Allowed

Kasu Ram Reddy and 2 Ors. v. M/S,Sri Homes and Anr.

Telangana HC7 Jan 2022CMA/164/2013

Case brief

AI extract

What is this about?

This appeal challenged an award forfeiting an advance payment for a land sale due to non-payment of instalments. The High Court upheld the Arbitrator's finding that specific performance was denied due to lack of clean hands, and dismissed the plea for a refund as it was not claimed in the arbitration proceedings.

What did the court decide?

C.M.A. No. 164 of 2013 allowed; C.M.A. No. 358 of 2013 dismissed; no order as to costs.

Kasu Ram Reddy and 2 Ors. Vs M/S,Sri Homes and Anr. — Specific Performance | Telangana HC (2022)

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HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD

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FRIDAY,THE SEVENTH DAY OFJANUARY TWo rHousAND AND rwsNiy rwo'-

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PRESENT

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THE HONOURABLE SRI JUSTICE P NAVEEN RAO AND THE HONOURABLE SMTIUSTICE P.SREE SUDHA

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CIVIL MI SCELL ANEOUS APPE AL Nos : 358 AND1640 F 2013

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CIVIL M ISCELLANEOUS APPEAL Nos:358 OF 2013

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Appeal under section 37 0f Arbitration and Conc,iation Act, 1gg6, agsrieved by the Judgment and decree dated 06-11-2012 i" Aop No.325 of 2009 on the fi-lE of the Chairma.' MACT-cum-rI Additionar nir,.i.i-lrag", Rangareddy District at L.B.Nagar.

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Between;

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Siri Homes, A partnership firm rep by its Managing partner, Sri Gangula Venkateshwara Reddy, occ :_ a_,1si1uss, Age 64"V.;'Rr;lall_sli)ery, Slralivahana Nagar, Diisukhnagar, Hyd era Lad.'

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AND

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...Appellant/petitioner

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fas^u Ram Reddy, S/o Kasu Venugopal Reddy, Occ :- Business, R/o Flat No.260 A, 2nd Floor, Maheswari Tower, Road No.1, ilanjara Hills, Hyderabad.

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Kasu Madhavi, W/o Kasu Ram Reddy, Occ :- Business, R/o Flat No.260 A,2nd Floor, Maheswari Tower, Road No.1, Banjara Hills, Hytierabad.

¶14

Maruthi Hemant Housing Pvt Co Ltd, Rep by its Manging Director, Sri Kasu ]ia3^{Rgddy,Flat No.260 A, 2nd Floor, Maheswari Tower,Road No.1, Banjara} Hil1s, Hyderabad,

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.1. Sri M Ranga Redtlv, Occ :- Hon'ble Retired Justice, Sole Arbitrator, Dr.No.6-5486, Venkatrao Nagar, Ananthapur Dist.

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..,Respondents/Respondents

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IA NO:1 OF 2019

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Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filecl in support of the petition, the High Court may be pleased to vacate the order datecl 17 -12-2013 passecl in CMA lA No. 827 of 2013 in CMA No.358 of 2013.

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LA. No:1 OF 2013(CMAMP. NO:822 QI2813)

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Petition undcr Section 151 CPC praying that in the circumstances stated in the affidavit filed irr support of the petition, the High Court may be pleased to pass adinterim injunction restraining the Respondents 1to 3 herein, their men, agents, officers ant.l all those claiming under or through them from alienating in any way or encumbering the plots agreed to be sold uncler Ex.A.3 pencling disposal of the appeal.

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Counsel for the Appellant(s):SRI. V HARI HARAN

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Counsel for the Respondents: Sri N Sridhar Reddy

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E US AL No 540^{F 201J}

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tion Act,^{1996, aggrieved} Appeal^{underSection 37 of Arbitration and Concilia} 5 of^{2009 on the file of the} by th" iIJ;; "i :ii a """"^{J'" J,L*:l'5fJ?l:} : il:,.'RangareclclY^Districtat ihrittttutt,^MACT-cum-lt L.B.Nagar.

