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IN THE HIGH COURT OF JUDICATURE AT MADRAS
INDIRA BANERJEE, P.T. ASHA, JJ.
Chillara Kalyan – Appellant
Versus
M/s. Berggruen Estate Projects Private Limited – Respondent
O.S.A. Nos. 116, 199 of 2018 and C.M.P. Nos. 7208, 8277, 10029 of 2018
Decided On : 31-07-2018
Arbitration and Conciliation Act, 1996 - Section 37 - Section 34 - Section 34(2) - Section 34(2)(a) or (b) - Section 31(3) - Section 28(3) – Section 31(7) - Indian Contract Act - Section 74 - Arbitration Act, 1940 - Work Of Development - Security Deposit - Interest On Security - It is case of appellants that respondent claimant did not carry out work of development as per agreement - By a letter appellants alleged that respondent claimant had committed breaches of terms of JDA and sought to forfeit security deposit of Rs. 7 crores kept by respondent claimant with appellants - In addition to forfeiting security deposit as aforesaid, appellants also made a claim of a sum of Rs. 86.45 crores towards loss and damages, after adjusting security deposit amount of Rs. 7 crores - Thereafter, there was exchange of correspondence between parties with allegations and counter allegations against each other - Ultimately, respondent claimant invoked arbitration clause in JDA – Held, Respondent claimant also advanced argument that clandestine manner in which appellants withdrew amount deposited towards security deposit after order of Division Bench justifies award of interest - However, in adjudicating legality or validity of an award in an application under Section 34(2) of the 1996 Act, Court cannot take notice of any post award events - An award has to be adjudged on basis of materials that were placed before Arbitral Tribunal at time of making of award - Learned Arbitral Tribunal has on consideration of materials before it, as also its interpretation of terms and conditions of JDA, rejected counter claim of appellants - This Court does not find any patent illegality in award insofar as claim to damages has been rejected - Learned Arbitral Tribunal has also on its interpretation of JDA held that security deposit was liable to be returned - Since, as observed above, this Court deciding an application under Section 34 of the 1996 Act does not sit in appeal over an award, award except to extent of interest on security deposit is not liable to be interfered with by this Court - However, award of interest on security deposit is liable to be set aside - Respondent claimant shall, however, be entitled to post award interest at rate of 9% per annum - Learned Single Bench having erred in affirming award of interest on security deposit, judgment and order of learned Single Judge is set aside only to extent it affirms the award of interest - Impugned award is also set aside to extent of award of interest on security deposit of Rs. 7 crores - Except to extent of award of interest, award is confirmed – Appeal Partly Allowed.
1. Both these appeals under Section 37 of the Arbitration and Conciliation Act, 1996, hereinafter referred to as the 1996 Act, are against a common judgment and order dated 29.1.2018 passed by the learned Single Bench, disposing of two applications under Section 34 of the 1996 Act, one filed by the appellants being O.P. No. 434 of 2016 and the other filed by the respondent being O.P. No. 473 of 2016, for setting aside an arbitral award made and published on 9.11.2015 by an Arbitral Tribunal comprising a Retired Chief Justice of India and two retired Judges of the Supreme Court, namely, Justice Dr. A.S. Anand (Retd.), Mr. Justice B.P. Jeevan Reddy (Retd.) and Mr. Justice Doraiswamy Raju (Retd.). The appeals were, therefore, heard together and are now being disposed of by this common judgment and order.
2. The respondent was the claimant before the Arbitral Tribunal and the appellants were the respondents. The respondent claimant and the appellants had entered into a Joint Development Agreement, hereinafter referred to as "JDA" dated 24.01.2008, whereby the respondent claimant had undertaken to develop a commercial complex with agreed amenities and facilities on the land owned by the appellants herein.
3. Some of the conditions of the JDA are as follows:
"(4) SECURITY DEPOSIT:
The DEVELOPER has today deposited with the OWNERS a sum of Rs. 7,00,00,000/- (Rupees Seven Crores only) vide, Pay Order No. 259999, dated 23.01.2008, drawn on HSBC Bank, Chennai Office favouring Sri C. Kalyan i.e. the representative of Owners 1 to 4 and Owner No. 5 in the manner set out in Annexure 5 as interest free refundable security deposit (Security Deposit) which shall be paid on the compliance of the Conditions Precedent as set out in Clause 6(a) to the satisfaction of the DEVELOPER. The OWNERS shall be liable to refund the interest free Security Deposit to the DEVELOPER on the completion of the Project. The DEVELOPER shall have a lien on the Schedule Property till the Security Deposit is refunded/adjusted by the OWNERS.
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6. OBLIGATIONS OF THE OWNERS:
(a) The OWNERS shall at their cost and expenses perform the following obligations:
(i) To satisfy all the conditions precedent as listed herein below within 60 (sixty) days of this Agreement (Conditions Precedent).
1. The Landowner shall furnish all documents as may be required by the Developer and/or by the legal counsel of the Developer as may be required by them to fully satisfy and assure the Developer and the legal counsel of the Developer that the Landowner is the absolute owner of the property with uninhibited / unrestricted rights of alienation over the same and the legal counsel of the Developer issues a title report (Report) to the satisfaction of the Developer. Such compliance is including but not limited to obtaining the Orders, passed by the concerned Tahsildar, permitting Ayesha Begum to alienate of the property in favour of Madari Singh.
It being agreed between the Parties that the obligations of the DEVELOPER under this Agreement would commence only upon satisfaction of all the conditions Precedent save as except any condition waived by the DEVELOPER. It is also agreed that the DEVELOPER would be entitled to terminate this Agreement in the event the Conditions Precedent are not satisfied within 60 (sixty) days hereof. Upon termination of this Agreement, the OWNER shall refund the entire Security Deposit paid to them till the date of termination.
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(xiv) Simultaneous with the execution of this agreement, the OWNERS shall deposit all the title documents relating to the Project in original with the DEVELOPER and such original documents shall be kept in the custody of the Developer and shall not be parted with by the Developer and no encumbrance or charge or mortgage shall be created by deposit of such title deeds and such documents will be in the custody of the developer only for the purpose of enabling the Bankers to verify the said documents for advancing loan facility to
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