Bangalore District Court
/ The Mysore City Corporation vs ) M/S.Vantage Advertising Pvt. Ltd on 15 October, 2020
IN THE COURT OF THE VI ADDL. CITY CIVIL & SESSIONS JUDGE
AT BENGALURU CITY
(CCCH.11)
Dated this the 15th day of October, 2020
PRESENT: Sri. Rama Naik, B.Com., LL.B.,
VI Addl.City Civil & Sessions Judge,
Bengaluru City.
A.S.NO:55/2016
PLAINTIFF / THE MYSORE CITY CORPORATION
APPLICANT New Sayyaji Rao Road,
Mysore - 570 024.
Reptd. By its Commissioner
[By Pleader Sri.Geetha Devi.M.P]
/Vs/
DEFENDANTS/ 1) M/S.VANTAGE ADVERTISING PVT. LTD.
RESPONDENTS No.2, La-Citadel, Cunningham,
Crescent Road, Bengaluru -560 052.
Reptd.by its Manager.
[By Pleader Sri.SN]
2) SRI.JUSTICE MOHAMED ANWAR,
Sole Arbitrator,
Arbitral Tribunal,
Arbitration Center-Karnataka
(Domestic & International), Bengaluru
No.49, 3rd Floor East Wing,
Khanija Bhavan, Race Course Road,
Bengaluru -560 001.
[Arbitrator]
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J U D G M E NT
This suit is filed by Plaintiff under Section 34
of the Arbitration and Conciliation Act, 1996, for
setting aside the arbitral award dated 09.09.2015
passed by sole Arbitrator/2nd Defendant in AC
No.102/2014.
2) Plaintiff's case, in brief, is that, Plaintiff, is a
statutory body, constituted under the Karnataka
Municipal Corporation Act, 1976 [for brevity 'KMC
Act'] and Defendant No.1 is a Private Limited
Company.
3) It is stated that, Plaintiff and Defendant No.1
entered into two Agreements dated 31.03.2004,
whereunder, Defendant No.1 was permitted to put
up advertisement kiosk on electric poles. Period of
contract was for three years subject to renewal for
another period of three years. Agreements
stipulated that Defendant No.1 is not liable to pay
any ground rent and advertisement tax for the
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initial three year period, however, it is liable to pay
advertisement tax at the applicable rates for the
next three year period.
4) It is stated that, in addition to above two
Agreements dated 31.03.2004, Plaintiff and
Defendant No.1 also entered into two other
Agreements dated 25.07.2007 and 12.10.2007
respectively for putting up street lights.
5) It is stated that, as the work done by
Defendant No.1 was not satisfactory, Plaintiff issued
show cause notice dated 26.08.2009 and final show
cause notice dated 23.10.2009 to Defendant No.1.
Defendant No.1 failed to reply and to carry out the
work as per the terms of contract, hence, contract
was cancelled vide letter dated 12.03.2010.
6) It is stated that, Plaintiff issued final demand
notice dated 23.10.2009 to Defendant No.1 for
paying the advertisement taxes.
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7) It is further stated that, in addition to
cancellation of contract, Plaintiff blacklisted
Defendant No.1 vide letter dated 23.09.2010.
Defendant No.1 challenged the termination of
Agreements, order of blacklisting Defendant No.1
and demand notices issued for payment of arrears
of advertisement tax before the Hon'ble High Court
of Karnataka in WP No.32218/2010.
8) It is further stated that, as demand notices
issued by Plaintiff were quashed with a direction to
issue fresh demand notice, Plaintiff issued a fresh
demand notice dated 20.01.2014 demanding
payment of arrears of tax. Instead of making
payment, Defendant No.1 issued arbitration notice
and sole Arbitrator got appointed by filing CMP
before the Hon'ble High Court of Karnataka vide
order dated 21.08.2014 and impugned award came
to be passed by sole Arbitrator/2nd Defendant.
9) Aggrieved by the award, Plaintiff has
challenged the same on the following grounds :
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(i) Award has been made in contravention
of the provisions of KMC Act.
(ii) Tribunal has erred in rejecting the
contention of Plaintiff that claim for
compensation was barred by limitation.
(iii) Tribunal has erred in awarding damages
and compensation in the light of the
findings that Defendant No.1 was doing
business even after six year period had
lapsed and therefore there was loss for
Defendant No.1.
(iv) Granting compensation for the breach
of Agreements dated 27.07.2007 and
12.10.2007, which had not been challenged,
is erroneous and same is beyond the scope
of submission to arbitration.
(v) Finding of learned Arbitrator regarding
the competency of the officer of Plaintiff in
absence of pleadings and issue is
erroneous.
For these grounds, Plaintiff prays for setting
aside the award.
10) 1st Defendant marked appearance through its
Counsel and filed its statement of objections,
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stating that, award is well reasoned. Plaintiff cannot
resort to Section 34 of the Arbitration and
Conciliation Act, 1996 to re-examine and re-assess
the materials adduced before the Abitral Tribunal.
No grounds are made out under Section 34 of the
Arbitration and Conciliation Act, 1996 to set aside
the award. Plaintiff has merely sought for re-
examination of the facts, which is not permissible
under Section 34. Hence, prays for dismissal of the
suit.
11) Heard the argument of learned Counsels for
Plaintiff and Defendant No.1. Perused the written
argument filed by both Plaintiff and 1 st Defendant.
Also perused the records.
12) Point that arises for consideration is that :
"Whether Plaintiff has made
out any of the grounds as
enumerated in Section 34 of
the Arbitration and
Conciliation Act, 1996 to set
aside the award?"
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13) My answer to above point is in the
affirmative for the following :
REASONS
14) By this suit, Plaintiff has sought for setting
aside the award dated 09.09.2015, whereby, the
Arbitral Tribunal was pleased to make an award for
Rs.28,71,660/- towards damages and compensation
with pendente lite interest at the rate of 9% per
annum and future interest at the rate of 12% per
annum and to direct the Plaintiff to refund a sum of
Rs.7,00,000/- deposited by 1st Defendant with
Plaintiff, by allowing the claim petition in part filed
by 1st Defendant.
15) Background in nutshell - It is not in
dispute that, two Agreements were entered into
between Plaintiff and Defendant No.1 on
31.03.2004 [Exs.R.2 and R.3], whereunder,
Defendant No.1 agreed to put up tubular poles and
maintain the same. Defendant No.1 was permitted
to put up advertisement kiosk. Defendant No.1
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agreed to pay the applicable rates of tax for the
same. Stipulated time for performance of the
Agreements was three years subject to renewal for
further 3 years.
16) It is also not in dispute that, two more
Agreements dated 25.07.2007 and 12.10.2007
were also entered into between Plaintiff and
Defendant No.1 for providing street lights.
17) All the above Agreements were terminated
by Plaintiff vide notice dated 12.03.2010 [Ex.C.79]
on two grounds, that, Defendant No.1 had not
maintained the street lights as agreed and that
Defendant No.1 did not pay the advertisement tax
due by it.