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Between:

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Kasu^{Ram Reddy, s/o.Kasu vengar.Retldy R/o.5th Floor, Ma,vfair Builclings'} ' ii; r.io.1z, o'";i'u ili11s' Hvderabad' 2. Smt.Kasu^{Madhavi' W/oKasuRam'Reddy R/o5thFloor' Mayfair Buildings'}

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"n""i N.rz, Baniara Hiils' Hyderabad'

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M/s.Maruthi^{HemanthHousing P'iu'ut:, Limited' IA companyincorporatetl} under lndian^{co-plni"''itti-6l(ll'r-l rtoo'"rt?tu'rii' Builclings' Road No 12'} Baniara^{Hills, HYderabad'}

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...APPELLANTAESPONDENT^{Nos' 1 TO 3}

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AND

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1 M/S,SRI^{HOMES& ANR, IA Partnership} lil*.J.t"-q^{by its Partner Sri C;rngula} io-t t -li^t 7^{f - I 5' Shal ivaha na}

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Venkateswar Reddv^{Aged oz v"" tt nl} "io'irto Nagar, Dilsu^{khnagar, HYderabtl'}

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.....RESPONDENT/PETITIONER

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2 Hon'ble Sri Justice^{M.Ranga Redcly[Retired], Sole Arbitrator R/o D No 6-5-486'} Venkat Rao Nagar,^AnantaPur

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...RESPONDENry4^{rH RESPONDENT}

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I.A. NO:1 OF^2013(CM MP. NO: 330 0F²⁰¹³⁾

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Petition under section^{151 CPC praying that in the circumstances statedin the} affidavit filed in suPport^{of the petition,the High Courtmaybe pleasecl staythe} operation of^{judgernent and decree datecl 06.11.2012 in AOP No.325/2009 on the filc} oi the Chairmar, VeCf^{cumI1 Additional District} Judge,^{Rar-rga Reddy Districtat LB} Nagar.

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Counsel for the Appellant(s):^{Sri N Sridhar Reddy}

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Counsel for the Respondents:^{Sri. V Hari Haran}

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The Court made the following:^COMMON JUDGMENT

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HON'BLE SRI JUSTICE P,NAVEEN RAO AND HON'BLE SMT.^{JUSTICE P'SREE SUDHA}

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CIVIL MI SCELLANEOU^{SAPPEAL NOs,358AND 164} OF 2()13 co MMON JUD GM^ENT fucer^{JusticeP.Sree} Sudha)

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C.M.A.No.358^{of 2013is filedby M/s.SiriHomes, a partnership} 1, firm,^{representedby its ManagingPartner-petitionerin the A'OP'} against^{the orders in A'O'P'No'325 of 2OO9 dated O6 11'2012on the} lile ol^{the IearneclIl Actditional District Judge' Ranga Reddy' insofar} relief of^{specific performanceof ccntract dated} as denying^the 26.02.2004^\n confirming^{the order daterl06 02 2009passed in} A.A.No.39^{of 2006 on the file of the learned Arbitrator'}

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C.M.A^{No 164 of 2Ol3 is also filed by Sri Kasu Ram Reddy'} Smt.^{Kasu Madhavi and M/s Maruthi Hemanth HcusingPrivate} l,rmited^{-respondentsinA o 'Pagainst partialmodificationof} reluncling^{of Rs ll5'00'OOO/- in A O P'No325of 2OO9'}

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'lhc panics in^{t hcsc appeals are hcreinaltcrrclerreclto as the'v} rvcre arral'etl^{ir-r the AOPfor the sake ol convenience'} 4. The brief^{facts of the case are that orrgr} nally^resPondents 236,24O^{and 24</sup>}

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purchased^{agricultural lands in Sy'Nos234' 235'} Gram^PanchaYat'

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Village,^Patelguda

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situated^{atMangalPalli} between^{the Years}

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RangareddY^District'

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lbrahimPatnam^Mandal' \gg2-9a.They^{dividedthe land into plots for constructionof houses} anrl^{got Lhe layoutapprovedby the Gram Panchayat' They sold 118} plots^{measuring an extent of 34'000 squareyards to differentpersons} and^{the balance left out in the said landwasabout 72'000 square} yards.^{The third respondent-M/ s'Maruthi Hemanth HousingPrivate}

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Limited, agreed^{to sell the same land measuring72,OOO square yards} to the^{petitionerat the rate of Rs'300/- per square yard lor a total} amount of Rs.2,16,00,000/-,^{to which an agreementof sale was} executed on 26.05.2004^{and on the date ol agreement and amounl of} Rs.35,OO,0OO/ - was paid and^{thebalance amountof} Rs. 1 ,81 ,O0,OO0/ - was agreed to be^paid in^{five quarterlyinstalments} commencing from 25.05.2004 as indicated^below.

