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2018 DIGILAW 305 (KAR)

Astha Constructions v. L. G. Ramakrishnaiah S/o Late Gudadaiah

2018-03-02

R.S.CHAUHAN, S.G.PANDIT

body2018
JUDGMENT : The appellant is aggrieved by the award dated 12.05.2013, passed by the Arbitral Tribunal, Bengaluru, whereby the learned Tribunal has rejected the appellant's claim, has allowed the counter-claim of the respondent, and has directed the appellant to pay Rs.3,77,336/- to the respondent. Also aggrieved by the judgment and order dated 26.03.2016, passed by the VI Additional City Civil & Sessions Judge, Bengaluru City (CCCH-11), whereby the learned Judge has rejected the application filed by the appellant, under Section 34 of the Arbitration and Conciliation Act, 1196 ("the Act", for short), the petitioner has approached this Court. 2. Briefly the facts of the case are that the respondent No.1, Mr. L.G. Ramakrishnaiah was the owner of property No.142, situated at Rajarajeshwari Nagara Sabha admeasuring 31,725 Sq.ft., located in Sy.No.39/5 of Srigandadakaval village, Yeshwanthapura Hobli, Bengaluru North Taluk. He was also the owner of property bearing Sy.No.38(P), 39P and 40-P, located in the Rajaji Nagar Housing Co-operative Society Limited area, situated in Srigandadakaval village, Yeshwanthapura Hobli, Bengaluru North Taluk. The appellant and the respondent entered into a joint development agreement ("JDA", for short) for construction of a residential Apartment Complex on the said properties. In compliance of the JDA, on 16.05.2005, the respondent executed a General Power of Attorney in favour of the appellant. Simultaneously, the respondent granted the possession of the properties to the appellant. Further, according to the JDA, it was the respondent's duty to get the General Power of Attorney, and the JDA registered. Furthermore, it was his duty to deposit the original title deed documents with the appellant. However, the respondent failed to do so. 3. Yet, on the other hand, in compliance of the JDA, the appellant not only paid the betterment charges to the Rajarajeshwari City Municipal Council, but also paid the required fees to the BWSSB and other statutory authorities. The appellant also got the sanctioned plan approved and started the construction of the residential apartment complex. So far, the appellant has completed the construction of the third floor of the complex. 4. Moreover, according to the JDA, while 60% of the ownership over the developed schedule property was to be transferred to the appellant, the remaining 40% of the schedule property was supposed to go to the respondents. Thus, while the appellant was scheduled to get 17 residential units, the respondent was entitled to receive only 11 residential units. 5. 4. Moreover, according to the JDA, while 60% of the ownership over the developed schedule property was to be transferred to the appellant, the remaining 40% of the schedule property was supposed to go to the respondents. Thus, while the appellant was scheduled to get 17 residential units, the respondent was entitled to receive only 11 residential units. 5. When such was the position, on 21.08.2006, the appellant was shocked to see a public notice in the Kannada Daily "Vijaya Karnataka", wherein the respondent made false allegations against the appellant, ostensibly claiming that the appellant was fraudulently receiving the money for the sale of apartment allotted to him. The public notice further claim that the GPA dated 16.05.2006 was cancelled by notice dated 17.08.2006. The said allegations were made without any legal basis. Therefore, immediately on 24.08.2006, the appellant replied to the public notice and requested the respondent to withdraw the notice cancelling the GPA, to clarify the actual position for the general public, and to fulfil all its obligations under the JDA. According to the appellant, because of the action of the respondent, the appellant has suffered a loss of Rs.8 Crores. 6. Since a dispute had erupted between the parties, in compliance of the arbitration clause, the appellant raised an arbitral dispute. The said dispute was eventually referred to an Arbitral Tribunal. Before the learned Tribunal, the appellant prayed that the respondent be directed to register both the JDA and General Power of Attorney; to compensate the loss of Rs.8 Crores along with interest @ 24% per annum from 21.08.2006, till realisation. In turn, the respondent filed his objections along with his counter-claim. In the counter-claim, the respondent sought the relief that the appellant be directed to obtain the necessary sanctioned plan for the construction of 4th and 5th Floor of the building from the Bangalore Development Authority, and the appellant should be directed to complete the construction. The respondent further prayed that due to the delay caused by the appellant from 16.11.2006, the appellant should be directed to pay Rs.1 Lakh per month from 16.05.2005 till the date of realisation. The respondent further prayed that the appellant be directed to reimburse a sum of Rs.3,77,336/- for the amount paid by the respondent to the BDA. 7. The respondent further prayed that due to the delay caused by the appellant from 16.11.2006, the appellant should be directed to pay Rs.1 Lakh per month from 16.05.2005 till the date of realisation. The respondent further prayed that the appellant be directed to reimburse a sum of Rs.3,77,336/- for the amount paid by the respondent to the BDA. 7. By award dated 12.05.2013, the learned Tribunal rejected the claim filed by the appellant and partly allowed the counter-claim filed by the respondent. 