Bangalore District Court
M/S Smart Owners Services India Pvt Ltd vs Usha Rani on 27 September, 2024
1
Com.A.P.No.34/2023
KABC170006902023
IN THE COURT OF LXXXII ADDL.CITY CIVIL &
SESSIONS JUDGE, AT BENGALURU (CCH.83)
THIS THE 27th DAY OF SEPTEMBER 2024
PRESENT:
SUMANGALA S BASAVANNOUR., B.COM, LL.M.,
LXXXII ADDL.CITY CIVIL & SESSIONS JUDGE,
BENGALURU.
Com.A.P.No.34/2023
BETWEEN:
1. M/s Smart Owner's
Services India Pvt Ltd., A
company incorporated
under the provisions of
companies Act, 1956
having its registered
office at ground floor,
Alpha Block, Sigma Tech
Park, Varthur Whitefield
Main Road, Bengaluru -
560 066, represented by
its Authorised
representative, Mr.
Nagappa R.
2
Com.A.P.No.34/2023
2. M/s Pinehill
Properties Pvt Ltd, A
company incorporated
under the provisions of
Companies Act, 2013
having its registered
office at No. 55, Embassy
Crown, Aga Abbas Ali
Road, Bengaluru - 560
042, represented by its
Authorised
representative, Mr.
Nagappa R.
3. M/s Silver Stream
Developers Pvt Ltd, A
company incorporated
under the Provisions of
Companies Act, 2013,
having its registered
office at No. 500,
Embassy Crown, Aga
Abbas Ali Road,
Bengaluru - 560 042,
represented by its
Authorised
representative, Mr.
Nagappa R.
: PETITIONERS
(By Mr. Harikrishna S
Holla., Advocate)
3
Com.A.P.No.34/2023
AND
1. Mrs. Usha Rani, W/o
Joginer Paul Garg, Aged
about 65 years, R/At
Vivek Sadan, Vijay
Nagar, Totu Shimla,
Shimla - 171 011,
Himachal Pradesh.
2. Mr. Soumya Ranjan
Chhatoi, S/o Mr.
Niranjan Chhatoi, aged
about 40 years,
Presently r/at No. 4327,
Bayhead CT, Apt-2c,
Aurora lllinois - 60504,
USA represented by his
SPA Holder, Mr. Vinoth J,
S/o MR. Joseph Varkey
P, aged about 50 years,
R/at No. A-3, Sraddha
Residency, 1st cross,
Kaggadasapura,
Bangalore - 560 093.
3. Mr. Shreedhar
Singh, S/o M Thuljaram
Singh, aged about 56
years, R/at No. A-3,
Sraddha Residency, 1st
cross, kaggadasapura,
4
Com.A.P.No.34/2023
Bangalore - 560 093,
represented by his SPA
Holder Mr. Vinoth J, S/o
Mr. Joseph Varkey P,
aged about 50 years, R/
at No. A-3, Sraddha
Residency, 1st cross,
Kaggadasapura,
Bangalore - 560 093.
4. Mrs. Smija Vinoth,
D/o Mr. John Issac
Mularickal, Aged about
42 years, R/at No. A-3,
Sraddha Residency, 1st
cross, kaggadasapura,
Bangalore - 560 093,
represented by his SPA
Holder Mr. Vinoth J, S/o
Mr. Joseph Varkey P,
aged about 50 years, R/
at No. A-3, Sraddha
Residency, 1st cross,
Kaggadasapura,
Bangalore - 560 093.
5. Mr. Ranjneesh
Lakhotia, S/o Mr. Anand
Swarup Lakohtia, aged
about 61 years, R/at C-
1103, Shalimar Gallant,
Vigyanpuri, Mahanagar,
Lucknow - 226 006,
represented by his SPA
Power of Attorney
5
Com.A.P.No.34/2023
Holder, Mr. Vinoth J, S/o
Mr. Joseph Varkey P,
aged about 50 years, R/
at No. A-3, Sraddha
Residency, 1st cross,
Kaggadasapura,
Bangalore - 560 093.
6. Mr. Trinadh
Nagireddy, S/o Gandhi
Nagireddy, Aged about
43 years, R/at No. 2950,
Annapolis Way,
Cumming, GA 30041
USA, represented by his
SPA Power of Attorney
Holder, Mr. Vinoth J, S/o
Mr. Joseph Varkey P,
aged about 50 years, R/
at No. A-3, Sraddha
Residency, 1st cross,
Kaggadasapura,
Bangalore - 560 093.
7. Mr. Korukonda
Murali Krishna, S/o Mr.
Korukonda Srinivasa
Rao, aged about 34
years, R/at 05-134,
Block - 230, Tampines
Street 24, Singapore 524
230, represented by his
SPA Power of Attorney
Holder, Mr. Vinoth J, S/o
Mr. Joseph Varkey P,
6
Com.A.P.No.34/2023
aged about 50 years, R/
at No. A-3, Sraddha
Residency, 1st cross,
Kaggadasapura,
Bangalore - 560 093.
8. Mr. Gokul
Hrishikesh Pillai, S/o Mr.
Hrishikesh Pillai, Aged
about 34 years, Building
3A, Rutu River Estates,
Neat Agarwal College,
Kalyan West, Gandhari,
Kalyam - 421 301,
Maharashtra,
represented by his SPA
Power of Attorney
Holder, Mr. Vinoth J, S/o
Mr. Joseph Varkey P,
aged about 50 years, R/
at No. A-3, Sraddha
Residency, 1st cross,
Kaggadasapura,
Bangalore - 560 093.
