Bangalore District Court
M/S. Srinivasa Construction vs The Mysuru And Chamarajanagara on 6 November, 2019
IN THE COURT OF THE LXXXIII ADDITIONAL CITY CIVIL
AND SESSIONS JUDGE AT BENGALURU CITY[CCH-84]
PRESENT: Sri S.A. HIDAYATHULLA SHARIFF,
B.A., LL.M.,
LXXXIII Additional City Civil and
Sessions Judge
Dated this the 6th day of November 2019
COM.A.S.No.93/2019
(A.S.No.04/2018)
PLAINTIFFS: 1. M/s. Srinivasa Construction, a
registered Partnership Firm having
its office at 1st Floor, No.427,
Sanmarga, 7/A Cross,
Siddarthanagar, Mysuru570011.
Represented by its Managing
Partner Nikhil .G.
2. Nikhil .G, Managing Partner of M/s.
Srinivasa Construction, S/o late C.
Gopalakrishna, aged about 28
years, R/at No.427, Sanmarga, 7/A
Cross, Siddarthanagar, Mysuru
570011.
3. Nithin .G, partner of M/s. Srinivasa
Construction, S/o late C.
Gopalakrishna, aged about 28
years, R/at No.427, Sanmarga, 7/A
Cross, Siddarthanagar, Mysuru
570011.
Currently R/at No.1207, East 8th
Street, Apartment 207, Temple
Arizona 85281, United States of
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America.
4. Swetha Raajesh, Partner of M/s.
Srinivasa Constructions W/o Rajesh
Manivannan, aged about 33 years,
permanently residing at No.427,
Sanmarga, 7/A Cross,
Siddarthanagar, Mysuru570011.
5. N. Harish, Partner of M/s. Srinivasa
Construction. S/o late
K.N.Narayanaswamy, aged about 47
years, R/at No.2865, Varshadhare,
1st Cross, Raja Kempegowda
Extension, Channapatna.
[By Sri.A.V.J.R, Advocate]
/v e r s u s/
DEFENDANT: The Mysuru and Chamarajanagara
District School teachers House
Building Cooperative Society
Limited. Formerly the Mysore
District School Teachers House
Building Cooperative Society
Limited, represented under
Karnataka Cooperative Societies
Act, 1959, No.114, Vivekananda
Block, Dr. S. Radhakrishnan
Nagar, Teacher's Layout, Mysuru
570011. Represented by its Chief
Administrative Officer/ Secretary.
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[By Sri.J.S.D, Advocate]
Date of institution of the : 14/6/2019(23/4/2018)
suit
Nature of the suit : Arbitration Suit under
Arbitration Act
Date of commencement of :
recording of the evidence
Date on which the : 6/11/2019
Judgment was
pronounced.
: Year/s Month/s Day/s
Total duration
01 06 14
(S.A. Hidayathulla Shariff)
LXXXIII ACC & SJ: Bengaluru
The plaintiff construction firm has filed this suit
U/S.34 of the Arbitration & Conciliation Act 1996, to set
aside the arbitral award dated 30/1/2018, passed by the
Arbitrator. Originally suit was filed in the court of Prl.
District & Sessions Judge, Mysuru and suit was
numbered as A.S.No.4/2018. Thereafter, the suit was
transferred to I Addl. District Judge, Mysuru. After
establishment of this court to try commercial disputes,
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on the point of territorial jurisdiction the suit is
transferred to this court and renumbered as Commercial
OS No.93/2019.
2. The case of plaintiff construction firm in brief
as stated in the present petition is that it is a registered
partnership firm doing business as Engineering
Contractor doing estate agency and carrying out the work
of formation of private layouts. The defendant is a
registered house building cooperative society registered
under the Karnataka Cooperative Societies Act and its
main object is to procure lands round about Mysuru and
to form layouts and sites and to cater to the needs of its
members by allotting sites. The defendant society had
entered into agreements with various land owners of
Yaraganahalli village for purchase / acquisition of their
lands for its use. The defendant had invited offers for
undertaking the time bound formation and the offer of
the plaintiff construction firm to form the layout and do
other connected matters at the rate of Rs.105/ per
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square yard of actual sital area was accepted by the
defendant. On 5/9/1988, a development agreement was
entered into between the plaintiff construction firm and
the defendant society to develop the lands into a housing
layout. According to the terms of the above mentioned
agreement, the plaintiff construction firm was to procure
and develop agricultural lands identified by the
defendant society. The plaintiff was entrusted with the
work of getting the land acquired through acquisition
proceedings, forming layout in the acquired land as
litigation free land. The plaintiff was required to pay the
land lords and deposit to MUDA and other government
authorities, deposit with MUDA towards scrutiny fee,
supervision charges, tree planting, formation of CA sites,
street lighting and maintenance of layout, execution of
civil portion of layout works such as roads, drains,
culverts and providing and laying of water supply by cast
iron pipes and providing the laying of sewerage pipes.
The defendant society had identified the land bearing
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Sy.No.55/3, 58/4, 62/1, 62/2, 62/3, 65, 66/1, 67/3A,
68/2B and 63/1 of Yaraganahalli village, Kasaba Hobli,
Mysuru Taluk, Mysuru suitable for its use.
