Bangalore District Court
Polytech Automation Private Limited vs Interpump Hydraulics India Pvt. Ltd on 29 February, 2020
IN THE COURT OF THE XII ADDL. CITY CIVIL JUDGE, AT
BENGALURU
Dated this the 29th day of February, 2020.
PRESENT: SRI. SATHISHA L.P., B.A.,LL.B.,
XII ADDL.CITY CIVIL & SESSIONS JUDGE
(CCH.No.27), BENGALURU
A.S.No.81/2017
PLAINTIFF/ Polytech Automation Private Limited
APPELLANT : Having office at No.165,
6th Cross, S.T. Bed Layout,
Koramangala,
Bengaluru-560034.
Represented by its Managing Director,
Mr. G. Harish
S/o Mr. H.P. Gopaliah
VS.
DEFENDANTS/ 1. Interpump Hydraulics India Pvt. Ltd.
RESPONDENTS : Having office at No.129,
SIPCOT Industrial Estate,
Zuzuvadi, Hosur -635 126
2. Justice Mohammad Anwar
Former Judge, High Court of Karnataka ,
Sole Arbitrator,
Arbitration and Conciliation Centre
Khanija Bhavan, Race Course Road,
Bengaluru-560001
2 A.S.No.81/2017
JUDGMENT
This Arbitration suit is filed under Section 34 of Arbitration and Conciliation Act to set aside the award dated 04.05.2016 passed by the respondent No.2 in so far as appellant is concerned and to remand the matter for fresh hearing with opportunity to lead additional evidence, witnesses, experts, etc., and to award cost of this suit and such other reliefs.
2. The grounds urged in the suit are, the award passed by respondent No.2 is biased, contrary to law, against the weight of evidence and probabilities of the case and prejudiced against the applicant. The award is vitiated and prejudiced as the appellant since the principles of natural justice are not adhered to and on this ground also the arbitral award is liable to be set aside.
Respondent No.2 has passed a perverse order without understanding the actual facts and has come to the conclusion without understanding the basic facts placed by the parties and has come to his own finding that the appellant has cheated the respondent No.1, which shows that the respondent No.2 has been arbitrary without even weighing the proof submitted by the 3 A.S.No.81/2017 appellant. In fact the provisions of Evidence Act also have not been followed leading to travesty of justice. Some of the facts are listed by the plaintiff as under:
At para 16.2 of impugned order and also the whole tenor of the order the respondent No.2 failed to understand that it was a pre-fabricated factory that was being assembled at the contractor's site and the same was not being built at the site in Sy.No.36/2 and 3 and 56 of Moorthigana Dinna Village, Dasaripalli, Hosur Begur Road, Hosur Taluk, Tamil Nadu. The respondent No.2 has assumed that the materials not reached the site meant that no materials for construction of a factory had reached in the normal parlance wherein here it was pre-fabricated factory building which was being done by a contractor of the appellant, i.e., Raksha Buildtech, at their site. Once the foundation and columns was put the whole pre-fabricated factory would be brought and installed on the foundation and columns that were already completed by the appellant. Respondent No.2 failed to note that the foundation and columns was completed for installation of the pre-fabricated unit. Ex.P.29 being an e-mail has been misunderstood by the respondent No.2 which was actually means that the foundation has been completed with the pre-fabricated factory, being constructed at the contractor's site. Therefore the appellant was stating that at the site there will be no work till December 2015. In fact when we look at Ex.R.2 being 4 A.S.No.81/2017 e-mail dated 30.11.2015, which is Mr.Girish Garud's representative of the respondent No.1 email clearly mentioning that progress was going on in work which was actually the foundation for laying the pre-fabricated factory building on the foundation. The whole false allegation of respondent No.1 centers around the facts and circumstances of this case that they claim the appellant has not started any development work even till 09.01.2016 on which date a meeting was held. Respondent No.1 has conveniently forgotten to state that the foundation and plinth work was complete as per their own admissions. The factory building was a steel fabrication which was being done at a contractors place, i.e., at Raksha Build Tech juxtaposed with Ex.P.28 which is an email of Mr. Harish MD, of the appellant dated 13.03.2016 at 12.06 p.m. written to Mr.Garud of the respondent No.1 company. He clearly states "we need electrical power at site for installing steel building". In Ex.R.13 it is made clear that the factory is a pre-fabricated building, Ex.P.21 being email dated 27.11.2015 and the email reply of appellant dated 30.11.2015 clearly states that by next week, that is first week of December the foundation forting for factory building and office would be completed and after that in second week of December 2015 the pre-fabricated factory building would be erected and they have in fact asked the respondent No.1 to come and certify that it is ok.5 A.S.No.81/2017
At para 16.3 of the impugned order the respondent No.2 failed to note that even if the Ex.R.3 is dated 24.11.2015, which he has taken into account but on the same basis that payment of Rs.1,41,50,000/- have been released to Raksha Build Tech being the contractor for manufacturer of pre-fabricated factory building has not been taken into account since this would have been made the case of the appellant stronger since advances had already been paid to the contractor.
At para 17 of the impugned order, respondent No.2 failed to note that the requirements that were asked by the respondent No.1 on email on 03.10.2015 in Ex.R.1 were not even present in the lease deed. RW.1 sent an email reply dated 03.10.2015 stating that the preliminary drawings were already given and if 3D drawings are required by the respondent No.1, it would take time and additional costs would be charged for payment to the architects since it was never asked for in the first instance. RW.1 also says that no new design can be done which clearly shows that on 03.10.2015 itself the respondent No.1 has asked for new things. In fact the last line itself makes it clear "this is not as per agreed...." Instead of understanding that it was the respondent No.1 who was asking for new things, the respondent No.2 came to a conclusion that RW.1 of appellant was asking them to make the designs and drawings for their factory, which was not the case here.
6 A.S.No.81/2017At para 18.1 of the impugned order, the respondent No.2 failed to note that even though the statement of payments made to the contractor Raksha Build Tech amounting to Rs.1,41,50,000/- have been given on oath, the same was not taken into account and conversely he has from Ex.R.3 assumed that the construction of building in question was not yet started for want of work order from the former and therefore arrived at an adverse inference. In fact it is clear that when such large payments are made it would be for construction of the pre- fabricated structure, which would ultimately sit on the concrete foundation that was already made till that date.
At para 18.2 of the impugned order, the respondent No.2 failed to note that the appellant is stating that in case changes are required the rent would need to be revised since the appellant could not afford the loss, due to the changes asked for. In fact at P.21 email dated 25.11.2015 the appellant clearly states that he would need to stop the work which means that work was going on.
At para 18.3 of the impugned order, the respondent No.2 failed to note that orally the appellant was informed that the renewed rental amounts were acceptable to them and therefore vide email dated 27.11.2015 he stated that the contractors have been advised to follow the agreement between the parties. This has been twisted to suit the respondent No.1's case.
