Bangalore District Court
M/S. Global Associates vs Mr.D.V.Sathyanarayana on 10 April, 2017
IN THE COURT OF THE XII ADDL. CITY CIVIL AND
SESSIONS JUDGE (CCH.No.27), AT BENGALURU
PRESENT:SRI. K.S.THIMMANNACHAR, B.Sc.,LL.B.
XII ADDL.CITY CIVIL & SESSIONS JUDGE,
BENGALURU.
DATED: THIS THE 10TH DAY OF APRIL 2017
A.S.No.109/2010
Plaintiff:- M/s. Global Associates,
A registered Partnership
Firm, having its office
At No.14, "H.M. Geneva
House", Cunningham Road,
Bengaluru -560052.
Represented by its
Partners
1. Mr.H.J.Siwani and
2. Mr. M.J.Siwani
(By Sri.Abhinav.R,
Advocate)
-VS-
Defendants:- 1. Mr.D.V.Sathyanarayana
s/o. Late D.S.Vasudeva Rao,
aged about 55 years
No.15, 6th Main,
9th Cross, R.K.Layout,
1st Stage,
2 A.S.No.109/2010
Padmanabhanagar,
Banashankari II stage,
Bengaluru -560070.
2.Mr.A.Mohan Ram,
District & Sessions
Judge,(Retd.)
No.2339, HAL III Stage,
BDA Layout,
Bengaluru -560017.
(D1:by Sri.R- Advocate
D2: Absent)
Date of Institution of the suit : 14/12/2010
Nature of the suit : To set aside the
Arbitration Award.
Date of commencement of
recording of the evidence : ------
Date on which the Judgment was
pronounced : 10/04/2017
Total Duration Years Months Days
: 06 03 27
(K.S.THIMMANNACHAR)
XII Addl. City Civil & Sessions Judge,
Bengaluru
3 A.S.No.109/2010
J U D G M E N T
This is a suit filed U/s.34 of the Arbitration & Conciliation Act, 1996 praying this court to set aside the arbitral award dated.10.9.2010 passed by the Learned Arbitrator in A.C. 4 & 5 of 2007.
2. The plaintiff was the respondent and the 1st defendant was the claimant and the 2nd defendant is the Arbitrator. I would like to refer the parties with respect their rank in which they held before the Arbitral Tribunal.
3. The case of the Claimant is that he entered into two Agreements both dated.10.02.2005 one described as Agreement of Sale for the purchase of undivided share in the 'A' schedule property measuring 403.3 Sq.ft for a consideration of Rs.4,71,600/-. The another Agreement is described as Construction Agreement. It is the case of the Claimant that total amount paid in respect of the same is Rs.2,13,824/- as on the date of entering into Agreement of 4 A.S.No.109/2010 Sale. It is further case that a total sum of Rs.8,41,884/- has been paid under the Construction Agreement. Therefore, it is the case of the Claimant that the total amount paid by the Claimant is Rs.10,22,614/-. It is stated that the total consideration for the purchase of the schedule apartment is Rs.28,09,259/-.
4. It is the case of the Claimant that he has signed the above two Agreements without knowing the contents and it is one sided and penal in character. It is further stated that a sum of Rs.14,25,000/- had been sanctioned to him by the State Bank of India, J.P.Nagar, Bengaluru on 19.01.2006 as home loan. The said bank wanted the signature of the respondent on the original letter of sanction. It is stated that taking into account the loan sanctioned by the said Bank, only a small amount had to be paid to the respondent towards the purchase of the said apartment. It is stated that the respondent instead of signing the letter of sanction of the 5 A.S.No.109/2010 bank, issued a notice dated.23.2.2006 terminating the Agreement. The above notice of termination was issued taking into consideration the slab wise progress made by the respondent. It is stated that as the payment of interest is stipulated, time cannot be the essence of the contract and the respondent cannot forfeit the amounts paid. Therefore, it is stated that the Claimant was always ready and willing to perform his part of the contract and hence he prayed for suitable orders before the Arbitrator.
5. The respondent has filed objections to the two claim petitions. There is no dispute about the execution of the two Agreements dated.10.02.2005. It is also not in dispute the payment of money by the Claimant to the respondent. It is admitted that an amount of Rs.3,23,302/- has been paid in respect of the Agreement of Sale. It is also admitted that the Claimant has paid in all Rs.10,22,614/-. 6 A.S.No.109/2010
6. It is the case of the respondent that it formulated a scheme for the development of the 'A' schedule property by way of township comprising of multi-storeyed residential apartments and commercial complexes. It is stated that the Claimant has to strictly abide by payment schedule incorporated in the two agreements and despite being well aware of the same, the Claimant has defaulted in making the payments. It is stated that despite the said fact, the payment of interest is stipulated, time is the essence of the contract and the respondent is put to lot of hardship and loss due to default of the Claimant.