9. Mr. Anubhav Bhatt,
S/o Mr. Rajiv Lochan
Bhatt, aged about 39
years, R/at No. 600,
Rainbow Drive
Apartment 225,
Mountain, View, CA
94041, USA, represented
by his SPA Power of
Attorney Holder, Mr.
7
Com.A.P.No.34/2023
Vinoth J, S/o Mr. Joseph
Varkey P, aged about 50
years, R/at No. A-3,
Sraddha Residency, 1st
cross, Kaggadasapura,
Bangalore - 560 093.
: RESPONDENTS
(Represented by P.B.
Ajith., Advocate)
Date of Institution of the suit 04.03.2023
Nature of the suit (suit on
pronote, suit for declaration & Petition for setting aside
Possession, Suit for injunction Arbitral Award
etc.)
Date on which judgment was 27.09.2024
pronounced
Total Duration Year/s Month/s Day/s
01 06 23
(SUMANGALA S BASAVANNOUR),
LXXXII Addl. City Civil & Sessions Judge,
Bengaluru.
JUDGMENT
This is a Petition filed by the petitioners under Section 34 of the Arbitration & Conciliation Act, 1996 and Petitioner 8 Com.A.P.No.34/2023 prays that to set aside the award dated 07.12.2022 passed in A.C. No. 141 to 147 and 149 to 151/2022 in the interest of justice.
2. The Brief facts of the Plaint are as follows:-
The respondent herein filed claim petition before the sole arbitrator for passing of an award for grant of damages against the Plaintiffs alleging that the Plaintiffs have committed breach of agreement on their failure of allot plots in the lay out developed by them. It is pertaining to note that the orders of the tribunal in AA NO. 144/2022, AC NO. 144/2022 was ordered to be treated as the main case and AC Nos. 141 to 143, 145 to 147 and 149 to 151/2022 as connected cases to the main case. The parties were directed to lead their common evidence in the above cases in the main case AC No. 144/2022.
The Hon'ble Arbitrator was pleased to pass an award directing the Plaintiffs to pay as hereunder:
(a) Claim statement of the claimant in AC Nos 141 to 147, 149 to 151/2022 are hereby partly allowed with costs.9
Com.A.P.No.34/2023
(b) Respondents 1 and 2 in the above 10 cases are hereby jointly and severally held liable and are directed to pay to the respective claimants in:
(i) Ac No. 141/2022 the principal amount of Rs. 14,70,000/- along with interest at 14% per annum from 29.08.2016 till the date of publication of award with costs.
(ii) AC No. 142/2022 the principal amount of Rs.
14,70,000/- along with interest at 14% per annum from 27.06.2016 till the date of publication of award with costs.
(iii) AC NO. 143/2022 the principal amount of Rs. 14,10,000/- along with interest at 14% per annum from 17.02.2016 till the date of publication of award with costs.
(iv) AC No. 144/2022 the principal amount of Rs. 22,56,000/- along with interest at 14% per annum from 25.02.2016 till the date of publication of award with costs.
(v) AC No. 141/2022 to 147/2022 and AC Nos 149/2022 to Ac o. 151/2022, 247/2022, 151/20 of MAC No. 145/2022 the principal amount of Rs. 22,56,000/- along with interest at 14% per annum from 17.02.2016 till the date of publication of award with costs.
(vi) AC No. 146/2022 the principal amount of Rs.
10Com.A.P.No.34/2023 24,96,000/- along with interest at 14% per annum from 21.06.2016 till the date of publication of award with costs.
(vii) AC No. 147/2022 the principal amount of Rs. 14,10,000/- along with interest at 14% per annum from 09.05.2016 till the date of publication of award with costs.
(viii) AC No. 149/2022 the principal amount of Rs. 23,52,000/- along with interest at 14% per annum from 08.06.2016 till the date of publication of award with costs.
(ix) AC No. 150/2022 the principal amount of Rs. 11,76,000/- along with interest at 14% per annum from 17.06.2016 till the date of publication of award with costs.
(x) Ac NO. 151/2022 the principal amount of Rs. 45,50,000/- along with interest at 14% per annum from 30.12.2015 till the date of publication of award with costs.
(c) The Respondents in the above 10 cases are hereby further held liable and are directed to pay to the claimants in the above cases post-award interest at 18% per annum on the principal amount int he above 10 cases within 30 days from the date of publication of the common award.
(d) The prayers of the claimants in the above 10 11 Com.A.P.No.34/2023 cases for award of Rs. 5,00,000/-, each, as damages as per prayer No.2 of the prayer paragraph of the respective claim statements are hereby rejected.
(e) The claimants in the above 10 cases are hereby directed to pay stamp duty on their respective award on their respective claim statements in question under the provisions of the Karnataka Stamp Act, 1957.
(f) The common award is drawn in 4 sets, one set for the Centre, 1 set for the claimants in the above 10 cases, 1 set for respondent No.1 and 2 in AC No. 141 to 147/2022, 149/2022 and 150/2022 and in the remaining 1 set to the respondents in AC No. 151/2022.
The Moratorium on plan approvals by the planning authority, this being beyond the control of Plaintiff delayed the contract. The prevalent COVID pandemic then also added to the delay in the release of the CRP by the authorities and hence force majeure clause is applicable and therefore the Plaintiffs have not deliberately committed breach of booking agreement. The Plaintiff also pleaded that COVID 19 pandemic also added to delay and hence contended that they are not liable to pay compensation as demanded by the Defendants and hence pleaded for dismissal of the suit. The release of the new CDP, the 12 Com.A.P.No.34/2023 Plaintiff is in the process of getting approvals to develop the property as agreed in the booking agreement with the Defendants.
