Bangalore District Court
) Smt.N.K.Nagaveni vs ) M/S.Raja Housing And on 11 September, 2020
IN THE COURT OF THE VI ADDL. CITY CIVIL & SESSIONS JUDGE
AT BENGALURU CITY
(CCCH.11)
Dated this the 11th day of September, 2020
PRESENT: Sri.Rama Naik, B.Com., LL.B.,
VI Addl.City Civil & Sessions Judge,
Bengaluru City.
A.S.NO:14/2012
C/w
A.S.No: 53/2013
PLAINTIFFS/ 1) SMT.N.K.NAGAVENI,
APPLICANTS W/o.late Sri.H.Anantharam,
Aged about 49 years.
[In AS.14/2012]
2) SMT.DHEENA,
W/o.late Sri.H.Anantharam,
Aged about 26 years.
3) SRI.SANDEEP REDDY,
S/o.late Sri.H.Ananthram,
Aged about 26 years.
Plaintiffs 1 and 2 are Represented by their
General Power of Attorney Holder -
3rd Plaintiff.
All are available for service at
Chinnappanahalli, Doddanekundi Post,
Bengaluru East Taluk.
[By Pleader Sri.C.Shankar Reddy]
/Vs/
DEFENDANTS 1) M/S.RAJA HOUSING AND
CONSTRUCTIONS
[In AS.14/2012] A registered Partnership firm,
Having its office at No.13/3,
G.D Cornwell Classic, Cornwell Road,
Langford Town, Bengaluru -560 025.
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AS.No.53/2013
Reptd.by its Partners -
Sri.Raja Datta and
Sri.Raja Suchindra.
[By Pleader Sri.Rajeswara.P.N]
2) M/s.Woodbine Properties,
A registered Partnership firm
having its Office at No.172/1,
Srinivas Industrial Estate,
Bannerghatta Road, Bengaluru -76.
Reptd. By its Partners -
Sri.A.C.Srinivas Raju and
Sri.R.Bhaskar Naidu.
[By Pleader Sri.Kashyap.N. Naik]
3) MS.SOUMYA REDDY
D/o.late Sri.H.Anantharam,
Aged about 29 years.
4) MS.SUMA REDDY,
D/o.late Sri.H.Anantharam,
Aged about 53 years.
Residents of Chinnappanahalli,
Doddanekundi Post,
Bengaluru East Taluk.
[ Dismissed ]
PLAINTIFFS/ 1) MRS.SOWMYA REDDY,
APPLICANTS Aged about 38 years,
W/o.Sri.Hari Prasad,
[In AS.53/2013] R/at Apartment No.217,
5334, Bond Street, Irving,
Texas - 75038.
United States of America.
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AS.No.53/2013
2) MRS.SUMA REDDY,
Aged about 39 years,
W/o.Sri.Naveen Reddy,
R/at 1954, Garzoni Place,
Santa Clara, California - 95054.
United States of America.
[By Pleader Sri.G.Vikram]
/Vs/
DEFENDANTS 1) M/S.RAJA HOUSING &
CONSTRUCTIONS
[In AS.53/2013 A registered Partnership Firm
having its Office at No.13/3,
G.D.Cornwell Classic,
Cornwell Road, Langford Town,
Bengaluru -560 025.
Reptd.by its Partners -
Sri.Raja Datta and
Sri.Raja Suchindra.
[By Pleader Sri.Rajeswara.P.N]
2) SMT.N.K.NAGAVENI,
Aged about 59 years,
W/o.late Sri.H.Anantharam.
[By Pleader Sri.C.Shankar Reddy]
3) SMT.DHEENA,
Aged about 62 years,
W/o.late Sri.H.Anantharam.
[Exparte]
4) SRI.SANDEEP REDDY,
Aged about 36 years,
S/o.late Sri.H.Anantharam.
[By Pleader Sri.C.Shankar Reddy]
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Defendants No.2 to 4 are
R/at Chinnappanahalli Village,
Doddanekundi Post,
Bengaluru East Taluk.
5) M/S.WOODBINE PROPERTIES,
A registered Partnership Firm
having its office at No.172/1,
Srinivas Industrial Estate,
Bannerghatta Road, Bengaluru -560 076.
Reptd.by its Partners -
Sri.A.C.Srinivas Raju and
Sri.R.Bhaskar Naidu.
[By Pleader Sri.Kashyap.N.Naik]
6) SRI.N.S.SANGOLI,
District Judge (Retd.),
No.415/2, 'F' Block, Sahakaranagar,
Bengaluru -560 092.
[ARBITRATOR]
COMMON JUDGMENT
Suit in AS No.14/2012 is filed by Plaintiffs
[Respondents No.1, 4 and 5 in arbitral proceedings]
and suit in AS No.53/2013 is filed by Plaintiffs
[Respondents No.2 and 3 in arbitral proceedings]
under Section 34 of the Arbitration and Conciliation
Act, 1996, for setting aside the arbitral award,
dated 04.01.2012, passed by sole
Arbitrator/Defendant No.6 [in AS No.53/2013] in
CMP No.98/2010.
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2) Since both suits are arising out of common
award dated 04.01.2012, they are taken up
together for passing common judgment.
