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2025 DIGILAW 352 (KAR)

Mahadeva v. Arattukulam Developers

2025-06-12

S.RACHAIAH, V.KAMESWAR RAO

body2025
JUDGMENT : V KAMESWAR RAO, ACJ. The challenge in this appeal is to a judgment dated 04/04/2022 passed by the learned LXXXV Addl. City Civil and Sessions Judge, Bengaluru (‘Trial Court’ for short) in Com.AP No.17/2020, whereby the Trial Court has dismissed the petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (‘Act of 1996’ for short). 2. The facts to be noted are, it is the case of the appellants that, they are the absolute owners of the converted lands bearing Sy.No.95 measuring 2 acres 36 guntas, Sy.No.96 measuring 4 acres 04 guntas, Sy.No.97/1 measuring 30 guntas, Sy.No.97/2 measuring 1 acre 03 guntas, Sy.No.99/3 measuring 29 guntas, in all measuring 9 acres 22 guntas, situated at Lingapura Village, Kasaba Hobli, Anekal Taluk, Bengaluru District. 3. The respondent No.1 is partnership firm and is represented by its one of the Partner Sri. Tony Vincent. Respondent No.1 entered into joint development agreement dated 19/05/2014 registered as Document No.1383/2014-15, Book I, in the office of the Sub-Registrar, Attibele, Anekal Taluk with the appellants, to form a residential layout in accordance with sanctioned plan and licence and specifications agreed between the parties as per the joint development agreement in respect of schedule properties. 4. According to the appellants, the respondent No.1 agreed to bear the entire cost of development and formation of residential layout providing all the required amenities as agreed in the joint development agreement. The appellants also executed a general power of attorney dated 19/05/2014 registered as Document No.59/2014-15 in the office of the Sub-Registrar, Attibele, Anekal Taluk, to facilitate the respondent No.1 to develop the lands as agreed on the schedule properties, including getting necessary plans drawing commencement certificate, completion certificate etc., and to deal with necessary statutory authorities and for completing the project. 5. The respondent No.1 entered into rectification of joint development agreement dated 19/11/2015 registered as Document No.3621/2015-16 in the office of the Sub-Registrar, Anekal, regarding correction of sharing ratio in the aforesaid joint development agreement dated 19/05/2014. According to the appellants, as per the rectification deed, the appellants are entitled for 67% of sital area or 1,50,508 square feet in the residential layout to be formed in the schedule property and the respondent No.1 was to retain 33% of the sital area. 6. According to the appellants, as per the rectification deed, the appellants are entitled for 67% of sital area or 1,50,508 square feet in the residential layout to be formed in the schedule property and the respondent No.1 was to retain 33% of the sital area. 6. That as per clause 11.1 of the joint development agreement, the respondent No.1 had agreed to deliver owners’ share of sital area within a period of 15 months from the date of registration of the joint development agreement, with a grace period of 2 months. 7. That as per clause 11.2 of the joint development agreement, the respondent No.1 agreed and undertook to compensate the owners at the rate of Rs.30,000/- per acre of land in the schedule properties per month and to pay compensation every month, in the event, developer was unable to adhere to deliver the sital area as aforesaid and if there is delay for the reasons not attributable for reasons set out in clause 11.3. 8. That as per clause 11.3 of the joint development agreement, the developer shall not incur any liability for any delay in delivery of the possession of the owners’ sital area, by reasons of Governmental restrictions and/or by reason of civil commotion, any act of God or due to any injunction or prohibitory order or conditions of force majeure. In any of the aforesaid events, which are beyond the control of the developer, the developer shall be entitled to corresponding extension of time, for delivery of the said owners' sital area. 9. According to the appellants, the respondent No.1 herein secured sanction plan from the concerned authority on 06/02/2016 and supplementary agreement was entered into between the parties on 05/05/2016. Since the respondent No.1 failed to complete the project in terms of the joint development agreement, the appellants issued notice dated 01/07/2016 demanding payment of damages for non-delivery of their sital area share, amounting to Rs.2,86,500/- (Rupees Two Lakhs Eighty Six Thousand Five Hundred only) per month from 19/10/2015 to 19/06/2016 and also sought for payment of Rs.2,86,500/-(Rupees Two Lakhs Eighty Six Thousand Five Hundred only) per month till delivery of appellants’share of sital area. 10. The respondent No.1 issued reply dated21/07/2016 making untenable allegation which was denied as per rejoinder dated 26/07/2016. 