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IN THE HIGH COURT OF JUDICATURE AT MADRAS
N. SATHISH KUMAR, J.
M/s. Landmark Housing Projects Chennai Pvt. Ltd., Represented by its Managing Director, T. Udayakumar & Others - Appellant
Versus
M/s. Savithri Naidu & Others - Respondent
O.P. No. 546 of 2020 & Arb.O.P.(Comm.) No. 87 of 2021
Decided on : 09-11-2021
Arbitration and Conciliation Act, 1996 - Section 34, 11 and 23 - Negotiable Instruments Act, 1881 - Section 138 - Indian Contract Act, 1872 - Section 62 - Transfer of Property Act, 1882 - Section 55 - Income tax Act, 1961 - Section 269SS - Registration Act, 1908 - Section 50 - Indian Evidence Act, 1872 - Section 31 and 17 - Land - Sale - Challenging Arbitral Award - Whether any fresh Memorandum of Understanding altering terms and conditions of MOU was entered into between claimants and 1st Respondent, as claimed by 1st Respondent - Whether MOUs and other documents were entrusted to Respondents 2 and 3 with a direction to keep same as in trust as claimed by Claimants - Whether te documents covered in Issue No.3 are in custody of Respondents 2 and 3 and whether they are liable to produce same - Whether Respondents 2 and 3 had acted as Escrow Agents of 1st Respondent or whether they acted in professional capacity as Advocates for 1st Respondent as well as Claimants - Whether 1st Respondent and Respondent 2 and 3 have in any manner colluded with each other as claimed by Claimants - Whether it is true that 1st Respondent has paid a total sum of Rs.32,01,66,000/- towards accounted transaction and Rs.34,50,00,000/- towards unaccounted transaction in terms of MOU so far to Claimants towards sale consideration as claimed by 1st Respondent - Whether 1st Respondent is liable to pay Rs.30,23,34,000/- as claimed by Claimants - Whether Claimants are entitled for interest for principal amount at rate of 24% - Whether Claimants are entitled for damages to tune of Rs.34.20 Crores with interest @ 18% towards damages for breach of contract, loss of profit and loss of business as claimed by Claimants - Whether Claimants are entitled for a sum of Rs.5 Crores towards mental agony, harassment, trauma, loss of reputation and suffering from the malicious, wrongful, fraudulent and dishonest action of Respondents as claimed by Claimants - Whether claim made by Claimants is barred by Section 62 of Indian Contract Act - Whether Arbitral proceeding as against R2 and R3 is not maintainable - Whether 2nd Respondent is entitled for damages to tune of Rs.5 Crores as claimed in counter claim - Whether claimants are entitled for injunction and attachment as claimed by Claimants – Held, Alleged illegal purpose has not been substantially carried into effect before it is sought to recover money paid or goods delivered in furtherance of it - As discussed above, it is nowhere mentioned in Memorandum that cash transaction made only to evade tax i.e., illegal purposes - Accordingly at most it could be held that they are less guilty than Petitioner - In such view of matter maxim cannot be applicable to facts of present case, as Petitioner has admitted price money and failed to discharge their burden in proving payment of Rs.34.50 Crores as alleged in entire proceedings - Arbitrator finding that payment has to be made by Petitioner cannot be found fault with - Other reliefs passed taking note of conduct of Petitioner - Having taken advantage of registration for lesser amount, Petitioner immediately mortgaged property and realised huge amount from finance companies - These facts in fact weighed mind of Arbitrator to pass other reliefs of attachment, charge and injunction etc., till amount is realized - In fact, learned Arbitrator has also recorded fact that 2nd Respondent had active involvement in negotiation and also in subsequent transaction between Claimants and 1st Respondent and dismissed counter claim also - On perusal of entire judgments, this Court is of view that Award passed by Arbitrator does not require any interference - Petitions dismissed.
Key Points: - The court discusses arbitrability and confirms the award does not require interference, dismissing petitions challenging it. (!) (!) (!) - The award against the 1st Respondent includes specific sums, interest, attachment, and injunction, with others dismissed. (!) (!) (!) (!) (!) (!) (!) - The court addresses whether cash transactions and alleged illegal purposes affect enforceability, concluding no perversity in the arbitral findings and that the contract is not void ab initio. (!) (!) (!) (!) (!)
