Bangalore District Court
M/S J M Associates vs Mohammed Gafoorur Rahman on 2 February, 2026
KABC170029082025
IN THE COURT OF LXXXV ADDL. CITY CIVIL &
SESSIONS JUDGE, AT BENGALURU (CCH-86)
(Commercial Court)
THIS THE 2nd DAY OF FEBRUARY 2026
PRESENT:
SRI.ARJUN. S. MALLUR. B.A.L.LL.B.,
LXXXV ADDL. CITY CIVIL & SESSIONS JUDGE,
BENGALURU.
Com.A.P.NO.127/2025
BETWEEN:
M/S J M Associates
A Partnership firm presently having it office At No. 102,
103, Ground Floor, Prestige Center Point,
Cunningham Road, Bangalore-560052.
Reptd. By Managing Partner,
Mr. Mohammed Meraj.
: PETITIONER/APPLICANT
(Represented by Sri. H Mujtaba, Advocate)
AND
Mohammed Gafoorur Rahman
Son of Late Abdus Subhan,
Aged about 80 years,
R/at No. 93, ITI Layout,
Com AP 127/ 2025
6th Main, Bangalore-46.
2. Mr. Vivekananda S
Sole Arbitrator
Bunglow No.3
Jayamahal Palace Hotel
No.1, Jayamahal Road
Bangalore-46
(Represented by Sri. S.R.Kamalacharan., Advocate for R.1)
(R2 - Sole Arbitrator)
Date of Institution of the 12.09.2025
suit
Nature of the suit (suit on Arbitration Suit under
pronote, suit for Sec. 34 of Arbitration &
declaration & Possession, Conciliation Act, 1996
Suit for injunction etc.)
Date of commencement of
recording of evidence ---
Date on which judgment 02.02.2026
was pronounced
Total Duration Year/s Month/s Day/s
00 04 21
(ARJUN. S. MALLUR)
LXXXV Addl.City Civil & Sessions Judge,
Bengaluru.
JUDGMENT
Petition under Sec.34 of the Arbitration and Conciliation Act 1996 seeking setting aside the arbitral 2 Com AP 127/ 2025 award passed by the Learned Sole Arbitrator in A.C.No.1/2020 dated 12.07.2022.
Parties are referred as per their rank before the Arbitral Tribunal.
2. Facts in brief is as under:-
The claimant is the absolute owner of the residential property bearing site No.102, situated at 6 th Main, ITI Layout, Chinnappa Garden, Municipal Ward No.62 of Pulakeshinagar, Bengaluru. The claimant had entered into a Joint Development Agreement and GPA with the respondent for construction of a residential apartment dated 10.01.2014 registered on 25.03.2014. It is submitted that as per the terms and conditions of the JDA the respondent No.1 was required to complete the work within the timelines but did not complete the same and the claimant sent an email to the respondent indicating that the claimant intends to proceed with the construction themselves. In this regard a meeting came to be convened on 09.05.2017 in which it was agreed that the claimant would undertake the remaining construction work by infusing the funds and all the payments made by the claimant towards the construction would be reimbursed by the respondent. It 3 Com AP 127/ 2025 is further contended that thereafter the claimant has spent nearly a sum of Rs.24,51,202/- for completion of the construction work by September 2017 and thereafter the claimant took his share of the developed property. The respondent had undertaken to reimburse the said amount and, in that regard, paid a sum of Rs.5,00,000/- through RTGS and NEFT and a sum of Rs.4,90,000/- came to be adjusted. However, the respondent failed to pay the balance amount inspite of issuance of a legal notice. The claimant invoked the arbitration clause by issuing a notice dated 01.08.2018 to which there was no reply. Thereafter the claimant filed the proceedings in C.M.P.No.12/2019 under which the Sole Arbitrator came to be appointed.
(a) Upon constitution of the tribunal the Learned Sole Arbitrator issued notices and declared that he does not have any past or present relationship with any of the properties as required under schedule V and VI of the Arbitration and Conciliation Act. However, the declaration was not in the mandated form as specified under schedule VI. Before the Learned Sole Arbitrator the claimant filed the claim statement raising several contentions and sought for granting the following reliefs:4
Com AP 127/ 2025
a) a sum of Rs.24,51,202/- (Twenty-Four Lakhs Fifty One Thousand Two Hundred and Two Only) to the claimant towards refund of actual expenses incurred by the Claimant for completion of the construction works, along with interest at the rate of 18% per annum on Rs.29,51,202/- from September 2017 till date of payment.
b) a sum of Rs.25,00,000/- (Rupees Twenty-Five Lakhs only) to the claimant towards goodwill amount as admitted by the Respondent in its letter dated 12.12.2012 (Exhibit C-1), along with interest at the rate of 18% per annum from 06.07.2014 till date of payment,
c) a sum of Rs 4,90,000/- (Rupees Four Lakhs and Ninety Thousand only) to the claimant towards rent for alternate accommodation as per clause 11 of JDA along with interest at the rate of 18% per annum from July 2016 till date of payment,
d) a sum of Rs 25,00,000/-(Rupees Twenty Five Lakhs only) to the claimant towards Compensation for breach of JDA, Non-completion of Construction and lapses on the part of Respondent along with interest at the rate of 5 Com AP 127/ 2025 18% per annum from the date of commencement of arbitration proceedings till date of payment,
e) a sum of Rs. 75,00,000/- (Rupees Seventy-Five Lakhs only) to the claimant towards loss of future profit, mental agony and stress caused due to the breach of contract committed by the Respondent,
f) a sum of Rs. 15,00,000/- (Rupees Fifteen Five Lakhs only) to the claimant towards cost of these proceedings and cost of proceedings before the Hon'ble High Court, since the Respondent needlessly driven the Claimant to litigation Among them the prayer sought at 'c' came to be withdrawn by the claimant.
