Bangalore District Court
M/S Terminus Park India Pvt Ltd vs Pushpa on 29 January, 2025
1
Com.A.P.No.64/2024
KABC170010922024
IN THE COURT OF LXXXII ADDL.CITY CIVIL & SESSIONS
JUDGE, AT BENGALURU (CCH.83)
THIS THE 29th DAY OF JANUARY 2025
PRESENT:
SUMANGALA S BASAVANNOUR., B.COM, LL.M.,
LXXXII ADDL.CITY CIVIL & SESSIONS JUDGE,
BENGALURU.
Com.A.P.No.64/2024
BETWEEN:
M/s. Terminus Park India
Pvt. Ltd., A company
incorporated under the
provisions of the
Companies Act, 1956,
having its registered office
at 7th & 8th Floor, SJR
Primus, No.1, Industrial
Layout, Seventh Block,
Koramangala, Bengaluru -
560 095, Represented by
its Director Mr. Vijay
Reddy
Also at No.27, BREN
Centre, Lavelle Road,
Shantinagar, Ashoknagar,
2
Com.A.P.No.64/2024
Near BMW Showroom,
Bengaluru - 560 001.
: PETITIONER
(Represented by H.K.V.L.,
Advocate)
AND
1. Smt. Pusha
D/o Krishna Reddy,
Aged about 51 years,
2. Sri. Venkataramana Reddy
S/o Late Sanjeeva Reddy,
Aged about 74 years,
3. Sri. B. V. Srinath
S/o Venkataramana Reddy,
Aged about 45 years,
4. Sri. B. V. Mahesh
S/o Venkataramana Reddy,
Aged about 41 years,
5. Smt. Anandamma
W/o Late Govinda Reddy,
Aged about 66 years,
6. Sri. Narendra Babu
S/o Late Govinda Reddy,
Aged about 44 years,
7. Sri. Manjunath
S/o Late Govinda Reddy,
Aged about 40 years,
3
Com.A.P.No.64/2024
8. Sri. Harish
S/o Late Govinda Reddy,
Aged about 38 years,
9. Sri. Narayana Reddy
S/o Late Sanjeeva Reddy,
Aged about 69 years,
10. Smt. Lavanya
D/o Narayana Reddy,
Aged about 35 years,
11. Kum. Kavitha
D/o Narayana Reddy,
Aged about 31 years,
12. Sri. Yogesh
S/o Narayana Reddy,
Aged about 26 years,
13. Smt. Sarojamma
W/o Late Krishna Reddy,
Aged about 78 years,
14. Smt. B.V. Sudha
D/o Venkataramana Reddy,
Aged about 38 years,
All are R/at Balagere
Village, Varthur Hobli,
Bengaluru East Taluk,
Bengaluru - 560 087.
: RESPONDENTS
(Defendant No. 1 to 13
Represented by S.A.V.,
Advocate)
4
Com.A.P.No.64/2024
(Defendant No. 14
Represented by
D.K.I.S., Advocate)
Date of Institution of the suit 10.04.2024
Nature of the suit (suit on
pronote, suit for declaration & Petition for setting aside
Possession, Suit for injunction Arbitral Award
etc.)
Date on which judgment was 29.01.2025
pronounced
Total Duration Year/s Month/s Day/s
00 09 19
(SUMANGALA S BASAVANNOUR),
LXXXII Addl. City Civil & Sessions Judge,
Bengaluru.
JUDGMENT
This is a Petition filed by the Petitioners U/s. 34 of the Arbitration & Conciliation Act, 1996 and Petitioner prays that to set aside the above order dated 11.01.2024 in the Arbitration Case No. 245/2021 between Smt. Pushpa and other V/s M/s Terminus Park India Pvt., Ltd., and another as per annexure-A. 5 Com.A.P.No.64/2024
2. The Brief facts of the Plaint are as follows:-
The petitioner has been incorporated under the companies act, to inter alia put up residential/commercial projects. The present petitioner is part of SJR Group of Companies. The respondents having portrayed to the petitioner that they are the owner of the schedule land. It was for the benefit of both parties, entered into Joint Development Agreement dated 04.06.2008. Further, a Power of Attorney came to be executed between the parties, to enable the petitioner to carry out the works as enumerated therein.
The respondents got issued notice dated 18.03.2020 purportedly terminating to joint development agreement and power of attorney entered between the parties. Subsequently, Arbitration notice dated 10.08.2020 came to be issued some of the respondents. The respondents has filed Civil Miscellaneous Petition in CMP No.186/2020 before the Hon'ble High Court of Karnataka, Bengaluru for seeking appointment of an Arbitrator. The Hon'ble High Court of Karnataka was pleased to dispose the Civil Miscellaneous Petition in CMP No.186/2020 vide its order dated 22.01.2021. The Hon'ble High Court of Karnataka referred the matter to the mediation for settlement at first instance. It is only on such failure of mediation, matter referred for Arbitration to Hon'ble Justice 6 Com.A.P.No.64/2024 Ashok B. Hinchigeri, Former Judge of High Court of Karnataka. After considering the pleadings and evidence on record, the learned Arbitrator has passed award as under:-
The claimants and the respondent No.2 are jointly and severally liable to refund the security deposit amount of Rs.1,95,75,000/- to the respondent No.1. The claimants and respondent No.2 are jointly and severally liable to pay a sum of Rs.27,00,000/- towards the reimbursement of the pre- construction expenditure incurred by the respondent No.1 towards the conversion of the schedule property. The aforesaid sums of Rs.1,95,75,000/- shall be paid by the claimants and the respondent No.2 within 2 months from the date of the passing this award. The aforesaid sums shall carry interest at the rate of 18% per annum from 18.03.2020 till the date of payments. The respondent No.1 shall execute the deed of cancellation of the JDA and the deed of revocation of POA, both dated 04.06.2008 within two months from the date of the receipt of sum of Rs.1,95,75,000/- and Rs.27,00,000/- along with the interest thereon.
The present petitioner challenged above said award on following grounds:7
Com.A.P.No.64/2024 GROUNDS That the outset, the constitution of the Arbitral Tribunal, has not been in accordance with law i.e., the order of the Hon'ble High Court and as per the JDA entered into between the parties.
