Karnataka High Court
Mr Jugraj Sethia vs Mr Yakub S Erinpurwala on 20 May, 2025
1
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 20th DAY OF MAY, 2025
PRESENT
THE HON'BLE MR JUSTICE V KAMESWAR RAO
AND
THE HON'BLE MR JUSTICE T.M.NADAF
COMMERCIAL APPEAL NO.77 OF 2022
BETWEEN:
1. MR. JUGRAJ SETHIA
AGED ABOUT 67 YEARS
S/O MR. DANCHAND SETHIA
2. MRS. VIJAYA DEVI SETHIA
AGED ABOUT 62 YEARS
W/O MR JUGRAJ SETHIA
BOTH RESIDING AT #D1503,
VAISHNAVI TERRACE,
DOLLARS COLONY
4TH PHASE, 4TH CROSS
J P NAGAR
BENGALURU - 560 078.
...APPELLANTS
(BY SMT. NIDHISHREE B V, ADVOCATE)
AND
1 . MR. YAKUB S ERINPURWALA
AGED ABOUT 72 YEARS
S/O MR. SAJAUDDIN
#402, PEACE HEAVEN APARTMENTS
51/52, LANGFORD ROAD,
BENGALURU - 560 025.
2 . MR. ROSHAN S ERINPURWALA
AGED ABOUT 70 YEARS
S/O MR SAJAUDDIN
2
#E-304, ADARSH GARDEN
47TH CROSS, 8TH BLOCK, JAYANAGAR
BENGALURU - 560 082.
3. MR. YUSUF S ERINPURWALA
AGED ABOUT 67 YEARS
S/O MR SAJAUDDIN
NO.2563 22ND MAIN, 28TH CROSS
BANASHANKARI II STAGE
BENGALURU - 560 070.
4. MRS. HUSENA M ERINPURWALA
AGED ABOUT 69 YEARS
W/O MR. MOHAMMED
NO.2563, 22ND MAIN, 28TH CROSS
BANASHANKARI II STAGE
BENGALURU - 560 070.
5. MR. MURTUZA M ERINPURWALA
AGED ABOUT 43 YEARS
S/O MR. ROSHAN
#E-304, ADARSH GARDEN
47TH CROSS, 8TH BLOCK
JAYANAGAR
BENGALURU - 560 082.
6. MR. DANCHAND SETHIA
AGED ABOUT 90 YEARS
S/O ALTE MR JAICHAND LAL JI SETHIA
NO.8/2 TULSI GARDEN
F4 LAXMI ROAD
SHANTHINAGAR
BENGALURU - 560 027.
7. MR. DHARMENDRA BACHAWAT
AGED ABOUT 56 YEARS
S/O MR. BHANWAR LAL BACHAWAT
#7A, NANJAPPA MANOR
FLAT #201, NANJAPPA ROAD
SHANTINAGAR
BENGALURU - 560 027.
8. MR. HEMRAJ SETHIA
AGED ABOUT 57 YEARS
S/O MR. DANCHAND SETHIA
ELEGANT VALLEY
3
B - BLOCK, TF-301
HV HALLI, GUTTIGERE EXTENSION
RAJARAJESHWARINAGAR
BENGALURU - 560 098.
9. MRS. SAROJ SETHIA
AGED ABOUT 52 YEARS
W/O MR. HEMRAJ SETHIA
ELEGANT VALLEY, B-BLOCK
TF-301, HV HALLI
GUTTIGERE EXTENSION
RAJARAJESHWARINAGAR
BENGALURU - 560 098.
...RESPONDENTS
(RESPONDENT NOS.1 TO 9 ARE SERVED AND UNREPRESENTED)
THIS APPEAL IS FILED UNDER SECTION 13(1A) OF COMMERCIAL
COURTS ACT, 2015 AND R/W SECTION 37(1)(c) OF THE ARBITRATION
AND CONCILIATION ACT, 1996 PRAYING TO SET ASIDE THE ORDER
DATED 30/11/2021 PASSED BY THE COURT OF THE LXXXVIII ADDL. CITY
CIVIL AND SESSIONS JUDGE (EXCLUSIVE COMMERCIAL COURT) (CCH-
89) IN COMMERCIAL ARBITRATION SUIT NO.193/2019 FILED BY THE
APPELLANTS UNDER SECTION 34 OF THE ARBITRATION AND
CONCILIATION ACT, 1996 AND FURTHER BE PLEASED TO ALLOW THE
SAID COMMERCIAL ARBITRATION SUIT, IN ITS ENTIRETY IN THE
INTERESTS OF JUSTICE.
THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR JUDGMENT
ON 22.04.2025 AND COMING ON FOR 'PRONOUNCEMENT OF JUDGMENT'
THIS DAY, T.M. NADAF J., PRONOUNCED THE FOLLOWING:
CORAM: HON'BLE MR. JUSTICE V KAMESWAR RAO
AND
HON'BLE MR. JUSTICE T.M.NADAF
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CAV JUDGMENT
( PER: THE HON'BLE MR JUSTICE T.M.NADAF ) Unsuccessful petitioners, in petition filed under Section-34 of Arbitration and Conciliation Act 1996 ('Act 1996' for short), are before this Court calling in question the judgment and order dated 30.11.2021, passed by the Court of LXXXVIII Additional City Civil and Session Judge (Exclusive Commercial Court) (CCH-89), Bengaluru City COM.AS.No.193/2019, dismissing the petition filed, by them, seeking to set-aside the Arbitral Award dated 11.01.2018, in A.C.No.91/2017.
2. Facts of the case are as follows:
The undisputed facts are that an agreement dated 02.11.1998 was entered into between the appellants and respondent Nos.6 to 9 herein on one part, and respondent Nos.1 to 5 on the other part, in respect of the immovable property stated in Schedule-A and Schedule-B to the agreement. Whereupon the parties viz., the appellants and respondent Nos.6 to 9 being the co-owners of the property at Schedule-A agreed to sell 1.9859% of their undivided share, right, title and interest in favour of respondent Nos.1 to 5, for the purpose of construction of commercial office / shop bearing No.212 on the 2nd Floor measuring a built-up area of 411 sq.ft. As 5 per the agreement, the amount agreed for the property being Rs.1,67,000/- (Rupees One Lakh Sixty Seven Thousand Only), Rs.1,40,000/- (Rupees One Lakh Forty Thousand Only) was required to be paid on or before signing of the agreement and the balance Rs.27,000/- (Rupees Twenty Seven Thousand Only) on or before the time of registration. It is further admitted fact that a sum of Rs.1,00,000/- (Rupees One Lakh Only) has been paid by way of two cheques being No.601651 drawn on Bank of Maharashtra, dated 09.07.1997, for a sum of Rs.70,000/- and another being No.350977, drawn on Syndicate Bank, dated 10.07.1997, for a sum of Rs.30,000/-.
3. The disputed facts are that as per the appellants, respondent Nos.1 to 5 have failed to pay the amount as per the agreement, despite repeated reminders by the appellants and respondent Nos.6 to 9. As such, they have waived their rights under the agreement. However, as per respondent Nos.1 to 5 the appellants have not come forward to execute the sale deed despite several reminders, to receive the balance of consideration amount and to execute the registered sale deed.
4. It is the case of the respondent Nos.1 to 5, that the appellants qua respondent Nos. 6 to 9, subsequent to the 6 agreement dated 02.11.1998 and payment of earnest amount of Rs.1,00,000/- (Rupees One Lakh Only) supra, in spite of several reminders, have not come forward to receive the balance of sale consideration amount and execute the sale deed, in terms of the agreement supra. The respondents No.1 to 5 issued a notice in 2015, calling upon appellants qua Respondent Nos. 6 to 9 to perform their part of performance by accepting the balance sale consideration and execute the sale deed or else to consent for referring the dispute to an Arbitrator as per the arbitration clause contained in the agreement supra for resolution. As there was no response from the appellant qua respondent Nos.6 to 9, they filed a petition in CMP No.78/2015, before this Court seeking to appoint an Arbitrator to resolve the dispute between the parties. Appellants who were served in the petition appeared through their counsel and filed their statement of objections. However, respondent Nos.6 to 9 though served were unrepresented. They further stated that, this Court upon considering the contest between the parties on several aspects, disposed off the petition on 02.06.2017 as per paragraph No.15, which reads as under:
"15. Accordingly, Sri.A.C.Vidyadhara, Retried District Judge, is appointed to act as the Sole Arbitrator to resolve the dispute between the parties.7
The Arbitration shall be held in terms of the Act and the Rules governing the Bangalore Arbitration Centre.
Registry to dispatch a copy of this order to the Arbitration Centre, Bangalore.
The parties represented by their respective learned counsel to also approach the Arbitration Centre and file the necessary papers.
There upon, the learned Arbitrator shall enter upon reference and proceed with the matter in accordance with law.
Registry to return the papers if any, sought for by the learned counsel for the petitioner.
Petition is accordingly disposed of."
5. As could be evident from the record, the appellants raised several contentions before this Court in CMP No.78/2015, such as, insufficiency of stamp, absence of clause for seeking specific performance before the Arbitrator and also the relief under the agreement was barred by limitation, as the respondent Nos.1 to 5 approached this Court seeking appointment of an Arbitrator after lapse of a period of 17 years, for specific performance. This Court answered the contentions raised by the appellants in paragraph Nos.5 to 14 of its order, in CMP No.78/2015, in the following manner:
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"5. In the light of the contentions put forth, I have heard the learned Senior Counsel representing the petitioners and the learned counsel for the respondents. With regard to the issue relating to the document if being insufficiently stamped the same arising for consideration in relation to the arbitration clause only on the appropriate stamp duty being paid, the learned counsel for the respondents has relied on the decision in the case of SMS Tea Estates Private Limited Vs. Chandmari Tea Company Private Limited reported in (2011) 14 SCC 66. Having noticed the said decision insofar as the issue enunciated therein there could be no dispute. In that light what is necessary to be taken note at the outset, is as to whether the document in issue is liable to be impounded as being insufficiently stamped and any direction is necessary to be issued to pay the deficit stamp duty.