3) For the sake of convenience, parties are
referred to as 'Claimants' and 'Respondents' as
they were referred to in arbitral proceedings.
4) In brief, the case of Respondents No.1, 4 and
5 is that, 1st Claimant persuaded Respondent No.1
to enter into Joint Development Agreement [JDA] in
respect of Sy.No.24 of Chinappanahalli village,
which was leased out to M/s. Rain Forest vide Lease
Deed dated 01.02.2002 for ten years. Accordingly,
JDA dated 10.02.2004 and General Power of
Attorney [GPA] were executed. As the terms of JDA
were not adhered to by Claimants, GPA got
cancelled by Respondents on 08.05.2007. In turn,
Claimants filed application for interim measures in
AA No.462/2010 on the file of City Civil Judge at
Bengaluru. Apart from this, impugned award dated
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04.01.2012 came to be passed ex-parte without the
knowledge of Respondents.
5) Being aggrieved by the award, Respondent
Nos.1, 4 and 5 have challenged the same on the
following grounds :
(1) Award came to be passed ex-parte.
Opportunity of being heard was denied to
them. Arbitrator erred in not considering
the fact that there was no proper and
adequate service on Respondents as
required under law.
(2) Award came to be passed on the
basis of notary attested copies without
there being original documents.
(3) Arbitrator failed to consider that
Claim of Claimants was barred by
limitation.
(4) Findings of Arbitrator in allowing the
Claim of Claimants are contrary to law
and facts. Award is passed in violation of
principles of natural justice and same is
perverse and arbitrary.
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AS.No.53/2013
6) 2nd and 3rd Respondents' case is that, they
have settled in United States of America after their
marriage. Respondents No.2 and 3 came to India
on 07.05.2013 and 27.07.2013 to attend the
marriage of their niece scheduled to be held on
11.08.2013. They came to know of the impugned
award on 30.07.2013 from 1 st Respondent and
collected details from the advocate of Respondents
No.1, 4 and 5. It is stated that, then only, they
came to know that, based on publication, which
was taken in Kannada newspaper, award came to
be passed ex-parte without serving any notice and
without affording an opportunity to Respondents
No.2 and 3.
7) It is stated that, after filing this suit for
setting aside the award, Claimants filed application
before the learned Arbitrator under Section 17 of
the Arbitration and Conciliation Act, 1996 for
interim measures suppressing the suits filed by
Respondents and execution of award filed by
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Claimants. Without intimating the Respondents,
learned Arbitrator passed interim order. Procedure
adopted by learned Arbitrator is contrary to Section
24(3) of the Arbitration and Conciliation Act, 1996.
Arbitral proceedings were held in violation of
Section 18 of the Arbitration and Conciliation Act,
1996. On coming to know of the ex-parte interim
order, memos were filed for recalling the interim
order and for making full disclosure. Instead of
passing the order on memos, learned Arbitrator
withdrew himself from the proceedings. Conduct of
learned Arbitrator raises justifiable doubts in
conducting the arbitral proceedings and passing
the award also.
8) Being aggrieved by the award, Respondents
No.2 and 3 have challenged the same on the
following grounds :
(a) Arbitral proceedings were initiated
for specific performance of contract. Law
prohibits specific enforcement of a
contract for development agreement as
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AS.No.53/2013
provided under Section 14(1) read with
Section 14(3) of the Specific Relief Act.
(b) Claimants were not entitled to the
relief. There was a specific bar for the
relief under Section 16 of the Specific
Relief Act.
(c) Award is passed without there being
issue of any notice to Respondents No.2
and 3 and they were unable to present
their case.
(d) Learned Arbitrator relied upon the
copies of documents while passing the
award without insisting the originals.
For all these reasons, Respondents pray for
setting aside the award.
9) Claimants, in their statement of objections,
have stated that, grounds on which Respondents
have filed these suits are not sustainable in law.
Respondents, in spite of receiving the notice of
arbitral proceedings, failed to participate in the
proceedings. It was the obligation of Respondents
to get possession of the property and hand it over
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AS.No.53/2013
to Claimants. Arbitrator is not bound by the Indian
Evidence Act, 1872 and Code of Civil Procedure,
1908. Mere fact that originals were not marked,
which itself does not vitiate the arbitral
proceedings and does not render the award void.
Procedure followed by learned Arbitrator in the
proceedings is proper.
10) It is stated that suit filed by Respondents
No.2 and 3 is hopelessly barred by time.
Respondents have no case. They have filed the
suits with the sole intention of depriving the
Claimants from deriving the benefit of the award.
Hence, pray for dismissal of the suits.
11) Heard argument of learned Counsels for
Respondents and Claimants. Perused the written
arguments filed by Claimants and perused the
records.
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12) Points that arise for consideration are :
(1) Whether suit filed in AS
No.53/13 by Respondents
No.2 and 3 is barred by
limitation as provided in
Section 34(3) of the
Arbitration and
Conciliation Act, 1996?
(2) Whether Respondents
have made out any of the
grounds as enumerated in
Section 34 of the
Arbitration and
Conciliation Act, 1996, to
set aside the impugned
award?
(3) What Order?
