Bangalore District Court
M/S Lakshmi Gold Khazana Pvt Ltd vs M/S Panchamishree Constructions Pvt … on 6 January, 2025
Com AP 87/2024
KABC170017172024
IN THE COURT OF LXXXV ADDL. CITY CIVIL &
SESSIONS JUDGE, AT BENGALURU (CCH-86)
(Commercial Court)
THIS THE 6th DAY OF JANUARY 2025
PRESENT:
SRI.ARJUN. S. MALLUR. B.A.L.LL.B.,
LXXXV ADDL. CITY CIVIL & SESSIONS JUDGE,
BENGALURU.
Com.A.P.NO.87/2024
BETWEEN:
M/S Lakshmi Gold Khazana Pvt Ltd,
A Company incorporated under the
Provisions of the Companies Act, 1956
Having its registered office At No.475, Sampige Road, Vi
Cross, Malleshwaram, Bengaluru - 560003
Rep By Its Managing Director,
K P Nanjundi Vishwakarma
: PETITIONER/APPLICANT
(Represented by Sri. S Hemanth Bharadwaj Advocate)
1
Com AP 87/2024
AND
M/S Panchamishree Constructions Pvt Ltd
A Company incorporated under the
Provisions of the Companies Act, 1956
Having its registered office At No.6,
Lakshmaiah Reddy Road, Ulsoor,
Bengaluru - 560008
Rep By Its Managing Director
2:N Narayana
Retired District Judge
Sole Arbitrator
C/O Arbitration And Conciliation Centre
Khanija Bhavan
Bangalore - 560001
DEFENDANT/CLAIMANT
(Represented by Haranahalli Law Partners, Advocate)
Date of Institution of 24-06-2024
the suit
Nature of the suit Arbitration Suit under Sec. 34
(suit on pronote, suit of Arbitration & Conciliation
for declaration & Act, 1996
Possession, Suit for
injunction etc.)
Date of
commencement of ---
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recording of evidence
Date on which 06-01-2025
judgment was
pronounced
Total Duration · Year/s Month/s Day/s
· 00 06 13
(ARJUN. S. MALLUR)
LXXXV Addl.City Civil & Sessions Judge,
Bengaluru.
JUDGMENT
Application under Sec.34 of the Arbitration and
Conciliation Act 1996 seking setting aside the arbitral
award passed by the Learned Sole Arbitrator in A.C
No.647/2022 dated 05.03.2024.
Parties are referred as per their rank before the
Arbitral Tribunal.
2. Facts in brief is as under:-
The claimant and the respondent had entered into an
agreement for putting up constructions in property
bearing plot No.83/1, 83/2A, 83/2B and 83/3 situated at3
Com AP 87/2024V ward, IX Division, P.J Extension, Davanagere. The
period of contract was for 12 months and the agreement
required that if there is failure of completion of the work
at the respective stage the respondent would be eligible
to deduct 5% of the amount raised in the particular bill
as penalty for the delayed work. It is submitted that as
per the terms of the agreement the entire construction
was to be completed within a period of 12 months
commencing from 5.12.2014. The respondent was
required to settle the bills subject to approval by the
architect M/s Cruthi Consultants Consortium (P) Ltd and
also with the approval of the manager of the respondent.
The claimant was required obtain prior approvals from the
respondent for purchasing the cement and steel and it
was also agreed that the claimant would provide for 2%
discount on the bill of amount in every bill and respondent
was also at liberty to retain 5% of the amount after
deducting the discounted amount and the same had to be
retained as marginal deposit to be repaid after one year
from the date of completion of the works. Further under
the agreement a sum of Rs.2,00,000/- was paid by the
respondent to the claimant as advance amount. It is
further submitted that clause V of the agreement4
Com AP 87/2024mandated that whenever bills were raised by the claimant
it need to be approved and certified by M/s Cruthi
Consultants Consortium(P) Ltd and as well as by Mr.KKS
Rajan the manager of the respondent. It is submitted that
even though the bills submitted by the claimant were
cleared from time to time the claimant initiated arbitral
proceedings by issuing a notice dated 30.10.2019. As the
respondent did not give consent for the arbitrator
suggested by the claimant, the claimant filed CMP
No.411/2021 for appointment of the Sole Arbitrator which
came to be allowed and the Learned Sole Arbitrator came
to be appointed.
