(Prayer: This Commercial Appeal is filed under Section 13(1)(A) of the Commercial Courts Act Of 2015, praying to call for the entire records, set-aside the order dated 21.09.2023 (Annexure-A) passed by the LXXXV Addl. City Civil and Sessions Judge at Bengaluru (CCH-86) Commercial Court in Com.Ap/93/2023, consequently allow this Commercial Appeal and uphold the arbitration award passed in Ac/09/2021.)

CAV Judgment

Anu Sivaraman, J.

1. This appeal is filed under Section 13(1-A) of the Commercial Courts Act, 2015 challenging the Judgment dated 21.09.2023 passed by LXXXV Additional City Civil and Sessions Judge, Bengaluru (CCH-86) ('Commercial Court' for short) in Commercial Appeal No.93/2023.

2. We have heard Shri. Nandakumar C.K, learned senior counsel as instructed by Shri. Sridhar Chakravarthi M.V, learned counsel appearing for the appellants.

3. Notice had been ordered by way of substituted service to the respondents on 06.06.2024 and duly served. However, there is no representation on behalf of the respondents.

4. The subject matter of the dispute between the parties was the handing over of built-up area to the appellants, who were the landowners on the basis of Joint Development Agreement dated 11.06.2008 and Supplementary Joint Development Agreement dated 18.03.2010. The matter was referred to arbitration and an arbitral award was passed on 27.06.2022, allowing the claim in part. The respondents herein filed an arbitration petition under Section 34 of the Arbitration and Conciliation Act, 1996 ('Arbitration Act' for short) challenging an arbitral award dated 27.06.2022. The same was allowed and the award was set aside. The claimants are in appeal under Section 13(1-A) of the Commercial Courts Act, 2015.

5. The learned senior counsel appearing for the appellants submits that there was no justification on the part of the Commercial Court in having interfered with the arbitral award. It is submitted that the parties had entered into a registered Joint Development Agreement dated 11.06.2008 and a Registered Supplementary Joint Development Agreement dated 18.03.2010. The Supplementary Joint Development Agreement provided for completion of construction within 18 months with a grace period of six months. It was further provided that after completion of the construction, 28% of the built-up area would be handed over by the developer to the appellants. Alleging that the built-up area in floor number 4 and 5 and the corresponding parking space was not handed over, the appellants sought reference of the dispute to arbitration. Thereafter, they filed CMP No.94/2018, which was allowed and the sole arbitrator was appointed to adjudicate the disputes between the parties. The arbitrator allowed the claim of the appellants in part and held that they were entitled to 28% of the build-up area in the fourth and fifth floors of the schedule property along with corresponding extent of parking space and ordered compensation of Rs.2,25,000/- per month, if the respondents fail to honour the award within three months.

6. In the Section 34 application preferred by the respondents herein, the Commercial Court held that the time to complete the construction having ended on 18.03.2012, the claim preferred by the appellants on 21.12.2017, was barred by limitation. The Section 34 application was allowed and the award was set aside. It was found that the finding in the arbitral award that limitation for raising the main claim starts only when the claimant has notice of refusal to handover 28% of the built-up area in floors 5 and 6, is contrary to the agreement entered into between the parties by way of Ex.P2 - Supplementary Joint Development Agreement. It was found that the claim was barred by limitation and the finding on limitation entered into in the award is a patent illegality that vitiates the award.

7. The learned senior counsel appearing for the appellants submits that the respondents being put on notice by the sole arbitrator filed their statement of objections, admitting the supplementary agreement dated 18.03.2010, but contending that they had delivered the claimants' share of 28% of the entire constructed area including the car parking area on the scheduled property except on the fourth and fifth floors. They set up a contention that it was to compensate the loss suffered by the developer and as orally agreed between the parties that the 28% constructed area in the fourth and fifth floors was not handed over. They further contended that construction was complete before the stipulated time and therefore they are not liable to pay any penalty.

8. The Sole Arbitrator considered the contentions advanced and specifically found that the claim for handing over 28% of the built-up area in the 4th and 5th floors with corresponding parking area was well within the period of limitation. This finding has been interfered with by the Commercial Court without any justification whatsoever. It is submitted that the interference in the arbitral award is well beyond the powers conferred under Section 34 of the Arbitration Act and that the order is liable to be set aside.

9. The learned senior counsel has relied on the following decisions:-

          * Bharat Sanchar Nigam Limited and Another v. Nortel Networks India Private Limited, reported in (2021)5 SCC 738;

          * M/s. Arif Azim Co. Ltd. v. M/s. Aptech Ltd., reported in AIR 2024 SC 1347; and

          * SBI General Insurance Company Limited v. Krish Spinning, reported in (2024) 12 SCC 1.

