Bangalore District Court
Trishul Developers vs Smart Asset Services India Pvt. Ltd on 15 June, 2022
IN THE COURT OF THE LXXXIII ADDITIONAL CITY
CIVIL AND SESSIONS JUDGE AT BENGALURU CITY
[CCH-84]
:Present:
Ravindra Hegde,
M.A., LL.M.,
LXXXIII Addl. City Civil & Sessions Judge,
Bengaluru
Dated on this the 15th day of June 2022
COM.A.S.No.64/2019
Plaintiffs 1. Trishul Developers,
a registered partnership firm,
having its office at Mittal Towers,
No.109, 'B' Wing, 1st Floor, No.6,
M.G.Road, Bengaluru-560001.
Represented by its Managing Partner
Mr. Niraj Mittal.
2. Mr. Niraj Mittal,
Major,
Managing Partner, Trishul
Developers,
Mittal Towers, No.109, 'B' Wing,
1st Floor, No.6, M.G.Road,
Bengaluru-560001.
3. Mr. O.P.Mittal,
Major,
Partner, Trishul Developers,
Mittal Towers, No.109, 'B' Wing,
1st Floor, No.6, M.G.Road,
Bengaluru-560001.
2
CT 1390_Com.A.S.64-2019_Judgment.doc
4. Mrs. Uma Mittal,
Major,
Partner, Trishul Developers,
Mittal Towers, No.109, 'B' Wing,
1st Floor, No.6, M.G.Road,
Bengaluru-560001.
Represented by her constituted
Attorney Mr. Niraj Mittal.
5. Mrs. Jyoti Mittal,
Major,
Partner, Trishul Developers,
Mittal Towers, No.109, 'B' Wing,
1st Floor, No.6, M.G.Road,
Bengaluru-560001.
Represented by her constituted
Attorney Mr. Niraj Mittal.
(By Sri.D.J, Advocate)
// versus //
Defendant Smart Asset Services India Pvt. Ltd.,
having its registered office at:
No.151, 9th Main, 6th Sector,
H.S.R.Layout, Bengaluru-560102.
(By Sri.K.V.P, Advocate)
Date of Institution of the : 10/04/2019
suit
Nature of the suit : Arbitration Suit
Date of commencement of :
recording of the evidence
Date on which the : 15/06/2022
Judgment was pronounced.
: Year Month/ Day/s
Total duration /s s
03 02 05
3
CT 1390_Com.A.S.64-2019_Judgment.doc
JUDGMENT
This Arbitration suit under Section 34 read with Section 16(6) of the Arbitration & Conciliation Act is filed by the plaintiffs praying to set aside the Award dated 28/12/2018 passed in AC No.37/2018 and praying to direct the defendant to bear the entire costs of the arbitration proceedings and for other reliefs.
2. The Plaintiffs were the respondents before the learned Arbitrator. The Defendant was the claimant.
3. The case of the plaintiffs in brief is as under:
Plaintiff No.1 is a partnership firm engaged in the business of Real estate and Plaintiff No.2 is Managing Partner and plaintiff No.3, 4 and 5 are the partners of plaintiff No.1. plaintiff No.1 was engaged in the development of a residential apartments complex in Bengaluru named as 'Mittal Palms'. In 2012, one Vikram Chari met plaintiff No.2 and he represented that he was in the business of broking and investing for clients in real estate projects and that he regularly bought and sold immovable properties for high-net-worth individuals and has also stated that he is in look out for good projects. The discussions were held between Vikram Chari and plaintiff No.2 and service agreement dated 18/12/2012 was entered between the plaintiff No.1 and Vikram Chari and his company Smartowner Services India Private Limited. By this agreement, plaintiff No.1 had agreed to provide service to 4 CT 1390_Com.A.S.64-2019_Judgment.doc market and sell the apartments in the project Mittal Palms for brokerage commission of 3% of the consideration received by plaintiff No.1. Later, Vikram Chari induced plaintiff No.2 and being induced by the funds that would become available to the plaintiff No.1 on the sale of apartments, plaintiff No.1 executed agreement of sale and construction agreement with the respondent. On 1/2/2013 Supplemental agreement and Marketing agreement were also entered with plaintiff No.1 completely overriding the agreements to sell and the construction agreements. Although plaintiff No.1 was persuaded to enter into marketing agreements with the respondent, Vikram Chari and his Associate Company continued to market and sell the apartments for plaintiff No.1 and thereby continued to earn the brokerage. On 4/4/2013 exclusive marketing rights agreement were also entered by the Smart owner Services India Private Limited with plaintiff No.1 under which plaintiff No.1 was restrained from marketing or selling any of the apartments in the project except to friends and relatives and that too not more than 15% of the unsold apartments. Among these several agreements entered the supplemental agreement dated 1/2/2013 and supplemental agreement dated 24/5/2013 and also addendum dated 8/9/2014 did not contain arbitration clause. The plaintiff No.1 and 2 and Vikram Chari were aware that the access road to the project was becoming an issue. The project was being developed within the proposed Arkavathy Layout 5 CT 1390_Com.A.S.64-2019_Judgment.doc Phase I, developed by the BDA and 18 meters public road providing access to the project was already completed and on the basis of this public road BDA and BBMP had issued sanction plan to the plaintiff No.1 for development of the project. Suddenly by order dated 10/5/2013 BDA denotified the lands adjacent to the project, in which 18 meters public road had been formed by the BDA. Plaintiff challenged the de-notification and order of status-quo was passed by the Hon'ble High Court. In the meantime even without issuing of notice, BBMP on 28/8/2014 has canceled the sanctioned plan on the ground that project had lost its road access. plaintiff No.1 has even challenged this by filing writ petition before the Hon'ble High Court. As plaintiff No.1 could not afford to wait for the conclusion of legal proceedings, at great cost purchased an easementary right from the neighboring landowner to provide road access to the project and plaintiff No.1 is in the process of obtaining a modified/revised sanctioned plan on the basis of the new road access to the project. The plaintiff No.1 was prevented by factors beyond its control from continuing with the development of the project. The claimant was aware of these facts. However on 22/6/2017 claimant issued notice seeking adjudication of its alleged claim arising out of the agreements of sale and construction agreements for refund of sale consideration together with compounded interest. Arbitration proceedings were initiated, Arbitral Tribunal was constituted.6
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4. Before the tribunal, plaintiffs filed application under Section 16 of the Arbitration & Conciliation Act contending that claims raised by the claimant were not arbitrable as they related to persons who were not parties to the arbitration proceedings and the claims were outside the scope of the agreements to sell and construction agreements that provided for dispute resolution by way of arbitration. Contrary to Section 16(5) of the Arbitration & Conciliation Act the Arbitral Tribunal declined to take up the hearing of the plaintiff's application and deferred the same to the final hearing of the arbitration proceedings. Learned Arbitrator framed issues No.1 to 19. Parties have led their evidence. On 28/12/2018 Arbitral Tribunal passed award and directed the plaintiffs to pay Rs.26,92,80,169/- to the defendant/claimant together with pendente lite and post award interest @9% per annum. The cost of Rs.6,32,000/- is also awarded. Being aggrieved by this award, the plaintiffs who were the respondents before the learned Arbitrator have filed this arbitration suit challenging the award under Section 34 and also Section 16(6) of the Arbitration & Conciliation Act.