18) In addition to termination of Agreements,
Plaintiff blacklisted the Defendant No.1 vide notice
dated 23.09.2010 [Ex.C.77A] on the grounds
mentioned in notice dated 12.03.2010.
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19) 1st Defendant challenged the notice dated
12.03.2010, terminating the agreements; notice
dated 23.09.2010, blacklisting the Defendant No.1
and demand notices dated 08.08.2008, 19.06.2009
and 23.10.2009, demanding the payment of arrears
of tax by filing writ petition before the Hon'ble High
Court of Karnataka in WP No.32218/2010, which
came to be disposed off on 05.04.2011. Case
history produced by Plaintiff goes to show that, Writ
Petition was filed by 1st Defendant on
05.10.2010. Hon'ble High Court was pleased to
allow the writ petition in part and quash the notice
dated 23.09.2010, blacklisting Defendant No.1 and
demand notices dated 08.08.2008, 19.06.2009 and
23.10.2009, demanding the payment of arrears of
tax.
20) Order passed in Writ petition further goes to
show that, termination notice dated 12.03.2010 was
quashed in part in respect of non-payment of
advertisement tax and issue regarding non-
performance of Defendant No.1 under the
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Agreements was left for arbitration in view of
arbitration clause in the Agreements. Order further
substantiates that, Plaintiff was given liberty to
issue a fresh demand notice in the event of there
being any arrears of advertisement tax to be paid
by Defendant No.1.
21) After passing the order in Writ Petition,
Defendant No.1 filed interlocutory application at IA
No.1/2013 seeking refund of sum of Rs.14,27,348/-,
which was deposited by Defendant No.1, as per
interim order dated 06.10.2010 passed by the
Hon'ble High Court in Writ petition.
22) On 28.02.2014, the Hon'ble High Court was
pleased to pass an order on IA No.1/2013 for
transmitting 50% of deposit amount to Plaintiff
towards advertisement tax, subject to future course
of action that may be taken by Defendant No1 as
against the fresh demand notice issued by Plaintiff
to Defendant No.1.
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23) It is to be noted that, as on the date of
initiation of arbitration proceedings by Defendant
No.1, termination of agreements with regard to non-
performance of Defendant No.1 under the
Agreements remained in force.
24) Initiation of Arbitration Proceedings - As
pleaded by Defendant No.1, arbitration notice was
issued to Plaintiff on 30.01.2014 by invoking the
arbitration clause for resolving the disputes arising
under the Agreements. Arbitration notice came to
be served on Plaintiff on 03.02.2014. Thereafter,
Defendant No.1 filed CMP before the Hon'ble High
Court of Karnataka for appointment of sole
Arbitrator, which came to be allowed on
21.08.2014.
25) Before the Arbitral Tribunal, Defendant No.1
filed its Claim Petition and claimed the following
reliefs :
" (a) Declare that the action of the
respondent unilateral termination of
agreements (Annexure A & G) both
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dated 31.03.2004 is highly arbitrary and
illegal.
(b) Declare that demand notice dated
31.12.2013 and 20.01.2014 for
advertising tax of Rs.14,27,348/- is
highly arbitrary and illegal and
consequently set aside the demand
notices dated 31.12.2013 and
20.01.2014 for advertising tax of
Rs.14,27,348/- being highly arbitrary and
illegal (Annexure JJ and KK).
(c) Direct the respondents ....... to pay
a sum of Rs.1,43,58,301/- (Rupees One
Crore Forty three lakh Fifty Eight
thousand Three Hundred and One Only)
at 18% per annum from 23.09.2010 to
the date of realization........... towards
damages, towards the investment made
by the claimant.
(d) Direct the respondents to pay a
sum of Rs.3,00,00,000/- towards
business loss caused to the claimant.
(e) Direct the respondents to refund to
the claimant Rs.7,00,000/- with interest
at the rate of 18% from the date of
payment 09.10.2010 till the date of
realisation which was deposited by the
claimant .............................. with the
Hon'ble High Court of Karnataka
(Annexure GG and Annexure MM).
(f) Direct the respondent to pay the
costs of the arbitration.
** ** ** "
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26) Award makes it clear that, there is no order
with respect to Prayers No.(a) and (b) as claimed in
Claim Petition. Arbitral Tribunal, without declaring
the Agreements dated 31.03.2004 and demand
notices dated 31.12.2013 and 20.01.2014 as null
and void and without setting aside the same,
awarded damages and compensation of
Rs.28,71,660/- and directed the Plaintiff to refund
the deposited amount Rs.7,00,000/- to Defendant
No.1. Without there being decision on the main
reliefs at Prayers No.(a) and (b), damages and
compensation were awarded under Prayers No.(c)
and (d). Be that as it may.
27) Grounds urged for setting aside the
award - Plaintiff has mainly urged the following
grounds :
(i) Claim of Defendant No.1 is barred
by limitation.
(ii) Decision on matters is beyond the
scope of submission to arbitration.
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(iii) Damages awarded for loss of business
for 3 term of three years is not
sustainable because there was no
concluded contract beyond 2010.
(iv) Without pleadings and issue,
competency of Officer passing orders at
Ex.C.79 and Ex.C.77 has been decided.
(v) Power to levy advertisement tax
under KMC Act was not the negotiated
term of the contract.
(vi) Decision regarding powers of
Commissioner is erroneous and against
substantive provisions of Section 171 and
176 of KMC Act.
28) Defendant No.1 contests the suit contending
that Section 34 of the Arbitration and Conciliation
Act, 1996 has a very narrow scope. Interference
with the award can be made only if grounds urged
strictly fall within the ambit of amended provisions
of Section 34. Proceedings under Section 34 are
summary in nature. Scope of enquiry in Section 34
petition is restricted to a consideration whether any
of the grounds mentioned in Section 34(2) or
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Section 13(5) or Section 16(6) are made out to set
aside the award.
29) In support of its contention, reliance has been
mainly placed on Para-24 and 25 of the judgment of
the Hon'ble Supreme Court in Associate Builders
vs. Delhi Development Authority, [(2015) SCC
49]. Para-24 and 25 read thus :
"24. In DDA v. R.S.Sharma and Co., the
Court summarised the law thus : (SCC
pp.91-92, para 21)
"21. From the above decisions, the
following principles emerge:
(a) An award, which is
(i) contrary to substantive
provisions of law; or
(ii) the provisions of the
Arbitration and Conciliation Act,
1996; or
(iii) against the terms of the
respective contract; or
(iv) patently illegal; or
(v) prejudicial to the rights of the
parties;
is open to interference by the court under
Section 34(2) of the Act.
(b) The award could be set aside if
it is contrary to :
(a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality.
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(c) The award could also be set aside if it is
so unfair and unreasonable that it shocks
the conscience of the court.
