Bangalore District Court
) Sri.K.L.Ramaiah Reddy vs ) M/S.Alpine Housing Devlopment on 23 December, 2021
KABC010231112014
IN THE COURT OF THE VI ADDL.CITY CIVIL & SESSIONS JUDGE
AT BENGALURU CITY
(CCCH.11)
Dated this the 23rd day of December 2021
PRESENT: Sri. Rama Naik, B.Com., LL.B.,
VI Addl. City Civil & Sessions Judge
Bengaluru City
A.S.NO.117/2014
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A.S.NO.113/2014
PLAINTIFFS/ 1) SRI.K.L.RAMAIAH REDDY
APPLICANTS Deleted as he died on 01.05.2019
(In AS.117/2014) 2) SRI. K.L.LAKSHMAIAH REDDY
Deleted as he died on 24.04.2016
3) SMT.ANANTHAMMA
W/o.Sri.K.L.Lakshmaiah Reddy
Aged about 70 years
4) SRI. K.L.RAVI SHANKAR
S/o.Sri.K.L.Lakshmaiah Reddy
Aged about 42 years
5) SMT.MALATHI
W/o.Sri.K.L.Ravi Shankar
Aged about 37 years
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6) SRI.K.L.SRINIVAS
S/o.Sri.K.L.Lakshmaiah Reddy
Aged about 39 years
7) SMT.SHYAMALA
W/o.Sri.K.L.Srinivas
Aged about 33 years
[By Pleader Sri.S.N.Prashanth Chandra]
8) SMT.K.L.VANI
D/o.Sri.K.L.Lakshmaiah Reddy
Since dead by her LR
Ms.Priyanka
Aged about 23 years
D/o.late Smt.K.L.Vani
Doddakannehalli Village
Varthur Hobli, Bengaluru East Taluk
Bengaluru
[By Pleader Sri.A.M.Suresh Reddy]
All are r/at Doddakannehalli Village
Varthur Hobli, Bengaluru East Taluk
/Vs/
DEFENDANTS/ 1) M/S.ALPINE HOUSING DEVLOPMENT
RESPONDENTS CORPORATION LTD.,
Having its registered Office at
(In AS.117/2014) No.302, Alpine Arch, No.10
Longford Road, Shanthinagar
Bengaluru -560 027
Reptd.by its Managing Director
Mr.Kabeer S.A
[By Pleader Sri.Abhinav.R]
2) HON'BLE ARBITRAL TRIBUNAL
Arbitration Centre
Khanija Bhavan, III Floor, East Wing
Race Course Road, Bengaluru -560 001
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AS.NO.113/2014
PLAINTIFF 1) M/S.ALPINE HOUSING DEVLOPMENT
CORPORATION LTD.,
(In AS.113/2014) Having its registered Office at
No.302, Alpine Arch, No.10
Longford Road, Shanthinagar
Bengaluru -560 027.
Reptd.by its Managing Director
Mr.Kabeer S.A
[By Pleader Sri.Abhinav.R]
/Vs/
DEFENDANTS 1) SRI.K.L.RAMAIAH REDDY
RESPONDENTS S/o.late Sri.Linga Reddy
Aged about 78 years
(In AS.113/2014) 2) SRI. K.L.LAKSHMAIAH REDDY
S/o.late Sri.Linga Reddy
Aged about 78 years
3) SMT.ANANTHAMMA
W/o.Sri.K.L.Lakshmaiah Reddy
Aged about 73 years
4) SRI. K.L.RAVI SHANKAR
S/o.Sri.K.L.Lakshmaiah Reddy
Aged about 45 years
5) SMT.MALATHI
W/o.Sri.K.L.Ravishankar
Aged about 37 years
6) SRI.K.L.SRINIVAS
S/o.Sri.K.L.Lakshmaiah Reddy
Aged about 42 years
7) SMT.SHYAMALA
W/o.Sri.K.L.Srinivas
Aged about 36 years
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8) SMT.K.L.VANI
D/o.Sri.K.L.Lakshmaiah Reddy
Since dead by her LR
8(a) Ms.Priyanka
Aged about 23 years
D/o.late Smt.K.L.Vani
All are R/at Doddakannehalli Village
Varthur Hobli, Bengaluru East Taluk
Bengaluru
[By Pleader Sri.S.N.Prashanth Chandra]
9) Sri Justice A.B.Murgod
Former Judge
High Court of Karnataka
And Presiding Arbitrator
10) Sri Justice B.N.Krishnan
Former Judge
High Court of Karnataka
And Co-Arbitrator
11) Sri.V.Ravindra
Retd. District & Sessions Judge
And Co-Arbitrator
Respondents 9 to 11 formed the
Hon'ble Tribunal at the Arbitration Centre
Karnataka (Domestic and International)
Khanija Bhavan, Race Course Road
Bengaluru -560 001
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COMMON JUDGMENT
Suit in A.S.No.113/2014 is filed by Claimant,
whereas, A.S.No.117/2014 is filed by Respondents
No.1 to 8 [for brevity, parties are referred to as per
their ranks in arbitration proceedings]. Claimant
seeks to set aside the award dated 02.08.2014, and
Respondents No.1 to 8 seek to set aside the award
dated 02.08.2014 relating to award Nos.4 to 9 of
the award, passed by the Arbitral Tribunal in
A.C.No.17/2013 .
2) Facts in brief as stated in both suits are,
Claimant being a Company incorporated under the
Companies Act, entered into a Joint Development
Agreement dated 29.08.2005 [for brevity, 'JDA']
with Respondents No.1 to 8, who are the owners of
property shown in claim statement [for brevity,
'schedule property'] for construction of residential
apartment agreeing to share the super built up area
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at the ratio of 64:36 as per the terms and
conditions mentioned in JDA.
