Bangalore District Court
M/S Kayali Constructions vs Ms. Padma Priya on 22 September, 2022
KABC010021602014
IN THE COURT OF THE VI ADDL. CITY CIVIL & SESSIONS JUDGE
AT BENGALURU CITY
(CCCH.11)
Dated this the 22nd day of September 2022
PRESENT: SRI.D.P. KUMARA SWAMY, B.Com., LL.M.,
VI Addl. City Civil & Sessions Judge
Bengaluru City
A.S.NO.58/2014
CLAIMANT M/S KAYALI CONSTRUCTIONS,
A registered Partnership Firm
Having its Office at No.34,
6th Main, Banaswadi Road,
Banaswadi,
Bangalore - 560 043.
Represented by its Managing
PartnershipSri G. Dhamodaran.
[By Pleader Smt. Anushree Jois]
/Vs/
RESPONDENT MS. PADMA PRIYA
D/o Sri L. Bala Kumar
Aged about 29 years,
Residing at No.11-50/B,
AS.No.58/2014
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M.B.T. Road, Palamaner,
Chittor District - 517 408,
Andra Pradesh
[By Pleader Sri M. Nagesh)
Date of Institution of the suit : 10.06.2014
Nature of the Suit : Arbitration Suit
Date of commencement of recording
of evidence : NIL
Date on which the Judgment was
pronounced : 22-09-2022
Year/s Month/s Day/s
Total Duration : 08 03 12
(D.P. KUMARA SWAMY)
VI ADDL.CITY CIVIL & SESSIONS JUDGE
BENGALURU CITY
J U D G M E NT
This is a suit filed by the Claimant under
Section 34 of the Arbitration and Conciliation Act,
1996 to assail the award of the Arbitral Tribunal
dated 11-03-2014.
AS.No.58/2014
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2. In this judgment, the parties would be
referred to as per the ranks held by them before the
Arbitral Tribunal.
3. The Arbitral Tribunal was constituted by the
Hon'ble High Court of Karnataka vide its Order
dated 27-06-2008 in C.M.P. No.89/2005.
4. The Arbitration Tribunal has passed the
impugned award dated 11-03-2014 dismissing the
claim of the Claimant. Feeling aggrieved by the
impugned award, the Claimant has approached this
Court with this suit.
5. The brief facts of the case of the Claimant
may be stated to the following effect.
5.1 The respondent has purchased 1/12th share
in the immovable property namely a vacant land
bearing old HASB Khata No.119/A and new No.3,
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Konena Agrahara main road, BMP Khata No.3,
situated at Konena Agrahara village, Varthur Hobli,
Bangalore South Taluk, Bangalore (which is more
fully described in the 'A' schedule of the plaint)
under a registered sale deed bearing document No.
BNG(U)-BLR(S)12446/2004-05 dated 07-08-2004.
5.2 Thereafter, the respondent has entered into a
construction agreement dated 09-08-2004 with the
Claimant for construction of flat No.101 on the
ground floor of the plaint 'A' schedule property. The
consideration amount under the construction
agreement is Rs.23,50,000/-.
5.3 The Claimant has completed the construction
of the said flat No.101 (which is more fully
described in the plaint 'B' schedule) as per the
terms and conditions of the construction
agreement.
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5.4 After several requests and demands, the
respondent has paid only Rs.15,65,000/- to the
Claimant.
5.5 The Claimant has issued a notice dated
25-07-2005 to the respondent calling upon the
respondent to pay the balance consideration
amount of Rs.7,85,000/-. But, however, the
respondent has not paid the said balance
consideration amount.
5.6 In breach of the terms of the construction
agreement, the respondent has clandestinely
executed a registered sale deed in respect of plaint
'B' schedule property in favour of one Sri G.
Venkateswaran and one Sri G. Rama Kumar.
5.7 Thereafter, left with no other option, the
Claimant has issued a notice dated 02-09-2005
against the respondent for appointment of Sole
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Arbitrator for settlement of disputes in view of
Clause-12 of the construction agreement.
5.8 The respondent has not issued any reply to
the said notice.
5.9 Thereafter, the Claimant has filed a case in
CLP No.89/2005 before the Hon'ble High Court for
appointment of Sole Arbitrator to resolve the said
dispute. Vide Order dated 27-06-2008 the Hon'ble
High Court had appointed the learned Sole
Arbitrator.
5.10 Thereafter, the parties appeared before
the learned Sole Arbitrator for settlement of the
said dispute.
5.11 Before the Arbitral Tribunal, the
Claimant had submitted its claim petition narrating
to the effect that :
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(i) Under the construction agreement, Claimant
had completed the work assigned to him by the
respondent ;
(ii) That out of consideration amount of
Rs.23,50,000/-, the respondent had paid
Rs.15,65,000/- only and the respondent has not
paid the balance consideration amount of
Rs.7,85,000/- ; and
(iii) That in spite of several requests and
reminders, the respondent has not paid the
balance consideration amount and on the other
hand, sold the plaint 'B' schedule property; to
one Sri G. Venkateswaran and Sri G. Rama
Kumar.
6. The respondent had filed her objection before
the Arbitral Tribunal stating to the following effect.