7. It is false that the Claimant had no knowledge of the contents of the two Agreements. The respondent has no knowledge of the earnings of the Claimant which is described in the claim petition as Rs.40,833/- p.m. It is stated that Claimant has not approached the forum with clean hands and cannot seek the discretion of the Tribunal under Sec.20 of 7 A.S.No.109/2010 the Specific Relief Act. The respondent has denied that the Claimant was always ready and willing to perform his part of the contract. It is the case of the respondent that there is no contravention of the provisions of Sec.74 of the Indian Contract Act, contrary to the claim made by the Claimant in the claim petition as there is nothing penal in the stipulations made in the Agreements for the payment of interest or penalty. It is the case of the respondent that time is the essence of the contract and the Arbitrator had no jurisdiction to order for the specific performance of the Agreements. Hence he has paid for dismissal of the claim petition.
8. On the above pleadings the parties have led their evidence. The Claimant was examined as P.W.1 and the respondent was examined as R.W.1. Ex.P1 to Ex.P17 and Ex.R1 to Ex.R8 were marked. The learned Arbitrator after appreciating the oral and documentary evidence available on 8 A.S.No.109/2010 record passed an award allowing the claim petition and directed the respondent to execute and register the Sale Deed in respect of the residential apartments mentioned in the 'C' schedule along with corresponding undivided right, title and interest mentioned in the 'B' schedule hereunder (along with rights in common areas etc.,) subject to the Claimant paying the balance sale consideration of Rs.17,84,295/- to the respondent within a period of five months from the date of receipt of the copy of the Award. The respondent is further directed to execute and register Sale Deed in respect of the Schedule 'B' and 'C' property within a period of three months from the date of receipt of the balance sale consideration to be tendered by the Claimant. The Claimant to bear the stamp duty, registration charges towards the completion of the sale. The proceedings are terminated under Sec.32 of the Arbitration & Conciliation Act, 1996.
9 A.S.No.109/2010
9. Aggrieved by the above arbitral award, the respondent has preferred this suit praying this court to set aside the Arbitral award on the following grounds:-
(i) that the Learned Arbitrator has passed an award against the specific terms of the Contract entered into between the parties and the same is arbitrary, capricious and without jurisdiction.
(ii) that the impugned order is liable to be set aside U/s.34 (2) (b) (i) of the Arbitration & Conciliation Act, 1996.
(iii) that the subject-matter of the dispute being an immovable property and seeking Specific Performance of the Agreement dated.10.02.2005 of 'C' schedule is not capable of being settled by Arbitration under the law.
(iv) that the Learned Arbitrator has not appreciated the evidence of the parties on record.
(v) that the Arbitrator has not strictly followed the terms of the Agreement entered into between the parties.10 A.S.No.109/2010
(vi) that the Learned Arbitrator committed error in directing the respondent to execute and register the Sale Deed in favour of the Claimant.
10. On the other hand, the Claimant has filed the written statement and also additional written statement to the plaint filed by plaintiff. A perusal of the written statement clearly shows that the Claimant has supported to the award passed by the Arbitrator by reiterating the contentions taken in the claim petition before the Arbitrator.
11. The points that arise for my consideration are:-
POINTS
1. Whether the Learned Arbitrator has erred in passing an award against the specific terms of the Contract entered into between the parties and the same is arbitrary, capricious and without jurisdiction.
2. Whether the impugned order passed by the Learned Arbitrator is liable to be set aside U/s.34 (2) (b) (i) of the 11 A.S.No.109/2010 Arbitration & Conciliation Act, 1996?
3. Whether the subject-matter of the dispute being an immovable property and seeking Specific Performance of the Agreement dated.10.02.2005 of 'C' schedule is not capable of being settled by Arbitration under the law?
4. Whether the Learned Arbitrator erred in appreciating the evidence of the parties on record.
5. Whether the Learned Arbitrator has erred in not following strictly the terms of the Agreement entered into between the parties?
6. Whether the Learned Arbitrator has committed an error in directing the respondent to execute and register the Sale Deed in favour of the Claimant?
7. What order or decree?12 A.S.No.109/2010
12. I have heard the learned counsels appearing for both the parties. I have secured the records from the Arbitrator. I have gone through the entire claim petition, objections, oral and documentary evidence and also award passed by the learned Arbitrator.
