Bangalore District Court
Mr.Paul Fernandez vs M/S.Sobha Developers Limited on 9 February, 2017
IN THE COURT OF THE VI ADDL.CITY CIVIL & SESSIONS JUDGE
BENGALURU CITY
CCCH. 11
Dated this the 9th day of February, 2017
PRESENT: Sri.K.M.Rajashekar, B.Sc., LL.B.,
VI Addl. City Civil & Sessions Judge,
Bengaluru City.
A.S.NO: 39/2013
APPLICANT/ : MR.PAUL FERNANDEZ,
PLAINTIFF S/o.Mr.Anthony Fernandez,
Aged about 62 years,
Having office at No.2, AVS Compound,
80 Feet Main Road, 4th Block,
Koramangala,
Bengaluru-560 034.
[By Pleader Sri.K.S.Nagaraja Rao]
/Vs/
RESPONDENT/ : M/S.SOBHA DEVELOPERS LIMITED,
DEFENDANT A Company registered under the
Provisions of the Companies Act, 1956,
Having its registered office at No.E-106,
Sunrise Chambers, No.22, Ulsoor Road,
Bengaluru-560 042.
Reptd.by its Managing Director.
[By Pleader Sri.Arun Pradesh]
---
2 AS.NO:39/2013
JUDGMENT
The Plaintiff has got filed this suit under Section 34(1)(2)(a)(iv)(v) & (v)(b)(i) & (ii) of the Arbitration and Conciliation Act, 1996, to set aside the order dated 09.04.2013 passed in CMP.No.225/2009 by the Hon'ble Arbitrator.
2) In nutshell Plaintiff's case is that, he has entered into MOU dated 01.04.2006 with the Defendant agreeing to sell the 'A' schedule property for a consideration of Rs.4,600/- per sq.ft., and also access of 40 feet road from the public road and the Defendant had paid a sum of Rs.1 Crore on execution of MOU dated 01.04.2006 by way of cheque drawn on UTI Bank, M.G.Road, Bengaluru, and that the remaining payment would be made on complying with the terms and conditions of said MOU. The claim of damages of Rs.10 crores is baseless and unsustainable in law as the MOU dated 01.04.2006 between the parties doesn't stipulate the same and the Plaintiff is not liable to 3 AS.NO:39/2013 make good of the alleged loss of the Defendant muchless to the tune of Rs.10 Croes and he is not liable to pay interest at the rate of 18% on Rs.1 Crore from the date of MOU dated 01.04.2006, pendent lite interest and future interest at 18% from the date of award till the date of payment as the MOU doesn't stipulate the same. The MOU dated 01.04.2006 is opposed to public policy as the land bearing Sy.No.19 of Bilikalli Village i.e. 'A' schedule property is an agriculture land and the Defendant being non-agriculturist is not entitled to enter into contract of sale to buy the same, the contract dated 01.04.2006 is void and illegal and claim cannot be made on the basis of void, illegal and unlawful contract. The Arbitrator has failed to decide the basic question as to 'Whether MOU dated 1.4.2006 is properly terminated by the Respondent/Claimant to seek refund of the amount from the Applicant?" The Defendant has not at all pleaded the termination of the MOU in the claim petition. The Defendant did admit the fact in evidence that MOU was 4 AS.NO:39/2013 not terminated before or after filing of the claim petition. The legal notice does not indicate the termination of the MOU dated 01.04.2006. The alleged correspondence between the parties indicating the alleged refund of money does not amounts to due compliance of the termination in law or implied termination. The Arbitration proceeding without termination of contract is pre matured and should have been dismissed as not maintainable.
