Karnataka High Court
Sri Mahadeva vs The Arattukulam Developers on 12 June, 2025
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COMAP No.271 of 2022
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 12TH DAY OF JUNE, 2025
PRESENT
THE HON'BLE MR V KAMESWAR RAO, ACTING CHIEF JUSTICE
AND
THE HON'BLE MR JUSTICE S RACHAIAH
COMAP NO. 271 OF 2022
BETWEEN:
1. SRI. MAHADEVA,
AGED ABOUT 48 YEARS,
S/O. C. NAGAPPA,
2. SMT. KAVITHA,
AGED ABOUT 39 YEARS,
W/O. MAHADEVA,
3. MASTER. SHIRISH GOWDA,
AGED ABOUT 15 YEARS,
S/O. MAHADEVA,
4. MASTER. CHETHAN GOWDA,
AGED ABOUT 11 YEARS,
S/O MAHADEVA,
APPELLANTS NO.3 AND 4 ARE MINORS
AND THEY ARE REP. BY THEIR
FATHER AND NATURAL GUARDIAN,
SRI. MAHADEVA,
ALL ARE RESIDING AT NAYANAHALLI VILLAGE,
LINGAPURA DHAKALE,
KASABA HOBLI,
ANEKAL TALUK,
BENGALURU DISTRICT.
...APPELLANTS
(BY SRI. B. RAVINDRANATH, ADVOCATE)
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COMAP No.271 of 2022
AND:
1. M/S. ARATTUKULAM DEVELOPERS,
A PARTNERSHIP FIRM HAVING ITS OFFICE AT
NO.106/A, 4TH "C" CROSS,
BEHIND RAHEJA ARCADE, 5TH BLOCK,
KORAMANGALA INDUSTRIAL AREA,
BENGALURU-560 095.
REP. BY ITS PARTNER
SRI. TONY VINCENT,
S/O. A.P. KUNJUKUNJU.
2. SRI. G. RAGHAVENDRA RAO,
DISTRICT JUDGE (RETIRED),
SOLE ARBITRATOR,
ARBITRATION & CONCILIATION CENTRE,
BENGALURU (DOMESTICE & INTERNATIONAL),
BENGALURU.
...RESPONDENTS
(R1 IS SERVED AND UNREPRESENTED,
NOTICE TO R2 IS D/W V/O DTD:16.06.2022)
THIS COMAP IS FILED UNDER SECTION 13(1A) OF THE
COMMERCIAL COURTS ACT, 2015 R/W SECTION 37(1)(c) OF
THE ARBITRATION AND CONCILIATION ACT, 1996 PRAYING TO
SET ASIDE THE ORDER DATED 04.04.2022 (ANNEXURE-A)
PASSED IN COM.A.P.NO.17/2020 ON THE FILE OF THE LXXXV
ADDITIONAL CITY CIVIL AND SESSIONS JUDGE AT
BENGALURU (CCH NO.86), ETC.
THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT ON 13.01.2025, COMING ON FOR
PRONOUNCEMENT OF JUDGMENT THIS DAY, ACTING CHIEF
JUSTICE DELIVERED THE FOLLOWING:
CORAM: THE HON'BLE MR V KAMESWAR RAO, ACTING CHIEF JUSTICE
AND
THE HON'BLE MR JUSTICE S RACHAIAH
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COMAP No.271 of 2022
CAV JUDGMENT
(PER: THE HON'BLE MR V KAMESWAR RAO, ACTING CHIEF JUSTICE)
The challenge in this appeal is to a judgment dated
04/04/2022 passed by the learned LXXXV Addl. City Civil
and Sessions Judge, Bengaluru ('Trial Court' for short) in
Com.AP No.17/2020, whereby the Trial Court has
dismissed the petition filed under Section 34 of the
Arbitration and Conciliation Act, 1996 ('Act of 1996' for
short).