(d) It is open to the court to consider
whether the award is against the specific
terms of contract and if so, interfere with it
on the ground that it is patently illegal and
opposed to the public policy of India.
With these principles and statutory
provisions, particularly, Section 34(2) of th
Act, let us consider whether the arbitrator as
well as the Division Bench of the High Court
were justified in granting the award in respect
of Claims 1 to 3 and Additional Claims 1 to 3
of the claimant or the appellant DDA has
made out a case for setting aside the award
in respect of those claims with reference to
the terms of the agreement duly executed by
both parties."
25. J.G.Engineers (P) Ltd., v. Union of India
held : (SCC p.775, para 27)
"27. Interpreting the said provisions,
this Court in ONGC Ltd., v. Saw Pipes
Ltd. Held that a court can set aside an
award under Section 34(2)(b)(ii) of the
Act, as being in conflict with the public
policy of India, if it is (a) contrary to the
fundamental policy of Indian law; or (b)
contrary to the interest of India; or (c)
contrary to justice or morality; or (d)
patently illegal. This court explained
that to hold an award to be opposed to
public policy, the patent illegality
should go to the very root of the
matter and not a trivial illegality. It is
also observed that an award could be
set aside if it is so unfair and
unreasonable that it shocks the
conscience of the court, as then it
would be opposed to public policy."
30) Defendant No.1 further contends that, Court
in considering Section 34 petition cannot sit on
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appeal and cannot re-assess or re-appreciate facts
and evidence, even if it comes to contrary
conclusions. What a Court can do is that, examine
whether judicious mind has been applied and
legally plausible conclusion has been arrived while
passing the award. If a conclusion is arrived, which
is not plausible and it shocks the conscience of the
Court, then, the award would be perverse and liable
to be set aside. Reliance has been placed on para-
32 and 33 of Associate Builders' case. Para-32
and 33 reads thus :
"32. A good working test of perversity is
contained in two judgments. In Excise
and Taxation Officer-cum-Assessing
Authority v. Gopi Nath & Sons, it was
held : (SCC p.317, para 7)
" 7. ... It is, no doubt, true that if a
finding of fact is arrived at by
ignoring or excluding relevant
material or by taking into
consideration irrelevant material or
if the finding so outrageously defies
logic as to suffer from the vice of
irrationality incurring the blame of
being perverse, then, the f
In kuldeep Singh v. Commr. Of Police, it
was held : (SCC p.14, para 10)
"10. A broad distinction has,
therefore, to be maintained between
the decisions which are perverse and
those which are not. If a decision is
arrived at on no evidence or
evidence which is thoroughly
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unreliable and no reasonable person
would act upon it, the order would be
perverse. But if there is some
evidence on record which is
acceptable and which could be relief
upon, howsoever compendious it
may be, the conclusion would not be
treated as perverse and the findings
would not be interfered with."
" 33. It must be clearly understood that
when a court is applying the "public
policy" test to an arbitration award, it does
not act as a court of appeal and
consequently errors of fact cannot be
corrected. A possible view by the arbitrator
on facts has necessarily to pass muster as
the arbitrator is the ultimate master of the
quantity and quality of evidence to be
relied upon when he delivers his arbitral
award. Thus an award on little evidence or
on evidence which does not measure up in
quality to a trained mind would not be held
to be invalid on this score. Once it is found
that the arbitrators approach is not
arbitrary or capricious, then he is the last
word on facts. In P.R. Shah, Shares &
Stock Brokers (P) Ltd., v. B.H.H. Securities
(P) Ltd., this Court held : (SCC pp. 601-02,
para 21)
" 21. A court does not sit in appeal
over the award of an Arbitral Tribunal
by reassessing or reappreciating the
evidence. An award can be
challenged only under the grounds
mentioned in Section 34(2) of the Act.
The Arbitral Tribunal has examined
the facts and held that both the
second respondent and the appellant
are liable. The case as put forward
by the first respondent has been
accepted. Even the minority view was
that the second respondent was
liable as claimed by the first
respondent, but the appellant was
not liable only on the ground that the
arbitrators appointed by the Stock
Exchange under Bye-law 248, in a
claim against a non-member, had no
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jurisdiction to decide a claim against
another member. The finding of the
majority is that the appellant did the
transaction in the name of the second
respondent and is therefor,e liable
along with the second respondent.
Therefore, in the absence of any
ground under Section 34(2) of the
Act, it is not possible to re-examine
the facts to find out whether a
different decision can be arrived at."
31) In the backdrop of the contentions of
Defendant No.1, it is necessary to take the
cognizance of law laid down in Associate
Builders' case, in which, the Hon'ble Supreme
Court was pleased to elaborately discuss the heads
of "Public Policy of India". (1) Fundamental Policy of
Indian Law; (2) Interest of India; (3) justice and
morality; and (4) patent illegality are the heads
'Public Policy of India' that have been discussed in
the judgment (supra).
32) In the judgment (supra), it is held that,
"Fundamental Policy of Indian Law" includes-(i)
compliance with statutes and judicial precedents;
(ii) need for judicial approach; (iii) natural justice
compliance; and (iv) Wednesbury reasonableness.
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33) Further, it is held that, (i) contravention of
substantive law of India; (ii) contravention of A & C
Act, 1996; and (iii) contravention of the terms of
the contract would be regarded as patent illegality.
34) In para-15 and 16, the Hon'ble Supreme
Court was pleased to hold as follows :
"15. This section in conjunction with Section
5 makes it clear that an arbitration award
that is governed by Part I of the Arbitration
and Conciliation Act, 1996 can be set aside
only on grounds mentioned under Sections
34(2) and (3), and not otherwise. Section 5
rads as follows :
" 5. Extent of judicial
intervention.- Notwithstanding
anything contained in any other law
for the time being in force, in matters
governed by this Part, no judicial
authority shall intervene except where
so provided in this Part."
16. It is important to note that the 1996 Act
was enacted to replace the 1940 Arbitration
Act in order to provide for an arbitral
procedure which is fair, efficient and capable
of meeting the needs of arbitration; also to
provide that the tribunal gives reasons for an
arbitral award; to ensure that the tribunal
remains within the limits of its jurisdiction;
and to minimise the supervisory roles of
courts in the arbitral process."
35) In para-17, the Hon'ble Supreme Court was
pleased to hold that :
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"17. It will be seen that none of the
grounds contained in sub-section 2(a) of
Section 34 deal with the merits of the
decision rendered by an arbitral award. It
is only when we come to the award being
in conflict with the public policy of India
that the merits of an arbitral award are to
be looked into under certain specified
circumstances."
36) It is, therefore, clear that, the Arbitration and
Conciliation Act, 1996 has been enacted in order to
ensure that the Arbitral Tribunal remains within the
limits of its jurisdiction and to minimize the
supervisory roles of Courts in the arbitral process.
Further, it is clear that, merits of arbirtal award can
be assailed only when it is in conflict with 'Public
Policy of India'.