The Plaintiff has raised specific defence at para-1 of the statement of objection before the Arbitrator by contending that the alleged authorized signatory has no right to sue on behalf of the Claimant Company in the absence of any general or specific Power of Attorney in this regard. It is submitted that, the Defendant is a Company registered under the Companies Act. The competent person to sue is the Managing Director. The Managing Director has not preferred the claim petition, but the claim petition is preferred by the alleged authorized signatory. The resolution-Ex.C.1 no doubt 5 AS.NO:39/2013 empowers C.W.1 to represent the Company, but the resolution itself cannot substitute to a GPA. In the case on hand, no such GPA is produced before the Court authorizing Mr.Vijay Kumar G. Bagoji to sue on behalf of the Company to give evidence by way of affidavit in the matter. It is for the Defendant to satisfy the Hon'ble Arbitral Tribunal about the competency of the authorized person to sue in the absence of any GPA by the Managing Director of the Company. The Defendant has not at all given any explanation in the said regard. The claim petition is not properly presented by the Company and the evidence adduced by CW.1 cannot be looked into. Therefore, the claim petition had to be rejected in limine. The claim has been made at the interest rate of 18% from the date of MOU and made a claim to the tune of Rs.73,50,000/- till the date of the claim petition. The said claim is unsustainable in law as the contract does not provide for the same. The Arbitrator has wrongly allowed the said claim. The question whether such claim of 6 AS.NO:39/2013 interest at 18% is sustainable in law is required to be decided by the Arbitral Tribunal. The MOU dated 01.04.2006 does not stipulate payment of interest muchless at the rate of 18% on Rs.1 Crore. The contract between the parties does not indicate the payment of interest from the date of contract. Therefore, calculation of interest at the rate of 18% on a sum of Rs.1 Crore amounting to a sum of Rs.73,50,000/- is nothing but a speculative and unsustainable claim and the same cannot be allowed in law. The basic question is whether notice Ex.C.19 is a valid notice giving raise to the cause of action. It is not a valid notice to urge as a cause of action, reason being the said notice does not terminate the MOU dated 01.04.2006 at all. The MOU dated 01.04.2006 does stipulate 15 days clear notice of termination of the contract for demand of refund of the amount. When there is an express contract in the mode of termination nothing can be presumed and assumed about the alleged implied termination of contract by the 7 AS.NO:39/2013 act of the parties. Assuming the cause of action for Defendant as on 01.04.2009 and not conceding the interest required to be calculated from 01.04.2009, the award of interest is again discretion of the Tribunal but not at 18% on the sum claimed. The issue relates to entitlement of Defendant for pendent lite interest at the rate of 18% p.a. on Rs.1 Crore from the date of filing of the claim petition till disposal of the matter and future interest at 18% p.a. from the date of the award till the date of the payment. Section 31(7)(a) of the Act, does not indicate the rate of interest payable. It is for the tribunal to award reasonable rate of interest on a sum of Rs.1 Crore. The conduct of the parties should be looked into while awarding any interest pendent lite. It is relevant to note that if proceeding is adjourned due to any other reasons, then, the Plaintiff in the arbitration proceeding shall not be liable to pay the interest of that period. In this context it is very relevant to note that the Hon'ble Arbitrator has been appointed as 'Upa Lokayukta' 8 AS.NO:39/2013 by the Government. The Hon'ble Arbitrator has indicated the same to the parties and directed the parties to seek appointment of new Arbitrator in his place on 29.08.2011. However, the Defendant has not opted to or initiated any proceeding for the appointment of the new Arbitrator nearly for a period of four months and kept the issue in the cold storage. For the said conduct, the Defendant is required to be blamed and not the Plaintiff in the Arbitration proceeding. The levy of the interest for such period on the Plaintiff is opposed to law. That in some occasion, due to non-sitting of the Arbitrator as he left to USA and adjourned for a longer period, then again the Plaintiff cannot be penalized with interest. Therefore, the Arbitral Tribunal may consider all the aforesaid aspects for awarding interest on Rs.1 Crore and the period for which the interest to be awarded is also an important aspect of the matter. The contract between the Defendant and Plaintiff is a contingent contract depending upon clearing of the dispute in respect of the properties of the Mutt. In 9 AS.NO:39/2013 fact, the Plaintiff has parted with huge sums of money to the said Sri Ramalingeshwara Mutt in order to honour his commitment to the Defendant. In view of the dispute regarding Peetadhipati of Sri Ramalingeshwara Mutt, the Plaintiff cannot comply with the terms and conditions of the Agreement. It is not the money transaction between the Defendant and the Plaintiff. The transaction is referable to the sale of the immovable property. Therefore, the question of deliberate default does not arise by looking into MOU itself. The conduct of the Plaintiff in the Arbitration proceedings cannot be doubted in view of the aforesaid circumstances. The Defendant is fully aware of the contingencies involved in the contract with regard to the title of the Mutt property. Therefore, at the best looking into the various correspondences between the parties, the Defendant should have terminated the contract and sought for refund of money at the earliest. The Defendant cannot keep the contract of sale on one hand intact and ask for refund of money on 10 AS.NO:39/2013 another hand. The Defendant should stick on to either termination of the contract seeking refund of the money or wait till the dispute pertaining to the Peetadhipati of Sri Ramalingeshwara Mutt is solved just in order to enable the Plaintiff to proceed with performance of his obligation in executing the Sale Deed pertaining to 'A' schedule property in favour of the Defendant. At any stretch of imagination, the Plaintiff in the Arbitration proceedings cannot be called as the willful defaulter and levy exorbitant interest on him. The land being an agricultural land, the non-agriculturist Company cannot enter into contract to buy agriculture land. The contract is opposed to law and public policy. The Company has not sought for any permission from the Government to buy the agricultural land. The said MOU is void ab initio and cannot be basis for making any claim. The Arbitrator has wrongly allowed the claim petition with cost erroneously. The Defendant and Plaintiff are parties to the agreement and they require to share the cost of the proceedings. 11 AS.NO:39/2013 The Arbitrator ought not to have imposed cost of the proceeding on the Plaintiff. The Arbitrator has also not spell out of the amount received by the Arbitrator from the parties in the award, hence, this suit for the aforesaid relief.
