Karnataka High Court
M/S Puravankara Projects Limited vs Mr K V Jayaprakash on 29 June, 2021
Bench: S.Sujatha, P.N.Desai
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 29TH DAY OF JUNE, 2021
PRESENT
THE HON'BLE MRS.JUSTICE S.SUJATHA
AND
THE HON'BLE MR. JUSTICE P.N.DESAI
M.F.A.No.5370/2016 (AA)
BETWEEN :
M/s PURAVANKARA PROJECTS LIMITED
A COMPANY INCORPORATED UNDER
THE PROVISIONS OF THE COMPANIES
ACT, 1956, HAVING ITS REGISTERED
OFFICE AT No.227, SV ROAD, MUMBAI-400050
BRANCH OFFICE AT NO.130/1,
ULSOOR ROAD, BANGALORE-560 042
REP BY ITS VICE PRESIDENT-LEGAL
Mr. S.JOHN VIJAYAKUMAR ...APPELLANT
(BY SRI SANJAY NAIR, ADV.)
AND :
Mr. K.V.JAYAPRAKASH
S/O Mr. K.VISHWANATH SETTY,
AGED ABOUT 50 YEARS,
R/AT NO.166, K.R.S.ROAD,
V.V.PURAM, BANGALORE-560 004 ...RESPONDENT
(BY SRI K.G.RAGHAVAN, SENIOR COUNSEL FOR
SRI G.S.BHAT, ADV.)
THIS M.F.A. IS FILED UNDER SECTION 37(1) OF
ARBITRATION AND CONCILIATION ACT AGAINST THE
JUDGMENT AND AWARD DATED 25.06.2016 PASSED IN
A.S.NO.34/2008 ON THE FILE OF THE 9TH ADDITIONAL CITY
CIVIL & SESSIONS JUDGE, BENGALURU, DISMISSING THE
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PETITION FILED UNDER SECTION 34 OF THE ARBITRATION
AND CONCILIATION ACT.
THIS APPEAL HAVING BEEN HEARD AND RESERVED ON
05.04.2021, COMING ON FOR PRONOUNCEMENT OF
JUDGMENT, THIS DAY, S. SUJATHA, J., DELIVERED THE
FOLLOWING:
JUDGMENT
This appeal is filed by the appellant under Section 37[1][c] of the Arbitration and Conciliation Act, 1996 ['Act' for short] challenging the judgment and order dated 25.06.2016 passed in A.S.No.34/2008 on the file of the IX Additional City Civil and Sessions Judge at Bangalore (C.C.H.5) [Trial Court for short].
2. The appellant is a Company registered under the provisions of the Companies Act, 1956. Appellant entered into an assignment agreement on 20.10.2004 [Ex.P55] for purchase of all the piece and parcel of the properties bearing katha Nos.1/1 to 54/54 situated at S.B.T Colony, Yelahanka Town formed out of land bearing Sy.No.153 and its sub numbers situated in Yelahanka village, Yelahanka Hobli, Bangalore North -3- Taluk measuring 9 acres and 19 guntas described as Schedule-A property and land bearing katha Nos.55/1, 56/2, 57/3, 58/4, 59/5, 60/6, 61/7, 62/8, 63/9, 64/10, 65/11, 66/12, 67/13, 68/14, 69/15, 70/16, 71/17, 72/18, 73/19, 74/20, 75/21, 76/22, 77/23, 78/24, 79/25, 80/26, 81/27 and 82/28 all situated at S.B.T Colony, Yelahanka town carved out of land bearing Sy.No.153, situated at Yelahanka village, Yelahanka Hobli, Bangalore North Taluk measuring 5 acres 36 guntas, referred to as Schedule-B property for a total consideration of Rs.22,66,02,100/- [Rupees Twenty Two Crores, Sixty Six Lakhs Two Thousand and One Hundred only].
3. On 20.10.2004, appellant made payment of an advance sale consideration of Rs.1,00,00,000/- [Rupees One Crore only]. As per the terms of the assignment agreement, appellant published an advertisement in the Times of India, English daily on -4- 21.10.2004 and Prajavani, Kannada daily on 28.10.2004. Subsequently, a supplemental agreement dated 15.11.2004 [Ex.P63] was entered into between the parties, an amount of Rs.1,50,00,000/- [Rupees One Crore Fifty Lakhs only] was paid to the respondent. As per Clause-III[5] of the said supplemental agreement, it was made clear that all the terms and conditions agreed between the parties would continue to subsist, save and except the payment as recorded in the supplemental agreement categorically and unimpeachably established.
4. The Respondent issued a notice dated 07.02.2005 [Ex.P64] alleging that the appellant had failed to fulfill its obligations and called upon the appellant to make payment of balance sale consideration within seven days of receipt of the letter dated 07.02.2005.
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5. A reply dated 09.02.2005 was issued by the appellant stating that the respondent has failed and neglected to comply with his part of the obligations and to provide a clear and marketable title to the schedule properties. It was stated that there was several objections received to the public notices issued by the appellant which are yet to be answered by the respondent. As per the terms and conditions of the agreement, respondent was required and obligated to provide good and marketable title which has not been done by the respondent. The objections raised by Dalit Sangha whilst putting up the compound wall was also not resolved along with other objections.
6. Pursuant to the said reply, dated 09.02.2005, the respondent had obtained two sale deeds as regards the schedule properties in his own name on 12.05.2005 and 29.12.2005.
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7. The appellant filed an application No.17/2006 on the file of the City Civil Court under Section 9 of the Arbitration and Conciliation Act, 1996 ['Act' for short] seeking certain interim orders including an order to restrain the respondent from transferring the schedule properties till the disposal of the dispute by an arbitrator wherein an order of injunction was granted. Thereafter, an arbitrator was appointed by this Court in CMP.No.55/2007 to resolve the dispute between the petitioner and the respondent. Learned Arbitrator passed an award dated 05.05.2008 whereby the claim of specific performance sought by the appellant was refused granting the relief of refund of Rs.2,50,00,000/- [Rupees Two Crores Fifty Lakhs only] paid by the claimant/appellant to the respondent with interest at 18% p.a., from 15.11.2004 till realization.
8. Being aggrieved by the said award passed by the Arbitral Tribunal, appellant has filed -7- A.S.No.34/2008 before the City Civil and Sessions Judge, Bengaluru under Section 34 of the Act. The respondent appeared through his counsel and contested the matter mainly contending that the grounds urged in the petition would not come within the realm of Section 34 of the Act. The Hon'ble City Civil Court passed the judgment on 25.06.2016 dismissing the said suit in A.S.No.34/2008.
