Bangalore District Court
M/S. Akruti Developers vs Smt. H.K.Chanchala Devi on 6 September, 2022
IN THE COURT OF THE LXXXIII ADDITIONAL CITY CIVIL
AND SESSIONS JUDGE AT BENGALURU CITY [CCH-84]
:Present:
Ravindra Hegde,
M.A., LL.M.,
LXXXIII Addl. City Civil & Sessions Judge,
Bengaluru
Dated on this the 6th day of September 2022
COM.A.S.No.244/2018
Plaintiff M/s. Akruti Developers,
A partnership firm
No.289, Amar Jyothi Layout,
Domlur West,
Bengaluru-560071.
Represented by its Parnter
Smt. Varsha V. jadhav.
(By Sri.R.S.K, Advocate)
// versus //
Defendants 1. Smt. H.K.Chanchala Devi
W/o late B.A.Narayana Reddy,
Age: Major, No.420/422,
II Block, HRBR, Kalyana Nagar,
Bengaluru-560084.
2. Hon'ble Justice (Retd) Sri V. Gopal Gowda
Sole Arbitrator,
Arbitration & Conciliation Centre,
Khanija Bhavan, Race Course Road,
Bengaluru.
(By Sri.S.K.V, Advocate)
Date of Institution of the : 04/12/2018
suit
Nature of the suit : Arbitration Suit
Date of commencement of : --
recording of the evidence
2
CT 1390_Com.A.S.244-2018_Judgment.doc
Date on which the : 06/09/2022
Judgment was pronounced.
: Year Month/ Day/s
Total duration /s s
03 09 02
JUDGMENT
This petition under Section 34 of the Arbitration & Conciliation Act is filed by the plaintiff praying to set aside the impugned Award passed in AC No.164/2017 dated 19/11/2018 passed by the learned Arbitrator-defendant No.2 and to allow the claim petition filed in AC No.164/2017 and to reject the counter claim filed by the defendant.
2. The plaintiff was the claimant before the learned Arbitrator and defendant No.1 was the respondent. Defendant No.2 was the learned Arbitrator. Parties are referred to by their respective ranks as appeared before the learned Arbitrator for the sake of convenience.
3. The case of the plaintiff-claimant, in brief is as under:
The claimant is a registered partnership firm involved in the business of developing real estate and in the said business since 2001 they have gained goodwill and reputation in the field. The respondent is owner of land Sy.No.139 described in the schedule and she contacted the claimant in 2004 and wanted the claimant to develop the schedule property. JDA was entered between the parties. At the relevant time there was no access to the suit property. The respondent represented the claimant that she had made 3 CT 1390_Com.A.S.244-2018_Judgment.doc application to the KIADB for allotment of the adjoining property which is the marginal land and also furnished copy of letter of allotment dated 26/5/2004 and as mentioned in this letter of allotment the respondent was asked to deposit Rs.15,12,000/- and as the claimant and the respondent had already talked about JDA, respondent expressed inability to pay amount to KIADB and claimant paid the said amount and respondent assured to transfer the complete title of the adjoining property in favour of nominee of the claimant. After allotment, claimant put up a temporary shed to carry on business in the adjoining property in compliance with the conditions of KIADB and the lease cum sale agreement still stood in the name of Sri.Krishna Caterers Services, a proprietary firm of which the respondent was the sole proprietor. Respondent had executed a memorandum of agreement on 8/11/2004 to develop the property. The memorandum of agreement provided for the claimant to pay Rs.19 lakhs to KIADB for allotment of the adjoining property. After registration of JDA the claimant has even paid further sum of Rs.1,31,627/- to the KIADB to execute the sale deed at the end of six years period. One Nikhil Jadhav had booked unit No.23 in Aaflon building which was the project coming up in JDA. Claimant also executed supplementary agreement dated 15/2/2005 with respondent and respondent was allotted certain units in the Aflon project with respect to the 25% share of the respondent. After KIADB forwarded copy of the sale deed to be executed to the respondent in February 4 CT 1390_Com.A.S.244-2018_Judgment.doc 2010, respondent expressed interest in one more unit fallen to the share of the claimant. On the request of claimant, Nikhil Jadhav agreed to exchange the unit allotted to him in exchange of the adjoining property which was a marginal land. As entire sale consideration to KIADB was paid by the claimant and the respondent desirous of having one more unit beyond 25% share agreed on, it was agreed that the respondent would execute an exchange deed in respect of the adjoining property and instead take unit No.23 of 1 st floor and exchange deed was executed and later, a rectification deed was also executed. By virtue of exchange deed title of the adjoining property transferred to the name of Nikhil Jadhav and he was put in possession of the said property and on execution of exchange deed, this adjoining property was taken out of purview of the JDA. All the charges towards BDA betterment charges, CMC katha including the charges for change of katha has been borne by the claimant and the respondent was bound to reimburse the same. The claimant was required to construct residential / commercial building in accordance with the sanctioned plan and have constructed the same as per the sanctioned plan. Respondent was entitled to 25% of total super built up area and claimant was entitled for 75% share. The respondent had to refund the amount of Rs.18 lakhs before handing over possession of the owner's constructed area apart from the proportionate costs specified in the agreement. The respondent had participated in several meetings over the past several years and has also 5 CT 1390_Com.A.S.244-2018_Judgment.doc visited the site personally to inspect the progress of the constructions and the entire project was completed and the respondent was aware of the same and in fact the respondent was keen on entrusting the management of their share to the claimant. After the death of respondent's husband on 2/2/2016, respondent and her daughter are trying to defraud the claimant and issued legal notice dated 28/4/2016 wherein the respondent made a false claim for which the claimant replied the respondent and has also filed Com.A.A.No.167/2016 under Section 9 of the Act, but did not make any efforts to get the matter referred to arbitration. As such, claimant approached Hon'ble High Court seeking appointment of arbitrator and the 2nd respondent/defendant was appointed as learned Arbitrator. Learned Arbitrator rejected contention of the claimant that respondent should be claimant and thereafter, claimant filed claim petition and raised 7 claims for the amount payable by the respondent in terms of the JDA. The respondent also made a counter claim. Parties have led their evidence. The learned Arbitrator on 19/11/2018 passed the award and rejected prayer of the claimant and allowed the counter claim and directed the claimant to pay compensation and to demolish the building built on the schedule property and the KIADB building and also directed to handover possession to the respondent apart from holding the exchange deed in respect of the KIADB property as null and void.6
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4. Being aggrieved by this award the claimant has filed this petition seeking setting aside of the award on various grounds. It is stated that the entire award is perverse, irrational and is passed without any application of mind and is contrary to public policy of India and contrary to fundamental policy of Indian law and is in conflict with the most basic notion of morality and justice and it suffers from bias and the entire award is nothing but a patent illegality apparent and appearing on the face of the award and the same is liable to be set aside. It is also contended that the award passed by the sole Arbitrator goes beyond the issues that are arbitrable and holding of registreed documents being null and void is beyond the power of the sole Arbitrator. It is stated that the reasons assigned and the relief granted in the impugned award are beyond the scope of the counter claim and without any legal basis and contrary to all well settled principles of law. It is stated that the sole Arbitrator has given finding regarding the construing of delivery of possession under JDA under Section 53A of the TP Act or under Section 2(47)(iv) of the Income Tax Act which do not find place in pleadings of the respondent or even the evidence. It is stated that there was no issue regarding the nature of construction on the KIADB land and it was the case of the claimant and respondent that the respondent had executed a registered exchange deed in favour of one Nikhil Jadhav who was not party to the arbitration proceedings. It is stated that Nikhil Jadhav had obtained sanction plan and license for 7 CT 1390_Com.A.S.244-2018_Judgment.doc putting up construction on the KIADB land and the finding of the sole Arbitrator is perverse and in total violation of the fundamental policy and law of India. It is stated that finding of the learned arbitrator in para 35 that condition in clause 7 of the agreement is deviated by the claimant unilaterally without assigning any reason is per se perverse and contrary to the documents. It is stated that the finding of the sole Arbitrator which is in respect of interpretation of GPA executed in favour of the firm and holding that the present managing partner was not authorized to apply for sanction plan is contrary to law of India. It is also stated that learned Arbitrator has failed to take into consideration that the registered GPA executed in 2005 was in favour of partnership firm and the present managing partner merely succeeds as a successor. It is stated that the learned Arbitrator has gone beyond its power and jurisdiction to hold that reasons assigned by the respondent for legal notice for termination need not be gone into and to hold that construction of a commercial complex amounted to violation of JDA entitling the respondent to terminate the agreement. It is stated that the ground mentioned in the legal notice of the respondent for termination are not considered and on the different reasons the finding are given by the learned Arbitrator. It is stated that the respondent has alleged that the construction of service apartment violates the sanction plan and endorsement issued on the plan by the BBMP finds no reference to residential apartments. It is stated that the reasoning of the 8 CT 1390_Com.A.S.244-2018_Judgment.doc sole Arbitrator in regard to the building of service apartments comes within permitted land use in residential category as indicated in Government Notification and therefore the finding is contrary to law. It is stated that the supplementary agreement was drawn up after the sanction plan in which nowhere it is stated that it is a residential apartment it refers to studio apartments and units which are clearly demarcated as per the sanction plan. It is stated that the occupancy certificate clearly indicates that the deviations were less than 5% for which the claimant firm has paid the penalty. It is stated that the commissioner's report has no bearing in the instant case. It is stated that the entire analysis of the sole Arbitrator about the use of the units in the building is perverse and without proper application of mind and the documents executed by the parties makes it apparent that the whole JDA was made with an intention of running service apartments which is permissible in residential areas. It is stated that the BBMP which is the appropriate authority had approved the sanctioned plan and the building put up is in accordance with the sanctioned plan. It is stated that the reasoning of the arbitrator that respondent had not given any written communication about taking possession of the units fallen into the share of the respondent is again contrary to the material placed on record and evidence. It is stated that Ex.R.20 which was the response to the legal notice, it is clearly stated that the units in the share of the respondent were ready to be taken. It is stated that the validity of the 9 CT 1390_Com.A.S.244-2018_Judgment.doc cancellation is beyond the scope of arbitration and is not an arbitrable dispute. It is stated that the learned Arbitrator had no power to declare the certificates issued by a statutory authority as illegal and therefore the finding is perverse. It is also stated that the exchange deed is null and void and this deed is a registered document entered in favour of third party who was not a party to the arbitration and declaring such document as null and void is against the rule of law and public policy. It is stated that the award is a gross violation of rule of law and the public policy and the learned Arbitrator has failed to taken into consideration that the case of the respondent is that all document are got executed by her by playing fraud on her and she being a housewife did not have worldly knowledge, but the defendant reveals that respondent's husband and daughter are consenting witnesses and the respondent's brother is another witness to the document and the documents were signed in the sub registrar office and GPA and JDA were drafted by respondent's brother-in-law and the respondent herself is an educated lady who is running a catering business and she cannot claim ignorance. It is stated that none of the ingredients of Section 27 of the Specific Relief Act exist or proved by the respondent to claim rescission or termination of the JDA and other agreements. It is stated that in the counter claim, respondent has not stated that agreement stood terminated. It is stated that the clause 13.2 of JDA prohibits the respondent from revoking the power of attorney.