37) Having regard to the submissions of learned
Counsel for Defendant No.1 and the ratio laid down
by the Hon'ble Supreme Court, grounds urged by
Plaintiff have to be assailed.
38) First and foremost contention of Plaintiff is
that, in Claim Petition, Defendant No.1 challenged
the termination of Agreements dated 31.03.2004,
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however, Tribunal has awarded damages and
compensation considering the other two
Agreements dated 27.07.2007 and 12.10.2007 also,
which is beyond the scope of the Tribunal, as there
was no challenge to the termination order in
respect of other two Agreements dated 27.07.2007
and 12.10.2007 in Claim Petition.
39) Learned Counsel for Defendant No.1 is
pleased to submit that, terms of reference includes
claims arising out of all four Agreements and
damages for breach of all four Agreements. It is
submitted that, said contention was raised before
the Arbitral Tribunal and same was answered in
negative findings, which substantiate as to how the
reference includes all four agreements.
40) Reasons assigned by the Arbitral Tribunal in
holding that terms of reference includes all four
agreements find place in para-20.1 and 33.1 of the
award. They read thus :
"20.1. The further submission of
Sri.Sandeep Lahiri, learned counsel for
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claimant was that to meet the ends of
justice, the termination by the respondent
of the other two agreements Exs.R4 and
Ex.R5 by its Ex.R13 order may also be
declared illegal and arbitrary to meet the
ends of justice although this relief is not
specifically prayed in the claim petition.
This submission of his is stoutly opposed
by Smt.Geetha on the ground that since
this relief was not sought for by the
claimant in its claim petition and that it
being not the subject of the terms of
reference/Issue No.1 the tribunal has no
jurisdiction to consider and decide the
legality or otherwise of the termination of
Exs.R4 and Ex.R5 agreements. Reliance
was placed by her on the decision of
Supreme Court in MSK Projects India
(JV) Ltd Vs. State of Rajasthan and
another, (2011) 10 Scc 573 for the
proposition;
"........ The settled legal
proposition emerges to the effect
that the Arbitral Tribunal cannot
travel beyond the terms of
reference, ..."
In view of this legal proposition, I
refrain myself from considering the
sufficiency of the reasons given in Ex.R.13
by the respondent termination of Exs.R4
and Ex.R5 agreements. Nevertheless, as
a result of this tribunal holding
respondent's Ex.R13 ordder itself as an
illegal and void order, the termination of
all the four agreements at Exs.R.2 to
Ex.R5 by Ex.R13 automatically becomes
illegal, apart from the fact that, as
indicated at Paragraph 15.1 herein-above,
the termination of Ex.R4 agreement under
Ex.R13 has been declared illegal by the
High Court in its said order dated
05.04.2011 passed in the claimant's
W.P.No.32218/2010."
"33.1 Let me now consider the objection
of Smt.Geetha Devi in regard to the
legality of these two agreements at
Exs.R4 and Ex.R5. Her first objection was
that this tribunal cannot probe into
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cancellation of thse two agreement as
they fall outside the terms of
refernce/issues. I find no substance in this
objection because the amplitude of Issues
3 and 4 obviously includes all the four
agreements at Exs.R2 to R.5. Moreover,
the said order dated 02.08.2014 of the
Hon'ble High Court of Karnataka made
in CMP No.68/2014 requires me to
resolve the dispute between the
parties arising from all these four
agreements."
41) As mentioned above, Defendant No.1 sought
for declaration to the effect that termination of
Agreements dated 31.03.2004 be declared as null
and void at Prayer No.(a) in its Claim Petition.
42) Arbitral Tribunal has framed a specific Issue
at Issue No.1 regarding the contention of
Defendant No.1. Issue No.1 is as follows :
"1. Whether the Claimant proves that
the 'action of the Respondent in
unilateral termination of Agreements
both dated 31.03.2004 (at Annexures A
& G), between the parties is arbitrary
and illegal?"
43) Under termination notice dated 12.03.2010
[Ex.R.13], all the four Agreements were cancelled.
Same was challenged before the Hon'ble High Court
in WP No.32318/2010. Hon'ble High Court was
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pleased to quash the termination notice in part in
respect of non-payment of advertisement tax and
issue regarding non-performance of Defendant No.1
under the Agreements was left for arbitration in
view of arbitration clause in the Agreements.
44) Arbitral Tribunal has arrived to the conclusion
in holding that, terms of reference includes all four
Agreements on the basis that termination of
Agreement dated 25.07.2007 [Ex.R.4] under
termination letter has been declared illegal by the
Hon'ble High Court in WP No.32218/2010 and that
the amplitude of Issues No.3 and 4 framed by the
Arbitral Tribunal includes all the four Agreements at
Exs.R.2 to R.5.
45) In fact, the Hon'ble High Court was pleased
to quash the termination notice in part with regard
to non-payment of advertisement tax. So far as
non-performance of Defendant No.1 under the
Agreements, was left to the arbitration in view of
arbitration clause in the Agreements. Defendant
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No.1 rightly sought for declaration of termination of
Agreements dated 31.03.2004 as null and void,
while filing Claim Petition. However, Defendant No.1
did not seek for declaration of termination of
Agreements dated 27.07.2007 and 12.10.2007 as
null and void, which were also cancelled under
termination notice. From the findings of Arbitral
Tribunal, it is clear that, while awarding damages
and compensation based on the findings on Issues
No.3 and 4, Arbitral Tribunal has also arbitrated the
dispute regarding the termination of Agreements
dated 27.07.2007 and 12.10.2007, which was not
submitted for arbitration, in order to grant the
reliefs as prayed in Prayers No.(c) and (d) of Claim
Petition.
46) Learned Counsel for Defendant No.1 is
pleased to contend that, subject matter of the
dispute in the instant case squarely falls within the
ambit of arbitrable dispute, as the same arises out
of Agreements executed between the parties.
Examples of non-arbitrable disputes as laid down by
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the Hon'ble Supreme Court in Booz Allen and
Hamilton Inc. vs. SBI Home Finance Ltd., and
Ors., [Civil Appeal No.5440/2002, Decided on
15-04-2011], have been brought to the notice of
the Court by the learned Counsel for Defendant
No.1. In para-22, the Hon'ble Supreme Court was
pleased to hold as follows :
"22.......The well recognised examples of
non-arbitrable dispuates are : (i) disputes
relating to rights and liabilities which give
rise to or arise out of criminal offences; (ii)
matrimonial disputes relating to divorce,
judicial separation, restitution of conjugal
rights, child custody; (iii) guardianship
matters; (iv) insolvency and winding up
matters; (v) testamentary matters (grant of
probate, letters of administration and
succession certificate); and (vi) eviction or
tenancy matters governed by special
statutes where the tenant enjoys statutory
protection against eviction and only the
specified courts are conferred jurisdiction to
grant eviction or decide the disputes."
