ORDER OF THE COURT:
With the consent of both sides the matter has been taken up for disposal pursuant to an earlier direction of this Court. Heard Sri A.Ramalingeswara Rao, learned counsel for the appellant, and Sri D.Prakash Reddy, learned senior counsel for respondents 1 and 2.
2. Appellant in this appeal is the petitioner in A.O.P.No.35 of 2008, an application filed under Section 34 of the Arbitration and Conciliation Act, 1996 (for short Act) to set aside the award dated 28.08.2007 passed by the third respondent (arbitrator) against him. The Court of IV Additional District Judge, Visakhapatnam (trial court) by its order dated 31.05.2011 dismissed that AOP. Aggrieved, this appeal (CMA) under Section 37(1)(b) of the Act is filed.
3. The appellant is admittedly the vendor under the agreement of sale dated 28.06.2004 which he executed in favour of respondents 1 and 2 (referred to as purchasers). Under the said agreement, he agreed to sell a site of 4000 sq. yards out of Ac.1-00 and 453.66 sq. yards (more fully described in the schedule to the said agreement) to the purchasers. The total sale consideration mentioned in the agreement was Rs.1,35,00,000/-. The purchasers admittedly paid Rs.15,10,116/- to the appellant by the date of the agreement and agreed to pay the balance sale consideration subject to the terms and conditions mentioned therein. That agreement contained an arbitration clause, i.e. clause 17. The named arbitrator is one Sri K.V.Rama Murthy (for short Mr.Murthy), an advocate of Visakhapatnam and the said clause also empowered him in case he is unable to adjudicate the disputes, to appoint another in his place for that purpose. The place of arbitration is Visakhapatnam.
4. The recitals in the agreement disclose that the appellant earlier filed O.S.No.397 of 1988 before the court of II Additional Senior Civil Judge, Visakhapatnam, in respect of the property in question against the Visakhapatnam Urban Development Authority (VUDA) and Waltair Club due to some dispute. That suit was decreed. Both the defendants preferred appeals A.S.No.118 of 1998 and A.S.No.227 of 1998 before the concerned appellate court questioning the said decree. The agreement reads that irrespective of the result of the above appeals the purchasers agree to buy the property in question. The conditions relating to the period within which the balance sale consideration was to be paid varied depending upon the result of the appeals and there were also other conditions which we will refer to later. We are told that both the above appeals were dismissed and second appeals filed by the aggrieved parties are now pending in this court. All these aspects are admitted.
5. Disputes having arisen between them under the present agreement, the purchasers invoked the arbitration clause and ultimately the award dated 31.12.2005 came to be passed in their favour by the third respondent-arbitrator who was nominated by Mr.Murthy for adjudicating the dispute. Under the said award, the third respondent granted the relief of specific performance of the agreement by fixing the terms. The third respondent decided the matter on the basis of eleven (11) documents filed by the purchasers which were marked as Exs.C.1 to C.11 by him. The purchasers and the appellant did not lead any oral evidence. The appellant did not file any documents either. The appellant has a complaint that the third respondent did not give him reasonable opportunity and we will consider this aspect under the relevant point. There is no dispute as will presently be seen, about the material documents filed by the purchasers. The appellant, having been unsuccessful in challenging the award before the trial court, is now before us for the same relief.
6. Sri Ramalingeswara Rao urged several points for reversing the decision of the trial court and setting aside the award. We will refer to the said points in the course of this judgment. Sri Prakash Reddy repelled all the points and argued that the third respondent had considered all these aspects and held against the appellant by a well considered award and the trial court did not thus commit any error. He relied upon Section 34 of the Act regarding the scope for judicial intervention in arbitration matters and argued that there are no grounds to disturb the award which has been confirmed by the trial court. As the matter was argued in detail by both sides on the material documents marked before the arbitrator on the several points raised, an elaborate order has become necessary.
7. Before we take up the points, it is necessary to look at Sections 5 and 34 of the Act as they lay down the scope for judicial intervention in arbitration matters. Section 5 which speaks of the extent of judicial intervention, in substance enjoins that no judicial authority shall intervene or interfere with an award except as provided under the Act. Section 34 specifies the conditions and grounds on which a court may intervene and set aside an award. Sub-section 3 of Section 34 prescribes the period of limitation for making an application for setting aside the award. Sub-section 2 of Section 34 specifies the grounds on which a court may set aside the award. It is not necessary to reproduce these provisions.
8. In McDermott International Inc. v. Burn Standard Co. Ltd. ((2006) 11 SCC 181)the Apex Court observed that the Act provides for a supervisory role of the courts to review an arbitral award only to ensure fairness; intervention of the court is envisaged in limited circumstances like in case of fraud or bias by the arbitrator; violation of principles of natural justice; the court cannot correct errors of the arbitrators; it can only quash the award leaving the parties free to begin the arbitration again if it is desired; and the scheme of the Act is to keep the supervisory role of the court at the minimum level. This limited role for the courts is founded on the principle that the parties to the agreement have made a conscious decision to exclude the court’s jurisdiction by opting for arbitration as they have preferred the expediency and the finality offered by the process. From the above legal formulation it follows that an award cannot normally be set aside on grounds other than those enumerated in Section 34(2).
9. However with regard to the scope of intervention on the merits of the matter and the correctness or otherwise of the decision of the arbitrator, the Apex Court in Kwality Manufacturing Corporation v. Central Warehousing Corporation (2009) 5 SCC 142 )held that a court under Section 34 of the Act cannot sit as an appellate body over the findings of the arbitrator if they are found to be reasonable. In O.N.G.C. Ltd v. Garware Shipping Corpn. Ltd. (AIR 2008 SC 456)the Court held that an award can be interfered with if it is found that it has been made without any material on record and merely on the basis of conjectures. Thus, having regard to the scope of judicial intervention prescribed by the Act and the above pronouncements of the Apex Court on the issue, we will now proceed to decide each point.
