Bangalore District Court
M/S.Spring Borewells Company vs M/S. Kanyakumari Builders Pvt. Ltd on 30 March, 2021
IN THE COURT OF THE LXXXIII ADDITIONAL CITY CIVIL
AND SESSIONS JUDGE AT BENGALURU CITY [CCH84]
:Present:
Ravindra Hegde, M.A., LL.M.,
LXXXIII Addl. City Civil & Sessions Judge,
Bengaluru
Dated on this the 31st day of March 2021
COM.A.S.No.75/2016
Plaintiff M/s.Spring Borewells Company
Private Limited,
No.41, Cubbon Road,
Bengaluru560001,
Represented by its Director
Sri.K.L.Swamy.
(By Sri.S.S, Advocate)
// versus //
Defendants 1. M/s. Kanyakumari Builders Pvt. Ltd.,
Raheja Chambers,
Linking Road and Main Avenue,
Santacruz (West)
Mumbai400054
Represented by its Director
Mr. Aditya Raheja.
2. Justice T. Jayaram Chouta (Retd)
Presiding Arbitrator,
No.385, 5th Main Road,
11th Cross, RMV II Stage,
Bengaluru560094.
3. Justice V. Jagannathan (Retd)
Arbitrator,
No.221, "Sri Ranga Nivas",
2nd Phase, 2nd Cross, 7th Main,
2
CT 1390_Com.A.S.752016_Judgment .doc
Judicial Layout,
Talaghattaura,
Bengaluru560062.
4. Justice A.J.Sadashiva (Retd)
Arbitrator,
No.672B, 11th Cross, 7th Block West,
Jayanagar,
Bengaluru560082.
5. M/s. L.K.Trust,
No.101, Infantry Road,
Bengaluru560001.
Represented by its Trustees
Sri.K.L.Ramachandra,
Sri.K.L.Srihari,
Sri.K.L.A.Padmanabha,
Sri. K.L.Swamy.
(D.1 by Sri.N.S.K, Advocate,
D.2,D.3 & D.4 - ArbitratorsExparte
D.5 by Sri.A.S.K, Advocate)
Date of Institution of the suit : 30/04/2016
Nature of the suit : Arbitration Suit
Date of commencement of :
recording of the evidence
Date on which the Judgment : 30/03/2021
was pronounced.
: Year/s Month/s Day/s
Total duration
04 11 00
JUDGMENT
This petition U/S.34 of the Arbitration & Conciliation Act is filed by plaintiff praying to set aside the Arbitral Award 3 CT 1390_Com.A.S.752016_Judgment .doc dated 5/2/2016 passed by the learned Arbitrators - defendants No.2 to 4 in the dispute between the plaintiff, defendants No.1 and 5.
2. The case of the plaintiff in brief is as under:
The defendant No.1 is a builder and Plaintiff is the owner of property measuring 31,372 sq.ft bearing No.41, Cubbon Road, Bengaluru and 5th defendant is the owner of land measuring 39,775 sq.ft bearing Corporation No.101 in Infantry Road, Bengaluru. These properties of plaintiff and defendant No.5 were the schedule 'C' property before the learned Arbitral Tribunal. The defendant No.1 is the builder and plaintiff is the Private Limited company represented by its Director in the arbitration proceedings. The defendant No.1 was a claimant in the arbitration proceedings and plaintiff and defendant No.5 were the respondents in the Arbitral Tribunal. The defendant No.5 being a Trust and a separate entity has filed separate petition to set aside the impugned award. The plaintiff and defendants No.1 and 5 entered into MOU dated 8/2/2006 for development of the schedule 'C' property and a public notice was also given by the plaintiff informing the public about its intention in entering into JDA and on 24/8/2006 Dhanalakshmi Bank sent a letter stating that 'C' schedule property is mortgaged to the bank and the defendant No.1 was put a notice about its claim. The defendant No.1 being fully aware of the fact that there was a mortgage of that bank entered into JDA on 16/11/2006 with 4 CT 1390_Com.A.S.752016_Judgment .doc the plaintiff and defendant No.5 for development of 'C' schedule property. In the JDA there is a clause stating that the owners have to clear and discharge any loan liabilities within 30 days and if not cleared then the developer shall discharge the same and the interest free security deposit by the developer to the owner will be increased by such amount. The Power of Attorney was executed by the plaintiff in favour of the defendant No.1 for carrying out various activities and the possession of the land has been handed over for carrying out the work under JDA which was akin to a license to enter the premises. The developer - 1st defendant has not cleared the liabilities of the Dhanalakshmi Bank which was not cleared by the owner within 30 days and the Dhanalakshmi Bank sent a letter on 6/1/2007 calling upon to liquidate the loan amount and restrain them from selling the property and thereafter plaintiff issued notice canceling the GPA dated 16/11/2006 which was entitling the developer to enter into sale transaction. This cancellation of GPA has not created any handicap to the 1st defendant in carrying out development work. The plaintiff by its letter dated 2/11/2007 canceled the JDA and 1st defendant responded to the letter on 30/11/2007 and on 10/1/2008 the 1st defendant gave notice of arbitration to the plaintiff and defendant No.5 and Arbitral Tribunal was constituted and on 30/7/2008 1st defendant filed statement of claim for declaration that JDA and Power of Attorney are valid and subsisting and sought a direction to put the defendant No.1 in possession of the properties and directing 5 CT 1390_Com.A.S.752016_Judgment .doc the plaintiff and defendant No.5 to fulfill its obligation under the JDA. Subsequently the statement of claim was amended and alternative relief to the effect of return of Rs.17.5 crores with interest and Rs.100 crore as damages for the loss of business opportunities, loss of profit as well as for seeking reimbursement of expenses of Rs.23,09,755/ is also claimed. The plaintiff and defendant No.5 filed statement of defence and also raised counter claim. After completion of the pleadings, the learned Arbitral Tribunal framed issues and on 5/2/2016 has passed the impugned award and awarded damages of Rs.25 crores as well as return of Rs.17.5 crores to the 1st defendant and awarded interest @12% per annum from the date of payment of Rs.17.5 crores and also awarded Rs.23.09 lakhs towards expenses to the 1st defendant and has rejected the counter claim of the plaintiff and the 5 th defendant.
