Delhi High Court - Orders
Ambient Land Holding Ltd vs Splendor Landbase Ltd And Anr on 20 July, 2022
Author: Anup Jairam Bhambhani
Bench: Anup Jairam Bhambhani
$~24
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P. (COMM) 263/2021 and I.A. 11208/2021, I.A. 11209/2021
AMBIENT LAND HOLDING LTD. ..... Petitioner
Through: Mr. Akhil Sibal, Senior Advocate
with Mr. Avinash Lakhanpal, Ms.
Asavari Jain, Mr. Dhiraj and Ms.
Shriya, Advocates.
Versus
SPLENDOR LANDBASE LTD and ANR. ..... Respondents
Through: Mr. Gaurav Puri, Mr. Sarthak Gupta
and Ms. Yashika Verma, Advocates
CORAM:
HON'BLE MR. JUSTICE ANUP JAIRAM BHAMBHANI
ORDER
% 20.07.2022
I.A. 11207/2021 (Exemption)
Exemption granted, subject to just exceptions. Let requisite compliances be made within 01 week. Application stands disposed of.
O.M.P. (COMM) 263/2021 By way of the present petition under section 34 of the Arbitration and Conciliation Act, 1996 ('A&C Act' for short) the petitioner impugns arbitral award dated 06.05.2021 rendered by the learned arbitral tribunal, whereby the arbitral tribunal has rejected all the claims made by the petitioner; while 02 out of the 07 counter-
Signature Not Verified Digitally Signed By:SUNITA RAWAT Signing Date:22.07.2022 O.M.P. (COMM) 263/2021 Page 1 of 8 18:01:52claims made by respondent No.1 have been allowed. For completeness it may be noted that out of the 08 claims made, claims Nos. 2 to 5 were withdrawn by the claimant.
2. The disputes between the parties arose from a Development Management Agreement dated 02.08.2016 ('DMA' for short) signed between them, for completing construction of the '1st Phase Development' of a housing colony situate at Panipat, Haryana. It transpired however, that the collaboration and transaction between the parties, which commenced with the signing of a Term Sheet dated 19.05.2016 followed by the DMA dated 02.08.2016, was terminated by respondent No.1 vidé termination letter dated 04.02.2017, in just about 06 months of commencement.
3. To begin with, Mr. Akhil Sibal, learned senior counsel for the petitioner has drawn the attention of this court to the fact that while this matter was still at the pre-notice stage, respondent No.1 moved before this court an application bearing I.A. No. 14270/2021 under section 34(4) of the A&C Act, praying that the present proceedings be adjourned, to give to the arbitral tribunal an opportunity to resume arbitral proceedings so as to remedy the lack of detailed reasoning in paras 80 to 84 and 88 of the award, to eliminate that ground of challenge for setting-aside the award. In the said paras, the arbitral tribunal had allowed counter-claims Nos. 1 and 2. It is submitted that a perusal of paras 9 and 10 of the said application will show, that it was respondent No.1's own stand that while allowing counter-claims Nos.1 and 2, the arbitral tribunal had "...not gone into detailed and explicit reasoning, which could be viewed as gaps in the reasoning or Signature Not Verified Digitally Signed By:SUNITA RAWAT Signing Date:22.07.2022 O.M.P. (COMM) 263/2021 Page 2 of 8 18:01:52 absence of explicit reasoning given by the Ld. Arbitrator"; submitting therefore, that the absence of such reasoning was a curable defect, for which the arbitral tribunal should be afforded an opportunity to eliminate such ground for challenging the award.
4. It is pointed-out however, that the said application was subsequently withdrawn as recorded in order dated 30.03.2022. However, it is argued that the very filing of the application amounts to an admission on respondent No.1's part that the award made on counter-claims Nos.1 and 2 was a non-reasoned award.
