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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 ..... 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. The majority view of the Arbitral Tribunal has given a specific finding that the so called meeting that was held on 24th November, 2004 fixing a deadline of 20th December, 2004 for completion of the transaction by the Claimant was not acceptable. The majority view of the Arbitral Tribunal has given a categorical finding that the earlier meeting held on 10th November, 2004 and the so called gist of the discussions prepared on 26th November, 2004 on the basis of the meeting dated 24th November, 2004, was not proved by the Respondents. The majority view of the Arbitral Tribunal noted that in fact the case of the Claimant was that on 24th November, 2004 no date of completion of the transaction was ever agreed or fixed. This being so, coupled with the fact that the Respondents were unable to prove that any such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd arbitrator is concerned, the learned arbitrator dismissed the statement of claim of the Claimant (1st respondent herein) as well as the counter-claim of the Appellant in Commercial Appeal No.152 of 2017 (Respondent No.1 before the Arbitral Tribunal). It is the majority view of the Arbitral Tribunal that was challenged by the Appellants herein before the learned Single Judge. We must also mention that after the appeals were filed, the Appellant in Commercial Appeal No.152 of 2017 went into Provisional Liquidation and the Official Liquidator has been brought on record by carrying out an amendment in the cause title of the appeal pursuant to an order of this Court passed on 16th March, 2018. The Appellant in Commercial Appeal No.169 of 2017 was Respondent No.2 before the Arbitral Tribunal. For the sake of convenience we shall refer to the parties as they were arrayed before the Arbitral Tribunal. 3. Before we narrate the brief facts of the case, it would be apposite to set out the challenge that was laid to the impugned Award before the learned Single Judge. In a nutshell they were as under:- It was the case of Respondent No.1 (the Petitioner before the learned Single Judg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces of the present case. Though, as we have stated earlier, only the first point was seriously pressed before us, considering that these three submissions have been raised in the written submissions, we shall also deal with them so as to not give rise to any grievances that a particular contention was taken by the Appellant and not considered by us in this Judgment. 6. Having set out in a nutshell the challenge laid to the impugned Award, and in turn, to the order of the learned Single Judge, we shall now narrate the brief facts of the case, which as as under:- (a) Respondent No.1 (the original Claimant) is a company registered under the Companies Act, 1956. Both the Appellants (Respondent Nos.1 2 before the Arbitral Tribunal) are also the companies registered under the Companies Act, 1956. It is not in dispute before us that both, Respondent Nos.1 2 are the sister concerns and are group companies and part of the S. Kumar Group. Both Respondents are owned and controlled by members of the Kasliwal family. (b) Respondent No.1 is the owner of various immovable properties including the property situated at Lower Parel Division admeasuring 67,785.50 sq. mtrs. in Mumbai (th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assed also before us, was that the Claimant was not ready and willing to perform its part of the contract, and therefore, was not entitled to seek specific performance thereof. According to Respondent No.1, the Claimant failed to pay the amount under the MOU and also failed to furnish the Bank Guarantees amounting to Rs. 57.50 Crores which were immediately encashable. According to Respondent No.1, time was the essence of the contract and similarly payment under the MOU was also the essence of the contract. Thus, according to the Respondents, the payment was to be done within the time frame as mentioned in the contract. Since, these payments were not made within the timely manner, Respondent No.1 had suffered huge losses and for that Respondent No.1 also filed a counter-claim against the Claimant and sought an Award of Rs.760.30 Crores. (e) The relief sought by the Claimant was also contested by Respondent No.2 by filing its Written Statement on 21st February, 2008. Even according to the 2nd Respondent, the Claimant was not entitled to the specific performance of the MOU along with its Addendum, since it had failed to fulfill its commitments under the said MOU. In the supplementa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.1,528.93 Crore or any other amount as compensation in lieu of specific performance of the Agreement along with interest thereon at the rate of 24 % per annum or at any other rate, from the date of the award till payment and/or realization, as claimed in paragraph 7A of the Statement of Claim? 9(c) In the event that this Hon'ble Tribunal is inclined to award any amount to Respondent No.1 with respect to the Counter Claim made by it, whether the sum of Rs.30 Crores is liable to be adjusted against this amount as contended by Respondent No.1 in paragraph 3 of its Supplementary Written Statement ? 9(d) In the event that the Hon'ble Tribunal deciding that specific performance ought not to be granted or ought to be refused to the Claimants for any reason, whether the claimants are entitled to interest at the rate of 24 % per annum or at any other rate on the sum of Rs.30 Crores as claimed in paragraph 7 A of the Statement of Claim ? 