Allowed

Union of India v. M/S Kala Enterprises

Karnataka HC10 Feb 2021MFA/821/2019

Case brief

AI extract

What is this about?

The High Court of Karnataka dismissed three miscellaneous first appeals filed by the Union of India against an arbitral award and related orders. The Court rejected the condonation of delay plea, citing Supreme Court precedents on government delays, and dismissed the appeals on grounds of acquiescence and lack of application of mind, directing the release of deposited funds.

What did the court decide?

The Registry is directed to release the amount deposited by the appellant forthwith.

Union of India Vs M/S Kala Enterprises — Arbitration | Karnataka HC (2021)

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IN THE HIGH COURT OF KARNATAKA, BENGALURU

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DATED THIS THE 10^TH DAY OF FEBRUARY, 2021

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PRESENT

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THE HON’BLE MRS. JUSTICE B.V.NAGARATHNA

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AND

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THE HON’BLE MRS. JUSTICE M.G. UMA

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MISCELLANEOUS FIRST APPEAL No.822/2019 (AA)

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C/W

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MISCELLANEOUS FIRST APPEAL No.820/2019 (AA)

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AND

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MISCELLANEOUS FIRST APPEAL No.821/2019 (AA)

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BETWEEN:

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UNION OF INDIA, REPRESENTED BY CHIEF ENGINEER, CHENNAI ZONE, ISLAND GROUNDS, CHENNAI – 600 009. ... APPELLANT (COMMON IN ALL THE APPEALS)

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(BY SRI UNNIKRISHNAN M., ADVOCATE (THROUGH VIDEO CONFERENCE))

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AND:

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M/S.KALA ENTERPRISES, ENGINEERS AND CONTRACTORS, NO.59, 4^TH BLOCK, JAYANAGAR (WEST), BENGALURU – 560 011.

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REPRESENTED BY ITS PROPRIETOR, SRI.H.SHIVARAM.

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MR.M.P.V.SHENOI, SOLE ARBITRATOR, NO.3E, CRESCENT COURT APTS., NO.8, CRESCENT ROAD, HIGH GROUNDS, BENGALURU – 560 001. ... RESPONDENTS (COMMON IN ALL THE APPEALS)

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(BY SRI VARUN VEDACHALA, ADVOCATE FOR SRI M.V.VEDACHALA, ADVOCATE FOR R1 (PHYSICAL HEARING); R2 NOTICE DISPENSED WITH VIDE ORDER DATED 08.12.2020)

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IN MISCELLANEOUS FIRST APPEAL NO.822/2019 IS FILED UNDER SECTION 39(1)(vi) OF THE ARBITRATION ACT, 1940 AGAINST THE JUDGMENT & DECREE DATED 11.07.2017 PASSED IN AC.NO.1/2004 ON THE FILE OF THE VI ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, BENGALURU CCH-11, DISMISSING THE PETITION FILED UNDER SECTION 30 AND 31 OF THE ARBITRATION ACT.

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IN MISCELLANEOUS FIRST APPEAL NO.820/2019 IS FILED UNDER SECTION 39(1)(vi) OF THE ARBITRATION ACT, AGAINST THE JUDGMENT & DECREE DATED 11.07.2017 PASSED IN AC.NO.49/2004 ON THE FILE OF THE VI ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, BENGALURU CCH-11, DISMISSING THE SUIT FILED UNDER SECTION 30 AND 31 OF THE ARBITRATION ACT, 1940.

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IN MISCELLANEOUS FIRST APPEAL NO.821/2019 IS FILED UNDER SECTION 39(1)(vi) OF THE ARBITRATION ACT, 1940 AGAINST THE ORDER DATED 11.07.2017 PASSED IN AC.NO.6/2004 ON THE FILE OF THE VI ADDITIONAL CITY CIVIL AND SESSIONS JUDGE, BENGALURU CCH-11, DISPOSING THE SUIT FILED UNDER SECTION 14 AND 14(2) OF THE ARBITRATION ACT, 1940.

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THESE APPEALS COMING ON FOR ADMISSION THIS DAY, NAGARATHNA J., DELIVERED THE FOLLOWING:-

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J U D G M E N T

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Though there is a delay of 106 days in filing the appeal as stated by the appellants in their application, we have nevertheless heard the learned counsel for the respective parties at length on the appeals filed by the appellant-Union of India, represented by its Chief Engineer, Chennai Zone, Chennai.