9. Being aggrieved by the said judgment and decree, the appellant has preferred this appeal.
10. Learned counsel Sri.Sanjay Nair appearing for the appellant argued that in terms of Clause VI [3] of the agreement dated 20.10.2004, an obligation was cast on the part of the respondent to answer the objections. The respondent has categorically represented that the schedule properties are not subject to any encumbrance, attachment, Court or acquisition proceedings or charges of any kind and that he would -8- facilitate transfer of the schedule properties from the original owners in favour of the appellant for the consideration stipulated in the agreement. As per the said Clause VI[3], the balance consideration of Rs.1,50,00,000/- [Rupees One Crore and Fifty Lakhs only] and Rs.20.16 Crores was required to be made only after the respondent had cleared all the objections made to the public notice taken out by the claimant/appellant. A discretionary right was conferred on the appellant to terminate the agreement in case the respondent does not clear the objections to the public notice. It was obligatory on the part of the respondent to answer and clear all objections raised relating to the subject properties and thereafter the appellant was required to make balance payment. On the public notices taken by the appellant pursuant to the terms of the agreement, numerous objections by various persons were received including Ramalingeshwara Mutt on 26.10.2004, 28.10.2004, 03.11.2004 and 12.12.2004. It -9- is at the request of the respondent to clear the objections received on the public notice, the appellant paid a sum of Rs.1,50,00,000/- [Rupees One Crore Fifty Lakhs only] and entered into supplemental agreement dated 15.11.2004.
11. The erstwhile owners of the suit schedule properties i.e., Standard Brick and Tile Factory had filed suits bearing No.116/2005, O.S.No.15734/2005 and O.S.No.15375/2005 seeking for an order of temporary injunction which was granted. Though the said suits were disposed of before passing of arbitral award, the pending disputes affecting the schedule properties cannot be disputed. The appellant was continuously ready and willing to execute the agreement subject to clearance of all the objections by the respondent. However, the respondent in a malafide manner got issued letter dated 07.02.2005 [Ex.P64] calling upon the appellant to make payment of alleged balance sale
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consideration within 7 days of the receipt of the letter. There was no agreement between the parties inasmuch construing the time as an essence of contract. The Learned Arbitrator exceeded his jurisdiction traveling beyond the terms of the contract in interpreting the agreement wrongly in making time as the essence of contract. The view taken by the Learned Arbitrator on his own, without there being any such pleadings or evidence to this effect solely based on the letter dated 07.02.2005 is totally erroneous and unjustifiable. This patent illegality would certainly come within the parameters of Section 34 of the Act which ought to have been considered by the learned Trial Court while exercising the powers under Section 34 of the Act.
12. Secondly, the Learned Arbitrator while refusing the claim for specific performance sought by the appellant, only relied upon the cross-examination of CW1 ignoring the evidence of RW1. There is unequal
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treatment by the Learned Arbitrator. The fundamental principle of the arbitration i.e., the Arbitral Tribunal to confine to the terms and conditions of the agreement has been violated. The reasoning of the Learned Arbitrator that by virtue of the letter dated 07.02.2005, time is made as an essence of the contract certainly shocks the conscience of the Court and the same ought to have been considered by the Trial Court in a proper perspective. It was further argued that the impugned judgment/decree suffers from non-consideration of grounds urged under Section 34 of the Act. The Hon'ble Trial Court has wrongly applied the amended provisions of the Act, 2015. The impugned judgment/decree does not take into consideration the additional evidence let in by the appellant, suffers from non-application of mind. Thus, the learned counsel sought for allowing the appeal, setting aside the impugned judgment/decree as well as the award passed by the Learned Arbitrator.
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13. Learned counsel has placed reliance on the following judgments:
1. Associate Builders V/s. Delhi Development Authority1
2. Ssangyong Engineering & Construction Co.
Ltd.,V/s. NHAI2
3. ONGC V/s. Saw Pipes Ltd.,3
4. Dyna Technologies [P] Ltd V/s. Crompton Greaves Ltd.,4
5. Gomathinayagam Pillai V/s. Palaniswami Nadar5
6. Claude-Lila Parulekar V/s. Sakal Papers [P] Ltd.,6
7. MSK Projects [I] [JV] Ltd., V/s. State of Rajasthan7
8. Managing Director, Army Welfare Housing Organisation V/s. Sumangal Services [P] Ltd.,8
14. Learned Senior counsel Sri.K.G.Raghavan, representing the learned counsel for the respondent on record submitted that as per Clause-VI[a], Rs.1,00,00,000/- [Rupees One Crore only] was paid as 1 AIR 2015 SC 620 2 (2019) 15 SCC 131 3 (2003) 5 SCC 705 4 [2019] 20 SCC 1 5 (1967) 1 SCR 227 6 (2005) 11 SCC 73 7 (2011) 10 SCC 573 8 (2004) 9 SCC 619
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advance amount towards sale consideration on 20.10.2004. As per Clause-VI[b], Rs.1,50,00,000/- [Rupees One Crore Fifty Lakhs only] was agreed to be paid by the appellant within a period of 8 days of execution of the agreement. Clause-VI[3] stipulates that the second party [appellant] will be entitled to put public notice calling for claims and if there are any objections, the same shall be answered by the first party to the satisfaction of the appellant and till then, the payment at Clause VI[b] need not be made. Clause-VI[7] of the agreement dated 20.10.2004 [Ex.P55] would stipulate that in the event of first party not clearing any objections that may be pursuant to the public notice within a period of 30 days from the second party notifying such objections to the first party, then the second party shall at its sole discretion will be entitled to terminate the agreement and on such termination the first party shall repay all payments received from the second party with interest thereon at 1.5% p.m.
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15. In terms of the agreement, the appellant issued public notice in Times of India and Prajavani on 21.10.2004. Though the appellant alleged that certain objections were received, the appellant has not produced such objections and documents. The Supplemental agreement dated 15.11.2004 was executed between the parties wherein the appellant has come forward to pay further amount of Rs.1,50,00,000/- [Rupees One Crore Fifty Lakhs only]. As per Clause-III[4], the time for completion of due diligence was agreed to be 30 days from the date of execution of the Supplementary agreement. Since the appellant was not continuously ready and willing to get the sale deed executed, the respondent after visiting the appellant as there was no response, addressed the letter dated 07.02.2005 calling upon the appellant to get the sale deed executed within 7 days from the date of receipt of the letter. The appellant though gave an
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evasive reply dated 09.02.2005, has not come forward to get the sale deed executed by paying the balance sale consideration amount. Since the assignees were not co- operating due to long gap and astronomical price hike, the respondent got the properties registered in his name on 29.12.2005 and 12.05.2005 after selling his property.
16. The learned senior counsel argued that neither in the application filed under Section 9 of the Act nor in CMP No.55/2006, there is any whisper regarding objections raised by Ramalingeshwar mutt or Dalit Sangha so also in the claim petition. The appellant examined Sri.Girish Puruvankara as PW1/CW1 and marked Ex.P1 to P78 before the Arbitral Tribunal. The crucial question, "Are you prepared to complete the transaction by paying the balance sale consideration and taking a sale deed as of today in the existing conditions" was answered by CW1 in negative i.e., "No".
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Further, the said witness has deposed that he has not produced any bank documents to show that their company had sufficient funds or resources to pay the balance sale consideration under the supplemental agreement at Ex.P63 i.e., within a period of one month from the date of the said agreement.
17. CW2 - Sri.Dayanand.K, chartered accountant has admitted in the cross-examination that he is not a chartered account of the appellant's company. As the appellant requested to issue Ex.P79 and therefore, he has issued.
18. The respondent had filed an application for additional evidence and has produced the documents regarding the order passed by the Karnataka Appellate Tribunal in R.P.No.5/2005 and 1/2006. The sum and substance of the arguments would be that the appellant has not proved his continuous readiness and willingness to seek the relief of specific performance.
