"5. Without prejudice to any of the provisions
mentioned above, the CO - OWNERS and the
PURCHASER have a right to enforce specific
performance of the Contract against each other."
13. However, in the instant case if Clauses 4 and 5
contained herein are taken into consideration, such a
conclusion cannot be reached since all that Clause 5 provides
is that the parties could also enforce the agreement for
specific performance and a different forum for that purpose
by excluding it from Arbitration as agreed in clause 4 has not
been agreed. Hence in respect of all aspects since the dispute
has arisen between the parties, the same will have to be
considered by the learned Arbitrator.
14. Insofar as the contentions put forth by the learned
counsel for the respondents that the relief as prayed pursuant
to the agreement of sale would be barred by limitation, that
aspect of the matter need not be gone into in the instant
petition since that is also an aspect which is required to be
considered by the learned Arbitrator to come to a conclusion
as to whether the relief as prayed is time barred. In view of
taking note of the sequences of the proceedings and the
agitation of the disputes insofar as the aspect relating to a
petition under Section 11 of the Act, it cannot be said that the
petitioner has lodged a stale claim before this Court. The
issue of limitation in that event is required to be considered
by the learned Arbitrator. Thus having considered all aspects
of the matter, I am of the opinion that the learned Arbitrator
is required to be appointed.
6. It was the case of the appellants before the Trial Court,
of the statement of objections, before this Court, in CMP supra.
'no such person in this address'. On 13.11.2017 paper publication
paper publication is not a due Notice in terms of law. They further
7. They further contended that, a perusal of the award
of limitation. There are no reasons forthcoming from the Arbitral
as gospel truth. The case sought to be adjudicated before the
to be observed. Absolutely, there is no reason forthcoming in the
days from the date of publication of notice i.e., 06.12.2017.
8. They also contended that, they received a phone call
date is fixed on 12.10.2018 for appearance. The appellants
put in execution. Immediately, thereafter they approached the
and all papers on record before the Arbitral Tribunal. They were
application, only on 29.10.2018. Thereafter they have handed over
Award.
9. Upon service of notice respondent Nos.1 to 5 appeared
and filed their objections. Respondent Nos.6 to 9 though served
10. Respondent Nos.1 to 5 in their statement of objections
petition. They further stated that, the appellants, have contested
11. The appellants reiterated the grounds raised in the
1996. That apart, the award passed by the Arbitrator is opposed to
12. The respondent Nos.1 to 5 argued in support of the
No.78/2015 and being aware of the arbitral proceedings.
13. The Trial Court upon considering the contentions of the
Point No. 2: In the Negative;
Point No. 3: As per final order, on the following;"
14. The Trial Court was of the view that the appellants have
not explained the delay with a reasonable cause in approaching the
Court under Section-34 of Act 1996, beyond 90 days as
contemplated under Section - 34(3) of Act 1996. Secondly, the Trial
Court was of the view that as per the order passed by this Court in
CMP No.78/2015, there was an observation that the parties were
represented by their respective learned counsel who also approach
the arbitration center and filed the necessary papers. The Trial Court
was of the view that the appellants are bound to adhere to the
directions issued by this Court, in the CMP supra, as they have
failed to comply with the directions of this Court to approach the
arbitration center voluntarily, now they cannot raise their voice that
no Notice of arbitration proceedings was served on them. Further
that, there is due notice of the proceedings served through the
paper publication. The Trial Court also held that the Arbitrator has
considered the point of limitation. On these grounds, the Trial Court
dismissed the petition on delay, as well as on merits.
15. It is this order which is called in question before this
Court by the appellants.
16. Heard Ms.Nidhishree B.V., learned counsel appearing for
the appellants. Respondent Nos.1 to 9 though served remained
unrepresented.
17. Upon hearing the learned counsel for the appellants, the
points that arise for our consideration are as follows:
i) Whether there is proper service of notice on the
appellants regarding the arbitration proceedings by
the Arbitrator?
ii) Whether the Arbitrator was right in examining
tenability of the claim in the presence of the order
in CMP No.78/2015, passed by the learned Single
Judge of this Court dated 02.06.2017, while
referring the matter to the Arbitrator for disposal?