3) On service of notice, the Defendant marked appearance through his counsel and filed his written statement denying the plaint averments in general and contended that the Plaintiff has preferred this suit by suppressing and misrepresenting the material facts. The learned Arbitrator after considering all the contentions urged by the respective parties, the relevant facts, evidence, documents and point of law passed a well reasoned award dated 09.04.2013 allowing the claim petition in part. The learned Arbitrator is appointed by an order dated 05.02.2010 passed by the Hon'ble High Court of Karnataka in CMP.No.225/2009, so once an Arbitrator is appointed under Section 11(6) of the Arbitration Act, and Plaintiff did not opt to challenge the said order and 12 AS.NO:39/2013 the said order has attained finality, the procedure followed thereof in this regard cannot be questioned at a belated stage and it is not permissible. The Plaintiff has been unable to substantiate before this court as to how the award passed by the learned Arbitrator is beyond the scope of the submission to Arbitration. The Plaintiff had expressly vide his letter dated 28.10.2008 marked as Ex.C.15 and in his cross-examination had agreed to pay interest for the delay caused by him in repayment of the amount to the Defendant, thus, the Plaintiff is liable to repay the amount with interest. The Plaintiff has also failed to establish as to what was the procedure that was contemplated under the MOU which was not followed by the learned Arbitrator, when in fact, the MOU did not contemplate any particular procedure to be followed and the procedure based on which the proceedings came to be conducted by the learned Arbitrator was mutually agreed to between the parties. The Plaintiff has made this allegation desperately to initiate this suit based on 13 AS.NO:39/2013 frivolous grounds. The MOU clearly specifies the fact that all the disputes arising between the parties could be referred to Arbitration and empowers the Defendant to seek for refund of the amount along with interest as awarded by the learned Arbitrator on account of Plaintiff's failure to comply with his obligations and complete the transactions as contemplated under the MOU. The arbitral award is not in conflict with the public policy of India as there is no bar under Section 79A and 79B of the Karnataka Land Reforms Act, 1961 for a non-agriculturist to enter into an agreement to purchase an agricultural land without delivery of possession. Further, the act of entering into an agreement is not opposed to public policy nor is it contrary to law. The Plaintiff has failed to make a valid ground either on facts or under law to challenge the well reasoned award dated 09.04.2013 passed by the Arbitral Tribunal and has also ventured to cheat the Defendant, suppressed the material facts and has 14 AS.NO:39/2013 approached this court with unclean hands and prayed for dismissal of the suit with exemplary costs.
4) Heard. Perused the written arguments and also the records.
5) The points that arise for my consideration are :
(1) Whether he Plaintiff proves that the Arbitrator has entertained the claim of the Defendant presented by an unauthorized person and wrongly awarded 18% of interest on the claim?
(2) Whether Plaintiff has made out any of the grounds under Section 34 of the Arbitration and Conciliation Act, to set aside the Arbitration award?
(3) What Order?
6) My answer to the above points are :
Point No.1 - In the Negative;
Point No.2 - In the Negative;
Point No.3 - As per final order, for the
following :
15 AS.NO:39/2013
REASONS
7) Point No.1 and 2 : Since both these points
are inter related to each other, they are taken up together to avoid repetition of facts and for convenience of the court.
Upon going through the materials available on record, it is seen that the Plaintiff has come up with this suit to set aside the order dated 09.04.2013 passed in CMP.No.225/2009 by the Arbitrator under the Arbitration and Conciliation Act, 1996, on the ground that Mr.Vijaykumar G. Bagoji has no right to sue on behalf of Defendant company and the claim statement is liable to be dismissed for non joinder of necessary and proper parties; he has not received the advance amount, but however had given a sum of Rs.80 lakhs to his vendor, the original land owner Sri Ramalingeshwara Mutt and admitted having provided schedule 'B' property as security towards the advance amount. That even at the 16 AS.NO:39/2013 time of entering into the MOU in question, the Defendant was aware of the fact that there was a dispute with regard to the Peetadi Pati of his vendor viz., Sri Ramalingeshwaraa Mutt and opted to enter into MOU in question since the merits of the case was in favour of his vendor, unfortunately even though there was an order from the Hon'ble High Court to accord khatha of various properties including Schedule 'A' property in favour of his vendor, the Plaintiff and his vendor were not in a position to make out a clear and marketable title in view of certain frivolous cases filed by number of persons seeking 'peeta' of Sri Ramalingeshwara Mutt. Though the said inability was explained in detail to the Defendant and sought time to execute a sale deed after disposal of the cases pending against his Vendor, he showed deaf ears to the same and went on insisting the due honour of the MOU, hence, the Plaintiff issued a letter dated 28.10.2008 giving option of repayment of the advance amount stating that he himself has advanced huge 17 AS.NO:39/2013 amount to his vendor with regard to the Schedule 'A' property and other five properties and meaningful negations are going on and certain time is required for actual turn around and he could not make arrangement for settlement of the advance received by him in view of the market fluctuation and even then he was not in a position to settle the matter unless and until the dispute regarding the 'peetadi pati' of his vendor is resolved by the Hon'ble High Court. The Plaintiff is not liable to make good the alleged losses to the Defendant muchless to the tune of Rs.10 crores and the said claim is unsustainable in law and it does not form part of the contract and same is liable to be rejected. Further, the interest at 18% p.a. made by the Defendant on a sum of Rs.1 Crore from the date of receipt of the same till payment by the Plaintiff is not maintainable and the same is speculative claim and the MOU doesn't stipulate payment of any interest, in the absence of agreement for payment of interest in the contract, the Tribunal has no 18 AS.NO:39/2013 jurisdiction to grant any interest muchless at 18% p.a. That the property in question viz., land bearing Sy.No.19 of Bilekali Village, Kasaba Hobli, Bengaluru North Taluk, Bengaluru is an agriculture land and the Defendant Company is not competent to enter into any sort of contract to buy the same, the contract dated 01.04.2006 by way of MOU is a void contract opposed to law and public policy, etc.
