Bombay High Court
Upendra Kantilal Thanawala And Ors vs Shreeram Builders on 5 March, 2024
Author: R.I. Chagla
Bench: R.I. Chagla
2024:BHC-AS:10500
1-arast-93127-2020.doc
JSN
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
ARBITRATION APPEAL (ST.) NO.93127 OF 2020
Upendra Kantilal Thanawala & Ors. ...Appellants
Versus
Shreeram Builders ...Respondents
WITH
ARBITRATION APPEAL (ST.) NO.5662 OF 2020
Shreeram Builders ...Appellant
Versus
Upendra Kantilal Thanawala & Ors. ...Respondents
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Mr. Sanjay Jain, Amrut Joshi, Nakul Jain with Sneha Patil and Vrinda
Samdani i/b. Maniar Srivastava Associates for the Appellant in ARA
ST No.93127 of 2020 and Respondent in ARAST No.5662 of 2020.
Mr. Girish Godbole, Senior Advocate i/b. Parag Tilak, Rahul Soman
and Deepashikha Godbole for the Respondents in ARAST No.93127
of 2020 and Appellant in ARAST No.5662 of 2020.
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CORAM : R.I. CHAGLA J
Reserved on : 6TH NOVEMBER, 2023
Pronounced on : 5TH MARCH, 2024
JUDGMENT :
1. By Arbitration Appeal (St.) No.93127 of 2020, the Appellants have challenged the impugned judgment and order dated 1/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:44 ::: 1-arast-93127-2020.doc 25th January, 2020 passed by the learned District Judge, Thane in Civil Miscellaneous Application (Arbitration) No.35 of 2012 (for short CMA No.35 of 2012), whereas in the Arbitration Appeal (St.) No.5662 of 2020, there is challenge to the impugned judgment and order dated 25th January, 2020 in so far as it dismisses Civil Miscellaneous Application (Arbitration) No.76 of 2013 (for short CMA No.76 of 2013) against the same arbitral Award passed by the Majority Arbitral Tribunal dated 10th December, 2011. Both the CMA No.35 of 2012 and CMA No.76 of 2013 were clubbed together and decided by the impugned judgment and order dated 25 th January, 2020.
2. Both the Appellants have sought the setting aside of the impugned judgment and Order in so far as it dismisses the respective CMA No.35 of 2012 and CMA No.76 of 2013.
3. In order to consider the Arbitration Appeals, filed under Section 37 of the Arbitration Act, it would be necessary to set out a brief background of facts in both the Arbitration Appeals. For the sake of convenience the Appellants and Respondents in Arbitration Appeal (St.) No.93127 of 2020 are referred to.
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4. The Appellants in Arbitration Appeal (St.) No.93127 of 2020 - Upendra Kantilal Thanawala together with his brothers Pankaj and Vyomesh equally own 1/3rd share of their late father Kantilal's share in the larger property. Thus, Upendra, Pankaj and Vyomesh are entitled to 1/9th share in the larger property.
5. By an Agreement for Development dated 11th February, 2003, Vyomesh granted development rights in respect of his 1/9th share in the larger property in favour of Respondent No.1 including his share in the Bungalow for and at consideration reserved thereunder. It is necessary to note that under the Agreement for Development, the larger property excluded the Bungalow under the definition of the "said land" in recital I of the Agreement. This larger property with the bungalow has been defined in Clause 12 of the Agreement as "the said property". Under Clause 22 of the said Agreement, Vyomesh has given possession of his 1/9th share in the said land and not of the said property. Thus, it is contended by the Appellants that Vyomesh's share in the Bungalow was never handed over to the Respondent. Reliance has been placed by the Appellants on the cross examination of Vyomesh in the arbitral proceedings wherein Vyomesh has admitted that no part of the Bungalow was 3/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:44 ::: 1-arast-93127-2020.doc given to the Respondent (Vyomesh's Cross examination is at page 870 of Volume 3). Vyomesh was the Respondents' witness in the arbitral proceedings.
6. The subject agreement was executed between the Appellants and Respondents on 6th August, 2003 in respect of the subject property agreed to be developed for at the consideration of Rs.2,28,75,000/-. This consideration was arrived at calculating the net FSI quotient at 25,000 Square Feet @ 915/- per square feet. A sum of Rs.55,00,000/- was paid to the Appellants at the time of the execution of the subject Agreement. It is noted that the subject Agreement is stamped at 1% of the total consideration. The contention of the Appellants in the arbitral proceedings was that the subject agreement is a Development Agreement and not an Agreement to Sell. They have relied upon the stamp duty paid on Agreement to Sell at the contemporaneous period which had quotient at 5% of the value of the Agreement and the Development Agreement's quotient was at 1% of the value of the Agreement. Thus, it is the contention of the Appellants that the Respondents had approached the Appellants with an offer to develop the subject property for construction of a shopping, commercial and residential 4/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:44 ::: 1-arast-93127-2020.doc complex ("the project"). The nature of the development has been defined in the said Agreement.
7. Further, reliance has been placed on the clauses in the subject Agreement, where the subject property excludes the "excluded property" which includes the Bungalow on the said land. Further, reliance has been placed on Clause 6 of the subject Agreement wherein the balance consideration of Rs.1,73,75,000/- was payable by the Respondents to the Appellants in 10 equal installments. Each installment was for a sum of Rs.17,37,500/-. The manner in which the installment was to be paid and the proportion of each Appellants' share has been set out in Clause 7 of the subject Agreement. The first installment was payable on 30th April, 2005, 2nd installment on 1st August, 2005 and 3rd installment payable on 1st June, 2006. Thereafter, successive installments were payable on the 1st day of each fourth successive month. The parties agreed that due payments shall be the essence of the Agreement. Reliance has been placed on the evidence i.e. cross examination of Ramesh Mehta (Respondent's partner) who agreed that time was intended to be essence of the subject Agreement, (paragraph 39 of the Cross examination of Ramesh Mehta at page 246 of Volume - I). Under 5/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:44 ::: 1-arast-93127-2020.doc Clause 37 of the subject Agreement, the Appellants were to execute a Deed of Conveyance of the subject property along with the other owner (which is the responsibility of the Respondents) in favour of Respondents or their nominee including a Co-operative Housing Society after the project was fully constructed. Further, Deed of Conveyance was not to be executed till payments due under the subject agreement, are paid to the Appellants.
8. It is necessary to note that the contention of the Appellants in the arbitral proceedings was that the obligation to execute the Deed of Conveyance is based on three pre-conditions, namely, (i) Conveyance of the subject property will be executed along with the conveyance of the properties of the other owners i.e. Vyomesh and Madhukant's heirs share; (ii) time for conveyance will arrive after the project is fully constructed, and (iii) all installments and amounts are paid to the Appellants' under the subject Agreement. Clause 47 of the subject Agreement, provided that "notwithstanding anything contained in the subject Agreement or any other Agreement with other legal heirs (especially with heirs of Madhukant or Vyomesh), the Respondents will have no right, title, claim or interest in the Excluded Property."
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9. The Appellants have placed reliance upon Clauses 52, 53,63 and 64 of the Subject Agreement to contend that a cumulative reading of these Clauses reveal that notwithstanding anything contained in the subject Agreement (including Clause 7) in case if there is a default in payment of any installment on the due date, the subject Agreement will come to an end along with rights of the parties.
10. An Agreement for Development was executed by Sumati, Hemal and Kamal Pillay (legal heirs of Madhukant) on 29th September, 2003 in favour of the Respondents in respect of their 1/3rd share in the Larger Property. Under Clause 6 of that Agreement, the Respondents inter alia undertook to satisfy the liability of the owners to an extent of Rs.5 lakh as specified in Annexure C to the Agreement dated 29th September, 2003.
11. On 9th February, 2005, the Respondent through their Advocates' letter called upon the District Collector, Thane to issue appropriate directions to DILR, Thane to execute the Order dated 30th April, 1987 to conduct survey of the Larger Property and effect partition thereof.
