Bangalore District Court
(1) M/S.Skn Investments (Chennai) vs (1) M/S.Bid & Hammer Auctioneers on 14 June, 2016
IN THE COURT OF THE XXXIX ADDITIONAL CITY CIVIL &
SESSIONS JUDGE, BANGALORE CITY.
Dated on this the 14th day of June, 2016.
-: Present :-
Smt. Hemavathi, BBM., L.L.B,
XXXIX Additional City Civil & Sessions Judge,
Bangalore.
A.S.NO. 34/2016
Plaintiffs (1) M/s.SKN Investments (Chennai)
Pvt. Ltd., A company registered
and incorporated under the
Companies Act, 1956, having its
registered office at No.44,
Friends Colony (East), New
Delhi-110065.
(2) Mrs. Kiran Nadar, Director
M/s.SKN Investments (Chennai)
Pvt. Ltd., No.44, Friends Colony
(East), New Delhi-110065,
Both represented by its
Authorized Representative
Mr.Nishant Rana.
(By M/s.Juris Consult Advocates)
/ Versus /
Respondents : (1) M/s.Bid & Hammer Auctioneers
(P) Ltd., A Company registered
and incorporated under the
Companies Act, 1956, having its
registered Office at No.226, 39th
'C' Cross, 8th Main Road, 5th
Block, Jayanagar, Bengaluru-41.
Represented by its Director
Mr.Ankush Dadha.
(2) Hon'ble Mr.Justice R.Gururajan
(Retd), Learned Sole Arbitrator,
R/o. "Sri.Hari Krupa", No.504, 5th
Floor, Sri Chitrapura Housing Co-
operative Society Ltd., 15th Cross,
Malleshwaram, Bengaluru-03.
(Sri.S.S. for R-1.
R-2 - ex-parte)
***
JUDGMENT
This is an Arbitration Suit filed under Sections 34 and 28 of the Arbitration and Conciliation Act, 1996 by the plaintiffs challenging the Award dated 12.12.2014 passed by the respondent No2/Arbitrator in C.M.P.No.93/2012 praying to set aside the Award and reject the claim of defendant No.1 and to allow the counter claim of the plaintiff No.1 with interest from the date of payment by the plaintiff No.1 to the defendant No.1 until the date of Award at 18% p.a. and thereafter to award interest on the awarded amount at 18% p.a. from the date of award to the date of payment in full in by the defendant No.1 and such other reliefs.
2. The brief facts of the Memorandum of Suit are, plaintiff No.1 and defendant No.1 are the companies incorporated under the provisions of Companies Act and the plaintiff No.1 is represented by its Director plaintiff No.2 and defendant No.1 is represented by its Director and plaintiff No.1 is involved in the business of investing in authentic works of art and defendant No.1 is involved in the business of inter-alia selling and auctioning antiquities and art treasures. Defendant No.1 issued a brochure setting out in detail certain works of art, including antiquities and art treasures, which it proposed to auction at the ITC Sherton Hotel at New Delhi on 30.11.2010, which depicted as lot No.30 on pages 68-70 a painting advertised and described as a painting painted by the famous artiest "Raja Ravi Verma" in the year 1895 entitled "Jatayu Vadha or Ravana carrying Sita" and the said painting was antiquity within the meaning of Antiquities and Art Treasures Act, 1972 and the defendant No.1 as an auctioneer and seller of antiquities and art treasures could not have sold or offered the same for sale without a licence authorizing it to do so under the said Act. These plaintiffs believing the same, bid over the telephone for the said paining and was the highest bidder for total price of Rs. 1,65,91,884/-. But defendant No.1 for the reasons best known to them, neither accepted the bid made by the plaintiff No.1 at the auction nor parted with the painting. Thereafter, on 24.12.2010 plaintiff No.2 representing plaintiff No.1 wrote a letter to defendant No.1 requesting to send the said art at the earliest to enable them to verify and the exhibit at Kiran Nadar Museum of Art. But, defendant No.1 did not send the painting to the plaintiffs for verification or display. Thereafter, by a phone call on 5.2.2011 and e-mail dated 6.2.2011, defendant No.1 through its Managing Director, Mr.Maher Dadha informed plaintiff No.2 about the status of certain prior undisclosed events with respect to the Painting and also sent the copy of e-mail sent to others on 2.2.2011 and by these communications, defendant No.1 for the first time informed the plaintiffs that there was an order of Hon'ble High Court of Kerala in a Public Interest Litigation instituted by one Ms.Archana Narayana, Advocate in which Kerala Hon'ble Court had restrained defendant No.1 from parting with possession of the Painting and it was alleged in that said proceedings that the painting was stolen from Kaudiar Palace or Chitra Art Gallery. Further, defendant No.1 also informed that during the auction held at New Delhi on 30.11.2010 at 7.15 p.m., there was a raid by the Archeological Survey in India and CBI at the venue of the auction as defendant No.1 was carrying on the business of selling antiquities without a licence in contravention of the provision of Section 5 of the Antiquities and Art Treasures Act, 1972 and the auction had to be discontinued. Thereafter defendant No.1 went on trying to convince the plaintiffs to go ahead with the purchase of Painting and represented that Painting was a genuine original of Raja Ravi Verma painting, but was unable to give the opinion of any renowned expert on the authenticity of painting. In its efforts to convince the plaintiffs, defendant No.1 also carried the Painting to Delhi for the plaintiff's visual inspection, which revealed that the name of the painter on the Painting had been painted over a pencil tracing of the signature, which clearly indicated that the signature on the Painting was not the original of Raja Ravi Verma, but a imitation painted over a pencil tracing and that the painting was most likely not a Raja Ravi Verma's painting. Plaintiff No.2 informed defendant No.1 of this observation during her telephone conversation with the Managing Director of defendant No.1 and by an email dated 24.8.2011, defendant No.1 attempted to dispel the suspicions and doubts of plaintiffs. Plaintiff No.2 reiterated the suspicion once more in her e-mail dated 25.8.2011. On September 8, 2011, defendant No.1 purported to accept the bid of the Painting made by plaintiff No.1 at the auction held on 30.11.2010 and requested the plaintiffs to make payments and