Bangalore District Court
M/S Nitesh Residency Hotels vs The Archdiocese Of Bangalore on 18 June, 2021
1
Com.A.S.154/2017
IN THE Court OF LXXXVII ADDL.CITY CIVIL & SESSIONS
JUDGE, (EXCLUSIVE DEDICATED COMMERCIAL COURT)
AT BENGALURU (CCH.88)
THIS THE 18th DAY OF JUNE 2021
PRESENT:
SRI.CHANDRASHEKHAR U., B.Sc., LL.M.,
LXXXVII ADDL.CITY CIVIL & SESSIONS JUDGE,
BENGALURU.
Com.A.S.No.154/2017
PLAINTIFF: M/s Nitesh Residency Hotels
Pvt.Ltd.,
Office at No.25a,
2nd floor, Imperial Court,
Cunningham Road,
Bengaluru - 560 052
Rep. by its Authorised Signatory,
Mr. K.B. Swamy
(Reptd by Adv. Sri. V.H)
AND
DEFENDANTS : 1. The Archdiocese of Bangalore
Archbishop's House,
No.75, Miller's Road,
Benson Town,
Bengaluru - 560 046
Rep. By the Archbishop of Bangalore
REV./ BERNARD MORAS
(Reptd by Adv. Sri. C.S)
2. Hon'ble Justice R.Gururajan,
Regired Judge of High Court of
Karnataka,
No.504, 'Sri Hari Krupa'
5th floor, 'Chitrapur Apartment'
15th Cross, Malleshwaram,
Bangalore - 560 003.
2
Com.A.S.154/2017
Date of Institution of the 09.11.2017
suit
Nature of the suit (suit on
pronote, suit for
declaration & Possession, Arbitration Suit
Suit for injunction etc.)
Date of commencement of -
recording of evidence
Date on which judgment
was pronounced 18.06.2021
Total Duration Year/s Month/s Day/s
03 07 10
(CHANDRASHEKHAR U),
LXXXVII Addl.City Civil & Sessions Judge,
(Exclusive dedicated Commercial Court)
Bengaluru.
JUDGMENT
The plaintiff has filed the suit under Section 34 of the Arbitration & Conciliation Act, 1996, (hereinafter called 'the Act') to call for the records in the Arbitration dispute on the file of the Hon'ble Sole Arbitrator and also to set aside the interim Arbitral Award, dated 2.10.2017 passed by the Sole Arbitrator.
2. The brief facts of the case of the plaintiff are as under:- 3
Com.A.S.154/2017 The 1st defendant being the claimant, is the owner of the land bearing Municipal No.5 (Old No.4), New No.99, Residency Road, Bangalore, measuring 1,12,475 Sq.ft. On 11.1.2007, the plaintiff obtained the schedule property as per the terms and conditions set out in the registered lease deed, dated 11.1.2007 with the object of setting up a World Class Hotel. The lease was for a period of 40 years including two years moratorium period and extendable by 25 years. In fact, the schedule property was leased in favour of the plaintiff/respondent by the claimant/1 st defendant primarily for the purpose of putting up a luxury hotel project alone at the instance of the claimant/ 1 st defendant and the schedule property should not be used for any other purpose other than the luxury hotel. At the time of execution of the lease deed, the respondent paid a sum of Rs.30 crores, as non- refundable deposit and a sum of Rs.10 crores as refundable deposit, which was adjustable as set out in the lease deed. During the moratorium period, the rent payable was Rs.39,36,625/- per month and after completion of the moratorium period, the rent payable was Rs.1,29,34,625/- per month. Since, the moratorium period is till the completion of the project and commencement of commercial operation of the project, the enhanced rent shall be payable only from then and 4 Com.A.S.154/2017 not earlier to the same. At the time of grant of lease, claimant/defendant was the lessor had specifically made the representation that the lessor is the absolute owner and is in possession of the schedule property and that the lessor has absolute, marketable and subsisting title and possession over the schedule property and none else has the right, title, interest or share therein. The schedule property is not the subject matter of litigation, attachments of Court or acquisition proceedings of any kind. It is further made clear in the lease deed, that there were no claims, mortgages, charges, lien or encumbrances on the schedule property. That the lessor has not entered into any agreement of sale, Memorandum of Understanding, lease or any scheme for development of the schedule property with any other person, company, society or organization, that there are no easementary rights over the schedule property, that the lessor has paid property taxes, utility charges, up to date, in respect of the schedule property and that there are no tenants or occupants on the schedule property. He has already stated, the claimant was fully aware that the schedule property was to be used for constructing a 5 Star hotel with extensive facilities. The respondent/ the claimant were also aware that a hotel of the nature planned by 5 Com.A.S.154/2017 the respondent would involve multi-storied building and several levels of basements. The construction and operation of the hotel would also require clear and unencumbered title and access to the land, development potential that can be fully exploited and peaceful co-existence with the neighborhoods. Claimant was also aware that it was critical that the project needed to be completed on time, so that the revenue stream could begin and that respondent could not pay higher rent, unless project was completed and commercial operations commenced. Further, stated that the delay in completion of the project or escalation of costs not attributable to the default of the respondent, would have to be taken into account by the claimant /defendant by way of extension of the moratorium period and/or reduction in lease rental liabilities. This was the understanding between the parties from the commencement of the transaction and has in fact been acted upon by both the parties, as evident from the subsequent events. The respondent/plaintiff had spent about Rs.920.36 crores to put up the hotel and over Rs.312.50 