3. Before the Learned Sole Arbitrator the respondent filed his statement of defence denying the averments made in the claim petition contending that the respondent has not committed any breach of contract and the contract was completed within the agreed time and further that the time for completion of the works came to be extended from time to time with mutual consent of both the parties. As the date for completion extended mutually the claimant has not initiated any action against the respondent as per the terms of the 6 Com AP 127/ 2025 JDA. Further it is stated that the amount that was spent by the claimant has been duly reimbursed by the respondent and that the respondent is not liable to make any payments. The respondent further contended that the claimant has conveniently suppressed the payments made by the respondent only to make a unlawful gain and unjustly enrich himself. A further contention was taken that pursuant to the filling of the petition in C.M.P.No.12/2019 the claimant had executed registered Gift Deeds gifting all the apartment of his shares to his two sons and therefore he had no right title and interest over the property and thus could not maintain the claim before the Arbitrator. It is averred that the claimant has deliberately concealed these facts and on these grounds the respondent sought to reject the claim.
4. Before the learned sole arbitrator, the claimant examined himself as CW-1 and got marked documents at Ex.C.1 to C.48. No oral evidence was led by the respondent. The respondent got marked documents at Ex.R.8 to R.13.
5. Upon considering the oral and documentary evidence. The Learned Sole Arbitrator vide award dated 12.07.2022 allowed the claim petition in part directed 7 Com AP 127/ 2025 the respondent to pay a sum of Rs.17,91,202/- with interest at the rate of 12% p.a. from 08.12.2017 till realization and also directed the respondent to pay a sum of Rs.4,80,000/- as damages towards breach of JDA and a sum of Rs.4,00,000/- as cost of the proceedings.
6. The respondent has challenged the said award under Sec.34 of the Arbitration and Conciliation Act urging various grounds. Even though the respondent has raised as many as 37 grounds they can be broadly classified as under:
a) That the award passed by the Learned Sole Arbitrator is bad for non-compliance of mandatory declaration and disclosure required to be provided under Sec.12 R/w Schedule VI to the Arbitration and Conciliation Act 1996.
It is alleged that the explanation two to Sec.12 mandates such disclosure to be made in the form specified in VI Schedule and Learned Sole Arbitrator having not done so the award is liable to be set aside.
b) The award passed by the Learned Sole Arbitrator is perverse and in fact is non est in law as the award is not filed within the mandatory period of 12 months from the date of completion of pleadings. It is alleged that completion of the pleadings before the Learned Sole 8 Com AP 127/ 2025 Arbitrator was on 21.06.2021. The Arbitrator ought to have passed the award on or before 20.06.2022 but the award passed on 12.07.2022 is beyond the period of 12 months as contemplated under Sec.29A (1) of the Arbitration and Conciliation Act. It is alleged that there was no extension of the mandate of Arbitration either by mutual consent or by way of application to the Court. Therefore, the award is non-est in law.
c). Apart from the above main two grounds the others grounds urged is that the Learned Sole Arbitrator has not taken into consideration the fact that as on the date of entering reference the claimant had no subsisting right in the property as by virtue of a registered gift he had gifted away all the properties in favor of his children and therefore as on the date of filing of the claim petition on 23.01.2019 the claimant having given away his title on the properties no claim could have been maintained before the Learned Sole Arbitrator. It is alleged that even though the same widely canvased in the statement of defence and substantiated before the Arbitrator the same has not been taken into consideration and that the Learned Sole Arbitrator has passed the award ignoring the material facts which amount to perversity and is liable to be set aside.
9Com AP 127/ 2025
d). It is further contended that the Learned Sole Arbitrator has grossly misread Ex.P.20(b) minutes of meeting which in fact provided that the reimbursement on part of the respondent was only up to Rs.10,00,000/- and not beyond it. It is submitted that as per MOM the respondent was only required to reimburse to an upper limit of Rs.10,00,000/- and therefore the Learned Sole Arbitrator was not justified in awarding payment of a sum of Rs.17,91,202/-. It is further alleged that the Learned Sole Arbitrator has not taken into consideration the documentary evidence put forth by the respondent and the answers elicited in the cross examination and has wrongly awarded repayment of the sum of Rs.17,91,202/-.
e). The other grounds urged is that the Learned Sole Arbitrator without any valid evidence on record has wrongly concluded that there was breach on part of the respondent in performance of terms of JDA and has awarded damages. It is contended that the claimant has never sought to declare that the JDA is invalid and not enforceable and in the absence of such a declarative relief the Learned Sole Arbitrator could not have awarded damages for breach of terms of JDA which amounts to a patent illegality appearing on the face of it 10 Com AP 127/ 2025 and not sustainable. It is also contended that the Learned Sole Arbitrator has acted against the provisions of Sec.55 of the Indian Contract Act and Sec.73 and has wrongly awarded a sum of Rs.4,80,000/- as damages. It is further alleged that the award passed by the Learned Sole Arbitrator is oppose of principles of law, justice and morality, suffers from patent illegality and is in ignorance of public policy of India and on these grounds broadly the respondent seeks for setting aside of the award.