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12. The Respondents for itself and on behalf of the Appellants as well as on behalf of the heirs of the Madhukant filed a civil suit being Suit No.199 of 2005 against the heirs of Prabhulal, inter alia seeking injunction. An Appeal was preferred against the order vacating the ad-interim relief being Appeal from Order No.724 of 2005.
13. This Court by order dated 23rd September, 2005 directed that none of the parties shall create third party rights without leave of the Trial Court. It is necessary to note that Vyomesh, Sumati, Hemal and Kamal Pillay are parties to the Suit. The Appellants have contended that the Deed of Conveyance executed by them in favour of the Respondents is void for want of leave of the trial Court. Further, it is necessary to note that Prabhulal along with Madhukant and Kantilal each had 1/3rd share in the larger property. Thus, it is contended that third party rights could not have been created without leave of the Trial Court.
14. Mr. Rakesh Mehta, the partner of the Respondent No.1, had handed over 10 A/c payee cheques to the Appellants bearing cheque Nos.451165 to 451174, all dated 10th October, 2007, for an 8/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:44 ::: 1-arast-93127-2020.doc aggregate sum of Rs.34,75,000/-. It is necessary to note that these cheques were not encashed by the Appellants on account of the alleges breaches committed by the Respondents of clauses of the subject Agreement.
15. The Respondents have contended that on account of non deposit of the said 10 cheques, by its letter, dated 27th March, 2008, the Respondents forwarded five cheques to the Appellant Nos.1 and 2 bearing cheques No.451460 to 451464 all dated 1st December, 2007 for an aggregate sum of Rs.17,37,500/-. In the said letter the Respondents alleged that a sum of Rs.19.50 lakh was paid to Kantilal during his lifetime of which Upendra, Pankaj and Vyomesh were aware. It is further alleged that Upendra and Pankaj were to each reimburse a sum of Rs.6,59,167/- towards consideration under the Agreement. The Appellants have contended that there is no Clause or provision in the subject Agreement entitling the Respondents to appropriate the sum paid to Kantilal. The Appellants have in this context relied upon Clause 51 of the subject Agreement which provides that the parties have terminated all prior agreements and arrangements and the subject Agreement is the Agreement governing the rights and liabilities of the parties. Further, the Respondents in 9/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:44 ::: 1-arast-93127-2020.doc the said letter have recorded that payment towards last installment is ready and attached a condition to execute necessary documents to complete the transactions. Further, it is necessary to note that the receipt of the letter has been denied by the Appellants.
16. The Appellants through their Advocates letter dated 9th April, 2008 terminated the Agreement on account of breaches committed by the Respondents. The Appellants called upon the Respondents to take back monies paid by it under the subject Agreement.
17. On 9th April, 2008, the Respondents through their Advocates letter referring to the letter dated 27th March, 2008, sent 5 A/c payee cheques to Appellant No.2 for an aggregate amount of Rs.17,37,500/-.
18. The Respondents through their Advocate letter dated 9th April, 2008 referred to the letter bearing the same date and intimated Appellant No.1 that 5 cheques were sent to Appellant No.2.
19. The Appellant through Advocates letter dated 16th April, 10/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:44 ::: 1-arast-93127-2020.doc 2008 returned the cheques sent to them under letter dated 9th April, 2008.
20. The Respondents by their Advocates letter dated 25th April, 2008 replied to the Appellants Advocate's letter dated 9th April, 2008.
21. Thereafter the Arbitral Tribunal comprising of three members was constituted.
22. The pleadings were filed in the arbitral proceedings. It is the Appellants contention that in the statement of claim the Respondents sought a direction against the Appellants to execute and register a Deed of Conveyance of land which includes portion of the Excluded Property against the receipt of balance consideration.
23. One Mr. Chandu Mirani, Mr. Ashwin Vasavada and Mr. Mehul Vasavada filed a Suit against Shree Builder (Sister concern of Respondent No.1), the Appellants, Mr. Ramesh Mehta. The Suit was based on agreement between Shree Builder and Plaintiffs therein in respect of land A. The Appellants share in the larger property was not 11/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:44 ::: 1-arast-93127-2020.doc in question in that Suit. The Appellants filed a say to the Interim Application filed in the aforesaid Suit. It is necessary to note that the Respondents have contended that on account of filing a say in the said Suit, the Appellant has admitted that the Agreement was an Agreement to Sell. The Appellants have disputed the context in which their say was filed by contending that the subject matter of arbitration was different and distinct. The Majority Award has relied upon the Appellants say to arrive at a conclusion that the Agreement was an Agreement to Sell.
24. The Arbitral Tribunal on 11th July, 2009 framed 16 points of disputes. Thereafter, on 26th June, 2010 with consent of parties, the Arbitral Tribunal framed additional points of disputes.
25. On 10th December, 2011, the Majority Tribunal and the Minority Tribunal passed the Majority Award and Minority Minority Award respectively.
26. The Respondents filed the Section 34 Petition in January, 2012 challenging the Majority Award viz. the directions contained in paragraph No.92 (b) and (d) and to modify paragraph No.92(c). 12/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:44 :::
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27. The Application was made under Section 33(4) of the Act on 7th February, 2012 by the Appellants for an additional Award. The Majority Tribunal dismissed the Application under Section 33(4) of the Arbitration Act on 18th February, 2012.
28. The Appellants filed the Section 34 Petition before this Court challenging the Majority Award and Additional Award. This Petition was returned to the District Court. The District Court by order dated 29th March, 2017 dismissed the Appellants Section 34 Petition and allowed the Respondents Section 34 Petition.
29. The Appellants preferred two Appeals under Section 37 of the Arbitration Act in June, 2017 challenging the Order dated 29th March, 2017 before this Court. By an Order of this Court dated 29th June, 2019, the said Order dated 29th March, 2017 was set aside and both the Petitions under Section 34 were remanded for fresh consideration on its own merits.
30. The District Court at Thane by impugned Order dated 25th January, 2020 rejected the Appellants' Section 34 Petition as well as the Respondents' Section 34 Petition and which impugned 13/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:44 ::: 1-arast-93127-2020.doc Order is the subject matter of challenge under Section 37 of the Arbitration Act in the above Appeals before this Court.
31. Mr. Jain, the learned Counsel appearing for the Appellants in Arbitration Appeal (St.) No.93127 of 2020, has submitted that the instant case is governed under unamended Section 34 of the Arbitration Act. This is in view of the applications under Section 34 of the Arbitration Act having been preferred by the parties in the year 2012. Thus, the amended Section 34 which applies to Petitions/Applications filed on or after 23rd October, 2015, will not apply to these applications under Section 34 filed prior to that date. He has in this context placed reliance upon the decision of the Supreme Court in Ssangyong Engineering and Construction V. National Highways Authority of India1 wherein the Supreme Court in paragraph 19 held that, Section 34 of the Arbitration Act as amended will only apply to Section 34 applications that have been made to the Court on or after 23rd October, 2015.
32. Mr. Jain has submitted that the District Court by upholding the Majority Award by the rejection of the Section 34 1 (2019) 15 SCC 131.
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1-arast-93127-2020.doc Petition/application preferred by the Appellants has erroneously exercised equity jurisdiction under Section 28(2) of the Arbitration Act and which is impermissible. Under this provision equity can be exercised by the Arbitral Tribunal only by authorisation of both parties and not otherwise. There was no such authorisation by the parties and hence the Arbitral Tribunal being a creature of the contract has no scope to exercise equity jurisdiction. Ignorance of this mandate renders the Majority Award contrary to Section 28(2) of the Arbitration Act. In this context he has placed reliance upon the decision of this Court in Board of Control for Cricket in India V. Deccan Chronicle Holding Ltd.2 wherein this Court had held that, the Arbitral Tribunal under Section 28(2) is required to decide ex aequo et bono or as amiable composite only if the parties expressly authorise it to do so. The Arbitrator is bound to implement the contractual clauses and cannot go contrary to them. He cannot decide based on his notions of equity and fairness, unless the contract permits it.
