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2025 Supreme(Online)(Kar) 17649
HC-KAR IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 24 TH DAY OF JULY, 2025 BEFORE THE HON'BLE MR. JUSTICE HANCHATE SANJEEVKUMAR MISCELLANEOUS FIRST APPEAL NO.6720 OF 2016 (AA)
C/W MISCELLANEOUS FIRST APPEAL NO.2962 OF 2016 (AA)
IN MFA NO. 6720 OF 2016:
BETWEEN:
THE KARNATAKA URBAN HOUSING CO-OPERATIVE SOCIETY LTD., NO.352, 3 RD A CROSS, 2 ND STAGE, 3 RD PHASE, WEST OF CHORD ROAD, BENGALURU-79, REP. BY SECRETARY.
… APPELLANT (BY SRI S.R.HEGDE HUDLAMANE, ADVOCATE)
AND:
1. HANUMANTHARAYA S/O LATE THIMMARAYAPPA, Digitally AGED ABOUT 76 YEARS, signed by R/O: NO.4, 3 RD MAIN ROAD, RAMYA D 10 TH CROSS, AGRAHARADASARAHALLI, Location:
BENGALURU-560 079.
HIGH COURT OF KARNATAKA SURESH S/O LATE MAHESHWARAIAH, SINCE DECEASED BY HIS LR’S., 2. SMT. MANGALA GOWRAMMA W/O LATE SURESH, AGED ABOUT 57 YEARS, 3. SRI. HARISH S/O LATE SURESH, AGED ABOUT 40 YEARS, HC-KAR
4. USHA D/O LATE SURESH, AGED ABOUT 38 YEARS, NAGARAJ SINCE DECEASED BY HIS LR’S., 5. SMT. VANAJA W/O LATE NAGARAJ, AGED ABOUT 57 YEARS, 6. SRI. KARTHIK S/O LATE NAGARAJ, AGED ABOUT 39 YEARS, REP. BY ITS GPA HOLDER NO.5 ABOVE.
7. KAVYA D/O LATE NAGARAJ, AGED ABOUT 57 YEARS, 8. CHENNEKESHAVA S/O LATE MAHESHWARAIAH, SINCE DECEASED BY HIS LR’S., SMT. SHANTHAMMA W/O LATE CHENNAKESHAV, AGED ABOUT 56 YEARS, 9. SRI. C. NAGARATHNA D/O LATE CHENNAKESHAVA, AGED ABOUT 29 YEARS, 10. SRI. C. JAYANTHI D/O LATE CHENNAKESHAVA, AGED ABOUT 27 YEARS, RAVI S/O MAHESHWARAIAH, SINCE DECEASED BY HIS LR’S., 11. SMT. SAROJA W/O LATE RAVI, AGED ABOUT 47 YEARS, 12. SUHAS S/O LATE RAVI, AGED ABOUT 22 YEARS, 13. JITHEEN S/O LATE RAVI, AGED ABOUT 20 YEARS, HC-KAR ALL THE RESPONDENTS NO.2 TO 13 ARE RESIDING AT NO.23, 4 TH MAIN ROAD, 10 TH CROSS, AGRAHARADASARAHALLI, BENGALURU-560 079.
14. SMT. LAKSHMAMMA W/O LATE T. CHANDRAPPA, AGED ABOUT 68 YEARS, 15. YATHISH S/O LATE CHANDRAPPA, AGED ABOUT 55 YEARS, 16. SRI. RAGAVENDRA S/O LATE T. CHANDRAPPA, AGED ABOUT 53 YEARS, 17. SRI. THIMMARAYAGOWDA @ MAHESH S/O LATE T. CHANDRAPPA, AGED ABOUT 40 YEARS, RESPONDENT NOS.13 TO 17 ARE RESIDING AT NO.4, 3 RD MAIN ROAD, 10 TH CROSS, AGRAHARADASARAHALLI, BENGALURU-560 079.
18. THE ARBITRATOR, SRI. V.R. RAMASWAMY IYANAGAR, ADVOCATE, NO.209, RAJA SNOW BUILDING, S.C. ROAD, SESHADRIPURAM, BENGALURUR-560 020.
19. SMT. SHANTHAMMA WIDOW OF LATE KRISHNAPPA, AGED ABOUT 73 YEARS, 20. SRI. B.K. SRINIVASA S/O LATE KRISHNAPPA, AGED ABOUT 40 YEARS, BOTH ARE R/O: GURUSWAMY NILAYA, NO.1025/13, 11 TH MAIN, HAMPI NAGARA, BENGALURU-560 104.
