Bombay High Court
A Company Having Its Registered vs Ipn Packaging Prvate Ltd on 1 July, 2013
Author: R.D.Dhanuka
Bench: R.D.Dhanuka
.. 1 .. ARBP-557/12
IN THE HIGH COURT OF JUDICATURE AT BOMBAY.
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO.557 OF 2012
ROPA PLASTICS PRIVATE LTD.
A company having its registered
Office at GAT No.837/2, Pune
Nagar road, Village Sanaswadi,
Taluka Shirur, Pune - 412208 ... Petitioner.
V/s.
IPN PACKAGING PRVATE LTD.
A company having its registered
Office at GAT No.183, "IPN Campus"
Off Pune-Nagar Road, Village Sanaswadi,
Taluka Shirur, Pune -412208. ... Respondent.
Mr Chetan Kapadia a/w H.S. Khokawalla i/b M/s Nankani & Associates for the
Petitioner.
Dr Birendra Saraf a/w J.S. Soloman & Shruti Maniar i/b M/s Soloman & Co. for
the Respondent.
CORAM : R.D.DHANUKA J.
JUDGEMENT RESERVED ON JUNE 18, 2013.
JUDGMENT PRONOUNCED ON JULY 1, 2013.
JUDGMENT :
By this petition filed under Section 34 of the Arbitration & Conciliation Act, 199 ( For short herein after referred as Arbitration Act 1996), petitioner seeks to challenge award dated 21st November 2011 delivered by the learned arbitrator directing the petitioner herein to pay the sum of Asmita 1/25 ::: Downloaded on - 27/08/2013 21:01:48 ::: .. 2 .. ARBP-557/12 Rs.90,00,000/- to the respondent together with interest thereon @ 12% p.a. from 12th November 2008 till realization and directed the respondent herein to apply to this Court for payment of the said sum together with interest which amount has been deposited in company Petition No.343 of 2009 by the petitioner herein as per order dated 9th August 2010. The learned arbitrator also directed the petitioner herein not to alienate, dispose of or encumber or create any third party rights or part with possession of the property being the subject matter of the arbitration till the respondent herein realizes all the amounts under the said award. The learned arbitrator also directed payment of Rs.1,20,000/- towards the costs of the arbitration payable by the petitioner to the respondent.
Factual Matrix :
2. Under a Sale Deed dated 11th August 2006 between Durolite Pvt. Ltd and the petitioner herein, the petitioner became owner of the property admeasuring 1 Hector and 27 Ares equivalent to about 12700 square meters of land bearing Gat. No.837/2. Village Sanaswadi, Taluka Shirur, Dist. Pune (hereinafter referred to as 'the said property'). The petitioner had obtained credit facility of Rs.6,55,00,000/- from the Saraswat Co. Op Bank Ltd., on security of the said property along with the building, plant and machinery thereon. Charge was created on the said property in favour of the Saraswat Co. Op Bank Ltd., and Asmita 2/25 ::: Downloaded on - 27/08/2013 21:01:48 ::: .. 3 .. ARBP-557/12 was registered with the Registrar of Companies, Maharashtra. By Leave and License Agreement dated 1st April 2008 executed by the petitioner as the Licensor and the respondent as the Licensee, petitioner granted Leave & License to the respondent to use and occupy the premises adm. 10000 square feet in a building on the said property for the term of twelve months on payment of license fee of Rs.50,000/- per month. The respondent was given an option of buying the said property at the mutually agreed price.