5. The plaintiffs have contended that the award is perverse, arbitrary, contrary to the facts and the evidence and it deserves to be set aside under Section 34(2)(a)(iv) and 34(2)(b)(ii) of the Act. It is stated that the tribunal has grossly erred in declining to adjudicate on the issue No.13 and 14 on the ground that it is constituted under Section 7 CT 1390_Com.A.S.64-2019_Judgment.doc 11 of the Arbitration & Conciliation Act. The tribunal has failed to adjudicate whether the landowners are proper and necessary parties for the adjudication of the respondent's claim and whether respondent omission to have implead them is fatal to the maintainability of these proceedings by the respondent. The tribunal has erred in failing to adjudicate whether the plaintiff No.2 to 5 had any direct privity of contract with the defendant in their personal and individual capacities. The Arbitral Tribunal has erred in failing to adjudicate whether the exhibits Ex.P.1 to Ex.P.48 are distinct and separate from the contractual relationships set out in the exhibits Ex.P.49 to Ex.P.53. The tribunal has failed to note that the claim arising out of any of the exhibits 49 to 53 are not arbitrable and ought to be rejected. It is stated that being a creature of contract, the agreement of sale and the construction agreements entered into between the parties, arbitral tribunal could not have considered and granted any claim or relief not contemplated in the agreement of sale and the construction agreement. The Arbitral Tribunal has attributed to itself the powers and jurisdiction of a court of equity. It is stated that the tribunal has erred in holding issue No.9 in the claimant's favour without any reasoning or reference to evidence. The tribunal ought to have decided whether plaintiff No.1 was under an obligation to market its own apartment or the plaintiff No.1 had been granted a right to do so. It is stated that the finding of the tribunal on various issues are not 8 CT 1390_Com.A.S.64-2019_Judgment.doc proper and by non appreciation. It is stated that on issue No.8, tribunal has failed to appreciate that the defendant did not lead any evidence to prove that any of the apartments that it agreed to purchase from the plaintiff No.1 were in fact re-sold by plaintiff No.1. It is stated that the tribunal has erred in failing to accept the plaintiff No.1's submission that the respondent has not prayed for refund of the consideration amount paid to plaintiff No.1 under Ex.P.25 to Ex.P.48 and in the absence of such plea refund could not be granted. It is stated that the total consideration paid under the agreement to sell was Rs.3,76,68,795/- only and there was no basis for the amount claimed in the arbitration proceedings by the defendant. It is also stated that Ex.P.1 to Ex.P.24 agreements to sell did not contain any provision in payment of interest and hence even if the amount is ordered to be refunded the respondent was not entitle for interest. It is also stated that the tribunal has failed to accept the 1 st petitioner's contention that Shell and Core of the building is complete within the stipulated period, though plaintiffs have produced evidence for the same. The tribunal has also failed to note that upon expiry of 18 months period, defendant returned all the cheques that the plaintiff No.1 had furnished as security for the performance of its obligation to comeplete the shell and core of the building. It is stated that at the time of entering into agreement, defendant was aware that project had lost its then existing 9 CT 1390_Com.A.S.64-2019_Judgment.doc road access due to the illegal actions of the BDA which were under challenge. It is stated that the obligation to procure road access to the project is not subject to any time frame. It is stated that to claim for refund of sale consideration due to a breach of this obligation, it was incumbent upon the defendant to have first terminated the agreement to sell. It is stated that the tribunal has ignored the evidence produced by plaintiffs showing resolution of this issue of road. It is also stated that the tribunal has erred in failing to appreciate that Ex.P.53 is a distinct and separate contract. It is stated that to secure the obligation, defendant received fresh cheques from the plaintiff No.1 under Ex.P.53 and the tribunal ought to have held that Ex.P.53 is a sham document and does not reflect the true and actual contractual relationship between the parties. It is stated that the tribunal has failed to appreciate that the plaintiff No.1 is not in the business of re-selling apartments for its customers and defendant is in the business of trading in real estate. The tribunal ought to have held that Ex.P.53 is a void contract and no consideration has passed to the plaintiff No.1 in exchange for agreeing to market the apartments agreed to be purchased by the defendant. On all these grounds it is stated that award is clearly in conflict with the public policy of India and deserves to be set aside.
6. The defendant who was the claimant before the learned Arbitral Tribunal has appeared and filed statement of objection and stated that this arbitration suit is liable to 10 CT 1390_Com.A.S.64-2019_Judgment.doc be dismissed and is not maintainable. It is stated that the plaintiffs have suppressed the material facts and records and have approached the court with unclean hands. It is stated that the jurisdiction of the court under Section 34 of the Arbitration & Conciliation Act is supervisory and not appellate in nature. It is stated that the award can be set aside only if the grounds mentioned under Section 34 of the Act is made out. It is stated that none of the grounds mentioned in Section 34 of the Act is made out which would call for interference of this court. It is stated that award of the sole Arbitrator is well reasoned, speaking award which is in accordance with law and is passed after hearing both the parties. It is stated that plaintiffs represented to the defendant with regard to its construction and development of project of Mittal Palms and subsequent to representation made by the plaintiff No.1 on 1/2/2013, the defendant entered into 26 agreements to sell and 26 construction agreements with respect to 26 residential apartments being constructed by the plaintiffs and supplemental agreement was also executed on 1/2/2013. It is stated that the plaintiff No.1 issued cheques to defendant for Rs.12,91,69,636/- was a guarantee for return of the entire sale consideration paid under the agreements along with interest @25% per annum compounded annually. The defendant has also stated about execution of agreements on 23/5/2013. It is stated that out of 30 apartments agreed to be sold, only 6 apartments are sold by plaintiff to 11 CT 1390_Com.A.S.64-2019_Judgment.doc 3rd parties and 24 apartments have remained unsold. Consequently exclusively marketing rights agreement remained unperformed. It is stated that the managing partner of the plaintiff No.1 expressed his inability to fulfill the obligation as agreed in the agreement within time due to issues with regard to road access to the project. It is stated that the plaintiff has not completed construction of the apartment and they are not able to re-sell the apartment as per the agreement. Defendant has performed all acts in compliance with the agreements. However, plaintiffs have not delivered the apartment in marketable condition and not refunded the agreed amount. It is stated that learned Arbitrator after taking note of these facts and perusal of the documents has passed the award which is correct. Defendant has denied various averments of the petition. It is stated that the tribunal after detailed hearing and after careful perusal of the evidence has passed a detailed award and award does not call for interference. It is stated that there is no error in recording facts or evidence as claimed by the plaintiffs. It is stated that the dispute is regarding refund of sale consideration and award is well within the scope of reference and same cannot be set aside. It is stated that award would be in conflict with the public policy only if making of such an award is induced or is affected by fraud or corruption and plaintiffs have not urged any such facts. It is stated that the agreement of sale, construction agreements, supplemental agreements, addendum to 12 CT 1390_Com.A.S.64-2019_Judgment.doc supplemental agreement are all part of the same transaction as stated by the tribunal and entire transaction has to viewed as a whole. It is stated that after considering the terms in the exclusive marketing agreement, learned Arbitrator has come to a finding that the plaintiffs were under obligation to sell the apartments of the defendant. It is stated that nowhere in the written statement, plaintiffs have taken a contention that the total sale consideration paid by the respondent is only Rs.3,76,68,795/-, but only in argument such contention was raised and the learned Arbitrator has rightly rejected the same. It is stated that no documents produced to demonstrate that they were successful in obtaining easement rights to construct the road and therefore, tribunal has rightly held that plaintiff has failed to obtain road access within the time frame. It is also stated that Ex.P.53 cannot be considered as sham document and as held by the tribunal plaintiff being a business entity and knowing fully well of the consequences of issuing post dated cheques has issued cheques and the plaintiff cannot now turn around and say that the said document is a sham document. On all these grounds the defendant has prayed to dismiss the petition.
