Karnataka High Court
M/S Nirpl Ventures Private Limited vs Sri Vijayshekar Thangaiah on 29 July, 2022
Author: Suraj Govindaraj
Bench: Suraj Govindaraj
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CMP No. 448 of 2022
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 29TH DAY OF JULY, 2022
BEFORE
®
THE HON'BLE MR JUSTICE SURAJ GOVINDARAJ
CIVIL MISC. PETITION NO. 448 OF 2022
BETWEEN:
1. M/S NIRPL VENTURES PRIVATE LIMITED
(PREVIOUSLY KNOWN AS NITESH INDIRANAGAR
RETAIL PRIVATE LIMITED)
NITESH TIME SQUARE
7TH FLOOR, NO.8, M.G.ROAD
BENGALURU-560001
REP. BY ITS AUTHORISED REPRESENTATIVE
MR. K.B. SWAMY
2. M/S NEL HOLDINGS SOUTH PRIVATE LIMITED
(PREVIOUSLY KNOWN AS NEL HOLDINGS LTD.
AND EARLIER M/S NITSH ESTATES LIMITED)
NITESH TIME SQUARE
7TH FLOOR, NO.8, M.G.ROAD
BENGALURU-560001
REP. BY ITS AUTHORISED REPRESENTATIVE
MR. K.B.SWAMY
...PETITIONERS
(BY SRI. SIDDHARTH SUMAN, SR. COUNSEL)
Digitally signed by AND:
POORNIMA
SHIVANNA
Location: HIGH 1. SRI. VIJAYSHEKAR THANGAIAH
COURT OF
KARNATAKA MAJOR IN AGE
S/O LATE GEORGE THANGAIAH
R/AT NO.6, COMMISSARIAT ROAD
ASHOK NAGAR, BENGALURU-560025
2. MR. RACHEL CHITRA PRABHAKAR
MAJOR IN AGE
D/O LATE GEORGE THANGAIAH
R/AT NO.6, COMMISSARIAT ROAD
ASHOK NAGAR, BENGALURU-560025
...RESPONDENTS
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CMP No. 448 of 2022
(BY SRI. K.G. RAGHAVAN, SRI. COUNSEL FOR
SRI. SHRIKARA P.K AND SRI. TEJAS, ADVOCATES)
THIS CMP IS FILED UNDER SECTION 11(5) OF THE
ARBITRATION AND CONCILIATION ACT 1996, PRAYING TO APPOINT
HON'BLE JUSTICE ASHOK B.HINCHIGERI (RETD.) HIGH COURT OF
KARNATAKA, BENGALURU, HAVING ADDRESS AS APARTMENT
NO.1431, EMBASSY HABITAT, VASANTHNAGAR, BENGALURU - 560
052 AS ARBITRATOR TO ENTER UPON REFERENCE AND PASS AWARD
IN THE MATTER OF DISPUTES RAISED BY THE PETITIONERS
AGAINST THE RESPONDENTS FOR DAMAGES; AS PER CLAUSE 35(D)
OF THE JOINT DEVELOPMENT AGREEMENT DATED 11.02.2011 I.E.
ANNEXURE-E.
THIS CMP COMING ON FOR ADMISSION, THIS DAY THE
COURT MADE THE FOLLOWING;
ORDER
1. The petitioners are before this Court seeking for the following reliefs:
a. To appoint Hon'ble Justice Ashok B.Hinchigeri (Retd.) High Court of Karnataka, Bengaluru, having address as Apartment No.1431, Embassy Habitat, Vasanthnagar, Bengaluru-560 052 as Arbitrator to enter upon reference and pass award in the matter of disputes raised by the petitioners against the respondents for damages; as per clause 35(d) of the Joint Development Agreement dated 11.02.2011 i.e. Annexure-E. b. to award costs and grant such other relief(s) as this Hon'ble Court deems fit and expedient in the circumstances of the case, in the interests of justice and equity.
2. The petitioners claim that they had entered into an agreement with the father of the respondent herein for joint development of the property owned by the -3- CMP No. 448 of 2022 said father in regard to which a Memorandum of Understanding dated 19.10.2007, Supplementary Memorandum of Understanding dated 26.10.2007, Second Supplementary Memorandum of Understanding dated 29.03.2010, Joint Development Agreement dated 11.02.2011 and Supplementary Joint Development Agreement dated 11.02.2014 have been entered into.
3. On an earlier occasion, when there was a dispute between the petitioners and father of the respondents No.1 and 2, an adhoc Arbitral Tribunal has been constituted, when the petitioners appointed their nominee and the father of the respondents appointed his nominee and the said two nominees had appointed the Presiding Arbitrator.
4. The petitioners had filed a claim petition seeking for specific performance of the aforesaid agreements as also damages in addition thereto. The proceedings -4- CMP No. 448 of 2022 before the Tribunal being completed, an award was delivered on 25.04.2018. By way of the said award, the reliefs of specific performance as also the damages in addition sought for by the petitioners was rejected. An amount of Rs.100 crores, which was paid as advance, was directed to be refunded after adjusting Rs.55 crores which was claimed by the respondents as damages in the counter claim filed by them.
5. Subsequently the Petitioners had filed a proceedings under Section 34 of the Arbitration and Conciliation Act 1996 (For Short A&C Act), which also came to be dismissed.