8. Since the appellant was aggrieved by the award dated 12.05.2013, the appellant challenged the same under Section 34 of the Act, before the learned Civil Court. However, by judgment and decree dated 26.03.2016, the learned Civil Court dismissed the appeal filed by the appellant. Hence, this appeal before this Court. 9. Mr. M.I. Arun, the learned counsel for the appellant, has raised the following contentions before this court:- Firstly, the learned arbitrator has ignored the fact that the completion of the project was delayed due to laxity on the part of the respondent, rather than inefficiency on the part of the appellant. The appellant could not initiate the project as the respondent failed to get the land converted from its agricultural status to a residential one. In fact, the conversion was done during the pendency of the arbitration proceedings. Thus, the learned arbitrator is unjustified in directing the appellant to pay a sum of Rs.1 Lakh per month from 16.11.2006 till the date of completion of the project and handing over the project to the respondent. Secondly, the learned arbitrator has ignored the fact that the time of nine months in completing the project is too unrealistic. And the appellant required at least twelve months to complete the project. Thirdly, according to the Commissioner's report the appellant had completed 70% of the construction. Thus, the appellant had invested huge amount of monies into the project. Therefore, the appellant was entitled to recover the same from the respondent. But instead of directing the respondent to pay the amount invested by the appellant, the learned arbitrator has partly allowed the counter-claim filed by the respondent. Hence, the learned arbitrator has illegally imposed a liability upon the appellant. Fourthly, the award is in conflict with the public policy of India. But instead of directing the respondent to pay the amount invested by the appellant, the learned arbitrator has partly allowed the counter-claim filed by the respondent. Hence, the learned arbitrator has illegally imposed a liability upon the appellant. Fourthly, the award is in conflict with the public policy of India. Hence, the learned Judge is unjustified in concluding that the case does not fall within the ambit of Section 34 (2) (b) (ii) of the Act. Therefore, both the award and the impugned judgment deserve to be set aside by this Court. 10. On the other hand, Mr. Venkatesh R. Bhagat, the learned counsel for the respondent, has raised the following counter-contentions:- Firstly, the jurisdiction of the court to interfere with an arbitral award is well defined by Section 34 of the Act. Therefore, before the learned Judge could have interfered with the arbitral award, the appellant was legally bound to establish that its case falls within the ambit of the said provision. But the appellant has failed to do so. Secondly, the learned Judge could not have re-appreciated the evidence produced before the learned arbitrator, unless the appreciation of evidence done by the learned arbitrator is based on wrong preposition of law, or reasons are totally perverse, or conclusions reached are so unreasonable as could not be reached by a reasonable person. But if the view taken by the learned arbitrator is a plausible view, then the learned Judge would not be justified in substituting his/her view in place of the view taken by the learned arbitrator. Thirdly, the appellant has not pleaded any ground for establishing that the impugned award is in conflict with the public policy of India. Thus, the learned counsel has supported both the impugned award, and the judgment. 11. Heard the learned counsel for the parties, perused the impugned award and the judgment, and considered the record. 12. It is, indeed, trite to state that the court cannot re-appreciate the evidence produced before the learned arbitrator, unless the learned arbitrator has based his/her appreciation of evidence on a wrong preposition of law, or the appreciation of evidence is totally perverse, or there is an error apparent on the face of the record. Hence, the first two contentions raised by the learned counsel, based as they are on re-appreciation of evidence, are unacceptable. 13. Hence, the first two contentions raised by the learned counsel, based as they are on re-appreciation of evidence, are unacceptable. 13. Needless to say, the parties to a contract are bound to discharge their respective duties as prescribed by the contract. Thus, the appellant was legally bound to complete the construction of the apartment complex within the time-frame provided in the contract. According to the Commissioner's report, the appellant had completed only 70% of the construction. Hence, the appellant failed to complete the construction as required by the contract. Therefore, the appellant had committed a breach of the contract. Since the appellant had violated the conditions of the contract, obviously, the appellant cannot claim damages from the respondent. In the case of Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705 the Apex Court has observed that "It is the primary duty of the arbitrators to enforce a promise which the parties have made and to uphold the sanctity of the contract which forms the basis of the civilized society and also the jurisdiction of the arbitrators." Thus, the learned arbitrator was justified in dismissing the claim petition filed by the appellant, and in partly allowing the counter-claim petition filed by the respondent. Moreover, the learned Arbitrator had extended the time for the completion of the construction by the appellant. But despite the extension of time, the appellant still has failed to complete the construction. Hence, the learned Judge was justified in upholding the arbitral award. 