7. Now the points that arise for consideration of this court are:
1) Whether the plaintiffs prove that the learned Arbitrator without having jurisdiction, has decided the dispute in AC No.37/2018 by award dated 22/02/2018 and has also 13 CT 1390_Com.A.S.64-2019_Judgment.doc exceeded his authority to decide the dispute and therefore, award is required to be setaside under section 16(6) r/w section 34 of Arbitration and conciliation Act?
2) Whether plaintiffs have made out any grounds under Section 34 of the Arbitration & Conciliation Act to set aside the Award passed by the learned Arbitrator in AC No.37/2018 dated 22/2/2018?
3) What order?
8. Heard learned Senior Counsel for Plaintiffs.
Heard the learned counsel for the Defendant. Both the counsels have filed written arguments also. Perused records.
9. My answer to the above points are :
POINT No.1 : In the negative.
POINT No.2 : In the negative.
POINT No.3 : As per final order for the
following:
REASONS
10. POINT No.1 and 2 : Since both these points are inter related, they are taken together for discussion.
11. The plaintiffs who were the respondents in the arbitration proceedings in AC No.37/2018 have filed this Arbitration suit under Section 34 and section 16(6) of the Arbitration & Conciliation Act challenging the award dated 28/12/2018 by which the claim petition fled by the defendant was allowed and the present plaintiffs were directed to pay Rs.26,92,80,169/- with 9% interest and also to pay costs.
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12. The case of the claimant who is the defendant in this case is that the plaintiffs and defendant have entered into agreement of sale, construction agreement, supplemental agreement, exclusive marketing rights agreement and also addendum agreement in respect of totally 30 flats. According to the claimant, initially plaintiffs had agreed to sell the apartments to be constructed by the plaintiffs to the claimant and on the same day plaintiffs, who are developers, have agreed to market the flats that are agreed to be sold to the claimant and entered into exclusive marketing right agreement. According to the claimant the construction was to be completed within a time schedule, but the same is not completed. Even the apartments which were agreed to be sold by the plaintiffs were not sold and thereafter addendum agreement was executed on 8/9/2014 in respect of unsold 26 apartments and plaintiffs agreed to sell all the 26 apartments within 12 months and on failure to pay Rs.3,924/- per square feet to the claimant. Since these apartments are not sold within this period, claimant claimed amount as per this agreement. According to the claimant there was also an issue of road access to the project and the construction is also not complete. As construction agreement and agreement to sell which are mentioned as definitive agreements had an arbitration clause, arbitration was initiated and in CMP, Hon'ble High Court appointed the learned Arbitrator and the learned Arbitrator has passed the award and allowed the claim 15 CT 1390_Com.A.S.64-2019_Judgment.doc partly and same is challenged on many grounds as stated above.
13. Jurisdiction of the court to set aside an arbitral award is limited to the grounds set out in Section 34(2) and 34 (2A) of the Arbitration & Conciliation Act 1996. Even on Learned arbitrator proceeding with arbitration by overruling objection raised regarding jurisdiction under section 16(5) of the Act, the remedy provided under section 16(6) is to seek setting aside of award under section 34 of the Act. It is well established principle that even if a contrary view based on the facts before the Arbitral Tribunal is possible, in the absence of any compelling reasons, court cannot interfere with the view taken by the learned Arbitrator. Finding of Arbitrator on his Jurisdiction to decide a dispute, existence and validity of arbitration agreement and Arbitrator exceeding scope of his authority, are also covered in section 34 of the Act as grounds to setaside the award. It is also well established principle that the court sitting U/S.34 of the Act is not supposed to go for re-appreciation of evidence or impose its view as against the view of learned Arbitrator and the power of the court is only to set aside the award, if it is coming under one of the grounds mentioned in the said section. In the presence of these basic principles, grounds urged by the plaintiffs and the award of the learned Arbitrator are to be looked into.
14. On looking to the award, learned Arbitrator by considering the pleadings has framed 18 issues and parties 16 CT 1390_Com.A.S.64-2019_Judgment.doc have led evidence. By considering pleadings, evidence and also the arguments, learned Arbitrator has found that Issues No.1 to 6, which are with regard to execution of documents like agreement of sale, construction agreement, supplemental agreement, exclusive marketing rights agreement and addendum to supplemental agreement, are not disputed and answered the same in favour of the claimant. The plaintiffs had raised dispute before the learned Arbitrator about maintainability of the claim and on this contention issues No.13 and 14 were framed. The learned Arbitrator has considered the contention of the plaintiffs that Ex.P.1 to Ex.P.48, which are the agreement to sell and construction agreement, are contrary to contractual relationship said to be in Ex.P.49 to Ex.P.53. Contention that Ex.P.49 to Ex.P.53 do not contain the arbitration clause and therefore, claim arising out of Ex.P.49 to Ex.P.53 are not arbitrable is also considered. It was contended before the learned Arbitrator that in Ex.P.49 to Ex.P.53 new and additional obligation is casted, which amounts to material alteration and as these agreements do not contain arbitration clause and therefore dispute which are raised, based on the addendum agreement is not arbitrable. It was also contended before the learned Arbitrator that plaintiff No.3 to 5, who were respondents No.3 to 5 before the learned Arbitrator have not signed Ex.P.1 to 48, which contains arbitration clause and arbitration agreement in Ex.P.1 to 48 is not binding on 17 CT 1390_Com.A.S.64-2019_Judgment.doc them. Therefore, it was contended that arbitrator has no jurisdiction to decide the dispute in relation to plaintiff No. 3 to 5 as dispute is not arbitrable. It was also contended that land owners are not parties to the arbitration proceedings.