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Secondly, no objections were existing as alleged. Thirdly, time being an essence of contract compliance was sine-qua-non. Thus, it was argued that the Arbitral Tribunal has rightly held that the appellant has failed to prove his continuous readiness and willingness to get the sale deed executed and time being an essence of contract, there is breach of contract by the appellant. It was submitted that Ex.R-6 to R-11 would reflect the expenses of Rs.40,02,800/- incurred towards the compound wall, sale of the property of respondent to get the registration of the schedule property in his favour. No grounds permissible under Section 34 of the Act was made out by the appellant. Hence, the same has been rightly dismissed by the Trial Court. Learned counsel has relied on the following judgments:
1. Bangalore Water Supply and Sewerage Board V/s. C.N.krishnamurthy9 9 2014 SCC OnLine Kar 222
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2. State of Jharkhand and Others V/s. HSS Integrated SDN and Others10
3. Navodaya Mass Entertainment Limited V/s.
J.M.Combines11
4. Associate Builders V/s. Delhi Development Authority1
5. Vinod Bhatla V/s. M/s. Matrimony.com [Previously known as Consim Info Private Ltd.], Chennai and Another12
6. M/s. Canara Nidhi Limited V/s.
M.Shashikala and others [AIR 2019 SC 4544]
7. Smt.Chand Rani [dead] by LRs. V/s.
Smt.Kamal Rani [dead] by LRs.13
8. Kamal Kumar V/s. Premlata Joshi and Others14
9. Gomathinayagam Pillai V/s. Palaniswami Nadar5
19. We have carefully considered the arguments advanced by the learned counsel for the parties and perused the material on record.
10 (2019) 9 SCC 798 11 (2015) 5 SCC 698 12 AIR 2019 Madras 320 13 AIR 1993 SC 1742 14 AIR 2019 SC 459
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20. The points that arise for our consideration are:-
1. Whether the impugned judgment and decree passed under Section 34 of the Act is justifiable?
2. Whether the award passed by the Arbitral Tribunal warrants interference?
21. To address the controversy involved in this appeal, it is apt to refer to the relevant clauses of the assignment agreement dated 20.10.2004 [Ex.P55].
"VI. NOW THIS AGREEMENT WITNESSES AS FOLLOWS:
1] That in consideration of the First Party transferring and assigning all his right, title, interest under the several agreements with regard to the Schedule Property and the Schedule Property, the Second Party has agreed to pay in all a sum of Rs.22,66,02,100/- [Rupees Twenty-two Crores Sixty-six Lakhs Two Thousand and One Hundred only] as
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sale consideration to the First Party which is inclusive of nomination fee and development charges of Rs.5,00,00,000/-, which amounts shall be paid in the following manner:-
[a] Rs.1,00,00,000/- [Rupees One Crore only] on the execution of this Memorandum of Understanding by Cheque No.213795 dated 20.10.2004 drawn on HDFC Bank Limited, M.G.Road Branch, Bangalore, the receipt of which the First Party hereby accepts and acknowledges;
[b] Rs.1,50,00,000/- [Rupees One Crore and Fifty Lakhs only] within a period of eight days of the execution of this Agreement;
[c] Rs.20,16,02,100/- [Rupees Twenty Crores Sixteen Lakhs Two Thousand and One Hundred only] being the balance on the registration of the Schedule property in favour of the Second Party or its nominees;
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2] .......
3] The Second Party will be entitled to put Public Notice calling for claims and if there are any objections, the same shall be answered by the First Party to the satisfaction of the Second Party and till then the payment in Clause 1[b] above and thereafter need not be made;
4] The First Party shall before the payment of the balance sale price in clause 1[c] above, get the portion of the lands which are not converted to be from agricultural to non-agricultural residential use, as the major portion of the land is already converted; 5] ......
6] ......
7] In the event of the First Party not clearing any objections that may be raised pursuant to the Public Notice within a period of 30 days from the Second Party notifying such objections
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to the First Party, then in that event the Second Party shall at its sole discretion will be entitled to terminate this Agreement and on such termination the First Party shall repay all payments received from the Second Party with interest thereon at the rate of 1.5% per month and on such payment being received, the First Party will be entitled to deal with the Schedule Property;
8] ...... 9] ...... 10] ...... 11] ......
12] In case there being no breach on the part of the First Party and the second Party fails to pay the amounts within stipulated period, then in that event the First Party will be entitled to terminate this Agreement and on such termination the First Party will be entitled to forfeit a sum of Rs.5,00,000/- from the advance paid and refund the balance amounts;
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13] In the event of either party to this Agreement committing breach, the aggrieved party shall be entitled to enforce specific performance of this contract and also recover all cost, expenses and losses incurred by the aggrieved party, as a consequence of such breach from the party committing breach.
Clause II, III[5] of the Supplemental agreement dated 15.11.2004 [Ex.P63] reads thus:
II. WHEREAS the Second Party has come forward to pay a further advance of Rs.1,50,00,000/- [Rupees One Crore and Fifty Lakhs only] to the First Party in terms of the said Agreement and the Parties hereto are desirous of recording the payment of the further advance and other matters agreed and accordingly this Supplemental Agreement is being executed by the Parties;
III[4] The time for completion of due diligence is hereby agreed to be thirty days from
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the date of execution of this Supplemental Agreement;
III[5] It is agreed between the Parties hereto that all other terms and conditions shall continued to be binding on the Parties as stated in the Agreement dated 20.10.2001, save and except the further payment as recorded in this Supplemental Agreement."
22. Before proceeding further, it is apt to refer to the relevant provisions of the Act. Section 28[3] of the Act reads thus:
"28 [3]. While deciding and making an award, the arbitral tribunal shall, in all cases, take into account the terms of the contract and trade usages applicable to the transaction."
Section 31[3] of the Act reads thus:
"31.[3] The arbitral award shall state the reasons upon which it is based, unless, -
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[a] the parties have agreed that no reasons are to be given, or [b] the award is an arbitral award on agreed terms under Section 30."
Section 34 [2][b] of the Act reads thus:
"34. Application for setting aside arbitral award. - [1] ......
[2] An arbitral award may be set aside by the Court only if, [a].....
[b] the Court finds that, -
[i] the subject-matter of the dispute is not
capable of settlement by arbitration under the law for the time being in force; or [ii] the arbitral award is in conflict with the public policy of India."
23. Broadly, Heads of 'Public Policy of India' has been categorized by Judicial Pronouncements as under:
1. Fundamental policy of Indian law.
2. Justice or morality
3. Patent illegality
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as explained by Associate Builders1 and Ssangyong Engineering2.
24. In Associate Builders1 supra, the Hon'ble Apex Court has held thus:
"34. Application for setting aside arbitral award.-
(2) An arbitral award may be set aside by the Court only if-
(a) the party making the application furnishes proof that-
(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;
xxxxxx xxxxxx The third juristic principle is that a decision which is perverse or so irrational that no reasonable person would have arrived at the same is important and requires some
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degree of explanation. It is settled law that where-
1. a finding is based on no evidence, or
2. an arbitral tribunal takes into account something irrelevant to the decision which it arrives at;
3. or ignores vital evidence in arriving at its decision, such decision would necessarily be perverse. A good working test of perversity is contained in two judgments. In H.B. Gandhi, Excise and Taxation Officer-cum-Assessing Authority v. Gopi Nath & Sons, 1992 Supp (2) SCC 312 at p. 317, it was held:
"7. ...................It is, no doubt, true that if a finding of fact is arrived at by ignoring or excluding relevant material or by taking into consideration irrelevant material or if the finding so outrageously defies logic as to suffer from the vice of irrationality incurring the blame of being perverse, then, the finding is rendered infirm in law.