6. The document in question is an Agreement to sell the immovable property which is referred to in the schedule to the document. The agreement has been drawn on a stamp paper of Rs.200/-.
7. The learned counsel for the respondent has relied on Article 5(e)(ii) of the schedule to the Karnataka Stamp Act to contend with regard to the provision therein in respect of the document even if the possession is not granted. From the same, it is seen as per sub-clause (e)(ii), if the value exceeds Rs.50,000/- the stamp duty provided is Rs.200/-. In the instant case admittedly, the possession have not been transferred. The value of the property evidently is more than Rs.50,000/-. In that view the stamp duty paid is as per the 9 requirement and in that view I do not see a need to impound the said document.
8. That being the position the said document can be looked into in the instant proceedings in relation to the arbitration clause. Clause 4 to the said agreement reads as hereunder:
"4. In the event of any dispute or difference arising between the parties hereto in regard to any matter releterd (Sic.) to or connected to the Agreement, the same shall be referred to arbitration in accordance with the Indian Arbitration Act, 1940."
9. A perusal of the same would indicate that in the event of there being any dispute or differences arising between the parties, the same is to be referred to Arbitration. In the instant case the fact that certain disputes have arisen between the parties is evident from the very nature of the contentions urged in the petition and the contentions that are raised in the objection statement. Therefore, such disputes in any event would have to be resolved through arbitration as provided therein.
10. The learned counsel for the respondent would however refer to Clause 5 of the agreement which reads as hereunder:
"5. Without prejudice to any of the provisions mentioned above, the CO - OWNERS and the PURCHASER have a right to enforce specific performance of the Contract against each other."10
11. In that view it is contended that if the petitioner is to seek for specific performance, the proceedings before the Arbitrator would not be maintainable as a suit for specific performance alone could be entertained. To buttress her contention the learned counsel for the respondents has relied on the decision in the case of Dilip Bafna vs. K.S. Vasudeva reported in 2007(6) Kar.L.J. 554 and is contended that a similar issue has been considered in the said case and this Court has held that in such circumstance a Civil suit is to be filed.
12. Having perused the said decision, it is seen that this Court in the said proceedings was considering the case as had arisen for consideration in the background of the agreement that had been entered into between the parties therein. From the clause as contained therein the parties themselves had agreed that in respect of all other disputes between the parties relating to the agreement the matter would be arbitrable, while insofar as the specific performance any Court at Bangalore would have jurisdiction. It is in that circumstance this Court was of the view that insofar as the specific performance the Civil suit was required to be filed as the parties to that agreement had agreed so.
13. However, in the instant case if Clauses 4 and 5 contained herein are taken into consideration, such a conclusion cannot be reached since all that Clause 5 provides is that the parties could also enforce the agreement for specific performance and a different forum for that purpose by excluding it from Arbitration as agreed in clause 4 has not been agreed. Hence in respect of all aspects since the dispute 11 has arisen between the parties, the same will have to be considered by the learned Arbitrator.
14. Insofar as the contentions put forth by the learned counsel for the respondents that the relief as prayed pursuant to the agreement of sale would be barred by limitation, that aspect of the matter need not be gone into in the instant petition since that is also an aspect which is required to be considered by the learned Arbitrator to come to a conclusion as to whether the relief as prayed is time barred. In view of taking note of the sequences of the proceedings and the agitation of the disputes insofar as the aspect relating to a petition under Section 11 of the Act, it cannot be said that the petitioner has lodged a stale claim before this Court. The issue of limitation in that event is required to be considered by the learned Arbitrator. Thus having considered all aspects of the matter, I am of the opinion that the learned Arbitrator is required to be appointed.
6. It was the case of the appellants before the Trial Court, in Petition under Section 34 of Act 1996, that they were not served with the Notice of the arbitration proceedings before the Arbitrator, as the address given by the respondent Nos.1 to 5 was incorrect and the respondents suppressing the proper address of the appellants which they have furnished in the affidavit filed in support of the statement of objections, before this Court, in CMP supra. Even as per the Arbitral Award at paragraph No.4, the Notice sent to the address of the appellants and others returned with postal shara 12 'left' and the Notice sent again regarding the first day of hearing as 13.11.2017, was also returned with postal shara as 'left' in respect of appellants and respondent No.6 and in so far as respondent Nos.7 to 9 are concerned, the notice returned with postal shara as 'no such person in this address'. On 13.11.2017 paper publication was taken in Kannada Prabha, Kannada Daily despite the knowledge that, the appellants qua respondent Nos.6 to 9 were not familiar with Kannada language, in such circumstances the notice through paper publication is not a due Notice in terms of law. They further contended that, the Arbitrator in a haste, decided the matter without answering the point of limitation which this Court had kept open for the Arbitrator to consider the same.