crores have been borrowed from Banks and Financial Institutions. The claim made by the defendant/claimant is not correct and representation made by it is not correct. The plaintiff /respondent found that parts of 6 Com.A.S.154/2017 the schedule property were in occupation of tenants, who had subsisting leasehold rights, resulting in the respondent being unable to commence the work. That apart, to the great shock and consternation of the respondent, they also found that the entire FAR pertaining to the schedule property had been appropriated by M/s Prestige Estates, with whom claimant had a prior agreement, as a result of which, the Bruhat Bengaluru Mahanagara Palike refused to sanction the plans of respondent in respect of the schedule property. This fact was deliberately suppressed by the claimant. As a result of the same, respondent had to do a lot of liasoning work with the authorities and also initiate legal proceedings to get back the FAR pertaining to the schedule property, which was caused a delay of nearly three years. Though, the lease deed was signed on 11.1.2007, he could get the commencement certificate only on 19.11.2009, after a lapse of 3 years of the execution of the lease deed. Due to that, respondent suffered staggering monetary losses in terms of escalation of project cost including payment of interest to Banks during construction, apart from loss of reputation. Initially, the project cost was envisaged at Rs.342.4 crores, but, increased manifold due to delay in construction and the said delay is solely attributable to the 7 Com.A.S.154/2017 defendant/claimant. In fact, the project cost increased stupendously to Rs.920.36 crores due to escalation in construction cost, over heads, material cost, labour costs, and steep interest rate on the loan amounts obtained from Banks and financial institutions due to longer construction time frame.
Because of the continuance of the tenants in the schedule property contrary to the very representation made by the claimant/ defendant, took about 10 to 11 months to get the eviction order against the tenant and the plaintiff /respondent paid Rs.13 lakhs to the tenants for settlement, apart from wasting about 10 to 11 months of time to evict them from the schedule property. Further, there were certain senior citizens who were housed in some of the buildings situated in the schedule property by the claimant/defendant and they were to be shifted by hiring separate building and it took sufficient time and the plaintiff/respondent spent Rs.13.25 lakhs for the said purpose. Further, since hard rock found in the schedule property, which took the sufficient longer time to removal the same and put up construction. Though the plaintiff/respondent had idea of having 5 basements, because of the various reasons, it could raise only two basements and thereby suffered and in order to protect the property of the neighbours, it had to 8 Com.A.S.154/2017 be spent Rs.12 crores for piling of rigs, moved to inner parts of the site etc. Since, while breaking the rock bed, it caused vibration in and around, which resulted in filing of police complaints and invoking of third party liabilities, etc. The plaintiff respondent has to slowdown the work and he had to incur a sum of Rs.7.5 lakhs towards damages to the neighbours land and inconvenience caused to the society at large. Due to suppression of the material facts by the defendant /claimant, it had to suffer a huge loss and delay is due to misrepresentation by the claimant. Therefore, moratorium period as fixed in the lease deed was not sufficient and it was only because of the suppression of the material facts by the claimant/defendant, which led to huge loss to the plaintiff/respondent. As per the moratorium the amount payable is at the rate of Rs.39,36,625/- till the period of commencement of the Hotel is only Rs.32,28,03,250/-, an excess amount of Rs.11,46,71,090/- has been paid. At every stage of construction, there has been communication and exchange of correspondence, as well as minutes of meetings between the parties, all of which clearly indicate that there have been repeated complaints made by the respondent about the falsity of the representations made by the claimant at the time of entering into lease agreement. Though, 9 Com.A.S.154/2017 the respondent/ claimant agreed to take care of all the loss or damages that may be sustained. It has not given any concession and many representation submitted by the plaintiff/respondent found in vain. Due to submission of many queries under the RTI Act, the plaintiff/respondent had to face severe objection by the public and several issues were raised by the BBMP and they were answered to by the plaintiff/respondent. Further, many residents of Haynes Hall Apartment owners Association filed a Writ Petition No.362/2007 challenging the legality of construction and subsequently on 8 th June 2007, the said Writ Petition was withdrawn by the said Association. Further, several residents were protesting in the location of the property particularly one Mr. Peeran and Mr. Veenay Bajaj filed two suits and obtained injunction orders and considerable amount of time was spent for settlement of the case. The entire project was delayed because of the objection by the public and lodging of the complaint by the public neighbors. As per clause No.4 of the registered lease deed dated 11.1.2007, the moratorium period shall mean the initial period of the lease during which the lessee makes its own arrangements to obtain the necessary permissions, commences and proceeds with the preliminary work on the schedule 10 Com.A.S.154/2017 property