10CT 1390_Com.A.S.244-2018_Judgment.doc It is stated that without any rational basis or material or evidence the learned Arbitrator has held that the claimant has violated the terms of JDA and has arrived at the figure of Rs.6 crore plus which is contrary to evidence led in by the respondent. It is stated that entire method and figure arrived in para 85 of the award are fancy and contrary to public policy. On all these grounds the plaintiff / claimant has prayed to set aside the award passed by the learned Arbitrator.
5. The plaintiff has also filed application under Order 41 Rule 27 r/w Sec. 151 r/w 36 of the Arbitration and Conciliation Act seeking permission to produce additional documents. In the affidavit filed in support of the application, the plaintiff has stated that present petition filed challenging the award and stated that the additional documents need to be permitted to be produced as additional evidence to effectively adjudicate the matter in issue and if plaintiff is not permitted to produce the additional documents, plaintiff will be put to irreparable loss. Along with the application documents like photographs, NOC from BWSSB, Email, advertisement in newspaper, project approval letter, etc., are produced.
6. The defendant No.1/ respondent has filed objection to main suit and stated the fact that led to the arbitral dispute between the parties. The respondent has stated that the application under Section 34 of the Arbitration & Conciliation Act is summary proceeding and the plaintiff have 11 CT 1390_Com.A.S.244-2018_Judgment.doc to prove the existence of any ground under Section 34(2) of the Arbitration & Conciliation Act. The respondent has contended that the petition is not in the nature of appeal or revision or review of award, but the scope of application is only either to set aside the award, if the ground in Section 34 are made out. It is stated that under Section 34 enables the plaintiff to prove the grounds as indicated in Section 34(2) and (3). It is stated that the grounds raised by the plaintiff in para 29 to 70 show that the award is contrary to public policy of India and contrary to fundamental policy of Indian law and is against basic notation or morality or justice. It is stated that the plaintiff has failed to cite even single instance of the above said contentions and they do not fall in the purview and ambit of Section 34(2) and (3) of the Arbitration & Conciliation Act. It is stated that the contention of the plaintiff in the nature of arguments in an appeal or revision is not permissible under Section 34. It is stated that the possibility of different view is projected without the basis and evidence and against terms and conditions in the contract entered between the parties. It is stated that the court do not sit in appeal over the award and if the finding recorded by the arbitrator are permissible based on the evidence before it no interference is called for on the premise that a different view is possible. It is stated that the plaintiff has raised the point of violation of law referring to Section 202 of Indian Contract Act. It is stated that it is a contract to develop the schedule property entered between 1st defendant and the plaintiff and 12 CT 1390_Com.A.S.244-2018_Judgment.doc GPA's are not creation of independent agency, creating independent interest in the agent. It is stated that the specific issues were framed based on the pleadings, evidence and also counter claim of the defendant. It is stated that the arbitral tribunal has considered terms and conditions in the arbitration agreement, competence of arbitral tribunal and keeping in mind the powers of Arbitral Tribunal and decided in accordance with the terms of the contract and has taken into account the consequences of the contract between the parties. It is stated that in the grounds raised by the plaintiff, no erroneous legal position, reasons and findings by the tribunal are shown and the contentions are not acceptable. It is stated that the learned Arbitrator has kept in view of the hardship caused to 1st defendant and also considered the object of the special law. It is stated that the 1 st defendant denies all the averments of the petition which are not specifically admitted. On these grounds the 1 st defendant has prayed to dismiss the petition.
7. Now the points that arise for consideration of this court are:
1) Whether the documents produced with application under Order 41 Rule 27 CPC is permitted to be produced as additional evidence?
2) Whether the plaintiff has made out any ground under Section 34(2) of the Arbitration & Conciliation Act to set aside the Arbitral Award of the learned Arbitrator in A.C.No.164/2017 dated 19/11/2018?13
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3) What order?
8. Heard learned senior counsel Smt. Pramila Nesargi for the plaintiff and learned counsel Sri.Mallareddy for the defendant. Perused records.
9. My answer to the above points are :
POINT No.1 : In the Negative.
POINT No.2 : In the Negative.
POINT No.3 : As per final order for the following:
REASONS
10. Point No.1: Plaintiff has filed application along
with affidavit praying to receive the documents as additional evidence. Documents produced are photographs, letter of the electricity board, sale deeds etc., On going through the application and the affidavit filed in support of the application, plaintiff has not given any reasons for non- production of these documents before the learned arbitrator. Most of the documents are prior to the passing of the award by learned arbitrator. The learned arbitrator has already decided the matter on the basis of the documents and evidence produced before him and such award has been challenged in the present Arbitration Suit. Powers of the court u/s 34 are very limited and proceeding under section 34 are not in the nature of appeal. On the basis of the documents that were made available before the learned arbitrator, court have to consider the award and have to see whether it is to be set u/s 34 of the Act. Though in exceptional circumstances, for the reasons to be recorded, some new documents could be considered in the cases falling 14 CT 1390_Com.A.S.244-2018_Judgment.doc u/s 34(2)(b) of the Arbitration and Conciliation Act, plaintiff have to make out sufficient cause for non-production of documents earlier before the learned arbitrator. In the affidavit filed in support of the application, plaintiff has not stated any reasons for non-production of these documents, most of which were available even earlier, before the learned arbitrator. No reasons are given for producing these documents in the suit u/s 34 of the Act. Moreover, it is not stated as to why production of these documents is necessary. On considering all this, application filed u/s 41 Rule 27 of CPC cannot be allowed and the documents produced along with application in this Arbitration Suit cannot be considered. Accordingly, this point is answered in the Negative.
11. POINT No.2 : This Arbitration Suit is filed by the unsuccessful claimant before the learned Arbitrator, challenging the award passed by the learned Arbitrator by which it is held that the claimant is not entitle for any claim and respondent is entitle for Rs.6,01,29,896/- with interest @12% per annum and on failure to pay interest within the particular period, interest increased to 15% and also directed claimant to demolish the construction of building made on the schedule property of agreement Ex.R.6 and JDA Ex.R.1 and the KIADB property purchased by the respondent. Several grounds are urged in the arbitration suit by the claimant. The case of the claimant is that the JDA was entered into between the claimant's firm and the respondent as per Ex.R.1 on 15/2/2005 and GPA and several other 15 CT 1390_Com.A.S.244-2018_Judgment.doc subsequent documents were also executed between the parties to complete the development work in terms of JDA. The Respondent who is Defendant of this suit has disputed most of the documents that are said to have been executed between the claimant and the respondent and also denied the knowledge of such document being executed. The claimant firm is a developer and the respondent is the owner of the property. There is also an issue of exchange deed that was entered between the respondent and Nikhil Jadhav and said Nikhil Jadhav is not party in the arbitration proceedings and the property which was given in exchange to Nikhil Jadhav is stated to be part of the schedule property in Ex.R.1 JDA and the same is subsequently stated to have been left out of this JDA. Before the learned Arbitrator, claimant has given evidence and also produced documents at Ex.P.1 to Ex.P.22. For the respondent RW.1 to 3 were examined and documents Ex.R.1 to R.47 were marked. After considering the evidence and materials placed and the provisions of law the learned Arbitrator has passed impugned award.
12. On looking to the award, learned Arbitrator has considered the issue regarding construction of the building in terms of the JDA dated 15/2/2005 and subsequent supplemental agreement entered on 14/8/2009 and in accordance with the sanction plan in issue NO.3, 5 and 6. Claimant contended that the construction of the building is in terms of the JDA and is in accordance with the sanction plan and on the other hand the respondent contended that the 16 CT 1390_Com.A.S.244-2018_Judgment.doc building constructed is for commercial purpose, and not for residential purpose and it is not in conformity with the sanctioned plan, JDA and also the GPA. Learned Arbitrator has discussed on these issues No.3, 5 and 6 in detail and then came to the conclusion that the construction made by the claimant is not in compliance with the JDA Ex.R.1 and is also not in accordance with the sanctioned plan. The learned Arbitrator has also held that the building constructed upon the schedule property is for commercial use as against the sanctioned plan obtained for residential purpose. In para 28 to 52 of the award, learned Arbitrator has considered evidence and the documents that are placed by both the parties in support of their respective contentions. The contention of the plaintiff is that the construction is in accordance with the sanction plan and the plaintiff has completed the development work and during the construction activities the defendant and also her family members have also participated. The learned Arbitrator in these issues, has considered that as per clause 2.1 of the JDA obtaining plan and license from licensing authority, is the duty of the claimant and the claimant have to carry out the construction in the schedule property as per the sanctioned plan and therefore, it was the responsibility of the claimant to obtain the license and necessary permission for the construction and after construction 75% of the super built-up area was to be given to the claimant and 25% to the respondent and the expenditures are to be borne for construction by claimant.
17CT 1390_Com.A.S.244-2018_Judgment.doc The agreement also contains clause for payment of amount by the developer to the respondent and it also provides for using the KIADB granted area for the purpose of road without making construction etc.