2. The facts to be noted are, it is the case of the
appellants that, they are the absolute owners of the
converted lands bearing Sy.No.95 measuring 2 acres 36
guntas, Sy.No.96 measuring 4 acres 04 guntas,
Sy.No.97/1 measuring 30 guntas, Sy.No.97/2 measuring
1 acre 03 guntas, Sy.No.99/3 measuring 29 guntas, in all
measuring 9 acres 22 guntas, situated at Lingapura
Village, Kasaba Hobli, Anekal Taluk, Bengaluru District.
3. The respondent No.1 is partnership firm and is
represented by its one of the Partner Sri. Tony Vincent.
Respondent No.1 entered into joint development
agreement dated 19/05/2014 registered as Document
No.1383/2014-15, Book I, in the office of the
Sub-Registrar, Attibele, Anekal Taluk with the appellants,
to form a residential layout in accordance with sanctioned
plan and licence and specifications agreed between the
parties as per the joint development agreement in respect
of schedule properties.
4. According to the appellants, the respondent No.1
agreed to bear the entire cost of development and
formation of residential layout providing all the required
amenities as agreed in the joint development agreement.
The appellants also executed a general power of attorney
dated 19/05/2014 registered as Document No.59/2014-15
in the office of the Sub-Registrar, Attibele, Anekal Taluk,
to facilitate the respondent No.1 to develop the lands as
agreed on the schedule properties, including getting
necessary plans drawing commencement certificate,
completion certificate etc., and to deal with necessary
statutory authorities and for completing the project.
5. The respondent No.1 entered into rectification of
joint development agreement dated 19/11/2015
registered as Document No.3621/2015-16 in the office of
the Sub-Registrar, Anekal, regarding correction of sharing
ratio in the aforesaid joint development agreement dated
19/05/2014. According to the appellants, as per the
rectification deed, the appellants are entitled for 67% of
sital area or 1,50,508 square feet in the residential layout
to be formed in the schedule property and the respondent
No.1 was to retain 33% of the sital area.
6. That as per clause 11.1 of the joint development
agreement, the respondent No.1 had agreed to deliver
owners' share of sital area within a period of 15 months
from the date of registration of the joint development
agreement, with a grace period of 2 months.
7. That as per clause 11.2 of the joint development
agreement, the respondent No.1 agreed and undertook to
compensate the owners at the rate of Rs.30,000/- per
acre of land in the schedule properties per month and to
pay compensation every month, in the event, developer
was unable to adhere to deliver the sital area as aforesaid
and if there is delay for the reasons not attributable for
reasons set out in clause 11.3.
8. That as per clause 11.3 of the joint development
agreement, the developer shall not incur any liability for
any delay in delivery of the possession of the owners' sital
area, by reasons of Governmental restrictions and/or by
reason of civil commotion, any act of God or due to any
injunction or prohibitory order or conditions of force
majeure. In any of the aforesaid events, which are beyond
the control of the developer, the developer shall be
entitled to corresponding extension of time, for delivery of
the said owners' sital area.
9. According to the appellants, the respondent No.1
herein secured sanction plan from the concerned authority
on 06/02/2016 and supplementary agreement was
entered into between the parties on 05/05/2016. Since
the respondent No.1 failed to complete the project in
terms of the joint development agreement, the appellants
issued notice dated 01/07/2016 demanding payment of
damages for non-delivery of their sital area share,
amounting to Rs.2,86,500/- (Rupees Two Lakhs Eighty Six
Thousand Five Hundred only) per month from 19/10/2015
to 19/06/2016 and also sought for payment of
Rs.2,86,500/-(Rupees Two Lakhs Eighty Six Thousand
Five Hundred only) per month till delivery of appellants'
share of sital area.
10. The respondent No.1 issued reply dated
21/07/2016 making untenable allegation which was
denied as per rejoinder dated 26/07/2016. According to
the appellants, respondent No.1 has not completed the
concreting of all roads, not constructed the box type
concrete drainage to 40 and 60 feet roads and not
constructed culvert drainage and footpaths for other
roads, not given water supply points and sewage lines
points to the sites, no overhead electricity lines and also
not installed the required transformers, not constructed
the sewage treatment plant, not developed parks, not
started to construct overhead tank, not constructed the
swimming pool and not started construction of the club
house as agreed.