7. They further contended that, a perusal of the award clearly shows that there was no point for consideration on the point of limitation. There are no reasons forthcoming from the Arbitral Award, which shows that there is no application of mind and the Arbitrator has accepted the case put forth by respondent Nos.1 to 5 as gospel truth. The case sought to be adjudicated before the Arbitrator is in respect of specific performance, wherein strict compliance of Section-16(c) of Specific Relief Act, 1963, is required to be observed. Absolutely, there is no reason forthcoming in the 13 award and the entire episode has been decided within a span of 40 days from the date of publication of notice i.e., 06.12.2017.
8. They also contended that, they received a phone call from a Peon of the Execution Court, stating that an execution petition being No.3260/2018, has been filed against them and the date is fixed on 12.10.2018 for appearance. The appellants appeared on the said date and at that point of time noticed that there was an ex-parte arbitral award passed against them, which is put in execution. Immediately, thereafter they approached the arbitration center and filed an application seeking the Arbitral Award and all papers on record before the Arbitral Tribunal. They were issued the Arbitral Award along with documents sought in the application, only on 29.10.2018. Thereafter they have handed over the papers to their learned counsel and filed petition under Section- 34 of Act 1996, calling in question the Award passed in A.C.No.91/2017, in COM AS No.193/2019, before the Trial Court within 120 days explaining the delay caused for not filing the petition within 90 days from the date of delivery of the Arbitral Award.
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9. Upon service of notice respondent Nos.1 to 5 appeared and filed their objections. Respondent Nos.6 to 9 though served remained absent and were placed ex-parte.
10. Respondent Nos.1 to 5 in their statement of objections stated that the petition filed by the appellants is devoid of merits and there is a considerable delay from the date of award and the filing of the petition, and even there is a delay of more than 90 days from the date of delivery of the Award as contemplated under Section-34(3) of the Act 1996 and there is no satisfactory explanation offered by the appellants for belated filing of the petition. They further stated that, the appellants, have contested the matter before this Court in CMP No.78/2015 and aware of the proceedings, as the Arbitrator appointed, in CMP supra and having not contested the proceedings, now they cannot urge the grounds of non-service of Notice, accordingly they sought dismissal of the petition.
11. The appellants reiterated the grounds raised in the petition before the Trial Court and sought to allow the petition on the ground that there is violation of Section-34(2)(ii) and (iii) of Act 1996. That apart, the award passed by the Arbitrator is opposed to public policy and in the absence of proper notice of the arbitration 15 proceedings and opportunity of hearing, the award passed is void and liable to be set-aside, as the same is opposed to the principles of natural justice.
12. The respondent Nos.1 to 5 argued in support of the award and sought to dismiss the petition on the ground that the appellants are not diligent in prosecuting the proceedings though they have contested the proceedings before this Court in CMP No.78/2015 and being aware of the arbitral proceedings.
13. The Trial Court upon considering the contentions of the parties, framed the following points for consideration and answered the same against the appellants, which reads as under:
"10. The points that arise for consideration of this court are as under:
1) Whether the plaintiffs were made out sufficient cause to condone the delay in filing the instant petition?
2) Whether the plaintiffs were made out any of the grounds which enumerated under Sec. 34 of the Arbitration and Conciliation Act to set aside the award which passed by the sole arbitrator?
3) What order?
11. My answer to the above points are as under:
Point No. 1: In the Negative;
Point No. 2: In the Negative;16
Point No. 3: As per final order, on the following;"
14. The Trial Court was of the view that the appellants have not explained the delay with a reasonable cause in approaching the Court under Section-34 of Act 1996, beyond 90 days as contemplated under Section - 34(3) of Act 1996. Secondly, the Trial Court was of the view that as per the order passed by this Court in CMP No.78/2015, there was an observation that the parties were represented by their respective learned counsel who also approach the arbitration center and filed the necessary papers. The Trial Court was of the view that the appellants are bound to adhere to the directions issued by this Court, in the CMP supra, as they have failed to comply with the directions of this Court to approach the arbitration center voluntarily, now they cannot raise their voice that no Notice of arbitration proceedings was served on them. Further that, there is due notice of the proceedings served through the paper publication. The Trial Court also held that the Arbitrator has considered the point of limitation. On these grounds, the Trial Court dismissed the petition on delay, as well as on merits.
15. It is this order which is called in question before this Court by the appellants.
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16. Heard Ms.Nidhishree B.V., learned counsel appearing for the appellants. Respondent Nos.1 to 9 though served remained unrepresented.