and complete the construction and hence the moratorium period shall mean to say that it will be up to the date of the completion of the entire construction work. The commercial work is commenced only on 31.10.2013 and therefore, there is no question of payment of the enhanced rate of rent as per the time fixed from November 2013 as per clause No.4. Therefore, the claim of the claimant payable during moratorium period is highly untenable. Further, the service tax applicable on the lease is collected by the claimant with effect from July 2012. However, it is to be noted that claimant obtained the registration under service tax only from February 2013. Further, under lease deed dated 11.2.2007, the liability of payment of tax on income collection is not on the lessee and hence the respondent has stated that the said liability is not on the lessee. The claimant has collected service tax and other tax and failure to extend the moratorium till completion of the work. It is not liable to pay agreed rent, on account of delay, till commencement of the work and that it should be treated as moratorium period. According to the plaintiff, the act of the claimant is highly illegal and high handed. Since, the defendant/ claimant committed breach of lease, it is not entitled to enhance rate of rent. Further, it is pertinent to state 11 Com.A.S.154/2017 herein that from the date of lease, till the date of commencement of the Hotel, an amount of Rs.43,74,74,340/- has been paid as lease rentals to the claimant/ defendant from January 2007 till 31st October 2013, which is an excess amount to the tune of Rs.11,46,71,090/-. Despite the above, Arbitral Tribunal granted interim award dated 2.10.2017, directing the plaintiff/respondent to pay a sum of Rs.5,98,43,926/- towards payment of rent.
3. Being aggrieved by the said interim Arbitral award, dated 2.10.2017, the present suit is filed on the ground that the interim award passed by the Arbitration Tribunal is wholly erroneous, contrary to the facts of the case, evidence on record and to law. The learned sole Arbitrator has failed to notice that counter claim of the respondent is much higher than the claims of the claimant and in view of the same, the interim order ought not have passed pending the trial. The learned Sole Arbitrator failed to notice that unless the counter claims of the respondent are determined after a detailed trial, the interim award ought not have been passed and hence the impugned award is liable to be set aside. Learned sole Arbitrator failed to notice that the interim award sought by the claimant requires a detailed trial and therefore, without them, the same is liable to be set aside. 12
Com.A.S.154/2017 Learned sole Arbitrator failed to notice that because of the misrepresentations of the claimant, the project in question got delayed, which caused enormous loss to the respondent. Learned sole Arbitrator failed to notice that the interim Arbitral award can be passed only if there is unequivocal and clear admissions of the claim of the claimant by the respondent and in the instant case, respondent has not admitted any claims of the claimant and learned Sole Arbitrator failed to notice that respondent has paid 90% of the market value of the property in question by way of refundable and non-refundable deposits. Learned Sole Arbitrator has failed to notice that over Rs.14,50,00,000/- is with the claimant. Learned Sole Arbitrator has ignored the Judgments of the Hon'ble Apex Court and various High Courts, with regard to judgment on admission provided under Order 12 Rule 6 of CPC. Learned Arbitrator has misunderstood the case of a Judgment of Delhi High Court, reported in AIR 2006 Delhi.266. Learned Sole Arbitrator has failed to notice that the respondent disputes the amount which claimant claims to be the difference in the rental amounts alleged to be payable by the respondent to claimant No.1 and 2 filed by the applicant along with application for eviction order. Learned Sole Arbitrator has failed to notice that clause No.25 of 13 Com.A.S.154/2017 the lease deed and its implication. Learned Sole Arbitrator has failed to notice that the actual commercial commencement of the hotel in question was started only on 31.10.2013, that too, after a lapse of 6 years from the date of lease. Learned Sole Arbitrator has failed to notice that interim award which amounts to granting a final award is not permissible and hence the interim award, which is in the nature of final award is liable to be set aside. Learned Sole Arbitrator has passed interim award erroneously held that when a statute provides for passing of an interim award on admitted facts, mere factum of relief by itself cannot be a ground for rejecting the application. Learned Sole Arbitrator has passed interim award erroneously held that what is being allowed is only an admitted amount on the facts of the case in the absence of non-payment during the pendency of the proceedings. Learned Sole Arbitrator failed to notice that the amounts paid towards the rents from 2013 till the date and that it has paid excess rent. Interim Award is in contravention of the public policy in as much as the same in conflict with the basic notions of justice, which has been denied to the applicant herein. The impugned Award suffers from various other legal infirmities that shall be pointed out at the time of arguments. Accordingly, it has prayed for setting aside the Interim Award. 14
Com.A.S.154/2017