3) Further facts are that in pursuance of JDA,
Respondents No.1 to 8 executed a registered
General Power of Attorney dated 01.09.2005 [for
brevity, 'GPA'] in favour of Claimant. After
conversion of schedule property by Claimant,
Respondents No.1 to 8 issued notice dated
02.01.2012 terminating the JDA. As dispute arose,
the same was referred to arbitration before the
Arbitral Tribunal for adjudication and impugned
award came to be passed.
4) Claimant challenges the award on the
grounds that award has dealt disputes which were
not contemplated with or not falling within the
scope of the submission to arbitration; award
contains decisions on matters beyond the scope of
the pleadings of the parties; and award is passed in
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contravention of the terms of JDA, the provisions of
the Specific Relief Act, 1963, the Indian Contract
Act, 1872, and the Arbitration and Conciliation Act,
1996.
5) Respondents No.1 to 8 assail the award on
the grounds that awarding interest is contrary to
the terms of JDA; and award is passed in
contravention of Section 21(5) of the Specific Relief
Act, 1963 and Section 34(2)(a)(iv) and 34(2)(b)(ii) of
the Arbitration and Conciliation Act, 1996.
6) For the above grounds Claimant seeks to set
aside the award in whole, whereas, Respondents
No.1 to 8 seeks to set aside the award so far as
award relating to award Nos.4 to 9.
7) Heard learned Counsel for Claimant, as well
as Respondents No.1 to 8. Perused the records.
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8) Points that arise for consideration are :
(1) Does Claimant make out any of
the grounds as enumerated in
Section 34 of the Arbitration
and Conciliation Act, 1996 to
set aside the award dated
02.08.2014 passed by the
Arbitral Tribunal?
(2) Do Respondents No.1 to 8
make out any of the grounds
as enumerated in Section 34
of the Arbitration and
Conciliation Act, 1996 to set
aside the award dated
02.08.2014 so far as award
relating to award Nos.4 to 9
passed by the Arbitral
Tribunal?
9) My answer to above points is as per the
findings, for the following :
REASONS
10) Point No.1 and 2 : Both these points being
interrelated are taken to gether for discussion.
Before the Arbitral Tribunal, Claimant claimed
the following reliefs :
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" (i) A Decree declaring that the termination
dated 02.01.2012 in relation to the Joint
Development Agreement dated 29.08.2005
and the Power of Attorney dated 29.08.2005
is bad, illegal unsustainable in law and that
the Claimant shall be entitled to develop the
Schedule Property in terms of the Joint
Development Agreement dated 29.08.2005.
(ii) Issue directions in the nature of
Mandatory Injunction directing the
Respondents to co-operate in the Joint
Development of the Schedule Property in
terms of the Agreement dated 29.08.2005
and by signing the requisite papers, plans
etc.
(iii) Direct the Respondents to jointly and
severally pay a sum of Rs.24,45,36,000/- to
the Claimant together with interest at the
rate of 12% from the date of this Petition till
actual payment and to order a charge to be
created over the Schedule Property to the
extent of the Respondents share of the
constructed area as defined in the Joint
development Agreement dated 29.08.2005
till the above payments are completely
effected by the Respondents. If for any
reason, the Respondents fails or neglect to
pay and remit the above amounts, then to
pass appropriate orders for attachment and
sale of the Schedule Property to the extent
of the Respondents share of the constructed
area as defined in the Joint Development
Agreement dated 29.08.2005.
(iii)(a) In the alternative, if this Hon'ble
Tribunal comes to the conclusion that the
claimant is not entitled to the reliefs claimed
above, to direct the Respondents to refund
a sum of Rs.42,00,001/- which was paid to
them under the Agreement dated
29.08.2005 along with interest at 18% from
the date of Agreement ill actual payment in
addition to the other damages claimed by
the Claimant."
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11) Points for consideration that were formed by
the Arbitral Tribunal are as under :
"1. Whether the JDA was obtained by unfair
means and void ab initio, unenforceable
and illegal?
2. Whether the claimant is guilty of active
fraud and misrepresentation?
3. Whether the JDA has been executed by
respondents with no knowledge or
understanding of its contents?
4. Whether the Claimant unilaterally
undertook to obtain conversion of the
lands in question?
5. Whether claimant is guilty of breach of
contract or whether respondents are
guilty of breach of contract?
6. Whether the responsibility of obtaining
commencement certificate was that of
claimant or respondents ?
7. Whether the claimant was ready and
willing to perform its part of the
contract ?
8. Whether the claimant is entitled to
specific performance of contract?
9. Whether the conversion of land for
industrial purposes is void and
unenforceable ?
10. Whether the dispute arising out of such
a contract is beyond the jurisdiction of
this Tribunal?
11. Whether the claim is barred by time ?
12. Whether the termination dated
02.01.2012 of the JDA and the Power of
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Attorney is bad, illegal and
unsustainable in law and whether
therefore Claimant is entitled to develop
the property in terms of JDA?
13. Whether the claimant is entitled to
recover damages and if yes how much?
14. To what reliefs are the parties entitled
to ?"
12) Additional points for consideration formulated
by the Arbitral Tribunal are as follows :
"1. Whether the claimant is entitled to the
declaration and mandatory injunction
prayed for ?
2. Whether the claimant is entitled to the
alternate relief of refund of Rs.42
lakhs with interest as prayed for? "
13) Award passed by the Arbitral Tribunal is as
under :
"(1) The claimant is not entitled to the relief of
declaration and mandatory injunction as
prayed for.
(2) The claimant is not entitled to the relief of
specific performance of the JDA.
(3) The respondents are directed to return the
sum of Rs.41,00,000/- to the claimant.
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(4) The respondents are also directed to pay
interest on the sum of Rs.41,00,000/-
which is quantified at Rs.45,36,000/-.
(5) The respondents are directed to pay
interest on the aforesaid sums of
Rs.41,00,000/- and Rs.45,36,000/- at the
rate of 18% per annum from the date of
claim till the date of realization.
(6) The respondents are directed to pay a sum
of Rs.10,31,838/- by way of
reimbursement of conversion fee paid in
respect of Exs.P4 and P5.
