Bombay High Court
Upendra Kantilal Thanawala And Ors vs Shreeram Builders on 5 March, 2024
Author: R.I. Chagla
Bench: R.I. Chagla
2024:BHC-AS:10500
1-arast-93127-2020.doc
JSN
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
ARBITRATION APPEAL (ST.) NO.93127 OF 2020
Upendra Kantilal Thanawala & Ors. ...Appellants
Versus
Shreeram Builders ...Respondents
WITH
ARBITRATION APPEAL (ST.) NO.5662 OF 2020
Shreeram Builders ...Appellant
Versus
Upendra Kantilal Thanawala & Ors. ...Respondents
----------
Mr. Sanjay Jain, Amrut Joshi, Nakul Jain with Sneha Patil and Vrinda
Samdani i/b. Maniar Srivastava Associates for the Appellant in ARA
ST No.93127 of 2020 and Respondent in ARAST No.5662 of 2020.
Mr. Girish Godbole, Senior Advocate i/b. Parag Tilak, Rahul Soman
and Deepashikha Godbole for the Respondents in ARAST No.93127
of 2020 and Appellant in ARAST No.5662 of 2020.
----------
CORAM : R.I. CHAGLA J
Reserved on : 6TH NOVEMBER, 2023
Pronounced on : 5TH MARCH, 2024
JUDGMENT :
1. By Arbitration Appeal (St.) No.93127 of 2020, the
Appellants have challenged the impugned judgment and order dated
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25th January, 2020 passed by the learned District Judge, Thane in
Civil Miscellaneous Application (Arbitration) No.35 of 2012 (for
short CMA No.35 of 2012), whereas in the Arbitration Appeal (St.)
No.5662 of 2020, there is challenge to the impugned judgment and
order dated 25th January, 2020 in so far as it dismisses Civil
Miscellaneous Application (Arbitration) No.76 of 2013 (for short
CMA No.76 of 2013) against the same arbitral Award passed by the
Majority Arbitral Tribunal dated 10th December, 2011. Both the CMA
No.35 of 2012 and CMA No.76 of 2013 were clubbed together and
decided by the impugned judgment and order dated 25 th January,
2020.
2. Both the Appellants have sought the setting aside of the
impugned judgment and Order in so far as it dismisses the respective
CMA No.35 of 2012 and CMA No.76 of 2013.
3. In order to consider the Arbitration Appeals, filed under
Section 37 of the Arbitration Act, it would be necessary to set out a
brief background of facts in both the Arbitration Appeals. For the
sake of convenience the Appellants and Respondents in Arbitration
Appeal (St.) No.93127 of 2020 are referred to.
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4. The Appellants in Arbitration Appeal (St.) No.93127 of
2020 - Upendra Kantilal Thanawala together with his brothers
Pankaj and Vyomesh equally own 1/3rd share of their late father
Kantilal's share in the larger property. Thus, Upendra, Pankaj and
Vyomesh are entitled to 1/9th share in the larger property.
5. By an Agreement for Development dated 11th February,
2003, Vyomesh granted development rights in respect of his 1/9th
share in the larger property in favour of Respondent No.1 including
his share in the Bungalow for and at consideration reserved
thereunder. It is necessary to note that under the Agreement for
Development, the larger property excluded the Bungalow under the
definition of the "said land" in recital I of the Agreement. This larger
property with the bungalow has been defined in Clause 12 of the
Agreement as "the said property". Under Clause 22 of the said
Agreement, Vyomesh has given possession of his 1/9th share in the
said land and not of the said property. Thus, it is contended by the
Appellants that Vyomesh's share in the Bungalow was never handed
over to the Respondent. Reliance has been placed by the Appellants
on the cross examination of Vyomesh in the arbitral proceedings
wherein Vyomesh has admitted that no part of the Bungalow was
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given to the Respondent (Vyomesh's Cross examination is at page 870
of Volume 3). Vyomesh was the Respondents' witness in the arbitral
proceedings.
6. The subject agreement was executed between the
Appellants and Respondents on 6th August, 2003 in respect of the
subject property agreed to be developed for at the consideration of
Rs.2,28,75,000/-. This consideration was arrived at calculating the
net FSI quotient at 25,000 Square Feet @ 915/- per square feet. A
sum of Rs.55,00,000/- was paid to the Appellants at the time of the
execution of the subject Agreement. It is noted that the subject
Agreement is stamped at 1% of the total consideration. The
contention of the Appellants in the arbitral proceedings was that the
subject agreement is a Development Agreement and not an
Agreement to Sell. They have relied upon the stamp duty paid on
Agreement to Sell at the contemporaneous period which had quotient
at 5% of the value of the Agreement and the Development
Agreement's quotient was at 1% of the value of the Agreement. Thus,
it is the contention of the Appellants that the Respondents had
approached the Appellants with an offer to develop the subject
property for construction of a shopping, commercial and residential
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complex ("the project"). The nature of the development has been
defined in the said Agreement.
7. Further, reliance has been placed on the clauses in the
subject Agreement, where the subject property excludes the
"excluded property" which includes the Bungalow on the said land.
Further, reliance has been placed on Clause 6 of the subject
Agreement wherein the balance consideration of Rs.1,73,75,000/-
was payable by the Respondents to the Appellants in 10 equal
installments. Each installment was for a sum of Rs.17,37,500/-. The
manner in which the installment was to be paid and the proportion
of each Appellants' share has been set out in Clause 7 of the subject
Agreement. The first installment was payable on 30th April, 2005,
2nd installment on 1st August, 2005 and 3rd installment payable on
1st June, 2006. Thereafter, successive installments were payable on
the 1st day of each fourth successive month. The parties agreed that
due payments shall be the essence of the Agreement. Reliance has
been placed on the evidence i.e. cross examination of Ramesh Mehta
(Respondent's partner) who agreed that time was intended to be
essence of the subject Agreement, (paragraph 39 of the Cross
examination of Ramesh Mehta at page 246 of Volume - I). Under
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Clause 37 of the subject Agreement, the Appellants were to execute a
Deed of Conveyance of the subject property along with the other
owner (which is the responsibility of the Respondents) in favour of
Respondents or their nominee including a Co-operative Housing
Society after the project was fully constructed. Further, Deed of
Conveyance was not to be executed till payments due under the
subject agreement, are paid to the Appellants.
8. It is necessary to note that the contention of the
Appellants in the arbitral proceedings was that the obligation to
execute the Deed of Conveyance is based on three pre-conditions,
namely, (i) Conveyance of the subject property will be executed along
with the conveyance of the properties of the other owners i.e.
Vyomesh and Madhukant's heirs share; (ii) time for conveyance will
arrive after the project is fully constructed, and (iii) all installments
and amounts are paid to the Appellants' under the subject
Agreement. Clause 47 of the subject Agreement, provided that
"notwithstanding anything contained in the subject Agreement or any
other Agreement with other legal heirs (especially with heirs of
Madhukant or Vyomesh), the Respondents will have no right, title,
claim or interest in the Excluded Property."
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9. The Appellants have placed reliance upon Clauses 52,
53,63 and 64 of the Subject Agreement to contend that a cumulative
reading of these Clauses reveal that notwithstanding anything
contained in the subject Agreement (including Clause 7) in case if
there is a default in payment of any installment on the due date, the
subject Agreement will come to an end along with rights of the
parties.
10. An Agreement for Development was executed by Sumati,
Hemal and Kamal Pillay (legal heirs of Madhukant) on 29th
September, 2003 in favour of the Respondents in respect of their
1/3rd share in the Larger Property. Under Clause 6 of that
Agreement, the Respondents inter alia undertook to satisfy the
liability of the owners to an extent of Rs.5 lakh as specified in
Annexure C to the Agreement dated 29th September, 2003.
11. On 9th February, 2005, the Respondent through their
Advocates' letter called upon the District Collector, Thane to issue
appropriate directions to DILR, Thane to execute the Order dated
30th April, 1987 to conduct survey of the Larger Property and effect
partition thereof.