4. The 1st defendant has filed written statement denying the allegation made by the plaintiff and that the suit is false, frivolous and untenable. It has stated that suit is filed by the plaintiff has suppressed the material facts. The Interim Order cannot be challenged under Section 34 of the Act, unless, conditions are laid down under Section 34(5) of the Arbitration & Conciliation Act, 1996 shall be filed by a party only after issuing a proper notice to the other party. Hence, application is liable to be dismissed. Since, the defendant made an application under Section 34(b) of the Act to pass interim order, after hearing both the parties interim award came to be passed on the basis of the existing laws and terms of the lease deed. In the said interim order, the plaintiff was directed to make a payment of Rs.67,64,312/- towards its occupation of the schedule property and arrears of rent to the tune of Rs.5,98,43,926/-. Since, what is being allowed is only an admitted amount, same cannot be challenged by way of this application. The 1st defendant is the absolute owner of the composite property known as the 'GRANGE' situated at Residency Road, Bangalore and the plaintiff entered into a lease agreement agreeing to pay rent and said lease of the schedule property was for a period of 40 years, which includes a 15 Com.A.S.154/2017 moratorium period of 24 months, wherein the plaintiff was to arrange for obtaining the necessary permissions to commence and proceed with the preliminary work on the schedule property. As per the terms of the lease agreement, the building has to be commenced and completed within 2 years and thereafter, rent at the higher end has to be paid as agreed in the lease deed. After completion of moratorium period, whatever the problems faced by the plaintiff is only diligently solely within the domain of the lease deed, for which the defendant No.1 cannot be penalised Whatever, agreed as per the lease deed has to be paid and therefore, the contention of the plaintiff cannot be accepted. The delay in construction and completion of the building is attributed to the plaintiff, for which the defendant No.1 cannot made to suffer. The plaintiff addressed letter to the defendant No.1 on 1.3.2011, requesting it to release an amount of Rs.3,25,00,000/- out of the total additional refundable security deposit of Rs.7,76,07,750/- to address various issues with respect to the schedule property and to facilitate appropriate handling of the same. As per the 2nd Addendum agreement dated 28.3.2012, the refund of Rs.3.26 crores has been recovered. The 1st defendant holds interest free refundable security deposit of Rs.14,50,07,750/-. 16
Com.A.S.154/2017 The refundable security deposit is of Rs.10,00,000/- and Rs.4,50,07,750/- is not refunded, which is taken as the additional security received under the 1st Addendum to the lease deed. The plaintiff continued to be irregular in payment of rent and defaulted multiple times in the payment of rent and committed breach of the terms of the lease and therefore, the 1st defendant invoked Arbitration clause and sought for reference of dispute to Arbitration. Further, the 1 st defendant approached the Hon'ble High Court of Karnataka in Company Petition No.243/2014, seeking the winding up of the plaintiff on the of ground of their inability to pay the defendant No.1 debts to the tune of Rs.41,89,95,466/- and the matter is pending before the Hon'ble High Court. As on 31.12.2014, an amount of Rs.36,33,80,123/- was due to the 1 st defendant towards arrears of rent. 1st defendant has denied para No. 1 to 4, 6 to 8 are the matter of fact and does not need traversal and denied para Nos.9 to 11 completely. It has also denied para No.12, 13 to 26 and with regard to para No.27 it has stated that it is borne out in the records and regarding para No.31, it has stated that it is borne out in the records and it has specifically denied para No.32, 37, 38, 39 to 48 and it has stated some of the paras are repeated. It has denied specifically para No.51 to 56, 58 to 65. 17
Com.A.S.154/2017 It has stated that the plaintiff has paid rent to the 1 st defendant as per the 1st Addendum agreement 13.08.2009 up to December 2010. As per the 1 st Addendum agreement the moratorium period is ended on 10.1.2011 and the rent payable from 11.1.2011 was Rs.1,29,34,625/- only. However, the plaintiff has paid rent of Rs.64,67,312/- for the period from 11.1.2011 to 10.2.2011. Therefore, 1st defendant addressed a letter, dated 4.3.2011 to the plaintiff requesting to pay the balance of the rent i.e., up to the June for the said period. To this letter, 1 st defendant received untenable reply, dated 8.3.2011 stating that the full rent become payable only after the hotel become functional commercially. To the said letter, the 1 st defendant vide letter dated 11.3.2011 responded that the moratorium period is expired on 10.3.2010 and therefore, full rent was payable from 11.1.2010 onwards. Thereafter, the plaintiff in its reply vide letter dated 12.3.2011, requested the 1 st defendant to extend the moratorium period till April 2012 owing to in completion of the contract. The 1st defendant refused to do so and intimated the same by its letter. Inspite of insisting for payment of rent as agreed, the plaintiff has not paid the same. The 1st defendant requested the plaintiff to adhere to the terms and condition and to pay the arrears with interest at 12% 18 Com.A.S.154/2017 per annum. Again, the plaintiff replied vide letter dated 4.11.2011 stating that due to many problems rent of Rs. 64,67,312/- could not be paid till July 2010 and regular rent as per the terms and conditions would be paid from August 2012 onwards. This was not accepted by 1st defendant and it expressed the same by letter dated 16.11.2011. The plaintiff is liable to pay differencing rent of Rs.64,67,312/- together with interest along with regular rent as per the 1 st Addendum agreement from August 2012. Inspite of all these, the plaintiff has not paid the same and gone against the terms of the lease agreement and therefore, the Arbitrator came to be appointed. Accordingly, it has prayed for dismissal of the suit.