raised invoice on 8.9.2011. Even thereafter plaintiffs neither received any cogent report of any expert on behalf of the defendant No.1 confirming the authenticity of the Painting and not being convinced of the authenticity of the plaintiffs, continued to raise questions pertaining to authenticity of the Painting with the defendant No.1 and in response, defendant No.1 continued its efforts to convince the plaintiff to accept the Painting and by its e-mail dated 14.9.2011 assured and undertook that defendant No.1/Company would deliver the painting to plaintiff No.1 for its verification of its authenticity against payment of Rs.79,72,598/- by the plaintiff No.1 by appropriate tests and examination undertaken by an expert of plaintiff No.2's choice and the balance of price would be paid as soon as the authenticity of the Painting was established by the expert, which was expected to be done within a month of the delivery of the Painting, and plaintiffs agreed and rendered payment of Rs. 79,72,598/- to defendant No.1 and the Painting was dispatched to plaintiffs on 27.9.2011. On receipt of the said Painting, plaintiffs got the painting verified by Mr.Sree Kumar Menoon, the foremost Restorer of the and an Authority on Raja Ravi Verma's paintings in the country. On examination and testing of the Painting, said expert gave a report on 9.11.2011 stating that it is very unlikely that the Painting was painted by Raja Ravi Verma. Immediately on receipt of the e-mail dated 10.11.2011 addressed to the Managing Director of defendant No.1, plaintiff No.2 on behalf of plaintiff No.1 sought to return the Painting on the refund of the money paid. But, defendant No.1 instead of communicating regarding the report dated 9.11.2011 or refunding the money paid, got issued a legal notice dated n25.11.2011, refused to honour its express commitment, refusing to refund money paid by the plaintiff No.1 and instead initiating the arbitration proceedings pursuant to an arbitration agreement incorporated in the Brochure which advertised the auction, and making demand for the payment of balance sale price of the Painting from the plaintiffs. Plaintiffs replied by an e-mail dated 6.12.2011 through their advocate denying the allegations of defendant No.1 and again called upon defendant No.1 to refund the advance amount. But, inspite of series of communications between the advocates of both parties, defendant No.1 did not honour the request of plaintiffs. Thereafter, defendant No.1 filed a petition under Section 11(6) of the Arbitration and Conciliation Act, 1996 before the defendant No.2 claiming balance price of Painting bid by the plaintiffs with interest, wherein the plaintiffs have also claimed refund of amount paid by them to defendants on delivery of Painting.
3. Being aggrieved by the Award passed by the learned Sole Arbitrator - defendant No.2 on 12.12.2014, plaintiffs have filed this suit challenging the same on the following grounds :
The impugned Award is contrary to the public policy and respondent No.2 had failed to appreciate that Section 5 of the Antiquities and Art Treasures Act prohibits a person to carry on business of selling or offering for sale any antiquity except under and in accordance with the terms and conditions of a licence granted under Section 8 of the said Act and the learned Arbitrator failed to appreciate that the alleged sale of painting by defendant No.1 is void for illegality with the consequences specified in Section 65 of the Indian Contract Act and learned Arbitrator grossly erred in holding that defendant No.1 had applied for licence under Section 7 of the Act and licencing authority held no licence was necessary. The learned Arbitrator also erred in law in relying on the Judgment dated 23.10.2013 of Hon'ble Kerala High Court in W.P.(C) No.1895/2010. The learned Arbitrator ought to have held that alleged sale was void as being a contravention of Section 5 of the said Act, with the consequences specified in Section 65 of the Contract Act, also appreciated that since the sale of Painting was a sale by description under Section 15 of the Sale of Goods Act, 1930 and plaintiff had the right to repudiate the Contract under Section 12(2) of the Sale of Goods Act, 1930. The learned Arbitrator grossly erred in shifting the burden to the plaintiffs to prove the authenticity of the Painting and failed to consider or appreciate that the plaintiffs had not contracted for the purchase of painting irrespective of its painter, but had contracted for the painting only if it answered the description of a painting by the famous artiest Raja Ravi Verma in 1895. The learned Arbitrator failed to appreciate that defendant No.1 had not produced a shred of evidence to prove and establish that the Painting was painted by the famous artiest Raja Ravi Verma and not by anyone else and corresponded with the description of the Painting given by defendant No.1 and also erred in holding that mere inspection of painting would discharge the burden of defendant No.1 as provided under Section 15 of Sale of Goods Act and the learned Arbitrator has failed to appreciate that Raja Ravi Verma painting displayed at the Gallery and Kaudiar Palace Art Gallery, which is unsigned and undated and it is clear that Raja Ravi Verma's paintings displayed at Ghitra Art Gallery are well documented and their authenticity has never been doubted. The learned Arbitrator failed to appreciate the report of expert and also erred in holding that defendant No.1 without licence cannot carry on business and it is against Section 5 of the Act and erred in considering the evidence of Sree Kumar Menon and created admissions which are not in existence and consequently passed the impugned award and also failed to appreciate that the return of painting by the plaintiffs was subject to simultaneous with the refund of advance amount by the defendant No.1 and the learned Arbitrator has erroneously failed to appreciate the express assurances given by defendant No.1 of full refund in the event that the Painting is found to be a forgery. Hence award is liable to be set aside. Hence, prayed to set aside the Award.