18. Our answer to the above two questions are in Negative
and in favour of the appellants for the following
: REASONS :
Ms. Nidhishree with all vehemence submitted that, the Notice
of the year 2015, as alleged by the respondent Nos.1 to 5 issued to
the appellants prior to institution of CMP No.78/2015 (CMP for
Short), before this Court, which was returned with a postal shara,
as 'addressee left, returned to sender'. The address shown in the
CMP petition was also incorrect. The appellants received the
information of CMP supra, when they received a phone call by the
local postman regarding the Notice sent to them on the wrong
address. Thereafter, they received the notice and appeared before
this Court in the above CMP and filed the statement of objections
and also disclosed their present address in the affidavit filed in
support of the statement of objections. She further stated that,
despite the knowledge of the present address; the respondent Nos.1
to 5 filed claim petition before the arbitrator showing the wrong
address of the appellants qua respondents Nos.6 to 9. The Notice
sent to the addresses on two occasions was returned with postal
shara as 'left' which is clear from paragraph No.4 of the arbitral
award.
19. To buttress her arguments, Ms. Nidhishree, relied upon
the judgment of Hon'ble Apex Court in the case of Sachin Gupta
And Another vs. K.S. Forge Metal Private Limited1 and stressed
upon paragraph Nos.2 and 3, which we reproduce as under:
"2. We are satisfied that the High Court could have set aside
the Award only on the ground that the Award has been
rendered against the Respondent without issuance of any
notice and without hearing the Respondent. On this ground
alone, the Award was liable to be set aside u/s 34(2)(a)(iii) of
the Arbitration and Conciliation Act, 1996. There was no
(2013) 10 SCC 540
necessity for the learned Single Judge to convert itself into a
Court of First Appeal. It was certainly not necessary to
examine the dispute between the parties so minutely or to
make such strong remarks against any of the parties. Judges
at all levels are required to be restrained and circumspect in
use of the language, even when criticizing the conduct of a
party. However, we agree with the conclusion of the High
Court that the Award had to be set aside as no notice had
been served on the Respondent. But, having set aside the
Award, it would have been appropriate if the matter had been
referred back to the Arbitrator. In the event, any of the
parties were not satisfied, an independent arbitrator
agreeable to both the parties could have been appointed.
3. In view of the above, we deem it appropriate to set aside
the order passed by the High Court. As noticed above, instead
of leaving the parties to seek their remedy in accordance with
law, the matter ought to have been referred to a specific
arbitrator. The learned counsel for the parties are agreed that
we appoint Mr.Justice A.P. Shah, former Chief Justice of the
Delhi High Court, residing at F-6A, Hauz Khas Enclave, New
Delhi-110 016, as the Arbitrator. We order accordingly. The
learned Arbitrator shall be at liberty to determine his
remuneration/fees in consultation with the parties."
20. She also referred to the judgment of High Court of Delhi,
in the case of Daisy Trading Corporation vs. Union of India2, to
contend that, not providing of proper opportunity at the hearing,
2001 (60) DRJ 846
amounts to violation of Principles of natural Justice, which vitiates
the entire proceedings and the Award becomes void.
21. For easy reference paragraph No.4 of the arbitral award
in A.C. No.91/2017, is reproduced reads as under:
"4. In pursuance of the order of the Hon'ble High Court of
Karnataka in CMP No. 78/2015 this Tribunal is constituted.
After the claim statement is filed before the Arbitration and
Conciliation Centre notice was sent to the respondents
through registered post acknowledgment due by the centre to
submit their written response. The same was returned with
postal shara respondent Nos. 1 to 3 "left, returned to sender",
notice sent to respondent No. 4 returned with postal shara as
"in this route no such door number". The notice send to
respondent Nos. 5 and 6 also returned with postal shara as
"no such person in the address and returned to sender".
Thereafter on 26.10.2017 the notice through R.P.A.D
intimating the respondents about the first day of hearing as
13.11.2017 was sent to the respondents 1 to 6 by the centre.