10. The respondent No.1 issued reply dated21/07/2016 making untenable allegation which was denied as per rejoinder dated 26/07/2016. According to the appellants, respondent No.1 has not completed the concreting of all roads, not constructed the box type concrete drainage to 40 and 60 feet roads and not constructed culvert drainage and footpaths for other roads, not given water supply points and sewage lines points to the sites, no overhead electricity lines and also not installed the required transformers, not constructed the sewage treatment plant, not developed parks, not started to construct overhead tank, not constructed the swimming pool and not started construction of the club house as agreed. 11. According to the appellants, the respondent No.1 has committed serious breach of the terms of the said joint development agreement, resulting in the appellants suffering huge loss and hardship due to the respondent No.1's inaction and breach of the terms of joint development agreement. The respondent No.1 was never ready and willing to comply by the terms of joint development agreement. 12. The appellants therefore claimed for a sum of Rs.85,95,000/-(Rupees Eighty Five Lakhs Ninety Five Thousand only) as penalty for the period from 19/10/2015 till the date of filing of the claim petition along with interest thereon @ 18% p.a from the date of the claim petition till the date of payment and for a direction to the respondent No.1 to continue to pay the appellants a sum of Rs.2,86,500/- (Rupees Two Lakhs Eighty Six Thousand Five Hundred only) per month as penalty from date of filing of the claim petition till the date the respondent No.1 hands over the completely finished Owners share of sital area as agreed in the joint development agreement dated 19/05/2014 and on the failure of the respondent No.1 to pay the said amount interest thereon @ 18% per annum from due dates of payment till date of actual payment etc. 13. The appellants invoked clause 19 of the joint development agreement and filed CMP No.60/2017 before this Court for appointment of Sole Arbitrator. The said petition came to be allowed by order dated 07/03/2019 appointing the respondent No.2 as Sole Arbitrator to decide the dispute between the parties. 14. The respondent No.1 filed its statement of objections on 31/07/2018 and contending that the claim petition is filed with an intention to harass the respondent No.1. The said petition came to be allowed by order dated 07/03/2019 appointing the respondent No.2 as Sole Arbitrator to decide the dispute between the parties. 14. The respondent No.1 filed its statement of objections on 31/07/2018 and contending that the claim petition is filed with an intention to harass the respondent No.1. The joint development agreement dated 19/05/2014 execution of the General Power of Attorney, Rectification deed dated 19/11/2015 are admitted. It is contended that, a sum of Rs.30,00,000/- (Rupees Thirty Lakhs only) is paid towards non-refundable security deposit and a sum of Rs.60,00,000/-(Rupees sixty lakhs only) towards refundable security deposit and that as per Clause 11.3 of the joint development agreement, it was agreed that the respondent No.1 will not be liable to compensate for delay in delivery of the sital are due to government restrictions, force majure or act of God and which is not attributable to the respondent No.1 and that owing to the boundary dispute between the appellants and the neighboring land owner and due to governmental restrictions are the conditions covered by clause 11.3 of the joint development agreement. That during the process of obtaining the sanction plan the respondent No.1 learnt that the schedule property consisted of 27 guntas of kharab land out of 9 acres 22 guntas which was suppressed by the appellants. That the joint development agreement does not mention the aspect of kharab land and as such the respondent No.1 faced hindrances and the plan sanction was delayed till 06/02/2016 for the reasons attributable to the appellants because of the suppression of kharab land running in a "V" shape in the middle of the properties. That it is only after approval of the plan sanction on 06/02/2016 the parties entered into supplementary agreement on 05/05/2016 for the purpose of sharing sites. That the Anekal Town Planning Authority released 40% of the sites and the remaining 60% was retained by the authority, as on 06/02/2016 and thereafter there cannot be any liability attributable to the respondent No.1 for any delay on account of government restriction as mentioned in clause 11.3 of the joint development agreement. 15. That the Anekal Town Planning Authority released 40% of the sites and the remaining 60% was retained by the authority, as on 06/02/2016 and thereafter there cannot be any liability attributable to the respondent No.1 for any delay on account of government restriction as mentioned in clause 11.3 of the joint development agreement. 15. That the respondent No.1's efforts to cover the entire layout with compound was prevented by neighbouring land owners on the eastern and southern side of the schedule property and the said boundary dispute shows that the appellants are not in complete possession of the schedule property and have suppressed the same while entering into joint development agreement and also even at the time of rectification deed dated 19/11/2015. 