47) In Booz Allen and Hamilton Inc. case, the
Hon'ble Supreme Court was pleased to explain the
term 'arbitrability'. Para 21 of the judgment reads as
follows :
" 21. The term 'arbitrability' has different
meanings in different contexts. The three
facets of arbitrability, relating to the
jurisdiction of the arbitral tribunal, are as
under : (i) whether the disputes are
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capable of adjudication and settlement by
arbitration? That is, whether the disputes,
having regard to their nature, could be
resolved by a private forum chosen by th
parties (the arbitral tribunal) or whether
they would exclusively fall within the
domain of public for a (courts. (ii)
Whether the disputes are covered by the
arbitration agreement? That is, whether
the disputes are enumerated or described
in the arbitration agreement as matters to
be decided by arbitration or whether the
disputes fall under the 'excepted matters'
excluded from the purview of the
arbitration agreement. (iii) Whether the
parties have referred the disputes to
arbitration? That is, whether the disputes
fall under the scope of the submission to
the arbitral tribunal, or whether they do
not arise out of th e statement of claim
and the counter claim filed before the
arbitral tribunal. A dispute, even if it is
capable of being decided by arbitration
and falling within the scope of arbitration
agreement, will not be 'arbitrable' if it is
not enumerated in the joint list of disputes
referred to arbitration, or in the absence of
such joint list of disputes, does not form
part of the disputes raised in the pleadings
before the arbitral tribunal."
48) It is to be noted that, there finds a difference
between 'non-arbitrable dispute' and 'arbitrable
dispute'. Non-arbitrable dispute shall not be
entertainable by private fora, like the Arbitral
Tribunal. Whereas, arbitrable dispute can be
entertainable by the Arbitral Tribunal, however, it
should be specifically referred to the Arbitral
Tribunal for its arbitrability as mandated by Section
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34(2)(a)(iv) of the Arbitration and Conciliation Act,
1996. In that context, 'arbitrable dispute' and 'non-
arbitrable dispute' cannot be equated with same
terms. Thus, it has been clear that, even if the
dispute is capable of being decided by arbitration
and falling within the scope of arbitration
agreement, will not be arbitrable if it is not listed in
the joint list of disputes referred to arbitration or
does not form part of the disputes raised in the
pleadings before the Arbitral Tribunal.
49) In the instant case, relief was sought for in
respect of the Agreements dated 31.03.2004 being
declared as null and void. In respect of the
Agreements dated 27.07.2007 and 12.10.2007, no
claim was made before the Arbitral Tribunal and no
dispute was raised by Defendant No.1 in its Claim
Petition. Despite the objection raised by Plaintiff,
Arbitral Tribunal has awarded damages and
compensation, as if disputes were referred to it in
respect of Agreements dated 27.07.2007 and
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12.10.2007 also. It squarely falls under Section
34(2)(a)(iv) of the Arbitration and Conciliation Act,
1996, which enumerates that arbitral award be set
aside if it deals with a dispute not contemplated by
or not falling within the terms of the submission to
arbitration, or it contains decisions on matter
beyond the scope of submission to arbitration.
Thus, it has been clear that, award contravenes
Section 34(2)(a)(iv) of the Arbitration and
Conciliation Act, 1996. It has been further clear
that, without declaring the termination of
Agreements dated 31.03.2004 as null and void as
sought for in Prayers No.(a) and (b) in Claim
Petition, Arbitral Tribunal has awarded damages and
compensation as sought for in Prayers No.(c) and
(d) relying on other two Agreements dated
27.07.2007 and 12.10.2007. In this circumstance,
proviso to Section 34(2)(a)(iv) cannot be made
applicable to the award passed by the Arbitral
Tribunal.
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50) Further ground that has been raised by
Plaintiff, is that, claims of Defendant No.1 laid
before the Arbitral Tribunal is barred by limitation.
51) Defendant No.1 contends that claims made
by it are well within the period of limitation. It is
contended that, point of limitation was raised
before the Arbitral Tribunal and same was answered
in negative by specific findings.
52) Findings relating to point of limitation find
place in para-30.2 and 30.3 of the award. They
read thus :
"30.2 ... ... It is raised by its Learned
Counsel for the first time at the end of her
reply argument. However, it being the
point of law touching upon the jurisdiction
of this tribunal to deal with the terms of
reference, I have to entertain and decide
it. Her submission in this behalf was that
Section 43(1) of the Arbitration and
Conciliation Act, 1996, makes the
Limitation Act, 1963 applicable to the
arbitrable proceedings under this Act of
1996 as it applied to the proceedings in
court; and that Article 27 of the Schedule
of the Limitation Act prescribes 3 years
period of limitation: " For compensation for
breach of promise to do anything at a
specified time, or upon the happening of a
specific contingency"; from the time :
"When the time specified arrives or the
contingency happens". Elaborating her
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submission Smt.Geetha contended that
the contingency for the claimant to seek
compensation/damages from respondent
occurred on the date of receipt of
respondent's Ex.R.13 termination notice
dated 12.03.2010/15.04.2010 which must
have been received by it on
17/18.04.2010, and excluding the time
taken for the claimant to prosecute its
W.P.Nos.32218/2010 which was disposed
of on 05.04.2011, the 3 years prescribed
period of limitation for the claimant to
initiate action against respondent seeking
compensation/damages started flowing
from 05.04.2011 and its expired on
04.04.2014. But the claim petition is filed
by the claimant on 13.10.2014, that is 6
months 9 days after expiry of the
limitation period. Therefore, Smt.Geetha
Devi, contended that petition may be
dismissed as time barred.
30.3 It is to be noted that in its legal
notice dated 30.01.2014 at Ex.C95 the
respondent was, inter-alia, called upon by
the claimant to enter into arbitration
process in terms of the relevant clauses of
the agreements at Exs.R2 to Ex.R5; and
when this request of claimant was not
acceded by the respondent, the claimant
approached the High Court with his
application u/s.11(6) of the Arbitration and
Conciliation Act, 1996 in CMP No.68/2014
on the basis of its Ex.C95 notice for
appointment of an Arbitrator to resolve the
dispute between the parties. That CMP
No.68/2014 was disposes of the Hon'ble
High Court of Karnataka by its order dated
21.08.2014 appointing me as the
Arbitrator. The time of 6 months 22 days
this taken by the claimant from the date of
its Ex.C95 notice i.e., 30.01.2014 to the
date of disposal of its said CMP No.68/2014
i.e., 21.08.2014 is entitled to be excluded
from computation of the limitation period.
When this time is also so excluded, the
claim petition filed on 13.10.2014 is well
within the limitation period of 3 years, it
having been filed 9 days before expiry of
this period. Accordingly, I find no force in
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this objection of the respondent's Learned
Counsel."
53) In the backdrop of the findings of the Arbitral
Tribunal, it is worthwhile to mention Sections 21 and
43 of the Arbitration and Conciliation Act, 1996.