8) On the other hand, the Defendant has contended that, it is engaged in the business of Real Estate Development and Plaintiff is also in the business of real estate development. In March, 2006 the Plaintiff approached them stating that he is an agreement holder in respect of land measuring approximately 80,000 sq.ft. comprised in portion of Sy.No.19 of Bilekahalli Village, Kasaba Hobli, Bengaluru North Taluk i.e. 'A' schedule property and represented that claim 'A' schedule property was owned by Sri Ramalingeshwara Mutt and he had 19 AS.NO:39/2013 entered into an agreement for purchase of the said property with the said Mutt and he is authorized by the land owner to deal with the said property and on that basis, the Defendant agreed to purchase the said property from the land owner through the Plaintiff who is an agreement holder at Rs.4,600/- per sq.ft., which would have an access through a 40 ft. public road, who had agreed to make out a good and marketable title to the satisfaction of the Defendant. Accordingly, the Defendant made advance payment of Rs.1 crore to the Plaintiff on execution of MOU dated 01.04.2006 by way of cheque agreeing to make further payment after complying with the terms and conditions of the MOU. Since schedule 'A' property was not owned by the Plaintiff, he offered residential site Nos. 49 and 50 situated at 'Spring Woods Enclave' , a BMRDA approved layout formed in Sy.No.171/3, Bukkasagara Village, Jigani Hobli, Anekal Taluk, Bengaluru, along with other survey numbers developed by a company owned by the Plaintiff 20 AS.NO:39/2013 as security towards the advance payment of Rs.1 Crore and a simple mortgage deed dated 01.04.2006 was also entered into and executed by the Plaintiff along with his company Landtech (India) Condominiums Private Ltd., in favour of the Defendant. Thereafter, the Defendant requested the Plaintiff time and again to furnish the documents relating to the claim schedule 'A' property in order to comply with the terms and conditions of MOU so as to make out a clear and marketable title over the schedule 'A' property, but the Plaintiff delayed the matter and did not discharge his obligations and by his letter dated 28.10.2008 informed that nothing concrete had moved in the matter and volunteered to refund the advance amount with interest to settle the matter, which was agreed by the Defendant by its letter dated 29.11.2008. However, even after unequivocal promise and admission to refund the advance amount along with interest, the Plaintiff did not comply with the same, hence, had no option but to realize the security provided 21 AS.NO:39/2013 by the Plaintiff under Agreement of simple mortgage, but the Plaintiff had sold the Schedule 'B' property without the consent and knowledge of the Defendant with an intention to make unlawful gain at the cost of the Defendant and also to frustrate the terms of the MOU. Thus, the Plaintiff has miserably failed to honour the terms and conditions of the MOU and failed to repay the advance amount with interest as agreed upon by him. In these circumstances, the Defendant invoked Arbitration clause and issued a legal notice dated 04.04.2009, even then, the Plaintiff did not either replied or paid the amount. The Defendant has not committed any breach of the MOU and has suffered tremendous losses on account of default on the part of the Plaintiff and he being in the business of real estate development intended to purchase the schedule 'A' property situated in a prime area for the purpose of development into a commercial office building, which would have fetched considerable returns and on account of non performance of the obligations by 22 AS.NO:39/2013 the Plaintiff, the Defendant could not realize the expected profits, etc.
9) At this stage, it is relevant to have a look at the provisions of Section 34 of the Arbitration and conciliation Act, 1996.
" 34. Application for setting aside arbitral award.- (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).
(2) An arbitral award my be set aside by the Court only if -
(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 submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the 23 AS.NO:39/2013 arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provisions of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the Court finds that -
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation.- Without prejudice to the generality of sub-clause (ii) it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81."