33. Mr. Jain has submitted that the Majority Award is in contravention of the terms of the subject Agreement. This is in view 2 Commercial Arbitration (L) No.4466 of 2020 in 2021 SCC OnLine Bom 834. 15/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:44 :::
1-arast-93127-2020.doc of the Majority Award directing the Appellants to execute a sale deed of their 2/9th share in the Larger Property excluding (i) the Appellants' share in the Bungalow, (ii) Garden in front and behind the Bungalow and (iii) one room in Chawl No.1 and open court yard of the said room adjacent to the Bungalow. The subject Agreement specifically excludes the Excluded Property in its entirety. However, this is not excluded by the Majority Tribunal whilst passing the Majority Award. Further, Excluded Property being out of the scope of the Agreement, the same was beyond the scope of the reference to Arbitration. Thus, the Majority Tribunal has exceeded its scope and ventured into areas which are beyond the subject Agreement.
34. Mr. Jain has placed reliance upon the decision of the Supreme Court in the case of ONGC Vs. Saw Pipes3 wherein the Supreme Court in paragraph 31 held that, the Court may set aside the Arbitral Award if the same is against the terms of the Contract or the Arbitral Tribunal deals with matters beyond the scope of arbitration. He has submitted that Excluded Property was beyond the Majority Tribunal's scope of reference and hence on this ground alone, the Award is required to be set aside. He has further relied 3 (2003) 5 SCC 705.
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1-arast-93127-2020.doc upon the decision of the Supreme Court in Delhi Development Authority Vs. R.S. Sharma4 when the Supreme Court in Paragraph 21 held that an Award which is against the terms of the respective contract is open to interference by the Court under Section 34 of the Arbitration Act on the ground of patent illegality.
35. Mr. Jain has submitted that the Majority Award is in contravention of unamended Section 28(3) of the Arbitration Act. It is provided therein that the Arbitral Tribunal shall decide in accordance with the terms of the contract and any award made in violation of the terms of the contract violates this provision. He has in this context placed reliance upon the decision of the Supreme Court in BCCI(Supra) wherein it has been held that no contract can be read in the manner the Award suggests. The Arbitral Tribunal cannot rewrite a major contractual term to arrive at a view that is not even possible.
36. Mr. Jain has submitted that the Majority Tribunal has ignored the specific terms of the subject Agreement and which leads to commission of jurisdictional error. He has submitted that 4 (2008) 13 SCC 80.
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1-arast-93127-2020.doc cumulative reading of Clauses 3, 4 and 5 of the subject Agreement indicates that the Appellants are entitled to further sum by way of additional consideration under the subject Agreement. The Majority Tribunal has ignored the specific clauses of the subject Agreement and rendered the Majority Award. The Majority Tribunal has further ignored that the Respondents had accepted that the consideration under the subject Agreement was variable. Further consideration is to be paid on or before last installment under the subject Agreement. Therefore, it was imperative on the Respondents to have the building plans sanctioned in respect of the subject Property. The Majority Tribunal ought to have rejected the claim contained in the Statement of Claim on the ground of non-performance of material terms of the subject Agreement.
37. Mr. Jain has submitted that the construction / interpretation of subject Agreement adopted by the Majority Tribunal has led to substituting an entire new agreement for the parties, which was never intended by the parties. He has placed reliance upon the decision of this Court in Vilayati Ram Mittal Vs. Reserve Bank of India5 wherein in paragraph 27 this Court has held that the Arbitrator 5 2017 SCC OnLine Bom 8479.
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1-arast-93127-2020.doc being a creature of the contract ignores the specific clause of the Contract, it would be a question of jurisdictional error and his award could be corrected by the Court. He has submitted that the Majority Award is one such case where there is ignorance of material terms of the subject Agreement (on which the consideration is dependent), the Majority Tribunal has committed a jurisdictional error. Thus, the impugned Award of the Majority Tribunal requires correction.
38. Mr. Jain has placed reliance upon Clause 51 of the subject Agreement which contains non-obstante clause and provides that the subject Agreement shall be in super-cession of all prior agreements between the parties and all rights between the parties, inter se, under any prior agreement shall come to an end and are extinguished.
39. Mr. Jain has submitted that the Majority Tribunal has answered the issue as to whether the claimants prove that they have paid Rs.19,50,000/- to the deceased Kantilal and the Respondents had agreed to adjust the same towards consideration of the subject Agreement in the affirmative. The Majority Tribunal has taken into account a prior Agreement between the parties which could not have 19/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:44 ::: 1-arast-93127-2020.doc been taken into account. By virtue of Clause 51 of the subject Agreement, all rights of the parties inter se under the prior Agreement came to an end and were extinguished. Thus, the Majority Tribunal has acted beyond the terms of the contract and there is misapplication of mind on the part of the Majority Tribunal. He has in this context relied upon the decision of the Supreme Court in Vilayati Ram Mittal (supra).
40. Mr. Jain has submitted that the Majority Award has inspite of granting specific performance to the Respondent also awarded the alternative claim for damages raised by the Respondents for a sum of Rs.23,21,19,982/- on the basis of loss of business profits. This is solely based on the speculation that in the event of the superior Court reversing the finding of specific performance granted in favour of the Respondents, they are entitled to a sum of Rs.23,21,18,982/- towards the grant of damages.
41. Mr. Jain has submitted that the Majority Tribunal has failed to consider that the Respondents had not produced any evidence to support and / or justify the sum of Rs. 35,00,00,000/-as loss of business profits. The Respondents have not substantiated its 20/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:44 ::: 1-arast-93127-2020.doc claim for damages. The Respondents had in the Statement of claim claimed a sum of Rs.41,46,49,688/- in the alternative towards grant of damages in the event of refusal of decree of specific performance. Thus, the Majority Award without any basis for grant of damages by way of loss of business profits awarded the sum to the Respondents. He has submitted that this is contrary to Section 73 of the Indian Contract Act, 1872. The said provision mandates that damages are required to pleaded as well as proved. Having failed to do so, the Majority Tribunal in granting damages has acted contrary to the fundamental policy of Indian Law. Mr. Jain has placed reliance upon the decisions of the Supreme Court and this Court in support of the above submission which are as under:-
(i) Anila Gautam Jain Vs. Hindustan Petroleum Corporation Ltd. (2018) SCC OnLine Bom 917.
(ii) Murlidhar Chiranjilal Vs. Harishchandra Dwarkadas and Anr., AIR 1962 SC 366.
(iii) Basanlingappa V. Mudibasappa, (2019) 5 SCC 418.
(iv) Punj Lloyd V. IOT, Arbitration Petition No.1323 of 2012.
(v) Kailash Nath Associates V. DDA, (2015) 4 SCC 136.
42. Mr. Jain has accordingly submitted that the Majority Award suffers from patent illegality as it has awarded damages to the 21/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:44 ::: 1-arast-93127-2020.doc Respondents without any proof of damages caused to the Respondents. He has submitted that this alternative claim awarded is materially severable and the same ought to be set aside. He has relied upon the decision of this Court in R.W. Tiwari Vs. Ircon International Limited 6 in this context.
43. Mr. Jain has submitted that the Majority Award has interpreted the subject Agreement to be an Agreement to Sell the subject property which finding is an impossible interpretation. This is contrary to the terms of the subject contract. He has submitted that the value of the subject Agreement is Rs.2,28,75,000/- and the stamp duty paid thereon is Rs.2,29,000/- (approximately 1% of Rs.2,28,75,000/-). At the contemporaneous period, the stamp duty leviable / payable on Development Agreement was quotient at 1% of the value of the Agreement. Stamp Duty of 5% of the value of the Agreement was attracted in case if the agreement in question was Agreement to Sell or Agreement to Sale or conveyance, as the case may be. In the instant case, the parties intended and understood the Agreement to be one for Development.