3. Parties negotiated for sale of portion of the said property pursuant to which the respondent paid the sum of Rs.60,00,000/- in instalments to the petitioner. By an agreement dated 2 nd September 2008 executed between the petitioner and the respondent, petitioner agreed to sell portion of the said property admeasuring 46667 square feet out the said property along with building with ground floor adm.21600 square feet built up area and permissible further construction of about 18000 square feet built up area for a consideration of Rs.5.70 crores. It was agreed that amount of Rs.60,00,000/- paid by the respondent to the petitioner in April 2008 shall be considered as earnest money and part payment of the purchase price under the said agreement. The respondent agreed to pay the balance amount of Rs.5.10 crores at the time of completion of sale of the said property in favour of the respondent and on Asmita 3/25 ::: Downloaded on - 27/08/2013 21:01:48 ::: .. 4 .. ARBP-557/12 delivery of vacant possession of the said property to the respondent. Clauses 4, 5, 11, 12 and 15 of the said agreement are extracted as under :
4. The Purchasers have agreed to pay to or according to the instructions of the Vendors amounts aggregating to Rs.5,10,00,000/- (Rupees Five Crores Ten Lakhs Only) on or before 19 th September 2008 at the time of completion of the sale of the said property in favour of the Purchasers and delivery of vacant possession of the said property to the Purchasers as provided herein.
The agreed price includes following :
• Land admeasuring 43,600 sq.ft.
Bldg. Of 21600 sq.ft.
•
• 1 No. Transformers of 500 kva
• Materials storage racks. 4 nos. 16.5 tons each with
ducting system."
"5. The Vendors shall within 90 days of the date of this Agreement obtain from The Saraswat Co. Op Bank Ltd., Somwarpeth branch and deliver to Purchasers confirmation in writing of the said Bank of the amounts payable by the Vendors to the said Bank for redemption of the mortgage and security of the said Bank over the said property and the buildings and the movables thereon. And No Objection Certificate from the said The Saraswat Co-operative Bank Ltd."
"11 In case of Purchasers are not satisfied with the title of the Vendors to the said property, or with any of the other attributes of the property declared by the Vendors the Purchasers shall have the option to Asmita 4/25 ::: Downloaded on - 27/08/2013 21:01:48 ::: .. 5 .. ARBP-557/12 rescind this Agreement by giving to the Vendors notice in writing and in case of such rescission the Vendors shall refund to the Purchasers the earnest money of Rs.60,00,000/- and any other amounts paid by the Purchasers to the Vendors for the purchase of the property & interest thereon @ 12% per annum basis."
"12. The sale shall be completed in the manner provided herein withing by not later than 31st December 2008 subject to condition of performance by the Vendors of their obligations under Clause 5 and 9 hereof. Thereafter either party hereto shall have the option of making time essence of the contract by giving to the other 15 days in wiring of their intention to do so as per Annexe 1."
"15. If the sale is not completed due to any wilful default on the part of the Vendors, the Purchasers shall have the option without prejudice to their right to claim specific performance of this Agreement, to obtain from the Vendors the return of the amount of Rs.60,00,000/- & interest @ 12 % per annum basis and any other amount, if any, paid in part payment of the purchase price."
4. On 10th September 2008, the respondent made further payment of Rs.30,00,000/- to the petitioner as part payment against the purchase of the said property. On 18th September 2008, the petitioner handed over photocopies of document of title relating to the said property to the respondent. By e-mail Asmita 5/25 ::: Downloaded on - 27/08/2013 21:01:48 ::: .. 6 .. ARBP-557/12 dated 24th September 2008, the respondent informed the petitioner that their banker required a legal subdivision of the said property and the audited balance sheet showing the property asset. Respondent also called upon the petitioner to inform as to when the petitioner would be able to provide the respondent the vacant property (machines and electrical panels removed), walls and floors repaired and painted as well as a painted separation wall as per the agreement.
5. Vide e-mail dated 25th September 2008 to the respondent, petitioner referred to alleged discussion and recorded that if the petitioner did not get at least 35% of the payment of the sale value on or before 30 th September, then the petitioner would not be interested to sell the said property to the respondent. It is also recorded that petitioner would return payment of Rs.30,00,000/- which the petitioner could have forfeited as per the said agreement. By another e-mail dated 25th September 2008, petitioner informed the respondent that petitioner would not give their balance-sheet to the respondent as it was not part of any agreement or discussion. It was recorded that petitioner had already given all the papers of land to the respondent. It is alleged that on the subdivision of the property, petitioner could only demark the said property at that time as the Sale Deed was not completed and thus it was not possible to make any such legal subdivision. By e-mail dated 25 th September 2008, respondent once again Asmita 6/25 ::: Downloaded on - 27/08/2013 21:01:48 ::: .. 7 .. ARBP-557/12 informed the petitioner that the Syndicate Bank required the balance-sheet to see that the said land was shown as an asset of the petitioner and the said document could be directly provided to the Syndicate Bank by the petitioner. The respondent informed the petitioner that respondent had fulfilled their obligation to pay Rs.60,00,000/- advance and would fulfill their obligation to pay the remaining sum upon the receipt of all documents, property in their name and completion of the building in order to legally enter and operate from the building.
