Karnataka High Court
Sri N S Nagaraj Reddy vs Bren Corporation on 2 September, 2022
Author: G.Narendar
Bench: G.Narendar
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 02ND DAY OF SEPTEMBER, 2022 R
PRESENT
THE HON'BLE MR. JUSTICE G.NARENDAR
AND
THE HON'BLE MR. JUSTICE C M JOSHI
WRIT PETITION NO.14573/2022 (GM-RES)
BETWEEN:
SRI. N.S NAGARAJ REDDY
AGED ABOUT 70 YEARS,
S/O LATE S.R SRINIVAS REDDY,
PRESENTLY RESIDING AT,
NO.1 FERNS HABITAT,
DODDENAKUNDI VILLAGE,
BANGALORE - 560 047
REPRESENTED BY HIS GPA HOLDER
SRI N.KIRAN REDDY.
... PETITIONER
(BY SRI SAMMITH .S, ADV.)
AND:
BREN CORPORATION
(FORMERLY, SJR ENTERPRISES)
A PROPRIETARY CONCERN,
HAVING ITS REGISTERED OFFICE AT,
3RD FLOOR, BALAVANA,
PLOT NO.51, 5TH A BLOCK,
KORAMANGALA, BANGALORE - 560 095
REPRESENTED BY ITS SOLE PROPRIETOR,
SRI J.BHOOPESH REDDY.
... RESPONDENT
(BY SRIYUTHS AJAY SHANKAR RAO AND
MIRA MAHADEVAN, ADVOCATES.)
2
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 &
227 OF THE CONSTITUTION OF INDIA PRAYING TO GRANT A
WRIT, ORDER OR DIRECTION IN THE NATURE OF CERTIORARI,
QUASHING THE ORDER DATED 07/04/2022 PASSED BY THE
LEARNED SOLE ARBITRATOR IN A.C.NO.114/2019, AS
CONTAINED IN ANNEXURE-A ETC.
THIS WRIT PETITION COMING ON FOR "PRELIMINARY
HEARING" THIS DAY, G.NARENDAR J., MADE THE FOLLOWING:
ORDER
Heard the learned counsel for the petitioner and the learned counsel for the respondent.
2. The instant writ petition is preferred being aggrieved by the order of the Arbitral Tribunal dated 07.04.2022 rejecting the I.A's preferred by the petitioner under Order VI Rule 17 of the Code of Civil Procedure, 1908 (hereinafter referred to as 'CPC' for short) for amendment of pleadings, Order XVIII Rule 17 of CPC for recall of witness and under Section 151 of CPC for reopening the stage of evidence.
3. The applications, all dated 25.02.2022, are produced as Annexures - C, D and E to the writ petition. All 3 the applications came to be considered and rejected by a common order produced as Annexure-A.
4. The facts in a nutshell are that the petitioner was approached by the respondent for developing the schedule property into a multi-storied residential apartment complex. In that direction, initially a Joint Development Agreement dated 09.12.2005 came to be executed with M/s. SJR Builders and the present respondent was then one of its partners. That the said entity failed to complete the project and the respondent stepped forward and personally assured the petitioner and his family members that he would take over and complete the joint development venture in his individual capacity and independent of the said entity.
5. Accordingly, a separate Joint Development Agreement came to be executed between the parties on 30.12.2010 and that the respondent entity is a proprietary concern. That subsequently, an Agreement supplemental to the JDA (hereinafter referred to as the 2nd JDA) came to be entered into and executed between the parties on 4 02.09.2011, under which a modification was made to the allocation of apartments.
6. The modification came about because the area earlier ear-marked was not proportionate to the 32% share agreed upon. That this modification was necessitated and consequential to the modification of the original plan as the modification of the building plan resulted in a larger constructed area.
7. That a Civil Misc. Petition came to be preferred by the respondent invoking the provisions of Section 11 (5) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act' for short) praying for the appointment of an Arbitrator in terms of Clause 29.4 of the 2nd JDA. The said CMP No.101/2017 came to be allowed on 23.04.2019 and the disputes were referred to arbitration by the learned Sole Arbitrator.