14. In the case of McDermoti International Inc. v. Burn Standard Co. Ltd & Others, (2006) 11 SCC 181 the Hon'ble Supreme Court dealt with the role of the court while examining an arbitral award. The Apex Court observed that- "The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, the scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as the parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it." 15. In the cases of Saw Pipes Ltd. (supra), McDermoti International Inc. (supra), and ONGC Ltd. v. Western Geco International Ltd., (2014) 9 SCC 263 the Apex Court has elaborately dealt with the scope of the words, "in conflict with the public policy of India". 16. In the case of Saw Pipes Ltd. (supra) the Apex Court observed that the phrase "public policy of India" has not been defined in the Act. In case where the validity of an award is under challenge, the phrase should be given a wider meaning, rather than a narrower one. Thus, an award could be set aside if it were contrary to the fundamental policy of Indian Law, or interest of India, or justice or morality, or if it were patently illegal. But illegality must go to the root of the matter. If the illegality is of trivial nature, it cannot be held that the award is against the public policy. However, if the award is contrary to the substantive provisions of law, or the provisions of the Act, or against the terms of the contract, it would be patently illegal, which could be interfered with under Section 34 of the Act. But such a failure of procedure should be patent affecting the rights of the parties. The award could also be set aside if it is so unfair and unreasonable so as to shock the conscious of the court. For, such an award would be opposed to public policy and is required to be adjudged as void. In the case of McDermoti International Inc. The award could also be set aside if it is so unfair and unreasonable so as to shock the conscious of the court. For, such an award would be opposed to public policy and is required to be adjudged as void. In the case of McDermoti International Inc. (supra) the Hon'ble Supreme Court further added that "Lastly, where the arbitrator, however, has gone contrary to or beyond the expressed law of the contract or granted relief in the matter not in dispute, would come within the purview of Section 34 of the Act." 17. Moreover, in the case of Western Geco International Ltd. (supra) the Apex Court observed that the learned arbitrator is required to follow three distinct and fundamental juristic principles while determining the rights and obligations of the parties: i) the duty to adopt judicial approach; ii) compliance with the principles of natural justice, particularly application of mind to the attendant fact and circumstances while deciding the case; iii) that the decision should not be so perverse or irrational that no reasonable man could have arrived at the conclusions. 18. In the case of Western Geco International Ltd. (supra), the Apex Court further elaborated on the words "to adopt a judicial approach". It means that a court, tribunal or an authority having a judicial or quasi-judicial power "cannot act in an arbitrary, capricious or whimsical manner. Judicial approach ensures that the authority acts bona fide and deals with the subject in a fair, reasonable and objective manner and that its decision is not actuated by any extraneous consideration. Judicial approach in that sense acts as a check against flaws and faults that can render the decision of a court, tribunal or authority vulnerable to challenge." Thus, if the learned arbitrator fails to discharge his duty in accordance with one of these juristic principles, then the award would be in "conflict with the public policy of India". 19. However, in the present case, the learned counsel for the appellant has failed to plead and establish that one of these juristic principles has, indeed, been ignored by the learned arbitrator while passing the impugned award. Hence, the learned counsel has failed to bring the impugned award within the scope of Section 34 (2) (b) (ii) of the Act. 20. However, in the present case, the learned counsel for the appellant has failed to plead and establish that one of these juristic principles has, indeed, been ignored by the learned arbitrator while passing the impugned award. Hence, the learned counsel has failed to bring the impugned award within the scope of Section 34 (2) (b) (ii) of the Act. 20. A bare perusal of the impugned judgment also reveals that the learned Judge has considered all the contentions raised by the parties, has examined the award, and has given cogent reasons for rejecting the appeal. Thus, the impugned judgment does not suffer from any perversity or illegality. 21. For the reasons stated above, this Court does not find any merit in the appeal. It is, hereby, dismissed.