Point No.1: -- Bias
10. The first point raised by Sri Ramalingeswara Rao is that Mr.Murthy was biased against the appellant and that the third respondent who passed the award was nominated by him and therefore both must be held disqualified on the ground of bias and award set aside. He says that the trial court ignored this aspect completely and committed a serious error. The appellant by an application before the third respondent challenged the authority of Mr.Murthy and of the third respondent, on the ground of bias. The latter however by his order dated 31.12.2005 dismissed that application which was within his power. Aggrieved by the same, the appellant filed C.R.P.No.855 of 2006 in this court. That was dismissed on 21.02.2006 giving liberty to the appellant to raise the ground of bias in the application under Section 34 of the Act. Section 13(5) also enables a party who has been unsuccessful in challenging the authority of an arbitrator on the ground of bias to raise that objection again in an application under Section 34. Hence we entertained this objection now.
11. The normative position pertaining to independence of an arbitral tribunal has been crisply and admirably stated by RUSSEL ON ARBITRATION, 20th Ed. (1982), p. 110, thus:
There is universal agreement amongst jurists of all countries that it is of the first importance that judicial tribunals should be honest, impartial and disinterested. This rule applies in full force to arbitral tribunals, subject only to this exception, that the parties who are free to choose their own tribunal may, provided they act with full knowledge, choose dishonest, partial or interested arbitrators (though this exception in its turn is subject to a statutory exception which gives parties who have so chosen a locus poenitentiae in certain circumstances). But apart from this exception, arbitrators who are in all other respects suitably qualified are disqualified by dishonesty, partiality or interest.
12. The reasons on which an arbitrator can be said to be disqualified are also in substance stated to be dishonesty, partiality or interest and they are briefly indicated to be justifiable doubts about independence and impartiality of the arbitrator in Section 12 of the Act which reads as follows.
“12.Grounds for challenge.- (1) When a person is approached in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances likely to give rise to justifiable doubts as to his independence or impartiality.
(2) An arbitrator, from the time of his appointment and throughout the arbitral proceedings, shall, without delay, disclose to the parties in writing any circumstances referred to in sub-section (1) unless they have already been informed of them by him.
(3) An arbitrator may be challenged only if-
(a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality, or
(b) he does not possess the qualifications agreed to by the parties.
(4) A party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment has been made.”
13. Section 12 says that an arbitrator can be disqualified on two grounds. The first is existence of circumstances that give rise to “justifiable doubts as to his independence or impartiality” and the second is “non-possession of qualifications agreed to by the parties”. So far as the second ground is concerned, it is not the case of the appellant that either Mr.Murthy or the third respondent does not possess the required qualification to adjudicate the dispute. What has therefore to be considered is whether the appellant is able to establish the first ground. For the purpose of examining this aspect, having regard to the pleadings of the appellant, it is not necessary to consider the scope of sub-sections 1, 2 and 4 of Section 12. We therefore proceed to examine the allegations of bias made against Mr.Murthy having regard to Section 12(3).
14. The appellant made allegations of bias against Mr.Murthy for the first time in his reply dated 04.05.2005 (marked as Ex.C.3) which he sent to the purchasers' letter dated 28.04.2005 (marked as Ex.C.2) calling upon him to get ready for completing the sale transaction. Both these documents are admitted and were marked before the arbitrator. It would be better to set out the allegations made in Ex.C.3 and they read as follows.
“During the pendency of the said appeals, one Sri K.V.Ram Murthy, Advocate, negotiated with our client on behalf of you and persuaded our client to enter into a transaction with you in respect of 4000 sq. yards of land described above. The transaction was completed within few hours without allowing our client to think over the matter. Sri K.V.Ram Murthy, Advocate, representing and mediating on behalf of you, compelled our client to sign on the agreement drafted by him. Out client signed on the said agreement. On the same day, the amounts stated in your letter were paid.”
15. The purchasers sent a rejoinder dated 28.05.2005 (office copy of which is marked as Ex.C.8) tothe above reply of the appellant. In that rejoinder, after denying that Mr.Murthy negotiated on their behalf and the allegations against Mr.Murthy, the purchasers stated as follows (relevant portions are extracted).
“It is your client who brought Mr. Rama Murthy’s name into picture as your client has immense belief in him. Your client himself expressed that Mr. Rama Murthy was looking after personal cases of his and that he was very much impressed by his amazing grasp, clarity of thought, clear expression and instantaneous rejection of all that is not vital and since he is not known to be interested in real estate affairs. Under those circumstances, your client as well as our client approached him to intimate about our choice of his candidature as arbitral Tribunal in the event of any dispute, if any, in future.”
“Your client is very much aware that Sri K.V.Rama Murthy is a neutral, unbiased and impartial arbitrator appointed by our client and your client under the agreement dated 28/06/2004.”
“Your client has also ventured to mention that the transaction was completed without allowing your client to think over the matter and that Sri K.V. Rama Murthy stated to be representing and mediating on our client’s behalf compelled your client to sign on the agreement drafted by him. Once again your client has ventured to malign Sri K.V.Rama Murthy. Our client’s hereby denies the allegation that Sri K.V.Rama Murthy negotiated and compelled your client to sign. In the execution of the agreement, be and compelled your client to sign. In the execution of the agreement, be it inception, preparation or completion, Sri K.V.Rama Murthy had no role to play. Our client asserts that he was a neutral person and that was the reason he was chosen as an arbitrator. ”
16. The averments in the purchasers' rejoinder dated 28.05.2005 are self-explanatory. They show that it was the appellant himself who suggested the name of Mr.Murthy because of his professional ability as a lawyer and his known disinterestedness in real estate affairs and he now made allegations against Mr.Murthy only to wriggle out of the present agreement. This has not been denied by the appellant by a further notice or reply. It is not the version of the appellant that the land value was higher than Rs.1.35 crores on the date of the agreement and Mr.Murthy exercised any undue influence on him or coerced him to sell it at a lower price to benefit the purchasers and also for his own gain. It is also not his case that Mr.Murthy appeared in any case for the purchasers previously and was acting in concert with them in property matters or has developed any interest in the present disputed land to favour the purchasers; or was otherwise interested in the transaction.
17. It is not possible to visualise various circumstances or situations and codify them for universal application to itemise the type of situations or circumstances which would give rise to a justifiable doubt about the independence or impartiality of an arbitrator in all cases. That aspect has to be decided on the facts and circumstances of each case. For example, when an advocate is appointed as an arbitrator in a case like this, one may infer a reasonable doubt about the independence or impartiality of such advocate where it is shown that the advocate was regularly appearing for one of the parties and was always patronised by such party; or he or his close relative like a son, daughter or son-in-law are indebted to such party in one way or the other; or the said advocate and the party are indulging in any champertous litigation; or such advocate was interested in ensuring that the property goes to the party in whose favour he is disposed or has some interest in the property in question covered by the agreement.