17. Upon hearing the learned counsel for the appellants, the points that arise for our consideration are as follows:
i) Whether there is proper service of notice on the appellants regarding the arbitration proceedings by the Arbitrator?
ii) Whether the Arbitrator was right in examining tenability of the claim in the presence of the order in CMP No.78/2015, passed by the learned Single Judge of this Court dated 02.06.2017, while referring the matter to the Arbitrator for disposal?
18. Our answer to the above two questions are in Negative and in favour of the appellants for the following : REASONS :
Ms. Nidhishree with all vehemence submitted that, the Notice of the year 2015, as alleged by the respondent Nos.1 to 5 issued to the appellants prior to institution of CMP No.78/2015 (CMP for Short), before this Court, which was returned with a postal shara, as 'addressee left, returned to sender'. The address shown in the CMP petition was also incorrect. The appellants received the 18 information of CMP supra, when they received a phone call by the local postman regarding the Notice sent to them on the wrong address. Thereafter, they received the notice and appeared before this Court in the above CMP and filed the statement of objections and also disclosed their present address in the affidavit filed in support of the statement of objections. She further stated that, despite the knowledge of the present address; the respondent Nos.1 to 5 filed claim petition before the arbitrator showing the wrong address of the appellants qua respondents Nos.6 to 9. The Notice sent to the addresses on two occasions was returned with postal shara as 'left' which is clear from paragraph No.4 of the arbitral award.
19. To buttress her arguments, Ms. Nidhishree, relied upon the judgment of Hon'ble Apex Court in the case of Sachin Gupta And Another vs. K.S. Forge Metal Private Limited1 and stressed upon paragraph Nos.2 and 3, which we reproduce as under:
"2. We are satisfied that the High Court could have set aside the Award only on the ground that the Award has been rendered against the Respondent without issuance of any notice and without hearing the Respondent. On this ground alone, the Award was liable to be set aside u/s 34(2)(a)(iii) of the Arbitration and Conciliation Act, 1996. There was no 1 (2013) 10 SCC 540 19 necessity for the learned Single Judge to convert itself into a Court of First Appeal. It was certainly not necessary to examine the dispute between the parties so minutely or to make such strong remarks against any of the parties. Judges at all levels are required to be restrained and circumspect in use of the language, even when criticizing the conduct of a party. However, we agree with the conclusion of the High Court that the Award had to be set aside as no notice had been served on the Respondent. But, having set aside the Award, it would have been appropriate if the matter had been referred back to the Arbitrator. In the event, any of the parties were not satisfied, an independent arbitrator agreeable to both the parties could have been appointed.
3. In view of the above, we deem it appropriate to set aside the order passed by the High Court. As noticed above, instead of leaving the parties to seek their remedy in accordance with law, the matter ought to have been referred to a specific arbitrator. The learned counsel for the parties are agreed that we appoint Mr.Justice A.P. Shah, former Chief Justice of the Delhi High Court, residing at F-6A, Hauz Khas Enclave, New Delhi-110 016, as the Arbitrator. We order accordingly. The learned Arbitrator shall be at liberty to determine his remuneration/fees in consultation with the parties."
20. She also referred to the judgment of High Court of Delhi, in the case of Daisy Trading Corporation vs. Union of India2, to contend that, not providing of proper opportunity at the hearing, 2 2001 (60) DRJ 846 20 amounts to violation of Principles of natural Justice, which vitiates the entire proceedings and the Award becomes void.
21. For easy reference paragraph No.4 of the arbitral award in A.C. No.91/2017, is reproduced reads as under:
"4. In pursuance of the order of the Hon'ble High Court of Karnataka in CMP No. 78/2015 this Tribunal is constituted. After the claim statement is filed before the Arbitration and Conciliation Centre notice was sent to the respondents through registered post acknowledgment due by the centre to submit their written response. The same was returned with postal shara respondent Nos. 1 to 3 "left, returned to sender", notice sent to respondent No. 4 returned with postal shara as "in this route no such door number". The notice send to respondent Nos. 5 and 6 also returned with postal shara as "no such person in the address and returned to sender".
Thereafter on 26.10.2017 the notice through R.P.A.D intimating the respondents about the first day of hearing as 13.11.2017 was sent to the respondents 1 to 6 by the centre. The notice sent to respondents 1 to 3 returned with postal shara as "left". In respect of respondent Nos. 4, 5 and 6 the notice returned with postal shara as "no such person in this address". Thereafter on 13.11.2017, before this tribunal the learned counsel for claimants prays for taking out paper publication to the respondents. The claimants were permitted to take out paper publication. The claimants took out paper publication in Kannada Daily News Paper "Kannada Prabha"
taking out notice to respondents 1 to 6 to appear in person or through pleader at 2.00 p.m. on 06.12.2017. In spite of taking out paper publication respondents remained absent 21 and nobody represented them. Therefore, the service through paper publication to all the respondents held sufficient and the respondents were placed ex-parte. The claimants deposited the respondents' share of arbitration proceedings fee and then the matter was posted for claimants' evidence."