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Instalment	Due Date	Amount l
Firstlnstalment		25-O5-2OO4
SecondInstalment	25-08-2004	Rs,38,20,000/-
ThirdInstalment	25-11-2004	Rs.33,20,000/-
Fourth lnstalment	25-O2-200s	Rs.33,20,O00/-
FifthInstalment	25-05-2005	Rs.33,20,000/-

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The petitioner did not pay the abovementioned instalments and there was correspondence between the petitioner and the respondents through letters and legal notices and the claimant-petitioner filed O.P.No.l82 of 2006 under Section 9 of the Arbitration ancl Conciliation Act, and obtained interim orders on 28.O4.2006 restraining the.respondents from alienating the said property. He also filed an application for appointment of an Arbitrator for adjudication of the dispute and it was allowed on 13.10.2006.

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The learned Arbitrator after considering the evidence of both sides and documents on record, arrived at the conclusion that the petitioner-claimant committed a breach of the agreement and held that the amount of Rs.35,00,000/- already paid by claimantpetitioner is liable to be forfeited.

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Aggrieved by the said order, an Appeal is preferred by M/s. Siri Homes-petitioner in A.O.p.No.325 of 2OOg and the learned II Additional District Judge allou,ed the appeal in part holding that the petitioner is entitled for refund of the amount of Rs.35,OO,O0O/_ r"l,hich r,r,,a s paid by it along with interest at the rate of 67o per annurn lrom the date of the Agreement of Sale till the date of refund, with a charge over the property covered under the Agreement of Sale, if any, left unsold. C.M.A.No.358 of 2013 is filed against the said order, and the petitioner rs seekrng for the relief of specific performance.

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B, The C.M.A.No.164 of 2013 is^preferred by^{the respondents} against the same order contending^{that the Court does not have any} grounds to interfere with, modify or set^{aside the well-reasoned} findings of the^{learnedArbitrator withinthe groundsmentionedin} Section 34(2) and^{(3) of the Arbitrationand Conciliation Act; and that} there \,as no^{prayer for refund of Rs 35,O0,OOO/- made by M/ s'Siri} Homes Private^{Limited and hencethe same cannot be granted'}

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g. Now the^{point forconsideratlonbefore this Court is} (1) rvhether the^{petitioner isentitled for the relief ofspecific} performance of^{contract, (2) whetherthe refund of Rs'35'00'000/-} u,ith an interest^{at the rate of 6o/o per annumgranted by the} ll Additional^{District Judge is valid or not, and (3) whetherthe order} ofthelearnedArbitratorwasrightlyinterferedbytheCourt.

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i0.TheagreementofsaleforanextentofT2,00Osquareyardsat the rate of^{Rs.300/- square yards was entered on 26'02'2004'Tl:.e} petrtioner^{paid an amount of Rs 35'00'OOO/-in cash and by wayof} agreed to PaY^{the balance infive} cheques on^{the same daYand} The petitioner^{asked for a dispute-} instalments^{as indicatedbefore'}

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free vacant^{possession of the 72,ooo Squareyards of land before} payment of^{the first instalment through letter marked as Ex A-4 ' he} demanded^{the link documents and originalapproved plan of the} iayout. Under^{Ex.A-S,the respondent stated that the originallayout} was misplaced^{and applied to the Gram Panchayatfor a copy and as} soon as it^{is received,they can furnish a copy of the samePW- 1 in} hisevidenceStatedthatcopyoflayoutandcopiesoflinkdocument were furnished even^{belorethe said agreement was entered into. The} petitioner also stated that the^{extent ol land possessed by the} respondents does not exceed^more than^{35,000 squareyards and} that they had also suppressed the saie^{of some plots to third parties} while entering into the agreement.

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The petitioner would submit that in accordance with the terms of the agreement, he cleared the debris on the land, fixed survey. stones on the basis of the plan, displayed sign boards and advertisement boards on the sides. He also laid the roads. plantcd avenue trees, erected fencing around the land, employed a watchman and incurred an amount of Rs.40,00,000/- for the development of the said 1and. He further stated, that as the respondents had transferred portion of the property to third parties, the petitioner negotiated with them and purchased plots from them to avoid complications, and thus, spent a further amount of Rs.30,OO,OOO/-. The petitioner has not filed a statement of expenditure incurred for development or land and did not file the report of surveyor and he has not mentioned about the expenditure incurred by him for development and purchase of the said lands in the notice issued to the respondents in November 2004 through their counsel and also in Exs.A_6 ancl A_g letters written by him on 21.05.2004 and 03.06.2004. Alihough he

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stated that the respondents disturbed the signs and advertiSement boards and he gave comp.liant against them, the copy of complaint is not produced before the Court or the learned Arbitrator.

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As per the terms of the agreement, the respondents have to execute sale deeds as and when each instalment is paid in any portron of the land as desired by the petitioner for such extent in proportion to the consideration paid by him and the said condition is admitted by the petitioner in rejoinder. In spite of such a condition, the petitioner contendecl that the respondents should deliver dispute free vacant possession of 72,ooo square yards of lands as a condition precedent for payment of the first instalment. This demand for possession of entire extent even before payment of first instalment is contrary to the terms of the agreement.