18. The above are some of the illustrations but they are not exhaustive and their application to a given case has to be decided on pleadings and evidence and at times it may also be necessary to look into the provisions under the Advocates’ Act, 1961 and the various rules framed thereunder governing the conduct of advocates when an advocate is chosen as arbitrator. It is for this reason that Section 12 is enacted by using the words “justifiable doubts about independence or impartiality of an arbitrator” leaving the application of the said provision for being determined on the facts and circumstances of each case.
19. As already mentioned, the appellant except making the above allegations, which are bald, against Mr.Murthy has not been able to substantiate the same. On the other hand he has not denied the purchasers’ version that Mr.Murthy was appearing in his (appellant) cases earlier and it was he who brought him into picture as arbitrator because of his professional ability. This being the position, we are of the opinion that the appellant failed to establish any of the circumstances which give rise to justifiable doubts about the integrity and impartiality of Mr.Murthy. Despite sufficient opportunity given by the third respondent-arbitrator, the appellant could not place before him either documentary or oral evidence to impeach the independence or impartiality of Mr.Murthy. The appellant has not been able to establish any circumstance even against the third respondent arbitrator except saying that since the third respondent was appointed by Mr.Murthy, he must also be held to be disqualified. The arbitrator and the trial court went into this aspect and held against the appellant and we discern no compelling reason to disagree with them.
20. Sri Ramalingeswara Rao relied upon BiharStateMineral Dev. Corpn. vs. Encon Builders (I) Pvt. Ltd. (AIR 2003 SC 3688)in support of his contention. That was a case where the Court found that the employee-officer of the party to the agreement who was named as arbitrator in that case could be said to be interested in securing termination of the contract and therefore was disqualified. That is not the case here. On the other hand, in Indian Oil Corporation Ltd. vs. Raja Transport (P) Ltd. ((2009) 8 SCC 520),it was held by the Apex Court that even in relation to an arbitration clause enabling reference of disputes to an officer or employee of a party an automatic inference of vitiating bias is not to be presumed. It has been held that unless bias or interestedness is established, a mere suspicion or apprehension cannot be a ground for intervention. That proposition applies here.
21. Sri Ramalingeswara Rao also relied upon the principle relating to apprehension of official bias as applied to authorities taking administrative decisions. The Kerala High Court in Impex Corporation vs. Elenjikal Aquamarine Exports Ltd. (2008) 2 Ker LT 822)and the Bombay High Court in Oil and Natural Gas Corporation Ltd. vs. Sumitomo Heavy Industries Ltd. (2000) 4 RAJ 339 (Bom))reiterate a principle established in administrative law that mere suspicion of bias without any material or substance is not a ground to set aside an award. Thus these decisions also cannot help the appellant.
22. The appellant also pleaded that the third respondent belongs to Hyderabad, and though many competent people are available at Visakhapatnam the act of Mr.Murthy in choosing the third respondent itself shows that he acted to help the purchasers. The arbitration clause does not contain any restriction that in case Mr.Murthy for any reason is unable to adjudicate the disputes, he should nominate another who is a resident of Visakhapatnam. Both the parties have freely chosen to accord Mr.Murthy such authority without placing any restriction on it. In these circumstances this plea of the appellant cannot be accepted. Sri Ramalingeswara Rao also pointed out that the third respondent did not give reasonable opportunity to the appellant because of the above bias. So far as bias aspect is concerned, we are unable to accept the plea of the appellant. However the plea of want of reasonable opportunity to the appellant by the third respondent is by itself a separate ground for interference under Section 34 of the Act and we will consider it under that point.
23. The object of the Act is to provide a speedier alternative dispute resolution system and once the parties choose their arbitrator, arbitration proceedings cannot be interfered with on the mere suspicion or doubt of one of the parties about the independence or impartiality of the arbitrator. If the courts interfere on mere suspicions or doubts that would only result in frustrating the very object of the Act. For the aforesaid reasons, we decide this point against the appellant.
Point No.2: (Authority of the third respondent?)
24. The second point raised by Sri Ramalingeswara Rao is that on receiving the initial letter dated 30.06.2005 (a fact not in dispute) setting out the disputes and inviting Mr.Murthy to adjudicate the same, he must be held to have entered upon reference and therefore had no authority to appoint the third respondent to adjudicate the disputes.
25. In the impugned award, the third respondent mentioned that Mr. Murthy through his letter dated 25.07.2005 requested him to adjudicate the disputes between the parties. He has also extracted portions of the said letter of Mr. Murthy which suggests that Mr.Murthy had recused himself, perhaps in view of the allegations made against him by the appellant, and appointed the third respondent. This recital in the award would suggest that Mr.Murthy received the initial claim statement dated 30.06.2005 of the purchasers sometime before 25.07.2005 and this claim letter of purchasers may have also been received by the appellant.
26. Clause 17 of the agreement (arbitration clause) says once a dispute is referred to Mr. Murthy, he may himself adjudicate it or appoint another to resolve the disputes. Section 21 of the Act recognizes the terms of the agreement under which even after receiving the claim statement (a copy of which may be marked to the opposite party), Mr.Murthy inheres the authority to appoint another to adjudicate the disputes. In fact it is not necessary for us to decide the question whether an arbitrator upon entering reference can exercise the authority to nominate another as arbitrator. Having regard to the terms of the arbitration clause and for the aforesaid reasons we answer this point also against the appellant.
Point No.3: (Denial of reasonable opportunity to appellant)
27. The third point raised is that the third respondent in substance passed an ex parte award without affording reasonable opportunity to appellant and therefore it is bad. This is a ground for interference, if proved, under Section 34(2)(iii) of the Act. The trial court negatived it. Sri Prakash Reddy on the other hand relying upon the diary of the proceedings of the third respondent argued that the appellant was given more than reasonable opportunity and having failed to avail the same he cannot complain now. This aspect was also elaborately argued by both sides.
28. Sections 24 and 25 falling in Chapter V of the Act are relevant to this point. These provisions which are found in the Act were not there in the Arbitration Act of 1940 (old Act) and are intended to emphasise fair procedure.
