Sudsun Housing Development India Ltd. vs Pradeep Dugar and Lata Dugar and Others

S. Rajeswaran, J.—The petitioner is challenging the award dated 21.08.2000 passed by the eighth respondent/Arbitrator, u/s 34 of the

Arbitration and Conciliation Act 1996.

The facts are as under:

The petitioner is engaged in the business of promoting flats. They entered into an agreement with the owners of the property bearing Door No. 42,

South Boag Road, T. Nagar, Chennai 17, for the development of the property. Pursuant to the above agreement with the owners of the said

property, the owners conveyed by sale undivided shares in the above said property to the respondents 1 to 7 herein by different sale deeds.

Thereafter, the petitioner entered into an agreement with the respondents 1 to 7 herein, for putting up construction in the said property. The

construction of the building was completed in June 1997 and the flats were handed over to the respondents 1 to 7 from June 1997 onwards. After

receiving their respective apartments, the respondents 1 to 7 created problems which necessitated the petitioner to file a Civil Suit in O.S. No.

2544 of 1998 before the IV Assistant City Civil Court, Chennai. Along with the suit, an application in I.A. No. 6250 of 1998 was filed by the

petitioner for an interim injunction and the City Civil Court granted an order of interim injunction restraining the respondents 1 to 7 herein from

interfering with the peaceful possession and enjoyment of basement and the entire terrace area of the building. Respondents 1 to 7 herein

approached the High Court in O.P. No. 647 to 653 of 1998 and this court by order dated 10.12.1999 appointed 8th respondent as the sole

Arbitrator to resolve the disputes between the parties.

According to the petitioner, the eighth respondent/Arbitrator appointed a Chartered Engineer to inspect the building and to submit a report as to

whether the building was built up according to the approved plan and in terms of the Construction Agreement. The Engineer inspected the building

on several occasions in the absence of the petitioner and filed his report without giving an opportunity to the petitioner to present their case. The

petitioner also filed their objections for the report of the Engineer, but, it is contended by the petitioner that the Arbitrator passed an award on

21.08.2000 in favour of the respondents 1 to 7 solely on the basis of the report filed by the Chartered Engineer. Aggrieved by the award dated

21.08.2000 passed by the eighth respondent/Arbitrator, the petitioner filed the above Original petition u/s 34 of the Arbitration and Conciliation

Act 1996 to set aside the same.

Respondents 1 to 7 entered appearance through their counsel and filed a common counter affidavit supporting the award and seeking to dismiss

the petition.

Heard the learned Counsel for the petitioner and the learned Counsel for the respondents 1 to 7. I have also gone through the entire records

including the impugned award passed by the eighth respondent/ Arbitrator.

Before the 8th respondent/arbitrator, respondents 1 to 7 jointly filed a Claim petition and also filed separate individual claim statements in

respect of their individual claims. In the common claim petition filed by them jointly, it was stated that they entered into a Construction Agreement

with the petitioner for the construction of their flats and the agreement includes a provision for providing certain common amenities for the benefit of

the flat owners. According to the respondents 1 to 7, the common amenities to be provided include

Care Taker/Security Room and

Landscaped surroundings

They contended that these amenities were not provided even though they paid for the same. It is stated by the respondents 1 to 7 that the Block

of the building should have a basement as per the sanctioned plan for the purpose of installation of Generator and the Electricity Main Board. The

open terrace, leaving apart a portion exclusively reserved for the 6th respondent''s use, shall be available for the common use of the other flat

owners. But, contrary to the undertaking given by them, the petitioner manipulated the construction of the basement and extended it over and

above the area sanctioned in the approved plan. Instead of providing the Electricity Main Board and installing the Generator in the sanctioned

basement area, they were installed in the unapproved portion of the basement. That apart, the petitioner is claiming ownership over the open

terrace portion which was reserved for the common use and enjoyment of the flat owners.

Further, the undertaking given by the petitioner herein that they would not violate the sanctioned plan was later on violated by the petitioner. The

suit filed by the petitioner in O.S. No. 2544 of 1998 was resisted by the respondents 1 to 7 by filing an application u/s 8 of the Arbitration and

Conciliation Act 1996. After taking possession, it was stated by the respondents 1 to 7 that they noticed several serious defects in the

construction, for which, they filed separate claim statements. It is their further contention that the petitioner has been taking steps to sell the

unapproved basement area to third parties. They formed an Association and wrote to the petitioner on 16.03.1998 pointing out the defects and the

works which have not been carried out by the petitioner. A reply dated 23.03.1998 was sent by the petitioner wherein it was accepted that

unapproved portions of the basement area was measuring about 2884 sq.ft. To stop the petitioner from selling the upapproved basement area to

third parties, respondent 1 to 7 filed O.A. No. 216 of 1999 before this court u/s 9 of the Arbitration and Conciliation Act 1996, for an injunction

restraining the petitioner from disposing of the unapproved area in the basement. This court granted injunction as prayed for and the application

was closed by the High Court, after the petitioner gave an undertaking that they would not sell the unapproved basement portion to third parties till

the completion of the arbitration proceedings.