(7) The respondents are also directed to pay to
the claimant a sum of Rs.12,36,000/- being
the respondents' share of arbitration
charges paid by the claimant.
(8) The amounts as detailed above (in 6 and 7)
should be paid to the claimant within one
month failing which the respondents are
also directed to pay interest on the
aforesaid sum at 18% per annum from this
date till the date of realization.
(9) There shall be a charge on the schedule
properties for the aforesaid sums.
(10) The uncashed cheque and draft Ex.P.7 and
Ex.P.8 shall be returned to the claimant.
(11) The claimant shall also return all the
documents given to it by the respondents
in relation to the schedule property to the
respondents.
(12) As neither of the parties is blemish-less
and as we have answered several points
against the respondents and several
points against the claimant, we direct the
parties to bear their own costs."
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14) At this juncture, it would be relevant to point
out the observation made by the Arbitral Tribunal at
para-7 of the award. It reads thus :
"7. ....... At the commencement of his
arguments the learned advocate for
claimant submitted that this is not a
proceeding for specific performance of
contract especially having regard to the
prayers of declaration and mandatory
injunction sought for in the claim petition.
His attention was invited to the averments
in paras 15 and 16 of the claim statement
wherein it has been stated that the
claimant is entitled to specific performance
of agreement and that it is a case where
specific performance will have to be
granted. He was also questioned whether
the points raised in relation to the specific
performance could be deleted. At that the
learned advocate practically withdrew his
submission that this is not a proceeding for
specific performance."
15) Paras-15 and 16 of the Claim Statement filed
by the Claimant before the Arbitral Tribunal read as
under :
"15. The Claimant submits that they are
entitled to Specific Performance of the
Agreement. In addition to the relief of Specific
Performance, the Claimant is also entitled to
damages on account of various acts and
omissions on the part of the Respondents.
The Claimant submits that it is entitled to the
various amounts towards damages in addition
to the Specific Performance of the Agreement
as set out hereunder :
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(a) The Claimant has paid a sum of
Rs.40,50,000/- as set out in the proceeding
paragraphs. The Respondents had the benefit
of the said amounts for almost 8 years,
without any corresponding return to the
Claimant. The Claimant is entitled to interest
at the rate of 18% p.a. over the
advances/deposits paid to the Respondents
from the date of the payments till actual
payment by the Respondents, in a sum of
Rs.45,36,000/-.
(b) The cost of construction has drastically
escalated over the years. In case the
Claimants had permitted to commence the
construction work at least during the year
2005-06, they would have incurred
expenditure at Rs.1,100/- per sq. ft. The cost
of land has appreciated. The cost of
construction as on the date of filing of the
Petition is around Rs.1,800/- per sq.ft. The
Claimant is therefore entitled to the difference
amount on the Respondents (Owners) share of
constructed area which is estimated at
Rs.2,00,000 sq.ft. The Respondents are
entitled damages of Rs.14.00 Crores on this
count.
(c) The Claimant has lost many business
opportunities. The Claimant quantifies the
loss on account of business opportunities in a
sum of Rs.10.00 Crores for the present.
16. The Claimant submits that the
Agreement that is sought to be enforced is
in relation to an immovable property and
compensation in terms of money will not
afford any adequate relief. That apart, in
part performance of the Agreement, the
nature of the land has also been changed to
non-agricultural/residential purposes. It is
case where specific performance will have to
be granted."
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16) Thus, it would be clear that the claim was
made for specific performance of JDA and for
damages. However, reliefs were sought for in the
form of mandatory injunction directing
Respondents to co-operate in the joint
development of schedule property in terms of the
JDA dated 29.08.2005 [Prayer No.(ii) in claim
statement].
17) Having regard to the pleadings made in the
claim statement, the Arbitral Tribunal formulated
the points as to readiness and willingness of
Claimant in performing its part of the contract,
Claimant's entitlement of specific performance of
contract, and Claimant's entitlement of damages.
Also formed additional point as to alternative relief
of refund of Rs.42,00,000/- with interest.
18) From the award, it would be clear that
Claimant's entitlement of specific performance of
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contract has been denied, whereas, award has
been passed for refund of Rs.41,00,000/- and
interest of Rs.45,36,000/- along with interest @
18% per annum on the above sums from the date
of claim till the date of realisation.
19) Contentions of Claimant :
(i) Main contention that has been taken by
Claimant is that Arbitral Tribunal has committed
error in holding that Claimant is not entitled to
specific performance of contract and that
Claimant was not ready and willing to perform its
part of the contract.
(ii) It is contended that Arbitral Tribunal has
arrived at a conclusion that Annexure-1 which is
appended to JDA has not been produced and
that in absence of specifications as to the exact
nature of the building proposed to be
constructed, JDA cannot be enforced specifically
as envisaged in Section 14(3)(c)(i) of the
Specific Relief Act, 1963.
(iii) It is contended that Annexure-1 contains
the precise nature of the building that is to be
constructed, and hence, bar specified in Section
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14(3)(c) of the Specific Relief Act, 1963 does not
apply to the claim made in claim statement.
20) Contentions of Respondents No.1 to 8 :
(i) Respondents No.1 to 8 assail the award
Nos.(4) to (9) which are made against them
regarding payment of interest of Rs.45,36,000/-,
payment of interest @ 18% per annum on sums
of Rs.41,00,000/- and Rs.45,36,000/-, directing
them to pay a sum of Rs.10,31,838/- towards
reimbursement of conversion fees, and directing
them to pay half share of arbitration charges.
(ii) They support the award Nos.1 to 3, which
are made in their favour regarding denial of
mandatory injunction, denial of specific
performance of contract, and directing them to
refund of Rs.41,00,000/- to Claimant.
(iii) They contend that Arbitral Tribunal ought
not to have awarded pendente lite interest and
future interest while passing award for refund of
deposit amount of Rs.41,00,000/-.