29. Section 24 deals with hearings and proceedings before an arbitrator and it speaks of giving of sufficient advance notices of proceedings to parties and fair procedure. Equally Section 25 speaks of the consequences if a party fails to avail the said opportunity and Section 25(c) specifically lays down that if a party fails to appear at an oral hearing or to produce documentary evidence, the arbitrator may continue the proceedings and pass the award on the evidence before him.
30. Thus what should be noted is that while Sections 24 and 25 enjoin the arbitrator to adhere to fair procedure in conducting the proceedings, Section 25(c) empowers him toproceed and pass in substance even an ex parte award if the party fails to avail the reasonable opportunity given to him. The above procedural provisions it is clear, are enacted to ensure that arbitral proceedings do not get stalled because of the uncooperative attitude of a party. Having regard to the above provisions, this point has to be decided.
31. Both sides filed a copy of the “diary of proceedings and events” (diary) of the arbitrator in support of their respective contentions. The diary shows that one Sri T.V.S.Kanaka Raju and Sri V.Satish, Advocates filed vakalat on 03.09.2005 on behalf of the purchasers while Sri T.Narsing Rao and Sri S.S.Vasu, Advocates filed vakalat for the appellant on 13.10.2005 before the arbitrator. Thus both parties were represented by counsel before the arbitrator.
32. The appellant, at the initial stage, unsuccessfully challenged the authority of the arbitrator before the arbitrator himself and his C.R.P.No.855 of 2006 on the same issue was dismissed by this court on 21.02.2006. The purchasers admittedly filed their claim statement along with their documents within the time prescribed by the arbitrator. The diary shows that the arbitrator has held thirteen sittings from 02.08.2005 till 14.04.2007 i.e. nearly for twenty months. The proceedings were adjourned several times at the request of appellant’s counsel or the appellant. The arbitrator ultimately reserved the matter for award on 14.04.2007 and passed the award on 20.08.2007. All these facts are borne out from the diary.
33. What transpired on various dates during the course of thirteen sittings are recorded by the third respondent in his diary. This diary is maintained like a docket sheet of the trial court is maintained in a suit showing the progress of the case as required by the Civil Rules of Practice in the State of Andhra Pradesh. The notings in the diary regarding the progress made in the arbitration proceedings reveal eloquently speak the attitude of the appellant.
34. Sri Ramalingeswara Rao’s argument is that as the appellant and his counsel did not appear before the arbitrator on 31.03.2007, the arbitrator ought to have given a pre-emptory notice to the appellant that he would proceed ex parte on the future dates and since the arbitrator did not issue such a notice, the award should be set aside on the ground that it was passed without giving reasonable opportunity to the appellant. Having regard to what transpired on 31.03.2007, 14.04.2007 and on 20.08.2007 (date of the award) as recorded in the diary it can be said that the arbitrator has proceeded ex parte and passed the award. In support of the above contention Sri Ramalingeswara Rao relied upon two decisions, one of High Court of Delhi in M/s. Lovely Benefit Chit Fund and Finance Pvt. Ltd. vs. Puran Dutt Sood (AIR 1983 DELHI 413(1))and the other of the High Court of Calcutta in Lohia Jute Press P. Ltd. vs. The New India Assurance Co. Ltd (AIR 1988 CALCUTTA 174). In both the above decisions a proposition was, inter alia, laid down that a pre-emptory notice was necessary before passing an ex parte award.
35. Now coming to the question whether or not appellant was given reasonable opportunity, as already mentioned, two advocates namely Sri Narsing Rao and Sri S.S.Vasu filed vakalat for him before the arbitrator on 13.10.2005 and they were appearing on various dates before the arbitrator. The diary shows that from 04.03.2006 the counsel for the appellant or the appellant himself went on seeking adjournments and they had notice of each and every date of hearing from the arbitrator.
36. The diary discloses that on 24.03.2007 at last the appellant’s counsel Sri S.S.Vasu filed the counter or defence statement of the appellant and at his request the arbitrator posted the matter to 31.03.2007 giving a final opportunity to the appellant and the appellant’s counsel was informed of the same. The appellant or his counsel appear neither on 31.03.2007 nor on 14.04.2007. The diary of arbitrator notes on 14.04.2007 also the arbitrator tried to contact appellant’s advocate by phone but he did not respond. It should also be noted that arbitration proceedings were throughout held at Visakhapatnam, the agreed place for arbitration. The venue throughout has been YMCA Tourist Hotel, Beach Road, Visakhapatnam, and both sides knew the same. It has not been changed by the arbitrator except on one occasion i.e. on 06.01.2007 and on that day the venue was Hotel Palm Beach, Beach Road, Visakhapatnam, as no rooms were available on that date at the YMCA Tourist Hotel.
37. From the diary of the arbitrator it is clear that the appellant or his counsel never took steps required of them from 04.03.2006 onwards (which was the date of the proceedings after the dismissal of the appellant’s CRP No.855 of 2006), in filing the appellant’s defence statement and taking the proceedings to their logical conclusion. Nearly after one year from 04.03.2006 the appellant’s counsel Sri S.S.Vasu filed the defence statement of the appellant on 24.03.2007 and again sought time for filing documents and he knew about the next date of hearing which is 31.03.2007. On the said date, neither the counsel for appellant nor the appellant appeared before the arbitrator though venue was not changed and they also did not appear on 14.04.2007. This attitude of the appellant’s counsel and the appellant would only show that they did not cooperate with the arbitrator despite the order in the CRP No.855 of 2006 directing the appellant to participate in the arbitration proceedings.
38. The above attitude of the appellant and his counsel establishes that they were throughout at fault, right from 04.03.2006. Now the appellant complains that the arbitrator should have given a pre-emptory notice on 31.03.2007 despite the fact that the appellant’s counsel knew about the said date which was fixed on 24.03.2007 and peremptorily. The above defaulting attitude of the appellant consistently since 04.03.2006 would show that the appellant’s complaint regarding a pre-emptory notice does not stand to reason. In our view, it is precisely to remedy such a mischief on the part of a party that Section 25 (which was not there in the old Act) was enacted in the Act. Section 25(c) of the Act clearly reads that unless otherwise agreed by the party, where without showing sufficient cause, a party fails to appear at an oral hearing or to produce documentary evidence, the arbitral tribunal may continue the proceedings and make the arbitral award on the evidence before it. There is no clause in the arbitration agreement which is contrary to Section 25(c).
