IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 18-2-2010 CORAM THE HONOURABLE MR.JUSTICE M.CHOCKALINGAM AND THE HONOURABLE MR.JUSTICE T.MATHIVANAN O.S.A.No.443 of 2009 and M.P.No.1 of 2009 M/s.Arunoday Developers Rep. By its Proprietrix Aruna Parwal No.7, Doctors' Lane Gole Market New Delhi 100 001. .. Petitioner vs 1.M/s.Gemini Arts Private Ltd., Rep. By its Chairman and Managing Director Ravishankar Prasad 601, Mount Road, Chennai 600 006. 2.M/s.Green Gardens Private Limited Rep. By its Chairman and Managing Director Ravishankar Prasad 601, Mount Road, Chennai 600 006. 3.Justice Sri S.Ramalingam (Retired) Sole Arbitrator, No.9, Madha Church Road Mandavelipakkam Chennai 600 028. .. Respondents Original side appeal preferred under Order XXXVI Rule 1 of Original Side Rules against the fair and decreetal order of this Court dated 7.8.2009 made in O.P.No.588 of 2007. For Petitioner : Mr.AR.L.Sundaresan Senior Counsel for Mr.Ramesh Kumar Chopda For Respondents : Mr.T.V.Ramanujan Senior Counsel for Mr.Y.N.Venkatraj for RR1 and 2 JUDGMENT
(Judgment of the Court was delivered by M.CHOCKALINGAM, J.)
This intracourt appeal has arisen from the order of the learned Single Judge of this Court made in O.P.No.588 of 2007 filed by the appellant herein against the award passed by the Arbitral Tribunal.
2.The facts and circumstances under which this appeal has arisen are as follows:
(a) On an application submitted by the respondents 1 and 2, the Government passed an order in G.O.Ms.No.1729, Housing and Urban Development Department, dated 16.11.1987, granting exemption in their favour in respect of construction of two multistoried building blocks H & I with basement plus ground floor and also 10 floors which is the subject matter of arbitration. Pursuant to the same, the respondents 1 and 2 entered into a development agreement with the appellant herein on 17.3.1988, assigning the construction rights in respect of 4th to 10th floors of the property for a valuable consideration of Rs.2,86,38,540/- but retaining the construction of basement and ground to 3rd floor. The said agreement was signed by the husband of the appellant. A memo of consideration was also signed by both the parties on the same date.
(b) While the matter stood thus, the sanction accorded under G.O.Ms.No.1729 was withdrawn by the Government on 28.4.1989. Thereafter, a supplementary agreement was entered into between the parties on 25.7.1990, to secure the interest and also the payments received from the appellant. Under the agreement, the respondents 1 and 2 agreed to allot to the appellant 29 units of 35450 sq. ft. of the constructed area from their own constructed area in the 1st to 3rd floors along with 50% of the basement. The agreement also acknowledged the receipt of advance monies by the respondents 1 and 2, and it stood to the credit of the claimant as Rs.2,02,16,000/-. Thereafter, the respondents 1 and 2 issued a letter of allotment dated 13.6.1991, to the appellant in terms of the supplementary agreement confirming the allotment of the said units valued at Rs.2,02,16,000/- undertaking to deliver the possession of the said units before 30.6.1992.
(c) There was exchange of notices between the parties. Then, a caution notice was issued by the MMDA on 26.10.1995, regarding the unauthorised construction of 5th to 7th floors. The Indian Bank which had funded the respondents 1 and 2, issued a public notice against the property which was mortgaged with them, and the details of the properties mentioned excluded the portions already allotted or sold. The appellant invoked the arbitration clause, and applications were filed under Sec.11 of the Act. Following the same, this Court, on enquiry, appointed Hon’ble Mr.Justice S.Ramalingam as the Arbitrator. An award came to be passed on 3.2.2007. Aggrieved over the same, the appellant filed O.P.No.588 of 2007 under Sec.34 of the Act.
(d) Opportunity was given to the opposite party to file their counter.
(e) The learned Single Judge on enquiry dismissed the petition. Hence this appeal at the instance of the appellant.
