ARBITRATION APPEAL NO. 20/2017

23rd July 2019

Petitioner Counsel: Shri Abhishekh Shukla
Respondent Counsel: Shri U. M. Aurangabadkar
Act Name: Consumer Protection Act, 1986 Arbitration and Conciliation Act, 1996

Section :
Section 8 Consumer Protection Act, 1986 Section 12 Consumer Protection Act, 1986 Section 21 Consumer Protection Act, 1986 Section 27 Consumer Protection Act, 1986 Section 43 Consumer Protection Act, 1986 Section 34 Arbitration and Conciliation Act, 1996 Section 37 Arbitration and Conciliation Act, 1996

Cases Cited :
Para 5: Naraindas Vs. Vallabhdas and others, 1971(3) SCC 642
Para 5: N. Chellappan Vs. Secretary, Kerala State Electricity Board and anr., (1975) 1 SCC 289
Para 5: Kanha Credit & Holding Pvt. Ltd. Vs. Janacim Electronics 2005(80)DRJ 151
Para 5: Sat Pal Mohindra Vs. Surindra Timber Stores, (1999) 5 SCC 696
Para 5: Fair Air Engineers Pvt.Ltd. And anr. Vs. V.K. Modi, (1996) 6 SCC 385
Para 5: Hindustan Tea Co. Vs. K.Shashikant Co. and anor. 1986 (supp) SCC 506
Para 5: Birla International Pvt. Ltd.and others Vs. Karvy Financial Services Ltd., Mumbai., 2016(3)Mh.L.J. 819
Para 5: Food Corporation of India Vs. Joginderpal Mohinderpal and another, (1989) 2 SCC 347
Para 5: State of Orissa Vs. Niranjan Swain (1989) 4 SCC 269
Para 5: J. G. Engineers Private Ltd. Vs. Union of India and another, (2011) 5 SCC 758
Para 5: M/s. Allen Berry and Co.Pvt.Ltd. Vs. The Union of India, 1971 (1) SCC 295
Para 5: Mokha Ligh House Vs. Central Pollution Control Board, (1995) 1 Arb LR 540
Para 5: Bfil Finance Ltd. Vs. G.Tech Stone Ltd., 2002 (4) Mh.L.J.434
Para 6: Nagarwala Constructions through Partners Vs. Mrs. Sunita Ashok Verma., Writ Petition No.735/2015
Para 6: Schlumberger Asia Services Ltd. Vs. Oil and Natural Gas Corporation Ltd. 2013 AIR (SC) 3778
Para 6: Panchu Gopal Bose Vs. Board of Trustees for the Port of Calcutta, AIR 1994 SC 1615
Para 6: Narayana Farm Produce Pvt. Ltd. and anr. Vs. M/s.Jalaram Feeds., C.R.A. No.58/2017

JUDGEMENT

Admit. Heard finally with the consent of learned counsel for the parties.

2. This appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (for short, ‘the said Act’) takes exception to the judgment of the learned Principal District Judge in proceedings under Section 34 of the said Act.

3. The facts relevant for deciding the present appeal are that on 23.05.1996, the respondent no.1 entered into an agreement with the appellant to purchase flat no.202 for a consideration of Rs.5,25,000/-. In that agreement clause no.21 pertains to referring the dispute if any between the parties for arbitration. By 15.05.2000, the respondent no.1 had made entire agreed payment and on 28.02.2001 the respondent no.1 received possession of the flat in question. On 18.05.2004 the respondent no.1 filed a complaint under Section 12 of the Consumer Protection Act, 1986 (for short, ‘the Act of 1986’). The grievance raised in that complaint was non-execution of the sale deed of the said flat along with a prayer seeking damages for not providing various facilities as agreed. This complaint was allowed by the Consumer Forum on 29.04.2005 and the appellant was directed to execute the sale deed in favour of the respondent no.1. Similarly, the appellant was directed to pay an amount of Rs.50,000/- towards expenditure to complete the incomplete work. Other ancillary directions also came to be issued. The appellant challenged the aforesaid decision by filing an appeal bearing No.1154/2006 before the State Commission. In the meanwhile, in the execution proceedings that were initiated by the respondent no.1 an order came to be passed on 07.07.2009 which order also came to be challenged before the State Commission by preferring Appeal No.562/2009.