7. Upon service of notice the claimant appeared through the counsel and filed statement of objections primarily contending that none of the grounds urged in the petition qualify as ground under Sec.34 of the Arbitration and Conciliation Act 1996 to set aside the award. It is further contended that the Hon'ble Apex Court in catena of judgments has held that the award of an Arbitrator can be set aside only on the grounds falling within the ambit of Sec. 34 and nothing beyond it. The claimant, apart from reiterating the facts, contends that the Learned Sole Arbitrator has duly complied with the requirement of Sec.12 of the Act, R/w Schedule VI and that there is no mandatory requirement that the disclosure by an Arbitrator must be necessarily 11 Com AP 127/ 2025 in the form as mandated in schedule VI. Further it is contended that subsequent to the initiation of the arbitral proceedings due to on slot of Covid 19 pandemic the Hon'ble Apex Court vide its order is Suo Motu Writ Petition (Civil) No.3 of 2020 In Re:
Cognizance For Extension Of Limitation has observed that the period from 15.03.2020 till 28.02.2022 needs to be excluded for the purpose of computing limitation in Arbitration matters as required under Sec.23(4) and Sec.29(A) of the Act. Therefore, for the period of computing the limitation it is to be reckoned from 01.3.2022 and from that date the award is well within the period of limitation. The claimant denies all other grounds urged in the petition and contends that claim before the Arbitrator was only about reimbursement of the expenses incurred by the claimant in terms of the MOU and for payment of damages. The claimant gifting the properties to his sons would have no bearing on the reliefs claimed in the petition. It is further contended that the tribunal upon careful consideration of all the evidence on record has rightly arrived at the conclusion for repayment of the amount as requested. It is further contended that the Learned Sole Arbitrator has proceeded to award damages as per the clauses of the JDA and in so far as 12 Com AP 127/ 2025 awarding of interest it is as per Sec.31(7)(a) which empowers the Arbitrator to award interest as it deems fit and on these grounds the claimant seeks for dismissing the petition with exemplary costs.
8. The 2nd respondent being the Learned Sole Arbitrator notice has been dispensed. The arbitral records have been filed by both the parties.
9. Heard the Learned Counsel appearing for the petitioner and the counsel for respondents who have also filed respective citations. Perused the entire material on records.
10. The points that arise for my consideration are as below:
(1) Whether the petitioner substantiates that the learned sole arbitrator has not complied with the mandatory requirement of disclosure as contemplated under Sec.12 of the Arbitration and Conciliation Act 1996 thereby rendering the award liable to be set aside?
(2) Whether the petitioner substantiates that the award passed by the learned sole arbitrator is beyond the mandate of twelve 13 Com AP 127/ 2025 months from entering upon reference and therefore the award is rendered non est in law and liable and liable to be set aside? (3) Whether the petitioner substantiates that the award passed by the learned sole arbitrator in A.C.No.1/2020 dated 12.07.2022 is perverse suffering from patent illegality appearing on the face of it and oppose to public policy of Indian Law and liable to be set aside?
(4) What order?
11. My finding on the above Points is: -
Point No.1: In the Negative.
Point No.2: In the Negative.
Point No.3: In the Negative.
Point No.4: As per final order for the following:
REASONS
12. POINT NO.1:- One of the major grounds that has been assailed is that the Learned Sole Arbitrator having not made the mandatory disclosure as contemplated under Sec.12 the award is liable to be set aside. At the outset it is necessary to mention here that nowhere 14 Com AP 127/ 2025 under the provision of Sec.34, which provides for an application for setting aside the arbitral award, stipulates that if the Learned Sole Arbitrator does not follow the requirement of Sec.12 the award is liable to be set aside. Sec.12 of the Arbitration and Conciliation Act provides for grounds of challenge to the appointment of an Arbitrator. The respondent is mainly harping upon the Learned Sole Arbitrator not complying with Explanation 1 to Sec.12(1) of the Act. Sec.12(1) of the Act requires the Arbitrator to disclose in writing any circumstances about the existence of any either direct or indirect relationship with any of the parties in relation to the subject of arbitration. Explanation 2 provides that such a disclosure must be made by person in the form specified in the VI Schedule. The arbitral records indicate that in fact the Learned Sole Arbitrator has made a disclosure that he has got no relationship with any of the parties to the litigation concerning the subject matter. The VI Schedule provides for undertaking the disclosure in a required form which requires the name of the Arbitrator, contact details, prior experience and the number of ongoing Arbitrations pending with the said Arbitrator. No doubt it is true that the Learned Sole Arbitrator has not made the disclosure in the required form as provided under VI Schedule.