3.Advancing arguments on behalf of the appellant, the learned Senior Counsel Mr.AR.L.Sundaresan would submit that the import of the supplementary agreement has to be taken into account in the light of the clear admission of the respondents 1 and 2 and the finding of the Tribunal on the huge consideration received by the respondents 1 and 2 from the appellant under the development agreement; that while the respondents 1 and 2 have not denied the execution of the development agreement and receipt of huge consideration, there was no reason to doubt the genuineness of the supplementary agreement which was executed as a consequence of the default committed by the respondents 1 and 2; that the respondents 1 and 2 raised objection that the supplementary agreement was hit by fraud and collusion, but they did not bring any evidence to support the same; that despite the same, the arbitrator has recorded a finding that the supplementary agreement was not acted upon and suspicious; that it is pertinent to note that the appellant had transacted with two incorporated companies, and they have their own entity; that while the supplementary agreement was entered into on 25.7.1990, within less than three years from the date of the development agreement, there was no necessity or occasion for the appellant to enter into any clandestine action anticipating a change in the management of the respondents 1 and 2; that it is further to be noted that the supplementary agreement was never challenged by the respondents 1 and 2; that in fact, the respondents had knowledge about the said agreement; that all the documents filed by the appellant before the Tribunal including the supplementary agreement, were only xerox copies; that no objection was raised by the respondents 1 and 2 for marking of the same; that under the circumstances, there was no necessity for the appellant to place the originals; that it was not the case of the respondents 1 and 2 that the supplementary agreement was not executed, and under the circumstances, the order of the learned Single Judge has got to be set aside.
4.In support of his contentions the learned Senior Counsel relied on the following decisions:
(i)AIR 1972 SUPREME COURT 608 (P.C.PURUSHOTHAMA REDDIAR V. S.PERUMAL);
(ii)(2006) 4 SUPREME COURT CASES 445 (HINDUSTAN ZINC LTD. V. FRIENDS COAL CARBONISATION) and
(iii)(2008) 13 SUPREME COURT CASES 80 (DELHI DEVELOPMENT AUTHORITY V. R.S.SHARMA AND COMPANY)
5.The learned Senior Counsel Mr.T.V.Ramanujan appearing for the respondents 1 and 2 put forth his submissions in his sincere attempt of sustaining the order of the learned Single Judge, and relied on the following decisions:
(1)2000 (1) RAJ 111 (DELHI) (IRCON INTERNATIONAL LIMITED V. ARVIND CONSTRUCTION COMPANY LIMITED AND ANOTHER);
(2)2000 (3) CTC 83 (TAMIL NADU CIVIL SUPPLIES CORPORATION LTD. V. ALBERT & CO.);
(3)AIR 2002 CAL 65 (M/S.SARKAR ENTERPRISES V. M/S.GARDEN REACH SHIPBUILDERS AND ENGINEERS LTD.);
(4)2006 (5) CTC 519 (BRICK STEEL ENTERPRISES V. THE SUPERINTENDING ENGINEER, PWD, SALEM);
(5)2002 (2) RAJ 502 (BOMBAY) (UNION OF INDIA V. M/S.INDIA PROOFING AND GENERAL INDUSTRIES, KANPUR);
(6)2002 (3) RAJ 360 (DELHI) (INDIA TOURISM AND DEVELOPMENT CORPORATION LTD. V. T.P.SHARMA);
(7)AIR 2005 DELHI 415 (KANHA CREDIT & HOUSING PVT. LTD. V. JANACIM ELECTRONICS);
(8)2009(1) RAJ 654 (DELHI) (LARSEN AND TOUBRO V. PURI CONSTRUCTION LIMITED AND OTHERS);
(9)2008 (4) RAJ 669 (DELHI) (HIMACHAL JOINT VENTURE V. PANILPINA WORLD TRANSPORT (INDIA) PVT. LTD);
(10)2008 (4) RAJ 448 (DELHI) (GURDEEP KAUR V. C.K.BEDI AND ANOTHER);
(11)2008 (4) RAJ 381 (DELHI) (NATIONAL HIGHWAYS AUTHORITY OF INDIA V. AFCONS INFRASTRUCTURE LIMITED);
(12)2008 (2) RAJ 594 (DELHI) (DELHI DEVELOPMENT AUTHORITY V. ANAND AND ASSOCIATES);
(13)AIR 2003 DELHI 314 (GOVERNMENT OF NCT OF DELHI V. KHEM CHAND AND ANOTHER);
(14)2006(5) SCC 558 (ANIL RISHI V. GURBAKSH SINGH);
(15)AIR 2002 DELHI 255 (THYSSEN STAHLUNION GMBH V. STEEL AUTHORITY OF INDIA);
(16)AIR 2003 DELHI 128 (EM AND EM ASSOCIATES V. DELHI DEVELOPMENT AUTHORITY);
(17)2009 (1) RAJ 243 (DELHI) (S.P.PURI V. ALANKIT ASSIGNMENTS LTD.); and
(18)2008 (1) CTC 97 (J.NAVAL KISHORE V. D.SWARNA BHADRAN).