It is further submitted that before the Sole Arbitrator
the claimant filed a claim statement for recovery of a sum
of Rs.93,00,626/- due by the respondent with interest at
18%p.a. The entire claim was based on the amounts
claimed under 5 R.A. bills dated 17.03.2015, 04.04.2015,
10.06.2015, 06.10.2015 and 18.03.2016. In response the
respondent filed statement of defense denying the claim
made by the claimant and also contended that with
respect to the alleged bills the required procedure was not5
Com AP 87/2024followed by the claimant and therefore there was no
liability to pay the amount.
3. Based on the pleadings and the evidence the Learned
Sole Arbitrator under the impugned award allowed the
claim and directed the respondent to make payment of a
sum of Rs.93,00,626/- with interest at 18% p.a. from the
date of raising of the bills till realization along with cost.
4. Aggrieved by the impugned award the respondent has
filed this application contending the award passed by
Learned Arbitrator is in breach of fundamental policy of
Indian Law and is in complete violation of principles of
natural justice and there is error apparent on face
required the award to be set aside. It is contended that
the Learned Arbitrator has failed to observe that the R.A.
bills raised by the claimant and marked as Ex.C.3 to C.7
were not duly approved as required under clause V of the
construction agreement and it was not in accordance with
the procedure contemplated under clause V of the
agreement. It is contended that the Learned Arbitrator
has undertaken rewriting the terms of the contract instead
of interpretation of the same which is against the spirit of
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Com AP 87/2024
Sec.34 of the Act. It is submitted that the Learned
Arbitrator has failed to observe that the bills produced had
no nexus with the bills indicated in the claim statement
and that the arbitrator has failed to observe that the
claimant had not produced any statements supporting the
claims due under the said bills and ignoring the fact the
best evidence was withheld by the claimant instead of
drawing an adverse inference the Learned Arbitrator has
grossly erred in passing impugned award. It is further
contented that the Learned Arbitrator has failed to
consider the fact that the claimant had abandoned the
project without any reason and further has not taken into
consideration that there was also a residential project
being constructed by the claimant and the claimant had
included both the amounts due under the commercial
project as well as residential project. It is further
contented that the Learned Arbitrator has failed to
observe that with respect to the amounts due under the
residential project it was a non-arbitrable dispute and the
Learned Arbitrator by clubbing both the arbitrable and
non-arbitrable matters has passed the impugned award
which is in violation of the principles laid down by the
Apex Court in various decisions. It is submitted that with
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Com AP 87/2024
respect to the residential project the claimant had filed a
separate suit in O.S.No.129/2017 and the abstract sheet
produced in the said suit were produced in the evidence
by the claimant marked as Ex.C.18 to C.21 which has
been considered by the Learned Arbitrator which itself is
erroneous approach rendering the award to be set aside.
It is further contended that there is no basis whatsoever
for the figures arrived at by Learned Arbitrator in the
award and that the impugned award is opposed to public
policy and is no erroneous interpretation of law and on
these grounds sought for setting aside the award.