15Com AP 127/ 2025 Merely so whether the same would vitiate the award is the question which arises for consideration. The answer to the said question will be the Negative because the disclosure required to be made by the Learned Sole Arbitrator is at the initiation of the proceedings and Arbitrator though has made a disclosure if the same is not in the required proforma no objection is raised by the respondent who has participated all along the proceedings till the date of passing of the award. The provisions of Sec.12 clearly state that it is a ground for challenging the appointment of the Arbitrator. If the Arbitrator has not complied with the VI Schedule requirements nothing prevented the respondent from objecting to the continuation of the Arbitral proceedings and moving the concerned authority for substitution of the Arbitrator. Admittedly has not done so. Therefore, under such circumstances the respondent cannot now be permitted to seek to set aside the award on the said ground more so when Sec.34 does not say that due to non-compliance of any mandatory requirement under Sec.12 the award is liable to be set aside.
13. In this regard the learned counsel for the claimant has placed reliance upon judgment of the Division Bench of Hon'ble Delhi High Court in 2022 SCC OnLine 16 Com AP 127/ 2025 Del 4268 Ram Kumar and another vs. Shriram Transport Finance Co.Ltd., wherein with respect to Sec.12 at paragraphs 19,22,23 and 24 it has been observed as under:
Para 19: In terms of Explanation 1 to Section 12(1) of the A&C Act - the grounds as stated in the Fifth Schedule of the A&C Act - the learned Sole Arbitrator was required to be guided by the grounds as stated in the Fifth Schedule of the A&C Act. Entry 22 of the Fifth Schedule of the A&C Act specifically provides circumstances where an arbitrator has, within the past three years, been appointed as an arbitrator on more than two occasions by either of the parties or their affiliates. This Court is unable to accept that such a disclosure is not mandatory and is merely at the discretion of the arbitrator. The onus for disclosing the number of matters in which the learned Sole Arbitrator had been appointed as such, at the instance of the respondent, rested with the learned Sole Arbitrator. The assumption that the burden of ascertaining the circumstances that may give rise to justifiable doubts as to the independence and impartiality of the arbitrators is on the parties, is erroneous; this disclosure is necessarily required to be made by the person approached in connection with his appointment as an arbitrator.
Para 22: It is necessary to note that the language of Section 12(1) of the A&C Act does not leave it at the discretion of any person, approached in connection with being appointed as an arbitrator, to make the necessary disclosures. The use of the words "he shall disclose" in Section 12(1) of the 17 Com AP 127/ 2025 A&C Act makes it mandatory for the person who is approached in connection with his possible appointment as an arbitrator, to make a disclosure of all circumstances that may give rise to justifiable doubts as to his independence and impartiality.
Para 23:In terms of Explanation 2 to Section 12(1) of the A&C Act, such disclosure is to be made in the form specified in the Sixth Schedule of the A&C Act. It may be sufficient compliance of the Explanation if the necessary particulars, as required to be disclosed in the Sixth Schedule, are disclosed but the disclosure is not in the format as provided. However, it would be erroneous to assume that the requirement of making a disclosure is not mandatory.
Para 24: This Court is of the view that the requirement of making a disclosure is a necessary safeguard for ensuring the integrity and 2022/DHC/005313 efficacy of an arbitration as an alternate dispute resolution mechanism and is not optional.
14. The observations made above squarely applies to the prevailing facts and circumstances. The respondent having participated throughout arbitral proceedings cannot now seek to dispute the validity of the award for non-compliance of Sec.12 under a Sec.34 petition. Hence for these reasons I answer Point No.1 in the Negative.
18Com AP 127/ 2025
15. POINT NO.2: - The next main ground urged by the respondent is that the award which is passed on 12.07.2022 is beyond the period of mandate and therefore is rendered non est in law. It is the contention of the respondent that pleadings before the Arbitrator came to be concluded on 21.06.2021. Therefore, as per Sec.29A (1) the award ought to have been passed on or before 20.06.2022 but the award passed on 12.07.2022 is beyond the period of 12 months. Per contra it is the contention of the claimant that during the course of arbitral proceedings there was the on slot of Covid 19 pandemic and by virtue of the judgment of the Apex Court in Suo Motu Writ Petition (Civil) No.3 of 2020 In Re: Cognizance For Extension Of Limitation the period of 15.03.2020 to 28.02.2022 needs to be excluded and the limitation has to be computed from 01.03.2022 and the award on 12.07.2022 is well within the mandate.
16. Sec.29A of the Arbitration and Conciliation Act provides for the time limit for arbitral awards. Sec.29A (1) stipulates that the award is to be made within a period of 12 months from the date the tribunal enters upon reference. By virtue of the decision of the Apex Court and the observations therein for the purpose of 19 Com AP 127/ 2025 computing the limitation it is now held that the time must start from the date on which pleadings get completed before Arbitrator. In the present case, as borne out from the proceedings of the facts sheet pleadings got completed on 21.06.2021. Therefore, the period of 12 months for passing the award is 12 months from 21.06.2021 which will lapse by 20.06.2022. Admittedly neither of the parties have mutually contested for extension of the period as required under Sec.29A (3) nor is there any extension granted by the Courts as required under Sec.29A (4) of the Act.