5. Heard, learned counsel for the 1st defendant. Learned counsel for the plaintiff sought time. However, in spite of granting sufficient time, learned counsel for the plaintiff has not submitted his arguments. Hence, argument on behalf of the plaintiff was taken as not addressed. However, he was permitted to file written argument within three days. Till today, written argument has not been filed by learned counsel for the plaintiff.
6. Now, the points that arise for my consideration are:- 19
Com.A.S.154/2017
1. Whether the plaintiff has made out the sufficient grounds to set aside the interim award passed in the case of the Archdiocese of Bangalore Vs. M/s Nitesh Residency Hotels Pvt.
Ltd., dated 2.10.2017?
2. What Order ?
7. My findings on the above Points are as under:
1. Point No.1 :- In the Negative.
2. Point No.2 :- As per the final Order for the following reasons.
REASONS
8. POINT NO.1: On perusal of the order sheet, it reveals that learned counsel for the plaintiff took time to address argument on the ground that the interim order merges with the final order and final order is being challenged and further he sought time for withdrawal of the case. Since, the matter is of the year 2017, the Court insisted learned counsel for the plaintiff to address argument on main matter on 9.4.2021, 15.4.2021. However, learned counsel for the plaintiff was not prepared to argue either on the merger or on the main matter. Learned counsel for the defendant would argue that the interim 20 Com.A.S.154/2017 order passed by learned Arbitrator based upon the facts of the case and admitted facts in the lease deed and also Memorandum of Understanding, which took place between the claimant and respondent prior to the execution of lease deed. The claimant/defendant is the owner of the Schedule property and the respondent /plaintiff was the lessee, who took the schedule property as per the registered lease deed, dated 11.1.2007. Prior to that a Memorandum of Understanding was entered into between the plaintiff and defendant for the purpose of letting out the premises, which specifically discloses the condition of the schedule property and accordingly, it was agreed to give the property on a long term lease with condition to execute registered lease deed within 110 days of Memorandum of Understanding. According to learned counsel for the defendant, it is clear from the Memorandum of Understanding that what the parties were required to do prior to, and after the Memorandum of Understanding and also the registered lease deed. He straightaway took the Court, to lease deed, dated 11.1.2007 and same has been signed by both the plaintiff and defendant through their representatives and it is specifically stated that lessor is the full and absolute owner of the composite property known as the 'GRANGE', consisting of 21 Com.A.S.154/2017 land and buildings, bearing Municipal No.5 (Old No.4), New No.99, Residency Road, Bengaluru -25. It was also mentioned in the lease deed about purpose for which the lease deed was entered into and it is stated that in order to generate revenue for the purpose of purchasing the land in different places, they decided to let out the schedule property in favour of the plaintiff herein and the conditions at page No.3 at para (a) that the lessor is the absolute owner and is in possession of the schedule property and that the lessor has absolute, marketable and subsisting title and possession over the schedule property. It is also stated that the schedule property is not subject to any litigation, attachments of Court or acquisition proceedings of any kind. Similarly, para No. K states that the lessee being satisfied with rights, title and interest of the lessor entered into lease agreement knowing fully well that there are buildings in and around the schedule property. At the time of execution of lease deed, there was no any legal proceedings in respect of the schedule property, but after entering into lease deed, when the construction commenced, the neighbors and tenants in the schedule property filed complaint etc., which according to defendant is not the look after of the defendant, but it is the risk of the plaintiff, who knowing fully well about the property, 22 Com.A.S.154/2017 buildings or residences of tenants who proposed to put up building there. Therefore, the plaintiff took the schedule property knowing all these aspects and therefore, the moratorium period was fixed for 24 months with lesser rate of rent. It is stated that, the moratorium period initially for the period of 24 months and completion of the construction and it is agreed between the parties that the moratorium period under the lease deed shall be 24 months from the lease commencement date, i.e., up to 11th day of January 2009. Since, there was certain dispute and objection by the neighbors and other apartment association, the plaintiff requested for extension of moratorium period. Accordingly, another Addendum to lease deed was executed on 13 th day of August 2010, which provides for extension of moratorium period for another 24 months from 11.1.2009. So, according to learned counsel for the defendant in all, 4 years were given as moratorium period, which enables the plaintiff to pay lesser rent, than the one agreed