Bombay High Court
John Peter Fernandes vs Saraswati Ramchandra Ghanate And ... on 30 March, 2017
Bench: Anoop V. Mohta
1 APPEAL NO.475 of 2009
Sudhir Rane
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
O.O.C.J.
APPEAL NO.475 OF 2009
IN
ARBITRATION PETITION NO.275 OF 2006
John Peter Fernandes
Aged about 36 years, Indian Inhabitant
St. Paulin No. 175/D, Near Doulars
Colony, Wadala (East),
Mumbai - 400 037
...APPELLANT/
Orig. Respondent No. 1
VERSUS
1. Saraswati Ramchandra Ghante
aged about 40 years, Indian Inhabitant
Occupation - business, residing at
12 Bhupal House, Naigaon Society
S.M. Jadhav Marg, Dadar
Mumbai - 400 014.
2. Ramakant Ramchandra Ghanate
aged about 40 years, Indian Inhabitant
Occupation - Business also constituted
attorney of Respondent No.1, residing
at 12 Bhupal House, Naigaon Society,
S.M. Jadhav Marg, Dadar,
Mumbai - 400 014.
...RESPONDENTS/
Orig. Petitioners
3. Deepak L. Thakkar
aged about 28 years, Indian Inhabitant,
Occupation - Business, residing at
Gour "B" Nirmala Niwas, Ground floor,
Aaimai, Merwagadi Street, Parel,
Mumbai - 400 012.
...RESPONDENT/
Orig. Respondent No.2
::: Uploaded on - 01/04/2017 ::: Downloaded on - 02/04/2017 01:04:54 :::
2 APPEAL NO.475 of 2009
...
Mr. Rushabh Shah i/b. Bptist D'Souza for
Appellant.
Mr. Rohaan Cama i/b. Shriram S. Redij for
Respondent Nos. 1 & 2.
...
CORAM: ANOOP V. MOHTA AND
P.R. BORA, JJ.
...
DATE OF RESERVING THE JUDGMENT : 01.02.2017
DATE OF PRONOUNCING THE JUDGMENT : 30.03.2017
...
JUDGMENT: (Per P.R.Bora, J.)
1. The appellant has preferred the present appeal
against the judgment and order dated 03.11.2006 passed
by the learned Single Judge in Arbitration Petition No.275
of 2006. The learned Single Judge has allowed the
Arbitration Petition and has thereby set aside the arbitral
award impugned in the said petition.
2. The facts which are relevant for decision of the
present appeal in brief are thus:
Respondent Nos. 1 and 2 had agreed to sell to
the appellant the premises belonging to them along with
the business being run therein, for the consideration of
Rs.35 Lakh. Accordingly, an agreement dated 06.10.2003
3 APPEAL NO.475 of 2009
was executed between the appellant and the respondent
Nos. 1 and 2. The said agreement was duly registered and
duly stamped. It is the case of the appellant that, he had
paid a sum of Rs. 11.5 Lakh to the respondents by way of
advance amount towards the consideration of the said
property before entering into an agreement of sale dated
06.10.2003. It is the further case of the appellant that
since the respondents failed to perform their part of the
agreement though he was ready and willing to perform his
part. He filed a Suit No.2410/2004 against the respondent
Nos. 1 and 2 in the High Court for specific performance of
the agreement dated 06.10.2003. In the aforesaid suit,
notice of motion was taken out by the appellant seeking
interim relief, however same was rejected. Against the
said order, the appellant preferred an Appeal No.322 of
2005 before the Division Bench of this Court. In the
aforesaid appeal, the appellant and respondent Nos. 1 & 2
filed consent terms, whereby they both consented to refer
the dispute between them to the Arbitrator. By consent
the dispute was referred to the arbitration of the learned
Arbitrator Shri D.D. Madan. Both the parties filed their
respective statements before the arbitrator with the
4 APPEAL NO.475 of 2009
supporting evidence. The learned arbitrator passed the
award on 03.02.2006 and thereby partly allowed the
claim of the appellant. The learned Arbitrator though
refused the relief of specific performance, directed
respondent Nos. 1 and 2 to refund the sum of Rs.11.5
Lakh to the appellant with interest thereon. Being
aggrieved by the award so passed, respondents filed
Arbitration Petition No.275/2006 challenging the said
award. The learned Single Judge after hearing the parties
allowed the said petition and set aside the said award.