8. That the respondent preferred its statement of claim and the petitioner filed his counter claim on 5 09.09.2019 and in the counter claim, the following reliefs were sought by the petitioner against the respondent:-
'a) INR 2,51,06,112/- (Rupees Two Crore Fifty- One Lakh Six Thousand and One Hundred and Twelve only) for violating Recital 7 and Covenant (a) of the 2010 JDA.
b) INR 3,40,37,088 (Rupees Three Crore Forty Lakh Thirty-Seven Thousand and Eighty-Eight only) along with the sale value of 6 car parks for violating Covenant
(b), Clause 8.1 and 8.2 of the 2010 JDA; and
c) INR 56,39,460/- (Rupees Fifty-Six Lakh Thirty-Nine Thousand Four Hundred and Sixty only) for violating Clause 10.1 and 10.3;'
9. Issues for consideration were framed by the learned Sole Arbitrator on 18.12.2019.
10. It is the case of the petitioner that during one of his interactions with his counsel and in the course of instructing his counsel, he realized that, inadvertently an arithmetical error had crept in into the counter claim and proof affidavit filed into the Tribunal. That the arithmetical error related to the calculation of delay penalty as per Clause 10.1 and 10.3 of the 2nd JDA as claimed under prayer (c) (reproduced supra). That the respondent herein 6 was liable to be fastened with penalty for delay in completion of the project, as even on the date of going to Arbitration, Occupancy Certificate was yet to be issued.
That the petitioner was entitled to a delay penalty calculated at the rate of Rs.4/- per sq. ft., per month commencing from July 2013 and the same totaled to Rs.1,16,54,884/- but on account of a calculation error, a reduced sum of Rs.56,39,460/- alone was wrongly claimed. Realizing this arithmetic/calculation error, I.A.Nos.1/2022, 2/2022 and 3/2022 came to be filed. That the applications have been filed at the stage set for respondent's evidence.
11. That the applications were resisted by the respondent by a formal and common statement of objections. The Arbitral Tribunal, after hearing was pleased to reject the applications by the order, which is impugned before this Court.
12. The learned Sole Arbitrator has detailed the sequence of events in paragraph Nos.7, 8 and in paragraph No.9 has expounded about the proviso to Order VI Rule 17 7 of CPC and has also discussed the fact of Rw-2 being discharged on completion of evidence. In paragraph No.10, the learned Arbitrator has discussed the ruling in the case of Rajesh Kumar Aggarwal and Others vs. K. K. Modi and Others,1 and has distinguished the same, by holding that the said pronouncement is made without appreciating the proviso and that the said ruling has been rendered prior to the insertion of the proviso. In paragraph Nos.10 and 11, the learned Sole Arbitrator has discussed other rulings and distinguished the same on the ground noted supra. In respect of the ruling in the case of Navjot Singh vs. Satvinder Pal Singh2, the learned Arbitrator has placed reliance on the observation that an amendment, after commencement of trial, can be allowed only if it is demonstrated that such amendment could not be sought despite due diligence by the applicant.
13. In paragraph No.14, the learned Arbitrator has discussed the judgment in the case of M. Revanna vs. 1 (2006) 4 SCC 385 2 (2018) SCC Online P & H 1570 8 Anjanamma and Others3, and has placed reliance on the observations in paragraph No.7. In paragraph No.16, the learned Arbitrator has observed that the applicant has failed to demonstrate that despite their due diligence the applicant could not identify the mistake that had crept into the arithmetical calculation and consequently, held that the respondent, the petitioner herein, has failed to establish a case for allowing the application for amendment and held that the same is sought for at a belated stage.
14. In view of dismissal of the application, I.A.No.1/2022 preferred under Order VI Rule 17 of CPC, the learned Arbitrator has also opined that I.A.No.2/2022 for recalling Rw-1 and Rw-2 and I.A.No.3/2022 for re-opening, being consequential were required to be rejected and accordingly, rejected them.