under the lease agreement and same has been used by the plaintiff herein and completed the construction and started the Hotel business in the year 2013. However, even thereafter, the plaintiff has not paid the rent of Rs.1,29,34,625/- and after reduction of the amount 23 Com.A.S.154/2017 already paid a sum of Rs.51,75,851/- was sought from the plaintiff by letter dated 4.3.2011 issued by the defendant herein. So, according to learned counsel for the defendant, when there is a clause to the lease agreement and Addendum to the lease deed, then the plaintiff is bound to pay the rent agreed and it was admitted rent. When admitted rent is not paid when application was moved before the learned Arbitrator under Section 31(6) Act, and after hearing a detailed argument by both the counsels, learned Arbitrator passed interim award directing the plaintiff herein to pay the rent of Rs.67,64,312/- towards occupation of the property from October 2017 and arrears of rent to the tune of Rs.5,98,46,926/- along within one month and it has to pay the same with interest at 10% per annum. He took the Court to the various documents furnished by both the parties and the arguments canvassed before the learned Arbitrator with reference to the various decisions of Delhi High Court, Apex Court and other High Courts. After considering the submission, learned Arbitrator by relying upon various submission made by learned counsel for the claimant along with the decision in the case of Numero Uno International Ltd., Vs. Prasar Bharti reported in 2008 (1) ArbLR 446 (Delhi), in the case of Ludhiana 24 Com.A.S.154/2017 Improvement Trust Vs. Mapletree Property Infrastructure Pvt. Ltd., reported in 2015 (5) ArbLR 205 (Del) and the decision of the Madras High Court in the case of Gammon India Ltd., Vs.Sankaranarayana Construction, reported in (2011) 3 ArbLR 382, in the case of Uttam Singh Dugga & Co. Ltd., Vs. United Bank of India & Others reported in (2007) 7 SCC 120, has come to the conclusion that the Arbitrator has got jurisdiction to pass interim award under Section 31(b) of the Act. Though, it was strenuously canvassed by learned counsel for the respondent that interim award is in the nature of final award order cannot be passed by distinguishing the decision quoted by learned counsel for the respondent. The learned Arbitrator has not passed interim award on the basis of admitted rent as per the lease agreement. Even the construction was delayed on account of various legal proceedings, which were initiated after lease agreement and commencement of the work, it has to be duty and look after of the lessee/respondent and the lessor had extended 4 years of moratorium period from the date of lease deed. Further by way of another agreement, the lessor has t released security amount to the tune of Rs.3,25,00,000/- on request by the respondent by way of letter dated 1.3.2012. 25
Com.A.S.154/2017 Having accommodated the respondent to a maximum extent, according to him, it is the duty of the respondent, who has undertaken to pay rent as per lease deed and when he fails to pay the same, then, certainly the arrears would become an admitted rent and there is no bar under Section 31(6) of the Act. Learned Arbitrator after considering all these aspects and the decision quoted by learned counsel for the respondent reported in 1992(4) SCC 167, 1995(3) SCC 257, 1995 SUPPL (3) SCC 590, 1996 (1) SCC 681, 2006 (11) SCC 181 and AIR 2006 Delhi 266 come to a conclusion that the Arbitration Tribunal has power to pass interim award relating to admitted rent and it is also observed that it will be taken care of by passing final award. After interim order, though it was challenged before the before tribunal, final award came to be passed by learned Arbitrator on 7.11.2020, wherein, he has taken a note of the interim award and that the same shall be given deduction to. All the counter claims came to be rejected by learned Arbitrator and the respondent/plaintiff has filed a separate suit challenging the final award. So, according to the counsel for the defendant, when there is final order, interim award merges with the final award and interim award has no legs to stand. So, when the interim award merges with 26 Com.A.S.154/2017 the final award there is nothing to decide in the present case. Moreover, the plaintiff has failed to show that the interim award passed by learned Arbitrator is opposed to public policy and interest of India, justice or morality and it is patently illegal. The plaintiff has failed to show that the Arbitrator has exceeded the limit under Section 31(6) of the Act. The plaintiff has failed to show that the award is opposed to public policy, justice or morality or non-application of the law, which ought to have been applied or application of the law, which are not applicable, resulting in interim award, has not been substantiated by the plaintiff. So, whether this court can set aside the award has been held in various decisions and one such decision in the case of Associate Builders Vs. Delhi Development Authority reported in (2015) 3 SCC 49, which speaks about when an Arbitral Award can be set aside. The Award includes interim award also. Therefore, the same has been challenged under Section 34 of the Act and whatever, the grounds available for challenging final award are also applicable to the interim Award. He has also cited another decision in the case of National Highway Authority of India Vs. I.T.D Cementation India Ltd, reported in (2015) 14 SCC 21, which also speaks about when award can be set aside and if 27 Com.A.S.154/2017 Arbitrator has not adhered to terms of contract, in