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These appeals assail the Judgment dated 11.07.2017 and order dated 19.12.2018 passed by the VI Additional City Civil and Sessions Judge, Bengaluru in AS No.49/2004 connected with AC Nos.1/2004 and AC No.6/2004.

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Briefly stated the facts are that the

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appellant/plaintiff-Union of India had entered into an

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agreement with respondent-defendant No.1 for the construction of a ‘Lecture-cum-Assembly Hall’ for ADGES Training Institute at TSR Complex, Bengaluru, the construction of which was to commence on 06.09.1986 and to complete on 05.03.1988, which time-frame was extended from time to time and the work was completed on 03.05.1990. Defendant No.1 raised certain claims and on his application, defendant No.2 was appointed as the sole Arbitrator to decide the disputes raised between the parties. He entered upon the reference on 20.09.1999. On issuance of notice to both parties to furnish their claims by 05.10.1999, defendant No.1 made their submission of claims on 05.05.2000 and since the term of a sole Arbitrator expired prior to the filing of statement of claims by defendant No.1, another Arbitrator (Defendant No.2) continued the proceedings and passed an award on 06.10.2003. Plaintiff filed an

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application seeking a direction to direct defendant No.2 to file the award numbered as AC No.6/2004. In the meanwhile, plaintiff received notice from the trial court on 16.08.2004 in respect of the petition filed under Section 14 of the Arbitration Act, 1940 (hereinafter referred to as ‘the 1940 Act’) by defendant No.1 which was numbered as AC No.1/2004.

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The Additional City Civil and Sessions Judge at Bengaluru city, by common Judgment, dismissed the suit filed by the appellant-plaintiff in A.S.No.49/2004 and the suit filed in AC No.1/2004 and AC No.6/2004 under Section 14 of the 1940 Act were held to be infructuous.

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Being aggrieved by the portion of the order dismissing AC No.1/2004 and AC No.6/2004, the respondent herein preferred MFA No.6393/2017 (AA)

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before this Court. This Court, by judgment dated 09.02.2018, disposed of the appeal and permitted the appellant therein (first respondent herein) to file a miscellaneous case and to seek review of that portion of the order. Accordingly, Misc.No.205/2018 was filed by the first respondent before the trial Court and the same was allowed by order dated 23.10.2018 and that portion of the order by which AC No.1/2004 and AC No.6/2004 filed under Section 14 of the 1940 Act were dismissed, was reviewed and the award filed by the learned Arbitrator was made absolute and A.C.No.1/2004 was allowed. This was on the premise that AC No.49/2004 filed by the appellant herein seeking cancellation of the award as being arbitrary was dismissed.

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In the above circumstances, the appellant-

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Union of India has now filed three appeals, one being

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aggrieved by the dismissal of AS No.49/2004 and two other appeals for allowing of AC No.1/2004 and AC No.6/2004 by review in Misc.No.205/2018.

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We have heard learned counsel for the

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appellant and learned counsel for Respondent No.1.

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Notice to Respondent No.2 is dispensed with

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as Respondent No.2 is the sole Arbitrator who passed the award.

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Learned counsel for the appellant submitted

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that there is a delay of 106 days in filing the appeal.

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The same is due to administrative reasons and it may be condoned as the appellant has a good case on merits and hence, the application seeking condonation

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of delay may be allowed and the appeals may be admitted and heard on merits.

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Per contra, learned counsel for Respondent

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No.1, at the outset, contended that the impugned judgment is dated 11.07.2017. The appellant has not challenged the impugned judgment at all till the filing of these appeals on 23.01.2019. That the delay is not just 106 days in filing the appeal; it is much more. In fact, it was only Respondent No.1, being aggrieved by dismissal of AC No.1/2004 and AC No.6/2004 who had approached this Court in MFA No. 6393/2017 and this Court permitted respondent No.1 for filing of a review petition. On filing of the review petition in Misc.No.205/2018 and the same being allowed on 23.10.2018, the error committed by the trial court in dismissing AC No.1/2004 and AC No.6/2004 also on the dismissal of AS No.49/2004 was rectified. The said rectification has been rightly made by the trial Court since there has been no challenge to the Judgment passed in AS No.49/2004 by the appellant

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herein before this Court. Therefore, in MFA

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No.6393/2017 filed by the first respondent herein, a simple direction was issued by reserving liberty to the first respondent herein to seek rectification of the order passed in AC No.1/2004 and AC No.6/2004 by way of a review petition to be filed by the first respondent before the trial Court. The same was complied with by the first respondent. The trial Court corrected the error in the earlier Judgment dated 11.07.2017. The said correction has been made on the basis that AS No.49/2004 filed by the appellant herein was dismissed and consequently, AC No.1/2004 and AC No.6/2004 have been allowed. Therefore, there is no merit at all in the appeals filed by the appellant-Union of India.