3. It is further case of the plaintiff construction firm
that as the work progressed, the terms and conditions of
the development agreement dated 5/9/1988 was revised
by execution of supplementary agreements dated
13/1/1990, 14/10/1991, 3/12/1993, 15/3/1995 and
31/12/1995. In the final supplementary agreement
dated 31/12/1995, the period for execution of the work
was extended upto 31/3/1996.
4. It is further case of the plaintiff construction firm
that it was regularly in touch with the defendant society
and informed the defendant society from time to time
regarding the progress of the work. Inspite of completing
most of the work, the defendant society was not
forthcoming with the payments commensurate with the
work completed by it. The condition precedent for the
entire agreement to be completed was the timely payment
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of the bills to it. The defendant society had thereby
caused breach of the contract. The partners of the
plaintiff construction firm who were the members of the
defendant society raised a dispute under Section 70(2) of
Karnataka Cooperative Societies Act before the Joint
Registrar of Cooperative Societies, Mysuru in case
No.JRM/DDS/862/9697 seeking relief in the form of
direction to the defendant society to allow the plaintiff
construction firm to complete the project within the time
stipulated by the authority and also sought for an order
for payment of a sum of Rs.2,12,48,283/, which is due
from the defendant society together with interest @ 21%
per annum. The defendant society has contested the
above mentioned dispute. The Joint Registrar of
cooperative society after fullfledged trial by its order
dated 2/8/2008 passed an award directing the defendant
society to pay a sum of Rs.5,85,934/ to the plaintiff
construction firm along with interest @ 14% per annum.
After passing of the above mentioned award, the
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defendant society paid a sum of Rs.15,37,044/ to the
plaintiff construction firm and purported to have
terminated the contract by issuing a letter dated
20/8/2008 to the plaintiff construction firm. The
purported termination of the contract between the
plaintiff construction firm and the defendant society was
subjudice and was subsequent to the raising of dispute
between the parties.
5. It is further case of the plaintiff construction firm
that aggrieved by the award passed by the Joint Registrar
of Cooperative Societies, it has approached the Hon'ble
Karnataka Appellate Tribunal in Appeal No.594/2008.
The Hon'ble Karnataka Appellate Tribunal by its order
dated 29/8/2013 has held that the plaintiff construction
firm was not a member of the defendant society and the
matters involved are not concerned with the affairs of the
defendant society. The Hon'ble Karnataka Appellate
Tribunal by its order dated 29/8/2013 has dismissed the
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appeal of the appellant - plaintiff construction firm and
also dismiss the dispute No.862/199697.
6. It is further case of the plaintiff construction firm
that subsequent to the order passed by the Karnataka
Appellate Tribunal, it has approached Hon'ble High Court
of Karnataka with a petition U/S.11 of the Arbitration &
Conciliation Act seeking appointment of arbitrator. The
Hon'ble High Court of Karnataka by its order dated
20/9/2016 allowed the petition and appointed Hon'ble
Justice Sri.A.V.Chandrashekar as the sole Arbitrator
with a direction to enter upon the reference and to
resolve the dispute between the parties. Hon'ble Justice
Sri.A.V.Chandrashekar who was appointed as a sole
arbitrator by its order dated 6/6/2017 passed in
A.C.No.135/2016, allowed the application filed by the
applicant/ claimant for condonation of delay U/S.14 of
the Limitation Act and posted the matter for
commencement of evidence by framing issues. In view of
inability of Hon'ble Justice Sri. A.V.Chandrashekar to
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proceed with the arbitration proceedings, the Hon'ble
High Court of Karnataka by its order dated 20/7/2017
has directed substitution of the Arbitrator and appointed
Hon'ble Justice Sri. A.N.Venugopal Gowda as an
Arbitrator. The claimant/ plaintiff construction firm filed
its claim statement on 21/11/2016 requesting the
Tribunal to direct the defendant to pay a sum of
Rs.27,49,06,124/ together with interest @ 21% per
annum.
7. It is further case of the plaintiff construction firm
that the agreement with the defendant society makes it
clear that if its work found to be not satisfactory or if
substandard materials are found to have been used, the
amount shall be withheld until it completes the work
within the specified period to the satisfaction of the
concerned authorities and in case of default, the
defendant society shall have the right to get the work
done by itself, in which event, retention money may be
used for the said work and of the amount found to be
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insufficient the plaintiff construction firm to make good
to the defendant society the loss and damages along with
costs. The defendant society was entitled to deduct 2% of
the amount from the payments made, towards payment
of income tax and remit the same to the concerned
authority. The agreement provides for the termination of
the contract by the defendant society only in case of the
contractor was unable to carry out all or any work
entrusted to it within stipulated period and or on account
of executing any substandard work or violation of any
specifications of MUDA or any concerned authority. The
plaintiff construction company had not challenged the
purported termination of the agreement by the defendant
society. In fact, it had claimed a sum of Rs.3,00,000/
being the value of its materials which it had left in the
work place. Therefore, no dispute was raised by it
regarding the termination of agreement before the
arbitrator. Further even the defendant society in its
objection had not raised any contentions before the
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arbitrator regarding termination of the contract between
the parties. On the other hand, it had reiterated the
contentions which it had raised before the Joint Registrar
of Cooperative Societies, Mysuru. The Arbitrator passed
an award on 30/1/2018 rejecting the claim petition of
the plaintiff construction firm on the ground that it ought
to have sought for the relief of declaration, declaring that
the termination of joint development agreements by the
defendant society is not maintainable in law. In the
absence of any plea raised by the defendant society
regarding the maintainability of the claim of the plaintiff
construction firm for not seeking declaration that the
termination of the agreement is void in law, the arbitrator
has dealt with a matter not contemplated by or not falling
within the terms of the submission to arbitration and the
award contains the decisions on matter which is beyond
the scope of the submission to arbitration. The dispute
with the plaintiff construction firm raised before the
Arbitrator was concerning to the period prior to the date
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of cancellation of the agreement. It had not raised any
dispute regarding the cancellation of the agreement and
it was not a bone of contention within the parties. It had
claimed the amount for the works it had done prior to the
date of cancellation of the contract. The impugned award
passed by the Arbitrator is bad in law and liable to be set
aside.