6. It is thereafter that the petitioners claiming that the performance of the contract was frustrated on account of actions on part of the Respondents issued a notice stating that in the earlier arbitral proceedings the claim for damages was not -5- CMP No. 448 of 2022 considered by the Arbitral Tribunal called upon the respondents to concur with the appointment of its nominee arbitrator, which was not acceded to as such the petitioners are before this court seeking for the aforesaid reliefs.
7. Sri.K.Suman, learned Senior counsel appearing for the petitioners submits that:
7.1. Though the relief of specific performance has been rejected, the Tribunal has not considered the aspect of the damages which has been sought for by the petitioners and as such, the petitioners are entitled to claim for the same.
7.2. The petitioners would be entitled for the damages on account of fresh causes of action, which have arisen subsequent to the award having been rendered inasmuch as there are certain proceedings which had been initiated against the land owners on account of -6- CMP No. 448 of 2022 encroachment of karab land, rendering the agreement infructuous and therefore, frustrating the performance of the agreement and as such, the claims of the petitioners are required to be referred to an arbitrator to be arbitrated upon, the respondents not having agreed to the nominee of the arbitrator, this Court could appoint an independent arbitrator.
8. Sri.K.G.Raghavan, learned Senior Counsel appearing for the respondents would submit that:
8.1. The entire claims which have been raised by the petitioners have been adjudicated by the Arbitral Tribunal while rejecting the claim for specific performance, the claim for damages in addition has also been rejected.
8.2. The petitioners had filed a proceeding under Section 34 of the A&C Act, challenging the said award before the Commercial Court in -7- CMP No. 448 of 2022 Com.A.S.No.134/2018 which has also been dismissed vide order dated 23.02.2022. Hence, the contentions of the petitioners having been rejected both by the Tribunal and in the proceedings under Section 34, the question of initiation of fresh arbitral proceedings after the dismissal of the proceedings under Section 34 would not arise.
8.3. The petitioners have themselves withdrawn their claim for specific performance and what was remaining to be adjudicated in Com.A.S.No.134/2018 was only the rejection of the damages which had been sought for by the petitioners before the Tribunal. Thus, the contention now raised that the same has not been considered and a fresh arbitration could be initiated for consideration of the damages in addition is not sustainable. The same would amount to a second round of litigation after -8- CMP No. 448 of 2022 having lost the arbitral proceedings as also the proceedings under Section 34.
8.4. The claims which have been proposed to be raised by the petitioners in terms of a legal notice dated 29.03.2022 are the very same claims which had been raised before the Tribunal and rejected and therefore, such a claim is barred under res-judicata.
9. In rejoinder, Sri.K.Suman, learned Senior Counsel submits that 9.1. relies upon the decision of the Hon'ble Apex Court in the case of INDIAN OIL CORPORATION LIMITED VS. SPS ENGINEERING LIMITED reported in (2011) 3 SCC 507 more particularly Paras 16 and 25 thereof which are reproduced hereunder for easy reference:
-9- CMP No. 448 of 2022"16. The question whether a claim is barred by res judicata, does not arise for consideration in a proceedings under section 11 of the Act. Such an issue will have to be examined by the arbitral tribunal. A decision on res judicata requires consideration of the pleadings as also the claims/issues/points and the award in the first round of arbitration, in juxtaposition with the pleadings and the issues/points/claims in the second arbitration. The limited scope of section 11 of the Act does not permit such examination of the maintainability or tenability of a claim either on facts or in law. It is for the arbitral tribunal to examine and decide whether the claim was barred by res judicata. There can be no threshold consideration and rejection of a claim on the ground of res judicata, while considering an application under section 11 of the Act.
Re : Question (ii)
17. We extract below the reasoning adopted by the Designate to dismiss the appellant's application under section 11 of the Act :
"5. In my opinion, not only the aforesaid para 102 in the Award dated 27.10.2008 operates as res judicata against the present petitioner, I find that the present petition is misconceived and mala fide because, if the present petitioner is correct in saying and which I doubt it is, that its limitation/right would only begin after the work is completed by M/s Deepak Construction Company when the amount of the higher cost is known, even then, the work was completed by the M/s Deepak Construction Company admittedly on 29.12.2007, and thus the present petitioner, could well have proved its counter claim in the earlier proceedings and could have crystallized the amount in the said earlier arbitration proceedings. If necessary it could have even amended its pleadings as regards the counterclaim.
On a further query by the Court to the counsel for the petitioner with respect to the statement
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in the notice dated 22.01.2009 sent by the petitioner to the respondent which states that M/s Deepak Construction Company has completed the work on 29.12.2007 and its final bill has now been settled" that when was the bill of M/s Deepak Construction Company settled, the counsel for petitioner states that for the present no such information is at all available whether in the form of any assertion in the present petition or in any document in support thereof.