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Learned counsel for respondent No.1

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submitted that the delay is enormous. The delay in

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filing the appeal in assailing the dismissal of AS No.49/2004 on 11.07.2017 is not just 106 days, it is much more. In fact, no appeal could be filed at this stage challenging the dismissal of AS No.49/2004. When the earlier opportunity of filing the appeal was not availed by the appellant, the appellant has acquiesced and accepted the Judgment passed in AS No.49/2004. Therefore, the said appeal may be dismissed in limine. Consequently, other two appeals may also be dismissed.

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Having heard learned counsel for the

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respective parties, though the matter is at the stage of admission, we nevertheless considered the following points:

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i) Whether the appellant is entitled to maintain these appeals?

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ii) Whether the appeals have to be dismissed on the ground of delay?

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iii) What order?

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The detailed narration of facts would not call

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for reiteration, except to highlight the fact that the sole arbitrator passed his award on 06.10.2003/21.11.2003 with regard to the disputes that arose between the parties in the matter of construction of ‘Lecture-cum-Assembly Hall’ for ADGES Training Institute at TSR Complex, Bengaluru. Being aggrieved by the said award, the appellant herein filed AS No.49/2004 under Section 30 of the 1940 Act. AC No.1/2004 and AC No.6/2004 were filed under Sections 14(1) and 14(2), respectively seeking for the award to be made the rule of the Court and for enforcement of the award. By judgment dated 11.07.2017, AS No.49/2004 filed by the appellant herein was dismissed. But simultaneously, AC No.1/2004 and AC No.6/2004 were also dismissed. Admittedly, no appeal was filed by the appellant

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herein assailing the dismissal of AC No.49/2004. But,

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the first respondent herein being aggrieved by the dismissal of AC No.1/2004 and AC No.6/2004, preferred MFA No.6393/2017 before this Court. By Judgment dated 09.02.2018, this Court granted liberty to the first respondent herein to approach the trial court by seeking review of the operative portion of the judgment dated 11.07.2017 and that portion of the order by which AC No.1/2004 and AC No.6/2004 were dismissed. In fact, this Court did not even issue any notice to the appellant herein in MFA No.6393/2017 and simply liberty was granted to first respondent herein to file a review petition before the trial court. This was because there was no challenge to the Judgment passed by the trial court in AS No.49/2004. When the judgment passed in AS No.49/2004 dismissing the same had attained finality as there was no challenge to the same before this

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Court, the implication is that the award passed by the sole arbitrator had been sustained. Consequently, liberty was reserved by this Court to the first respondent herein to seek modification of that portion of the judgment dismissing AC No.1/2004 and AC No.6/2004 when the award of the sole arbitrator had been affirmed by the trial Court. This was precisely on the basis that there was no challenge to the judgment passed in AS No.49/2004, by which the said suit filed by appellant herein was dismissed and the award of the arbitrator had been sustained by the trial court.

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In the circumstances, on the strength of the liberty granted by this Court, the first respondent herein filed Misc.No.205/2018 and the said miscellaneous case was allowed after issuing notice to the appellant herein and hearing the appellant and by making a detailed order in that regard. As a result, on

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the basis of dismissal of AS No.49/2004 by the trial court, AC No.1/2004 and AC No.6/2004 had to be allowed and have been allowed in Misc.No.205/2018 by order dated 23.10.2018. That was in fact the logical conclusion that ought to have been arrived at by the trial court while passing the judgment on 11.07.2017 itself. The same was however, arrived at in Misc.No.205/2018 by order dated 23.10.2018.