It is with this very important caveat that the two fundamental principles which form
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part of the fundamental policy of Indian law (that the arbitrator must have a judicial approach and that he must not act perversely) are to be understood.
Interest of India The next ground on which an award may be set aside is that it is contrary to the interest of India. Obviously, this concerns itself with India as a member of the world community in its relations with foreign powers. As at present advised, we need not dilate on this aspect as this ground may need to evolve on a case by case basis.
Justice The third ground of public policy is, if an award is against justice or morality. These are two different concepts in law. An award can be said to be against justice only when it shocks the conscience of the court. An illustration of this can be given. A claimant is content with restricting his claim, let us say to Rs. 30 lakhs in a statement of claim before the arbitrator and at no point does he seek to claim anything more. The arbitral award
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ultimately awards him 45 lakhs without any acceptable reason or justification. Obviously, this would shock the conscience of the court and the arbitral award would be liable to be set aside on the ground that it is contrary to "justice".
Morality The other ground is of "morality". Just as the expression "public policy" also occurs in Section 23 of the Indian Contract Act, so does the expression "morality". Two illustrations to the said section are interesting for they explain to us the scope of the expression "morality".
Patent Illegality We now come to the fourth head of public policy namely, patent illegality. It must be remembered that under the explanation to section 34 (2) (b), an award is said to be in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption. This ground is perhaps the earliest ground on which courts in England set aside awards under English law.
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Added to this ground (in 1802) is the ground that an arbitral award would be set aside if there were an error of law by the arbitrator. This is explained by Lord Justice Denning in R v. Northumberland Compensation Appeal Tribunal. Ex Parte Shaw., 1952 1 All ER 122 at page 130:"
25. In Ssangyong Engineering & Construction Co. Ltd.,2 the Hon'ble Apex Court has held 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 Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705 ["Saw Pipes"] and ONGC Ltd. v. Western Geco International Ltd., (2014) 9 SCC 263 ["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,
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irrespective of the fact that the arbitration proceedings may have commenced prior to that date.
34. What is clear, therefore, is that the expression "public policy of India", whether contained in Section 34 or in Section 48, would now mean the "fundamental policy of Indian law" as explained in paragraphs 18 and 27 of Associate Builders (supra), i.e., the fundamental policy of Indian law would be relegated to the "Renusagar" understanding of this expression. This would necessarily mean that the Western Geco (supra) expansion has been done away with. In short, Western Geco (supra), as explained in paragraphs 28 and 29 of Associate Builders (supra), would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Court's intervention would be on the merits of the award, which cannot be permitted post amendment.
However, insofar as principles of natural justice are concerned, as contained in
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Sections 18 and 34(2)(a)(iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in paragraph 30 of Associate Builders (supra).
35. It is important to notice that the ground for interference insofar as it concerns "interest of India" has since been deleted, and therefore, no longer obtains. Equally, the ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the "most basic notions of morality or justice". This again would be in line with paragraphs 36 to 39 of Associate Builders (supra), as it is only such arbitral awards that shock the conscience of the court that can be set aside on this ground.
36. Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law, as understood in paragraphs 18 and 27 of Associate Builders (supra), or secondly, that
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such award is against basic notions of justice or morality as understood in paragraphs 36 to 39 of Associate Builders (supra). Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii) was added by the Amendment Act only so that Western Geco (supra), as understood in Associate Builders (supra), and paragraphs 28 and 29 in particular, is now done away with.
37. Insofar as domestic awards made in India are concerned, an additional ground is now available under sub-section (2A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within "the fundamental policy of Indian law", namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to
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setting aside an award on the ground of patent illegality.
38. Secondly, it is also made clear that re-appreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.
39. To elucidate, paragraph 42.1 of Associate Builders (supra), namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award.Paragraph 42.2 of Associate Builders (supra), however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award.
40. The change made in Section 28(3) by the Amendment Act really follows what is stated in paragraphs 42.3 to 45 in Associate Builders (supra), namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless
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the arbitrator construes the contract in a manner that no fair-minded or reasonable person would; in short, that the arbitrator's view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2-A). As per the law declared by the Hon'ble Apex Court in Ssangyong Engineering & Construction Co. Ltd.2, the said Amendment Act would apply only to Section 34 application 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 day. Admittedly in the present case, Section 34 petition was filed on 01.08.2008. Thus, the Amendment Act 2015 is not applicable to the facts of the case. This is a subsequent judgment. However, any reference made by the learned Trial Judge to the Amended Act though is not appropriate for adjudication of the dispute herein,
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the same would not prejudice the rights of the appellant since the Amendment Act to Section 34 of the Act which has come into effect from 23.10.2015 gives wider connotation to the phrase 'public policy of India'. More particularly, domestic arbitration is concerned. Merely on the reference made by the Trial Judge to the amended provisions of Section 34 of the Act, the award of the Arbitral Tribunal cannot be held to be perverse. Even if the test of patent illegality as contemplated under Section 34[2-A] of the Act is not directly applicable but the principles propounded by the judicial pronouncements as to patent illegality would certainly apply. As far back as in 2003, the Hon'ble Apex Court in the case of ONGC3, has clearly explained the effect of patent illegality found in the Arbitral awards. It is on the touchstone of the judicial pronouncements, the scope of Section 34 has to be analyzed.
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26. In ONGC3, the Hon'ble Apex Court has held 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
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arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
2) The Court may set aside the award:-
(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
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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 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;
(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.
B. (1) The impugned award requires to be set aside mainly on the grounds:-
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(i) there is specific stipulation in the agreement that the time and date of delivery of the goods was the essence of the contract;
(ii) in case of failure to deliver the goods within the period fixed for such delivery in the schedule, ONGC was entitled to recover from the contractor liquidated damages as agreed;
(iii) it was also explicitly understood that the agreed liquidated damages were genuine pre-estimate of damages;
(iv) on the request of the respondent to extend the time limit for supply of goods, ONGC informed specifically that time was extended but stipulated liquidated damages as agreed would be recovered;
(v) liquidated damages for delay in supply of goods were to be recovered by paying authorities from the bills for payment of cost of material supplied by the contractor;
(vi) there is nothing on record to suggest that stipulation for recovering liquidated
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damages was by way of penalty or that the said sum was in any way unreasonable.
(vii) In certain contracts, it is impossible to assess the damages or prove the same. Such situation is taken care by Sections 73 and 74 of the Contract Act and in the present case by specific terms of the contract.
27. In Dyna Technologies Private Limited4, the Hon'ble Apex Court has held thus:
"34. The mandate under Section 31(3) of the Arbitration Act is to have reasoning which is intelligible and adequate and, which can in appropriate cases be even implied by the Courts from a fair reading of the award and documents referred to thereunder, if the need be. The aforesaid provision does not require an elaborate judgment to be passed by the arbitrators having regards to the speedy resolution of dispute.