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12. The Respondents for itself and on behalf of the
Appellants as well as on behalf of the heirs of the Madhukant filed a
civil suit being Suit No.199 of 2005 against the heirs of Prabhulal,
inter alia seeking injunction. An Appeal was preferred against the
order vacating the ad-interim relief being Appeal from Order No.724
of 2005.
13. This Court by order dated 23rd September, 2005 directed
that none of the parties shall create third party rights without leave
of the Trial Court. It is necessary to note that Vyomesh, Sumati,
Hemal and Kamal Pillay are parties to the Suit. The Appellants have
contended that the Deed of Conveyance executed by them in favour
of the Respondents is void for want of leave of the trial Court.
Further, it is necessary to note that Prabhulal along with Madhukant
and Kantilal each had 1/3rd share in the larger property. Thus, it is
contended that third party rights could not have been created
without leave of the Trial Court.
14. Mr. Rakesh Mehta, the partner of the Respondent No.1,
had handed over 10 A/c payee cheques to the Appellants bearing
cheque Nos.451165 to 451174, all dated 10th October, 2007, for an
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aggregate sum of Rs.34,75,000/-. It is necessary to note that these
cheques were not encashed by the Appellants on account of the
alleges breaches committed by the Respondents of clauses of the
subject Agreement.
15. The Respondents have contended that on account of non
deposit of the said 10 cheques, by its letter, dated 27th March, 2008,
the Respondents forwarded five cheques to the Appellant Nos.1 and 2
bearing cheques No.451460 to 451464 all dated 1st December, 2007
for an aggregate sum of Rs.17,37,500/-. In the said letter the
Respondents alleged that a sum of Rs.19.50 lakh was paid to Kantilal
during his lifetime of which Upendra, Pankaj and Vyomesh were
aware. It is further alleged that Upendra and Pankaj were to each
reimburse a sum of Rs.6,59,167/- towards consideration under the
Agreement. The Appellants have contended that there is no Clause or
provision in the subject Agreement entitling the Respondents to
appropriate the sum paid to Kantilal. The Appellants have in this
context relied upon Clause 51 of the subject Agreement which
provides that the parties have terminated all prior agreements and
arrangements and the subject Agreement is the Agreement governing
the rights and liabilities of the parties. Further, the Respondents in
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the said letter have recorded that payment towards last installment is
ready and attached a condition to execute necessary documents to
complete the transactions. Further, it is necessary to note that the
receipt of the letter has been denied by the Appellants.
16. The Appellants through their Advocates letter dated 9th
April, 2008 terminated the Agreement on account of breaches
committed by the Respondents. The Appellants called upon the
Respondents to take back monies paid by it under the subject
Agreement.
17. On 9th April, 2008, the Respondents through their
Advocates letter referring to the letter dated 27th March, 2008, sent
5 A/c payee cheques to Appellant No.2 for an aggregate amount of
Rs.17,37,500/-.
18. The Respondents through their Advocate letter dated 9th
April, 2008 referred to the letter bearing the same date and intimated
Appellant No.1 that 5 cheques were sent to Appellant No.2.
19. The Appellant through Advocates letter dated 16th April,
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2008 returned the cheques sent to them under letter dated 9th April,
2008.
20. The Respondents by their Advocates letter dated 25th
April, 2008 replied to the Appellants Advocate's letter dated 9th
April, 2008.
21. Thereafter the Arbitral Tribunal comprising of three
members was constituted.
22. The pleadings were filed in the arbitral proceedings. It is
the Appellants contention that in the statement of claim the
Respondents sought a direction against the Appellants to execute and
register a Deed of Conveyance of land which includes portion of the
Excluded Property against the receipt of balance consideration.
23. One Mr. Chandu Mirani, Mr. Ashwin Vasavada and Mr.
Mehul Vasavada filed a Suit against Shree Builder (Sister concern of
Respondent No.1), the Appellants, Mr. Ramesh Mehta. The Suit was
based on agreement between Shree Builder and Plaintiffs therein in
respect of land A. The Appellants share in the larger property was not
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in question in that Suit. The Appellants filed a say to the Interim
Application filed in the aforesaid Suit. It is necessary to note that the
Respondents have contended that on account of filing a say in the
said Suit, the Appellant has admitted that the Agreement was an
Agreement to Sell. The Appellants have disputed the context in which
their say was filed by contending that the subject matter of
arbitration was different and distinct. The Majority Award has relied
upon the Appellants say to arrive at a conclusion that the Agreement
was an Agreement to Sell.
24. The Arbitral Tribunal on 11th July, 2009 framed 16
points of disputes. Thereafter, on 26th June, 2010 with consent of
parties, the Arbitral Tribunal framed additional points of disputes.
25. On 10th December, 2011, the Majority Tribunal and the
Minority Tribunal passed the Majority Award and Minority Minority
Award respectively.
26. The Respondents filed the Section 34 Petition in January,
2012 challenging the Majority Award viz. the directions contained in
paragraph No.92 (b) and (d) and to modify paragraph No.92(c).
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27. The Application was made under Section 33(4) of the
Act on 7th February, 2012 by the Appellants for an additional Award.
The Majority Tribunal dismissed the Application under Section 33(4)
of the Arbitration Act on 18th February, 2012.
28. The Appellants filed the Section 34 Petition before this
Court challenging the Majority Award and Additional Award. This
Petition was returned to the District Court. The District Court by
order dated 29th March, 2017 dismissed the Appellants Section 34
Petition and allowed the Respondents Section 34 Petition.
29. The Appellants preferred two Appeals under Section 37
of the Arbitration Act in June, 2017 challenging the Order dated 29th
March, 2017 before this Court. By an Order of this Court dated 29th
June, 2019, the said Order dated 29th March, 2017 was set aside and
both the Petitions under Section 34 were remanded for fresh
consideration on its own merits.
30. The District Court at Thane by impugned Order dated
25th January, 2020 rejected the Appellants' Section 34 Petition as
well as the Respondents' Section 34 Petition and which impugned
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Order is the subject matter of challenge under Section 37 of the
Arbitration Act in the above Appeals before this Court.
31. Mr. Jain, the learned Counsel appearing for the
Appellants in Arbitration Appeal (St.) No.93127 of 2020, has
submitted that the instant case is governed under unamended
Section 34 of the Arbitration Act. This is in view of the applications
under Section 34 of the Arbitration Act having been preferred by the
parties in the year 2012. Thus, the amended Section 34 which applies
to Petitions/Applications filed on or after 23rd October, 2015, will
not apply to these applications under Section 34 filed prior to that
date. He has in this context placed reliance upon the decision of the
Supreme Court in Ssangyong Engineering and Construction V.
National Highways Authority of India1 wherein the Supreme Court in
paragraph 19 held that, Section 34 of the Arbitration Act as amended
will only apply to Section 34 applications that have been made to the
Court on or after 23rd October, 2015.
32. Mr. Jain has submitted that the District Court by
upholding the Majority Award by the rejection of the Section 34
1 (2019) 15 SCC 131.
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Petition/application preferred by the Appellants has erroneously
exercised equity jurisdiction under Section 28(2) of the Arbitration
Act and which is impermissible. Under this provision equity can be
exercised by the Arbitral Tribunal only by authorisation of both
parties and not otherwise. There was no such authorisation by the
parties and hence the Arbitral Tribunal being a creature of the
contract has no scope to exercise equity jurisdiction. Ignorance of this
mandate renders the Majority Award contrary to Section 28(2) of the
Arbitration Act. In this context he has placed reliance upon the
decision of this Court in Board of Control for Cricket in India V.
Deccan Chronicle Holding Ltd.2 wherein this Court had held that, the
Arbitral Tribunal under Section 28(2) is required to decide ex aequo
et bono or as amiable composite only if the parties expressly
authorise it to do so. The Arbitrator is bound to implement the
contractual clauses and cannot go contrary to them. He cannot
decide based on his notions of equity and fairness, unless the contract
permits it.