6. By e-mail dated 25th September 2008, the petitioner informed the respondent that the letter of comfort from Saraswat Bank would be handed over to Mr Kanuga of the respondent on Monday and the petitioner could not start the work on division of the property until the petitioner had at least 35% of the payment and firm date of payment for the balance amount. Petitioner informed that petitioner would like to have confirmation on payment from the respondent and not from Syndicate Bank. By e-mail dated 26 th September 2008, respondent informed the petitioner that there was no clause in the agreement that at least 35% of the sale price was to be paid before the property would be divided. The respondent made it clear that if the petitioner did not divide the property, respondent would not pay the remaining amount. It is also recorded that it was Asmita 7/25 ::: Downloaded on - 27/08/2013 21:01:48 ::: .. 8 .. ARBP-557/12 agreed that if the petitioner had to vacate the property, only then the respondent would pay the full amount. By e-mail dated 29 th September 2008, petitioner informed the respondent that petitioner could confirm the possession date only based upon when the respondent confirming full payment.
7. By e-mail dated 30th September 2008, respondent informed the petitioner that the letter of Comfort from Saraswat Bank and Rs.30,00,000/- as per the commitment of the petitioner has not been received by the respondent.
Petitioner vide e-mail dated 1st October 2008 to the respondent informed that area given to the respondent was till then not vacated and machines and the stock was not removed. The respondent was requested to remove the machine and the stock and then the petitioner would give back the money. On 1 st October 2008, the Saraswat Co-Op. Bank Ltd., addressed a letter to the Managing Director of the petitioner and informed that the bank would agree to release its charge on the said part of the property provided the entire sale proceeds was credited to the account of the petitioner with the said bank and advance against the same was fully repaid. Bank also informed that since no division of the property/plot was made, the bank was unable to deliver the title deeds till the other advance was outstanding in their books.
Asmita 8/25 ::: Downloaded on - 27/08/2013 21:01:48 :::.. 9 .. ARBP-557/12
8. The petitioner vide letter dated 4th October 2008 informed the respondent that petitioner was not in a position to make available the premises on rental to the respondent beyond 31 st October 2008 and called upon to vacate the said premises on or before date of termination of agreement i.e. 31 st October 2008. The petitioner also called upon the respondent to clear the rent payable for the month of September 2008 immediately and pay balance all dues on or before the date of termination.
9. By e-mail dated 8th October 2008, petitioner informed the respondent that as the petitioner had not received full payment of Rs.570 lacs against the sale of property as per agreement dated 2 nd September 2008 under that circumstances, petitioner was left with no other option but to call off the property deal. It is the case of the respondent that even before the respondent could progress investigation of title and searches and publication of notice, the petitioner by e-mail dated 8th October 2008 called off the deal of sale of the said property. By letter dated 12 th November 2008, the respondent placed on record that petitioner had not yet forwarded confirmation in writing of the Bank of the amounts payable by the petitioner to the bank for redemption of the mortgage and security of the bank over the property agreed to be sold and movables thereon. The respondent conveyed that the respondent had been ready and Asmita 9/25 ::: Downloaded on - 27/08/2013 21:01:48 ::: .. 10 .. ARBP-557/12 willing to make payment of the balance purchase price and complete the sale as provided in the agreement. However, petitioner had not performed their obligation for making arrangement for redemption of security in favour of the Bank and for delivery of vacant possession of the property to the respondent at the time of completion of the sale. Respondent confirmed that there was no default on the part of the respondent in performing any of their obligations under the said agreement. The respondent protested that the action on the part of the petitioner in calling off the property deal was wrongful and unjustified and in the circumstances, respondent was not satisfied with the title of the petitioner to the property and with the attributes of the said property declared by the petitioner and in exercise of the option granted to them under Clause-11 of the agreement, respondent rescinded the agreement and called upon the petitioner to refund the earnest money of Rs.60,00,000/- and further amount of Rs.30,00,000/- paid by the respondent to the petitioner with interest @ 12% p.a. It was also informed that the said amount would constitute a charge on the property agreed to be sold to the respondent under the agreement under Section 55(6)(b) of the Transfer of Property Act, 1882.