5. That apart, Mr. Sibal submits, that the arbitral award is self-conflicted and self-contradictory inasmuch as the very reasons, based on which two counter-claims have been allowed in favour of respondent No.1, are the reasons for which the other counter-claims have been disallowed. In this behalf, attention is drawn to para 87 of the impugned award which reads as under:
"87. The project consisted of six high-rise towers and six low-rise towers for which the Respondent had obtained licences and permissions in 2008. It brought in the Claimant to complete 1st phase of the project that comprised 40% of the total project in 2016 within 18 months from the date of the DMA. The DMA records, that at the time of its signing, two towers, B1 and A3 had been raised to 11th f1oor and to 7th floor respectively. It is thus obvious that the Respondent has not been able to make any significant progress in the project for all these years. Clearly, therefore, the brief hiccup for six months caused by the Claimant cannot be the cause of the apparently sorry state of the project. The troubles of the Respondent appear to be deep rooted and arising from multiple causes, mostly perhaps of its own making. In those circumstances it would be unfair to fasten its alleged losses on the Claimant."
(Emphasis Supplied) Signature Not Verified Digitally Signed By:SUNITA RAWAT Signing Date:22.07.2022 O.M.P. (COMM) 263/2021 Page 3 of 8 18:01:52 It is argued that, evidently therefore, the arbitral tribunal was of the view that respondent No.1 was itself liable for the delay in construction of the project for several years before the petitioner was engaged for the purpose under the DMA and that, "... the brief hiccup for six months caused by the Claimant cannot be the cause of the apparently sorry state of the project."
6. It is argued that having so observed, there was no basis for the arbitral tribunal to have allowed counter-claim No. 1 towards loss of interest on the investment of Rs. 58.29 crores made by respondent No.1, allegedly for the period that the said capital remained 'blocked' from August 2016 to January 2017 during which period the petitioner had been engaged. It is submitted that the inference drawn in this behalf in para 82 of the impugned award, is therefore based on 'no evidence', since in the said para the arbitral tribunal holds that the loss of interest on the investment of Rs. 58.29 crores made by respondent No.1 even before the petitioner was engaged, was to be attributed to the petitioner. This, it is argued is especially so, when even the rate of interest was admittedly not proved. This is a conclusion no reasonable person would have reached; and yet this counter-claim has been allowed in the sum of about Rs. 1.96 crores, when neither the interest rate was proved, nor is there any evidence or basis to hold that the capital investment of Rs. 58.29 crores was made by respondent No.1 in the project at the petitioner's instance or during the petitioner's engagement for the project.
Signature Not Verified Digitally Signed By:SUNITA RAWAT Signing Date:22.07.2022 O.M.P. (COMM) 263/2021 Page 4 of 8 18:01:527. It is submitted that furthermore, the second counter-claim for interest on the term loan of about Rs. 28.64 crores has also been allowed, towards interest paid by respondent No.1 on a term loan taken by respondent No.1 for the period from August 2016 to January 2017, despite the fact that clause 3.6 of the DMA relating to the rights and obligations of the petitioner as Development Manager specifically records that:
"DM Shall have no obligation for the term loan taken by MD or mortgage created by MD in favour of Punjab and Sind Bank as define in Clause 1.2 above."
(Emphasis Supplied)
8. Despite a specific stipulation that the petitioner would have no obligation for such term loan, however, counter-claim No. 2 for about Rs. 2.19 crores has been allowed in favour of respondent No.1. After setting-off a sum of about Rs. 1.57 crores already paid by the petitioner to respondent No.1 under the DMA, counter-claim No. 2 has been allowed in the sum of about Rs. 62 lacs.
9. It is argued, that apart from being in the teeth of a contractual provision, even otherwise the interest liability on the term loan taken by respondent No.1 in relation to the project before the DMA was signed between the petitioner and respondent No.1, cannot be placed upon the petitioner. It is pointed-out that the sum of about Rs. 1.57 crores, which has been adjusted towards interest on the term loan, was in fact the same as the amount in claim No. 1 made in the matter, which claim has been rejected.