16. That the appellants did not co-operate with the respondent No.1 to resolve the boundary dispute. Since one Sri. P.Venkatesh neighbouring owner filed complaint before the Anekal Town Planning Authority regarding boundary dispute and construction of wall, the respondent No.1 addressed a letter dated 20/11/2017 requesting the appellant No.1 to resolve the dispute. However the appellant No.1 sent untenable reply. The very fact that the appellants have entered into Rectification deed dated 19/11/2015 and supplementary Agreement dated 05/05/2016 which is beyond the Initial delivery stipulated period i.e., 19/10/2015, shows that the Claimants have not raised any claim and mutually agreed for extension of time. That, on account of lapse of appellants they have impliedly extended the time and therefore estopped from contending otherwise. That the respondent No.1 has made huge investment to the tune of Rs.9 Crores and have also paid a sum of Rs.90,00,000/- (Rupees Ninety Lakhs only) and due to the violation of the terms of the joint development agreement by the appellants they are liable to indemnify respondent No.1 as per clause 17.2 of joint development agreement. 17. That because of suppression of kharab portion of 27 guntas of land, the total area is reduced and as per clause 4.2 of the joint development agreement, respondent No.1 is entitled to be paid by the appellants for the fractional shortfall as per prevailing market rate. 18. That on the basis of the abovesaid pleadings of the parties, the respondent No.2 framed the following issues: “1) Whether the claimants prove that the respondent has committed breach of the terms of the Joint Development Agreement dated 19/05/2014? 18. That on the basis of the abovesaid pleadings of the parties, the respondent No.2 framed the following issues: “1) Whether the claimants prove that the respondent has committed breach of the terms of the Joint Development Agreement dated 19/05/2014? 2) Whether the claimants prove that the respondent has deliberately set up the neighbor Sri P. Venkatesh to delay the implementation of Joint Development Agreement? 3) Whether the claimants are entitled to a sum of Rs.85,95,000/- as penalty for the period from 19/10/2015 till the date of claim petition dated 02/05/2018 with interest @ 18% from the date of claim petition till payment? 4) Whether the respondent proves that it is the claimants who have committed the breach of the contract and is guilty of suppressio veri suggestio falsi ? 5) Whether the respondent proves that the claimants had suppressed the act of kharab land of 0.27 guntas out of 9 acres 22 guntas of the schedule area for development? 6) Whether the respondent proves that delay in sanctioning of the plan for construction till 06/02/2016 was attributable to the claimants because of suppression of the location of kharab land running in the middle of the schedule area? 7) Whether the alleged delay in sanctioning of the layout plan on 06/02/2016 is not attributable to the respondent as contended? 8) Whether the respondent proves that by virtue of the parties entering into supplementary deed dated 05/05/2016, there was implied extension of time for the completion of the project? 9) Whether the respondent proves that it has incurred loss and damages due to the alleged fraud violation of the terms and conditions of the Joint Development Agreement in terms of clause No.17.2 of the Joint Development Agreement by the claimants and hence claimants are liable to indemnify the respondent? 10) Whether the respondent proves that there is a short-fall with the sital area as per clause No.4.2 of the Joint Development Agreement? 11) What award / order?” 19. It is stated that, the learned Arbitrator has decided the dispute by stating in paragraph No.67 under issue No.11 as under: “67. Issue No.11: In view of the foregoing discussion and findings on the issues, the following award is passed: “AWARD (i) The claim petition is allowed in part. The claimants are entitled to compensation at the rate of Rs. It is stated that, the learned Arbitrator has decided the dispute by stating in paragraph No.67 under issue No.11 as under: “67. Issue No.11: In view of the foregoing discussion and findings on the issues, the following award is passed: “AWARD (i) The claim petition is allowed in part. The claimants are entitled to compensation at the rate of Rs. 1,28,925/- (Rupees One Lakh Twenty Eight Thousand Nine Hundred and Twenty Five only) per month being 45% deficit in the implementation of the project vide JDA, for the period from 06.07.2017 to 23.05.2019 with interest at 12% per annum on the amount of compensation due till the date of claim petition 02.05.2018 and thereafter at 9% on the amount due as compensation till realisation. (ii) The respondent to bear the cost of arbitration of the claimants and bear his own. (iii) It is made clear that both the parties are entitled to share the sites released by Anekal Town Planning Authority in the sital area developed in accordance with the sharing ratio as per Rectification Deed dated. 