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WHEN THE PRESENT DIRECTORS/ SHAREHOLDERS HAVE ENTERED THE SCENE EVEN IN THE MIDST OF THE BREACH, THE

JAGJEET SINGH LYALLPURI v. M/S. UNITOP APARTMENTS & BUILDERS LTD. Civil Appeal No. 692/2016 – 3rd December, 2019

CORAM: A three judge bench comprising of Justice R. Banumathi, Justice A.S. Bopanna and Justice Hrishikesh Roy.

It was being held in this case that: “When the present directors/ shareholders have entered the scene even in the midst of the breach, they would have to bear with the loss” The question of law raised was as to whether even the share holders or directors who have entered only during the midst of the breach are jointly liable too or not?

Provisions such as S.19 & S.34 of the Act were examined.

The appellant contended that while assaulting such conclusion by the HC, one must mainly examine the clauses of the agreement. It is also contended that when a dispute is referred to the Learned Arbitrator u/s. 19 of the Act, it provides that the Arbitrator is to determine the rules & the procedure. In that regard, it is pointed out that the Learned Arbitrator has, in the course of the proceedings, finalised the procedure and recorded the same in order. It is also pointed out that in the proceedings itself, the parties agreed that they would rely upon the affidavits and the documents that were filed and the procedure of cross examination could be dispensed. In that background, the Learned Arbitrator has referred to the materials on record in the background of the claim put forth and the affidavits filed in support thereof while arriving at the conclusion. Hence he concludes that the procedural lapse as attempted to be made out at this stage is not to be justified.

It is also contended that in the proceedings the consideration ought to be limited to the extent given u/s. 34 of the Act & when the Learned Addl. Dist Judge has examined in that light & affirmed the award, it ought not to be expanded by the Learned Single Judge of the High Court. The Counsel has also pointed out that a learned consideration was made by the Learned Arbitrator on all aspects including the cancellation of the agreement between the parties. It is also urged that an amount of Rs. 1, 22, 00,000 said to have been made by the respondent also a consideration has been made. Also it was contended that a view taken by the Learned Arbitrator based upon the finding of a fact, Learned Single Judge is not justified in commenting that the said aspect had not been adverted to by the Learned Arbitrator. It is therefore contended that the award is liable to be sustained and that the order of the Learned Single Judge of the High Court is to be set aside.

The respondent contended that they had raised 12 claims in front of the Learned Arbitrator and each claim should have been decided separately. He contends that it is unfair on part of the Learned Arbitrator to reject the claim on the conclusion that time is the essence of the contract. Though the terms as per the agreement is not disputed, the learned counsel contends that the delay caused due to the non completion of the project is solely attributable to the appellant. The Appellants had not parted with the title documents relating to the land in question due to which the respondent was not in a position to raise funds from the bank by creating a mortgage. Apart from the security amount, the respondent has suffered a loss of Rs. 1, 22, 00, 000 due to the cost of construction which was put up. Specific claim was raised under different heads too before the Learned Arbitrator, but he has not considered the same and in that regard, they contended that clause 11 of the agreement which provides relating to the expenditure incurred has not been properly appreciated. The Respondent also contended that the Learned Addl. Dist Judge had not adverted to the aspects of the matter too, but the Learned Single Judge of the High Court had based upon a precedent Oil and Natural Gas Corp Ltd v. SAW Pipes Ltd

It is observed that the procedure to be followed in arbitration proceedings were settled by a separate order during the course of the proceedings before the Learned Arbitrator. Also it is an inter se matter to claim so non cross examination does not lead to any prejudice. Also, the Learned Single Judge of the High Court observed that the Learned Arbitrator had not considered the right of the parties relating to the extent of the cost incurred to be dealt with. Care is to be taken to not ignore the losses suffered by the appellants too. The Appellant would have to seek an alternate developer

The appeal is disposed.

–  Nardhana Ram

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