13. The learned Arbitrator has noted that these clauses are blatantly violated by putting up commercial complex unauthorizedly upon the marginal land given by KIADB. The learned Arbitrator has noted that for making construction in the KIADB land, which is purchased by the defendant, no sanction was obtained. Learned arbitrator has noted that as per clause 7.1 and 14 of the JDA, claimant has to indemnify the owner against the losses, claim for damages, charges and expenditure that may be suffered in relation to the property demolished on existing structure and construction of new building etc. The learned Arbitrator has also noted that the original GPA executed by the respondent was in the name of A.B.Umakanth - Managing Partned of the plaintiff on 17/2/2005 which was registered on 18/2/2005, but said Umakanth has retired from the partnership firm and the present Managing Partner has applied for the sanctioned plan as per Ex.P.10, wherein she has signed against the name of the applicant, but she has no authority of the respondent on the date of filing such application for grant of license. The tribunal has considered that Smt. Varsha V. Jadhav (PW.1) has applied for sanction plan and obtained sanctioned plan as per Ex.P.10, but she had no power of attorney of the respondent, as power of attorney given was to Umakanth and 18 CT 1390_Com.A.S.244-2018_Judgment.doc not to her and has observed that she has no authority to seek grant of license and approved plan as on that date when sanction plan was obtained on 29/6/2009. The learned Arbitrator has also noted that on the right hand side of the sanctioned plan, it is written in the heading as architectural project proposed for residential apartment and therefore, plan sanctioned by the BBMP is in respect of private property of the respondent and not to the land of KIADB and the sanction plan was given for construction of residential apartment and not commercial apartment.
14. The learned Arbitrator has also noted that Respondent has denied the GPA executed in favour of Varsha V Jadhav as per Ex.P.9 and copies of which were produced as Ex.R.12, 12(a) and (b). In the arbitration proceedings this Ex.P.9 was even sent to Forensic Laboratory for examining the alleged signature of respondent in Ex.P.9 by comparing with her admitted signature and the Forensic Lab has submitted report as per Ex.R47, in which it is stated that except signature on the last page of Ex.P.9, other signatures in Ex.P.9 are not that of the respondent. The learned Arbitrator has also considered the discrepancy in every page of Ex.P.9 and noted that page No.1 to 4 were purchased by the claimant on 2/9/2008, but page No.5 to 9 which are additional document sheet do not contain date of purchase and name of the person who has purchased it. The learned Arbitrator has found that in view of the expert opinion, though the signature of the respondent in the last page of 19 CT 1390_Com.A.S.244-2018_Judgment.doc Ex.P.9 is established to be her signature, she is not party to the terms and conditions of the said document as signature found at page No.1 to 8 are not that of respondent as per the report. Submission of the learned counsel for the claimant that claimant is not placing any reliance on Ex.P.9 was taken on record and learned Arbitrator has held that in view of this submission, as Ex.P.9 is not relied by Claimant and is found to be not properly executed by respondent, Claimant represented by Smt. Varsha V. Jadhav would not have authority to apply for license and sanction plan to BBMP. Except this GPA Ex.P.9 there are no other documents showing that the claimant had authority to seek sanctioned plan. On this basis the learned Arbitrator has held that Smt. Varsha V. Jadhav had no authority to apply for grant of sanctioned plan and license from the licensing authority for putting up residential apartment in the part of the schedule property of Ex.R.1 and on this basis the learned Arbitrator has held that obtaining sanction plan and license by Varsha V. Jadhav is not in accordance with the terms and conditions of JDA and clause 2.1 of JDA is breached and the said license is also not in conformity with the provisions of Karnataka Municipal Corporation Act and Building Bye-laws and Zonal Regulations.
15. On this basis, learned Arbitrator has held that the sanction plan and license obtained by Varsha V. Jadhav is illegal as is obtained without authority of law and the construction of the non residential complex is unauthorized 20 CT 1390_Com.A.S.244-2018_Judgment.doc and therefore it cannot be allowed to be retained. In this connection the learned Arbitrator has also relied on the decision of Hon'ble Supreme Court in Saket Housing Limited wherein it is held that building in violation of sanctioned plan cannot be allowed to exist. The learned Arbitrator has also noted that the sanction plan and license granted to the claimant is for the construction of residential apartments, but the actual construction made is not residential apartments building but it is the commercial building and is also used for lodging purpose. The learned Arbitrator has also referred to Ex.P.13 which is an agreement entered by the claimant with Wyndham Hotel Asia Pacific Company Limited, wherein the licensee is entitled to use the Marks and the System for hotel marketed as Days Inns & Days Hotels and also relied on the evidence of RW.3 who is stated to have resided in the hotel being run by licensee as per the agreement Ex.P.13. By considering this evidence the learned Arbitrator has held that the construction made is not of a residential apartment, but it is a commercial building. The learned Arbitrator has also noted that even electricity connection to the building given by KPTCL is for commercial purpose.
16. The learned Arbitrator has also noted that as per Ex.R.1, construction was to be completed within 30 months plus 3 months grace period from the date of obtaining sanction plan and noted that the sanction plan was obtained on 26/9/2009 and construction was not completed within the 21 CT 1390_Com.A.S.244-2018_Judgment.doc said period and the claimant has not handed over 25% share of the apartment building as agreed by the claimant to the respondent and he has not communicated the completion of construction of building in writing. The learned Arbitrator has also noted the submission that the commercial activities will be allowed even in the residential main and residential mixed zones by relying on notification and has observed that the said notification has no application to present case as sanction plan was obtained for residential purpose and not for the commercial building, which is 100% deviation of the sanctioned plan, which neither come within the amended regulation Nos.1 to 3 nor within the permissible user limits. The learned Arbitrator has held that contention of the claimant that completion of the building was intimated to the respondent is not acceptable as there was no written communication sent by the claimant to the respondent informing about completion of the residential apartment. The email relied by the claimant at Ex.P.20 is found to have not been sent by claimant's firm to the respondent. By considering all these aspects, tribunal has held these issues 3, 5 and 6 in favour of the respondent and held that the building constructed in the property is for commercial purpose and not for residential purpose and it is not in conformity with the sanction plan, JDA and GPA.
17. In issue No.4 the learned Arbitrator has held that the restoration of the occupancy certificate is not binding on the respondent. The learned Arbitrator has noted that the 22 CT 1390_Com.A.S.244-2018_Judgment.doc occupancy certificate Ex.R.17 dated 16/3/2017 was granted in favour of the claimant on the assumption that the building is residential apartment constructed on the part of the schedule property of JDA, though the construction made by the claimant is the commercial building and is unauthorized. The deviation of less than 5% is erroneously observed and the same is said to be against the building bye-laws and the Zonal Regulations of the BBMP. The learned Arbitrator has also considered the report of the Court Commissioner in A.A.No.167/2016 before the City Civil Court, which was submitted in the matter between the same parties, wherein construction of the building is said to be not in accordance with the BBMP Bye-Laws and Zonal Regulations and that claimant has violated the regulations and made construction for commercial purpose, to run it as a lodge which is against sanction plan given for residential purpose and it is not as per the terms of supplemental agreement Ex.R.13. The learned Arbitrator has also noted that as per the bye-law No.2057 of BBMP bye-law 2003 dwelling unit means an independent housing unit for separate facility for living, cooking and sanitary requirement and noted that this construction is not conformity with this bye-law and the units constructed cannot be taken as dwelling unit and even it cannot be called as service apartment, as for service apartment there should be room with kitchen which is intended to be used on rental basis and this requirement is not found in these units. The learned Arbitrator has also noted that for any violation of 23 CT 1390_Com.A.S.244-2018_Judgment.doc sanction plan, licensing authority is entitled to pull down and demolish the structure which is constructed by the claimant. The learned Arbitrator by considering that construction of the building is not in accordance with the sanction plan and claimant proceeded to give constructed building for running the hotel and by considering the evidence of RW.1 and 3 that claimant has given building for running a hotel and by considering the commissioner's report along with photographs, showing that the requirement of dwelling unit is not found, has held that the occupancy certificate given is without considering the nature of building. This occupancy certificate was challenged by the respondent and the same was canceled and the occupancy certificate was restored by the standing committee by resolution dated 15/2/2018 as per Ex.P.8. As the respondent was not party to this proceeding, the learned Arbitrator has held that this occupancy certificate is not binding on the respondent. Moreover, the occupancy certificate is given on the assumption that the building constructed is of residential apartment, though it is a commercial building constructed by claimant in violation of sanction plan. The learned Arbitrator has also noted that the commercial building constructed in violation of sanction plan has been given on license as per Ex.P.13 for running hotel and the licensee has been using the premises for lodging and boarding purpose. By considering these aspects, learned arbitrator has answered issue No. 4 in favour of the respondent.
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18. The learned Arbitrator then considered issue No.8 which is with regard to validity of exchange deed in respect of 'B' schedule property in favour of Nikhil V. Jadhav. Learned Arbitrator considered that part of the land of the KIADB which was given to the respondent was also part of Ex.R.1 JDA and subsequently after execution of the sale deed by the KIADB in favour of the respondent an exchange deed is created in favour of Nikhil V. Jadhav who is son of managing partner of the claimant and noted the discrepancies in this document and found that the property given to the respondent on exchange was not even existing at the time of execution of this exchange deed and the valuation of both the properties and its measurement are also not matching and valuable consideration has also not passed. The learned Arbitrator has also noted that 'A' schedule property of the respondent mentioned in Exchange deed, which is said to have been given to Nikhil V. Jadhav was measuring 511 square meters which is equalant to 5498.36 sq.ft and 'B' schedule property of Nikhil V. Jadhav mentioned in this document is measuring 725 sq.ft as per built up area and the said building has not even come up and there were no title documents in favour of Nikhil V. Jadhav in respect of the 'B' schedule property and valuation of the property of respondent was about Rs.2,74,00,000/- and the value of the 'B' schedule property would be around 36,25,000/-. By considering these facts and figures, learned Arbitrator has found that the exchange deed and rectification deed for these 25 CT 1390_Com.A.S.244-2018_Judgment.doc exchange deed are obtained by Nikhil V. Jadhav at the instance of his mother and is not valid in law. Suit which has been pending before the City Civil Court in relation to the exchange deed and rectification deed in relation to non existing property described as 'B' schedule to the plaint is held to be not a bar, to the Tribunal in giving finding based on facts. By considering all these materials, learned Arbitrator has held that this exchange deed, several rectification deeds produced are sham documents and they are void, abinitio and cannot be enforced by law against the respondent.