11. According to the appellants, the respondent No.1
has committed serious breach of the terms of the said
joint development agreement, resulting in the appellants
suffering huge loss and hardship due to the respondent
No.1's inaction and breach of the terms of joint
development agreement. The respondent No.1 was never
ready and willing to comply by the terms of joint
development agreement.
12. The appellants therefore claimed for a sum of
Rs.85,95,000/-(Rupees Eighty Five Lakhs Ninety Five
Thousand only) as penalty for the period from 19/10/2015
till the date of filing of the claim petition along with
interest thereon @ 18% p.a from the date of the claim
petition till the date of payment and for a direction to the
respondent No.1 to continue to pay the appellants a sum
of Rs.2,86,500/- (Rupees Two Lakhs Eighty Six Thousand
Five Hundred only) per month as penalty from date of
filing of the claim petition till the date the respondent No.1
hands over the completely finished Owners share of sital
area as agreed in the joint development agreement dated
19/05/2014 and on the failure of the respondent No.1 to
pay the said amount interest thereon @ 18% per annum
from due dates of payment till date of actual payment etc.
13. The appellants invoked clause 19 of the joint
development agreement and filed CMP No.60/2017 before
this Court for appointment of Sole Arbitrator. The said
petition came to be allowed by order dated 07/03/2019
appointing the respondent No.2 as Sole Arbitrator to
decide the dispute between the parties.
14. The respondent No.1 filed its statement of
objections on 31/07/2018 and contending that the claim
petition is filed with an intention to harass the respondent
No.1. The joint development agreement dated 19/05/2014
execution of the General Power of Attorney, Rectification
deed dated 19/11/2015 are admitted. It is contended
that, a sum of Rs.30,00,000/- (Rupees Thirty Lakhs only)
is paid towards non-refundable security deposit and a sum
of Rs.60,00,000/-(Rupees sixty lakhs only) towards
refundable security deposit and that as per Clause 11.3 of
the joint development agreement, it was agreed that the
respondent No.1 will not be liable to compensate for delay
in delivery of the sital are due to government restrictions,
force majure or act of God and which is not attributable to
the respondent No.1 and that owing to the boundary
dispute between the appellants and the neighboring land
owner and due to governmental restrictions are the
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conditions covered by clause 11.3 of the joint
development agreement. That during the process of
obtaining the sanction plan the respondent No.1 learnt
that the schedule property consisted of 27 guntas of
kharab land out of 9 acres 22 guntas which was
suppressed by the appellants. That the joint development
agreement does not mention the aspect of kharab land
and as such the respondent No.1 faced hindrances and the
plan sanction was delayed till 06/02/2016 for the reasons
attributable to the appellants because of the suppression
of kharab land running in a "V" shape in the middle of the
properties. That it is only after approval of the plan
sanction on 06/02/2016 the parties entered into
supplementary agreement on 05/05/2016 for the purpose
of sharing sites. That the Anekal Town Planning Authority
released 40% of the sites and the remaining 60% was
retained by the authority, as on 06/02/2016 and
thereafter there cannot be any liability attributable to the
respondent No.1 for any delay on account of government
restriction as mentioned in clause 11.3 of the joint
development agreement.
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15. That the respondent No.1's efforts to cover the
entire layout with compound was prevented by
neighbouring land owners on the eastern and southern
side of the schedule property and the said boundary
dispute shows that the appellants are not in complete
possession of the schedule property and have suppressed
the same while entering into joint development agreement
and also even at the time of rectification deed dated
19/11/2015.