4. Defendant No.1 filed written statement as under :
The arbitration suit filed by the plaintiffs without making any ground for consideration under the statute to invoke the jurisdiction of Court to set aside the arbitrary award and it is liable to be dismissed and in this suit the plaintiffs have set up a new case which was not pleaded, not argued and not prove and it is drafted by misrepresentation, mis-interpreting the dates and events pleaded during the arbitration proceedings. The entire facts and circumstances pleaded in this suit is new case, which is impermissible under statute. There are no grounds to challenge the award as set out under Section 34 of the Arbitration and Conciliation Act. The alleged grounds are imaginary and do not fall under the grounds mentioned in Section 34 of the Act. The plaintiffs have misunderstood the scope of application under Section 34 of the Act. The proceedings before the arbitral tribunal was in accordance with the procedure agreed by the parties. The plaintiffs have not disputed any procedure of the Arbitral Tribunal. The scope of interference as contemplated on an application as contemplated under Section 34 of the Act for setting aside the arbitral award is very limited and the arbitrary award can be set aside by the Court only on satisfying the requisite conditions as contemplated under Section 34(2) of the Act and in view of the Judgments of the Hon'ble Apex Court, the plaintiffs vehemently failed to prove the present suit within the ambit of Section 34 of the Act. Hence, prayed to dismiss the suit with exemplary costs.
5. Heard the learned advocate for plaintiffs and defendant No.1. Defendant No.1 also submitted written arguments.
6. The following issues arise for my consideration:
1) Whether the plaintiffs prove that the Award dated 12.12.2014 in CMP No. 93/2012 is to be set aside as per Section 34 of the Arbitration and Conciliation Act, 1996 ?
2) What order ?
7. My finding on the above points are as under :
Point No.1 : Partly in the affirmative. Point No.2 : As per the final order for the following :
REASONS
8. Point No.1 :- Defendant No.1 who is the petitioner in C.M.P. No. 93/2012 before the Hon'ble High Court of Karnataka has filed petition to appoint the Arbitrator under Section 11(5) and (6) of the Arbitration and Conciliation Act, 1996 and accordingly defendant No.2 is appointed as Sole Arbitrator as per Order dated 7.12.2012 to resolve the dispute between the parties. The plaintiffs who are respondents before the learned Arbitrator being aggrieved by the Arbitral Award dated 12.12.2014 have filed the present suit under Section 34 of the Arbitration and Conciliation Act on various grounds to set aside the said Award passed in C.M.P. No.93/2012 and to allow their counter claim.
9. For the sake of convenience and confusion, hereinafterwards I refer the rank of the parties as per the rank mentioned in the plaint and I also refer the Arbitration and Conciliation Act, 1996 as the Act and the subject matter of the award as Painting in question.
10. The certified copy of the claim statement of the defendant No.1, the certified copy of the written statement with affidavit filed by the plaintiffs and the certified copies of the of the documents relied upon by the parties, certified copies of the rejoinder filed by the plaintiffs and defendant No.1 and certified copy of the Award passed by the learned Arbitrator are produced by the plaintiffs along with the plaint. These are not disputed by the defendant No.1.
11. On going through the record it is seen that defendant No.1 filed claim statement before the learned Arbitrator praying for a Award directing the plaintiffs to make payment of Rs.79,72,598/- with interest at the rate of 18% p.a. from the date of invoice till the date of payment. The plaintiffs on their appearance filed written statement along with the counter claim praying to reject the claim of the defendant No.1 and to pass an Award to direct defendant No.1 to refund the advance consideration of Rs.79,72,598/- paid by the plaintiffs to defendant No.1 along with interest at the rate of 18% p.a. from the date of payment until the said amount is refunded in favour of the plaintiffs.
12. Based on the claim and counter claim of the paries, the learned Arbitrator has framed in all 14 issues and defendant No.1 being a claimant examined one witness as C.W.1 and got marked 24 documents as Ex.C.1 to C.24 and the plaintiffs being respondents before the learned Arbitrator got examined 2 witnesses as R.W.1 and 2 and got marked 9 documents as Exs.R.1 to R.9.
13. The learned Arbitrator after hearing both the parties has passed an Award in favour of defendant No.1 holding as under :
(i) The claim of the Claimant is allowed in part.
(ii) This Tribunal declares that the claimant is entitled to recover a sum of 79,72,598/-
along with interest @ 12% p.a. from the date of invoice till the date of settlement of the amount in terms of this award.
(iii) The respondent-1 is directed to settle the amounts in terms of this Award within a period of two months from today.
(iv) On failure to settle the above awarded amounts within the stipulated time by the respondent No.1, the claimant is entitled for future interest @ 12% p.a. till the date of settlement of the awarded amount.
(v) The Counter Claim made by the respondent No.1 stands rejected.
(vi) The claimant is entitled to recover from the respondent -1 only the sitting fee paid to the Arbitrator by the claimant in these proceedings after adjusting any expenses payable by the claimant to the respondents as costs of these proceedings.
14. Herein the fact that defendant No.1 is involved in the business of selling and auctioning antiquities and art treasures and plaintiff No.1 represented by its authorized representative is carrying on the business by investing in authentic works of art and defendant No.1 issued a brochure for auctioning the painting of famous artist Raja Ravi Verma in the year 1895 entitled 'Jatayu Vadha or Ravana Carrying Sita' at ITC Sheraton Hotel at New Delhi on 31.11.2010. These plaintiffs participated in the said auction and became highest bidder for the said Painting for a total price of Rs. 1,65,91,884/- on 30/11/2010 and on that day said bid was not accepted on the auction spot, are all admitted facts.