(iv) It is contended that refund of conversion
fee of Rs.10,31,838/- by them to Claimant is not
the subject matter of the dispute/claim.
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(v) It is contended that Section 21(5) of the
Specific Relief Act, 1963 bars grant of any such
compensation unless it is claimed.
(vi) It is further contended that in CMP
No.89/2012, the Hon'ble High Court of Karnataka
was pleased to direct Claimant to pay the
arbitration charges to the Arbitration Centre at
Bangalore and they were specifically exempted
from payment of arbitration charges. Despite the
order of the Hon'ble High Court of Karnataka,
award directs them to pay half arbitration
charges. Award so far as payment of half
arbitration charges contravenes the order of the
Hon'ble High Court of Karnataka and Section
34(2)(a)(iv) of the Arbitration and Conciliation
Act, 1996.
(vii) It is further contended that award for
payment of interest @ 18% per annum on
conversion fee and arbitration fee is contrary to
the established principles of law.
(viii) It is also contended that JDA is compulsorily
registrable document as envisaged in Section
17(2) of the Registration Act, 1908. JDA in
question is void document because it is not
registered, and therefore, the question of
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creation of charge on schedule property by way
of award on the basis of void document does not
arise. Hence, award is opposed to public policy
as contemplated in Section 34(2)(b)(ii) of the
Arbitration and Conciliation Act, 1996.
21) First of all, it necessary to assail the
contention of Claimant that denial of specific
performance of contract is contrary to Section 14(3)
(c)(i) of the Specific Relief Act, 1963.
22) In Vinod Seth vs. Devinder Bajaj and
Another, [(2010) 8 SCC 1], the Hon'ble Supreme
Court was pleased to hold that a collaboration
agreement cannot be specifically enforced. Para-12
to 15 read thus :
" 12. It is doubtful whether the
collaboration agreement, as alleged by the
appellant, is specifically enforceable,
having regard to the prohibition contained
in Sections 14(1)(b) and (d) of the Specific
Relief Act, 1963. The agreement
propounded by the appellant is not an
usual agreement for sale/transfer, where
the contract is enforceable and if the
defendant fails to comply with the decree
for specific performance, the court can
have the contract performed by appointing
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a person to execute the deed of
sale/transfer under Order 21 Rule 32(5) of
the Code of Civil Procedure ("the Code", for
short).
13. The agreement alleged by the
appellant is termed by him as a
commercial collaboration agreement for
development of a residential property of
the respondents. Under the alleged
agreement, the obligations of the
respondents are limited, that is, to apply to
DDA for conversion of the property from
leasehold to freehold, to submit the
construction plan to the authority
concerned for sanction, and to deliver
vacant possession of the suit property to
the appellant for development. But the
appellant-plaintiff has several obligations
to perform when the property is delivered,
that is, to demolish the existing building, to
construct a three-storeyed building within
one year in accordance with the agreed
plan, deliver the first and second floors to
the respondents and also pay a token cash
consideration of Rs.3,71,000. The
performance of these obligations by the
appellant is dependent upon his personal
qualifications and volition.
14. If the court should decree the suit as
prayed by the appellant (the detailed
prayer is extracted in para 5 above) and
direct specific performance of the
"collaboration agreement" by the
respondents, it will not be practical or
possible for the court to ensure that the
appellant will perform his part of the
obligations, that is, demolish the existing
structure, construct a three storeyed
building as per the agreed specifications
within one year, and deliver free of cost,
the two upper floors to the respondents.
Certain other questions also will arise for
consideration. What will happen if DDA
refuses to convert the property from
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leasehold to freehold? What will happen if
the construction plan is not sanctioned in
the manner said to have been agreed
between the parties and the respondents
are not agreeable to any other plans of
construction? Who will decide the
specifications and who will ensure the
quality of the construction by the
appellant?
15. The alleged agreement being vague
and incomplete, requires consensus,
decisions or further agreement on several
minute details. It would also involve
performance of a continuous duty by the
appellant which the court will not be able
to supervise. The performance of the
obligations of a developer/builder under a
collaboration agreement cannot be
compared to the statutory liability of a
landlord to reconstruct and deliver a shop
premises to a tenant under a rent control
legislation, which is enforceable under the
statutory provisions of the special law. A
collaboration agreement of the nature
alleged by the appellant is not one that
could be specifically enforced. Further, as
the appellant has not made an alternative
prayer for compensation for breach, there
is also a bar in regard to award of any
compensation under Section 21 of the
Specific Relief Act."
23) JDA came to be entered into between
Claimant and Respondents No.1 to 8 with an
understanding that Claimant should develop by
constructing residential apartment in the schedule
property belonging to Respondents No.1 to 8.
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Sharing of super built up area, constructions of
residential apartment after securing various
requisite permissions from the competent
authorities, obligations of Claimant as well as
Respondents No. 1 to 8, availing various facilities to
the residential flats to be constructed from the
concerned departments, payment of taxes and
charges, defects liability, indemnification by
Claimant to Respondents and such other terms and
conditions have been incorporated in JDA. The
contract of such nature involves the performance of
a continuous duty which the Court cannot
supervise.
24) Moreover, as observed by the Arbitral
Tribunal, specifications as to structural designs and
the nature of the construction of flats are
conspicuously absent in JDA.
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25) Argument that has been canvassed by
learned counsel for Claimant is that non-production
of Annexure-1 relating to specification was not a
subject matter in claim petition and even in that
regard no point for consideration was framed,
despite that Arbitral Tribunal has held that in
absence of specifications, no relief of specific
performance can be granted.
26) Section 14(1)(d) and 14(3)(c)(i) of the
Specific Relief Act, 1963 states thus :
" 14. Contracts not specifically
enforceable.-
(1) The following contracts cannot be
specifically enforced, namely:-
(a) ** ** **
(b) ** ** **
(c) ** ** **
(d) a contract the performance of
which involves the performance of a
continuous duty which the court cannot
supervise.