HC-KAR
21. SMT. BHARATHI D/O LATE A. KRISHNAPPA, W/O SRI. VASUDEVA MURTHY, AGED ABOUT 46 YEARS, R/O: NO.1227/68, IST MAIN ROAD, MRCR EXTENSION, VIJAYANAGARA, BENGALURU-79.
22. SMT. SUMITHRA W/O DR. KEMPARAJ, AGED ABOUT 48 YEARS, R/O: NO.20, 515, ABW LAYOUT, 2 RD CROSS, HAL 3 RD STAGE, NEW THIPPASANDRA, BENGALURU-560 075.
… RESPONDENTS (BY SRI. M.J. ALVA, ADVOCATE FOR R1-R9, R11, R14-R17 AND R10, R12, R13, R18 ARE SERVED;
SRI. RAMESHA K.R., ADVOCATE FOR R19 TO R22)
THIS MFA IS FILED UNDER SECTION 37(1)(C) OF ARBITRATION AND CONCILIATION ACT, PRAYING TO SET ASIDE THE IMPUGNED JUDGMENT DATED 20.02.2016 PASSED IN A.C. NO.76/1999 ON THE FILE OF THE LEARNED LII ADDL. CITY CIVIL AND SESSIONS JUDGE, AT BENGALURU CITY (CCH-
53).
IN MFA NO.2962 OF 2016:
BETWEEN:
1. HANUMANTHARAYA S/O LATE THIMMARAYAPPA AGED ABOUT 67 YEARS, R/AT: NO.4, 3 RD MAIN ROAD, 10 TH CROSS, AGRAHARADASARAHALLI, BENGALURU-560 079.
2. SURESH S/O LATE MAHESHWARAIAH, SINCE DEAD BY HIS LR’S., 2A. SMT. MANGALA GOWRAMMMA W/O LATE SURESH, AGED ABOUT 50 YEARS, HC-KAR
2B. HARISH S/O LATE SURESH, AGED ABOUT 32 YEARS, 2C. USHA D/O LATE SURESH, AGED ABOUT 30 YEARS
3. NAGARAJ SINCE DEAD BY HIS LR’S., SMT. VANAJA W/O LATE NAGARAJ, 3A. AGED ABOUT 50 YEARS, 3B. KARTHIK S/O LATE NAGARAJ, AGED ABOUT 31 YEARS, 3C. KAVYA D/O LATE NAGARAJ, AGED ABOUT 28 YEARS 4. CHENNAKESHAVA S/O LATE MAHESHWARAIAH, SINCE DEAD BY HIS LR’S., 4A. SMT. SHANTHAMMA W/O LATE CHENNAKESHAVA, AGED ABOUT 39 YEARS, 4B. C. NAGARATHNA D/O LATE CHENNAKESHAVA, AGED ABOUT 20 YEARS, 4C. C. JAYANTHI D/O LATE CHENNAKESHAVA, AGED ABOUT 18 YEARS, APPELLANTS NO.4(B) AND (C) ARE MINORS AND THEY REPRESENTED BY THEIR MOTHER GUARDIAN APPELLANT NO.4(A).
5. RAVI S/O MAHESHWARAIAH, SINCE DEAD BY HIS LR’S., 5A. SMT. SAROJA W/O LATE RAVI, AGED ABOUT 35 YEARS, HC-KAR
5B. SUHAS S/O LATE RAVI, AGED ABOUT 15 YEARS, 5C. JITHEEN S/O LATE RAVI, AGED ABOUT 12 YEARS, APPELLANTS NO.5(B) AND (C) ARE MINORS AND THEY REPRESENTED BY THEIR MOTHER AND NATURAL GUARDIAN APPELLANT NO.5(A).
ALL THE APPELLANTS NO.2(A) TO 5(C)
ARE RESIDING AT NO.23, 4 TH MAIN ROAD, 10 TH CROSS, AGRAHARADASARAHALLI, BENGALURU-560 079.