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44. He has submitted that the Majority Award refers to Clause 16 of the subject Agreement and holds that only in case of Agreement to Sell does the obligation to make out a marketable title arise. This overlooks the obligation of the Appellants in the subject Agreement to make out marketable title to the Respondents in respect of the subject property to ensure that they have the right to transfer the development right in favour of the Respondent.
45. Further, the Majority Award by observing that the possession of the subject property does not go back to the Appellants, interpreted the subject Agreement to be an Agreement to Sell. This overlooks the obligation under the subject Agreement being that upon post construction of the Project proposed, the land was to be conveyed to the Co-Operative Housing Society so that the question of gaining back the possession does not arise. Further, the obligation of the Respondents to bear costs of development in consideration of Appellants permitting the Respondents to sell the flats or shops to be constructed in the proposed building could never have been the basis in the Majority Award to arrive at a conclusion that the Agreement in question is an Agreement to Sell. Further, payment of taxes or cess, by no stretch of imagination will suggest that the Appellants agreed 23/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 ::: 1-arast-93127-2020.doc to sell the subject Property. In any event, the payment of property taxes is a matter of exercise of prerogative of the parties and the Respondents undertook to pay the same during the period of construction.
46. Mr. Jain has submitted that the reliance placed by the Majority Award on the say of the Appellant No.1 in a Suit filed by Chandu Mirani and two others is baseless. The context in which the say was filed and the subject matter of the Arbitration were different and distinct. The Suit was for specific performance against the sister concern of the Respondents. The Majority Award has erroneously relied upon the say to arrive at a conclusion that the Agreement was an Agreement to Sell. This overlooks the settled position that a party is not bound by the admission given in his pleading except for the purpose of the Suit in which the pleading is delivered. He has in this context placed reliance upon the decision of Ramabai Shriniwas Nadgir Vs. The Government of Bombay7.
47. Mr. Jain has submitted that the Majority Award has failed to consider the breach committed by the Respondents of the 7 AIR 1941 Bom 144.
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1-arast-93127-2020.doc subject Agreement on account of default in payment of installments and which dis-entitled the Respondents to specific performance of the subject Agreement. He has submitted that the Majority Award has observed that despite the 1st to 6th installments never being paid on time as per the subject Agreement, the Appellants accepted it without raising any dispute or protest that the same were being received without prejudice to their rights under the Agreement. Further, the Majority Award has held that since the Appellants failed to issue a notice in terms of Clause 7 of the subject Agreement and offer a period of 30 days to remedy the breach, no breach can be held to have committed by the Respondents.
48. Mr. Jain has submitted that no part of the subject Agreement can be read in isolation to interpret the terms thereof. He has placed reliance upon the decision of the Supreme Court in South East Asia Marine Engineering and Construction Ltd. V. Oil India Ltd. 8, wherein the Supreme Court observed that a wide interpretation cannot be accepted and the thumb rule of interpretation is that a document should be read as a whole and so far as possible as mutually explanatory.
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49. Mr Jain has submitted that cumulative reading of all other clauses including Clauses 52 and 53 of the subject Agreement would reveal that time was the essence of the subject Agreement. Further, a part payment of the installment shall constitute a default and in case if there is a default in payment of any installment on the due date, the subject Agreement will come to an end along with rights of the parties. Clause 52 is a non-obstante clause. Clause 52 of the subject Agreement has overriding effect and will prevail over all other Clauses of the Agreement. He has in this context relied upon the decisions of the Supreme Court in Chandavarkar Sita Ratna Rao Vs. Ashalata Guram9.
50. Mr. Jain has accordingly submitted that the interpretation adopted by the Majority Tribunal is perverse. The Majority Tribunal ought to have considered Clause 52 along with the non-obstante provision contained therein which would only lead to logical conclusion that the breach committed by the Respondents entailed into putting an end to the subject Agreement.
51. Mr. Jain has submitted that the Respondents are not 9 (1986) 4 SCC 447.
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1-arast-93127-2020.doc ready and willing to perform their part of the subject Agreement and which is borne out from the fact that none of the installments were paid on the due date of the subject Agreement. A party insisting on performance has to perform its part unconditionally and as per the terms of the contract and shall be ready and willing to perform until the date of the Decree. No conditions can be attached or insisted by a party who is seeking performance of the Contract. In the instant case, the Respondents by letter dated 27th March, 2008 had made their performance subject to a condition to have conveyance of the subject Property in its favour. The Respondents had recorded that the payment towards the last installment was ready and attached a condition to execute necessary documents to complete the transactions. This is impermissible. The Respondents cannot attach any condition much less the present one to perform the subject Agreement.
52. Mr. Jain has submitted that in the Statement of Claim the Respondents have pleaded that it is ready and willing to pay the entire balance in one stroke, if the Appellants are agreeable to execute and register a Deed of Conveyance of the Appellants Property.
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53. This was contrary to the terms of the Agreement. The readiness and willingness have to be exhibited in respect of the entire agreement. A party cannot choose not to perform or deny its performance of the Agreement in its entirety. Further, the Respondents have not expressed their readiness and willingness to pay the additional consideration which is a material clause in the subject Agreement. This tantamounts to a breach of the subject Agreement.
54. Mr. Jain has submitted that an application had been preferred by the Appellants for seeking as additional Award under Section 33(4) of the Arbitration Act on the ground that the Majority Award had not passed any direction with respect to payment of additional consideration. The Application was summarily dismissed by the Arbitral Tribunal on the ground that it was barred by limitation relying on Section 33 of the Arbitration Act. However, the Majority Tribunal upon dismissing the application on ground of limitation had also considered the merits of the Application. This is an error committed by the Majority Tribunal. The Majority Tribunal ought not to have decided the Application seeking additional award in a composite manner. He has placed reliance upon unreported 28/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 ::: 1-arast-93127-2020.doc judgment in Kotak Mahindra Bank Vs. R.C. Shah10, wherein this Court held that dealing with application for condontion and the merits of the main application at one and the same time, is liable to result in a situation where a litigant may have a justifiable apprehension that the view taken by the Tribunal on merits has coloured its view on the issue of whether sufficient cause has been shown. This practice is best avoided. He has accordingly submitted that the Majority Tribunal committed grave error in deciding the merits of the Application as well as assessing grounds seeking condonation of delay together. This led to influencing the Majority Tribunal in assessing the prayer seeking condonation of delay on standalone basis.
55. Mr. Jain has submitted that the Majority Tribunal has erroneously relied upon Section 5 of the Arbitration Act to observe that the same will not allow the Tribunal to extend the period prescribed under the Act. Section 5 of the Act deals with the scope of judicial intervention. This is not applicable to the Arbitral Tribunal. Under Section 43 of the Act, the provisions of the Limitation Act, 1963 are made applicable to the proceedings before the Arbitral 10 Writ Petition (L) No.2886 of 2011 dated 23rd January, 2012. 29/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 :::
1-arast-93127-2020.doc Tribunal as if the same were Court proceedings. Thus, Section 5 of the Limitation Act, 1963 is applicable under the instant case. The Majority Tribunal ought to have applied the benefit of Section 5 of the Limitation act, 1963 in order to meet the ends of justice. Accordingly, the additional Award is ill-founded. Further, the additional Award is bad on non-compliance of Section 31 of the Arbitration Act as it is only signed by the two members of the Tribunal and there is non-signing of the third member. An Award which is contrary to the provisions of the Act is illegal and cannot be sustained.
56. Mr. Jain has also submitted that the impugned Order of the District Court which has upheld the Majority Award has failed to appreciate the true purport of the subject Agreement. He has adopted the above submissions with regard to challenge of the impugned order of the District Court to the Majority Award.