19. Issue No.1 in the arbitration proceedings is about validity and legality of the termination of the agreement dated 8/11/2004, JDA dated 18/2/2005, GPA dated 8/11/2004 and supplementary agreement dated 14/8/2009. The learned Arbitrator on this issue has considered all these documents and also the allegations of the respondent with regard to these documents that she has signed the documents without knowing the contents. The learned Arbitrator has observed that as Ex.P.9 GPA alleged to have been made by respondent in favour of Varsha V. Jadhav is not relied by the claimant as submitted by counsel, claimant had no authority to apply for plan sanction and also that, after obtaining plan sanction for residential, construction of commercial building has been made and construction is in contravention of terms and conditions of JDA. The learned Arbitrator has held that this construction in violation of sanction plan is blatant breach of various terms and 26 CT 1390_Com.A.S.244-2018_Judgment.doc conditions of the JDA. The learned Arbitrator also noted that construction of the building for use of commercial purpose and not for residential purpose as agreed by the parties is in contravention of sanction plan and license issued by the BBMP.
20. The learned Arbitrator has also noted that the license agreement entered by the claimant with Wyndham Hotel clearly establish that the construction of the building is for the commercial purpose and the same was given in favour of licensee who will use the same for lodging and boarding purpose, as seen from the records at Ex.R.25, Ex.R.26 and evidence of RW.3. The learned Arbitrator has also held that the respondent has proved that there is breach of contract by the claimant. It is also noted that even the time limit fixed for completion of the construction is not followed and 25% of the built up area of the residential apartment is not handed over to the respondent. For these reasons learned Arbitrator has held that the terms and conditions of the JDA and the subsequent documents and the GPA are all violated and for these reasons the termination of these agreements by legal notice dated 28/4/2016 as per Ex.R.19 is valid. The learned Arbitrator has also noted that the claimant has not prayed to declare the termination of the agreement by the respondent as illegal and invalid and has not sought any appropriate relief on that basis. The learned Arbitrator has held that the respondent has rightly invoked her right and terminate the said agreement by issuing legal notice dated 28/4/2016 and 27 CT 1390_Com.A.S.244-2018_Judgment.doc reiterated the same in her reply dated 3/6/2016 as per Ex.R.21. Learned Arbitrator has found that though the reasons given in the notice of termination are objected and it is held that the Arbitrator need not rely on the reasons assigned in the legal notice to terminate the document for the reason that the respondent has clearly pleaded and adduced evidence with regard to blatant violation of terms and conditions of the agreement. With these findings, the learned Arbitrator has answered issue No.1 in favour of the respondent.
21. The learned Arbitrator then considered issue No.2 which is about the claimant's claim made in the claim petition. The learned Arbitrator has noted these claims made by the claimant including the refund of Rs.18 lakhs refundable security deposit which is found in the JDA Ex.R.1. Learned Arbitrator has noted that this amount is payable on handing over of the possession of the owners constructed area and as the owners constructed area of the residential apartment has not been handed over, question of refund of the same do not arise. Regarding second claim for Rs.20 lakhs stated to have been advanced to the respondent to get katha and other property documents from the concerned authorities, for which Ex.P.4 receipt is produced, learned Arbitrator has held that payment of Rs.20 lakhs by the claimant for this purpose is proved, but the said amount cannot be ordered to be returned as respondent has been suffering to the great extent from 2005 and she is not getting 28 CT 1390_Com.A.S.244-2018_Judgment.doc income from the property given to the claimant and respondent's share was not delivered and she was not put in possession of the super built up area. The other claims for Rs.45,44,000/- towards market value of 568 sq.ft excess area coming under 25% of the owners constructed area, learned Arbitrator has held that construction of 30 units was not done within stipulated time of 30 + 3 months and construction is not in compliance with the requirement of law and the occupancy certificate was obtained by misrepresenting the fact and suppressing the relevant facts of pendency of civil case before the Civil Court and that the construction made is for commercial purpose and is against the agreement and claimant is not entitle for this amount. Regarding another claim for Rs.29,23,500/- also, learned Arbitrator has held that this claim is in respect of maintenance deposit and as the construction is found to be illegal and owners share is not delivered to the respondent, question of maintaining the property by the claimant on behalf of the respondent do not arise and it is also noted that Apartment Owners Association is not formed as required as per clause 11.1 of the JDA and held that question of payment of maintenance charges to the claimant in respect of respondent's share of 25% built up area of residential apartment do not arise. In claim No.5 which is stated to be with regard to expenditure to the extent of Rs.1,01,58,968/- paid towards BESCOM, STP and other charges which is to be paid by the respondent proportionately as per the JDA cost 29 CT 1390_Com.A.S.244-2018_Judgment.doc payable by the respondent is calculated as Rs.25,39,742/- and the claim has been rejected as construction was made of commercial building and not residential building and even spending of Rs.1,01,58,968/- by the claimant towards these expenses is also not established. In claim No.6 the claimant had prayed for Rs.50 lakhs as damages for filing false criminal case against the claimant's partners and its employees etc and the same is rejected as it is not subject matter of the arbitration proceedings and no evidence is led on the same. In claim No.7 the case of the claimant that it has fulfilled terms and conditions of JDA and unnecessarily the respondent has filed application under Section 9 of the Arbitration & Conciliation Act and claimant had spent Rs.5 lakh towards filing the miscellaneous petition for appointment of Arbitrator, is also rejected by holding that the respondent is most affected person as she has been unnecessarily harassed on the project construction and completion of the residential apartments and residential apartments are not delivered to her. With these reasons this issue No.2 is answered by rejecting all the claims made by the claimant.
22. In issue No.7 the learned Arbitrator has considered the claim of the respondent for awarding compensation in lieu of deprivation of utilizing her land from 8/11/2004 till the date of filing the counter claim amounting to Rs.12,61,78,890.4 with interest @24% per annum. The learned Arbitrator has noted that terms of JDA are not complied by the claimant and construction is not in 30 CT 1390_Com.A.S.244-2018_Judgment.doc accordance with the sanction plan and is against the provisions of Karnataka Municipal Corporation Act and the construction is illegal and the building constructed is commercial building and not residential. The learned Arbitrator has also noted that after construction, building has been given on license for running the hotel. The respondent in the pleading has assessed Rs.20 per square feet as the rent and calculated Rs.12,61,78,890.4. As the licensee of the claimant is using the premises for the commercial purpose as lodging and boarding and it is rented to the customers on daily basis, the interest is also claimed. The learned Arbitrator has held that as the claimant has blatantly breached the terms and conditions of the JDA as recorded in issue No.1, claim of the claimant against respondent towards loss or damage caused by the claimant on account of breach of terms and conditions of contract of non delivery of possession of the respondent's share of built up area within stipulated period is legally justified. The learned Arbitrator by considering the evidence and by considering rent as Rs.15/- per sq.ft, arrived at a figure of Rs.72,33,184/- and then considering 15% interest per annum for 6 years by taking into consideration the period of 33 months including grace period which would have expired on 10/11/2012, calculated the amount due in detail in page 110 and 111 of the award and by considering Section 73 of the Indian Contract Act arrived to the amount of Rs.6,01,29,896/- to which the respondent is entitle and 31 CT 1390_Com.A.S.244-2018_Judgment.doc awarded 12% interest on the same from the date of counter claim till the payment.
23. On answering all these issues, learned Arbitrator has held that the counter claim is to be allowed to the extent of Rs.6,01,29,896/- with future interest and then held that the claimant is not entitle for any claim and the respondent is entitle for this amount which is to be paid with interest of 12% within 6 weeks and on failure respondent is entitle for 15% interest. In view of the finding of the learned Arbitrator on the other issues that the construction of the building made upon the schedule property, including the KIADB property purchased by the respondent is unauthorized, directed the claimant to demolish the same within 4 weeks and on failure allowed the respondent to get it demolished through BBMP at the cost of the claimant and held that the respondent shall be continued in possession of the schedule property and enjoy the same.
24. In nutshell, as per the award, plaintiff has not made construction in terms of the JDA Ex.R.1 and has also not handed over 25% of the owners constructed area in the residential apartment to the respondent within the period of 30+3 months as provided in the JDA. The award also states that sanction plan as per Ex.P.10 was obtained for construction of residential apartment, but the construction made by the claimant is of commercial building, wherein a hotel and lodge being run as per the license agreement executed by the claimant in favour of another company. The 32 CT 1390_Com.A.S.244-2018_Judgment.doc learned Arbitrator has also held that even at the time of filing the application and approaching the statutory authority seeking sanction plan and license for construction of the building in the property of the respondent, PW.1 had no authority, as GPA relied by her was not valid, as confirmed by Forensic lab report. The learned Arbitrator has also considered the exchange deed, said to have been entered between Claimant and Nikhil Jadhav as per Ex.R.5 on 5/3/2019 and has held that as 'B' schedule property of exchange deed was not even existing at the time of this exchange deed on 5/10/2010 and the measurement and the valuation of the property which are exchanged in Ex.R.5 are totally inappropriate and there was no 'B' schedule property available for handing over possession as mentioned in the exchange deed, it is a sham document. The learned Arbitrator has also considered the issuance of occupancy certificate and its cancellation and restoration of original occupancy certificate by Standing committee. He has also considered Commissioner's report submitted in A.A filed by the respondent against the claimant, wherein after inspection Court Commissioner has clearly held that construction in the schedule property is not of a residential building, but is of a commercial building. By considering this Report and evidence, learned Arbitrator has held that the occupancy certificate is without looking to the real facts. The learned Arbitrator has held that in view of the construction being illegal and respondent being not given possession of the 33 CT 1390_Com.A.S.244-2018_Judgment.doc property, within the time schedule and the respondent has lost the rent income from property and has suffered more, has held that claimant is not entitle for any amount. On the other hand, learned Arbitrator has partly allowed the counter claim and by holding that the respondent is entitle for the amount of Rs.6,01,29,896/- from the claimant along with interest and also held that as construction made is unauthorized and is of a commercial building as against the sanction plan for residential building, directed claimant to demolish the building and to hand over vacant land to the respondent. The learned Arbitrator has also held that the construction made in the KIADB granted property is also to be demolished.