The Arbitration and Conciliation (Amendment) Act, 2015 reads as under:
"18. In Section 34 of the Principal Act.- (I) In sub-section (2), in clause (b), for the Explanation, the following Explanations shall be substituted, namely :-
(i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or section 81; or
(ii) it is in contravention with the fundamental policy of Indian law;
or 24 AS.NO:39/2013
(iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.", (II) after sub-section (2), the following sub-section shall be inserted, namely :-
"2(A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by re- appreciation of evidence."
10) To add to this, in a land mark judgment rendered by the Hon'ble Supreme Court of India in Civil Appeal No.10531/2014 reported in AIR 2015 SC 620 between Associate Builders Vs. Delhi Development Authority dated 25.11.2014 extends a wider scope to Section 34 of the Arbitration and Conciliation Act, 1996. Their Lordships have clearly mandated that :
"an extent of judicial intervention notwithstanding anything contained in any other law for the time 25 AS.NO:39/2013 being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part. (Section 5) It is important to note that, the 1996 Act was enacted to replace the 1940 Arbitration Act in order to provide for an arbitral procedure which is fair, efficient and capable of meeting the needs of Arbitration; also to provide that the tribunal gives reasons for an arbitral award; to ensure that the tribunal remains within the limits of its jurisdiction; and to minimize the supervisory roles of courts in the arbitral process.
Therefore, in our view, the phrase "public policy of India" used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term "public policy" in Renusagar case is required to be held that the award could be set aside if it is patently illegal. The result would be, award could be set aside if it is contrary to :
(a) Fundamental policy of Indian law; or
(b) The interest of India; or
(c) Justice or morality, or
(d) In addition, if it is patently illegal.
Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void.
103. Such patent illegality, however, must go to the root of the matter. The public policy, indisputably, should be unfair and unreasonable so as to shock the conscience of the court. Where 26 AS.NO:39/2013 the Arbitrator, however, has gone contrary to or beyond the expressed law of the contract or granted relief in the matter not in dispute would come within the purview of Section 34 of the Act.
35. Without meaning to exhaustively enumerate the purport of the expression "fundamental policy of Indian law", we may refer to three distinct and fundamental juristic principles that must necessarily be understood as a part and parcel of the fundamental policy of Indian law. The first and foremost is the principle that in every determination whether by a court or other authority that affects the rights of a citizen or leads to any civil consequences, the court or authority concerned is bound to adopt what is in legal parlance called as "judicial approach" in the matter. The duty to adopt a judicial approach arises from the very nature of the power exercised by the court or the authority does not have to be separately or additionally enjoined upon the fora concerned. What must be remembered is that the importance of a judicial approach in judicial and quasi-judicial determination lies in the fact that so long as the court, tribunal or the authority exercising powers that affect the rights or obligations of the parties before them shows fidelity to judicial approach, they cannot act in an arbitrary, capricious or whimsical manner. Judicial approach ensures that the authority acts bona fide and deals with the subject in a fair, reasonable and objective manner and that its decision is not actuated by any extraneous consideration. Judicial approach in that sense acts as a check against flaws and faults that can render the decision of a court, tribunal or authority vulnerable to challenge.
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 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; or 27 AS.NO:39/2013
3. ignores vital evidence in arriving at its decision.
such decision would necessarily be perverse.
A broad distinction has, therefore, to be maintained between the decisions which are perverse and those which are not. If a decision is arrived at on no evidence or evidence which is thoroughly unreliable and no reasonable person would act upon it, the order would be perverse. But if there is some evidence on record which is acceptable and which could be relied upon, howsoever compendious it may be, the conclusions would not be treated as perverse and the findings would not be interfered with.
It must clearly be understood that when a court is applying the "public policy"
test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. 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 invalid on this score.
A Court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or re-appreciating the evidence. An award can be challenged only under the grounds mentioned in Section 34(2) of the Act.
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 ultimately awards him 45 lakhs without an acceptable reason or justification. Obviously, 28 AS.NO:39/2013 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".
If the Arbitrator commits an error in the construction of the contract, that is an error within his jurisdiction. But if he wanders outside the contract and deals with matters not allotted to him, he commits a jurisdictional error. Extrinsic evidence is admissible in such cases because the dispute is not something which arises under or in relation to the contract or dependent on the construction of the contract or to be determined within the award. The ambiguity of the award can, in such cases, be resolved by admitting extrinsic evidence. The rationale of this rule is that the nature of the dispute is something which has to be determined outside and independent of what appears in the award. Such a jurisdictional error needs to be proved by evidence extrinsic to the award.
The court while considering challenge to arbitral award does not sit in appeal over the findings and decision of the Arbitrator, which is what the High Court has practically done in this matter. The umpire is legitimately entitled to take the view which he holds to be the correct one after considering the material before him and after interpreting the provisions of the agreement. If he does so, the decision of the umpire has to be accepted as final and binding."