The notice sent to respondents 1 to 3 returned with postal
shara as "left". In respect of respondent Nos. 4, 5 and 6 the
notice returned with postal shara as "no such person in this
address". Thereafter on 13.11.2017, before this tribunal the
learned counsel for claimants prays for taking out paper
publication to the respondents. The claimants were permitted
to take out paper publication. The claimants took out paper
publication in Kannada Daily News Paper "Kannada Prabha"
taking out notice to respondents 1 to 6 to appear in person or
through pleader at 2.00 p.m. on 06.12.2017. In spite of
taking out paper publication respondents remained absent
and nobody represented them. Therefore, the service through
paper publication to all the respondents held sufficient and
the respondents were placed ex-parte. The claimants
deposited the respondents' share of arbitration proceedings
fee and then the matter was posted for claimants' evidence."
22. It is evident from the record that the respondent Nos.1
to 5 were aware of the present address, in CMP supra, however, for
the best reasons known to them they have instituted the claim
petition by furnishing wrong address of the appellants and
respondent Nos.6 to 9. It is also evident from the records that the
paper publication is taken in Kannada Prabha, which is a Kannada
Daily. It is the case of the appellants that they are not familiar with
the Kannada language, if that be so, obviously, they have not
noticed the Notice issued in the said paper.
23. From the judgments supra, it is quite clear that a
reasonable opportunity of hearing is to be rendered as the same is
the demand of principles of natural justice. Even Section-34(2)
especially, (a)(iii) of Act 1996, which states as under:
"Section 34(2): An arbitral Award may be set aside
by the Court only if:
(a) a party making the application furnish proof
that:
(i) -xxx--xxx---
(ii) -xxx--xxx---
(iii) 'A party making an application was not given
proper notice of appointment of arbitrator or of the
arbitral proceedings or was unable to present his
case.'
24. It is evident from the record that the appellants have
furnished their present address in the affidavit filed in support of
their statement of objections to the CMP supra, manifests that, the
Respondent Nos. 1 to 5 were aware of the new address of the
appellants than the one they have shown in the claim petition.
25. Be it noted that an Arbitrator has been appointed in the
order passed by this Court in CMP No.78/2015, however, there was
no notice of the arbitral proceedings as contemplated in the
provisions stated supra. Though the Trial Court was of the view that
the appellants ought to have approached the arbitration center in
terms of the observations by this Court in CMP supra, however,
there is nothing to suggest that this Court has mentioned any
specific date for the parties to appear before the Arbitrator after
appointment of the Arbitrator. What is evident from the order at
paragraph No.15 is -'the arbitration shall be held in terms of
the Act and the Rules governing the Bangalore Arbitration
Center'.(emphases supplied). This observation clarifies that the
arbitration proceedings shall be conducted in strict adherence to the
Act and Rules.
26. The Notice of arbitration proceedings having not been
served on the appellants, there is a clear violation of principles of
natural justice and the same is hit by Section-34(2)(iii) of Act 1996.
The Trial Court failed to consider the same and was taken away by
the Rules prescribed under the Arbitration Rules, which it has
extracted at paragraph Nos.12 and 13.
27. In the case on hand, though the Notice was issued twice,
i.e., once by the Arbitration Center and again by the Arbitrator
intimating the date of hearing, both were returned with a postal
shara as 'left'. In these circumstances, the Rules referred by the
Trial Court especially Rule-24 of Arbitration Centre - Karnataka
(Domestic and International) Rules, is not applicable to the case on
hand. The Notice issued through Paper publication was in Kannada
daily, which the appellants are not familiar with, as contended. The
Trial Court fell in error to hold that there is proper service of Notice
and further that the appellants ought to have approached the
Arbitration Centre in terms of the order of this Court in CMP supra.
In these circumstances, we without any hesitation come to a
conclusion that there is no notice as contemplated under law,
served on the appellants in respect of the arbitration proceedings,
as such, the award is hit by Section-34(2)(iii) of the Act 1996,
accordingly, the Point No.1 is answered in negative and favored the
appellants.