13) My answer to above points are :
Point No.1 - In the Negative;
Point No.2 - In the Affirmative;
Point No.3 - As per final order, for
the following :
REASONS
14) Point No.1 : Award passed by learned
Arbitrator reads as follows :
"The Respondents are directed to
discharge their obligation under
Ex.P.1 and develop the schedule
property in terms of Ex.P.1 and
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execute General Power of Attorney
in favour of Petitioners as was done
as per Ex.P.5".
15) Award came to be passed on 04.01.2012.
Suit in AS No.14/2012 has been filed by
Respondents No.1, 4 and 5 on 14.02.2012. It has
been filed well within the period of limitation as
contemplated in Section 34(3) of the Arbitration
and Conciliation Act, 1996 [for brevity 'the
Arbitration Act, 1996']. However, suit in AS
No.53/2013 has been filed by Respondents No.2
and 3 on 02.08.2013. Admittedly, same has been
filed after lapse of 20 months from the date of
passing of the award. Claimants contend that suit
in AS No.53/2013 filed by Respondents No.2 and 3
is barred by limitation. It ought to have been filed
by them within stipulated time as mentioned in
Section 34(3) of the Arbitration Act, 1996.
16) Admitted position is that, award has been
passed ex-parte. Arbitration notices issued to
Respondents No.2 and 3 were returned unserved
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on the ground that 'they left India'. It is, therefore,
clear that, as on the date of passing of the award,
Respondents No.2 and 3 were not in India. In the
plaint, Respondents No.2 and 3 have taken specific
contention that, after their marriage, they have
settled in United States of America [USA]. It is
contended that, they came to India on 07.05.2013
and 27.07.2013 respectively to attend the marriage
of their niece scheduled to be held on 11.08.2013.
It is further contended that, on 30.07.2013, when
they were having food in the hotel, 1st Respondent
informed about the award passed against them. It
is their specific contention that, till 30.07.2013,
they were not aware of the award having passed by
sole Arbitrator against them and after getting
information from the Counsel for Respondents No.1,
4 and 5, on 01.08.2013, they filed the suit
challenging the award.
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17) In the light of the contention of Respondents
No.2 and 3, it is relevant to take notice of Section
34(3) of the Arbitration Act, 1996. It reads thus :
"34. Application for setting aside
arbitral award.-
(3) An application for setting aside may
not be made after three months have
elapsed from the date on which the party
making that application had received the
arbitral award, or, if a request had been
made under Section 33 from the date on
which that request had been disposed of
by the Arbitral Tribunal.
Provided that if the Court is satisfied
that the applicant was prevented by
sufficient cause from making the
application within the said period of three
months it may entertain the application
within a further period of thirty days, but
not thereafter".
18) Section 34(3) of the Act makes it mandatory
that, an application for setting aside the award may
not be made after elapsing three months from the
date of receipt of the award. If the application is not
made within three months, same may be
entertained within a further period of thirty days, if
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sufficient cause is shown to the satisfaction of the
Court, as provided in the proviso to Section 34(3).
19) Under Section 31(5) of the Act, it is
mandatory for the Arbitral Tribunal to deliver the
signed copy to each party after the arbitral award
is made. It reads thus:
"31. Form and contents of arbitral
award. -
(5) After the arbitral award is made, a
signed copy shall be delivered to each
party".
20) From the arbitral award, it is, thus, clear that,
as on the date of passing of the award,
Respondents No.2 and 3 left India and arbitral
proceedings were held by placing them ex-parte.
Award does not disclose that after passing the
award, duly signed copies were sent to the
Respondents. Order-sheet dated 04.01.2012 simply
says that 'award passed allowing the claims'. There
is no mention in the order-sheet that duly signed
copies of the award were sent to the Respondents
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soon after its passing. There is no iota of evidence
to show that, after passing the award, duly signed
copies were sent to the Respondents. In absence of
proof of sending the award copies to Respondents,
the question of delivering the copy of award to
Respondents and its receipt by Respondents do not
arise. Under Section 31(5), it is mandatory to
deliver the signed copy of the award to each party.
No such delivery has been established by
Claimants. Even, if it is assumed that learned
Arbitrator had sent duly signed copies of the award
to Respondents No.2 and 3, the question of actual
delivery of it cannot be presumed on the reason
that as on the date of passing of the award,
Respondents No.2 and 3 were not in India. They
came to India on 07.05.2013 and 27.07.2013
respectively. In Union of India (UOI) Vs. Tecco
Trichy Engineers and Contractors, [(2005) 4
SCC 239], the Hon'ble Supreme Court was pleased
to hold that, delivery of an arbitral award under
sub-section (5) of Section 31 is not a matter of
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mere formality. It is a matter of substance. In para-
8, it is held as follows :
" 8. The delivery of an arbitral award
under sub-Section (5) of Section 31 is not
a matter of mere formality. It is a matter
of substance.
It is only after the stage under Section 31
has passed that the stage of termination of
arbitral proceedings within the meaning of
Section 32 of the Act arises.
The delivery of arbitral award to the party,
to be effective, has to be "received" by the
party. This delivery by the arbitral tribunal
and receipt by the party of the award sets
in motion several periods of limitation such
as an application for correction and
interpretation of an award within 30 days
under Section 33(1), an application for
making an additional award under Section
33(4) and an application for setting aside
an award under Section 34(3) and so on.