3. Being aggrieved by this award, the plaintiff has filed the present petition praying to set aside the Arbitral Award on various grounds. The plaintiff contended that the award is clearly in conflict with the public policy of India and there are several specific instances manifestly showing the award is arbitrary, perverse and capricious and lacks of judicial approach and the tribunal went to the extent of making out a case for claimant which was did not even pleaded or urged before the Tribunal by the claimant and the respondent were not aware of it. As per the JDA it was incumbent upon the claimant to get the plans for construction of buildings drawn 6 CT 1390_Com.A.S.752016_Judgment .doc up, get them approved by the owners, submitting the plans to appropriate authorities for sanctions, permissions, clearances or approvals of the plans as required. The defendant No.1/ claimant has not prepared the required records and not obtained approval from the owners. The Arbitral Tribunal has held that it was incumbent upon the owners to handover the schedule property and only thereafter claimant is required to get the plan approved as per clause 4.8 which is prima facie wrong and handing over of possession is not required for preparing the plans and getting approval of the owners and obtaining the sanction. It is contended that though the claimant has stated that after MOU, the survey of the project was done and topography sketch was prepared, the learned Tribunal has held that not handing over of vacant possession was a hindrance in progress of the JDA. The Tribunal has not considered the evidence placed before it and it has failed to consider the terms of the contract and has failed to consider that for preparing the plan to carry out construction and to submit plan for sanction possession is not required. It is also contended that not a single letter was received by the owners from the developer for a period of one year asking the vacant possession of the land and still the Tribunal has found fault with the owners in not giving possession of the property. It is also contended that the developer had only obtained approval from the Survey of India, Airport Authority of India and BSNL and did not obtain approval from other departments like BWSSB, BESCOM etc. Although one year 7 CT 1390_Com.A.S.752016_Judgment .doc period is elapsed and this is not considered by the Arbitral Tribunal.
4. It is also contended that the non availability of funds for putting up constructions with the developer who is seeking specific performance of the agreement is also not considered by the Tribunal and the financial capacity was necessary to be established by the 1 st defendant to seek specific performance. The Tribunal has not considered the same and it has referred to Ex.C.8 as the document showing the capacity of the developer to arrange funds, though it is not a document showing such financial capacity and was dated earlier to the JDA and the Tribunal has failed to consider the same. It is also contended that the directors of the claimant/developer had contended about financial constraint in OS No.25412/2010 which is found in Ex.R.14 and same is not considered by the Tribunal. It is contended that the readiness of the claimant/ developer to carry out its obligations was not established and still the Tribunal held in favour of the developer which is arbitrary, capricious and perverse. It is also contended that the answering of the issue No.4(b) by the Tribunal suffers from non appreciation of the materials on record. It is also stated that though claimant/ developer was aware of the loan of Dhanalakshmi Bank, on receiving letter from the Dhanalakshmi Bank and with full knowledge has entered into JDA, but has failed to clear the loan liability, after coming to know that the owners have not cleared the same after 30 days as provided in the JDA. It is 8 CT 1390_Com.A.S.752016_Judgment .doc stated that the observation of the learned Arbitral Tribunal that the developer claimant was not aware of the loan and the claim of Dhanalakshmi Bank and that the owner has not informed about the loan etc. are against the facts and the findings of the Tribunal, that no demand was made calling upon the developer to discharge the bank liability is a whimsical reason for it finding. The plaintiff also contended that the finding on issue No.5 regarding expenses incurred by the claimant is contrary to the provisions of Evidence Act and even finding on issue No.8 is not proper. It is stated that when specific power is given to the developer by GPA to get katha amalgamated, question of owners asking the developer to get katha amalgamated do not arise. It is also contended that without looking to the plaint in OS No.7123/2006 the Tribunal has held that the pendency of the original suit is suppressed. It is contended that none of the subject properties was the subject matter of the suit and still the Tribunal held that the owners have suppressed the pendency of the suit. The plaintiff also contended that awarding of Rs.25 crores as damages is contrary to settled law of India, as in the claim petition, it is not mentioned that it would suffer loss and damage if specific performance is not allowed and there is no pleading for the claim of damages. It is also contended that the developer has assigned all its right under the JDA to M/s. Advantage Raheja Reality Private Limited by Ex.R.42 and by virtue of the same, 1 st defendant was dis entitled to seek specific performance and was not even entitle 9 CT 1390_Com.A.S.752016_Judgment .doc for damages. It is contended that the 1 st defendant was not entitle to specific performance because of the breach committed by it and not showing readiness and willingness and also not entitle for the reasons of its conduct, which is brought on record still the tribunal proceeded to award damages which is wrong. It is also contended that the Tribunal ought to have considered the counter claim of the owners on merits.
5. The impugned award is also challenged on the ground that it is patently illegal and is in contravention of the fundamental policy of Indian Law and is also in conflict with the basic notions of law and justice and it is against the terms of the underlying contract governing the substantial rights and obligations of the parties and is patently illegal because the Tribunal has ignored vital evidence and its sidesteps the settled position of law laid down by the Hon'ble Supreme Court in matters of arbitration and contract. It is also contended that the assignment of right by the 1 st defendant to M/s. Advantage Raheja Reality Private Limited by assignment deed dated 18/7/2008 which disabled the 1 st defendant from seeking any relief is not considered. It is also stated that the JDA was not a complete contract and it was requiring further understanding as to the manner in which the proposed flats are to be divided. It is contended that the claimant/ 1st defendant was not ready to perform the JDA and he did not have the financial capacity to carry out the project. It is also contended that the claimant was seeking 10 CT 1390_Com.A.S.752016_Judgment .doc damages of RS.100 crores without having anything to pay as consideration to the plaintiff and the 1st defendant had not made any investment to carry out the development work and has done only negligible work and spent Rs.23.09 lakhs and still the Tribunal proceeded to award damages even without establishing the loss and damage caused to the developer. It is contended that though the Tribunal is a creature of the underlying contract, it has modified the terms of the contract in violation of law by holding plaintiff was required to demolish the building structure standing on the schedule property, though there was no such obligation on the plaintiff and 5th defendant to demolish the structure. When the 1 st defendant was not entitle for specific performance it was debarred from claiming damages. It is stated that the Tribunal has erred in holding that the claimant had been prevented by the plaintiff in obtaining necessary plan from the sanctioning authority. It is also stated that the Tribunal has even given finding against the bank though it was not party before it. It is also stated that the cancellation of GPA was not coming in the way of joint development and still the developer has not made any progress in the development for one year and the same is not considered by the Tribunal and it wrongly held that the claimant/developer has established its readiness and willingness. It is stated that though payment vouchers produced by the developer / claimant were not established, the tribunal has wrongly taken it into consideration in determining the expenses incurred. The 11 CT 1390_Com.A.S.752016_Judgment .doc learned Tribunal has failed to consider that the plaintiff and 5th defendant were well within the rights to terminate the JDA due to the persistent breach by the owner. The Tribunal has not considered the evidence placed by the plaintiff regarding the loss sustained by the plaintiff. The order of the learned Arbitral Tribunal directing the plaintiff and 5 th defendant to refund the security deposit to the claimant/ developer is wrong as the claimant has already assigned all his rights, title and interest to its sister concern. It is stated that the award of alternative claim of damage to the extent of Rs.25 crores as losses in the anticipation of profits in complete contravention of the terms of the JDA and contrary to the Indian Contract Act. It is stated that the award is contrary to the provisions of Section 73 of the Indian Contract Act and how the tribunal arrived at this figure is also not found and the amount awarded is so high and is completely against the approach expected of Arbitral Tribunal. It is also stated that how the damages is to be paid by the plaintiff and 5th defendant is also not stated though they are separate entities and it cannot be held jointly liable. It is also stated that the award of interest @18% per annum from the date of award in respect of the principal amount of Rs.25 crores as damage is also patently illegal. It is also stated that the awarding of 12% interest per annum on Rs.17.50 crores from the date of award is also patently illegal. On all these grounds, the award of the learned Arbitrator is prayed to be set aside.