They read as follows :
"21. Commencement of arbitral
proceedings
Unless otherwise agreed by the
parties, the arbitral proceedings in respect
of a particular dispute commence on the
date on which a request for that dispute to
be referred to arbitration is received by
the respondent."
" 43. Limitations
(1) The Limitation Act, 1963 (36 of 1963),
shall apply to arbitrations as it applies to
proceedings in court.
(2) For the purposes of this section and
the Limitation Act, 1963 (36 of 1963), an
arbitration shall be deemed to have
commenced on the date referred in
section 21.
(3) Where an arbitration agreement to
submit future disputes to arbitration
provides that any claim to which the
agreement applies shall be barred unless
some step to commence arbitral
proceedings is taken within a time fixed by
the agreement, and a dispute arises to
which the agreement applies, the court, if
it is of opinion that in the circumstances of
the case undue hardship would otherwise
be caused, and notwithstanding that the
time so fixed has expired, may on such
terms, if any, as the justice of the case
may require, extend the time for such
period as it things proper.
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(4) Where the court orders that an arbitral
award be set aside, the period between
the commencement of the arbitration and
the date of the order of the court shall be
excluded in computing the time prescribed
by the Limitation Act, 1963 (36 of 1963),
for the commencement of the proceedings
(including arbitration) with respect to the
dispute so submitted."
54) A bare reading of Section 21 makes it clear
that, in absence of agreement by the parties, the
arbitral proceedings in respect of the dispute
commence on the date on which a request for that
dispute to be referred to arbitration is received by
other party. Section 43(2) makes it further clear
that, for the purpose of Section 43 and the
Limitation Act, 1963, an arbitration shall be deemed
to have commenced on the date referred to in
Section 21.
55) In the light of the above provisions of law,
claim made by Defendant No.1 is to be viewed.
Admitted position is that, arbitration notice
was issued by Defendant No.1 raising the dispute
vide notice dated 30.01.2014 [Ex.C.95].
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Acknowledgment at Ex.C.96A2 makes it clear that,
arbitration notice was served to Plaintiff on
03.02.2014. Thus, in view of Section 43(2),
arbitration shall be deemed to have commenced on
03.02.2014, the date of receipt of arbitration notice
by Plaintiff.
56) Arbitral Tribunal observed that no specific
plea was raised by Plaintiff with regard to limitation
and same was canvassed by Plaintiff for the first
time at the end of reply argument. Anyhow, Arbitral
Tribunal has dealt the point of limitation raised by
Plaintiff by way of argument, as it touches the
jurisdiction of the forum.
57) At this stage, it is relevant to take notice of
Section 3 of the Limitation Act, 1963. It reads as
follows :
"3. Bar of Limitation.- (1) Subject to the
provisions contained in sections 4 to 24
(inclusive), every suit instituted, appeal
preferred, and application made after the
prescribed period shall be dismissed,
although limitation has not been set up as
a defence".
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58) Position of law has been further reiterated in
Vijay Narayan Thatte and Others vs. State of
Maharashtra and Others, [(2009) 9 SCC 92].
Hon'ble Supreme Court was pleased to hold that :
"21. In our opinion, there can be no
estoppel against a Statute. Since the
statute is very clear, the period of
limitation provided in Clause (ii) of the
proviso to section 6 of th Act has to be
followed, and concessions of the counsel
can have no effect. As already stated
above, the proviso is mandatory in nature,
and must operate with its full rigour vide
Ashok Kumar V. State of Haryana (2007) 3
SCC 470 (para 17)".
59) In view of Section 3 of Limitation Act, Arbitral
Tribunal has rightly considered the point of
limitation raised by Plaintiff.
60) In Panchu Gopal Bose vs. Board of
Trustees for Port of Calcutta [AIR 1994 SC
1615] , the Hon'ble Supreme Court was pleased to
hold that, "The period of limitation for the
commencement of an arbitration runs from the
date, on which, had there been no arbitration
clause, the cause of action would have accrued,
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just as in the cause of actions the claim is not
brought after the expiration of a specified number
of years from the date on which the cause of action
accrued, so in the case of arbitrations, the claim is
not to be put forward after the expiration of the
specified number of years from the date when the
claim accrued".
61) Thus, the question which loops the matter is
that, whether claim made by Defendant No.1 was a
live claim, as on the date of initiation of arbitral
proceedings?
62) Admittedly, Agreements were terminated
vide notice dated 12.03.2010. In view of
termination of notice, contract is broken on
12.03.2010. Arbitration proceedings ought to have
been initiated within three years from the date of
termination as contemplated under Section 55 of
the Limitation Act, 1963. Defendant No.1, in its
Claim Petition, challenged the termination and
sought for declaration as the termination is highly
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arbitrary and illegal. Arbitration proceedings were
commenced on 03.02.2014, the date of receipt of
the arbitration notice by Plaintiff. Having regard to
the date of termination of contract, the period of
limitation would expire on 12.03.2013. However,
arbitration proceedings were initiated on
03.02.2014. Thus, it is crystal clear that, as on the
date of initiation of arbitral proceedings there was
no live claim to be arbitrated upon.
63) Arbitral Tribunal has given the benefit of
exclusion of time taken for by Defendant No.1 to
prosecute writ petition filed by Defendant No.1
before the Hon'ble High Court in WP
No.32218/2010. Question that arises is that,
whether exclusion of time taken for prosecuting the
Writ Petition by Defendant No.1 is within the
purview of substantive provisions of the Limitation
Act, 1963?
64) Section 43 makes it clear that, the Limitation
Act, 1963 is applicable to arbitration proceedings. In
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that view, if Section 14 of the Limitation Act is taken
into consideration, it goes to show that, the benefit
of exclusion of time can be granted only in the
cases where the Plaintiff has been prosecuting with
due diligence another civil proceeding and is
prosecuting the same in good faith in a Court, which
defect of jurisdiction or other cause of a like nature,
is unable to entertain it. It is worthwhile to mention
Section 14(1) of the Limitation Act, 1963. It reads as
follows :
"14. Exclusion of time of proceeding
bona fide in Court without
jurisdiction.-
(1) In computing the period of limitation
for any suit the time during which the
plaintiff has been prosecuting with due
diligence another civil proceeding, whether
in a Court of first instance or of appeal or
revision, against the defendant shall be
excluded, where the proceeding relates to
the same matter in issue and is
prosecuted in good faith in a Court which,
from defect of jurisdiction or other cause
of a like nature, is unable to entertain it."
65) In the instant case, no such occasion had
arisen to exclude the time taken for prosecuting the
writ petition by Defendant No.1. WP No.32218/2010
was filed by Defendant No.1 to quash the
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termination notice and demand notices issued by
Plaintiff. It was not filed for seeking damages on
the ground that contract is broken by Plaintiff. Writ
Petition is not the proceeding to say that Defendant
No.1 had mistakenly filed the same before the
Hon'ble High Court instead of filing the same before
the Arbitral Tribunal. In that view, in order to
entertain the Claim Petition filed by Defendant No.1,
extension of benefit of Section 14(1) of the
Limitation Act, 1963 by the Arbitral Tribunal is
contrary to Section 14(1) of the Limitation Act,
1963.