15. In the above facts and circumstances, the point that arises for determination by this Court is whether the application I.A.No.1/2022 is hit by the provisions of the 3 (2019) 4 SCC 332 9 proviso to Order VI Rule 17 of CPC. The Rule and the proviso read as under:-
'17. Amendment of pleadings.- The Court may at any stage of the proceedings allow either party to alter or amend his pleadings in such manner and on such terms as may be just, and all such amendments shall be made as may be necessary for the purpose of determining the real questions in controversy between the parties:
Provided that no application for amendment shall be allowed after the trial has commenced, unless the Court comes to the conclusion that in spite of due diligence, the party could not have raised the matter before the commencement of trial.' (emphasis by this Court)
16. It would also be useful to refer to certain provisions of the Act. Section 19 of the Act deals with determination of rules of procedure to be followed by the Tribunal and sub-sections (1), (2), (3) and (4) read as under:-
"19. Determination of rules of procedure.--(1) The Arbitral Tribunal shall not be bound by the Code of Civil Procedure, 1908 (5 of 1908) or the Indian Evidence Act, 1872 (1 of 1872).10
(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 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."
17. Section 23 of the Act relating to statements of claim, defense and counter claim and sub-sections (3) and (4) read as under:-
"23. Statements of claim and defence.--(1) Within the period of time agreed upon by the parties or determined by the Arbitral Tribunal, the claimant shall state the facts supporting his claim, the points at issue and the relief or remedy sought, and the respondent shall state his defence in respect of these particulars, unless the parties have otherwise agreed as to the required elements of those statements.
(2) The parties may submit with their statements all documents they consider to be relevant or may add a reference to the documents or other evidence they will submit.11
[(2A) The respondent, in support of his case, may also submit a counterclaim or plead a set-off, which shall be adjudicated upon by the Arbitral Tribunal, if such counterclaim or set-off falls within the scope of the arbitration agreement.] (3) Unless otherwise agreed by the parties, either party may amend or supplement his claim or defence during the course of the arbitral proceedings, unless the Arbitral Tribunal considers it inappropriate to allow the amendment or supplement having regard to the delay in making it.
(4) The statement of claim and defence under this section shall be completed within a period of six months from the date the arbitrator or all the arbitrators, as the case may be, received notice, in writing of their appointment."
18. On a plain reading of the above provisions, it is crystal clear that amendment of pleadings is not totally prohibited but is merely qualified and moreso under the Act, 1996. The provisions of Order VI Rule 17 of CPC speaks of permitting amendments "for the purpose of determining the real question in controversy between the parties". In the case on hand, the claim or counter claim of the petitioner is one of the issues in controversy and the said counter claim 12 has already been raised in compliance with the provisions of sub-section (2-A) and sub-section (4) of Section 23 of the Act. In other words, there is no dispute to the fact that the counter claim has been filed and that too within time.
19. It is now necessary to analyze the provisions of Section 19 of the Act. Sub-section (1) mandates that the Arbitral Tribunal shall not be bound by the Code of Civil Procedure. Sub-section (2) mandates that, subject to this Part, the parties are free to agree on the procedure to be followed by the Arbitral Tribunal. Sub-section (3) mandates that in the event of failure on the part of the parties to agree to a procedure as provided under sub-section (2), it is open to the Arbitral Tribunal to conduct the proceedings in the manner it considers appropriate. Sub-section (4) further expounds about the authority of the Arbitral Tribunal under sub-section (3). Sub-section (4) is an inclusive provision and other things apart, it empowers the Arbitral Tribunal to determine the admissibility, relevance, materiality and weight of any evidence. (emphasis by this Court). 13
20. The emphasized portion supra, would go to show that in the matter of assessing the materiality and weight of any evidence, the Arbitral Tribunal is not tied down by the pleadings and the power is vested in it to analyze, appreciate and draw conclusions independently and as demonstrated by the material evidence on record.