12CT 1390_Com.A.S.752016_Judgment .doc
6. The defendant No.1 has appeared through counsel and filed statement of objection stating that the petition is not maintainable in law or on facts. It is stated that the petitioner has not paid stamp duty on the award and unless stamp duty is paid on the award, plaintiff cannot be permitted to prosecute the petition. It is stated that the pleadings are contrary to the averments before the Arbitral Tribunal. It is stated that the contention of the present petition are not in consonance with the statement of defence before the Arbitral Tribunal and it is not in consonance with the affidavit evidence also. It is stated that the award is passed against the plaintiff and 5th defendant. It is stated that the plaintiff alone cannot maintain this petition. It is stated that the plaintiff has not complied with the terms of the award and therefore it cannot prosecute the case. The respondent has replied to each para of the petitioner's contention in its statement of objection. It is stated that the plaintiff has failed to prove the assignment of the right by the defendant before the Arbitral Tribunal and the rights of the parties as they stood before the date of commencement of arbitration proceedings is to be considered as appearing in Ex.C.16 JDA. It is stated that the plaintiff and 5 th defendant were represented by Sri. K.L.Srihari, though Sri. K.L.Swamy has lead the evidence before the Arbitral Tribunal. It is stated that the plaintiff was one of the respondent in the arbitration proceedings and they had given reply to the notice of arbitration. The defendant No.1 has also stated that the 13 CT 1390_Com.A.S.752016_Judgment .doc details of the loan of Dhanalakshmi Bank was not informed to the 1st defendant and 1st defendant was not aware of the mortgage as on the date of execution of the JDA. It is stated that at the time of JDA, the plaintiff and defendant No.5 had specifically represented and stated that the schedule property is free from all encumbrances, charges, liens. It is stated that without the Power of Attorney the defendant No.1 cannot perform its obligations as per JDA and as such recall of the GPA has made the JDA unworkable. It Is also stated that the defendant has not physically delivered possession as per the terms of Ex.P.16 and the plaintiff prevented the defendant from exercising its rights to enter the schedule property which is even admitted by RW.1. It is also stated that the plaintiff and defendant No.5 have failed to demolish structures of the schedule property and give vacant land to the 1 st defendant. It is stated that the award was passed in accordance with law by the Arbitral Tribunal by following the procedures as agreed by the parties. It is stated that the parties were given full opportunity to complete pleading and to lead evidence and to make oral and written submissions. It is stated that the learned Arbitral Tribunal has conducted the proceedings in accordance with law and it cannot be faulted by the plaintiff only because of this adverse award. It is stated that the plaintiff without referring to complete award and evidence has chosen part of the evidence to challenge the award. It is also stated that to understand the correctness of the award entire award in totality is to be seen. It is stated that scope of 14 CT 1390_Com.A.S.752016_Judgment .doc proceedings under Section 34 of the Act is not including the replacing of the reasoning or discretion exercised lawfully by the Arbitral Tribunal. It is stated that the arguments of the plaintiff is contrary to the pleadings and evidence. It is stated that the defendant was ready and willing to perform their obligation even on this day and evidence was lead in this regard. It is stated that the plaintiff suppressed the suit in OS No.7123/2006 and also mis described the suit property. It is stated that 1st defendant has produced the document showing the expenses made and it is rightly considered by the Tribunal. It is also stated that the 1 st defendant has proved the loss suffered by it. It is stated that as the obligation of the plaintiff and 5th defendant are joint and several, they cannot file separate petition U/S.34 of the Arbitration & Conciliation Act and they cannot issue separate notices. On all these grounds, the 1st defendant has defended the award of the learned Arbitral Tribunal and prayed to dismiss the arbitration petition.
7. Now the points that arise for consideration of this court are:
1. Whether the plaintiff has made out grounds U/S.34 of the Arbitration & Conciliation Act, to set aside the Arbitral Award dated 05/02/2016, passed by the learned Arbitral tribunal?
2 What order?15
CT 1390_Com.A.S.752016_Judgment .doc
8. Heard both the counsels. Counsel for plaintiff and defendant no.1 have filed written arguments also. Perused the records.
9. My answer to the above points are :
POINT No.1 : Partly in the affirmative
POINT No.2 : As per final order for the following:
REASONS
10. POINT No.1 : The present petition U/S.34 of the Arbitration & Conciliation Act is filed by plaintiff, being aggrieved by the award of the Learned Arbitral Tribunal dated 05/02/2016. The jurisdiction of the court to set aside an arbitral award is limited to the ground set out in Section 34 of the Arbitration & Conciliation Act 1996. Even if a contrary view based on the facts before the Arbitral Tribunal is possible, in the absence of any compelling reasons court cannot interfere with the view taken by the learned Arbitrator, as if it is sitting in appeal over the award made by the Tribunal. Grounds on which the award of the Tribunal can be set aside by this court is clearly mentioned in Section 34(2) and 34(2A) of the Arbitration & Conciliation Act and these grounds are also elaborated by the Hon'ble Supreme Court in various decisions including ONGC v/s Saw Pipes Limited, ONGC v/s Western Geco International Limited and Associate Builders v/s Delhi Development Authority. In the decision in Associate Builders v/s Delhi Development Authority reported in (2015) 3 SCC 49 the Hon'ble 16 CT 1390_Com.A.S.752016_Judgment .doc Supreme Court has considered most of the earlier decisions and has dealt with the grounds on which an award could be considered as opposed to public policy or is patently illgal and thereby could be set aside U/S.34 of the Arbitration & Conciliation Act. As per this decision, under head of public policy of India, fundamental policy of Indian law, interest of India, justice or morality, patent illegality are covered and if the award is hit by grounds mentioned in Section 34(2) of the Arbitration & Conciliation Act, the award can be set aside by the court and not otherwise. It is even held that contravention of substantive law of India would be death knell of an Arbitral award. It is also held that contravention of Arbitration Act would be regarded as patent illegality. It is also well established principle that the court acting U/S.34 of the Arbitration & Conciliation Act is not supposed to go for re appreciation of evidence or impose its view as against the view of learned Arbitrator and the power of the court is only to set aside the award if it is coming under one of the grounds appearing in Section 34(2) and 34(2A) of the Arbitration & Conciliation Act. In the presence of these basic principle, grounds urged by the plaintiff and the award of the learned Arbitral tribunal are to be looked into.