The appellant has challenged the said order by filing the
present appeal.
3. Mr. Rushabh Shah, learned Counsel appearing
for the appellant, assailed the impugned order on various
grounds. Learned Counsel submitted that, the learned
Single Judge manifestly erred in coming to the conclusion
that the arbitrator has excluded from consideration the
relevant material and further that the finding recorded by
the arbitrator is contrary to the material on record.
Learned Counsel further submitted that, the learned Single
Judge has failed in appreciating that the forfeiture clause
5 APPEAL NO.475 of 2009
in the agreement dated 06.10.2003 is inconsequential.
Learned Counsel further submitted that the learned Single
Judge has kept out of consideration the receipts at Exhibit
11 to 13 evidencing the payment of Rs.5 Lakh to the
respondent by the appellant and by considering only
receipt at Exhibit 14, has recorded the conclusion that the
arbitrator has excluded certain material from consideration
while passing the award. Learned Counsel further
submitted that, the learned Single Judge has also not
considered the observation made by the learned arbitrator
to the effect that the evidence of the appellant was found
by the arbitrator to be more dependable and reliable,
whereas the evidence adduced by the respondents did not
inspire any confidence. Learned Counsel further submitted
that, the learned arbitrator has duly appreciated the
evidence brought before him and has passed well reasoned
order. Learned Counsel therefore prayed for setting aside
the order passed by the learned Single Judge and to
confirm the award passed by the learned arbitrator.
4. Mr. Rohaan Cama, the learned Counsel
appearing for the respondents supported the order passed
6 APPEAL NO.475 of 2009
by the learned Single Judge. Learned Counsel submitted
that, the arbitrator has passed an award in favour of the
appellant thereby directing the respondents to refund the
amount of Rs.11.5 Lakh to the appellant with interest
@ 18% p.a. thereon, presuming firstly that the aforesaid
amount was in fact received to the respondents and
secondly that there was no such clause in the agreement
dated 06.10.2003 permitting forfeiture of the said amount
by the respondents. Learned Counsel invited our attention
to the agreement dated 06.10.2003 and more
particularly to the clause therein to the effect that, on
willful default on the part of the purchaser, the vendor
shall be entitled to forfeit the earnest money. The learned
Counsel submitted that in spite of the aforesaid specific
clause in the agreement, the learned arbitrator has
observed that there is no forfeiture clause in the said
agreement. Learned Counsel submitted that, no more
evidence is required to arrive at the conclusion that the
award passed by the learned arbitrator is contrary to the
evidence on record.
5. Learned Counsel further submitted that the
7 APPEAL NO.475 of 2009
learned Single Judge has rightly set aside the finding
recorded by the Arbitrator to the effect that the receipts at
Exhs. 11 to 14 establish that Rs. 10 lakhs were received by
respondent nos. 1 and 2. Learned Counsel submitted
that, according to appellant himself, the amount of Rs. 5
lakhs was not paid by him by cheque as is mentioned in
the receipt at Exh.14 and the said amount was, according
to him, he has paid in cash. However, there was no
receipt executed by respondent nos. 1 and 2 for having
received the said sum of Rs. 5 lakhs by cash. Learned
Counsel submitted that in the circumstances, the finding
arrived at by the learned Arbitrator was not sustainable.