The present Arbitration proceedings are neither maintainable in law and/or on facts, in view of there being no conciliation/mediation between the parties hereto.
In view of clause 26.2 of JDA, the parties ought to have given a notice of breach, time to remedy the same, and failing thereof, be referred to conciliation and thereafter to Arbitration. That as such, undisputedly, there is no notice of breach placed before this Hon'ble Tribunal, and therefore, this Hon'ble Tribunal could not have been constituted.
In view of Article 361 of the Constitution of India, 1950, the mediation between the parties, is no longer a discretion between the parties or a formality and is now arising out the order of the Hon'ble High Court. That in view of the order of the mediator stating that the parties have not co-operated, which is in direct contravention to para 5 of the order of the High Court, as extracted supra, the parties ought to be 8 Com.A.P.No.64/2024 relegated to mediation, in the case there is any grievance made out as per the Agreement. The landowners have not co- operated to mediate the dispute as in borne out of the evidence.
The Hon'ble Tribunal has considered the aforesaid in issue No.10, whereby the order of the Hon'ble High Court of Karnataka is overlooked, to state that the clock cannot be put back after conclusion of trial, and that the respondent No.1 i.e., the petitioner herein has not challenged the mediation failure report. The learned Arbitrator further states at para 155, that non-adjudicatory alternative dispute mechanism could not have come in the way of an aggrieved party in seeking to address their disputes through Arbitration.
The Hon'ble Tribunal has most respectfully rendered the order of the Hon'ble High Court of Karnataka otiose and further has amended the terms of the contract between the parties, which is not maintainable and on this ground alone, the impugned Award ought to be set aside as would fall under Section 34(2) (v) and also being opposed to Public Policy of India.
The Hon'ble Tribunal has failed to consider the averments made by the petitioner herein that there has been no 9 Com.A.P.No.64/2024 statement of claim filed by the Landowners to the JDA. As per the Arbitration Centre Rules, 2012 R/w the Arbitration and Conciliation Centre, Rule 12 R/w Section 23 of the Arbitration and Conciliation Act, 2016 indicates that only a person aggrieved can file a claim petition. In the present case, all the landowners have not filed a claim petition and are therefore, not aggrieved persons, and only of the landowner who has signed the claim petition, filed along with a false verifying affidavit, is purportedly as aggrieved person.
The claim petition purportedly signed is only by one of the signatories to the JDA and not the other signatories, in view of there being no authorization granted to the sole claimant - B.V. Mahesh and there being no verifying affidavit filed by the other landowners. When the claim petitioner has been signed only by one of the landowner - B.V. Mahesh, there is no claim petition filed as per the JDA, as the said Agreement does not contemplate resolution of disputes in part and further, does not contemplate piece meal Arbitration. The claimant Mr. B.V. Mahesh, could not have sought declaratory reliefs on behalf others in their absence.
The JDA, reads all the landowners as the first party/owners, and clause 26.3, contemplates the first party to 10 Com.A.P.No.64/2024 initiate such proceedings and not a single landowner. Therefore, even on this count, the present claim is barred by law and the Agreement. In fact, clause 26.2, involving a dispute inter-se the first party, as in the present case, ought to be settled between them without involving the second party and the schedule property and the development therein.
The Hon'ble Tribunal has answered the aforesaid contentions in para 155 of the Award, whereby the aspect of the verifying affidavit having not been filed by the other claimants has been overlooked and has taken into consideration that the sole person who has filed the verifying affidavit has stated that he is authorized to depose on behalf of the other claimants. It is to be noted that there has been no authorization provided by the sole signatory and further in his cross-examination, the said signatory has stated that there has been no authorization provided. Therefore, on this sole ground, the Hon'ble Tribunal has erred in fact and has failed to consider vital evidence, in coming to the conclusion that the argument of the petitioner on this court is not tenable, and therefore, the award ought to be set aside as it would be opposed to the Public Policy of India and is vitiated by patent illegality.11
Com.A.P.No.64/2024 The Hon'ble Tribunal has failed to consider that the prayers as sought for by the claimant, as filed in the claim petition are barred by the law of limitation in view of the right to sue on those counts being expired.
On a perusal of the claim petition, at para 20 therein, the damages are calculated from 01.01.2013 i.e., after 4½ years from the date of the Joint Development Agreement. Therefore, according to the sole claimant, there is a purported breach/non-performance and his right to sue arose therefrom. That the cause of action as stated in paragraph 23 of the claim petition, has been cleverly drafted, to seek to maintain the claim as per the law of limitation. That assuming for a moment the cause of action is from 2020, then the respondent No.1/petitioner, still has 4 years as per the Agreement to construct the schedule property and that all claims prior to 2020 ought to be extinguished.
Therefore, the present claim petition which has been filed by the claimants is barred by law of limitation. The contention of the petitioner have been answered by the Hon'ble Tribunal at para 112 of the impugned award, whereby on the ground of Section 22 of the Limitation Act i.e., in view of there being a continuing breach, a fresh period of limitation is stated to run 12 Com.A.P.No.64/2024 at every moment of time during which the breach continues. The said findings in para 112 and 113 of the award, is contrary to law in as much as there is a difference between the concept of cause of action and right to sue. While there might be a cause of action for the claimants, the right to seek/sue for the prayer as sought for in the claim is contained stands extinguished as stated supra.
The Hon'ble Tribunal could not have summarily come to the conclusion that there has been a breach of the Agreement of the petitioner, and therefore in view of a continuing breach of contract, there is a fresh period of limitation, when the time to perform the contract for the petitioner/respondent No.1 has not arisen yet, until the respondents were to fulfill their obligations as per the agreement in so far as conversion of lands/change of land use/clearing of prior structures have not been performed. In view of the said findings being erroneous in law and unsustainable on the facts of the present case, the said award deserves to be set aside as it would be in conflict with the Public Policy of India and patently illegal.
The respondent No.13 Smt. Sarojamma, had not sent an Arbitration notice prior to her name being included in Civil Miscellaneous Petition filed before the Hon'ble High Court of 13 Com.A.P.No.64/2024 Karnataka. It is the contention of the petitioner, that having not sent an Arbitration Notice, nor the purported Termination notice, the said party could not have been arrayed as a party before the Civil Miscellaneous Petition, and thereafter, could not have filed any claim or seek any prayer.