8.In response to the court notice, the secretary of
the defendant society appeared before the court and has
filed his objections statement to the petition filed by the
plaintiff U/S.34 of the Arbitration & Conciliation Act
1996. The defendant society in its objection statement
has not disputed the petition averments with regard to
the development agreement dated 5/9/1988 entered
between the plaintiff construction firm and the defendant
society and also not disputed the execution of
supplementary agreements between the plaintiff
construction firm and the defendant society. The
defendant society in its objections statement has
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contended that the plaintiff construction firm could not
complete the developmental work within the time fixed by
the parties under original development agreement dated
5/9/1998. For one or the other reason, the plaintiff
construction firm had been delaying the construction
work with a sole intention to obtain construction cost at
enhanced rates. With an intention to complete the
formation of proposed layout project, it has compelled to
extend the time for completion of the project periodically,
as such, the defendant society was constrained to
execute 5 supplementary agreements. Inspite of
extension of time for completion of development work, the
plaintiff construction firm did not complete even 50% of
the work entrusted. On the other hand, the plaintiff
construction firm once again sought for extension of time
and to enhance the rate of construction cost. The
plaintiff construction firm committed breach of terms of
development agreement. When the defendant society
refused to accede to the unreasonable demand of the
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plaintiff construction firm, the then partners of the
plaintiff construction firm invoked Section 21 of
Arbitration & Conciliation Act and issued notice dated
22/6/1996 on the defendant to refer the dispute to
arbitration that has arisen between the parties, with a
sole intention to put an end to the developmental work.
Thereafter, instead of proceeding for settlement of dispute
through arbitration, the plaintiff construction firm has
approached the Joint Registrar of Cooperative Societies
U/S.70(2) of Karnataka Cooperative Societies Act. Both
the parties subjected to the jurisdiction of the Joint
Registrar of Cooperative Societies for dispute resolution.
In case No.JRM/DDS/862/9697, the Joint Registrar of
Cooperative Societies passed an order dated 2/8/2008,
directing the defendant society to pay a sum of
Rs.5,85,934/ to the plaintiff construction firm with 14%
interest. The above mentioned order was duly complied
by the defendant society. Thereafter, as per the board
resolution, the defendant society has issued termination
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notice dated 20/8/2008 to the plaintiff construction firm
and terminated the development agreements. The
plaintiff construction firm after reaping the fruits of the
order dated 2/8/2008 passed in case No.862/9697 had
preferred an appeal before the Karnataka Appellate
Tribunal in Appeal No.594/2008. The above mentioned
appeal was dismissed on 29/8/2013. At this juncture to
get over the hurdle of limitation, the plaintiff construction
firm got issued a notice for appointment of arbitrator on
28/9/2013. Subsequently, the Hon'ble High Court of
Karnataka has appointed the arbitrator who decided the
reference in A.C.No.135/2016 and ultimately the award
was passed on 30/1/2018.
9. The defendant society in its objection statement
has further contended that the averments made in the
petition reveals that the plaintiff construction firm
challenged the impugned award U/S.34 (2) (iv) of
Arbitration & Conciliation Act. The grounds urged by the
plaintiff construction firm in challenging the impugned
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award are untenable. The plaintiff construction firm
which has sought the declaratory relief before the Joint
Registrar of Cooperative Societies in Case No.862/9697
has intentionally and deliberately has not sought the
foundational relief before the arbitrator. The Arbitrator
has rightly pointed out the apparent defect on the part of
the plaintiff construction firm in not seeking foundational
relief has rightly come to the conclusion that in view of
the ratio of the decision reported between I.S.Sikandar
Vs. Subramani and others reported in 2013 (15) SCC 27
is not entitled to seek the consequential relief without
seeking the foundational relief of declaration. The
arbitrator has properly considered the legal position to
the effect that in the absence of seeking foundational
relief, the claimants are not entitle for consequential
relief. The arbitrator has properly dealt within the terms
of submission to arbitration by the parties in accordance
with law and he has not dealt with any matter not falling
within the terms of submission to arbitration. The
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arbitrator has not exceeded his jurisdiction. The
arbitrator has confined his award within the framework
of the reference made to him. The award is inconsonance
with the provisions of substantive law and the same is
not patently illegal and decision of the arbitrator is not
beyond the scope of reference.
