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TMI Blog2018 (10) TMI 1968X X X X Extracts X X X X X X X X Extracts X X X X ..... Pravin Dhage i/b M/s Federal and Rashmikant, Mr Arif Bookwala Sr. Counsel a/w Ms Sai Redij i/b Joy Legal Consultants for the Respondent Mr Samsher Garud I/b Jayakar and Partners for the applicant JUDGMENT [PER B. P. COLABAWALLA J.]: 1. Admit. Paperbook is dispensed with. By consent of parties, both appeals made returnable forthwith and heard finally. 2. These commercial appeals take exception to the common Judgment and Order dated 14th / 17th July, 2017, passed by the learned Single Judge under which the learned Judge dismissed the Arbitration Petitions filed by both the Appellants under Section 34 of the Arbitration and Conciliation Act, 1996 (for short the "said Act"). The Arbitral Tribunal consisted of three arbitrators. What was challenged before the learned Single Judge was the majority Award dated 29th August, 2016 (for short the "impugned Award") passed by two arbitrators (for short the "majority view of the Arbitral Tribunal") allowing the claim of the 1st respondent herein (original Claimant) for specific performance of the contract between the parties and rejecting the counter-claim of the Appellant in Commercial Appeal No. 152 of 2017 (original respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m of repudiation of the contract by the Claimant, which according to the Respondents, was borne out from the record. 4. It is, on all these grounds, that the impugned Award was challenged before the learned Single Judge. 5. Before us, the main point that was argued by the learned Senior Counsel appearing on behalf of the Appellant in Commercial Appeal No.152 of 2017 was that the Tribunal had grossly erred in coming to the conclusion that the Claimant was ready and willing to perform its obligations under the contract when it was clear that they never furnished and refused to provide the bank guarantees as required by the MOU dated 28th June, 2004. This was the main ground on which the arguments were canvassed before us. However, in the written submissions, the Appellant in Commercial Appeal No.152 of 2017 (Respondent No.1 before the Arbitral Tribunal) has also contended that there was nothing that prevented the Claimant from complying with the agreed terms of the MOU of providing the bank guarantees, especially since the encumbrances were cleared and only some documents were not furnished to the Claimant at the time in question. The third argument canvassed before us is that it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is also recorded in the said Addendum. It was averred before the Arbitral Tribunal that the Claimant was always ready and willing to perform its part of the obligations under the MOU, but however the Respondents sought to resile from their obligations therein by wrongfully demanding a higher price for the suit property and by not observing the terms and conditions of the MOU. It was also alleged that the Respondents failed to discharge the obligations under the MOU and also prepared a false record in the form of so called Meetings held on 10th November, 2004 and 24th November, 2004. It was in these circumstances that the Claimant approached the Arbitral Tribunal by filing a Statement of Claim on 23rd December, 2005 for a declaration and specific performance of the MOU dated 28th June, 2004 as amended on 10th December, 2004. Thereafter, the Claimant amended the Statement of Claim by adding the alternative prayer for payment of damages/ compensation which was allowed on 14th March, 2009. (d) To the Statement of Claim as well as the amended claim, Respondent No.1 filed its Written Statement on 11th January, 2008 and supplementary Written Statement on 13th April, 2009. One of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the Gist of Minutes dated 24th November, 2004 ? (4) Whether the claimants were ready and willing at the material times to perform their obligations ? (5) Whether the Respondents performed their obligations as required by the said arrangement / agreement ? (6) Whether the time was of / made of the essence of the arrangement / agreement between the parties as set out in the Written Statement ? (7) Whether the arrangement / agreement between the parties is valid, binding and subsisting ? (8) Whether the said agreement was repudiated by the Claimants or such alleged repudiation was accepted by the Respondents in the circumstances alleged in the Written Statement ? (9) Whether the Claimants are entitled to specific performance of the arrangement / agreement and/or whether damages are adequate ? 9(a) Whether the claim for compensation in lieu of specific performance (as claimed by the Claimants in paragraph 7A of the Statement of Claim) is barred by the law of limitation as on the date that the claim was filed ? 