39. The arbitration clause in the agreement of sale does not say that arbitrator has to give a separate notice for each and every date of hearing and should not pass an ex parte award. Then with regard to sufficient cause, even in the application filed before the trial court under Section 34 of the Act the appellant did not plead anything about the cause that prevented his counsel or himself from appearing before the arbitrator on 31.03.2007 even though his counsel had notice of the said date on 24.03.2007 itself and even for absence on subsequent dates. Even in the grounds of appeal the appellant did not plead any justification or cause for his absence or for the absence of his counsel on 31.03.2007 or on subsequent dates.
40. Having engaged a counsel to represent him before the arbitrator, the appellant should have suitably instructed him to pursue the matter on every date of hearing. It was the duty of the appellant’s counsel in a case like this to appear on each and every date of hearing as he had notice of the same or else he should have reported no instructions in which case alone the arbitrator could be saddled with the duty of issuing of a fresh notice to the appellant i.e. a party about the date of the next hearing. The appellant did not complain any thing against his counsel. We are constrained to observe that the circumstances in this case would show that the appellant right from 04.03.2006 onwards, to say the least, exhibited a wholly indifferent attitude to the arbitration proceedings, having agreed for arbitration in the agreement. The circumstances of this case would establish that having regard to the consistent defaulting attitude of the appellant and the fact that the proceedings went on for two years before the arbitrator, the arbitrator had no other choice but to act in the manner he did. This is consistent with Section 25(c) of the Act.
41. The learned counsel for the appellant could not cite any authority or any provision in the Act to show that despite the obstructive conduct of the appellant, he is nevertheless entitled to a pre-emptory notice on 31.03.2007 from the arbitrator to proceed ex parte. It should be noted that Section 25(c) of the Act is intended to take care of a situation like this and it empowers the arbitrator even to proceed ex parte. Both the decisions cited by Sri Ramalingeswara Rao which were given under the old Act i.e. Arbitration Act, 1940, laid down the proposition relating to requirement of pre-emptory notice on the facts and circumstances of those cases which disclosed that arbitrators therein did not adopt a fair procedure even otherwise. They are distinguishable on facts. In the present case, the diary of the arbitrator shows that he consistently adopted a fair procedure and gave ample and reasonable opportunity to the appellant which he failed to avail.
42. It should also be noted that the arbitrator proceeded to decide the matter considering Ex.C.1 certified photocopy of agreement of sale, Ex.C.2 first notice of purchasers, Ex.C.3 reply of the appellant and Ex.C.8 rejoinder of the purchasers. Apart from the above documents, Ex.C.11 certificate issued by the concerned bank manager showing purchase of bank drafts worth Rs.40 lakhs in the name of appellant was considered by him. The rest of the documents are postal acknowledgements, acknowledgements and certificates from the postal authorities and the office copy of a letter addressed to Mr.Murthy by the purchasers for initially requesting him to adjudicate the disputes. These are not material documents. Thus the arbitrator did not give the award on any new material which was not to the notice of the appellant and which took him by surprise or caused prejudice to his case. For the aforesaid reasons, we answer this point as well against the appellant.
Point No.4: (Material alterations in the agreement)
43. This point relates to material alterations in the agreement, alleged by the appellant. The appellant’s version is that the original agreement did not contain any stipulation or pre-condition that the appellant should obtain permission under the Urban Land Ceiling Act, 1986 (ULC Act), and such clause was deliberately introduced by way of alteration in the agreement by the purchasers with the help of Mr.Murthy to cover up their default in not paying the balance sale consideration in terms of clause 2 of the agreement. On the other hand, the version of purchasers is that the above pre-condition relating to ULC Act permission was there initially in the agreement itself, was an essential condition and there was no alteration.
44. We have summoned the original agreement of sale dated 28.06.2004 from the trial court which was earlier filed in connection with another O.P. i.e. A.O.P.No.841 of 2005 on the file of the I Additional District Judge, Visakhapatnam. It was represented that the said O.P.No.841 of 2005 was filed by the purchasers in connection with reliefs under Section 9 of the Act. The said original agreement and Ex.C.1 certified photocopy of the same tally.
45. It may be noted that tampering with an agreement or a contract by materially altering it with respect to essential conditions to the prejudice of a party not consenting for the same would make the agreement void against such party under Indian law. It therefore follows that obtaining relief on such a document even in an award under the Act may make the award as one in conflict with the public policy of India, subject of-course to the proof of such alteration. However a finding on material alterations in a document still remains a finding on fact. Both the arbitrator and the trial court concluded that the appellant’s plea in this behalf cannot be accepted.
46. The version of the appellant is that clauses 2, 3 and 7 of the agreement were altered by introducing the pre-condition relating to obtaining of permission by the appellant under the ULC Act. This plea was taken by the appellant in the counter before the arbitrator and also in his application under Section 34 of the Act. It would be better to set out the said clauses 2, 3 and 7 in the original agreement showing in bold, the “sentences” which are alleged to have been interpolated by way of alterations.
2. That upon the seller securing judgment in his favour and against the appellants, the PURCHASERS shall pay the balance of Rs.1,19,89,884/- (Rupees one crore nineteen lakhs eighty nine thousand eight hundred eight four only) consideration within 10 (ten) days the SELLER furnishing the Certified copy of the Judgement in A.S.Nos.118/98 and 227/98, on the file of the Hon’ble 1st Additional District and Sessions Judge’s Court, Visakhapatnam, subject to production of ULC clearance.
3. That the PURCHASERS shall pay the balance consideration within 180 (one hundred and eighty) days from the date of SELLER furnishing certified copyof the Judgement in A.S.Nos.118/98 and 227/98, on the file of Hon’ble 1st Additional District and Sessions Judges Court, Visakhapatnam, even if the said court reverses the findings and judgement in O.S.No.397/88, decreed by Hon’ble 2nd Additional Senior Civil Judge’s Court, Visakhapatnam. Subject ofcourse, to production of ULC clearance.
7. That the PURCHASERS shall bear the expenses for obtaining required permissions from the Urban Land Ceiling Authority, Visakhapatnam, so as to execute the Sale Deed/s or Agreement of Sale coupled with Power of Attorney in favour of the PURCHASERS or their Nominees. Fees shall be paid by the seller only.