9(e) In the event that this Hon'ble Tribunal deciding that specific performance ought not to be refused to the claimants for any reason, whether the claimants are entitled to reimbursement of Rs.1,07,78,688/- or any other amount along w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9(b) Does not arise in view of finding on Issue No.9. 9(c) Does not arise in view of finding on Issue No.9. 9(d) Does not arise in view of finding on Issue No.9. 9(e) Does not arise in view of finding on Issue No.9. (10) The claimants are entitled to specific performance of contract. (11) In the affirmative. (12) In the affirmative. However, Counter-Claim deserves to be dismissed. 12(a) Does not arise. 12(b) Claimants consent is required for shifting of MP/PG reservation. (13) In the negative. (14) In the negative. (15) In the affirmative. (16) In the affirmative. (17) Addendum dated 10.12.2004 is binding on Respondent No.2. (18) MoU is binding on Respondent No.2. (19) In the affirmative. (20) In the affirmative. Claimants are entitled to specific performance of contract. (21) As per Final Award. (g) On the basis of these findings on all the issues, the majority view of the Arbitral Tribunal was that the Claimant was entitled to specific performance of the agreement contained in the MOU dated 28th June, 2004 read with Addendum dated 10th December, 2004. The Respondents accordingly were directed to take all necessary steps to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Tribunal and in light of the applicable law, the learned Single Judge held that the contract was contained only in the MoU and the Addendum. It was further held that the Minutes of the Meeting and the gist of discussions of 10th November, 2004 and 24th November, 2004 were not proved and these being pure finding of facts and based on the evidence that was led before the Arbitral Tribunal, was certainly a possible and a plausible view requiring no interference. (j) The learned Judge further recorded that the majority view of the Arbitral Tribunal found that on the interpretation of the contract and particularly clause (5) of the MoU read with the Addendum, there was no obligation on the part of the Claimant to pay the balance consideration at any fixed time independent of the compliances on the part of Respondent Nos.1 2 of their reciprocal obligations. The majority view of the Arbitral Tribunal also found that the contract itself provided for extension of time and payment of interest on the unpaid amount. Besides this, the contract further provided for a cure period to comply with the contract. All this clearly showed that the time was never made the essence of the contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was required to furnish immediately encashable bank guarantees (for two tranches of payment of Rs.28.75 Crores each) under subclauses (v) and (vi) thereof (read with the proviso thereto), which according to Respondent No.1 was not done, and therefore, the Claimant was not entitled to specific performance. The learned Judge found that this submission was plainly contrary to the terms of the Addendum read with Clause 5 of the MOU. The learned Judge held that the bank guarantees were clearly relatable under Clause 5 of the MOU which also required fulfillment of the reciprocal obligations of Respondent No.1 resting with execution and registration of conveyance/assignment and their purpose was to guarantee payments when such payments were ripe. The learned Judge also found that there was no merit in the submission that the linking up of the payments to performance of reciprocal obligations by Respondent Nos.1 2 was done away with in the Addendum. Be that as it may, the learned Judge also held that in any event this was a possible and plausible conclusion arrived at by the majority view of the Arbitral Tribunal of the relevant contractual stipulations in the agreement and no exception ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the funds from the very outset. On the other hand, most of the obligations of Respondent No.1 related to certification of title of what was its own land. While encumberances were cleared, only some documents were not furnished to the Claimant and in any event the Claimant was aware that none of the encumberances could prevent Respondent No.1 from conveying the property or in any manner handing over the possession or giving right of way to the Claimant. Thus, according to Mr Bharucha, there was absolutely nothing that prevented the Claimant from complying with the agreed terms of the MoU by providing bank guarantees. This also clearly establishes that the Claimant was not ready and willing to perform its obligations under the contract, namely, giving of the immediate encashable bank guarantees as contemplated under clause 5 of the MoU, was the submission of Mr Bharucha. 10. Mr Bharucha then submitted that in the facts and circumstances of the present case, in any event, it was inequitable to grant specific performance. He submitted that specific performance is an equitable relief and therefore, multiple relevant factors must be kept in mind before said relief is granted. Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Claimant cannot claim specific performance against it as it has no right, title or interest in the suit property which came to an end pursuant to a Deed of Cancellation executed between Respondent No.1 and Respondent No.2 dated 21st December, 2004. He submitted that there cannot be any implied consent of Respondent No.2 by virtue of the fact that either Respondent No.2 is a group company of Respondent No.1 or it being represented by the same lawyers or that the addendum was executed by a Director of Respondent No.2 who is also a Director of Respondent No.1. For all these reasons he submitted that in any event of the matter, considering that Respondent No.2 was not a party to the Addendum, (which had the effect of modifying the MoU dated 28th June, 2004), it could not be asked to specifically perform the contract that was executed in favour of the Claimant. 12. On the other hand, Mr Chagla, learned Senior Counsel appearing on behalf of the Claimant (Respondent No.1 herein) submitted that the MoU dated 28th June, 2004 was executed between the Claimant and Respondent No.2 with the consent and concurrence of its Group Company (Respondent No.2). Respondent No.2 had a prior agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Arbitral Tribunal after considering all the evidence led before it, documentary as well as oral. He submitted that in considering all these issues, the majority view of the Arbitral Tribunal has not in any way left out of consideration any vital or material evidence that would result in holding that the impugned Award suffers from any perversity, which in turn, would result in setting aside the Award. He submitted that what is important to note is that the impugned Award specifically records that it was an admitted position that neither Respondent No.1 nor Respondent No.2 either terminated the agreement and which agreement admittedly contained a termination clause. He submitted that the Award specifically dealt with the contention that the Claimant was not ready and willing to furnish the bank guarantees as required under Clause 5 of the MoU. After considering the relevant facts and the evidence on record, the majority view of the Arbitral Tribunal came to a finding that the readiness and willingness of the Claimant to complete the transaction was apparent from the fact that it had on 24th December, 2004 informed Respondent No.1 that the bank guarantee format required by Respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section, whereas the jurisdiction under Section 37 is even more limited, namely, that the Appellate Court would only consider whether there was any infirmity in the Judgment and Order under appeal and not in the Award. Mr Chagla submitted that in the facts of the present case the order of the learned Single Judge certainly does not suffer from any infirmity that would require interference by us in an appeal under Section 37 of the said Act. He, therefore, submitted that there is no merit in either of the appeals and the same ought to be dismissed with compensatory costs. 16. We have heard the learned counsel for parties at length and have perused the papers and proceedings in both appeals including the impugned Award dated 29th August, 2016 as well as the impugned Judgment and Order dated 14th / 17th July, 2017. 17. The main issue that was canvassed before us by Mr Bharucha was that it was impossible for the majority view of the Arbitral Tribunal, and in turn learned Single Judge, to conclude that the Claimant was ready and willing to perform their obligations under the contract, when their own banker had refused to provide the bank guarantees as required by clause 5 of the M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal was unable to uphold this contention. The discussion on this issue can be found from pages 67 to 78 of the impugned Award. On going through the reasoning and findings of the majority view of the Arbitral Tribunal on this issue, we find that it has taken all the material on record into consideration and come to the finding that it has. The majority view of the Arbitral Tribunal has specifically recorded that for showing the readiness and willingness, the Claimant has relied upon several circumstances and actions taken by it to complete the transaction. It recorded that the following acts taken by the Claimant show its conduct towards the specific performance of the contract. They are as under: (i) From July 2004 onwards, the claimant took various steps to prepare a design of the proposed building; (ii) In November-December 2004, the claimant continuously reminded and called upon the respondents to comply with their obligations so that the contract can be specifically performed; (iii) The claimant initiated the process of designing an iconic building by engaging renowned architect M/s Hafiz Contractor and got prepared building plans and lay outs in the beginning of 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o OBC. This witness also stated that he informed Mr V.K.Jain of the Respondents on 24th December, 2004 that the revised clause submitted by IL FS was acceptable to OBC. After considering all the correspondence and the evidence led before it, the majority of the Arbitral Tribunal took a view that from the available record, documentary and oral, it was clearly proved that all attempts were made by the Claimant to perform its obligations under MoU. Regarding furnishing of bank guarantees is concerned, after analysing the evidence and other material on record, the majority view of the Arbitral Tribunal came to the conclusion the Claimants had made every attempt to comply with clause 5 of the MoU. Correspondence between the parties, their