On the basis of Master Service agreement the following booking agreements have been entered with Defendnats.
Name Case No. Date of Booking
Agreement
Gokul Hrishikesh Pillai 149/2022 29.11.2016
Soumya Ranjan Chhatoi 142/2022 15.11.2016
Shreedhar Singh 143/2022 29.07.2016
Smija Vinoth 144/2022 12.07.2017
Rajaneesh Lakhotia 145/2022 01.07.2016
Trinadh Nagireddy 146/2022 07.02.2017
Korukoda Mallikarjun 147/2022 27.07.2016
Anubhav Bhat 150/2022 01.07.2016
Anubhav Bhat 151/2022 20.06.2016
Usha Rani 141/2022 26.09.2016
The clause No. 3.1 of the said booking agreement reads as under.
"3.1 The Seller shall, within a period of 12 months from the date hereof, obtain a plan approval from the planning authority for development of the project. In the event the seller fails to perform its obligation under this section 3.1, the seller shall, within 30 days of such breach, refund to the purchaser the consideration paid by the purchaser 13 Com.A.P.No.34/2023 along with interest at the rate of 24% per annum calculated from the date of payment of the consideration by the purchaser until the date of the refund. It is hereby clarified that the aforesaid amount shall constitute reasonable compensation for losses suffered by the purchaser and shall not be considered a penalty. The seller shall not transact on the plot until the purchaser has been paid the amounts covered in this clause in full"
In view of the fact that the breach alleged to have been committed by the Plaintiffs, the defendants approached the sole arbitrator for passing of an award on 08.04.2022 since the booking agreement was entered into between the plaintiff and the Defendant in and around 2016-17 and the Plaintiffs alleged to have committed in terms of clause No. 3.1 of booking agreement, the claim for recovery of compensation ought to have filed the suit for recovery of damages on or before expiry of 3 years from the date of breach of agreement alleged to have been committed by the Plaintiffs as provided under article 55 of the Limitation Act, 1963. However, the present suit has been filed after a lapse of more than three years and therefore the suit is hit by limitation Act, 1963. This fact has been overlooked by the sole arbitrator. Though, the Plaintiffs have not raised plea with regard to applicability of law limitation, it is statutory duty cast on the arbitrator to take judicial notice of the fact 14 Com.A.P.No.34/2023 regarding applicability of law of limitation. In view of the fact that in this case, on proven facts, the question of limitation even if it is not pleaded on the basis of pleadings and the defense statement of plaintiff the sole arbitrator ought to have taken judicial notice of the same, since the question of limitation is pure question of law and hence, the arbitrator in not taking notice of the same is fatal and hence the award is liable to be set aside.
Clause 12 of Master service Agreement dated 03.06.2016 deals with miscellaneous provisions provides for force majeure clause and clause 5.2 of the booking agreement dated 29.11.2016 which also provides for force majeure clause exclude the liability of either of parties to perform the obligations under the said agreements if performance of such obligations is beyond their reasonable control. Though there was an obligation on the part of plaintiffs to obtain the plan sanction within 12 months and to execute the sale deed within 90 days thereafter, could not be complied with as the state government included the subject lands in the development plan of chikkaballapura town planning authority and promulgated a reclassification of the zoning of the subject lands to green zone. The time taken for the proceedings before the planning authority to 15 Com.A.P.No.34/2023 get the project lands to further reclassify the lands appropriately for residential purposes was protracted, followed by moratorium on new plan approvals and the final comprehensive development plan was notified by the State Government of Karnataka only in the year 2022. In the meanwhile, the Plaintiff has obtained conversion of the project lands, however the layout approvals submitted by the Plaintiff had been delayed by the planning authority until the comprehensive development plan is notified. The Plaintiff herein has made every effort to obtain final layout approval from the planning authority. However the same is being delayed to the inaction of the government. The approval process was also severely hampered due to the pandemic which was faced by the entire world. Therefore, the agreement in question stood frustrated. The sole arbitrator that even then they have put their efforts in getting the approvals by making repeated applications, however the same did not heed any result as the town planning authority, chikkaballapur has issued endorsement wherein it is stated that as the plaintiff property comes within the limit of Master Development Plan, 2031 and the approval for developing residential layout cannot be given at this time. Without there being any intentional breach/ negligence on the part of the 16 Com.A.P.No.34/2023 plaintiff, but due to government order/decision, namely delay in announcement of the new CDP and related plan approvals, the plan approval of the subject could be obtained only in the year 2022. Due to Covid- 19 which has been declared by the Government of India as natural calamity slowed down the process and the aforementioned government order has made it impossible for the plaintiff to fulfill their obligations. The above factors resulted in frustration of contract and hence the sole arbitrator ought to have held that the plaintiffs are justified in invoking force majeure clause and ought to have held that, the plaintiff cannot be burdened with the claim of the claimant. Therefore, the sole arbitrator ought to have dismissed the claim petition. The arbitrator has rejected the defense taken by the Plaintiffs more particularly with regard to force majeure. As a matter of fact, the observation of the sole arbitrator is opposed by the law laid down by the Hon'ble Supreme Court of India which has extended the limitation due to covid-19 and therefore, the sole arbitrator ought to have considered the same and ought to have held that the plaintiffs have not deliberately committed breach of contract and ought to have held that the same is due to circumstances beyond their control. Further, the Plaintiff has 17 Com.A.P.No.34/2023 specifically stated that in the booking agreement that only after approval of the plan from the government it will be able to construct the plots. In so far as claim in AC 151/2022, the defendant soon after obtaining approval of plan, the defendant is submitted that after obtain the plan approval, the plaintiff herein had addressed letter to the claimant calling him for unit selection and also provided the site photographs and also the photographs of the flats to show how the flats would look after completion of the project. However, the respondent did not respond to the request of plaintiff and therefore having failed to respond to the request of the plaintiff the defendant now cannot allege breach of contract. The plaintiff having fulfilled his part obligation cannot be said to have breached the terms of agreement. The Defendant having failed to come forward to execute contract and select flat to enable the plaintiff to sale deed is not entitle for damages for breach of contract since the Defendant is liable for repudiation of contract. The Plaintiff in compliance of the terms of the agreement and upon mutual understanding with the Defendant No.9 were successful in obtain the plan approval from the planning authority on 29.01.2018 and the same was communicated to the Defendant No.9. Therefore, there is no breach on the 18 Com.A.P.No.34/2023 part of the plaintiff. Due to the circumstances of Moratorium in plan approval and covid beyond their control the plaintiff was not in a position to honour the claim and therefore the plaintiff cannot be saddled with liability of payment of compensation.