According to the respondents 1 to 7 herein, the following defects were found in the construction and they have to be rectified by the petitioner

as per the construction agreement:

Fixing proper granite stones in the entrance as well as in the lobby near the lift and also in the common area.

Proper provision of lighting in the common area as well as in the front and side set-back area of the premises;

Providing window shutters in the staircase windows on the western side.

Rectification of the water leakage from the terrace to the lift area on the third floor;

Provision of proper storm water drain from the open terrace area so as to prevent flooding of staircase.

The Corpus fund collected from the respondents 1 to 7 were not returned and therefore, the same is to be returned by the petitioner.

The respondents 1 to 7 therefore claimed a sum of Rs. 10 lakhs towards damages and also for a direction directing the petitioner to install the

Generator and the Electricity Main Board in the approved area. They also sought for an injunction restraining the petitioner from alienating the

entire basement area and also for a direction directing the petitioner to rectify the defects in the construction. Yet another direction was also sought

for directing the respondents 1 to 7 to pay a sum of Rs. 3.5 lakhs for not providing the Security/ Care Taker Room, land-scapped surroundings

and for further direction directing the petitioner to return the Corpus fund collected from the respondents 1 to 7 for common amenities with interest

at the rate of 24%.

In the individual claim statements filed separately, the first respondent contended that the Electrical wiring done by the petitioner was extremely

poor and short-circuit and tripping were common. Therefore, another electrician was engaged and the entire electrical wiring was re-done at their

cost. The points which were not provided by the petitioner, were also got done through the same electrician. Inspite of requesting the petitioner to

supply the electric wiring drawings, the petitioner refused to supply the drawings. It was further pointed out that the petitioner charged a sum of Rs.

60,000/- for providing Open Car park, but, the same was not at all provided. What was given to them is only a portion earmarked in the plan for

the set-back area for parking a Single Car. Therefore, the first respondent claimed a sum of Rs. 2.50 lakhs as damages for not providing covered

Car Park, Rs. 50,000/- for re-doing the electrical work, Rs. 1.50 lakhs for not providing fittings and accessories, a sum of Rs. 2 lakhs for poor

finish and cracks and a sum of Rs. 60,000/- for the Open Car Park.

The second respondent in his separate claim statement accused the petitioner of providing defective electrical wiring and he also had to re-do

the electrical wiring by engaging another electrician. He paid a sum of Rs. 75,000/- for providing a open Car park, but, the same was not

provided. Therefore, he claimed a sum of Rs. 2.50 lakhs for the covered Car Park, Rs. 40,000/- for re-doing the electrical work, Rs. 50,000/- for

not providing the fittings and accessories and Rs. 1.50 lakhs for poor finish and cracks and Rs. 75,000/- for Open Car Park.

Similar claims were individually made by the third to 7th respondents respectively.

The petitioner herein filed a counter statement common to all the claim petitions. According to the petitioner, it was agreed between the parties

that the construction would be made subject to the construction of a basement area which was to be in the exclusive ownership, use and enjoyment

of the petitioner. According to the petitioner, respondents 1 to 7 herein did not state that a Security Room and landscaped area have been

provided by them at their own cost to satisfy the claim of Rs. 3.50 lakhs in this regard. The specific case of the petitioner is that all along the

respondents 1 to 7 agreed that the basement area could be owned by the petitioner and in fact the Association formed by the Flat owners also

accepted the title of the petitioner to the basement area. It was admitted by the petitioner that a portion of the basement area is an unauthorised

construction and steps are being taken to regularise the same by C.M.D.A. So far as the terrace area is concerned, it was contended by the

petitioner that there was a clear covenant in favour of the petitioner to use the terrace area. At no point of time, the petitioner agreed to use and

enjoyment of the open terrace by respondents 1 to 7. The petitioner stated that they did not try to sell the basement area to third parties. Even

though it was denied by the petitioner that there are no defects, an undertaking was given by them that they would be willing to rectify any defect, if

any.

On the basis of the above pleadings, the 8th respondent/Arbitrator framed the following issues:

(1) Whether the basement was built in violation of the sanctioned plan by C.M.D.A.?

(2) Whether the respondent has a right to retain a portion of the terrace?

(3) Whether the claimants are entitled to damages as mentioned in prayer No. 1 of the claim statement, if so, what is the quantum?

(4) Whether the respondent is bound to shift and install the Generator and Electricity Main Board as mentioned in prayer 2 of the Claim

Statement?

(5) Whether the claimants are entitled to an order in the matter of permanent injunction as prayed for in prayer No. 3 of the claim petition?