11) Upon going through the materials available on record, it is seen that the Plaintiff has challenged the award on two counts. The first point is that, the Defendant/Claimant has to satisfy the tribunal about the 29 AS.NO:39/2013 competency of the authorized person to sue in the absence of any GPA by the Company. The Defendant has not at all given any explanation in this regard, hence, the claim petition is not properly presented by the Defendant and the evidence adduced by C.W.1 cannot be looked into. The learned Arbitrator has wrongly interpreted under Order 29 Rule 1 and Order 6 Rule 14 and wrongly held that the provision is maintainable. Another ground challenging the arbitral award is that, awarding interest at 18% from the date of MOU and made claim to the tune of Rs.73,50,000/- till the date of claim petition is unsustainable as the contract doesn't provide for the same, the Arbitrator has wrongly allowed the same. The MOU dated 01.04.2006 doesn't stipulate payment of interest much less at the rate of 18% on Rs.1 Crore. The contract between the parties doesn't indicate the payment of interest from the date of contract, therefore calculation of interest at the rate of 18% on a sum of Rs.1 Crore 30 AS.NO:39/2013 amounting to Rs.73,50,000/- is speculative, unsustainable, etc.
12) In support of the claim, Plaintiff filed written arguments and the learned counsel for the Plaintiff vehemently argued that the claim petition was not properly verified and represented. The contract dated 01.04.2006 to sell agricultural land is forbidden in law and opposed to public policy, the contract prohibits sale of agricultural land in favour of non agriculturist under Section 79 of the Land Reforms Act. The learned counsel has relied on judgment reported in 1991(3) SCC 67; AIR 2010 SCW 1715 etc. On the other hand, the learned counsel appearing for the Defendant through his written arguments contended that CW.1 was duly authorized by the Board of Directors to represent the Defendant Company in the Arbitration matter and there is no legal infirmity or illegality as alleged by the Plaintiff. The learned counsel 31 AS.NO:39/2013 relying on the judgment reported in (2010)(3) SCC 690 and (2005) 6 SCC 462 vehemently argued that the claim of the Plaintiff that the contract of authorities was void in nature as the same is forbidden in law in view of the fact that non agriculturist company cannot buy agricultural land in violation of Section 79A of the Karnataka Land Reforms Act, is not sustainable.
13) Upon going through the materials available on record, it is seen that the learned Arbitrator has framed as many as nine issues based on the claim of the parties. The important issue that touches the crucks of this dispute is Issue No.2, which reads thus :
" (2) Whether the Claimant proves that the Claimant is entitled for pendent elite interest at the rate of 18% p.a. on the amount of Rs.1,00,00,000/- from the date of filing of the Claim Petition until the disposal of the matter and for further interest at the rate of 18% p.a. from the date of the award till receipt of payment by the Respondent?"32 AS.NO:39/2013
On careful perusal of the reasoning of the learned Arbitrator, it is seen that the learned Arbitrator has relied upon catena of decision of the Hon'ble Supreme Court to arrive at such a conclusion. As far as competency of C.W.1 to represent this case, the learned Arbitrator has observed that 'it is no doubt true that the claim statement is signed by one Mr.Vijayakumar Bagoji. Admittedly, he is not the Managing Director. But, however, the Claimant has placed before this Tribunal a certified copy of resolution of the company in the case on hand. In fact the said resolution would show that Mr.Vijayakumar Bagoji has been authorized by the Claimant company to file this Claim Statement.' The learned Arbitrator has relied upon the decision reported in (1996) 6 SCC 660 (United Bank of India Vs. Naresh Kumar and Others) and has observed that 'in the circumstances and in the light of the law laid down by the Hon'ble Supreme Court in the decision cited supra, the defence of the Respondent with regard to the claim 33 AS.NO:39/2013 statement being not signed by the Managing Director and that the claim statement is not maintainable does not hold water. This argument in the light of resolution stands rejected.'
14) As far as the 2nd claim of the Plaintiff regarding awarding interest is concerned, at page-25 of the award the learned Arbitrator has made the following observation:
" Admittedly, the Respondent has received the payment of Rs.1 crore from the Claimant and he is liable to refund the same in terms of my earlier findings. What is the interest to be granted to the Claimant is the question. It is no doubt true that the Claimant has claimed interest @ 18% p.a. i.e. from 1.4.2006. Admittedly, the payment was made on 1.4.2006 and a demand was made for refund on 28.10.2008. Though the Respondent has agreed to make the payment, he has failed to do so resulting in this reference. As mentioned earlier, the agreement is silent with regard to interest. In the circumstances, in terms of section 31 (7) and in the light of clear pronouncement of the law laid down by the Hon'ble Supreme Court this Tribunal has to exercise its discretion in the matter of awarding interest in the given circumstances. Payment has been received by the Respondent on 1.4.2006. Admittedly, it is a huge payment. It is also clear from the material on record that the property does not have clear marketable title and even the Respondent admits the same in his letter Ex.C15. In the given circumstances and in the absence of clear terms in the Memorandum of Understanding, 34 AS.NO:39/2013 in terms of the law laid down by the Supreme Court, I have exercised my discretion in the matter of grant of interest. The Act provides for interest @ 18% p.a. in terms of Section 31 of the Act. The latest law laid down by the Supreme Court provides a discretion to the Tribunal to grant interest for pre- award period, of course subject to there being no clear terms in terms of the contract. In the case on hand there is no term prescribed providing for rate of interest. However, the payment of amount is admitted from 1.4.2006 and RW-1 has undertaken to pay the interest in terms of Ex.C15 made available to the Tribunal. Despite receipt of payment, despite agreeing to pay the said amount with interest, the Respondent has not made over the payment till date. A huge amount of Rs.1 crore has been received by the Respondent without performing his part of the obligations in terms of the MOU. Admittedly, the Respondent is a business man. Rs.1 crore paid in the year 2006 would be much more valuable in the light of fall in rupee value as on date. A inference can be drawn that the Respondent must have utilized this money for his business activities and would have earned on this money.