5. The first respondent has appeared and filed his
statement of objections wherein it has reiterated the facts
that has been already mentioned by the petitioner in the
petition. It is contended by the first respondent that the
Learned Arbitrator after considering the evidence on
record has arrived at the just and proper conclusion and
no interference whatsoever is called for in the award. It is
submitted that after considering the amounts due under
the 5 R.A. bills and after giving deductions to the amounts
already paid the claim is made for the balance amount of
Rs.93,00,626/- which has been duly awarded by the
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Com AP 87/2024
Learned Arbitrator and there is no illegality in the same. It
is contended that the grounds urged by the petitioner
under Sec.34 of the Act is more in the nature of the
appeal which cannot be considered and that the Court has
got a very limited jurisdiction to interfere in an arbitral
award. It is submitted that the grounds urged by the
petitioner does not in any manner make out that the
award suffers from breach of fundamental policy of Indian
Law and that there is no patent illegality in the award
requiring it to be set aside. It is submitted that as per
clause V of the construction agreement the work
completed must be approved and duly certified by the
architect M/s Cruthi Consultants Consortium(P) Ltd and
also the manager of the respondent and the same has
been done and further the Director of M/s Cruthi
Consultants Consortium(P) Ltd has been examined as
C.W.2 who has deposed with regard to the certifications of
the bills raised by the claimant. It is submitted that the
claimant had to abandon the project when the respondent
defaulted in making payments of the bills. It is further
submitted that with respect to the residential project a
separate suit has been filed in which the respondent did
not contest the proceedings even though appeared and
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Com AP 87/2024
there is clear bifurcation of the payments made with
respect to the commercial project as well as the
residential projects. It is submitted that the award passed
by the learned arbitrator is strictly in accordance with the
terms of the agreement and the evidence led before the
tribunal and on these grounds sought for rejecting the
application with costs.
6. Heard the Learned Senior Counsel Sri.D.R.Ravi Shankar
appearing for the counsel for the petitioner and the
Learned Counsel for respondent No.1. Records from the
Arbitration Conciliation Centre Bengaluru have been
summoned. Respondent No.2 is the Sole Arbitrator and
notice against respondent No.2 has been dispensed.
Perused the entire material on record.
7. The points that arise for my consideration are as
under:
(1) Whether the petitioner substantiates that the
impugned award passed by the Learned Sole
Arbitrator in A.C.No.647/2022 dated
05.03.2024 is in breach of fundamental Policy
of Indian Law?
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Com AP 87/2024
(2) Whether the petitioner further substantiates
that the award passed in A.C.No.647/2022
dated 05.03.2024 suffers from patent illegality
appearing on face of it requiring it to be set
aside?
(3) What order?
8. My finding on the above Points are: –
Point No.1: In the Negative.
Point No.2: In the Negative.
Point No.3: As per final order
for the following:
REASONS
9. POINT NOS.1 AND 2:- To avoid repetitions these
two points are taken up together for answering.
The entire crux of the dispute between the petitioner
and the respondent is with regard to interpretation of
clause V of the construction agreement entered into
between the parties and is with respect to awarding the
amounts having no basis what so ever. Clause V of the
construction agreement entered into between the parties
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Com AP 87/2024
requires that every bills would become payable subject to
the condition that the work completed must be approved
and duly certified by the architect M/s Cruthi Consultants
Consortium(P) Ltd and manager of the respondent Mr.KKS
Rajan and if there is any delay in completion of stage of
work on part of the owner of the premises then the owner
was liable to pay 2% interest to contractor on the amount
mentioned in the respective bills. It is borne out from the
records that it is not in dispute that as and when the bills
were raised the amounts have been paid and as
mentioned in the claim statement itself and also in the
statement of objections the respondent has made
payment to an extent of Rs.2,03,40,000/-. There has
been a balance due of Rs.93,00,626/- under the 5 R.A.
bills dated 17.03.2015, 04.04.2015, 10.06.2015,
06.10.2015 and 18.03.2016. The amounts due is after
giving adjustments to the amounts already paid under
those bills.
10. The Learned Senior Counsel appearing for the
petitioner would vehemently submit that the claims raised
under these bills are without any basis whatsoever and
these bills have been raised without following the
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Com AP 87/2024
procedure as required under clause V of the construction
agreement and the amounts are not supported by any
ledger statement and therefore the same could not have
been granted. The Learned Senior Counsel for the
petitioner would also submit that there was also a
residential project being constructed parallel with the
commercial project and the amounts payable under the
residential project has been mixed up with the commercial
project and further the amounts with respect to the
residential project was a non-arbitral issue and by
clubbing arbitrable and non-arbitrable issues the
impugned award is passed which is clearly in breach of
public policy.