15. It is the case of defendant No.1 before the learned Arbitrator that the plaintiffs by way of letter dated 24.11.2010 shown interest in Lot No.30, which is the Painting of famous artist Raja Ravi Verma in the year 1895 entitled 'Jatayu Vadha or Ravana Carrying Sita' and requested defendant No.1 to send the said Painting to enable the plaintiffs to verify and thereafter exhibit the same at her Museum called Kiran Nadar Museum of Art, which is plaintiff No.1 and by an e-mail dated 24.8.2011 plaintiff No.2 sought for certain clarifications and she was given an opportunity in a transparent manner to verify the authenticity of the Raja Ravi Verma Painting and 2nd plaintiff got examined the Painting through her expert on 25.8.2011 and sent a e-mail along with enclosures, which was presumably the opinion rendered by her expert and on receipt of the e-mail defendant No.1 sent reply on 5.9.2011 conveying their authenticity of the Painting and only after the Painting was verified by the plaintiffs and after their satisfaction about its authenticity and confirmation of the same, invoice was drawn on 8.9.2011 in favour of first plaintiff and the same was communicated on the very same day and thereafter second plaintiff requested for special terms of payment seeking for payment of 50% of the amount immediately and remaining 50% after one month and the same was agreed by defendant No.1 and communicated to the plaintiffs by email dated 19.9.2011 and accordingly plaintiffs paid Rs.79,72,598/- towards 50% of the price of said Art shown in the invoice and subsequently all of a sudden plaintiff sent email dated 10.11.2011 to the defendant No.1 with a technical report, which is faulty and refused to pay the balance amount due from them towards the concluded contract between the plaintiffs and defendant No.1 about the purchase of Painting of famous Artist Raja Ravi Verma in the year 1895 entitled 'Jatayu Vadha or Ravana Carrying Sita'. Thereafter this defendant No.1 issued a legal notice on 24.8.2011 for which plaintiffs replied on 6.12.2011 by email and rejoinder was also issued on 7.12.2011 by way of an email, for which reply was sent on 26.12.2011 and defendant No.1 also sent reply on 4.1.2012, which was acknowledged by the plaintiffs on 6.8.2012. When the plaintiffs after evencing interest in purchase of said Painting, even after made out suitable verification in relation to its authenticity and requested defendant No.1 to raise invoice and also made part payment of the invoice amount, the contract has been concluded and the defendant No.1 is open and transparent in the sale transaction for making available the work for the plaintiffs for verifying the authenticity in relation to the same and the plaintiffs have exercised due care in the sale transaction and they are now estopped from taking contrary stand. Hence, prayed to pass an Award directing the plaintiffs to make payment of balance amount with interest.
16. Plaintiff No.2 in the written statement has taken a contention that the Painting is an antique as defined under Section 2 I(a)(i) of the Antiquities and Art Treasures Act, 1972. Since the claimant did not possess the mandatory licence required under the provisions of Section 5 of the Act, the auction held on 30.11.2010 for sale of Painting is illegal and defendant No.1 has committed an offence under Section 25(2) of the said Act and it was also void under Section 23 of the Indian Contract Act and defendant No.1 is liable to refund the advance consideration amount paid by the plaintiffs as required under Section 65 of the Contract Act and the Painting which is brought for auction is not an antique as claimed by defendant No.1, but it is a forgery to which the provisions of the Antiquities and Art Treasures Act, 1972 is inapplicable, then the contract of sale between the plaintiffs and defendant No.1 voidable for fraud and misrepresentation. After the said Painting was put into possession of these plaintiffs, they got it verified by an expert who in his report dated 9.11.2011 stated that it is very unlikely that Painting is painted by Raja Ravi Verma with reasons. Hence, by a letter dated 6.12.2011 addressing to the first defendant's lawyer, plaintiff avoided the contract of sale on the ground of fraud and mis- representation and the defendant No.1 induced them to purchase the Painting on the representations in its catalogue for auction and the defendant No.1 fraudulently withheld that it do not have the mandatory licence as required under the Act and also withheld the Order of the Hon'ble High Court of Kerala prohibiting the defendant No.1 from the possession of the painting.
17. The mandate under Section 34(2) of Arbitration and Conciliation Act, 1996 is that the party making an application to set aside the Arbitral Award shall furnish the proof of the facts and circumstances enumerated under Clause (a) (i to v) and (b)(i) and (ii) and then only the Arbitral Award may be set aside by the Court. In the Judgment reported in (2003) 7 Supreme Court cases 396 (State of U.P. Vs. Allied Constructions), it is held that the Award could be set aside only when atleast any one of the ingredients of Section 34(2) is satisfied. On going through the plaint averments and hearing both sides, it is apparent and evident that none of the grounds made out by the plaintiffs attract the facts and circumstances enumerated under Section 34(2)(a)(i),(ii) and (iv) of the said Act. So, the Court has to see whether the grounds raised by the plaintiffs attract invoking Sections 34(2)(b)(i) and (ii) of the said Act. Sections 34(2)
(b) (i) and (ii) of the Act says that :
"34. Application for setting aside arbitral award : (2) An arbitral award may be set aside by the Court only if -
(b) the Court finds that -
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India."