33. Mr. Jain has submitted that the Majority Award is in
contravention of the terms of the subject Agreement. This is in view
2 Commercial Arbitration (L) No.4466 of 2020 in 2021 SCC OnLine Bom 834.
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of the Majority Award directing the Appellants to execute a sale deed
of their 2/9th share in the Larger Property excluding (i) the
Appellants' share in the Bungalow, (ii) Garden in front and behind
the Bungalow and (iii) one room in Chawl No.1 and open court yard
of the said room adjacent to the Bungalow. The subject Agreement
specifically excludes the Excluded Property in its entirety. However,
this is not excluded by the Majority Tribunal whilst passing the
Majority Award. Further, Excluded Property being out of the scope of
the Agreement, the same was beyond the scope of the reference to
Arbitration. Thus, the Majority Tribunal has exceeded its scope and
ventured into areas which are beyond the subject Agreement.
34. Mr. Jain has placed reliance upon the decision of the
Supreme Court in the case of ONGC Vs. Saw Pipes3 wherein the
Supreme Court in paragraph 31 held that, the Court may set aside
the Arbitral Award if the same is against the terms of the Contract or
the Arbitral Tribunal deals with matters beyond the scope of
arbitration. He has submitted that Excluded Property was beyond the
Majority Tribunal's scope of reference and hence on this ground
alone, the Award is required to be set aside. He has further relied
3 (2003) 5 SCC 705.
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upon the decision of the Supreme Court in Delhi Development
Authority Vs. R.S. Sharma4 when the Supreme Court in Paragraph 21
held that an Award which is against the terms of the respective
contract is open to interference by the Court under Section 34 of the
Arbitration Act on the ground of patent illegality.
35. Mr. Jain has submitted that the Majority Award is in
contravention of unamended Section 28(3) of the Arbitration Act. It
is provided therein that the Arbitral Tribunal shall decide in
accordance with the terms of the contract and any award made in
violation of the terms of the contract violates this provision. He has in
this context placed reliance upon the decision of the Supreme Court
in BCCI(Supra) wherein it has been held that no contract can be read
in the manner the Award suggests. The Arbitral Tribunal cannot
rewrite a major contractual term to arrive at a view that is not even
possible.
36. Mr. Jain has submitted that the Majority Tribunal has
ignored the specific terms of the subject Agreement and which leads
to commission of jurisdictional error. He has submitted that
4 (2008) 13 SCC 80.
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cumulative reading of Clauses 3, 4 and 5 of the subject Agreement
indicates that the Appellants are entitled to further sum by way of
additional consideration under the subject Agreement. The Majority
Tribunal has ignored the specific clauses of the subject Agreement
and rendered the Majority Award. The Majority Tribunal has further
ignored that the Respondents had accepted that the consideration
under the subject Agreement was variable. Further consideration is to
be paid on or before last installment under the subject Agreement.
Therefore, it was imperative on the Respondents to have the building
plans sanctioned in respect of the subject Property. The Majority
Tribunal ought to have rejected the claim contained in the Statement
of Claim on the ground of non-performance of material terms of the
subject Agreement.
37. Mr. Jain has submitted that the construction /
interpretation of subject Agreement adopted by the Majority Tribunal
has led to substituting an entire new agreement for the parties, which
was never intended by the parties. He has placed reliance upon the
decision of this Court in Vilayati Ram Mittal Vs. Reserve Bank of
India5 wherein in paragraph 27 this Court has held that the Arbitrator
5 2017 SCC OnLine Bom 8479.
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being a creature of the contract ignores the specific clause of the
Contract, it would be a question of jurisdictional error and his award
could be corrected by the Court. He has submitted that the Majority
Award is one such case where there is ignorance of material terms of
the subject Agreement (on which the consideration is dependent),
the Majority Tribunal has committed a jurisdictional error. Thus, the
impugned Award of the Majority Tribunal requires correction.
38. Mr. Jain has placed reliance upon Clause 51 of the
subject Agreement which contains non-obstante clause and provides
that the subject Agreement shall be in super-cession of all prior
agreements between the parties and all rights between the parties,
inter se, under any prior agreement shall come to an end and are
extinguished.
39. Mr. Jain has submitted that the Majority Tribunal has
answered the issue as to whether the claimants prove that they have
paid Rs.19,50,000/- to the deceased Kantilal and the Respondents
had agreed to adjust the same towards consideration of the subject
Agreement in the affirmative. The Majority Tribunal has taken into
account a prior Agreement between the parties which could not have
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been taken into account. By virtue of Clause 51 of the subject
Agreement, all rights of the parties inter se under the prior
Agreement came to an end and were extinguished. Thus, the
Majority Tribunal has acted beyond the terms of the contract and
there is misapplication of mind on the part of the Majority Tribunal.
He has in this context relied upon the decision of the Supreme Court
in Vilayati Ram Mittal (supra).
40. Mr. Jain has submitted that the Majority Award has
inspite of granting specific performance to the Respondent also
awarded the alternative claim for damages raised by the Respondents
for a sum of Rs.23,21,19,982/- on the basis of loss of business profits.
This is solely based on the speculation that in the event of the
superior Court reversing the finding of specific performance granted
in favour of the Respondents, they are entitled to a sum of
Rs.23,21,18,982/- towards the grant of damages.
41. Mr. Jain has submitted that the Majority Tribunal has
failed to consider that the Respondents had not produced any
evidence to support and / or justify the sum of Rs. 35,00,00,000/-as
loss of business profits. The Respondents have not substantiated its
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claim for damages. The Respondents had in the Statement of claim
claimed a sum of Rs.41,46,49,688/- in the alternative towards grant
of damages in the event of refusal of decree of specific performance.
Thus, the Majority Award without any basis for grant of damages by
way of loss of business profits awarded the sum to the Respondents.
He has submitted that this is contrary to Section 73 of the Indian
Contract Act, 1872. The said provision mandates that damages are
required to pleaded as well as proved. Having failed to do so, the
Majority Tribunal in granting damages has acted contrary to the
fundamental policy of Indian Law. Mr. Jain has placed reliance upon
the decisions of the Supreme Court and this Court in support of the
above submission which are as under:-
(i) Anila Gautam Jain Vs. Hindustan Petroleum
Corporation Ltd. (2018) SCC OnLine Bom 917.
(ii) Murlidhar Chiranjilal Vs. Harishchandra Dwarkadas
and Anr., AIR 1962 SC 366.
(iii) Basanlingappa V. Mudibasappa, (2019) 5 SCC 418.
(iv) Punj Lloyd V. IOT, Arbitration Petition No.1323 of
2012.
(v) Kailash Nath Associates V. DDA, (2015) 4 SCC 136.
42. Mr. Jain has accordingly submitted that the Majority
Award suffers from patent illegality as it has awarded damages to the
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Respondents without any proof of damages caused to the
Respondents. He has submitted that this alternative claim awarded is
materially severable and the same ought to be set aside. He has
relied upon the decision of this Court in R.W. Tiwari Vs. Ircon
International Limited 6 in this context.
43. Mr. Jain has submitted that the Majority Award has
interpreted the subject Agreement to be an Agreement to Sell the
subject property which finding is an impossible interpretation. This is
contrary to the terms of the subject contract. He has submitted that
the value of the subject Agreement is Rs.2,28,75,000/- and the stamp
duty paid thereon is Rs.2,29,000/- (approximately 1% of
Rs.2,28,75,000/-). At the contemporaneous period, the stamp duty
leviable / payable on Development Agreement was quotient at 1% of
the value of the Agreement. Stamp Duty of 5% of the value of the
Agreement was attracted in case if the agreement in question was
Agreement to Sell or Agreement to Sale or conveyance, as the case
may be. In the instant case, the parties intended and understood the
Agreement to be one for Development.
6 2010 (I) MhLJ 547
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44. He has submitted that the Majority Award refers to
Clause 16 of the subject Agreement and holds that only in case of
Agreement to Sell does the obligation to make out a marketable title
arise. This overlooks the obligation of the Appellants in the subject
Agreement to make out marketable title to the Respondents in
respect of the subject property to ensure that they have the right to
transfer the development right in favour of the Respondent.