The plaintiff further stated that the award of interest of 14% is also not based on rationale. The RBI has reduced the interest of deposits/loan from time to time and therefore award of interest at 14% on the amount deposited by the defendant is exorbitant and therefore, the order passed by the arbitrator is without any basis and not based on any rationale. The Hon'ble arbitrator has failed to apply his mind properly to the facts and circumstances of the case and has failed to pass a speaking order and therefore, on this ground the award is liable to be set aside.
The Plaintiff has further stated that since the booking agreement was entered unto between the plaintiffs and the defendants in 2016 and the defendants have alleged that the plaintiffs have committed breach of clause No. 3.1 of booking agreement, for recovery of compensation and sought for filing arbitration proceedings as per common order of the Hon'ble High Court of Karnataka in CMP NO.19
Com.A.P.No.34/2023 383, 384,,385, 386, 388, 391, 392, 393 and 394/2021 dated 22.02.2022. As per article 55 of the limitation Act 1963 the arbitration proceedings ought to have been initiated within a period of three years from the date of breach alleged to have been committed by Plaintiffs. However, the arbitration suits AC 141 to 151 had been filed after a lapse of more than 5 years and therefore the suits are hit by the limitation Act, 1963. The claim in AC 141 to 151 had been filed by Plaintiffs after the expiry of limitation prescribed under Section 55 of limitation Act and therefore, the arbitral tribunal ought to have taken judicial notice of the same while passing the award. The question of law of limitation is a matter of public policy and the learned arbitrator, having overlooked this aspect, is opposed to public policy. Hence this petition.
3. The Respondents have filed objection stating that the application filed by the petitioners herein under Section 34 (2) of the arbitration and conciliation Act on following grounds : Firstly, the petitioners have not made out any ground under section 34 of the Act to set aside the award dated 07.12.2022. Secondly, the contentions raised by the petitioners herein, namely, the objection on limit, the objection on force majeure, and the objection on the rate of 20 Com.A.P.No.34/2023 interest do not warrant the interference of this court as the same have been duly considered by the arbitrator in the award dated 07.12.2022.
The petitioner herein have not made out any grounds under Section 34 (2) of the Act in their application to set aside the award dated 07.12.2022 and hence, the same is liable to be dismissed in limine. The Hon'ble Apex court on several occasions reiterated that the scope of challenge to an arbitral award under Section 34 (2) of the Act, unlike an appeal under section 96 of the CPC, is very limited and the court cannot re-appreciate evidence in a proceedings initiated under the section 34 of the Act. An award can be set aside only if it is contrary to public policy, suffers from patent illegality or perversity or in such that it would shock the conscience of a court of law. An arbitrator, being the sole judge of law and fact, is entitled to take a view on the facts involved in the matter. The arbitrator's interpretation of the contractual term is to be respected, whenever the same is plausible. The interference of this court to re-interpret the terms of the contract, introduce new evidence, reassess the evidence, and re-evaluate the findings of the arbitrator, which are contrary to the scope of section 34 of the Act. One of the grundnorm of the arbitration proceedings is the 21 Com.A.P.No.34/2023 minimal judicial interference and the same is ensured by Section 34 r/w Section 5 of the Act. The petitioners herein are traversing beyond the scope of Section 34 of the Act and this court must not allow for the same. On the perusal of the application filed under Section 34 of the Act by the petitioner for setting aside the award dated 07.12.2022, it is apposite to note that the petitioners herein have not urged even a single ground that is provided under Section 34 (2) of the Act. It is as plain as a pikestaff that the present proceedings are initiated with the sole intention of protracting the realization of the award. Thereby, delay the respondents herein from getting their due amount. It amounts to an abuse of the process of law and this court must deprecate the same. The petitioner herein have urged a three-fold objection to the award dated 07.12.2022 passed by the Hon'ble arbitrator. The petitioners herein have contended that the claim is barred by limitation, the breach is attributable to force majeure, and the rate of interest awarded by the arbitrator is exorbitant. Although none of the aforementioned objections qualifies as a ground under Section 34 (2) of the Act, the respondents herein seek the leave of this court to demonstrate that the petitioners objections are fallacious.