18. The learned advocate for defendant No.1 relied upon the Judgment in Civil Appeal No.3415/2007 in the case of Oil and Natural Gas Corporation Ltd., Vs. Western Geeco International Ltd., and W.P.No. 37279, 37280 to 37282/2013 in case of M/s. Udupi Power Corporation Ltd., Vs. M/s. Simplex Infrastruture Ltd. On the file of Hon'ble High Court of Karnataka and Civil Appeal No.7531/2014 on the file of Hon'ble Supreme Court of India in case of Association Builders Vs. Delhi Development Authority, with regard to when the Court can interfere to set aside the Arbitral Award and what are the jurisdiction to set aside the Arbitral Award. To that effect, I also relied upon the decision reported in SSC 2006 (11) Page 181 in the case of M.C.Dermoti International I.M.C. Vs. Burn Standard co., Ltd., and others, wherein also the earlier decision of Hon'ble Supreme Court in (2003) 5 SCC 705 in case of Oil and Natural Gas Corporation Ltd., Vs. Saw Pipes Ltd., where it is held, which reads thus :
"Arbitration and Conciliation Act, 1996 - Ss. 34 and 5 - Role of Court - Grounds for interference under S.34, enumerated
- Position via-a-vis Ss.30 and 33, Arbitration Act, 1940, compared-Non- interference with pure questions of fact and appreciation of evidence - Held, the 1996 Act makes provision for the supervisory role of Courts and for the review of the arbitral award only to ensure fairness - this supervisory role is to be kept at a minimum level and interference is envisaged only in cases of fraud or bias, violation of natural justice, etc., - Interference on ground of "patent illegality" is permissible only if the same goes to the root of the matter, and a public policy violation should be so unfair and unreasonable as to shock the conscience of the Court - what would constitute "public policy" is a matter dependant upon the nature of the transaction and the statute - Relevance of pleadings and particulars on record in this regard, explained."
19. So, on going through the principle laid down on these cases by the Hon'ble Apex Court, it is very clear that the Award could be set aside only if it is contrary to the fundamental policy of Indian Law or interest of India or justice or morality and if it is patently illegal. Further it is very clear that the Court has no power to re-appreciate the evidence given before the Arbitrator while dealing with the petition under Section 34 of the Act.
20. In this case, it is the first and foremost grounds of challenge of the Award by the plaintiffs that the defendant No.1 had no licence to sell or auction the Painting in question. The learned Arbitrator has elaborately discussed about whether the licence is required to auction and sell the painting in question and whether it is an antiquity as defined under Section 2 of the Act. The learned Arbitrator after considering all the material produced by the parties has rightly come to the conclusion that no licence is required to auction the Painting in question. So, it does not call for interference. Further, even if for a moment it is assumed that the licence is required for auctioning the Painting in question, that does not vitiate the contract if any entered into in respect of the said Painting in question as void as contended by the plaintiffs in this suit.
21. Another ground to challenge the arbitral award that there is no concluded contract between the plaintiffs and defendant No.1, on the ground that Painting in question does not tally with the description given in Ex.C.1, it is forgery and the defendant No.1 had withheld the order of Hon'ble High Court of Kerala prohibiting the defendant No.1 from holding possession of the painting. But, according to the defendant No.1 there is a concluded contract to purchase the Painting in question soon after invoice was raised and 50% of the value of the said Painting was made by the plaintiff. Now the question is to be considered is, whether there is a concluded contract or not.
22. It is admitted fact that the auction in respect of the Painting in question was held on 30.11.2010. Ex.R.2 reveal that on 8.9.2011 defendant No.1 intimated to the plaintiff No.2 accepting the bid of the plaintiff No.2 in respect of Painting in question and also requested to make payment by raising the invoice. Ex.R.3 is the letter dated 14.9.2011 by the defendant No.1 to the plaintiffs stating that the said contract adhere to Clause 7.5 of Ex.C.1 and the buyer will be indemnified in the event of forgery if established as per Clause 7 of the said contract and it was also assured by the defendant No.1 to the plaintiff No.2 in case contract is rescinded they will refund full amount paid by the plaintiff to purchase of said painting within a reasonable time. Ex.R.4 reveals that on 19.9.2011 the plaintiff No.2 had made 50% of the payment towards the said Painting and Ex.R.5 reveals that the painting was dispatched by the defendant No.1 to the plaintiffs on 27.9.2011. Ex.R.6 reveals that by letter dated 10.11.2011 the plaintiff No.2 by sending a report of Expert as per Ex.R.7 by name Sree Kumar Menon informed to the defendant No.1 that plaintiffs would repudiate the contract and would return the Painting and requested to refund the amount paid. Ex.R.8 is the e-mail dated 6.12.2011 by the plaintiff No.1 through its Director plaintiff No.2 to the e- mail notice dated 25.11.2011 issued by defendant No.1 stating that plaintiffs would not like to purchase the said painting and called upon the defendant No.1 to refund the amount paid by them and to take back the Painting. Ex.R.9 is the e-mail dated 6.2.2011 by the defendant No.1 to plaintiff No.2 informing about the proceeding before the Hon'ble High Court of Kerala in relation to the Painting in question by sending copy of the letter returned to all other its customers.
