(Prayer: Appeal filed under Section 13(1) of the Commercial Courts Act 2015 r/w Section 37(1)(c) of the Arbitration and Conciliation Act, 1996 read with Clause 15 of the Letters Patent Act, to set aside the fair order and decreetal order dated 07.06.2024 passed in Arb.O.P.(Comm.Div) 228 of 2021and consequently set aside the Arbitral Award dated 11.08.2021.)

Dr. G. Jayachandran, J.

1. The appellant/ ASV Constructions Private Ltd., is a limited company involved in construction activities and real estate business. The respondents are joint owners of a piece of land measuring 281 cents in Solinganallur Village on the Old Mahabalipuram Road (OMR) near Chennai.

2. For the sake of brevity, the appellant whenever convenient referred to as Constructor and the respondents as land owners.

3. In or around the year 2006, the appellant identified the land of the respondents and others located adjacent to the land of the respondent suitable for promoting it into a IT Complex. 282 cents of the respondents and 333 cents of land owned by M/s Chemisol Group and one private individual by name Smt.Savithri, totally 615.56 cents, were consolidated by the appellant for the implementation of the project. To begin, a power of attorney from the respondents in favour of one Bharat Kumar K.Kamdar, was obtained to deal with 282 cents of land owned by the respondents. Thereafter, on 20.12.2010 a reconstitution agreement was entered by the appellant with the respondents herein and with the M/s Chemisol group.

4. On 09.04.2012, a Joint Venture Agreement (JVA) between the appellant and the respondents was entered, wherein the parties agreed that in lieu of the land measuring 282 cents owned by the respondents herein, the appellant /constructor will construct 3,66,326 sq.ft + 12,688 ( premium FSL) on the 282 cents of the land and out of which 48% of the build up area ie 1,82,268 sq.ft will be given to the respondents (landlords). Two other JVA with the other land owners with similar clause were entered and the appellant commenced construction.

5. After completion of construction in the consolidated land measuring 615 cents, the other land owners have got their share in the building as per their agreement with the appellant/constructor. Whereas, the respondents herein, who have title in respect of 282 cents land and right to get 48% of the built up area, were not given the share as per terms of the agreement. Hence, the dispute arose and matter was referred to Arbitrator in terms of clause 42 of the JVA.

6. Before the Arbitrator, the land owners claimed that the agreement is not area-sharing but revenue- sharing as per the clause 5(a) and (b) of JVA. After construction in the consolidated land, the constructor had shared the area with the other landowners as per the terms of JVA and MoU dated 01.12.2012 entered with them and also sold away the portion of its share, but not shared the revenue as agreed under clause 5 of the JVA.

7. Per contra, the constructor claimed that, if the clauses in JVA read as a whole, it will prove that it was a area sharing agreement and not revenue sharing agreement. The sharing of revenue clause is an alternate to the area sharing only, in case the land owners agree as marketing strategy to authorise the constructor to sell the land on behalf of them and share the revenue at the rate of 48% : 52%. The landowners had given power of attorney to the constructor only to the extent of 52%, which is the share of the constructor and for the remaining 48% of built up area no authorisation was given to deal with the prospective buyers.

8. Further, the power of attorney given by the landowners in favour of the constructor in respect of 52% of the built up area land and building also was cancelled by the land owners. Thus, the landowners having explicitly withdrawn from revenue sharing option, the declaration sought in the claim petition that the JVA is revenue sharing and not area sharing is not maintainable. The contractor also made counter claim against the landowners for direction to take 1,82,125 sq.ft of the building after the return of Rs.4 crores given to the landowners as security deposit and pay maintenance charges, additional charges and damages due to lack of avenue to sell the property and the maintenance of the unsold portion of the building.