6. SMT. LAKSHMAMMA W/O LATE T. CHANDRAPPA, AGED ABOUT 58 YEARS, 7. YATHISH S/O LATE CHANDRAPPA, AGED ABOUT 38 YEARS, 8. RAGAVENDRA S/O LATE CHANDRAPPA, AGED ABOUT 36 YEARS, 9. THIMMARAYAGOWDA @ MAHESH S/O LATE CHANDRAPPA, AGED ABOUT 34 YEARS, APPELLANT NOS. 6 TO 9 ARE R/A: NO.4, 3 RD MAIN ROAD, 10 TH CROSS, AGRAHARADASARAHALLI, BENGALURU-560 079.
... APPELLANTS (BY SRI. M.J. ALVA, ADVOCATE)
AND:
1. KRISHNAPPA SINCE DEAD BY HIS LR’S., 1A. SMT. SHANTHAMMA W/O LATE A. KRISHNAPPA, HC-KAR AGED ABOUT 71 YEARS, NO.1025/13, 'GURUSWAMY NIVASA'
11 TH MAIN, HAMPINAGARA, BENGALURU-560 104.
1B. B.K. SRINIVASA S/O LATE A. KRISHNAPPA, AGED ABOUT 40 YEARS, NO.1025/13, 'GURUSWAMY NIVASA'
11 TH MAIN, HAMPINAGARA, BENGALURU-560 104.
1C. SUMITHRA D/O LATE A. KRISHNAPPA, W/O DR. KEMPARAJ, AGED ABOUT 48 YEARS NO.20, 515, ABW LAYOUT, 2 ND CROSS, HAL 3 RD STAGE, NEW THIPPASANDRA, BENGALURU-560 075.
1D. SMT. BHARATHI D/O LATE A. KRISHNAPPA W/O MR. VASUDEVA MURTHY, AGED ABOUT 46 YEARS, NO.1227/68, 1 ST MAIN ROAD, MRCR EXTENSION, VIJAYANAGAR, BENGALURU-560 040. 2. THE ARBITRATOR SRI. V.R. RAMASWAMY IYANGAR, ADVOCATE, NO.209, RAJA SNOW BUILDING, S.C. ROAD, SESHADRIPURA, BENGALURU-560 020.
… RESPONDENTS (BY SRI. RAMESHA K.R., ADVOCATE FOR PROPOSED R1(A-D);
R2-SERVED)
THIS MFA IS FILED UNDER SECTION 37(1)(B) OF ARBITRATION AND CONCILIATION ACT, PRAYING TO SET ASIDE THE IMPUGNED JUDGMENT DATED 20.02.2016 PASSED IN A.C. NO.76/1999 ON THE FILE OF THE LEARNED LII ADDL.
HC-KAR CITY CIVIL AND SESSIONS JUDGE, AT BENGALURU CITY (CCH- 53) AND REVERSE THE FINDINGS BY SETTING ASIDE THE AWARD DATED 08.02.1999 PASSED IN AC NO.76/1999 BY THE LEARNED ARBITRATOR/RESPONDENT NO.2 AND DECREE THE SUIT FILED BY THE APPELLANTS ON THE FILE OF THE LII ADDL. CITY CIVIL AND SESSIONS JUDGE, AT BENGALURU CITY (CCH-53).
THESE APPEALS ARE HAVING BEEN HEARD AND RESERVED FOR JUDGMENT AND COMING ON FOR PRONOUNCEMENT OF JUDGMENT THIS DAY, JUDGMENT IS DELIVERED THEREIN AS UNDER:
CORAM: HON'BLE MR JUSTICE HANCHATE SANJEEVKUMAR
Fraud in arbitration proceedings can vitiate the validity of an award, emphasizing the need for jurisdictional clarity in arbitration agreements and confirming that such matters are under civil court jurisdiction for relief.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 34 - Impugned award challenged citing alleged fraud in obtaining signatures and lack of jurisdiction in arbitration proceedings. The Court found that the plaintiffs made no sufficient grounds to invalidate the award under Section 34. It concluded that the arbitration agreement existed, and the award was made within jurisdictions, noting a lack of evidence supporting the claims of fraud and collusion. (Paras 12, 14, 33)
(B) The Court addressed whether sufficient grounds were demonstrated to challenge the arbitrator's award and asserted the importance of jurisdiction in arbitration agreements. Findings indicated that there were signs of collusive actions between parties, which were inadequately addressed by the lower court, leading ultimately to the appeals being allowed. (Paras 24-33)
Facts of the case:
The plaintiffs claimed ownership over a property acquired by the BDA and challenged an arbitration award favoring a third party based on alleged fraudulent actions by that party. They contended that the arbitration process was devoid of their knowledge and irreversible damage resulted from it. (Paras 5-10)
Findings of Court:
The appeals were allowed, setting aside both the arbitration award and the earlier City Civil Court ruling, indicating the lower court's failure to perceive key fraud elements possibly affecting the legal standing of agreements. (Para 34)
Issues: The primary issues were whether the arbitration award was enforceable despite the alleged fraud and if the City Civil Court appropriately determined the existence of an arbitration clause. (Paras 12, 34)
Ratio Decidendi: The court emphasized that instances of fraud require a thorough examination and should nullify any consequent legal action, underscoring the jurisdictional limits of arbitration compared to civil court processes regarding specific performance claims. (Paras 26-33)
Result: Appeals allowed.