25. It is settled principle that the award of the learned Arbitrator can be set aside only on limited ground as appearing in Section 34 of the Arbitration & Conciliation Act. The plaintiff-claimant has raised preliminary objection on the ground of procedural illegality. It is contended that as Respondent had given notice invoking arbitration, respondent should have been considered as claimant and claimant as respondent and that there is also illegality in casting burden on claimant to prove issue No.4 etc. On looking to award, as claimant had approached Hon'ble High Court under section 11 of arbitration and conciliation Act, learned arbitrator has rightly treated the petitioner in CMP as claimant. Moreover, under section 19 of the Act, Arbitrator can determine rules of procedure and Arbitral Tribunal s not bound by CPC. As per 34 CT 1390_Com.A.S.244-2018_Judgment.doc this section, in the absence of any agreement, Arbitrator may conduct the proceedings in the manner he considers it appropriate. Therefore, objections raised for not considering claimant as respondent and vice versa would not sustain. For the same reason, objection on casting burden on a particular party to prove particular issue will not hold good.
26. One of the contention of the plaintiff is that the learned Arbitrator has decided the dispute which is not contemplated and not falling within the terms of submission to arbitration and it contains decision of matter beyond the scope of the submission to arbitration and the award is to be set aside under Section 34(2)(a)(iv) of the Act. In the decision reported in (2011) 5 SCC 532 (Boozallen and Hamilton Inc v. SBI Home Finance Limited and others) relied for the Plaintiff, Hon'ble Supreme Court has stated as to what is the arbitrability of a dispute and held that whether the disputes are capable of adjudication and settlement by arbitration and whether disputes are covered by the arbitration agreement and whether parties have referred the disputes to arbitration are necessary to be considered. The contention of the plaintiff is that the learned Arbitrator has decided on validity of Exchange deed which was entered between Nikhil Jadhav and the Respondent and also on validity of Occupancy certificate given by the statutory authority and has also ordered for demolition of the building including property purchased from KIADB by the defendant. According to plaintiff, all these findings of the learned 35 CT 1390_Com.A.S.244-2018_Judgment.doc Arbitrator are beyond the scope of arbitration agreement and even these disputes were not referred to the learned Arbitrator. It is also contended that even there is no prayer for demolition of the construction in the counter claim of the defendant. For these main reasons among others, it is strongly contended that the Award travels beyond the scope of reference and arbitration agreement and even beyond the power of the learned Arbitrator and it even decides on the right of third party who is not party in the arbitration proceedings and who is not even party to arbitration agreement between the parties.
27. Coming to the point of right of third party being decided by the learned Arbitrator, contention of the plaintiff is that the KIADB property which was purchased by defendant was given in exchange to Nikhil Jadhav as per the Registered exchange deed and this Nikhil Jadhav is not party in the present proceedings and still the learned Arbitrator has decided about the validity of Exchange deed on which even there is a suit filed by the defendant against Nikhil Jadhav which is pending. The learned Arbitrator has considered the evidence and also various documents and found that exchange deed Ex.R.5 contains 'A' and 'B' properties. Schedule 'A' property is admittedly belong to defendant having purchased the same from KIADB. Schedule 'B' property in the exchange deed is Suit No.23 measuring 725 sq.ft in the building to be constructed by the plaintiff. Learned Arbitrator has noted that the construction of the 36 CT 1390_Com.A.S.244-2018_Judgment.doc apartment was made in 2013-2014 as admitted by even PW.1 and therefore, when this Exchange deed was executed this 'B' schedule property was not even in existence. For giving this finding, by the learned arbitrator, pendency of another suit do not come in the way, as this property given by KIADB is one of the property in Ex.R.1 JDA. Excluding 600 Sq.ft in property purchased from KIADB, remaining property is also part of joint development as mentioned in schedule of JDA. Admittedly, no documents are executed to exclude this KIADB property from joint development.
28. Claimant is not party to Exchange deed. There is no reference to registered JDA, in Exchange deed. Parties to exchange deed are aware of JDA, as suit No.23 which is given in exchange to KIADB proeprty is the bulding to be constructed on the basis of Ex.R.1 JDA. Moreover, Nikhil Jadhav is son of Managing partner of Claimant. This Nikhil Jadhav's property which is given in exchange to KIADB property is the building to be constructed by this claimant in the property of Respondent by virtue of JDA Ex.R.1. On considering all these aspects, Nikhil Jadhav cannot be even considered as 3rd party, as he is son of Managing partner of Claimant and property given by him in exchange is the building to be constructed by claimant and this KIADB property is even property included in Ex.R.1 JDA and even after Exchange deed, this property is not excluded from development by any rectification or supplementary agreement. Hence this exchange deed will not come in the 37 CT 1390_Com.A.S.244-2018_Judgment.doc way of rights and liabilities of parties under Ex.R.1 JDA. Even in the present suit, plaintiff has stated that it had made payment on behalf of defendant to KIADB as that property was also included in JDA for development. Therefore, issue regarding property purchased from KIADB, is even connected to present JDA between plaintiff and defendant. Even in the further arguments addressed by both Counsels, it is clarified that there is no any further documents executed between the parties to exclude this KIADB property from JDA after execution of Exchange deed. For all practical purposes, this KIADB property continued to be part of property to be developed as per JDA Ex.R.1, even after Exchange deed. Therefore, the contention of the plaintiff that the property in exchange deed is foreign to this JDA Ex.R.1 cannot be accepted. Hence, it cannot be said that learned Arbitrator has exceeded his jurisdiction in considering the validity of exchange deed.
29. The learned Arbitrator has noted discrepancies and differences in the two property that are exchanged and found that even value and measurement of the two properties are not tallying with each other and 'B' schedule property is having very less extent than the 'A' schedule property and value of 'A' schedule property is many times more than the property in 'B' schedule. Learned Arbitrator has found that 'B' schedule property was not in existence when this exchange deed was executed on 5/3/2010 as per Ex.P.4. In the presence of clear evidence showing that the property 38 CT 1390_Com.A.S.244-2018_Judgment.doc which is 5498 sq.ft has been exchanged with a property of 725 sq.ft and this property of 725 sq.ft was not even existing and still, exchange deed says that this purchaser is absolute owner and that possession was handed over to the defendant which are impossible as on the date of exchange deed on 5/3/2010 as the development itself has not taken place at that time, learned Arbitrator gave a factual finding that the exchange deed is a sham document. Since one of the property of exchange deed is property in JDA and one of the suit to be constructed on the basis of JDA is another property of Exchange deed, finding given by the learned Arbitrator based on facts cannot be said to be beyond the power of the arbitrator. Regarding deciding about validity of Exchange deed in the absence of Nikhil Jadhav, this person is son of PW.1 and he is aware of JDA as his property given in exchange is the part of building to be constructed on the basis of JDA. Hence, he is aware of the proceedings that are initiated by the plaintiff firm against the defendant. Though it is stated by the plaintiff that Nikhil Jadhav has obtained separate sanction plan for construction in KIADB property, no such document are produced. When plaintiff, could produce Exchange deed before the Arbitrator, plaintiff could have also produced such sanction plan if really obtained by Nikhil Jadhav. Moreover, if Nikhil Jadhav is having independent right on the basis of Exchange deed, this award may not affect his right as he is not party to these proceedings. Plaintiff need not canvass on behalf of this 3 rd party. This 39 CT 1390_Com.A.S.244-2018_Judgment.doc property of KIADB is part of Schedule property, which is to be developed as per JDA. Arbitration proceedings are initiated on the basis of arbitration agreement entered between the parties in JDA. Parties have not specifically excluded KIADB property from reference of dispute to arbitration. Therefore, plaintiff cannot contend that decision of the learned Arbitrator with regard to this property of the exchange deed is beyond the scope of arbitration. Under these circumstances, contention that, holding the exchange deed as sham and invalid document and ordering demolition of the construction in the property purchased by defendant from KIADB is beyond the scope of arbitration on the ground that Nikhil Jadhav is not party in Arbitration, cannot be accepted.
30. Regarding order passed by the learned Arbitrator for demolition of the building it is contended by the plaintiff that there was no such prayer in the counter claim of the Defendant and the learned Arbitrator has exceeded his jurisdiction in ordering demolition of the property covered by JDA. As rightly submitted for the defendant, when Arbitrator has found that the termination of JDA is valid and has also found that the construction made by the plaintiff developer in the property is in contravention of not only the JDA but also law and also the rules and regulations and the construction made is an illegal construction, under Specific Relief Act, the Arbitrator has the power to cancel the contract and the status-quo ante requires to be restored. For that purpose, after holding that the sanction plan obtained is without 40 CT 1390_Com.A.S.244-2018_Judgment.doc proper authorization as Ex.P.9 is invalid and not relied and construction of commercial building as against permission obtained for residential building is against law and such illegal construction requires to be demolished and property is to be restored to earlier condition, learned arbitrator ordered demolition of the illegal construction. In the facts of the case and for the reasons given in the award, ordering demolition cannot be said to be beyond the scope of power of the learned Arbitrator. As held in the decision of Hon'ble Supreme Court in Olympus Superstructures Pvt Ltd Vs Meena Vijay Khetan reported in (1999) 5 SCC 651, Court includes Arbitrator. Hence, Arbitrator has the power to cancel the contract and even under the Specific relief Act, learned Arbitrator has power to grant specific relief.
31. The learned counsel for the claimant-plaintiff has relied on the decision reported in (2003) 5 SCC 705 (Oil & Natural Gas Corporation Limited v. Saw Pipes Limited), in which, in para 74 Hon'ble Supreme Court has held that under Section 34(2)(iv), if 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, award can be set aside.