28. So far as the second point for consideration is concerned,
though the opposite party is placed ex-parte, the Arbitrator is duty
bound to examine the tenability of the claim under different heads
and decide the same by assigning proper reasons how so ever brief
they are, any omission on the part of the Arbitrator to adhere to this
principle would vitiate the award.
29. The Hon'ble Apex Court in the case of State Of Uttar
Pradesh and Others vs. Combined Chemicals Private
Limited3, at paragraph Nos.30 and 31 held as under:
"30. However, we find merit in the submission of learned
Senior Counsel appearing for the appellants that the award of
the Arbitrator was vitiated by an error apparent and reasons
assigned by the Trial Court and the High Court for refusing to
annul the same are legally unsustainable. A reading of the
award shows that after adverting to the claim made by the
respondent and the proceedings held by him on various
dates, the Arbitrator referred to the affidavit of Shri
A.K.Saigal, Managing Director of the respondent and passed
the award without assigning any reason whatsoever and
2009 (2) SCC 151
without even recording a finding that the respondent had
suffered loss/damages on account of the failure of Appellant
No.3 to place supply order in furtherance of the acceptance
letter dated 16.11.1985. The casual manner in which the
Arbitrator decided the dispute is evident from paragraph 10 of
the Award, which is extracted below:
"10. I have heard the learned counsel for the
claimant and the representatives of the Opposite
Party no.3 at length and carefully perused the
records and I am of the certain opinion that the
claimant is entitled to receive Rs.23,56,500/- from
the Opposite Parties No.1 and 2 which said amount
also comprises of Rs.12,300/- as cost of these
proceedings details whereof are given hereunder:-
AWARD
The claim of the claimant is allowed to the extent of
Rs.23,44,200/- with interest thereon at the rate of
6% per annum with effect from the date of this
award till the date of payment or the decree which
is earlier.
The claimant is also awarded Rs.12,300/- being the
cost of this arbitration as per details given below:-
(a) Cost of non-judicial stamp for award Rs. 6,500/-
(b) Arbitration fee paid by the claimant Rs. 2,800/-
(c) Typing and office expenses for Rs. 500/-
arbitration paid by the claimant
(d) Cost awarded to the claimant on Rs. 2,500/-
account of counsel's fee
Total Rs.12,300/-"
31. In our view, the Arbitrator was duty-bound to examine
the tenability of the claim made by the respondent under
different heads and decide the same by assigning some
reasons, howsoever briefly. His failure to do so constituted a
valid ground for setting aside the award and the Trial Court
committed a serious error by making the award rule of the
Court. Unfortunately, the High Court also overlooked this
lacuna in the award and approved the judgment of the Trial
Court.
30. It is evident from the record that the entire arbitration
proceedings from 06.12.2017, concluded within a period of 40 days
in a haste. There is no reason forthcoming for the arbitrator to allow
the claim petition filed before him and passing the award in favour
respondent Nos.1 to 5. The Arbitrator just endorsed the affidavit
filed by PW-1, which was reiteration of claim petition and nothing
else. A perusal of documents produced clearly shows that nothing
was placed by way of any documentary proof, before the Arbitrator
to show that, what was the reason for the respondent Nos.1 to 5 to
wait upto 2015 to seek for specific performance, as they have taken
a specific contention in their claim petition, as well as before this
Court in CMP that, on several occasions they requested the
appellants to execute the sale deed by receiving the balance sale
consideration.
31. Absolutely there is no discussion by the Arbitrator, as
contemplated under Section-16(c), for the conclusion to award
specific performance, as the dispute is involving substantial rights in
respect of immovable property. The Trial Court has failed to
consider the same. That apart, there is nothing in the award on
Limitation point, except a vague sentence that, 'there is no time
limit fixed in the agreement,'(emphasis supplied), which is
just opposite to the order in CMP supra.
