Partly allowed

M/S Bearys Properties and Developments v. Mr Naeem Mohammed

Karnataka HC13 Dec 2023MFA/3099/2017

Case brief

AI extract

What is this about?

The High Court allowed the first appeal filed by respondents challenging an order under Section 34 of the Arbitration Act dismissing their challenge to an arbitral award. The Court held the award was not impugned on any grounds under Section 34(2) and disposed of the appeal regarding respondents who settled.

What did the court decide?

The appeal was disposed of. Registry shall release the amount in deposit to respondents No. 1 and 2 digitally on furnishing required records.

M/S Bearys Properties and Developments Vs Mr… — Execution and Attachment | Karnataka HC (2023)

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1 - NC: 2023:KHC:45423-DB MFA No. 3099/2017

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 13^TH DAY OF DECEMBER, 2023 PRESENT

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THE HON'BLE MRS JUSTICE K.S.MUDAGAL

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AND

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THE HON'BLE MR JUSTICE K V ARAVIND MISCELLANEOUS FIRST APPEAL NO.3099/2017 (AA)

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BETWEEN:

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M/S BEARYS PROPERTIES AND DEVELOPMENTS A PARTNERSHIP FIRM REGISTERED UNDER THE INDIAN PARTNERSHIP ACT,1932

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REPRESENTED BY ITS PARTNES

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a) MR. SYED MOHAMED BEARY AGED 60 YEARS

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SON OF LATE HAJI K. MOHIDIN BEARY

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b) MR ABUBACKER SIDDIQUE BEARY AGED 49 YEARS SON OF LATE HAJI K. MOHIDIN BEARY

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HAVING ITS ADDRESS AT "BEARYS HORIZON", NO.21, WOOD STREET BENGALURU-560 025

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Digitally signed by K S RENUKAMBA Location: High Court of Karnataka

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M/S BEARYS PROPERTIES AND DEVELOPMENT PRIVATE LIMITED A COMPANY INCORPORATED UNDER THE COMPANIES ACT, 1956 REPRESETNED BY ITS DIRECTORS

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a) MR SYED MOHAMED BEARY AGED 60 YEARS SON OF LATE HAJI K. MOHIDIN BEARY

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b) MR ABUBACKER SIDDIQUE BEARY AGED 49 YEARS SON OF LATE HAJI K. MOHIDIN BEARY HAVING ITS ADDRESS AT "BEARYS HORIZON", NO.21, WOOD STREET BENGALURU-560 025 …APPELLANTS (BY SRI. APPAIAH P B., ADVOCATE)

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AND:

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MR. NAEEM MOHAMMED RAHMATHULLA AGED ABOUT 69 (NOW 71) YEARS SON OF LATE MR. MOHAMMED RAHMATHULLA, RESIDING AT 401, "BRIGADE ODYSSEY" NO.9/1, CONVENT ROAD RICHMOND TOWN, BENGALURU-560 025

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MRS FOWZIA ALI AKBAR SHAMIM AGED BOUT 67 (NOW 69) YEARS WIFE OF MR. ALI AKBAR SHAMIM DAUGHTER OF LATE M R MOHAMMED RAHMATHULLA RESIDING AT NO.842/843 17^TH 'F' MAIN, 6^TH 'C' CROSS 6^TH BLOCK, KORAMANGALA BENGALURU-560 093

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MRS. FIRDOUS ALI SHARIAT AGED ABOUT 61 (NOW 63) YEARS WIFE OF MR. ALI SHARIAT DAUGHTER OF LATE MR. MOHAMMED RAHMATHULLA RESIDING AT 162, EDGEBROOK PARK, NW CALGARY, ALBERTA T3A5T8 CANADA AND ALSO C/O RESPONDENT NO.2 AT NO.842/843, 17^TH 'F' MAIN 6^TH 'C' CROSS, 6^TH BLOCK KORAMANGALA BENGALURU-560 093

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MRS. FAZEELA MEHDI ZOLFAGHARI AGED ABOUT 60 (NOW 62) YEARS WIFE OF MR. MEHDI ZOLFAGHARI DAUGHTER OF LATE MR. MOHAMMED

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RAHMATHULLA RESIDING AT 165-171 NORTH ROCKS ROAD NORTH ROCKS, NEW SOUTH WALES NSW 2151, AUSTRALIA AND ALSO C/O RESPONDENT NO.2 AT NO.842/843, 17^TH 'F' MAIN 6^TH 'C' CROSS, 6^TH BLOCK KORAMANGALA, BENGALURU-560 093

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MR. MOHAMMED IRSHAD RAHMATHULLA AGED ABOUT 70 (NOW 72) YEARS SON OF MR MOHAMMED RAHMATHULLA RESIDING AT O-011 OMEGA TOWER, "BEARYS LAKESIDE HABITAT" NO.18, SHANTHIVANA KODIGEHALLI BENGALURU-560 092.