47. The contention of Sri Ramalingeswara Rao is that the above sentences cannot be treated as part of the agreement as originally drafted having regard to the context, language, wording and conditions in the above clauses. He also strained to point out that the above sentences are contrary to the homogenous construction of the agreement and therefore must be inferred to be alterations. The said contention does not commend acceptance for the following reasons.
48. It may firstly be noted that the purchasers’ in their Ex.C.2 notice dated 28.04.2005 mentioned about the appellant’s obligation to obtain ULC clearance certificate. However, in his Ex.C.3 reply dated 04.05.2005 the appellant did not allege any material alterations in the agreement regarding that ULC clearance. In his said reply the appellant’s version regarding ULC clearance is as follows.
“You are trying to blow hot and cold by stating that you have no knowledge of the disposal of the appeals on the one hand and on the other hand that there were sittings in respect of the capital gains, ULC, etc. Further, our client obtaining the ULC clearance also do not arise as the agreement stand extinguished even on 16.10.2004. However, without prejudice to the same, our client need not apply for the ULC clearance certificate, as you have not made arrangement for the expenses required for the purpose of obtaining the ULC certificates in terms of the agreement.”
49. The above reply of the appellant does not show that the appellant had alleged the material alterations regarding ULC clearance now pleaded by him. On the other hand, the reply would show that since the purchasers did not pay the balance sale consideration in terms of clause 2 of the agreement, it stood cancelled by 16.10.2004 and therefore he was under no obligation to get that clearance. The reply also shows that the appellant pleaded a second ground which is to the effect that since purchasers have not made arrangements for payment of expenses required for obtaining the ULC clearance, he is under no obligation to apply for the same. Thus, the appellant’s reply itself would suggest that he was aware about the existence of his obligation to obtain ULC clearance under the agreement as it was entered into but he was trying to avoid that obligation on the above grounds.
50. Secondly, on the date of the agreement i.e. on 28.04.2005, the ULC Act was in force in the State of Andhra Pradesh and it is common knowledge that for sale of urban land permission under the said Act was necessary and therefore anybody entering into such transactions must be aware of the same. It is in this context para-3 of the preamble to the agreement becomes relevant. Para-3 first sets out the total (agreed) sale consideration of Rs.1.35 crores. After mentioning the extent to be sold as 4000 sq. yards, the said para concludes that the appellant agreed to sell the land only after securing “all permissions”. The words “all permissions” would clearly include ULC clearance which was an essential statutory requirement, on the date of the agreement.
51. Thus the sentences “subject to production of ULC clearance” in clauses 2 and 3 can be said to be consistent with the words “all permissions” occurring in
para-3 of the preamble to the agreement. Even the words in clause 7 that “purchasers shall bear the expenses for obtaining required permissions” from the ULC authority, Visakhapatnam, and the appellant shall pay the fees can also be said to be consistent with the terms and conditions of the agreement as it stood at the time of its execution and no inference is permissible to support the contention of the appellant regarding alterations.
52. One argument of Sri Ramalingeswara Rao is that clauses 2 and 3 speak of terms and conditions for payment of balance sale consideration depending upon the result of the appeals mentioned therein and therefore the usage of the words “subject to production of ULC clearance” at the end in the said clauses is patently incongruous as parties to the document will usually have it as a separate condition but not as part of the said clauses 2 and 3 the purpose of which is payment of balance sale consideration. He therefore says that the above words must be held to have been introduced in the said clauses subsequently by way of alterations. There is no force in this contention also.
53. It may be noted that various persons entering into agreements of sale may adopt different verbal formulae in agreements to indicate their intention which is the prime factor for interpreting a document and the court has to go only by the intention manifest from the document having regard to the surrounding circumstances. In this view of the matter and in the above circumstances, we are of the considered view that the parties having regard to all the terms of the agreement intended that the purchasers should pay the balance sale consideration as indicated in clause 2 or clause 3 not only depending upon the result of the appeals mentioned therein but subject to the condition of the appellant obtaining ULC clearance as well. It may also be noted that no prudent purchaser will come forward to part with the entire sale consideration unless all the requirements necessary for completing the sale transaction are complied with.
54. The conclusion of the arbitrator and the trial court cannot therefore be said to be perverse or to have ignored the material on record in negativing the case of the appellant on this aspect. In Kwality Manufacturing Corp. case (2 supra) and O.N.G.C. Ltd case (3 supra) the Supreme Court pointed out that a court cannot interfere with the award on the merits unless it is found to be perverse and against record or is otherwise unreasonable. We have considered the matter in detail because of the strenuous contentions put forward by Sri Ramalingeswara Rao but we are unable to agree with him for the aforesaid reasons. Accordingly, we answer this point also against the appellant.
Point No.5: (Non-compliance with clause 2 of the agreement by purchasers and cancellation of agreement)
55. The fifth point raised on behalf of the appellant is though he gave certified copies of the judgments in the two appeals A.S.No.118/1998 and A.S.No.227/1998 on 07.10.2004 itself to the purchasers after the dismissal of the said appeals, the purchasers did not pay the balance sale consideration of Rs.1,19,89,884/- within ten (10) days i.e. by 16.10.2004 as per clause 2 of the agreement and therefore the agreement stood cancelled in terms of clause 5 thereof, as time was essence of the contract. The purchasers denied this plea of the appellant.
56. In the above context, the appellant took a further plea that even assuming that there was an obligation on his part to obtain ULC clearance he has to obtain the same at the time of execution of the sale deed, but the purchasers were bound to pay the balance sale consideration as per clause 2 of the agreement after the receipt of the copies of judgments in the above appeals. (See paras-13 and 16 of the counter of the appellant before the arbitrator). The appellant contends that in view of the above violations on the part of the purchasers the agreement stood cancelled.