4. During the pendency of the aforesaid proceedings, the appellant invoked the arbitration clause and thereafter appointed the respondent no.2 as an Arbitrator. The respondent no.1 informed the Arbitrator about the pendency of the proceedings before the State Commission and requested the Arbitrator to drop the arbitration proceedings. That request was not accepted. Ultimately on 22.07.2012, the Arbitrator passed his award. As per the said award, the agreement dated 23.05.1996 came to be cancelled and the appellant was held entitled to recover the possession of flat in question. The respondent no.1 was held entitled to the refund of the amount of consideration paid. Being aggrieved, the respondent no.1 filed proceedings under Section 34 of the said Act. After hearing the parties, the learned Principal District Judge came to the conclusion that the arbitration proceedings had been commenced after the award was passed by the Consumer Forum. Two inconsistent awards for the same subject matter could not be permitted to operate. It was further found that the award passed by the Arbitrator suffered from perversity. On these counts, by the judgment dated 14.02.2017, the award passed by the sole Arbitrator was set aside. That judgment has been challenged in the instant appeal.

5. Shri Abhishekh Shukla, learned counsel for the appellant submitted that the appellant was justified in invoking the arbitration clause and mere fact that the complaint under Section 12 of the Act of 1986 had been adjudicated earlier could not be a reason to set aside the award as passed. The arbitration clause had been invoked on a distinct cause of action and therefore even the aspect of res-judicata would not arise. In the arbitration proceedings the dispute was with regard to non-payment of maintenance charges and other compliances which were not done by the respondent no.1. The respondent no.1 having failed to contest the said proceedings before the Arbitrator, it was not permissible to raise a challenge to the award in proceedings under Section 34 of the said Act. He referred to the application filed under Section 34 of the said Act in that context. Even the application preferred by the respondent no.1 for dropping the proceedings had been rejected. While the Consumer Forum was concerned with the the cause of action that had occurred prior to 29.04.2006, the Arbitrator had taken cognizance of the cause of action that had occurred after that date. Without prejudice to the aforesaid submissions, it was submitted that if a portion of the award passed by the Arbitrator could be severed from the portion that was found to be overlapping with the order passed by the Consumer Forum, then the entire award was not liable to be set aside. In absence of there being any perversity in the findings recorded by the Arbitrator, the award was not liable to be set aside. In support of his submissions, the learned counsel relied upon the following decisions.

a] Naraindas Vs. Vallabhdas and others, 1971(3) SCC 642.
b] N. Chellappan Vs. Secretary, Kerala State Electricity Board and anr., (1975) 1 SCC 289.
c] Kanha Credit & Holding Pvt. Ltd. Vs. Janacim Electronics 2005(80)DRJ 151
d] Sat Pal Mohindra Vs. Surindra Timber Stores, (1999) 5 SCC 696.
e] Fair Air Engineers Pvt.Ltd. And anr. Vs. V.K.Modi, (1996) 6 SCC 385.
f] Hindustan Tea Co. Vs. K.Shashikant Co. and anor. 1986(supp) SCC 506
g] Birla International Pvt. Ltd.and others Vs. Karvy Financial Services Ltd., Mumbai., 2016(3)Mh.L.J. 819.
h] Food Corporation of India Vs. Joginderpal Mohinderpal and another, (1989) 2 SCC 347.
i] State of Orissa Vs. Niranjan Swain (1989) 4 SCC 269.
j] J.G.Engineers Private Ltd. Vs. Union of India and another, (2011) 5 SCC 758.
k] M/s.Allen Berry and Co.Pvt.Ltd. Vs. The Union of India, 1971(1) SCC 295.
l] Mokha Ligh House Vs. Central Pollution Control Board, (1995) 1 Arb LR 540.
m] Bfil Finance Ltd. Vs. G.Tech Stone Ltd., 2002(4) Mh.L.J.434