6. A conspectus of the aforesaid facts show that firstly in the earlier arbitration proceedings, the counter claim of the present petitioner on this very subject matter was specifically dismissed by holding and observing that the risk purchase tender awarded to M/s Deepak Construction Company was not given within a reasonable period of time after termination of the work of the present respondent. Secondly, it has further become clear that the work was completed by M/s Deepak Construction Company admittedly as per the case of the petitioner on 29.12.2007 and the earlier arbitration proceedings came to an end later by passing of the Award on 27.10.2008 and, therefore, the claim with respect to any cost of the total materials for the substitute contract for the risk purchase could very well have been crystallized and claimed in the earlier arbitration proceedings. Thirdly, admittedly there is no challenge to the award dated 27.10.2008 by the present petition whereby its counter claim was rejected. Fourthly, I am of the view that once a risk and cost tender is issued at the risk and cost of a person, then, the amount which is to be claimed from the person who is guilty of breach of contract and against whom risk and cost is tendered, becomes crystallized when the risk purchase tender at a higher cost is awarded.
Once a higher cost of work is known as compared to the cost of the work for the earlier work for which the earlier contract was there and with respect to which the earlier contractor
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was in breach, then not only the amount becomes crystallized but limitation also commences for filing of the legal proceedings against the person in breach of obligations under the earlier contract. It cannot be that limitation and a right continues indefinitely to be extended till the performance is completed under a subsequent risk purchase contract. This would give complete uncertainty to the period of limitation striking at the very root of one of the principles of the Limitation Act and which is that evidence is lost by passage of time and which will cause grave prejudice to the person against whom a stale claim is filed."
18. The appellant submitted that having regard to clause 7.0.9.0 of the contract, damages can be claimed by it (as employer), in regard to the additional amount incurred for getting the work completed through an alternative agency at the risk and cost of the contractor along with the supervision charges, only when the amount was actually expended for completion of the entire work; and therefore, unless the work was completed by the alternative agency and the final bill was settled or finalized, the actual extra cost could not be determined.
19. It was pointed out that in the first round of arbitration, the hearing was concluded by the Arbitrator on 13.3.2008 and matter was reserved for orders and the award was declared on 27.10.2008; that the work was completed by the alternative agency on 29.12.2007 and final bill of the alternative agency was drawn and settled only on 7.5.2008, after the conclusion of the hearing, by the Arbitrator; that the actual extra cost could be worked out only when the final bill was prepared, and not on the date of completion of work; that therefore the appellant could not make the claim for actual extra cost, in the first round arbitration. It was also submitted that the appellant was not expected to give details of completion of work and preparation of the final bill, or produce documents in support of it in a proceeding under section 11 of the Act; and that the Designate was not therefore
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CMP No. 448 of 2022justified in finding fault with the appellant for not stating the date of settlement of the final bill in the petition under section 11 of the Act and for not producing the final bill.
20. The appellant also contended that when its statement of counter claim was amended before the Arbitrator, the appellant had only indicated its estimation of the probable extra cost to be Rs.2,10,41,626/-, as advance indication of a claim to be made in future on the basis of actuals, and that it had not prayed for award of the said amount in the said proceeding. It was pointed out that even after mentioning the proposed claim by amending the statement of counter claim, the actual counter claim before the arbitrator remained as only Rs.92,72,529/- exclusive of any claim on account of the risk completion cost. It was submitted that having regard to clause 7.0.9.0, the counter claim for extra cost could not have been made when the first arbitration was in progress and that the arbitrator had in fact noticed in his award (at para
102) that only when the cost actually incurred, the appellant could make the claim for the extra cost.
21. It is contended that the "rejection" by the arbitrator was not on the ground that the claim for extra cost was not recoverable, nor on the ground that no extra cost was involved in completing the work, but on the ground that as on the date of the award, the appellant had not actually incurred any specific extra cost; and that as the arbitrator clearly held that any claim for extra cost was premature and could not be considered at that stage, the observation that `I reject this counter claim' only meant that the claim relating to extra cost was not being considered in that award and that appellant should make the claims separately after the amount was actually expended.
22. Clause 7.0.9.0 of the contract relied upon by the appellant reads thus :
"clause 7.0.9.0
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Upon termination of the contract, the owner shall be entitled at the risk and expenses of the contractor by itself or through any independent contractor(s) or partly by itself and/or partly through independent contractor(s) to complete to its entirety the work as contemplated in the scope of work and to recover from the contractor in addition to any other amounts, compensations or damages that the owner may in terms hereof or otherwise be entitled to (including compensation within the provisions of clause 4.4.0.0 and clause 7.0.7.0 hereof) the difference between the amounts as would have been payable to the contractor in respect of the work (calculated as provided for in clause 6.2.1.0 hereof read with the associated provisions thereunder and clause 6.3.1.0 hereof) and the amount actually expended by the owner for completion of the entire work as aforesaid together with 15% (fifteen per cent) thereof to cover owner's supervision charges, and in the event of the latter being in the excess former, the owner shall be entitled (without prejudice to any other mode of recovery available to the owner) to recover the excess from security deposit or any monies due to the contractor."
(emphasis supplied)
23. On a perusal of the order of the Designate, we find that the Designate has clearly exceeded his limited jurisdiction under section 11 of the Act, by deciding that the claim for extra cost, though covered by the arbitration agreement was barred by limitation and by the principle of res judicata. He was also not justified in terming the application under section 11 of the Act as `misconceived and malafide'. Nor could he attribute `mala fides' to the appellant, a public sector company, in filing an application under section 11 of the Act, without any material to substantiate it.