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6.1 The plaint 'A' schedule property was having
built up area of 17000 sq.ft., as on the date of its
purchased and it was in a semi-finished stage and
was ready for occupation on 06-10-2004. On 06-10-
2004, the respondent was put in possession of her
apartment. The respondent has denied the
existence of the construction agreement itself. The
respondent has denied the existence of the
arbitration Clause (Clause No.12 in the construction
agreement). The respondent had raised an
objection to the effect that the claim petition was
filed without producing the original construction
agreement. The claim of the Claimant is false one.
6.2 In order to finish and complete the
construction work and make the apartment suitable
for living, the other 12 apartment owners and
purchasers of the plaint 'A' schedule property have
entrusted the said work to one Sri P.M. Rajarajan.
One Sri Damodaran had assisted the said Sri P.M.
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Rajarajan to complete the said work. The
respondent had paid Rs.22,00,000/- through cash,
cheque and D.D. No further amount remains to be
paid.
6.3 The Claimant had issued a letter dated
13-01-2005 to its Banker stating that the
respondent has paid a sum of Rs.23,50,000/- and
that entire claim of the Claimant as against the
respondent is fully settled. Thus the respondent
has sought for dismissal of the claim petition of the
Claimant before the Arbitral Tribunal.
7. The Arbitral Tribunal has tried three cases
namely, the arbitration proceedings arising out of
C.M.P. No.89/2005, C.M.P. No.90/2005 and C.M.P.
No.91/2005.
8. The Arbitral Tribunal had framed the following
issues :
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1. Whether the Claimant proves that it is a
Registered Partnership Firm ?
2. Whether the Claimant proves that it has
constructed the apartment 'Sai Residency' as
contended by the Claimant in each of the
cases ?
3. Whether the Claimant proves that on 09-08-
2004 the Respondents had entered into a
construction agreement with the Claimant for
the construction of flats more fully described in
A and B schedule to the Claim petition in each
one of the cases ?
4. Whether the claims made by the Claimant
are maintainable before this Arbitral Tribunal for
want of original construction agreement dated:
09-08-2004 ?
5. Whether the Claimant proves that the
Respondent has paid a sum of Rs.15,67,500/-
and the respondent is liable to pay the balance
sum of Rs.7,85,000/- as claimed by the Claimant
(C.M.P.No.89/2005) ?
6. Whether the Claimant proves that the
respondent has paid a sum of Rs.1,50,000/- and
the respondent is liable to pay the balance sum
of Rs.22,00,000/- as claimed by the Claimant
(C.M.P.No.90/2005) ?
7. Whether the Claimant proves that the
respondent has paid a sum of Rs.1,50,000/- and
the respondent is liable to pay the balance sum
of Rs.22,00,000/- as claimed by the Claimant
(C.M.P.No.91/2005) ?
8. Whether the Claimant proves that it is
entitled for the amounts claimed in the claim
petitions in each one of the claim petitions filed
namely CMP No.89/2005, CMP No.90/2005 and
CMP No.91/2005) ?
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9. Whether the respondent proves that he or
she has paid various payments to Mr. G.
Damodharan and Mr. P.M. Rajarajan as
contended by each one of them in para 7 of the
Statement of Objection ?
10. Whether the Claimant is entitled to the
reliefs as sought for in each one of the claim
petition ?
11. Whether each one of the respondent is
entitled for costs of these proceedings as
claimed by them ?
12. To what order ?
9. Before the Arbitral Tribunal on behalf of the
Claimant two witnesses were examined namely,
CW.1 and CW.2. Exs.C-1 to C-26 were marked on
behalf of the Claimant. On behalf of the present
respondent and the respondents in other two cases,
Ex.R-1 to R-16 were marked. But, however, the said
three respondents of the said three cases have not
chosen to examine any witnesses. Arbitral Tribunal
has passed the impugned award dated 11-03-2014
dismissing the claim petition of the Claimant in all
the three cases. Thus, the Claimant is before this
AS.No.58/2014
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Court with this suit to assail the impugned award of
the Arbitral Tribunal.
10. The Claimant has urged the following
grounds to assail the impugned award.
10.1 The Arbitral Tribunal has failed to take into
consideration the fact that the respondent herself
has stated before the Arbitral Tribunal that the
respondent had paid Rs.22,00,000/- only on
different dates. The consideration amount under
the construction agreement is Rs.23,50,000/-.
Thus, the Arbitral Tribunal ought to have allowed
the claim petition at least in respect of remaining
balance consideration amount of Rs.1,50,000/-.
Hence, the impugned award is illegal and suffers
from an error apparent on the face of the record.
10.2 The respondent has failed to produce her
bank accounts to show that she has made payment
AS.No.58/2014
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to a tune of Rs.22,00,000/- to the Claimant on
various dates. Instead, the respondent has relied
upon Ex.R-5 - Challan dated 28-09-2004 for
Rs.7,59,550/-. It is the contention of the respondent
that out of said amount Rs.1,10,000/- is paid
towards her dues toward the Claimant. The Arbitral
Tribunal has failed to appreciate the fact that no
positive evidence is adduced by the respondent to
prove that respondent has paid a sum of
Rs.20,90,000/- to the Claimant. Hence, the
impugned award is perverse amounting to
misconduct.
10.3 The respondent has relied upon Ex.C-24 to
contend that the respondent has paid
Rs.23,50,000/-. It may be remembered that the
respondent has denied the existence of Ex.C-24
itself. The respondent has stated that Ex.C-24 is
concocted and fraudulent. Such being the position,
AS.No.58/2014
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the respondent cannot take shelter under the very
same Ex.C-24 to prove her defence.