11. Per contra the Learned Counsel appearing for the
respondent would vehemently submit that there is clear
bifurcation of both residential as well as commercial
project and the evidence has been adduced only with
respect to the commercial project and considering the
same the award has been passed. The Learned Counsel
for the respondent would submit that there is no clubbing
of arbitrable and non-arbitrable issues and in fact with
respect to the residential project a separate suit is filed in
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Com AP 87/2024
which the petitioner has not contested the proceedings
even though appeared through the Counsel and has
already suffered a decree and therefore there is no mix up
whatsoever as alleged in the award.
12. During the course of evidence before the Learned
Arbitrator the 5 R.A. bills have been tendered in
evidence and marked as Ex.C.3 to C.7. On perusal of
these R.A. bills all of them have been duly certified and
approved with necessary corrections by the architect M/s
Cruthi Consultants Consortium(P) Ltd. Director of M/s
Cruthi Consultants Consortium(P) Ltd has been examined
as P.W.2 before the Learned Arbitrator. To substantiate the
claims made in Ex.C.3 to C.7 the claimant has produced
the abstract sheets which are at Ex.C.18 to C.21. It is
contended by the petitioner that the abstract sheet
pertaining to the residential project could not have been
considered by the Learned Arbitrator. Though this Court is
not empowered to undertake re-appreciation of evidence
while deciding an application under Sec.34 of the Act
nevertheless on considering the abstract sheets at
Ex.C.18 to C.21 they are earmarked with respect to the
commercial projects undertaken by the claimant and they
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Com AP 87/2024
do not correspond to the residential project. The abstract
sheet corroborating the figures mentioned at raised under
the R.A. bills at Ex.C.3 to C.7 clearly substantiates the
amount due to be payable by the respondent. Though it is
contended that the bills were defective neither in the
course of evidence before the tribunal nor in the grounds
urged in the petition it is substantiated as to how or in
what manner the R.A. bills were defective. Also it is
contended that the R.A. bills raised were not as per the
procedure contemplated under clause V of the agreement.
Again the said contention is not substantiated as the R.A.
bills that are raised at Ex.C.3 to C.7 have been duly
certified by the architect as required under the said clause
and also by the manager of the respondent and there is
no violation of any terms of the clause that would render
the bills unacceptable and unreliable. The petitioner has
not been able to substantiate any ground to infer the bills
raised by the claimant were defective in nature and it
could not have been ordered.
13. It is also contended by the petitioner that the Learned
Arbitrator has attempted to rewrite the terms of the
contract. No doubt it is true that under the Arbitration the
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Com AP 87/2024
Arbitrator has to stick to the terms of the contract and
cannot go beyond the terms of the contract. In the case
on hand upon going through the entire material and also
on going through the award there are no circumstances
which would indicate that the Learned Arbitrator has
deviated from the terms of the contract. This is a claim
made with respect to amounts due under the R.A. bills
and the R.A. bills have been duly certified by the architect
and the manager of the respondent and after deducting
the amounts already paid for the balance claim the award
has been passed. In fact the in the entire award there was
no requirement of any interpretation to be given to the
terms of the contract. The R.A. bills submitted were in
accordance with the clause V of the construction
agreement which has been duly taken into consideration
and the award has been passed after deducting the
amounts that has been already paid.
14. Another argument that was put forth by the Leaned
Senior Counsel for the petitioner was that the Learned
Arbitrator has mixed up the arbitrable and non-arbitrable
issues. It is true that with respect to construction of the
residential house there was no provision for settlement of
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Com AP 87/2024
dispute by way of arbitration. On the other hand dispute
with respect to the commercial project was required to be
decided through arbitration. On perusal of the entire
award no where there is any evidence which discloses the
claims with respect to the commercial project and the
residential project being mixed up. In fact with respect to
the residential project there is already a suit filed and
decree is passed and in the said suit the present
petitioner though appeared has not contested the claim.