15. The learned Arbitrator by considering that the dispute is between the claimant and the respondents who are the developer and agreement holder for purchase and then sale of the apartments, has held that the land owners are not necessary parties. Regarding the point of arbitrability of the dispute, the learned Arbitrator has considered the order of the Hon'ble High Court in CMP in which, it is held that there is an arbitration agreement and Addendum to the supplementary agreement is only supplementary and not main agreement and clause 5 restricts its operation only in respect to terms contained therein and agreement do not substitute pre existing definitive agreement and therefore arbitration clause in the earlier agreement between the parties do not get wiped out by addendum to the supplemental agreement. By considering this finding of Hon'ble High Court, learned Arbitrator has held that existence of arbitration agreement regarding the dispute raised by the parties is already held by the Hon'ble High Court and the Hon'ble High Court has given categorical finding by rejecting the contention of the plaintiffs regarding non-arbitrability of the claim and it is not open for them to raise very same pleas and such 18 CT 1390_Com.A.S.64-2019_Judgment.doc consideration would be going against binding judgment of the Hon'ble High Court. By holding so, the learned Arbitrator has held issue No.13 and 14 against the respondents (present plaintiffs) which findings are seriously challenged by the plaintiffs in the present arbitration suit.
16. In other issues, tribunal has considered dishonour of the cheque and failure to sell 24 apartments as agreed. Learned arbitrator has held Shell and core is not completed within the time limit and the respondents have committed breach. The issue of road access which arose due to Govt order, which lead to cancellation of even Sanction plan are also considered by the learned Arbitrator. Learned Arbitrator has found that the respondents had agreed in Ex.P.49 supplementary agreement for construction of shell and core within 18 months and on failure to return the consideration paid with interest @25% per annum and also the enlargement of time due to force mejure for another 3 months or to return the consideration amount with 25% interest if not completed within 21 months. The learned Arbitrator has noted that the issue of road access is not a force majuere. He has held that the respondents have not completed the construction as agreed upto shell and core. The tribunal has noted that though it may be true that the respondents have incurred expenses for the purpose of road access and the respondents cannot be blamed for the issue of road access, that would not come 19 CT 1390_Com.A.S.64-2019_Judgment.doc in the way of claimant seeking refund of the amount in terms of the agreement for breach of conditions.
17. Tribunal by considering evidence and the admitted facts has found that in terms of Ex.P.49, respondents have to repay the consideration under along with interest @25% compounded annually. Tribunal has also found that in Ex.P.53, respondents had agreed to pay particular amount per sq.ft, if marketing is not done. Tribunal has noted that these documents would determine the point in dispute. Contention raised by the respondents in the course of arguments that, if the claim of the claimant has to be allowed, it should be limited to refund of Rs.3,76,68,795/-, is also considered by the Tribunal. Tribunal by considering that if Rs.3,76,68,795/- was to be repaid, cheques for more than 15 crore would not have been given, has rejected this contention of the respondent raised for the first time in the written arguments.
18. The contention that Ex.P.53 is not connected to Ex.P.1 to 48 and Ex.P.49 to 52 is also rejected by holding that Ex.P.1 to Ex.P.53 are to be read together. The tribunal has also noted that parties who are basically business persons, have signed the documents by knowing consequence of their breach and respondents have issued cheques. Tribunal also noted that respondents have not replied to the notice. By considering these facts, learned Arbitrator has upheld the claim of the claimant for Rs.15,48,40,240/- which is basic agreed amount to be 20 CT 1390_Com.A.S.64-2019_Judgment.doc refunded and by adding interest thereon, totally for Rs.26,92,80,169/- award is passed in favour of claimant. The other claims towards loss suffered in the business, towards cost and expenses are all rejected. Tribunal has awarded pendentilite and future interest @9% per annum as against the claim for 25%.
19. Main ground on which this award is challenged is under Section 34(2)(a)(ii) as arbitration agreement is not valid as plaintiffs No.3 to 5 have not signed the arbitration agreement. Contention of plaintiffs under section 16 of the Act will also fall under section 34(2)(a) of the Act. It is contended that plaintiffs No.3 to 5 who are the partners of plaintiff No.1 firm have not signed the arbitration agreement and there is no arbitration agreement as against these persons and in view of Section 19(2)(a) of Indian Partnership Act, other partners i.e. plaintiff No.2 cannot bind these plaintiffs to the arbitration agreement which he has signed. It is contended that against these plaintiffs there is no arbitration agreement and in the absence of valid arbitration agreement, entire process of arbitration is vitiated and the award is liable to be set aside. It is contended for the plaintiffs that plaintiffs No.2 to 5 have not even ratified the acts of plaintiff No.2 by impliedly consenting for arbitration agreement and have contested the issue even before the Hon'be High Court and in the arbitration proceedings under section 16 of the Act. On this ground, it is also contended that award is even against fundamental principles of Indian 21 CT 1390_Com.A.S.64-2019_Judgment.doc law and learned Arbitrator has not even given any reasons and the award is without reasons with regard to this point. It is also contnded that the learned Arbitrator has not considered these contentions and has only referred to the finding of the Hon'ble High Court in CMP under Section 11 and thereby the award is against the public policy.
20. On looking to award, the learned arbitrator has referred to these contentions of the plaintiffs and has not accepted the same. Records disclose, that agreement of sale and the construction agreement which are produced at Ex.P.1 to Ex.P.48 before the learned Arbitrator show that on behalf of Trishul Developers who is the plaintiff No1, its managing partner Neeraj Mittal who is second plaintiff before this court has signed the agreements. Admittedly other 3 partners who are plaintiffs No.3 to 5 have not signed any of these agreements that are entered between the parties. Therefore plaintiffs contend that arbitration agreement appearing in Ex.P.1 to Ex.P.48, cannot be considered as arbitration agreement on behalf of plaintiffs No.3 to 5. Even Section 19(2)(a) of Partnership Act bars a partner from binding other partners for an arbitration agreement. In the award the learned Arbitrator though referred to, about this objection raised by the plaintiffs, has not specifically considered this point and by considering the order of the Hon'ble High Court in the CMP, held that there is valid arbitration agreement between the parties to refer 22 CT 1390_Com.A.S.64-2019_Judgment.doc the dispute and has rejected the contention of these plaintiffs.
21. The learned senior counsel for the plaintiffs has relied on the decision of the Hon'ble High Court of Delhi in National Small Industries Corporation Limited reported in ILR (1979) 1 Delhi 381, in which in para 8 and 9 it is held that all the partners of a firm should agree to refer disputes to arbitration. The Hon'ble High Court by considering Section 19(2)(a) of Partnership Act has held that, in the absence of any usage or custom or trade to the contrary, the implied authority of a partner does not empower him to submit a dispute relating to the business of the firm to arbitration. The plaintiffs have also relied on the decision of Hon'ble High Court reported in 1988 SCC Online P & H 117 (Food Corporation of India v. Rama Mills, Shahbad Markanda)in which the Hon'ble High court has considered Section 19(2)(a) of the Indian Partnership Act and also the decision in National Small Industries referred above and held that when there is no valid arbitration agreement binding all the partners or rejecting the application under Section 34 has to be sustained. In another decision of the Bombay High Court reported in 2000 SCC Online Bombay 670 (J.J.L.B Engineers and Contractors through its partner Balabeersingh v. Manmohan Harijinder and Associates and another) also it is held that an award passed in a reference to arbitration at the instance of one of the partner 23 CT 1390_Com.A.S.64-2019_Judgment.doc without specific consent of others is not binding on the firm is a well settled law.