10. We have considered the contentions advanced. The sole arbitrator had framed issues, including Issues No.5, 11 and 12, which reads as follows:-

          "xxxxx

          5. Whether the respondents, as contended by them in their statement of objections, prove that they have delivered the claimants share of 28% of the entire constructed area on the schedule property except of the 4th and 5th floors and whether they further prove that the 4th and 5th floors fell to their share?"

          xxxxx

          11. Whether the claimants prove that the claims stated in the claim petition are made within the period of limitation, computed as per the provisions of the Limitation Act, 1963 r/w Section 43(1) & (2) of the Arbitration & Conciliation Act, 1996?

          12. Whether the respondents, as contended by them in para 13 of their statement of objections, prove that the claims stated in the claim petition are made beyond the period of limitation, computed as per the provisions of the Limitation Act, 1963 r/w Section 43(1) & (2) of the Arbitration & Conciliation Act, 1996?"

11. After considering the recitals in the agreement and the contentions of the parties, the Tribunal found that in the light of Ex.R9 - allotment letter dated 07.08.2015, the claimants had received their 28% share in the built-up area of the schedule property and 28% share in the parking area except the share in the fourth and fifth floors. It was also found that the respondents failed to prove delivery of 28% of the built-up area on fourth and fifth floors and the corresponding parking area to the claimants. On Issue No.11 and 12, the Tribunal clearly held that the limitation to make a claim for specific performance, that is, for delivery of the claimants' remaining 28% share in the built-up area is three years from the date fixed for the performance or if no such date is fixed, from the date on which the plaintiff has notice that performance is refused. It was found as follows:-

          "(c) Under Article 54, the period of limitation is three years and it begins to run from the date fixed for performance of the contract, or, if no such date is fixed, when the plaintiff had notice that the performance was refused. In this case, as no specific date is fixed for performance of the contract, period of limitation begins to run from the time the claimants had notice that the performance was refused. In this case, the claimants came to know of the respondents' refusal to perform the contract when they received the notice dated 25.01.2018 (Ex.P10). The claimants' notice dated 18.12.2017 (Ex.P8) to refer the dispute to Arbitration was received by the respondents on 21.12.2017. Hence, in view of Section 43(2) of the Act, this arbitration proceeding shall be deemed to have commenced on 21.12.2017. As this arbitration is deemed to have commenced on 21.12.2017, the claim for 28% share in the remaining built-up area is not barred by limitation."

12. The limitation to make the claim for penalty for breach of contract was found to have commenced on 20.12.2012 and therefore the claim for penalty was found to be barred by limitation. On this point, there is no contest raised by the appellants.

13. The Commercial Court considered the contentions of the respondents herein and found that the time for completion of the construction was 18 months from the date of the Supplementary Joint Development Agreement dated 18.03.2010 and the period could have been extended only by 6 more months as grace period. It was therefore found that the 24 months for completion of the construction was over on 18.03.2012 and that the claim raised in 2017 was barred by limitation. It was found that the finding in the Arbitral Award that limitation in respect of the main claim starts only when the claimant has notice of refusal to handover 28% of the built-up area.

14. Having considered the claim, the materials on record, the award of the sole arbitrator and the findings of the Commercial Court in the order impugned, we are of the opinion that the Commercial Court seriously misdirected itself in interfering with the Award in an application filed under Section 34 of the Arbitration Act. It is trite law and requires no reiteration that an arbitral award can be interfered with on an application under Section 34 of the Arbitration Act only on the limited grounds as provided in Section 34(2) of the Arbitration Act.

15. We notice from the claim preferred by the appellants before the sole arbitrator that a specific claim had been raised that the agreed area was not handed over after the completion of construction. The Arbitral Tribunal had considered the clauses of the contract between the parties and the claim raised and had found that the period of limitation with respect to that said claim starts to run when the claimants had notice of the refusal of performance of the terms of the contract. It was clearly found that it was only on receipt of Ex.P10 - reply notice dated 25.01.2018 that the appellants had notice of the respondent's refusal to perform the contract.

16. We are of the opinion that the Commercial Court lost sight of the nature of the dispute between the parties by holding that the time provided in the Supplementary Joint Development Agreement dated 18.03.2010 to complete the construction expired on 18.03.2012. In the nature of the dispute between the parties, we are of the opinion that the finding of the Commercial Court and its interference in an award on an application under Section 34 of the Arbitration Act was completely unjustified and uncalled for and much beyond the scope of interference as provided under Section 34 of the Arbitration Act.

17. In the above view of the matter, we are of the opinion that this commercial appeal is liable to be succeeded.

18. In the result:-

          (i) The Commercial Appeal is accordingly allowed.

          (ii) The judgment dated 21.09.2023 passed by LXXXV Additional City Civil and Sessions Judge, Bengaluru in Commercial Appeal No.93/2023, is set aside.

          (iii) The arbitral award dated 27.06.2022 passed by the sole arbitrator in AC.No.09/2021, shall stand upheld.

          Parties shall suffer their own costs.

          Pending Interlocutory applications shall stand dismissed.