57. Mr. Jain has submitted that it is settled law that an objection as to jurisdiction of the Arbitral Tribunal which deals with the subject matter of the dispute beyond the Agreement can be raised at the stage of Section 34 of the Arbitration Act even if not raised 30/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 ::: 1-arast-93127-2020.doc under Section 16 of the Arbitration Act and the Court shall be empowered to entertain the objection under Section 34 of the Act. Further, assuming that such objection was not taken at the stage of Section 34 of the Act but under Section 37 of the Act, the Court entertaining an Appeal under Section 37 of the Act can interfere invoking powers under Section 34(2A) of the Act with the Arbitral Award on that ground. Thus, it is submitted that the parameters / grounds available under Section 34 against the Arbitration Award are equally available to the Court exercising powers under Section 37 of the Arbitration Act. He has accordingly submitted that this Court set aside the impugned Order passed by the District Court, Thane which has upheld by the Majority Award and dismissed the CMA No.76 of 2013 which was filed by the Appellant under Section 34 of the Arbitration Act, Further, the Majority Award as well as additional Award of the Arbitral Tribunal requires to be set aside.
58. Mr. Girish Godbole, the learned Senior Counsel appearing for the Respondents has submitted that the Appellants have made submissions in respect of the Area of Bungalow Excluded Area and the Larger subject Property when there is no pleading in respect of the same in the CMA No.76 of 2013 filed by the Appellants 31/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 ::: 1-arast-93127-2020.doc before the District Court, Thane under Section 34 of the Arbitration Act and neither the same has been argued before the District Court. He has submitted that however considering scope and jurisdiction of the Court under Section 37 of the Arbitration Act, the said factual aspects cannot be considered by this Court in absence of common pleading to that effect.
59. Mr. Godbole has submitted that the Respondents restrict their claim to the 1/3rd plus 1/9th share as acquired from the heirs of Madhukant and Vyomesh respectively and that it is true that the Respondents have acquired proportionate rights and interest in the Bungalow property. Further, while the Respondents were granted development rights only of the subject property, the Respondents have not relinquished their 1/3rd plus 1/9th right in the Bungalow property. However, the Respondents have undertaken to respect the right of undisturbed possession of the Bungalow of the Appellants.
60. Mr. Godbole has submitted that the Respondents do not at this time wish to partition or claim their 2/9th share in the Bungalow and other excluded property. However, they seek to retain their rights and interest in the land below the Bungalow for future. 32/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 :::
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61. Mr. Godbole has submitted that in respect of alleged default in payment of installments from the 7th to the 10th installment and time being the essence in respect of those payments, the Appellants have admitted that there has been no written complaints or issuance of any demand notice / reminder or a legal notice in respect of any balance payment. This is borne from the cross examination of Upendra Thanawalla, witness for the Appellants. The Appellants have also admitted that there is no documentary evidence to show that they have returned the 7th and 8th installment cheques to the Respondents herein. Therefore, these admissions, coupled with the clear findings of the District Judge under Section 34 of the Arbitration Act that no notice of any nature whatsoever in respect of default in payment was issued by the Appellant herein concludes that there was a breach on part of the Appellants, sine they failed to issue a reminder notice of 15 days as stipulated under Clause No.7 of the said Agreement.
62. Mr. Godbole has submitted that there is no dispute in so far as payment of the 1st to 6th installments by the Respondents are concerned. The Arbitral Tribunal considered that before issuance of termination notice by the Appellants, the Respondents issued cheque 33/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 ::: 1-arast-93127-2020.doc of Rs.34,75,000/- (7th and 8th installment together) on 10th October, 2007. The receipt of which has been acknowledged by the Appellants. Further, the 9th installment of Rs.17,37,500/- was sent by RPAD on 27th March, 2008. He has submitted that all the cheques were issued before the issuance of the Termination Notice. Further, the finding of the Arbitral Tribunal in paragraph 66 of the Arbitral Award is that the Respondents have paid Rs.19,50,000/- to Upendra Thanawalla and his father. The Respondents by Advocates notice dated 25th April, 2008 have indicated to the Appellants herein that amount of Rs.19,50,000/- paid in cash would be adjusted against the last installment (10th installment) to be paid as per the Agreement. Accordingly, the Arbitral Tribunal as well as District Court have held that the Respondents have always been ready and willing to pay its consideration in entirety.
63. Mr. Godbole has submitted that the contingencies of payment of installments and conveyances was depending upon three scenarios. In any case, the first condition / contingency has been fulfilled by the Respondents since they had acquired shares of the other co-owners by Deeds of Conveyance. Further, only one of the conditions amongst the others could have been fulfilled. He has 34/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 ::: 1-arast-93127-2020.doc submitted that while execution of the conveyance on a standalone basis on fulfillment of only one condition, while the condition of getting conveyance from the co-owners was fulfilled, only one of the other conditions that is obtaining sanctioned plans or obtaining conveyance from other owners could have been fulfilled and accordingly has been fulfilled. He has submitted that the Respondents are unable to apply for sub division of the subject property in absence of a valid conveyance in their favour free from encumbrances. Further, the Respondents could not apply for sanction of building plans in respect of construction permissions since the Respondents, till date, do not hold a clear and marketable title of the subject property due to the litigation pending on the subject property.
64. Mr. Godbole has submitted that even after arbitral award was passed, the Appellant herein had filed application for passing of an additional award to include and / or issue further clarification upon the rights of the Appellants herein regarding the increase in FSI and allied rights. This application was rejected and an Appeal has not been filed against the said decision. The decision has thus attained finality.
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65. Mr. Godbole has submitted that the subject Agreement is an Agreement to sell. At all places except one, the Appellants herein are described as 'Vendor'. The Arbitral Tribunal has also held that though the Agreement is titled as a Development Agreement, it is indeed an Agreement for Sale. He has submitted that if it were a Development Agreement, conveyance would not be envisaged under the Agreement. Further, it would have contained relevant clauses for handing over a part of the Development property and / or percentage in profit and loss sharing.
66. Mr. Godbole has submitted that Clause 3 of the subject Agreement specifically determines the consideration of the property for Rs.2,28,75,000/- at price of Rs.915/- Sq.ft and further in case of increase in FSI, the consideration will proportionately increase or decrease. This clause clearly stipulates the intention of the parties that the full price of the share of the land holders is required to be paid to them. Further, under Clause 37 of the subject Agreement for Sale, complete authority to execute the conveyance is given to the purchasers and infact the purchasers has been given the power to execute the conveyance as certified attorney of the Vendors. This clause clearly indicates that the purport and nature of the instrument 36/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 ::: 1-arast-93127-2020.doc is not a Development Agreement but an Agreement for Sale and it is a settled law that the heading or the bare words of an agreement or instrument do not conclude the nature of the Agreement and the Agreement as a whole is required to be considered the understand the true nature and intention of the parties. He has submitted that the taxes on the property are being paid by the Respondents under Clause 26 of the subject Agreement. Mr. Godbole has submitted that the Appellants have admitted in their say in SCS No.445 of 2008 that they have agreed to sell the property to the Respondents. The said say is filed in July, 2008, which is 4 months after the date of notice of termination sent by the Appellants and therefore, this admission, later in time also fortifies the stand of the Respondents that this is an Agreement for Sale.
67. Mr. Godbole has submitted that it is well settled by the Supreme Court in Haryana Tourism Ltd. Vs. Kandhari Beverages Ltd.,11 that under Section 37 of the Act, the Court cannot enter into merits of claim. The Award can only be set aside under Sections 34 / 37, only if award is found to be contrary to :- (i) fundamental policy of Indian law; (ii) the interest of India; (iii) justice or morality or (iv) 11 (2022) 3 SCC 237.
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1-arast-93127-2020.doc if it is patently illegal.
68. Mr. Godbole has also placed reliance upon the decision of the Supreme Court in Parsa Kente Collieries Ltd. Vs. Rajasthan Rajya Vidyut Utapadan Nigam Ltd.12, wherein the Supreme Court has upon referring to its earlier decisions held that the Arbitral Tribunal must decide in accordance with the terms of the contract, but if an Arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground. 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. He has submitted that in the present case, the Arbitral Tribunal has considered the terms of the contract in a reasonable manner and hence the award is not liable to be set aside.
69. Mr. Godbole has also relied upon the decision of the Supreme Court in UHL Power Company Ltd. Vs. State of Himachal Pradesh13, wherein the Supreme Court has held that the jurisdiction conferred on Courts under Section 34 of the Arbitration Act is fairly narrow. When it comes to the scope of an appeal under Section 37 of 12 (2019) 7 SCC 236.