The claim that has been made with respect to the
residential project is totally different from the claims that
has been raised under the 5 R.A. bills at Ex.C.3 to C.7.
There is virtually no mix up of any arbitral or non-arbitral
issue as contended by the petitioner.
15. The Learned Senior Counsel for the petitioner
contended that the claimant has not produced any
evidence or the ledger statements with respect to the
amounts due under the running account bills adverse
inference needs to be drawn. In the course of evidence
before Learned Arbitrator the abstract sheets with respect
to R.A. bills at No.1 to 4 have been tendered in evidence
and marked as Ex.C18 to C.21. The abstract sheet does
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Com AP 87/2024
corroborate the claims made under the running account
bills. Moreover there is no dispute as regards to the bills
that are raised under Ex.C.3 to C.7. On the other hand
only dispute is that the bills are not certified as per the
procedure contemplated under clause V of the agreement.
The said contention has been negated as it is clearly
evident from the bills that they have been duly certified
by the architect and manger of the respondent. Also in
the cross examination of C.W. 1 and 2 nothing is elicited
to infer that the claims made under the bills are fictitious
or fabricated. Therefore under such circumstances non
production of the ledger statement substantiating the
claims does not entitle to draw any adverse inference
against the claimant.
16. The Leaned Senior Counsel for the petitioner in
support of the arguments with regard to drawing of
adverse inference has relied upon the following decisions.
1. (2012) 8 SCC 148, Union of Undia vs. Ibrahim
Uddin and another wherein it is observed as under:
F. Evidence Act, 1872 – S.114 III. (g) –
Adverse inference on withholding of material18
Com AP 87/2024evidence by a party – when can be drawn –
Relevant factors for consideration of court:
pleadings of parties, relevance of
documents/evidence withheld, whether
application for interrogatories/inspection and
production of documents, if any, made by
other party in terms of Or.11 CPC, whether
documents not produced despite court’s order
-All pros and cons required to be examined by
Court for deciding whether adverse inference
could be drawn.
2. (2004) 8 SCC 195, Municipal Corporation,
Faridabad vs. Siri Niwas wherein at para 15 it is
observed as under:
Para 15: A Court of Law even in a case where
provisions of the Indian Evidence Act apply,
may presume or may not presume that if a
party despite possession of the best evidence
had not produced the same, it would have
gone against his contentions. The matter,
however, would be different where despite
direction by a court the evidence is withheld.
Presumption as to adverse inference for non-
production of evidence is always optional and
one of the factors which is required to be
taken into consideration in the background of
facts involved in the lis. The presumption,
thus, is not obligatory because
notwithstanding the intentional non-
production, other circumstances may exist19
Com AP 87/2024upon which such intentional non-production
may be found to be justifiable on some
reasonable grounds.
3. 1998 SCC Online Kar 434, N.T. Vijayakumar and
others vs. The Allahabad Bank, Nehru Road Branch,
Shimoga wherein at para 6 it is observed as under:
Para 6: It is one of the well settled principles
of law of evidence that a person who comes to
claim relief the Court with a specific case, he
has to rest and stand on his own legs and not
on the weakness of defendant’s case. Even if
the defendants had not led any evidence,
burden did lie on the plaintiff to prove the
transaction of loan and the alleged agreement
to pay 13% interest as well as failure of the
defendants to repay that amount or
repayment of debt amount.
17. I have gone through the above cited decisions and the
facts and circumstances enumerated in the above cited
decisions are different from the facts of the case on hand
and therefore the observations made therein are not
applicable to the given facts and circumstances of the
case.
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Com AP 87/2024
18. Per contra the Learned Counsel for the respondent
has relied upon the following decisions.
1. (2013) 2 SCC 606, Gian Chand and brothers and
another vs. Rattan Lal ailas Rattan Singh, where in at
para 18 of the judgment it has been observed as under:
Para 18: It is well settled principle of law that
a person who asserts a particular fact is
required to affirmatively establish it. In Anil
Rishi v. Gurbaksh Singh, it has been held that
the burden of proving the facts rests on the
party who substantially asserts the affirmative
issues and not the party who denies it and the
said principle may not be universal in its
application and there may be an exception
thereto.