23. Ex.C.1 produced by the defendant No.1 is the copy of the catalogue with respect to the auction of Painting in question and in that document certain information are provided to the buyers. It also contains the terms and conditions of the sale and the details of painting in question. Ex.C.2 is the Registration Certificate belonged to defendant No.1. Ex.C.3 is the Letter dated 24.12.2010 by plaintiff No.2 to defendant No.1 requesting to send the Painting in question to display the same in their Museum of Art at New Delhi. Ex.C.4 is the e-mail letter dated 24.8.2011 by defendant No.1 to the 2nd plaintiff giving some details about the painting in question. Ex.C.5 is the copy of e-mail dated 25.8.2011 by plaintiff No.2 to the defendant No.1 along with the scanned copy of art work as per Ex.C.6. Ex.C.7 is the copy of e-mail dated 5.9.2011 by defendant No.1 to plaintiff No.2 calling upon the plaintiffs to visit Bengaluru and to consult their panel with regard to the authenticity of the Painting in question and also given an opportunity for first choice of refusal if any on the part of the plaintiff not later than the next day afternoon. Ex.C.8 and Ex.R.2 are one and the same. Ex.C.10 and Ex.R.4 are also one and the same. Ex.C.10(a) is the copy of e-mail 24.10.2011 by defendant No.1 calling upon the plaintiff to pay the balance amount towards the painting in question. Ex.C.11 and Ex.R.6, Ex.C.13 and Ex.R.7 are one and the same documents.
24. On perusal of Ex.C.1, it is seen that the auction was held on 25 to 27 November 2010 at New Delhi and the defendant No.1 had provided certain information to the buyers under Ex.C.1 and it also provided the details of terms and conditions of the sale. The Clause - 3 provide for the seller's responsibility to the buyer. Clause-3(2) provides that if the property shown under auction is found being a forgery, Clause-7.3 to 7.5 shall apply. Clause-7 provides for forgeries. Clause-7.1 speaks about the definition of the forgery. Clause-7.2 provides that if the property offered for auction is found to be forgery and satisfactory evidence was given, the defendant shall withdraw the item for sale and hold until evidence about the legitimity of the item or property delivered and make it available to necessary authority to ascertain the validity of the said property. Clause - 7.3 says that in case the buyer believed that the item purchased by him is forgery, the buyer should prove legal title and then furnish the necessary proof to the seller for examination through expert or consultant nominated by both if required and the decision of the expert would be final. As per Clause- 7.4 if the description given at the time of auction was accepted, but the opinion or the means of testing used to determine whether item sold was forgery, the seller shall not be held liable. Clause 7.5 provides that if it is proved that auction sold is forgery the seller shall cancel the same and refund the total price to the buyer.
25. Considering all these facts, it can be said that it is the buyer who has to prove the forgery and furnish the necessary proof to that effect for the examination by the seller's expert or if required through the expert nominated by both the parties mutually and even if at the time of auction the opinion or means of testing was not available at the time of sale, seller is not liable.
26. Herein, on going through the material on record, it is very clear that no expert report was available at the time of auction of painting in question and further it is very clear, as per Ex.C.3 dated 24.12.2010 which is subsequent to the auction that subject to verification of authenticity and provenance of said painting the plaintiff requested the defendant No.1 to send the said painting to display the same in their museum of art. But, admittedly till e-mail dated 8.9.2011 as per Ex.R.2, there was no reply from the defendant No.1 about either accepting or rejecting the bid of plaintiff No.1. Only on that date the defendant No.1 accepted the bid of plaintiff with regard to the painting in question and raised the invoice towards the said painting and even till that date the said painting was not sent or delivered to the plaintiff. Even as per Ex.R.3, the defendant No.1 had agreed to adhere to the Clause- 7.5 of Ex.C.1. Ex.R.4 reveals that the plaintiff has sent only 50% of the amount towards the invoice raised with respect to the painting and as per Ex.R.5, the painting was dispatched on 27.6.2011 i.e., after payment of the 50% of the invoice raised. As per Ex.C.7 dated 5.11.2011 which much prior to Ex.R.2 to R.4 opportunity was given to the plaintiff either to accept or refuse the purchase of said painting.
27. It is the contention of the plaintiffs that the sale of Painting in question was sale by description and sample within the meaning of Section 15 of Goods Act and it was an implied condition that painting shall not only be the same as sample, but also must an answer the description by which it was sold. Since the sale of Painting in question was sale by description under Section 15 of Sale of Goods and painting did not answer the description, the sale was voidable and the plaintiff has right to liquidate the contract under Section 12(2) of the Sale of Goods Act and the burden is upon the seller to prove that the painting in question is answered with the description by which it was sold and learned Arbitrator has failed to appreciate these facts.
28. The learned advocate for plaintiff relied upon the decision reported in AIR 1997 Supreme Court 536 (Mannalal Khetan etc., Vs. Kedar Nath Khetan) at para 16, 17, 19 and 20, which says that an opportunity is to be given to the buyer to inspect the goods and mere receipt of the goods does not amount to an acceptance and before the buyer can be called upon to accept the goods, he can claim a reasonable opportunity to examine the goods.
29. The learned advocate for plaintiff also relied upon the decision reported in CDJ 2006 Calcutta High Court 556 (Calicut Engineering Works (P) Ltd., Vs. Batiliboi Ltd.,) in para 13, 15 and 16 where it is observed that if there is no previous inspection of goods, the delivery of item does not amount to acceptance of the contract until sufficient opportunity is given for examination. Herein, as stated above, before auction there was no opportunity to the plaintiff for verification of the Painting in question. Ofcourse, R.W.2 in his evidence deposed in his cross-examination para 6 deposed that he did attend the preview before the auction. But, he has further stated that he did not attend the same to purchase the subject Painting, but to ascertain what was available in auction. So, it is clear, prior to auction there was no opportunity to the plaintiff for verification or examination of the said painting.