13 (2022) 4 SCC 116.
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1-arast-93127-2020.doc the Arbitration Act, the jurisdiction of an Appellate Court in examining an Order, setting aside or refusing to set aside an award, is all the more circumscribed. Further, the Supreme Court has held that if there are two plausible interpretations of the terms and conditions of the contract, then no fault can be found, if the learned Arbitrator proceeds to accept one interpretation as against the other.
70. Mr. Godbole has further relied upon the decision of the Supreme Court in Reliance Infrastructure Ltd. Vs. State of Goa14, wherein the Supreme Court has in the context of the scope of challenge to an arbitral award under Section 34 and the scope of appeal under Section 37 of the Act referred to its decision in MMTC Ltd. Vs. Vedanta Ltd.15 wherein it is held that it cannot be disputed that interference under Section 37 of the Act cannot travel beyond restrictions laid down under Section 34. The Court cannot undertake an independent assessment of the merits of the award and must only ascertain that the exercise of power by the Court under Section 34 has not exceeded the scope of the provision. The Supreme Court in Ssangyong Engg. & Construction Co. Ltd. Vs. NHAI 16 has held that 14 2023 SCC OnLine SC 604 15 (2019) 4 SCC 163 16 (2019) 15 SCC 131 39/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 ::: 1-arast-93127-2020.doc patent illegality appearing on the face of the award, refers to illegality as going to the root of the matter but which does not amount to a mere erroneous application of the law. Re-appreciation of evidence cannot be permitted under the ground of patent illegality appearing on the face of the Award.
71. Mr. Godbole has submitted that the impugned order as well as the Majority Award in so far it has been challenged by the Appellants in the above Arbitration Appeal (St.) No.93127 of 2020 does not suffer from any patent illegality or perversity or is liable to be set aside on any of the grounds of challenge under Section 34 of the Arbitration Act.
72. Mr. Godbole has also made submissions with regard to Arbitration Appeal (L) No.93127 of 2020 which has been preferred by the Respondents herein / Appellants in the said Arbitration Appeal.
73. Mr. Godbole has submitted that the exercise of discretion under Section 20 of the Specific Relief Act, 1963 by Court in the matters of passing of decree of specific performance cannot be used 40/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 ::: 1-arast-93127-2020.doc to the prejudice of an honest vendee, who was always ready and willing to perform his part of the contract, and has not committed any breach of the contract and who was forced to approach the Court for seeking specific performance on account of wrongful termination of the contract by the Vendor. He has submitted that learned District Judge has completely overlooked this principle of settled law regarding exercise of powers conferred under the Specific Relief Act, 1963.
74. Mr. Godbole has submitted that the Supreme Court in Nirmala Anand Vs. Advent Corporation Ltd. 17 in paragraph 6 has held that whether the purchaser is directed to pay an additional amount to the seller, or converse, would depend upon facts and circumstances of each case and while balancing the equities, the Court must bear in mind who is the defaulting party.
75. Mr. Godbole has submitted that the learned District Judge and the Arbitral Tribunal ought to have seen that power to award enhanced compensation to a defaulting vendor was essentially a power which is neither vested with the Arbitral Tribunal nor with 17 (2002) 8 SCC 146 41/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 ::: 1-arast-93127-2020.doc the Civil Court or the High Court.
76. Mr. Godbole has submitted that Arbitral Tribunal and learned District Judge has completely misconstrued the ratio of the Supreme Court judgment in the case of Gobind Ram Vs. Gian Chand18. The judgment does not lay down a binding precedent, nor does it hold that it is permissible for the Court to rewrite the contract. In that case, the Respondent Vendee had voluntarily agreed to pay additional amount of Rs.1 lakh to mitigate hardship which is caused to the vendor in that case on account of the escalation in prices and hence the additional compensation was increased to Rs.3 lakh. This, at the highest, can be construed to be passed in exercise of jurisdiction under Article 142 of the Constitution of India and does not lay down any binding precedent.
77. Mr. Godbole has submitted that the learned District Judge and Arbitral Tribunal has not considered the admitted fact that the Claimant / Respondent herein has paid more than 82.03% of the agreed consideration before initiation of the Arbitral Proceedings and the omission to consider the said aspect while awarding additional 18 2009 (7) SCC 548 42/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 ::: 1-arast-93127-2020.doc amount to be paid by the claimant is erroneous. He has submitted that the learned District Judge ought to have considered this admitted fact whilst arriving at a figure of Rs.5490/- per square feet allegedly payable by the Respondent herein to the Appellants herein. Further, there was neither cogent evidence to support this rate nor reasons were given by the Arbitral Tribunal as to how this rate was arrived in paragraph 83 of the Award which has been upheld by the learned District Judge. This is despite the Arbitral Tribunal noting that at the time of execution of the agreement in question the rate was Rs.915/- per square feet for total area of 25,000 sq.ft. Thereafter, without assigning any reasons as to why the Claimant / Respondents herein have been directed to pay the additional amount, particularly when the Claimant / Respondents herein had not committed any breach of the Agreement, the Arbitral Tribunal had held that the Claimant / Respondents herein should pay six times of that amount viz. Rs.5,490/- per square feet. This finding of the Arbitral Tribunal was required to be modified and set aside by the learned District Judge.
78. Mr. Godbole has submitted that there is no justification for giving unnecessary bonanza to the Appellants herein, particularly 43/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 ::: 1-arast-93127-2020.doc after holding that the Appellants herein have committed breaches. Thus, the Arbitral Tribunal could not have directed the Respondents herein to pay additional price for the entire area.
79. Mr. Godbole has submitted that the impugned part of the Award whereby the Arbitral Tribunal have directed payment of additional consideration to a party who has committed breach, is contrary to the public policy established in India.
80. Mr. Godbole has submitted that the Court is empowered to partly modify an Award while exercising power under Section 34 and 37 of the Arbitration Act and has placed reliance upon the decision of Poysha Oxygen Pvt. Ltd. Vs. Ashwini Suri and Ors. 19 paragraph 36 and 37 as well as the decision in Star Track Fasteners Pvt. Ltd. Vs. Union of India20 wherein it has been held that the Court can modify the Award if such part is severable.
81. Mr. Godbole has accordingly submitted that the Arbitration Appeal (St.) No.5662 of 2020 be allowed and the impugned order as well as the Arbitration Award which directs 19 2009 (112) DRJ 169 20 (2019) SCC OnLine Bombay 1453 44/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 ::: 1-arast-93127-2020.doc payments of additional consideration by the Respondents herein to the Appellants herein requires to be set aside.
82. Mr. Jain has submitted that in view of the submissions in Arbitration Appeal (St.) No.93127 of 2020 that the impugned award itself is perverse and suffers from patent illegality and contrary to public policy of India, the impugned award itself is required to be set aside and cannot be severable and hence there is no merit in the Arbitration Appeal (St.) No.5662 of 2020.
83. Mr. Jain has submitted that in any event it is well settled that the Arbitral Tribunal cannot modify an arbitral award and there are only two options viz. either to set aside the award or to uphold the Award. Thus, there is no merit in the Arbitration Appeal (St.) No.5662 of 2020 which seeks modification of the arbitral Award by seeking a deletion of the additional amount to be paid by the Claimants / Respondents herein to the Appellants which this Court under Section 37 of the Arbitration Act has no power to do so.