6.This Court paid its anxious consideration on the submissions made and looked into the materials available.
7.Admittedly, the respondents 1 and 2 applied for sanction of construction of a multistoried building in a land owned by them measuring 13 grounds and 18.03 sq. ft. and 7 grounds and 597 sq. ft. The same was sanctioned by the Government in G.O.Ms.No.1729 dated 16.11.1987. A part of the construction in the basement and three floors was made. A development agreement was entered into between the appellant and the respondents 1 and 2 on 17.3.1988, whereby the appellant agreed to take up the construction of 4th to 10th floors, and the same was entrusted to the appellant for a consideration of Rs.2,86,38,540/-. As per the agreement, the construction was to the extent of 187180 sq. ft. of FSI. A sum of Rs.1,44,11,070/- would represent 50% of the total consideration payable by the appellant on behalf of the respondents 1 and 2, towards supply of materials to the respondents upto the first floor. The remaining 50% was to be paid in this manner: (i) Rs.14,00,000/- to be paid before the execution of the agreement; (ii) Rs.90,11,070/- payable on signing the agreement; and (iii) Rs.40,00,000/- payable on or before 13.4.1988. The development agreement and the memo of consideration form part of the agreement. After the two payments namely Rs.14,00,000/- and Rs.90,11,070/- were paid, a show cause notice was issued by the Government on 28.4.1989, whereby the validity of construction from 4th to 10th floors was questioned, and the sanction originally granted was also withdrawn in respect of the same.
8.While all the above factual position was admitted by both the parties, the appellant put forth a claim before the arbitral Tribunal stating that the supplementary agreement dated 25.7.1990, was entered into between the appellant and the respondents 1 and 2 whereby it was agreed that both the parties should file necessary proceedings before the Apex Court challenging the show cause notice issued by the Government. In the meantime, the respondents 1 and 2 agreed to allot to the appellant 29 units containing 35450 sq.ft. from basement to the first floor which was valued at Rs.2,02,16,000/-. It was also contended by the appellant’s side that the consideration for such approval of the said units was agreed to be set off against the claims of the appellant. It is also further urged by the appellant that as per the supplementary agreement, the appellant would be having the first charge over the said units till obtaining revalidation of the sanction by the MMDA for the 4th to 10th floors on or before 30.6.1991, and if revalidation was obtained, the units should be released from the charge, and the appellant should also hand over the allotment letters to the respondents 1 and 2, and if done so, the appellant developer must give the balance amount as agreed upon by the parties under the original agreement dated 17.3.1988, and complete the construction from 4th to 10th floors, and if it did not fructify, 29 units in respect of which a charge has been created would vest with the appellant.
9.What was contended by the appellant before the Tribunal and equally here also is that the appellant was entitled to 29 units as found in the supplementary agreement since the revalidation of the plan could not be obtained by the respondents 1 and 2 as understood under the agreement; that the claim that was made before the Tribunal was in the nature of a relief of specific performance; and that apart from that, the appellant made a claim in respect of the completion of the works in the ground to third floors along with the compensation in respect of the deprivation of the right to construct 4th to 10th floors. Contrarily, the defence plea by the respondents 1 and 2 was that out of the three amounts stipulated in the first agreement, Rs.14 lakhs was paid, and no more amount was paid. At this juncture, it is pertinent to point out that the Arbitral Tribunal was perfectly correct in finding that apart from the said amount of Rs.14 lakhs, the respondents 1 and 2 were liable to pay Rs.90,11,070/- in view of the memorandum of understanding under Ex.C3. In respect of the above finding, the parties are not in row.
10.The appellant rested its entire case before the Tribunal on the supplementary agreement dated 25.7.1990, marked as Ex.C4, in order to ask the reliefs mentioned above. The respondents 1 and 2 took a specific plea that the said supplementary agreement was an antedated one. A specific issue “whether the supplementary agreement is true and valid” was framed by the arbitral Tribunal, and it has given a finding in that regard which reads as follows:
“There is some force in the submissions of the Respondents that the supplemental agreement was not acted upon and that it is suspicious. The Respondents counsel submits that Palaniappan Ramasamy the erstwhile Managing Director of respondents had acted in collusion with the claimants and he had no authority to enter into any agreement. The Respondents counsel points out that said Palaniappa Ramasamy has not signed against the name of 2nd party and further what has been filled purports to be certified copy. Further what was the need or necessity for the supplemental agreement many years after the construction activities had stopped. There is no evidence to show that the supplemental agreement was placed before the Board of Directors.”