10.4 In the objection statement, the respondent
has stated that she has paid Rs.22,00,000/-. While
in Ex.C-24 it is stated that the respondent has paid
Rs.23,50,000/-. The said two statements are
inconsistent with each other. On this ground alone
the Arbitral Tribunal ought to have allowed the
claim petition of the Claimant.
10.5 The Arbitral Tribunal has considered page
No.2 in Ex.C-24. The alleged signature of the
Managing Partner of the Claimant at page No.2 is
not affixed with the seal of the applicant.
Comparison of the said signature with other
signatures of the Managing Partner of the Claimant
in Ex.C-24 would show significant difference
between them. The CW.1 has stated in his cross-
examination that the details found on the page No.2
AS.No.58/2014
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of Ex.C-24 is not at all related to the project under
consideration (construction agreement). The
Arbitral Tribunal has not appreciated that Ex.C-24 is
concocted and that it cannot be relied upon for the
purpose of arbitration proceedings.
10.6 The respondent did not verify the objection
statement filed by her before the Arbitral Tribunal.
Likewise, no affidavit is filed annexed to the said
statement of objection filed before the Arbitral
Tribunal. The objections were filed by father of the
respondent by name Mr. L. Balakumar. However,
Mr. L. Balakumar did not produce before the Arbitral
Tribunal the GPA or its copy, wherein the
respondent did authorize Mr. L. Balakumar to
appear before the Arbitral Tribunal and to submit
pleadings etc., Hence, the objection statement filed
by Mr. L. Balakumar cannot be looked into in the
eye of law. Hence, the respondent did not have
right to cross-examine CW.1 and CW.2 and to
AS.No.58/2014
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submit her arguments. The reliance placed on such
cross-examination and such argument by the
Arbitral Tribunal is liable to be set aside.
10.7 The Arbitral Tribunal has committed
misconduct in passing the impugned order which is
patently illegal and against public policy. Hence,
the impugned award is liable to be set aside. The
present suit is in time. This Court has jurisdiction to
entertain this suit. The respondent is amenable to
the jurisdiction of this Court. The Claimant has not
received any Caveat notice 90 days prior to filing of
this suit. Hence, the impugned award may be set
aside.
11. The respondent has submitted his written
statement raising pleas to the following effect :
11.1 The Claimant had filed six cases under
Sec.11 of the Arbitration and Conciliation Act, 1996,
before the Hon'ble High Court in CMP No.89/2005,
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CMP No.90/2005, CMP No.91/2005, CMP
No.92/2005, CMP No.93/2005 and CMP No.94/2005.
Out of the said six cases, the Hon'ble High Court
allowed the petitions in CMP No.89/2005, CMP
No.90/2005 and CMP No.91/2005. The Hon'ble High
Court had rejected the remaining 3 cases namely,
CMP No.92/2005, CMP No.93/2005 and CMP
No.94/2005. The said order rejecting the said 3
petitions has attained finality.
11.2 The Arbitral Tribunal has disposed off 3
cases arising out of CMP No.89/2005, CMP
No.90/2005 and CMP No.91/2005, by its common
order dated 11-03-2014. Under the said common
order, the Arbitral Tribunal had rejected the claim of
the Claimant. In all the three cases before the
Arbitral Tribunal, the petitioner was common and
the respondents were different.
AS.No.58/2014
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11.3 The Claimant has filed this suit to
challenge the said common order in so far as the
case arising out of CMP No.89/2005 is concerned.
11.4 The respondent has reiterated the
pleaded facts of the case of the Claimant at para 6
to 8 of the written statement to explain as to what
the case of the Claimant before the Arbitral Tribunal
was.
11.5 The Claimant had suppressed several
facts in its claim petition before the Arbitral Tribunal
with an ulterior motive to make wrongful gain itself
by causing wrongful loss to the respondent. The
respondent and 11 others had jointly purchased
semi-finished residential building complex with total
plinth area of 17000 sq.ft., bearing No.3.
11.6 The Managing Partner of the Claimant
firm by name Sri G. Damodaran has also purchased
1/12th share in the said incomplete building.
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11.7 One Ms. Reena Goel had executed
separate sale deeds in respect of said semi-finished
building in favour of 12 persons (which include the
present respondent also).
11.8 By the date 06-10-2004, the said
apartment was ready for occupation. In this regard,
a declaration deed dated 06-10-2004 came to be
executed between the said 12 persons (joint
purchasers), including the Managing Partner of the
Claimant firm. All the said 12 purchasers were put
in possession of their respective residential houses
purchased by each one of them. Each floor is
having two apartments and built up area of each
apartment is 1200 sq.ft.
11.9 Vide a registered sale deed dated 2201-
2005, the respondent has sold the plaint 'B'
schedule property in favour of one Sri G.
Venkateswaran and one Sri G. Rama Kumar.
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11.10 It is one Sri G. Damodaran (Managing
Partner of the Claimant firm) who secured the
buyers and at his instance the draft sale deeds
were prepared. The respondent had carefully
perused the contents of the sale deed. The said Sri
G. Damodaran accompanied the other purchasers
to Indian Bank, Benson Town branch and made
necessary arrangements to avail loans for purchase
of plaint 'B' schedule property.
11.11 The construction agreement is a cooked
up and forged document.