24. We may refer to some of the findings of fact recorded by the Designate, which were wholly
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CMP No. 448 of 2022unwarranted in a proceeding under section 11 of the Act and the fallacy in such findings :
(i) Finding: The appellant did not state anywhere in the petition the date which the final bill was settled and did not produce any document containing such information.
The appellant was not expected or required to give such information in a petition under section 11 of the Act or produce the documents showing the settlement of final bill along with the said petition. Therefore, the appellant could not be found fault for such omission. In fact, the Designate noticed that the work was completed on 29.12.2007. The claim was in time with reference to the date on which the work completed (29.12.2007) by the alternative agency.
(ii) Finding: As the work was completed on 29.12.2007 and as the award was made only on 27.10.2008, the appellant ought to have crystalised the extra cost and claimed it in the first arbitration proceedings.
The assumption that the appellant ought to have made the claim for extra cost which arose after the commencement of the arbitration proceedings, in the pending proceedings by way of amendment, has no basis either in law or in contract. If the cause of action arose after the completion of pleadings and commencement of hearing in the first round of arbitration, nothing prevented the appellant from making a separate claim by initiating a second arbitration.
(iii) Finding: Once a risk and cost tender is issued at the risk and cost of a person, then, the amount which is to be claimed from the person who is guilty of breach.......... becomes crystallized when the risk purchase tender at a higher cost is awarded.
This may be true as a general proposition. But it may not apply if there is a specific provision in the contract (like clause 7.0.9.0) which requires that the employer should claim as extra cost, only the difference between the "amounts as would have been payable to the contractor in respect of the work" and "the
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CMP No. 448 of 2022amount actually expended by the owner for completion of the entire work".
25. The Designate should have avoided the risks and dangers involved in deciding an issue relating to the tenability of the claim without necessary pleadings and documents, in a proceeding relating to the limited issue of appointing an Arbitrator. It is clear that the Designate committed a jurisdictional error in dismissing the application filed by the appellant under section 11 of the Act, on the ground that the claim for extra cost was barred by res judicata and by limitation. Consideration of an application under section 11 of the Act, does not extend to consideration of the merits of the claim or the chances of success of the claim."
9.2. By relying upon the said decision, he submits that the aspect of res-judicata would have to be decided by the Arbitral Tribunal when constituted and this Court ought not to go into the aspect of whether the claim is barred by res-judicata or not. The same relating to the facts of the matter, it is for the Tribunal to frame issues and then decide thereafter. On this ground, he submits that this Court ought to appoint an arbitrator and all the disputes to be left open for arbitrator to decide on.
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CMP No. 448 of 202210. Heard Sri.K.Suman, learned Senior Counsel for the petitioners and Sri.K.G.Raghavan, learned Senior Counsel for the respondents and perused the records.
11. The points that would arise for consideration are that:
1) Whether a claimant in arbitral proceedings on the rejection/non-consideration of a claim made in arbitral proceedings, can reagitate the same by seeking for reference to a fresh arbitration under Section 11 of the Arbitration and Concliation Act, 1956?
2) Whether subsequent to the award being rendered, the proceedings seeking for the very same relief which had been sought for in the proceedings can be agitated on a fresh cause of action?
3) What order?
12. I answer all the above points together as under:
13. The petitioners as claimants had filed claim proceedings before the Arbitral Tribunal. The
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CMP No. 448 of 2022prayers which had been sought for in the claim petition are as under:-
"PRAYER WHEREFORE the Claimants respectfully pray that this Hon'ble Arbitral Tribunal may be pleased to pass an award:
(1) Granting specific performance of the registered Joint Development Agreement dated 11.02.2011 and the Supplementary Agreement dated 11.02.2014 entered into between the Claimants and the Respondent and direct the Respondent to comply with the terms of the Joint Development Agreement dated 11.02.2011 the Supplementary Agreement dated 11.02.2014 understanding relating to the mortgage of the Schedule Property by the Claimant No.1, to the satisfaction of the lenders to the transaction i.e., either the oral understanding concerning upfront and the mortgage of the schedule property or in the alternative the written understanding concerning creation of mortgage as contained in the Joint Development Agreement dated 11.02.2011 as amended by the Supplementary Agreement dated 11.02.2014;
(ii) Further, the Claimants pray this Hon'ble Arbitral Tribunal to pass an award in favour of the Claimants and against the Respondent to pay to the Claimants:
(a) A sum of Rs.539 Crores comprising of deposit for land, commercial opportunity cost, annual average lease rentals and project cost along with an interest at the rate of 21% from 22.06.2016 till the date of actual payment.
(b) A sum of Rs.150/- per month on Claimant's share as lease rentals of the Claimants area as per the JDA totalling Rs. 40,481,320/- per month from 01.09.2014 till the date of its actual payment along with interest at the rate of 21% per annum.
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CMP No. 448 of 2022(c) A sum of Rs.3000/- per car park per month on the share of the Claimants for 700 numbers from 01.09.2014 till the date of its actual payment along with interest at the rate of 21% per annum.
(d) A sum of Rs.15/- per Sq. Ft. on Claimants' area as loss of income from advertisements/endorsements and other income like brand value enhancement, premium of its share value of Claimant No. 2 being a listed company from 01.09.2014 till the date of its actual payment along with interest at the rate of 21% per annum.