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The petitioner addressed a letter dated 10.05.2004 and respondent gave reply on 12.05.2004. The petitioner wrote another lelter on 21.05.2004 and the third respondent sent a reply on 26.05.2004 in r.vhich he categorically stated that he will cancel the agreement if the amount is not paid within the time specified in the agreemenl. The respondents got issued a legal notice on 27.IO.2OO4 and also published general notice in Eenadu on 29 .IO.2OO4 , for which the petitioner gave reply notice on 09 .ll .2OO4 requesting them lo receive the instalments, but they did not cooperate with him,

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1 8. The petitioner stated that he was always ready and wiiling to perform his part ol the contract, but the respondents stated that they wrote a letter under Ex.A-7 on 26.05.2004 giving five days .time for payment of the first instalment to the petitioner, and also stated that if he faits to do so, it would be deemed that he has no objection^for

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repudiation'^{Subsequentlyin a Lawyer's notice markedEx A-9' the} respondents^{stated that the amount of Rs 35'00'000/ - is liable to be} forfeited^{in view of cancellation of the agreement'}

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The^{respondents contended that after repudiating the contract} the^{petitionerkept quietfor more than a year and approached this} Court for^{appointment of an Arbitrator in the year 2006' lf at al1 the} petitioner^{was reallyinterested in the specific performanceof the} contract,^{he would not have kept quiet for such a long time after} repudiating^{the contract and stating that the advance paid u'ill be} forfeited. It is^{also submittedthat it appears that he now came up} with this relief of^{specific performanceonly to get a refu nd ol the} advance^paid.

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The respondents stated that^{they receivednoticesfrom the} State Pinancial Corporation^(SFC) for^auction of^{the coldstorage} Ex.B14 to 17 were the notices received prior to agreement of sale. As such the respondents entered into an agreemenl of sale with a view to settle the amount due to the State Financial Corporation and agreed to receive the consideration in instalments. In fact, they agreed to sell, in order to discharge their liability towards State Financial Corporation. As the petitioner committed default in paying first instalment, they could not discharge their liability. As per Ex.B19, the valuation of the cold storage was Rs. 1,75,00,00O/-, but they sold it for a meagre amount of Rs.76,O0,000/- in order to discharge the aforesaid loan.

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The respondents not only canceiled the agreement but also requested the learned Arbitrator for forfeiture of the paid-up amount of Rs.35,00,000/ - and for further damages. The learned Arbitrator

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concluded that the petitioner committed breach and thereby the respondents were lorced ro sell the cold storage un it for a meagre amount lor discharge of their liabilities and thereby ordered for the forfeiture of the amount of Rs.35,00,000/_ in favour of the respondents However, he rejected the damages as the said forfeiture is sufficient to cover the same

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2'2. The petitioner prelerred an appeal against the arbitration award, in AOp No.325 o{ 2OO9 in which the learned District Judge supported Lhe version of the petitioner and observed that at no point of time the respondent issued notice to the petitioner stating their urgency and their needs and thereby demanding him to pay the amount. The learned Judge further observed that though petitioner was in possession of the property, the respondents have not taken any steps for getting back the possession and he deferred with the finding of the learned Arbitrator and held that the petitioner is entitled to a refund of Rs.35,0O,OOO/- with an interest at the rate of 60/o per annum and also observed that the respondents have no right to forfeit the amount without putting a notice to the petitioner.

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Aggrieved by the said order, the petitioner approached this Court and claimed the relief of specific performance. As per the agreement, he has to pay the balance amount in five instalments on lhe dates mentioned in the agreement but the petitioner miserably iailed ro pay even the lirst instalment. Though he stated that he was ready and u,illing to perlorm his part of the contract, he failed to pay the instalment amount even after receiving notice from the third respondent regarding the repudiation and forfeiture of the'amount paid by him on the date of agreement of sa1e. T:"0, quiet for more than one and half years and filed O.P.No.182 of 2006 for

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appointment^{of Arbitrator' Evenafter this' he has not deposited} amount^{before the Arbitratorto show h\s bona fides '}

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In^{the agreement'it was specificallymentioned that the first} instaiment^{is to be paid on 25 05'2004 and the last on 25'05 2005} and it clearly^{reflectsthat time is the essence of the conlracl} Moreover,^{respondents statedthat they sold the land at the rate ol} Rs.3O0/-^{per squareyard only to dischargetheir liabilityto the State} Financial^{corporation.Inspite of having knowledgeabout the} requirements^{of the respondents, the petitioner never complied with} the conditions^{ol the contract.Therefore,his version that he is ready} and willing to^{perform his part of the contract is not tenable'}