17. The learned counsel for the respondent in support of his argument has relied upon the judgment of Division Bench of our Hon'ble High Court reported in 2024 SCC Online Kar 82, Buoyant Technology Constellations Pvt. Ltd., vs. Manyata Infrastructure Developments Pvt. Ltd., wherein at para 12 it is observed as below:
Para 12: In terms of Section 29A, awards other than international commercial arbitration shall be made by the Arbitral Tribunal within a period of twelve months from the date of completion of pleadings under Sub-Section (4) of Section 23. Sub-Section (3) provides that parties may by consent extend the period specified in Subsection (1) for making award for a further period not exceeding six months. If the award is not made 20 Com AP 127/ 2025 within the period specified in Sub-Section (1) or within the extended period under Sub-Section (3), the mandate of Arbitral Tribunal shall terminate unless Court 18 has, either prior or after the expiry of the period so specified, extended the period. The extension of period by Court referred to in Section 4 may be in the application of any of the parties for sufficient cause and on such terms and conditions as may be imposed by the Court.
Order of the Hon'ble Apex Court in Special Leave to Appeal (C) No.9331/2024, Buoyant Technology Constellations Pvt. Ltd., vs. Manyata Infrastructure Developments Pvt. Ltd., wherein the judgment of our Hon'ble High Court in the writ petition referred to above has been affirmed.
Judgment of the Division Bench of Hon'ble Delhi High Court in FAO (OS) (COMM) 164/2025, Sarvesh Security Services Pvt Limited vs. Institute of Human Behaviour Resource and Allied Sciences (IBHAS) dated 15.10.2025 wherein at para 16 it has been observed as under:
Para 16: This we say so, as the award becomes enforceable/operational only when it is written; signed by the Arbitrator giving reasons on which it is based, having date and the place of the Arbitration where it was made.
18. Per contra the learned counsel for the claimant in support of his argument placed a reliance upon the 21 Com AP 127/ 2025 orders of the Apex Court in Suo Motu Writ Petition (Civil) No.3 of 2020 In Re: Cognizance For Extension Of Limitation, wherein it is observed that for the purpose of computing the period under Sec.29A of the Arbitration and Conciliation Act 1996 the period of 15.03.2020 till 28.02.2022 needs to be excluded.
19. By virtue of the Orders of the Apex Court referred supra for the purpose of computing the limitation for passing of the award under Sec.29 A of the Commercial Courts Act 2022 the period of 15.03.2020 till 28.02.2022 needs to be excluded. Therefore, for all practical purposes the time limit for passing of the award would commence from 01.03.2022 as rightly contended by the learned counsel for the claimant. The award in this case having been passed on 12.07.2022 is well within the mandatory period of 12 months and therefore the contention of the respondent that the award being passed beyond 12 months is rendered non est in law cannot be sustained. Accordingly, I answer Point No.2 in the Negative.
20. POINT NO.3: - Apart from the above-mentioned main grounds, one of the other grounds that was vehemently canvased was that the Learned Sole Arbitrator grossly erred in awarding damages. The 22 Com AP 127/ 2025 claimant before the Learned Sole Arbitrator has sought compensation of Rs.25,00,000/- by way of damages. The Learned Sole Arbitrator upon considering evidence on record has arrived at the conclusion that the respondent has been responsible for breach of the terms of the Joint Development Agreement which was marked at Ex.C.8 and therefore the respondent has been saddled with the liability to pay the damages which is as per clause 6.1. Clause 6.1 of the Joint Development Agreement provides that even after the extension the developer fails to deliver the constructed area then the damages will be equivalent to the rent fixed by the Bengaluru Real Estate Association for a period of 6 months. Clause 21 of the Joint Development Agreement provides for the breaches, and it stipulates that the non-defaulting party will be entitled to recover all losses and expenses incurred as a consequence of breach by the defaulting party. The Learned Sole Arbitrator has also concluded that the claimant has not led cogent evidence regarding the losses incurred. However the rental amount agreed between the parties is an amount of Rs.20,000/- per month per apartment and it has been held by the Learned Sole Arbitrator that the claimant would be entitled for damages with respect to four apartments and at the rate of Rs.20,000/- per 23 Com AP 127/ 2025 apartment per month for 6 months for 4 apartments the claimant has been awarded damages of Rs.4,80,000/-. The learned counsel for the respondent in course of his argument vehemently contended that awarding damages is pure guess work by the Arbitrator and there is no evidence on record. In support of his argument, he has placed reliance upon the judgment of the Hon'ble Delhi High Court reported in 2007 SCC Online Del 1169, Indian Oil Corporation vs. Lloyds Steel Industries Ltd., wherein with respect to the principles governing the award of damages and compensation the Hon'ble Delhi High Court in para 55 of the order has observed as under:
Para 55: It is clear from the above that Section 74 does not confer a special benefit upon any party, like the petitioner in this case. In a particular case where there is a clause of liquidated damages the Court will award to the party aggrieved only reasonable compensation which would not exceed an amount of liquidated damages stipulated in the contract. It would not, however, follow there from that even when no loss is suffered, the amount stipulated as liquidated damages is to be awarded. Such a clause would operate when loss is suffered but it may normally be difficult to estimate the damages and, therefore, the genesis of providing such a clause is that the damages are pre-estimated. Thus, discretion of the Court in the matter of reducing the amount of damages agreed upon is left unqualified by any specific 24 Com AP 127/ 2025 limitation. The guiding principle is 'reasonable compensation'. In order to see what would be the reasonable compensation in a given case, the Court can adjudge the said compensation in that case. For this purpose, as held in Fateh Chand (supra) it is the duty of the Court to award compensation according to settled principles.