10. Upon a conspectus of the averments contained in the petition and the submissions made, issue notice.
Signature Not Verified Digitally Signed By:SUNITA RAWAT Signing Date:22.07.2022 O.M.P. (COMM) 263/2021 Page 5 of 8 18:01:5211. Mr. Gaurav Puri, learned counsel appearing for the respondents on advance copy accepts notice; and seeks time to file reply.
12. Let reply be filed within 06 weeks; rejoinder thereto, if any, be filed within 04 weeks thereafter; with copies to the opposing counsel.
13. Re-notify on 14th November 2022.
I.A. 11206/2021 (Stay)
14. In support of his prayer for stay of operation of the impugned award, Mr. Sibal draws attention to the verdict of the Hon'ble Supreme Court in State of Haryana and Ors. Vs. S.L. Arora and Company reported as (2010) 3 SCC 690, in which the following observations appear in relation to the concept of 'interest' :
"9. Payment of interest arises in different circumstances. It can be the consideration paid by a borrower to a lender for use of the money lent or made available by the lender. It can be the return given by a bank, financial institution or a company on amounts deposited or invested· with them by a customer or constituent. It can be the compensation paid by a person who withholds or defaults in paying an amount or in discharging a liability, when it is due and payable. Interest may be payable in pursuance of a contract, or a provision in a statute, or the fiat of a court or tribunal. It is usually quantified in terms of a percentage of the "principal" or the "investment" or the "amount of liability". Interest unless otherwise specified, refers to simple interest, that is, interest paid on only the principal and not on any accrued interest."
(Emphasis Supplied)
15. Mr. Sibal contends that in view of the foregoing observations of the Hon'ble Supreme Court, award of 'interest' on the capital invested by respondent No.1 in the project or on the term loan taken by respondent No.1, at a time when the petitioner was nowhere in the picture, and which sums were not monies lent or made available by Signature Not Verified Digitally Signed By:SUNITA RAWAT Signing Date:22.07.2022 O.M.P. (COMM) 263/2021 Page 6 of 8 18:01:52 respondent No.1 to the petitioner, is wholly misconceived; and a conclusion that no reasonable person would reach.
16. It is further submitted that the petitioner has made no profit from the project under the DMA, since the contractual relationship between the parties ended in a very short period of about 06 months; and accordingly, even on purely equitable considerations, asking the petitioner to securitise the awarded sum would be unfair.
17. Furthermore, it is noticed that when in para 84 of the award, the arbitral tribunal purports to grant to the petitioner adjustment of the sum of about Rs. 1.57 crores paid under the DMA against the interest on the term loan aggregating to about Rs. 2.19 crores, it is implicit that the arbitral tribunal is, in effect, holding that the said sum of about Rs. 1.57 crores claimed by way of claim No. 1 is money that belongs to the petitioner. But then, on the other hand, the arbitral tribunal rejects claim No. 1, thereby contradicting its decision on counter-claim No. 2.
18. Issue notice on the application.
19. Counsel as above, accepts notice on behalf of the respondents; and seeks time to file reply.
20. Let reply be filed within 06 weeks; rejoinder thereto, if any, be filed within 04 weeks thereafter; with copies to the opposing counsel.
21. In view of the submissions made, this court is satisfied that pending consideration of the challenge, the operation of the arbitral award requires to be stayed, without requirement of any deposit or securitisation of the award, at this stage.
Signature Not Verified Digitally Signed By:SUNITA RAWAT Signing Date:22.07.2022 O.M.P. (COMM) 263/2021 Page 7 of 8 18:01:5222. Accordingly, the operation of the impugned award is stayed, till the next date of hearing.
23. Re-notify on 14th November 2022.
ANUP JAIRAM BHAMBHANI, J.
JULY 20, 2022/uj Signature Not Verified Digitally Signed By:SUNITA RAWAT Signing Date:22.07.2022 O.M.P. (COMM) 263/2021 Page 8 of 8 18:01:52