As this delivery of the copy of award has
the effect of conferring certain rights on
the party as also bringing to an end the
right to exercise those rights on expiry of
the prescribed period of limitation which
would be calculated from that date, the
delivery of the copy of award by the
tribunal and the receipt thereof by each
party constitutes an important stage in the
arbitral proceedings."
21) Same principles of law have been
reiterated in The State of Maharashtra and
Ors. vs. Ark Builders Pvt. Ltd., [AIR 2011 SC
1374]. In para-13, the Hon'ble Supreme Court
was pleased to hold that :
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" 13. The highlighted portion of the judgment
extracted above, leaves no room for doubt
that the period of limitation prescribed under
Section 34(3) of the Act would start running
only from the date a signed copy of the
award is delivered to/received by the party
making the application for setting it aside
under section 34(1) of the Act. The legal
position on the issue may be stated thus. If
the law prescribes that a copy of the
order/award is to be communicated,
delivered, dispatched, forwarded, rendered
or sent to the parties concerned in a
particular way and in case the law also sets a
period of limitation for challenging the
order/award in question by the aggrieved
party, then the period of limitation can only
commence from the date on which the
order/award was received by the party
concerned in the manner prescribed by the
law."
22) From the above principles of law, it is clear
that, delivery of arbitral award is not a mere
formality. Actual delivery of the arbitral award and
its receipt by the party are mandatory, which has
not been established in this case. In that view of
the matter, there is no reason to rule out the
contention of Respondents No.2 and 3 that they
came to know of the award only on 30.07.2013 and
got the copies of the same from the Counsel for
Respondents No.1, 4 and 5 on 01.08.2013 and filed
the suit on 02.08.2013. In this circumstance, it has
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to be held that, Respondents No.2 and 3 came to
the knowledge of the award only on 30.07.2013
and soon after the notice of the award, they have
filed the suit within the period of limitation as
contemplated in Section 34(3) of the Arbitration
Act, 1996. When such being the matter, there is no
impediment to hold that, suit filed by Respondents
No.2 and 3 is within limitation; accordingly, I
answer the above point in the negative.
23) Point No.2 : First and foremost contention
of 2nd and 3rd Respondents is that, they were not
served with arbitration notice and therefore, they
were unable to present their case before the
learned Arbitrator.
24) It is contended that, notice issued by
Arbitrator was returned with endorsement that "the
parties have left India". Learned Arbitrator erred in
ordering substituted service without there being
exhausted the remedy of personal service. Learned
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Arbitrator erred in ordering paper publication in a
newspaper, which is not in circulation in America,
where Respondents No.2 and 3 are staying. Paper
publication was ordered as if Respondents No.2 and
3 were living in India. Hence, award vitiates under
Section 34(2)(a)(iii) of the Arbitration Act, 1996.
25) Claimants contend that Respondents No.2
and 3 were duly represented by their Counsel in
CMP before the Hon'ble High Court of Karnataka.
They were aware of the appointment of sole
Arbitrator. It is further contended that, Arbitrator is
not bound by the provisions of CPC or Evidence Act
as provided in Section 19 of the Arbitration Act,
1996. As they had the knowledge of appointment
of the Arbitrator, award passed by learned
Arbitrator by placing them ex-parte does not vitiate
in any manner. It is also contended that, scope of
Section 34 of the Arbitration Act, 1996 is limited.
Learned Arbitrator has passed the award after due
consideration and application of mind and
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moreover, sufficient opportunities were given to
Respondents, however, they failed to contest the
arbitral proceedings.
26) It is not in dispute that at the time of issue of
arbitration notice to Respondents No.2 and 3, they
were in USA. Notices issued by Arbitrator were
returned with endorsement that "they left India".
From the endorsement, it is abundantly clear that,
it was known to the Arbitrator as well as Claimants
that, at the time of taking paper publication,
Respondents No.2 and 3 were not in India. In this
circumstance, would it be proper to take paper
publication in India? From the records of arbitral
proceedings as well as contention of Claimants, it is
clear that, paper publication was taken in India.
However, at that time, Respondents were staying in
USA. Claimants contend that, as per Section 19 of
the Arbitration Act, 1996, learned Arbitrator is not
bound by the strict procedure of law as laid down in
the Code of Civil Procedure, 1908 [CPC] as to
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service of summons. If it is held as true, there
would be no necessity to take paper publication in
India, because there would be no chance to take
notice of the arbitration proceedings through paper
publication published in India.
27) However, a moot question is that, whether
Section 19 of the Arbitration Act, 1996 precludes
the learned Arbitrator from following the provisions
of law as to service summons?
28) Section 19 of the Arbitration Act, 1996 states
that, the Arbitral Tribunal shall not be bound by the
Code of Civil Procedure, 1908 or the Indian
Evidence, Act, 1872. Section 19 reads thus :
" 19. Determination of rules of
procedure
(1) The arbitral tribunal shall not be
bound by the Code of Civil Procedure,
1908 or the Indian Evidence Act, 1872.
(2) Subject to this Part, the parties are
free to agree on the procedure to be
followed by the arbitral tribunal in
conducting its proceedings.
(3) Failing any agreement referred to in
sub-section (2), the arbitral tribunal may,
subject to this Part, conduct the
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proceedings in the manner it considers
appropriate.