a reasonable manner, award cannot be set aside. The Court can interfere only in case of perverse interpretation, that is only if Arbitrator construe the contract in such a way that no fair-minded or reasonable person could do. Further, Court does not sit in appeal to appreciate the findings and decision of the Arbitrator. Now, we have to see, whether learned Arbitrator has exceeded his jurisdiction and gone against the terms of the contract. When we peruse the lease deed, it goes to show that the plaintiff herein has agreed to pay rent at two different rates, one for moratorium period and one after completion of moratorium period. If plaintiff was not able to complete the construction after grant of two moratorium periods i.e., for four years, who is responsible for that. It is the plaintiff only responsible for the delay in construction and completion of the work and commencement of the business. Ofcourse, the plaintiff must have suffered loss on account of delay for which the lessor/defendant cannot be penalized. The parties are bound by the terms of the contract, which stipulates the payment of rent, which is very clear on the basis of the lease deed, then there is no bar for passing the interim award to pay the admitted rent. There may be several other aspects 28 Com.A.S.154/2017 regarding damages etc., which require evidence and rightly learned Arbitrator based upon other aspects and directed the plaintiff to pay admitted rent. Therefore, the case of the plaintiff does not fall within the Section 34 of the Act regarding contract, how contract has to be constituted, how the formalities are to be done, has been stated in the case of Rashtriya Ispat Nigam Limited Vs. Dewan Chand Ram Saran, reported in (2012) 5 SCC 306, which speaks about a particular clause, i.e., clause No.9.3, which refers to the liabilities of the respondent contractor in connection with discharge of his obligations. The term "his obligations under this order" in clause 9.3 of the contract denoted the contractor's responsibilities under clause 6 in relation to the work, which he has required to carry out as handling contractor. The tax liability will depend upon the value of the taxable service provided, which will vary depending upon the volume of the goods handled. It is further held that the contract read as a whole harmonising the various provisions thereof, clause No.9.3 will have to be held as containing the stipulation of the respondent, contractor accepting the liability to pay the service tax, since the liability did arise out of the discharge of his obligations under the contract. It appears that the rationale 29 Com.A.S.154/2017 behind clause 9.3 was that the petitioner as a public sector undertaking should be thereby exposed only to a known and determined liability under the contract, and all other risks regarding taxes arising out of the obligation of the contractor are assumed by the contractor. So, when the parties are bounded to the terms of the contract, neither of them cannot plead contrary to that. No doubt, the plaintiff had to get the property free from encumbrances or any litigations or No Objection from BBMP. Therefore, the burden cannot be shifted on the lessor to claim any compensation or exemption. He has cited one more decision in the case of McDermott International Inc. Vs. Burn Standard Company Limited reported in (2006) 11 SCC 181, which speaks about role of Court and grounds for interference under Section 34 of the Act. Even, if there is any error committed by learned Arbitrator by interpreting the terms of the contract, this Court cannot substitute its view as held in the case of ONGC Ltd Vs. Saw Pipes Ltd., and Rajasthan State Mine and Minerals Ltd., Vs. Eastern Engineering Enterprises and another and earlier decision in the case of Renusagar Power Co.Ltd., Vs. General Electrical Company. This decision at para No. 52 states that :
30
Com.A.S.154/2017
52." The 1996 Act makes provision for the supervisory role of courts, for the review of the Arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the Arbitrators, violation of the award leaving the parties free to begin the Arbitration again if it is desired. So, the scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for Arbitration as they prefer the expediency and finality offered by it." and further 58 and 59, it is held that
58. "this Court laid down that the Arbitral award can be set aside if it is contrary to (a) fundamental policy of Indian law; (b) the interest of India; or (c) Justice or morality. A narrower meaning to the expression "public policy" was given therein by confining judicial review of the Arbitral award only on the aforementioned three grounds. An apparent shift can, however, be noticed from the decision of this Court in ONGC Ltd., Vs. Saw Pipes Ltd., (for short "ONGC"). This Court therein referred to an earlier decision of this Court in Central Inland Water Transport Corpn. Ltd., Vs. Brojo Nath Ganguly, wherein the applicability of the expression "public policy" on the touchstone of Section 23 of the Indian Contract Act and Article 14 of the Constitution of India came to be considered. This Court therein was dealing with unequal. Any term of the agreement which is patently arbitrary and/or otherwise arrived at because of the unequal bargaining power would not only be ultra vires Article 14 of the Constitution of India but also hit by Section 23 of the Indian Contract Act, In ONGC this Court, apart from the three grounds stated in Renusagar, added another ground thereto for exercise of the court's jurisdiction in setting aside the award if it is patently arbitrary.