And
(iii) Direct the respondent to pay to claimants a sum of Rs.180 Crores incurred on the project till today plus Rs.230 Crores (calculated @ of 21% interest) accrued thereon calculated from the date of expenditure of each instalment as on 22.06.2016 i.e., Rs. 410 Crores plus interest at the rate of 21% till its actual payment.
(iv) Direct the respondent to pay a sum of Rs.200 Crores to Claimant No. 2 for the loss of reputation/ brand value and loss of premium on its share value."
14. The Arbitral Tribunal after considering the pleadings which had been filed had formulated the following points for determination:
"DISPUTE 1 POINTS FOR DETERMINATION
1. Whether the Tribunal has no jurisdiction to adjudicate on claims made jointly by claimants 1 and 2 as contended by the respondent?
2. Whether the respondent has become senile and does not have the mental capacity or soundness to verify if Ms. Chitra Poornima can file the statement of defence as his agent and whether the statement
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of defence filed in this Dispute by Ms. Chitra Poornima as holder of Power of Attorney from the respondent has to be rejected as contended by claimants?
3. Whether the claimants prove that there was an understanding between the parties that the schedule property would be mortgaged by the 1st claimant to the satisfaction of the lenders to the transaction?
4. Whether the claimants have always been ready and willing to perform their obligations under the Joint Development Agreement (JDA) amended by as supplementary JDA?
5. Whether the JDA as amended was illegally terminated by the respondent by letters dated 19.1.2015 and 9.10.2015 as contended by claimants?
Or 5(a) Whether the claimants repudiated the JDA as amended, by their conduct and whether the JDA stood terminated by the acceptance of such repudiation by the respondent as contended by the respondent?
6. Whether the specific performance of the JDA and Supplemental JDA is barred under Section 14(1)(a)(b) and (c) and Section 14 (3)(c) of the Specific Relief Act?
7. If point No.6 is answered in the negative whether the claimant is entitled to the specific performance as sought for?
8. Whether the claimants are entitled to recover the amounts claimed under various heads in addition to the relief of Specific Performance?
9. If Specific Performance cannot be granted, whether the claimants are entitled to the alternative Relief sought for?
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10. What Award?
DISPUTE 2 POINTS FOR DETERMINATION
1. Whether the claimant has turned fully senile and does not have the mental capacity or soundness to verify if Ms. Chitra Poornima can file the statement of claim as his agent under the GPA dated 13.2.2014 and whether the claim statement filed in this case is liable to be rejected as contended by the respondents?
2. Whether the respondents repudiated the JDA (as) amended) by refusing to perform their obligations there under? If so, whether the said JDA came to be terminated by the claimant accepting the repudiation by letter dated 19.1.2015 as pleaded by claimant?
3. Whether the respondents committed breach/default in performance of their obligations under the JDA and other agreements? If so, whether the claimant is entitled to the declaration as sought and to all or any of the monetary claims made in the claim statement?
Or 3(a) Whether the claimant committed breach of contract by illegally terminating the subsisting JDA as contended by the respondents?
4. What Award?
On 22.11.2017 the following additional issues were framed In dispute No. 1, point 2A: Whether this Tribunal has no jurisdiction to consider or adjudicate point No. 2 as contended by the Respondent?
In dispute No. 2, point 1A: Whether this Tribunal has no jurisdiction to consider or adjudicate point No. 1 as contended by the Claimant?
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15. The Tribunal answered the same as under:-
"AWARD
1. The main Prayer for Specific Performance of the Development Agreement and for other monetary reliefs sought for by the Claimants in Dispute No.1 is rejected. The alternative Prayer made by the Claimants in Dispute No.1 is allowed in part directing the Respondent to pay to the Claimants a sum of Rs.42,45,00,000/ (Rupees Forty Two Crores Forty Five Lakhs Only) together with interest at the rate of 9% per annum from the date of Award till the date of payment.
2. The Prayer of the Respondent who is the Claimant in Dispute No.2 is allowed in part awarding Rs.51,05,00,000/- (Rupees Fifty One Crores Five Lakhs Only) as Damages and after adjusting the same out of the Non-refundable Deposit and the interest earned thereon, the balance amount of Rs.42,45,00,000/- (Rupees Forty Two Crores Forty Five Lakhs Only) has to be refunded by him and a direction is given in this regard as above.
3. Considering the facts and circumstances of the case, the parties are directed to bear their own costs.
4. The requisite Stamp Duty on this Award shall be paid by the Claimants in Dispute No. 1 in accordance with the provisions of the Karnataka Stamp Act.
Signed on this 25th day of April 2018 at Bengaluru"
16. The petitioners had filed Com.A.S.No.134/2018 challenging the arbitral award. In the said
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CMP No. 448 of 2022Com.A.S.No.134/2018, the points which were framed for consideration are as under:-
16. Now, the points that arise for my consideration are:
1. Whether the applicants prove that the award dated 25.4.2018 passed under dispute No.1/2016 is against the terms of the contract, the evidence placed before the Tribunal and the decisions cited by the applicants before the Arbitral Tribunal and as such it is opposed to public policy and patent illegality and as such it is liable to be set aside?