45. Further, the Majority Award by observing that the
possession of the subject property does not go back to the Appellants,
interpreted the subject Agreement to be an Agreement to Sell. This
overlooks the obligation under the subject Agreement being that
upon post construction of the Project proposed, the land was to be
conveyed to the Co-Operative Housing Society so that the question of
gaining back the possession does not arise. Further, the obligation of
the Respondents to bear costs of development in consideration of
Appellants permitting the Respondents to sell the flats or shops to be
constructed in the proposed building could never have been the basis
in the Majority Award to arrive at a conclusion that the Agreement in
question is an Agreement to Sell. Further, payment of taxes or cess,
by no stretch of imagination will suggest that the Appellants agreed
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to sell the subject Property. In any event, the payment of property
taxes is a matter of exercise of prerogative of the parties and the
Respondents undertook to pay the same during the period of
construction.
46. Mr. Jain has submitted that the reliance placed by the
Majority Award on the say of the Appellant No.1 in a Suit filed by
Chandu Mirani and two others is baseless. The context in which the
say was filed and the subject matter of the Arbitration were different
and distinct. The Suit was for specific performance against the sister
concern of the Respondents. The Majority Award has erroneously
relied upon the say to arrive at a conclusion that the Agreement was
an Agreement to Sell. This overlooks the settled position that a party
is not bound by the admission given in his pleading except for the
purpose of the Suit in which the pleading is delivered. He has in this
context placed reliance upon the decision of Ramabai Shriniwas
Nadgir Vs. The Government of Bombay7.
47. Mr. Jain has submitted that the Majority Award has
failed to consider the breach committed by the Respondents of the
7 AIR 1941 Bom 144.
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subject Agreement on account of default in payment of installments
and which dis-entitled the Respondents to specific performance of the
subject Agreement. He has submitted that the Majority Award has
observed that despite the 1st to 6th installments never being paid on
time as per the subject Agreement, the Appellants accepted it without
raising any dispute or protest that the same were being received
without prejudice to their rights under the Agreement. Further, the
Majority Award has held that since the Appellants failed to issue a
notice in terms of Clause 7 of the subject Agreement and offer a
period of 30 days to remedy the breach, no breach can be held to
have committed by the Respondents.
48. Mr. Jain has submitted that no part of the subject
Agreement can be read in isolation to interpret the terms thereof. He
has placed reliance upon the decision of the Supreme Court in South
East Asia Marine Engineering and Construction Ltd. V. Oil India Ltd. 8,
wherein the Supreme Court observed that a wide interpretation
cannot be accepted and the thumb rule of interpretation is that a
document should be read as a whole and so far as possible as
mutually explanatory.
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49. Mr Jain has submitted that cumulative reading of all
other clauses including Clauses 52 and 53 of the subject Agreement
would reveal that time was the essence of the subject Agreement.
Further, a part payment of the installment shall constitute a default
and in case if there is a default in payment of any installment on the
due date, the subject Agreement will come to an end along with
rights of the parties. Clause 52 is a non-obstante clause. Clause 52 of
the subject Agreement has overriding effect and will prevail over all
other Clauses of the Agreement. He has in this context relied upon
the decisions of the Supreme Court in Chandavarkar Sita Ratna Rao
Vs. Ashalata Guram9.
50. Mr. Jain has accordingly submitted that the
interpretation adopted by the Majority Tribunal is perverse. The
Majority Tribunal ought to have considered Clause 52 along with the
non-obstante provision contained therein which would only lead to
logical conclusion that the breach committed by the Respondents
entailed into putting an end to the subject Agreement.
51. Mr. Jain has submitted that the Respondents are not
9 (1986) 4 SCC 447.
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ready and willing to perform their part of the subject Agreement and
which is borne out from the fact that none of the installments were
paid on the due date of the subject Agreement. A party insisting on
performance has to perform its part unconditionally and as per the
terms of the contract and shall be ready and willing to perform until
the date of the Decree. No conditions can be attached or insisted by a
party who is seeking performance of the Contract. In the instant case,
the Respondents by letter dated 27th March, 2008 had made their
performance subject to a condition to have conveyance of the subject
Property in its favour. The Respondents had recorded that the
payment towards the last installment was ready and attached a
condition to execute necessary documents to complete the
transactions. This is impermissible. The Respondents cannot attach
any condition much less the present one to perform the subject
Agreement.
52. Mr. Jain has submitted that in the Statement of Claim the
Respondents have pleaded that it is ready and willing to pay the
entire balance in one stroke, if the Appellants are agreeable to
execute and register a Deed of Conveyance of the Appellants
Property.
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53. This was contrary to the terms of the Agreement. The
readiness and willingness have to be exhibited in respect of the entire
agreement. A party cannot choose not to perform or deny its
performance of the Agreement in its entirety. Further, the
Respondents have not expressed their readiness and willingness to
pay the additional consideration which is a material clause in the
subject Agreement. This tantamounts to a breach of the subject
Agreement.
54. Mr. Jain has submitted that an application had been
preferred by the Appellants for seeking as additional Award under
Section 33(4) of the Arbitration Act on the ground that the Majority
Award had not passed any direction with respect to payment of
additional consideration. The Application was summarily dismissed
by the Arbitral Tribunal on the ground that it was barred by
limitation relying on Section 33 of the Arbitration Act. However, the
Majority Tribunal upon dismissing the application on ground of
limitation had also considered the merits of the Application. This is
an error committed by the Majority Tribunal. The Majority Tribunal
ought not to have decided the Application seeking additional award
in a composite manner. He has placed reliance upon unreported
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judgment in Kotak Mahindra Bank Vs. R.C. Shah10, wherein this
Court held that dealing with application for condontion and the
merits of the main application at one and the same time, is liable to
result in a situation where a litigant may have a justifiable
apprehension that the view taken by the Tribunal on merits has
coloured its view on the issue of whether sufficient cause has been
shown. This practice is best avoided. He has accordingly submitted
that the Majority Tribunal committed grave error in deciding the
merits of the Application as well as assessing grounds seeking
condonation of delay together. This led to influencing the Majority
Tribunal in assessing the prayer seeking condonation of delay on
standalone basis.
55. Mr. Jain has submitted that the Majority Tribunal has
erroneously relied upon Section 5 of the Arbitration Act to observe
that the same will not allow the Tribunal to extend the period
prescribed under the Act. Section 5 of the Act deals with the scope of
judicial intervention. This is not applicable to the Arbitral Tribunal.
Under Section 43 of the Act, the provisions of the Limitation Act,
1963 are made applicable to the proceedings before the Arbitral
10 Writ Petition (L) No.2886 of 2011 dated 23rd January, 2012.
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Tribunal as if the same were Court proceedings. Thus, Section 5 of
the Limitation Act, 1963 is applicable under the instant case. The
Majority Tribunal ought to have applied the benefit of Section 5 of
the Limitation act, 1963 in order to meet the ends of justice.
Accordingly, the additional Award is ill-founded. Further, the
additional Award is bad on non-compliance of Section 31 of the
Arbitration Act as it is only signed by the two members of the
Tribunal and there is non-signing of the third member. An Award
which is contrary to the provisions of the Act is illegal and cannot be
sustained.
56. Mr. Jain has also submitted that the impugned Order of
the District Court which has upheld the Majority Award has failed to
appreciate the true purport of the subject Agreement. He has adopted
the above submissions with regard to challenge of the impugned
order of the District Court to the Majority Award.
57. Mr. Jain has submitted that it is settled law that an
objection as to jurisdiction of the Arbitral Tribunal which deals with
the subject matter of the dispute beyond the Agreement can be raised
at the stage of Section 34 of the Arbitration Act even if not raised
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under Section 16 of the Arbitration Act and the Court shall be
empowered to entertain the objection under Section 34 of the Act.