57. Regarding the plea of the appellant that he furnished certified copies of the judgments in the above two appeals on 07.10.2004 to the purchasers, it should be noted that it is the version of the appellant that he sent them to the purchasers through the clerk of his counsel and they were delivered in the presence of Mr.Murthy. The appellant mentioned this aspect in his reply notice dated 04.05.2005 and also in his counter before the arbitrator. However the appellant did not furnish the name of the concerned clerk of his counsel or even his counsel’s name. The arbitrator rejected the above plea of the appellant as not convincing by giving cogent reasons. That conclusion of the arbitrator which was not interfered with by the trial court cannot be said to be perverse. It may be noted that the appellant did not furnish the name of that clerk either in his application under Section 34 of the Act or in the grounds of appeal in this CMA. We therefore do not find any legitimate reason to disturb the above conclusion of the arbitrator.
58. Coming to the other plea of the appellant that obtaining of ULC clearance is not a pre-condition for payment of balance of sale consideration, we have already set out our reasons under point No.4, that the recitals in the agreement relating to obtaining of ULC clearance do not constitute any material alterations and must be treated as an essential pre-condition to be complied with by the appellant for payment of balance sale consideration in either case of clauses 2 and 3 becoming applicable. Thus what follows is that whichever of clauses 2 and 3 of the agreement become applicable, the appellant has not only to comply with the requirement of furnishing copies of judgments but must also obtain the ULC clearance certificate.
59. In the present case, the appellant neither obtained ULC clearance nor even applied for it. Thus even assuming that the appellant had supplied copies of judgments in the above appeals to the purchasers, that is of little significance since he failed to obtain ULC clearance which is an essential condition. Clause 5 of the agreement which speaks of cancellation of the agreement would read that in case the purchasers failed to pay the balance sale consideration as agreed in clauses 2 and 3, the agreement would stand cancelled. It can therefore be said that clauses 2 and 3 cover the obtaining of ULC clearance in addition to furnishing copies of the judgments in appeals as stipulated therein. Since the appellant did not obtain the ULC clearance certificate, his contention that the agreement stood cancelled on the purchasers default to pay the balance sale consideration on receiving copies of the judgments cannot be entertained. The third respondent-arbitrator concluded so giving his own reasons and we find no reason to disagree with him which was confirmed by the trial court. Accordingly we answer this point also against the appellant.
Point No.6: (purchasers were not ready to perform their part of the contract?)
60. The sixth point raised on behalf of the appellant is that the purchasers did not plead in their claim statement before the arbitrator that they were throughout ready and willing to perform their part of the agreement as required by Section 16(c) of the Specific Relief Act, 1963 (for short 1963 Act), and in fact were not ready and are thus disentitled to the relief of specific performance. This is denied by the purchasers.
61. It is true that the purchasers in their claim statement did not take the above plea specifically by using the phraseology mentioned in Section 16(c). In Syed Dastagir v. T.R. Gopalakrishna Setty ((1999) 6 SCC 337 ) the Apex Court held that to indicate readiness and willingness, it is not necessary that the plaintiff must use the phraseology that “he is ready and willing to perform his part of the contract” occurring in Section 16(c) in the plaint. It was held that it is enough if, on a construction of the entire pleading (i.e. the plaint), readiness and willingness of the plaintiff can be inferred positively from the entire averments in the plaint and the circumstances relating to the conduct of the plaintiff. This principle has been reiterated subsequently in H.P. Pyarejan v. Dasappa (AIR 2006 SC 1144)and Sita Ram v. Radhey Shyam (AIR 2008 SC 143)by the Supreme Court, decisions which are relied upon by Sri Ramalingeswara Rao. The same principle was earlier stated in Motilal Jain vs. Ramdasi Devi (AIR 2000 SC 2408)and Faquir Chand v. Sudesh Kumari ((2006) 12 SCC 146).
62. In the present casse the purchasers in their Ex.C.2 first notice dated 28.06.2004 addressed to the appellant, specifically made it clear that they were ready and willing to perform their part of the contract by stating “as you know we have always been ready and willing to perform our part of the contract by paying entire balance sale consideration”. In the said notice the purchasers complained that the appellant did not inform them about the result of appeals and furnish them copies of the judgments in the said appeals and also failed to obtain the ULC clearance which was an essential condition for paying the balance sale consideration. The purchasers thus made it clear that in view of the above lapses on the part of the appellant they withheld the payment of the balance sale consideration and they were otherwise ready and willing to perform their part of the contract. The claim statement of the purchasers before the arbitrator would also in substance discloses the same. Thus in our view the purchasers cannot be faulted for not mentioning the words that they were ready and willing to perform their part of the contract, which is found in Section 16(c) of the Act, in the claim statement.
63. We should also mention here that the appellant in his counter before the arbitrator did not specifically plead and make an issue that the purchasers were not ready and willing to perform their part of the contract and he did not mention anything to show that the purchasers had no financial capacity to pay the balance sale consideration. It is only in para-12 of the counter, the appellant alleged that the purchasers had no financial capacity to pay a sum of Rs.40 lakhs at a stretch perhaps to make one time payment. It should be noted that the certificate of the concerned bank manager and copies of the bank drafts would show that the purchasers purchased eight bank drafts of Rs.5 lakhs each from the concerned bank on 29.03.2005 in the name of the appellant and they were subsequently cancelled as the appellant failed to receive the same. The said certificate and bank draft copies were marked as Ex.C.11 before the arbitrator. This itself shows that the appellant’s contention on the above aspect cannot be accepted.
64. Even in his application under Section 34 of the Act the appellant did not raise any contention based on 16(c) of the 1963 Act. The appellant’s counter before the arbitrator and his application under Section 34 of the Act are principally on the aspect of bias of Mr.Murthy and the third respondent-arbitrator; material alterations in the agreement; non-compliance with clause 2 of the agreement by the purchasers; non-payment of expenses by them for obtaining ULC clearance; and cancellation of the agreement. It is only for the first time in this CMA Sri Ramalingeswara Rao has raised and argued this aspect and that is a minus point for the appellant and the probabilities weigh against him. The stand of the purchasers in their first notice i.e. Ex.C.2, their rejoinder marked as Ex.C.8 before the arbitrator and in their claim statement before the arbitrator would show that they withheld payment of balance sale consideration only because of the appellant not furnishing them with the copies of the judgments in the appeals and the appellant’s failure to obtain ULC clearance. The appellant has failed to disprove the above stand of the purchasers, which is entirely reasonable. Thus the appellant’s plea that the purchasers were not ready and willing to perform their part of the contract cannot be accepted.