35. When we consider the requirement of a reasoned order three characteristics of a reasoned order can be fathomed. They are:
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proper, intelligible and adequate. If the reasoning in the order are improper, they reveal a flaw in the decision-making process. If the challenge to an award is based on impropriety or perversity in the reasoning, then it can be challenged strictly on the grounds provided under Section 34 of the Arbitration Act. If the challenge to an award is based on the ground that the same is unintelligible, the same would be equivalent of providing no reasons at all. Coming to the last aspect concerning the challenge on adequacy of reasons, the Court while exercising jurisdiction under Section 34 has to adjudicate the validity of such an award based on the degree of particularity of reasoning required having regard to the nature of issues falling for consideration. The degree of particularity cannot be stated in a precise manner as the same would depend on the complexity of the issue. Even if the Court comes to a conclusion that there were gaps in the reasoning for the conclusions reached by the Tribunal, the Court needs to have regard to the documents submitted by the parties
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and the contentions raised before the Tribunal so that awards with inadequate reasons are not set aside in casual and cavalier manner. On the other hand, ordinarily unintelligible awards are to be set aside, subject to party autonomy to do away with the reasoned award. Therefore, the courts are required to be careful while distinguishing between inadequacy of reasons in an award and unintelligible awards."
(emphasis supplied)
28. In State of Jharkhand and Others10, the Hon'ble Apex Court has held thus:
"7. As held by this Court in catena of decisions, the award passed by the Arbitral Tribunal can be interfered with in the proceedings under Sections 34 and 37 of Arbitration Act only in a case where the finding is perverse and/or contrary to the evidence and/or the same is against the public policy. (See Associate Builders v. DDA (2015) 3 SCC 49 etc.)
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7.1. In the present case, the categorical findings arrived at by the Arbitral Tribunal are to the effect that the termination of the contract was illegal and without following due procedure of the provisions of the contract. The findings are on appreciation of evidence considering the relevant provisions and material on record as well as on interpretation of the relevant provisions of the contract, which are neither perverse nor contrary to the evidence in record. Therefore, as such, the First Appellate Court and the High Court have rightly not interfered with such findings of fact recorded by the learned Arbitral Tribunal.
7.2. Once it is held that the termination was illegal and thereafter when the learned Arbitral Tribunal has considered the claims on merits, which basically were with respect to the unpaid amount in respect of the work executed under the contract and loss of profit. Cogent reasons have been given by the learned Arbitral Tribunal while allowing/partly allowing the respective
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claims. It is required to be noted that the learned Arbitral Tribunal has partly allowed some of the claims and even disallowed also some of the claims. There is a proper application of mind by the learned Arbitral Tribunal on the respective claims. Therefore, the same is not required to be interfered with, more particularly, when in the proceedings under Sections 34 and 37 of the Arbitration Act, the petitioners have failed."
29. The scope of Section 34 and 37 of the Act has been enunciated by the Hon'ble Apex Court in the case of MMTC Ltd. V/s. Vedanta Ltd.,15 as under:
"10. Before proceeding further, we find it necessary to briefly revisit the existing position of law with respect to the scope of interference with an arbitral award in India, though we do not wish to burden this judgment by discussing the principles regarding the same in detail. Such interference may be undertaken in terms of Section 34 or Section 37 of the Arbitration and 15 AIR 2019 SC 1168
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Conciliation Act, 1996 (for short, "the 1996 Act"). While the former deals with challenges to an arbitral award itself, the latter, inter alia, deals with appeals against an order made under Section 34 setting aside or refusing to set aside an arbitral award.
11. As far as Section 34 is concerned, the position is well-settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii), i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the "fundamental policy of Indian law" would cover compliance with statutes and judicial precedents, adopting a judicial approach,
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compliance with the principles of natural justice, and Wednesbury reasonableness. Furthermore, "patent illegality" itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract.
It is only if one of these conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)(b)(ii), but such interference does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts. (See Associate Builders v. DDA, (2015) 3 SCC
49). Also see ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705; Hindustan Zinc Ltd. v.
Friends Coal Carbonisation, (2006) 4 SCC 445; and McDermott International v. Burn Standard Co. Ltd., (2006) 11 SCC 181).
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It is relevant to note that after the 2015 amendments to Section 34, the above position stands somewhat modified. Pursuant to the insertion of Explanation 1 to Section 34(2), the scope of contravention of Indian public policy has been modified to the extent that it now means fraud or corruption in the making of the award, violation of Section 75 or Section 81 of the Act, contravention of the fundamental policy of Indian law, and conflict with the most basic notions of justice or morality. Additionally, sub-section (2A) has been inserted in Section 34, which provides that in case of domestic arbitrations, violation of Indian public policy also includes patent illegality appearing on the face of the award. The proviso to the same states that an award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciation of evidence.
12. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel
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beyond the restrictions laid down under Section 34. In other words, the Court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the Court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the Court under Section 34 and by the Court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings.
13. Having noted the above grounds for interference with an arbitral award, it must now be noted that the instant question pertains to determining whether the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration. However, this question has been addressed by the Courts in terms of the construction of the contract between the parties, and as such it can be
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safely said that a review of such a construction cannot be made in terms of re-assessment of the material on record, but only in terms of the principles governing interference with an award as discussed above.
14. It is equally important to observe at this juncture that while interpreting the terms of a contract, the conduct of parties and correspondences exchanged would also be relevant factors and it is within the arbitrator's jurisdiction to consider the same. (See McDermott International Inc. v. Burn Standard Co. Ltd. (supra); Pure Helium India (P) Ltd. v. ONGC, (2003) 8 SCC 593, D.D. Sharma v. Union of India, (2004) 5 SCC 325)."
(emphasis supplied)
30. It is not in dispute that time for completion of due diligence was fixed as thirty days from the date of execution of the Supplemental agreement. Learned counsel for the appellant argued that the phrase "completion of due diligence" cannot be interpreted to
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construe the time an essence of contract since objections were pending pursuant to the public notice which were required to be clarified/addressed by the respondent. If so, the appellant ought to have terminated the contract as per Clause VI[7]. Admittedly, no suits filed by M/s. Standard Brick and Tile Company relating to A-Schedule property, were pending at the time of passing of the award by the Learned Arbitrator. The Learned Arbitrator has observed that there is a declaration by the Competent Authority that A-schedule property has been forfeited to the State Government and the same does not belong to the respondent or erstwhile owners. The grievance of the appellant that the Learned Arbitrator ought to have deferred the matter till the final decision in W.P.No.18811/2007 which was filed by the appellant challenging the order of the Karnataka Appellate Tribunal would also do not merit consideration in view of the order passed by the Writ Court in W.P.No.18811/2007 on 20.03.2009 whereby
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the matter was remanded to Karnataka Appellate Tribunal for fresh consideration. Subsequently, on re- consideration of the matter, Karnataka Appellate Tribunal has dismissed the same on 31.08.2009. Deferring the matter indefinitely would defeat the object and purpose of the Act. Arbitrator was appointed at the instance of the appellant pursuant to the CMP No.55/2007. The main objective of the Act is to resolve the dispute as expeditiously as possible with the minimum intervention of a Court of law. The learned Arbitrator has rightly adjudicated the dispute keeping in the mind the objective of the Act.