Further, assuming that such objection was not taken at the stage of
Section 34 of the Act but under Section 37 of the Act, the Court
entertaining an Appeal under Section 37 of the Act can interfere
invoking powers under Section 34(2A) of the Act with the Arbitral
Award on that ground. Thus, it is submitted that the parameters /
grounds available under Section 34 against the Arbitration Award are
equally available to the Court exercising powers under Section 37 of
the Arbitration Act. He has accordingly submitted that this Court set
aside the impugned Order passed by the District Court, Thane which
has upheld by the Majority Award and dismissed the CMA No.76 of
2013 which was filed by the Appellant under Section 34 of the
Arbitration Act, Further, the Majority Award as well as additional
Award of the Arbitral Tribunal requires to be set aside.
58. Mr. Girish Godbole, the learned Senior Counsel
appearing for the Respondents has submitted that the Appellants
have made submissions in respect of the Area of Bungalow Excluded
Area and the Larger subject Property when there is no pleading in
respect of the same in the CMA No.76 of 2013 filed by the Appellants
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before the District Court, Thane under Section 34 of the Arbitration
Act and neither the same has been argued before the District Court.
He has submitted that however considering scope and jurisdiction of
the Court under Section 37 of the Arbitration Act, the said factual
aspects cannot be considered by this Court in absence of common
pleading to that effect.
59. Mr. Godbole has submitted that the Respondents restrict
their claim to the 1/3rd plus 1/9th share as acquired from the heirs
of Madhukant and Vyomesh respectively and that it is true that the
Respondents have acquired proportionate rights and interest in the
Bungalow property. Further, while the Respondents were granted
development rights only of the subject property, the Respondents
have not relinquished their 1/3rd plus 1/9th right in the Bungalow
property. However, the Respondents have undertaken to respect the
right of undisturbed possession of the Bungalow of the Appellants.
60. Mr. Godbole has submitted that the Respondents do not
at this time wish to partition or claim their 2/9th share in the
Bungalow and other excluded property. However, they seek to retain
their rights and interest in the land below the Bungalow for future.
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61. Mr. Godbole has submitted that in respect of alleged
default in payment of installments from the 7th to the 10th
installment and time being the essence in respect of those payments,
the Appellants have admitted that there has been no written
complaints or issuance of any demand notice / reminder or a legal
notice in respect of any balance payment. This is borne from the cross
examination of Upendra Thanawalla, witness for the Appellants. The
Appellants have also admitted that there is no documentary evidence
to show that they have returned the 7th and 8th installment cheques
to the Respondents herein. Therefore, these admissions, coupled with
the clear findings of the District Judge under Section 34 of the
Arbitration Act that no notice of any nature whatsoever in respect of
default in payment was issued by the Appellant herein concludes that
there was a breach on part of the Appellants, sine they failed to issue
a reminder notice of 15 days as stipulated under Clause No.7 of the
said Agreement.
62. Mr. Godbole has submitted that there is no dispute in so
far as payment of the 1st to 6th installments by the Respondents are
concerned. The Arbitral Tribunal considered that before issuance of
termination notice by the Appellants, the Respondents issued cheque
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of Rs.34,75,000/- (7th and 8th installment together) on 10th
October, 2007. The receipt of which has been acknowledged by the
Appellants. Further, the 9th installment of Rs.17,37,500/- was sent by
RPAD on 27th March, 2008. He has submitted that all the cheques
were issued before the issuance of the Termination Notice. Further,
the finding of the Arbitral Tribunal in paragraph 66 of the Arbitral
Award is that the Respondents have paid Rs.19,50,000/- to Upendra
Thanawalla and his father. The Respondents by Advocates notice
dated 25th April, 2008 have indicated to the Appellants herein that
amount of Rs.19,50,000/- paid in cash would be adjusted against the
last installment (10th installment) to be paid as per the Agreement.
Accordingly, the Arbitral Tribunal as well as District Court have held
that the Respondents have always been ready and willing to pay its
consideration in entirety.
63. Mr. Godbole has submitted that the contingencies of
payment of installments and conveyances was depending upon three
scenarios. In any case, the first condition / contingency has been
fulfilled by the Respondents since they had acquired shares of the
other co-owners by Deeds of Conveyance. Further, only one of the
conditions amongst the others could have been fulfilled. He has
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submitted that while execution of the conveyance on a standalone
basis on fulfillment of only one condition, while the condition of
getting conveyance from the co-owners was fulfilled, only one of the
other conditions that is obtaining sanctioned plans or obtaining
conveyance from other owners could have been fulfilled and
accordingly has been fulfilled. He has submitted that the Respondents
are unable to apply for sub division of the subject property in absence
of a valid conveyance in their favour free from encumbrances.
Further, the Respondents could not apply for sanction of building
plans in respect of construction permissions since the Respondents,
till date, do not hold a clear and marketable title of the subject
property due to the litigation pending on the subject property.
64. Mr. Godbole has submitted that even after arbitral award
was passed, the Appellant herein had filed application for passing of
an additional award to include and / or issue further clarification
upon the rights of the Appellants herein regarding the increase in FSI
and allied rights. This application was rejected and an Appeal has not
been filed against the said decision. The decision has thus attained
finality.
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65. Mr. Godbole has submitted that the subject Agreement is
an Agreement to sell. At all places except one, the Appellants herein
are described as 'Vendor'. The Arbitral Tribunal has also held that
though the Agreement is titled as a Development Agreement, it is
indeed an Agreement for Sale. He has submitted that if it were a
Development Agreement, conveyance would not be envisaged under
the Agreement. Further, it would have contained relevant clauses for
handing over a part of the Development property and / or percentage
in profit and loss sharing.
66. Mr. Godbole has submitted that Clause 3 of the subject
Agreement specifically determines the consideration of the property
for Rs.2,28,75,000/- at price of Rs.915/- Sq.ft and further in case of
increase in FSI, the consideration will proportionately increase or
decrease. This clause clearly stipulates the intention of the parties
that the full price of the share of the land holders is required to be
paid to them. Further, under Clause 37 of the subject Agreement for
Sale, complete authority to execute the conveyance is given to the
purchasers and infact the purchasers has been given the power to
execute the conveyance as certified attorney of the Vendors. This
clause clearly indicates that the purport and nature of the instrument
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is not a Development Agreement but an Agreement for Sale and it is
a settled law that the heading or the bare words of an agreement or
instrument do not conclude the nature of the Agreement and the
Agreement as a whole is required to be considered the understand
the true nature and intention of the parties. He has submitted that
the taxes on the property are being paid by the Respondents under
Clause 26 of the subject Agreement. Mr. Godbole has submitted that
the Appellants have admitted in their say in SCS No.445 of 2008 that
they have agreed to sell the property to the Respondents. The said
say is filed in July, 2008, which is 4 months after the date of notice of
termination sent by the Appellants and therefore, this admission,
later in time also fortifies the stand of the Respondents that this is an
Agreement for Sale.
67. Mr. Godbole has submitted that it is well settled by the
Supreme Court in Haryana Tourism Ltd. Vs. Kandhari Beverages
Ltd.,11 that under Section 37 of the Act, the Court cannot enter into
merits of claim. The Award can only be set aside under Sections 34 /
37, only if award is found to be contrary to :- (i) fundamental policy
of Indian law; (ii) the interest of India; (iii) justice or morality or (iv)
11 (2022) 3 SCC 237.
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if it is patently illegal.
68. Mr. Godbole has also placed reliance upon the decision
of the Supreme Court in Parsa Kente Collieries Ltd. Vs. Rajasthan
Rajya Vidyut Utapadan Nigam Ltd.12, wherein the Supreme Court has
upon referring to its earlier decisions held that the Arbitral Tribunal
must decide in accordance with the terms of the contract, but if an
Arbitrator construes a term of the contract in a reasonable manner, it
will not mean that the award can be set aside on this ground. When a
Court is applying the "Public Policy" test to an arbitration award, it
does not act as a Court of Appeal and consequently errors of fact
cannot be corrected. He has submitted that in the present case, the
Arbitral Tribunal has considered the terms of the contract in a
reasonable manner and hence the award is not liable to be set aside.