The Hon'ble Tribunal has dealt with the same at para 116 of the award. The said contention has been rejected as the said contention has been raised belatedly and that there has been no prejudice shows that she has been arrayed as a party and further that the order appointing the Arbitrator by the Hon'ble High Court has attained finality.
The said findings by the learned Arbitrator is erroneous and not maintainable in law nor on the facts of the case in as much as, when there was no Termination notice and Arbitration notice, sent by the said respondent Smt. Sarojamma, it can be concluded that she never had any dispute with the present petitioner, in addition to she not having filed any claim before the Arbitral Tribunal.
In the fact, at the first instance, the petitioner raised the present contention at para 9 to the statement of defense. Therefore, it is not a contention raised at a belated stage. Notwithstanding the same, in view of the said respondent 14 Com.A.P.No.64/2024 Smt. Sarojamma, there is not valid claim petitioner raised as only one of the signatories to the JDA has signed a purported claim petition, which is neither contemplated under the JDA nor under law.
The Hon'ble Tribunal has failed to take into consideration the terms of the agreement, to decide issue No.1, issue No.8
(ii) and issue No.9 to decide the violation of the terms of the agreement, either by the landowners or the petitioners herein.
It is the contention of the Petitioner that the Landowners have failed to get the land converted for Commercial Purposes as per Section 95 of the Karnataka Land Revenue Act, whereas the Hon'ble Tribunal at Para 119 of the Award, states that the obligation as required as per Clause 3 of the JDA is performed by the Parties. This is erroneous as there has been no conversion to Commercial/Mixed Use Development as required under the JDA.
With respect to Clause 4 of the JDA - the Hon'ble Tribunal misreads the Agreement and fails to take into consideration the powers granted under the Power of Attorney. That it was the bounden duty of the Landowners, to get the change of land use from Sensitive Zone to Commercial Zone, in view of the POA, having not granted any power to the Petitioner 15 Com.A.P.No.64/2024 herein to apply to the Bangalore Development Authority for such change as per the Karnataka Town and Country Planning Act. Therefore, the Hon'ble Tribunal at Para 120 of the impugned Award, could not have held that the application could have been made by either of the Parties and further that the Obligation have not been performed by either of the Parties.
The Hon'ble Tribunal has failed to take into consideration that (i) the Landowners have not handed over vacant possession of land for the Respondent to undertake its obligations under the Agreement; (ii) 17 When no vacant possession has been granted and further structures have been built and leased to third parties, as admitted by the sole Claimant himself, the time for the completion of the obligations of the Respondent No. 1 does not begin.
The Hon'ble Tribunal has ignored vital evidence and has erred in not looking at the defence of the Respondent No.1/Petitioner to come to the conclusion that at Para 123 and 124 of the Impugned Award, that there has been no construction undertaken by the Respondent No. 1 and further that the Respondent No. 1 has failed to prove that the Claimants have no marketable title to the Schedule Property.
16Com.A.P.No.64/2024 Such a finding could not have found place in the Impugned Award, when it has been admitted by the landowner himself that there are standing structures and further such structures have been leased to third parties and further, as per the documentary evidence that there has been no conversion or change of land use as per the terms of the Agreement. The said finding further contradicts, Para 136 of the Award, whereby the Hon'ble Tribunal finds the act of the Landowners that there has been an ex- facie illegal act committed by them by constructing the said structures on the schedule property. when the Landowners as on this date, have neither proved that their obligations have been fulfilled under Clause 3 and 4 of the JDA, the burden to prove, the fulfillment of the Obligations of the Respondent does not arise. Therefore, in view of the erroneous findings and the contradictory findings within the Award itself, the same deserves to be set aside as it would be opposed to Public Policy and further patently illegal appearing on the fact of the Award.
There is a procedure contemplated for any breach of the Agreement as per Clause 26 of the Agreement which has been extracted supra. There is no gainsaying in the fact that breach presupposes termination, if permissible, at all. There is no gainsaying in the fact that the POA could not have been terminated, in view of the same being coupled with interest 17 Com.A.P.No.64/2024 and further the Respondent No. 1 having obtained licenses/permission/making representations to third parties on the basis of the said POA.
The JDA contemplates Arbitration, whereas no such recital is found in the GPA for the reason that, any right exercised under the GPA is a right in personam and not a right in rem and therefore, only a Civil Court can make a determination of the GPA. That there is no gainsaying in the fact that, an Arbitral Tribunal cannot only adjudicate those disputes which are within the four the of Agreement and cannot corners make declarations/determinations over rights in rem. That the Respondent No. 1/Petitioner has exercised its rights in pursuance of the irrevocable GPA, to make representations and seek for sanctions in pursuant of the GPA and hence, the Claimants are misconceived in seeking for any such relief as sought for in Prayer (a) and (b) of the Claim Petition. The said issue is also answered at Para 157 of the Impugned Award, in contravention to the settled principle of law that mere reference to another agreement having an Arbitration Clause does not automatically incorporate it.
The findings at para 113 in so far as only because clause No.261 of the JDA provides for the specific performance and entitles the injured party to recover the losses, it cannot be held that the JDA has to subsist perpetually in spite of total 18 Com.A.P.No.64/2024 inaction on part of one party' directly contradicts the findings of the Hon'ble Tribunal with respect to the findings on Limitation, whereby a continuing cause of action has been conferred upon the Landowners. In spite of taking into consideration that there has been no Notice of breach as contemplated in the Agreement, proceeds to re-write the agreement between the Parties, that such notice is a mere formality.
The Hon'ble Tribunal has further at Para 133 of the Impugned Award, without putting the Petitioner/Respondent No.1 on Notice, has proceeded to draw an adverse inference by stating that the Respondent No. 1 has not come forward to give any undertaking to implement the Project in definite time-frame, even in the arbitration proceedings. Such an inference could not have been drawn, when the Petitioner/Respondent No. 1 herein had sought for Specific Performance in the Arbitral Proceedings and further, when no notice was given to the Respondent to make such a submission/undertaking. Therefore, in view of the foregoing findings in the Impugned Award being in contravention to the Law and in contravention to the JDA, amounting to re-writing the contract, ought to be set aside.