7 A.S.No.81/2017At para 19.1 of the impugned order, the respondent No.2 failed to note that he himself has come to a finding that email dated 27.11.2015 at Ex.P.21 and the email reply of the appellant dated 30.11.2015 clearly states that by next week, i.e., by first week of December the foundation forting for factory building and office would be completed and after that in second week of December 2015 the pre-fabricated factory building would be erected and they have in fact asked the respondent No.1 to compromise and certify that it is ok. The respondent No.2 has completely missed this point in his finding that as the building is a pre-fabricated building and this email has not been negated by the respondent No.1 also which proves that it was a pre- fabricated building being built by Raksha Build Tech to whom Rs.1,41,50,000/- was paid. The respondent No.2 also clearly missed the point that the foundation and forting was completed and that the respondent No.1 in his reply email dated 30.11.2015 states that progress is going on fast.
At para 19.2 of the impugned order, the respondent No.2 has taken the Ex.P.22 letter dated 04.12.2015 as its face value and come to a conclusion that after bhoomi pooja no work was done. By this time, the appellant was fed up of the several request for changes and did not reply which the respondent No.2 is now claiming that since the averment made in P.22 was correct the appellant did not reply. Such an assumption cannot be taken.
8 A.S.No.81/2017At para 20.1 of the impugned order, the respondent No.2 failed to note that what options were given in email dated 08.12.2015 at Ex.R.10 shows that the appellant had given two options; option-I was for building with changes required and option-II was building as per the lease agreement. The respondent No.1 to escape his changes made in the design etc. negated the email. The respondent No.2 without any proof of the document concluded that option-I was the design originally approved in the lease agreement i.e., Ex.P.1 and that option-II was being pushed illegally by the appellant. In fact respondent No.2 becomes personal here and come to a conclusion that the appellant is not an upright person.
At para 20.2 of the impugned order, the respondent No.2 failed to note that email message of the appellant dated 09.12.2015 support the claim of the appellant that there was an additional requirement of a crane, which was not in the original lease agreement P.1. He also further states that in the lease agreement the power requirement was for 140 HP but later power of 350 KVA and due to several emails their demand was later reversed. The appellant clearly states that the lease agreement specifications would be met and if anything new is required for such additional features the respondent No.1 has to pay additional.
9 A.S.No.81/2017At para 21 of the impugned order, the respondent No.2 failed to note that the matter came to a status quo, and a revised terms were agreed upon at meeting held on 22.12.2015 the minutes which were marked as P.23. The very fact that the minutes came to be drawn clearly shows that the respondent No.1 wanted lots of changes and therefore the same meeting was held so that the new specifications demanded by respondent No.1 would be completed and consigned within 1st May 2016. The respondent No.2 has lost track that in the minutes, the respondent No.1 has agreed to novate the lease agreement so that the new undertakings as per Article 1 would be taken into account. Ex.R.11 is the draft MOU which was circulated and conditions put in by the respondent No.1 which were not acceptable to the appellant due to a stringent penalty clause which was never discussed in the meeting and due to these, the MOU never got signed which was done on purpose by the respondent No.1. Just because the minutes, has recorded the undertaking under Article 1 will be binding irrespective of the execution of amendments of deed and BG can be even reversed to suit the appellant in the case of the BG. If the respondent No.1 claims that the appellant was to spend money on all the changes required without a written document, they led the appellant to believe that they would perform their part of the contract and also made a MOU in such a way that the appellant would refuse and seek changes therefore leading the appellant up 10 A.S.No.81/2017 the garden path. Hereto if this is related on the BG also, then invocation of the bank guarantee would be right in terms of the fact the changes made were not compensated and that the invocation was right on the part of the appellant. The very fact of the MOU being executed shows that additional changes were required by the respondent No.1 ant that for these additional rents were also agreed to be paid by the respondent No.1. The respondent No.2 has relied upon the MOU dated 09.01.2016 marked as Ex.P.24 wherein in the preamble it is very clear that "PAPL and IPH executed a meeting memorandum on 22.12.2015 and after successive meetings on 09.01.2016, agreed to change the terms and conditions of the deed." Now this deed is the deed as per Ex.P.1. This means that there very changes required, hence even the main lease deed was required to be amended which make it clear that there were many modifications. In addition in para 5 (Sl.2) of Ex.P.24 "the property will be completed and consigned within 1st May 2016 with the specifications requested by IPH such as one referred to in MM". Here MM means the minutes of the meeting dated 22.01.2016 marked as Ex.P.23. Here also it is clear that there have been changes and modifications asked for, which the respondent No.2 failed to notice.
At para 23.1 of the impugned order, the respondent No.2 failed to note that conditions which were not agreed to were put 11 A.S.No.81/2017 into the MOU so that the appellant would refuse to signature and this could be used as an excuse by the respondent No.1. The Arbitrator has relied upon the unsigned and undated MOU placed by the respondent No.1 which was sent by claimant to be signed by the respondent No.1 marked as Ex.R.11 and failed to note that since new conditions had been put in, the respondent No.1 had to threaten the clamant that he would stop the work. The additional conditions which were not acceptable to the respondent No.1 was with regard to the penalty clause and letter of credit instead of ban guarantee. The Arbitrator failed to note that the failure to sign was due to untenable conditions having been put in ad not on purpose by the respondent No.1 because of delay in the work.
At para 23.2 of the impugned order, the respondent No.2 failed to note that the appellant was legally bound to complete the building only as per the lease agreement dated 22.06.2016 marked as P.1 and not as per the MOU which did no materialized and neither as per the minutes dated 09.01.2016.
At para 24.1 of the impugned order, the respondent No.2 failed to understand that it was a pre-fabricated building which was being constructed at the site of the contractor Raksha Build Tech and not at the leased property. The respondent No.2 to the query of Mr. Paolo email 17.03.2016 states that the material will arrive on Wednesday 23.03.2016. What he meant was that since the foundation were already put in, the pre-fabricated building 12 A.S.No.81/2017 would be transported by the contractor to the site and installed by that time.
At para 24.2 and 24.3 of the impugned order, the respondent No.2 failed to understand that "material has not arrived at site" to mean the sand, stones, cement and other construction equipment etc., which was not required in this case since the foundations had already been completed and only the pre-fabricated structure had to be mounted on the foundations. The respondent No.2 has therefore come to a wrong conclusion that the work had not started at all.
At para 24.3 and 24.4 of the impugned order, the respondent No.2 failed to understand that at Ex.R.13, the appellant is actually informing the respondent No.1 that the steel building is being erected after it arrives next week and that steel building erection will be completed by April end. After the completion of the steel building, they will take up side wall and floor of factory building and will finish by mid May. The respondent No.2 has not taken this email in its right perspective but has concluded that by March 2016 the construction work had not commenced at all and materials were expected at the site after March 2016. The respondent No.2 only based on the email Ex.R.13 email dated 29.03.2016 has concluded that the appellant was negligent and has failed in his performance.
13 A.S.No.81/2017At para 25 of the impugned order, the respondent No.2 failed to note that Ex.P.25 is not an admitted document but the respondent No.2 has relied on this document without the same being put to proof by the respondent No.1 and has concluded that the appellant has failed to shift its existing HTSC No.327 so that HT connection facility can be installed.
At para 26 of the impugned order, the respondent No.2 failed to notice that even in Ex.P.2 the legal notice sent by the respondent No.1, the respondent No.1 himself has said that "by 09.01.2016 you have only put up foundation and had completed the plinth.....". This makes it clear that they were aware of laying of the foundation and the plinths, having been put in the said property.