11.12 The Arbitral Tribunal has also returned a
finding to the effect that the Claimant could not
have constructed the entire building (as claimed by
the Claimant firm), but it did some construction
work of various flats in 'Sai Residency'.
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11.13 The Claimant has not produced any
document to show that the Claimant firm got
permission from the competent authorities for
construction of the building.
11.14 There is no privity of contract between
the Claimant firm and the respondent.
11.15 One Sri P.M. Rajarajan is one of the
purchasers of a flats in the plaint 'A' schedule
property. Said Sri P.M. Rajarajan is a qualified
Engineer. Said Sri G. Damodaran (Managing Partner
of the Claimant firm) is a brother-in-law of said P.M.
Rajarajan. All the purchasers have entrusted the
work to complete the semi-finished construction
work to said Sri P.M. Rajarajan. Said Sri G.
Damodaran assisted said Sri P.M. Rajarajan in
completing the semi-finished building.
11.16 The respondent has paid Rs.22,00,000/-
by way of cheque, D.D. and cash.
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11.17 The respondent had not given any
authority to Mr. G. Damodaran to obtain power
connection to the plaint 'B' schedule property from
the BESCOM or to obtain water connection to the
plaint 'B' schedule property from the BWSSB.
11.18 If really a huge sum (as claimed in the
plaint) was due from the respondent to Sri G.
Damodaran, he would not have delivered the
possession of the plaint 'B' schedule property to the
respondent.
11.19 Sri G. Damodaran is the President of a
Co-operative Society. A case was registered by the
Deputy Registrar of Co-operative Societies (DRCS)
against Sri G. Damodaran ( in his capacity of
President of such Co-operative Society) on the
accusation of misappropriation of funds of such
Society. In the said proceedings, the immovable
properties of Sri G. Damodaran appears to have
AS.No.58/2014
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been attached for recovery of the amount of the
Society. To make good the said loan, Sri G.
Damodaran appears to have filed this false suit
against this respondent.
11.20 The construction agreement is dated
09-08-2004. The stamp paper was purchased on
06-09-2004. This shows that the construction
agreement is cooked up document.
11.21 The construction agreement refers to an
approval from HASB on 24-11-1995. This recital in
the construction agreement is contrary to the case
of the Claimant.
11.22 The construction agreement shows that
the entire building would be constructed on vacant
site from foundation itself which is again false.
11.23 Assuming for a moment, but not
accepting the correctness thereof, that cost of
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construction of each apartments would be
Rs.23,50,000/-, then the total cost of construction of
12 apartments would be 2,82,00,000/-. If each
individual owner has paid Rs.1,50,000/- each, the
total amount paid by the each one of the owners of
the flats would be Rs.18,00,000/-. The remaining
amount would be Rs.2,64,00,000/-. The Claimant
firm has not produced any records to show such
huge expenditure or the I.T. returns etc., regarding
amount spent by it.
11.24 On 30-03-2005, the Claimant firm had
written a letter to the said Bank stating that the
respondent has paid entire sum of Rs.23,50,000/-
and that the account is fully satisfied. It is also
stated in the said letter that the Claimant firm has
no objection to mortgage the plaint 'B' schedule
property in favour of the said Bank. It is clear that
the Claimant firm has not constructed any building
and has not obtained any construction permission
AS.No.58/2014
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from the competent authority. There is no privity of
contract between the Claimant and the respondent.
11.25 The Arbitral Tribunal has framed the
issue No.5 to the effect that the Claimant must
prove that the respondent had paid Rs.15,65,000/-
and that the balance consideration amount is
Rs.7,85,000- which is due from the defendant to the
Claimant firm. The Arbitral Tribunal has answered
the said issue No.5 in the negative.
11.26 The Claimant has not raised any valid
grounds before this Court to interfere with the
impugned award. The suit is devoid of merit.
11.27 Before the Arbitral Tribunal an attempt
was made by the CW.1 to contend that the
payments were made, but not in respect of
construction agreement, but in respect of some
other project. It is a faint attempt on the part of the
Claimant before the Arbitral Tribunal.
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11.28 The CW.1 has admitted regarding the
letter addressed to the said Bank about receiving
the total amount from the respondent. If that is so,
where is the question of any amount, much less
Rs.7,85,000/-, being due from the respondent to the
Claimant.
11.29 The Claimant has not produced original
or certified copy of the construction agreement,
where the arbitration clause is included. Hence,
there is no compliance of Sec.8 of the Arbitration
and Conciliation Act, 1996.
11.30 The Claimant has not produced its
statement of accounts to substantiate the claim
against the defendant.
11.31 There is no cause of action to file the
present suit. There is no existence of any
arbitration or valid arbitration in the present case.
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Hence, the suit is liable to be dismissed. The suit
may be dismissed.
12. Perused written arguments of the learned
Advocate for the Claimant. Perused the records.
Suffice it to note that the written arguments
submitted by the learned Advocates is reiteration of
pleadings of each party's pleadings and evidence.
The relevant point urged would be considered at
relevant point of discussion infra.
13. In the facts and circumstances of the case on
hand, the following points do arise for consideration of
this Court in this judgment :
(1) Whether the plaintiff has made out that the
Arbitral Tribunal has committed a patent
illegality in passing the impugned award ?
(2) Whether the impugned award calls for
any interference ?
(3) What order ?