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…RESPONDENTS

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(BY SRI. SEETHA RAMA RAO B. C., ADVOCATE FOR R1&R4 SMT.PARINA LALLA ADVOCATE FOR R2 &R3 SRI.DHYAN CHINNAPPA, SENIOR COUNSEL FOR SRI.M.H.HIDAYUTHULLA ADVOCATE FOR R5 (V/O DATED 04.12.2023 APPEAL IN RESPECT OF R2, R3 AND R5 STOOD DISPOSED OF IN TERMS OF MEMO OF SETTLEMENT)

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THIS MFA IS FILED U/S 37(1)(c) OF THE ARBITRATION AND CONCILIATION ACT, AGAINST THE JUDGMENT AND DECREE DATED.07.01.2017 PASSED IN A.S.NO.31/2015 ON THE FILE OF THE VII ADDITIONAL CITY CIVIL & SESSIONS JUDGE, BANGALORE, (CCH-19), DISMISSING THE SUIT FILED U/S 34 OF ARBITRATION AND CONCILIATION ACT AND ETC.

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THIS APPEAL COMING ON FOR DICTATION THIS DAY, K.S.MUDAGAL J., DELIVERED THE FOLLOWING:

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JUDGMENT

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Assailing the dismissal of their suit, the plaintiffs in A.S.No.31/2015 on the file of VII Additional City Civil and

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Sessions Judge, Bengaluru City (CCH-19) have preferred this appeal.

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The appellants were respondent Nos.1 and 3, respondents No.1 to 4 were claimants No.1 to 4 and respondent No.5 was respondent No.2 before the Arbitral Tribunal which was appointed by this Court in CMP No.32/2012.

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For the purpose of convenience the parties are henceforth referred to as per their ranks before the Arbitral Tribunal.

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The claimants and their late mother entered into Joint Development Agreement (for short 'JDA') on 19.05.2005 with the respondents for development of property bearing Nos.102, 102/1, 102/2 and 103 (Old No.4-A), situated at Residency road, Bangalore. As per the JDA, the respondents had to get the tenants evicted, secure the building license and commencement certificate in a time bound manner and construct a commercial building with a super built-up area of 30,000 square feet within 24 months from the date of the commencement certificate. For that purpose, the claimants had to vacate the premises and the respondents had to secure two flats of three bed rooms for their accommodation till the building is constructed. It was further agreed that the building

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shall be constructed in accordance with the sanctioned building plan and in compliance with the laws governing the construction of the building. The respondents were required to give some security deposit to the claimants. In case of delay in execution of work, the respondents were liable to pay penalty.

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It was agreed that the claimants were entitled to lease the premises allotted to them, as per the JDA to any tenants or to respondents themselves and recover the liability. JDA contained a clause to refer the matter to Arbitration in case any dispute arises between the parties.

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The claimants contended that the respondents committed breach of terms of agreement and did not commence the construction, in violation of the sanctioned plan and unauthorisedly occupied the premises even before receipt of the occupancy certificate. They also claimed that respondents instead of providing two flats to the claimants for their accommodation during such construction, secured only one flat for them and also failed to pay the security deposit and comply other things as agreed.

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The claimants filed CMP No.32/2012 before this Court seeking appointment of the Arbitrator. This Court appointed Justice Sri.Patribasavana Gowda, Hon'ble former

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Judge of this Court as Arbitrator. Before filing of CMP No.32/2012, the mother of the claimants passed away. Pending the proceedings, respondent No.1 which was earlier a partnership firm changed its constitution as private limited Company/respondent No.3, but the same partners continued to represent the said Company. Respondent No.3 got itself impleaded in the proceedings before the Arbitrator as the newly formed Company represented through its two directors.