At para 26.2 of the impugned order, the respondent No.2 failed to notice that in the previous legal notice dated 11.04.2016 they have admitted that foundation and plinth work is over but in Ex.P.4 dated 27.04.2016 wherein the legal rejoinder notice they claim that the photographs clearly show that even foundation/plinths has not been completed. This is clear flip flop on the part of the respondent No.1 and a complete lie and falsehood that was perpetrated before respondent No.2 and the respondent No.2 failed to notice that they have completely backtracked as compared to their previous legal notice dated 14 A.S.No.81/2017 11.04.2016 with regard to status of the project which clearly shows that they were lying and not the appellant.
At para 27.1 of the impugned order, the respondent No.2 has taken the date of the photos in Ex.R.1 as on 20.02.2017 wherein the same was produced at the stage of construction as on 20.02.2016, i.e., 3 months prior to the due date of 01.05.2016. Only on this date mishap the respondent No.2 has held that the photos have been taken on 20.02.2017 which is further from the truth since these have been given to depict the stage of construction as on 20.02.2016 and not in 2017. This whole presumption drawn that the photos taken as on 20.02.2017 are totally wrong and not based on the correct documents placed before the respondent No.2. The respondent No.2 has assumed that the photos are as on 20.02.2017 and therefore anything after 10.05.2016 has no relevance, which is not true in this context since the photos were taken as on 20.02.2016. In fact at para 5 of the appellant counsel reply dated 19.05.2016 the photos have been denied and have been claimed as old photos in addition to cross-examination of the appellant at Q19 and 20 it is clearly shown that the photos graphs as being projected by the respondent No.,1 are old and denied and that the concrete columns were already in place for office and for the factory since it was pre-fabricated building would be installed in the site after 15 A.S.No.81/2017 comes from Raksha Buildtech who was the contractor for the project, At para 27.2 of the impugned order, the respondent No.2 has taken the Ex.P.4 four photos placed by respondent No.1 and stated that there is no disputes on the photos. These photos relate to a situation before the foundation and plinth was being put up. Though the photos were received by the respondent No.2 the contents were denied, which was not taken into account. In fact the photos were never sent with the legal notice by the respondent No.1. The respondent No.2 has come to a conclusion that if the photos had been taken prior to Ex.P.2 notice dated 11.04.2016 they would have surely been sent to the appellant No.1 along with Ex.P.2 which is not borne out by the facts since there is no mention of any enclosures in the notice itself so the respondent No.2 wrongly comes to a conclusion without any factual evidence that the photos show the correct picture of the stage of the construction between the period 11.04.2016 and 27.04.2016 which is based on an erroneous conclusion.
At para 28 of the impugned order, the respondent No.2 in spite of the reliance on un admitted documents and conclusions without any factual basis comes to a finding that there is overwhelming believable evidentiary material obtainable on record of proof that appellant failed to fulfill his contractual obligations.
16 A.S.No.81/2017At para 29.1 of the impugned order, the respondent No.2 has not understood the changes required and put into the minutes of the meeting at Ex.P.23 ad terms it as cosmetic when every change made from the previously agreed contract would always be a change. There is no proof laid down that these were cosmetic changes only. Some of the glaring errors were as follows:
(i) As per lease deed Ex.P.1 page 23 space is for paved roads with tiles. LOl dated 29.04.2015 also shows that driveway will be of heavy duty pavers and not concrete roads. In the MOM respondent No.1 indicated trailer weight of 40 tons and above and to provide concrete roads, which cost would be Rs.1200 per sq.ft. as against paved tiles costing Rs.70 per sq.ft. This additional cost would be around Rs.32 lakhs and is a major change from the lease agreement.
(ii) Instead of 140 HP, the respondent No.1 decided to go in for 300 HP connection. To provide infrastructure for 300 HP it would be a major change.
Ex.P.30 letter and Ex.P.34 were not admitted and the same was not proved by the respondent No.1 and hence relying on these un-admitted documents the respondent No.2 has come to a conclusion that time was the essence of the contract. The finding 17 A.S.No.81/2017 of the respondent No.2 that time was the essence of the contract only on un-admitted documents which have not even been proved is erroneous and is liable to be struck down.
At para 32 of the impugned order, the respondent No.2 has not understood that the appellant had already invested in the fabrication of the pre-fabricated factory building to an extent of Rs.1,41,50,000/- and when it became apparent that the respondent No.1 was backing out of the contract, the bank guarantee was invoked by the appellant to cover the loses of the appellant. Therefore the invocation cannot be called illegal and therefore the respondent No.1 is not entitled to the claim of Rs.50 lakhs.
At para 35.1 of the impugned order, the respondent No.2 has relied on Ex.P.15 which has not been admitted and therefore since this has not been proved by the respondent No.1. Further clause 17 of P1 clearly excludes consequential losses. Therefore respondent No.1 is not entitled to the said claim of Rs.89,800/-. For the claim of Rs.2017,248/- the respondent No.2 has relied on Ex.P.11 and P.13 which has not been admitted and this has also not been proved by the respondent No.1. Based on a bald statement made in affidavit the respondent No.2 has stated that this evidence has remained un-impeached. But the question that is to be asked here is how documents, which have not been admitted, can be relied upon for cross-examination. Further 18 A.S.No.81/2017 clause 17 of P.1 clearly excludes consequential losses. Therefore respondent No.1 is not entitled to the said claim of Rs.20,17,248/-.
At para 35.2 of the impugned order, the respondent No.2 has concluded that the respondent No.1 is entitled to Rs.70,89,800/- which is arithmetically incorrect.
At para 35.2 of the impugned order, the respondent No.2 has concluded that respondent No.1 is entitled to an interest of 18% without any basis and without relying on any contractual documents placed in evidence and against the provision of the Arbitration and Conciliation Act, 1996.
That by adjudicating and passing an award on an improperly stamped lease agreement and unregistered lease agreement there has been patently illegal award given by respondent No.2 since it is not a registered document and neither is it properly stamped and should have been impounded as per the Stamp Act. As the lease deed was not registered, the respondent No.2 should not have relied upon the lease deed or any term thereof and the lease deed cannot affect the immovable property or the construction on the property thereon which is the subject matter of the lease nor be received as evidence of any transaction affecting such property. Therefore, the respondent No.2 would not have been able to entertain any claim for 19 A.S.No.81/2017 enforcement of the lease agreement. By passing an award on a unregistered and unstamped lease deed, there is patent illegality in passing of the awards by the respondent No.2 In Para 12 of the judgment rendered by the Hon'ble Supreme Court in M/s. Sms Tea Estates P Ltd. vs. M/s. Chandmari Tea Co. P. Ltd., 2011 (14) SCC 66 has laid down the procedure to be adopted.