9. The Learned Arbitrator after framing as much as 14 issues, concluded as below:-

                   “113.Thus, taking in to account the extent of the claimants' holding at 282 cents, on the overall extent of the reconstituted land at 615 cents, the same comes to 45.854% and the Chemisols Group of 333 cents at 54 146% The total built up area is given in the written arguments of the claimants as well as in the defence by the respondent in Schedule A as 828120 sq ft. including premium FSI. Out of this, an extent of 379726 sq. ft. goes to claimants and 448394 sq ft to the Chemisols Group The claimants and the respondent revenue sharing under their Joint Development Agreement is 48% and 52%. On the 379726 sq. ft. falling to the share of the claimants on the construction done on the reconstituted lands, the claimants revenue share being 48%, the eligibility of the area for revenue sharing would be 182268 sq.ft, for and the respondent 197458 sq.ft, it being 52% (Total 182268+197458=379726). In the case of Chemisols Group, out of 448394 sq. ft. falling to Chemisols Group in the reconstituted land, Chemisols Group and the respondent area sharing under Joint Development Agreements of the Chemisols Group at 41.220% would be 184828 sq ft for Chemisols Group and the respondent at 58.780% will be 263566 sq. ft. respectively (Total 184828+263566=448394). As per the Joint Development Agreement with Chemisol Phenilics LLP the sharing of Chemisol and the respondent is 41.22.58.780 and with Savithri the sharing is also the same ratio Thus, excluding the Chemisols Group share and the claimants individual share in the overall project that fall under the respective Joint Development Agreement, the respondent's share in the project in total under the three Joint Development Agreements will be 461024 sq. ft. (197458 +263566=461024 sq.ft.). Based on this working on the total project, the revenue sharing will have to be worked out. If we work out the share of the parties individually vis-a-vis the land area, as may be seen from the details stated above, the results will be the same and the same is given through a table as follows:-

                   On the constructed area sharing Chemisols Group :184828/828120 x 100 = 22.33% (excluding the respondent share) Claimants :182268/828120 x 100 = 22% (excluding the respondent share) Respondent : 461024/828120 x 100 = 55.67%

                  

                  

                   The Difference that one notes as between the agreement and the working on the area is on account of rounding off.

                   114 Thus, whether ones works out the share of the parties from the built up area or the reconstituted lands as per the share ratio given in the respective Joint Development Agreement, the results that one arrives at is the same, the difference one notes between the area in the working given above and as per the Joint Venture Agreements is due to the rounding off and not otherwise. Going by this the revenue sharing by the claimants at 48% as per the Joint Development Agreement would be 22% on the total sale consideration received by the respondent as the agents of the claimants and the Chemisol Group This working is also logically arrived at based on the share of the claimants, the Chemisols group and the respondent on the total reconstituted land. The revenue sharing between the parties herein is worked out based on the share ratio under the Joint Development Agreement. Thus, as against the claim of the claimants the revenue share of the claimants on the overall total sales relating to the reconstituted lands vis-a-vis their percentage of holding shall be 22% and that of the respondent 55 67% overall And certainly not as what the respondent contended or the claimants had given the net working at 28.33%.

                   116.Admittedly, the flats that the claimants sought for themselves have not been allotted so far Going by the projections made to the prospective buyers on what is offered from out of the project constructed in the reconstituted lands, the claimants are entitled to 22% revenue share as stated above on all sales that had happened so far and as well as those that may happen in future The details of the sales done by the respondent as the Power of Attorney of the claimants and the Chemisols Group show that the sales were not exclusively from the Chemisols Group lands as claimed by the respondent or for that matter from the respondent' share. In these circumstances, the claimants are entitled to the revenue share from all sale consideration received by the respondent and consequently for a direction to the respondent to furnish the copy of the true accounts on all sale considerations received by the respondent from the project ASV Alexandria along with interest at 12% since the date of the High Court order under Section 9 when the Hon'ble High Court made its observation on the pattern of sharing under the Joint Venture Agreement which order remains unchallenged. As per the Joint Development Agreement, the respondent was bound to account for the consideration received within 30 days of the receipt of the sale consideration Yet, taking the orders of the Hon'ble High Court in Section 9 application, which has become final, as the starting point for calculation of interest the claimants are entitled to the grant of interest at the rate of 12% From the date of the order in Section 9 application. The encumbrance certificates give the number of sales effected Since the complete details on the construction agreement and the sale deeds are not available, the respondent is hereby directed to furnish the same on all the sales effected since 2014 out of the Project ASV Alexandria within 30 days of the receipt of the award to the claimants to work out its share of sale consideration at 22% on each sale effected.”

10. Being aggrieved by the award of the arbitrator, the constructor filed petition u/s 34 of Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'A & C Act') before the Learned Single Judge. Along with Arb.OP 228 of 2021 filed under Section 34 of the Act, an Application in A.No.4180 of 2021 for interim stay was filed. The landowners filed O.A.No.735 of 2023, to restrain the constructor from alienating or encumbering the property without depositing Rs.61.19 crores of rupees.

11. Applications in Arb.Appln.Nos.441 and 442 of 2023 were filed by the landowners for a direction to deposit Rs.46.31 crores being 22% of the total sale consideration and further sum of Rs.14.88 crores towards interest at the rate of 12% pa.