JUDGMENT :
(Prayer in O.P.No.546 of 2020: Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996, to set aside the Award No.1 of 2018 dated 14.09.2020 on the file of the Arbitral Tribunal, as being illegal and opposed to public policy.
Arb.O.P.(Comm)No.87 of 2021: Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996,to set aside the paragraphs 233(e), 233(f), 233(h), practically set aside in paragraphs 233(a) and 233(b) of the Arbitral Award dated23.12.2015, and enhance the rate of interest from 9% to 24% till the date of realization.)
1. Two Original Petitions are filed Challenging the Arbitral Award passed by the learned sole Arbitrator dated 14.09.2020.
1.a. O.P.No.546 of 2020 has been filed by the 1st Respondent before the Arbitral Tribunal to set aside the Award No.1 of 2018 dated 14.09.2020 on the file of the Arbitral Tribunal, as being illegal and opposed to public policy.
1.b. O.P.No.87 of 2021 has been filed by the Claimants before the Arbitral Tribunal to set aside the Award and dismiss the claim petition preferred by the Claimant.
1.c The parties are arrayed as per their own rankings before the Arbitral Tribunal. The Petitioner who filed O.P.No.546 of 2020 is referred as 1st Respondent and the Petitioners who filed O.P.No.87 of 2021 is referred as Claimants for the convenience sake.
1.d. Since both the Petitions are arising out of the same Award, the same are disposed by way of this Common Order.
1.e. This Court while entertaining these petitions, issued limited notice on the arbitrability of the dispute alone vide order dated 02.12.2020.
2. The brief facts leading to file these Original Petitions are as follows:
2.a. The Claimants who are Respondents in main O.P.No.546 of 2020 owned a total extent of 9.80 Acres of land in Sholinganallur Village, Kanchipuram District comprised in Survey Nos.329/aB (329/3B1B as per patta), 329/2, 329/3A, 328/3A, 328/1B (328/1B1 as per patta), 328/1B (328/1B2 as per patta) and 328/3B. The 1st Respondent company approached the Claimants and offered to purchase the entire extent of 9.80 Acres including those 2 Acres which was agreed to be sold to M/s. Clan Laboratories. After negotiation, the Claimants have agreed to sell the entire 9.80 Acres to the 1st Respondent. Memorandum of Understanding (MOU) dated 23.07.2014 came to be executed by the parties. By the said MOU the parties fixed the total sale consideration at Rs.73.50 Crores which was to be paid in five installments. On the date of MOU Rs.2 Crores was paid by cash. By the same MOU, 2nd Respondent was appointed as an Escro Agent who shall be the custodian of the MOU and the original title deeds. The 2nd Respondent also agreed that in the event of any dispute between the Claimants and 1st Respondent, he shall act as sole Arbitrator between the parties.
2.b. Apart from Rs.2 Crores in cash, another Rs.10 Crores also paid by cash and the 1st Respondent also issued a cheque drawn on Axis Bank for a sum of Rs.30,23,34,000/- without filling the name and the date of cheque and the 2nd Respondent filled up his name and the date of cheque as 25.09.2017. However, the cheque was dishonoured and the 2nd Claimant prosecuted 1st Respondent for the offence under Section 138 of the Negotiable Instruments Act in CC.No.121 of 2018.
2.c. It is the further case of the Claimants that the Respondents 2 and 3 have colluded with 1st Respondent and played fraud upon the Claimants and have cheated the Claimants by handing over the original title deeds and the MOUs to the 1st Respondent. Subsequent agreement dated 20.10.2014 also came into existence between the parties. It is also the case of the Claimant that in the meanwhile they executed sale deeds in favour of the 1st Respondent on l0.11.2014 and 12.11.2014 for total extent. In nutshell, it is the case of the Claimant that the Respondents are liable to pay the balance sum of Rs.34.20 Crores as per the Memorandum of Understanding entered between the parties and claimed
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