Swastika Mahapatra & Anr vs Cygnus Investments & Finance Private Limited

This is an application for setting aside an Award dated 3rd April, 2017 passed by a learned sole Arbitrator. The petitioner herein was the respondent no.1 in the arbitration proceeding.

The facts revolve around a Memorandum of Understanding (MoU) dated 30th April, 2014 executed between the respondent and the petitioner no.1 by which the petitioner no.1 agreed to sell a flat located in New Alipore along with car parking space for a total consideration of Rs.65 lakhs. It was agreed by the parties that permission would be sought from a court of competent jurisdiction pursuant to which the petitioner no.1 would sell the flat to the respondent on the terms and conditions provided in the MoU. Before the learned Arbitrator, the claimant's case (the case of the respondent herein) was that with the execution of the MoU, a sum of Rs.50 lakhs was paid to the petitioner no.1 out of which Rs.25 lakhs was paid through RTGS and the balance Rs.25 lakhs was paid in cash. At the time of execution of the MoU, the original title deeds relating to the property were handed over by the petitioner no.1 to the respondent, despite which physical possession of the flat continued to remain with the petitioner no.1. The petitioner no.1 however failed to honour the terms of the MoU and failed to obtain permission for sale of the minor's interest in the said flat from a court of competent jurisdiction. It is the admitted case, inter alia, that the petitioner no.1 is presently in possession of the said flat and continues to reside in the same as on date.

Before the learned arbitrator, the respondent prayed for an award directing the petitioner no.1 to perform her obligation under the MoU dated 30th April, 2014 by obtaining permission for sale of the interest of the petitioner no.2 (then a minor) and for handing over possession of the said flat to the respondent.

The learned Arbitrator found substance in the case made out by the respondent and was of the view that it is not possible to deal with the minor's share unless permission is taken from a court of competent jurisdiction and that such permission cannot be given by the Arbitral Tribunal. The Arbitrator directed the petitioner no.1 to return a sum of Rs.50 lakhs to the respondent which had been given under the MoU along with interest at 18% per annum from the date when the Money was received by the petitioner no.1 till the date of the Award. The petitioner no.1 was directed to refund the amount within thirty days from the date of the award.

Ms. Rao, learned counsel appearing for the petitioner no.1 fairly points out that there has been extreme laches on the part of the petitioner no.1 in that the petitioner no.1 failed to provide any assistance to the learned Arbitrator during the proceedings. She submits that the petitioner no.1 is a practicing doctor and could not make herself available for attending the sittings. She submits that it may be difficult for the petitioner no.1 to refund the amount of Rs.50 lakhs within the time frame directed and accordingly seeks the indulgence of this court to excuse the petitioner for her conduct.

Mr. Suddhasatva Banerjee, learned counsel appearing for the respondent relies on the impugned Award and points to the Minutes recorded by the learned Arbitrator which would show that in the course of about thirty sittings, the petitioner no.1 (the respondent no.1 mentioned in the Award) was represented in only about eleven sittings. He also points to the conduct of the petitioner in changing lawyers representing her at least ten times which severely impeded the proceeding. He further submits that the purpose for which Rs.50 lakhs was given by the respondent to the petitioner no.1 was admittedly frustrated since the minor's interest in the flat could not be sold and that the petitioner no.1 has continued to remain in possession of the flat contrary to the terms of the MoU. Counsel submits that the petitioner no.1 cannot possibly have any reason for challenging the impugned award since the petitioner no.1 did not show any inclination to seriously contest the claim of the respondent before the Arbitrator. He submits that the instant petition for setting aside of the Award is without merit and should be dismissed.

This court has gone through the impugned Award and the findings of the learned Arbitrator. The impugned Award contains a detailed statement of the proceedings including the attendance of the parties during the sittings before the learned Arbitrator. Among the thirty sittings described, one finds that the petitioner no.1 was represented only in about eleven sittings. Of these, the petitioner no.1 was given several opportunities to file her reply/statement of defence to the statement of claim of the respondent. The sittings were in fact continuously adjourned for the petitioner no.1 to file her statement of defence. The statement mentions that repeated adjournments were prayed for by advocates appearing on behalf of the petitioner no.1 which was granted by the Arbitrator. On 14th July, 2015 the petitioner no.1 filed an application for vacating an ex parte order passed by the learned Arbitrator but strangely enough did not pursue such application. On other dates, the advocate of the petitioner no.1 appeared without a Vokalatnama and prayed for an adjournment on that ground; while still on other dates, adjournment was sought for on the ground that the Vokalatnama was defective and is required to be withdrawn. Innumerable sittings were adjourned on the ground of the advocate of the petitioner no.1 appearing without a Vokaltnama. The petitioner no.1 appeared in person sometime in September, 2015 and prayed for an adjournment on the ground of illness which was granted by the learned Arbitrator. In December 2015, adjournment was again sought for filing the counter statement. The hearing held on 15th January, 2016 as recorded in the impugned Award, states that the petitioner no.1 made an application in the form of a letter with regard to some queries under section 12 of The Arbitration and Conciliation Act, 1996 and failed to pay the costs of Rs.2000/- as had been directed by the Arbitrator. On 8th April, 2016, yet another application was filed by the petitioner no.1 for recalling an order dated 14th March, 2016 by which the learned Arbitrator had directed the matter to be heard ex-parte. The list of dates on which adjournment was sought for by advocate representing the petitioner no.1 or by the petitioner no.1 herself are so numerous that it would be an idle exercise to enumerate the same. The patience of the learned Arbitrator in continuing to entertain the requests of the petitioner no.1 is worth noting. On the other hand, the conduct of the petitioner no.1 in not only seeking repeated adjournments but changing her advocates at least ten times during the course of the proceedings is lamentable. It almost appears that the idea of changing lawyers was used as a means to stall the arbitration proceedings. There is absolutely no reason why the petitioner no.1 could not file her statement of defence despite being given opportunities for such from 19th March, 2015 till 16th March, 2017. After two years the learned arbitrator was compelled to record that the petitioner no.1 was only trying to delay the proceedings and has no interest to contest the matter. In fact, one does not find a single submission made by the petitioner no.1 or her lawyers on the merits of the matter.

On the basis of the above and the factual findings including examination of exhibits contained in the statement of claim of the respondent, the learned arbitrator awarded the refund of Rs.50 lakhs to be made by the petitioner no.1 to the respondent.

Having gone through the extended recording of sittings over a span of two years, this court finds no basis in setting aside the impugned Award. While one can appreciate the predicament of the lawyers representing the petitioner no.1 in having to safeguard the interest of a litigant who plays truant while resisting an Award against such litigant, the conduct of the petitioner no.1 in taking advantage of a lenient Arbitrator and dragging a clear-cut case to extend over two years, cannot be absolved at all. The claim of the respondent should also be seen in context. Having parted with the money, the respondent could not get possession of the asset in question, namely, the flat where the petitioner no.1 has been living till date.

Since the advocate on record of the petitioner before me at the very outset beseeched this court to treat this essentially as a petition for mercy, and having regard to the fact that the petitioner no.1 is a single parent with a young child, it would be reasonable to direct the petitioner no.1 to pay the amount of Rs.50 lakhs in five equal instalments payable on the last Friday of every month, starting from the month of February, 2019. If the petitioner no.1 defaults in the payment of the first and second instalments, the respondent will be at liberty to seek appropriate recourse against the petitioner no.1 in accordance with law.

AP No.442 of 2017 is dismissed. There shall be no order as to costs.