84. Having considered the rival submissions in Arbitration Appeal (St.) No.93127 of 2020, it would be necessary to first 45/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 ::: 1-arast-93127-2020.doc consider the objection taken by Mr. Godbole on behalf of the Respondents that the Section 37 Court cannot consider the challenge to the jurisdiction of the Arbitral Tribunal in dealing with the subject matter of the dispute beyond the Agreement without there being any pleading or ground raised in the Section 34 Petition. The Appellants have contended that the Bungalow and other areas defined as "Excluded Area" in the subject Agreement has been taken into consideration by the learned Arbitrator although not being the subject matter of dispute. In this context it is necessary to refer to the decision of the Supreme Court in State of Chhattisgarh (Supra) which has been relied upon by Mr. Jain on behalf of the Appellants, in particular paragraph 23, which reads thus:-
"23. We are afraid, the plea of waiver taken against the appellant-State on the ground that it did not raise such an objection in the grounds spelt out in the Section 34 Petition and is, therefore, estopped from taking the same in the appeal preferred under Section 37 or before this Court, would also not be available to the respondent-Company having regard to the language used in Section 34(2A) of the 1996 Act that empowers the Court to set aside an award if it finds that the same is vitiated by patent illegality appearing on the face of the same. Once the appellant-State had taken such a ground in the Section 37 petition and it was duly noted in the impugned judgment, the High Court ought to have interfered by resorting to Section 34(2A) of the 1996 Act, a provision which would be equally available for application to an appealable order 46/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 ::: 1-arast-93127-2020.doc under Section 37 as it is to a petition filed under Section 34 of the 1996 Act. In other words, the respondent-Company cannot be heard to state that the grounds available for setting aside an award under sub-section (2A) of Section 34 of the 1996 Act could not have been invoked by the Court on its own, in exercise of the jurisdiction vested in it under Section 37 of the 1996 Act. Notably, the expression used in the sub-rule is "the Court finds that". Therefore, it does not stand to reason that a provision that enables a Court acting on its own in deciding a petition under Section 34 for setting aside an Award, would not be available in an appeal preferred under Section 37 of the 1996 Act.".
85. Thus, it is clear from the decision of the Supreme Court that the contention that a specific ground had not been raised in Section 34 Petition and Appellant was estopped from taking the same in the Appeal preferred under Section 37 of the Act or before this Court has not been accepted. The Supreme Court has held that it does not stand to reason that the provision viz. Sub-Section 2(A) of Section 34 of the Arbitration Act which enables a Court acting on its own in deciding a Petition under Section 34 for setting aside an Award would not be available in an Appeal preferred under Section 37 of the 1996 Act.
86. Accordingly, I do not find any merit in the contention of Mr. Godbole that jurisdictional error not having been pleaded in the 47/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 ::: 1-arast-93127-2020.doc CMA No.76 of 2012 filed by the Appellants before the learned District Judge cannot be raised before this Court under Section 37 of the Arbitration Act. Hence it would be necessary to consider whether there is such a jurisdictional error on the part of the Majority Tribunal which renders the majority award as being patently illegal.
87. I have perused the relevant clauses of the subject Agreement and in particular Clause 47 thereof which provides that the Respondents will have no right, title, claim or interest in the 'Excluded Property'. The Respondents have also relinquished their right, title and interest over the 'Excluded Property' in favour of the Appellants. This 'Excluded Property' included the subject Bungalow. However, it is noted that prayer sought by the Respondents in the Statement of claim included the 'Excluded Property'. Thus, the Majority Tribunal in granting such claim has acted beyond the specific terms of the subject Agreement.
88. Further, a cumulative reading of Clauses 3, 4 and 20 indicates an entitlement of the Appellants to an additional consideration under the subject Agreement. The Appellants are entitled to additional sums under these Clauses. The Majority 48/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 ::: 1-arast-93127-2020.doc Tribunal has ignored these specific clauses of the subject Agreement and rendered the Majority Award. The Appellants became entitled for additional consideration in respect of increase of FSI, consideration in respect of construction of basement if proposed and FSI towards land held by the Appellants on account of adverse possession.
89. Further, it is relevant to note that the execution of conveyance could have only been awarded provided the conditions to execute the Deed of Conveyance had been complied with. There were three pre-conditions namely (i) Conveyance of the subject property will be executed along with the conveyance of the properties of the other owners i.e. Vyomesh, Madhukant's heirs share; (ii) time for conveyance will arrive after the project is fully constructed and (iii) all installments and amounts are paid to the Appellants under the subject Agreement. It appears that neither of these conditions stipulated under the subject Agreement were fulfilled. Thus, the obligation to execute Deed of Conveyance had not yet arrived. Further, the determination of the consideration under the conveyance would necessarily depend upon the additional amounts which the Appellants are entitled to receive as aforementioned. Thus, the consideration itself was variable under the subject Agreement. This 49/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 ::: 1-arast-93127-2020.doc would necessarily depend upon the project being constructed and without determination of such entitlement, in my view the Majority Award could not have directed the execution of a sale deed by Appellants in favour of the Respondents. This is in contravention of the terms of the subject Agreement.
90. There is much merit in the submissions of Mr. Jain that the instance case is covered under the unamended Section 34 of the Arbitration Act, particularly since the application under Section 34 of the Act were in the year 2012. It has been held by the Supreme Court in the case of Ssangyong Engineering (Supra) that amended Section 34 of the Arbitration Act will apply to the Petitions / Applications which are filed on or after 23rd October, 2015. Thus, the decision of the Supreme Court in ONGC Vs. Saw Pipes (Supra) which decision was prior to the amended Section 34 is applicable to the present case. The Supreme Court holds that a Court may set aside the Arbitral Award if the same is against the terms of the contract or the Arbitral Tribunal deals with matters beyond the scope. Further, the Supreme Court in Delhi Development Authority (Supra) has held that the Award which is against the terms of the respective contract is open to interference by the Court under Section 34 of the Arbitration 50/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 ::: 1-arast-93127-2020.doc Act on the ground of patent illegality. When a contract bars / prohibits a particular claim, any award made in violation of the terms of the contract would violate Section 28(3) of the Arbitration Act, thereby rendering the award patently illegal and liable to be set aside under Section 34(2)(b) of the Act. Further, if the Award is found to be patently illegal, the same would be opposed to public policy.
91. Further, this Court in the case of Vilayati Ram Mittal (Supra) has held that the Arbitrator being a creature of the Contract ignores a specific clause of the contract, it would be a question of jurisdictional error and his award could be corrected by the Court.
92. In Board of Control for Cricket in India(Supra) this Court held that the Arbitral Award must decide in accordance with the terms of the contract. The decision of the Supreme Court in Associate Builders was relied upon and the Caveat entered therein that if the arbitral tribunal interprets the contract in a reasonable manner, there is no patent illegality. Further, it has been held by this Court in the said decision that no contract can be read in the manner the Award suggests. It is not possible for an Arbitral Tribunal to re-write a major contractual term to arrive at a view that is not even possible. 51/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 :::
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93. In my view in the instant case, the Majority Award has not interpreted the contract in a reasonable manner and by ignorance of material terms of the subject Agreement, the Majority Tribunal has committed jurisdictional error.
94. Further, the Majority Tribunal Award ought to have considered Clause 51 of the subject Agreement which is a non- obstante Clause which provides that the subject Agreement is in super-cession of all prior Agreements between the parties including the M.O.U. and that all rights between the parties, inter se, under any prior Agreement shall come to an end and are extinguished. The Majority Award having framed an issue viz. whether the Claimants prove that they have Rs.19,50,000/- to deceased Kantilal and the Respondents and that they had agreed to adjust the same towards the consideration of the subject Agreement and answering the issue in the affirmative, is yet one instance where the Majority Tribunal has held contrary to the terms of the subject Agreements. This in view of the agreement which existed during the lifetime of Kantilal was no longer in existence by virtue of Clause 51 of the subject Agreement.
95. I also find much merit in the submission of Mr. Jain that 52/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 ::: 1-arast-93127-2020.doc the grant of damages on account of alleged loss of business profits by the Majority Tribunal is against the weight of evidence before it rendering the Majority Award patently illegal. It has been held by the Supreme Court and this Court in the decisions relied upon by Mr. Jain that no damages shall be awarded unless the party claiming loss has pleaded and proved the extent of damages suffered by it. There is also a duty imposed on that party to take all reasonable steps to mitigate the loss consequent on the breach and debars him from claiming any part of the damage which is due to his neglect to take such step. In the present case the Majority Award inspite of there being no proof of damages by the Claimants / Respondents herein has granted damages to the Respondents herein. Further, the Majority Award inspite of granting specific performance of the subject agreement to the Claimants / Respondents herein have also granted damages which was an alternate claim of the Claimants/Respondents herein. Thus, the awarding of damages by the Majority Award is contrary to the fundamental policy of India Law.