The Hon'ble Tribunal in spite of having found at Para 136 of the Impugned Award, that there has been an ex-facie illegal 19 Com.A.P.No.64/2024 violation by the Landowners in building structures and collecting rents from the said structures, fails to hold that there has been a fundamental breach in the Agreement and thereby, the condition precedent has not been fulfilled.
Notwithstanding the fact, that any issue arising out of the GPA could not have been adjudicated by the learned Arbitrator, in view of there being no Arbitration Clause in the GPA. The landowners have a continuing and a continuous obligation to keep the GPA valid by operation of Law.
The Hon'ble Tribunal has ignored the clauses 31 of GPA by answering the issue at No.7 at para 141, 142 of the impugned award.
The Hon'ble Tribunal having come to the conclusion that the structures put up by the Claimants are ex-facie illegal, could not have held at Para 145 that the temporary structures were put up only in 2019 and whereas nothing prevented the Petitioner from completing the Project within the agreed period of 4 years.
The Hon'ble Tribunal has erred in coming to the conclusion that the structures were put up only in 2019. The Claimant has never proved that the structures were only put up in 2019. In fact, the said putting up of structures is 20 Com.A.P.No.64/2024 suppressed by the Claimant in the Claim Petition and the Affidavit of Evidence.
The Hon'ble Tribunal has erred in not drawing an adverse inference on the Claimant whereby he has undertaken to produce the said rental agreements entered into with the third parties, which has been extracted at Para 71 of the Award.
The Hon'ble Tribunal has failed to take into consideration that there has been no fulfillment of the obligations of the landowners while testing the Specific Performance to be granted to the Petitioner/Respondent No. 1.
The sanctioning of the Line of Credit vide Ex.R16 and Ex.R17 was to showcase that the Respondent No.1/Petitioner along with the Group Companies, had the financial wherewithal to complete the project that was envisaged under the JDA. That the Hon'ble Tribunal had erred in expecting the Respondent No.1/Petitioner to showcase that there was a line of credit for a project that still had to undergo change of land use and conversion by the Claimants.
In Para 151 and 152, the findings of the Hon'ble Tribunal are erroneous Inc in as much as it is so perverse or irrational that no reasonable person would have arrived at the same.
21Com.A.P.No.64/2024 The Hon'ble Tribunal has erred in law by ignoring the vital evidence placed towards damages, in granting meagre and assumptive sums to the Respondent No.1/Petitioner herein and is therefore, patently illegal on the face of the Award.
The Impugned Award, is an outcome of the Arbitral Tribunal replacing the terms of the contract and the stance of the parties, which is otherwise opposed to facts and circumstances of the case, is opposed to Public Policy of India and as such is patently illegal. Hence, the plaintiff is filed this suit.
3. The Respondents have filed objection stating that, entire averments in the present Petition are verbatim repetition of the Statement of Defence before the Hon'ble Arbitrator and there are no valid grounds, which require interference at the hands of this Hon'ble Court. No valid ground as provided under Section 34 of the Arbitration and Conciliation Act, 1996 is forthcoming from the perusal of the entire Petition and the Respondent No.1 has not taken even a single ground to contend that the award is in violation of any of the grounds mentioned for setting aside the same.
In para 6 of the Petition, the Petitioner has simply extracted the terms of the JDA and the same is irrelevant/ 22 Com.A.P.No.64/2024 insignificant to this petition as it has already been examined by the Hon'ble Arbitrator. All the obligations cast on the Claimants under the JDA were fulfilled by them, the Claimants executed a Power of Attorney on the very same day of the JDA authorizing the Petitioner/Respondent No.1 to obtain Sanctioned Plan, License etc., required for executing the project. In addition to the GPA, Clause 3 of the JDA required that the Claimants make an application for conversion, which was also complied by the Claimants. With regard to the averments in this paragraph, the Hon'ble Arbitrator has given categorical finding that it is the Respondent No.1, which has failed to perform its part of the obligation and not the Claimants.
It is submitted that the JDA and power of attorney both dated 04.06.2008 were entered into way back in the year 2008 with the hope that the Claimants would have a permanent roof and a reliable source of income throughout their life, however even after a lapse of more than 15 years as the Petitioner/Respondent No.1 has not even undertaken preliminary steps to begin the project which is an admitted fact and even observed by the Hon'ble Arbitrator in the award. The Claimants having no other alternative were forced to take steps towards termination of the JDA and power of attorney.
23Com.A.P.No.64/2024 Neither the notice of termination nor the process of issuing the notice are illegal but are as contemplated under law.
The Hon'ble Arbitrator was appointed by a valid order of the Hon'ble High Court of Karnataka passed in CMP 186/2020 dated 22.01.2021. The order of the Hon'ble High Court was passed only after joint submission of the parties and after taking note of the instructive clauses in JDA entered into between the parties. The Petitioner is urging already decided claims by making very general allegations without backing of any rational reasoning. This issue of their being a clause in JDA giving provision for parties to seek mediation and conciliation for dispute resolution was urged before the Hon'ble Arbitrator and it was held by the Hon'ble Arbitrator that the dispute between the parties was already referred to mediation but was handed over for Arbitration along with a failure report that the mediation was inconclusive and that the report from the mediation centre was never challenged by the Petitioner.
The Hon'ble Arbitrator further held that even if a contract contains a clause regarding non-adjudicatory form of alternate dispute resolution like conciliation or mediation the same term cannot restrain the aggrieved party from seeking resolution of the dispute through arbitration. It is pertinent to mention here 24 Com.A.P.No.64/2024 that the Hon'ble High Court of Karnataka vide its order dated 22.01.2021 in CMP No.186/2020 had directed that the parties appear before the Learned Mediator. After the appearance of the parties, as they did not agree for any settlement, the Learned Mediator prepared a failure report and thereafter the matter was transferred to the Arbitration Centre as per the order of the Hon'ble High Court of Karnataka. Therefore tedious argument that the appointment of the arbitral tribunal being illegal without opting for mediation/ conciliation or the ground that the appointment of Hon'ble Arbitrator is without following the order of the Hon'ble Court in CMP.185/2020 is false and this aspect has already attained finality as held by the Hon'ble Arbitrator.