That the respondent No.2 has come to a conclusion based on documents that have not been admitted by the appellant in evidence and therefore the respondent No.1 should have led evidence on those documents which were not admitted. Rules of evidence were not followed in terms of admission and proving of documents by the respondent No.2. The Arbitral Tribunal should have conduced proceedings in accordance with the provisions of Arbitration and Conciliation Act 1996 and in respect of matters not covered either by agreement or by statue, keeping in view the principles of natural justice, fair play and equity. The Tribunal cannot throw to the winds established procedures of procedural laws namely The Evidence Act, 1872, which help litigants get justice before courts or tribunals In this matter by taking on record un-admitted documents of the respondent No.1 for the findings and thereafter for the award, the respondent No.2 has erred and has passed a perverse order and the same cannot be said to have been passed by following principles of natural justice 20 A.S.No.81/2017 and equity. On the reverse the respondent No.2 has not taken on record un-admitted documents of the appellant at Ex.R.1(a) to (f) to R.9 thereby becoming partial towards the respondent No.1 for no reason by taking the respondent No.1s documents which were not admitted and therefore not even proven by way of evidence in the Tribunal proceedings. Ex.P.11 to P.20, P.26 to P.30, P.33 to P.38, P.40 to P.44 were documents produced by the respondent No.1 and not admitted by the appellant. The respondent No.1 should have led proper and cogent evidence before the respondent No.2 which they failed to and even then the respondent No.2 on the matter of their claims has relied on these documents which is patently illegal for the claim amounts of Rs.20,00,000/- and Rs.90,000/-. In Ex.P.32 Mr. Harish MD of the alt has written an email to Mr. Girish of the respondent No.1 on 20.11.2015, where he mentions "in case you are coming to India on your other work, I will be pleased to meet you". In cross- examination of Mr. Harish at para 11 he specifically says that Mr. Paolo did not come specifically to meet Harish only for that purpose. All these have been overlooked by the respondent No.2. The respondent No.1 has not even proved the existence, content of these documents and neither have they produced any witness for this purpose. Even without this, the respondent No.2 has taken the statements made by the sole witness of the respondent No.1 at the face value throwing the rules of evidence out of reckoning and has granted the respondent No.1 amounts of 21 A.S.No.81/2017 Rs.20,00,000/- and Rs.90,000/- without a shred of evidence being proved by the respondent No.1 showing clearly that the order is totally perverse and against justice and morality. Morality here would mean a legal mistake in terms of findings made on documents which have not been proved.
That the respondent No.2 has given an award in the nature of damages when such losses are not even payable as per the exclusion clause 17 of the lease agreement marked as Ex.P.1 clause 17 of the lease agreement dated 22.06.2015, marked as Ex.P.1 as follows:
Exclusion of consequential loss: In no event, whether arising before or after completion of its obligation hereunder, shall either party, its affiliates, employees, agents, representatives, sub-contractor and vendors be liable for special, consequential, incidental or penal damages of any kind including but not limited to loss of use, revenue or profits, inventory or use charges, cost of capital or claims of third party, even if such party has been advised of the possibility of such damages and notwithstanding any failure of essential purpose of any limited remedy.
By this very clause the respondent No.1 is estopped from claiming any expenses incurred by him towards bank guarantee charges, travel and stay expenses etc. since not only special losses are excluded even charges etc., are excluded and therefore 22 A.S.No.81/2017 the Respondent No.1 should not have been granted his claim of bank guarantee charges and travel and stay expenses. In fact the Lease Agreement also has no such contractual obligation for the appellant to be liable for payment of bank guarantee charges and travel and stay charges. In a claim for damages, a clear connection and sufficient nexus has to be demonstrated between the breach of contract event and the damage suffered, and the threshold to establish this is very high and this has to be proven by the Respondent No.1 otherwise there are chances that all expenses in the books of the respondent No.1 can be attributed to the breach of contract. As per the admission of the respondent No.1 themselves that the respondent No.1 is a subsidiary company of a company from Italy it is but normal for a the technical head to keep coming to India since they already have their existing factories in India that too in Hosur and directors of the company would need to come to India to attend Board meetings. Without proving any of the documents placed the respondent No.1 has been granted the privilege of getting all expenses of their chairman and the technical head passed in the award which is totally against public and morality. The Respondent No.2 should have come to a finding that in order to contractually determine the extent of liability, as per the Lease Deed dated 22.06.2015 the parties had agreed to exclude all kinds of losses and expenses. Though the title reads as "Exclusions of consequential loss" the para in detail below that 23 A.S.No.81/2017 title excludes both the parties from special, consequential, incidental or penal damages of any kind including but not limited to loss of use, revenue or profits, inventory or use charges, cost of capital or claims of the third parties..., to limit their exposure which has therefore made the parties being excluded being awarded compensation. The Respondent No.2 has also failed to note that the appellant has nowhere agreed to pay any liquidated damages or given any indemnity to the respondent No.1 in spite of this the respondent No.2 just because a claim has been made given an award of Rs.20,00,000/- and Rs.90,000/- by holding that expenses spent by the respondent No.1 which have not even been proved by the respondent No.1 in the proceedings fall outside the purview of Clause 17 since they come under the category of direct losses, the basic of the findings having not been given has the made the award perverse. The respondent No.2 failed to note that as per the lease agreement, that costs or losses incurred could not have been claimed by way of damages by the respondent No.1 both on the grounds of equity or reasonableness. The respondent No.2 has misinterpreted the Clause 17 and has failed to come to a finding that:
a. Clause 17 in Ex.P.1 leaves no room for any ambiguity in interpretation.
b. There is no specific obligation cast upon the appellant to mitigate losses of the respondent No.1 anywhere in the agreement.24 A.S.No.81/2017
c. Clause 17 is exculpatory clause and lends to strict interpretation since expenses as alleged to have been incurred has been interpreted as having been incurred for the project without any shred of evidence only on the basis of pleadings made by the respondent No.1.
d. Further nowhere have the Appellant has agreed to pay for any travel expenses of any employee of the respondent No.1 in the lease deed whether during the project or in its breach and neither was the fact that employees were traveling for the project was ever made known to the appellant and hence the appellant had neither actual nor constructive knowledge.
The interest awarded by the respondent No.2 is patently illegal and goes against the fundamental law of India and especially Section 31 of the Arbitration and Conciliation Act 1996 read with Arbitration and Conciliation (Amendment) Ordinance 2015. Interest has being granted by respondent No.2 at 18% when agreement does not provide for interest and that too interest has been provided at 18% which is too high and against principles of natural justice. 18% p.a. interest granted from date of initiation of the Arbitral proceedings i.e., 09.06.2016 till full payment by the respondent No.2 appears to be penal without giving any reasons and keeping in view the provisions under Section 31 of the Arbitration & Conciliation Act, 1996 read with Arbitration & Conciliation (Amendment) ordinance 2015, interest is granted at 18% p.a. from date of initiation of the arbitration proceedings i.e., 09.06.2016 till full payment is nothing but mistaken or inadvertent and definitely a misreading outcome of 25 A.S.No.81/2017 Section 31 of the Arbitration and Conciliation Act, 1996. The interest should be reasonable since the agreement itself has not provided for any interest on the bank guarantee invoked interest should not have been levied. Since the liability in relation to the sum so adjudged to be paid by the Appellant has arisen out of a commercial transaction, the rate of such interest should not have exceeded the contractual rate of interest and in this case there is no contractual rate of interest, interest should not have been provided or at least should have been provided at the rate at which moneys are lent or advanced by nationalized banks in relation to commercial transactions. In fact granting of interest @ 18% goes against the provisions of Section 31 (7) (a) and (b) of the Arbitration and Conciliation Act, 1996. Here the respondent No.2 has made a perverse order which is against the gain of the Arbitration Act 1996 itself.