16. That the appellants did not co-operate with the
respondent No.1 to resolve the boundary dispute. Since
one Sri. P.Venkatesh neighbouring owner filed complaint
before the Anekal Town Planning Authority regarding
boundary dispute and construction of wall, the respondent
No.1 addressed a letter dated 20/11/2017 requesting the
appellant No.1 to resolve the dispute. However the
appellant No.1 sent untenable reply. The very fact that the
appellants have entered into Rectification deed dated
19/11/2015 and supplementary Agreement dated
05/05/2016 which is beyond the Initial delivery stipulated
period i.e., 19/10/2015, shows that the Claimants have
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not raised any claim and mutually agreed for extension of
time. That, on account of lapse of appellants they have
impliedly extended the time and therefore estopped from
contending otherwise. That the respondent No.1 has made
huge investment to the tune of Rs.9 Crores and have also
paid a sum of Rs.90,00,000/- (Rupees Ninety Lakhs only)
and due to the violation of the terms of the joint
development agreement by the appellants they are liable
to indemnify respondent No.1 as per clause 17.2 of joint
development agreement.
17. That because of suppression of kharab portion of
27 guntas of land, the total area is reduced and as per
clause 4.2 of the joint development agreement,
respondent No.1 is entitled to be paid by the appellants
for the fractional shortfall as per prevailing market rate.
18. That on the basis of the abovesaid pleadings of
the parties, the respondent No.2 framed the following
issues:
"1) Whether the claimants prove that the
respondent has committed breach of the terms of
the Joint Development Agreement dated
19/05/2014?
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2) Whether the claimants prove that the
respondent has deliberately set up the neighbor Sri
P. Venkatesh to delay the implementation of Joint
Development Agreement?
3) Whether the claimants are entitled to a sum
of Rs.85,95,000/- as penalty for the period from
19/10/2015 till the date of claim petition dated
02/05/2018 with interest @ 18% from the date of
claim petition till payment?
4) Whether the respondent proves that it is the
claimants who have committed the breach of the
contract and is guilty of suppressio veri suggestio
falsi ?
5) Whether the respondent proves that the
claimants had suppressed the act of kharab land of
0.27 guntas out of 9 acres 22 guntas of the schedule
area for development?
6) Whether the respondent proves that delay in
sanctioning of the plan for construction till
06/02/2016 was attributable to the claimants
because of suppression of the location of kharab land
running in the middle of the schedule area?
7) Whether the alleged delay in sanctioning of
the layout plan on 06/02/2016 is not attributable to
the respondent as contended?
8) Whether the respondent proves that by
virtue of the parties entering into supplementary
deed dated 05/05/2016, there was implied extension
of time for the completion of the project?
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9) Whether the respondent proves that it
has incurred loss and damages due to the
alleged fraud violation of the terms and
conditions of the Joint Development Agreement
in terms of clause No.17.2 of the Joint
Development Agreement by the claimants and
hence claimants are liable to indemnify the
respondent?
10) Whether the respondent proves that
there is a short-fall with the sital area as per
clause No.4.2 of the Joint Development
Agreement?
11) What award / order?"
19. It is stated that, the learned Arbitrator has
decided the dispute by stating in paragraph No.67 under
issue No.11 as under:
"67. Issue No.11: In view of the foregoing
discussion and findings on the issues, the following
award is passed:
"AWARD
(i) The claim petition is allowed in part.
The claimants are entitled to compensation
at the rate of Rs. 1,28,925/- (Rupees One
Lakh Twenty Eight Thousand Nine Hundred
and Twenty Five only) per month being
45% deficit in the implementation of the
project vide JDA, for the period from
06.07.2017 to 23.05.2019 with interest at
12% per annum on the amount of
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compensation due till the date of claim
petition 02.05.2018 and thereafter at 9%
on the amount due as compensation till
realisation.
(ii) The respondent to bear the cost of
arbitration of the claimants and bear his
own.
(iii) It is made clear that both the parties
are entitled to share the sites released by
Anekal Town Planning Authority in the sital
area developed in accordance with the
sharing ratio as per Rectification Deed
dated. 19.11.2015 and Supplementary
Agreement dated 05.05.2016 out of the
70% of the sites released.
(iv) The claimants shall refund the balance
of refundable deposit of Rs.60,00,000/-
(Rupees Sixty Lakhs only) if any, after
deducting/adjusting the amount payable by
the respondent as per award passed herein.