10. The defendant society in its objection statement
has further contended that the arbitrator has properly
applied his mind to the matter before him and followed
the legal position and consequently came to the
conclusion that the plaintiff construction firm without
seeking foundational relief of declaration is not entitled to
consequential reliefs and hence claim petition filed
without seeking the main and foundational relief of
declaration is not maintainable. The scope of
interference U/S.34 of Arbitration & Conciliation Act is
very limited. While exercising the power U/S.34 of
Arbitration & Conciliation Act, the court cannot be
justified in reappreciating the material on record and
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substituting its own view in place of the arbitrators view.
On these grounds, the defendant has sought for
dismissal of the petition.
11. Based on the above pleadings of the parties, the
points that arises for consideration of this court are :
1) Whether in the impugned award dated
30/1/2018 passed by the Arbitrator in A.C.No.135/2016,
the arbitrator dealt with the dispute not contemplated or
not falling within the terms of the submission of
arbitration or it contains decisions on matters beyond he
scope of submission of arbitration?
2) What order?
12. Heard learned counsel for the plaintiff and
learned counsel for the defendant. Perused the materials
on record.
13. My findings on the above points are as follows:
Point No.1 : In the negative.
Point No.2 : As per final order for the following:
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REASONS
14. POINT No.1 : A perusal of the materials on
record discloses that there are certain undisputed facts
between the parties to the present suit. The fact that on
5/9/1988, Ex.P.1 Joint Development Agreement was
entered between the plaintiff construction firm and the
defendant society to develop the land bearing
Sy.No.55/3, 58/4, 62/1, 62/2, 62/3, 65, 66/1, 67/3A,
68/2B and 63/1 of Yaraganahalli village, Kasaba Hobli,
Mysuru Taluk, Mysuru into a housing layout is not in
dispute. Further fact that the terms and conditions of
the Joint Development Agreement dated 5/9/1988 was
revised by execution of Ex.P.2 to P.6 supplementary
agreements dated 13/1/1990, 14/10/1991, 3/12/1993,
15/3/1995 and 31/12/1995 is also not in dispute.
Further fact that the plaintiff construction firm raised a
dispute U/S.70(2) of Karnataka Cooperative Societies Act
before the Joint Registrar of Cooperative societies,
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Mysuru District, Mysuru, alleging breach of contract by
the defendant society is also not in dispute. Further fact
that the Joint Registrar of Cooperative Societies in Case
No.862/9697 has passed an award dated 2/8/2008,
directing the defendant society to pay a sum of
Rs.5,85,934/ along with interest to the plaintiff
construction firm is also not in dispute. Further fact that
upon disposal of the dispute No.862/9697, the
defendant society has paid a sum of Rs.15,37,044/ to
the plaintiff construction firm by duly complying the
award is also not in dispute. Further fact that the
defendant society by passing Ex.R.57 resolution dated
3/8/2008 has terminated Ex.P.1 to P.6 the joint
development agreements and subsequent supplementary
agreements entered with the plaintiff construction firm
and communicated the same to the plaintiff construction
firm through Ex.P.118 - letter is also not in dispute.
Further fact that the plaintiff construction firm aggrieved
by the award passed by the Joint Registrar of Cooperative
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Societies in Case No.862/9697 had preferred an appeal
before the Karnataka Appellate Tribunal in appeal
No.594/2008 is also not in dispute. Further fact that the
Karnataka Appellate Tribunal by its order dated
29/8/2013 had dismissed the said appeal filed by the
appellant - plaintiff construction firm is also not in
dispute. Further fact that the plaintiff construction firm
has filed petition U/S.11 of the Arbitration & Conciliation
Act before Hon'ble High Court of Karnataka in CMP
No.168/2014 is also not in dispute. The Hon'ble High
Court of Karnataka by its order dated 20/9/2016, passed
in CMP 168/2014 has appointed Hon'ble Sri.
A.V.Chandrashekar, Former Judge, Hon'ble High Court
of Karnataka as the sole arbitrator to decide the dispute
between the parties to the suit is also not in dispute.
Further fact that during the course of arbitration
proceedings, Hon'ble Sri. A.V.Chandrashekar, Former
Judge of Hon'ble High Court of Karnataka was appointed
as the judicial member of KAT, as such, the Hon'ble High
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Court of Karnataka by its order dated 20/7/2017 has
ordered for substitution of arbitrator and appointed
Justice Sri. A.N.Venugopal Gowda as the sole Arbitrator
is also not in dispute. Justice Sri. A.N.Venugopal Gowda,
Former Judge, High Court of Karnataka has passed
award on 30/1/2018 in A.C.No.135/2016 by rejecting
the claim petition filed by the claimant / plaintiff
construction firm is also not in dispute. Aggrieved by the
award dated 30/1/2018 passed in A.C.No.135/2016, the
claimant/ plaintiff construction firm has filed the present
suit U/S.34 of the Arbitration & Conciliation Act 1996.
In the present suit, the main objection raised by the
plaintiff against the arbitral award is that the arbitral
award deals with a dispute not contemplated by law or
not falling within the terms of the submission to
arbitration and it contains decision on mattes beyond the
scope of the submission to arbitration.