32. This Court in CMP No.78/2015 categorically held that it is
for the Arbitrator to dwell upon the issue of limitation. In the
presence of record before the Arbitrator regarding the point of
limitation there is no deliberation and discussion by way of reasons
in the award, which clearly shows that the award cannot be
sustained, as there is no legal reasoning to supplement a conclusion
except reproducing the contentions of respondent Nos.1 to 5 in the
claim petition as well as the examination-in-chief of P.W.1
33. A Three Judges Bench of the Hon'ble Apex Court in the
case of Dyna Technologies Private Limited vs. Crompton
Greaves Limited4 at paragraph Nos.36 to 43, has held as under:
AIR Online 2019 SC 1928
"36. When we consider the requirement of a reasoned order
three characteristics of a reasoned order can be fathomed.
They are: proper, intelligible and adequate. If the reasoning
in the order are improper, they reveal a flaw in the decision-
making process. If the challenge to an award is based on
impropriety or perversity in the reasoning, then it can be
challenged strictly on the grounds provided under Section 34
of the Arbitration Act. If the challenge to an award is based
on the ground that the same is unintelligible, the same would
be equivalent of providing no reasons at all. Coming to the
last aspect concerning the challenge on adequacy of reasons,
the Court while exercising jurisdiction under Section 34 has to
adjudicate the validity of such an award based on the degree
of particularity of reasoning required having regard to the
nature of issues falling for consideration. The degree of
particularity cannot be stated in a precise manner as the
same would depend on the complexity of the issue. Even if
the Court comes to a conclusion that there were gaps in the
reasoning for the conclusions reached by the Tribunal, the
Court needs to have regard to the documents submitted by
the parties and the contentions raised before the Tribunal so
that awards with inadequate reasons are not set aside in
casual and cavalier manner. On the other hand, ordinarily
unintelligible awards are to be set aside, subject to party
autonomy to do away with the reasoned award. Therefore,
the courts are required to be careful while distinguishing
between inadequacy of reasons in an award and unintelligible
awards.
37. At this juncture it must be noted that the legislative
intention of providing Section 34 (4) in the Arbitration Act
was to make the award enforceable, after giving an
opportunity to the Tribunal to undo the curable defects. This
provision cannot be brushed aside and the High Court could
not have proceeded further to determine the issue on merits.
38. In case of absence of reasoning the utility has been
provided under of Section 34(4) of the Arbitration Act to cure
such defects. When there is complete perversity in the
reasoning then only it can be challenged under the provisions
of Section 34 of the Arbitration Act. The power vested under
Section 34 (4) of the Arbitration Act to cure defects can be
utilized in cases where the arbitral award does not provide
any reasoning or if the award has some gap in the reasoning
or otherwise and that can be cured so as to avoid a challenge
based on the aforesaid curable defects under Section 34 of
the Arbitration Act. However, in this case such remand to the
Tribunal would not be beneficial as this case has taken more
than 25 years for its adjudication. It is in this state of affairs
that we lament that the purpose of arbitration as an effective
and expeditious forum itself stands effaced.
39. It may be noted that when the High Court concluded that
there was no reasoned award, then the award ceased to exist
and the Court was functus officio under Section 34 of the
Arbitration Act for hearing the challenge to the award under
the provisions of Section 34 and come to a conclusion that
the arbitration award was not in terms of the agreement. In
such case, the High Court ought to have considered
remanding the matter to the Tribunal in the usual course.
However, the High Court analyzed the case on merits, but, for
different reasons and we need not go into the validity of High
Court's interference.
40. Coming back to the award, we need to see whether the
award of the Arbitral Tribunal can be sustained in the instant
case. Although the Arbitral Tribunal has dealt with the claims
separately under different subheadings, the award is
confusing and has jumbled the contentions, facts and
reasoning, without appropriate distinction. The Tribunal
rendered the award with narration of facts with references to
the annexures wherever it relied upon by it. The Tribunal
abruptly concluded at the end of the factual narration, without
providing any reasons, in the following manner:
"(3) Claim for unproductive usage of machineries
....