(4) The power of the arbitral tribunal
under sub-section (3) includes the power
to determine the admissibility, relevance,
materiality and weight of any evidence. "
29) Section 3 of the Arbitration Act, 1996
deals with receipt of written communications. It
reads as follows :
"3. Receipt of written communications
(1) Unless otherwise agreed by the parties -
(a) any written communication is
deemed to have been received if it is
delivered to the addressee personally
or at his place of business, habitual a
residence or mailing address, and
(b) if none of the places referred to in
clause (a) can be found after making a
reasonable inquiry, a written
communication is deemed to have been
received if it is sent to the addressee's
last known place of business, habitual
residence or mailing address by
registered letter or by any other means
which provides a record of the attempt
to deliver it.
(2) The communication is deemed to have
been received on the day it is so delivered.
(3) This section does not apply to written
communication in respect of proceedings of
any judicial authority. "
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30) Section 3 makes it clear that, if the written
communication is delivered to the addressee
personally or at his place of business, habitual
residence or mailing address, same is deemed to
have been received by the addressee.
31) In this case, admittedly, no notice was served
to Respondents No.2 and 3. Notice issued by the
Arbitrator was returned with endorsement that
'they left India'. From the said endorsement,
Arbitrator as well as Claimants came to know that
Respondents No.2 and 3 were not in India. Under
such circumstance, there would be no reason for
Claimants to take paper publication in India. Mere
fulfilling the formality does not mean that notice
issued by learned Arbitrator was actually served.
Once it is known that Respondents No.2 and 3 left
India, it is the duty of Claimants to trace out their
address and take notice to the said address.
Claimants, in support of their contention, have
placed reliance on the judgment in Madan and Co.
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vs. Wazir Jaivir Chand, [AIR 1989 SC 630],
wherein, having regard to the facts of the case, the
Hon'ble Supreme Court was pleased to hold that:
"5.... If a registered letter addressed to a
person at his residential address does not
get served in the normal course and is
returned, it can only be attributed to the
addressee's own conduct".
32) In the judgment (supra), as observed by the
Hon'ble Supreme Court, the tenant is away from
the premises for some considerable time. Having
considered the said aspect of the case, above ratio
has been laid down by the Hon'ble Supreme Court.
In this case, the factual aspect is that, arbitration
notice was not served to Respondents No.2 and 3
as they left India. Hence, question of avoiding the
notice by them does not arise. Of course, no
procedure has been contemplated in the Arbitration
Act, 1996 regarding the service of summons/
notices out of India in cases where the party
resides out of India. Under such circumstances, it
is necessary to adopt the procedure provided in
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CPC for service of summons. Order V Rule 25 of
CPC specifically states that, where the defendant
resides out of India and has no agent in India
empowered to accept service, the summons shall
be addressed to the defendant at the place where
he is residing and sent to him or by post or by such
courier service as may be approved by the High
Court, by fax message or by electronic mail service
or by any other means. Claimants, without recourse
to take any such steps, took paper publication in
India and proceeded with the arbitration case. If the
service of summons/notice is a mere formality,
then, there would be no occasion to insert Clause
(iii) to Section 34(2)(a) of the Arbitration Act, 1996.
Clause (iii) specifically states that "the party
making the application was not given proper notice
of the appointment of an Arbitrator or of the arbital
proceedings or was otherwise unable to present his
case", arbitral award may be set aside by the
Court.
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33) In Associate Builders vs. Delhi
Development Authority [(2015) 3 SCC 49],
the Hon'ble Supreme Court was pleased to hold
that 'audi alteram partem' principle is a
fundamental juristic principle in Indian law. In
para-30, it is held as follows :
"30. The audi alteram partem principle
which undoubtedly is a fundamental
juristic principle in Indian law is also
contained in Section 18 and 34(2)(a)(iii) of
the Arbitration and Conciliation Act. These
sections read as follows :
" 18. Equal treatment of parties. -
The parties shall be treated with
equality and each party shall be given a
full opportunity to present his case.
34. Application for setting aside
arbitral award. - (1) * * *
(2) An arbitral award may be set aside
by the court only if -
(a) the party making the application
furnishes proof that -
***
(iii) the party making the application as
not given proper notice of the
appointment of an arbitrator or of the
arbitral proceedings or was otherwise
unable to present his case; "
AS.No.14/2012
28 C/w
AS.No.53/2013
34) In this case, it has been established that,
Respondents were not served with the notice of
arbitration proceedings. At the time of issue of
notice of arbitration proceedings, they were in USA.
Paper publication was taken in India. Merely
because Section 19 of the Arbitration Act, 1996
precludes the Arbitrator from following the CPC,
due service of notice of arbitration proceedings
cannot be dispensed with. Moreover, merely
because 2nd and 3rd Respondents had appeared in
CMP through their Counsel, it can not be held that,
they had notice of arbitration proceedings. Having
considered these aspects of the matter, it can be
fairly said that, opportunity of being heard was
denied in the case of Respondents No.2 and 3 by
learned Arbitrator.