(6) Whether the claimants are entitled to Rs. 3.50 lakhs as damages for not providing Security/Caretaker room and landscapped surroundings?

(7) Whether the respondent is liable to return the Corpus fund as claimed in prayer No. 6?

(8) Whether the claimants are entitled to the relief sought for in Claim VII (A) of para 7 of the amended claim statement?

(9) Whether the claimant No. 1, Pradeep Dugar and Lata Dugar are entitled to covered Car Park as claimed in their claim statement?

(10) Whether the respondent was justified in collecting various amounts ranging from Rs. 60,000/- to Rs. 75,000/- from the claimants for

providing only open Car Park?

(11) Whether the entire electrical wiring system is defective and in violation of the contract. If so, whether the claimants are entitled to the damages

as claimed in the respective Claim petition?

(12) Whether the claims are entitled to the amounts as claimed in their respective Claims statements for not providing Covered Car Parks?

(13) Whether the claimants are entitled to the amounts as claimed, towards rectifying the cracks in the walls, and for cost of the repainting and the

finish?

(14) To what relief?

By consent of both the parties, the Arbitrator appointed a Chartered Engineer to inspect the property and to submit a report. The report of the

Chartered Engineer was marked as Ex-A1. 59 documents were filed on behalf of respondents 1 to 7 and 22 documents were filed on behalf of the

petitioner herein.

After evaluating the entire evidence adduced before him, the 8th respondent/Arbtirator found that there was a clear undertaking given by the

petitioner herein to the respondents 1 to 7 that construction would be strictly in accordance with the approved plan and there would be no

deviation at all. While considering the claim for terrace, the learned Arbitrator after going through Ex.C19 which is a letter written by the Director

of the petitioner company found that the respondents 1 to 7 are entitled to use and enjoyment of the open terrace on the third floor. In Ex.C19, the

Director of the petitioner clarified that the terrace immediately above the Type III Flat T2 would be reserved for all the owners of the building

excepting the owner of Flat Type III � T1, who is the 6th respondent herein. Thus, the Ex.C19 was not at all repudiated by the petitioner and

therefore on that basis, the learned Arbitrator came to the conclusion that the open terrace excluding the area reserved for the 6th respondent

herein is available for the common use and enjoyment of all other respondents and the petitioner cannot put any restrictions on their enjoyment of

the open terrace. This finding arrived at by the learned Arbitrator is purely on the basis of the evidence adduced before him and the reasons given

by him for arriving at this finding are reasonable and cogent and therefore, the same cannot be assailed before this court u/s 34 of the Arbitration

and Conciliation Act 1996.

While considering the basement area, the Arbitrator found that the basement area is more than the area approved by the C.M.D.A. The report

of the Chartered Engineer in Ex.A1 was considered in this regard. The area approved by the C.M.D.A. is 1036 sq.ft., but, what was constructed

is, 3926 sq.ft. There is no doubt that the Generator and the Electricity Main Board are to be installed in the portion of the approved basement

area. But, it was not installed in the approved area, but, in the unapproved area measuring about 2890 sq.ft. This unapproved construction was

already admitted by the petitioner in their counter statement. Because of this, the learned Arbitrator observed that the petitioner was not in a

position to explain why and how the basement area was enlarged in total violation of the agreement and also without the knowledge of the

respondents 1 to 7.

The Arbitrator made it very clear that the Generator and the electricity main board were installed against the conditions contained in the

construction agreement. After going through the agreement and the other accompanying facts, the Arbitrator is of the opinion that the basement as

per the approved plan, absolutely belongs to the respondents 1 to 7 and other flat buyers. That apart, after going through Ex.C13 which is the

letter written by the respondents 1 to 7 dated 16.03.1998 objecting to the sale of the unapproved basement area and Ex.C14 which is the reply

sent by the petitioner and also Ex.R14 which is the letter dated 26.6.1997 written by the third respondent and Ex.R15 which is the letter dated

26.6.1997 written by the 4th respondent, came to the conclusion that the respondents 1 to 7 are the exclusive owners in so far as the basement

area is concerned and the petitioner cannot have any right to make any claim with regard to the basement. This finding is also a pure factual finding

which is based on the evidence adduced before him and I do not find any grounds to interfere with the same.