22. It is evident from the record that the respondent Nos.1 to 5 were aware of the present address, in CMP supra, however, for the best reasons known to them they have instituted the claim petition by furnishing wrong address of the appellants and respondent Nos.6 to 9. It is also evident from the records that the paper publication is taken in Kannada Prabha, which is a Kannada Daily. It is the case of the appellants that they are not familiar with the Kannada language, if that be so, obviously, they have not noticed the Notice issued in the said paper.
23. From the judgments supra, it is quite clear that a reasonable opportunity of hearing is to be rendered as the same is the demand of principles of natural justice. Even Section-34(2) especially, (a)(iii) of Act 1996, which states as under:
"Section 34(2): An arbitral Award may be set aside by the Court only if:
(a) a party making the application furnish proof that:
(i) -xxx--xxx---
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(ii) -xxx--xxx---
(iii) 'A party making an application was not given
proper notice of appointment of arbitrator or of the arbitral proceedings or was unable to present his case.'
24. It is evident from the record that the appellants have furnished their present address in the affidavit filed in support of their statement of objections to the CMP supra, manifests that, the Respondent Nos. 1 to 5 were aware of the new address of the appellants than the one they have shown in the claim petition.
25. Be it noted that an Arbitrator has been appointed in the order passed by this Court in CMP No.78/2015, however, there was no notice of the arbitral proceedings as contemplated in the provisions stated supra. Though the Trial Court was of the view that the appellants ought to have approached the arbitration center in terms of the observations by this Court in CMP supra, however, there is nothing to suggest that this Court has mentioned any specific date for the parties to appear before the Arbitrator after appointment of the Arbitrator. What is evident from the order at paragraph No.15 is -'the arbitration shall be held in terms of the Act and the Rules governing the Bangalore Arbitration Center'.(emphases supplied). This observation clarifies that the 23 arbitration proceedings shall be conducted in strict adherence to the Act and Rules.
26. The Notice of arbitration proceedings having not been served on the appellants, there is a clear violation of principles of natural justice and the same is hit by Section-34(2)(iii) of Act 1996. The Trial Court failed to consider the same and was taken away by the Rules prescribed under the Arbitration Rules, which it has extracted at paragraph Nos.12 and 13.
27. In the case on hand, though the Notice was issued twice, i.e., once by the Arbitration Center and again by the Arbitrator intimating the date of hearing, both were returned with a postal shara as 'left'. In these circumstances, the Rules referred by the Trial Court especially Rule-24 of Arbitration Centre - Karnataka (Domestic and International) Rules, is not applicable to the case on hand. The Notice issued through Paper publication was in Kannada daily, which the appellants are not familiar with, as contended. The Trial Court fell in error to hold that there is proper service of Notice and further that the appellants ought to have approached the Arbitration Centre in terms of the order of this Court in CMP supra. In these circumstances, we without any hesitation come to a conclusion that there is no notice as contemplated under law, 24 served on the appellants in respect of the arbitration proceedings, as such, the award is hit by Section-34(2)(iii) of the Act 1996, accordingly, the Point No.1 is answered in negative and favored the appellants.
28. So far as the second point for consideration is concerned, though the opposite party is placed ex-parte, the Arbitrator is duty bound to examine the tenability of the claim under different heads and decide the same by assigning proper reasons how so ever brief they are, any omission on the part of the Arbitrator to adhere to this principle would vitiate the award.
29. The Hon'ble Apex Court in the case of State Of Uttar Pradesh and Others vs. Combined Chemicals Private Limited3, at paragraph Nos.30 and 31 held as under:
"30. However, we find merit in the submission of learned Senior Counsel appearing for the appellants that the award of the Arbitrator was vitiated by an error apparent and reasons assigned by the Trial Court and the High Court for refusing to annul the same are legally unsustainable. A reading of the award shows that after adverting to the claim made by the respondent and the proceedings held by him on various dates, the Arbitrator referred to the affidavit of Shri A.K.Saigal, Managing Director of the respondent and passed the award without assigning any reason whatsoever and 3 2009 (2) SCC 151 25 without even recording a finding that the respondent had suffered loss/damages on account of the failure of Appellant No.3 to place supply order in furtherance of the acceptance letter dated 16.11.1985. The casual manner in which the Arbitrator decided the dispute is evident from paragraph 10 of the Award, which is extracted below:
"10. I have heard the learned counsel for the claimant and the representatives of the Opposite Party no.3 at length and carefully perused the records and I am of the certain opinion that the claimant is entitled to receive Rs.23,56,500/- from the Opposite Parties No.1 and 2 which said amount also comprises of Rs.12,300/- as cost of these proceedings details whereof are given hereunder:-
AWARD The claim of the claimant is allowed to the extent of Rs.23,44,200/- with interest thereon at the rate of 6% per annum with effect from the date of this award till the date of payment or the decree which is earlier.