(2) ** ** **
(3) Notwithstanding anything contained
in clause (a) or clause (c) or clause (d) of
sub-section (1), the court may enforce
specific performance in the following
cases :-
(a) ** ** **
(b) ** ** **
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(c) where the suit is for the enforcement
of a contract for the construction of any
building or the execution of any other
work on land :
Provided that the following conditions
are fulfilled, namely :-
(i) the building or other work is
described in the contract in terms
sufficiently precise to enable the court
to determine the exact nature of the
building or work ; "
27) In absence of production of Annexure-1, there
would be no occasion for Arbitral Tribunal to
consider the fact that residential apartment or other
work is described in JDA in terms sufficiently precise
to enable it to determine the exact nature of the
apartment or work. In that view, it can be fairly said
that the findings of the Arbitral Tribunal that JDA is
the one not specifically enforceable is in accordance
with the provisions of law as contained in Section
14(1)(d) and Section 14(3)(c)(i) of the Specific Relief
Act, 1963.
28) Secondly, Respondents No.1 to 8 contends
that Section 21(5) of the Specific Relief Act, 1963
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bars grant of any compensation much-less award of
interest of Rs.45,36,000/- in addition to deposit
amount of Rs.41,00,000/-, as well as a sum of
Rs.10,31,838/- towards reimbursement of
conversion charges.
29) In claim statement, it has been specifically
sought for the alternative relief of direction to
Respondents to refund a sum of Rs.42,00,000/-
along with interest @ 18% per annum from the date
of JDA till actual payment in addition to other
damages claimed by Claimant.
30) To assail the said contention, it is necessary
to have regard to Section 21 of the Specific Relief
Act, 1963. Section 21 reads thus :
"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
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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."
31) Section 21(1) of the Act makes it clear that in
a suit for specific performance of contract, Plaintif
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may claim compensation in addition to or in
substitution of specific performance. Under Section
21(2) of the Act, if Court decides that specific
performance ought not to be granted, it shall award
compensation to Plaintif, and under Section 21(3),
if Court decides that specific performance ought to
be granted, but same does not satisfy the justice, it
shall award compensation to Plaintif. Section 21(5)
of the Act mandates that no compensation shall be
granted unless Plaintif has claimed the same in his
plaint. Further, explanation to Section 21 makes it
clear that even contract has become incapable of
specific performance, which does not preclude the
Court from exercising the jurisdiction under Section
21.
32) In Gopi Nath Sen and others vs.
Bahadurmul Dulichand and others, [1978 SCC
onLine Cal 270], the Hon'ble Culcutta High Court
was pleased to hold as under :
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"3. In my opinion, the principle under
which damages will be awarded under
Section 73 of the Indian Contract Act will
be different from the principle involved in
damages which will be awarded in lieu of
specific performance. In the case of
damages in lieu of specific performance
the same does not result directly or
consequentially from out of a breach of a
contract as is the case under Section 73 of
the Indian Contract Act. There might be
circumstances when the plaintiff might be
entitled to specific performance but the
Court in its discretion might find that in
the special facts of the case the plaintiff
should not be awarded specific
performance of the contract; but if
damages would be awarded in lieu or in
substitution thereof then that would
amount to granting of a suitable relief.
........"
33) As there is a prayer for alternative relief to
refund of the deposit amount with interest @ 18%
per annum, the Arbitral Tribunal, having regard to
the provisions of Section 21 of the Specific Relief
Act, 1963 passed award for refund of security
deposit with quantified interest of Rs.45,36,000/-
and same does not contravene the provisions of
Section 21 of the Specific Relief Act, 1963, rather
award passed for refund of security deposit along
with quantified interest of Rs.45,36,000/- is within
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the purview of Section 21 of the Specific Relief Act,
1963. In that view, the findings of the Arbitral
Tribunal that Claimant is entitled to recover
damages by way of interest in a sum of
Rs.45,36,000/- is within the purview of law.
34) A bare perusal of prayers made in claim
statement make it clear that neither the relief of
damages whatsoever regarding the conversion
charges of schedule property nor the relief for
refund of conversion charges borne by Claimant has
been claimed by Claimant. Further, the entitlement
of reimbursement of conversion charges to
Claimant is not a fact in issue and no point for
determination has been formed to the said efect.
Despite that, award directs Respondents No.1 to 8
to pay a sum of Rs.10,31,838/- to Claimant towards
reimbursement of conversion fee. That part of the
award squarely comes under the provisions of
Section 34(2)(a)(iv) of the Arbitration and
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Conciliation Act, 1996 and same requires to be set
aside and consequent direction to payment of
interest @ 18% per annum on the sum of
Rs.10,31,838/- from the date of award till payment
is also required to be set aside.
35) Award directs the payment of interest @ 18%
per annum on the sums of Rs.41,00,000/- which is
refundable security deposit and Rs.45,36,000/-
which is damages being awarded to Claimant
towards interest. Awarding future interest is well
within the powers of Arbitral Tribunal as
contemplated in Section 31(7) of the Arbitration and
Conciliation Act, 1996. Section 31(7) does not
empower the Arbitral Tribunal to award interest on
interest.
36) It is to be noticed that Rs.45,36,000/- has
been awarded to Claimant as interest on security
deposit of Rs.41,00,000/- by way of damages. In
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that view, the question of granting interest on
interest does not arise at all. Thus, there would be
no impediment to hold that award granting interest
on interest part of Rs.45,36,000/- is vitiated and
same needs to be set aside.
37) The Hon'ble High Court of Karnataka while
disposing of CPM No.89/2012, which is filed by
Claimant for appointment of Arbitrator, was pleased
to hold in para-5 as under :
"5. Learned counsel for the respondents
submits that they are in financial
difficulties and are unable to pay the
arbitration charges. In that event, the
petitioner has to bear the arbitration
charges in accordance the provision of
Arbitration Act... ."