2. Whether the applicants have made out grounds to receive the documents filed under IA No V under Order 41 Rule 27?
3. What Order?
17. The said points raised were answered in negative and the proceedings came to be dismissed. The order in Com.A.S.No.134/2018 having been passed on 23.02.2022, the petitioners issued a legal notice dated 29.03.2022 contending that the petitioners are entitled for certain claims and as such, called upon the respondents to agree to the nomination of the arbitrator made by the petitioners.
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CMP No. 448 of 202218. In para 34 of the said notice, the petitioners have stated that the arbitral proceedings filed by them were not only for specific performance but also included the claims of various amounts, which reads as under:-
34. In fact in the arbitral proceedings the claim of my clients was not merely or specific performance as stated above but also for the following:
i. Further the Claimants pray this Hon'ble Arbitral Tribunal to pass an award in favour of the Claimants and against the Respondent to pay to the Claimants:
(a) A sum of Rs.539 Crores comprising of deposit for land, commercial opportunity cost, annual average lease rentals and project cost along with an interest at the rate of 21% from 22.06.2016 fill the date of actual payment.
(b) A sum of Rs. 150/- per month on Claimant's share as lease rentals of the Claimants area as per the JDA totaling Rs.40,481,320/- per month from 01.09.2014 till the date of its actual payment along with interest at the rate of 21% per annum.
(c) A sum of Rs.3000/- per car park per month on the share of the Claimants for 700 numbers from 01.09.2014 till the date of its actual payment along with interest at the rate of 21% per annum.
(d) A sum of Rs.15/- per Sq. Ft. on Claimant's area as loss of income from advertisements/endorsements and other
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CMP No. 448 of 2022income like brand value enhancement, premium of its share value of Claimant No.2 being a listed company from 01.09.2014 till the date of its actual payment along with interest at the rate of 21% per annum And ii. Direct the respondent to pay to the claimants a sum of Rs.180 Crores incurred on the project till today plus Rs.230 Crores (calculated @ 21% interest) accrued thereon calculated from the date of expenditure of each instalment as on 22.06.2016 i.e. Rs.410 Crores plus interest at the rate of 21% till its actual payment.
iii. Direct the respondent to pay a sum of Rs.200 Crores to Claimant No.2 for the loss of reputation / brand value and loss of premium on its share value.
19. The petitioners in the said legal notice contended that the above have not been considered and thereafter there being certain other issues, which have arisen frustrating the agreement had stated at Para 46 that the petitioners would be entitled to "reiterate" their claim for damages. The said para 46 is reproduced hereunder for easy reference:
46. My clients will therefore be entitled to reiterate their claim for damages and accordingly will be claiming against you by invoking the arbitration clause contained in the JDA at Clause 35 therein, inasmuch as there is no question of my clients or the first and second of you amicably resolving all or any matters of
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disagreement or conciliating the same. My clients intends to, therefore, refer their claim for damages against you for arbitration as under:
a. Directing both of you jointly and/or severally to pay my clients the sum of Rs.539 Crores comprising of deposit for land, commercial opportunity cost, annual average lease rentals and project cost along with an interest at the rate of 21% from 22.06.2016 till the date of actual payment.
b. Directing both of you jointly and/or severally to pay my clients the sum of Rs. 150/- per month on my clients share as lease rentals of my clients area as per the JDA totaling Rs 40,481,320/- per month from 01.09.2014 till the date of its actual payment along with interest at the rate of 21% per annum.
c. Directing both of you jointly and/or severally to pay my clients sum of Rs.3000/- per car park per month on the share of my clients for 700 numbers from 01.09.2014 till the date of its actual payment along with interest at the rate of 21% per annum.
d. Directing both of you jointly and/or severally to pay my clients sum of Rs.15/- per Sq. Ft. on my clients' area as loss of income from advertisements/endorsements and other income like brand value enhancement, premium of its share value of the 2 of my client being a listed company from 01.09.2014 till the date of its actual payment along with interest at the rate of 21% per annum And e. Directing both of you jointly and/or severally to pay my clients sum of Rs.180 Crores incurred on the project till today plus Rs.230 Crores (calculated @ 21% interest) accrued thereon calculated from the date of expenditure of each instalment as on 22.06.2016 i.e., Rs.410 Crores plus interest at the rate of 21% till its actual payment.
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f. Directing both of you jointly and/or severally to pay to the second of my clients sum of Rs.200 Crores to my clients for the loss of reputation / brand value and loss of premium on its share value.
g. Directing both of you to pay the first of my clients sum of Rs.950 crores, (Rupees Nine Hundred and Fifty Crores Only) for loss caused to my clients by suppressing material facts relating to the Property in question and illegal gains made by you in the said transaction as a result performance of the said JDA has become impossible and thereby subjecting my client to suffer the losses.
20. The above being the facts and nature of proceedings which had occurred, it is on that basis that this Court would have to consider and answer the points which has been raised for determination.