10. The respondent thereafter issued a notice for winding up of the petitioner company on 17th February 2009 and filed Company Petition No.343 of Asmita 10/25 ::: Downloaded on - 27/08/2013 21:01:48 ::: .. 11 .. ARBP-557/12 2009 in this Court against the petitioner for winding up the company under Section 433 and 434 of Companies Act 1956. By an order dated 2 nd September 2009, this Court admitted the said Company Petition. By consent of parties, this Court disposed of the said Company Petition. Petitioner was directed to deposit a sum of Rs.90,00,000/- in this Court on or before 31 st October 2010 and directed the office to invest the said amount in Fixed Deposit of nationalized bank initially for a period of one year and thereafter for like periods of one year each. The said amount was directed to be deposited to the credit of the arbitration proceedings. Liberty was granted to parties to apply in respect of the said amount and was directed to abide by the award passed by the learned arbitrator. By consent of parties disputes and differences in respect of the Company Petition or in respect of agreement dated 2 nd September 2008 were referred to sole arbitration of Mr Justice H. Suresh, former Judge of this Court.
By the said order it was also directed that pending the award being made and published by the Arbitrator and for eight weeks, the petitioner herein shall not alienate, dispose of, encumber, part with possession of or create any third party right, title or interest in , to , upon or in respect of the property which was subject matter of the agreement dated 2nd September 2008.
11. Pursuant to the said order, petitioner herein deposited the said sum of Asmita 11/25 ::: Downloaded on - 27/08/2013 21:01:48 ::: .. 12 .. ARBP-557/12 Rs.90,00,000/- in this Court which came to be invested by the Prothonotary and Senior Master. Pursuant to liberty granted by the learned arbitrator, respondent filed statement of claim. Petitioner filed written statement.
12. By reasoned award dated 21 st November 2011, the learned arbitrator rendered a finding that forfeiture of the amount by the petitioner was illegal and was not valid. The learned arbitrator directed the petitioner to refund the sum of Rs.90,00,000/- together with interest thereon @ 12% p.a from 12 th November 2008 and also awarded arbitration cost at Rs.1,20,000/-. The learned arbitrator however did not grant relief for declaration of charge on the property and proposed to continue the Order of injunction granted by this Court on the said property. The learned arbitrator also directed the respondent to apply to this Court for payment of Rs.90,00,000/- together with interest accrued thereon which was deposited in Company Petition No.343 of 2009 as per order dated 9 th August 2010 and to adjust the same towards the awarded amount and to call upon the petitioner to pay the balance if any. The learned arbitration ordered that the petitioner shall not alienate, dispose of, or encumber, or create any third party rights or part with possession of the property being the subject matter of the arbitration till the respondent realizes all the amounts under the said award.
Asmita 12/25 ::: Downloaded on - 27/08/2013 21:01:48 ::: .. 13 .. ARBP-557/12
13. Rival submissions of parties :
Submissions made by Mr Kapadia, learned counsel appearing for the petitioner :
(a) Finding of the learned arbitrator that the rescission of the contract by the respondent by letter dated 12th November 2008 in exercise of power under Clause 11 of the suit agreement was valid, is contrary to the provisions of the contract. Under the contract, time for completion of sale was 19 th September 2008 and/or till 31st December 2008. On the date of rescission of the contract, time to complete the sale had not expired and thus respondent could not have rescinded the contract on the ground that the petitioner had not cleared its title in respect of the said property.