(g) All the above facts clearly establish that the machineries
deployed by the Claimant had to do unproductive work by
shifting from one place to another to suit the availability of
work. The contract contemplates only payment for actual
turnover of earthwork and for this they had received amount
totaling to Rs. 1709782.88. The Claimant claims that the hire
charges paid to the machineries, men and engineers should
be reimbursed to him. He has given the actual expenses in his
claim statement.
(emphasis supplied)
41. Interestingly, the factual narration is coupled with the
claimant's argument, which is bundled together. A close
reading of the same is required to separate the same wherein
the Arbitral Tribunal has mixed the arguments with the
premise it intended to rely upon for the claimant's claim.
Further, it has reduced the reasons for respondent's defense.
In spite of our independent application of mind based on the
documents relied upon, but cannot sustain the award in its
existing form as there is a requirement of legal reasoning to
supplement such conclusion. In this context, the complexity
of the subject matter stops us from supplementing such legal
reasoning and we cannot sustain the aforesaid award as being
reasoned.
42. It may be beneficial to reduce the concluding paragraph
of the award, which reads as under:
"3.4. The above arguments and various authorities quoted by
them have been studied by the Tribunal and we are convinced
that the compensation is payable on the hire charges and
expenses incurred by the claimant based on the claims made
by him in June 95 and now submitted by the claimant in his
revised claim petition on 05.07.1997. We are convinced that
the machineries have been actually mobilized from the letter
R3, R8 and R10 issued by DCM reporting on the number of
machineries deployed by Claimant. The Claimants have
produced the log books and bills for the various machineries
and modified their claims. The tribunal had perused the log
books and idle wages approved in C7 by Respondent and the
claims made in R17."
(emphasis supplied)
43. From the facts, we can only state that from a perusal of
the award, in the facts and circumstances of the case, it has
been rendered without reasons. However, the muddled and
confused form of the award has invited the High Court to
state that the arbitrator has merely restated the contentions
of both parties. From a perusal of the award, the
inadequate reasoning and basing the award on the
approval of the respondent herein cannot be stated to
be appropriate considering the complexity of the issue
involved herein, and accordingly the award is
unintelligible and cannot be sustained."(emphases
supplied)
34. A perusal of the award clearly shows that, it suffers from
short of valid reasons for the conclusion, which is against the law as
contemplated under Section-34(2)(A) of the Act 1996. The Trial
Court failed to consider the same, which has resulted in dismissing
the petition filed under Section-34 of the Act 1996, causing
miscarriage of Justice to the appellants. The Trial Court is too
technical, while considering the substantive legal rights of the
parties that too in respect of the immovable properties involving
specific performance of contract. The Trial Court is enjoined with
power under Section-34 of Act 1996, to set aside the arbitral award
under the contingences enumerated in the Provision as well as the
law of precedents laid down by the Hon'ble Apex Court as well as
this Court. The Trial Court failed to exercise its power/jurisdiction
under Section 34 of the Act 1996, as such the order impugned calls
for interference at our hands. For the foregoing reasons, we pass
the following:
ORDER
i) The appeal filed under Section-13(1A) of Commercial
Courts Act, 2015 read with Section-37(1)(C) of Act 1996,
is hereby Allowed.
ii) The judgment and order dated 30.11.2021, passed by
the court of LXXXVIII Additional City Civil and Session
Judge, (Exclusive Commercial Court) (CCH 89),
Bengaluru City COM.AS.No.193/2019 is set-aside.
Consequently, the application under Section-34 of Act
1996 is allowed and the award passed by the Sole
Arbitrator dated 11.01.2018 in Arbitration Case
No.91/2017 is set-aside.
iii) The matter is remanded to the Arbitrator, who shall
decide the matter afresh after giving a reasonable
opportunity of hearing to both the parties including an
opportunity to adduce oral and documentary evidence.
iv) All contentions of the parties are left open. The Arbitrator
shall decide the dispute on its own merits, without being
influenced by any of the observations made by this Court
while considering the case on hand.
v) No order as to costs.
Sd/-
(V KAMESWAR RAO)
JUDGE
Sd/-
(T.M.NADAF)
JUDGE
JJ
CT: BRS