35) Respondents No.2 and 3 contend that,
specific performance of Development Agreement
at the instance of Claimants is not at all
maintainable under Section 14(1) and (3) of the
AS.No.14/2012
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AS.No.53/2013
Specific Relief Act, 1963. Further, it is contended
that, relief sought for by Claimants requires
continuous supervision of the Court and same
cannot be granted under Section 14(1)(d) of the
Specific Relief Act. On the other hand, Claimants'
only contention is that, Section 14 of the Specific
Relief Act, 1963 favours Claimants. Operative
portion of the award once again reads as
follows :
"Respondents are directed to
discharge their obligation under Ex.P.1
and develop the schedule property in
terms of Ex.P.1 and execute General
Power of Attorney in favour of
Petitioners as was done as per Ex.P.5".
36) Respondents being the owners and
Claimants being the developers entered into
Agreement dated 16.02.2004 at Ex.P.1, whereby,
Claimants agreed to develop the property of
Respondents into residential buildings. Both
Respondents and Claimants agreed upon certain
terms and conditions including handing over of the
vacant possession of the property to Claimants by
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AS.No.53/2013
Respondent; converting the property into non-
agricultural purpose; obtaining khata from City
Municipal Council after assessment of property
taxes and payment of betterment charges;
obtaining 'no objection certificate' from BDA; order
seeking change of land use to residential use;
obtaining necessary licenses, sanctioned plans and
other permission as required; construction of
residential buildings according to license and plan;
internal and external services as per specifications;
investment; sharing of built up area and various
other works.
37) A bare perusal of contentions of the parties,
except entering into Agreement, any of the agreed
terms in the Agreement have not been performed.
Most important thing is that, possession of the
property was not handed over to Claimants by
Respondents as on the date of the Agreement and
even as on the date of initiation of arbitration
proceedings. It remained with the possession of
AS.No.14/2012
31 C/w
AS.No.53/2013
the tenants. From the above background of the
case, it is necessary to have regard to Section 14
of the Specific Relief Act, 1963. It reads thus :
" 14. Contracts not specifically
enforceable.- (1) The following contracts
cannot be specifically enforced, namely:-
(a) a contract for the non-performance of
which compensation in money is an
adequate relief;
(b) a contract which runs into such minute
or numerous details or which is so
dependent on the personal qualifications
or volition of the parties, or otherwise from
its nature is such, that the court cannot
enforce specific performance of its
material terms;
(c) a contract which is in its nature
determinable;
(d) a contract the performance of which
involves the performance of a continuous
duty which the court cannot supervise.
(2) Save as provided by the Arbitration
Act, 1940, no contract to refer present or
future differences to arbitration shall be
specifically enforced; but if any person
who has made such a contract (other than
an arbitration agreement to which the
provisions of the said Act apply) and has
refused to perform it, sues in respect of
any subject which he has contracted to
refer, the existence of such contract shall
bar the suit.
(3) Notwithstanding anything contained in
clause 9a) or clause 9c) or clause 9d) or
sub-section (1), the court may enforce
specific performance in the following
cases:-
(a) Where the suit is for the enforcement
of a contract, -
AS.No.14/2012
32 C/w
AS.No.53/2013
(i) to execute a mortgage or furnish any
other security for securing the repayment
of any loan which the borrower is not
willing to repay at once:
Provided that where only a part of the loan
has been advanced the lendor is willing to
advance the remaining part of the loan in
terms of the contract; or
(ii) to take up and pay for any debentures
of a company;
(b) where the suit is for .-
(i) the execution of a formal deed of
partnership, the parties having
commenced to carry on the business of
the partnership; or
(ii) the purchase of a share of a partner in
a firm;
(c) where the suit is for the enforcement of
a contract for the construction of any
building or the execution of any other work
on land:
Provided that the following conditions are
fulfilled, namely:-
(i) the building or other work is described
in the contract in terms sufficiently precise
to enable the court to determine the exact
nature of the building or work;
(ii) the plaintiff has a substantial interest in
the performance of the contract and the
interest is of such a nature that
compensation in money for non-
performance of the contract is not an
adequate relief; and
(iii) the defendant has, in persuance of
the contract, obtained possession of the
whole or any part of the land on which the
building is to be constructed or other work
is to be executed."
AS.No.14/2012
33 C/w
AS.No.53/2013
38) Principles of law contained in Section 14 of
the Specific Relief Act, 1963 has been further
substantiated by the judgments in Vipin Bhimani
and Anr. Vs. Sunanda Das and Anr. [FMAT
No.3789/2005, Decided on 24-02-2006] and
Devender Kumar Sharma vs. Mohinder Singh
and Ors. [CS(OS) NO.65/2012, Decided on
16.07.2012].
39) In Vipin Bhimani case (supra), the Hon'ble
Calcutta High Court was pleased to hold that, suit
for specific performance of a development
agreement at the instance of a developer is clearly
hit by the provisions of Section 14(3)(c) of the
Specific Relief Act, 1963. Para-11 and 12 of the
judgment reads thus :
" 11. From the provisions contained in
Section 14(3)(c) of the Act, it is clear that a
suit for specific performance of a
development agreement at the instance of
a developer is clearly hit by the provisions
contained therein. However, a suit for
specific performance of such agreement
at the instance of the owner of the building
would be maintainable if possession is
already handed over to developer and
AS.No.14/2012
34 C/w
AS.No.53/2013
Clauses (i) and (ii) of Section 14(3)(c) are
complied with.