32. The learned senior counsel for the claimant- plaintiff by relying on above decision in Saw Pipes Limited has argued that the award which directs demolition of the building even though there was no such prayer in the counter 41 CT 1390_Com.A.S.244-2018_Judgment.doc claim is shocking the conscience of the court. In this decision the Hon'ble Supreme Court in para 13 has stated that if the arbitral tribunal has not followed the mandatory procedure prescribed under the Act, it would mean that it has acted beyond its jurisdiction and thereby the award would be patently illegal. It is also held that the tribunal have to decide the dispute in accordance with substantive law for the time being in force in India and Indian Contract Act, Transfer of Property Act and other such laws are the substantive law of the country. In para 31 it is held that the phrase "public policy of India" used in Section 34 in context is required to be given a wider meaning. It is also held that, patent illegality which go to the root of the matter would be against the public policy and award could be set aside if it is so unfair and unreasonable that it shocks conscience of the court. In another decision in (2008) 13 SCC 80 (Delhi Development Authority v. R.S.Sharma and Company, New Delhi) also it is similarly held.
33. The learned Senior counsel for the claimant has argued that when there is no prayer no relief can be granted. In this connection, the learned counsel has relied on the decision of Hon'ble Supreme Court in Civil Appeal No.440441 of 2020 dated 26/3/2021 between Tata Consultancy Services Limited v. Cyrus Investments Private Limited and others). In this decision the Hon'ble Supreme Court in para 17.9 has noticed that there was no prayer for reinstatement of Cyrus Mistry either as a director 42 CT 1390_Com.A.S.244-2018_Judgment.doc or as an executive chairman of Tata Sons and held that without there being any complaint against those companies and there being any prayer against them such relief cannot be granted. In the decision reported in (2008) 17 SCC 491 (Bachaj Nahar v. Nilima Mandal) in para 10 the Hon'ble Supreme Court has held that when there is no prayer for a particular relief and no pleadings to support such a relief, and when defendant has no opportunity to resist or oppose such a relief, if the court considers and grants such a relief, it will lead to miscarriage of justice. Thus it is said that no amount of evidence, on a plea that is not put forward in the pleadings, can be looked into to grant any relief. Another decision reported in (1991) 1 SCC 441 (Om Prakash and others v. Ramkumar and others) is also cited in which the Hon'ble Supreme Court has held that a party cannot be granted a relief which is not claimed, if the circumstances of the case are such that the granting of such relief would result in serious prejudice to the interested party and deprive him of the valuable rights under the statute.
34. On going through above decisions, they are not applicable to present case. In the present case after holding that construction is illegal and against sanction plan, necessary consequence would be to direct demolition. Such construction cannot be permitted to exist after being held to be illegal. Parties cannot be asked to venture into another litigation for getting the relief consequent to declaring that the construction is illegal. In Ssangyong Engineering and 43 CT 1390_Com.A.S.244-2018_Judgment.doc Construction Company Limited v. National Highways Authority of India reported in (2019) 15 SCC 131, it is held in para 58 that where matters, though not strictly in issue, are connected with matters in issue, they would not readily be held to be outside or beyond the scope of submission to arbitration. Therefore, direction to demolish the construction cannot be said to be patently illegal or shocking conscience of the Court or that the relief granted is without the prayer or is without giving opportunity to other party to contest etc.
35. Learned senior counsel for the Plaintiff has relied on the decision reported in (2003) 8 SCC 154 (Bharat Coking Coal Limited v. Annapurna Construction) it is held in para 20 that it is now well settled that the arbitrator cannot act arbitrarily, irrationally, capriciously or independent of the contract. It is also held in para 26 that in Heyman v. Darwins Limited it was held that an arbitrator as a rule cannot clothe himself with jurisdiction when he has none. Decision of Hon'ble Supreme Court reported in (2004) 9 SCC 619 (Mr.Army Welfare Housing Organization v. Sumangal Services Private Limited) is cited in which, it is held in para 43 that the Arbitral Tribunal is not a court of law and its orders are not judicial orders and its functions are not judicial functions. It is held that jurisdiction of the arbitrator being confined to the four corners of the agreement, he can only pass such order which may be the subject matter of reference.
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36. The learned counsel for defendant has relied on a decision reported in (2007)9 SCC 503 BOC India Ltd., vs. Bhagwati Oxygen Ltd., in which Hon'ble Supreme Court held that if the Arbitrator travelled beyond terms of contract or there is error apparent on the face of the record or misconduct by arbitrator, then only award can be interfered. It is held that when arbitrator has considered all aspects of the matter, including terms of the contract and all materials on record and has come to a conclusion on fact and when the arbitrator had taken a plausible view on interpretation of the contract, court cannot set aside award on ground of misconduct of arbitral proceedings.
37. On looking to the facts and decisions cited, technical contentions raised to challenge validity of the award, on the ground that award deals with the dispute not contemplated and dispute involving 3 rd party and decides matter which is not falling within the terms of submission and the tribunal exceeded its power in passing the award are not established by the plaintiff. Though, the award for demolition of the constructed building, appears harsh, learned Arbitrator is within his power to order such demolition to restore the property into original condition, when the construction made in the property is found to be illegal and cannot be permitted to remain. When award of the arbitrator directing demolition of the construction and handing over possession of vacant land to Defendant is within the powers of the learned arbitrator, Court under section 34 45 CT 1390_Com.A.S.244-2018_Judgment.doc of Arbitration and Conciliation Act cannot interfere in such award. Hence challenge to the Award under section 34(2)(a)
(iv) of the Act would fail. As held in catena of decisions, Court under Section 34 cannot interfere in the award on the ground that different view, other than the view of the Learned arbitrator is also possible, unless view of the arbitrator is not even a possible view. In this case when the construction is held to be illegal and sanction plan itself says that if the construction is not in accordance with the rules and sanction plan, such construction may have to be demolished, order for demolition of such construction is a possible view that could be taken by the learned Arbitrator and same cannot be interfered under Section 34. Therefore, ground urged under Section 34(2)(a)(iv) regarding the learned Arbitrator exceeding the jurisdiction and deciding the matter beyond the scope of reference and deciding the dispute not contemplated under the arbitration agreement etc would fail.
38. Another main ground on which the award is challenged is under Section 34(2)(b) of the Arbitration & Conciliation Act and under Section 34(2A). It is contended that the award is against public policy and is also patently illegal. In a decision reported in (2009)5 SCC 142 Kwality Manufacturing Corporation vs. Central Warehousing Corporation, relied by the Defendant, it is held that the scope of interference by courts in regard to arbitral awards is limited. It is held that Court while considering challenge to arbitral award does not sit in appeal over the findings and 46 CT 1390_Com.A.S.244-2018_Judgment.doc decision of the arbitrator nor can it reassess or re-appreciate evidence or examine the sufficiency or otherwise of the evidence. In another judgment reported in (2009)5 SCC 678 Madhya Pradesh Housing Board vs. Progressive Writers and Publishers it is held under Arbitration Act that, court do not exercise appellate jurisdiction and cannot reappraise evidence and interpreting a contract is matter within the jurisdiction of arbitrator and the award passed by the arbitrator is ordinarily final and it cannot be interfered with unless the reasons/findings contained therein are totally perverse or award is based on wrong proposition of law. In (2009) 9 SCC 357 K.V. Mohammed Zakir vs. Regional Sports Centre it is held that interference in award is called for only where reasoning is such as no person of ordinary prudence can ever approve of it and degree of such unreasonableness must be greater and it is held that substitution of court's own view for the view taken by arbitrator is impermissible. In another judgment in (2008)16 SCC 128 Associated Construction vs. Pawanhans Helicopters Limited it is held that the court do not sit in appeal over an award and when view taken by the arbitrator is permissible then no interference is called for on the ground that a different view is also possible. These decisions clearly states the scope of interference in the award by the court u/s 34, which is very limited and only if view of the learned arbitrator is not even a possible view and not a view which 47 CT 1390_Com.A.S.244-2018_Judgment.doc ordinary prudent man would have arrived at, court can interfere with such an award.
39. The learned senior counsel for plaintiff to contend that the award is patently illegal, perverse and against public policy has referred to many of the celebrated judgments. In (2015) 3 SCC 49 (Associate Builders v. Delhi Development Authority) in para 30, Hon'ble Supreme Court has held that "the audi alteram partem" principle which undoubtedly is a fundamental juristic principle in Indian law is also constrained in Sections 18 and 34(2)(a)(iii) of the Arbitration & Conciliation Act. In para 42 the Hon'ble Supreme Court has stated about substituted ground of patent illegality and held that it contains a contravention of the substantive law of India, contravention of the Arbitration Act and contravention of Section 28(3) of Arbitration & Conciliation Act and the arbitral tribunal must decide in accordance with the terms of the contract. In another judgment reported in (2006) 11 SCC 181 (McDermott International Inc v. Burn Standard Company Limited and others) the Hon'ble Supreme Court has held that the patent illegality must go to the root of the matter and public policy violation should be so unfair and unreasonable as to shock the conscience of the court and it is held that what would conflict with public policy is a matter dependent upon the nature of transaction and nature of statute. In another decision reported in (2006) 11 SCC 245 (Centrotrade Minerals & Metals Inc. v. Hindustan Copper Limited) it is held that patent illegality must go to the root of 48 CT 1390_Com.A.S.244-2018_Judgment.doc the matter. It is also held that where the Arbitrator has gone contrary to or beyond the express provision of law or contract or granted relief on the matter not in dispute, it would come within the purview of Section 34 of the Act. In another judgment reported in (2010) 8 SCC 563 (Rashtriya Chemicals and Fertilizers Limited v. Chowgule Brothers and others) it is held that Arbitrator has no jurisdiction to make an award against the specific terms of the contract executed between the parties. Plaintiff has also relied on the decision in Ssangyong Engineering referred above, to contend that arbitrator cannot go beyond the reference. In this decision in para 68 it is held that where an arbitral tribunal has rendered an award which decides matters either beyond the scope of the arbitration agreement or beyond the disputes referred to the Arbitral Tribunal, an award could be said to have dealt with decisions on matters beyond the scope of submission of arbitration. It is also held in para 69 that if arbitrator has wandered outside the contract and dealt with matters not allotted to him, this would be a jurisdictional error which could be corrected on the ground of patent illegality. In the presence of the ratio laid down in the above decisions by the Hon'ble Supreme Court, contentions raised by the parties in present arbitration suit are to considered.