This particular issue of non-joinder/mis-joinder of parties has already been dealt with in detail by the Hon'ble Arbitrator in the Arbitral Award and re-urging them again and again is not allowed under Section 34 of the Act, 1996, the recourse enabled by the Act cannot be used as a second appeal for reviewing facts or issues already settled by the Hon'ble Arbitrator. It i is an irrefutable fact that all the parties that were signatories to the JDA are made parties before the Hon'ble Arbitral Tribunal in AC. No.245/2021. Even the Second Respondent, who did not join to file the Claim Petition, has 25 Com.A.P.No.64/2024 appeared before the Hon'ble Tribunal and filed her statement of objections on 20.12.2021 seeking allowing of the claim petition. As such, there were never any inter-se disputes between the claimants and the question of non-joinder or mis- joinder of parties or lack of authorization to file claim petition is false and has been substantiated before the Hon'ble Arbitrator.
Question of limitation has already been deliberated and expounded in enormous detail by the Hon'ble Arbitrator. It is pertinent to mention here that if the Claimants have lost the right to sue under the JDA on account of being barred by limitation, then the Petitioner, whose right to the property concerned arises from the very same JDA, has also lost its the right to the property of the Claimants. Further, as held by the Hon'ble Arbitrator that it is a continuing breach of the contract by the Respondent No.1, as such limitation begins to run at every movement of the time during which the breach continues. Therefore, this aspect which was never pleaded anywhere was for the first time raised before the Hon'ble Arbitrator and the same has been answered in negative. The averments in these paragraphs have been thoroughly examined by the Hon'ble Arbitrator and has come to the conclusion that the Claimants have rightly included Smt. 26 Com.A.P.No.64/2024 Sarojamma wife of Krishna Reddy as a party to the Claim Petition. Further, the Hon'ble Arbitrator has held that Claimant No.1 who is the daughter of Smt. Sarojamma and Krishna Reddy is already on record. Therefore, the contention that there is no valid claim is out-rightly rejected by the Hon'ble Arbitrator and now adjudication of this issue under Section 34 of the 'Act, 1996' does not arise.
It is submitted that the Claimants have satisfied all the obligations cast on them under the JDA. As agreed under the JDA, the Claimants have executed a Power of Attorney authoring the Petitioner to carry out any action necessary for the execution of the project/JDA. The other obligation required of the Claimants under the JDA is that they have to apply for the conversion, which was also complied by the Claimants almost instantaneously. This fact was very rightly observed by the Hon'ble Arbitrator and even admitted by the Respondent No.1 himself. The Claimants have also provided sufficient proof regarding the same. Therefore the argument of the Respondent No.1 seems to be made only to mislead this Hon'ble Court and holds no water. On the other hand, it is the Respondent No.1, which has not performed any of the obligations under the Joint Development Agreement, even after lapse of more than 15 years.
27Com.A.P.No.64/2024 It is submitted that this issue was raised before the Hon'ble Arbitrator and it was very aptly observed by the Hon'ble Arbitrator while addressing issue Nos. 2, 3 and 6 that the termination of the JDA and GPA by the Claimants is valid as the JDA was frustrated by the conduct of the First Respondent and the Claimants were constrained to issue legal notices terminating the JDA and GPA and consequently commence the arbitration proceedings. It is submitted that the claimants have waited for 15 years from the date of the JDA and GPA for the Respondent No.1 to complete, actually start the project under the JDA but the Respondent No.1 has not made any attempt what so ever. Having no other alternative, the Claimants have got issued a legal notice for termination of the JDA and GPA, they have then gone on to approach Hon'ble High Court of Karnataka for appointment of Arbitrator as provided under the JDA. After appointment of the Hon'ble Arbitrator by the Hon'ble High Court of Karnataka, the Claimants have filed claim petition seeking declaration inter- alia termination of the JDA and the GPA. It is pertinent to mention that the GPA has been executed to complete the project. Therefore, the course of relief agreed upon under the JDA being Arbitration proceedings should be applied to the GPA as well.
28Com.A.P.No.64/2024 In fact the First respondent/ Petitioner in its statement of defense, in its counter claim as well as in during the cross- examination states that the claimants are the absolute owners of the property, having good title. It is submitted the Award is not incorrect and erroneous/ contrary to public policy, it is not illegal either and most definitely it does not fall under purview of section 34(i) to (iv) to be called in question. An Arbitral Award cannot become illegal merely because the Petitioner has said so in its pleadings, for that the Petitioner would have to very specifically point out the abnormality or illegality, which is of course not the case herein. It appears that the Petitioner has made this petition somewhat of an appeal against the award is simply just repeating the same arguments and same allegations again and again without attesting them with reasons. Hence, on this ground alone the petition needs to be dismissed.
It is submitted that due to utter failure of the Respondent No.1 even in commencing the project after lapse of more than 15 years from the DA the Claimants were made to suffer severe financial loss and to overcome the same and for the treatment of their young family members, who was suffering from a kidney failure, the temporary sheds were put-up only after 2019, which did not impede commencement of the 29 Com.A.P.No.64/2024 project under JDA. The JDA is of the year 2008 and the structures were put up only after 2019 by the land owners. In fact the CW1 in his cross- examination regarding the temporary structures put- up in one end of the subject property admits to the same. It is submitted that if the Respondent No.1 knew about the sheds and they were impeding the development activities then it could have approached the claimants/land owners in 2019 itself regarding this issue of putting up sheds. But the Respondent No.1 did not do so. This fact only confirms the claim of the Claimants that the petitioner/respondent No.1 had abandoned the JDA long ago and it is only after the claimants have issued legal notice, filed the claim petition that the Respondent No.1 has woken up from its deep slumber and is now coming up with these ridiculous counterclaims in order to make illegal gain at the cost of the Claimants.