31. As regards, time an essence of contract relating to immovable properties, in Vidyanandam V/s. Vairavan [(1997) 3 SCC 1], the Hon'ble Apex Court has observed thus:
"10. It has been consistently held by the courts in India, following certain early English decisions, that in the case of
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agreement of sale relating to immovable property, time is not of the essence of the contract unless specifically provided to that effect. ... in the case of urban properties in India, it is well- known that their prices have been going up sharply over the last few decades-- particularly after 1973. ...
11. ... We cannot be oblivious to the reality-- and the reality is constant and continuous rise in the values of urban properties--fuelled by large-scale migration of people from rural areas to urban centres and by inflation. ... Indeed, we are inclined to think that the rigor of the rule evolved by courts that time is not of the essence of the contract in the case of immovable properties-- evolved in times when prices and values were stable and inflation was unknown--requires to be relaxed, if not modified, particularly in the case of urban immovable properties. It is high time, we do so."
32. In Ferrodous Estates [Pvt.] Ltd., V/S. P.Gopirathnam [Dead] & Others [Civil Appeal
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No.13516/2015, D.D. 12.10.2020], the Hon'ble Apex Court has held thus:
42. Therefore there is an urgent need to revisit the principle that time is not of the essence in contracts relating to immovable properties and also explain the current position of law with regard to contracts relating to immovable property made after 1975, in view of the changed circumstances arising from inflation and steep increase in prices. We do not propose to undertake that exercise in this case, nor referring the matter to a larger Bench as we have held on facts in this case that time is the essence of the contract, even with reference to the principles in Chand Rani [(1993) 1 SCC 519] and other cases. Be that as it may.
43. Till the issue is considered in an appropriate case, we can only reiterate what has been suggested in K.S. Vidyanadam [(1997) 3 SCC 1]:
(i) The courts, while exercising discretion in suits for specific performance, should bear
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in mind that when the parties prescribe a time/period, for taking certain steps or for completion of the transaction, that must have some significance and therefore time/period prescribed cannot be ignored.
(ii) The courts will apply greater scrutiny and strictness when considering whether the purchaser was "ready and willing" to perform his part of the contract.
(iii) Every suit for specific performance need not be decreed merely because it is filed within the period of limitation by ignoring the time-limits stipulated in the agreement. The courts will also "frown" upon suits which are not filed immediately after the breach/refusal. The fact that limitation is three years does not mean that a purchaser can wait for 1 or 2 years to file a suit and obtain specific performance. The three-year period is intended to assist the purchasers in special cases, as for example, where the major part of the consideration has been paid to the vendor and possession has been
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delivered in part-performance, where equity shifts in favour of the purchaser."
33. Having regard to these aspects, Learned Arbitrator has rejected the relief of specific performance claimed by the appellant. Whether such decision of the Learned Arbitrator is amenable to challenge under Section 34[2][b][ii] or in other words, whether the grounds urged by the appellant would come within the purview of Section 34[2][b][ii] of the Act has to be addressed in the light of the judgments of the Hon'ble Apex Court.
34. It is trite that a possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus, an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be
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invalid on this score. Once it is found that the arbitrator's approach is not arbitrary or capricious, then he is the last words on facts. [Kuldeep Singh V/s. Commissioner of Police, [(1999) 2 SCC 10].
35. It is well settled by now that the Court exercising the power under Section 34 or 37 does not act as a Court of appeal in re-assessing or re- appreciating the evidence but can interfere on merits only on the limited grounds provided under Section 34[2][b][ii] and as interpreted by the judicial pronouncements.
36. O.S.No.6999/1995 which was filed by the Ramalingeshwar Mutt [marked as Ex.R13] was dismissed on 18.07.2005. The exparte temporary injunction granted on 19.10.1995 in the said suit has been vacated pursuant to the orders on I.A.No.1 and I.A.No.4 on 07.06.2001 and those proceedings were of the period about three years four months prior to the
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date of entering into the agreement. Similarly, the so called objections of the erstwhile owner and the so called matter pending in the writ petition having been reached finality, the appellant cannot take shelter on the said objections which were neither pleaded in the petition filed under Section 9 of the Act or in the CMP No.55/2006 fild before this Court or in the claim petition filed before the Arbitrator or in the reply letter dated 09.02.2005 [Ex.P65]. It was open to the appellant to terminate the agreement within 30 days on the ground of respondent not answering any of the objections issued in public notice but the appellant has not chosen to do so. As per the agreement at Ex.P.55, the total sale consideration amount has to be made in three part payments subject to discharge of certain obligations by the respective parties. First payment of Rs.1,00,00,000/- [Rupees One Crore only] was made on the date of agreement Ex.P.55. Second payment of Rs.1,50,00,000/- [Rupees One Crore Fiifty Lakhs only]
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was required to be made within eight days from the date of execution of the agreement Ex.P.55 subject to all objections received to the public notice are answered by the respondent to the satisfaction of the appellant. Even payment of Rs.1,50,00,000/- [Rupees One Crore Fifty Lakhs only] made on 15.11.2004 in terms of Ex.P55 would indicate that all the objections received to the public notice were answered by the respondent as per the terms of the agreement at Clause-VI[1][b] read with Sub-Clause[3] and [4].
37. The letter dated 07.02.2005 addressed by the respondent to the appellant would indicate that whatever was required to be done on the part of the respondent has been done towards the execution of sale deed. Though the sale transaction was required to be completed within a period of 30 days from the date of entering into the agreement by paying the balance of sale consideration and getting the sale deed registered,
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despite more than 90 days, the sale transaction has not been completed for no reason and accordingly it was requested complete the sale transaction by paying the balance sale consideration and getting the sale deed executed within a period of 7 days from the date of receipt of the letter.
38. The arguments of the learned counsel for the appellant that the learned arbitrator exceeded his jurisdiction in holding time an essence of contract contrary to the terms of the agreement cannot be countenanced for the reason that the conduct of the parties also plays an important role in interpreting the agreement and the jurisdiction of the arbitrator. The subsequent documents and the correspondence made within the parties also has a bearing in deciding the issue of jurisdiction. The Hon'ble Apex Court in the case
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of D.D.Sharma V/s. Union of India16 reiterated in MMTC15 supra, has categorically held thus:
"Interpretation of a contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law. It is also trite that correspondences exchanged by the parties are required to be taken into consideration for the purpose of construction of a contract. Once it is held that the construction of an agreement fell for consideration of the arbitrator, the determination thereupon shall not ordinarily be interfered with. The court's jurisdiction in this behalf is merely to see whether the arbitrator has exceeded his jurisdiction or not."