When time was the essence, then changes being asked to be made to the original agreement the Respondent No.1 has waived his right for the agreement to be time is of the essence. In order to ascertain whether time was intended to be of the essence or not, the term and conditions of the lease deed dated 22.06.2015 should be read. Just because the agreement says that the construction should be completed on or before 30th April 2016, cannot determine the contract, where time is the essence, merely specifying the time at which the agreement has to be 26 A.S.No.81/2017 performed does not make time the essence of the agreement. In fact that if the construction was not completed on or before 30th April 2015 the agreement would be terminated was never present in the agreement. This raises a strong evidence for the Appellant that time was not the essence. Further the Acts of the Respondent No.1 itself seeking variations in the specifications would go to show that they knew that the time schedule would be further elongated due to the new additions to the specs being made. Even in the legal notices sent by the respondent No.1 nowhere thy have indicated that time is the essence of the contract and that in case the same is not completed the Lease Agreement dated would be terminated. The very fact that Clause- 17 of the lease agreement provides that no party can claim liquidated damages for nay kinds of losses itself shows that time was never the essence of the lease agreement. When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promise, if the intention of the parties was that time should be of the essence of the contract. This is applicable when the other party does not seek any variation or changes as agreed in the previous contract entered into between the parties. In the instant case though there was a time given before which the construction was required to be completed i.e., on or before 27 A.S.No.81/2017 01.05.2016, the numerous changes that the respondent No.1 wanted itself showed that time was not the essence of the lease agreement. The respondent No.2 failed to notice this and hence the order is perverse.
That since a construction contract is difficult to understand, the respondent No.2 should have appointed a court commissioner or an independent professional to see the status of the project on the date the dispute was brought before the tribunal to see at least what stage the building was constructed instead of going ahead with photos placed before the respondent No.2 which did not even have a date stamp and the contents of which were denied by the Appellant.
That the respondent No.2 has not correctly framed an issue regarding whether the lease agreement provided for termination when the construction of the factory building was in process and whether the lease agreement has been validity terminated leading to an award which is patently against justice and equity.
That the award is illegal since it is contrary to public policy and if enforced would be contrary to the fundamental policy of Indian law.
That the appellant was unable to lead evidence on their costs invested for building the factory and the amounts advanced to their vendors due to paucity of time and the frenzied hurry of 28 A.S.No.81/2017 the respondent No.2 to finish the Arbitration which put the Appellant's staff in a pressure and therefore the Appellant court not lead evidence on his documents to prove that he had already spent Rs.1,41,50,000/- in the project and also that he had already completed the pre-fabricated construction of the factory. The award has been passed without the Appellant being able to lead proper and cogent evidence for his counter claim which he now has with him in his custody. Copy of the same has been produced as Ex.R.8 in support to the objections and counter claim. In addition the Appellant has now in his custody additional documents which will clearly prove the defense against the Respondent No.1. Therefore if the subject matter is remanded for a fresh hearing, with opportunity to lead additional evidence, witnesses, experts etc, the Appellant would be able to prove its burden of proof. If the claim petition is remanded back to the Tribunal for a fresh hearing the Appellant would be able to lead evidence and justice would be done to the Appellant which could not be done earlier. Hence the matter is eligible to be remanded back for fresh consideration, by setting aside the award.
That the appellant has got fresh evidence in his hands that he wants to lead before the tribunal which he was unable to do since the dates given by the Respondent No.2 were too short and the respondent No.2 was in no mood to grant time as shown the order sheets. Presumable he wanted to finish his duty as an 29 A.S.No.81/2017 Arbitrator and did not realize that due to the pressure there could be a chance of a party to be unable to lead cogent evidence in the short timelines given by him. The counsel for the Appellant also did not vociferously object to the pressure exerted by the respondent No.2. Therefore the appellant seeks to have the matter remanded for fresh arbitration, so that the evidence now in the hands of the appellant can be placed before the respondent No.2 so that justice can be rendered.
That the appellant wants to produce an expert who can prove to the respondent No.2 that the factory was a pre- fabricated factory and was built in another areas and was transported to the site well within the time as agreed in spite of the changes having been made to the original specifications. That since a construction contract is difficult to understand; the respondent No.2 should have appointed a court commissioner or an independent professional to see the status of the project on the date the dispute was brought before the tribunal to see at least what stage the building was constructed.
That the award is illegal since it is contrary to public policy and if enforced would be contrary to justice or morality. That justice has not been rendered to the appellant, since; the respondent No.2 has rejected the counter claims made by the appellant. The respondent No.2 has not given any reasons for illegal rejection of the counter claim made by the appellant and 30 A.S.No.81/2017 there is no specific finding as to why he has rejected the counter claims. In fact in the award the respondent No.2 states that since on merits he has found the case proved on merits on behalf of the claims as a logical corollary the counter claims are rejected.
That there is patent illegality in the award having been passed which has not taken into account violation of contractual principles and violation of contract law.
That the award is against public policy since the respondent No.2 has not acted in a fair, reasonable and objective manner in arriving at his conclusions.
That the award is against public policy since the respondent No.2 has not applied his mind and not recorded his reasons for many of his findings and conclusions.
That post the award, the same has not been duly stamped as required under Article 11 of Karnataka Stamp Act 1957.
That the award is against public policy since the respondent No.2 has given an award which is unreasonable and where the respondent No.2 has not used his judicial knowledge on giving his findings making the order perverse to the appellant. The respondent No.2 should have used his judicial discretion properly to render justice and not make it Arbitrary resulting in a perverse order. The respondent No.2 should have considered matters from 31 A.S.No.81/2017 both the sides which have not been done. He has included matters which should have actually been excluded by him in terms of documents which were not admitted by the appellant and not even proved by the respondent No.1. Therefore the respondent No.2 has acted unreasonably and no respondent No.2 with the powers it had could have given such a decision on claims of the respondent No.1 which are not backed by documents and that too on documents which were not admitted and not even proved by the respondent No.1. The finding is so unreasonable that it could be termed as done in bad faith. Therefore the decision given has fallen out of reasonableness when tested on the touch stone of Wednesbury Principle of Reasonableness.
The arbitral award is not a speaking award. Section 31(3) of the Arbitration and Conciliation Act, 1996 it is necessary that an arbitral award should be a speaking award disclosing the reasons for arriving at a decision, unless (a) the parties have agreed that no reasons are to be given or (b) the award is an arbitral award on agreed terms under Section 30 of the Act. A speaking order is an order that speaks for itself. The order should stand the test of legality, fairness and reason at all the higher appellate forums, that is, the order should contain all the details of the issue, clear findings and a reasoned order. Such an order that speaks for itself is called a speaking order. That the reasoning given in the Award is not very clear and explicit and the respondent No.2 has clearly 32 A.S.No.81/2017 jumped to his own conclusions based on presumptions drawn without giving due consideration to the points in controversy. This has led to miscarriage of justice. Even without understanding that the appellant has already invested huge amounts in giving advances to the agency "Raksha Build Tech" and custom built factory which is a pre-fabricated factory and being built at the Raksha's site and was transported in full to the site of the appellant which conveniently has been hidden by the respondent No.1 shows that the respondent No.2's decision making lacked fairness.