The 'Act, 1996' is very clear that the remedy of challenge provided under Section 34 cannot be treated as an ordinary appeal. An arbitral award cannot be set-aside by re- appreciating the factual aspects under section 34 of the 'Act, 1996. A Court will not review the benefits of the dispute in deciding whether the award is in negation with the fundamental policy of Indian law. Therefore, the petitioner 30 Com.A.P.No.64/2024 treating this petition as an appeal and re-urging the same grounds that have already been adjudicated by the Hon'ble Arbitrator cannot be allowed and the petition deserves to be dismissed in limine. Although the Petitioner contends that in this regard the Arbitral Award is erroneous, the Petitioner does not substantiate this averment with any justification. The Claimants however are enduring inexhaustible litigation. The Petitioner is unnecessarily dragging the matter when it has lost nothing, the Hon'ble Tribunal has directed that the Claimants to refund the security deposit and the cost incurred by the Petitioner for conversion of the property, the Claimants have even adhered to the order of the Hon'ble Arbitrator and have issued a notice requiring the Petitioner/Respondent No.1 to furnish the Bank details for compliance of the award of the Hon'ble Arbitrator.
It is submitted that the award passed by the Hon'ble Arbitrator is based on the sound principles of law as well as appreciation of documentary evidence on behalf of the parties. None of the grounds raised in the present Petition satisfy the requirements of section of the 'Act, 1996'. The award impugned herein does not suffer from any infirmity and illegality to set aside the same. Hence, the present Petition is liable to be dismissed as devoid of merits with exemplary.
31Com.A.P.No.64/2024 Hence, he prayed to dismiss the petition.
4. I have heard the arguments on both the advocates.
5. Based on the above contentions of both parties, following Points arise for my consideration:-
1. Whether there are grounds to set aside the Impugned Award under Section 34 of the Arbitration & Conciliation Act?
2. What Order?
6. My findings on the above points are as follows:-
Point No.1:- In the Affirmative.
Point No.2:- As per the final Order for the following reasons.
REASONS
7. Point No.1:- The settled position in law that in proceedings under Section 34 of the Act, the Court does not sit in appeal over the Award. Thus, an Arbitral Award passed by an Arbitrator shall not be interfered with lightly. The Court can neither sit in appeal nor reassess or re-appreciate the evidence and the Arbitral Award can only be interfered with grounds stipulated in Section 34(2) of the Act.
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8. It is settled position in law that an Award could be set aside if it is contrary to :-
(a) fundamental policy of Indian law; or
(b) the interest of India ; or
(c) justice or morality ; or
(d) in addition, if it is patently illegal.
9. The illegality must go to the root of the matter and if the illegality is of trivial nature, it cannot be held that the award is against the public policy. Award could also be set aside, if it is so unfair and unreasonable that it shocks the conscience of the Court. Such an award is opposed to public policy and is required to be adjudged void.
10. In the said decision, the Hon'ble Apex Court observed that it must be clearly understood that when a Court is applying the "Public Policy" test to an Arbitration Award, it does not act, as a Court of appeal and consequently errors of fact cannot be corrected. A possible view by the Arbitrator on facts has necessarily to pass muster, as the Arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his Arbitral Award. Thus, an Arbitral Award based on little evidence or no evidence which does not measure up in quality to a train legal mind would not be held to be invalid on this count.
33Com.A.P.No.64/2024
11. In view of the above mentioned discussions, the position in law is well settled that while dealing with an award under Section 34 of the Act, the Courts are not supposed to sit in appeal and re-appreciate the evidences as an appellate Court. Hence, the findings of the facts by the Arbitral Tribunal, if based on evidence, even where a different opinion can be held on the basis of that evidences, the findings given by the Arbitrator has to be accepted and the Courts cannot substitute its opinion. The power to interpret the contracts also lies with the Arbitrator. Once the Court reach to the conclusion that the Arbitrator has acted within its jurisdiction, even if the Courts are of the view that the opinion of the Arbitrator is wrong, the same cannot be disturbed unless it is against the public policy. Keeping above said principal, I would like to consider the case in hand.
12. The Petitioner has challenge the award on the ground that, the respondent has ignored vital evidence and has erred in not looking at the defence of the Respondent No.1 come to the conclusion that at para 123 and 124 of the Impugned award, that there has been no construction undertaken by the Respondent No.1 and further that the respondent No.1 has failed to prove that the claimants have no marketable title to 34 Com.A.P.No.64/2024 the schedule property. The such a findings could not have found place in the impugned award, when it has been admitted by the landowner himself that there are standing structures and further such structures have been leased to third parties and further, as per documentary evidence that there has been no conversion or change of land use as per the terms of the agreement.
13. Further contradicts, para 136 of the award, whereby the Hon'ble Tribunal finds the act of the landowners that there has been an ex-facie illegal act committed by them by constructing the said structures on the schedule property. That when the landowners as on this date, have neither proved that their obligations have been fulfilled under clause 3 and 4 of JDA, the burden to prove, the fulfillment of the obligations of the respondent does not arise. Therefore, in view of the erroneous findings and the contradictory findings within the award itself, the same deserves to be set-aside as it would be opposed to public policy and further patently illegal appearing on the fact of the award.
14. Let is consider whether the findings given by the learned arbitrator is opposed to the public policy.
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15. In para No. 123 of award that, the learned arbitrator held that, as per clause No. 12.1 of the JDA, the respondent no.1 shall commence construction of the buildings in the larger property or in the schedule property, as t he case may be within three months from the date of sanction of license and plan. As the sanctioned plan itself is not obtained by respondent No.1, the stage of putting up the construction is not reached at all. The said clause also requires the respondent NO.1 to complete the construction of the owners area within 42 months. As per clause 12.2 of the JDA, the respondent NO.1 is also entitled to 6 months extension for completing and delivering the owners area. But, no construction has taken place either in the schedule property or in the larger area of which schedule proper is a part.
16. Further in para - 124 the learned arbitrator held that, the contention of the respondent No.1 that the claimants have failed to establish their marketable title to the schedule property holds no water in view of what it has stated in paragraph No. 4 of its statement of defence. The same is extracted herein below:
"It is submitted that there is no doubt that the claimants are the owners of the claim schedule property along with others named in the JDA dated 04.06.2008 referred to as JDA or Agreement"36
Com.A.P.No.64/2024
17. In para 125 the learned arbitrator held that, however, in paragraph NO. 15 of its statement of defence, the respondent NO.1 has made the averment that the claimants have failed to satisfy that they have clear marketable title without any lis/claims. It is hard to give any credence to such statements in the absence of any written communication/notice to the claimants to produce title deeds. In response to question No. 48, RW.1 has deposed that the respondent No.1 has not written any letters to the claimants to establish their marketable title. The respondent No.1 is a body corporate and it is expected to make a demand in writing.