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Now, being aggrieved by the judgment dated 11.07.2017 passed in AS No.49/2004 and allowing of AC No.1/2004 and AC No.6/2004 in Misc.No.205/2018 on 23.10.2018, the appellant has preferred these three appeals. We do not understand as to how the appellant could now assail the earlier order passed in AC No.1/2004 and AC No.6/2004 on 11.07.2017 as the dismissal of these cases was in favour of the appellant-Union of India. There is absolutely no

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reference made to the order passed in Misc.No.205/2018 modifying the order passed in AC No.1/2004 and AC No.6/2004 by order dated 23.10.2018 in Misc.No.205/2018 by the appellant herein. This is an instance of non-application of mind.

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That apart, the challenge to the order made subsequently in AC No.1/2004 and AC No.6/2004 is also without any basis as earlier, no challenge was made to the judgment dated 11.07.2017 in AS No.49/2004 by the appellant herein. It is on the basis of the dismissal of AS No.49/2004 that AC No.1/2004 and AC No.6/2004 filed by Respondent No.1 herein and have been allowed by the trial court in Misc.No.205/2018. Earlier, the same having been dismissed, resulted in the first respondent herein filing MFA No.6393/2017, in which liberty was reserved by this Court to seek review of that portion of the

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judgment dated 11.07.2017. On the said review, Misc. No.5/2018 being filed and allowed, the error committed by the trial court was rectified.

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In the circumstances, we hold that the appellant herein had accepted the dismissal of AS No.49/2004 by judgment dated 11.07.2017 as there was no challenge to the same. Only Respondent No.1 being aggrieved by dismissal of AC No.1/2004 and AC No.6/2004, had approached this court and liberty was reserved to file a review petition and the review petition having been filed, a rectification was made in the judgment dated 11.07.2017. Even after filing of Misc.No.205/2018 by first respondent herein, the appellant did not think it fit to assail the dismissal of AS No.49/2004. Rather, they have accepted even the order passed in Misc.No.205/2018 dated 23.10.2018 and have simply challenged the judgment dated

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11.07.2017 by filing these appeals. The same is also totally without application of mind.

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In the circumstances, we dismiss these

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appeals not only on the ground of delay as the explanation offered for condonation of delay is without

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any basis as is evident from the affidavit filed in support of the application, but also on the ground of acquiescence.

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For a better understanding of the same, we extract Paragraphs 3 to 5 of the affidavit filed in support of the application seeking condonation of delay.

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“3. I submit that the Hon’ble VI Additional City Civil and Sessions Judge, Bangalore has in terms of the Judgement and Decree dated 11.07.2017 dismissed the Appeal filed by the Appellant and confirmed the order of the Hon’ble Arbitrator in terms of which the Appellant is made liable to pay the First Respondent huge sum of

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money which it is not bound to, since the contract between the parties did not provide for payment of minimum wages in respect of the work done during the extended period of completion.

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4. I submit that the impugned order has caused grave loss and hardship and the Appellant is forced to pay out of public funds for no fault of it. In fact the impugned order by itself is unsustainable and has been passed without considering the principle of the contract and the Arbitration and Conciliation Act. In fact the impugned order passed by Hon’ble VI Additional City Civil and Sessions Judge, Bangalore is without application of mind. Accordingly, the impugned order by itself is liable to be set aside.

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5. I submit that as stated above, the loss occasioned to the Appellant cannot be compensated in terms of money.”

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On a reading of the same, we find that the stand taken by the appellant in not filing the appeal assailing the dismissal of AS No.49/2004 is wholly incorrect and not in accordance with law and further, there is no explanation which is sufficient in law to be

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accepted so as to condone the delay in filing the appeals. In this regard, we place reliance on the following judgments of the Hon’ble Supreme Court:

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(a) In the case of Post Master General &

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others vs. Living Media India Ltd. & another [(2012) 3 SCC 563], Hon’ble Supreme Court has deprecated the delay in filing the special leave petitions by the State and Central Governments as well as their instrumentalities and agencies. Paragraph Nos.27 to 30 of the said judgment read as under:

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“27. It is not in dispute that the person(s) concerned were well aware or conversant with the issues involved including the prescribed period of limitation for taking up the matter by way of filing a special leave petition in this Court. They cannot claim that they have a separate period of limitation when the Department was possessed with competent persons familiar with court proceedings. In the absence of plausible and acceptable

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explanation, we are posing a question why the delay is to be condoned mechanically merely because the Government or a wing of the Government is a party before us.