12. The fulcrum of the dispute is Clause 5 of the JVA. The Arbitrator had interpreted it as revenue sharing agreement. In the Arbitration Original Petition filed under Section 34 of the Act, the learned Single Judge on clause 5 of the JVA, confirmed the view of the Arbitrator by holding as follows:

                   “80. The above clause [clause of JVA] specifically states that apartments shall be marketed by the Petitioner without specific allotment of physical area either to the Petitioner or to the Respondents/Claimants and that the sale proceeds shall be divided in the same proportion as 52% and 48% between them. Thus, the conclusion arrived by the Arbitral Tribunal in the Impugned Award dated 11.08.2021 in so far as issue No.1 cannot be faulted. It cannot be therefore said in the Impugned Award, the Learned Arbitrator has rewritten the terms of the contract.

                   81. As per Clause 5 of the Joint Development Agreement dated 09.04.2012 which has been extracted above stating the sharing of 52% to the Petitioner and 48% to the Respondents/Claimants was only in respect of the amount/sale proceeds as stipulated in the respective Agreements of Sale in respect of the cost of the flat including the cost of undivided land and the cost of car parking also makes it clear that the Agreement in the Joint Development Agreement dated 09.04.2012 with the Respondents/Claimants for sharing of the revenue from the proceeds of sale made by the Petitioner.

                   82. In the case of the Joint Development Agreements dated 09.04.2012 with M/s.Chemisols Phenolics LLP and C.Savithri, the Petitioner specifically agreed for 'Area Sharing' and to that effect, a Memorandum of Understanding dated 01.12.2012 was signed with them. As mentioned above, a similar agreement with the Respondents/Claimants is absent.

                   83. Flats which were specifically identified and allotted in the four blocks which were then under construction to M/s.Chemisols Phenolics LLP and C.Savithri under Memorandum of Understanding dated 01.12.2012 signed by the Petitioner with them. It is in proportion to 41.22% share in the Joint Development Agreements dated 09.04.2012 signed with them.

                   84.There was no identification of any area allotment ie.. allotment of flats under Joint Development Agreement dated 09.04.2012 with the Respondents/Claimants between the Petitioner and the Respondent/Claimant except the one's as per Clause 5(a) of the Joint Development Agreement between them. Therefore, there can be only allocation of revenue from the sales by the Petitioner for the purpose of 'Revenue Sharing' from the homogeneous common pool of 6,43,292, sq.ft. (8,28,120-1,84,828). Thus, the revenue was also required to be worked out in proportions.” ..........

                   “105. Therefore, conclusion in the Impugned Award in Para 116 of the Impugned Award by the Arbitral Tribunal cannot be questioned. The conclusion arrived by the Arbitral Tribunal in Paragraph 116 of the Impugned Award extracted above is based on the working in Paragraphs 113 to 115, which have been extracted above.

                   106. The conclusion in the Impugned Award that the Respondents/Claimants are entitled to revenue for 1,82,268 sq.ft., which is equivalent to 22% from and out of total built up/constructed area of 8,28,120 sq.ft. excluding 22.31% (1,84,828 sq.ft.) the share belonging to M/s.Chemisols Phenolics LLP and C.Savithri, is correct. The conclusion arrived was merely not a possible conclusion but the only conclusion that could be arrived. Therefore, it cannot be said that the Impugned Award has awarded amounts to the Respondents/Claimants from and out of 58.78% share of the Petitioner under the Joint Development Agreement with M/s.Chemisols Phenolics LLP and C.Savithri dated 09.04.2012.

                   107. The failure to obtain necessary Power of Attorney from the Respondents/Claimants for selling balance extent bearing 1,84,268 sq.ft., being 48% of share under the Joint Development Agreement dated 09.04.2012 with the Respondents/Claimants [i.e., 22% out of total built up area 8,28,120 sq.ft.] is on account of the faulty drafting of the Clause 5 in the said Joint Development Agreement dated 09.04.2012 with the Respondents/Claimants. The object of the Joint Development Agreement dated 09.04.2012 between the parties could be achieved only if the Respondents/Claimants execute Power of Attorney in favour of the Petitioner or the Respondents/Claimants co-operate with the Petitioner at each stage in the execution of the Sale Deeds for transferring the undivided share in the land as and when sale is completed by the Petitioner.”

