- Arbitrator cannot grant pendente lite interest if the contract expressly bars payment of interest: Supreme Court of India & High Court.
Case Name: Garg Builders vs Bharat Heavy Electricals Limited, decided on October 4, 2021.
Case Citation: Civil Appeal No. 6216 OF 2021.
Case Facts: The respondent floated a tender for construction of a boundary wall and the appellant’s bid was accepted for the same. On October 24, 2008, the parties entered into an agreement which contained an interest barring clause. Disputes arose between the parties and arbitration proceeding was undertaken. The appellant claimed amongst various amounts, pr-reference, pendente lite and future intrest on the value of the award given in favour of the appellant. The arbitrator concluded that there is no prohibition in the contract about payment of interest for the presuit, pendente lite and future period and awarded interest at the rate of 10% p.a. on the award amount to the appellant. The respondent challenged the award before the Delhi High Court successfully. Hence, this appeal.
Case Decision: The apex court observed that the Arbitration and Conciliation Act, 1996 (“Arbitration Act”) gives paramount importance to the contract entered into between the parties and restricts the arbitrator to award pre-reference and pendente lite interest when the parties themselves have agreed to the contrary under Sec. 31 (7) (a) of the Arbitration Act. Therefore, if the contract prohibits interest, the arbitrator cannot award interest. The clause in the present agreement clearly and categorically states that “No interest shall be payable by BHEL on Earnest Money Deposit, Security Deposit or on any moneys due to the contractor.” and uses the expression “any moneys due to the contractor.” which includes the amount awarded by the arbitrator. It is pertinent to note that Section 3 (3) of the Interest Act, 1978 explicitly allows the parties to waive their claim to an interest by virtue of an agreement. Thus, when there is an express statutory permission for the parties to contract out of receiving interest and they have done so without any vitiation of free consent, it is not open for the arbitrator to grant pendent lite interest. Hence, the appeal fails and is dismissed.
2.Breach of contract or cheating? A criminal color cannot be given to a civil dispute: Supreme Court of India
Case Name: Mitesh Kumar J. Sha vs. State of Karnataka & Ors., decided on October 26, 2021.
Case Citation: Criminal Appeal No. 1285 of 2021.
Case Facts: The appellants and the respondents entered into multiple contracts including joint development agreement for developing a particular property, supplementary agreement specifying respective shares of each party, general power of attorney (“GPA”) and memorandum of understanding (“MoU”) whereby the appellant was authorized to sell a portion of respondent’s share in the property. Disputes arose between the parties and the appellant filed for arbitration, praying for injunction restraining the respondent from alienating the property. The respondent lodged a FIR for offence under Section 406, 419 and 420 of the Indian Penal Code, 1860 claiming that the sale of 4 flats by the appellant was in excess of the share agreed between the parties. The appellant approached the High Court of Karnataka to quash the FIR. Meanwhile, the arbitrator partly allowed the claims of both parties and held that unilateral revocation of GPA by respondent was illegal. However, regarding the question of sale of four excess flats by the appellants, the arbitrator left it unanswered as the respondent had withdrawn his prayer in relation to the same. The High Court of Karnataka, considering the arbitration award and the FIR, did not interfere with the subject matter. Hence, this appeal.
Case Decision: Based on the facts of the case, the court observed that it cannot be concluded that the appellants herein have deceptively or intentionally tried to sell excess flats and instead have acted pursuant to the rights given under the MoU. Hence, relevant ingredients (dishonest intention) for a criminal case of criminal breach of trust or cheating are not made out. The dispute between the parties could be termed as one involving mere breach of contract. The instant dispute certainly involves issues of civil nature but cannot be stretched, so as to impart it a criminal color.
The court went on to state that it has, at innumerable instances, expressed its disapproval for imparting criminal colour to a civil dispute, made merely to take advantage of a relatively quick relief granted in a criminal case in contrast to a civil dispute. Such an exercise is nothing but an abuse of the process of law which must be discouraged in its entirety. The court set aside the order passed by the High Court and quashed the criminal proceedings against the appellant.
3. When the documents are presented for registration before the Sub-Registrar, his duty is to register the same, subject to any bar contained in the provisions of the Stamps and Registration laws: Andhra Pradesh High Court.
Case Name: Mangipudi Nagaraju vs. State of Andhra Pradesh, decided on October 8, 2021.
Case Citation: Writ Petition No.1399 of 2021.