38) As per the Order passed in CMP, it is the
Claimant who had to bear the arbitration charges in
accordance with provisions of the Arbitration and
Conciliation Act, 1996. Arbitrators were requested
to conduct the proceedings from the Arbitration
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Centre at Bangalore in terms of the Rules framed by
it.
39) Section 38 of the Arbitration and Conciliation
Act, 1996 deals with deposits. It reads as under :
"38. Deposits
(1) The arbitral tribunal may fix the
amount of the deposit or supplementary
deposit, as the case may be, as an
advance for the costs referred to in sub-
section (8) of Section 31, which it expects
will be incurred in respect of the claim
submitted to it :
PROVIDED that where, apart from the
claim, a counter-claim has been submitted
to arbitral Tribunal, it may fix separate
amount of deposit for the claim and
counter-claim.
(2) The deposit referred to in sub-section
(1) shall be payable in equal shares by the
parties :
PROVIDED that where one party fails to
pay his share of the deposit, the other
party may pay that share :
PROVIDED FURTHER that where the other
party also does not pay the aforesaid
share in respect of the claim or the
counter-claim, the arbitral Tribunal may
suspend or terminate the arbitral
proceedings in respect of such claim or
counter-claim, as the case may be.
(3) Upon termination of the arbitral
proceedings, the arbitral Tribunal shall
render an accounting to the parties of the
deposits received and shall return any
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unexpended balance to the party or
parties, as the case may be. "
40) Similarly, Rule-28 of Arbitration Centre -
Karnataka (Domestic and International) Rules, 2012
deals with deposits. Rule 28 reads thus :
"28. Deposits -
(1) The Director may require the parties,
before referring the case to the Arbitral
Tribunal, to deposit in advance in one or
more installments, such sums of money as
he deems necessary to defray
miscellaneous expenses and the
Arbitrator's fee.
(2) The deposits shall be called for in
equal share from the Claimants and the
Respondents. The Director may, during
the course of the arbitration proceedings,
require further sums to be deposited by
the Parties or anyone of them to meet the
costs of the arbitration.
(3) When one of the parties neglects or
refuses to make the deposit, the Director
may require such deposit, whether in
relation to a Claim or a Counter-claim, to
be made by the other Party to the dispute
(Claimant or Respondent as the case may
be) and costs so deposited shall follow the
cause.
(4) The Arbitral Tribunal shall proceed
only in respect of those Claims or Counter-
claims for which the deposits have been
duly paid to the Centre and otherwise may
order the suspension or termination of the
arbitral proceedings.
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(5) All deposits towards administrative
expenses, miscellaneous expenses and
Arbitrator's fee shall be made through the
Centre and no payment shall be made
directly to the Arbitrators, by the parties.
The deposit made by the parties shall be
taken into account by the Arbitral Tribunal
in apportioning the costs while making the
Arbitral Award. Any deposit made in
excess shall be refunded to such party as
the Arbitral Tribunal may direct.
(6) The Centre shall have a lien on the
Arbitral Award for any unpaid costs and
fees of the arbitration.
(7) All the deposits towards the
Administrative Expenses, other expenses
and the Arbitrator's fee shall be paid by
the parties in the form of Demand Draft or
Pay Order drawn in favour of the Director,
Arbitration Centre - Karnataka.
(8) The Director shall decide any dispute,
as between the parties, regarding the
quantum, the liability or any other issue
regarding the deposit of the administrative
and miscellaneous expenses and such
decision shall be final."
41) From Section 38 of the Arbitration and
Conciliation Act, 1996 as well as Rule 28 of
Arbitration Centre - Karnataka (Domestic and
International) Rules, 2012 it would be clear that
arbitration charges shall be payable in equal shares
by the parties and where one party fails to pay his
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share, the other party may pay that share. It would
be further clear from the Rules that Arbitral Tribunal
shall proceed only in respect of the claim or
counter-claim for which the deposits have been duly
paid to the Centre.
42) In the present case, Claimant paid entire
arbitration charges to the Arbitration Centre as
directed by the Hon'ble High Court of Karnataka, as
Respondents No.1 to 8 pleaded their inability to pay
the arbitration charges due to financial crisis. Award
directs Respondents No.1 to 8 to pay half of the
arbitration charges to Claimant. A meaningful
reading of para-5 of the Order passed in CMP makes
it clear that Claimant is directed to bear the
arbitration charges in accordance with the
provisions of the Arbitration and Conciliation Act,
1996.
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43) The provisions of Section 38 of the Arbitration
and Conciliation Act, 1996 mandates that
arbitration charges shall be payable in equal shares
by the parties, and if the party does not pay his
share in respect of the claim or the counter-claim,
the Arbitral Tribunal may suspend or terminate the
arbitral proceedings in respect of such claim or
counter-claim.
44) In the present case, no circumstance has
arisen for suspension or termination of the arbitral
proceedings because the claim was laid by
Claimant before the Arbitral Tribunal by paying the
arbitration charges in full as per the directions of
the Hon'ble High Court of Karnataka. Accordingly,
Arbitral Tribunal passed the award in respect of the
claim of Claimant. Had Respondents No.1 to 8 made
any claim or counter-claim, the Arbitral Tribunal
could have suspended or terminated the arbitral
proceedings in respect of such claim or counter-
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claim in the case of non-payment of arbitration
charges. No such circumstance had arisen before
the Arbitral Tribunal.
45) Of course, as per Section 31A of the
Arbitration and Conciliation Act, 1996, Arbitral
Tribunal shall have discretion to determine the
costs which are payable by one party to another
party. However, Section 31A has been inserted by
the Arbitration and Conciliation (Amendment) Act,
2015 (3 of 2016) and it came into force with efect
from 23.10.2015. Award in question came to be
passed in 2014. Thus, the said provisions of law
cannot be made applicable to the instant case.