21. A perusal of the reliefs which had been sought for in the arbitral proceedings and the demands now made at para 46 of the legal notice, which had been issued on 29.03.2022 would indicate that the reliefs are identical infact it could be said that they are verbatim. Para 46 also uses the word 'reiterate' inasmuch as the petitioners claim that they would
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reiterate the claims which had been made earlier which would necessarily entail that the claims had been made in the proceedings earlier which had been rejected by the Tribunal, which also subsequently came to be rejected in Com.A.S.No.134/2018. A comparative statement of reliefs sought in the Arbitration proceedings and the demands now made in the legal notice is as under:
Reliefs sought for in the Demand made in the Arbitration Proceedings legal notice (1) Granting specific performance of the registered Joint Development Agreement dated 11.02.2011 and the Supplementary Agreement dated 11.02.2014 entered into between the Claimants and the Respondent and direct the Respondent to comply with the terms of the Joint Development Agreement dated 11.02.2011 the Supplementary Agreement dated 11.02.2014 understanding relating to the mortgage of the Schedule Property by the Claimant No.1, to the satisfaction of the lenders to the transaction i.e., either the oral understanding concerning upfront and the mortgage of
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the schedule property or in the alternative the written understanding concerning creation of mortgage as contained in the Joint Development Agreement dated 11.02.2011 as amended by the Supplementary Agreement dated 11.02.2014;
(ii) Further, the Claimants pray this Hon'ble Arbitral Tribunal to pass an award in favour of the Claimants and against the Respondent to pay to the Claimants:
(a) A sum of Rs.539 Croresh. Directing both of you comprising of deposit for jointly and/or severally to land, commercial opportunity pay my clients the sum of cost, annual average lease Rs.539 Crores comprising rentals and project cost along of deposit for land, with an interest at the rate of commercial opportunity 21% from 22.06.2016 till the cost, annual average lease date of actual payment. rentals and project cost along with an interest at the rate of 21% from 22.06.2016 till the date of actual payment.
(b) A sum of Rs.150/- per Directing both of you month on Claimant's share as jointly and/or severally to lease rentals of the Claimants pay my clients the sum of area as per the JDA totalling Rs. 150/- per month on Rs. 40,481,320/- per month my clients share as lease from 01.09.2014 till the date rentals of my clients area of its actual payment along as per the JDA totaling Rs with interest at the rate of 40,481,320/- per month 21% per annum. from 01.09.2014 till the date of its actual payment along with interest at the rate of 21% per annum.
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CMP No. 448 of 2022(c) A sum of Rs.3000/- perk. Directing both of you car park per month on the jointly and/or severally to share of the Claimants for pay my clients sum of 700 numbers from Rs.3000/- per car park per 01.09.2014 till the date of its month on the share of my actual payment along with clients for 700 numbers interest at the rate of 21% from 01.09.2014 till the per annum. date of its actual payment along with interest at the rate of 21% per annum.
(d) A sum of Rs.15/- per Sq. Directing both of you Ft. on Claimants' area as loss jointly and/or severally to of income from pay my clients sum of advertisements/endorsements Rs.15/- per Sq. Ft. on my and other income like brand clients' area as loss of value enhancement, premium income from of its share value of Claimant advertisements/endorsem No. 2 being a listed company ents and other income like from 01.09.2014 till the date brand value enhancement, of its actual payment along premium of its share value with interest at the rate of of the 2 of my client being 21% per annum. a listed company from And 01.09.2014 till the date of its actual payment along with interest at the rate of 21% per annum And m.
(iii) Direct the respondent ton. Directing both of you pay to claimants a sum of jointly and/or severally to Rs.180 Crores incurred on the pay my clients sum of project till today plus Rs.230 Rs.180 Crores incurred on Crores (calculated @ of 21% the project till today plus interest) accrued thereon Rs.230 Crores (calculated calculated from the date of @ 21% interest) accrued expenditure of each thereon calculated from instalment as on 22.06.2016 the date of expenditure of i.e., Rs. 410 Crores plus each instalment as on interest at the rate of 21% till 22.06.2016 i.e., Rs.410 its actual payment. Crores plus interest at the rate of 21% till its actual payment.
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CMP No. 448 of 2022(iv) Direct the respondent too. Directing both of you pay a sum of Rs.200 Crores jointly and/or severally to to Claimant No. 2 for the loss pay to the second of my of reputation/ brand value clients sum of Rs.200 and loss of premium on its Crores to my clients for share value." the loss of reputation / brand value and loss of premium on its share value.
p. Directing both of you to pay the first of my clients sum of Rs.950 crores, (Rupees Nine Hundred and Fifty Crores Only) for loss caused to my clients by suppressing material facts relating to the Property in question and illegal gains made by you in the said transaction as a result performance of the said JDA has become impossible and thereby subjecting my client to suffer the losses.
q.
22. It is thus clear that the claims which had been made in the arbitral proceedings initiated earlier and the claims that the petitioners propose to raise are one and the same except the last claim which has been made in the notice.
23. Section 21 of the Specific Reliefs Act reads as under:
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21. Power to award compensation in certain cases.--
(1) In a suit for specific performance of a contract, the plaintiff may also claim compensation for its breach, either in addition to, or in substitution of, such performance.
(2) If, in any such suit, the court decides that specific performance ought not to be granted, but that there is a contract between the parties which has been broken by the defendant, and that the plaintiff is entitled to compensation for that breach, it shall award him such compensation accordingly.
(3) If, in any such suit, the court decides that specific performance ought to be granted, but that it is not sufficient to satisfy the justice of the case, and that some compensation for breach of the contract should also be made to the plaintiff, it shall award him such compensation accordingly.
(4) In determining the amount of any compensation awarded under this section, the court shall be guided by the principles specified in section 73 of the Indian Contract Act, 1872 (9 of 1872).