13. In this appeal, the challenge to the arbitral award and the order of the learned Singe Judge, who has confirmed the award is primarily on the ground that Learned Judge failed to take note of the fact that the arbitrator has substituted the terms of JVA and passed a perverse award. While JVA is area sharing agreement, the arbitrator has misread clause 5 in isolation and held the JVA is revenue sharing. Further, the arbitrator had arrived the revenue share of the claimants/landowners as 22% in entire built up area, whereas JVA specifically mentions that the area sharing is 48% in the built up area of 3,66,326 sq.ft. + 12,688 ( premium FSL) on the 282 cents of the land and out of which 48% of the built up area i.e., 1,82,268 sq.ft.

14. It is further contended that the relief granted by the arbitrator in excess of the claim made is apparently an act of perversity. The Learned Single Judge failed to consider the infirmity in the award granting relief, which was not prayed. The conversion of the area sharing agreement into revenue sharing agreement is tantamount to substituting the clause of the contract. Hence, it is violative of Section 28(3) of A & C Act. While the relief sought confines to 48% area in total built up area on 282 cents of the claimants land, the arbitrator has covered into 22% out of total built up area on 615 cents of land, even without giving any opportunity to the third party land owners. The learned Single Judge has failed to understand that the award as such not executable.

15. The learned Senior Counsels appearing on behalf of the appellant further submitted that, the impugned order of the learned Single Judge as well as the award of the arbitrator to be set aside in view of the dictum laid in the following judgments:-

                   “A. Ssangyong Engineering & Construction Company Limited Vs. NHAI [(2019) 15 SCC 131]

                   B. Patel Engineering Ltd.,-Vs.North Eastern Electric Power Corporation Ltd. [(2020) 7 SCC 167]

                   C. Project Director, NHAI Vs. M.Hakeem & another [(2021) 9 SCC 1]

                   D. IOCI vs. Shree Ganesh Petroleum Rajgurunagar [(2022) 4 SCC 463]

                   E. State of Chattisgargh and another vs. Sal Udyog Pvt.Ltd.. [(2022) 2 SCC 275]”

16. The consistent case of the appellant/constructor is that JVA is an area sharing agreement. The respondents are entitled for 48% of the area of construction corresponding to their 282 cents of land. The Arbitrator had ignored other terms in the JVA and Section 28(3) of A & C Act, before jumping to the conclusion that the JVA is a revenue sharing agreement.

17. Next, the case of the appellant is that, consideration of the entire 615 cents of land by the arbitrator for determining the revenue entitlement of the landowners is perverse. The third party land under the reconstitution cannot be the subject matter of the arbitration. Hence, the arbitration suffers lack of jurisdiction.

18. We are conscious of the law prevailing that the power of the appellate authority under Section 37 of the A & C Act is very limited and interference by the appellate Court as if it is an appeal under Section 96 of CPC is not permissible. In Punjab State Civil Supplies Corporation Ltd and others –vs- M/s Sanman Rice Mills and others, [2024 INSC 742], the Hon’ble Supreme Court had reiterated as below:-

                   “20. In view of the above position in law on the subject, the scope of the intervention of the court in arbitral matters is virtually prohibited, if not absolutely barred and that the interference is confined only to the extent envisaged under Section 34 of the Act. The appellate power of Section 37 of the Act is limited within the domain of Section 34 of the Act. It is exercisable only to find out if the court, exercising power under Section 34 of the Act, has acted within its limits as prescribed thereunder or has exceeded or failed to exercise the power so conferred. The Appellate Court has no authority of law to consider the matter in dispute before the arbitral tribunal on merits so as to find out as to whether the decision of the arbitral tribunal is right or wrong upon reappraisal of evidence as if it is sitting in an ordinary court of appeal. It is only where the court exercising power under Section 34 has failed to exercise its jurisdiction vested in it by Section 34 or has travelled beyond its jurisdiction that the appellate court can step in and set aside the order passed under Section 34 of the Act. Its power is more akin to that superintendence as is vested in civil courts while exercising revisionary powers. The arbitral award is not liable to be interfered unless a case for interference as set out in the earlier part of the decision, is made out. It cannot be disturbed only for the reason that instead of the view taken by the arbitral tribunal, the other view which is also a possible view is a better view according to the appellate court.

                   21. It must also be remembered that proceedings under Section 34 of the Act are summary in nature and are not like a fullfledged regular civil suit. Therefore, the scope of Section 37 of the Act is much more summary in nature and not like an ordinary civil appeal. The award as such cannot be touched unless it is contrary to the substantive provision of law; any provision of the Act or the terms of the agreement.”

19. In the case in hand, the appellant's contention is that the tribunal award is perverse and cannot be entertained, as it is established that the JVA does not contemplate revenue sharing and it is purely area sharing agreement. Whileso, contrary to sub-section (3) of Section 28 of the A & C Act, the learned arbitrator substituted the terms of contract by misreading clause 5 of the JVA.