21. A reading of sub-section (3) of Section 23 of the Act would go to show that unless the parties have other wise agreed to, i.e., if they have agreed under Section 19 (2) of the Act not to seek any amendment to the pleadings, it is open to either of the parties to amend or supplement his claim or defense, during the pendency of the arbitral proceedings, unless the Arbitral Tribunal considers it in- appropriate to allow the amendment having regard to the delay in making it. On a reading of sub-section (3), a modification or amendment is rendered impermissible only under two circumstances, namely, one if the parties have agreed to the contra as provided under Section 19 (2) of the Act and secondly, if the Arbitral Tribunal is of the 14 considered opinion that on account of the delay, the application is rendered in-appropriate or allowing the application would not be appropriate.
22. The word 'in-appropriate' is not defined under the Arbitration and Conciliation Act, 1996. It is the opposite of the word 'appropriate' and is defined in the Concise Oxford English Dictionary South Asia Edition 2011 as below:-
"inappropriate-not suitable or appropriate"
The word 'appropriate' is defined as "suitable; proper".
23. From a reading of sub-section (3), it is apparent that a onus is cast on the Arbitrator to analyze and assess, as to whether it would be suitable or proper to allow the amendment. In other words, the arbitrator is called upon to conduct a judicious exercise of appreciating not only the nature of amendment sought but in conjunction with the delay in seeking the same, and such appreciation should cause not a mere displeasure but indignation, that is, a 15 strong displeasure, enough to convince a prudent mind that it would cause injustice to one party or it would not appeal to a prudent person as being righteous or judicious to grant the application. The delay referred to sub-section (3) of Section 23 of the Act cannot be a mere ordinary delay but delay of such nature that it would cause a sense of revulsion in a prudent person or a judicious mind.
24. Thus, on a detailed analysis of the provisions of Order VI Rule 17 of CPC, the proviso to it and Sub-section (3) of section 23 of the Act, it can be safely inferred that impetus is on the aspect of delay but not a mere delay but delay of such nature, which any prudent or judicious mind would infer, to cause injustice or a wrong to the other party, if condoned.
25. But it is also pertinent to note that provisions of Order VI Rule 17 of CPC and Section 23 of the Act specifically empowers the parties to seek for amendments even after the commencement of the trial. But what is more interesting and if the aforestated provision be read in 16 conjunction with the provisions of Section 18 of the Act, which is the first Section of Chapter V, in which Chapter, Sections 19 and 23 are also placed and which Chapter is placed in Part I of the Act. The heading of Section 18 reads as under:-
'18. Equal treatment of parties.-' And the provision reads as under:-
'The parties shall be treated with equality and each party shall be given a full opportunity to present his case.'
26. A plain reading of the provision makes it apparent that the impetus of the provision is on providing a full opportunity to a party to present his case. In our opinion, the phrase "to present his case" would include the right to present the correct case. The provisions of Section 18 of the Act or phrase "full opportunity" can be easily equated with the words in Rule 17 of Order VI of CPC, which reads as - 'as may be necessary for the purpose of determining the real questions in controversy between the parties.' 17
27. If this be the interpretation that is required to be placed on the relevant provision, then we are unable to accept the conclusions drawn by the learned Sole Arbitrator. Paragraph No.16 of the impugned order reads thus:-
"16. In this case on facts as stated supra the respondent failed to establish that inspite of due diligence the arithmetical calculation mistake could not be found and therefore the mistake in calculation had crept in. Thus, this tribunal is of the view that the respondent has not established a case for ordering amendment of the counter claim at this belated stage, consequently I.A.No 1 of 2022, is dismissed."
28. From a reading of the above, it is apparent that the reasoning is neither in consonance with Order VI Rule 17 of CPC or the provisions of Sections 18, 19 (1), 19 (3) or Section 23 (3) and 23 (4) of the Act. The impugned order would reveal that the application has been rejected only on the premise that it is filed at a belated stage. There are no reasons forthcoming as to whether the delay has rendered allowing the application inappropriate or whether it would cause injustice or wrong to the other party. 18
29. It would be useful to place reliance on the observations of the Hon'ble Apex Court in the case of State of Goa vs. Praveen Enterprises4, rendered in paragraph Nos.26 and 27. The Hon'ble Apex Court has analyzed Section 23 of the Act and has observed as below:-
"26. Section 23 of the Act makes it clear that when the arbitrator is appointed, the claimant is required to file the statement and the respondent has to file his defence statement before the arbitrator. The claimant is not bound to restrict his statement of claim to the claims already raised by him by notice, "unless the parties have otherwise agreed as to the required elements" of such claim statement. It is also made clear that "unless otherwise agreed by the parties" the claimant can also subsequently amend or supplement the claims in the claim statement. That is, unless the arbitration agreement requires the arbitrator to decide only the specifically referred disputes, the claimant can while filing the statement of claim or thereafter, amend or add to the claims already made.