18. Further in para - 136 the learned arbitrator held that it is not in dispute that the land-owners have constructed the structures, be it temporary or permanent, on the schedule property. CW-1 has admitted in paragraph NO. 14 that they were constructed in 2019 and that the claimants have been earning Rs. 1,50,000/- by way of rent. The tribunal finds these acts of the claimants to be ex-facie illegal. It was not open to the land owners to take the law in their own hands even assuming that they were suffering from penuary. This tribunal 37 Com.A.P.No.64/2024 would have appreciated the claimants terminating the JDA and POA first and thereafter constructing the structures and renting them out. This aberration on the part of the claimants from the letter and spirit of the JDA disentitles them to claim any damages whatsoever.
19. It is a settled principle of law that arbitral proceedings are per se not comparable to judicial proceedings before the Court Dyna Technologies Private Limited v. Crompton Greaves Limited6. The Arbitrator's view, generally is considered to be binding upon the parties unless it is set aside on certain specified grounds. In the very same decision taking note of the opinion as is in "Russel on Arbitration", reiterated the need for the Court to look at the substance of the findings, rather than its form, stood reiterated and the need for adopting an approach of reading the award in a fair and just manner, and not in what is termed as "an unduly literal way". All that is required is as to whether the reasons borne out are intelligible or not for adequacy of reasons cannot stand in the way of making the award to be intelligibly readable.
20. In the instant case, the only provision under which the award could have been assailed was for it to have been in conflict with the public policy of India. This concept has been 38 Com.A.P.No.64/2024 elaborately considered by the Hon'ble Supreme Court in Associate Builders (supra); Ssangyong Engineering and Construction Company Limited v. National Highways Authority of India.
21. The Hon'ble Supreme Court in the landmark judgment reported in Associate Builders vs. Delhi Development Authority, (2015) 3 - S.C.C. - 49, wherein Hon'ble Supreme court held that, while setting aside the judgment passed by the Division Bench of Hon'ble High Court of Delhi culled out the legal principles after traversing the judicial pronouncements passed by the various High Courts and the Hon'ble Apex Court. In the said case, it is held that it is important to note that the 1996 Act was enacted to replace the Arbitration Act, 1940 in order to provide for an Arbitral procedure which is fair, efficient and capable of meeting the needs of Arbitration and also to provide that the tribunal gives reasons for an Arbitral Award; to ensure that the Arbitral Tribunal remains within the limits of its jurisdiction and to minimize the supervisory role of Courts in the Arbitral process.
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22. In the above decision it is held that, however, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest.
23. In the strength of the above decisions, in the present case, the findings given by the learned arbitrator, it does not on the face of it, patently in violation of statutory provisions and not opposed to the fundamental policy of India. Hence, not required any interference by this court.
24. The petitioner has taken an another ground to setting aside the award that the findings at para 133 in so far as' only because clause No. 26.1 of the JDA provides for the specific performance and entitles the injured party to recover the losses, it cannot be held that the JDA has to subsist perpetually in spite of total inaction on part of one party' directly contradicts the findings of the Hon'ble Tribunal with respect to the findings on limitation, whereby a continuing cause of action has been conferred upon the landowners.
25. In spite of taking into consideration that there has been no notice of breach as contemplated in the agreement, proceeds to re-write the agreement between the parties, that such notice is a mere formality. There is no gainsaying in the fact, that without the obligations in so far as title and the 40 Com.A.P.No.64/2024 schedule property is concerned, there could have been no sanction plan obtained by the Respondent No.1. Further, in para 133 of the Impugned award, without putting the Respondent NO.1 on notice, has proceeded to draw an adverse inference by stating that the respondent NO.1 has not come forward to given any undertaking to implement the project in definite time-frame, even in the arbitration proceedings. Such an inference could not have been drawn, when the Respondent No.1 herein had sought for specific performance in the arbitral proceedings and further, when no notice was given to the respondent to make such a submission/undertaking. Therefore, in view of the foregoing findings in the Impugned award being in contravention to the law and in contravention to the JDA, amounting to re-writing the contract, ought to be set aside as it would fall under section 34 (2)(iv) and further being opposed to public policy and being patently illegal on the fact of the award.
26. Clause 26 of JDA reads as under: Breach and consequences:
In the event of breach by either party, the other party shall be entitled to specific performance and also be entitled to recover all losses and expenses incurred as a consequence of such breach from the party committing breach.41
Com.A.P.No.64/2024 26.2 : Irrespective of what is stated above, any breach committed by the members of first party/second party should be complained of by the member of first party/second party in writing and shall further call upon the members of first party/second party to remedy the breach and on the failure of members of first party/second party to remedy such breach within fifteen days or within such extended period as may be mutually agreed from the date of receipt of such notice to that effect, the parties shall take steps to resolve such compliance or non-compliance in terms stated below. Any dispute/s between the members of first party shall not affect this agreement or rights of the second party and such dispute/s shall be settled between them without involving the second party and the schedule property and the development therein.
27. The learned arbitrator in para 133 of the award held that, only because clause No. 26.1 of the JDA provides for the specific performance and entitles the injured party to recover the losses, it cannot be held that the JDA has to subsist perpetually inspite of total inaction on part of one party. Under normal circumstances, the claimants ought to have issued a notice to the Respondent No.1 enumerating the breaches and calling upon the Respondent No.1 to remedy them. But this is a case in which the Respondent No.1 has not even applied for the sanctioned plans for the purpose of construction. Issuance 42 Com.A.P.No.64/2024 of the notice contemplated under clause NO. 26 of the JDA would only be an empty formality. It is also to be noted that the respondent No.1 has not come forward to give any undertaking to implement the project in a definite time-frame, even in these arbitration proceedings. Fairness is not one way traffic.