advocates and bankers related only to the format of the bank guarantees to be submitted. The record showed that the formats suggested by and/or the advocates of the Respondents were also considered by the Claimant as well as their bankers. The majority view of the Arbitral Tribunal therefore came to the conclusion that there was nothing on record to show that the Claimant had either refused or failed to execute the bank guarantees as per clause 5 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only with a view to wriggle out of the transaction. On going through the discussion of the majority view of the Arbitral Tribunal on this issue, we are in full agreement with the findings of the learned Single Judge that this is certainly a possible and a plausible view that has been taken by the majority view of the Arbitral Tribunal. Nothing has been brought to our notice that would make us come to the conclusion that the finding given by the majority view of the Arbitral Tribunal on this issue either suffers from any perversity that would lead us to interfere either with the findings given in the impugned Award, or in turn, with that of the learned Single Judge. 24. What is also important to note is that when one reads clauses 4 and 5 of the MoU dated 28th June, 2004, it is clear that there were reciprocal obligations of the Respondents in order for them to receive the payments as well as the bank guarantees. They have been spelt out in clause 4 of the MoU which inter alia provides that the Respondents were to handover clear, vacant and physical possession of the developable land duly demarcated and surveyed; to provide a land to the developer with common right of way being 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the evidence and has not left out of consideration any material evidence that would have the effect of leading to any perversity in the findings given in the impugned Award. For these reasons, we are unable to accept the arguments made by Mr Bharucha on this issue. Whether time was essence of the contract. 25. This was an issue that was specifically framed by the Arbitral Tribunal as Issue No.6. The discussion on this issue can be found from pages 32 to 50 of the impugned Award. The Arbitral Tribunal recorded the submissions of respective parties on this issue. It was the case of the Respondents before the Arbitral Tribunal that the contract required time bound performance and thus time was the essence of the contract which was evidenced from various clauses of the MoU as also contemporaneous record made between the parties. Alternatively, it was argued by the Respondents that time was made the essence of the contract by various letters and communications written by the Respondents and/or their advocates, to the Claimant and/or their advocates. In a nutshell, it was the case of the Respondents that the Claimant failed to observe timely payment as contemplated under the contra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to this conclusion, we find that the majority view of the Arbitral Tribunal has in detail adverted to the statutory provisions, legal principles laid down thereunder and whether same would apply to the facts of the present case. In doing so the majority view of the Arbitral Tribunal has considered several clauses of the MoU and also the correspondence that has been exchanged between parties. The majority view of the Arbitral Tribunal has given a specific finding that the so called meeting that was held on 24th November, 2004 fixing a deadline of 20th December, 2004 for completion of the transaction by the Claimant was not acceptable. The majority view of the Arbitral Tribunal has given a categorical finding that the earlier meeting held on 10th November, 2004 and the so called gist of the discussions prepared on 26th November, 2004 on the basis of the meeting dated 24th November, 2004, was not proved by the Respondents. The majority view of the Arbitral Tribunal noted that in fact the case of the Claimant was that on 24th November, 2004 no date of completion of the transaction was ever agreed or fixed. This being so, coupled with the fact that the Respondents were unable to prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in practically every matter the releif of specific performance would have to be declined due to the delays of litigation. This can never be the law and in fact is not the law laid down by the Supreme Court in the case of K.S.Vaidyanandam Vs Vairavan (supra). Hence, the reliance placed on it by Mr. Bharucha, and more particularly paragraphs 10 and 11 thereof, is wholly misconceived. 30. As far as the appeal filed by the Appellant in Commercial Appeal No.169 of 2017 is concerned (Respondent No.2 before the Arbitral Tribunal), we find that for the reasons discussed above, even this appeal has no merits. It is not in dispute that Respondent No.2 was a party to the MoU dated 28th June, 2004. All that was done by the Addendum dated 10th December, 2004 was the price to be paid by the Claimant to the Respondents was increased from Rs.86.30 Crores to Rs.105.30 Crores. Further it is also Respondent No.2's case before us that it has absolutely no right, title, interest in the suit property. This being the case, all that Respondent No.2 is required to do under the Award is to ensure that the property is properly conveyed to the Claimant along with Respondent No.1. We, therefore, do not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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