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Claimants filed their claim statement before the Arbitrator. The respondents filed their counter to the said claim statement. They also filed counter claim seeking direction to claimants No.2 to 4 to join respondent No.2 in executing the registered lease deed in their favour.

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On behalf of the claimants, claimant No.1 was examined as C.W.1 and Exhibits C1 to 24 were marked. On behalf of respondents No.1 and 3, the Managing Director - Syed Mohammed Beary was examined as RW-1 and Exs.R1 to 10 were marked. Respondent No.2 who was the brother of the claimants though served did not participate in the proceedings before the Arbitrator.

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Learned Arbitrator on hearing the parties held that time was the essence of the contract and respondents No.1 and

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3 have failed to adhere to the time schedule. The Arbitral

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Tribunal further held that respondents No.1 and 3 have constructed the building in violation of the building license and commencement certificate. It was further held that respondents No.1 and 3 did not provide two flats to the claimants as per the terms of the agreement, occupied the premises without completion certificate and without the permission of the claimants to make wrongful gain for himself. The Arbitral Tribunal rejected the counter claim and passed award in favour of the claimants granting the following reliefs:

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(1) That respondents No.1 and 3 shall get the occupied portion of the building vacated and demolish the construction made in contravention of the modified plan dated 06.07.2009 and bring the building in conformity with the said modified plan.

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(2) Respondents No.1 and 3 shall obtain occupancy certificate and deliver to claimants No.1 to 4 and respondent No.2, the portion falling in their share in terms of the Memorandum of Understanding dated 30.12.2009, limiting their share, according to the built-up area of the entire building and bringing the building in conformity with the modified plan and they shall pay Rs.7,50,000/- per month to the claimants

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and respondent No.2 from 06.07.2009 till respondents No.1 and 3 deliver the share of the claimants and respondent No.2 in the building. Respondents No.1 and 3 shall pay to the claimants and respondent No.2 Rs.15,000/- per month from 05.04.2007 till respondent Nos.1 and 3 deliver to the claimants and respondent No.2 their portion of the building.

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Respondent Nos.1 and 3 challenged the said order

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before the VII Additional City Civil and Sessions Judge (CCH19) in A.S.No.31/2015 under Section 34 of the Arbitration and Conciliation Act,1996 (for short ‘Arbitration Act’). The said suit was contested by the claimants and respondent No.2. The Arbitral Court on hearing the parties by the impugned judgment and order dismissed the said suit on the ground that the arbitral award does not suffer any illegalities or any other grounds contemplated under Section 34(2) of the Arbitration Act. Respondents No.1 and 3 have challenged the said order and the arbitral award in the above appeal.

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Initially, all the claimants contested the matter. Pending these proceedings, claimants Nos.2, 3 and respondent Nos.1 to 3 filed joint memo dated 02.12.2023 duly signed by them and their counsel with the affidavit. Under the said joint memo they claimed that they have settled the matter with

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respondent Nos.1 and 3 as per the terms stated therein and the

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award so far it related to them stood satisfied. That was opposed by counsel for claimant Nos.1 and 4 on the ground that such settlement in no way affects the rights of claimant No.1 and 4 under the award.

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Sri P.B.Appaiah, learned counsel for the appellants/respondent Nos.1 and 3 submits that the arbitral award suffers patent illegality as the arbitrator had not taken into consideration the admissions of the claimants. He further submits that the arbitral award is opposed to the public policy since the directions issued by the arbitrator to pull down the building is in the nature of mandatory injunction. He further submits that Section 41(g) of the Specific Relief Act, 1963 (‘the SR Act’ for short) bars granting injunction which requires continuous monitoring. It was further contended that as per the arbitration clause in the agreement an architect was to be appointed as the arbitrator whereas, the arbitrator appointed

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was not an architect, therefore, the arbitrator was not competent to arbitrate the matter. In support of his

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contentions, he relied on the judgment in Dilip Bafna vs.

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K.S.Vasudeva¹ .