11. The learned counsel for the 1st defendant has also referred to the decision of Hon'ble Supreme Court reported in (2019) 15 SCC 131 (SSANGYONG Engineering and Construction Ltd., V/s. National Highways Authority of 17 CT 1390_Com.A.S.752016_Judgment .doc India(NHAI), in which the Hon'ble Supreme court, by referring to the decision in Associate builders has held that the mere contravention of the substantive law of India by itself, is no longer a ground available to setaside an arbitral award. In another decision cited by 1st defendant reported in (2020) 5 SCC 164, (South East Asia Marine Engineering and construction limited V/s. Oil India Ltd.,), it is held that where two views are possible the court cannot interfere into plausible view taken by the arbitrator supported by reasoning. In the decision reported in (2018) 16 SCC 661 (MP Power Generation company limited V/s. Ansaldo Energia spa), Hon'ble supreme court has considered decision in Associate builders and held that lack of judicial approach, violation of Principles of Natural justice. Perversity and patent illegality have been identified as grounds for interference with an award of Arbitrator. It is also held by the Hon'ble Supreme court in Civil Petition NO. 7544/2019 dated 23/09/2019 (M./s. Canara Nidhi Ltd., V/s. M. Shashikal and others) that on the basis of the record of the arbitral tribunal, the petition U/s. 34 have to be considered and the court cannot go beyond the record that was before the Arbitrator. These decisions relied by the learned counsel for the 1 st defendant also clearly explains the scope of the petition U/s. 34 of Arbitration & Conciliation Act.
18CT 1390_Com.A.S.752016_Judgment .doc
12. The facts leading to the arbitration proceedings is that, plaintiff and defendant No.5 are owners of property bearing No.101 and 41 respectively and they entered into MOU as per Ex.C.5 with Defendant No.1 for development of the property. Defendant No.5 being Trust entered into MOU by being represented by its Trustee and Plaintiff being Private Limited Company is represented by is Director. After entering into MOU, the 1st defendant gave public notice in newspaper informing about the MOU. In response, Dhanalakshmi Bank sent a letter to the defendant No.1 informing that the part of the property is mortgaged to the bank. Thereafter, on 16/11/2006 parties have entered into JDA as per Ex.C.16. Power of Attorney as per Ex.C.19 and GPA as per Ex.C.20 are executed by plaintiff and defendant No.5 in favour of 1 st defendant. Ex.C.19 has authorized defendant No.1 to approach authorities for obtaining sanction plan, approval etc and Ex.C.20 is executed to enable defendant No.1 to enter into lease, license, mortgage in respect of share of the developer.
13. In terms of JDA, Ex.C.16 totally Rs.17.5 Crores is given to plaintiff and defendant No.5 by defendant No.1. As per clause 11.1 of the JDA time for completion of project was 30 months from the date of obtaining sanction plan and 6 months grace period is also provided. As per JDA Developer - defendant No.1 had the right to terminate the contract on certain conditions and it also entitles 1st defendant to seek specific performance and even damages for the loss suffered.
19CT 1390_Com.A.S.752016_Judgment .doc After the execution of JDA, on 6/1/2007 the Dhanalakshmi Bank sent letter to defendant No.1 as per Ex.C.23 stating about its claim and asking defendant No.1 to clear the loan. On the same day, defendant No.5 gave notice as per Ex.C.21 canceling GPA authorizing leasing and mortgaging the property given to 1st defendant in view of objection raised by secured creditor. After that, on 2/11/2007 plaintiff and defendant No.5 sent notice of termination of JDA as per Ex.C.24. Defendant No.1 gave reply on 30/11/2007 as per Ex.C.26 and plaintiff and defendant No.5 gave rejoinder as per Ex.C.27. This JDA also provided for arbitration to adjudicate the dispute. By invoking the said arbitration clause, on 10/1/2008, 1st defendant gave notice of arbitration. Thereafter, Arbitral Tribunal was constituted consisting of 3 former Hon'ble Judges of Hon'ble High Court by the order of the Hon'ble High Court.
14. In the learned Arbitral Tribunal, claim petition was filed by defendant No.1. Plaintiff and defendant No.5 have jointly appeared and filed the statement of objection. Issues were framed and evidence was recorded. After hearing arguments, Arbitral Tribunal passed the award and awarded Rs.25 crores to the defendant No.1 as damages and awarded refund of Rs.17.5 crores with interest @12% per annum from the date of receipt of the amount by plaintiff and defendant No.5 and also awarded Rs.23,09,755/ as expenses and also awarded cost. The respondent before the Arbitral Tribunal were held to be jointly and severally liable to pay this amount.
20CT 1390_Com.A.S.752016_Judgment .doc This award is under challenge in this petition by respondent No.2 of arbitration proceedings. Respondent No.1 in the arbitration proceedings has filed separate petition in AS No.75/2016 which is also taken into consideration and is posted today for Judgement. Plaintiff contended that the award is against public policy and award is patently illegal for various reasons.
15. The learned counsel for 1st defendant has vehemently argued that the owners of the land who have entered into joint development agreement jointly with the defendant no. 1 cannot file separate petition under section 34 og Arbitration and Conciliation Act. The claim petition was filed by the defendant no. 1 before the learned tribunal against the plaintiff and defendant no. 5 who are the owners of the land, with whom joint development agreement was executed on 16/11/2006. The respondents before the arbitral tribunal that is plaintiff and defendant no. 5 have appeared and filed common objections and contested the matter jointly. After passing of the award, the respondent no. 1 before the learned arbitral tribunal has filed AS No. 75/2016 and respondent no. 2 in the arbitral tribunal has filed present petition in AS No. 74/2016. It is contended that as it is one award passed against both the respondents, two arbitration suits are not maintainable. The learned senior counsel for the plaintiff has submitted that as the plaintiff in AS No. 74/2016 is the trust and the plaintiff in AS No. 75/2016 is the private limited company, they are having separate existence and as 21 CT 1390_Com.A.S.752016_Judgment .doc such separate petitions are filed in AS No. 74/2016 and AS No.75/2016 and there is no such law which bars the parties from filing independent petition challenging the award.
16. On going through the records, it is clear that respondent no. 1 in the arbitral tribunal has filed AS No. 74/2016 and respondent no. 2 filed AS No.75/2016 challenging the same award though joint development agreement and Memorandum of agreement were executed jointly by the plaintiff of both these Arbitration suits who were respondents before the arbitral tribunal, plaintiff in AS No. 74/2016 is the trust and plaintiff in AS. No. 75/2016 is Private Limited company and as such two separate petition challenging the same award under section 34 of Arbitration and Conciliation Act are filed. Though filing of one petition by both these plaintiff would have been appropriate, the filing of two petitions by both these respondents cannot be said to be defective or is barred by any law. Both the arbitrations suit are before this court and are taken simultaneously for arguments and Heard. Both the cases are posted today for judgment. Therefore there is no possibility of passing any conflicting judgments. As such the contention of the respondent that the petition is defective for the reason of two respondent filing separate petition challenging the same award, cannot be accepted. On this ground this petition cannot be said as not maintainable.
17. Apart from many grounds urged in the petition to challenge this award, in the course of arguments non 22 CT 1390_Com.A.S.752016_Judgment .doc registration of the JDA, Ex.C.16 is also highlighted. This contention is not taken in the petition. Learned senior counsel for petitioner has argued that issue of non registration was raised in the counter filed to the claim petition. He has drawn the attention of this court to para 19 in page 32 of amended counter filed before the learned Arbitral Tribunal. On going through the said paragraphs, it cannot be made out that objection of non registration of Ex.C.16 was raised. On the other hand, it appears to have been contended that no interest in immovable property can be recognized unless there is registered document and on this ground it was contended that JDA did not confer any interest in the property. Therefore, this issue of non registration of JDA was not raised specifically before the learned Arbitral Tribunal. Even in the present petition this point is not raised. Moreover, as mentioned in the Arbitral Tribunal challenge regarding jurisdiction of Arbitral Tribunal is given up by respondent before the Arbitral Tribunal. Therefore, this issue cannot be now raised before this court, that too even without taking such contention.