69. Mr. Godbole has also relied upon the decision of the
Supreme Court in UHL Power Company Ltd. Vs. State of Himachal
Pradesh13, wherein the Supreme Court has held that the jurisdiction
conferred on Courts under Section 34 of the Arbitration Act is fairly
narrow. When it comes to the scope of an appeal under Section 37 of
12 (2019) 7 SCC 236.
13 (2022) 4 SCC 116.
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the Arbitration Act, the jurisdiction of an Appellate Court in
examining an Order, setting aside or refusing to set aside an award, is
all the more circumscribed. Further, the Supreme Court has held that
if there are two plausible interpretations of the terms and conditions
of the contract, then no fault can be found, if the learned Arbitrator
proceeds to accept one interpretation as against the other.
70. Mr. Godbole has further relied upon the decision of the
Supreme Court in Reliance Infrastructure Ltd. Vs. State of Goa14,
wherein the Supreme Court has in the context of the scope of
challenge to an arbitral award under Section 34 and the scope of
appeal under Section 37 of the Act referred to its decision in MMTC
Ltd. Vs. Vedanta Ltd.15 wherein it is held that it cannot be disputed
that interference under Section 37 of the Act cannot travel beyond
restrictions laid down under Section 34. The Court cannot undertake
an independent assessment of the merits of the award and must only
ascertain that the exercise of power by the Court under Section 34
has not exceeded the scope of the provision. The Supreme Court in
Ssangyong Engg. & Construction Co. Ltd. Vs. NHAI 16 has held that
14 2023 SCC OnLine SC 604
15 (2019) 4 SCC 163
16 (2019) 15 SCC 131
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patent illegality appearing on the face of the award, refers to
illegality as going to the root of the matter but which does not
amount to a mere erroneous application of the law. Re-appreciation
of evidence cannot be permitted under the ground of patent illegality
appearing on the face of the Award.
71. Mr. Godbole has submitted that the impugned order as
well as the Majority Award in so far it has been challenged by the
Appellants in the above Arbitration Appeal (St.) No.93127 of 2020
does not suffer from any patent illegality or perversity or is liable to
be set aside on any of the grounds of challenge under Section 34 of
the Arbitration Act.
72. Mr. Godbole has also made submissions with regard to
Arbitration Appeal (L) No.93127 of 2020 which has been preferred
by the Respondents herein / Appellants in the said Arbitration
Appeal.
73. Mr. Godbole has submitted that the exercise of discretion
under Section 20 of the Specific Relief Act, 1963 by Court in the
matters of passing of decree of specific performance cannot be used
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to the prejudice of an honest vendee, who was always ready and
willing to perform his part of the contract, and has not committed
any breach of the contract and who was forced to approach the Court
for seeking specific performance on account of wrongful termination
of the contract by the Vendor. He has submitted that learned District
Judge has completely overlooked this principle of settled law
regarding exercise of powers conferred under the Specific Relief Act,
1963.
74. Mr. Godbole has submitted that the Supreme Court in
Nirmala Anand Vs. Advent Corporation Ltd. 17 in paragraph 6 has held
that whether the purchaser is directed to pay an additional amount
to the seller, or converse, would depend upon facts and
circumstances of each case and while balancing the equities, the
Court must bear in mind who is the defaulting party.
75. Mr. Godbole has submitted that the learned District
Judge and the Arbitral Tribunal ought to have seen that power to
award enhanced compensation to a defaulting vendor was essentially
a power which is neither vested with the Arbitral Tribunal nor with
17 (2002) 8 SCC 146
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the Civil Court or the High Court.
76. Mr. Godbole has submitted that Arbitral Tribunal and
learned District Judge has completely misconstrued the ratio of the
Supreme Court judgment in the case of Gobind Ram Vs. Gian
Chand18. The judgment does not lay down a binding precedent, nor
does it hold that it is permissible for the Court to rewrite the contract.
In that case, the Respondent Vendee had voluntarily agreed to pay
additional amount of Rs.1 lakh to mitigate hardship which is caused
to the vendor in that case on account of the escalation in prices and
hence the additional compensation was increased to Rs.3 lakh. This,
at the highest, can be construed to be passed in exercise of
jurisdiction under Article 142 of the Constitution of India and does
not lay down any binding precedent.
77. Mr. Godbole has submitted that the learned District
Judge and Arbitral Tribunal has not considered the admitted fact that
the Claimant / Respondent herein has paid more than 82.03% of the
agreed consideration before initiation of the Arbitral Proceedings and
the omission to consider the said aspect while awarding additional
18 2009 (7) SCC 548
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amount to be paid by the claimant is erroneous. He has submitted
that the learned District Judge ought to have considered this
admitted fact whilst arriving at a figure of Rs.5490/- per square feet
allegedly payable by the Respondent herein to the Appellants herein.
Further, there was neither cogent evidence to support this rate nor
reasons were given by the Arbitral Tribunal as to how this rate was
arrived in paragraph 83 of the Award which has been upheld by the
learned District Judge. This is despite the Arbitral Tribunal noting
that at the time of execution of the agreement in question the rate
was Rs.915/- per square feet for total area of 25,000 sq.ft. Thereafter,
without assigning any reasons as to why the Claimant / Respondents
herein have been directed to pay the additional amount, particularly
when the Claimant / Respondents herein had not committed any
breach of the Agreement, the Arbitral Tribunal had held that the
Claimant / Respondents herein should pay six times of that amount
viz. Rs.5,490/- per square feet. This finding of the Arbitral Tribunal
was required to be modified and set aside by the learned District
Judge.
78. Mr. Godbole has submitted that there is no justification
for giving unnecessary bonanza to the Appellants herein, particularly
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after holding that the Appellants herein have committed breaches.
Thus, the Arbitral Tribunal could not have directed the Respondents
herein to pay additional price for the entire area.
79. Mr. Godbole has submitted that the impugned part of the
Award whereby the Arbitral Tribunal have directed payment of
additional consideration to a party who has committed breach, is
contrary to the public policy established in India.
80. Mr. Godbole has submitted that the Court is empowered
to partly modify an Award while exercising power under Section 34
and 37 of the Arbitration Act and has placed reliance upon the
decision of Poysha Oxygen Pvt. Ltd. Vs. Ashwini Suri and Ors. 19
paragraph 36 and 37 as well as the decision in Star Track Fasteners
Pvt. Ltd. Vs. Union of India20 wherein it has been held that the Court
can modify the Award if such part is severable.
81. Mr. Godbole has accordingly submitted that the
Arbitration Appeal (St.) No.5662 of 2020 be allowed and the
impugned order as well as the Arbitration Award which directs
19 2009 (112) DRJ 169
20 (2019) SCC OnLine Bombay 1453
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payments of additional consideration by the Respondents herein to
the Appellants herein requires to be set aside.
82. Mr. Jain has submitted that in view of the submissions in
Arbitration Appeal (St.) No.93127 of 2020 that the impugned award
itself is perverse and suffers from patent illegality and contrary to
public policy of India, the impugned award itself is required to be set
aside and cannot be severable and hence there is no merit in the
Arbitration Appeal (St.) No.5662 of 2020.
83. Mr. Jain has submitted that in any event it is well settled
that the Arbitral Tribunal cannot modify an arbitral award and there
are only two options viz. either to set aside the award or to uphold
the Award. Thus, there is no merit in the Arbitration Appeal (St.)
No.5662 of 2020 which seeks modification of the arbitral Award by
seeking a deletion of the additional amount to be paid by the
Claimants / Respondents herein to the Appellants which this Court
under Section 37 of the Arbitration Act has no power to do so.