96. I further find that the Majority Award has not arrived at any plausible interpretation of the subject Agreement by considering 53/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 ::: 1-arast-93127-2020.doc it to be an Agreement to Sell rather than Development Agreement. It has been held by the Supreme Court in Rajendra Lalitkumar Agrawal Vs. Ratna Ashok Murangan and Anr.21 in paragraphs 10 and 11 that interpretation of document constitutes a substantial question of law, more so when the parties admit the document. This was in the context of Second Appeal under Section 100 of the Code of Civil Procedure, 1908. However, the ratio laid down in the said decision would be applicable to the present matter. It has also been held by the Constitution Bench of the Supreme Court in Sir Chunilal V. Mehta and Sons Ltd. Vs. Century Spinning and Manufacturing Col Ltd. 22, that construction of a document which is the foundation of the rights of the parties necessarily raises a question of law.
97. In the present case the finding in the Majority Award that the subject Agreement is an Agreement to Sell is in my considered view erroneous in law. The subject Agreement having been stamped at 1% of the value of the Agreement which at the contemporaneous period, was the stamp duty leviable / payable on Development Agreement would show that the parties have treated the subject Agreement as a Development Agreement. The Majority 21 (2019) 3 SCC 378.
22 AIR 1962 SC 1314 54/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 ::: 1-arast-93127-2020.doc Tribunal has erred in holding that only in the case of an Agreement to Sell does the obligation to make out the marketable title will arise. In the instance case the Appellants were obligated to make out marketable title to the Respondents in respect of the subject property to ensure that they have a right to transfer the development right in favour of the Respondents.
98. Further, the subject Agreement may not have mentioned the defined area on which the development is envisaged. However, that does not result in an inference that the subject Agreement is an Agreement to Sell. In the present case, the area was not defined as the subject property is a part of the larger property which was undivided.
99. The finding of the Majority Tribunal that the possession of the subject property not going back to the Appellants would lead to an inference that the subject Agreement is an Agreement to Sell, is erroneous. The subject Agreement contemplated post construction of the project, the land to be conveyed to the Co-operative Housing Society, so the question of gaining back the possession does not arise. The subject Agreement would have to be read as a whole and not in 55/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 ::: 1-arast-93127-2020.doc a piecemeal manner as sought to be done by the Majority Tribunal. Further, the payment of taxes or cess and cost of development being borne by the Respondent cannot lead to an inference that the subject Agreement was an Agreement to Sell. The Respondents undertook the same during the period of construction.
100. I also do not find any merit in the submission on behalf of the Respondents that there was an admission by the Appellants in the Suit filed by one Chandu Mirani and two others that the subject Agreement was an Agreement to Sell. An admission of a party can be used against the maker in the same proceedings in which it is made. However, a party is not bound by the admission given in his pleadings except for the parties to the Suit in which the pleading is delivered. This has been held in Ramabai Shriniwas Nadgir (Supra).
101. I am of the considered view that, the Majority Award has read Clause 7 of the subject Agreement in isolation by holding that since the Appellants failed to issue notice in terms of Clause 7 of the subject Agreement in case of default of the Respondents in making payment of the installments on the due dates, no breach has been committed by the Respondents. A cumulative reading of other clauses 56/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 ::: 1-arast-93127-2020.doc including Clauses 52 and 53 of the subject Agreement would reveal that the time was of the essence of the subject Agreement. Merely, because the Appellants had not objected to the payment of the first to sixth installment on time under the subject Agreement, that does not result in the Appellants being estopped from raising the contention that the payment under the subsequent installments had not been adhered to by the Respondents.
102. Clause 52 of the subject Agreement is non-obstante and would have an overriding effect, notwithstanding Clause 7 of the subject Agreement. Further, under Clauses 52 and 53, it is provided that a part payment of the installment shall constitute a default and in case if there is a default in payment of any installment on the due date, the subject Agreement will come to an end along with the rights of the parties.
103. In addition to the aforementioned findings, I am of the view that there was lack of readiness and willingness on the part of the Respondents to perform their part of the subject Agreement which has been overlooked in the Majority Award. None of the installments were paid on the due date as per the subject Agreement. 57/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 :::
1-arast-93127-2020.doc Further, the Respondents had attached a condition on making payment of last installment viz. to execute necessary documents to complete the transactions. This was not as per the terms of the contract and hence impermissible. The Respondents have thus not been ready and willing to perform their part of the subject Agreement. Further, the Respondents in the Statement of claim had pleaded that they were ready and willing to pay entire balance in one stroke, if the Appellants were agreeable to execute and register a Deed of Conveyance of the Appellants property. This also displays lack of readiness and willingness on the part of the Respondents to perform the subject Agreement according to its terms. Further, the Respondents have denied their liability to pay additional consideration which they were obliged to pay. The Respondents have also failed to display their readiness and willingness to meet the pre- conditions for conveyance of the property.
104. Mr. Jain has also made submissions on the application for additional award which was dismissed the Majority Tribunal on the merits as well as rejection of prayer for condonation of delay i.e. on limitation. Given the aforementioned findings with regard to the Majority Award being patently illegal and perverse, it is not necessary 58/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 ::: 1-arast-93127-2020.doc to render a finding on the submissions with regard to the additional Award.
105. Mr. Jain has made independent submissions on the learned District Judge failing to consider the ground of challenge in the Appellants Section 34 Petition. Having held the Majority Award to be patently illegal and suffering from perversity, I am inclined to accept the submissions of Mr. Jain that the learned District Judge ought to have considered the grounds in the Section 34 in light of the aforementioned findings, particularly where the Majority Tribunal had exceeded its scope of jurisdiction by awarding claims beyond the subject Agreement. The Majority Award is thus, patently illegal as it strikes at the root of the subject Agreement and shocks the conscious of the Court. Thus, I find that the impugned order passed by the learned District Judge is amenable to set aside in view of it not interfering with the Majority Award which suffers from patent illegality and perversity.
106. Mr. Godbole has cited several judgments on the power of the Court under Section 37 of the Arbitration Act and where this Court as well as the Supreme Court has held that the Court under 59/61 ::: Uploaded on - 05/03/2024 ::: Downloaded on - 06/03/2024 11:27:45 ::: 1-arast-93127-2020.doc Section 37 of the Arbitration Act cannot enter into the merits of the Claim. I am mindful of the law laid down by the Supreme Court and this Court whilst arriving at the aforementioned findings, particularly given the jurisdictional error on the part of the Majority Tribunal in awarding the claim contrary to the terms of the subject Agreement.
107. Thus, the power exercised by this Court is within the parameters of the Section 37 of the Arbitration Act and hence the Majority Award is being set aside in exercise of such powers.
108. Accordingly, the impugned order of the learned District Judge, the Majority Award as well as the order rejecting the Application for Additional Award of the Tribunal impugned in the above Arbitration Appeal, being Arbitration Appeal (St.) No.93127 of 2020 are required to be quashed and set aside.
109. In that view of the matter, submissions of Mr. Godbole in support of the Arbitration Appeal (St.) No.5662 of 2020 seeking severance of part of the Majority Award and modification of that part which awards additional amount to be paid to the Applicants by the Respondents is not required to be considered.
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110. The Arbitration Appeal (St.) No.5662 of 2020 is accordingly disposed of.
111. The Arbitration Appeal (St.) No.93127 of 2020 is made absolute and impugned order dated 25th January, 2020 with Majority Award dated 10th December, 2011 and additional Award dated 18th February, 2012 are set aside.
112. The Arbitration Appeal (St.) No.93127 of 2020 is accordingly disposed of.
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