Supreme Court in S.N. Mukherjee vs. Union of India 1990 (4) SCC 594: AIR 1990 SC 1984 Held that "Except in cases where the requirement has been dispensed with expressly or by necessary implication, an administrative authority exercising judicial or quasi-judicial functions must record the reasons for its decision. Such a decision is subject to the appellate jurisdiction of the Supreme Court under Art. 136 as well as the supervisory jurisdiction in the High Courts under Art.227 and the reasons, if recorded, would enable the Supreme Court or the Hon'ble Courts to effectively exercise the appellate or supervisory power.
But this is not the sole consideration. The other considerations are the requirement of recording reasons would (i) guarantee consideration by the authority: (ii) introduce clarity in the decisions; and (iii) minimize chances of arbitrariness in 33 A.S.No.81/2017 decision-making. As contrasted with the ordinary courts of law and tribunals and authorities exercising judicial functions where the Judge is trained to look things objectively uninfluenced by considerations of policy or expediency, an executive officer generally looks at things from the standpoint of policy and expediency. These considerations show that the recording of reasons by an administrative authority serves a salutary purpose, namely it excludes chances of arbitrariness and ensures a degree of fairness in the process of decision-making. The said purpose would apply equally to all decision irrespective of the fact whether the decision is subject to appear, revision or judicial review.
However, it is not required that the reasons should be elaborate as in the decision of a court of law. The extent and nature of the reasons would depend on particular facts and circumstances. What is necessary is that the reasons are clear and explicit so as to indicate that the authority has given due consideration to the points in controversy. The need for recording of reasons is greater in a case where the order is passed at the original stage.
The object underlying the rules of natural justice "is to prevent miscarriage of justice" and secure "fair play in action". The requirement about recording of reasons for its decision by an administrative authority exercising quasi-judicial functions 34 A.S.No.81/2017 achieves this object by excluding chances of arbitrariness and ensuring a degree of fairness in the process of decision-making.
That the appellant was not able to provide the documents to prove his counter claim and no time was given since it was mentioned that it was fast track arbitration and therefore, the appellant lost his chance to prove his counter claim. Opportunity was not granted for leading cogent evidence on the fact that the Appellant had spent enormous money by way of advances given to vendors for the construction of the factory building which details were also placed before the respondent No.2.
That the Bank guarantee was towards the lease deposit and not for specific performance. That the Clause 4 of the Lease deed dated 22.06.2015 clearly outlines that the Bank Guarantee is against the security deposit, since the lease deed for the land and building commenced on 01.05.2016, whereas the possession of the constructed factory building was to be as on 01.05.2016. This has not been understood by the respondent No.2 and he has taken as if the same has been invoked without any grounds, thereby making a perverse order.
That the respondent No.2 has not taken into account the fact that the construction of the factory building is not a stand alone contract and the construction and its specifications were included in the lease agreement and the Respondent No.1 was 35 A.S.No.81/2017 obligated to take the lease either way. That the clause 12 of the Lease Deed does not provide for termination of the Lease for non completion of construction within time. Only two occasions the lessor can terminate the Lease i.e., 1) defective title of the Lessee to the property leased and 2) after completion of lock in period. In fact as per clause 4 of the Ex.P1, the bank guarantee has been furnished in lieu of the security deposit for the lease and this had nothing to do with the construction per se and claiming this money for non completion of the factory building is a travesty of justice. The respondent No.2 failed to notice that even without termination of the lease agreement the Arbitration suit which is based on only this document has not been terminated at all and even without termination, the respondent No.1 has made its claim.
3. Respondent No.1 has appeared before Court in response to the notice and has filed detailed written statement disputing and denying the plaint averments and has supported the Arbitration award.
4. Heard the arguments and perused the records.
5. Now the point for my consideration is :-
36 A.S.No.81/2017Whether the award passed by the second respondent is calls for interference by this Court?
6. My finding on the above point is in the 'negative' for the following:
REASONS
7. This Arbitration Suit is filed under Section 34 of Arbitration and Conciliation Act to set aside the award dated 04.05.2017 passed in AC.No.107/2016. Since the suit is filed under Section 34 of the Arbitration and Conciliation Act, for the sake of convenience Section 34 is reproduced, which reads as under:
"34. Application for setting aside arbitral award.- (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).
(2) An arbitral award may be set aside by the Court only if--37 A.S.No.81/2017
(a) the party making the application furnishes proof that--
(i) a party was under some incapacity; or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or 38 A.S.No.81/2017
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(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 [Explanation 1.- For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,--
(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or
(ii) it is in contravention with the fundamental policy of Indian law; or 39 A.S.No.81/2017
(iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute] [(2-A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciation of evidence.]"
8. On perusal of Section 34, it is very much clear to challenge Arbitration award plaintiff must bring out his case within the ambit of Section 34 of Arbitration and Conciliation Act. In that background let me consider the grounds urged by the plaintiff in his suit in challenging the Arbitration award.40 A.S.No.81/2017
9. In ground No.1 he has stated that award passed by respondent No.2 is biased, contrary to law, against the weight of evidence and probabilities of the case and prejudiced against the applicant. But this ground is not within Section 34 ambit.
10. The ground No.2 is urged in respect of violation of natural justice. But here in this case, the claimant and respondent have been examined and cross-examined and documents have been marked and at any stretch of imagination it cannot be said that principles of natural justice are violated .
11. Under ground No.3 the grounds urged at (a) to (z) are regarding appreciation of evidence. This Court is not sitting in appeal to re-appreciate the evidence of Arbitration proceedings, because in Section 34(2-A) reappreciation of evidence is not permitted. Hence those grounds cannot be considered. And in ground No.3 plaintiff has categorically contended that:
"In fact the provisions of Evidence Act also have not been followed leading to travesty of justice."41 A.S.No.81/2017
But Evidence Act is not applicable to arbitration proceedings. In this regard Section of Evidence Act is very much clear, which reads as under:
"1. Short title, extent and commencement.--This Act may be called the Indian Evidence Act, 1872.
It extends to the whole of India except the State of Jammu and Kashmir and applies to all judicial proceedings in or before any Court, including Courts-martial, [other than Courts-martial convened under the Army Act] (44 and 45 vict., c.58) [the Naval Discipline Act (29 and 30 Vict; c.109) or the Indian Navy (Discipline) Act, 1934 (34 of 1934) [or the Air Force Act (7 Geo. 5, c.51) but not to affidavits presented to any Court or Officer, nor to proceedings before an arbitrator."
So that ground also cannot be taken into consideration.
12. So far as ground No.4 is concerned, plaintiff has taken contention that:
42 A.S.No.81/2017"By adjudicating and passing an award on an improperly stamped lease agreement and unregistered lease agreement there has been patently illegal award given by respondent No.2 since it is not a registered document and neither it is properly stamped and should have been impounded as per the Stamp Act, as the lease deed was not registered..........."
