.
34. It is relevant to note that I have carefully gone through the terms of JDA at Ex.C.1. As rightly observed in the Award, the agreement and Power of Attorney cannot be terminated or revoked till the completion of the project. As per clause 4 of JDA, owners of the lands have given irrevocable permission and authority to the developer to enter into the property and to develop the same by forming residential layout after duly converting it into non-agricultural/residential purpose from the concerned authorities in accordance with the plans to be sanctioned by BDA/Bangalore Mahanagara Palike or any other competent authority. As per clause 22 of the JDA, in the event of breach by either party, the other party (the aggrieved party) shall be entitled to recover all losses and expenses incurred as a consequence of such breach from the party committing breach.
35. Ex.R.5 produced by the respondent No.1 before the Arbitral Tribunal is initial confirmation letter dated 24.04.2010 issued by the BDA permitting conversion of 64 acres 5.34 guntas of land, including 9 items of land of the JDA, from high tech to residential use. This communication was made on the basis of application dated 06.08.2009 made by the respondent No.1. The other 8 items shown in the JDA being in park zone, change of land use could not have been sought for. On 24.10.2010 respondent No.1 applied for conversion of all the lands from agriculture to 34 Com.AS.No.111/2014 non-agriculture (residence) or park and subsequently conversion was granted as per Ex.R.12 series dated 30.07.2012 except Sy.No.30/2. Application filed by the respondent No.1 to the concerned authority seeking conversion of said Sy.No.30/2 was still pending. Respondent No.1 took steps for implementing the project from August 2009. As rightly observed in the award though there was delay of nearly 2 years on the part of respondent No.1 to take steps to implement the project, but the petitioners did not question the respondent No.1 in that regard. Petitioners issued legal notice as per Ex.C.3 in November 2010. But by that date, respondent No.1 had taken substantial steps to implement the project. Though there was initial delay of about 2 years to start the project work, since the time for delivery of owners developed share was extended to 24 months from the date of sanction of plan due to certain modifications shown in Supplementary Agreement at Ex.R.2 and due to this reason petitioners received and encashed Cheques till August and September 2009, which Cheques were issued by the respondent No.1 towards non- refundable deposit and therefore there are no materials to hold that there was a breach of contract.
36. As rightly observed in the Award, it is settled proposition that where the time is fixed for performance of contract, with the provisions for extending the time and also for payment of damages in case of delay, the time cannot be considered as essence of the contract. In the case on hand, 35 Com.AS.No.111/2014 though period of 24 months from the date of registration of JDA is fixed for delivery of owners' share, but provision is made in the JDA itself for payment of penalty in case of delay in delivery. Therefore it is clear that time is not essence of the contract under JDA. Due to this reason, as rightly observed in the Award, the petitioners could not straight away terminate the contract on the ground of breach. They ought to have fixed the reasonable time by informing the developer to complete the project by making the time as essence of the contract and then they could proceed to terminate the contract on the ground of breach. But this has not been followed up by the petitioners who had issued notice as per Ex.C.3 to the developer instructing him to treat JDA and GPA dated 05.01.2007 as cancelled or terminated due to breach committed i.e., failure to complete the project. After going through the nature of terms of JDA and also the above discussed circumstances of the case and the materials on record, as rightly observed by the learned Arbitrator, the say of the petitioners that JDA and GPA stand rescinded/terminated is untenable. The JDA and GPA continued to be in force. Finding recorded in the Award in this regard is based on the proper appreciation of the terms of the JDA and other undisputed facts between the parties and also the materials on record. This Court while deciding the petition under Sec.34(2) of Arbitration and Conciliation Act, 1996 cannot substitute its view to the view taken by the Arbitrator. There is no scope for the Court for re-appreciation of the facts 36 Com.AS.No.111/2014 and materials on record in the absence of perversity in the Award. For these reasons Point No.3 is answered in the 'Negative'.
37. Point No.4 :- For the above discussed reasons, I proceed to pass the following :
ORDER Petition filed under Sec.34 of the Arbitration & Conciliation Act 1996 is dismissed.
Both parties shall bear their own costs.
(Dictated to the JW, typed by her, corrected and then pronounced by me in Open Court, on this the 26th May, 2020.) (JAGADEESHWARA.M.) LXXXII Addl. City Civil & Sessions Judge, Bangalore.