39. Applying the said principle with the Clause- III[4] of the supplemental agreement read with the letter dated 07.02.2005, no other reasonable view could be taken than the view taken by the Learned Arbitrator, rightly confirmed by the Trial Court, having analyzed 16 [2004] 5 SCC 325
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the basic jurisprudence behind Section 34 of the Act. In Gomathinayagam Pillai5, the Hon'ble Apex Court has categorically observed that even if time was not originally of the essence, the appellant could by notice served upon the other side call upon him to take the conveyance within the time fixed and in default of compliance of the contract would be treated as cancelled. However, no such notice was issued by the appellant to the respondent therein but in the present case, such notice has been issued as per the letter dated 07.02.2005 [Ex.P64] which has been replied by the appellant as per the letter dated 09.02.2005 [Ex.P65]. On comprehensive reading of these documents, it may not be correct to say that time could not be construed as an essence of contract. The relevant para of Gomathinayagam Pillai and Others5, reads thus:
"Intention to make time of the essence of the contract may be evidenced by either
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express stipulations or by circumstances which are sufficiently strong to displace the ordinary presumption that in a contract of sale of land stipulations as to time are not of the essence. In the present case there is no express stipulation, and the circumstances are not such as to indicate that it was the intention of the parties that time was intended to be of the essence of the contract. It is true that even if time was not originally of the essence, the appellants could by notice served upon the respondent call upon him to take the conveyance within the time fixed and intimate that in default of compliance with the requisition the contract will be treated as cancelled. As observed in Stickney v. Keeble (1) where in a contract for the sale of land the time fixed for completion is not made of the essence of the contract, but the vendor has been guilty of unnecessary delay, the purchaser may serve upon the vendor a notice limiting a time at the expiration of which he will treat the contract as at an end.
In the present case appellants 1 & 2 have served no such notice; by their letter dated
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July 30, 1959 they treated the contract as at an end. If the respondent was otherwise qualified to obtain a decree, for specific performance, his right could not be determined by the letter of appellants 1 & 2." The said principle is followed in Claude-Lila Parulekar6.
The intention and conduct of the parties at the time of entering into the contract plays a pivotal role. On comprehensive reading of the agreement Ex.P.55, it is clear that in the event of respondent not clearing the objections raised pursuant to the public notice within a period of 30 days from the date of notifying such objections appellant was entitled to terminate the agreement [Clause VI(7)] i.e., objections were required to be cleared before the thirty days prescribed therein and not thereafter, indefinitely it cannot be prolonged.
40. It cannot be gainsaid that the parties shall be treated equally and full opportunity shall be given to
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each party. Though the learned counsel for the appellant made a feeble attempt to argue that no equal treatment was given to the parties by the Learned Arbitrator, the same is not supported by any cogent material. We do not see any breach of the principles of Audi Alteram Pattern or discrimination made to the parties by the learned arbitrator prejudicing the rights of the appellant. Learned Arbitrator has considered the evidence of both the parties to arrive at the conclusion. Memo dated 01.07.2007 filed by the appellant stating his readiness to purchase the property subsequent to cross examination of CW1 has been rejected by the learned Arbitrator giving reason that the same is an afterthought, certainly would discard the evidence of CW1 inasmuch as his unwillingness to get the sale deed executed. Inconsistent stand of the appellant was not appreciated. Absolutely no discrimination is found as alleged by the appellant. No supporting material is shown except the bald allegation. On this ground also,
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no interference under Section 34 of the Act was called for.
41. A reading of the award of the learned arbitrator could not give any indication that it has been rendered without reasons. Neither the reasons could be said to be unintelligible or unsustainable. Merely for the reason that the reasons assigned by the arbitrator is not convincing to the appellant, no interference would be made in casual and cavalier manner. There is no jurisdictional error or perversity in the arbitral award. In our opinion, the mandate under Section 31[3] of the Act is not violated. The good working test of perversity propounded by the Hon'ble Apex Court that a finding of fact has been arrived at by ignoring or excluding relevant material or by taking into consideration irrelevant material or if the finding so outrageously defies logic as to suffer from the vice of irrationality incurring the blame of being perverse is not established.
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42. The learned Arbitrator has held that the time was made as essence of the contract placing reliance on Ex.P63 and P64. The ground urged by the appellant that objections issued to the public notice were not clarified by the respondent has been negated referring to the material evidence on record. It has been recorded that the respondent has clarified in his evidence that the objections sent by Ramalingeshwar Mutt on different dates were answered to the satisfaction of the appellant and on account of it, the appellant has released second payment of Rs.1½ Crores as agreed under terms of agreement at Ex.P55. It has been categorically observed that though the subsequent objections received on 12.12.2004 from Ramalingeshwar Mutt was the similar objections raised earlier by the said Ramalingeshwar Mutt, having regard to the facts of the litigation instituted by the Ramalingeshwar Mutt as well as the suit in
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O.S.No.6999/1995 filed by Sri.B.Shivanna and K.Papireddy against the erstwhile owners of the schedule property seeking for permanent injunction has been considered. It has been recorded that ultimately the said suit came to be dismissed and temporary injunction order in the suit was vacated on 07.01.2001 about 3 years 4months prior to the date of entering the agreement Ex.P55 by the parties. It is further observed that the claimant has not claimed any encumbrances to show that any such rival ownership claim was made by Ramalingeshwar Mutt in respect of the schedule property. Similarly, regarding O.S.No.5113/2005 filed against M/s. Standard Bricks and Tiles Company for specific performance in respect of A-Schedule property which has ended in compromise within 10 days from the date of filing of the suit marked as Ex.P81 is analyzed by the Arbitral Tribunal. Again O.S.No.116/2005, 15374/2005 and 15375/2005 against Dalit Sangha and others in respect of the
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schedule property filed by the M/s. Standard Bricks and Tiles Company is also discussed. On the basis of the objections said to have been raised, pursuant to the public notice being clarified by the respondent and the efforts made by the respondent to convey the free marketable title performing their part of their contract every aspect of the claim made by the appellant is minutely analyzed and adequate reasons have been assigned by the tribunal. At any stretch of imagination, the same cannot be held to be improper; unintelligible or perverse as explained by the Hon'ble Apex Court in Dyna Technologies4. The Trial Court has rightly applied its mind and negated the grounds urged by the appellant to invoke Section 34(2)(b)(ii) to set aside the award.
43. It is well settled, as per Section 16[1][c] of the Specific Relief Act, 1963, the appellant has to aver and prove his continuous readiness and willingness
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while seeking the relief of specific performance. The evidence of CW1 - Girish would certainly show that the appellant company was neither ready and willing to pay the balance sale consideration nor had any intention to get the sale deed executed even during the arbitral proceedings. In order to discard this clinching evidence, memo filed by the appellant on a subsequent date before the learned arbitrator has rightly been held to be an after thought and a valid reason is given that 'A' schedule property has been forfeited to the State Government and as such the relief of specific performance of the contract cannot be granted. The requirement under law is continuous readiness and willingness from the date of execution of the agreement. Assets of the company or funds of the company would not be suffice to establish the readiness and willingness in the absence of concrete steps taken to perform its part of the contract. What is required is the readiness
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and willingness to pay the balance sale consideration in spirit and substance not in letter or form.
44. We are afraid to accept the contention of the learned counsel for the appellant that the Trial Court has applied the amended law in dismissing the petition. Even assuming the Trial Court has examined the arbitral award in a broader spectrum, it is more advantageous to the appellant rather than the respondent. If no grounds as enunciated by the Hon'ble Apex Court for interference is found as per the amended law, certainly it would not pass the tests for interference of the award in a narrow compass as per the unamended law. As discussed in the preceding paragraphs, law is now well settled by Ssangyong2 which indeed was not available at the time of passing of the impugned judgment. It is a pure technical argument. The Trial Court has observed that none of the grounds available under Section 34[2][b][ii] is
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attracted having meticulously analyzed the learned arbitrator's award.