18. However, fact remains that Ex.C.16 is not registered. Learned counsel for defendant NO.1 has argued that as relations were strained within short time, document could not be taken up for registration. He has referred to notice dated 6/1/2007 canceling the GPA and submitted that as per Section 23 of Indian Registration Act within four months documents can be submitted for registration and 23 CT 1390_Com.A.S.752016_Judgment .doc before that period GPA was canceled and relation strained. This argument cannot be accepted for the reason that the General Power of Attorney canceled was the one authorizing defendant No.1 to lease, mortgage the property and it is mentioned in the award that such notice was given only to satisfy Dhanalakshmi Bank and was not intended to be acted upon. Same is even considered in the award. Hence Ex.C.16 remain unregistered document and as rightly stated in counter filed before the Arbitral Tribunal, interest in immovable property cannot be recognized without registration of such document. Be that as it may.
19. The learned senior counsel for the plaintiff has vehemently argued that the defendant no.1 who is claimant before the arbitral tribunal has assigned his right in favour of M/s. Advantage Raheja Reality Private Limited on 18/7/2008 and as such this claimant had no right in the joint development agreement and as such the claimant had no right to continue the arbitration proceedings before the arbitral tribunal and was not entitled for any relief as it had no subsisting right in the property or in the agreement. The copy of assignment is produced as Ex.R.42 before the arbitral tribunal and the statement of account submitted to income tax by the said assignee was produced as Ex.R.44, in which Rs.17.50 crores given to owners mentioned in this joint development agreement is clearly appearing in the head of loans and advances. On the basis of this, it is argued that M/s. Advantage Raheja Reality Private Limited which is 24 CT 1390_Com.A.S.752016_Judgment .doc assignee has taken over the project and claims, and M/s. Kanyakumari Builders Pvt. Ltd., is not entitled to any relief before Arbitral Tribunal and is not having any right to continue the proceedings.
20. On looking to the arbitral award the learned arbitral tribunal has considered the aspect of assignment and observed that this assignment deed is subsequent to joint development agreement Ex.C.16 and is also subsequent to commencement of arbitration proceedings and has also observed that the arbitration Act mandates the arbitrator to function within the limits of the agreement and the tribunal cannot go beyond the joint development agreement and cannot look into the Assignment deed. The tribunal has also considered the judgment of the Hon'ble Supreme Court holding that the judgment adjudicates the right of the parties as existing before the suit in which it was obtained and subsequent conduct of the parties is immaterial. By considering all these, the learned arbitral tribunal has held that merely on the basis of Ex.R.42 showing the assignment of its right, claimant cannot be said to be not entitle to seek the relief, as per terms of joint development agreement. On going through the averments and contention of the plaintiff, during pendency of the arbitration proceedings, the claimant appears to have assigned its right in favour of another company by Ex.R42, on 18/07/2008. On the ground that the rights are assigned by the claimant to another company, the respondents who are the plaintiff in both the arbitration suits 25 CT 1390_Com.A.S.752016_Judgment .doc are contending that claimant has lost its right to seek the relief under Ex.C.16. It is not the case of the plaintiff that the said assignee has entered any in separate arrangement with the plaintiff subsequent to assignment and it is also not the case before arbitral tribunal that this assignee has separately insisted for enforcement of its right under assignment in respect of Ex.16. As such on the ground that assignment deed is executed by the claimant in favour of another company, it cannot be held that the arbitration proceedings could not be continued and award would not be passed and that claimant had no right to agitate before the arbitral tribunal. Therefore this objection raised by plaintiff cannot be accepted.
21. Awarding Rs.25 crores as damages, Rs.17.5 crorres with interest towards return of refundable deposit and Rs.23,09,755/ towards expenses by the learned Arbitral Tribunal is challenged by the plaintiff. The plaintiff and defendant No.5 are held to be jointly and severally liable to pay this award amount to the 1 st defendant. Records disclose that after executing JDA on 16/11/2006 and executing GPA on 6/1/2007, defendant No.5 sent notice canceling GPA given for executing lease deed, mortgage etc on the ground that secured creditors had objected. It has come in the evidence that the cancellation of GPA was to satisfy Dhanalakshmi Bank which had charge over the property. In the award, issue of Dhanalakshmi Bank has been considered. It is contended for the first defendant that owners had obligation 26 CT 1390_Com.A.S.752016_Judgment .doc to clear the dues of Dhanalakshmi Bank and they have not intimated about the claim of Dhanalakshmi Bank and thereby owners have misrepresented the developer. On the other hand, plaintiff contended that after receiving first letter of Dhanalakshmi Bank, 1st defendant came to know about claim of the bank and inspite of knowledge, 1st defendant entered into JDA on 16/11/2006 and as per the JDA, if any liability or encumbering the existing property owners have to clear it within 30 days and on their failure developer have to clear it and amount so spent is to be added to the refundable security deposit. Though both the parties have blamed each other in this issue, it is clear that 1 st defendant was aware that there is a claim of Dhanalakshmi Bank. Though 1st defendant had Power of Attorney of the owners, 1st defendant appears to have not approached the bank on behalf of the owners even after 30 days of JDA and also has not sought any details from the bank by giving reply to the letter of the bank. Even the owners have not made any efforts to clear the dues of Dhanalakshmi Bank or to intimate the developer about the dues which are to be cleared. None of the parties produced any documents before the Arbitral Tribunal showing, their is efforts, made to resolve the issue of Dhanalakshni Bank to make the JDA workable.
22. Then the dispute comes with regard to handing over vacant possession of the property to the developer. JDA Ex.C.16 contains clear clause stating that possession is handed over to the developer on the date of JDA for the 27 CT 1390_Com.A.S.752016_Judgment .doc purpose of developmental activities. However, in the notice issued to the 1st defendant by plaintiff and 5th defendant on 2/11/2007, it is stated that possession is not handed over. In the presence of this contradictory stands, 1 st defendant contends that possession is not handed over, which is against terms of JDA and this has lead to frustration of contract. This contention of 1st defendant has even found favour with Arbitral Tribunal. However, what correspondence is made by the developer with the owners for acting contrary to the terms of Ex.C.16 till giving reply on 30/11/2007 to termination notice is not clear. If as per JDA, possession was to be handed over on 16/11/2006, but is not handed over by the owners and that has prevented the progress of developmental activities, the developer is not expected to sit quite till termination of JDA by owners on 2/11/2007. The records produced before the learned Arbitral Tribunal do not show any such efforts made by developer to take possession or even making correspondence with owners expressing difficulty. Though there is cancellation notice of GPA on 6/1/2007 that GPA is given for entering into lease, mortgage etc only. Another Power of Attorney dated 16/11/2006 was not cancelled by this notice and this POA was authorizing developer to approach the authorities for sanction, approval etc. Therefore, cancellation of GPA cannot be said to be major set back for the JDA. Moreover, both the parties conceded before the Arbitral Tribunal that this cancellation letter was not serious and has not come in the way of development of 28 CT 1390_Com.A.S.752016_Judgment .doc the property. As per the JDA, project was to be completed within 36 months, including 6 months grace, from the date of obtaining sanction plan.