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Per contra, Sri Seetharama Rao, learned Counsel for claimant Nos.1 and 4 submits that as respondent No.1 and 3 did not challenge the order of appointment of the arbitrator in CMP No.32/2012, it is not open to them to question the competence of the arbitrator or that the matter was not arbitrable. He further submits that in the case on hand, arbitrator or the Court need not monitor the pulling down of the building to bring that in conformity with the sanctioned plan, but BBMP people themselves will do that. As per the Joint Development Agreement, respondent Nos.1 and 3 had to construct the building and occupy the same only in accordance with the sanctioned plan, building rules and occupy the building only after the authorities issuing the completion certificate. Admittedly, the building was constructed contrary to the sanctioned plan and occupied by respondent Nos.1 and 3 before obtaining the completion certificate, despite the demolition order and notice under Section 321 of Karnataka Municipal Corporations Act, 1976 being in operation. The

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1 (2007)6 Kar.L.J.554

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arguments of acquiescence was also rejected by the arbitral Tribunal and the Court. He submits that the scope of interference in arbitral award is very limited and unless the grounds under Section 34(2) of the Arbitration Act are satisfied, the Courts cannot appreciate or reappreciate the evidence. Since there was no patent illegality or any of the grounds under Section 34(2) of the Arbitration Act were satisfied, the Court rightly dismissed the suit under Section 34 of the Arbitration Act. In support of his contentions, he relied on the judgment of

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the Hon'ble Supreme Court in Ssangyong Engineering &

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Construction Co.Ltd. vs. National Highways Authority of

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India .²

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On hearing both side and on perusal of the records, the point that arises for consideration is:

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“Whether the dismissal of the suit of the present appellants under Section 34 of the Arbitration Act is sustainable ?”

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About the relationship of claimants and respondent No.2, they entering into joint development agreement with respondent Nos.1 and 3, the period of time for completion of the construction agreed between them and other terms of the

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2 AIR 2019 SC 5041

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agreement, absolutely there is no dispute between the parties.

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Setting aside of an arbitral award is governed by Section 34 of the Arbitration Act. Section 34(2) of the Arbitration Act relates to the grounds for challenging the award. The same reads as follows:

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“ 34. Application for setting aside arbitral award .—

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(1) xxxxxxx

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(2) An arbitral award may be set aside by the Court only if,

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(a) the party making the application establishes on the basis of the record of the arbitral tribunal that,

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(i) a party was under some incapacity, or

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(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or

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(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

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(iv) 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:

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Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains

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decisions on matters not submitted to arbitration may be set aside; or

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(v) the composition of the arbitral tribunal or

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the arbitral procedure was not in accordance with the agreement of the parties , unless such

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agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or

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(b) the Court finds that—

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(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or

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(ii) the arbitral award is in conflict with the public policy of India.”

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Sri P.B.Appaiah, learned counsel assails the award

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on the following grounds:

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i) The dispute was not arbitrable one;

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ii) The Arbitrator appointed was not competent to arbitrate the matter in terms of the agreement;

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iii) The award suffers patent illegality; and

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iv) The award is opposed to the public policy.

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So far as the dispute being arbitrable one or the

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competency of the arbitrator to arbitrate the dispute, the arbitrator was appointed by this Court in CMP No.32/2012 exercising the powers under Section 11 of the Arbitration Act.

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That judgment was passed on hearing both parties. Respondent Nos.1 and 3 did not challenge that order. Instead of that they submitted themselves to the jurisdiction of the arbitral Tribunal. The order in CMP No.32/2012 was passed on 13.02.2013. After more than 10 years and on submitting themselves to the jurisdiction of the Arbitral Tribunal, it is not open to respondent Nos.1 and 3 to question the arbitrability of the dispute or the competence of the Arbitrator. The said submission deserves no merit.

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So far as the contention of arbitral award being in conflict with public policy of India, Explanation 1 to Section 34(2) of the Arbitration Act which describes the meaning of award being in conflict with public policy of India reads as follows:

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“ Explanation 1. —For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,—

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(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or

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(ii) it is in contravention with the fundamental policy of Indian law; or

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(iii) it is in conflict with the most basic notions of morality or justice.”

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It is not the contention of respondent Nos.1 and 3 that there was breach of any confidentiality as contemplated under Section 75 of the Arbitration Act or that arbitrator relied on any evidence in violation of Section 81 of the Arbitration Act. Relying on Section 14, 20 and 41 of the SR Act, it was contended that where a contract runs in minute or numerous details depending on personal qualification of the parties or nature of work, the Court shall not enforce specific performance and no injunction can be granted in such cases. It was contended that pulling down the building which is constructed in deviation of the sanctioned plan requires minute monitoring by skilled personnel, therefore, the Arbitral Tribunal directing to pull down the building is contrary to the provisions of the SR Act. It was further contended that granting any relief against any statute of India is in conflict with public policy of India.