(b) The respondent was not ready and willing to perform their contractual obligations and did not make the payment of balance consideration on demand and thus the learned arbitrator could not have held the action of rescission on the part of the respondent valid and the award is thus in contravention of provisions of the Transfer of Property Act and the Contract Act.
(c ) The learned arbitrator failed to appreciate that rescission of contract by the respondent was without making the time as essence of the contract and was before 31st December 2008 without satisfying the steps taken by the respondent for investigation of title and without calling upon the petitioner Asmita 13/25 ::: Downloaded on - 27/08/2013 21:01:48 ::: .. 14 .. ARBP-557/12 to clear such alleged clog on the part of the petitioner to clear the title in respect of the said property.
(d) Learned arbitrator ought to have appreciated that the contract could have been rescinded only if the petitioner would have committed breach and the respondent would have made time as an essence of the contract by issuing notice. Neither the petitioner had committed breach of the contract nor the respondent had issued notice making time as an essence of the contract, thus, rescission of the contract was illegal and could not have held valid by the learned arbitrator. Breach of the contract would have been committed by the petitioner only if time to perform such obligation would have expired and not prior thereto. Time to make an essence of the contract would have arisen only after 31st December 2008 and not prior thereto. The learned arbitrator ought to have come to a conclusion before declaring rescission as valid whether the petitioner had committed repudiatory breach. The learned arbitrator has not only directed the petitioner to refund the entire amount paid by the respondent but has also confirmed the injunction granted against the petitioner in respect of the said property. It is submitted that both the reliefs could not have been granted by the learned arbitrator.
(e) In the statement of claim, the respondent had applied for declaration that rescission of the contract was valid and had applied for refund.
Asmita 14/25 ::: Downloaded on - 27/08/2013 21:01:48 :::.. 15 .. ARBP-557/12 In such proceedings filed by the respondent, learned arbitrator could not have rendered a finding about the decision of the petitioner to call off the deal as illegal. The respondent had not sought any such relief in its statement of claim.
14. Dr Saraf, the learned counsel appearing for the respondent on the other hand submits as under :
(a) The learned arbitrator has construed the provisions of the contract. He has rendered a finding that the petitioner had committed breach and default of their obligations under the provisions of the contract. Time was an essence of the contract. On appreciation of the evidence before the learned arbitrator, such findings are rendered after considering the documents and/or interpretation of contract which findings are not perverse and thus, Court shall not re-appreciate the finding of fact rendered by the learned arbitrator under Section 34 of the Arbitration Act 1996.
(b) Under clause 5 of the contract, petitioner was under obligation to obtain No Objection Certificate (NOC) from the Saraswat Co. Op.
Bank Ltd. within a period of 90 days and was to carry out division of the suit property. The respondent had repeatedly called upon the petitioner to obtain NOC from the Saraswat Co. Op. Bank. NOC obtained by the petitioner from the Saraswat Co. Op. Bank was conditional NOC as the petitioner did not clear the Asmita 15/25 ::: Downloaded on - 27/08/2013 21:01:48 ::: .. 16 .. ARBP-557/12 dues of Saraswat Bank. Title of the petitioner was not clear. Even before the respondent could take any action, petitioner had already put off the deal. In the correspondence as well as in the statement of claim, respondent had challenged the action on the part of the petitioner to put off the deal as illegal and also applied for declaration that the said rescission of contract by the respondent was valid and legal. It is submitted that the correspondence and the statement of claim have to be read together. It was a composite cause of action pleaded by the respondent in the statement of claim. In the alternative, it is submitted that even if the respondent would not have rescinded the contract, the learned arbitrator could have granted the prayer for refund of the amount deposited on holding the action on the part of the petitioner for calling off the deal as illegal.
The learned arbitrator has held that calling off the deal by the petitioner was illegal and as a consequence thereof, rescission of contract by the respondent was valid and legal considering the pleadings, documents and contract between the parties. The petitioner did not challenge the decision of the respondent to rescind the contract by filing any independent proceedings.