14. The above points for determination are
answered thus :
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Point No.1 : In the Negative
Point No.2 : In the Negative
Point No.3 : As per the final order
for the following :
REASONS
15. Points No.1 and 2 : Before proceeding to
consider the merits of the case on hand, it would be
apposite to bear in mind "Dos" and "Do nots" as
explained by the Hon'ble Supreme Court in a recent
judgment reported in (2022) 1 SCC 131 Delhi
Airport Metro Express Pvt. Ltd., vs. Delhi Metro Rail
Corporation Ltd., at paras 28 to 31 which read as
under :
28. This Court has in several other judgments
interpreted Section 34 of the 1996 Act to stress
on the restraint to be shown by courts while
examining the validity of the arbitral awards.
The limited grounds available to courts for
annulment of arbitral awards are well known to
legally trained minds. However, the difficulty
arises in applying the well-established
principles for interference to the facts of each
case that come up before the courts. There is a
disturbing tendency of courts setting aside
arbitral awards, after dissecting and
AS.No.58/2014
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reassessing factual aspects of the cases to
come to a conclusion that the award needs
intervention and thereafter, dubbing the award
to be vitiated by either perversity or patent
illegality, apart from the other grounds
available for annulment of the award. This
approach would lead to corrosion of the object
of the 1996 Act and the endeavours made to
preserve this object, which is minimal judicial
interference with arbitral awards. That apart,
several judicial pronouncements of this Court
would become a dead letter if arbitral awards
are set aside by categorising them as perverse
or patently illegal without appreciating the
contours of the said expressions.
29. Patent illegality should be illegality which
goes to the root of the matter. In other words,
every error of law committed by the Arbitral
Tribunal would not fall within the expression
'patent illegality'. Likewise, erroneous
application of law cannot be categorised as
patent illegality. In addition, contravention of
law not linked to public policy or public interest
is beyond the scope of the expression 'patent
illegality'. What is prohibited is for courts to re-
appreciate evidence to conclude that the
award suffers from patent illegality appearing
on the face of the award, as courts do not sit in
appeal against the arbitral award. The
permissible grounds for interference with a
domestic award under Section 34(2-A) on the
ground of patent illegality is when the
arbitrator takes a view which is not even a
possible one, or interprets a clause in the
contract in such a manner which no fair-minded
or reasonable person would, or if the arbitrator
commits an error of jurisdiction by wandering
outside the contract and dealing with matters
not allotted to them. An arbitral award stating
no reasons for its findings would make itself
susceptible to challenge on this account. The
AS.No.58/2014
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conclusions of the arbitrator which are based
on no evidence or have been arrived at by
ignoring vital evidence are perverse and can be
set aside on the ground of patent illegality.
Also, consideration of documents which are not
supplied to the other party is a facet of
perversity falling within the expression 'patent
illegality'.
30. Section 34 (2) (b) refers to the other
grounds on which a court can set aside an
arbitral award. If a dispute which is not capable
of settlement by arbitration is the subject-
matter of the award or if the award is in conflict
with public policy of India, the award is liable to
be set aside. Explanation (1), amended by the
2015 Amendment Act, clarified the expression
'public policy of India' and its connotations for
the purposes of reviewing arbitral awards. It
has been made clear that an award would be in
conflict with public policy of India only when it
is induced or affected by fraud or corruption or
is in violation of Section 75 or Section 81 of the
1996 Act, if it is in contravention with the
fundamental policy of Indian law or if it is in
conflict with the most basic notions of morality
or justice.
31. In Ssangyong (supra), this Court held that
the meaning of the expression 'fundamental
policy of Indian law' would be in accordance
with the understanding of this Court in
Renusagar Power Co. Ltd. v. General Electric
Co.6 In Renusagar (supra), this Court observed
that violation of the Foreign Exchange
Regulation Act, 1973, a statute enacted for the
'national economic interest', and disregarding
the superior courts in India would be
antithetical to the fundamental policy of Indian
law. Contravention of a statute not linked to
public policy or public interest cannot be a
AS.No.58/2014
31
ground to set at naught an arbitral award as
being discordant with the fundamental policy of
Indian law and neither can it be brought within
the confines of 'patent illegality' as discussed
above. In other words, contravention of a
statute only if it is linked to public policy or
public interest is cause for setting aside the
award as being at odds with the fundamental
policy of Indian law. If an arbitral award shocks
the conscience of the court, it can be set aside
as being in conflict with the most basic notions
of justice. The ground of morality in this
context has been interpreted by this Court to
encompass awards involving elements of
sexual morality, such as prostitution, or awards
6 1994 Supp (1) SCC 644 seeking to validate
agreements which are not illegal but would not
be enforced given the prevailing mores of the
day.
32. In light of the principles elucidated herein
for interference with an arbitral award by a
court in exercise of its jurisdiction under
Section 34 of the 1996 Act, we proceed to
consider the questions that arise in these
Appeals as to whether the Division Bench of
the High Court was right in setting aside the
award of the Arbitral Tribunal dated
11.05.2017.
16. The conclusions recorded by the Arbitral
Tribunal may be summarised as follows :
16.1 The Claimant has proved the existence
of the construction agreement. In support of this
AS.No.58/2014
32
conclusion, the Arbitral Tribunal has stated the
following reasons.