66) Agreements were terminated on 12.03.2010/
15.04.2010 as per Ex.R.13/C.79. Arbitration notice
was received by Plaintiff on 03.02.2014. It clearly
indicates that, Defendant No.1 initiated arbitral
proceedings after 3 years 9 months 18 days. Even
assuming that, Section 14(1) is applicable to the
case of Defendant No.1, period of 6 months, during
which period writ petition was pending, is excluded,
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again, claims made by Defendant No.1 would be
beyond 3 years.
67) It is to be noted that, Arbitral Tribunal, apart
from giving the benefit of exclusion as
contemplated in Section 14(1), also excluded the
time taken for disposal of CMP. Once the arbitral
proceedings commenced on receipt of arbitration
notice by Plaintiff as per Section 21 read with
Section 43(2) of the Arbitration and Conciliation
Act, 1996, the question of taking the time in
disposal of CMP to give the benefit of exclusion in
order to bring the claims within limitation does not
arise at all. In this circumstance, it can be fairly
said that, view expressed by the Arbitral Tribunal
cannot be said to be a plausible view. From the
above discussion, this Court is of the view that, as
on the date of initiation of arbitral proceedings,
claims made by Defendant No.1 was not a live
claim to be arbitrated upon.
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68) Next ground that has been urged by Plaintiff,
is that, advertisement tax to be levied as per KMC
Act, is not a negotiated term of contract and it is
non-arbitrable dispute and same ought not to be
arbitrated by the Arbitral Tribunal.
69) Defendant No.1 contends that, terms of
reference before the Arbitral Tribunal includes
challenge to claim for payment of advertisement
tax by Defendant No.1. It is contended that,
Plaintiff did not raise it as non-arbitrable dispute
and therefore, contention taken by Plaintiff that
payment of advertisement tax is non-arbitrable
dispute is barred by doctrine of 'Waiver' as
contemplated in Sections 4 and 5 of the Arbitration
and Conciliation Act, 1996.
70) It is further contended that, the process of
charging advertisement tax is as per Clause-5 of
the Agreements and in view of arbitration clause in
the Agreements, claims made by Defendant No.1
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have been rightly considered by the Arbitral
Tribunal.
71) Admitted position is that, Defendant No.1,
being aggrieved by demand notices dated
08.08.2008, 19.06.2009 and 23.07.2009,
challenged the same by way of writ in WP
No.32218/2010. Hon'ble High Court was pleased to
quash the demand notices and liberty was given to
Plaintiff to issue a fresh demand notice in the event
of there being any arrears of advertisement tax to
be paid by Defendant No.1.
72) Accordingly, Plaintiff issued fresh demand
notices dated 31.12.2013 and 20.01.2014
demanding the arrears of advertisement tax of
Rs.14,27,348/-. Demand notices dated 31.12.2013
and 20.01.2014 came to challenged by Defendant
No.1 seeking the relief that demand notices be
declared as null and void in Prayer No.(b) of its
Claim Petition.
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73) Plaintiff's contention is that, tax to be levied
according to the provisions of KMC Act and same
cannot be negotiated by way of filing arbitration.
Contrary, Defendant No.1 contends that, in view of
arbitration clause in Agreements, the Arbitral
Tribunal could have adjudicated upon the dispute
regarding arrears of advertisement tax as claimed
in demand notices by Plaintiff.
74) Clause-14 of the Agreements, of course,
states that, all dispute shall be settled by
arbitration in accordance with the Arbitration Act,
1996. Mere mentioning the words "all the dispute",
it cannot be assumed that even non-arbitrable
dispute can also be settled by arbitration. If it is
held so, same would be contrary to law as laid
down in Section 34(2)(a)(iv) of the Arbitration and
Conciliation Act, 1996 and the principles of law laid
down by the Hon'ble Supreme Court.
75) Section 34(2)(a)(iv) of the Arbitration and
Conciliation Act, 1996 clearly states that, arbitral
AS.55/2016
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award deals with a dispute not falling within the
terms of the submission to arbitration, needs to be
set aside. Moreover, the Hon'ble Supreme Court in
Booz Allen Hamilton Inc. case, was pleased to
hold in a clear term that, non-arbitrable dispute
cannot be adjudicated upon by arbitration and
even by consent of the parties. Para-22 reads as
follows :
"22. Arbitral tribunals are private for a chosen
voluntarily by the parties to the dispute, to
adjudicate their disputes in place of courts and
tribunals which are public for a constituted
under the laws of the country. Even 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
arbitral tribunals is excluded either expressly or
by necessary implication. Adjudication of
certain categories of proceedings are reserved
by the Legislature exclusively for public for a as
a matter of public policy. Certain other
categories of cases, though not expressly
reserved for adjudication by a public for a
(courts and Tribunals), may by necessary
implication stand excluded from the purview of
private for a. Consequently, where the
cause/dispute is inarbitrable, the court where a
suit is pending, will refuse to refer the parties to
arbitration as the forum for settlement of such
disputes. ......"
76) Learned Counsel for Defendant No.1 is
pleased to submit that, Plaintiff did not raise any
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contention that claim made under Prayer No.(b) is
non-arbitrable dispute and hence, at this stage,
there is no scope to raise such ground, as the same
is barred by doctrine of 'waiver' as provided in
Section 4 and 5 of the Arbitration and Conciliation
Act, 1996. Sections 4 and 5 read thus :
"4. Waiver of right to object
A party who knows that -
(a) any provision of this Part from
which the parties may derogate, or
(b) any requirement under the
arbitration agreement,
has not been complied with and yet
proceeds with the arbitration without
stating his objection to such non-
compliance without undue delay or, if a
time limit is provided for stating that
objection, within that period of time, shall
be deemed to have waived his right to so
object."
" 5. Extent of judicial intervention
Notwithstanding anything contained in
any other law for the time being in force,
in matters governed by this part, no
judicial authority shall intervene except
where so provided in this Part."
77) No doubt, Section 4 deals with waiver of right
to object. A bare reading of Section 4 makes it clear
that, doctrine of waiver can be made applicable
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where the cases, in which, the party knows that any
provisions of Part-1 of the Arbitration and
Conciliation Act, 1996, which consists of Sections 1
to 43, from which the parties may derogate or any
requirement under the arbitration agreement has
not been complied with and yet proceeds with the
arbitration without stating his objection to such non-
compliance shall be deemed to have waived his
right to object.
78) Section 5 bars intervention of the Court
except in matters expressly provided for in the
Arbitration and Conciliation Act, 1996.
79) Of course, plea as to jurisdiction of Arbitral
Tribunal shall be raised at the earliest under Section
16(2) of the Arbitration and Conciliation Act, 1996,
otherwise, the same would be deemed to have
been waived by the parties. Be that as it may.