28. In this regard the learned counsel for the petitioner has relied upon a decision reported in 2004 (9) SCC 619, Md.
Army Welfare Housing Organization vs. Sumangal Services (P) Limited wherein Hon'ble Supreme Court held that:
The award of the arbitrators is vitiated in law as an agreement purported to have been entered into by and between AWHO and the architect was enforced against Sumangal although it was not a party thereto. The finding of the arbitrator that the frustration was a self-induced one is not based on any pleadings or materials on record. In any view of the matter the learned arbitrator committed a legal misconduct insofar as they applied a wrong principle of law as regard determination of quantum of damages.
The approach to the question by the learned arbitrators was wholly erroneous. An award made pursuant to an order which has been passed without jurisdiction necessarily must be held to be a nullity. Refusal on the part of the learned arbitrator 43 Com.A.P.No.64/2024 to consider the effect of clause 130 of the agreement would amount to a legal misconduct. Having regard to the facts and circumstances of the case, as would be discussed in details hereinafter, it was incumbent on the part of the Arbitrators to apply "due diligence" clause contained in clause 129(e), more cautiously. They were further required to consider as to whether "due diligence"
clause be applied where the alleged violation of contract was only in relation to a small part thereof. The learned arbitrators were, in law, bound to consider the relevant provisions of the contract and in particular those which deal with the rights and liabilities of the parties. This aspect of the matter has not been taken into consideration by the learned arbitrators while making the award. Thus, they failed to take into consideration a relevant fact.
Bharat Coking Coal Ltd. Vs. M/s. Annapurna Construction [2003 (7) SCALE 20] upon referring to a large number of decisions stated:
"The question is as to whether the claim of the contractor is d'hors the terms or not was a matter which fell for consideration before the arbitrator. He was bound to consider the same. The jurisdiction of the arbitrator in such a matter must be held to be confined to the four- corners of the contract. He could not have ignored an important clause in the agreement; although it may be open to the arbitrator to arrive at a finding on the materials on records that the claimant's claim for additional work was otherwise justified."44
Com.A.P.No.64/2024 "So far as these items are concerned, in our opinion, the learned sole arbitrator should have taken into consideration the relevant provisions contained in the agreement as also the correspondences passed between the parties. The question as to whether the work could not be completed within the period of four months or the extension was sought for on one condition or the other was justifiable or not, which are relevant facts and were required to be taken into consideration by the arbitrator.
29. It is to be reiterated that to find out whether the arbitrator has travelled beyond his jurisdiction and acted beyond the terms of the agreement between the parties, the agreement is required to be looked into. It is true that interpretation of a particular condition in the agreement would be within the jurisdiction of the arbitrator. 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. Whether the arbitrator has acted beyond the terms of the contract or has travelled beyond his jurisdiction would depend upon facts, which however would be jurisdictional facts, and are required to be gone into by the court. The arbitrator may have jurisdiction 45 Com.A.P.No.64/2024 to entertain claim and yet he may not have jurisdiction to pass award for particular items in view of the prohibition contained in the contract and, in such cases, it would be a jurisdictional error. For this limited purpose reference to the terms of the contract is a must in the present case.
30. In the present case as per clause 26 of the JDA in the event of breach by either party, the other party (the aggrieved party) shall be entitled to specific performance and also be entitled to recover all loses and expenses incurred as a consequences of such breach from the party committing breach. Any breach committed by the members of first party/ second party should be complained of by the member of first party/second party in writing and shall further call upon the members of first party/second party to remedy the breach and on the failure of members of first party/second party to remedy such breach within fifteen days or within such extended period as may be mutually agreed from the date of receipt of such notice to that effect, the parties shall take steps to resolve such compliance or non-compliance in terms stated below.
31. In the present case the learned arbitrator has contrary stated that under the claimants ought to have issued a notice to the Respondent No.1 enumerating the breaches and calling 46 Com.A.P.No.64/2024 upon the Respondent No.1 and to remedy them. But in this is a case in which the Respondent No.1 has not even applied for the sanctioned plans for the purpose of construction. Issuance of the notice contemplated under clause No. 26 of the JDA would only be an empty formality.
32. The above findings of the learned arbitrator that, is not based on any pleadings and material on record. The approach to the question by the learned arbitrator was wholly erroneous. Refusal on the part of the learned arbitrator to consider the effect of clause 26.1 and 26.2 of the agreement would amounts to legal misconduct. The learned arbitrator was, in law bound to consider the relevant provisions of the contract and particular those which deal with the rights and liabilities of the parties. Learned arbitrator has not taken into consideration of terms of contract I.e, clause 26.1 and 26.2 while making the award. The learned arbitrator could not have ignored an important clause in the agreement. 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. Since the arbitrator ignorance the clauses of the contract. This amounts to against the public policy of India and it also patent illegality. So, the awards would be arbitrary capricious and without jurisdiction. Hence, 47 Com.A.P.No.64/2024 on this ground the award should be set aside.
33. The petitioner has taken a taken other grounds for setting aside the award. On perusal of the award, findings given by the learned arbitrator is not against the public policy of India and not perverse and illegal. Hence, not required any interference by this court.
34. In view of my above discussions, observations and findings, I am of the opinion that the Award of the Learned Arbitrator is liable to be set aside on the ground that the same is contrary to the Public Policy and also there is patent illegality in the findings of the learned Arbitrator. Further, I make it clear that I have discussed only about the findings given by the learned Arbitrator in the light of the contentions taken by the petitioner without re-appreciating the oral or documentary evidence placed before the Learned Arbitrator. All my findings are based on the legal aspects and the development of case law on the said subject. When such being the case, I have no other option except to set aside the entire Award passed by the learned Arbitrator. Therefore, I answer this Point in the "Affirmative".
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35. Point No. 2:- For the discussion made on above point, following order is passed:
ORDER The Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996, is allowed.
The Arbitral Award dated 16.07.2021 passed in AC No. 122/2020 is hereby set aside.
The Office is directed to send copy of this judgment to both parties to their email ID as required under Order XX Rule 1 of the Civil Procedure Code as amended under Section 16 of the Commercial Courts Act.
(Dictated to the Stenographer, typed by him directly on computer, verified and then pronounced by me in open Court on this the 29th day of January, 2025).
(SUMANGALA S. BASAVANNOR), LXXXII Addl. City Civil & Sessions Judge, Bengaluru.