13. My answer to the above points are as under:
Point No.1: In the Negative
Point No.1: In the Negative
Point No.2: In the Negative
Point No.3: In the Negative
Point No.4: In the Negative
Point No.5: In the Negative
Point No.6: In the Negative
Point No.7: As per final order
for the following:-
/REASONS/
14.Point Nos.1 to 3:- These points are altogether
taken for discussion as they are linked with each other and the reasons that may assigned are one and the same.
15. Ex.P1 is the Agreement of Sale dated.10.2.2005 and Ex.P2 is the Construction Agreement dated.10.2.2005. There is absolutely no dispute between the parties about the 13 A.S.No.109/2010 execution of the above Agreements between them. A perusal of Ex.P1 shows that under Ex.P1-Clauase-10 and under Ex.P2 Clause-28 say that the parties agree that in case of any dispute arising in respect of above Agreement, the matter shall be referred to Arbitration, in consonance with the provisions of the Indian Arbitration & Conciliation Act, 1996 as may be amended from time to time. The decision of the Arbitrator so appointed shall be binding on the parties thereto. Therefore, it is very clear from the two clauses that any dispute arising in respect of these two Agreements are to be referred to an Arbitrator. Accordingly the Arbitrator was appointed and the matter was referred for a decision by the Arbitrator. The parties have appeared before the Arbitrator. They have submitted to the jurisdiction and conducted the case and finally the present award is passed.
14 A.S.No.109/2010
16. The main contention of the respondent is that, the award is against the specific terms of the contract entered into between the parties and it is arbitrary, capricious and without jurisdiction. As far as the jurisdiction is concerned, the learned Arbitrator has raised the point-(a) with regard to the maintainability of the claim petition before him. He has answered the above point by discussing the case laws of the Hon'ble Supreme Court of India and also Hon'ble High Court of Karnataka. He has ultimately held that he has got jurisdiction to decide the terms and conditions of the contract entered into between the parties.
17. As already stated, any dispute between the parties to the Agreement shall be referred to an Arbitrator. The Agreement of Sale and the Construction Agreement contain several terms and conditions, rights and obligations of both the parties. When both the parties agree that any 15 A.S.No.109/2010 dispute shall be determined by an Arbitrator, it is obvious that both the parties have submitted themselves to the adjudication of the dispute by the Arbitrator.
18. The learned counsel for the respondent has cited a decision reported in Manu/SC/ AIR 1999 S.C. 3626 in the case of Rajasthan State Mines & Minerals Ltd., Vs. Eastern Engineering Enterprises & Anr. The Head Note reads as under:-
"Case Note: Arbitration - award-
Sections 30 and 33 of Arbitration Act, 1940- matter related to jurisdiction of Arbitrator to pass award- in case there is specific term in contract or law which does not permit or give to Arbitrator power to decide dispute raised by claimant or there is specific bar in contract to raising of particular claim then award passed in respect thereof would be in excess of jurisdiction- award made by Arbitrator disregarding terms of reference or Arbitration Agreement or contract would be jurisdictional error which requires ultimately to be decided by Court- Arbitrator cannot act Arbitrarily or independently of contract"
16 A.S.No.109/2010
19. I have gone through the above decision. I have also gone through the terms and conditions of both the Agreements. There is absolutely no term which does not permit or give the Arbitrator power to decide the dispute raised by the Claimant or there is no specific bar in the contract. There is no excess of jurisdiction in this case by the Arbitrator. A perusal of the award clearly indicates that the Arbitrator has not disregarded any terms of Arbitration contract which oust the jurisdiction of the Arbitrator. Therefore, the above decision does not apply to the facts of the present case.
20. He also cited a decision reported in AIR 2011 SC 2979 in the case of MSK Projects (I) (JV) Ltd., Vs. State of Rajasthan and Anr. The Head Note reads as follows:-
" Arbitration- Jurisdiction of Arbitration Tribunal- Award of interest- Sections 8,31(7), 34, 34(2), and 37(1) of Arbitration & Conciliation Act, 1996 - Appeals against Judgment upholding decision 17 A.S.No.109/2010 setting aside the arbitral award-
Held, special Tribunals like Arbitral Tribunals and Labour Courts get jurisdiction to proceed with the case only from the reference made to them- Thus, it was not permissible for such Tribunals/ authorities to travel beyond the terms of reference of there was an error apparent on the face of the award it would certainly be open to the court to interfere with such an award."
21. I have gone through the above decision, The Hon'ble Supreme Court of India has held that the Tribunals and the Authorities are not permitted to go beyond the terms of reference. If the award goes beyond the reference or an error apparent on the face of the award, it would be certainly be open to the court to interfere with such an award.
