Common Commercial Disputes Queries - March, 2024

By Gunjan

Questions Answered in this Month’s CCDQ:

1.     Title of Land disputed - Can you File a Suit only for Injunction without Declaration of Title?

2.     Can a Bar Association Restrict Members from Filing Vakalatnama?

3.     Can Court modify an Arbitration Award When an Objection Petition or an Appeal is filed against the Award?

4.     Can a Suit for Declaration of Title to Property be filed, without seeking Relief of Possession?

5.     Does Inaction by the MSME Council in referring matter to Arbitration, entitle Party to Invoke Court’s jurisdiction for Appointment of Arbitrator?

Title of Land disputed - Can you File a Suit only for Injunction without Declaration of Title?

Tehsildar Urban Development v. Ganga Bai (#SupremeCourtofIndia, 20.02.2024) was a Civil Appeal challenging the decision of the Rajasthan HC in a property dispute.  

The plaintiffs claimed they had purchased a piece of land from the gram panchayat in 1959 & were in possession of the land since then. They had filed a suit for permanent injunction seeking to restrain the defendants from interfering in the Plaintiff’s possession of the suit land. The Defendants seriously disputed the title of the Plaintiff to the suit land. The Trial Court denied the injunction, stating the plaintiff unlawfully occupied the land. The First Appellate Court reversed this decision, which was upheld by the High Court.

It was this decision of the High Court which was finally challenged by the Defendants before the Supreme Court. The main contention was insufficient evidence of ownership by the Plaintiffs, on the basis of which the Defendants had challenged the maintainability of the suit for injunction itself.

The court observed as follows:

1.     To prove the Plaintiff’s ownership, he had produced a lease deed by Gram Panchayat dated 1959. Reliance was also placed on Section 90 of the Indian Evidence Act, which called for a presumption of authenticity as to the signatures, handwriting of particular people in the document & presumption as to the fact that the document is executed & attested in case it was executed and attested IF the document is over 30 years old & is produced from proper custody.

2.     While section 90 of the Indian Evidence Act, 1872 does imply the above presumptions for such a document/lease, there is no presumption that recitals or contents thereof are correct. [Union of India v. Brahim Uddin & Anr. (2012) 8 SCC 148].

3.     In light of the same, the Plaintiff was required prove the contents of the purported lease.

4.     When the title of the property is disputed by the Defendant, then a suit simpliciter for injunction may not be maintainable. In such a situation it was required for the respondent-plaintiff to prove the title of the property while praying for injunction. [Anathula Sudhakar v. P. Buchi Reddy (Dead) by Lrs. & Ors. (2008) 4 SCC 594].

5.     In the present case, no revenue record was produced by Plaintiffs to show that the land in question was ever mutated in their favour. Further Plaintiff did not summon the record from the Gram Panchayat when a specific plea of forgery was taken.

6.     Further, Plaintiff also failed to implead the Gram Panchayat as party to the suit when the competence of the Gram Panchayat to lease out the land itself was in question.

In view of the above, the judgment and decree of the First Appellate Court as well as the High Court were set aside & that of the Trial Court was restored.

Can a Bar Association Restrict Members from Filing Vakalatnama?

Rupashree H. R. v. The State of Karnataka & Ors. (#SupremeCourtofIndia, decided on 17.02.24) was a Writ Petition (Civil) under Article 32 of the Constitution before the Supreme Court challenging the resolution of the Mysore Bar Association whereby it had resolved that no member of the Association would file a vakalatnama on behalf of the petitioner.

The Court, while entertaining the petition, had stayed the aforesaid Resolution of the Mysore Bar Association and served notices to respondents, but despite this, the respondents did not appear.

Consequently, the Court proceeded ex-parte and made the following observations:

1.     Such a Resolution restricting any advocate from filing a vakalatnama on behalf of one particular party could not have been passed as the Right to defend oneself is a Fundamental Right under Part III of the Constitution of India.

2.     Further, the right to appear for a client is also a Fundamental Right, being a part of carrying on one’s profession as a lawyer.

In view of the above, the court quashed the said resolution and allowed the writ petition.

Can Court modify an Arbitration Award When an Objection Petition or an Appeal is filed against the Award?