19.11.2015 and Supplementary Agreement dated 05.05.2016 out of the 70% of the sites released. (iv) The claimants shall refund the balance of refundable deposit of Rs.60,00,000/- (Rupees Sixty Lakhs only) if any, after deducting/adjusting the amount payable by the respondent as per award passed herein. The stamp duty is payable as per Karnataka Stamp Act.” 20. The award dated 09.01.2020 has been the subject matter of challenge made by the claimants/ appellants before the Trial Court under Section 34 of the Act of 1996. The Trial Court had framed two points for its consideration, the same being: “1) Whether the applicants/claimants have made out a ground u/s 34 of the Arbitration and Conciliation Act to set aside the impugned award passed by the 2nd respondent in A.C.No.94/2018? 2) What Order?” 21. On points No.1 and 2, the Trial Court has stated as under: “7. POINT No.1:- The execution of registered Joint Development Agreement and also power of attorney by applicants/claimants in favour of respondent in respect of their property measuring 9 acres 22 guntas is not in dispute. 2) What Order?” 21. On points No.1 and 2, the Trial Court has stated as under: “7. POINT No.1:- The execution of registered Joint Development Agreement and also power of attorney by applicants/claimants in favour of respondent in respect of their property measuring 9 acres 22 guntas is not in dispute. It is also not in dispute that in the registered Joint Development Agreement there is a clause at clause (8) and clause (11) more particularly 11.1 that respondent shall develop the properties of applicants/claimants after securing the sanction plan from concerned authority and deliver the share of applicants/claimants within a period of 15 months from the date of registration of this JDA with a grace period of two months. It is also not in dispute that respondent has not completed the project within 17 months as agreed under clause 11 of the Joint Development Agreement. The learned arbitrator while considering the contentions of parties framed as many as 11 issues. While considering Issue No.1, 2, 4 to 7 together, the learned arbitrator at para-4 of his award extracted clause (8) of the Joint Development Agreement and also clause 11 and held that respondent failed to complete the project within the agreed period of 17 months and also failed to establish that the delay was due to force majeure and thereby considered some of the claims of applicants/claimants under Issue No.1 and 3. While adjudicating the matter between the parties, the learned arbitrator has discussed each and every facts and circumstances raised by the parties and also citation relied upon by them. Under such circumstances, contention of applicants/claimants that the impugned award is perverse in respect of Issue No.2 and 4 holds no water. That apart, Hon'ble Supreme Court in DELHI AIRPORT METRO EXPRESS PVT. LTD., VS METRO RAIL CORPORATION LTD (2021) SCC ONLINE SC 695 in para 26 & para 27 of the judgment laid down the parameters of interference with an arbitral award on the ground of patent illegality as under: (i) The patent illegality should be an illegality which goes to the root of the matter and every error of law committed by an arbitral tribunal would not fall within the expression of 'patent illegality'. (ii) Erroneous application of law cannot be categorized as patent illegality. (iii) Contravention of law not linked to public policy or public interest is beyond the scope of expression 'patent illegality'. (ii) Erroneous application of law cannot be categorized as patent illegality. (iii) Contravention of law not linked to public policy or public interest is beyond the scope of expression 'patent illegality'. (iv) The courts are prohibited to re appreciate the evidence to conclude that award suffers from patent illegality appearing on face of it as court do not sit in appeal against an arbitral award. (v) An award can be interfered with on the ground of patent illegality when an Arbitrator takes a view which is not even a possible view and interprets a clause in the contract in such a manner that no fair minded or reasonable person would or if the Arbitrator commits an error of jurisdiction by wandering outside the contract and deals with matters not allotted to it. (vi) An arbitral award stating no reasons for its findings would make itself susceptible to challenge on the ground of patent illegality. (vii) The conclusions of an Arbitrator which are based on no evidence or have been arrived at by ignoring vital evidence are perverse and can be set aside on the ground of patent illegality. Similarly, the consideration of documents, which are not supplied to the other party would render a finding recorded by the Arbitrator perverse and the same would fall within the expression 'patent illegality'. (viii) Explanation (1) amended by 2015 Amendment Act clarifies the expression 'public policy of India' and