45. It is trite that the relief of Specific Performance under Section 20 of the Specific Relief Act, 1963 is discretionary and equitable. The court is guided by the principles of justice, equity and good conscience in granting Specific Performance. It has come on record as elicited in the cross examination of CW1, that after entering into an agreement at Ex.P.55, the appellant, within 3 to 4 months they bought another property which is at a distance of 3 km from the schedule property and 1300 flats would be constructed therein. Out of the total sale consideration of Rs.22,66,02,100/- [Rupees Twenty Two Crores Sixty Six Lakhs Two Thousand and Hundred only] the appellant having made the payment of only Rs.2,50,00,000/- [Rupees Two Crores Fifty Lakhs only], merely alleging objections pending pursuant to public notice has
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protracted the matter. Exercising the discretionary and equitable jurisdiction, the learned arbitrator after assigning adequate reasons has directed the respondent to refund the advance amount of Rs.2,50,00,000/- [Rupees Two Crores Fifty Lakhs only] with interest at 18% p.a. from 15.11.2004 till the date of payment denying the relief of Specific Performance. The Trial Court has rightly denied to interfere with the said award under Section 34 of the Act. No fault can be found by the Trial Court in citing one or few judgments when multiple citations referred to by the parties enunciates the same principles. What is relevant is the application of mind and analyzing the matter with judicial approach keeping in mind the judicial pronouncements of the Hon'ble Courts on the subject matter. In our considered view, no exception can be found with the impugned judgment.
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46. In the light of the judgments of the Hon'ble Apex Court in Associate Builders1 and Ssangyong2, in applying the test of public policy to an arbitral award, the Court cannot act as a Court of appeal. If the arbitrator has interpreted the contract and if in such construction of the contract, if any error is committed then it is within the jurisdiction of the arbitrator which is not amenable to challenge unless there exists any bar on the face of the award or such award should shock the conscience of the Court. We do not find any such error committed by the Learned Arbitrator shocking the conscience of the Court.
47. Application in I.A.No.2/2020 is filed by the appellant to implead State Bank of India as a party respondent in the present appeal proceedings on the ground that the proposed respondent - bank in the guise of furthering a public cause, with a malafide intention and motive making attempts to sell the portion
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of the schedule property which was mortgaged through public e-auction or through private treaty as stipulated under Section 13 of the SARFESI Act, 2002 and Rule 8 of the Security Interest [Enforcement] Rules, 2002 only to harass the appellant and to defeat all the rights of the appellant herein. If such action by the bank is permitted to be proceeded to, the appeal becomes infructuous and further lead to unwanted and unavoidable multiplicity of proceedings, if the third party rights are created. Accordingly, seeks permission to implead the bank and further an interim order of stay against the bank to proceed with any auction of the schedule properties.
48. Detailed objections have been filed by the Bank. Learned counsel Sri.Ravishankar, appearing for the bank inviting the attention of the Court submitted, as per the order dated 26.05.2020, this Court has recorded that I.A.No.1/2020 was filed by the appellant to stay the e-auction sale notice dated 08.05.2020 fixing
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the date of auction on 03.06.2020. On recording the submissions of the learned counsel Sri.Ravi Shankar, appearing for impleading applicant-State Bank of India, made on instructions that the bank has already passed the order dated 16.05.2020 canceling the e-auction that was fixed to be held on 03.06.2020 and therefore, I.A.No.1/2020 has become infructuous, dismissed I.A.No.1/2020 as having become infructuous. However, pending consideration I.A.No.1/2018, the State Bank of India is directed not to take any precipitative action against the appellant, till the next date of hearing. On 12.06.2020, this Court passed the orders on I.A.No.1/2018 as under:
"ORDER ON IA.NO.1/2018
In the present appeal, the proposed applicant-State Bank of India (SBI) has filed an application for impleading.
Sri A.Ravishankar, learned counsel for the proposed applicant-SBI, on instructions,
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submits that the application for impleading may be dismissed as withdrawn.
The said submission is placed on record.
Accordingly, IA.No.1/2018 filed by the Bank is dismissed as withdrawn.ORDER ON IA.NO.1/2017
This application is filed by the impleading applicants-K.S.Naresh and Madhusudhana Tokala for impleading claiming to be the GPA holders of Sri Neelakanta Saranga Desikendra Mahaswamigalu, Matadhipathi, Peetadhipathi, Utharadhikari and
Sarwadhikari of Ramalingeshwara Matt and they are the owners of the properties mentioned in the appeal.
It is also relevant to note that Sri Ramalingeshwara Mutt has filed an application-I.A.No.10 for impleading in A.S.No.34/2008 before the trial Court. The said application came to be dismissed on
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19.09.2011. Again, Sree Ramalingeshwar Mutt and the State Bank of India have also filed an another application-I.A.No.5 for impleading before the trial Court. IA.No.5 also came to be dismissed on 05.12.2015. By the said order of dismissal, the application for impleading has reached finality. Thereafter, the trial Court considering both oral and documentary evidence on record, has dismissed A.S.No.34/2008 dated 25.06.2016 on merits.
Against the said judgment and decree, the present appeal is filed and the appeal came to be admitted on 13.07.2017 and the present application is filed on 01.08.2017.
Sri Udaya Holla, learned Senior Counsel appearing for the appellant and Sri G.S.Bhat, learned counsel for the caveator contended that the present application for impleading filed by the applicants in the form of third attempt, is not maintainable.
The said submission is placed on
record.
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None appears for the proposed
impleading applicants in IA.No.1/2017.
In view of the above, IA.No.1/2017 is dismissed for default.
Post the matter for hearing in the usual course."
49. Learned counsel Sri.Ravishankar argued that the proposed impleading applicant is neither a necessary party nor a proper party for the adjudication of dispute now pending in this appeal. Such an impleading application was filed before the Trial Court and the same was dismissed by a well reasoned order dated 05.12.2015. As such, the present application is hit by the principles of res-judicata and estoppel. There is no change in the circumstances to file the present application, it is only to protract the proceedings. The appellant cannot approbate or reprobate to suit its convenience; if the appellant is aggrieved by any of the proceedings pending under the DRT Act, it has to
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proceed in accordance with law and cannot expand the scope of litigation under Section 37 of the Act.
50. There is some considerable force in the arguments advanced by the learned counsel for the proposed respondent-bank. "Party" is defined under Section 2[1][h] of the Act, 1996 as under:
"[h] "party" means a party to an arbitration agreement."
51. As could be seen from the material on record, earlier applications filed by the appellant as well as the proposed respondent bank has been dismissed. The scope of Section 37 being limited, the appellant cannot expand the same to resolve the dispute arising under the DRT Act which is altogether a different proceeding. The appellant cannot circumvent the alternative remedy available for the redressal of such grievances if any and enlarge the scope of this appeal.
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Accordingly, I.A.No.2/2020 stands dismissed being devoid of merits.
52. For the reasons aforesaid, the impugned judgment of the Trial Court confirming the award of the Arbitral Tribunal cannot be held to be perverse warranting interference by this Court under Section 37 of the Act.
In the result, the appeal stands dismissed.
Sd/-
JUDGE Sd/-
JUDGE NC.