23. The developer-1st defendant has produced certain documents showing expenses made for this project. Evidence also given stating that approval from Airport Authority of India, BSNL and Survey of India are obtained as per Ex.C.9, 10 and 11. NOC from many more authorities like BWSSB, BESCOM etc. was yet to be taken. Thus till 2/11/2007, though nearly one year time has been lapsed, JDA had not made expected progress. Even the amount spent by developer which is placed before the Arbitral Tribunal is Rs.23,09,755/. In this one year about 23 lakhs was spent by the developer with regard to the project, apart from Rs.17.5 crores given to owners as refundable deposit. All these sequence of events show that the JDA has not progressed much during this period. Admittedly development plan was not prepared, application for sanction plan was not given, no work at the spot has begun and no major expenses were made by the developer on this project.
24. The plaintiff and defendant no. 5 have even disputed the financial capacity of the defendant no. 1 to carry out development work as per JDA. In this connection plaintiff relied on Ex.R14, which is order in OS No. 25412/2010, a suit in which sister concern of the 1st defendant was defendant. In this order reference is made to the contention of the sister concern of the 1st defendant stating that M/s.
29CT 1390_Com.A.S.752016_Judgment .doc Kanyakumari, was under severe financial pressure and not in a position to develop the property on the Cubbon Road. On the other hand the 1st defendant has relied on Ex.C8. A letter of HDFC to the 1st defendant dated 27/07/2006 stating that the line of credit loan of Rs. 75 Crores is given to 1 st defendant. On the basis of this letter the Arbitral Tribunal has also considered that the claimant before the tribunal had the financial capacity to execute the project. Though the financial difficulty of the 1st defendant is referred in the order in another suit. Ex.C8 show that the 1st defendant was sanctioned the line of credit loan of Rs. 75.00 crores. This loan was even before the date of JDA. Since MOU was executed on 08/02/2006 and even certain payments were also made before the JDA, this Ex.C.8 could be considered as one of the document showing capacity of the 1st defendant to arrange the funds for the purpose of carrying out development work as per JDA. Hence, the contention of the plaintiff that the 1st defendant had no financial capacity to implement the JDA is rightly not accepted by the Arbitral Tribunal.
25. The Arbitral Tribunal by considering certain expenses made by the 1st defendant in pursuance of JDA and certain permissions obtained has held that the claimant/1st defendant was ready and willing to perform its obligations under the JDA. This finding is seriously disputed by the plaintiff. The learned senior counsel for the plaintiff has vehemently argued that the 1st defendant was not ready and 30 CT 1390_Com.A.S.752016_Judgment .doc willing to perform his part of agreement and its readiness and willingness is not established, as the 1 st defendant has not taken any steps to even apply for sanction plan. On looking to entire records, no doubt, the 1 st defendant has performed certain acts in pursuance to the JDA like obtaining few approvals and making certain expenses which is quantified as about Rs. 23 lakhs, but though the agreement was executed on 16/11/2006 till giving of notice by the 2nd defendant on 06/01/2007 canceling the 2nd GPA, application for sanction plan was not given and even subsequently no such application for sanction plan was given by exercising the power given under 1st Power of Attorney. As stated above, in the JDA there is reference to handing over of possession. If there was some difficulty due to not giving of possession by the plaintiff, the 1st defendant would have taken steps to get the possession and would have approached the plaintiff asking it to comply with the terms. As per the records the 1 st correspondence from the 1st defendant appears to be on 30/11/2007 when a reply to the termination notice is given. At the same time, even the plaintiff except canceling the JDA by giving notice on 02/11/2007 appears to have not approached the 1st defendant earlier, to know the status of the project and to enquire about the steps taken by the 1 st defendant and to assess the progress of the project.
26. The 1st defendant has even referred to pendency of suit with regard to this property as a hurdle for proceeding with the development work and contended that the 1 st 31 CT 1390_Com.A.S.752016_Judgment .doc defendant was not informed about such cases and due to this, work could not be progressed and there is no fault on the part of the 1st defendant. In this connection the Arbitral tribunal has held that the plaintiff and the 1 st defendant have suppressed the fact of suits pending in respect of the property and that has caused delay in progress of the development work. The contention about various hurdles put across by the plaintiff and 5th defendant to the 1st defendant appears to have been 1st raised by the 1st defendant only on 30/11/2007. Before that, this difficulty appears to have not been communicated to the plaintiff and 5th defendant in writing. On looking to the award, the arbitral tribunal has mainly considered that the delay in progress of the work was due to lapses on the part of the plaintiff and 5 th defendant and that 1st defendant developer was always ready and willing to perform its part of the contract. After finding so, the Arbitral Tribunal has considered whether the 1st defendant/claimant can be granted the relief of specific performance and observed that the material on record and findings recorded on the other issues and the JDA Ex.C.16 entitles claimant for specific performance as per clause 12.2. but, by taking into consideration that the JDA was of the year 2006 and ten years have already lapsed and cost of construction has increased and there would be great and far reaching financial implications, if specific performance is granted and also by considering that there is no likelihood of getting cooperation from the owners, has held that though claimant is entitled to 32 CT 1390_Com.A.S.752016_Judgment .doc relief of specific performance as per clause 12.2 it is not the case wherein specific performance is to be ordered. By holding so, the learned Arbitral Tribunal has proceeded to consider the grant of alternative relief of damages. Therefore, though readiness and willingness of the 1 st defendant/claimant before the Arbitral Tribunal was established, the Tribunal has not granted specific performance.
27. While considering the entitlement of the claimant for damages the tribunal has considered the evidence of CW2 and the report at Ex.C51 in which potential profit of the claimant was assessed as Rs.225 crore and finally at 113 Crore, if the development contemplated as per JDA has succeeded. The claimant/1st defendant had prayed alternative relief of damages of Rs. 100 Crores. The tribunal by considering the evidence has awarded Rs. 25 crores as damages. It is observed by the tribunal that the figure of Rs.113 crores mentioned in Ex.C.51 cannot be taken on the face value as correct estimate of the loss sustained by the claimant. The learned Arbitral Tribunal by referring to the decision in ONGC V/s. Saw Pipes Ltd., has held that it would be impossible to assess the actual loss or damage. But a reasonable amount will have to be awarded even if no actual damage is proved to have been suffered by the claimant.