S.V. Samudram Vs. State of Karnataka (decided on 5.1.2024), was a Civil Appeal before the Supreme Court challenging the judgment of the High Court of Karnataka. The bmain question was whether the High Court, under Section 34 of the Arbitration & Conciliation Act, 1996 (“A&C Act”) could modify the award made by the #arbitrator by substantially reducing the amount awarded.

The disputes revolved around a construction contract at Sirsi, Karnataka, where the Appellant civil contractor had been engaged by the Respondent.

The Appellant invoked the arbitration after project completion and received a favourable award in 2003. The arbitrator found the Respondent department responsible for delays and approved revised rates. The Respondent challenged the award before the civil court which reduced the award amount and lowered the interest rate.

The High Court also upheld the civil court's decision, agreeing the original award was illogical and unsupported by evidence. 

The court observed as follows:

1.     The position as to whether an arbitral award can be modified in the proceedings initiated under Sections 34/37 of the A&C Act is no longer res integra. It has been categorically observed that any attempt to “modify an award” under Section 34 would amount to “crossing the Lakshman Rekha”. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. (NHAI v. M. Hakeem (2021)9SCC1, Dakshin Haryana Bijli Vitran Nigam Limited v. Navigant Technologies Private Limited (2021) 7 SCC 657)

2.     It is a settled principle of law that arbitral proceedings are per se not comparable to judicial proceedings before the Court. The Arbitrator’s view, generally is considered to be binding upon the parties unless it is set aside on certain specified grounds (Dyna Technologies Private Limited v. Crompton Greaves Limited AIRONLINE 2019 SC 1928).

3.     The order of the Civil Judge fails to mention as to which grounds under Section 34 of the A&C Act, warranted the Court’s intervention. The Court undertook a re-appreciation of the matter, & upon its own view of the evidence, modified the order. Similar was the case of the Single Judge of the High Court. The impugned judgment red like a judgment rendered by an appellate court, & neither court gave a clear reason why the award violated public policy.

4.     Claimant was entitled to interest in terms of the rate quantified by the arbitrator which includes the period of pre-arbitration, pendente lite and future original, so the arbitrator was justified on awarding interest as well. (Hyder Consulting (UK) Ltd. v. State of Orissa (2015) 2 SCC 189).

In view of the above, the court side aside the judgement of the HC and the lower court & restored the award learned Arbitrator. Further, the court allowed appeal with a direction to the Respondent to expeditiously pay the amount.

Can a Suit for Declaration of Title to Property be filed, without seeking Relief of Possession?

Vasantha v. Rajalakshmi (#SupremeCourtofIndia, 14.02.2024) was a Civil Appeal concerning a property dispute between the parties.

The main settler of the property, who was the matriarch of a family, had two sons. G, The husband of the matriarch’s elder grand-daughter from her elder son, was the Plaintiff who had set forth the entire matter. He had filed a suit for declaration against V, the matriarch’s grand-daughter of adopted by the matriarch's younger son.

By way of the First Settlement Deed (“FSD”), the matriarch granted lifetime interest on the property to her two sons, & thereafter to the elder son’s two daughters (elder grand daughter being wife of G, the Plaintiff). This was the main deed on the basis of which rights were being claimed.

The elder grand-daughter being wife of G, passed away in 1951 pre-deceasing the matriarch, as also her two sons. G then filed a suit for declaration of his vested rights in the property, claiming through the FSD, and through his wife’s interest in the property. This suit was filed in 1993.

The High Court in the second appeal before it, allowed G's suit. It was against this decision of the second appellate court that V filed the present second appeal.

key issue for consideration was whether G’s initial suit for declaration (without possession) filed in 1993 was valid & whether it was within limitation.

The court observed as follows:

1.      The reason for filing the suit for declaration in 1993 was a settlement deed executed by in favour of V, the younger son’s adopted daughter (matriarch’s grand daughter) by the younger son’s wife. Since the wife was still alive, G filed a suit for declaration and not possession as the possession was still with the elder son’s wife.

2.      The suit was filed in 1993. As per Article 58 of the limitation Act, the cause of action to seek any declaration should have arisen in the 3 years preceeding the filing of the suit.