22Com.A.P.No.34/2023 The Respondent further contended that the booking agreements were executed in the years 2016-17 and the period fixed in the said booking agreements was 12 months. Therefore, the limitation period would commence from 2018-2019 and the proceedings against the petitioners herein for recovery of deposit money along with interest was initiated on 08.04.2022, after the expiry of 3 years and the same is hit by limitation Act. According to the section 21 of the Act, the arbitration proceedings are initiated on the legal notice issued for the appointment of the arbitrator. The legal notice for the appointment of an arbitrator was issued to the petitioners in the year 2020 itself and therefore, the proceedings are initiated well within the limitation period. Further, the respondents herein have placed adequate evidence in the form of e-mail conversions, wherein, the petitioners herein kept assuring that the project will be completed. In fact, the RW.1 in the course of cross- examination has admitted the email correspondences. It emphasized that in the said emails, the petitioner's representative have specifically assured the respondents regarding execution of the project. The limitation to initiate proceedings are extended by these correspondences. Even otherwise, the arbitration notice was issued within 3 years 23 Com.A.P.No.34/2023 from the date of expiry of the time mentioned in the booking agreement. Therefore, by no stretch of imagination, the petitioners can contend that the claim made by the Respondents is barred by limitation. Hence, the ground urged by the petitioners are not tenanble.
The Respondent further contended that, the petitioners breach is not attributable to any force majeure event, the Covid -19 and comprehensive Development plan cause the delay in obtaining conversion and the that the petitioners are not liable for the breach of the terms of the contract as the same is attributable to the force majeure event. The arbitrator has dealt with these contentions specifically in para No. 149 and 150 of the award dated 07.12.2023 and has found no merit in the contention of the petitioner. As admitted by the petitioners in their application, they should have obtained the plan sanction at most by 2017, and the outbreak of the Covid- 19 pandemic was only in the year 2020. Further, as observed by the arbitrator, the petitioners have led no evidence to the effect the outbreak of the Covid- 19 pandemic affected the approval process. Regarding the CDP, the Hon'ble Arbitrator, after going through the evidence produced by the petitioners, has observed that the petitioners applied for the grant of requisite permission for 24 Com.A.P.No.34/2023 the development of residential layouts on 02.04.2019, 13.11.2019 and 31.09.2020. Admittedly, the petitioners have not even made any efforts to obtain the plan approvals and other sanctions within the time specifically agreed under the Booking Agreement, and as such they had committed the breach of the terms of the agreement and the same cannot be attributed to the CDP as contended by the petitioners. The rate of interest awarded by the Arbitrator is exorbitant and the same is not in line with the RBI - approved rate of interest is meritless. The Booking Agreeemnt provided for interest at the rate of 24% per annum and the Email correspondences between the petitioners and the Respondents clearly establish that the rate of interest agreed betweent he parties is 24% per annum. In fact, the correspondences clearly show that the petitioners assured the rate of returns on the investment made by the respondents at 26% per annum and the respondents have invested their hard earned money on believing such assurance with an intention to get higer returns on their investment. The interest award by the arbitrator is lesser than the rate of interest specifically agreed by the parties. The respondents have already impugned award passed y the arbitrator as far as it relates 25 Com.A.P.No.34/2023 to the rate of interest before this court in Commercial AP 43/2023 and the same is pending adjudication. None of the grounds urged by the petitioners warrant interference by this court under Section 34 of the Act and the above petition is not maintainable either in law or on the facts and circumstances of the case. Hence, he prayed to dismiss the petition.
4. I have heard the arguments on both the advocates.
5. Based on the above contentions of both parties, following Points arise for my consideration:-
1. Whether there are grounds to set aside the Impugned Award under Section 34 of the Arbitration & Conciliation Act?
2. What Order?
6. My findings on the above points are as follows:-
Point No.1:- In the Negative.
Point No.2:- As per the final Order for the following reasons.26
Com.A.P.No.34/2023 REASONS
7. Point No.1:- The petitioner has taken a ground for setting aside the award that the defendants approached the Sole Arbitrator for passing of an award on 08.04.2022 since the booking agreement was entered into between the plaintiff and the defendant in and around 2016-2017 and the plaintiff alleged to have committed in terms of clause No. 3.1 of booking agreement, the claim for recovery of compensation ought to have filed the suit for recovery of damages on or before expiry of 3 years from the date of breach of agreement alleged to have been committed by the plaintiffs as provided under article 55 of the limitation Act, 1963. However, the present suit has been filed after a lapse of more than three years and therefore the suit is hit by limitation Act, 1963. This fact has been overlooked by the sole arbitrator. Though, the plaintiffs have not raised plea with regard to applicability of law of limitation, it is statutory duty case on the arbitrator to take judicial notice of the fact regarding applicability of law of limitation. In view of the fact that in this case, on proven facts, the question of limitation even if it is not pleaded on the basis of pleadings and the defense statement of plaintiff the sole arbitrator ought to have taken judicial notice of the same, since the question of 27 Com.A.P.No.34/2023 limitation is pure question of law and hence, the arbitration is not taking notice of the same is fatal and hence the award is liable to be set aside.