30. Defendant No.1 says that there is sufficient opportunity to inspect the Painting in question and Ex.C.6 is the proof of the same. But, Ex.C.6 does not reveal who has given this document or who is the author of this document. But, R.W.2 in his evidence says that it was prepared by Priya Khanna who is an Expert and one of the Restorer in the country. So, it is very clear that prior to Ex.C.8/R.2 there was an opportunity to the plaintiffs to get examined the authenticity of the painting through her expert. But, C.W.1 admitted that the painting was not made available to the plaintiffs in terms of Ex.C.3 in which on 29.12.2010 the plaintiffs requested to send the work to enable the plaintiffs to verify and display the said Painting in question in their museum and in the said letter it is stated that subject to verification of authenticity and provenance they would like to display the painting. However, it is not explained by both the parties how this Painting in question was got verified by the plaintiffs through Priya Khanna and got the report as per Ex.R.6. But, on the evidence of R.W.2 it is very clear that prior to Ex.C.8/Ex.R.2 it was got examined through Priya Khanna and obtained report. Subsequently, the defendant No.1 sent a e-mail as per Ex.C.7 on 5.9.2011 about the authenticity of painting. Thereafter, defendant No.1 raised the invoice as per Ex.C.8/Ex.R.2. As per Ex.C.10, the plaintiffs paid 50% towards the invoice with respect to the Painting in question agreeing to repay the remaining 50% within one month after receipt of the work. Ex.R.7 is dated 9.11.2011. It is subsequent to Ex.C.10 dated 19.9.2011. So, it is very clear that even after acceptance of bid and raising of invoice, the plaintiffs had an opportunity to inspect and verify the Painting in question about its authenticity and provenance. So, it is very clear that the plaintiffs were having opportunity of inspection after the auction.
31. The plaintiff is stating that the Painting in question is not in accordance with the description based on the report as per Ex.R.7. The Painting in question which was the subject matter of the auction sale was shown in Ex.C.1 as described in para 39 of Arbitral Award is as under :
"this subject painting was painted by Raja Ravivarma in 1895. The description of Lot No.30 on page 68 to 70 of Ex.C.1 would read as under : -
"Raja Ravi Varma (1948-1906) Jatayu Vadha Oil on Canvas Signed and dated bottom left 1895 Size 90 x 64 cms Estimate : Rs. 1,35,00,000/- - 1,75,00,000/-
$ 287,050 - 37,350"
32. This description is not in dispute. According to the plaintiffs, the painting in question does not answer to the description. Hence, it is hit by provision of Sale of Goods Act. The burden is on the defendant No.1 to prove that Painting in question brought for auction does answer to the description given in Ex.C.1. Admittedly, there is no expert report either at the time of preview of the painting in question or at the time of auction or subsequently on the part of the defendant No.1. But, on the part of the plaintiff there is a report as per Ex.R.7 and Ex.C.6, stating that the signature of Raja Ravi Varma in Painting in question is not original signature, but it is traced. Because of this, the plaintiffs are saying that the Painting in question is forged and it is not answer to the description given in Ex.C.1 and Painting in question is not authentic one.
33. Even it is an admitted fact that there was a Writ Petition before the Hon'ble High Court of Kerala about the Painting in question even as on the date of auction. But admittedly, the said fact was not brought to the notice of plaintiffs till Ex.R.9 dated 6.2.2011. As per Clause 7.1 of Ex.C.1 forgery is defined as an object which is described as an object, which is described in such a way as to deceive a potential Buyer with respect to its attribution, authorship, date, age and provenance, unless it is made clear in the catalogue that this is the case. The forgery will be so described in order to effect and obtain a value in excess of its true value. As per Clause 7.3 when the buyer believe that item brought for auction is forgery, they must prove the legal title, then furnish the necessary proof which will be examined by the expert of the seller and if needed it is to be verified by mutually agreed panel of experts both buyer and seller. Herein, the plaintiff as per Ex.R.7 and Ex.C.6 brought to the notice of the defendant No.1 about the forgery of signature of Raja Ravi Varma by pencil tracing and authenticity of the Painting in question, but even after the receipt of the said report, the defendant has not got examined the Painting in question and obtained the report from their expert or from the panel of the experts by mutual consent. Further, the learned Arbitrator also has not obtained any expert report though the report as per Ex.R.7 and Ex.C.6 has not been accepted by the defendant No.1. R.W.1 who is the author of Ex.R.7 has been examined and cross-examined elaborately where he stated that the Painting in question was not delivered to him, but it was delivered to the studio of Priya Khanna and Priya Khanna instructed him to examine the painting and verify its genuineness. It is observed by the learned Arbitrator at para 64 after elaborately discussing the evidence of R.W.1 along with the other documents that this report is on a presumption. If that is so, when once the plaintiffs have questioned the authenticity of the painting and there was also a report as per Ex.C.6 which was accepted by the learned Arbitrator in favour of the defendant No.1 stating that it proves that the defendant No.1 had given opportunity to the plaintiffs to examined the authenticity of the painting, learned Arbitrator should have taken the expert opinion when Hon'ble High Court of Karnataka has observed in CMP proceedings that Arbitrator can take the advise of the expert in the field. On going through the para 64 and 72 of the Award, it is seen that the learned Arbitrator in one breath says that the report as per Ex.R.7 is on a presumption basis, in another breath he has considered the said report and based on that, come to the conclusion that there is no necessity of availing the advice from an expert in the field. When the Painting in question is worth more than Rs.1 Crore, and the plaintiffs even before raising the invoice have raised question about the authenticity of the Painting in question, the burden is on the defendant No.1 to get examined the Painting in question as provided in Clause 7.3. of Ex.C.1. But, the defendant No.1 did not do even after receipt of the e-mail as per Ex.C.5 along with Ex.C.6. So, I hold that the defendant No.1 has failed to prove the authenticity of the Painting in question. Therefore, it is proved that the Painting in question is not sale by description as shown in Ex.C.1.