The claimant is also awarded Rs.12,300/- being the cost of this arbitration as per details given below:-
(a) Cost of non-judicial stamp for award Rs. 6,500/-
(b) Arbitration fee paid by the claimant Rs. 2,800/-
(c) Typing and office expenses for Rs. 500/-
arbitration paid by the claimant
(d) Cost awarded to the claimant on Rs. 2,500/-
account of counsel's fee
Total Rs.12,300/-"
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31. In our view, the Arbitrator was duty-bound to examine the tenability of the claim made by the respondent under different heads and decide the same by assigning some reasons, howsoever briefly. His failure to do so constituted a valid ground for setting aside the award and the Trial Court committed a serious error by making the award rule of the Court. Unfortunately, the High Court also overlooked this lacuna in the award and approved the judgment of the Trial Court.
30. It is evident from the record that the entire arbitration proceedings from 06.12.2017, concluded within a period of 40 days in a haste. There is no reason forthcoming for the arbitrator to allow the claim petition filed before him and passing the award in favour respondent Nos.1 to 5. The Arbitrator just endorsed the affidavit filed by PW-1, which was reiteration of claim petition and nothing else. A perusal of documents produced clearly shows that nothing was placed by way of any documentary proof, before the Arbitrator to show that, what was the reason for the respondent Nos.1 to 5 to wait upto 2015 to seek for specific performance, as they have taken a specific contention in their claim petition, as well as before this Court in CMP that, on several occasions they requested the appellants to execute the sale deed by receiving the balance sale consideration.
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31. Absolutely there is no discussion by the Arbitrator, as contemplated under Section-16(c), for the conclusion to award specific performance, as the dispute is involving substantial rights in respect of immovable property. The Trial Court has failed to consider the same. That apart, there is nothing in the award on Limitation point, except a vague sentence that, 'there is no time limit fixed in the agreement,'(emphasis supplied), which is just opposite to the order in CMP supra.
32. This Court in CMP No.78/2015 categorically held that it is for the Arbitrator to dwell upon the issue of limitation. In the presence of record before the Arbitrator regarding the point of limitation there is no deliberation and discussion by way of reasons in the award, which clearly shows that the award cannot be sustained, as there is no legal reasoning to supplement a conclusion except reproducing the contentions of respondent Nos.1 to 5 in the claim petition as well as the examination-in-chief of P.W.1
33. A Three Judges Bench of the Hon'ble Apex Court in the case of Dyna Technologies Private Limited vs. Crompton Greaves Limited4 at paragraph Nos.36 to 43, has held as under: 4
AIR Online 2019 SC 1928 28 "36. When we consider the requirement of a reasoned order three characteristics of a reasoned order can be fathomed.
They are: proper, intelligible and adequate. If the reasoning in the order are improper, they reveal a flaw in the decision- making process. If the challenge to an award is based on impropriety or perversity in the reasoning, then it can be challenged strictly on the grounds provided under Section 34 of the Arbitration Act. If the challenge to an award is based on the ground that the same is unintelligible, the same would be equivalent of providing no reasons at all. Coming to the last aspect concerning the challenge on adequacy of reasons, the Court while exercising jurisdiction under Section 34 has to adjudicate the validity of such an award based on the degree of particularity of reasoning required having regard to the nature of issues falling for consideration. The degree of particularity cannot be stated in a precise manner as the same would depend on the complexity of the issue. Even if the Court comes to a conclusion that there were gaps in the reasoning for the conclusions reached by the Tribunal, the Court needs to have regard to the documents submitted by the parties and the contentions raised before the Tribunal so that awards with inadequate reasons are not set aside in casual and cavalier manner. On the other hand, ordinarily unintelligible awards are to be set aside, subject to party autonomy to do away with the reasoned award. Therefore, the courts are required to be careful while distinguishing between inadequacy of reasons in an award and unintelligible awards.
37. At this juncture it must be noted that the legislative intention of providing Section 34 (4) in the Arbitration Act was to make the award enforceable, after giving an 29 opportunity to the Tribunal to undo the curable defects. This provision cannot be brushed aside and the High Court could not have proceeded further to determine the issue on merits.
38. In case of absence of reasoning the utility has been provided under of Section 34(4) of the Arbitration Act to cure such defects. When there is complete perversity in the reasoning then only it can be challenged under the provisions of Section 34 of the Arbitration Act. The power vested under Section 34 (4) of the Arbitration Act to cure defects can be utilized in cases where the arbitral award does not provide any reasoning or if the award has some gap in the reasoning or otherwise and that can be cured so as to avoid a challenge based on the aforesaid curable defects under Section 34 of the Arbitration Act. However, in this case such remand to the Tribunal would not be beneficial as this case has taken more than 25 years for its adjudication. It is in this state of affairs that we lament that the purpose of arbitration as an effective and expeditious forum itself stands effaced.