40. In the present case, as per JDA Ex.R.1 dated 15/02/2005 (Registered on 18/2/2005), property of the defendant including property granted by KIADB to the defendant of which sale deed was executed subsequently are 49 CT 1390_Com.A.S.244-2018_Judgment.doc agreed to be developed, by developer putting up a multi- storied residential/commercial building in which 75% of construction area goes to the developer and 25% to the owner that is the defendant. As per the JDA, developed portion of the owner's constructed area is to be handed over to the owner within 30 months plus 3 months grace period from the date of obtaining sale deed for marginal land and clubbed katha and obtaining plan sanction. The construction should be as per the agreed plan and design and drawing for construction of multi-storied residential/commercial building. The GPA was given to the then Managing Partner of the plaintiff by name A.V.Umakanth by Ex.R.2 which is also registered and this was given to obtain plan sanction and license from concerned authority for putting up construction of service apartment. There was subsequent memorandum of understanding entered in 2008-09 regarding the size of the pent house and it is mentioned in this Ex.R.3 that the license to construct is obtained on 30/6/2009 and the time starts from 1/8/2009 to complete construction and 33 months time is given. The sale deed was executed by KIADB in respect of the marginal land on 5/2/2010 as per Ex.R.10 and the sale deed is executed in the name of Krishna Caterer to which Smt. Chanchaladevi is the proprietor.
41. The partnership deed produced at Ex.R.7 which is reconstitution of partnership show that Varsha Jadhav and Nikitha V. Jadhav became partners of plaintiff firm and Umakanth and his wife have retired from the firm. There are 50 CT 1390_Com.A.S.244-2018_Judgment.doc supplementary agreements also executed between the parties. Though, GPA was given to Umakanth earlier by the defendant, subsequent GPA Ex.P.9 given to PW.1 is found to be not valid and is not even relied by plaintiff as per the submission made before learned arbitrator. As per Ex.R.47 Report of Forensic Lab signature except on the last page are found to be not that of Defendant. On the basis of this Ex.P.9 GPA, application was given by PW.1 for obtaining sanction plan on behalf of Defendant. Since Ex.P.9 is found to be not valid and is said to have been not relied, learned arbitrator has found that this sanction plan itself is not validly obtained.
42. As stated earlier, learned Arbitrator has found that though JDA says that the development is by construction of residential/commercial building, in Ex.R.13 it is mentioned that construction of a studio apartment is to be made in this property. The sanction plan obtained by the plaintiff for construction is clearly for construction of residential building. Learned arbitrator has found that construction made is not of a residential building, but of a commercial building. For this finding the learned Arbitrator has relied on the commissioner's report filed in Arbitration Application filed under section 9 of the Act between the same parties which report is accepted by the court and copy of report is marked as Ex.R.28. In this report, Deputy Director of Town Planning Division of BDA, who was Court Commissioner, has found that building constructed is not a residential building. He has found that none of the units are having separate kitchen, 51 CT 1390_Com.A.S.244-2018_Judgment.doc which is one of the main requirement of a dwelling unit. On the basis of this report in Ex.R.28, learned Arbitrator has held that the construction made is that of commercial building. Since sanction plan obtained was for residential building, learned arbitrator has held that there is clear violation of the sanction plan. Learned arbitrator has also considered the fact that this building is used for lodging purpose at present, which is clearly commercial activity. The learned Arbitrator has even referred to Ex.P.13 which is an agreement entered by the claimant with Wyndham Hotel Asia Pacific Company Limited, as per which plaintiff have given the premises on license to run Lodging, which is even established by Evidence of RW.3. The learned Arbitrator has also noted that even electricity connection to the building given by KPTCL is for commercial purpose. Therefore, finding of the learned arbitrator that building constructed is not residential but is commercial and is even now used for commercial purpose is based on facts established through appreciation of evidence.
43. The plaintiff has obtained occupancy certificate in respect of this building which was later cancelled and then restored by the order of the standing committee of the BBMP and this order has attained finality as Writ petition filed and the Writ appeal are all dismissed. Since sanction plan obtained was for construction of Residential building and construction made is of Commercial building as established through evidence, learned arbitrator has held that construction is not in compliance with the requirement of law 52 CT 1390_Com.A.S.244-2018_Judgment.doc and occupancy certificate was obtained by misrepresenting the facts and even suppressing the relevant facts of pendency of civil case before the Civil Court. The evidence of giving the constructed building for running Lodging and obtaining electricity for commercial use etc., are considered by the learned arbitrator to come to the conclusion that the construction is illegal and obtaining occupancy certificate will not make the construction legal and also held that construction cannot be even regularized as there is 100% deviation from the sanction plan. When developer undertakes to develop the property in a particular manner, he is bound to develop in that manner only and Owner cannot be asked to adjust with this type of deviation against the will and consent of the Owner. Plaintiff has contended that during construction activity in the property, defendant and her family members were also present and have seen the construction activity and have not raised any objection etc. In this connection plaintiff has relied on the decision in MMTC Limited vs. Vedanta Limited in Civil Appeal No.1862/2014 dated 18/2/2019, in which, in para 14 the Hon'ble Supreme Court has held that while interpreting the terms of contract, conduct of parties and correspondences exchanged would also be relevant factors and it is within the arbitrator's jurisdiction to consider the same. It is argued for the plaintiff that the conduct of the defendant in attending the functions related to construction and watching the construction activity and not objecting for the same, ought to 53 CT 1390_Com.A.S.244-2018_Judgment.doc have been considered by the learned arbitrator. It is argued that the defendant who has not raised any objection at the time of construction, cannot raise objection after construction. Only because the defendant is seen in photographs, defendant cannot be said to be aware of the illegal construction. Moreover, defendant who is the owner of the land has entrusted the land to the plaintiff for the purpose of development and she cannot be expected to take possession of construction which is against the sanction plan. There are no such documents showing that the defendant has acquiesced and is now estopped from disputing the construction. In the absence of such material, defendant cannot be compelled to adjust with the construction and accept her share in the construction which is held to be unauthorized and against the terms of JDA and also sanction plan, which carry risk of being brought down by statutory authority for no fault of defendant. Defendant cannot be asked to accept something which she has not asked or agreed.
44. By considering Ex.P.9 and also the Forensic Report Ex.R47, the learned arbitrator has held that the GPA in favour of PW.1 on the basis of which application for sanction plan was given are not valid and the sanction plan obtained on the basis of invalid Ex.P9 is not legally sustainable. The learned arbitrator by considering the evidence including Ex.P28 report of the Court commissioner given in Arbitration Application between the same parties and also the evidence of 54 CT 1390_Com.A.S.244-2018_Judgment.doc RW.3, found that the construction made by the plaintiff is of a commercial structure and therefore construction is illegal. The learned arbitrator has noted that even electricity connection was obtained to the building for commercial use and the building after construction has been used for lodging purpose. By considering all these facts, learned arbitrator has held that the plaintiff has violated the terms of JDA as per which, building was to be constructed by obtaining proper license, permission and in accordance with law. Learned arbitrator has also held that from the stage of obtaining sanction plan there is illegality and even the construction is not in accordance with sanction plan and accordingly held that the construction is illegal. Though occupancy certificate was obtained by claimant, as construction made was of the commercial structure by obtaining sanction for construction of residential building, learned arbitrator found that construction made is 100% deviation from the sanction plan and as such this occupancy certificate do not regularize the illegal construction made. These findings of the learned arbitrator based on facts that have come out in the evidence both oral and documentary. The learned arbitrator has also noted that the constructed building has been given for running a lodging and the license agreement is also produced.
45. Learned senior counsel for the plaintiff has referred to decision in MSA No.537 of 2013 dated 16/2/2022 (Kasturi and others v. Kadappa) and argued that validity of building plan has to be examined by the 55 CT 1390_Com.A.S.244-2018_Judgment.doc authority and same cannot be examined by a civil court and Learned arbitrator has no authority to decide on validity of Occupancy certificate. In this decision in para 14 it is held that the statutory right of an authority to deal with constructions either in excess of permissible floor area or violation in regard to setback are issues which are totally vested with the authorities under the provisions of Karnataka Municipalities Act 1964.
46. On looking to the reasoning given to the finding by the learned arbitrator, finding of the learned arbitrator regarding the sanction plan, occupancy certificate and also construction made in the property cannot be said to be a finding which shocks conscience of the court. Though learned arbitrator cannot decide on validity of occupancy certificate, in view of above decision, authority of the arbitrator to decide on nature of construction and illegality in construction and deviation from sanction plan based on facts cannot be disputed. The view taken by the learned arbitrator regarding construction, by considering documents and also oral evidence cannot be said to be perverse or that, it is not a possible view. On looking to the facts and circumstances of the case, view of the learned arbitrator appears to be a clear possible view. Therefore, finding of the learned arbitrator about this construction and the irregularities etc., cannot be said to be against the public policy or is patently illegal or is shocking conscience of the code. The finding of the learned arbitrator about occupancy certificate also is based on the 56 CT 1390_Com.A.S.244-2018_Judgment.doc facts including Commissioner's Report. These findings are possible finding by the learned arbitrator and as such cannot be interfered by the court u/s 34 of the Arbitration and Conciliation Act. After finding that the construction is illegal, learned arbitrator has proceeded to order for demolition of the construction made.