22. In the case on hand, as already stated, parties have submitted to the Arbitration. The learned Arbitrator decided his own jurisdiction to entertain the dispute and passed the award. The reference in the present case is the 18 A.S.No.109/2010 terms and conditions contained in Ex.P1 and Ex.P2. Therefore, the Arbitrator should stick to the terms and conditions, rights and obligations of the parties and conclude on the basis of the material available on record that who is at fault and what is the remedy. The learned Arbitrator in this award has properly gone through the terms and conditions of the Agreement and he has perfectly passed the award and I feel that the Arbitrator has not gone beyond the scope of the terms and conditions or rights and obligations of both the parties contained in Ex.P1 and Ex.P2. Therefore, the above decision does not apply to the facts of the present case.
23. The Learned counsel for the respondent has cited a decision reported in (2006) 4 SCC 445 in the case of Hindustan Zinc Ltd., Vs. Friends Coal Carbonisation. The Head Note -A reads as follows:-
"A. Arbitration & Conciliation Act, 1996 - S.34- Setting aside of award under - Grounds for- Award 19 A.S.No.109/2010 contrary to terms of the contract- Held, such award would be open to interference by the court under S.34(2) (b) (ii) as being patently illegal and being opposed to the public policy of India- In present case, Arbitrators making an award that was in conflict with price variation formula as contained in Cl.(5) of the Purchase Order- Trial court setting aside award on that ground, but High Court restoring award of Arbitrators on the ground that court could not interfere on the basis that award was contrary to specific terms of contract- Sustainability- Held, trail court was correct to interfere and gave the right order- Order of trail court restored and that of High Court set aside."
24. I have gone through the above decision. The Hon'ble Supreme Court of India has held that "if the award is contrary to the terms of the contract, then the court can interfere with the award as contemplated u/s.34 (2) (i) of the Arbitration & Conciliation Act, 1996."
25. In the present case, the respondent has challenged the award U/s.34 (2) (b) and (i). Sub-Sec.2(b) (i) 20 A.S.No.109/2010 says "if the court finds that the subject-matter of the dispute is not capable of settlement by Arbitration under the law for the time being in force, then the award may be set aside."
26. As already stated the dispute involves the challenge to the Arbitration award in granting the specific performance of the Agreement of Sale.
27. The learned counsel for the respondent argued that the Arbitrator had no power where the subject-matter of the dispute in an immovable property and specific performance of the Agreement as sought for before him. Therefore, the prayer was not capable of being settled by Arbitrator under the law.
28. On the other hand, the learned counsel for the Claimant has relied on the following decisions:-
(1) AIR 1999 SC 2102 in the case of Olympus Superstructures Pvt.
Ltd., VS. Meena Vijay Khetan & Ors.
21 A.S.No.109/2010 (2) AIR 2006 SC 3456 in the case of Rodemadan India Ltd., Vs. International Trade Expo Center Limited. (3) AIR 2011 SC 2507 in the case Booz Allen and Hamilton Inc., Vs. SBI Home Finance Ltd., and Ors. and argued that the Arbitrator can grant specific
performance of contract relating to immovable property under an award. In the 2nd decision, the Hon'ble Supreme Court of India has again relied on Olympus Superstructures Pvt. Ltd., Vs. Meena Vijay Khetan & Ors. and held that the Arbitrator can grant the relief of the Specific Performance. In the 3rd decision, the Hon'ble Supreme Court of India has clearly held that "Every civil or commercial dispute, either contractual or non-contractual which can be decided by a court is in principle capable of being adjudicated and resolved by Arbitration unless the jurisdiction of the Arbitral Tribunals is excluded either expressly or by necessary implication."
22 A.S.No.109/2010
29. In the present case, a perusal of the terms and conditions and the rights and obligations of both the parties under Ex.P1 and Ex.P2 clearly shows that there is nothing in the Agreement which exclude jurisdiction of the Arbitrator in granting an award. Therefore, in view of the above decisions of the Hon'ble Supreme Court of India, the Arbitrator had every jurisdiction to decide and award the specific performance of the Agreement of Sale. In the facts and circumstances of the case, the citations of the learned counsel for the respondent does not apply to the facts of the present case.
30. The Learned counsel for the respondent cited a decision reported in AIR 2003 SC 2629 in the case of Oil and Natural Gas Corporation Ltd., Vs. SAW Pipes Ltd., Head Note 'C' reads as follows:-
"(C) Arbitration & Conciliation Act (26 of 1996) , S.34- Arbitral award- Setting aside- Phrase 'Public policy of India'- To be given wider meaning- Award could be set aside 23 A.S.No.109/2010 if it is contrary to fundamental policy of Indian Law, interest of India, justice or morality or is patently illegal."
