In a significant legal ruling by the Supreme Court of India, the final resolution has been provided for the complex land development dispute. After years of litigation and arbitration, the court has come to a decisive conclusion regarding the case involving a joint venture for a residential-cum-commercial complex. This judgment holds implications for both parties involved in the long-standing dispute, bringing closure to the legal battle.
Facts
- The project was abandoned by the appellants after the construction activity was not completed by 03.07.2000, leading to the termination of the agreement in 2001.
- The appellants owned a land in Ludhiana, Punjab, where a joint venture for a residential-cum-commercial complex was planned with a guarantee deposit of Rs. 45,00,000 by the appellants.
- An arbitration clause was invoked by the respondent in 2004 after delays in construction.
- A compromise was reached in 2004 where Rs. 40,00,000 was returned as security deposit, however, a new management change led to further legal actions.
- An award was passed in 2010 dismissing both the claim and counter-claim, which was affirmed by the Additional District Judge in 2012. The respondent then appealed to the High Court under Section 37 of the Act.
- The High Court found deficiencies in the arbitration process, noting lack of appropriate opportunities for evidence tendering and witness examination.
- The agreement from 1996 required completion of the building within three years of obtaining the sanctioned plan, which was not met leading to legal disputes.
- High Court remanded the matter to sole Arbitrator Mr. Justice Kuldip Singh for providing opportunity of leading evidence to both parties.
- The Arbitration Case No. 124 of 2006 was filed by the respondent under Section 11 of the Act, 1996.
- The appointment of Mr. Justice Kuldip Singh as the sole arbitrator to resolve the dispute between the parties was allowed on 03.07.2009.
- The sole Arbitrator is mandated to grant opportunity to cross-examine witnesses and decide each claim and counter claim separately on merits.
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Arguments
- The learned counsel argued that the Additional District Judge did not consider important aspects of the case in the Section 34 proceedings.
- The agreement dated 14.12.1996 and its clauses were referred to during the arguments to highlight the governing rules.
- Section 19 of the Act, 1996 allows the Arbitrator to determine the rules of procedure, which were finalized in a hearing on 28.11.2009.
- The procedural lapse alleged was contested based on clause 11 of the agreement regarding expenditure.
- The Arbitrator’s rejection of the claim solely on time being the essence of the contract was challenged.
- The delay in project completion was attributed to the appellant by the respondent’s counsel.
- The scope of consideration in the Section 37 proceedings under the Act, 1996 was argued to be limited, as examined by the Additional District Judge.
- The project’s non-completion despite agreed terms in the 1996 agreement was raised as a factual point.
- The arbitrator’s detailed consideration of all aspects and the remand by the Single Judge based on the Oil and Natural Gas Corporation Ltd. vs SAW Pipes Limited case was discussed.
- The Arbitrator’s consideration of construction costs and cancellation of the agreement was highlighted during the arguments.
- Specific claims made by the respondent under different heads were mentioned, along with the respondent’s representation by a senior advocate in the arbitration proceedings.
- The respondent raised a challenge against the arbitral award on the grounds of inappropriate procedure and denial of opportunity.
- The challenge falls under Section 34(2)(a)(iii) of the Arbitration and Conciliation Act, 1996.
- The procedural lapse by the arbitrator in denying opportunities to parties is being examined for validity of the challenge.
- The respondent contends that both parties should have an opportunity, and therefore, no grievance can be made by the appellant.
- The appeal papers and relevant records were reviewed, including the agreement between the parties.
- There was a dispute due to delay in project completion, attributed to the appellant for not furnishing title documents.
- Arbitration was initiated under Section 11 of the Act, and the arbitrator considered all aspects before making the award.
- The Additional District Judge upheld the award as no grounds for interference were found under Section 34 of the Act.
- Concurrent opinions by the arbitrator and the Additional District Judge necessitate examination of the Single Judge’s decision under Section 37 of the Act.
- Whether the Single Judge can go beyond the scope of Section 34(2) in setting aside the award based on procedural grounds needs evaluation.
- The Single Judge accepted the respondent’s contention of procedural irregularities prejudicing them, specifically mentioning lack of witness cross-examination.
Analysis
- The learned Arbitrator considered the affidavit and admitted documents without prejudice due to lack of cross-examination.
- Disputed claim of cancellation agreement and repayment of funds was addressed by the Arbitrator.
- No objections were raised during the settlement of issues for consideration on 28.11.2009.
- The Single Judge’s concern about the non-separate addressing of claims in the award was deemed unjustified.
- The claim of payment made to Mr. Surinder Singh was considered an inter-se matter.
- The Single Judge’s reason for remanding the matter regarding the unconsidered Rs. 1,22,00,000 expenditure post-award was dismissed as an afterthought.
- Parties’ refusal to cross-examine witnesses during proceedings and consent to evidence closure were noted.
- Arbitrator’s rejection of the claim relating to construction costs was justified and considered in the award.
- Lack of examination of former directors/shareholders by the claimant was highlighted as a procedural shortcoming.
- The agreed-upon arbitration procedure from 28.11.2009 was followed and precludes subsequent complaints.
- Arbitrator’s sequential consideration of all aspects and recorded conclusions were deemed appropriate.
- The allegation of arbitrator misconduct due to age and health issues was considered unjustified.
- The parties were encouraged to settle the matter amicably by compensating the respondent for the expended portion and acknowledging the appellants’ loss due to delay.
- Based on photographs, it was observed that only some columns were raised and major construction had not taken place beyond March 1999.
- There was no conclusive evidence regarding the expenses claimed by the respondent.
- The owner of the property, the appellant, would need to enter into a fresh contract for development, which may not align with the previous plans.
- Due to breach and the respondent’s failure in the case, they do not have an absolute right in their favor. The appellants have also suffered a significant loss by being unable to enjoy the property for over two decades.
- The actual quantum of loss cannot be determined, especially considering the breach committed by the predecessor directors/shareholders of the respondent company.
- In the interest of justice and to end the litigation, the appellant is directed to pay Rs. 45,00,000 to the respondent. This payment would allow the respondent to take possession of the land and proceed with lawful enjoyment. The appellant would incur a loss either by undertaking demolition themselves or through reduced compensation from alternate developers.
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Decision
- The award dated 13.01.2010 by the Arbitrator is restored.
- The appellant is directed to pay Rs. 45,00,000/- to the respondent within three months as full quit of all claims.
- The High Court’s order dated 31.07.2015 in FAO No 5704 of 2012 (O&M) is set aside.
- Upon payment, the appellant can resume possession of the land and enjoy it as per the law.
- Each party will bear their own costs.
Case Title: JAGJEET SINGH LYALLPURI (DEAD) THROUGH L.RS. Vs. M/S UNITOP APARTMENTS AND BUILDERS LTD.
Case Number: C.A. No.-000692-000692 / 2016