Arbitration proceedings have been initiated on the order passed by the Hon'ble High Court of Karnataka in CMP No.163/2016. The contention of the plaintiff is that lease agreement is insufficiently stamped and it is not registered and he has pressed his arguments since lease deed is unregistered and insufficiently stamped, Arbitrator should not have looked into the said document. In my opinion, plaintiff should have pressed this argument in the CMP proceedings because, CMP order is judicial order and not passed on the administration side. Plaintiff should have pressed this aspect in the CMP proceedings only. That apart, plaintiff has not objected for marking of the said document as Ex.P.1 during arbitration proceedings and now only he has come up with the said ground that said document is not 43 A.S.No.81/2017 registered and insufficiently stamped, merely because award has been passed against the plaintiff herein.
13. While countering the argument of counsel for plaintiff, the learned counsel for respondent, i.e., defendant No.1 has categorically contended that said document is only agreement to lease and it is not required registration and it is not insufficiently stamped and he further contends that the property in dispute is situating in Tamil Nadu and as per Tamil Nadu Stamp Act, proper stamp duty has been paid. He relied upon Schedule I Article 5, which reads as under:
"5. Agreement or Memorandum of an Agreement--
(a) to (h) xx xx xx
(i) If relating to construction One rupee for every
of building hundred rupees or part
hereof of the cost of the
proposed construction or
the value of construction or
the consideration specified
in the agreement,
whichever is higher.
Explanation.-- For the purpose of this clause, "building:
includes any unit, residential, commercial, institutional, industrial 44 A.S.No.81/2017 or otherwise proposed to be constructed on an undivided share of land)
(j) If not otherwise provided Twenty rupees"
As per the said Article, the stamp duty paid is correct. I have gone through the document and admittedly the property in dispute is a vacant site and it was agreed to be constructed according to the needs of the claimant and after the construction lease deed is to be registered, the same is evidenced in Ex.P.1 clause 13.7 which reads as under:
"Stamp Duty & Registration Charges: The cost of the required Stamp Duty and Registration Charges that may be applicable for registering the Lease Deed shall be borne by the Lessee. The Lessor shall co-operate by providing all necessary documentation and other reasonable assistance to the Lessee to complete such registration formalities relating to the Lease Deed."
So Ex.P.1 is only an agreement to lease and not lease deed itself and only after the completion of the construction for which agreement is entered, thereafter the lease deed as required under 45 A.S.No.81/2017 law is to be registered. Hence the argument canvassed by the plaintiff holds no water and the argument canvassed by the respondent/defendant No.1 appears to be correct. Hence this ground also cannot be taken into consideration.
14. In view of answering, the ground No.5 also cannot be taken into consideration since the ground urged in ground No.5 is regarding the evidence to be adduced so far as document which should not been admitted by the appellant in the evidence.
But as I have already stated that Evidence Act is not applicable to the arbitration proceedings, same cannot be considered.
15. Ground No.6 is urged in respect of the assessment of damages. But again the said ground is in respect of appreciation of evidence. Hence the same cannot be taken into consideration.
16. So far as ground No.6 is concerned, plaintiff has urged with regard to awarding of interest and has contended that same is patently illegal and goes against the fundamental law of India especially Section 31 of Arbitration and Conciliation Act, etc. But while submitting the said ground, learned counsel for 46 A.S.No.81/2017 plaintiff has lost sight Section 31(7)(a) of Arbitration and Conciliation Act, which is extracted below:
"31. Form and contents of arbitral award.--
(1) to (6) xx xx xx (7)(a) Unless otherwise agreed by the parties, where and insofar as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made."
Section 31(7)(a) authorizes the Tribunal to impose interest.
Hence that also cannot be taken into consideration.
17. Ground No.7 is taken in respect of time is essence of contract. But again the same is with respect to reappreciation of evidence, which is not permitted under Section 34 to this Court.
18. Ground No.8 is taken by the plaintiff stating that respondent No.2 should have appointed a court commissioner or 47 A.S.No.81/2017 an independent professional to see the status of the project on the date the dispute was brought before the tribunal. But same cannot be considered because without making any effort before the tribunal, all of a sudden taking such a ground before this Court is not sustainable one. If at all plaintiff wants to establish the said fact, he should have filed necessary application before tribunal itself for appointment of Commissioner and instead of that blaming respondent No.2 for not having appointed Court Commissioner cannot be considered. Hence this ground will not come to the aid of the plaintiff.
19. Ground No.9 is urged by the plaintiff with regard to not framing of issues correctly. For this ground, I am of the opinion that plaintiff has went full fledged trial before the tribunal and after knowing issue only, plaintiff and respondent have adduced their evidence to put forth their case. When the plaintiff has adduced evidence, he must be knowing issues are not framed properly, then he should have filed necessary application before the Tribunal to correct the issues. But surprisingly though he has 48 A.S.No.81/2017 stated that issues are not framed properly, he has not shown what was the correct issue to be framed. So this also will not come to the aid of the plaintiff. Hence that cannot be considered.
20. Ground No.10 is urged that award is illegal since it is contrary to public policy and if enforced would be contrary to the fundamental policy of Indian law. But merely stating award is against public policy and fundamental policy of Indian law, cannot be considered because Act has made it clear what is fundamental policy of Indian law and public policy, Section 34 (2)(b)(ii) is extracted below:
"34. Application for setting aside arbitrl award.--
(1), (2)(a) xx xx xx
(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 49 A.S.No.81/2017 [Explanation 1.- For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,--
(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or
(ii) it is in contravention with the fundamental policy of Indian law; or
(iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute]"
Here only to bring the said ground within the ambit of Section 34, plaintiff has used the words it is contrary to public policy and fundamental policy of Indian law. But under Section 34, that an award is in conflict with the public policy only if, the award is induced or affected by fraud or corruption or in violation of Section 75 or Section 81. Section 75 is with regard to confidentiality and there is no any material on record to disclose there is breach of confidentiality and Section 81 is admissibility of evidence in other proceeding, that is also not forthcoming from the grounds and there is no allegation of obtaining the award by 50 A.S.No.81/2017 inducement or affected by fraud or corruption. Hence that also cannot be taken into consideration.
21. Ground No.11 is with regard to appellant was unable to lead evidence on their costs invested for building the factory and the amounts advanced to their vendors..... etc. But on perusal of the record it is clear that plaintiff has adduced evidence. If at all it was not inconformity, definitely he should have filed application before tribunal itself to lead evidence.
Instead of that, after completing of the proceedings and after passing of the award only for the sake of argument or urging grounds that he was not able to lead evidence, also cannot be taken into consideration. Hence that ground also will not come to the aid of the plaintiff.
22. Ground No. 12 is also in the same line that appellant got fresh evidence and he could not lead the same before the tribunal since there was short of time. But without making effort before tribunal by filing necessary application, he should not contend the said ground.
51 A.S.No.81/201723. So far as ground No.13 is concerned, plaintiff wanted to produce expert evidence. But without filing necessary application before tribunal and even before this Court, the said ground cannot be taken into consideration and hence same will not come to the aid of the plaintiff.