6. Learned Counsel submitted that, the aforesaid
were the two main grounds which made the learned Single
Judge to arrive at a conclusion that the learned Arbitrator
had excluded from the consideration the relevant material
and the findings recorded by him are contrary to the
material on record. In the circumstances, according to the
learned Counsel, no error has been committed by the
learned Single Judge in setting aside the award passed by
the learned Arbitrator. Relying on the Judgment of the
8 APPEAL NO.475 of 2009
Hon'ble Apex Court in the case of Wander Ltd. And anr.
Vs. Antox India P. Ltd 1990 (Supp) SCC 727 and more
particularly the observations made by the Hon'ble Apex
Court in Para No.13 and 14 of the said judgment, the
learned Counsel submitted that, the Appellate Court would
normally not be justified in interfering with the exercise of
the discretion by the learned Single Judge, in an appeal
solely on the ground that if it had considered the matter at
the trial stage it would have come to a contrary
conclusion. The Hon'ble Apex Court, in the aforesaid
judgment has observed that if the discretion has been
exercised by the Trial Court reasonably and in a judicial
manner the fact that the Appellate Court would have taken
a different view may not justify interference with the Trial
Court's exercise of discretion. Learned counsel submitted
that, the learned Single Judge has exercised its discretion
reasonably and in a judicial manner and therefore no
interference is required in the impugned order.
7. We have carefully considered the submissions
advanced by the learned Counsel appearing for the
respective parties. We have also perused the impugned
9 APPEAL NO.475 of 2009
order, the award passed by the Arbitrator and the other
material on record. The learned Single Judge has set aside
the Arbitral Award mainly on the ground that though there
is a specific clause in the agreement of sale dated
6.10.2003, to the effect that, " in the event of any wilful
default on the part of the purchaser, the vendor shall be
entitled to forfeit the earnest money or deposit", the
learned Arbitrator has directed the refund of the said
amount observing that there is no forfeiture clause in the
said agreement. We have carefully perused the
agreement dated 6.10.2003. No doubt, there is a
forfeiture clause in the said agreement but the question
arises as to which amount was to be forfeited on the
strength of the forfeiture clause in the said agreement.
8. Clause 1A of the said agreement, in fact,
carries an averment that the total consideration of Rs.35
lakhs was already paid by the purchaser to the vendor and
that the vendor has admitted and acknowledged the
receipt of the said payment. If one goes by the recitals as
aforesaid in the said agreement, there was no question of
any default since the entire consideration was shown to
10 APPEAL NO.475 of 2009
have been paid before signing of the said agreement.
Consequently, when there was no possibility of any default
on the part of the purchaser in payment of consideration
amount, forfeiture clause was inconsequential. It is,
however, also the matter of record that though the
aforesaid clause connotes that the entire consideration of
Rs. 35 lakhs was paid by the present appellant and was
received by present respondent nos. 1 and 2, the appellant
himself has clarified that he had paid only a sum of Rs.
11,50,000/- to respondent nos. 1 and 2 before signing the
said agreement. It has also to be stated that respondent
nos. 1 and 2 have denied to have received any such
amount. The fact, however, remains that the aforesaid
agreement does not contain any information that a sum of
Rs.11,50,000/- was paid by the purchaser to the vendor.
The said agreement also does not contain any information
as to how much amount had remained to be paid by the
purchaser to the vendor out of the total consideration fixed
or no amount was paid by the purchaser as contended by
respondent nos. 1 and 2. It is also not mentioned in the
said agreement as to what was the time schedule for
making such payment by the purchaser. The said
11 APPEAL NO.475 of 2009
agreement does not prescribe any outer limit within which
the purchaser was required to pay the entire amount of
consideration. Unless a period is prescribed for making
the payment and unless the amount is specified, the
default clause cannot be pressed into service. The
agreement dated 6.10.2003 lacks both the particulars.
Most importantly, there is nothing in the said agreement to
indicate that the time was the essence of the said contract.
In absence of the vital particulars as aforesaid, there was
no meaning to the forfeiture clause; in fact, it was
inconsequential.