While considering the Issue Nos.9 and 12 together, which are the claims for not providing Open and Covered Car Parks, after going through

the evidence, the Arbitrator found that the petitioner was bound to provide a Covered Car Park as per the construction agreement and the cost of

it has been calculated and collected. Ex.C44 is the construction agreement of the respondent-5 wherein it was stated that for Open Car Park, the

flat buyers paid at the rate of Rs. 60,000/- each. But, the 5th respondent has not claimed in his claim statement refund of the amount paid by him

for the Covered Car Parking. In the construction agreement, the actual cost of providing Covered Car Park has not been mentioned. The

petitioner could only say that the cost of constructing one Car Park would be about Rs. 96,350/-. On that basis, the learned Arbitrator raised a

valid point that if the 5th respondent got a refund of Rs. 96,350/- for each Covered Car Park, then how the petitioner could deny an identical

amount as demanded by other respondents for not providing Covered Car Park as per the agreement. Therefore, the Arbitrator held that each of

the flat buyers, excepting the 5th respondent, would be entitled to a sum of Rs. 96,350/- as cost of the Covered Car Parking not provided for and

paid for by them.

While dealing with the question of Open Car Park, the Arbitrator found that it is also included in the construction agreement, but, it was not

provided at all. The Arbitrator did not accept the contention of the petitioner that the side set back areas and the rear set back areas could be used

as Car park areas. The Arbitrator observed that the set-back area is a part of the common area and after going through Ex.C34, the Arbitrator

found that a sum of Rs. 60,000/- is added to each one of the individual flat buyers. Further, the Arbitrator found that for the respondent-2, Rs.

75,000/- was collected (Ex.C24) instead of Rs. 60,000/- and therefore, the Arbitrator held that the second respondent is entitled to receive a sum

of Rs. 75,000/-, whereas the other respondents are entitled to receive a sum of Rs. 60,000/-, for not providing the Open Car Park.

The above said finding arrived at by the Arbitrator are well founded, reasonable, and logical and therefore, this court cannot interfere with the

same while exercising its powers u/s 34 of the Arbitration and Conciliation Act 1996.

While considering the question of damages claimed by the respondents 1 to 7 (issue No. 6), the Arbitrator found through Ex.A1 that the Care

Taker/Security Room, Common Toilet and land-scapping surroundings have not been provided even though it is clearly stated in the construction

agreement. The Arbitrator referred to item Nos.20 to 22 of the construction agreement in this regard. As the claim of Rs. 3.50 lakhs estimated by

the respondents 1 to 7 was not disputed by the petitioner, the Arbitrator awarded a sum of Rs. 3.50 lakhs as a lumpsum for not providing the

Security/Care Taker Room. This is also a factual finding which is reasonable and logical and therefore, this court cannot interfere with the same.

While considering Issue No. 7 which is the claim for returning the Corpus Fund, the Arbitrator found that under the construction agreement,

the deposits made by the flat buyers towards the Corpus Fund are liable to be refunded to the Association formed by the flat buyers after

completion of the flats. Ex.C22 was specifically considered by the Arbitrator in this regard which specifically provides that the petitioner undertook

to hand over the maintenance amount deposits to the flat buyers after deducting any amount for expenses incurred. After finding that 12 months

period expired on 14.04.1997, the Arbitrator took that date on which the Corpus fund ought to have been returned by the petitioner. Therefore,

the Arbitrator directed the petitioner to return the Corpus fund with interest at the rate of 12% per annum from 14.04.1997.

This is a very clear and reasonable finding based on the evidence and the same cannot be interfered with at all.

While considering issue No. 13, the Arbitrator on the basis of the undertaking given by the petitioner to rectify the defects, directed the

petitioner to rectify within a period of three months from the date of the award.

While considering the damages claimed for Rs. 10,00,000/- (Rupees ten lakhs only) (Issue No. 3), the Arbitrator awarded Rs. 10,000/- to

each of the respondents towards damages.

From the above, it is very clear that a reasoned award has been passed by the Arbitrator on the basis of the evidence adduced and therefore, I

hardly find any grounds enumerated u/s 34 of the Act 1996 to interfere with the same.

It was mainly contended on behalf of the petitioner that the Chartered Engineer appointed by the Arbitrator took sides with the respondents 1

to 7 who visited and inspected the property on three occasions without the presence of the petitioner. Therefore, the report is a biased one and the

entire award has been passed by the learned Arbitrator only on the basis of the biased report of the Chartered Engineer.

I am unable to accept these submissions made on behalf of the petitioner.

First of all, out of the five visits made by the chartered Engineer, on two occasions, both the parties were present. After the final report was

submitted by the Chartered Engineer, objections were also filed by the petitioner before the Arbitrator. The award also reveals that the learned

Arbitrator has not solely relied on the chartered Engineer''s report alone to pass the award as contended by the petitioner. In fact, the learned

Arbitrator has considered the entire evidence adduced before him and gave findings independently on the basis of the evidence with clarity and

cogency. Even assuming that the Chartered Engineer''s report is bad, as the Engineer visited the spot on three occasions without the presence of

the petitioner, still that cannot be a ground u/s 34 of the Act 1996 to interfere with the award.

In the result, I have no hesitation in upholding the Award and consequently, the Original petition is dismissed. No costs. The connected

miscellaneous petitions are also closed.