22. On the other hand counsel for the defendant has relied on the decision of Hon'ble Supreme Court reported in (1992) 1 SCC 145 (Sanganer Dal and Flour Mill v. F.C.I. and others) in which one of the partner of a firm entered into contract on behalf of the firm in the usual course of business and the said contract containing an arbitration clause and the firm filed application under Section 20 of Arbitration Act for reference of dispute arising out of the contract to arbitration in terms of the contract. The Hon'ble Supreme Court has held that it is valid and binding on the other partners of the firm under Section 18 and 19 (1) of the partnership Act and section 19(2) is not attracted and the reference made by the court under Section 20 is within the jurisdiction and valid. The Hon'ble Supreme Court in para 3 has held that, "... Section 19(2)(a) provides that in the absence of any usage or custom of trade to the contrary, the implied authority of a partner does not empower him to submit a dispute relating to the business of the firm and in exercise thereof he entered into the contract with the corporation during the usual course of business to supply the dal. The crucial question is whether a valid contract which was not repudiated as per law, binds the other partners? Our answer is yes. It is not in dispute that the contract engrafts an arbitration clause and in 24 CT 1390_Com.A.S.64-2019_Judgment.doc terms thereof the dispute is to be referred to the arbitration. Therefore, the reference made by the Additional District Judge under Section 20 of the Arbitration Act is perfectly within the jurisdiction and in terms of the contract. It is not the case of the partners that the firm is not carrying on the business of the supply of dal and that Satya Narain, as found by the trial court, was authorized to do business on behalf of the firm". This decision of the Hon'ble Supreme Court entirely supports the contention of the defendant that the reference of dispute to arbitration is valid and the reference to arbitration is justified.
23. Another decision reported in 1975 SCC Online Delhi 61 (S.N.Soni v. Taufiq Farooki and others) is also cited by the defendant with reference to Section 19(2) of the Partnership Act and it is held in para 14 that, " I do not see any difficulty as to why the partners can subsequently not agree to ratify and waive their objection to a legal act which had been done by a partner without their previous authority, but which could very well have been done with their authority". It is also held that, "In my opinion although the statute has helped in formulating the implied terms of the contract of partnership between the partners of the firm, the matter rests entirely in the will and capacity of the partners to extend or limit the implied authority and rebut the presumption which has been expressed by the statute".
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24. On going through the decisions cited and the contention of the parties and the award, contention of the plaintiff that the plaintiffs No.3 to 5 have not signed any agreement which contains arbitration clause and therefore in view of Section 19(2)(a) of Partnership Act the another partner i.e. plaintiff No.2 cannot bind plaintiffs No.3 to 5 to the arbitration agreement is considered by the learned Arbitrator and in view of the decision of the Hon'ble Supreme Court in Sanganer Dal and Flour Mill, which is on similar facts, section 19(2)(a) of Indian Partnership Act do not help the plaintiffs No.2 to 5. As rightly contended by the defendants, the plaintiffs No.3 to 5 have not agitated about they being not signatory to Ex.P.1 to Ex.P.48 or other documents by which the relationship is being created between the parties. The agreement of sale and the construction agreement are executed on 1/2/2013, the plaintiffs No.3 to 5 who have not signed any of these documents appears to have nowhere disputed the execution of such agreement by the partnership firm and receipt of consideration amount by the partnership firm and utilizing the same by the partnership firm for all these years. Though these plaintiffs have disputed such binding partnership agreement against them on the basis of Ex.P.1 to Ex.P.48 before the Hon'ble High Court and also before the learned Arbitrator, these partners have not raised dispute for these agreements and passing of consideration etc. As held in the decision referred above, valid contract which is 26 CT 1390_Com.A.S.64-2019_Judgment.doc not repudiated as per law would bind other partners and such agreement contains arbitration clause. Therefore on the basis of Section 19(2)(a) the plaintiffs No.3 to 5 cannot escape and go against the arbitration agreement i.e. entered by the firm represented by plaintiff No.2. Even as noted by the Hon'ble Supreme Court that the usage or custom or trade can also exclude the application of Section 19(2)(a). Admittedly the plaintiff No.2 has signed all the documents and he was representing the firm and he has acted on behalf of the partnership firm and received the consideration and contesting the matter even before the learned Arbitrator and has given evidence on behalf of the firm. Therefore the other partners now cannot contend that the arbitration agreement in Ex.P.1 to Ex.P.48 do not bind them. Therefore, challenge to the award on this ground cannot be accepted.
25. Next contention of the plaintiffs is that the award is hit by Section 34(2)(a)(iv) as the award deal with the dispute not contemplated and not falling within the terms of reference to arbitration. It is contended for the plaintiff that the dispute in the arbitration is about payment of amount to the claimant as per the addendum agreement dated 8/9/2014 which is addendum to the supplemental agreement dated 1/2/2013. It is argued that these agreements do not contain arbitration clause and the dispute raised is not on the terms mentioned in the construction agreement and agreement to sell which only 27 CT 1390_Com.A.S.64-2019_Judgment.doc contains the arbitration clause. It is contended for the plaintiffs that the dispute which is referred to arbitration is not contemplated and not covered by the arbitration agreement and therefore the Arbitrator had no power to decide the dispute and pass the award.
26. The learned senior counsel for plaintiffs has relied on the decision of Hon'ble Supreme Court reported in (2009) 7 SCC 696 (M.R.Engineers and Contractors Private Limited v. Som Datta Builders Limited). In this decision the Hon'ble Supreme Court has considered Section 7(5) and Section 11 of Arbitration & Conciliation Act. In para 16, Hon'ble Supreme Court has held that, "There is a difference between reference to another document in a contract and incorporation of another document in a contract, by reference. In the first case, the parties intend to adopt only specific portions or part of the referred document for the purposes of the contract. In the second case, the parties intend to incorporate the referred document in entirity, into the contract. Therefore when there is a reference to a document in a contract, the court has to consider whether the reference to the document is with the intention of incorporating the contents of that document in entirety into the contract, or with the intention of adopting or borrowing specific provisions of the said document for application to the contract". In para 22 it is held that a general reference to another contract will not be 28 CT 1390_Com.A.S.64-2019_Judgment.doc sufficient to incorporate the arbitration clause from the referred contract into the contract under consideration. There should be a special reference indicating a mutual contract. The exception to the requirement of special reference is where the referred document is not another contract, but a standard form of terms and conditions of trade associations or regulatory institutions which publish or circulate such standard terms and conditions for the benefit of the members or others who want to adopt the same".