( c) Dr Saraf learned counsel for the respondent placed reliance upon the Judgment of Supreme Court in case of Arosen Enterprises Ltd. vs. Union of India & Anr. Reported in (1999) 9 Supreme Court Cases 449 in support of his plea that the issues raised in the matter on merits relate to default, Asmita 16/25 ::: Downloaded on - 27/08/2013 21:01:48 ::: .. 17 .. ARBP-557/12 time being the essence are all issues of fact and the arbitrators are within their jurisdiction to decide the issue as they deem it fit and the Court shall not interfere with the finding of fact rendered by the learned arbitrator on this issue.
Para 39 of the said Judgment reads thus :
39. In any event, the issues raised in the matter on merits relate to default, time being the essence, quantum of damages are all issues of fact and the arbitrators are within their jurisdiction to decide the issue as they deem it fit - the courts have no right or authority to interdict an award on a factual issue and it is on this score the appellate court has gone totally wrong and thus exercised jurisdiction which it did not have. The exercise of jurisdiction is thus wholly unwarranted and the High Court has thus exceeded its jurisdiction warranting interference by this Court. As regards issues of fact as noticed above and the observations made hereinabove obtain support from a judgment of this Court in the case of Olympus Superstructures (P) Ltd. v. Meena Vijay Khetan (1999) 5 SCC 651.
(d) Dr Saraf also placed reliance upon the Judgment of Supreme Court in case of Rashtriya Ispat Nigam Ltd. vs. Dewan Chand Ram Saran reported in (2012) 5 Supreme Court Cases 306 in support of his plea that if a provision is capable of two interpretations and if a view taken by the arbitrator is clearly a possible if not a plausible one, Court shall not interfere with the award and substitute its view in place of the interpretation accepted by the learned arbitrator. The learned counsel placed reliance upon paragraphs 43 and 46 of the Judgment which read thus :
43. In any case, assuming that Clause 9.3 was capable of two interpretations, the view taken by the arbitrator was clearly a possible if not a plausible one. It is not possible to say that the arbitrator had travelled outside his jurisdiction, or that the view taken by him was against the terms of contract. That being the position, the high Court had no reason to interfere with the award and substitute its view in place Asmita 17/25 ::: Downloaded on - 27/08/2013 21:01:48 ::: .. 18 .. ARBP-557/12 of the interpretation accepted by the arbitrator.
46. In view of what is stated above, the respondent as the contractor had to bear the service tax under Clause 9.3 as the liability in connection with the discharge of his obligations under the contract. The appellant could not be faulted for deducting the service tax from the bills of the respondent under Clause 9.3, and there was no reason for the High Court to interfere in the view taken by the arbitrator which was based, in any case on a possible interpretation of Clause 9.3. the learned Single Judge as well as the Division Bench clearly erred in interfering with the award rendered by the arbitrator. Both those judgments will, therefore, have to be set aside.
Reasons and conclusion :
15. On perusal of the impugned award, it is clear that learned arbitrator has considered the fact that the suit property was mortgaged by the petitioner to Saraswat Co-Operative Bank in respect of the credit limit of Rs.6,55,00,000/- and as on the date of the Agreement, a sum of Rs.4,20,00,000/- was due and payable by the petitioner to the said bank. It was one of the conditions under the said agreement that petitioner would obtain Letter of Confirmation from the said bank within the period of 90 days from the date of said agreement that the bank has no objection to the sale of the suit property in favour of the respondent. The respondent was given a right to take searches of records and to investigate the title of the petitioner and to issue public notice inviting any claims in respect of the suit property. In my view, learned arbitrator has rightly held that no prudent purchaser would pay the full consideration without getting a clear title, particularly when an express mortgage is mentioned in the agreement itself. On perusal of the record, it is clear that the petitioner never cleared the titled by Asmita 18/25 ::: Downloaded on - 27/08/2013 21:01:48 ::: .. 19 .. ARBP-557/12 making payment to the Saraswat Bank. The mortgage in respect of the suit property continued. The petitioner could not produce any Letter of Confirmation from the bank to the effect that the bank had no objection to the sale of the suit property. Letter produced by the petitioner was a conditional letter which conditions were not fulfilled by the petitioner. Perusal of record also indicates that there was no provision in the contract for payment of instalment of 35% as demanded by the petitioner. The respondent had already made payment of the earnest money and the balance amount was payable only upon the petitioner clearing the title in respect of the suit property and handing over possession of the suit property to the respondent which the petitioner had failed. Learned arbitrator, therefore, was right in rendering a finding that title of the petitioner was not made clear which was mandatory for completion of sale in the manner provided in Clause-4 read with Clause-12 of the said agreement. In my view, such finding of fact which has been rendered by the learned arbitrator based on consideration of documents produced by parties and on interpretation of the agreement, is not perverse and does not warrant any interference.