In the circumstances, taking into consideration all aspect of the matter, I deem it proper to exercise my discretion and grant interest at the rate of 18% p.a. only w.e.f. 1.4.2006 till the date of award. On his failure to pay in terms of this Award the Respondent is further liable to pay future interest @ 18% p.a. to the Claimant. In fact this has become necessary in the light of the findings of the Hon'ble Supreme Court in the case of State of Haryana wherein the Hon'ble Supreme Court has ruled that interest @ 18% p.a. is deliberately provided with an intention of discouraging award debtors from adopting dilatory tactics and to persuade them to comply with the award. The conduct of the Respondent is also to be seen in the case on hand. In terms of the agreement the Respondent has certain obligations in terms of clauses 2, 3, 6 and 7 of Ex.C2. The Respondent has admitted that he has not provided 40 ft. Road 35 AS.NO:39/2013 in view of litigation and further admitted that there is a pending litigation with the Mutt with regard to the title in respect of schedule property. He has also agreed that he ha not provided any documents evidencing statutory approval and clearances in respect of the property in question. All that the Respondent would say is that the Respondent is unable to provide a clear marketable title in respect of the schedule property. Knowing fully well the pending litigation he has chosen to say that he has a marketable title and on that basis he has received Rs.1 crore from the Claimant. The conduct of the Respondent certainly compels the Tribunal to grant interest @ 18% p.a."
15) Added to that, the decisions relied by the Respondent reported in (1996) 6 SCC 660 comes to the aid of the Defendant's claim, wherein their Lordships have held that 'a person may be expressly authorized to sign the pleadings on behalf of the Company, for example by the Board of Directors passing a resolution to that effect or by a power of attorney being executed in favour of any individual. In absence thereof and in cases where pleadings have been signed by one of its officers a corporation can ratify the said action of its officer in signing the pleadings. Such ratification can be express or implied.' 36 AS.NO:39/2013
16) To add to this, in a judgment relied by the Respondent in (2005) 1 Kar.L.J., 385 (Town Ship Enterprises, Bangalore Vs. State of Karnataka & Another), our own High Court has observed that, ' Thus, this Court has laid down the law that an agreement to sell agricultural lands to a non-agriculturist is not a contract in contravention of the prohibition of the Reforms Act, and there is no bar under the Reforms Act for entering into an agreement to sell agricultural land in favour of a non-agriculturist, and that such agreement cannot be said, to be opposed to public policy or contrary to law.' The said judgments are squarely applicable to the case on hand. The same ratio has been upheld by the division bench of our own High Court in 2009(1) KAr.L.J., 547 (Parvatagouda Ninganagouda Patil and Others Vs. Guddappa and Another). Hence, the judgment relied by the Plaintiff cannot be applied to the facts and circumstances of this case, in view of direct applicable judgments of Hon'ble Supreme Court.
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17) This fact clearly indicates that the learned Arbitrator has gone in detail every minute material available on record and has arrived at a just and fair conclusion. Added to that, the Honble supreme court in Associate Builders VS Delhi Development Corporation case referred supra, lays down the principle that if the Arbitrator commits an error in the construction of the contract, that is an error within his jurisdiction. But if he wonders outside the contract and deals with matters not allotted to him, he commits a jurisdictional error. But here in the case, absolutely no case is made out by the Plaintiff to establish that learned Arbitrator had exceeded his jurisdiction by wondering outside the contract and dealt the matter not allotted to him. Added to that, their lordships of Honble Supreme Court has specifically mandated that extrinsic evidence is admissible in such cases because the dispute is not something which arises under or in relation to the contract or dependent on the construction of the contract or to be determined within 38 AS.NO:39/2013 the award. The ambiguity of the award can, in such cases, be resolved by admitting extrinsic evidence. The rationale of this rule is that the nature of the dispute is something which has to be determined outside and independent of what appears in the award. Such a jurisdictional error needs to be proved by evidence extrinsic to the award. But here in the case absolutely no evidence placed by the Plaintiff to establish such apparent jurisdictional error committed by the learned arbitrator.