15. The learned counsel for the plaintiff has argued
that the joint development agreement entered between
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the claimant/ plaintiff construction firm and the
defendant society provides for termination of contract by
the defendant society only in case of plaintiff
construction firm was unable to carry out all or any work
entrusted to it within the stipulated period or execution
of substandard work or violation of any specifications of
MUDA or concerned authority. It is further argued that
before the arbitrator, the claimant / plaintiff construction
firm had not challenged the purported termination of the
agreement by defendant society. Before the arbitrator the
claimant/ plaintiff construction firm has not raised any
dispute regarding termination of the agreement by the
defendant society. Even the defendant society in its
objection filed before the arbitrator has not raised any
contention regarding termination of the contract between
the parties. The alleged termination of the contract was
not a bona of contention between the parties before the
arbitrator. The dispute raised by the claimant before the
arbitrator was concerning to the period prior to the date
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of cancellation of the agreement. The claimant was only
claiming the amount for the work it had done prior to the
date of the cancellation of the contract. In the absence of
any plea raised by the defendant society regarding the
maintainability of the claim of the claimant / plaintiff
construction firm for not seeking declaration that the
termination of agreement is void in law, the Arbitrator
has dealt with the matter not contemplated or not falling
within the terms of the submission to the arbitration and
passed an impugned award rejecting the claim petition
on the ground that the claimant / plaintiff construction
firm ought to have sought for relief of declaration
declaring that the termination of the joint development
agreement by the defendant society is not maintainable
in law. It is further argued that the impugned award
passed by the Arbitrator contains the decision of matter
which is beyond the scope of the submission to
arbitration.
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16. The learned counsel for the plaintiff has further
argued that the Arbitrator had no power to adjudicate
upon the dispute pertaining to the legal validity of
arbitration agreement. It is further argued that the
arbitrator had no authority to pass declaratory award. It
is further argued that the arbitrator has erred in not
answering the vital issues framed to adjudicate the
matter in dispute. It is further argued that the Arbitrator
has traveled beyond the term of reference and the finding
given by the Arbitrator is perverse and hence court
required to interfere U/S.34(2) of the Arbitration &
Conciliation Act against the impugned award.
17. In support of his arguments, the learned
counsel for the plaintiff construction firm has relied on
following decisions:
1) Between Suwalal Jain Appellant v. Clive Mills Co.
Ltd. Respondent reported in AIR 1960 Calcutta 90,
wherein, it was held that the Arbitrator has no power to
adjudicate upon the legal validity of the submission. The
dispute as to the legal validity of the arbitration
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agreement as to the existence of fact which render it
illegal and void must be determined by court and not by
the Arbitrator just as disputes as to its factual existence
can be determined only by the court and not by the
arbitrator. The arbitrator cannot by his own finding
clothe himself with jurisdiction. Supposing that the
arbitrator finds that the arbitration agreement is valid,
such a finding cannot bind the parties.
2) Between Padam Chand Jain appellants v. Hukam
Chand Jain respondent reported in AIR 1999 Delhi 61,
wherein, it was held that the arbitrator has no authority
to pass declaratory award.
3) Between Oil and Natural Gas Corporation Limited
appellant v. SAW Pipes Limited respondent reported in
AIR 2003 SC 2629, wherein, the Apex court of the land
has held that if the arbitral award is contrary to the
substitutive provision of law or the provision of the act or
against the terms of the contract, it would be patently
illegal, which could be interfered U/S.34 of the
Arbitration & Conciliation Act 1996.
4) Between M/s. MSK Projects (I) (JV) Ltd. v. State
of Rajasthan and another reported in AIR 2011 Supreme
Court 2979, wherein, the Apex Court of the land has held
that the arbitration award passed contrary to the
provisions of law or against terms of contract or public
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policy would be patently illegal and court could interfere
U/S.34(2) against the said award.
5) Between Oil and Natural Gas Corporation Ltd. v.
Western Geco International Limited reported in AIR 2015
Supreme Court 363, wherein, Apex Court of the Land has
held that the Fundamental Policy of Indian Law include
all such fundamental principles as providing a basis for
administration of justice and enforcement of law in
country. The requirement that adjudicatory authority
must apply its mind can be described as fundamental
policy of Indian Law - When arbitrators committed error
resulting in miscarriage of justice and also failed to
appreciate and draw logical inference from proved facts
then arbitral award liable to be interfered.
6) Between ONGC ltd. v. Garware Shipping
Corporation Limited reported in AIR 2008 Supreme
Court 456, wherein, the Apex Court of the Land has held
that an award based on wrong basis and perverse
conclusions liable to be set aside. It was further held
that no proposition that courts could be slow to interfere
with arbitrator's award, even in such cases.
18. On the other hand, the learned counsel for the
defendant society has argued that U/S.34 of the
Arbitration & Conciliation Act 1996 an arbitral award can
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be set aside only on the ground mentioned in the sub
sections in the said section. In the present case, the
plaintiff has not made out a case in terms of Section 34
of the Act. The grounds raised by the plaintiff in the
present suit challenging the arbitral award are totally
outside the scope, purview and ambit of Section 34 of the
Act, therefore, there are no grounds for setting aside the
impugned award.