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As rightly pointed by learned Counsel for claimant Nos.1 and 4, admittedly the building was constructed in deviation of the sanctioned plan. BBMP had already issued notice under Section 321 of the KMC Act to the claimants/property owners to pull down the construction and

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cautioning that otherwise BBMP itself will demolish such construction. Admittedly both partners of respondent No.1 as the general power of attorney holders of claimants and respondent No.2 filed suit against BBMP seeking injunction against enforcement of such notice. The claimants contended

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that such suit was filed without their knowledge and consent. Anyway admittedly that suit came to be dismissed for nonprosecution and that was not further prosecuted.

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Under the circumstances, if the building is not brought in conformity with the revised sanctioned plan, the authorities will demolish the building. When respondent Nos.1 and 3 have constructed the building in deviation of sanctioned plan, it was for them to pull down, otherwise BBMP or the law enforcing authority itself will take action. Therefore, there is no merit in the contention that the said direction to respondent Nos.1 and 3 amounts to violation of above said provisions of the SR Act.

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So far as the acquiescence of the claimants and respondent No.5 about the illegal construction made by respondent Nos.1 and 3, the Arbitral Tribunal rightly considered the same and held that any agreement between the parties for

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breach of law is void under Section 23 of the Indian Contract Act, 1872 and Courts cannot put seal for the same.

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Admittedly respondent Nos.1 and 3 had not provided 2 flats of 3 bed rooms to the claimants for their stay as per JDA. Admittedly only one flat was provided. So far as time being the essence of the contract and non-adherence to the same, the Arbitral Tribunal rejected the contention of respondent Nos.1 and 3 that the said period of 24 months has to be computed from the date of the modified plan dated 06.07.2009. The admissions of respondent Nos.1 and 3 themselves show that before issuance of such plan, they had commenced the construction based on the plan/licence dated 19.07.2006. It was not the case of respondent Nos. 1 and 3 that they intended to seek modification of the plan dated 19.07.2006 and they waited till the modified plan dated 06.07.2009 was issued. As rightly held by the Arbitral Tribunal, that clearly shows the understanding of respondent Nos. 1 and 3 that they had to commence the work from 19.07.2006 itself.

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The Arbitral Tribunal giving cogent reasons rejected

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the claim of respondent Nso.1 and 3 that the time gap in evicting the tenants and obtaining modified plan amounts to force majeure period. Since the direction to bring the building

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in conformity with the modified plan is not hit by Section 14(1)(b), 41 and 20 of the SR Act, the judgment in Dilip Bafna ’s case relied by learned counsel for respondent Nos.1 and 3 has no application. The said judgment is not applicable also on the ground that the order passed in CMP No.32/2012 was not challenged.

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Looked at from any angle, the arbitral award does not suffer any violation of Section 34 of the Arbitration Act. The trial Court on considering the aforesaid facts and circumstances and the applicable law on the point rightly dismissed the suit.

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So far as the compromise entered into between respondent Nos.1 and 3 on one hand and claimant Nos.2, 3 and respondent No.2 on the other hand, at the most if the award is put to execution, the said respondents cannot proceed against the present appellants for recovery of the amount so far as their commitment to lease out their share of the property to the appellant. But, that agreement in no way binds claimant Nos.1 and 4 or their right to enforce the impugned award so far it relates to demolition etc. While complying the award, if portions of the property allegedly allotted to the share of claimant

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Nos.2,3 and respondent No.2 in the arbitral award has also to be demolished, that does not affect the award so far it relates to claimant Nos.1 and 4.

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The appeal is disposed of accordingly.

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Registry shall release the amount in deposit to

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respondent Nos.1 and 4 digitally on furnishing required records.

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Sd/JUDGE

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Sd/JUDGE

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AKC, GVP List No.: 1 Sl No.: 34

M/S Bearys Properties and Developments v. Mr Naeem Mohammed

Case brief

What is this about?

What did the court decide?

M/S Bearys Properties and Developments v. Mr Naeem Mohammed

Case brief

What is this about?

What did the court decide?

What the court decided

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Issues for consideration

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