16. In my view, question as to whether time was essence of the contract, whether terms and conditions of the agreement were complied with by a party or not, whether any default is committed by any party to a contract or not would be Asmita 19/25 ::: Downloaded on - 27/08/2013 21:01:48 ::: .. 20 .. ARBP-557/12 within the exclusive domain of the learned arbitrator to decide it on the basis of the evidence placed on the record before the learned arbitrator and on interpretation of the contract. In my view all such issues are issues of fact and unless finding of the arbitrator is perverse, Court cannot interfere with such finding of fact. The Court shall not interfere with possible interpretation of the learned arbitrator and shall not substitute its views in place of interpretation accepted by the learned arbitrator.
17. Learned arbitrator has also rendered a finding of fact that action on the part of the petitioner to call off the deal was unjustified. The learned arbitrator held that Clause-4 of agreement dated 19 th September 2008 could never be considered as 'time the essence of the contract' as the agreement itself mentions 31st December 2008 as the time for completion of sale. It is held that there was no willful default on the part of the respondent purchaser. The learned arbitrator also held that the respondent was justified by exercising right under Clause-11 of the agreement vide letter dated 12 th November 2008 on the ground that they were not satisfied with the title and by pointing out that calling off the deal by the petitioner was wrongful and unjustified. It is also held that the property was heavily mortgaged to the bank and the petitioner was not in a Asmita 20/25 ::: Downloaded on - 27/08/2013 21:01:48 ::: .. 21 .. ARBP-557/12 position to redeem the mortgage and to hand over title deeds and these facts were sufficient to satisfy the respondent in exercising their right under Clause 11 of the agreement. There was no reply to the said notice issued by respondent on 12th November 2008 rescinding the contract. The learned arbitrator also considered the fact that after receipt of notice dated 12 th November 2008 from the respondent, petitioner did not make any attempt to confront the respondent with any clear title and thus rescission must be considered as valid and justified and the petitioner therefore, shall be directed to refund all the amounts paid by the respondent to the petitioner.
18. On the issue as to whether rescission of contract by the respondent was valid before expiry of time for completion of sale or not, learned arbitrator has rendered a finding that this argument of the petitioner would not hold good because the petitioner themselves had purported to terminate the agreement and forfeit the amounts. It is held that if the forfeiture was wrongful, the respondent should get the amount back. The learned arbitrator rendered a finding that forfeiture by the petitioner was not legally valid and accordingly directed the petitioner to refund the entire amount. In my view, learned arbitrator is right in arriving at such conclusion as the petitioner themselves had called off the deal before expiry of contractual period and therefore rescission of contract by the Asmita 21/25 ::: Downloaded on - 27/08/2013 21:01:48 ::: .. 22 .. ARBP-557/12 respondent was proper and valid. In my view, once the petitioner themselves had called off the deal, rescission of contract by the respondent was not even necessary. The learned arbitrator considered both these aspects in right perspective and has rendered a finding of fact.