2. AIR 1968 SC 1413, Gopal Krishnaji Ketkar vs.
Mohamed Haji Latif and others, where in it has been
observed that adverse inference has to be drawn against
a party where in best evidence is withheld.
3. (1999) 3 SCC 573, Vidhyadhar vs. Manikrao and
another, where in at para 17 of the judgment it has
been observed as under:
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Com AP 87/2024
Para 17; Where a party to the suit does not
appear into the witness box and states his
own case on oath and does not offer himself
to be cross examined by the other side, a
presumption would arise that the case set up
by him is not correct
19. The observation made in the above cited decisions are
applicable to the facts and circumstances of the case on
hand. The respondent though contends that the bills are
defective in nature and is against clause V of the
construction agreement no where it has substantiated the
same as to how the bills are rendered defective and
cannot be sustained.
20. The Learned Counsel for the respondent in the course
of argument contended that the grounds on which the
petitioner is seeking setting aside of the award is more in
the nature of an appeal which cannot be permitted as the
scope of inference in an award of the arbitrator is very
much narrow and restricted. In support of his arguments
he has relied upon the following decisions.
1. (2015) 3 SCC 49, Associate Builders vs. Delhi
Development Authority.
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Com AP 87/2024
2. (2019) 15 SCC 131, Ssangyong Engineering and
construction company limited vs. National Highways
Authority of India(NHAI)
4. (2022) 4 SCC 116, UHL Power Company Limited
v. State of Himachal Pradesh
21. I have gone through the above cited decisions
wherein it has been observed by the Hon’ble Apex Court
that in a challenge to the award under Sec.34 the
jurisdiction of the Court is fairly narrow and re
appreciation of the evidence is impermissible. It has been
observed that judicial interference with the arbitral award
is strictly evident to the grounds mentioned in Sec.34 of
the Act and only when such grounds exists Court can
interfere. It has been observed that and award is said to
be in violation of public policy of India if it is not in
compliance with statues, Judicial precedents, natural
justice and a judicial approach. It is observed that the
award is said to be patently illegal when the arbitrator
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Com AP 87/2024
ignores the evidence on records and arise at a conclusion
which is not plausible for a reasonable person. In the
present case as rightly contended by the Learned Counsel
for respondent the grounds urged is virtually requiring
this Court to re appreciating the evidence which is not
permissible under Sec.34 of the Act. Also it is contended
that the R.A. bills are not in accordance with the
procedure contained under clause V of the agreement.
With respect to the same Learned Arbitrator has duly
interpreted clause V and has concluded hat the R.A. bills
are in accordance with said clause of the agreement.
Having already interpreted the clause in a particular
manner, merely because there can be another
interpretation to it the award cannot be said aside which
is what has been observed by the Apex Court in the
Associated Builders case referred supra. Hence for the
above said reasons the impugned award under challenge
is neither opposed to public policy nor suffers from any
patent illegality appearing on the face of it requiring this
Court to set aside the same. Accordingly, I answer Point
Nos.1 and 2 in the Negative.
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Com AP 87/2024
22. POINT NO.3:- For the aforesaid reasons, I proceed
to pass the following.
ORDER
Application filed by the applicant under
Sec.34 of Arbitration and Conciliation Act
1996 is dismissed with costs.
Office is directed to send back the
original records to the Arbitration and
Conciliation Centre Bengaluru.
(Dictated to the Stenographer Grade-III, transcribed by
her, corrected and then pronounced by me in open court
on this the 6th day of January, 2025)
Digitally signed by
ARJUN ARJUN SRINATH
SRINATH MALLUR
Date: 2025.01.07
MALLUR 17:18:55 +0530
(ARJUN. S. MALLUR)
LXXXV Addl.City Civil & Sessions Judge,
Bengaluru.
25