28. Apart from ordering damages of Rs. 25 crores the Arbitral Tribunal has also ordered for refund of Rs. 17.5 crores with interest of 12% and also Rs. 23,09,755/ towards 33 CT 1390_Com.A.S.752016_Judgment .doc expenses. Regarding receipt of Rs. 17.50 crores as refundable deposit by the plaintiff and defendant no. 1, there is no dispute. Since this amount was paid as refundable security deposit, on termination of JDA, 1st defendant would be entitled for the refund of the same. In the JDA clause no. 12.9 it is clearly mentioned that in case of default breach or mis representation by the owners, the developer on termination of agreement would be entitle for refund of security deposit with interest of 12% per annum from the date of payment. This clause is given effect to and 12% interest is awarded by the Arbitral Tribunal. Regarding expenses, by considering the document produced, the tribunal has awarded the amount. Though, the document produced showing the expenses made are disputed, the appreciation of the documents and the evidence by the Arbitral Tribunal need not be reconsidered and there is no scope for reappreciation. Therefore, this award towards expenses cannot be said to be against the public policy. Similarly, after holding that specific performance cannot be ordered, the awarding of Rs. 17.50 crores with interest as refund of the refundable security deposit cannot be said to be against the public policy of India or is patently illegal. Though the JDA do not give any right to the owners to terminate the contract, for the reasons mentioned in the award of the learned arbitral tribunal and the reasons which are even considered above, the continuing of JDA is found not feasible and therefore tribunal, though 34 CT 1390_Com.A.S.752016_Judgment .doc found that the lapses are on the part of the plaintiff and 5 th defendant, has not ordered for specific performance.
29. As discussed above there appears to be some lapses on both the sides. The lapses that could be attributed to the plaintiff and 5th defendant may be more than the lapses on the part of 1st defendant, who is the claimant before the tribunal. On looking to the entire award and the contentions raised by the parties in this petition, no fault could be found with the learned Arbitral Tribunal in refusing to grant specific performance and ordering for refund of security deposit with interest and expenses incurred by the 1st defendant. Over and above these reliefs tribunal awarded damages of Rs. 25 crores. The records disclose that, though the 1 st defendant entered into MOU and has given paper publication and then received letter from Danalakshmi Bank, the 1 st defendant entered into JDA with the owners on 16/11/2006, in which it is even mentioned that the properties are free from all encumbrances, charges and liens and if there is loan liability same will be cleared by the owner within 30 days or will be cleared by the developer. Since letter of Danalakshmi Bank was received earlier by the 1st defendant, it would have enquired about the same at the time of entering into JDA. Even after JDA, till 06/01/2007 no much progress is achieved in the project and there is no correspondence made by the developer with the owners expressing any difficulty in proceeding with the work. After receiving notice of cancellation of GPA permitting execution of agreement to 35 CT 1390_Com.A.S.752016_Judgment .doc lease, license and raise funds from the financial institution by mortgaging the share of the developer etc., the developer 1 st defendant has not made any correspondence questioning such cancellation and also appears to have not proceeded in terms JDA. Even subsequently, till notice of termination of contract given by the owners on 02/11/2007 the 1 st defendant appears to have not taken any concrete steps. Therefore even there are lapses on the part of 1st defendant which finally lead to frustration of the contract.
30. The total actual expenses made by the developer is to the extent of Rs. 23,09,755/ as established before the learned Arbitral tribunal. This amount is ordered to be paid under separate head as expenses. The entire refundable security deposit is also ordered to be refunded with interest. Apart from these amounts to which the developer/1 st defendant/claimant is entitled, the learned Arbitral tribunal has awarded Rs. 25 crores towards damages. The CW2 is extensively cross examined by the plaintiff and report of the CW2 is also disputed by the plaintiff. By this evidence and by considering the progress of the JDA and the work done by the 1st defendant, in pursuance to the JDA from the date of JDA till termination of the same and lapses on the part of the parties to the contract, damages was to be quantified. On looking to the progress made in the development work as per JDA, no substantial work has been done and only few approvals are obtained till commencement of arbitration proceedings and only Rs. 23 lakhs is spent. Though the cost 36 CT 1390_Com.A.S.752016_Judgment .doc of the project is estimated as Rs.125 crore in the report of CW2, the actual amount spent on the project by the 1 st defendant is very negligible. As stated above, the 1 st defendant has not made any correspondence with the authorities, the owners for proceeding with the development work and has not even applied for sanction plan. 1St defendant has not even taken steps for registration of JDA, though as per JDA, 1 st defendant was to bear the stamp duty and registration expenses.
31. Regarding the damages the learned counsel for 1st defendant has relied on the decision reported in (2020) 3 SCC 147 (Vijay Trading and transport Co., V/s. Central Ware housing corporation). In this decision it is held that when the contractor failed to carry out the work as per the terms and conditions of the contract, awarding of damages by the learned arbitrator is justified. He has also relied on the decision reported in (2018) 3, SCC 133 (Maharashtra State Electricity Distribution company Limited V/s. Datar Switch gear ltd) in which it is held that the injured party should be placed in the same position as he would have been in, if the contract had been performed and accordingly the damages is to be calculated and paid. He has also relied on the decisions of the Hon'ble Supreme court reported in AIR 1963 SC 1405 (Fatehchand V/s. Balakishan Das) and also relied on the decision reported in (2017) 8 SCC 237 (Kanchan Udyog Ltd V/s. United spirits 37 CT 1390_Com.A.S.752016_Judgment .doc limited) in which it is held that there must be causal connection between defendant's breach of contract and the plaintiff's loss. These decisions are cited with regard to the awarding of damages for breach of contract. On going through these decisions it is clear that for a breach of contract by one party other party would be entitle for damages, but there should be causal connection between the breach and entitlement for damages. In this case though the entitlement of the defendant no. 1 to the damages for the breach of contract as held by the Arbitral Tribunal could be accepted, the damages of Rs. 25 crores awarded is not justified.
32. The learned counsel for plaintiff has referred to the decision of the Hon'ble Supreme Court reported in AIR 2001 SC 2062 (Sikkim Subba Associates v/s State of Sikkim), in which the Hon'ble Supreme Court has held in para 14 that, "It is also, by now well settled that an Arbitrator is not a conciliator and his duty is to decide the disputes submitted to him according to the legal rights of the parties and not according to what he may consider it to be fair and reasonable".
33. The learned counsel has also referred to the decision of our Hon'ble High Court reported in AIR 2012 Karnataka 35 (M/s.Engineering Projects (India) Limited v/s B.K.Constructions), in which the Hon'ble High Court 38 CT 1390_Com.A.S.752016_Judgment .doc has considered Section 73, 74 of Indian Contract Act and also considered the power of the Arbitral Tribunal to award compensation. In this judgment in para 18, judgment of Hon'ble Supreme Court in Shiva Jute Baling Limited v/s Hindley and Company Limited reported in AIR 1959 SC 1357 is referred in which the Hon'ble Supreme Court has held that "Section 73 provides for compensation for loss or damage caused by breach of contract. It lays down that when a contract has been broken, the party who suffers by such breach is entitled to receive from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it." In the same judgment in para 22 the Hon'ble High Court has held that "jurisdiction of the court to award compensation in case of breach of contract is unqualified except as to the maximum stipulation, but compensation has to be reasonable, and that imposes upon the Court duty to award compensation according to settled principles. It merely dispenses with proof of "actual loss or damage"; it does not justify the award of compensation when in consequence of the breach no legal injury at all has resulted because compensation for breach of contract can 39 CT 1390_Com.A.S.752016_Judgment .doc be awarded to make good loss or damage which naturally arose in the usual course of things or which the parties knew when they made the contract, to be likely to result from the breach."