19. In support of his arguments, the learned
counsel for the defendant society has relied on following
decisions:
1) Between I.S.Sikandar (dead) by LRs v. K.
Subramani and others reported in (2013) 15 Supreme
Court Cases 27, wherein, the Apex Court of the Land has
held that in a suit for specific performance of contract
when the agreement was already terminated by the
defendant vendor, in the absence of plaintiff's prayer
seeking declaratory relief that the termination of the
agreement was bad in law, suit for specific performance
is not maintainable.
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2) Between State of Orissa and another v.
Surendranath Kanungo reported in AIR 2004 Orissa 153,
it was held that the dispute regarding arbitration clause
in question as to whether the same was scored out at the
time of execution of agreement between the parties can
be decided by arbitrator who has jurisdiction to
adjudicate.
3) Between Ram Nath International Construction
Pvt. Ltd. v. Stat of UP reported in AIR 1998 Supreme
Court 367, wherein, the Apex Court of the land has held
that the dispute as to payment of extra item of work, not
specific in the agreement and dispute as to whether work
in question was extra work or not was specifically
referred to arbitrator by parties. Parties arguing the
question before arbitrator, speaking award given with
details as to why work was extra work and payment was
required to be made. It is matter of interpretation of
contract and was referred by the parties to arbitrator.
The dispute cannot said to be beyond scope of reference
to arbitrator.
20. It is pertinent to note that an arbitral award
may be set aside by the court only on the ground
mentioned U/S.34 of the Arbitration & Conciliation Act
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1996. U/S.34(2) of the Act an arbitral award may be set
aside by the court only if
a) the party making the application furnishes proof
that
i) a party was under some incapacity; or
ii) the arbitration agreement is not valid under the
law to which the parties have subjected it or, failing any
indication thereon, under the law for the time being in
force; or
iii) the party making the application was not given
proper notice of the appointment of an arbitrator or of the
arbitral proceedings or was otherwise unable to present
his case; or
iv) the arbitral award deals with a dispute not
contemplated by or not falling within the terms of the
submission to arbitration, or it contains decisions on
matters beyond the scope of the 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 arbitral award which
contains decisions on matters not submitted to
arbitration may be set aside; or
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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 provision 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.
21. A perusal of the materials on record discloses
that the plaintiff construction firm has challenged the
impugned award U/S.34(2)(iv) of the Arbitration &
Conciliation Act on the ground that the arbitral award
deals with 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.
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22. At this stage, it is relevant to go through the
decision of Apex Court of the land on the aspect of
considering the legality and validity of the arbitration Act
U/S.34 of the Arbitration & Conciliation Act 1996. In the
decision reported between Puri Constructions Private
Limited v. Union of India reported in (1989) 1 Supreme
Court Cases 411, wherein, the Apex Court of the Land
has held that when a court is called upon to decide the
objection raised by a party against an arbitration award,
the jurisdiction of the court is limited as expressly
indicated in the arbitration act and it has no jurisdiction
to sit in appeal and examine the correctness of the award
on merits with reference to the materials produced before
the arbitrator. The court cannot sit in appeal over the
view of the arbitrator by reexamining and reassessing
materials.
23. In the light of the arguments advanced by the
learned counsel for the plaintiff construction firm and
learned counsel for the defendant society, a perusal of
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the materials on record discloses that the claimant/
plaintiff construction firm has filed claim petition before
the arbitrator seeking direction to the defendant society
to pay a sum of Rs.27,49,06,124/ together with future
interest @ 21% per annum. The claim sought for by the
claimant / plaintiff construction firm was based on the
allegations of breach of contract by the defendant society.
On the other hand, the defendant society has contested
the claim petition by denying the allegations of breach of
contract made against it and further contended that it
had already canceled the joint development agreements
entered with the claimant/ plaintiff construction firm and
hence the claim petition is not maintainable.
24. A perusal of the impugned award passed by the
Arbitrator discloses that the Arbitrator has framed 6
issues and one additional issue pertaining to the matter
in dispute referred to him. Issue No.1 framed by the
Arbitrator pertaining to the claim of the claimant /
plaintiff construction firm that it had executed all the
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works entrusted to it under main agreement dated
5/9/1998 and supplementary agreement and the works
were executed in time. By considering the contents of
Ex.P.1 to P.6 undisputed joint development agreement
and supplementary agreements and by considering the
oral and documentary evidence produced on record, the
Arbitrator has given a finding that the claimant / plaintiff
construction firm has not executed all the work entrusted
to it under Ex.P.1 and other supplementary agreements.
The finding of the arbitrator on issue No.1 to the effect
that the claimant / plaintiff construction firm has failed
to prove that it has executed all the works entrusted to it
under the joint development agreement dated 5/9/1988
and other supplementary agreements is not seriously
challenged in the present suit.