12. In the case before us, the suit is at
the instance of the developer and as such,
the formality required under Section 14(3)
(c)(iii) is, on the face of it, absent."
40) Similarly, the Hon'ble Delhi High Court in
Devender Kumar Sharma case (supra) was
pleased to extract the principles of law laid down by
the Hon'ble Supreme Court. It reads thus :
"2. ** ** ** **
8.1) It is doubtful whether the
collaboration agreement, as alleged by the
appellant, is specifically enforceable,
having regard to the prohibition contained
in section 14(1)(b) and (d) of the Specific
Relief Act, 1963. The agreement
propounded by the appellant is not an
usual agreement for sale/transfer, where
the contract is enforceable and if the
defendant fails to comply with the decree
for specific performance, the court can
have the contract performed by appointing
a person to execute the deed of
sale/transfer under Order XXI Rule 32(5) of
the Code of Civil Procedure ('Code' for
short). The agreement alleged by the
appellant is termed by him as a
commercial collaboration agreement for
development of a residential property of
the respondents. Under the alleged
agreement, the obligations of the
respondents are limited, that is, to apply to
DDA for conversion of the property from
leasehold to freehold, to submit the
construction plan to the concerned
authority for sanction, and to deliver
vacant possession of the suit property to
the appellant for development. But the
AS.No.14/2012
35 C/w
AS.No.53/2013
appellant/plaintiff has several obligations
to perform when the property is delivered,
that is, to demolish the existing building, to
construct a three storeyed building within
one year in accordance with the agreed
plan, deliver the first and second floors to
the respondents and also pay a token cash
consideration of Rs.3,71,000/-. The
performance of these obligations by
appellant is dependent upon his personal
qualifications and volition. If the court
should decree the suit as prayed by the
appellant (the detailed prayer is extracted
in para 3 above) and direct specific
performance of the "collaboration
agreement" by respondents, it will not be
practical or possible for the court to ensure
that the appellant will perform his part of
the obligations, that is demolish the
existing structure, construct a three
storeyed building as per the agreed
specifications within one year, and deliver
free of cost, the two upper floors to the
respondents. Certain other questions also
will arise for consideration. What will
happen if DDA refuses to convert the
property from leasehold to freehold? What
will happen if the construction plan is not
sanctioned in the manner said to have
been agreed between the parties and the
respondents are not agreeable for any
other plans of construction? Who will
decide the specifications and who will
ensure the quality of the construction by
the appellant? The alleged agreement
being vague and incomplete, require
consensus, decisions or further agreement
on several minute details. It would also
involve performance of a continuous duty
by the appellant which the court will not be
able to supervise. The performance of the
obligations of a developer/builder under a
collaboration agreement cannot be
compared to the statutory liability of a
landlord to reconstruct and deliver a shop
premises to a tenant under a rent control
legislation, which is enforceable under the
statutory provisions of the special law. A
collaboration agreement of the nature
alleged by the appellant is not one that
AS.No.14/2012
36 C/w
AS.No.53/2013
could be specifically enforced. Further, as
the appellant has not made an alternative
prayer for compensation for breach, there
is also a bar in regard to award of any
compensation under section 21 of the
Specific Relief Act."
41) In the instant case, Agreement got entered
into between Respondents and Claimants is a
developmental agreement. If the terms and
conditions envisaged in the Agreement at Ex.P.1, as
stated above, is taken into consideration, the Court
cannot enforce specific performance of the material
terms of the Agreement and moreover, the
performance of which involves the performance of
the continuous duty, which the Court cannot
supervise. Despite the provisions of law contained
in Section 14(1)(b) and (d) of Specific Relief Act,
learned Arbitrator, by the award, directed the
Respondents to discharge their obligations under
Ex.P.1 and develop the schedule property in terms
of Ex.P.1. Also directed the Respondents to execute
Power of Attorney in favour of Petitioners. Thus, it
has been clear that, learned Arbitrator passed the
AS.No.14/2012
37 C/w
AS.No.53/2013
award in contravention of the substantive law as
laid down in Section 14 of the Specific Relief Act,
1963.
42) In Associate Builders case (supra), it has
been held that, award passed in contravention of
substantive law, would amount to patent illegality.
Para-42 reads thus :
"42. In the 1996 Act, this principle is
substituted by the "patent illegality"
principle which, in turn, contains three
subheads:
42.1. (a) A contravention of the
substantive law of India would result in the
death knell of an arbitral award. This must
be understood in the sense that such
illegality must go to the root of the matter
and cannot be of a trivial nature. This
again is really a contravention of Section
28(1)(a) of the Act, which reads as under :
" 28. Rules applicable to
substance of dispute.- (1) Where the
place of arbitration is situated in India -
(a) in an arbitration other than an
international commercial arbitration, the
Arbitral Tribunal shall decide the dispute
submitted to arbitration in accordance with
the substantive law for the time being in
force in India; "
43) Respondents' further challenge to the award
is that, during the pendency of the arbitration suit
AS.No.14/2012
38 C/w
AS.No.53/2013
and after passing of the final award and after
Claimants having filed execution for enforcement of
the award, learned Arbitrator entertained the
application filed under Section 17(1)(ii)(d) of the
Arbitration Act, 1996 and granted interim order as
prayed for by Claimants without giving any notice
to Respondents. It is contended that, learned
Arbitrator has not treated the parties equally and
has not given opportunity to Respondents to
present their case before passing the interim order
on 10.08.2016. These facts have raised justifiable
doubts regarding the independence and impartiality
of the Arbitrator and it is clear that Arbitrator is
biased. It is contended that, Respondents filed
memo for making full disclosure, however, instead
of making disclosure, learned Arbitrator chose to
recuse himself from the case. It is contended that,
since learned Arbitrator did not make any
disclosure, it is clear that, he is biased.