Settled principles warrant not to award a compensation where no loss is suffered, as one cannot compensate a person who has not suffered any loss or damage. There may be cases where the actual loss or damage is incapable of proof; facts may be so complicated that it may be difficult for the party to prove actual extent of the loss or damage. Section 74 exempts him from such responsibility and enables him to claim compensation inspite of his failure to prove the actual extent of the loss or damage, provided the basic requirement for award of 'compensation', viz. the fact that he has suffered some loss or damage is established. The proof of this basic requirement is not dispensed with by Section 74. That the party complaining of breach of contract and claiming compensation is entitled to succeed only on proof of 'legal injury' having been suffered by him in the sense of some loss or damage having been sustained on account of such breach, is clear from Sections 73 and 74. Section 74 is only supplementary to Section 73, and it does not make any departure from the principle behind Section 73 in regard to this matter. Every case of compensation for breach of contract has to be dealt with on the basis of Section 73. The words in Section 74 'Whether or not actual damage or loss is proved to have been caused thereby' have been employed to underscore the departure deliberately made by Indian legislature from the 25 Com AP 127/ 2025 complicated principles of English Common Law, and also to emphasize that reasonable compensation can be granted even in a case where extent of actual loss or damage is incapable of proof or not proved. That is why Section 74 deliberately states that what is to be awarded is reasonable compensation. In a case when the party complaining of breach of the contract has not suffered legal injury in the sense of sustaining loss or damage, there is nothing to compensate him for; there is nothing to recompense, satisfy, or make amends. Therefore, he will not be entitled to compensation See State of Kerala v. United Shippers and Dredgers Ltd. . Even in Fateh Chand (supra) the Apex Court observed in no uncertain terms that when the section says that an aggrieved party is entitled to compensation whether actual damage is proved to have been caused by the breach or not, it merely dispenses with the proof of 'actual loss or damage'. It does not justify the award of compensation whether a legal injury has resulted in consequence of the breach, because compensation is awarded to make good the loss or damage which naturally arose in the usual course of things, or which the parties knew when they made the contract, to be likely to result from the breach. If liquidated damages are awarded to the petitioner even when the petitioner has not suffered any loss, it would amount to 'unjust enrichment', which cannot be countenanced and has to be eschewed.
21. He has also placed reliance upon the judgment of the Apex Court reported in (2015) 4 Supreme Court Cases 136, Kailash Nath Associates vs. Delhi 26 Com AP 127/ 2025 Development Authority and another, wherein at para 43.1 to 43.7 while dealing with the Sec.74 of Contract Act the following observations have been made.
Para 43.1: Where a sum is named in a contract as a liquidated amount payable by way of damages, the party complaining of a breach can receive as reasonable compensation such liquidated amount only if it is a genuine pre-estimate of damages fixed by both parties and found to be such by the Court. In other cases, where a sum is named in a contract as a liquidated amount payable by way of damages, only reasonable compensation can be awarded not exceeding the amount so stated. Similarly, in cases where the amount fixed is in the nature of penalty, only reasonable compensation can be awarded not exceeding the penalty so stated. In both cases, the liquidated amount or penalty is the upper limit beyond which the Court cannot grant reasonable compensation.
Para 43.2:Reasonable compensation will be fixed on well known principles that are applicable to the law of contract, which are to be found inter alia in Section 73 of the Contract Act.
Para 43.3:Since Section 74 awards reasonable compensation for damage or loss caused by a breach of contract, damage or loss caused is a sine qua non for the applicability of the Section. Para 43.4:The Section applies whether a person is a plaintiff or a defendant in a suit.
27Com AP 127/ 2025 Para 43.5:The sum spoken of may already be paid or be payable in future.
Para 43.6:The expression "whether or not actual damage or loss is proved to have been caused thereby" means that where it is possible to prove actual damage or loss, such proof is not dispensed with. It is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount named in the contract, if a genuine pre-estimate of damage or loss, can be awarded.
Para 43.7:Section 74 will apply to cases of forfeiture of earnest money under a contract. Where, however, forfeiture takes place under the terms and conditions of a public auction before agreement is reached, Section 74 would have no application.
22. He has further relied upon the decisions of Hon'ble Bombay High Court reported in 2015 SCC Online Bom 1412, Ajay Singh (Sunny) Deol of Mumbai Indian Inhabitant vs. Suneel Darshan and 2016 SCC Online Bom 9697, Essar Procurement Services Ltd., vs. Paramount Constructions, wherein the observations made by the Apex Court in Kailash Nath Associates has been followed.