11.The learned Senior Counsel for the appellant pointing to the fact that the said supplementary agreement was entered into on 25.7.1990, would submit that there arose a necessity for entering into such a supplementary agreement; that since following the show cause notice, the original sanction in respect of 4th to 10th floors was withdrawn by the Government, the parties were to approach the Apex Court for taking necessary proceedings, and hence the parties agreed that the respondents 1 and 2 should allot 29 units in the constructed area which was valued at Rs.2,02,16,000/-; that the consideration for such transfer of the said units was agreed to be set off against the claims of the appellant; that if the revalidation of the sanction was obtained, the appellant should release the charge in respect of those 29 units; that after paying the balance amount to the respondents 1 and 2 in terms of the development agreement already entered into on 17.3.1988, the appellant would continue the construction from 4th to 10th floors; and that the parties also thought of contingency that if the liquidation was not obtained, 29 units should vest with the appellant. The learned Senior Counsel would further urge that he was actually interested for entering into such supplementary agreement; that the finding of the Tribunal that the agreement was suspicious was not only erroneous, but also incorrect; that it is true that the xerox copy of the agreement was placed before the Tribunal which is marked as Ex.C4; that the same has also been admitted in evidence; that once it is admitted in evidence, the arbitral Tribunal should have accepted the contents therein; and that there is nothing to indicate that it was a suspicious one.
12.The learned Senior Counsel for the respondents 1 and 2 brought to the notice of the Court that only a xerox copy of the supplementary agreement dated 25.7.1990, was filed before the arbitral Tribunal; that the appellant had no explanation to offer what happened to the original; that while the first agreement in which the Managing Director has signed on behalf of the company, bore the seal of the company, the so-called supplementary agreement did not have; that the first agreement was entered into at Madras, while the supplementary agreement was actually attested by two witnesses who belonged to Delhi; that though the supplementary agreement was admitted, the Tribunal was perfectly correct in not accepting the same; that the erstwhile Managing Director of the respondents 1 and 2 had no authority to sign the document on the alleged date as found in Ex.C4, and thus it would be indicative of the collusion between the appellant and the erstwhile Managing Director; that taking into consideration all the above, the Tribunal has taken a view that it was a suspicious document; and that since the entire case of the appellant was rested upon the so-called supplementary agreement which was one suspicious and also not acted upon, he could not maintain the claim.
13.After considering the submissions made and looking into the materials available, this Court is of the considered opinion that the arbitral Tribunal was perfectly correct in rejecting the document as one suspicious. Before the arbitral Tribunal, the respondents 1 and 2 have taken a specific stand that the supplementary agreement was a collusive one. When the witness on the side of the appellant was examined, a specific suggestion was put in respect of Ex.C4 supplementary agreement, as collusive, and the same was replied that the witness did not remember. As rightly pointed out by the learned Senior Counsel for the respondents 1 and 2, all the defects are noticed in the document. There was no reason why the Managing Director of the company should sign the document when he was not acting so during the relevant time. Non-affixing the seal of the company would expose and indicate that the seal of the company could not be affixed since the erstwhile Managing Director was discharged. All these would clearly indicate that the document could not but be a suspicious one, and on the strength of the same, a relief cannot be granted.
14.It is pertinent to note that while the genuineness of the document was denied by the respondents 1 and 2 and also they came with the specific plea that the document has come into existence collusively in order to sustain a false claim, a duty was cast upon the appellant to prove the fact that it was a genuine document. But, the appellant has not taken steps in that regard. So long as the non-production of the original of the supplementary agreement was not explained, no question of acting over Ex.C4, xerox copy of the supplementary agreement, would arise. Though not the arbitrator gave elaborate reasons or grounds to arrive at a conclusion, in the instant case, the Arbitrator has mentioned the reasons why the said supplementary agreement Ex.C4, should be rejected and could not be acted upon. Now it is represented by the appellant’s side that the original of Ex.C4 is available with the appellant.