20. No doubt, Section 28(3) of the A&C Act mandates that while deciding and making an award, the arbitral tribunal shall, in all cases, take into account the terms of the contract and trade usages applicable to the transaction.

21. Turning to clause 5 of the JVA, it reads as below:-

                   "5. The DEVELOPER herein agrees to carry out the development on the Schedule A lands as per the sanctioned plan to be obtained with any further approved modifications as the work progresses and for that purpose the land owner has agreed to make available the land in the property more fully described in Schedule 'A' and the DEVELOPER has agreed to develop the said lands by putting up buildings as per the plans to be approved, with such variations as may be agreed upon from time to time by the parties hereto. The Developer covenants that all such modifications/alteration will be as per the Development Control Rules prevailing at that point of time. The Developer agrees to make available a copy of the complete set of sanctioned plan and all such modified sanctioned plans to the land owners.

                   a. The parties further covenant while the sharing ratio shall remain 52% to the Developer & 48% to the Land Owners and that instead of allotting specified and identified constructed area to the Land Owners and the Developer in accordance with the aforesaid proportion as agreed in the Development Agreement, with a view to evolve a market strategy which is acceptable to and beneficial to both the parties, agree that the entire/part constructed area/apartments shall be marketed by the Developer without specific allotment of physical areas to either of them and the sale proceeds shall be divided in the proportion 52% to the Developer & 48% to the Land Owner. The parties have agreed for the sake of convenience and better marketing procedures and efficiency that the marketing shall be done by the Developer with the assistance of the Land Owners wherever necessary at mutually agreed price. It is also agreed that the Land Owners can retain certain apartments out of their share and the same can be identified and earmarked.

                   b. The Developer agrees to sell on mutually agreed price and collect the sale proceeds and pay the share of the Land Owners within 30 days of such collection. Also the Developer will not charge any service charges, marketing expenses, brokerage or commission for selling the constructed area belonging to the Land Owners.

                   c. The parties hereto mutually agree and confirm that the sharing of 52% to the Developer & 48% to the Land Owner between the parties hereto is only in respect to the amount as stipulated in the respective agreement of sale cum construction which in respect of the cost of the flat including the cost of undivided of land and the cost of car parking." (emphasis applied).

22. The learned Arbitrator as well as the learned Single Judge, had examined clause 5 (a) and (b) in the JVA of the appellant with the respondents herein and the JVA with M/s Chemisol Group. All the three JVA’s were entered on the same day, however the clause relating to sharing of super-built up area is different.

23. In the JVA with the respondents herein, the option of revenue sharing is not an alternative, but it is the default clause. The word ‘instead of’ employed in clause 5(a) makes it clear that, the sharing ratio of 48:52 between the land owner and the constructor is interconnected with the built up area. If the contract is only for area sharing, then the constructor ought to have allotted the area to the landowners along with M/s.Chemisol Group. The allocation of area should have been simultaneous so that, there is no discrimination in allocation of area. The constructor had allotted super built up area to the rest of the land owners as per the terms of JVA entered with them. He had also sold a part of his share despite the claim by the respondents to allot their share in EWS. After denying to share the area, made landowners to believe that they will be getting the revenue as per clause 5 of JVA, the constructor had not shared the revenue, though he had sold a portion of the building. After allotting the built up area of their choice for the other landowners, the constructor cannot force the respondents to take the residual area. The allotment of area to the landowners as per JVA should have been done simultaneously at par with others namely M/s Chemsol Group.

24. In the given circumstances, the arbitrator has rightly held that, by written agreement as well as by conduct, the parties have understood clause 5 of JVA as revenue sharing agreement. The 48% of the respondents' right corresponding to 282 cents works out to 1.82.253 out of total built up area 379014.20 sq.ft while getting converted to 615 total extent of cents and total built up area of 8,28,120 sq.ft. Her percentage works out to 22%.

25. The trade usage in construction agreement coupled with JVA, the option of area sharing and revenue sharing is not a strange concept. The reading of clause 5 of the JVA indicates that instead of area sharing the parties agree for revenue sharing without specific allotment of physical area, will go for revenue sharing by selling the area at mutually agreeable rate. In JVA, by assigning reason, predominance is given for revenue sharing and not for area sharing.

26. Therefore, we hold that this appeal under Section 37 of the A & C Act does not satisfies any of the requirement to interfere the arbitral award or with the order of the learned Single Judge, hence the appeal stands dismissed. No costs.