23. Per contra the learned counsel for the respondent would vehemently submit that the Learned Sole Arbitrator has not awarded the damages as prayed but on the other hand he has awarded the damages purely 28 Com AP 127/ 2025 in the clauses maintained in the Joint Development Agreement. As mentioned above awarding of damages is as per clause 6.1 of the Joint Development Agreement. Clause 6.1 provides that the construction must be completed within 12 months from the date of plan sanction by BBMP with an extended period of another 6 months. Clause 6.1 stipulates that even after such extension if the developer cannot deliver the owners constructed area then the developer is liable to pay the owner damages which is equivalent to the rentals fixed by the Bengaluru Real Estate Association for a period of 6 months. The Learned Sole Arbitrator has taken note of the rental guidelines determined by the Bengaluru Real Estate Association and taking the minimal rent fixed by the association at Rs.20,000/- per month for 4 apartments for 6 months he has been awarded Rs.4,80,000/-. Therefore, the awarding of damages by the Learned Sole Arbitrator cannot be termed as arbitrary accessing and not based upon any evidence and cannot also be termed as a pure guess work by the Learned Sole Arbitrator. On the other hand, the Learned Sole Arbitrator after noting that both sides have not lead any evidence regarding assessment of damages which the claimant claimed at Rs.25,00,000/- has taken the guidance value determined by the real 29 Com AP 127/ 2025 estate association guidelines and has awarded a minimal sum as damages which cannot be found fault with.
24. Apart from the above yet another contention put forth is that the award passed by the Learned Sole Arbitrator is perverse in error apparent on face of it and is also opposed to public policy. How and in what manner the Learned Sole Arbitrator has erred in passing the award is nowhere substantiated in the grounds urged in Sec.34 petition. On the other hand, a general statement is made that the award is perverse and is opposed to public policy. As mentioned above regarding various claims, the Learned Sole Arbitrator has only awarded the amount to be repaid by the developer towards the expenses incurred by the owner for completing the project. It is a fact that the project has not been completed within the stipulated time of 12 months and within the extended period of 6 months. When the dispute arose between the parties there was a meeting conducted between the landowners and the developers and in the said meeting dated 09.05.2017 has been reduced into writing and the minutes of meeting has been produced before the tribunal which is marked at Ex.C.20. It is the contention of the claimant 30 Com AP 127/ 2025 that in the said minutes of meeting it has been made clear that the developer is bound to reimburse the claimant for the expenses incurred in completion of the project. Such a consensus that arrived in the said meeting is admitted by the respondent but on the other hand it is the contention of the respondent that the liability is restricted to Rs.10,00,000/- and not above. I have carefully gone through the minutes of the meeting that have been reduced into writing dated 09.05.2017 and nowhere it says that where the owner takes up the completion of the project through another development. The liability is restricted only upto Rs.10,00,000/-. On the other hand, it only says that the owner of the property can undertake expenditure up to Rs.10,00,000/- under their scope. Ex.C.4 to C.7 clearly stipulates that no civil work has been taken up for putting up any extra floor after the respondent has stopped the construction. The claimant before the Learned Sole Arbitrator has claimed for refund of a sum of Rs.24,51,202/- with respect to refund of the actual expenses. As per Ex.C.4 to C.7 the respondent has agreed to reimburse the amounts. The claimant in cross examination admits receipt of a sum of Rs.4,00,000/- on 04.12.2017, Rs.1,00,000/- on 08.02.2018 and Rs.1,70,0000/- on 05.11.2019. Thereafter, as per the 31 Com AP 127/ 2025 WhatsApp communications exchanged between the claimant and the respondent which are produced at Ex.C.19 there remains a balance amount of Rs.17,91,202/- i.e., liable to be paid to the claimant. The Learned Sole Arbitrator after taking into consideration these aspects has concluded that the respondent is liable to pay a sum of Rs.17,91,202/- and that is also the amount that has been awarded by the Learned Sole Arbitrator. Therefore, upon going through the evidence on record no illegality or arbitrariness has been committed by the Learned Sole Arbitrator in awarding the said amount and there is no perversity whatsoever as alleged by the respondent.
25. The learned counsel for the petitioner/respondent during argument vehemently contended that the awarding of interest is also without any basis whatsoever. No doubt it is true that the terms of the Joint Development Agreement does not provide for awarding of any interest on the defaulting party. The Learned Sole Arbitrator has taken shelter under Sec.31(7) of Arbitration and Conciliation Act and Sec.31(7)(a) stipulates that where there is no fixed rate of interest required to be payable then the interest to be awarded shall be at the rate of 2% higher than the 32 Com AP 127/ 2025 current rate of interest prevalent on the date of award. For current rate of interest, it shall be as defined under Sec.2(b) of the Interest Act 1978. Taking that into consideration and the Learned Sole Arbitrator has awarded interest at 12% p.a. which in the prevailing circumstances appears to be justified and it cannot be said to be arbitrary or excessive to vitiate the award.