9. Material on record reveals that the amount of
Rs.11,50,000/- which has been directed to be refunded by
respondent nos. 1 and 2 to the appellant in the award
passed by the Arbitrator, was, according to the appellant,
paid by him to respondent nos. 1 and 2 before the date of
the aforesaid agreement. The aforesaid contention is, of
course, disputed by respondent nos. 1 and 2. After the
date of execution of the aforesaid agreement, even
according to appellant, no amount was paid by him to
respondent nos. 1 and 2. As noted by us earlier, the
12 APPEAL NO.475 of 2009
agreement does not contain any information whether any
amount was paid by appellant to respondent nos. 1 and 2
towards consideration before execution of the said
agreement and, if yes, how much amount was paid.
Thus, whether forfeiture clause in the said agreement
would apply to the amount allegedly paid by the appellant
before execution of the said agreement is a matter of
scrutiny. The learned Single Judge has not considered
this aspect.
10. Considering the contentions raised by
respondent nos. 1 and 2, that the appellant had not paid a
single pie to them towards consideration, much less the
amount of Rs.11,50,000/- as alleged by him, it was
immaterial for them whether the agreement dated
6.10.2003 contains any forfeiture clause or not. These
respondents, in their written statement filed before the
Arbitrator, had also taken the same stand that since no
payment was received, there was no question of any
refund or forfeiture. In view of the above, it appears to
us that merely relying on the forfeiture clause contained in
the agreement, the learned Single Judge could not have
13 APPEAL NO.475 of 2009
set aside the award passed by the learned Arbitrator on
the said ground excluding from his consideration the other
material on record.
11. Setting aside the award passed by the
arbitrator, directing refund of Rs.11,50,000/- by observing
that there is no forfeiture clause in the agreement, merely
on the ground that there is a forfeiture clause in the said
agreement, and without considering the said agreement as
a whole and without considering other evidence on record,
impliedly leads to an inference that the appellant had paid
at least some amount. Considering the stand taken by
respondent nos. 1 and 2, though the order passed by the
learned Arbitrator was liable to be set aside, it ought to
have been set aside by holding that the appellant has not
paid any amount to respondent nos. 1 and 2 and not on
the ground that the agreement contains a forfeiture
clause.
12. From the pleadings of the parties, it is
evident that the real dispute is in respect of payment of
Rs.11,50,000/-. It is the assertion of appellant that he
14 APPEAL NO.475 of 2009
had paid that amount to respondent nos. 1 and 2 whereas
respondent nos. 1 and 2 had candidly denied to have
received any such amount. The learned Arbitrator, in the
latter part of the order, has dealt with the issue of
payment. The learned Single Judge has held the finding
recorded by the learned Arbitrator, that, "the receipts at
Exhs. 11 to 14 establish that an amount of Rs. 10 lakhs
was received by the vendor" to be unsustainable on the
ground that the appellant has failed to prove the payment
made under receipt at Exh.14. According to the learned
Counsel for the appellant, the finding so recorded by the
learned Single Judge is against the evidence on record.