9(b) In the event that this Hon'ble Tribunal deciding that specific performance ought not to be granted or ought to be refused to the Claimants for any rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement capable of being enforced under law ? (17) Whether the Addendum dated 10.12.2004 is not binding on Respondent No.2 ? (18) Whether the MoU does not survive in view of the subsequent execution of the Addendum without Respondent No.2 being a party to the said Addendum ? (19) Whether the Claimants are entitled to specific performance of the agreement against Respondent No.2 ? (20) Whether the claimants are entitled to any reliefs, if so what ? Common Issues (21) Whether any party is entitled to costs and if so, who and in what amount ?" (f) Once these issues were framed, the Arbitral Tribunal, on the basis of the reasons mentioned in the impugned Award gave its findings as under: "FINDINGS On overall consideration of the matter, our findings on the above issues are as under: (1) In the affirmative. (2) In the negative. (3) Does not arise. The Agreement between the Claimant and the Respondents are as reflected in MoU and Addendum. (4) In the affirmative. (5) In the negative. (6) In the negative. (7) In the affirmative. (8) In the negative. (9) In the affirmative. Payment of damages is not adequate. 9(a) Does not arise in view of finding on Is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bitration Petitions filed by Respondent Nos.1 & 2. The learned Single Judge held that on the analysis of the evidence and the applicable law to the facts of the case, the majority view of the Arbitral Tribunal, on the issues referred to it, appear to be reasonable and correct. The learned Judge recorded that the main contest in the reference was on three crucial aspects, namely, (1) was the contract between the parties contained in only the MoU and the Addendum or were the minutes of the meeting of 10 November, 2004 and /or gist of discussions on 24 November 2004 a part of the contract? And if the contract was contained only in the MoU and the Addendum, what is the correct interpretation of the Addendum read with Clause 5 of the MoU? (2) Even if one assumes that the minutes and the gist of discussions on 10th November, 2004 and 24th November, 2004 were not part of the contract, was time made the essence of the contract subsequently in the meetings of 10th November, 2004 and 24th November, 2004? (3) Was there anything in the case which dis-entitled the Claimant to seek specific performance as a discretionary relief? (i) On the analysis of the evidence before the Arbitral Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant, did not accept the contentions of Respondent Nos.1 & 2. The majority view of the Arbitral Tribunal held that there was nothing in the conduct of the Claimant which dis-entitled them to the discretionary relief of specific performance. In a nutshell the majority view of the Arbitral Tribunal did not accept any of the contentions of Respondent Nos.1 & 2 in this behalf and preferred to go by the general rule, statutorily recognized in the Explanation to Section 10 of the Specific Relief Act, 1963 that where the transaction relates to sale of immovable property, normally, a Court or Tribunal should grant specific performance. Taking all this into consideration, and once the finding of facts and the applicability of law determined by the majority view of the Arbitral Tribunal were clearly possible and plausible conclusions, the same should not be reversed in a challenge under Section 34 of the said Act, was the finding rendered by the learned Single Judge. (k) Despite this finding, it was thereafter sought to be argued before the learned Single Judge that under the Addendum (dated 10th December, 2004) read with Clause 5 of the MoU (dated 28th June, 2004) the Claimant was required ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that the majority view of the Arbitral Tribunal wrongly concluded that there was nothing on record to show that the Claimant had refused or failed to execute the bank guarantees as per clause 5 of the MoU. 8. Mr Bharucha further submitted that the argument of the Claimant that their draft of the bank guarantee was as per the first draft submitted by Respondent No.1's lawyer completely ignored the subsequent correspondence to the contrary. He submitted that the Claimants acceptance that the first draft must prevail over all else also reveals its lack of readiness and willingness to perform its obligations under the MoU that is providing bank guarantees in the agreed form. The majority view of the Arbitral Tribunal, not having taken into consideration all the correspondence in this regard, Mr Bharucha submitted that it had ignored vital evidence in arriving at its decision and would, therefore, suffer from the vice of perversity which is one of the grounds on which the Award could be set aside under Section 34 of the said Act. 9. In addition to this, Mr Bharucha submitted that the Claimant was well aware of Respondent No.1's urgent requirement of the funds from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed between Respondent No.1 and Respondent No.2 for development of the suit property. This agreement was subsequently cancelled and that is how the MoU dated 28th June, 2004 was executed between the Claimant, Respondent No.1 and Respondent No.2 respectively. He submitted that the advocates for Respondent No.2 (Little & Co.) had inter alia written to the Claimant that they should execute a development agreement with Respondent No.1 without joining Respondent No.2 as a party, as it had no interest in the suit property. He submitted that there was novatio of the MoU dated 28th June, 2004 by way of an addendum dated 10th