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2013 Supreme(Bom) 822
HIGH COURT OF JUDICATURE AT BOMBAY
R.D. DHANUKA, J.
Panna Sunit Khatau & Others
Versus
Dilip Dharamsey Khatau & Others
Arbitration Petition No. 4 of 1986
Decided on : 12-04-2013
For the Petitioners:Tushad Cooper alongwith Ms. Kanchan Gupta along with Ms. Jinal Mehta i/by M/s. Vigil Juris, Advocates.
For the Respondent:R1 to R5, Shiraz Rustomjee, Sr. Advocate along with Kedar Desai, Aditya Raut i/by M/s. Desai Desai Carrimjee, Advocates.
Headnote:
The court held that the arbitrator's award was partially set aside. The court held that the direction given by the arbitrator in clause 1, 10 and 12 of the award were quashed and set aside by which the arbitrator had declared that CMK had committed breach and/or willful default or had failed in fulfilling their obligations under clause 7 and 9 of the MOU and had directed payment of compensation in the sum of Rs.31,20,000/-in view of alleged willful default in clause 7 of the MOU and payment of Rs.3,75,000/-towards bungalow and other expenses in terms of clause 10 of the MOU. The court held that the issue of partition of the entire property is sub-judice in ongoing arbitration before Mr. Justice B.N. Shrikrishna, former Judge of the Supreme Court. The court held that thus there was no question of any willful default or delay on the part of CMK group in performance of their obligation under clause 7 of the MOU.
Fact of the Case:
The petitioners and respondents entered into a Memorandum of Understanding (MOU) for the division and/or partition of an immovable property by metes and bounds so that the both groups should have physical possession and ownership of their respective share in the suit property with both parties having their respective portion in FSI in respect of the immovable property. The petitioners filed an arbitration petition inter alia impugning the directions and declaration made by the arbitrator in paragraphs 1, 8 and 10 to 12 of the impugned award by which the arbitrator declared that the CMK had committed breach and/or willful default or have delayed in fulfilling their obligations under clause 7, 10 to 12 and have directed the CMK group to make payment of compensation at the rate of Rs.10,000/- per day and payment of Rs.3,75,000/-towards bungalow and other expenses.
Finding of the Court:
The court held that the arbitrator could not have directed the petitioner to pay compensation on the basis of alleged finding of fact that the petitioners committed willful default of their obligations under clause 7 of the MOU. The court held that the fact remains that both the parties are in possession of their respective portions held by them prior to the date of execution of the MOU. The court held that none of the parties could develop the property without subdivision, demolition, without sanction of plan and without ascertainment of the FSI. The court held that in its view, the learned arbitrator ought to have considered the provisions of the MOU in toto with a view to ascertain the intention and object of the parties to execute the said MOU.
Issues: Whether the arbitrator's award was valid and enforceable.
Ratio Decidendi: The court held that the clause under consideration of the Supreme Court in the case of Oil and Natural Gas Corporation Ltd. Vs. Saw Pipes Ltd. (supra) clearly shows that it was agreed that the recovery from the contractor as liquidated damages was not by way of penalty. The court held that clause in question in this case is totally different and does not record any agreement that sum of Rs. 10,000/- per day is not in the nature of penalty or that it is agreed genuine pre-assessment of damages. The court held that thus the judgment of the Supreme Court in the case of ONGC would not apply to the facts of this case.
Final Decision: The court held that the impugned declaration/direction given by the learned arbitrator in paragraphs 1, 8, 10 and 11 are set aside and the matter is remitted back to the arbitral tribunal which is seized of the matter between the parties for decision afresh. Direction in paragraph 12 of the impugned award is upheld. Petition is partly allowed in aforesaid terms. There shall be decree in terms of the award as modified aforesaid. There shall be no order as to costs.
By this petition filed under section 30 read with section 33 of the Arbitration Act, 1940, the petitioner seeks to challenge the interim award dated 4th December, 1985, directions dated 10th September, 1985, 25th September, 1985 and 21st October, 1985 issued by the learned arbitrator.
2. Some of the relevant facts for the purposes of deciding this petition are as under:
Mr. Sunit Chandrakant Khatau, Kiran Chandrakant Khatau, Dilip Khatau, Abhay Khatau
L. Khatau and Kishore Khatau were co-owners of the immovable property known as Khatau Bungalow, Manav Mandir Road, Mumbai 400 006. Under the family arrangement dated 10th August, 1983, the company known as Khatau Company Limited and certain other concerns were allotted to petitioners' group. In respect of the immovable property known as Khatau Bungalow, the Memorandum of Understanding dated 12th July, 1984 (for short “MOU”) was executed between Kishore Dharamsey Khatau, Dilip Dharamsey Khatau and Abhay Laxmidas Khatau (hereinafter referred to as “DMK GROUP” and Mr. Sunit Chandrakant Khatau and Kiran Chandrakant Khatau (hereinafter referred to as “CMK GROUP”). The Petitioners in this petition would be referred to as CMK group whereas respondents would be referred to as DMK group. The main object of the said MOU was to implement the desire of the parties i.e. to divide and/or partition of the immovable property by metes and bounds. It was agreed that the DMK group should have physical possession and ownership of two thirds of the said immoveable property and CMK group shall have physical possession and ownership of the remaining one-third of the said immoveable property. It was further agreed that in order to effectuate said desire and intention of the parties, two third of the total FSI in respect of the immovable property would be available to and for the beneficial enjoyment of the said two third portion given to DMK group and the one-third of the total FSI would be available to and for the beneficial enjoyment of one third coming to the share of the CMK group. Under clause 3 of the said MOU it was agreed that on the CMK group, their family members and personal servants and others handing over vacant possession to the DMK group of the portion of the said immovable property coming to the share of the DMK group, the DMK group shall pay to the CMK group a sum quantified at Rs.55,00,000/- (Rupees Fifty Five Lacs) in consideration of the CMK group agreeing to take the portion of the immoveable property coming to their share. Clause 4 of the said MOU provided for the respective FSI for the beneficial enjoyment of the respective portion of the CMK and DMK group. Clause 5 of the said MOU provided that for implementing the said MOU regarding the division of FSI in manner specified in the immediately preceding clause, the party concerned shall demolish any structures or any part or parts thereof on the portion of the said immoveable property coming to such party so that the other party may have the enjoyment and beneficial use of that portion of the FSI allocable to such party's share or portion of the said immoveable property. Clause 6 provided that the DMK group shall ensure that they and the respective members of their families and personal servants are removed from that portion of the said immovable property, shaded yellow on the said plan, within six months from the date of the said MOU and procure in favour of the CMK group a proper performance Guarantee of authorized family members and guaranteeing the payment of Rs.5,000/-per day. There was similar obligation cast upon CMK group. Clause 6 and 7 of the said MOU which are relevant for the purpose of deciding this petition are extracted below:
“6. DMK Group shall ensure that they and the respective members of their families and personal servants are removed from that portion of the said immovable property/shaded yellow on the said plan within six months from the date hereof. The cost of removing all their family members