Case Facts: One Murthy alienated his entire property in favour of his wife, Sodemma, who in turn, bequeathed the entire property to the petitioner herein vide a registered will deed. One Prabhakar Rao, son of younger brother of Murthy, fabricated an adoption deed and an unregistered agreement of sale by fraud and misrepresentation and filed (i) a suit for partition of the above-mentioned property by claiming that he is the adopted son of Murthy and Sodemma; and (ii) a suit for specific performance of unregistered agreement of sale. Both Murthy and Sodemma contested the suits. During the pendency of the suits, Minister of Animal Husbandary alleged to have purchased the property and started construction of building. The trial court decreed these suits in the favour of Prabhakar Rao. Aggrieved by the judgement, the petitioner and Sodemma filed appeals and asked for interim relief, which are still pending. During such time, the abovementioned minister plunged into action and influenced Prabhakar Rao and got his name mutated in the revenue records and obtained the sale deed. In this light, the petitioner claimed that when the appeals are pending, the registration of the sale deed by the Registrar is a grave illegality and amounts to fraud.
Case Decision: The court observed that indeed the appeals were pending but no interim order was passed. In the absence of any interim direction, the registration of a document when presented for registration satisfying the requirements under the India Stamp Act, 1899 (“Stamp Act”) and Registration Act, 1908 (“Registration Act”) is justified. Moreover, the Registrar is bound to register the document presented for registration unless there is prohibition from registration of such document pertaining to the land covered by Sec. 22A, 35 (3) and 71 of the Registration Act. Such registration of document is nothing but discharge of public duty and cannot be said to be a fraudulent act and such act will not attract the definition of fraud under Sec. 17 of the Indian Contract Act, 1872.
Further, execution of registered sale deed by Prabhakar Rao by playing fraud is purely a mixed question of fact and law and such question cannot be decided in the writ petition by a constitutional court. As per the principle laid down by the apex court, if a party to the document wants to annul the document, such party has to file a suit under Sec. 31 of the Specific Relief Act, 1963 (“SRA”) before the competent civil court and if, a third party wants to annul the document, such party has to approach the competent civil court and seek relief under Sec. 34 of the SRA. Therefore, the remedy available to the petitioner, who is not a party to the document, is to approach the competent civil court and file appropriate suit for annulment of those documents. The petition was dismissed.
4. Agreement to withdraw criminal complaint in consideration of receiving money not lawful: Chhattisgarh High Court.
Case Name: Nimish Agrawal v. State of Chhattisgarh, decided on October 25, 2021.
Case Citation: W.P.(Cr.) No.228 of 2016
Case Facts: The petitioner, Nimish Agrawal and respondent no. 5 are husband and wife, who are in an unhappy marriage and all efforts of reconciliation have failed between them. The wife had filed a FIR against the petitioner alleging commission of offences under IPC and Dowry Prohibition Act. The petitioner has prayed for quashing of the said FIR in the present petition. Subsequent to lodging of the FIR, a compromise was made between the parties and it was agreed that a divorce petition will be filed and the wife will withdraw her complaint. Subsequently, the wife filed an affidavit that a compromise has taken place and she does not want any prosecution against the petitioner. At a later point, the wife withdrew her consent for the agreement and stated that she did not want a compromise and she was forced to sign the agreement under threat and coercion
Case Decision: The court referred to Sec. 24 of the Indian Contract Act, 1872 and observed that one of the terms of the agreement was that the wife wants to withdraw the criminal complaint after receiving a payment for the same, which cannot be regarded as any lawful term and the agreement cannot be enforced under the law. Although there is a statement regarding compromise between the parties but the same is being disputed by the wife, therefore, it cannot be said that the settlement between the parties is complete. The terms of agreement in the compromise may be a ground of defence for the petitioner, but that cannot be a ground for quashment of the whole criminal case against him. Without there being any reason to believe that the settlement is complete between the parties, this Court cannot hold that the continuation of criminal proceedings will be an exercise in futility, as the wife is intending to prosecute the petitioner. Apart from that, the case of Gian Singh vs. State of Punjab & Anr. (2012) 10 SCC 303, forbids the exercise of inherent power of the High Court in case of heinous and serious offences like murder, rape, dacoity or other offence of mental depravity and corruption. One of the charges against the petitioner is the charge under Section 377 of IPC, regarding commission of unnatural sexual intercourse. After overall consideration of the facts and circumstances and the case law cited, the court opined that the FIR against the petitioner cannot be quashed. The petition was dismissed and disposed-off.