27. Similarly, Section 23 read with Section 2(9) makes it clear that a respondent is entitled to raise a counterclaim "unless the parties have otherwise agreed"
and also add to or amend the counterclaim, "unless otherwise agreed". In short, unless the arbitration agreement requires the arbitrator to decide only the specifically referred disputes, the respondent can file 4 (2012) 12 SCC 581 19 counterclaims and amend or add to the same, except where the arbitration agreement restricts the arbitration to only those disputes which are specifically referred to arbitration, both the claimant and the respondent are entitled to make any claims or counterclaims and further entitled to add to or amend such claims and counterclaims provided they are arbitrable and within limitation."
30. The learned Arbitrator has observed that there is lack of diligence and that the petitioner has not established a case for ordering the amendment at a belated stage. We are constrained to disagree with the observations regarding lack of diligence. In support of this, we draw sustenance from paragraph Nos.7 and 8 of the impugned order. It is recorded by the learned Arbitrator, that the evidence on the part of the claimant was completed on 29.10.2021 and the Proof Affidavit and examination-in chief and partial cross- examination of Rw-1 was completed on 10.11.2021. Further re-examination was completed on 17.11.2021 and he was discharged on the said date. The evidence of Rw-2 was recorded and conducted on 10.12.2021, 22.12.2021 and thereafter adjourned to 01.04.2022 and the hearing was 20 adjourned for further cross-examination of Rw-2 on 01.06.2022.
31. It is pertinent to state that the applications have been moved on 25.02.2022 itself and what was sought for, in real terms, was a correction. It is not the case that no counter claim was made or that no claim under the head of delay for penalty has been made. On the contrary, prayer
(c) is the claim for awarding compensation on account of delay on the strength of Clause 10.1 and 10.3 of the Agreement. Even before the evidence of the Rw-2 was completed, the applications had already been made. In essence, what is sought is a mere correction and not an amendment. The rate at which penalty is to be levied, the period for which the penalty can be levied are all forthcoming in the pleadings and the same put together, is the figure that is now sought to be incorporated in the prayer. But unfortunately, we see that the learned Arbitrator has adopted a straight jacket approach and has proceeded 21 to reject applications as if it were an attempt to introduce a new head of claim or introduce a new claim.
32. In our opinion, Section 18 of the Act is a complete answer to this conundrum. It is a reflection of the objective of the Act, which is to reduce the foot falls to the Courts of justice and to encourage the litigant public to attempt to resolve it by alternative means. In fact, from a reading of sub-section (3) of Section 23 of the Act, it can be safely deduced that a right stands vested in a party to the arbitration proceedings to seek amendment but for the two exceptions provided under the said provision i.e., one, if there is an agreement to the contrary and the second one being the consideration by the Arbitrator that the application is inappropriate. If the provisions of Section 18 and Section 23(3) of the Act are conjointly appreciated, it would clearly establish that the object of this Chapter is to ensure justice in its fullest sense.
33. In our opinion, the learned Arbitrator appears to have misread the provisions and thereby rendered an 22 erroneous decision. In that view of the matter, the writ petition requires to be allowed.
34. The writ petition is accordingly allowed. The order impugned dated 07.04.2022 passed in A.C.No.114/2019 is set-aside.
In view of the foregoing discussion, the applications I.A.Nos.1 to 3 of 2022 are allowed. Amendment shall be carried out within a period of two weeks from the date of receipt of a certified copy of this order.
In view of the peculiar circumstances, there shall be no order as to costs.
Sd/-
JUDGE Sd/-
JUDGE DN CT-HR