6. On the other hand, Shri U.M.Aurangabadkar, learned counsel for the respondent no.1 supported the impugned judgment. He referred to the provisions of Section 8 of the said Act and submitted that even after the complaint under Section 12 of the Act of 1986 was filed on 18.05.2004, the appellant did not raise any objection nor did he seek any reference to the arbitration proceedings. Only after the Executing Court passed orders under Section 27 of the Act of 1986 that the appellant sought to invoke the arbitration clause. It was rightly observed in the impugned order that two inconsistent orders could not be permitted to operate. The learned counsel further submitted that during the pendency of the arbitration proceedings, the State Commission decided both the appeals preferred by the appellant on 14.03.2014. Thereafter the appellant had approached the National Commission and on 17.07.2014 the revision application preferred by the appellant was also dismissed. Not being satisfied by the same, the appellant had filed the Writ Petition No.735/2015(Nagarwala Constructions through Partners Vs. Mrs. Sunita Ashok Verma). On 13.08.2018, this Court refused to entertain the writ petition. It was thus submitted that the orders passed by the Consumer Forum having attained finality, the directions issued in the award could not operate in derogation to the orders passed by the Consumer Forum. According to him, the possession of the flat in question was received in the year 2001 and the arbitration proceedings that were initiated in the year 2009 were clearly barred by limitation. He referred to the provisions of Sections 21 and 43 of the said Act in that regard. In support of his submissions, the learned counsel placed reliance on the following decisions:

i] Schlumberger Asia Services Ltd. Vs. Oil and Natural Gas Corporation Ltd. 2013 AIR (SC) 3778.
ii] Panchu Gopal Bose Vs. Board of Trustees for the Port of Calcutta, AIR 1994 SC 1615.
iii] C.R.A. No.58/2017 (Narayana Farm Produce Pvt. Ltd. and anr. Vs. M/s.Jalaram Feeds) decided on 15.09.2017 (Nagpur Bench of Bombay High Court.)

7. I have heard the learned counsel for the parties at length and I have given due consideration to their respective contentions. It is not in dispute that the agreement dated 23.05.1996 contains an arbitration clause at Sr.No.21. It is further not in dispute that after making entire agreed payment, the respondent no.1 received possession of the flat in question on 28.02.2001. Since according to the respondent no.1 there was some deficiency in services and the sale deed of the flat in question was not executed, the respondent no.1 filed a complaint under the provisions of the Act of 1986. The complaint having been allowed by the District Consumer Forum, the same was challenged in an appeal by the appellant. After the Executing Court passed further orders under Section 27 of the Act of 1986 that order was also challenged by filing an appeal. It is at this stage that the appellant has invoked the arbitration clause and has thereafter appointed an Arbitrator.

Under Section 8 of the Act of 1986 it was open for the appellant to have invoked the arbitration clause after being noticed in the proceedings before the Consumer Forum. He however did not do so. Having not done so and having thereafter submitted to the jurisdiction of the Consumer Forum, it was not permissible for the appellant to have invoked the arbitration clause after almost five years from the filing of the complaint before the Consumer Forum. Having willingly participated in the proceedings before the District Forum and thereafter having filed an appeal challenging the judgment of the District Consumer Forum, invocation of the arbitration clause by the appellant is clearly by way of an afterthought.

8. The contention sought to be raised by the appellant that the arbitration clause was sought to be invoked on the basis of a distinct cause of action also cannot be accepted. The possession of the flat in question having been delivered on 28.02.2001, the grievance if any with regard to the nonpayment of maintenance charges could have been raised immediately thereafter. Perusal of the award in question indicates that the appellant has been held entitled to recover the amount of maintenance till 30.09.2009. Similarly, the balance amount of installments is permitted to be recovered from the respondent no.1. There is an adjudication on the aspect of escalation clause in the agreement. All these issues were the subject matter of the complaint before the Consumer Forum and also a part of the defence raised by the appellant in those proceedings. Having failed to substantiate its defence before the Consumer Forum, the appellant has sought to invoke the arbitration clause. It was rightly observed by the learned Principal District Judge that two inconsistent awards could not be permitted to operate in the same field. The appellant having contested the proceedings before the Consumer Forum could not be permitted to thereafter turn around and invoke the arbitration clause with a view to set at naught that adjudication. The perversity in the award of the Arbitrator has also been clearly noticed in the light of the fact that on the one hand the appellant has been held entitled to get vacant possession of the flat in question by cancelling the agreement and in the same breath the respondent no.1 is held entitled to recover the amount of balance installments with interest. No other view in the matter is possible in these facts. There cannot be any quarrel with the legal propositions in the decisions relied upon by the appellant. However, in the facts of the present case, the ratio therein cannot be made applicable.

9. Hence for aforesaid reasons, there is no merit found in the challenges as raised by the appellant. The arbitration appeal is accordingly dismissed with costs.