80) In the instant case, Plaintiff, in its objection
statement has specifically contended that demand
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notices for levying arrears of tax issued by Plaintiff
ought to have been challenged as per the
provisions of the KMC Act and same cannot be the
subject matter of the arbitral proceedings. Relevant
portion of Para-10 of objection statement reads
thus:
"10. ...... If the Claimant was aggrieved
by the demand notice the claimant ought
to have challenged the same as per
Section of the Karnataka Municipal
Corporation Act which is the Statutory
Remedy. But he has failed to do so hence
the determination made by the
Corporation prevails and that cannot be
the subject matter of this proceedings."
81) Fact being thus, there is no reason to contend
that right to object has been waived, as objection to
non-arbitrability of the claim at Prayer No.(b) of
Claim Petition was not raised by Plaintiff at the first
instance.
82) Even assuming that, no such objection was
raised by Plaintiff in the arbitral proceedings as to
non-arbitrability of claim as sought for in Prayer No.
(b), which does not confer the jurisdiction on
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Arbitral Tribunal to decide the non-arbitrable
dispute and even by consent of the parties also,
same cannot be taken into consideration for
adjudication, as held in Booz Allen Hamilton Inc.
case.
83) Demand notices in respect of which
declaration was sought for in Prayer No.(b) of Claim
Petition were issued for demanding the arrears of
tax as per the provisions of the KMC Act. Earlier,
demand notices dated 08.08.2008, 19.06.2009 and
23.07.2009 were challenged by Defendant No.1 by
way of writ after invoking Article 226 of the
Constitution of India before the Hon'ble High Court
of Karnataka and got them quashed. For declaring
the fresh demand notices dated 31.12.2013 and
20.01.2014 at Exs.C.93 and C.94, as null and void,
Defendant No.1 invoked the arbitration clause.
84) Admittedly, Plaintiff is a statutory body
constituted under the KMC Act, 1976. Demand
notices for arrears of tax were issued under the
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KMC Act, 1976 and rules made thereunder. Section
470 of the KMC Act deals with recovery of sums due
as taxes. Section 471 states that, in case of dispute
with respect to sums due, application shall be made
to District Court for determination. Section 472 lays
down the procedures to be followed by District
Court. Section 473 deals with recovery of sums
payable by distress. It is worthwhile to read
Sections 470, 471, 472 and 473 of the KMC Act.
They read thus :
"470. Recovery of sums due as taxes.-
All costs, damages, penalties,
compensation, charges, fees, rents,
expenses, contributions and other sums
which under this Act or any rule, bye-law
or regulation made thereunder or any
other law or under any contract including a
contract in respect of water supply or
drainage made in accordance with this act,
and the rules, bye-laws and regulations
are due by any person to the Corporation
shall, if there is no special provision in this
Act for their recovery be demanded by bill,
containing particulars of the demand and
notice of the liability incurred in default of
payment and may be recovered in the
manner provided in Chapter X unless
within fifteen days from the date of
service of the bill such person shall have
applied to the District court having
jurisdiction, under Section 471.
471. Determination by District
Court of sums payable.- Where in any
case not provided for in Section 480 any
municipal authority or any person is
required by or under this Act or any rule,
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bye-law, regulation or contract made
under temporary injunction to pay any
costs, damages, penalties, compensation,
charges, fees, rents, expenses,
contributions, or other sums referred to in
Section 470, the amount or apportionment
of the same, shall, in case of dispute, be
ascertained and determined except as is
otherwise provided in Sections 207, 407,
or 460 or in the Land Acquisition Act,
1894, by the District Court having
jurisdiction on application made to it for
this purpose at any time within six months
from the date when such costs, damages,
penalties, compensation, charges, fees,
rents, expenses, contributions or other
sums first become payable.
472. Proceedings before District
Court.- (1) On an application made under
Section 471, the District Court shall
summon the other party to appear before
it.
(2) On the appearance of the parties or, in
the absence of any of them, on proof of
due service of the summons, the District
Court may hear and determine the case.
(3) In every such case the District Court
shall determine the amount of the costs
and shall direct by which of the parties the
same shall be paid.
473. Recovery of sums payable by
distress.- If the sum due on account of
costs, damages, penalties, compensation,
charges, fees, rents, expenses,
contribution or other sums ascertained in
the manner described in Section 471, is
not paid by the party liable within fifteen
days after demand such sum may be
recovered under a warrant of the District
Court, by distress and sale of the movable
property of such party."
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52
85) Section 470 specifically states that, all sums
which under the KMC Act, rules, regulations or
under any contract are due by any person may be
recovered by making an application to the District
Court. Section 471 makes it clear that, in case of
dispute regarding the payment of sums as taxes,
same shall be ascertained and determined by the
District Court on the application made to it by
municipal authority or any person.
86) Thus, it is clear that, the KMC Act mandates
that in respect of sums due as tax under the KMC
Act or contract, the same shall be recovered by
making application to District Court under Section
470 and if any dispute arises in respect of the sums
due as tax, the same shall be ascertained and
determined by District Court having jurisdiction
under Section 471. When law specifically confers
jurisdiction upon District Court in the matter of the
sums due as tax, whether it is under KMC Act or
contract, same cannot be adjudicated upon by
private fora viz., Arbitral Tribunal merely on the
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ground that there is an arbitration clause to the
effect that all the dispute shall be settled through
arbitration. If demand notices are illegal, the
aggrieved party can seek for its quash by invoking
Article 226 of the Constitution of India or if there
exists dispute as to actual due, the same shall be
questioned before the District Court for its
determination. In that view of the matter, regarding
the sums due as tax under the KMC Act or contract,
the question of invoking the jurisdiction of the
private fora does not arise. In that view, it can be
fairly said that dispute relating to arrears of tax
squarely comes under non-arbitrable dispute, which
ought not to have been arbitrated by the Arbitral
Tribunal. In view of this, there was no necessity for
the Arbitral Tribunal to decide the competency of
the officer, who issued demand notices. Thus it has
been clear that, award passed is in contravention of
the provisions of KMC Act, 1976. For the foregoing
discussion, it can be fairly said that, award vitiates
and same needs to be set aside; accordingly, I
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54
answer the above point in the affirmative and
proceed to pass the following:
ORDER
(1) Suit filed by Plaintiff under Section 34 of the Arbitration and Conciliation Act, 1996, for setting aside the award dated 09.09.2015 passed by sole Arbitrator/ Defendant No.2 in AC No.102/2014; is hereby allowed.
(2) Award dated 09.09.2015 passed by sole Arbitrator/ Defendant No.2 in AC No.102/2014; is hereby set aside.
(3) No order as to costs.
(Dictated to the Judgment Writer directly on computer, typed matter corrected and then pronounced by me in open court, on this the 15th day of October, 2020.) (RAMA NAIK) VI Addl.City Civil & Sessions Judge, Bengaluru City