24. Ground No.14 is also made on the ground of public policy. But as already discussed, there is no material that award is against to public policy and only for the sake of argument and to bring the suit within the ambit of Section 34, the words 'opposed to public policy and contrary to justice and morality' are used without there being any material on record. Because there is no even an allegation that award is obtained by inducement or by fraud or corruption or in violation of Section 75 and 81, etc. Hence that is also cannot be considered.
25. The ground Nos.15, 16, 17 and 19 are also urged in the same line of opposed to public policy for which already answer is given.
52 A.S.No.81/201726. So far as ground No.18 is concerned, this Court has already answered that same is duly stamped by considering Tamil Nadu Stamp Act since the property is situating in Tamil Nadu.
27. Ground No.20 is concerned, he has stated that it is not speaking order. But he has failed to consider the award is running consisting of voluminous discussion and point for consideration and all these things and when the Arbitrator has passed reasonable and speaking order, that cannot be taken into consideration.
28. Other grounds are urged by making allegation against Arbitrator that he has no sufficient time to adduce evidence. But the same cannot be taken into consideration, since all the other grounds are not within the ambit of Section 34 of Arbitration and Conciliation Act.
29. By looking into all these grounds, I am of the clear opinion that present suit is fails, since same is not within the purview of grounds as mentioned under Section 34 of Arbitration and Conciliation Act.
53 A.S.No.81/201730. The decision relied upon by the plaintiff in SMS Tea Estates Pvt. Ltd. vs. Candmari Tea Company Pvt. Ltd. in Civil Appeal No.5820/2011 is not applicable to the facts on hand, since Ex.P.1 is only agreement of lease and not lease deed itself.
In the same line another decision rendered by the Hon'ble Supreme Court in Naina Thakkar vs. Annapurna Builders in SLP (C) No.31311 of 2011 is not applicable, since Ex.P.1 is document only for agreement to lease after full construction.
Another decision rendered by the Hon'ble High Court of Karnataka in MFA.No.22578/2012 M/s. AMR Sangam Sugar Ventures Ltd. vs. Shr Sangam Sahaari Sakkare Karkhane Niyamit and others the same is also in the same line regarding unregistered and insufficiently stamped document. This Court has already given finding that Ex.P.1 agreement is only lease agreement and not lease deed itself and same is sufficiently stamped as per the Tamil Nadu Stamp Act since property is in Tamil Nadu.
54 A.S.No.81/2017Another decision rendered by the Hon'ble High Court in Writ Petition No.26932/2009 Smt. R. Sudharani vs. Smt. C.Krishnamma and another is also in the same line regarding stamp duty and the same will not come to the aid of the plaintiff.
Another decision rendered by the Hon'ble Supreme Court in Civil Appeal No.1539/2019 Jaiprakash Associates Ltd. vs. Tehri Hydro Development Corporation India Ltd. is not applicable to the facts on hand since Section 31(7)(a) is applicable to the case on hand.
Another decision in Konkan Railway Corporation Limited vs Oriental Construction Companu Limited rendered by Hon'ble Bombay High Court is also not applicable to the case on hand.
Another decision rendered by the Hon'ble Bombay High Court in Kadir Yakoob Patrawala ad others vs. Mehfuza and others is with regard to marking of the document. In this case Ex.P.1 original was produced before the Hon'ble High Court of Karnataka in CMP proceedings and both parties have admitted 55 A.S.No.81/2017 lease agreement and same is marked as per Ex.P.1. If the same is insufficiently stamped and unregistered, then certainly they should have brought to the notice of Hon'ble High Court during CMP proceedings itself, since CMP proceedings is judicial proceedings and not administrative proceedings. Now they cannot contend same is unregistered. Moreover this Court has considered that it is only an agreement to lease, after construction in the property registered lease deed has to be entered as per the terms and conditions of the said agreement.
Hence present decision is also not applicable to the facts on hand.
Another decision relied upon by the plaintiff in Arbitration Petition No.65/2008 rendered by the Hon'ble Bombay High Court is in respect of the application of the Evidence Act and also principles of natural justice. Of course I have considered this aspect that Section 1 of the Evidence Act is very much clear that Evidence Act is not applicable to the arbitration proceedings. But in this case question of violation of principles of natural justice is not arising because both parties have led their evidence and 56 A.S.No.81/2017 marked their documents and both of them have represented by the advocates. Now it cannot be contended that there is violation of principles of natural justice. Hence same is not applicable to the case on hand.
Another two decisions are also relied upon by the plaintiff in the same line of the above said decisions. They are not applicable to the case on hand.
The important decision relied upon by the plaintiff is recent decision rendered by Hon'ble Supreme Court of India in Civil Appeal No.3631/2019 in Garware Wall Ropes Ltd. vs. Coastal Marine Constructions & Engineering Ltd. It is in respect of agreement clause contained in an unregistered and insufficiently stamped document. Of course Hon'ble Supreme Court while clarifying earlier decision has rendered the said decision. But the said decision is not applicable to the case on hand since Ex.P.1 document as I have already stated that said document is only agreement of lease and deed of lease is to be 57 A.S.No.81/2017 registered after construction of the building. Hence the present decision is not applicable to the facts on hand.
31. Counsel for defendant has relied upon some of the decisions.
The decision relied upon by the defendant reported in 1993 Supp (1) Supreme Court Cases 295 ( Tamboli Ramanlal Motilal (Dead) by LRs. vs. Ghanchi Chimanlal Keshavlal (Dead) by LRs. and another). This is under Section 58 of T.P. Act. In that it is held that "one should be guided by the terms of the deed alone - Nomenclature of the document not decisive - Real intention of the parties to be gathered - On facts ...... ....." In this case also the document which is produced at Ex.P.1 is only an agreement to lease after the construction in the vacant site. Hence intention of the parties is very much clear after construction of the structure in the vacant property, registered lease deed is to be executed as per clause 13.7 of the agreement. Hence this is applicable to the case on hand.
58 A.S.No.81/2017Another decision reported in (2016) 10 Supreme Court Cases 813 Sasan Power Limited vs. North American Coal Corporation (India) Private Limited is also in the same line regarding nomenclature of the document. Hence it is applicable to the facts on hand.
Another decision reported in (2017) 11 Supreme Court Cases 832 (Bibi Fatima and others vs. M.Ahamed Hussan and others) is also in the same line of the above said decisions.
Another decision reported in (2015) 3 Supreme Court Cases 49 in Associate Builders vs. Delhi Development Authority wherein it is discussed about Fundamental Policy of Indian Law, all these things. It is also applicable to the facts on hand.
Another decision reported in (2015) 2 Supreme Court Cases 189 Hyder Consulting (UK) Limited vs. Governor, State of Orissa) it is in respect of Section 31(7)(a) and (b) of Arbitration and Conciliation Act. It is also applicable to the facts on hand.
59 A.S.No.81/201732. For the foregoing discussions and reasons, I proceed to pass the following:
ORDER The arbitration suit is dismissed.
No order as to costs.
(Dictated to the Stenographer, transcript thereof corrected, signed and then pronounced by me, in open Court, on this the 29th day of February, 2020.) (SATHISHA L.P.) XII ADDL.CITY CIVIL & SESSIONS JUDGE BENGALURU CITY