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28.Though we are conscious of the fact that in a matter of condonation of delay when there was no gross negligence or deliberate inaction or lack of bona fides, a liberal concession has to be adopted to advance substantial justice, we are of the view that in the facts and circumstances, the Department cannot take advantage of various earlier decisions. The claim on account of impersonal machinery and inherited bureaucratic methodology of making several notes cannot be accepted in view of the modern technologies being used and available. The law of limitation undoubtedly binds everybody, including the Government.”

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29.In our view, it is the right time to inform all the government bodies, their agencies and instrumentalities that unless they have reasonable and acceptable explanation for the delay and there was bona fide effort, there is no need to accept

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the usual explanation that the file was kept pending for several months/years due to considerable degree of procedural red tape in the process. The government departments are under a special obligation to ensure that they perform their duties with diligence and commitment. Condonation of delay is an exception and should not be used as an anticipated benefit for the government departments. The law shelters everyone under the same light and should not be swirled for the benefit of a few.

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30.Considering the fact that there was no proper explanation offered by the Department for the delay except mentioning of various dates, according to us, the Department has miserably failed to give any acceptable and cogent reasons sufficient to condone such a huge delay. Accordingly, the appeals are liable to be dismissed on the ground of delay.”

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(b) Recently, the Hon'ble Supreme Court in the State of Madhya Pradesh & others vs. Bherulal [decided on 15/10/2020 in Special Leave

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Petition (Civil) Diary No.9217/2020] , has deprecated the practice of filing appeals and special leave petitions belatedly. The relevant portion of the said judgment read as under:

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"5. A preposterous proposition is sought to be propounded that if there is some merit in the case, the period of delay is to be given a go-by. If a case is good on merits, it will succeed in any case. It is really a bar of limitation which can even shut out good cases. This does not, of course, take away the jurisdiction of the Court in an appropriate case to condone the delay.

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x x x

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7. We are thus, constrained to send a signal and we propose to do in all matters today, where there are such inordinate delays that the Government or State authorities coming before us must pay for wastage of judicial time which has its own value. Such costs can be recovered from the officers responsible."

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In the aforesaid case, the delay in filing the special leave petition was 663 days.

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(c) The same opinion has been expressed even in Municipal Corporation of Greater Mumbai & others vs. Uday N.Murudkar [Special Leave Petition (Civil) Diary No.9228/2020 disposed of on 15/10/2020] and the State of Uttar Pradesh and another vs. Prem Chandra [Special Leave Petition (Civil) Diary No.971/2020 disposed of on 27/11/2020].

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(d) Further, on 18/12/2020, the Hon'ble Supreme Court in the case of Deputy Conservator of Forests vs. Timblo Irmaos Ltd. & others has observed as under:

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"We have dealt with the issue of Government authorities in approaching Courts belatedly as if the Statute of Limitation does not exist for them. While referring to some reasons given for insufficiencies, we observed that the parties cannot keep on relying on judicial pronouncements for a period of time when

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technology had not advanced and a greater leeway was given to the Government (Collector, Land Acquisition, Anantnag & Anr, (supra). This situation no more prevail and this position had been elucidated by the judgment of this Court in Office of the Chief Post Master General & Ors. vs. Living Media India Ltd. & Anr. (2012) 3 SCC 563."

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As noted above, apart from dismissing the

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appeals on delay as already noted above, we dismiss

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the same on the ground of acquiescence.

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Parties to bear their respective costs.

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In view of the dismissal of the appeals, I.A.No.1/2019 and I.A.No.2/2019 in MFA

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No.822/2019, I.A.No.1/2019 and I.A.No.2/2019 in MFA No.820/2019 and I.A.NO.1/2019 and I.A.No.2/2019 in MFA No.821/2019 also stand dismissed.

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I.A.No.1/2020 has been filed by Respondent

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No.1 in MFA No.820/2019 seeking permission to withdraw the amount deposited by the appellant before this court.

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Learned counsel for the appellant submitted

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that despite the dismissal of the appeals, permission may not be granted to Respondent No.1 to withdraw the amount deposited by the appellant before this Court.

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Learned counsel for Respondent No.1 objected to the said submission and contended that once the appeals are dismissed, there is no reason to hold back amount deposited by the appellant before this Court. We find much force in the submission of learned counsel for Respondent No.1 as once the award of the arbitrator has been sustained by the trial court and the appeals have been dismissed by this

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Court, there is no reason to withhold the amount deposited by the appellant before this Court.

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