26. The learned counsel for the claimant during his argument relied upon the judgment of our Hon'ble High Court in Com. Appeal No.302/2025 dated 01.08.2025, M/s Prathibha Industries Limited vs. M/s Amrutha Constructions, wherein at para 19 and 20 it has been observed as under:
Para 19: It is also a well-settled principle of law that challenge cannot be laid to the award only on the ground that the arbitrator has drawn his own conclusion or failed to appreciate the relevant facts. Nor can the Court substitute its own view on the conclusion of law or facts as against those drawn by the arbitrator, as if it is sitting in appeal. Para 20:As long as the arbitrator has taken a possible view, which may be a plausible view, simply because a different view from that taken in the award, is possible based on the same evidence, would also not be a ground to interfere in the award.33
Com AP 127/ 2025
27. He also placed reliance upon judgment of the Apex Court reported in (2022) 45 Supreme Court Cases 463, Indian Oil Corporation Limited vs. Shree Ganesh Petroleum Rajgurunagar, wherein it has observed as under:
The Arbitral Award is liable to be set aside in so far as the same deals with disputes with regard to the Lease Agreement which are not contemplated by the Arbitration Clause in the dealership agreement and/or in other words, do not fall within the terms of the submission to Arbitration. The Arbitral award is thus liable to be set aside under Section 34(2)(a)(iv) of the 1996 Act. Section 34 in conjunction with Section 5 of the 1996 Act makes it clear that an arbitral award that is governed by Part I of the 1996 Act, can only be set aside on grounds mentioned under Sections 34(2) and (3) of the said Act and not otherwise. The Court considering an application for setting aside an award, under Section 34 of the 1996 Act cannot look 2 (2015) 3 SCC 49 into the merits of the award except when the award is in conflict with the public policy of India as provided in Section 34(2)(b)(ii) of the 1996 Act.
28. The learned counsel for the respondent has contended that the Learned Sole Arbitrator has not considered the fact that much prior to filing the statement claim the claimant had gifted away the properties in favour of his sons and had lost his right, title and interest over the properties and no subsisting 34 Com AP 127/ 2025 interest so as to file the claim. It is pertinent to mention here that the claimant is not seeking declaration of any of his rights on the properties. What has been sought by the claimant is reimbursement of the expenses incurred by him for completing the constructions as per the terms of the minutes of meeting. Therefore under such circumstances it is irrespective of the fact that whether the claimant has done away with his title and possession on the properties or not. The claimant doing away with his title and possession of the properties will not preclude him from making a claim for reimbursement of the expenses incurred by him in terms of the minutes of the meeting that has been entered under the Joint Development Agreement. Hence the said contention of the respondent cannot be sustained.
29. The learned counsel for the respondent also contended that the claimant has not sought for declaring that the Joint Development Agreement is not valid in law and that he has not sought for termination of the Joint Development Agreement and therefore he cannot maintain the present claim. It is contended that in the absence of declaratory relief the claim for payment of damages on account of breach will not 35 Com AP 127/ 2025 arise. It is true that the claimant has not sought for any declaratory reliefs. The main claim is with respect to awarding the amounts spent by the claimant for purpose of expenses towards completion of the project. The claim for damages is only with respect to non- completion of the project within the stipulated period. Damages of Rs.4,80,000/- has been awarded as compensation for non performance of the terms of the JDA. It is not required for the claimant to seek any declarative reliefs keeping in mind the nature of the claims made. In so far as payment of the expenses incurred for completion of the project the same has been provided under the minutes of meeting that has been reduced to writing pursuant to the joint discussions with the respondent. Under these circumstances the Arbitrator proceeding to pass an award in the absence of a declarative relief sought by the claimant or in the absence title to the claimant on the properties cannot be termed as perverse or suffering from any illegality appearing on face of it or being opposed to public policy. Upon careful examining the contends of the award and after going through the oral and documentary evidence on record it can be held without hesitation that the respondent has failed to demonstrate that the Arbitrator has ignored any vital 36 Com AP 127/ 2025 evidence or acted in any manner detrimental to the terms of the contract binding the parties and has traveled anywhere beyond the terms of reference thus rendering the award void and liable to be set aside. The respondent has failed to demonstrate any apparent illegality appearing on the face of it nor has been able to prove in any manner the award being in breach of public policy of India requiring it to be set aside. Hence, for these reasons, I answer Point No.3 in the Negative.
30. POINT NO.4: - For the aforesaid reasons, I proceed to pass the following.
ORDER Petition filed by the petitioner under Sec.34 of the Arbitration and Conciliation Act 1996 is dismissed with costs.
Office to return the original arbitral records to the concerned parties under due acknowledgment.
Office to send soft copies of the judgment to both parties on their e-mail if furnished.
(Dictated to the Stenographer Grade-III, transcribed by her, corrected and then pronounced by me in open court on this the 2nd day of February, 2026) ARJUN Digitally signed by ARJUN SRINATH SRINATH MALLUR Date: 2026.02.03 MALLUR 15:47:33 +0530 (ARJUN. S. MALLUR) LXXXV Addl.City Civil & Sessions Judge, Bengaluru.
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