December, 2004. He submitted that admittedly Respondent No.2 was not a party to this addendum, and therefore, the MoU dated 28th June, 2004 read with the addendum was not enforceable and binding on Respondent No.2. According to Mr Bookwala, the Addendum modifies the essential terms of the contract that is the consideration payable to the Respondents. According to him, therefore, the parties are not adidem as far as the MoU read with the Addendum are concerned. He submitted that considering that Respondent No.2 was not a party to the Addendum, the Claimant cannot claim s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrevocable, assignable and immediately encashable bank guarantees in the sum of Rs.28.75 Crores each which is more particularly set out in clause 5 of the MoU. He submitted that after considering the evidence and material on record, the majority view of the Arbitral Tribunal rejected this contention by giving detailed reasoning. This being a purely factual matter and the view taken by the majority of the Arbitral Tribunal, being a possible and a plausible view, cannot be interfered with by the Court in its limited jurisdiction under Section 34 of the said Act, was the submission. He submitted that this is exactly what the learned Single Judge has done, and therefore, no fault can be found in the impugned order especially in an appeal that has been filed before this Court under Section 37 of the said Act. 14. Mr Chagla, further submitted that it was Respondent No.1's case that time was made the essence of the contract and the bank guarantees were required to be provided on or before 20th December, 2004 which according to Respondent No.1, was the date fixed for completion. This contention of Respondent No.1 was also rejected by the majority view of the Arbitral Tribunal after con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this appeal has considered and rejected the challenges to the impugned Award by applying the correct tests and the settled legal principles. The learned Judge, according to Mr Chagla, correctly held that under Section 34 of the said Act, the jurisdiction of the Court was limited and restricted, and therefore, when Court found that the analysis of the evidence and the applicablility of the law to the facts was a reasonable and a possible view, the same certainly cannot be interfered with by us under Section 37 of the said Act. 15. Mr Chagla, further submitted that even though Respondent Nos.1 and 2 did not seriously press the argument that time was the essence of the contract, this issue also has been adequately dealt with not only by the majority view of the Arbitral Tribunal but also by the learned Single Judge in the impugned order. He submitted that there is a subtle distinction in the jurisdiction of the Court under Section 34 of the said Act, and that under Section 37 thereof. Whilst examining a challenge to an arbitral Award under Section 34 of the said Act, the Court's jurisdiction is limited and circumscribed to what is stated in the said section, whereas the jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Claimant stated that it had paid an amount of Rs.30 Crores by December 2004 and the Respondents had confirmed receipt of this payment. It further asserted that the Claimant had applied for a loan of Rs.90 Crores (including for the bank guarantees of Rs.57.50 Crores) for the purchase of the suit property and towards the construction cost and which was sanctioned by its bankers. In any event, according to the Claimant, as far as its financial position was concerned, it was never in doubt and for this purpose the Claimant relied upon its balance-sheet to show that it was a profit making company and had enough money to pay for the suit property. 19. On the other hand, it was Respondents' contention that the Claimant was never ready and willing to perform its part of the contract. The Respondents asserted that the Claimants had no sufficient amounts to perform its part of the agreement and this was apparent from the fact that the Claimants had failed to submit the bank guarantees as provided in Clause 5 of the MoU. 20. After considering these submissions (which we have stated only in a nutshell), the majority view of the Arbitral Tribunal was unable to uphold this contention. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se 5 of the MoU and came to the conclusion that the proviso set out under sub-clause (vi) of clause 5 of the MoU required the Claimant to furnish unconditional, irrevocable bank guarantees acceptable to the Respondents in terms of the draft guarantees inter alia guaranteeing the payments under sub-clauses (v) and (vi) of clause 5 of the MoU. In this regard, on page 73 of the impugned Award, the majority view of the Arbitral Tribunal recorded the submissions in this regard of both the parties. Thereafter it went on to analyze the evidence and the documents that were placed before it on this issue. The majority view of the Arbitral Tribunal has referred to detailed correspondence between the parties starting from an email of 19th August, 2004 all the way up to February 2005. It has also referred to the evidence of the parties on this issue. The majority view of the Arbitral Tribunal records that the Claimant's witness No.2, Parag Munot, stated that Mr