39. It may be noted that when the High Court concluded that there was no reasoned award, then the award ceased to exist and the Court was functus officio under Section 34 of the Arbitration Act for hearing the challenge to the award under the provisions of Section 34 and come to a conclusion that the arbitration award was not in terms of the agreement. In such case, the High Court ought to have considered remanding the matter to the Tribunal in the usual course. However, the High Court analyzed the case on merits, but, for different reasons and we need not go into the validity of High Court's interference.
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40. Coming back to the award, we need to see whether the award of the Arbitral Tribunal can be sustained in the instant case. Although the Arbitral Tribunal has dealt with the claims separately under different subheadings, the award is confusing and has jumbled the contentions, facts and reasoning, without appropriate distinction. The Tribunal rendered the award with narration of facts with references to the annexures wherever it relied upon by it. The Tribunal abruptly concluded at the end of the factual narration, without providing any reasons, in the following manner:
"(3) Claim for unproductive usage of machineries ....
(g) All the above facts clearly establish that the machineries deployed by the Claimant had to do unproductive work by shifting from one place to another to suit the availability of work. The contract contemplates only payment for actual turnover of earthwork and for this they had received amount totaling to Rs. 1709782.88. The Claimant claims that the hire charges paid to the machineries, men and engineers should be reimbursed to him. He has given the actual expenses in his claim statement.
(emphasis supplied)
41. Interestingly, the factual narration is coupled with the claimant's argument, which is bundled together. A close reading of the same is required to separate the same wherein the Arbitral Tribunal has mixed the arguments with the premise it intended to rely upon for the claimant's claim. Further, it has reduced the reasons for respondent's defense. In spite of our independent application of mind based on the 31 documents relied upon, but cannot sustain the award in its existing form as there is a requirement of legal reasoning to supplement such conclusion. In this context, the complexity of the subject matter stops us from supplementing such legal reasoning and we cannot sustain the aforesaid award as being reasoned.
42. It may be beneficial to reduce the concluding paragraph of the award, which reads as under:
"3.4. The above arguments and various authorities quoted by them have been studied by the Tribunal and we are convinced that the compensation is payable on the hire charges and expenses incurred by the claimant based on the claims made by him in June 95 and now submitted by the claimant in his revised claim petition on 05.07.1997. We are convinced that the machineries have been actually mobilized from the letter R3, R8 and R10 issued by DCM reporting on the number of machineries deployed by Claimant. The Claimants have produced the log books and bills for the various machineries and modified their claims. The tribunal had perused the log books and idle wages approved in C7 by Respondent and the claims made in R17."
(emphasis supplied)
43. From the facts, we can only state that from a perusal of the award, in the facts and circumstances of the case, it has been rendered without reasons. However, the muddled and confused form of the award has invited the High Court to state that the arbitrator has merely restated the contentions of both parties. From a perusal of the award, the inadequate reasoning and basing the award on the 32 approval of the respondent herein cannot be stated to be appropriate considering the complexity of the issue involved herein, and accordingly the award is unintelligible and cannot be sustained."(emphases supplied)
34. A perusal of the award clearly shows that, it suffers from short of valid reasons for the conclusion, which is against the law as contemplated under Section-34(2)(A) of the Act 1996. The Trial Court failed to consider the same, which has resulted in dismissing the petition filed under Section-34 of the Act 1996, causing miscarriage of Justice to the appellants. The Trial Court is too technical, while considering the substantive legal rights of the parties that too in respect of the immovable properties involving specific performance of contract. The Trial Court is enjoined with power under Section-34 of Act 1996, to set aside the arbitral award under the contingences enumerated in the Provision as well as the law of precedents laid down by the Hon'ble Apex Court as well as this Court. The Trial Court failed to exercise its power/jurisdiction under Section 34 of the Act 1996, as such the order impugned calls for interference at our hands. For the foregoing reasons, we pass the following:
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ORDER
i) The appeal filed under Section-13(1A) of Commercial Courts Act, 2015 read with Section-37(1)(C) of Act 1996, is hereby Allowed.
ii) The judgment and order dated 30.11.2021, passed by the court of LXXXVIII Additional City Civil and Session Judge, (Exclusive Commercial Court) (CCH 89), Bengaluru City COM.AS.No.193/2019 is set-aside.
Consequently, the application under Section-34 of Act 1996 is allowed and the award passed by the Sole Arbitrator dated 11.01.2018 in Arbitration Case No.91/2017 is set-aside.
iii) The matter is remanded to the Arbitrator, who shall decide the matter afresh after giving a reasonable opportunity of hearing to both the parties including an opportunity to adduce oral and documentary evidence.
iv) All contentions of the parties are left open. The Arbitrator shall decide the dispute on its own merits, without being influenced by any of the observations made by this Court while considering the case on hand.
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v) No order as to costs.
Sd/-
(V KAMESWAR RAO) JUDGE Sd/-
(T.M.NADAF) JUDGE JJ CT: BRS