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IN THE HIGH COURT AT CALCUTTA
RAJASEKHAR MANTHA, J.
M/s South City Projects (Kolkata) Limited And Anr. – Appellants
Versus
Kolkata Metropolitan Development Authority – Respondents
AP 383 of 2020
Decided on : 20-07-2023
ARBITRATION - AWARD - CHALLENGE - VALIDITY - SUBJECT MATTER OF CHALLENGE - AWARD PASSED BY SOLE ARBITRATOR - MOU EXECUTED BETWEEN CLAIMANTS AND RESPONDENT KMDA FOR DEVELOPMENT OF RESIDENTIAL-CUM-OFFICE COMPLEXES - DISPUTE AROSE BETWEEN THE PARTIES - ARBITRATION CLAUSE INVOKED - SOLE ARBITRATOR APPOINTED - ARBITRATOR PASSED AWARD - CLAIMANTS FILED STATEMENT OF CLAIM PRAYING FOR RELIEF - COUNTER-STATEMENT AND COUNTER-CLAIM FILED BY KMDA - ISSUES FRAMED - ARBITRATOR ANSWERED ISSUES - AWARDED SUMS IN FAVOUR OF CLAIMANTS - KMDA FILED APPLICATION UNDER SECTION 34 OF THE ARBITRATION AND CONCILIATION ACT, 1996 - COURT HELD THAT THE FINDINGS OF THE ARBITRATOR, THAT THE CLAIMANTS ARE NOT ENTITLED TO DAMAGES FROM THE RESPONDENTS; THE BREACH OF THE MOU ON THE PART OF THE KMDA, RECORDED BEFORE THE ARBITRATOR, ARE SUSTAINABLE AND SUPPORTED IN LAW AND THE FACTS OF THE CASE - COURT UPHELD THE AWARD AS VALID AND BINDING ON THE PARTIES.
Fact of the Case:
Claimants and respondent KMDA executed an MOU for development of residential-cum-office complexes. A dispute arose between the parties. Arbitration clause was invoked. Sole arbitrator was appointed. Arbitrator passed award. Claimants filed statement of claim. KMDA filed counter-statement and counter-claim. Issues were framed. Arbitrator answered issues. Sums were awarded in favour of claimants. KMDA filed application under Section 34 of the Arbitration and Conciliation Act, 1996.
Finding of the Court:
The findings of the Arbitrator, that the claimants are not entitled to damages from the respondents; the breach of the MOU on the part of the KMDA, recorded before the Arbitrator, are sustainable and supported in law and the facts of the case. Court upheld the award as valid and binding on the parties.
Issues: Whether the MOU dated 17th December 2007 was executed in violation of orders of injunction passed in respect of any lands forming the subject matter of the agreement? By reason of exchange of the letters dated 2nd February 2012 and 28th/31st July 2012, whether the MOU dated 17th December 2007 became confined to 83 cottahs of land? Whether the parties have discharged their respective obligations under the MOU dated 17th December 2007 after 31st July 2012 in respect of 83 cottahs of land? Have the parties discharged their respective obligations in respect of the balance quantity of land in terms of the MOU dated 17th December 2007? Whether the Respondent under the MOU dated 17th December 2007 was required to discharge the obligations as claimed by the Claimants in paragraph 44 of the Statement of Claim? If so, did the Respondent discharge such obligations?
Ratio Decidendi: An award may be interfered with only if: a) It is perverse i.e. the conclusions are not based on the evidence on record and/or based on extraneous considerations and/or material. b) No reasonable man can arrive at the conclusion arrived at by the Arbitral Tribunal. c) The findings of the Tribunal are such that would shock the conscience of a reasonable person. d) The award is patently illegal or irrational. e) The award is against the basic and/or fundamental and/or public policy of India or Indian Law. f) Any of the parties have been denied a reasonable opportunity to put forth their case or an equal opportunity is not given to the parties and there is denial of the principles of natural justice and the procedure followed is dehors a judicial approach. g) If the award is against the specific term of the contract and against the substantive law if India.
Final Decision: AP 383 of 2020 and AP 351 of 2020 were dismissed. The award dated 22nd June 2020 was upheld as valid and binding on the parties. No order as to costs.
JUDGMENT :
Rajasekhar Mantha, J.