27. On the basis of this decision it is argued for the plaintiffs that the arbitration agreement which is appearing in Ex.P.1 to Ex.P.48 cannot be imported to the subsequent document like addendum to supplemental agreement dated 8/9/2014 and dispute which is raised in the present case is based on addendum agreement which do not contain arbitration clause. It is also argued that arbitration clause in agreement of sale and the construction agreement cannot be imported to this agreement and there is no specific reference indicating intention to incorporate the arbitration clause of Ex.P.1 to Ex.P.48 in the addendaum agreement. On this basis it is argued that the dispute which is referred to the arbitration is not the dispute which can be resolved through arbitration, as there is no arbitration agreement entered between the parties.
28. The learned counsel for the defendant has referred to the decision of the Hon'ble Madras High Court 29 CT 1390_Com.A.S.64-2019_Judgment.doc reported in 2014 (1) MWN (Civil) 7 (Chaitanya Builders v. Leasing (P) Ltd., v. Dr. Tulsi Ram and another). In this decision the Hon'ble High Court has considered the incorporation of arbitration clause in supplemental agreement from the original agreement. Hon'ble High Court in para 5.4 has held, "5.4. A conjoint reading of the above three statements recorded in writing in both the documents would leave no doubt in our mind that the intention of the parties is very clear that in the event of any dispute, they must seek recourse through the arbitration proceedings. The disputes between the parties have arisen only in the interpretation of their respective allotments of plots/villas/OSR area, extent of site, etc. that is the reason why the supplemental agreement dated 17/2/2009 came into existence...."
The Hon'ble High Court has held that subsequnt agreement which is a supplemental agreement covers the dispute which has arisen subsequent to the earlier development agreement and the supplemental agreement is in addition to the agreement and both the documents are to be added together and there is no intention on the parties to dispense with the arbitration clause. It is also held that the definitive agreement provides for resolution of dispute by way of arbitration and therefore arbitration clause in development agreement would stand incorporated in the supplemental agreement.
29. In another decision of Hon'ble Supreme Court reported in (2018) 14 SCC 265 (Grasim Industries 30 CT 1390_Com.A.S.64-2019_Judgment.doc Limited v. State of Kerala) also, Hon'ble Supreme Court has considered the existence of an arbitration clause in an earlier agreement and earlier original agreement was subsequently modified. Hon'ble Supreme Court in para 4 has held as under:
"The first question that arises for consideration is, whether the arbitration clause incorporated in the original agreement, dated 3/5/1958, can be stated to be subsisting and enforceable between the parties, or whether the same stood extinguished? Having given our thoughtful consideration to the issues in hand, keeping in view clause 11 of the supplementary agreement dated 27/10/1988, we are satisfied that the original arbitral clause, contained in the agreement dated 3/5/1958, subsisted and was never extinguished. We say so because, clause 11, extracted above, clearly expressed that the supplementary agreements only altered the modifications provided for, and such of the terms and conditions, as were not modified "...shall remain in force and effect...". Since arbitration clause 16 was admittedly never modified/ altered, it would necessarily not be considered as having been extinguished. In the above view of the matter, we must also express our satisfaction that the dispute between the parties, would their contractual obligations, were arbitrable."
30. In the present case also definitive agreement Ex.P.1 to Ex.P.48 contains definite arbitration clause. There is no dispute about clause existing in Ex.P.1 to Ex.P.48. Supplemental agreement which are Ex.P.49 to Ex.P.53 are not independent agreements. They have only 31 CT 1390_Com.A.S.64-2019_Judgment.doc altered or provided few modification or clarification and such of the terms that were not modified by these supplemental agreements would remain in force. Even in Ex.P.53 it is specifically stated that this addendum will prevail over the definitive agreement, supplemental agreement and any other document executed between the parties only with respect to terms, mentioned therein. It is also mentioned in page 2 of this document that the supplemental agreement are attached and made part of this document and there is also reference to definitive agreements. Similarly in Ex.P.49 similar clauses are found and it is even stated in clause10 that definitive agreement shall continue to apply in full force and effect save as to the extent modified herein. Therefore, except for the modification made in supplemental agreement and addendum to supplemental agreement, definitive agreement which are Ex.P.1 to Ex.P.48 continue to apply in full force. These agreements contain arbitration clause and arbitration clause is not extinguished by addendum supplemental agreement or the supplemental agreement. Therefore the contention of the plaintiff that there is no arbitrable dispute with regard to addendum agreement and the supplemental agreement and that arbitration agreement in Ex.P.1 to Ex.P.48 cannot be incorporated or imported to Ex.P.49 to Ex.P.53 cannot be accepted.
31. For the discussions made above, challenge to the award on the ground that supplemental agreement which 32 CT 1390_Com.A.S.64-2019_Judgment.doc have given rise to the cause of action for the present dispute do not contain arbitration clause also not successfully established by the plaintiffs. Though, Ex.P.49 to Ex.P.53 do not contain arbitration clause, as held in the decisions referred above, arbitration clause in the original agreement have to be imported or incorporated in the supplemental agreement as the supplemental agreement and addendum agreement have only modified some clauses of the original agreement and do not take away the entire effect of the original agreement. As mentioned in those supplemental agreements, except the modified portion, with regard to other clauses, original definitive agreement shall have effect. Though Ex.P.49 to Ex.P.53 do not contain arbitration clause as they are only supplemental and addendum to supplemental agreement and they are supplemental to the original agreement of sale and construction agreement in Ex.P.1 to Ex.P.48, arbitration clause in the original agreement is to be read into the supplemental agreement as held in the decisions referred above. Asa such no fault could be found with the learned arbitrator in deciding in favour of arbitrability of the dispute and also on Tribunal having jurisdiction to try the dispute. Apart from this, Hon'ble High Court has already held in CMP, that there is valid arbitration agreement. Therefore, no fault could be found with the learned arbitrator in deciding the dispute between the parties.
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32. One more contention of the plaintiffs is that there is Novation of contract by subsequent ageements and therefore, original agreement need not be performed as per Section 62 of the Indian Contract Act. To rebut this contention, learned counsel for defendant has relied on the decision reported in (2016) 10 SCC 813 (Sasan Power Limited v. North American Coal Corporation (India) Private Limited) with regard to the contention of the plaintiff that there is novation of contract and due to such novation, earlier agreement of sale and the construction agreement are superseeded. In this decision in para 71 the Hon'ble Supreme Court has held as under:
"In other words, the novation of contract comprises of two elements. First is the discharge of one debt or debtor and the second is the substitution of a new debt or debtor. The novation is not complete unless it results in substitution, recession or extinguishment of the previous contract by the new contract. Mere variation of some terms of a contract does not constitute a novation."
33. In this connection another decision of the Hon'ble Supreme Court reported in (2000) 1 SCC 586 (Lata Construction v. Rameshchandra Ramniklal Shah and another) is cited by the learned counsel for the defendant. In this decision in para 10 the Hon'ble Supreme Court has held that "One of the essential requirements of "novation" as contemplated by Section 62, is that there should be complete substitution of a new contract in 34 CT 1390_Com.A.S.64-2019_Judgment.doc place of the old. It is in that situation that the original contract need not be performed. Substitution of a new contract in place of the old contract which would have the effect of rescinding or completely altering the terms of the original contract, has to be by agreement between the parties...."