25. A perusal of the impugned award passed by the
Arbitrator discloses that the 3rd recasted issue framed by
the arbitrator pertains to the aspect of payment of a sum
of Rs.76,92,506/as on 18/3/1998 by the defendant
36
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society to the claimant/ plaintiff construction firm and
the claim of the defendant society that it had paid excess
amount of Rs.1,28,346/ to the claimant / plaintiff
construction firm. On this recasted issue No.3 by
considering the contents of Ex.R.11 - eighteen vouchers
under which the defendant society had made payment to
the claimant / plaintiff construction firm and by
considering the other documentary evidence produced on
record, the arbitrator has given a finding to the effect that
the defendant society has proved that as on 18/3/1998,
it had made payment of Rs.76,13,476/ to the claimant /
plaintiff construction firm and failed to prove that there is
excess payment of Rs.1,28,346/. Even this finding of
the arbitrator of recasted issue No.3 is also not seriously
disputed in the present suit.
26. The main objection raised by the plaintiff in the
present suit pertaining to finding given by the arbitrator
on maintainability of the claim petition. On the aspect of
maintainability of the claim petition, the arbitrator has
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given a finding to the effect that in the absence of the
claimant prayer to declare the cancellation of the joint
development agreements as illegal or void in law, the
claim of the claimant for consequential relief to pass
award for monitory relief based on alleged breach of
contract is not maintainable. On the maintainability of
the claim petition, the Arbitrator has given a finding to
the effect that in the absence of the claimant seeking
foundational relief of declaration, he is not entitle for
consequential relief of award for monitory relief for
alleged breach of contract. This finding of the arbitrator
is based on the decision of the Apex Court of the Land
rendered between I.S.Sikandar (dead) by LRs v. K.
Subramani and others reported in (2013) 15 Supreme
Court Cases 27, wherein, it was held that in a suit for
specific performance of contract subsistence of contract
is essential precondition. When the agreement is already
terminated by the defendant vendor, in the absence of
plaintiff prayer seeking declaratory relief that the
38
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termination of the agreement was bad in law, suit of
specific performance is not maintainable.
27. A perusal of the materials on record discloses
that after passing of the award dated 2/8/2008 by the
Joint Registrar of Cooperative Society to pay a sum of
Rs.5,85,934/ along with interest to the plaintiff
construction firm, the defendant society has satisfied the
said award by paying a sum of Rs.15,37,044/ to the
plaintiff construction firm is not in dispute. A perusal of
the materials on record discloses that thereafter through
Ex.R.57 resolution dated 3/8/2008 passed by the
managing committee of the defendant society, the joint
development agreement dated 5/9/1988 and subsequent
supplementary agreements were rescinded and recession
of these agreements was communicated through
Ex.P.118 to the plaintiff construction firm. A perusal of
the materials on record discloses that in para 91 of the
claim statement, the claimant/ plaintiff construction firm
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has admitted about the receipt of Ex.P.118 notice
intimating termination of agreement.
28. A perusal of the materials on record discloses
that on 20/8/2008 itself through Ex.R.57, the defendant
society has rescinded the joint development agreement
and supplementary agreements and intimated the said
fact to the plaintiff construction firm through Ex.P.118
letter. In the present case on the application filed by the
claimant/ plaintiff construction firm, the Hon'ble High
Court of Karnataka by its order dated 20/9/2016 has
appointed the Arbitrator with a direction to enter upon
the reference and to resolve the dispute between the
parties.
29. On 21/11/2016, the claimant/ plaintiff
construction firm has filed the claim petition before the
arbitrator for recovery of a sum of Rs.27,49,06,124/
together with interest @ 21% per annum on the
allegations of breach of contract by the defendant society.
At the time of filing of the claim petition, the claimant /
40
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plaintiff construction firm was aware of the fact that
Ex.P.1 to P.6 the joint development agreement and
supplementary agreements were already rescinded by the
defendant society on 20/8/2008. However, without
seeking foundational relief of challenging the recession of
the joint development agreement and supplementary
agreements, the claimant/ plaintiff construction firm has
sought for only consequential relief of recovery of money
in the form of damages from the defendant society.
30. A perusal of the impugned award passed by the
Arbitrator discloses that the Arbitrator by considering the
contents of Ex.R.57 resolution passed by the managing
committee of the defendant society canceling the joint
development agreement and supplementary agreements
entered with the claimant / plaintiff construction firm
which was communicated to the plaintiff construction
firm under Ex.P.118 letter and further considering the
fact that the claimant inspite of having specific
knowledge of termination of the agreements on
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20/8/2008 instead of seeking foundational relief
challenging the said termination have chose only to seek
consequential relief of recovery of damages for breach of
contract. In the impugned award, the Arbitrator has held
that the foundation for the claim made by the claimant
before him is Ex.P.1 to P.6 agreements. By alleging
breach of the terms of said agreement, claim statement
has been filed to pass award. When Ex.P.1 to P.6
agreements have already been rescinded as per Ex.R.57
and communicated to the claimant as per Ex.P.118,
inspite of the rescission of the contract there been no
challenge putforth to Ex.R.57 resolution of rescission of
contract, it is not permissible for him to go through the
validity or otherwise of the cancellation of the
agreements.
31. A perusal of the impugned order passed by the
Arbitrator discloses that based on the ratio of the
decisions reported between I.S.Sikandar (dead) by LRs v.
K. Subramani and others reported in (2013) 15 Supreme
42
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Court Cases 27, the Arbitrator has come to the
conclusion that in the absence of the prayer to declare
the cancellation communicated vide Ex.P.118 as illegal or
void in law, the claim of the claimants for consequential
relief to pass the award for monitory relief only alleging
breach of contract is not maintainable as the essential
foundational relief of declaration has not been sought.