Khurana, Regional Manager of Oriental Bank of Commerce ("OBC") [bankers of the Claimant] had confirmed to him that the bank guarantees containing the new proposed clause was acceptable to OBC. This witness also stated that he informed M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spects." [LETTER DATED 11TH FEBRUARY, 2005] "3 Our clients have already informed you and your clients that they are and have at all material times been ready and willing to provide the bank guarantees as required by the agreement between the parties and to make the payments as agreed. The "assignment clause" which your clients required to be included in the said bank guarantees is also acceptable to our clients and this has already been informed to you and to your clients. Your clients are aware that they have not yet fulfilled their obligations under the agreement between the parties. This has been pointed out in the previous correspondence." 23. Looking to all this, the majority view of the Arbitral Tribunal came to the conclusion that there was nothing on record to indicate that the Claimant had either refused or failed to execute the bank guarantees as per clause 5 of the MoU. The majority view of the Arbitral Tribunal was of the opinion that the contention of the Respondents that the Claimant had failed to execute the bank guarantees as provided in clause 5 of the MoU was only an afterthought and was raised only with a view to wriggle out of the transaction. On going thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ready and willing to do the same and despite this, the Claimant refused to furnish the bank guarantees as required under clause 5. In fact as recorded by the majority view of the Arbitral Tribunal, and in our view correctly so, we find that the Claimant was always ready and willing to perform its part of the contract by furnishing the bank guarantees in the format required by the Respondents. This is quite clear from the correspondence exchanged between the parties and the evidence led before the Arbitral Tribunal. Such being the scenario, we do not think that the learned Single Judge was in error in rejecting the arguments of the Respondents that the Claimant was never ready and willing to perform its part of the contract. In any event, as stated earlier, the view taken in the impugned Award by the majority view of the Arbitral Tribunal is certainly a possible and a plausible view which would not entitle either the learned Single Judge to interfere with the same under Section 34 of the said Act nor us under Section 37 of thereof. We find that on this issue the majority view of the Arbitral Tribunal has considered all the evidence and has not left out of consideration any material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n this issue, the majority view of the Arbitral Tribunal considered this issue on principle as also on the facts of the case. It firstly went on to examine the legal position. It examined the statutory provisions in relation thereto. After examining the statutory provisions, the majority view of the Arbitral Tribunal referred to several Judicial Precedents including the Judgments of the Privy Council as well as that of the Supreme Court. After setting out the Judicial Pronouncements, the majority view of the Arbitral Tribunal referred to the pleadings between parties as well as the rival submissions and thereafter considered this issue on merits. After applying the statutory provisions and the legal principles that have been set out in Judicial Pronouncements, the majority view of the Arbitral Tribunal held that on the facts and circumstances of the present case, time was never made the essence of the contract. It held that it is settled law that in case of transfer of immovable property, normally time is not the essence of the contract and the present case was not an exception to this general rule. Whilst coming to this conclusion, we find that the majority view of the Arbitral Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. Accordingly, we find that even this argument of the Respondents cannot be accepted. It was inequitable to grant the specific performance. 28. Lastly it was contended that in the facts of the present case it was inequitable to grant the specific performance. Mr Bharucha argued this point by stating that specific performance of the MoU dated 28th June, 2004 was granted by the majority view of the Arbitral Tribunal more than 12 years later on 29th August, 2016 and which was highly inequitable considering such a long lapse of time. He submitted that in this time considerable substantial economic changes had taken place, and hence the majority view of the Arbitral Tribunal ought not to have granted the relief of specific performance. 29. We are unable to accept this submission. Merely because it has taken long time to dispose of the matter with anything more, would not dis-entitle the Claimant from seeking the relief of specific performance, especially if all other ingredients with reference to the same are duly complied with by the Claimant. If we were to accept the submission of Mr Bharucha then in practically every matter the releif of specific performance would have to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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