8. On the other hand the Respondent contended that, the petitioner have considered the date of initiation of the hearing in the arbitral proceedings to calculate the period of limitation; whereas, according to Section 21 of the Act, the arbitration proceedings are initiated on the legal notice issued for the appointment of the arbitration. The legal notice for the appointment of an arbitrator was issued to the petitioners in the year 2020 itself and therefore, the proceedings are initiated well within the limitation period. Further, the Respondents herein have placed adequate evidence in the form of e-mail conversations, wherein, the petitioners herein kept assuring that the project will be completed. In fact, the RW.1 in the course of cross- examination has admitted the email correspondences. It is emphasized that in the said emails, the petitioner's representatives have specifically assured the respondents regarding execution of the project. The limitation to initiate proceedings are extended by these correspondences. Even otherwise, the arbitration notice was issued within 3 years from the date of expiry of the time mentioned in the booking 28 Com.A.P.No.34/2023 agreement. Therefore, by no stretch of imagination, the petitioners can contend that the claim made by the respondents is barred by limitation.
9. Admittedly, the present petitioner has not taken contention in his objection statement as the claim is barred by limitation. Further, even during course of argument also they have not argued on the point of limitation before arbitration tribunal.
10. The Advocate for the petitioner has relied upon a decisions reported in 2005 (4) SCC 613, V.M. Salgaocar and Bros vs. Board of Trustees, wherein Hon'ble Supreme Court held that :
"Section 3 Bar of limitation - (1) Subject to the provisions contained in sections 4 to 24 (inclusive), every suit instituted, appeal preferred, and application made after the prescribed period shall be dismissed although limitation has not been set up as a defence.
(2) For the purposes of this Act
(a) a suit is instituted
(i) in an ordinary case, when the plaint is presented to the proper officer;
(ii) in the case of a pauper, when his application for leave to sue as a pauper is 29 Com.A.P.No.34/2023 made; and
(iii) in the case of a claim against a company which is being wound up by the court, when the claimant first sends in his claim to the official liquidator;
(b) any claim by way of a set off or a counter claim, shall be treated as a separate suit and shall be deemed to have been instituted -
(i) in the case of a set off, on the same date as the suit in which the set off is pleaded;
(ii) in the case of a counter claim, on the date on which the counter claim is made in court;
(c) an application by notice of motion in a High Court is made when the application is presented to the proper officer of that court."
The mandate of Section 3 of Limitation Act is that it is the duty of the Court to dismiss any suit instituted after the prescribed period of limitation irrespective of the fact that limitation has not been set up as a defence. If a suit is ex-facie barred by the Law of Limitation, a Court has no choice but to dismiss the same even if the defendant intentionally has not raised the plea of limitation.
30Com.A.P.No.34/2023 2008 (14) SCC 445, Noharlal Verma vs. District Cooperative Central Bank Limited, Jagdalput, wherein Hon'ble Supreme Court held that :
Now, limitation goes to the root of the matter. If a suit, appeal or application is barred by limitation, a Court or an Adjudicating Authority has no jurisdiction, power or authority to entertain such suit, appeal or application and to decide it on merits.
Sub-section (1) of Section 3 of the Limitation Act, 1963 reads as under;
(3) Bar of limitation.--(1) Subject to the provisions contained in Sections 4 to 24 (inclusive), every suit instituted, appeal preferred, and application made after the prescribed period shall be dismissed although limitation has not been set up as a defence. (emphasis supplied) Bare reading of the aforesaid provision leaves no room for doubt that if a suit is instituted, appeal is preferred or application is made after the prescribed period, it has to be dismissed even though no such plea has been raised or defence has been set up. In other words, even in absence of such plea by the defendant, respondent or opponent, the Court or Authority must dismiss such suit, appeal or application, if it is satisfied that the suit, appeal or application is barred by limitation.31
Com.A.P.No.34/2023
11. Section 21 of Arbitration and Conciliation Act reads as under:
Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.
12. It is settled principal of law that the accrual of cause of action cannot indefinitely postpone by repeatedly writing letters or sending reminder. Therefore when a party invoked the arbitration under Section 21 of Arbitration and Conciliation Act within a period pf 3 years from when the cause of action had arisen. Such claim was not been hit by limitation.
13. On perusal of the plot booking agreement executed on 18.07.2016 and it also discloses that, Clause 3.1: the seller shall, within a period of 12 months from date hereof, obtain a plan approval from the planning authority for development of the project. In the event the seller fails to perform its obligation under this section 3.1, the seller shall, within 30 days of such breach, refund to the purchaser the consideration paid by the purchaser along with interest at the rate of 24% per annum calculated from the date of payment of the consideration by the purchaser until the date of the refund.
32Com.A.P.No.34/2023 Clause 3.2 : The seller shall, within a period of 90days of obtaining such plan approval for the project, enter into a definitive sale agreement for a specific plot in the project in favour of the purchaser or its nominee, as set out in schedule B. Clause 4.1 This agreement shall be deemed to have commenced on and from the date hereof and shall be in force until the execution of the sale agreement or upon the refund of the entire amount by the seller to the purchaser as contemplated under Section 3 of this agreement, whichever occurs earlier.
14. It is an admitted fact that within a period of 12 months from date hereof, obtain a plan approval from the planning authority for development of the project. Seller/ petitioner shall within 30 days such breach refund to the purchaser the consideration paid by the purchaser along with interest and clause 3.2 clearly provides within a period of 90 days of obtaining such plan approval for the project, the seller has to execute the sale agreement in favour of the purchaser.
15. The records also reveals that the respondent issued notice to the present petitioner on 02.09.2020 to make payment of Rs. 47,36,240/- with interest at the rate of 24% per annum within 15 days from the receipt of said notice.
33Com.A.P.No.34/2023 The retired District Judge, as sole arbitrator to adjudicate and resolve the dispute in accordance with law.