Firstly, since this case is arising from the
order of the Hon'ble High Court under Section 11 of
the Act, Section 8 of the Act has no application to
the case on hand. Hence, non-production of the
original or the certified copy of the construction
agreement by the Claimant is not fatal to the
arbitration proceeding. Hence, the judgment of the
Hon'ble Supreme Court in 2008 AIR SCW 5870, Atul
Singh and Others vs. Sunil Kumar Singh and Others
is distinguishable.
Secondly, the respondent himself has
admitted the construction agreement, in the sale
deed executed by her in favour of third party in
respect of the plaint 'B' schedule property.
Thirdly, as per the terms of her objection
statement, the respondent has made certain
payments. The construction agreement would
evidence the factum of payment and they are
AS.No.58/2014
33
supported by the bank vouchers produced by the
respondent herself. If there is no such construction
agreement, why did the respondent make such
payments.
Fourthly, in AIR 2007 SC 1376 India
Household and Healthcare Ltd., vs. L.G. Household
and Healthcare Ltd., the Hon'ble Supreme Court has
ruled that where existence of an arbitration
agreement can be found, apart from the existence
of the original agreement, the Courts would
construe the agreement in such a manner so as to
uphold the arbitration agreement.
Fifthly and lastly, in the case on hand, there
is no allegation of fraud against the Claimant.
17. The Arbitral Tribunal has concluded that the
Claimant has failed to prove with regard to payment
in terms of issue Nos.5, 6 and 7 with regard to
claims in terms of issue No.8. The Arbitral Tribunal
has also concluded that the respondent has proved
AS.No.58/2014
34
the payment in terms of statement of objections.
Accordingly, the Arbitral Tribunal has answered
issue Nos.5,6,7,8 and 10 against the claimant and
issue No.9 in favour of the respondent.
18. It would be useful and handy for ready
reference to reproduce issue Nos.5 to 10 for ready
reference while considering the further discussions.
Issue Nos.5 to 10 framed by the Arbitral Tribunal
read as under :
5. Whether the Claimant proves that the
Respondent has paid a sum of Rs.15,67,500/-
and the respondent is liable to pay the balance
sum of Rs.7,85,000/- as claimed by the Claimant
(C.M.P.No.89/2005) ?
6. Whether the Claimant proves that the
respondent has paid a sum of Rs.1,50,000/- and
the respondent is liable to pay the balance sum
of Rs.22,00,000/- as claimed by the Claimant
(C.M.P.No.90/2005) ?
7. Whether the Claimant proves that the
respondent has paid a sum of Rs.1,50,000/- and
the respondent is liable to pay the balance sum
of Rs.22,00,000/- as claimed by the Claimant
(C.M.P.No.91/2005) ?
8. Whether the Claimant proves that it is
entitled for the amounts claimed in the claim
petitions in each one of the claim petitions filed
AS.No.58/2014
35
namely CMP No.89/2005, CMP No.90/2005 and
CMP No.91/2005) ?
9. Whether the respondent proves that he or
she has paid various payments to Mr. G.
Damodharan and Mr. P.M. Rajarajan as
contended by each one of them in para 7 of the
Statement of Objection ?
10. Whether the Claimant is entitled to the
reliefs as sought for in each one of the claim
petition ?
19. The reasons stated by the Arbitral Tribunal to
reach the above conclusions on issue Nos.5 to 10
may be summarize in the following words.
19.1 The CW.1 has admitted his signatures
on page No.2 in each one of the agreement. He has
also admitted that he has maintained A/c No.18922
in Indian Bank, Benson Town branch, Bengaluru.
19.2 The Arbitral Tribunal has referred to
Exs.C-24 and held that the CW.1 has admitted the
contents of page No.2 in Ex.C-24.
AS.No.58/2014
36
19.3 The Arbitral Tribunal has also concluded
that the CW.1 has admitted Ex.R-2, a letter written
by the CW.1 to the said Bank. In the said letter the
CW.1 has admitted the receipt of Rs.23,50,000/-
from the respondent. The said letter was addressed
by the CW.1 to the Branch Manager of the said
bank.
19.4 The said payments tally with the figures
shown in statement of objection of the respondent.
19.5 The claim is silent with regard to the
said payment details in its pleadings in the claim
petition.
19.6 The Claimant has failed to produce
statement of account of the Claimant with reference
to the said payment details, before the Arbitral
Tribunal.
AS.No.58/2014
37
19.7 No copy of Income tax returns or
assessment is filed by the Claimant before the
Arbitral Tribunal.
19.8 The notice issued by the Claimant to
the respondent is also silent about the receipt of
the said payments.
19.9 Likewise, the Claim statement is also
silent about the receipt of the said payments.
19.10 A faint attempt was made by the CW.1
to demonstrate that the said payments were not
towards the discharge of the obligation under the
construction agreement, but, it was towards some
other project. But, however, the Claimant has not
given details of said other project, either in the
pleadings or in the evidence. By considering the
above noted facts and circumstances, the Arbitral
Tribunal has concluded that it is a fit case to raise
AS.No.58/2014
38
presumption to the effect that the said payments
were made only towards discharge of the obligation
under the construction agreement.
19.11. The Claimant has not stated as to why
he received said payments, for what purpose he
received said payments and he has not received
the said payments on behalf of the Claimant.
19.12. By recording the above conclusions,
ultimately the Arbitral Tribunal has held that
Claimant has miserably failed to prove its
entitlement in terms of the pleadings in its claim
petition.