3.      The possible causes of action for a suit for declaration would be, the SSD (1952) or the younger son’s deed of settlement in favour of his wife (1976), which were both beyond the 3 year period.

4.      The cause of action for a possible suit for possession would accrue in 2004, upon death of the younger son’s wife who had life estate. However, G never filed a suit for possession. By 2016 V had perfected her title on the property by adverse possession (12 years).

5.      It was also incorrect to state that since G had filed a suit, the clock for adverse possession stopped ticking. This is because:

a)     The suit by G was for declaration only & not for possession.

b)    The suit was filed in 1993, whereas the period of adverse possession commenced only in 2004 when the younger son’s wife passed away.

(distinguished Tribhuvan Shankar v. Amrutlal (2014)2SCC788).

6.      G being aware of Appellant V's possession, ought to have sought the relief of possession which followed in terms of Section 34 of the Specific Relief Act. In such a case suit filed for a mere declaration without relief for recovery of possession of property would be hit by Section 34 of Specific Relief Act, 1963. (Vinay Krishna v. Keshav Chandra 1993 Supp (3) SCC 129, Union of India v. Ibrahim Uddin (2012) 8 SCC 148, Venkataraja and Ors. v. Vidyane Doureradjaperumal (Dead) thr. LRs (2014) 14 SCC 50).

7.      Further, even after the death of the life-estate holder in 2004, there was no attempt made by G to amend the plaint to seek the relief of recovery of possession.

In view of the above, the court observed that G’s suit was barred by limitation and also hit by Section 34 of the Specific Relief Act, owing to which it allowed the appeal and set aside the order of the High Court in second appeal.

Does Inaction by the MSME Council in referring matter to Arbitration, entitle Party to Invoke Court’s jurisdiction for Appointment of Arbitrator?

M/s Bafna Udyog vs Micro & Small Enterprises, Facilitation Council (Bombay High Court, 16.01.2024), was a Petition under Section 11(6) of the Arbitration & Conciliation Act, 1996 (“A&C Act”) seeking appointment of an #arbitrator.

The Petitioner was registered under the Micro, Small And Medium Enterprises Development Act, 2006 (“MSMED Act”). The Petitioner claimed that several discussions and consultations had taken place with the Respondent who had also acknowledged the debt but failed to pay. In view of the same, The Petitioner directly filed a certificate of termination under Section 76(d) of the A&C Act before the Facilitation Council under the MSMED Act (“MSEFC”). It was the Petitioner’s contention however, that the MSEFC failed to refer to matter to arbitration, owing to which the Petitioner approached the High Court.

The court observed as follows:

1.      Section 18 of the MSMED Act, requires the council (MSEFC) to first attempt conciliation and then refer the dispute to arbitration (themselves or through another body). It is only thereafter, that the provisions of the A&C Act apply to the dispute as if the arbitration was in pursuance of Section 7 of the A&C Act.

2.      Therefore, It is not correct to state that due to the provisions of the MSMED Act, arbitration agreement could be deemed to exist, eliminating the need for a separate arbitration agreement.

3.      Section 11(6)(c) of the A&C Act provides for vesting of jurisdiction in the Court to appoint an arbitrator if a person, including an institution fails to perform the function entrusted to it "under that procedure". These words contemplate, a procedure as agreed between the parties.

4.      The word 'agreed' directly refers to an Arbitration Agreement referred to in Section 7 of the Act. None of the criteria laid down in Section 7 is met in the present case to indicate existence of any arbitration agreement, either express or implied.

5.      In the absence of an arbitration agreement, Section 11(6)(c) cannot be invoked. (Mahanadi Coal Fields v. IVRCL AMR JV 2022SCCOnlineSC960). Thus, the inaction by the MSMED in referring to arbitration shall not entitle the Petitioner to invoke the provisions of 11(6) of the Act and seek appointment of an arbitrator de-hors existence of an arbitration agreement.

6.      Acknowledgment of debt by the Respondent & the consequent non-payment does not imply termination of conciliation proceedings (without even reference to the MSEFC) as the conciliation proceedings are to be conducted by the council at the first stage and it is only upon failure of the proceedings conducted by the council that the subsequent step of reference to arbitration arises. Thus, on this ground also, the petition is premature.

In the view of the above, the court dismissed the petition as not maintainable.