34. These two decisions of the Hon'ble Supreme Court with regard to novation makes it clear that every subsequent contract like supplemental agreement will not be novation of the original contract. Only if the contract is agreed to be set aside by new contract or to rescind or alter the original contract, then original contract need not be performed under Section 62 of the Indian Contract Act. Therefore contention of the plaintiff on the facts of the present case that the supplemental agreement Ex.P.49 or the addendum to supplemental agreement dated 8/9/2014 produced as Ex.P.53, has the effect of novation of the original contract and it a substitutes new contract cannot be accepted. In Ex.P.49 to 53, it is specifically stated that the agreement of sale and the construction agreement at Ex.P.1 to Ex.P.48 are definitive agreements and the supplemental agreement which came into effect subsequently will be effective only in respect of the subject which such agreement covers and the definitive agreement which are in Ex.P.1 to Ex.P.48 are not substituted or deleted by these addendum supplemental agreement or supplemental agreement. Therefore the contention of the 35 CT 1390_Com.A.S.64-2019_Judgment.doc plaintiff that there is novation and the clauses in definitive agreement which are Ex.P.1 to Ex.P.48 as mentioned in the subsequent agreements have seized to have effect cannot be accepted. Hence the contention that due to supplemental agreement and also the addendum to supplemental agreement, original agreements are novated and need not be performed and clause of those agreements containing arbitration clause cannot be given effect to, cannot be accepted. There is no Novation of original agreement. Only supplemental agreements have been executed in continuation of original definitive agreements. They only modified some of the clauses in the definitive original agreements and those agreements themselves say that all the other clauses of the original agreements would have effect. Therefore, there is no Novation of the original agreement by supplementary agreement and therefore, contention that in view of Novation, clauses in original agreement including arbitration clause do not have effect, is also not established and challenge to the award on this ground will also fail.
35. Another main contention is that the award is in conflict with the public policy of India and is required to be set aside under Section 34(2)(b)(ii) of the Act. It is contended for the plaintiff that the award is contrary to Section 56 of the Contract Act as in view of plaintiffs sanction plan being cancelled by the BBMP for no fault of the plaintiffs, the plaintiffs were prevented by law from continuing with the 36 CT 1390_Com.A.S.64-2019_Judgment.doc building or from selling any of the apartments and contract stood frustrated under Section 56. It is contended that the learned Arbitrator by wrongly holding that the actions of the BDA and BBMP are events that are not contemplated by force majeure clause in Ex.P.49 has proceeded to pass an award. It is contended by the plaintiffs that the learned Arbitrator has failed to note that the contract has become impossible to perform and the same is frustrated and therefore the plaintiffs cannot perform their part of the contract and the award in ignorance of non application of these provisions is against the fundamental policy of Indian law and is thereby against public policy.
36. The learned counsel for the plaintiff has relied on the decision reported in AIR 1954 SC 44 (Satyabrata Ghouse v. Mugneeram Bangur and company and another) in which the Hon'ble Supreme Court has considered frustration of contract and impossibility of performance of contract under Section 56 of the Indian Contract Act. This decision is referred to contend that due to impossibility to perform the contract, due to the issue of road access to the project, contract stands frustrated and it become void and the plaintiff cannot be blamed as there is no fault on the part of the plaintiff. It is also argued that the de-notification by the BDA and subsequent cancellation of the sanction plan by BBMP are all beyond control of the plaintiff and plaintiff cannot blame for that and this act is a force majeure as provided in Ex.P.49 and therefore the 37 CT 1390_Com.A.S.64-2019_Judgment.doc award directing the plaintiffs to pay the amount mentioned in Ex.P.53 with exorbitant interest of 25% is against justice and is bad in law and is against public policy of India.
37. In another decision reported in (2004) 9 SCC 619 (Md. Army Welfare Housing Organisation v. Sumangal Services Private Limited) the Hon'ble Supreme Court has considered Section 56 of the Indian Contract Act as per which agreement to do impossible act itself is void. As per this section the contract to do an act which after contract is made becomes impossible to perform becomes void, when the act become impossible. It is contended that due to the act of the BBMP in cancelling the Sanction plan, which was not self induced, agreement has become void as per Section 56 of the Indian Contract Act which is not taken into consideration by the learned Arbitrator. In another decision reported in (2007) 12 SCC 175 ((Rozan Mian v. Tahera Begum and others), it is held that a change in the law leading to impossibility of performance of a contract is covered by Section 56 of the Indian Contract Act 1872.
38. As discussed above, issue of road access which is contended as force majuere, by the plaintiffs is not established to be so. As rightly observed by the learned arbitrator, Ex.P.49, which defines what is Force majure, itself states that force majeure event shall specifically exclude any event that prevented access to the apartment. Hence contention of plaintiffs that due to event of force 38 CT 1390_Com.A.S.64-2019_Judgment.doc mejure, contract has become impossible to perform as appearing in Section 56 of the Indian Contract Act cannot be accepted. This contention of the plaintiffs was considered by the Learned arbitrator, by referring to relevant clauses of the agreement. On looking to the entire records and the award, this court finds that it cannot come to a different view than that of the learned arbitrator. In view of Ex.P.49, issue of access to the apartment is not a force majeure. Moreover, issue of road access was known to the parties even at the time of executing Ex.P.53 as that is stated as one of the cause for non selling of the apartment within 18 months as agreed and for this reason further extension of 12 months was given and on failure to condition was put to pay Rs.3,924/- per sq.ft to the plaintiff. Therefore the contention of the plaintiffs that due to the issue of road access which was not present at the time of entering into original agreement and which has arisen subsequently and this event has made the contract impossible to perform, also is rightly held to be not acceptable by the learned Arbitrator. Therefore, this finding of the learned arbitrator also cannot be said to be against the terms of contract, law or evidence on record. Hence, plaintiffs have failed to establish that this finding in the award is against fundamental principles of Indian law and is thereby against Public policy of India and requires to be set aside.
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39. In the decision reported in (2020) 2 SCC 524 (K. Lubna and others v. Beevi and others) the Hon'ble Supreme Court has held in para 10 that "On the legal principle, it is trite to say that a pure question of law can be examined at any stage, including before this court. If the factual foundation of a case has been laid and the legal consequences of the same have not been examined, the examination of such legal consequences would be a pure question of law". The learned senior counsel for the plaintiff has argued that when the question raised by the plaintiff in the present arbitration suit is pure question of law, with regard to frustration of the contract, binding arbitration agreement between the parties, novation of the agreement and agreement not containing arbitration clause, impossibility to incorporate arbitration clause of another document etc, they can be examined at any stage and even under Section 34 of the Arbitration & Conciliation Act. It is also argued that when it is found that the provisions of law are not followed, award is against fundamental principles of Indian law and is thereby become patently illegal and is also against public policy of India and requires to be set aside. For the discussions made above, on considering all the legal points raised by the plaintiffs on the Arbitrability of dispute, validity of arbitration agreement, Novation, Force mejaure and other disputed points, it is found that the learned arbitrator has considered all these points as raised before him and gave a proper finding and 40 CT 1390_Com.A.S.64-2019_Judgment.doc no fault could be found in the finding of the learned arbitrator.