The stamp duty is payable as per
Karnataka Stamp Act."
20. The award dated 09.01.2020 has been the
subject matter of challenge made by the claimants/
appellants before the Trial Court under Section 34 of the
Act of 1996. The Trial Court had framed two points for its
consideration, the same being:
"1) Whether the applicants/claimants have
made out a ground u/s 34 of the Arbitration and
Conciliation Act to set aside the impugned award
passed by the 2nd respondent in A.C.No.94/2018?
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2) What Order?"
21. On points No.1 and 2, the Trial Court has stated
as under:
"7. POINT No.1:- The execution of registered
Joint Development Agreement and also power of
attorney by applicants/claimants in favour of
respondent in respect of their property measuring 9
acres 22 guntas is not in dispute. It is also not in
dispute that in the registered Joint Development
Agreement there is a clause at clause (8) and clause
(11) more particularly 11.1 that repsondent shall
develop the properties of applicants/claimants after
securing the sanction plan from concerned authority
and deliver the share of applicants/claimants within
a period of 15 months from the date of registration
of this JDA with a grace period of two months. It is
also not in dispute that respondent has not
completed the project within 17 months as agreed
under clause 11 of the Joint Development
Agreement. The learned arbitrator while considering
the contentions of parties framed as many as 11
together, the learned arbitrator at para-4 of his
award extracted clause (8) of the Joint Development
Agreement and also clause 11 and held that
respondent failed to complete the project within the
agreed period of 17 months and also failed to
establish that the delay was due to force majeure
and thereby considered some of the claims of
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applicants/claimants under Issue No.1 and 3. While
adjudicating the matter between the parties, the
learned arbitrator has discussed each and every facts
and circumstances raised by the parties and also
citation relied upon by them. Under such
circumstances, contention of applicants/claimants
that the impugned award is perverse in repsect of
Issue No.2 and 4 holds no water. That apart, Hon'ble
Supreme Court in DELHI AIRPORT METRO EXPRESS
PVT. LTD., VS METRO RAIL CORPORATION LTD
(2021) SCC ONLINE SC 695 in para 26 & para 27 of
the judgment laid down the parameters of
interference with an arbitral award on the ground of
patent illegality as under:
(i) The patent illegality should be an
illegality which goes to the root of the
matter and every error of law committed by
an arbitral tribunal would not fall within the
expression of 'patent illegality'.
(ii) Erroneous application of law
cannot be categorized as patent illegality.
(iii) Contravention of law not linked to
public policy or public interest is beyond the
scope of expression 'patent illegality'.
(iv) The courts are prohibited to re
appreciate the evidence to conclude that
award suffers from patent illegality
appearing on face of it as court do not sit in
appeal against an arbitral award.
(v) An award can be interfered with
on the ground of patent illegality when an
Arbitrator takes a view which is not even a
possible view and interprets a clause in the
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contract in such a manner that no fair
minded or reasonable person would or if the
Arbitrator commits an error of jurisdiction
by wandering outside the contract and deals
with matters not allotted to it.
(vi) An arbitral award stating no
reasons for its findings would make itself
susceptible to challenge on the ground of
patent illegality.
(vii) The conclusions of an Arbitrator
which are based on no evidence or have
been arrived at by ignoring vital evidence
are perverse and can be set aside on the
ground of patent illegality. Similarly, the
consideration of documents, which are not
supplied to the other party would render a
finding recorded by the Arbitrator perverse
and the same would fall within the
expression 'patent illegality'.
(viii) Explanation (1) amended by
2015 Amendment Act clarifies the
expression 'public policy of India' and its
connotations for the purposes of reviewing
arbitral awards. It has been made clear that
an award in conflict with public policy of
India only when it is induced or affected by
fraud or corruption or is in violation of
Section 75 or Section 81 of the 1996 Act, if
it is in contravention of fundamental policy
of India law or if it is in conflict with most
basic notions of morality or justice.