34. The learned counsel for the plaintiff has also referred to the decision of Hon'ble Supreme Court reported in (2004) 8 SCC 569 ( Shamsu Suhara Beevi v/s G. Alex), in which the Hon'ble Supreme Court has held that, no compensation for breach of agreement can be awarded either in addition or substitution of the performance of agreement unless relief for compensation has been claimed either in the plaint or included later on by amendment of the plaint. The learned counsel has argued that in the entire claim petition filed before the Arbitral Tribunal, the claimant has not given details of any loss or damages caused, but has only made alternative claim for damage of Rs.100 crore by amending the claim petition and there is no pleading giving details for the claim for such amount.
35. The 1st defendant, claimant before the Tribunal relies on Ex.C.51 and the evidence of C.W.2 for the claim of damages of Rs.100 crore made in the claim petition. CW.2 has assessed more loss of profit, than what is claimed as damages in the claim petition. The learned Arbitral Tribunal has awarded considerably less as damages then what is claimed by the claimant in the petition. This makes it clear 40 CT 1390_Com.A.S.752016_Judgment .doc that awarding of damages to the claimant on the facts of the present case is basically guess work and even Ex.C.51 report is not conclusive in determining the loss of profit. This report is also based on ifs and buts. At the same time, if the damages is considered as return on investment (ROI) to the claimant, it has invested Rs.17.5 crores as refundable security deposit and this amount is coming back to it with interest @12% per annum from the date of investment, which is very reasonable. The expenses made is also coming back with interest from the date of award. In addition, towards loss of profit or as a damages Rs.25 crore is awarded. On the investment of Rs.23 lakhs towards expenses, damages of Rs.25 crore cannot be considered as reasonable. Though estimated cost for construction was Rs.125 crore as per Ex.C.51, expenses made was only Rs.23 lakhs. In assessing loss of profit, the fact that profit cannot be made in vacuum cannot be lost sight off. Under such circumstances the loss of profit may have to be assessed by considering even investment made, time duration and complexities involved in the project. On such consideration, on the facts of the present case, though 1st defendant may be justified in seeking nominal damages, award of Rs.25 crore cannot be justified. Though the letter of credit loan as per Ex.C.8 is produced, there are no document to show that this loan amount was actually received by the 1st defendant and it has incurred interest on the said loan and the loan amount has become idle in the hands of the 1 st defendant etc. It is also not the 41 CT 1390_Com.A.S.752016_Judgment .doc case of the 1st defendant that it has invested funds and made some advance and had arranged men, material and machineries and such investment have become idle. In fact, no considerable investment is made on this project. The project had came to complete stand still in short time.
36. In a project in which the developer has spent Rs.23,00,000/, awarding of Rs. 25 crores as damages would be against justice and would shock the conscience of the court. Even the contract between the parties do not mention the liquidated damages which could be granted. Moreover, as stated above the entire lapses in failure of this JDA cannot be attributed to the owners. Though the commission of certain acts by the owners has adversely affected the JDA, the omission on the part of the developer has also contributed its part. Therefore, awarding of Rs. 25 crores as damages, even in the presence of evidence of CW2 and the report Ex.C51 is not justified. Therefore the award of the learned arbitral tribunal in awarding damages of Rs. 25 crores appears to be patently illegal and is against justice which shocks the conscience of the court and is also not in terms of the contract. Even as per section 28 (3) of Arbitration & Conciliation Act, the arbitral tribunal shall have to take into account, the terms of the contract and trade usages applicable to the transaction. When the trade usages and the underlying contract are not taken into account then the award would be patently illegal. The trade usuage applicable to a joint development transaction of an immovable property 42 CT 1390_Com.A.S.752016_Judgment .doc may not permit awarding of Rs. 25 crores damages on an investment of Rs. 23 lakhs and that too, when transaction came to an end within about one year. Without making investment, earning a profit of Rs. 25 crores, only for some lapses of the other side would not be justified as trade usage and would be unjust enrichment. Damages are awarded to mitigate the loss and not as a wind fall, unrelated to actual damages.
37. The loss of profit estimated in Ex.C51 is a speculative figure and as rightly observed by the arbitral tribunal it cannot be considered on face value and only a reasonable amount could be awarded when it is impossible to assess actual damage. The awarding of Rs. 25 crores, on the facts of the present case as discussed above is highly unreasonable and appears to be against trade usage and is against justice. Therefore the findings of the learned Arbitral tribunal and its award with regard to awarding of Rs. 25 crores as damages to the claimant/1st defendant/developer is in the opinion of this court, is patently illegal and it is against principles of justice. Therefore, the findings and award of the learned arbitral tribunal with regard to awarding of Rs. 25 crores as damages is coming within the purview of Sec. 34(2) & 34(2A) of Arbitration and Conciliation Act and the award of the learned Arbitral tribunal with regard to awarding of Rs. 25 crores damages is to be setaside. This court sitting under section 34 of Arbitration and Conciliation Act can only set aside the award and cannot modify the award by reducing the 43 CT 1390_Com.A.S.752016_Judgment .doc damages awarded or cannot remand the matter to the Arbitral Tribunal for consideration. The entitlement and quantum of damages could be considered a fresh, in separate proceeding if necessary. Since the damages awarded is found to be excessive, unreasonable, against justice and is patently illegal, this award as regards damages is necessary to be set aside. The awarding refund of deposit of Rs. 17.50 crores with interest @ 12% per annum and expenses of Rs. 23,09,755/ with interest of 18% from the date of award is found to be just & proper on the facts of the case and is not against public policy of India or is not patently illegal and need not be set aside. Similarly rejecting the counter claim of the plaintiff is also not against the public policy. Accordingly, the award is to be partly setaside and the award awarding Rs. 25 crores as damages to be setaside and other part of the award is to be confirmed. Accordingly, point No.1 is answered partly in the affirmative.
38. POINT No.2 : For the discussion made on above point, following order is passed:
ORDER Petition U/S.34 of the Arbitration & Conciliation Act to set aside the Arbitral Award dated 5/2/2016 is partly allowed.
The award of the learned Arbitral Tribunal awarding damages of 44 CT 1390_Com.A.S.752016_Judgment .doc Rs.25 crores to the claimant/1 st defendant is setaside.
Petition challenging other portions of the award of learned Arbitral tribunal is dismissed.
[Dictated to the Judgment Writer; transcript thereof corrected, signed and then pronounced by me, in the Open Court on this the 31th day of March 2021] [Ravindra Hegde] LXXXIII Additional City Civil Judge.
BENGALURU.
*** 45 CT 1390_Com.A.S.752016_Judgment .doc