16. The records also reveals that the present petitioner has given a reply on 04.11.2020 he do not agree to make the payment of Rs. 47,36,240/- with interest at the rate of 24% per annum and also requested the counsel to withdraw the legal notice.
17. So, the cause of action arose for the respondent to file arbitration suit from 04.11.2020.
18. The records reveals that the claimant of AC No. 141/2022 as entered into the booking agreement dated 26.09.2016 in A.C. No. 142/2022 as entered into the booking agreement dated 15.11.2016, AC NO. 143/2022 as entered into the booking agreement dated 26.07.2016, AC NO. 144/2022 as entered into the booking agreement dated 12.07.2017, AC NO. 145/2022 as entered into the booking agreement dated 01.07.2016, AC NO. 146/2022 as entered into the booking agreement dated 07.02.2017, AC NO. 147/2022 as entered into the booking agreement dated 27.07.2016, AC NO. 149/2022 as entered into the booking agreement dated 29.11.2016, AC NO. 150/2022 as entered 34 Com.A.P.No.34/2023 into the booking agreement dated 01.07.2016 and AC No. 151/2022 as entered into the booking agreement dated 20.06.2016.
19. In the present case, the present petitioner has not raised the point of limitation in the objection statement. However, from the documents/emails placed by the respondent is clearly shows that the petitioner has given a new offer for investment and also undertaken to pay the amount as per Ex.P.48,75,102,114 and 138. The notice under Section 21 of Arbitration and Conciliation Act is issued within a 3 years. Hence, the claim of the claimant is within a limitation.
20. Furthermore, in view of the Suo moto decision of Hon'ble Supreme Court the period from 15.03.2020 till 28.02.2022 shall be stand excluded for the purpose of limitation may be prescribed under the any general or special loss in respect of all judicial or quashi judicial proceedings. In view of the decision of Hon'ble Supreme court the proceedings initiated by the Respondent is not barred by limitation.
35Com.A.P.No.34/2023 20 (a). Furthermore, it is an admitted fact that, the petitioner has not taken any objection regarding limitation before the arbitration. Now the petitioner has come up with a plea of limitation. It is settled that the new plea cannot be taken under Section 34 of Arbitration and Conciliation Act.
21. In this regard I relied upon a decision reported in New Delhi Municipal Council vs Decor India Pvt. Ltd wherein Delhi High court held that "35. The question then arises, whether in the facts and circumstances of the present case, the High Court committed any error in rejecting the appellant's application for addition of new grounds in the memorandum of arbitration appeal.
36. As noticed above, in the application for setting aside the award, the appellant set up only five grounds viz. waiver, acquiescence, delay, laches and res judicata. The grounds sought to be added in the memorandum of arbitration appeal by way of amendment are absolutely new grounds for which there is no foundation in the application for setting aside the award. Obviously, such new grounds containing new material/facts could not have been introduced for the first time in an appeal when admittedly these grounds were not originally raised in the arbitration petition for setting aside the award. Moreover, no prayer was made by the appellant for amendment in the petition under 36 Com.A.P.No.34/2023 Section 34 before the court concerned or at the appellate stage. It is thus manifest from the ultimate conclusions recorded in Hindustan Construction that the Supreme Court found that notwithstanding it being permissible for an amendment being introduced in a Section 34 petition, new and material facts could not have been introduced when admittedly those grounds were neither raised in the original arbitration petition or for that matter before the Arbitral Tribunal itself.
So, in view of the above decision, the new ground of limitation could not have been introduced for the first time in the Section 34 petition, when admittedly these grounds are not originally raised before the arbitration.
The above findings of the learned arbitrator, does not suffer from any infirmity so as to hold that any error apparent on the face of the record. According to the arbitration record and proceedings, the Arbitrator has not committed any legal misconduct. In my opinion, the above findings rendered by the learned Arbitrator, does not call for any interference.
22. The petitioner has taken a ground for setting aside the award that the Clause 12 of Master service Agreement dated 03.06.2016 deals with miscellaneous provisions provides for 37 Com.A.P.No.34/2023 force majeure clause and clause 5.2 of the booking agreement dated 29.11.2016 which also provides for force majeure clause exclude the liability of either of parties to perform the obligations under the said agreements if performance of such obligations is beyond their reasonable control. could not be complied with as the state government included the subject lands in the development plan of chikkaballapura town planning authority and promulgated a reclassification of the zoning of the subject lands to green zone. The time taken for the proceedings before the planning authority to get the project lands to further reclassify the lands appropriately for residential purposes was protracted, followed by moratorium on new plan approvals and the final comprehensive development plan was notified by the State Government of Karnataka only in the year 2022. In the meanwhile, the Plaintiff has obtained conversion of the project lands, however the layout approvals submitted by the Plaintiff had been delayed by the planning authority until the comprehensive development plan is notified. The Plaintiff herein has made every effort to obtain final layout approval from the planning authority. However the same is being delayed to the inaction of the government. The approval process was also severely 38 Com.A.P.No.34/2023 hampered due to the pandemic which was faced by the entire world. Therefore, the agreement in question stood frustrated.
23. The Respondent has contended that the petitioners in their applications, they should have obtained the plan sanction at most by 2017, and the outbreak of the Covid-19 pandemic was only in the year 2020. Further, the petitioners have led no evidence to the effect that the outbreak of the Covid-19 pandemic affected the approval process. Regarding the CDP, the Hon'ble Arbitrator, after going through the evidence produced by the petitioners, has observed that the petitioners applied for the grant of requisite permissions for the development of residential layouts on 02.04.2019, 13.11.2019 and 31.09.2020. Admittedly, the petitioners have not even made any efforts to obtain the plan approvals and other sanctions within the time specifically agreed under the booking agreement, and as such they had committed the breach of the terms of the agreement and the same cannot be attributed to the CDP as contended by the petitioners.