(ix) The contravention of a statute
only if is linked to public policy or public
interest is ground fro setting aside the
award as being at odds with the
fundamental policy of Indian law.
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Further, Hon'ble Supreme Court in National
Highways Authority of India vs. M.Hakeem held that
"While considering petition u/s 34 there is no power
to modify an arbitral award and the court may either
dismiss the objections filed and uphold the award or
set aside the award if the grounds contained in sub-
section (2) and (2A) are made out." When this is
settled position of law, the petition filed by the
applicants/claimants to set aside portion of the
award is not at all maintainable. Even otherwise, the
learned arbitrator by framing as many as 11 Issues
discussed each and every claim and contentions
raised by respective parties and passed the
impugned award. Section 34 of the Act does not
contemplate partly setting aside of the award by the
modification of the award. If an award is found to be
vitiated by any one of the grounds set out in Sec. 34
of the Act, it has to be set aside in its entirety. It
does not contemplate partly setting aside of the
award or modification of the award. As I have
already stated, the learned arbitrator while
considering the claim petition filed before him by the
applicants/claimants allowed the same in part by
discussing the various circumstances that has taken
place between the parties. There is no grounds made
out by the applicants/claimants herein to separate
the award only in respect of the issues which were
answered against them. The finding of the learned
arbitrator is based on evidence placed by respective
parties before him. Accordingly and also relying upon
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the principles laid down by Hon'ble Supreme Court in
the citation of National Highways Authority of India
case, I have answered Point No.1 in the Negative.
8. Point No.2: In view of my finding on Point
No.1, I proceed to pass the following
ORDER
The petition filed by applicants/
claimants under Section 34 of the Arbitration
and Conciliation Act, 1996 seeking to partly
set aside the award passed by the 2nd
respondent in A.C. No.94/2018 dated
dismissed with cost. 09.01.2020 is
Accordingly award passed by 2nd
respondent in A.C. NO.94/2018 is confirmed."
22. Despite notice, there was no appearance for
respondent No.1 on 13.01.2025, though
Sri. Siddharth Suman, Advocate, has filed vakalath for
respondent No.1 on 02.06.2025, after the appeal was
reserved for judgment. Respondent No.2 being an
Arbitrator, notice to him was dispensed with. We find
that, the appellants have raised 38 grounds in challenge
to the award. The Trial Court except noting the position of
law in terms of the judgments of the Hon'ble Supreme
Court in the cases of Delhi Airport Metro Express (P) Ltd.
-Vs.- Delhi Metro Rail Corporation Limited [(2022) 1 SCC
131] and also National Highways Authority of India
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-Vs.- M. Hakeem and Another [(2021) 9 SCC 1], has not
dealt with the grounds or the submissions made. It has
dismissed the petition filed under Section 34 of the Act of
1996. The Trial Court has said that, in view of the scope
of Section 34 of the Act of 1996, the award cannot be
interfered with. In other words, the Trial Court except
referring to the proposition of law in view of the
interpretation given by the Hon'ble Supreme Court to
Section 34 of the Act of 1996, has not dealt with the
grounds urged by the appellants and applied the law to
those grounds. In that sense, the order of the Trial Court
was overlooking the grounds urged by the appellants.
This is not the way the Trial Court should have dealt with
the issue. It should have considered the grounds and the
submissions made by the counsel for the appellants and
deal with the same by applying the law laid down by the
Hon'ble Supreme Court and this Court and should have
decided the petition under Section 34 of the Act of 1996.
In the absence of the same, it must be held that, the
order of the Trial Court is an unreasoned order. The
impugned order of passed by the Trial Court needs to be
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set aside. We do so accordingly and remand the matter
back to the Trial Court for a fresh decision on the petition
under Section 34 of the Act of 1996 by hearing the
counsel for the parties in accordance with law.
The appeal is disposed of as allowed.
No costs.
Sd/-
(V KAMESWAR RAO)
ACTING CHIEF JUSTICE
Sd/-
(S RACHAIAH)
JUDGE
PA