19.13. In fact, the Arbitral Tribunal has also
noted that the written arguments submitted on
behalf of the respondent has set forth the details of
the said payments and that no such details are
AS.No.58/2014
39
forth coming in the written arguments submitted on
behalf of the Claimant.
19.14. The Arbitral Tribunal has also
taken into consideration, the fact that in respect of
very same claim, the Claimant had initiated a civil
proceedings, but did not prosecute the same for the
reasons best known to the Claimant.
19.15. There is some evidence with
regard to certain proceedings against CW.1 before
the Deputy Registrar of Co-operative Societies. But,
however, the Arbitral Tribunal has held that it was
not necessary for it to consider the said aspect of
the matter.
19.16. By referring to a judgment of the
Hon'ble Apex Court in AIR 1968 SC 1418 Gopal
Krishnaji Ketkar vs. Mohammed Haji Latif the
Arbitral Tribunal has held that an adverse inference
AS.No.58/2014
40
is required to be drawn against the party, who is in
possession of the best evidence which would throw
light on the matter in controversy and which he fails
to produce in the proceedings.
19.17. The Arbitral Tribunal has referred
to a judgment of the Hon'ble Apex Court in AIR
1960 SC 100 Narayan Bhagwantrao Gosavi
Balajiwale vs. Gopal Vinayak Gosavi and others, for
the proposition of law that " An admission is the
best evidence that an opposing party can rely upon,
and though not conclusive, is decisive of the
matter, unless successfully withdrawn or proved
erroneous".
20. I have carefully gone through the impugned
award and in my considered view, the reasons as
well as ultimate findings on issue Nos.5 to 10
recorded by the Arbitral Tribunal is founded on the
materials on record and well reasoned.
AS.No.58/2014
41
21. The Arbitral Tribunal has held that in view of
the findings recorded on the other issues, the
Claimant is not entitle for the relief claimed.
22. While answering issue No.12, the Arbitral
Tribunal has concluded that the respondent is
entitled to recover from the Claimant only the share
of the sitting fee paid to the learned Arbitrator by
the respondent in the concerned arbitral
proceedings.
23. The learned Advocate for the Claimant has
raised one question of law to the following effect:
The respondent did not verify the objection
statement filed by her before the Arbitral Tribunal.
Likewise, no affidavit is filed annexed to the said
statement of objection filed before the Arbitral
Tribunal. The objections were filed by father of the
respondent by name Mr. L. Balakumar. However,
AS.No.58/2014
42
Mr. L. Balakumar did not produce before the Arbitral
Tribunal the GPA or its copy, wherein the
respondent did authorize Mr. L. Balakumar to
appear before the Arbitral Tribunal and to submit
pleadings etc., Hence, the objection statement filed
by Mr. L. Balakumar cannot be looked into in the
eye of law. Hence, the respondent did not have
right to cross-examine CW.1 and CW.2 and to
submit her arguments. The reliance placed on such
cross-examination and such argument by the
Arbitral Tribunal is liable to be set aside.
24. The said question of law is no more
resintegra. In a judgment reported in (1988) 4 SCC
619 Modula India vs. Kamakshya Singh Deo, at
paras 19 to 22, the Hon'ble Supreme Court has
ruled regarding the law governing the position as to
what are the rights of a defendant who has not filed
written statement to participate in the trial and
AS.No.58/2014
43
what are the limitations on such rights, in the
following words:
19. " To us it appears that the basic principle
that where a plaintiff comes to the court he
must prove his case should not be whittled
down even in a case where no defendant
appears. It will at once be clear that to say
that the Court can only do this by looking the
plaintiff's evidence and pleadings
supplemented by such questions as the court
may consider necessary and to completely
eliminate any type of assistance from the
defendant in this task will place the court
under a great handicap in discovering the
truth or otherwise of the plaintiff's statements.
For after all, the court on its own motion, can
do very little to ascertain the truth or
otherwise of the plaintiff's averments and it is
only the opposite party that will be more
familiar with the detailed facts of a particular
case and that can assist the court in pointing
out defects, weaknesses, errors and
inconsistencies of the plaintiff's case.
20. We, therefore, think that the defendant
should be allowed his right of cross-
examination and arguments. But we are
equally clear that this right should be subject
to PG NO 358 certain important safeguards.
The first of these is that the defendant cannot
be allowed to lead his own evidence. None of
the observations or decisions cited have gone
to the extent of suggesting that, inspite of the
fact that the defence has been struck off, the
defendant can adduce evidence of his own or
try to substantiate his own case.
21. Secondly, there is force in the
apprehension that if one permits cross-
examination of the plaintiff's witnesses by the
defendant whose defence is struck off,
AS.No.58/2014
44
procedural chaos may result unless great case
is exercised and that it may be very difficult to
keep the cross- examination within the limits
of the principles discussed earlier. Under the
guise of cross-examination and purported
demolition of the plaintiff's case, the
defendant may attempt to put forward pleas
of his own. To perceive quickly the difference
between questions put out to elicit a reply
from the plaintiff which may derogate from his
own case and questions put out to
substantiate pleas in defence which the
defendant may have in mind and to restrict
the cross-examination to its limits will be not
easy task. We think, however, that this is a
difficulty of procedure, rather than substance.
As pointed out by Ramendra Mohan Dutta, J.
this is a matter to be sorted out in practical
application rather than by laying down a hard
and fast rule of exclusion.