31. The Hon'ble Supreme Court of India has held that the word "Public Policy" cannot be given wider meaning. Award could be set aside if it is contrary to the fundamental policy of Indian law. In the case on hand the contract is between the company and a private person. The contract relates to building, apartment and handing over possession and also the selling of apartment built by the builder to the prospective purchasers of the apartment. Therefore, it does not involve anything contrary to fundamental policy of Indian Law. Therefore, the above decision does not apply to the facts of the present case.
32. The learned counsel for the respondent cited a decision reported in (1990) SCC page 1 in the case of Mayavathi vs. Kaushalya Devi. I have gone through the above decision. The Hon'ble Supreme Court of India has 24 A.S.No.109/2010 held that there must be a valid and binding contract between the parties in respect of which parties should be consensus ad idem.
33. A perusal of Ex.P1 and Ex.P2 clearly shows that there is a valid and enforceable contract which has been entered into between the parties. None of the terms of the contract is invalid in Ex.P1 and Ex.P2. Therefore the above decision does not apply to the facts of the present case. Hence the above reasons, point Nos.1 to 3 are answered in the Negative.
34. Point Nos.4 to 6:- The parties have led evidence before the learned Arbitrator. The documents are also marked. There is no dispute about the execution of the two Agreements between the parties. The dispute arose when the respondent rescinded the contract stating that the Claimant has not kept up the payment schedule or the instalments as and when it fell due. On the other hand, the 25 A.S.No.109/2010 Claimant submitted that he was always ready and willing to perform his part of the contract. He had sufficient amount with him. He had been sanctioned loan by State Bank of India, J.P.Nagar branch for the purchase of those apartments. The crux of the matter is that whether the time is the essence of contract or not. The Learned Arbitrator in his detailed award has clearly held that as a principle, the time is not essence of the contract in respect of the immovable property. In the present case, the subject- matter is an immovable property. Therefore, the time should not have been the essence of the contract. The Learned Arbitrator has gone in detail the oral and documentary evidence adduced by both the parties and concluded that the time was not essence of the contract. It is also pertinent to notice that the respondent has not honoured the contract in respect of another purchaser despite the full payment being made. Therefore, the learned Arbitrator has stated in 26 A.S.No.109/2010 his award that when the time is not the essence of contract in respect of the purchase under Ex.R8, he cannot say that the time is essence of the contract as far as the present claim is concerned. Therefore, I feel that the learned Arbitrator has properly appreciated the evidence adduced by both the parties.
35. The learned Counsel for the respondent submitted that the Arbitrator erred in following strictly the terms of the Agreement entered into between the parties. As already stated, the dispute between the parties is very narrow. Whether the time is essence of contract, (2) whether the default in payment of instalment enures to the benefit of the respondent and respondent is liable to terminate the contract? As already stated, time is not the essence of contract, the Claimant had all the resources to make the payment to the respondent and get the apartment allotted or registered in his name. The strict followance of 27 A.S.No.109/2010 the terms of the Agreement was not called for in the present case. As already stated, the respondent himself was at fault as per the Ex.R8. Therefore, the Learned Arbitrator has in all balanced away and appreciated the terms and conditions of the Agreement and following the Judgment of the Hon'ble High Court and Hon'ble High Court of Karnataka has passed the award legally.
36. As already stated, the Arbitrator had every jurisdiction to grant the specific performance of the Agreement. The Learned Arbitrator has relied on the decision of the Hon'ble High Court of Karnataka and Hon'ble Supreme Court of India has concluded that the arbitral Tribunal has got every power to grant specific Performance. Therefore, the Learned Arbitrator was right in directing the respondent to execute and register the Sale Deed in favour of the Claimant. Accordingly point Nos. 4, 5 and 6 are answered in the Negative.
28 A.S.No.109/2010
37.Point No.7:- In view of my findings on Point Nos.1 to 6, I pass the following:-
ORDER This Arbitration Suit is dismissed.
Parties to bear their own costs.
Draw decree accordingly.
(Dictated to the Judgment Writer, transcript thereof corrected, signed and then pronounced by me, in open Court, on this the 10th day of April 2017.) (K.S.THIMMANNACHAR) XII Addl. City Civil & Sessions Judge, Bengaluru 29 A.S.No.109/2010 (Judgment pronounced in open court) This Arbitration Suit is dismissed.
Parties to bear their own costs.
Draw decree accordingly.
(vide Judgment passed) XII ACCJ;Bengaluru