19. In my view there is no substance in the submissions made by Mr Kapadia, learned counsel appearing for the petitioner that the respondent ought to have made time as essence of the contract before rescinding the contract. It is not in dispute that before the expiry of time provided in contract for completion of the same, petitioner had already called off the deal much prior to the date of rescission of the agreement by the respondent. Record produced by the parties would also indicate that petitioner was not in a position to clear their title in respect of the suit property by obtaining NOC from the Saraswat Co-
Operative Bank Ltd. In my view, this Court cannot interfere with the finding of fact rendered by the learned arbitrator that the petitioner had committed breach of contract and had illegally called off the deal and that the respondent had rightly exercised their right under the said agreement clause rescinding the contract. The petitioner had committed repudiatory breach which was considered by the learned arbitrator in the impugned order while directing the petitioner to refund the amount deposited by the respondent.
Asmita 22/25 ::: Downloaded on - 27/08/2013 21:01:48 :::.. 23 .. ARBP-557/12
20. As far submission of the petitioner that learned arbitrator would not have confirmed the injunction granted against the petitioner in respect of the said property and also would not have issued direction to refund the said amount is concerned, in my view learned arbitrator was right in directing the petitioner to refund the entire amount paid by the respondent having found that the letter of the petitioner calling off the deal was illegal and invalid and letter of the respondent rescinding the contract was valid and proper. In so far as injunction in respect of the property is concerned, this Court, in Company Petition No.343 of 2009 filed by the respondent against the petitioner while referring the dispute to arbitration, had granted injunction restraining the petitioner from alienating, disposing of, encumbering, parting with possession of or creating any third party right, title or interest in, to upon or in respect of the suit property which was subject matter of agreement dated 2 nd September 2008 which was directed to be in enforce during the pendency of the award being made and for a period of eight weeks thereafter. Learned arbitrator in the impugned award has granted the same relief by way of injunction till the respondent realizes of the amount under the said agreement from the petitioner. In my view, there is no infirmity with that part of award rendered by the learned arbitrator.
21. As far as submission of the petitioner that there was no prayer for Asmita 23/25 ::: Downloaded on - 27/08/2013 21:01:48 ::: .. 24 .. ARBP-557/12 declaration that decision of the petitioner to call off the deal was legal and thus learned arbitrator could not have granted such relief in favour of the respondent is concerned, on perusal of the statement of claim and also the notice issued by the respondent prior to filing of statement of claim indicates that the respondent had not only sought declaration that rescission of agreement by the respondent was valid but had also challenged action on the part of the petitioner to call off the deal under the said agreement. In my view, there is no substance in the submission of Mr Kapadia that none of the reliefs could have been granted by the learned arbitrator or that the relief granted was not contemplated in the statement of claim filed by the respondent. In my view, even if the respondent could not have rescinded the contract, learned arbitrator would have granted prayer for refund of the amount deposited by the respondent while rendering a finding that the action on the part of the petitioner for calling off the deal was illegal. Direction to refund the amount deposited by the respondent was consequential in view of the action on the part of the petitioner calling off the deal having been declared illegal by the learned arbitrator. Such consequential relief granted by learned arbitrator in furtherance of the finding that calling off the deal by the petitioner was illegal, in my view, was in accordance with the pleadings filed by both the parties and was not beyond the scope of pleadings as canvassed by Mr Kapadia, learned counsel appearing on behalf of the petitioner.
Asmita 24/25 ::: Downloaded on - 27/08/2013 21:01:48 :::.. 25 .. ARBP-557/12 Petitioner did not challenge the decision of the respondent to rescind the contract by filing any independent proceedings. In my view, it was a composite cause of action pleaded by the respondent in statement of claim. There is no infirmity found in the impugned award and thus no interference is warranted with the impugned award rendered by the learned arbitrator. Petition is devoid of merit and thus deserves to be dismissed, resultantly I pass the following order.
(i) Arbitration petition is dismissed.
(ii) Respondent is at liberty to withdraw the amount deposited by the petitioner in this Court with accrued interest pursuant to order dated 9th August 2010 in Company Petition No.343 of 2009.
(iii) There shall be no order as to costs.
( R.D.DHANUKA, J.)
Asmita 25/25
::: Downloaded on - 27/08/2013 21:01:48 :::