CAV JUDGMENT
MFA No.6720/2016 is filed by the Karnataka Urban Housing Co-Operative Society Ltd., and MFA No.2962/2016 is filed by the owner of land challenging the order dated 20.02.2016 passed in A.C.No.76/1999 on the file of LII Additional City Civil and Sessions Judge, Bengaluru City (CCH-53), (hereinafter referred to as ‘the City Civil Court’ for short) thereby, the Arbitration Suit filed under Section 34 of the Arbitration and Conciliation Act, 1996 , (hereinafter referred to as ‘the Act, 1996’ for short) is dismissed.
2. For the sake of convenience and easy reference, the parties are referred to as per their rankings before the Arbitration suit.
Brief facts of the cases are:
3. It is stated that the plaintiffs are the absolute owners and in possession of the non-agricultural land bearing Sy.No.69/2-A measuring 2 acres 20 guntas, situated at Agradasarahalli, Yeshwanthapura Hobli, Bangalore. One Thimmarayappa, who is the father of plaintiff No.1, grandfather of plaintiff Nos.2 to 5, 7 to 9 and father-in-law of plaintiff No.6 had purchased the land bearing Sy.No.69/2, measuring 4 acres 26 guntas from one Annayappa through registered sale deed dated 22.10.1953. During his lifetime, he has sold 16 guntas of land and the remaining land was 3 acre 10 guntas. He died on 21.04.1984 leaving behind three sons namely Maheswaraiah, T Hanumantharaya and T Chandrappa. Maheswaraiah died leaving behind his sons, plaintiff Nos.2 to 5 namely Hanumantharaya (plaintiff No.1) and T Chandrappa. Plaintiff No.6 is the wife of late T Chandrappa. Thus, all the plaintiffs are owners and having right, title and interest over the suit schedule properties. During the lifetime of Thimmarayappa, Maheswaraiah and Chandrappa executed a registered Power of Attorney in favour of A.K.Gururao on 07.02.1972 to look after the affairs of schedule property.
4. On the basis of the said GPA, A.K.Gururao has made certain transactions with the third parties. He expired. In the meanwhile the then City Improvement Trust Board (CITB for short) now Bengaluru Development Authority (BDA for short) has acquired the said land for formation of house sites. The plaintiffs predecessor after coming to know about the same, attempted to take suitable action for getting release of the property from the acquisition. At that point of time, defendant No.1 came forward and approached the plaintiffs’ predecessor and promised that he will look after the affairs of the aforesaid land and he would also take steps to get release the property from the acquisition. The plaintiffs’ predecessor and plaintiff No.1 having reposed confidence in defendant No.1 had executed a GPA in his favour for release of the property and it was agreed that whatever the expenditure incurring by defendant No.1 will be repaid to defendant No.1 by the plaintiffs’ predecessor with minimum interest. Thereafter, defendant No.1 obtained the signature of the plaintiffs’ predecessor on various blank stamps papers, blank printed forms, blank vakalathnamas and other various papers stating that as they are required for him to move before the BDA and Government for release of the suit schedule land.
5. Since the plaintiffs’ predecessor and the plaintiffs are illiterates without knowing the consequences of signing on the said papers having reposed confidence on defendant No.1 have signed the papers. But defendant No.1 has misused the signed papers by taking undue advantage of innocence and illiteracy of the plaintiffs and plaintiffs’ predecessors in order to get and unlawful gain and to knock of the property in question has converted the said signed papers for his own benefit and created an agreement of sale and other valuable documents and also vakalathnama and other documents are utilized for the purpose engaging the advocate in the proceedings instituted by him and obtained orders from the courts in his favour.
6. The plaintiffs were not aware of the proceedings initiated by defendant No.1. Also, the plaintiffs had no awarene