The Arbitrator has further held that the relief sought in
the claim petition was being with reference to Ex.P.1 to
P.6 the non existing document on account of Ex.R.57
resolution read with Ex.P.118 communication, the claim
of the claimant had no legal foundation. The arbitrator
has further held that if the declaratory relief has been
sought and Ex.R.57 read with Ex.P.118 upon
adjudication, held as illegal or void abinatio, the claim for
award of damages as claimed in the claim petition would
have certainly received his consideration in accordance
with law for grant of appropriate relief as both sides have
adduced evidence and addressed arguments. The
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Arbitrator has further held that the settled position of law
is that the arbitrator cannot go beyond the contract as
clause 19 of Ex.P.1 agreement provides for termination of
the contract by the defendant society and there being no
challenge to the termination effected, on the ground
permissible in law, there cannot be any finding with
regard to illegality, if any, of the society in the matter of
canceling of Ex.P.1 to P.6 agreements as per Ex.R.57
resolution communicated to the claimant vide Ex.P.118.
32. The Arbitrator by considering the fact that in
the absence of the claimant seeking foundational relief
pertaining to the Ex.P.1 to P.6 which were rescinded by
the defendant society, the claimant is not entitle for
consequential relief of recovery of money by way of
damages has come to the conclusion that the claim of the
claimant for passing of monitory award is not
maintainable. Considering his finding on maintainability
of the claim petition, the Arbitrator has recorded a
finding that it is impermissible in law to record finding on
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issues 2,4 and 5 pertaining to the aspect of granting
monitory relief to the claimant and rejected the claim
petition.
33. It is pertinent to note that the claimant -
plaintiff construction firm has filed the claim petition
before the arbitrator seeking monitory relief in the form of
damages for the alleged breach of terms of Ex.P.1 to P.6
joint development agreement and subsequent
supplementary agreements by the defendant society.
Though, the claimant - plaintiff construction firm had
knowledge of recession of Ex.P.1 to P.6 contract by the
defendant society prior to filing of the claim petition has
not chosen to challenge the recession of the contracts,
which was the foundational relief instead it proceeded
only to seek monitory relief in the form of damages for
breach of terms of the contract which were already
rescinded. The aspect of granting monitory relief which
is consequential relief in the absence of seeking
foundational relief by the claimant was certainly within
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the terms of the submission of arbitration to the
arbitrator who was appointed to resolve the dispute
between the parties. The finding of the arbitrator with
regard to maintainability of the claim petition is certainly
within the scope of the submission to arbitration and it
was not beyond the scope of submission to arbitration as
alleged by the plaintiff - claimant in the present suit.
34. A perusal of the materials on record discloses
that the defendant society in its objection statement filed
before the arbitrator has specifically contended about the
termination of Ex.P.1 to P.6 agreements under Ex.R.57
resolution and communication of the same to the
claimant under Ex.P.118 communication. The objection
statement filed by the defendant society discloses that it
has taken a defence that the petition was not
maintainable in law. A perusal of the materials on record
discloses that the aspect of the termination of Ex.P.1 to
P.6 joint development agreement and supplementary
agreements was in dispute between the parties before the
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arbitrator. Hence the contention of the plaintiff that the
cancellation of the agreements was not a bone of
contention within the parties before the arbitrator cannot
be accepted.
35. A perusal of the impugned award passed by the
Arbitrator discloses that the arbitrator has properly
considered the legal position under the facts of the case
and rightly rejected the claim of the plaintiff for monitory
relief without seeking foundational relief pertaining to
recession of Ex.P.1 to P.6 joint development agreement
and supplementary agreements.
36. A perusal of the impugned award discloses that
the arbitrator has not dealt with a matter not
contemplated or not falling within the term of submission
to arbitration as alleged by the plaintiff in the present
suit. The impugned award do not contains the decision
of matter which is beyond the scope of submission to
arbitration as alleged by the plaintiff in the present suit.
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37. By perusing the materials produced on record,
this court is of the opinion that the claimant/ plaintiff
has failed to prove that the impugned arbitral award
deals with a dispute not contemplated by or not falling
within the term of the submission to arbitration or it
contains decision of matters beyond the scope of the
submission to arbitration.
38. By perusing the materials produced on record,
this court is of the opinion that the plaintiff has not
shown any ground U/S.34 of Arbitration & Conciliation
Act 1996 to interfere with the impugned award passed by
the Arbitrator. With these observations, I answer point
No.1 in the negative.
39. POINT No.2 : In view of my findings on point
No.1 and the reasons assigned thereon, I proceed to pass
the following:
ORDER
The suit filed by the plaintiff U/S.34 of the Arbitration & Conciliation Act 1996 is dismissed. 48
CT 1390_Com.A.S.932019_Judgment .doc Parties are directed to bear their own costs. Draw decree accordingly.
[Dictated to the Judgment Writer; transcript thereof corrected, initialed and then pronounced by me, in the Open Court on this the 6th day of November 2019] [S.A.Hidayathulla Shariff] LXXXIII Additional City Civil Judge.
BENGALURU.