22. A third safeguard which we would like to
impose is based on the observations of this
court in Sangram Singh's case. As pointed out
therein, the essence of the matter in all such
cases is that the latitude that may be
extended by the court to the defendant inspite
of his not having filed a written statement,
should not cause prejudice to the plaintiff.
Where the defendant does not file a written
statement or where he does not appear to
contest the case the plaintiff proceeds on the
basis that there is no real opposition and
contents himself by letting in just enough
evidence to establish a prima facie case.
Therefore, the court should ensure that by
permitting the defendant at a later stage
either to cross-examine the witnesses or to
participate in the proceeding the plaintiff is
not taken by surprise or gravely prejudiced.
This difficulty however can be easily overcome
in practice, because there is a wide discretion
with the court and it is always open to the
AS.No.58/2014
45
court, where it believes that the plaintiff has
been misled, to exercise its discretion to shut
out cross-examination or to regulate it in such
manner as to avoid any real prejudice to the
interests of the plaintiff."
25. In a subsequent judgment reported in ILR
2002 KAR 260 Basalingappa Chinnappa Goudar and
Others vs. Shanthavva and others, the Hon'ble High
Court of Karnataka has reiterated the said position
of law.
26. In view of the above noted well settled
position of law, the argument of the learned
Advocate for the claimant that the respondent has
no right to cross-examine CW.1 and that reliance
placed by the Arbitral Tribunal on Ex.C-24, on Ex.R-
4, and also on the cross-examination portion of the
deposition of CW.1 is bad in law is neither tenable
nor acceptable. Hence, the argument to the effect
that for the said reasons the impugned award is
perverse cannot be accepted.
AS.No.58/2014
46
27. The respondent in this case is entitled to
demonstrate that the case of the Claimant is false
based on the materials produced by the Claimant
itself. It is not necessary that the respondent must
produce independent evidence to show that the
case of the claimant is false.
28. The learned Advocate for the Claimant has
relied upon the following judgments of the Hon'ble
Apex Court regarding proposition of law noted
under each decision.
28.1 (2019) 15 SCC 131 Ssangyong Engg. &
Construction Co., Ltd., vs. NHA1 for the proposition
of law :
" A finding based on no evidence at all or an
award which ignores vital evidence in arriving
at its decision would be perverse and liable to
be set aside on the ground of patent illegality".
28.2 (2015) 3 SCC 491 Associate Builders vs. Delhi
Development Authority for the proposition of law :
AS.No.58/2014
47
" The third juristic principle is that a decision
which is perverse or so irrational that no
reasonable person would have arrived at the
same is important and requires some degree
of explanation. It is settled law that where :
(i) A finding is based on no evidence, or
(ii) An Arbitral Tribunal takes into account
something irrelevant to the decision which it
arrives at ; or
(iii) Ignores vital evidence in arriving at its
decision,
Such decision would necessarily be perverse".
28.3 1992 Supp (2) SCC 312 Excise and
Taxation Officer-Cum-Assessing Authority vs. Gopi
Nath & sons in paragraph 7, page 317 for the
proposition of law :
" 7. ..... It is, no doubt, true that if a finding of
fact is arrived at by ignoring or excluding
relevant material or by taking into
consideration irrelevant material or if the
finding so outrageously defies logic as to suffer
from the vice of irrationality incurring the
blame of being perverse, then, the finding is
rendered infirm in law".
29. Having discussed the materials on record, I
find that the Claimant has not made out that the
Arbitral Tribunal has committed a patent illegality in
AS.No.58/2014
48
passing the impugned order, that too to the
satisfaction of law declared by the Hon'ble Supreme
Court in Delhi Airport Metro Express Pvt. Ltd.,'s case
(supra). The judgments relied on by the learned
Advocate for the Claimant are not helpful to the
case of the Claimant in view of the conclusions
recorded on the facts of this case. Since the
Hon'ble Apex Court has ruled that in a proceedings
under Sec.34 of the Arbitration and Conciliation Act
1996, the interference should be minimal and that
it is not permissible for the concerned Court to
appreciate or re-appreciate the evidence on record
to come to a different conclusion unless patent
illegality is made out. It would not be necessary for
me to discuss in detail the other points urged in the
written arguments submitted by the learned
Advocates for the parties which would mainly deal
with appreciation or re-appreciation of evidence on
record which is not permissible in the present
proceedings as the scope of enquiry is very limited
AS.No.58/2014
49
and this Court is not exercising the powers of an
Appellate Court. In view of these conclusions, point
Nos.1 and 2 are held in the negative.
30. Point No.3 : Hence, the following :
ORDER
Suit filed by Claimant under Section 34 of the Arbitration and Conciliation Act, 1996 is dismissed with costs.
(Dictated to the Judgment Writer, transcribed and computerized by her, transcript thereof corrected and then pronounced by me in open court on this the 22nd day of September, 2022).
(D.P. KUMARA SWAMY) VI Addl.City Civil & Sessions Judge Bengaluru City.
AS.No.58/2014 50 ANNEXURE I. List of witnesses examined on behalf of :
(a) Plaintiff's side : NIL
(b) Defendants side : NIL ] II. List of documents exhibited on behalf of :
(a) Plaintiff's side : NIL
(b) Defendants side : NIL VI Addl.City Civil & Sessions Judge Bengaluru City