18) It is the settled principle of law that the court while considering challenge to arbitral award does not sit in appeal over the findings and decision of the Arbitrator. The umpire is legitimately entitled to take the view which he holds to be the correct one after considering the material before him and after interpreting the provisions of the agreement. If he does so, the decision of the umpire has to be accepted as final and binding. A broad 39 AS.NO:39/2013 distinction has, therefore, to be maintained between the decisions which are perverse and those which are not. If a decision is arrived at on no evidence or evidence which is thoroughly unreliable and no reasonable person would act upon it, the order would be perverse. But if there is some evidence on record which is acceptable and which could be relied upon, howsoever compendious it may be, the conclusions would not be treated as perverse and the findings would not be interfered with. Hence as rightly pointed out by the learned counsel for the Defendant, just because the opinion of the Arbitrator expressed against the interest of the Plaintiff, that itself cannot be a ground to set aside the award. Here in the case the Plaintiff has not placed any convincing materials to establish that decision is arrived at on no evidence or evidence which is thoroughly unreliable and no reasonable person would act upon it, the order would be perverse. Apart from that, since the reasoning in the award is based on the materials available on record, the 40 AS.NO:39/2013 learned Arbitrator is legitimately entitled to take the view which he holds to be correct one after considering the materials before him and after interpreting the provisions of the agreement. Since the learned Arbitrator does so, the decision of the learned Arbitrator has to be accepted as final and binding.
19) Added to that, the ratios laid down by their Lordships of the Hon'ble Supreme Court of India in the judgments referred supra, makes it very clear that this court cannot sit as a appellate court and reconsider the minute evidence and re-appreciate it, rather, this court gets jurisdiction to set aside the award only under Section 34 of the Act, that too, if it is established that any of the grounds under Section 34 of the Act, is made out. Apart from that, their lordship of the Hon'ble Supreme Court in the above referred judgment clearly mandated that a broad distinction has to be maintained between the decisions which are perverse and those which are not. If a decision is arrived at on no evidence 41 AS.NO:39/2013 or evidence which is thoroughly unreliable and no reasonable person would act upon it, the order would be perverse. But if there is some evidence on record which is acceptable and which could be relied upon, howsoever compendious it may be, the conclusions would not be treated as perverse and the findings would not be interfered with. Here in the case as narrated above, the learned Arbitrator has based his decisions relying on the decisions of the Hon'ble Supreme Court, hence, the said opinion cannot be termed as perverse to bring it within the ambit of Section 34 of the Act.
20) Under the facts and circumstances of the case, I am of the opinion that absolutely no grounds are made out by the Plaintiff to establish any of the grounds mentioned in the plaint or any of the grounds available in Section 34(b) of the Arbitration and Conciliation Act, 1996. The judgment referred supra rendered by the Hon'ble Supreme Court in Associate Builders Vs. Delhi 42 AS.NO:39/2013 Development Corporation makes it very clear that this court cannot sit on an appellate jurisdiction and the arbitral award cannot be set aside on trivial grounds. The Hon'ble Supreme Court consistently mandated that, if the Arbitrator wonders outside the work and deals with the matter not allotted to him, then only it can be termed as judicial error. Apart from that, the Arbitration and Conciliation Act makes provision for review of the arbitral award only to ensure fairness, intervention of the court is envisaged in few circumstances only, like fraud or bias by the arbitrator, violation of natural justice. Court cannot correct the errors of the Arbitrator. Scheme of the provisions 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 courts jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it. Herein the case, the learned Arbitrator has dealt the matter squarely within the four corners of the matter 43 AS.NO:39/2013 allotted to him. Added to that, no act is done by the learned Arbitrator which could be termed the award as perverse or unfair and unreasonable so as to shock the conscience of the court. The Plaintiff has utterly failed to establish that the learned Arbitrator has gone contrary to law or beyond the expressed law of the contract or granted relief in the matter not in dispute. Under these circumstances, I hold that the Plaintiff has utterly failed in establishing that the award passed by the learned Arbitrator falls within any of the clauses of Section 34 of the Arbitration and Conciliation Act, 1996, much less, any of the grounds mentioned in the plaint is established, accordingly, I answer the above points in the negative.
21) Point No.3 : In view of the foregoing reasons and answer to Point No.1 and 2, the suit of the Plaintiff is liable to be dismissed. In the result, I proceed to pass the following :
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ORDER (1) The suit filed by the Plaintiff under Section 34 of the Arbitration and Conciliation Act, 1996, to set aside the award dated 09.04.2013 passed in CMP.No.225/2009 passed by the Hon'ble Arbitrator; is hereby dismissed.
(2) Parties to bear their own costs.
(Dictated to the Judgment Writer, transcribed and computerized by her, transcript thereof corrected and then pronounced by me in open Court, dated this the 9th February, 2017.) (K.M.RAJASHEKAR) VI Addl.City Civil & Sessions Judge Bengaluru City.