40. In the decision in (2019) 20 SCC 1 (Dyna Technologies Private Limited v. Crompton Greaves Limited), cited by defendant, Hon'ble Supreme Court in para 24 has held as under:
"There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated."
This decision makes it very clear that the scope of interference for the arbitration award by the court under Section 34 of the Act is very limited and the court cannot interfere in such award in a casual manner and only if the perversity of the award goes to the root of the matter and there is no other possible alternative interpretation which could sustain the award, the court can interfere with the 41 CT 1390_Com.A.S.64-2019_Judgment.doc award of the learned Arbitrator. In the present case no such perversity, illegality requiring interfering with the award is made out by the plaintiffs.
41. Similarly in the decision reported in (2019) 15 SCC 131 (Ssangyong Engineering & Construction Company Limited v. NHAI), in para 23 and 24 the Hon'ble Supreme Court by referring to the decision in DDA v. R.S.Sharma and Company and the decision in Western Geco has explained in Associate Builders case has noted the principle on which an award could be set aside under Section 34 of the Arbitration & Conciliation Act and as held in those decisions the award which is contrary to substantive provision of law, the provision of the Arbitration and Conciliation Act or against the terms of the respective contract or patently illegal or prejudicial to the rights of the parties, then only the award could be set aside. Similarly, as held in this decision, if it is contrary to fundamental policy of Indian law and interest of India and justice or morality and is unfair and unreasonable and shocks the conscience of the court, then also it can be set aside and if the fundamental juristic principles like judicial approach, principles of audi alteram partem rule and principle of reasonableness are not followed, then also an award could be set aside. As rightly contended by the defendant, the plaintiffs have failed to make out any of these grounds to challenge the award passed by the learned Arbitrator.
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42. The learned counsel for the plaintiffs has also relied on the decision reported in (2021) 9 SCC 1 (Project Director, NHAI v. Hakeem and another) in which Hon'ble Supreme Court has held that the court cannot modify an award and it may either uphold an award in its entirety or set it aside in the circumstances mentioned in Section 34. This decision makes it clear that even if the portion of the award is found to be not correct, court cannot modify the award, but it can only set aside the award or uphold the award in its entirety. This decision is even cited by defendant by relying on para 16 of this decision, in which it is held;
"What is important to note is that, far from Section 34 being in the nature of an appellate provision, it provides only for setting aside awards on very limited grounds, such grounds being contained in sub-sections (2) and (3) of Section 34. Secondly, as the marginal note of Section 34 indicates, "recourse" to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-sections (2) and (3). "Recourse" is defined by P.Ramanatha Aiyar's Advanced Law Lexicon as the enforcement or method of enforcing a right. Where the right is itself truncated, enforcement of such truncated right can also be only limited in nature. What is clear from a reading of the said provisions is that, given the limited grounds of challenge under sub-sections (2) and (3), an application can only be made to set aside an award...."
This decision not only states the limited scope for the court to interfere with the award under Section 34, but also 43 CT 1390_Com.A.S.64-2019_Judgment.doc makes it very clear that there is no scope to modify an award and the court can only set aside or confirm the award. In the present case, for the discussions made above, there are no grounds to interfere with the award. When no fault could be found with the finding given by the learned arbitrator, setting aside of award or even considering modifying of award, which is not even permitted as per this decision, do not arise.
43. Apart from the above grounds on which the award is challenged, plaintiffs have also questioned the finding of the learned Arbitrator, which are based on facts and terms of the agreement. Plaintiffs have stated that the tribunal has failed to accept the 1st petitioner's contention that Shell and Core of the building is complete within the stipulated period, though plaintiffs have produced evidence for the same. On looking to the award, learned arbitrator has considered this contention of the Plaintiffs and has found that Shell and Core is not complete and the apartment has even lost road access and as such, construction is not complete. This finding based on facts cannot be interfered. The contention that the learned Arbitrator has considered 25% interest as contended by the defendants on the basis of the agreement, is also not acceptable as from the date of petition the learned Arbitrator has awarded only 9% interest. In Ex.P.53 addendum there is condition for payment of Rs.3,922/- per sq.ft, if apartments are not sold within 12 months. As 44 CT 1390_Com.A.S.64-2019_Judgment.doc security for such performance, cheques were also given and the cheques for Rs.15,58,40,240/- were presented to the bank and were dishonoured. As per Ex.P.49 the consideration amount is to be returned if the apartments are not sold with interest of 25% compounded yearly. As this is the term of the agreement, learned Arbitrator has applied the same and accepted the figure of Rs.26,92,10,169/- claimed in the petition. These findings of the learned arbitrator is based on facts and terms of agreement. Since, arbitrator is creature of contract, he is bound to give effect to terms of contract and cannot exercise any equity jurisprudence. Therefore, these findings of the learned arbitrator cannot be said to be against the law and unsustainable.
44. On looking to all these aspects, all the technical contentions, contentions on merits raised in this Arbitration suit were all taken by the plaintiffs even before the learned Arbitrator and the learned Arbitrator has considered the same. Contention that there is no arbitration agreement in respect of this dispute and the dispute raised is not contemplated under the arbitration agreement was rightly rejected by referring to finding given by the Hon'ble High Court in CMP. As held in the decision in Duro Felguera under section 11 Hon'ble High Court will consider, whether arbitration agreement exist. Therefore when the Hon'ble High Court has verified and gave finding that arbitration agreement exists, no fault could be found with the learned 45 CT 1390_Com.A.S.64-2019_Judgment.doc Arbitrator in relying on this finding of the Hon'ble High Court and rejecting the contention of plaintiff that there is no arbitration agreement and that plaintiffs 3 to 5 are not covered by this arbitration agreement etc. For all these reasons, plaintiffs have failed to establish any of the grounds urged in this arbitration suit to challenge the award under section 34(2)(a). Plaintiffs have failed to establish that the award is in conflict with public policy of India as appearing in Section 34(2)(b)(ii). Hence, plaintiffs have failed to make out any grounds to interfere with the award passed by the learned Arbitrator. Accordingly, point No.1 and 2 are answered in the negative.
45. POINT No.3 : For the discussion made on above point, following order is passed:
ORDER Arbitration suit filed under Section 34 and section 16(6) of the Arbitration & Conciliation Act challenging the arbitral award passed by the learned Arbitrator in AC No.37/2018 dated 28/12/2018 is dismissed.
[Dictated to the Judgment Writer; transcript thereof corrected, signed and then pronounced by me, in the Open Court on this the 15th day of June 2022] [Ravindra Hegde] LXXXIII Additional City Civil Judge.
BENGALURU.
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