its connotations for the purposes of reviewing arbitral awards. It has been made clear that an award in conflict with public policy of India only when it is induced or affected by fraud or corruption or is in violation of Section 75 or Section 81 of the 1996 Act, if it is in contravention of fundamental policy of India law or if it is in conflict with most basic notions of morality or justice. (ix) The contravention of a statute only if is linked to public policy or public interest is ground fro setting aside the award as being at odds with the fundamental policy of Indian law. (ix) The contravention of a statute only if is linked to public policy or public interest is ground fro setting aside the award as being at odds with the fundamental policy of Indian law. Further, Hon'ble Supreme Court in National Highways Authority of India vs. M.Hakeem held that "While considering petition u/s 34 there is no power to modify an arbitral award and the court may either dismiss the objections filed and uphold the award or set aside the award if the grounds contained in sub- section (2) and (2A) are made out." When this is settled position of law, the petition filed by the applicants/claimants to set aside portion of the award is not at all maintainable. Even otherwise, the learned arbitrator by framing as many as 11 Issues discussed each and every claim and contentions raised by respective parties and passed the impugned award. Section 34 of the Act does not contemplate partly setting aside of the award by the modification of the award. If an award is found to be vitiated by any one of the grounds set out in Sec. 34 of the Act, it has to be set aside in its entirety. It does not contemplate partly setting aside of the award or modification of the award. As I have already stated, the learned arbitrator while considering the claim petition filed before him by the applicants/claimants allowed the same in part by discussing the various circumstances that has taken place between the parties. There is no grounds made out by the applicants/claimants herein to separate the award only in respect of the issues which were answered against them. The finding of the learned arbitrator is based on evidence placed by respective parties before him. Accordingly and also relying upon the principles laid down by Hon'ble Supreme Court in the citation of National Highways Authority of India case, I have answered Point No.1 in the Negative. 8. Point No.2: In view of my finding on Point No.1, I proceed to pass the following ORDER The petition filed by applicants/claimants under Section 34 of the Arbitration and Conciliation Act, 1996 seeking to partly set aside the award passed by the 2nd respondent in A.C. No.94/2018 dated dismissed with cost. 09.01.2020 is Accordingly award passed by 2nd respondent in A.C. NO.94/2018 is confirmed.” 22. Despite notice, there was no appearance for respondent No.1 on 13.01.2025, though Sri. 09.01.2020 is Accordingly award passed by 2nd respondent in A.C. NO.94/2018 is confirmed.” 22. Despite notice, there was no appearance for respondent No.1 on 13.01.2025, though Sri. Siddharth Suman, Advocate, has filed vakalath for respondent No.1 on 02.06.2025, after the appeal was reserved for judgment. Respondent No.2 being an Arbitrator, notice to him was dispensed with. We find that, the appellants have raised 38 grounds in challenge to the award. The Trial Court except noting the position of law in terms of the judgments of the Hon’ble Supreme Court in the cases of Delhi Airport Metro Express (P) Ltd. -Vs.- Delhi Metro Rail Corporation Limited [(2022) 1 SCC 131] and also National Highways Authority of India -Vs.- M. Hakeem and Another [ (2021) 9 SCC 1 ] , has not dealt with the grounds or the submissions made. It has dismissed the petition filed under Section 34 of the Act of 1996. The Trial Court has said that, in view of the scope of Section 34 of the Act of 1996, the award cannot be interfered with. In other words, the Trial Court except referring to the proposition of law in view of the interpretation given by the Hon’ble Supreme Court to Section 34 of the Act of 1996, has not dealt with the grounds urged by the appellants and applied the law to those grounds. In that sense, the order of the Trial Court was overlooking the grounds urged by the appellants. This is not the way the Trial Court should have dealt with the issue. It should have considered the grounds and the submissions made by the counsel for the appellants and deal with the same by applying the law laid down by the Hon’ble Supreme Court and this Court and should have decided the petition under Section 34 of the Act of 1996. In the absence of the same, it must be held that, the order of the Trial Court is an unreasoned order. The impugned order of passed by the Trial Court needs to be set aside. We do so accordingly and remand the matter back to the Trial Court for a fresh decision on the petition under Section 34 of the Act of 1996 by hearing the counsel for the parties in accordance with law. The appeal is disposed of as allowed No costs.