(5) No compensation shall be awarded under this section unless the plaintiff has claimed such compensation in his plaint:
Provided that where the plaintiff has not claimed any such compensation in the plaint, the court shall, at any stage of the proceeding, allow him to amend the plaint on such terms as may be just, for including a claim for such compensation.
Explanation.--The circumstance that the contract has become incapable of specific performance does not preclude the court from exercising the jurisdiction conferred by this section.
24. A perusal of the said provision would indicate that in a suit for specific performance, the plaintiff may also
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CMP No. 448 of 2022claim compensation for breach in addition to such performance and it is based on the said entitlement under law that the petitioners have sought for specific performance and damages.
25. The grant of compensation/damages in addition to specific performance would only arise, if the plaintiff/claimant were to establish the entitlement for grant of relief of Specific Performance i.e., to say the sina qua non for grant of damages would be the grant of specific performance. When specific performance is not granted, the damages would also not be required to be granted and that is what has been observed by the Tribunal while passing the award.
"The main Prayer for Specific Performance of the Development Agreement and for other monetary reliefs sought for by the Claimants in Dispute No.1 is rejected. The alternative Prayer made by the Claimants in Dispute No.1 is allowed in part directing the Respondent to pay to the Claimants a sum of Rs.42,45,00,000/ (Rupees Forty Two Crores Forty Five Lakhs Only) together with interest at the rate of 9% per annum from the date of Award till the date of payment."
... Emphasis supplied by me
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CMP No. 448 of 202226. It is clear from the above that both the relief for Specific performance and the prayers for other monetary reliefs sought for by the Petitioners was categorically rejected by the Arbitral Tribunal.
27. The said award having been challenged by the Petitioners, the grounds of challenge were that the relief of specific performance which has been sought for by the petitioners ought to have been granted.
However, subsequently the said relief of specific performance is given up and the proceedings continued only in respect of the non-awardal of damages.
28. The Section 34 Court rejected the said petition thereby rejecting the claim of the petitioners for damages in addition (since the relief for specific performance had been given up) by holding that the award which had been passed is proper.
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CMP No. 448 of 202229. In the above background, when para 46 of the legal notice, which is the basis for the request made by the petitioners for appointment of an arbitrator is taken into consideration, the relief proposed to be claimed being the very same reliefs (identical and verbatim) which had been claimed before the Arbitral Tribunal and rejected by the Arbitral Tribunal, the proceedings under Section 34 also having been dismissed, I am of the considered opinion that the proceedings under Section 11 of the Arbitration and Concliation Act, 1996 cannot be made use of to reagitate the issues which had already been decided.
30. The only additional issue raised being the claim for:
"Directing both of you to pay the first of my clients sum of Rs.950 crores, (Rupees Nine Hundred and Fifty Crores Only) for loss caused to my clients by suppressing material facts relating to the Property in question and illegal gains made by you in the said transaction as a result performance of the said JDA has become impossible and thereby subjecting my client to suffer the losses."
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CMP No. 448 of 202231. The above relief could have been maintainable if the petitioner had succeeded in its claim for specific performance, the relief of specific performance being rejected by the Arbitral Tribunal and subsequently given up by the Petitioners in the Section 34 proceedings, the claim for the above relief in my considered opinion cannot be made. A person can claim frustration of performance only if the agreement is valid and in subsistence. The relief for specific performance having been given up
32. As regards the contention that the claim is barred by res judicata or otherwise, I am of the considered opinion that the issue of res judicata would have to be considered if there was a dispute between the parties as regards whether the claims were infact raised and decided or not? The very usage of the word 'reiterate' in para 46 of the legal notice would establish that the petitioners are reiterating their claims which had already been made before the
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CMP No. 448 of 2022arbitrator. A comparison of the prayer which had been sought before the Arbitral Tribunal and the demands made in para 46 clearly indicates that they are identical. A question of holding a detailed enquiry as to whether res judicata would apply or not therefore would not be required.
33. This Court while exercising powers under Section 11 of the A&C Act would be required to decide as to whether there is a live-lis which is capable of being referred to arbitration. The lis having already been decided in terms of the damages in addition to the relief of specific performance by the arbitral tribunal earlier appointed, in my considered opinion that, there is no lis which is required to be referred to an arbitrator.
34. The present petition is a clever manner of approaching this court to keep the dispute alive even after the same has been rejected by the Arbitral
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CMP No. 448 of 2022Tribunal and the Section 34 Court and reeks of malafides and is an abuse of the process of this court. Though this court would have been justified in imposing costs, this court refrains from doing so, due to the submissions made by Shri K Suman, learned Senior Counsel.
35. Hence, I answer the above points as under:
a. A party to arbitral proceedings on the rejection/non-consideration of a claim or counter claim made in the arbitral proceedings, can not reagitate the same by seeking for reference to a fresh arbitration under Section 11 of the Arbitration and Conciliation Act, 1956. The remedy being proceedings under Section 34 of the A&C Act, which has also been dismissed in the present case.
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CMP No. 448 of 2022b. Subsequent to the award being rendered, the proceedings seeking for the very same relief which had been sought for in the arbitral proceedings cannot be agitated on grounds of a fresh cause of action.
36. In view of the above, the petition stands dismissed.
Sd/-
JUDGE Prs*