46) From the above conspectus of the provisions
of law, a fair conclusion that can be drawn is that
where the party fails to pay his share of arbitration
charges, the Arbitral Tribunal may suspend or
terminate the arbitral proceedings in respect of the
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claim or counter-claim made by him, it cannot
direct by the award the defaulting party to pay his
portion of the arbitration charges to other party
who deposited the full arbitration charges. In that
view, it can be fairly said that award directing
Respondents No.1 to 8 to pay half share of
arbitration charges is not in accordance with the
provisions of the Arbitration and Conciliation Act,
1996 and same is also not in consonance with the
Order passed in CMP. In that circumstance, that
part of the award is vitiated and same needs to be
set aside and consequent award made for payment
of interest @ 18% per annum on the said amount
also needs to be set aside.
47) Respondents No.1 to 8 dispute the awarding
of future interest by the Arbitral Tribunal. Section
31(7) of the Arbitration and Conciliation Act, 1996
authorizes the Arbitral Tribunal to pass an award for
interest. In that view, there is no reason to dispute
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the award so far as awarding future interest on the
refundable security deposit amount of
Rs.41,00,000/-.
48) Respondents No.1 to 8 contend that award
directs the creation of charge on schedule property
till payment of the award amount and same is
illegal and opposed to Public Policy of India.
49) It is contended that JDA is not registered as
contemplated in Section 17(2) of the Registration
Act, 1908 and therefore, it is void document.
50) It is contended that when document is void, it
cannot be utilized to enforce an obligation and
hence, the question of creating the charge on
schedule property does not arise.
51) It is to be noticed that no plea as to JDA is
void in view of its non-registration, was taken
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before the Arbitral Tribunal where plea was taken to
the efect that JDA was obtained by unfair means
and said plea came to be rejected by the Arbitral
Tribunal while answering points for consideration
formed at Nos.1 to 3. For the first time, the plea
regarding non-registration of JDA has been taken in
this proceeding. Be that as it may.
52) Section 16(1)(a) of the Arbitration and
Conciliation Act, 1996 makes it clear that "an
arbitration clause which forms part of a contract
shall be treated as an agreement independent of
the other terms of the contract".
53) In Wellington Association Ltd. vs. Kirit
Mehta, [AIR 2000 SC 1379], the Hon'ble
Supreme Court was pleased to hold that "Section
16 of the Act permits the arbitral tribunal to treat
the arbitration clause as an independent clause and
section 16 say that the arbitration clause does not
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perish even if the main contract is declared to be
null and void".
54) In the present case, JDA was executed
between Claimant and Respondents No.1 to 8 for
construction of residential apartment by Claimant
with an agreement to share the super built up area
on pro-rata basis. For the said purpose, GPA was
executed by Respondents No.1 to 8 in favour of
Claimant to do all the acts, deeds and things for the
purpose mentioned in JDA. In substance, till
completion of construction of residential apartment
by Claimant and execution of Claimant's share in
schedule property by way of registered document
by Respondents No.1 to 8, it cannot be said that
right, title and interest of Respondents No.1 to 8 in
schedule property have been extinguished. At the
most, it can be said that JDA was executed between
Claimant and Respondents for construction of
residential apartment on schedule property and the
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same creates a right in favour of Claimant to obtain
another document in respect of his share of super
built up area which is agreed to be handed over by
Respondents No.1 to 8 in favour of Claimant on
completion of residential apartment.
55) Section 17(2)(v) of the Registration Act, 1908
makes it clear that "any document not itself
creating, declaring, assigning, limiting or
extinguishing any right, title or interest of the value
of one hundred rupees and upwards to or in
immovable property but merely creating a right to
obtain another document which will, when
executed, create, assign, limit or extinguish any
such right, title or interest registration is not made
compulsory".
56) That being the state of afairs, contentions
that JDA is a void document for its non-registration
and that award directing to create charge on
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schedule property till payment of the award amount
is vitiated, are not at all tenable.
57) In Ssangyong Engineering and
Construction Company Limited vs. National
Highways Authority of India (NHAI), [(2019) 15
SCC 131]. Para-19 of the judgment reads thus :
"19. There is no doubt that in the present
case, fundamental changes have been
made in the law. The expansion of "public
policy of India" in ONGC v. Saw Pipes Ltd.
[Saw Pipes"] and ONGC v. Western Geco
International Ltd. ["Western Geco"] has
been done away with, and a new ground
of "patent illegality", with inbuilt
exceptions, has been introduced. Given
this, we declare that Section 34, as
amended, will apply only to Section 34
applications that have been made to the
Court on or after 23-10-2015, irrespective
of the fact that the arbitration
proceedings may have commenced prior
to that date."
58) Award was made on 02.08.2014. The
Arbitration and Conciliation (Amendment) Act, 2015
came into force on 23.10.2015. Suits were filed in the
year 2014. Admittedly, suits were filed under Section
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34 of the Arbitration and Conciliation Act, 1996, prior
to the commencement of the 2015 Amendment Act.
In that circumstance, it is necessary to have regard to
the principles of law laid down in Oil & Natural Gas
Corporation Ltd. vs. Saw Pipes Ltd., [(2003) 5
SCC 705], wherein Para-74 reads thus :
"74. In the result, it is held that :
(A) (1) the court can set aside the arbitral
award under Section 34(2) of the Act if 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 of
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 submissions
to arbitration.
(2) The court may set aside the award:
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(i)(a) if the composition of the
Arbitral Tribunal was not in
accordance with the agreement of
the parties,
(b) failing such agreement, the
composition of the Arbitral Tribunal
was not in accordance with Part I
of the Act.
(ii) if the arbitral procedure was not in
accordance with :
(a) the agreement of the parties, or
(b) failing such agreement, the
arbitral procedure was not in
accordance with Part I of the Act.
However, exception for setting aside the
award on the ground of composition of
Arbitral Tribunal or illegality of arbitral
procedure is that the agreement should not
be in conflict with the provisions of Part I of
the Act from which parties cannot derogate.