84. Having considered the rival submissions in Arbitration
Appeal (St.) No.93127 of 2020, it would be necessary to first
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consider the objection taken by Mr. Godbole on behalf of the
Respondents that the Section 37 Court cannot consider the challenge
to the jurisdiction of the Arbitral Tribunal in dealing with the subject
matter of the dispute beyond the Agreement without there being any
pleading or ground raised in the Section 34 Petition. The Appellants
have contended that the Bungalow and other areas defined as
"Excluded Area" in the subject Agreement has been taken into
consideration by the learned Arbitrator although not being the
subject matter of dispute. In this context it is necessary to refer to the
decision of the Supreme Court in State of Chhattisgarh (Supra)
which has been relied upon by Mr. Jain on behalf of the Appellants,
in particular paragraph 23, which reads thus:-
"23. We are afraid, the plea of waiver taken against
the appellant-State on the ground that it did not raise
such an objection in the grounds spelt out in the
Section 34 Petition and is, therefore, estopped from
taking the same in the appeal preferred under Section
37 or before this Court, would also not be available to
the respondent-Company having regard to the
language used in Section 34(2A) of the 1996 Act that
empowers the Court to set aside an award if it finds
that the same is vitiated by patent illegality appearing
on the face of the same. Once the appellant-State had
taken such a ground in the Section 37 petition and it
was duly noted in the impugned judgment, the High
Court ought to have interfered by resorting to Section
34(2A) of the 1996 Act, a provision which would be
equally available for application to an appealable order
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under Section 37 as it is to a petition filed under
Section 34 of the 1996 Act. In other words, the
respondent-Company cannot be heard to state that the
grounds available for setting aside an award under
sub-section (2A) of Section 34 of the 1996 Act could
not have been invoked by the Court on its own, in
exercise of the jurisdiction vested in it under Section
37 of the 1996 Act. Notably, the expression used in the
sub-rule is "the Court finds that". Therefore, it does
not stand to reason that a provision that enables a
Court acting on its own in deciding a petition under
Section 34 for setting aside an Award, would not be
available in an appeal preferred under Section 37 of
the 1996 Act.".
85. Thus, it is clear from the decision of the Supreme Court
that the contention that a specific ground had not been raised in
Section 34 Petition and Appellant was estopped from taking the same
in the Appeal preferred under Section 37 of the Act or before this
Court has not been accepted. The Supreme Court has held that it
does not stand to reason that the provision viz. Sub-Section 2(A) of
Section 34 of the Arbitration Act which enables a Court acting on its
own in deciding a Petition under Section 34 for setting aside an
Award would not be available in an Appeal preferred under Section
37 of the 1996 Act.
86. Accordingly, I do not find any merit in the contention of
Mr. Godbole that jurisdictional error not having been pleaded in the
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CMA No.76 of 2012 filed by the Appellants before the learned
District Judge cannot be raised before this Court under Section 37 of
the Arbitration Act. Hence it would be necessary to consider whether
there is such a jurisdictional error on the part of the Majority
Tribunal which renders the majority award as being patently illegal.
87. I have perused the relevant clauses of the subject
Agreement and in particular Clause 47 thereof which provides that
the Respondents will have no right, title, claim or interest in the
'Excluded Property'. The Respondents have also relinquished their
right, title and interest over the 'Excluded Property' in favour of the
Appellants. This 'Excluded Property' included the subject Bungalow.
However, it is noted that prayer sought by the Respondents in the
Statement of claim included the 'Excluded Property'. Thus, the
Majority Tribunal in granting such claim has acted beyond the
specific terms of the subject Agreement.
88. Further, a cumulative reading of Clauses 3, 4 and 20
indicates an entitlement of the Appellants to an additional
consideration under the subject Agreement. The Appellants are
entitled to additional sums under these Clauses. The Majority
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Tribunal has ignored these specific clauses of the subject Agreement
and rendered the Majority Award. The Appellants became entitled for
additional consideration in respect of increase of FSI, consideration
in respect of construction of basement if proposed and FSI towards
land held by the Appellants on account of adverse possession.
89. Further, it is relevant to note that the execution of
conveyance could have only been awarded provided the conditions to
execute the Deed of Conveyance had been complied with. There were
three pre-conditions namely (i) Conveyance of the subject property
will be executed along with the conveyance of the properties of the
other owners i.e. Vyomesh, Madhukant's heirs share; (ii) time for
conveyance will arrive after the project is fully constructed and (iii)
all installments and amounts are paid to the Appellants under the
subject Agreement. It appears that neither of these conditions
stipulated under the subject Agreement were fulfilled. Thus, the
obligation to execute Deed of Conveyance had not yet arrived.
Further, the determination of the consideration under the conveyance
would necessarily depend upon the additional amounts which the
Appellants are entitled to receive as aforementioned. Thus, the
consideration itself was variable under the subject Agreement. This
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would necessarily depend upon the project being constructed and
without determination of such entitlement, in my view the Majority
Award could not have directed the execution of a sale deed by
Appellants in favour of the Respondents. This is in contravention of
the terms of the subject Agreement.
90. There is much merit in the submissions of Mr. Jain that
the instance case is covered under the unamended Section 34 of the
Arbitration Act, particularly since the application under Section 34 of
the Act were in the year 2012. It has been held by the Supreme Court
in the case of Ssangyong Engineering (Supra) that amended Section
34 of the Arbitration Act will apply to the Petitions / Applications
which are filed on or after 23rd October, 2015. Thus, the decision of
the Supreme Court in ONGC Vs. Saw Pipes (Supra) which decision
was prior to the amended Section 34 is applicable to the present
case. The Supreme Court holds that a Court may set aside the
Arbitral Award if the same is against the terms of the contract or the
Arbitral Tribunal deals with matters beyond the scope. Further, the
Supreme Court in Delhi Development Authority (Supra) has held
that the Award which is against the terms of the respective contract is
open to interference by the Court under Section 34 of the Arbitration
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Act on the ground of patent illegality. When a contract bars /
prohibits a particular claim, any award made in violation of the terms
of the contract would violate Section 28(3) of the Arbitration Act,
thereby rendering the award patently illegal and liable to be set aside
under Section 34(2)(b) of the Act. Further, if the Award is found to
be patently illegal, the same would be opposed to public policy.
91. Further, this Court in the case of Vilayati Ram Mittal
(Supra) has held that the Arbitrator being a creature of the Contract
ignores a specific clause of the contract, it would be a question of
jurisdictional error and his award could be corrected by the Court.
92. In Board of Control for Cricket in India(Supra) this Court
held that the Arbitral Award must decide in accordance with the
terms of the contract. The decision of the Supreme Court in Associate
Builders was relied upon and the Caveat entered therein that if the
arbitral tribunal interprets the contract in a reasonable manner, there
is no patent illegality. Further, it has been held by this Court in the
said decision that no contract can be read in the manner the Award
suggests. It is not possible for an Arbitral Tribunal to re-write a major
contractual term to arrive at a view that is not even possible.
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93. In my view in the instant case, the Majority Award has
not interpreted the contract in a reasonable manner and by ignorance
of material terms of the subject Agreement, the Majority Tribunal has
committed jurisdictional error.
94. Further, the Majority Tribunal Award ought to have
considered Clause 51 of the subject Agreement which is a non-
obstante Clause which provides that the subject Agreement is in
super-cession of all prior Agreements between the parties including
the M.O.U. and that all rights between the parties, inter se, under any
prior Agreement shall come to an end and are extinguished. The
Majority Award having framed an issue viz. whether the Claimants
prove that they have Rs.19,50,000/- to deceased Kantilal and the
Respondents and that they had agreed to adjust the same towards the
consideration of the subject Agreement and answering the issue in
the affirmative, is yet one instance where the Majority Tribunal has
held contrary to the terms of the subject Agreements. This in view of
the agreement which existed during the lifetime of Kantilal was no
longer in existence by virtue of Clause 51 of the subject Agreement.
95. I also find much merit in the submission of Mr. Jain that
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the grant of damages on account of alleged loss of business profits by
the Majority Tribunal is against the weight of evidence before it
rendering the Majority Award patently illegal. It has been held by the
Supreme Court and this Court in the decisions relied upon by Mr.