For a moment, even if it is accepted that the payment
allegedly made vide Exh.14 is not proved, the fact
remains that the learned Single Judge has not recorded
any adverse finding in regard to payment of Rs. 5 lakhs
allegedly made by the appellant vide receipts at Exhs. 11,
12 and 13. The learned Single Judge in paragraph no.3
of the impugned order has observed that the purchaser
had relied on several receipts to prove that he had paid
various sums to the vendor on various dates. Needless
to state that Exh.11 to Exh.14 are the said receipts. As
15 APPEAL NO.475 of 2009
noted earlier, the discussion made by the learned Single
Judge is restricted to the alleged payment of Rs. 5 lakhs
under receipt at Exh.14. It is observed by the learned
Single Judge that perusal of the receipt at Exh.14 though
shows that by that receipt the vendors have acknowledged
receipt of Rs.5 lakhs by cheque even according to the
purchaser, the said amount of Rs. 5 lakhs was not paid by
cheque but was paid in cash. Since the purchaser did not
produce on record the receipt executed by vendors for
having received the amount of Rs. 5 lakhs in cash, the
learned Single Judge proceeded to hold that the said
payment has not been proved by the appellant. Learned
Single Judge has not recorded any such finding as about
payment allegedly made by the appellant under receipts at
Exhs. 11, 12, and 13, which may lead to an inference that
the amount of Rs. 5 lakhs under the said receipts was
received to the respondent nos.1 and 2 and which may
also have an effect of rejecting the contention of present
respondent nos./ 1 and 2 that they have not received a
single pie from the appellant. It appears to us that the
learned Single Judge instead of recording such a vague
finding, must have recorded an unambiguous and clear
16 APPEAL NO.475 of 2009
conclusion whether the evidence on record supports the
contention of the appellant that he has paid
Rs.11,50,000/- to respondent nos. 1 and 2 or the
contention raised by respondent nos. 1 and 2 has to be
sustained that the appellant did not pay them a single pie.
13. It, thus, appears to us that after legality and
correctness of the finding recorded by the learned
Arbitrator, to the effect that the appellant has paid an
amount of Rs.11,50,000/- to respondent nos. 1 and 2, is
decided; either confirming, partly confirming or rejecting
it, then only the next question will fall for consideration,
whether the order passed by the learned Arbitrator
directing refund is to be sustained, or is to be set aside. If
it is held that there is no evidence showing that any
payment was made by the appellant to respondent nos. 1
and 2, the question of refund or forfeiture both would not arise.
However, if it is held that payment of Rs. 11,50,000/- or
payment of any sum, was made by the appellant to respondent
nos. 1 and 2 by way of earnest money / part payment,
the further question will have to be answered whether
the order passed by the Arbitrator, directing refund of the said
17 APPEAL NO.475 of 2009
amount was correct or was liable to be set aside. In such
a contingency, it would be further required to examine
whether the default committed by the appellant in
completing the transaction which was the subject matter
of the agreement dated 6.10.2003, was willful or
otherwise, because unless the said fact is established, the
grant of forfeiture of the earnest money amount may not
be permissible. We need not to elaborate evidence on
this aspect, suffice it to say that, there is ample evidence
on record which will have to be scrutinized before
recording any such finding whether the default committed
by the appellant was willful or otherwise. The learned
Single Judge in his impugned order has not even touched
to this aspect.
14. It has to be further mentioned that according to
respondent nos. 1 and 2, the appellant had executed a
deed of cancellation on 19th of December, 2003,
contending therein that since he failed in making
arrangement of finance in time, though sufficient time was
given to him by respondent nos. 1 and 2, he is inclined to
declare the agreement dated 6.10.2003 to have been
18 APPEAL NO.475 of 2009
cancelled from 1st of January, 2004. The appellant has
candidly denied to have executed any such document. It
appears to us that while deciding the issue of willful default
in complying with the agreement dated 6.10.2003, the
said cancellation deed may also have a material bearing.
The learned Single Judge has not even referred to the said
document and its impact on the transaction in dispute.
15. In the foregoing circumstances, we feel that it
would be in the interest of both the parties to remit back
the matter for its fresh decision. Hence, the following
order:
ORDER
1. The order passed by the learned Single Judge in
Arbitration Petition No.275/2006 dated 8th of November,
2006, is set aside.
2. The matter is remitted back to the learned
Single Judge to decide it afresh by giving due
consideration to the observations made in the body of the
present judgment and of course by giving due hearing to
the parties.
19 APPEAL NO.475 of 2009
3. The Appeal stands allowed in the aforesaid
terms.
( P.R.BORA) (ANOOP V.MOHTA)
JUDGE JUDGE
...