FACTS OF THE CASE
1. The subject matter of challenge in the instant proceeding under Section 34 of the Arbitration and Conciliation Act of 1996 is an award dated 22nd June 2020 passed by Shri Jayanta Kumar Mitra, Sole Arbitrator, appointed by this Court on 3rd May 2017 in AP 302 of 2017.
2. The petitioner nos. 1 and 2 [M/s South City Projects (Kolkata) Limited and M/s Merlin Projects Limited, respectively] (claimants) are, inter alia, engaged in the development of properties. The Kolkata Metropolitan Development Authority (KMDA) had invited bids for the development of residential-cum-office complexes at two separate sites, measuring about 132.20 cottahs at Mouzas, Laskarhat and Nonadanga (hereinafter referred to as ‘Ruby Complex’) and 1.487 acres at Kasba (hereinafter referred to as ‘Nilachal Complex’). The petitioners submitted a bid jointly which was accepted by the KMDA.
3. A memorandum of understanding was entered into on 17th December 2007 by the claimants, with the respondent KMDA. Upon execution of the MOU, a sum of Rs.10 crores was paid by the petitioners to the KMDA. In further compliance of the terms of the MOU, a Joint Venture Company, called “Kolkata Metropolitan South City Development Limited”, was formed.
4. A development agreement was to have been executed thereupon. The claimants were thereafter to construct and develop the aforesaid two building complexes. Leases for 99 years with a right to renew them for one more year, were to be executed by the KMDA in favour of the Joint Venture Company.
5. No development agreement was, however, executed by and between the parties in terms of Clause 6 of the MOU, since vacant physical possession of the two sites was not handed over to the claimants.
Hence the project remained stalled. Negotiations and discussions ensued between the parties.
6. A supplemental MOU came to be executed between the parties on 16th November 2011. The claimants from 2007 up to 2012 and from November 2011 to March 2016 continued to demand compliances of the terms of the MOU and the supplemental MOU by the KMDA.
7. By a letter dated 20th April, 2016, the claimant no. 1 terminated the MOU dated 17th December 2007 and the supplemental MOU dated 16th November 2011.
8. There was admittedly an arbitration clause in the MOU dated 17th December 2017. The arbitration clause was invoked by the claimants.
9. Pursuant to order dated 3rd May 2017 passed by consent of the parties, in AP 302 of 2017, a Co-ordinate Bench appointed the Arbitrator who entered upon the reference.
10. The claimants filed a statements of claim, praying as follows:-
b) Award for a sum of Rs. 1,76,76,527 as pleaded in paragraph 55 thereof;
c) Award for damages for a sum of Rs. 61 crores as pleaded in paragraph 58 hereof and in the alternative, an enquiry into damages as suffered by the claimants and an award for such sums which may be found due and payable upon such enquiry being made;
d) Interim interest and interest upon Award at the rate of 15% per annum;
e) Receiver;
f) Injunction;
g) Attachment;
h) Costs;
i) Such further or other relief or reliefs.
11. The KMDA filed a counter-statement and counter-claim.
12. The learned Arbitrator framed the following issues:-
It is pertinent to mention herein that the learned Arbitral Tribunal in course of the arbitral sitting held on 19th June, 2019 had settled the following issues:
a) Whether the MOU dated 17th December 2007 was executed in violation of orders of injunction passed in respect of any lands forming the subject matter of the agreement?
b) By reason of exchange of the letters dated 2nd February 2012 and 28th/31st July 2012, whether the MOU dated 17th December 2007 became confined to 83 cottahs of land?
c) Whether the parties have discharged their respective obligations under the MOU dated
The findings of the Arbitrator, that the claimants are not entitled to damages from the respondents; the breach of the MOU on the part of the KMDA, recorded before the Arbitrator, are sustainable and....
Clauses in contracts that prohibit claims for damages are against public policy and void under Section 23 of the Indian Contract Act, 1872, as they undermine the sanctity of contracts.
An arbitral award can only be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 if the appellant establishes that the award is in conflict with the public policy of India, is p....
The court ruled that arbitration findings are minimally subject to judicial review, confirming compensation awarded for unlawful possession and possession restoration based on the terms of the compro....
The court emphasized that arbitral awards should not be interfered with solely based on disagreements with findings, affirming the limited grounds for appeal under Section 34 of the Arbitration Act.
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