34. When the plaintiff as per Ex.C.3 has requested the defendant to send the Painting in question to display in their museum stating that they would like to display it subject to verification and authenticity of the painting and before raising invoice as per Ex.C.8 plaintiffs had sent a e- mail as per Ex.C.5 along with Ex.C.6 and even the plaintiffs have paid only 50% of the invoice amount as per Ex.C.10, it is very clear that the there is no concluded contract with regard to the purchase of Painting in question and the plaintiffs have accepted Ex.C.8 subject to verification of authenticity and provenance of the said painting in question.
35. Section 12(2) of sale of Goods Act provides that a condition is a stipulation essential to the main purpose of the contract the breach of which gives rise to a right to treat the contract as repudiated. When the plaintiffs by producing expert's report as per Ex.R.7 and Ex.C.6 had proved that the Painting in question is not sale by description as shown in Ex.C.1 and the signature of Raja Ravi Varma is not original, the plaintiffs are entitled to repudiate the contract.
36. Further, the learned advocate for plaintiffs relied upon Section 16(2) of the Sale of Goods which reads thus :
"(2) Where goods are bought by description from a seller who deals in goods of that description (whether he is the manufacturer or producer or not), there is an implied condition that the goods shall be of merchantable quality :
Provided that, if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought have revealed."
37. The learned advocate for plaintiffs also relied upon Sections 41 to 43 of Sale of Goods Act which reads thus :
"41. Buyer's right of examining the goods -
(1) Where goods are delivered to the buyer which he has not previously examined, he is not deemed to have accepted them unless and until he ha had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract.
(2) Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound, on request, to afford the buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract.
42. Acceptance - The buyer is deemed to have accepted the goods when he intimates to the seller that he has accepted them, or when the goods have been delivered to him and he does any act in relation to them which is inconsistent with the ownership of the seller, or when, after the lapse of a reasonable time, he retains the goods without intimating to the seller that he has rejected them.
43. Buyer not bound to return rejected goods - Unless otherwise agreed, where goods are delivered to the buyer and he refuses to accept them, having the right so to do, he is not bound to return them to the seller, but it is sufficient if he intimates to the seller that he refuses to accept them."
38. As I have already discussed above, as on the date of auction or prior to auction there was no opportunity to the plaintiffs to examine and verify the Painting in question about its authenticity and provenance of the same and after lapse of 9 months of auction, the said Painting in question was made available to the plaintiffs for verification and the plaintiffs by verifying the same through their expert submitted the report as per Ex.R.7 and Ex.C.6 and the defendant No.1 and C.W.1 though disputed the report of the expert, have not made any attempt to get verify the said Painting in question either through their expert or appointing the expert mutually agreed as provided under Clause 7.3 of Ex.C.1. When the Painting in question was delivered after raising the invoice in spite of report as per Ex.C.6 and Ex.R.7 was sent by the plaintiffs about the authenticity and provenance of the Painting in question, the raising of invoice or paying 50% of invoice price towards the Painting in question do not amount to accepting the contract of sale or purchase of Painting in question. In view of these discussion, the award passed by the learned Arbitrator is patently illegal and liable to be set aside.
39. The learned Advocate for the plaintiffs also relied upon the decision reported 2006 (4) Supreme Court Cases 445 (Hindusthan Zinc Ltd. Vs. Friend Core Corbonisation) in which the learned advocate relies upon para No.14, which reads thus :
"14. The High Court did not have the benefit of the principles laid down in Saw Pipes, and had proceeded on the assumption that award cannot be interfered with even if it was contrary to the terms of the contract. It went to the extent of holding that contract terms cannot even be looked into for examining the correctness of the award. This Court in Saw Pipes has made it clear that it is open to the Court to consider whether the award is against the specific terms of contract and if so, interfere with it on the ground that it is patently illegal and opposed to the public policy of India."
40. In view of the aforesaid discussion, I hold that the grounds urged by the plaintiffs satisfy the contents of Section 34(2) (b)(ii). Hence, I answer this point partly in the affirmative.
41. Point No.2 : - when the award passed by the learned Arbitrator is patently illegal, the Award is liable to be set aside and the counter claim of the plaintiffs before the learned Arbitrator is to be accepted.
42. In the counter-claim the plaintiffs have prayed to direct the defendant No.1 to return the amount paid by them with respect to the Painting in question with interest. As per Clause 7.5 of Ex.C.1 if the forgery is proved, then the defendant No.1 has to cancel the sale and to refund the total price to the buyer. None of the Clause provide for returning the amount to the plaintiffs with interest. Therefore, the plaintiffs are not entitled to claim interest from the date of payment, but the defendant No.1 is liable to pay the interest on the amount paid by the plaintiffs if he is failed to pay the same within the period prescribed by this Court. Accordingly I proceed to pass the following:
ORDER A.S.No.34/2015 is hereby allowed.
The impugned Award dated 20.12.2014 passed by the 2nd defendant in C.M.P. No.93/2012 is hereby set-aside.
First defendant is directed to pay to the plaintiffs a sum of Rs.79,72,598/- within three months from the date of this order, failing which, he shall pay interest at the rate of 6% p.a. from the date of expiry of three months till the date of payment. (Dictated to the Judgment writer directly on computer, script corrected, signed and then pronounced by me in the open court this the 14th day of June 2016.) (Hemavathi) XXXIX Addl. City Civil & Sessions Judge, Bangalore City.
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