(c) If the award passed by the Arbitral
Tribunal is in contravention of the provisions
of the Act or any other substantive law
governing the parties or is against the terms
of the contract.
(3) The award could be set aside if it is
against the public policy of India, that is to
say, if it is contrary to :
(a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality; or
(d) if it is patently illegal.
(4) It could be challenged :
(a) as provided under Section 13(5);
and
(b) Section 16(6) of the Act. "
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59) In Mcdermott International Inc. vs. Burn
Standard Co. Ltd., [(2006) 11 SCC 181], the
Hon'ble Supreme Court was pleased to hold as
under :
"52. The 1996 Act makes provision for the
supervisory role of courts, for the review of
the arbitral award only to ensure fairness.
Intervention of the court is envisaged in few
circumstances only, like, in case of fraud or
bias by the arbitrators, violation of natural
justice, etc. The court cannot correct errors
of the arbitrators. It can only quash the
award leaving the parties free to begin the
arbitration again if it is desired. So, the
scheme of the provision aims at keeping the
supervisory role of the court at minimum
level and this can be justified as parties to
the agreement make a conscious decision to
exclude the court's jurisdiction by opting for
arbitration as they prefer the expediency
and finality offered by it."
60) Learned Counsel for Respondents No.1 to 8
has placed reliance on the judgment of the Hon'ble
Supreme Court in the case of Project Director,
National Highways No.45E and 220 National
Highways Authority of India vs. M.Hakeem
and Another, [2021 SCC OnLine SC 473] and
contends that Section 34 deals with setting aside
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the award only and this Court is not invested with
the power of modification of the award. In para-47
of the judgment (supra), the Hon'ble Supreme Court
was pleased to hold as under :
" 47. Quite obviously if one were to
include the power to modify an award in
section 34, one would be crossing the
Lakshman Rekha and doing what,
according to the justice of a case, ought
to be done. In interpreting a statutory
provision, a Judge must put himself in the
shoes of Parliament and then ask whether
Parliament intended this result.
Parliament very clearly intended that no
power of modification of an award exists in
Section 34 of the Arbitration Act, 1996. It
is only for Parliament to amend the
aforesaid provision in the light of the
experience of the courts in the working of
the Arbitration Act, 1996, and bring it in
line with other legislations the world over."
61) From the above conspectus of law, it would
be clear that award can be set aside for the grounds
enumerated in Section 34 of the Arbitration and
Conciliation Act, 1996 and question of modification
or alteration of the award is far from the jurisdiction
of the Court which sits over Section 34 petition.
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62) Section 34(2)(a)(iv) makes it clear that the
arbitral award deals with a dispute not
contemplated by or not falling within the terms of
the submission or arbitration, or it contains
decisions on matters beyond the scope of the
submission to arbitration, an award may be set
aside by the Court.
63) Proviso thereto makes it clear that if the
decisions 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.
64) In R.S.Jiwani (M/s.) Mumbai vs. Ircon
International Ltd., Mumbai, [(2009 SCC
OnLine Bom 2021], the Hon'ble Bombay High
Court was pleased to hold that the judicial
discretion vested in the Court in terms of Section 34
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to set aside an award partly or wholly depending on
the facts and circumstances of the given case, In
para-38, it is held as under :
"38. ..............................
1. The judicial discretion vested in the
Court in terms of the provisions of section
34 of the Arbitration and Conciliation Act,
1996 takes within its ambit power to set
aside an award partly or wholly depending
on the facts and circumstances of the
given case. In our view, the provisions of
section 34 read as a whole and in
particular section 34(2) do not admit or
interpretation which will divest the Court
of competent jurisdiction to apply the
principle of severability to the award of the
Arbitral Tribunal, legality of which is
questioned before the Court. The
Legislature has vested wide discretion in
the Court to set aside an award wholly or
partly, of course, within the strict
limitations stated in the said provisions.
The scheme of the Act, the language of
the provisions and the legislative intent
does not support the view that judicial
discretion of the Court is intended to be
whittled down by these provisions.
2. The proviso to section 34(2)(a)(iv) has
to be read ejusdem generis to the main
section, as in cases falling in that category,
there would be an absolute duty on the
court to invoke the principle of severability
where the matter submitted to arbitration
can clearly be separated from the matters
not referred to arbitration and decision
thereupon by the Arbitral Tribunal."
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65) In that background, if the award is viewed,
award so far as directing Respondents No.1 to 8 to
pay Rs.10,31,838/- towards reimbursement of
conversion charges; Rs.12,36,000/- towards half
share of arbitration charges; and award for payment
of interest @ 18% per annum on the interest
amount of Rs.45,36,000/- which has been awarded
in the form of damages, and award of interest @
18% per annum on the sums of Rs.10,31,838/- and
Rs.12,36,000/- which have been found to be
vitiated, can be separable from rest of the award.
Hence, award so far as reimbursement of
conversion charges, payment of half share of
arbitration charges and payment of interest thereon
and interest on interest amount of Rs.45,36,000/- is
liable to be set aside. Accordingly, I answer the
above points.
ORDER
(1) Suit in A.S.No.113/2014 filed by Claimant is hereby dismissed.
AS.NO.117/2014 51 C/w AS.NO.113/2014 (2) Suit in A.S.No.117/2014 filed by Respondents No.1 to 8 is hereby allowed in part.
(3) Award relating to reimbursement of conversion charges; payment of half share of arbitration charges; and payment of interest thereon and interest on interest amount of Rs.45,36,000/- is hereby set aside.
(4) No order as to costs.
(5) Keep the original of this judgment in AS.No.117/2014 and copy in AS.No.113/2014.
(Dictated to the Judgment Writer directly on computer, typed matter corrected and then pronounced by me in open court, on this the 23rd day of December 2021) (RAMA NAIK) VI Addl.City Civil & Sessions Judge Bengaluru City AS.NO.117/2014 52 C/w AS.NO.113/2014 AS.NO.117/2014 53 C/w AS.NO.113/2014