59. Such patent illegality, however, must go to the root of the matter. The public policy violation, indisputably, should be so unfair and unreasonable as 31 Com.A.S.154/2017 to shock the conscience of the Court. Where the Arbitrator, however, has gone contrary to or beyond the expressed law of the contract or granted relief in the matter not in dispute would come within the purview of Section 34 of the Act. However, we would consider the applicability of the aforementioned principles while noticing the merits of the matter."
9. So, in the present case, when we go through the terms of the contract and reference made to the Learned Arbitrator for the decision, the various contentions raised that the plaintiff and defendant and production of documents go to show that a specific case was referred for recovery of the arrears of rent and damages and also on failure, to hand over the vacant possession of the schedule property. These aspects are borne out in the lease deed at clause No.7 and there is a reference to that effect and therefore, unless and until it is shown that learned Arbitrator has acted against the provisions of law and failed to consider the evidence related documents produced by it or other circumstances, which legally prevented the plaintiff from making payment. In this regard, the plaintiff has utterly failed to prove the same. When, we go through the petition filed before this Court and grounds urged as stated in para No.46, that the learned Arbitrator has failed to take notice of the counter claim of the respondent, which is much higher 32 Com.A.S.154/2017 than the claim of the claimant, absolutely learned Arbitrator has committed any error in passing interim Award. The plaintiff has stated that the learned Arbitrator has failed to notice that unless counter claim of the respondent is decided the interim award cannot be passed. Of course, there are some other grounds are made, which are borne out of the record and it appears from the lease deed that the plaintiff harp upon the delay in construction and obtaining No objection from the BBMP and also commencement of the work etc., for which the defendant cannot be penalised. Therefore, the plaintiff has failed to show that the interim passed by the Arbitrator is opposed to law and without any jurisdiction and further it would suffer from legally infirmities. When we read the entire materials placed before the Court along with the documents, one thing is clear that the final award passed by the learned Arbitrator and whatever the interim award granted to the defendant is ordered to be deducted and all the counter claims came to be rejected. One thing is clear that plaintiff has got every right to challenge the entire award in a separate suit and I am of the view that this suit does not survive for consideration on account of passing of final award, So, in view of the above, I am of the view that plaintiff has utterly failed to prove the 33 Com.A.S.154/2017 case within the ambit of Section 34 of the Act and therefore, I answer point No.1 is in the Negative.
10. Point No.2 :- For the aforesaid reasons, I proceed to pass the following Order.
ORDER The suit/petition filed by the plaintiff U/S. 34 of Arbitration & Conciliation Act, 1996 is dismissed with costs.
(Dictated to the Stenographer, typed by him, corrected and then pronounced by me through V.C on this the 18th day of June, 2021).
(CHANDRASHEKHAR U), LXXXVII Addl.City Civil & Sessions Judge, (Exclusive dedicated commercial Court) Bengaluru.
sk 34 Com.A.S.154/2017 18.06.2021 P 1- R1- R2 -
For Judgment
The Judgment is
pronounced through V.C vide
separate Judgment. The
operative portion of the said
Judgment is as follows :-
ORDER
The suit/petition filed by the
plaintiff U/S. 34 of Arbitration &
Conciliation Act, 1996 is
dismissed with costs.
LXXXVII ACC&SJ,
B'LURU.