65. Another plea raised by the appellant under this point is that the purchasers did not, as required by clause 7 of the agreement, pay him the expenses required for obtaining the ULC clearance and therefore they were at fault and can be said to be not willing to perform their part of the contract. It is true that appellant took such a plea in his Ex.C.2 reply and also in his counter before the arbitrator. A perusal of clause 7 of the agreement would show that purchasers were to pay the expenses for obtaining the ULC clearance while the appellant was to pay the fee for it. It is not clear why a distinction between for expenses and fee for obtaining ULC clearance was made by the parties but that is their arrangement.
66. It should be noted that Ex.C.11 marked before the arbitrator would show that on 29.03.2005 the purchasers obtained bank drafts for Rs.40 lakhs for paying it to the appellant. There cannot be any dispute on this aspect as it is borne out by copies of the bank drafts. Ex.C.2 first notice of the purchasers makes a mention about the negotiations between the parties regarding obtaining of ULC clearance also. The appellant had nowhere pleaded or stated as to when he demanded the said expenses and the amount he demanded. The appellant could have as well taken the bank drafts which were taken prior to Ex.C.2 notice and could have demanded the purchasers to pay additional amount towards the said expenses. He failed to do so. This conduct goes against the appellant and the appellant’s consistent non-cooperation in the proceedings before the arbitrator would also legitimate an inference that he was not interested in adhering to the terms of the agreement and came up with trivial defences. Sri Ramalingeswara Rao’s strenuous contention on this aspect cannot therefore be countenanced. For the aforesaid reasons we decide this point also against the appellant.
Point No.7: (Grant of specific performance would be inequitable and unjust?)
67. The seventh point presented on behalf of the appellant is that it would be inequitable and unjust to grant specific performance. Coming to this point, it is true that Section 20 of the 1963 Act read as a whole enacts that an agreement of sale of immovable property is not to be enforced just because it is lawful to do so, and the court can refuse specific enforcement where the terms of the contract or the conduct of the parties and other circumstances in a given case would show that it would give an unfair advantage to the purchaser over the seller if it is enforced or would cause some hardship to the defendant which he did not foresee, whereas its non-performance would involve no such hardship to the plaintiff/ purchaser. This proposition is also broadly laid down in Bal Krishna v. Bhagwan Das (AIR 2008 SC 1786)relied upon by Sri Ramalingeswara Rao. The Supreme Court refused the relief of specific performance in Bal Krishna case (15 supra) on the ground that the plaintiff was not ready and willing to perform the agreement of sale. In the present case, the appellant failed to explain how enforcement of the agreement would give unfair advantage to the purchasers or cause hardship to him. He also failed to establish the other circumstances under Section 20(2) of the 1963 Act which might disentitle the purchasers to the relief of specific performance.
68. The appellant nowhere pleaded that the value of the land is much more than Rs.1.35 Crores which was the agreed consideration as on the date of agreement and that he was misled in entering into the contract without knowing the value of the land. It is also not the case of the appellant that enforcement of the agreement would result in any untold hardship to him. It may be noted that the agreement of sale is dated 28.06.2004 and the litigation started in March 2005 after exchange of notices. The appellant failed to establish any disadvantageous aspect to him or any unfair advantage to the purchasers.
69. According to clause (i) of the Explanation to Section 10 of the 1963 Act there is a rebuttable presumption which operates in favour of purchasers that in the case of breach of a contract to sell immovable property the same cannot be adequately relieved by compensation in money. The appellant failed to plead any circumstances to show how this presumption could be rebutted, even before the trial court. Accordingly we decide this point also in favour of the purchasers and against the appellant.
Point No.8: (subsequent sales, other suits and an earlier refusal of ULC clearance for another sale)
70. Under this eighth point, the appellant, firstly, pleaded that he sold the agreement schedule land to third parties by executing sale deeds and that ULC authorities refused permission for those sales. Secondly, he pleaded that his brother Sri Ch. Mutyalanaidu filed O.S.No.218/2004 for partition of certain properties which includes the present agreement schedule land also and that suit is pending. Thirdly, he pleaded that one Perla Ramakrishna and others filed O.S.No.126/2005 in respect of this land not only against him but also against third party purchasers from him, the present purchasers and the Government and the same is pending in the court of the Principal District Judge, Visakhapatnam. He therefore contends that the present agreement has become impossible of performance and therefore specific performance cannot be granted. (See paras-19 and 20 of the appellant’s counter filed before the arbitrator).
71. The appellant did not file either certified copies or photocopies of the sale deeds or pleadings in the above suits or other documents mentioned by him in support of the above pleas either before the arbitrator, the trial court or even in this court. The question in this matter is between the purchasers and the appellant, whether the former are entitled to the relief of specific performance. The findings recorded by us under points 1 to 7 would show that the purchasers have to succeed regarding the said relief as held by the arbitrator and the trial court. If the above litigation mentioned by the appellant is pending, the purchasers will take the property i.e. conveyance depending on the result of the said litigation or litigations. It should also be noted that two second appeals arising out of the two appeals A.S.Nos.118/1998 and 227/1998 are already reported to be pending in this court and the purchasers’ right would depend upon the result of those second appeals or that litigation even according to the terms of Ex.A.1 agreement. Thus the appellant cannot avoid specific performance on this ground.
72. Even with regard to permission under the ULC Act, it should be noted that the State of Andhra Pradesh has adopted the Urban Land (Ceiling and Regulation) Repeal Act, 1999 (Central Act 15 of 1999) with effect from 27th March 2008 (vide G.O.Ms.No.603, Revenue (U.C.I) dated 22nd April 2008). Thus the appellant cannot avoid specific performance on this ground also. However it goes without saying that any relief to which purchasers' are entitled in that behalf will be subject to the consequences of such repeal. This point is accordingly decided.
Point No.9: (Relief)
73. In view of our conclusions under points 1 to 7, it follows that this appeal must fail and accordingly it is dismissed with costs. The purchasers shall deposit the balance sale consideration within two months from today in the trial court, if they have not already deposited it. Thereafter, the purchasers can take steps in accordance with law to obtain conveyance for the property. The executing court, in accordance with the procedure for execution governing this case, in its discretion may fix up the time schedule for obtaining necessary permissions by the appellant and execution of sale deed by him, and in the event of any default on the part of the appellant it may take steps in accordance with law for execution of the conveyance. In the result, the appeal is dismissed with costs.