Jain that no damages shall be awarded unless the party claiming loss
has pleaded and proved the extent of damages suffered by it. There is
also a duty imposed on that party to take all reasonable steps to
mitigate the loss consequent on the breach and debars him from
claiming any part of the damage which is due to his neglect to take
such step. In the present case the Majority Award inspite of there
being no proof of damages by the Claimants / Respondents herein
has granted damages to the Respondents herein. Further, the
Majority Award inspite of granting specific performance of the
subject agreement to the Claimants / Respondents herein have also
granted damages which was an alternate claim of the
Claimants/Respondents herein. Thus, the awarding of damages by
the Majority Award is contrary to the fundamental policy of India
Law.
96. I further find that the Majority Award has not arrived at
any plausible interpretation of the subject Agreement by considering
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it to be an Agreement to Sell rather than Development Agreement. It
has been held by the Supreme Court in Rajendra Lalitkumar
Agrawal Vs. Ratna Ashok Murangan and Anr.21 in paragraphs 10 and
11 that interpretation of document constitutes a substantial question
of law, more so when the parties admit the document. This was in the
context of Second Appeal under Section 100 of the Code of Civil
Procedure, 1908. However, the ratio laid down in the said decision
would be applicable to the present matter. It has also been held by
the Constitution Bench of the Supreme Court in Sir Chunilal V. Mehta
and Sons Ltd. Vs. Century Spinning and Manufacturing Col Ltd. 22,
that construction of a document which is the foundation of the rights
of the parties necessarily raises a question of law.
97. In the present case the finding in the Majority Award
that the subject Agreement is an Agreement to Sell is in my
considered view erroneous in law. The subject Agreement having
been stamped at 1% of the value of the Agreement which at the
contemporaneous period, was the stamp duty leviable / payable on
Development Agreement would show that the parties have treated
the subject Agreement as a Development Agreement. The Majority
21 (2019) 3 SCC 378.
22 AIR 1962 SC 1314
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Tribunal has erred in holding that only in the case of an Agreement
to Sell does the obligation to make out the marketable title will arise.
In the instance case the Appellants were obligated to make out
marketable title to the Respondents in respect of the subject property
to ensure that they have a right to transfer the development right in
favour of the Respondents.
98. Further, the subject Agreement may not have mentioned
the defined area on which the development is envisaged. However,
that does not result in an inference that the subject Agreement is an
Agreement to Sell. In the present case, the area was not defined as
the subject property is a part of the larger property which was
undivided.
99. The finding of the Majority Tribunal that the possession
of the subject property not going back to the Appellants would lead
to an inference that the subject Agreement is an Agreement to Sell, is
erroneous. The subject Agreement contemplated post construction of
the project, the land to be conveyed to the Co-operative Housing
Society, so the question of gaining back the possession does not arise.
The subject Agreement would have to be read as a whole and not in
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a piecemeal manner as sought to be done by the Majority Tribunal.
Further, the payment of taxes or cess and cost of development being
borne by the Respondent cannot lead to an inference that the subject
Agreement was an Agreement to Sell. The Respondents undertook
the same during the period of construction.
100. I also do not find any merit in the submission on behalf
of the Respondents that there was an admission by the Appellants in
the Suit filed by one Chandu Mirani and two others that the subject
Agreement was an Agreement to Sell. An admission of a party can be
used against the maker in the same proceedings in which it is made.
However, a party is not bound by the admission given in his
pleadings except for the parties to the Suit in which the pleading is
delivered. This has been held in Ramabai Shriniwas Nadgir (Supra).
101. I am of the considered view that, the Majority Award has
read Clause 7 of the subject Agreement in isolation by holding that
since the Appellants failed to issue notice in terms of Clause 7 of the
subject Agreement in case of default of the Respondents in making
payment of the installments on the due dates, no breach has been
committed by the Respondents. A cumulative reading of other clauses
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including Clauses 52 and 53 of the subject Agreement would reveal
that the time was of the essence of the subject Agreement. Merely,
because the Appellants had not objected to the payment of the first to
sixth installment on time under the subject Agreement, that does not
result in the Appellants being estopped from raising the contention
that the payment under the subsequent installments had not been
adhered to by the Respondents.
102. Clause 52 of the subject Agreement is non-obstante and
would have an overriding effect, notwithstanding Clause 7 of the
subject Agreement. Further, under Clauses 52 and 53, it is provided
that a part payment of the installment shall constitute a default and
in case if there is a default in payment of any installment on the due
date, the subject Agreement will come to an end along with the rights
of the parties.
103. In addition to the aforementioned findings, I am of the
view that there was lack of readiness and willingness on the part of
the Respondents to perform their part of the subject Agreement
which has been overlooked in the Majority Award. None of the
installments were paid on the due date as per the subject Agreement.
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Further, the Respondents had attached a condition on making
payment of last installment viz. to execute necessary documents to
complete the transactions. This was not as per the terms of the
contract and hence impermissible. The Respondents have thus not
been ready and willing to perform their part of the subject
Agreement. Further, the Respondents in the Statement of claim had
pleaded that they were ready and willing to pay entire balance in one
stroke, if the Appellants were agreeable to execute and register a
Deed of Conveyance of the Appellants property. This also displays
lack of readiness and willingness on the part of the Respondents to
perform the subject Agreement according to its terms. Further, the
Respondents have denied their liability to pay additional
consideration which they were obliged to pay. The Respondents have
also failed to display their readiness and willingness to meet the pre-
conditions for conveyance of the property.
104. Mr. Jain has also made submissions on the application
for additional award which was dismissed the Majority Tribunal on
the merits as well as rejection of prayer for condonation of delay i.e.
on limitation. Given the aforementioned findings with regard to the
Majority Award being patently illegal and perverse, it is not necessary
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to render a finding on the submissions with regard to the additional
Award.
105. Mr. Jain has made independent submissions on the
learned District Judge failing to consider the ground of challenge in
the Appellants Section 34 Petition. Having held the Majority Award
to be patently illegal and suffering from perversity, I am inclined to
accept the submissions of Mr. Jain that the learned District Judge
ought to have considered the grounds in the Section 34 in light of the
aforementioned findings, particularly where the Majority Tribunal
had exceeded its scope of jurisdiction by awarding claims beyond the
subject Agreement. The Majority Award is thus, patently illegal as it
strikes at the root of the subject Agreement and shocks the conscious
of the Court. Thus, I find that the impugned order passed by the
learned District Judge is amenable to set aside in view of it not
interfering with the Majority Award which suffers from patent
illegality and perversity.
106. Mr. Godbole has cited several judgments on the power of
the Court under Section 37 of the Arbitration Act and where this
Court as well as the Supreme Court has held that the Court under
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Section 37 of the Arbitration Act cannot enter into the merits of the
Claim. I am mindful of the law laid down by the Supreme Court and
this Court whilst arriving at the aforementioned findings, particularly
given the jurisdictional error on the part of the Majority Tribunal in
awarding the claim contrary to the terms of the subject Agreement.
107. Thus, the power exercised by this Court is within the
parameters of the Section 37 of the Arbitration Act and hence the
Majority Award is being set aside in exercise of such powers.
108. Accordingly, the impugned order of the learned District
Judge, the Majority Award as well as the order rejecting the
Application for Additional Award of the Tribunal impugned in the
above Arbitration Appeal, being Arbitration Appeal (St.) No.93127 of
2020 are required to be quashed and set aside.
109. In that view of the matter, submissions of Mr. Godbole in
support of the Arbitration Appeal (St.) No.5662 of 2020 seeking
severance of part of the Majority Award and modification of that part
which awards additional amount to be paid to the Applicants by the
Respondents is not required to be considered.
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110. The Arbitration Appeal (St.) No.5662 of 2020 is
accordingly disposed of.
111. The Arbitration Appeal (St.) No.93127 of 2020 is made
absolute and impugned order dated 25th January, 2020 with
Majority Award dated 10th December, 2011 and additional Award
dated 18th February, 2012 are set aside.
112. The Arbitration Appeal (St.) No.93127 of 2020 is
accordingly disposed of.
[ R.I. CHAGLA J. ]
