TaxTMI 
TaxTMI 
2018 (10) TMI 1968
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....avi Doshi, Ms Nidhi Malhotra and Mr 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 Commer....
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....case of Respondent No.1 that the impugned Award failed to appreciate the factum 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 Cla....
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..... It is not in dispute that by 10th December, 2004, the Claimant had paid an amount of Rs.30 Crores which 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 it....
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....No.1 is reflected only in the MoU and Addendum, as claimed, or whether it is also reflected in the alleged Minutes of Meeting dated 10th November, 2004 and 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 a....
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....titled to damages and if so, to what extent ? Issues between Claimants and Respondent No.2: (15) Whether the MoU dated 28.6.2004 and Addendum dated 10.12.2004 are adequately stamped ? (16) Whether the Memorandum of Understanding dated 28th June, 2004 is a final and definitive agreement 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. ....
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....ew of the Arbitral Tribunal also held and declared that the Claimant is entitled to recover the fees payable to the Arbitrators (amounting to Rs.32 Lacs) from Respondent No.2 (being its share), and Respondent No.2 was directed to pay the said amount to the Claimant. It is this majority Award that came to be challenged before the learned Single Judge. (h) The learned Single Judge, after noting the facts of the matter including the important terms and conditions of the MOU and the addendum thereto, went on to uphold the Majority Award and dismissed the Arbitration 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....
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....anting of reasonable time to the Claimant to fulfill their obligations of payment. The majority view of the Arbitral Tribunal also held that there was no reason in the facts of the case to deviate from the normal rule that in a transaction of transfer of immovable property, normally, time is not of the essence. Taking all this into account and on consideration of all the evidence, documentary and oral, the majority view of the Arbitral Tribunal, after discussing in detail each and every circumstance alleged by Respondent Nos.1 & 2 for denying specific performance to the Claimant, 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 speci....
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....clude that the Claimant was ready and willing to perform their obligations under the contract when their banker had refused to provide the bank guarantees as required by clause 5 the MoU. He submitted that Clause 5 of the MoU was an essential term of the agreement and the correspondence between parties would show that the bank guarantees as contemplated by the MoU were never given by the Claimant. According to Mr Bharucha, the bankers of the Claimant by its letter dated 2nd November, 2004 expressly refused to accept the points made by IL & FS (being the bankers of Respondent No.1). He 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 per....
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....tral Tribunal suffers from perversity which ought to have been set aside by the learned Single Judge. Not having done so, the order of the learned Single Judge also suffers from serious legal infirmities, and therefore, ought to be set aside by us in appeal. 11. Mr Bookwala, learned Senior Counsel appearing on behalf of the Appellant in Commercial Appeal No. 169 of 2017 (Respondent No.2 before the Tribunal), supported the arguments canvassed by Mr Bharucha. He submitted that prior to entering into the MoU with the Claimant on 28th June, 2004, an earlier MoU dated 27th June, 1996 was executed 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 ....
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....U read with the Addendum. He submitted that as recorded in the impugned Award and upheld by the learned Single Judge, the Claimant was at all times ready and willing to pay the balance amount including providing the bank guarantees as required. He submitted that the Award also so specifically holds, on the appreciation of the evidence and the material on record. 13. Mr Chagla then submitted that it was the case of Respondent No.1 that the Claimant had repudiated the agreement between parties by failing and neglecting to perform its obligations thereunder, namely, giving of two unconditional, irrevocable, 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 submitt....
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....t the matter relating to appreciation of evidence and the weight to be given to the evidence that was led before the Arbitral Tribunal etc. falls entirely within the domain of the Arbitral Tribunal and cannot be interfered with merely because the Court may take a different view under Section 34 of the said Act. The jurisdiction of the Court is circumscribed and restricted to that what is stated in the said section and an Award cannot be set aside by undertaking an exercise of re-appreciating the evidence and thereafter coming to a different conclusion. He submitted that even the order impugned in 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 ....
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....was ready and willing to perform its obligations under the contract ? 18. As far as the issue of readiness and willingness is concerned, the majority view of the Arbitral Tribunal framed this issue as Issue No.4. Thereafter, the Arbitral Tribunal recorded the submissions of the respective parties on this issue. In a nutshell, the majority view of the Arbitral Tribunal recorded in the impugned Award that it was the assertion of the Claimant that at all material times they were ready and willing to perform their part of the contract and to fulfill all their obligations thereunder. In support of this assertion 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 p....
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....execute a quadripartite agreement whereunder the respondents were permitted to execute mortgage of Plot No.5A for obtaining loan of Rs.50 Crores (though no such agreement was executed thereafter)." 21. According to the majority view of the Arbitral Tribunal all the above circumstances clearly proved that the Claimant, at all material times, was ready and willing to perform its part of the contract. As far as the issue of non-furnishing of the bank guarantees are concerned, the same was considered by the majority view of the Arbitral Tribunal from pages 71 to 78 of the impugned Award. The majority view of the Arbitral Tribunal took into consideration clause 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 ....
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.... [LETTER DATED 14TH JANUARY, 2005] "4. As conveyed to your clients' representative Mr V.K. Jain on 24th December 2004, our clients confirm and accept the following clause suggested by your clients vide their fax dated 22nd December 2004 to our clients' Mr Narendra Lodha in the guarantees to be procured by them in terms of proviso under sub-clause 5(vi) of the captioned M.O.U. read with Addendum thereto. "This guarantee can be assigned by the beneficiary in favour of the lenders subject to the regulations, if any, stipulated by the Reserve Bank of India". The draft of the guarantee was otherwise approved and accepted by your clients in all other respects." [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 clien....
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....able land as may be approved by the advocates for the parties; and to execute such other documents and Deeds (including production of original title deeds), for perfection of the title and rights of the Claimant to the developable land as may be approved by the advocates for the parties. When one reads clauses 4 and 5 together it is clear that the Claimant had to execute and furnish the bank guarantees as provided in clause 5 read along with its proviso, simultaneously on the respondents' fulfilling its obligations as set out in clause 4 of the MoU dated 28th June, 2004. It is not even the case of the Respondents before us that they had fulfilled their obligations as set out in clause 4 and/or were 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 l....
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....e, as per the settled law, time was never treated as an essence of the contract unless specifically done so. In the facts of the present case, according to the Claimant, various clauses of the MoU required the Respondents to perform several obligations which they failed to perform. In view of non-performance of these obligations by the Respondents, the contract could not be completed nor payment under the agreement could be made by the Claimant, was its submission. According to the Claimant, the Respondents sought to take undue advantage of their own default by putting forward false pleas and by contesting the prayer of the Claimant for specific performance of the contract. 27. After hearing the parties on 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 Pronouncem....
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....Tribunal has taken all the material evidence into consideration before coming to its finding on this issue. There is nothing that has been brought to our notice that the majority view of the Arbitral Tribunal has failed to consider and which would have such an impact that would render us to come to a finding that the conclusions arrived at in the impugned Award suffer from any perversity. Even assuming that we were to take a different view of the matter on this issue, that would not allow us to set aside the impugned Award on this ground. The majority view taken by the Arbitral Tribunal is clearly a possible and a plausible view that cannot be interfered with either under Section 34 or Section 37 of the said 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....