24. The learned arbitrator in para 149 and 150 held that the respondent have not led evidence to the effect that the 39 Com.A.P.No.34/2023 outbreak of Covid-19 pandemic, especially, within the limits of Bengaluru Urban and Chikkaballapur District affected the approval process to take forward the project planned by them. As to how force majure clause as per terms of security documents applies to the facts of the case on hand to enable tribunal to invoice the provisions of section 56 of the Indian Contract Act is not stated by the respondents in very clear words. In view of the respondents not taking the projects involved in this cases to their logical end and since application for grant of requisite permission for development of residential lay-outs came to be filed by the respondent on 02.04.2019, 13.11.2019 and 31.08.2020, as seen from Exs. R1 to R.10 read with Exs. R.22 to R.25, and the respondents as per their replies to the legal notice of the claimants in the above 10 cases have come forward to return the sale considerations so paid by the claimants. The respondents have failed to prove that they did not commit breach of terms of contract. The learned arbitrator held that in view of the bar under the plan of 2031 of Chikkaballapur town planning Authority, the respondents could not go a head in getting requisite approvals for development of the layout involved in the first 9 cases.
40Com.A.P.No.34/2023 The above findings of the learned arbitrator, does not suffer from any infirmity so as to hold that any error apparent on the face of the record. According to the arbitration record and proceedings, the Arbitrator has not committed any legal misconduct. In my opinion, the above findings rendered by the learned Arbitrator, does not call for any interference.
25. The petitioner has take an another ground for setting aside the award, the award of interest of 14% is also not based on rationale. The RBI has reduced the interest of deposits/loan from time to time and therefore award of interest at 14% on the amount deposited by the Defendants is exorbitant and therefore, the order passed by the arbitrator is without any basis and not based on any rationale. The Hon'ble arbitrator has failed to apply his mind properly to the facts and circumstances of the case and has failed to pass a speaking order and therefore, on this ground the award is liable to be set aside.
26. The learned arbitrator held that, in para 160 the learned arbitrator mentioned the rate of interest from 2.10.2015 to 27.09.2021. In para 161 and 162 held that the respondents are carrying respective commercial activities.
41Com.A.P.No.34/2023 They take overdraft facility/loans from financial institutions as and when they require. In view of facts of the case and nature of business transaction entered into by the respondents in favour of the claimants. The learned arbitrator held that the interest agreed to be paid by the respondents to the claimants as per Ex.P.4 and other relevant agreements is rather excessive and is not in consonance with standard practice of charging of interest on the payments in question. In view of Covid-19 pandemic which was prevalent across the globe for about 2 years from February-March, 2020 and in view of nature of contentions urged by the respondents in their statement of objection to the claim statements of the claimants in the above 10 cases and even though, the respondents are not able to prove that covid-19 pandemic had direct effect on taking the project to the logical end and since the respondents have come forward to refund the deposits made by the claimants which shows their bona-fides. The learned arbitrator held that the tribunal may take a lenient view directing the respondents to pay to the claimants pre-reference interest and pendente lite interest at 14% per annum.
42Com.A.P.No.34/2023
27. Arbitrator Has Discretion To Award Post-Award Interest On A Part Of The 'Sum': Supreme Court In state of Hariyana vs. Arora and Company Hon'ble Supreme Court held that under Section 31 (7)(a) an arbitrator has the discretion to award post-award interest on a part of the 'sum'. The arbitrator has the discretion to determine the rate of reasonable interest, the sum on which the interest is to be paid, that is whether on the whole or any part of the principal amount, and the period for which payment of interest is to be made.
The Hon'ble Supreme Court opined that must exercise discretion in good faith and must act reasonable and rationally taking cognizance on the surrounding circumstance.
The arbitral tribunal had the discretion to award post award interest on part of the ' sum' of award the word 'sum' connoting an aggregate of principle and interest.
In the present case, the learned arbitrator held that tribunal may take a lenient view directing the respondents to pay to the claimants pre-reference interest and pendente lite 43 Com.A.P.No.34/2023 interest at 14% per annum. It is clear that the learned arbitrator exercise discretion in good faith and reasonable by taking congnisance on the surrounding circumstances.
The above findings of the learned arbitrator, does not suffer from any infirmity so as to hold that any error apparent on the face of the record. According to the arbitration record and proceedings, the Arbitrator has not committed any legal misconduct. In my opinion, the above findings rendered by the learned Arbitrator, does not call for any interference. Therefore, I answer this Point in the "Negative".
28. Point No. 2:- For the discussion made on above point, following order is passed:
ORDER The Petition filed by the petitioner under Section 34 of the Arbitration & Conciliation Act, 1996 is Dismissed.44
Com.A.P.No.34/2023 The Office is directed to send copy of this judgment to both parties to their email ID as required under Order XX Rule 1 of the Civil Procedure Code as amended under Section 16 of the Commercial Courts Act.
(Dictated to the Stenographer, typed by him directly on computer, verified and then pronounced by me in open Court on this the 27th day of September, 2024).
(SUMANGALA S. BASAVANNOR), LXXXII Addl. City Civil & Sessions Judge, Bengaluru.