15.As rightly pointed out by the learned Senior Counsel for the respondents 1 and 2, the appellant was unable to show any one of the grounds available to set aside the award under Sec.34 of the Arbitration and Conciliation Act. While dealing with the application to set aside the award, the Court has to look into and consider whether the view taken by the arbitrator on the available materials was justified. The Court cannot travel beyond, but confine itself to the restrictions enumerated under Sec.34 of the Act. In this context, the learned Single Judge has relied on the followiong decision reported in 2000 (3) CTC 83 (TAMIL NADU CIVIL SUPPLIES CORPORATION LTD. V. ALBERT & CO.):
“12.It is clear from section 34(2) of the Arbitration and Conciliation Act that the award may be set aside by the court only under certain contingencies. The party making the application must furnish proof that the party was under some incapacity of the arbitration agreement is not valid under law or the party making the application was not given proper notice of the appointment of an arbitrator. According to sub-clause (4), the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration and according to section 34(2)(b), the party must establish that the arbitral award is in conflict with the public policy of India. It is therefore, clear that only limited ground is available to enable the party to set aside the award passed by the arbitrator. It is settled position of law that the award cannot be interfered with simply because another view is possible on the available things. Only if the petitioner is able to establish that his case falls within the category of section 34, this court can interfere.
13.Normally, the general principles which the court dealing with the application to set aside the award has to consider, whether the view of the arbitrator on the evidence is justified; the court has to confine itself to the restrictions enumerated therein and where the parties get the matter adjudicated through the arbitrator of their own choice and the arbitrator gives a detailed award, the court can interfere in the decision only if the conscience of the court is in any sense touched by palpable injustice. The Arbitrator is a Judge of the choice of the parties and his decision unless there is an error apparent on the face of the award which makes it unsustainable, is not to be set aside even the court as a court of law would come to a different conclusion on the same facts. The court cannot reappraise the evidence and it is not open to the court to sit on the appeal over the conclusion of the arbitrator. It is not open to the court to set aside a finding of fact arrived at by the arbitrator and only grounds on which the award can be cancelled are those mentioned in the Arbitration Act. Where the arbitrator assigns cogent grounds and sufficient reasons and no error of law or misconduct is cited, the award will not call for interference by the court in exercise of the power vested in it. Where the arbitrator is a qualified technical person and expert, who is competent to make assessment by taking into consideration the technical aspects of the matter, the court would generally not interfere with the award passed by the arbitrator.”
In the case on hand, the learned Single Judge by his elaborate order has sustained the award which, in the considered opinion of this Court, does not require any interference.
16.The learned Senior Counsel for the appellant at the end of his arguments put forth a submission in respect of interest, that the agreement was entered into in 1988 and the Tribunal while awarding Rs.14,00,000/- and Rs.90,11,070/-, has not awarded any interest on Rs.1,04,11,070/- from the date of respective payments till the award is made; that it is a fit case where it was actually a commercial transaction for purchase of the property, and hence interest at the rate of 18% per annum should have been awarded; that insofar as the subsequent interest also, the Tribunal has awarded at the rate of 6% from the date of award till date of payment which is also very low, and hence reasonable interest has got to be ordered. The learned Senior Counsel for the respondents 1 and 2 would submit that in the instant case, the appellant has come with the false plea and has made his claim only for specific performance and not for recovery of money; that apart from apart, he rested his claim on a document which was found as suspicious; that his claim on that ground was rejected; and that considering the totality of the circumstances, the Arbitrator has not awarded any interest till the award was passed and has given only 6% interest from the date of award which is reasonable.
17.It is pertinent to point out that though it is evident from the memorandum of understanding that the respondents 1 and 2 have received the second payment, they have denied the said payment. But, the Arbitrator has awarded the same. Equally, the arbitrator has rejected the supplementary agreement. However, the said two payments made by the appellant, was in the hands of the respondents 1 and 2 and was utilised for their purpose. In such circumstances, it would be highly unreasonable to deny the interest prior to the award while the appellant’s money was in the hands of the respondents 1 and 2. Hence awarding interest at 9% per annum from the time of respective payments till realisation would meet the ends of justice.
18.Therefore, for the reasons stated above, the appellant is entitled to get interest at 9% per annum from the time of respective payments namely Rs.14,00,000/- and Rs.90,11,070/- till realisation. Accordingly, the award of the Tribunal is modified, and this original side appeal is disposed of leaving the parties to bear their own costs. Consequently connected MP is closed.
(M.C.,J.) (T.M.,J.)
18-2-2010
Index: yes
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nsv
M.CHOCKALINGAM, J.
AND
T.MATHIVANAN, J.
nsv
To:
Mr.Justice Sri S.Ramalingam (Retired)
Sole Arbitrator,
No.9, Madha Church Road
Mandavelipakkam
Chennai 600 028.
OSA No.443 of 2009
Dt: 18-2-2010