47. Learned arbitrator has also noted that terms of JDA are not complied. The learned arbitrator has noted that the owners constructed area was required to be handed over to the defendant within 30+3 months and this time schedule is also not followed by the defendant and even after the construction, no intimation is given to the defendant for taking possession of constructed area. The learned arbitrator has also found that as the construction itself is illegal and is of the commercial building as against the sanctioned plan for residential building, there is no handing over of residential building as agreed, towards owners constructed area. The learned arbitrator by looking to these facts and also the nature of the construction made by the plaintiffs and also the notice issued by the defendant terminating JDA has found that the JDA is properly terminated by the defendant. The learned arbitrator has held that the construction of the building by the plaintiff is not in accordance with JDA and also not in accordance with sanction plan and the building constructed is for commercial purpose and not for residential purpose and is not in conformity with the sanction plan, Joint Development Agreement and General Power of Attorney. After 57 CT 1390_Com.A.S.244-2018_Judgment.doc finding that the construction is illegal by referring to the decision of Saketh Housing Limited vs. Patna Regional Development Authority reported in 2013(3) PLJR 126 the learned arbitrator has found that the building constructed in violation of sanction plan cannot be allowed to exist and on that basis the learned arbitrator has held that the construction which is illegal is required to be demolished. After giving a valid finding based on facts and evidence to the effect that the construction made is illegal and is against the sanction plan and JDA, the direction of learned arbitrator for demolition of the building cannot be said to be beyond the power of the learned arbitrator. When the construction is found to be illegal, the learned arbitrator is justified in passing consequential order for demolition of the building though there is no any specific prayer for the same, as construction which is illegal and against the sanction plan cannot be permitted to exist. On looking all these aspects, the finding of the learned arbitrator on these issues cannot be said to be perverse, illegal or is against the public policy or is against fundamental principles of Indian Law as contended by the plaintiff. Therefore, the finding of the learned arbitrator on Issue No.1, 3, 5, 6 cannot be said to be illegal and not sustainable. Regarding exchange deed, as already held above, the exchange deed is found to be not valid. For the reason of inadequacy of consideration and impossibility of handing over possession as one of the property was not in existence etc. The finding of the learned arbitrator on exchange deed cannot 58 CT 1390_Com.A.S.244-2018_Judgment.doc be even questioned by the defendant on the ground that Nikhil Jadhav is not a party to the arbitration proceedings for the reasons stated above.
48. The learned arbitrator has rejected all the claims of the claimant/plaintiff by considering that the lapses are on the part of the plaintiff and not on the part of the defendant. As construction made is found to be illegal and is required to be demolished, learned arbitrator has found that the plaintiff is not entitle for any of these claims as the claimant/plaintiff has not made construction in accordance with JDA and has not handed over the vacant possession of the premises to the defendant in accordance with JDA and has unnecessarily harassing the defendant by not delivering possession of her share and she has been deprived of utilizing the vacant schedule property from the year 2004 as the same is given to the claimant for development. These findings on Issue No.2 rejecting the claim of the plaintiff cannot be said to be perverse, illegal or against public policy as the plaintiff has failed to establish that the construction made is in accordance with sanction plan and failed to establish that plaintiff has handed over owners constructed area as per the JDA to the defendant. Therefore, finding on Issue No.2 rejecting the claim of the defendant cannot be said to be perverse, patently illegal and same cannot be interfered with.
49. The learned arbitrator in Issue No.7 has considered the claim of the defendant for compensation as she is deprived of utilizing her land from 08.11.2004 till the 59 CT 1390_Com.A.S.244-2018_Judgment.doc date of filing of the counter claim. The defendant has claimed Rs.12,61,78,900/- along with interest at 24% and the learned arbitrator in Issue No.7 has considered the evidence and has held that the property is within BBMP limits and would fetch rent of at least Rs.15/- per sq., ft., and found that claim of the defendant is reasonable, justifiable and fair and found that Rs.72,33,184/- would be such rent which would have been received by the defendant per year by considering the total extent of the land. The learned arbitrator has held that as defendant is deprived of receiving these benefits of income due to the acts of the plaintiff, defendant is entitled for interest at 15% p.a., and arrived at a figure of Rs.6,01,29,896/- which includes loss of income of Rs.4,33,99,104/- and interest @15% which comes to Rs.1,67,30,792/-.
50. Plaintiff has relied on a decision in Civil Appeal No.2153 of 2010 in Dyna Technologies Private Limited v Crompton Greaves Limited dated 18/12/2019, wherein it is held in para 22 that, it is well settled that the Arbitral Tribunal cannot travel beyond the terms of contract to award compensation. However, plaintiff has not shown any specific clause in JDA, which bars payment of compensation or damages. When a party to a contract suffers due to non performance by another party, it is natural to compensate the loss. The entitlement of the defendant for Rs.4,33,99,104/- towards loss of rent is a factual finding, which cannot be interfered by the court under section 34 of the Act. Therefore, 60 CT 1390_Com.A.S.244-2018_Judgment.doc awarding of this amount to the defendant towards damages cannot be said to be patently illegal or is perverse and is without reasons etc., and this finding cannot be interfered with.
51. Learned arbitrator has awarded 15% interest on this amount per year. On total sum learned arbitrator has awarded interest @ 12% from the date of counter claim. Since the amount due to the defendant is claimed up to the date of counter claim, the learned arbitrator is justified in awarding interest up to the date of counter claim. From the date of counter claim on the total sum to which defendant is entitled as loss of rent and 15% interest thereon, learned arbitrator has awarded future interest of 12% p.a., from the date of counter claim and held that if the said amount is not paid within 6 weeks from the date of award it will carry interest @ 15%.
52. Disputing awarding of interest, plaintiff has referred to a decision in 2021 SCC Online SC 855 (Garg Builders v. Bharat Heavy Electricals Limited) is cited by the claimant in which it is held in para 22, that , "When there is an express statutory permission for the parties to contract out of receiving interest and they have done so without any vitiation of free consent, it is not open for the Arbitrator to grant pendent lite interest". However, in the present case there is no such clause in JDA against awarding of interest. Even in general law, in a commercial 61 CT 1390_Com.A.S.244-2018_Judgment.doc transaction, when a party is entitle for certain amount, it is natural to award such amount with interest. These findings of the learned arbitrator in awarding interest is well within the discretion of the learned arbitrator as per Sec. 31(7)
(a)and (b) of Arbitration and Conciliation Act. Learned senior counsel for the plaintiff has argues that learned arbitrator has awarded interest on interest which is not permissible. However, the award of interest by the learned arbitrator from the date of counter claim is on the sum arrived, which includes loss of rent and interest thereon up to the date of counter claim. After arriving at this sum, learned arbitrator has awarded that sum and then held that this amount shall be paid with interest from the date of counter claim till six weeks of passing of the award and thereafter it shall carry interest of 15% p.a. So this finding cannot be said to be illegal and it is well within the powers of the learned arbitrator u/s 31(7) of the Arbitration and Conciliation Act. When the learned arbitrator has exercised discretion in awarding interest, same cannot be interfered with casually. Contention of the plaintiff that learned arbitrator has awarded interest on interest also cannot be accepted as interest up to the date of counter claim became part of the sum on which the interest is awarded.
53. Learned senior counsel for the plaintiff has relied on decision in (2006) 4 SCC 445 (Hindustan Zinc Limited v. Friends Coal Carbonisation), in which, Hon'ble Supreme Court by considering the decision in Saw Pipes has held that 62 CT 1390_Com.A.S.244-2018_Judgment.doc it is open to the court to consider whether the award is against the specific terms of contract and if so, interfere with it on the ground that it is patently illegal and opposed to the public policy of India. In another decision cited for the plaintiff reported in (1999) 8 SCC 122 (Steel Authority of India Limited v. J.C.Budharaja, Government and Mining Contractor), it is reiterated that to find out whether the arbitrator has traveled beyond his jurisdiction and acted beyond the terms of the agreement between the parties, the agreement is required to be looked into. It is held that interpretation of a particular condition in the agreement would be within the jurisdiction of the arbitrator. It is held that, however, in cases where there is no question of interpretation of any term of the contract, but of solely reading the same as it is and still the arbitrator ignores it and awards the amount despite the prohibition in the agreement, the award would be arbitrary, capricious and without jurisdiction. In the present case, Plaintiff, has failed to show that this award is against any specific terms of contract between the parties or that Arbitrator has ignored any particular condition in the contract. As such there is no scope to interfere with the award.
54. On looking to all these aspects, the learned arbitrator by considering the entire evidence and considering the facts and evidence placed before him has found that the defendant is deprived of enjoying the property and therefore the defendant is entitled for loss of rent with interest and is 63 CT 1390_Com.A.S.244-2018_Judgment.doc entitled for interest on the sum so arrived till the same is paid to the defendant. Regarding construction, as the construction is held to be illegal and is against the sanction plan and also the JDA and the owners built up area is not handed over in terms of JDA and portion of constructed area is given on license for running lodging, learned arbitrator has held that construction is to be demolished as such illegal construction cannot be permitted to exist and has ordered for demolition of the construction and directed the plaintiff to hand over vacant land to the defendant. On the facts and circumstances of the case, though finding of the learned arbitrator appears harsh, it cannot be said to be perverse, without reasons or is patently illegal or is against fundamental principles of Indian La and is thereby against public policy of India. Looking from any angle, in the exceptional circumstances of the case, learned arbitrator appears to have ordered for demolition of the building as illegal construction will not serve any purpose if the same is retained and the defendant owner of the land will not get justice if the construction which is found to be illegal is allowed to exist. As such award of learned arbitrator cannot be set aside under any of the provisions of Sec. 34(2) or 34(2A) of Arbitration and Conciliation Act. Accordingly, point No.2 is answered in the Negative.
55. POINT No.3 : For the discussion made on above point, following order is passed:
64CT 1390_Com.A.S.244-2018_Judgment.doc ORDER Application filed by Plaintiff under Order 41 Rule 27 CPC for production of additional evidence is dismissed.
Arbitration suit filed under Section 34 of the Arbitration & Conciliation Act to set aside the award dated 19/11/2018 passed in AC No.164/2017 by the learned Arbitrator is dismissed.
[Dictated to the Judgment Writer; transcript thereof corrected, signed and then pronounced by me, in the Open Court on this the 6th day of September 2022] [Ravindra Hegde] Digitally signed LXXXIII Additional City Civil Judge.
by RAVINDRA
RAVINDRA SANTHARAMA BENGALURU.
SANTHARAMA HEGDE ***
HEGDE Date: 2022.09.06
08:17:24 -0400
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CT 1390_Com.A.S.244-2018_Judgment.doc