AS.No.14/2012
39 C/w
AS.No.53/2013
44) On the other hand, Claimants contend that,
the learned Arbitrator passed an order pertaining to
old arbitration matter, which was initiated and even
completed before the amendment to the Arbitration
Act, 1996. Thus, Respondents could not have
sought for disclosure. Respondents failed to
demonstrate as to how the Arbitrator is biased.
45) Admitted position is that, award came to be
passed by learned Arbitrator on 04.01.2012. Interim
order came to passed by learned Arbitrator on
10.08.2016. At the time of passing interim order,
instant two suits filed by Respondents challenging
the award and execution case filed by Claimants for
enforcement of the award were pending for
consideration. Order-sheet placed by Respondents
reveals that, initially, learned Arbitrator, on the
application of Claimants, passed interim order
restraining the Respondents from creating any third
party interest in the suit schedule property till
further order. Order-sheet further reveals that, on
AS.No.14/2012
40 C/w
AS.No.53/2013
service of notice, Respondent No.3 appeared and on
03.10.2016, learned Arbitrator withdrew himself
from the case.
46) Making of ex-parte interim order by learned
Arbitrator subsequent to the final award without
there being issue of notice to Respondents, has
been taken as a ground by Respondents that
learned Arbitrator is biased and therefore, award is
vitiated. Learned Counsel for Respondents No. 2
and 3 is pleased to rely upon ratio laid down in
Venture Global Engineering vs. Satyam
Computer Services Ltd. and Anr., [AIR 2010 SC
3371]. Ratio laid down in the judgment (supra) is
that "Court shall consider facts surfaced
subsequent to making of award if same
demonstrate that there had been fraud in making
of award".
47) However, it is to be noted that, there must be
an allegation that there had been fraud in making
of award. If there has been an allegation of fraud in
AS.No.14/2012
41 C/w
AS.No.53/2013
making the award, then, the Court shall consider
the facts surfaced subsequent to making of award.
In the instant case, award has not at all been
challenged on the ground of fraud. Merely because
ex-parte interim order being passed by learned
Arbitrator subsequent to the final award, it cannot
be assumed or presumed that there had been fraud
in making the final award unless there has been
demonstration in that regard. Moreover, allegation
of fraud if taken as a plea, same cannot be
adjudicated upon without giving opportunity to
explain. In H.N.M.Prasad Vs. Smt.Vasundara
Srinivasan, [2015 (4) AKR 729], it has been held
that :
"6. .... Arbitrator cannot be summoned as
party to explain his conduct about the
decision passed by him, unless serious
allegation of corruption or involvement of
personal interest is attributed to the
arbitrator in passing of the award.
Therefore, summons so issued can only be
summoned to produce the original
documents and award passed and not
beyond....."
48) Merely because learned Arbitrator passed
the interim order subsequent to the final award, it
AS.No.14/2012
42 C/w
AS.No.53/2013
cannot be said that learned Arbitrator is biased and
same cannot be extended to the final award, which
has already been challenged while passing the
interim order. In these circumstances, it is
immaterial to decide as to whether Arbitrator had
power to pass interim order under Section 17 of
the Arbitration Act, 1996 as amended by the
Arbitration and Conciliation (Amendment) Act,
2015.
49) Substantial reading of the award makes it
clear that, learned Arbitrator has passed the award
without giving opportunity of being heard to
Respondents No.2 and 3. Further, it has been
established that award has been passed in
contravention of Section 34(2)(a)(iii) of the
Arbitration Act, 1996 and in contravention of
substantive law as envisaged in Section 14(1)(b)
and (d) of the Specific Relief Act, 1963; accordingly,
I answer the above point in the affirmative.
AS.No.14/2012
43 C/w
AS.No.53/2013
50) Point No.3 : In view of the foregoing
discussion and answer to Point No.1 and 2, I pass
the following :
ORDER
(1) Suits in AS.No.14/2012 and AS.No.53/2013 filed by Plaintiffs under Section 34 of the Arbitration and Conciliation Act, 1996; are hereby allowed.
(2) Award dated 04.01.2012 passed by learned Arbitrator in Arbitration Case No. CMP.98/2010; is hereby set aside.
(3) No order as to costs.
(4) Keep the original of this judgment in AS.No.14/2012 and copy in AS.No.53/2013.
[Dictated to the Judgment Writer directly on computer, typed matter corrected and then pronounced by me in open court this the 11th day of September, 2020.] [RAMA NAIK] VI Addl.City Civil & Sessions Judge Bengaluru City AS.No.14/2012 44 C/w AS.No.53/2013 AS.No.14/2012 45 C/w AS.No.53/2013 AS.No.15/2012 46 C/w AS.No.18/2012