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23.lnthearbitrationaward,thelearnedArbilrator,ondcteriled discussion, in^para 26^{held that the remaining extent of landis} 72,OOO square^{yards. The respondents also stated that they already} sold 1 18^{plots prior} to^{the agreement.Though the petitioner stated} that he spent Rs.4O,0O,O00/-^{for developmentand Rs.30,00,000/- for} purchasing the said lands from several^{persons,he has not filed a} scrap of paper showing the same. Instead of^{paying the first} instalment, he raised an objection regarding the extent of^land, demanded for link documents and copy of the^{layout, thoughtl're said} documents were furnished prior to the agreement of sale. On^tl're date of agreement, he paid Rs.35,00,000/- and he has not^paid thc first instalment on one or the other^pretext and thus he^violated the terms and conditions of the contract. He has not approached the Court with clean hands as such, he is not entitled for the equitable relief of specific performance.

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26 ln C.M.A.No, 164 of 2013, the respondenrs conrended that there is no prayer for a refund of Rs.35,00,0 OO/- rnade by M/s.Siri Homes. They further stated that the award can not be modified or set aside except for grounds mentioned in Section 34(2) and (3) of the Arbitration and Conciliation Act. They also stated that in Ex.A-7 it was clearly stated that if Siri Homes private Limited fa ed to pay the first instalment in five days from 26.05.2004, the agreement between the parties stands cancelled and the advance amount paid by them will be forfeited. But the Court below erred in modifying the reasoned lindings of the learned Arbitrator and thus requested the Court to set aside the order of A.O.P.No.325 of 2009, dated 06.1 1 .2012 .

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27 . Seclion 22 oi Specilic Relief Act, 1963 - Power to grant relief for possession, partition, refund of earnest money, etc.-(1) Notwithstanding anything to the contrary contained in the Code of Civil Procedure, 1908 (5 of 1908), any person suing for the specilic performance of a contract for the transfer of immovable property may, in an appropriate case, ask for -

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(a) .possession, or partition and separate possession, of the property, in addition to such performance; or

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(b) any other relief to which he may be entitled, including the refund of any earnest money or deposit paid or made by him, in case his claim for specilic performance is refused.

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(2) No relief under clause (a) or clause (b) of sub-section (1) shall be granted by the court unless it has been specifically ciaimed.

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As per Section 22(2) of the Specific Relief Act, refund of earnest money cannot be granted in the absence of specilic claim. Petitioner

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never claimed for^{refund of Rs.35,OO,O0O/- in A O P No 358 of 2Ol3'} and thus, he is not entitled^{for the said amount.}

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2a, Learned counsel for the respondents^{reliedon a case reported} in ASSOCIATE BUILDERS V/s. DELHI DEVELOPMENT AUTHORITYI, the Apex Court held that an Arbitral award cannot be interfered with unless it was assailed that the findings of the arbitrator are arbitrary, capricious or perverse. The Court shall not interfere with the arbitrary award r,".hen merely anothcr vieu is possible. The Award can be interfered only lr'hen in the follou,ing circumstances:

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i. Not in compliance with statutes or judicial precedents;

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ii. Violated the principle of judicial approach;

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iii. Not in compliance with the principles of natural justice; or

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iv. Violates the principle of Wednesbury reasonableness i.e.. the award is perverse.

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The counsel for the petitioner relied upon the case reported in OIL AND NATURAL GAS CORPORATTON V/s. WESTERN GEco INTERNATIONAL LTD.2, wherein the Apex Court held that an award can be set aside if it is contrary to the following:

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i. Fundamental policy of Indian law;

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ii. lnterest of India;

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iii. Justice or morality; or

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iv. Patently illegal

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The appellate Court cannot sit in appeal and re_appreciate the evidence in the award of the learned Arbitrator. It can interfere with only when it is patently illegal. But in the case on hand, the learned Arbitrator passed a well-reasoned award. Therefore, the interference

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'^{20 15 (3)} scc⁴⁹

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' 2014 (9) SCC 263

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ol the appe.ilate Court rs not warran ted and thus, the order of the trial Court in A.O,p,lVo.325 of 2OO9 dated 06. 1 1.2012 istiable to be set aside by dury confirming the award of the rearned Arbitrator.

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31, Accordingly, C.M.A.No.164 of 20 13 is allowed and C.M.A.No.35B of 20 1g is dismissed. There shall be no order as to costs.

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