Allahabad High Court

Kaushal Kishore Mishra vs State Of U.P.Thru ... on 27 November, 2017

Bench: Shabihul Hasnain, Sheo Kumar Singh-I




HIGH COURT OF JUDICATURE AT ALLAHABAD, LUCKNOW BENCH
 
 

 Reserved								      A.F.R.
 

 
Case :- FIRST APPEAL FROM ORDER DEFECTIVE No. - 76 of 2016
 

 
Appellant :- Kaushal Kishore Mishra
 
Respondent :- State Of U.P.Thru Prin.Secy.Revenue Deptt.Lko.& Ors.
 
Counsel for Appellant :- O.P.Yadav
 

 
Hon'ble Shabihul Hasnain,J.

Hon'ble Sheo Kumar Singh-I,J.

(Delivered by Justice Sheo Kumar Singh-I)

1. This is first appeal under Section 37 of Arbitration and Conciliation Act 1996 against judgment and order dated 30.9.2015 passed by the District Judge Sitapur in Miscellaneous Civil Case No.15 of 2015 filed under Section 34 of Arbitration and Conciliation Act.

2. Brief facts giving rise to the present appeal is that national highway NS-24 was under construction and the land gata No. 471 area 0.144 Hectare belonging to the appellant was acquired and compensation was awarded according to law. Aggrieved by the payment of compensation, the appellant fled an application under Section 3G of the National high Way Act 1956 before the District Magistrate Lucknow/ Arbitrator and Arbitrator/District Magistrate after affording an opportunity of hearing all the parties/land holders and national highway authority decided the application vide order dated 27.2.2015. Aggrieved by the order of the District Magistrate, the appellant filed a miscellaneous application No.15 of 2015 and the learned District Judge vide roder dated 30.9.2015 rejected the application. Learned counsel for appellant has submitted that while considering the amount of compensation, the learned court and Arbitrator ignored the circle rate of the area and also failed to assess the land which was non agricultural land. It has further been submitted that the non agricultural land was treated as agricultural land and a lesser amount of compensation was paid to the appellant. A prayer has been made to quash the order passed by the District Judge in Miscellaneous Case mentioned above and also to award the compensation at the rate of Rs. 4000/- per square metre in place of Rs. 1500/- per square metre.

3. We have heard learned counsel for appellant Sri Pankaj Srivastva and learned counsel for State and perused the record. It has been contended by learned counsel for State that the scope of interference under Section 34 of Arbitration Act is much limited and award can be set aside only on certain grounds mentioned therein while it is challenged before the competent court. The appellant has moved a miscellaneous application before the court of learned District Judge with a prayer to enhance the amount of compensation and the learned court while disposing the application found that the application was not maintainable in light of Section 34(2) of the aforesaid Act.

4. The contention as raised at the bar necessitates reference to the following provisions. Section 34 of Arbitration and Conciliation Acţ 1996 is quoted herein below:

"34.Application for setting aside arbitral award. "(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and subsection (3).

2. An arbitral award may be set aside by the Court only if-

a. the party making the application furnishes proof that-

i.a party was under some incapacity, or

ii.the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or

iii.the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

v.the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:

Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or

v. the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or

b. the Court finds that-

i. the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or

ii.the arbitral award is in conflict with the public policy of India.

Explanation.-Without prejudice to the generality of sub-clause (ii), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81."

5. Reference may also be made to certain provisions of National Highways Act, 1956. Section 3G reads herein as under:

"3G. Determination of amount payable as compensation.

"(l) Where any land is acquired under this Act, there shall be paid an amount which shall be determined by an order of the competent authority.

(2) Where the right of user or any right in the nature of an easement on, any land is acquired under this Act, there shall be paid an amount to the owner and any other person whose right of enjoyment in that land has been affected in any manner whatsoever by reason of such acquisition an amount calculated at ten per cent of the amount determined under sub-section (1), for that land.

(3) Before proceeding to determine the amount under sub-section (1) or sub-section (2), the competent authority shall give a public notice published in two local newspapers, one of which will be in a vernacular language inviting claims from all persons interested in the land to be acquired.

(4) Such notice shall state the particulars of the land and shall require all persons interested in such land to appear in person or by an agent or by a legal practitioner referred to in sub-section (2) of section 3C, before the competent authority, at a time and place and to state the nature of their respective interest in such land.

(5) If the amount determined by the competent authority under sub-section (1) or sub-section (2) is not acceptable to either of the parties, the amount shall, on an application by either of the parties, be determined by the arbitrator to be appointed by the Central Government.

(6) Subject to the provisions of this Act, the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply to every arbitration under this Act.

(7) The competent authority or the arbitrator while determining the amount under sub-section (1) or sub-section (5), as the case may be, shall take into consideration -

a) the market value of the land on the date of publication of the notification under section 3A;

(b) the damage, if any, sustained by the person interested at the time of taking possession of the land, by reason of the severing of such land from other land;

(c) the damage, if any, sustained by the person interested at the time of taking possession of the land, by reason of the acquisition injuriously affecting his other immovable property in any manner, or his earnings;

(d)if, in consequences of the acquisition of the land, the person interested is compelled to change his residence or place of business, the reasonable expenses, if any, incidental to such change.

6. Prima facie the objection as taken by the learned counsel for the respondent has much water. A perusal of Section 3G sub clause (7) shows that for determining the amount as payable under Section 3G(7), certain parameters are to be considered which have been classified in Clause a,b,c,d. Meaning thereby the fixation of quantum of compensation is not an exercise in abstract and the same is governed by the parameters given in sub Section (7) and Clause a,b,c,d, which have to be kept in mind by the authority concerned while determining the quantum of compensation. The quantum of compensation as such is a logical conclusion of the procedure to be adopted by the Arbitrator keeping in mind the parameters as given under the Act of 1956, while determining the quantum and thus, the grievance of the petitioners, if any, is to the effect that the quantum of compensation as determined is not in accordance with the parameters as prescribed under the Act, 1956 for the said purpose.

7. At this stage, it is relevant to consider the definition of public policy. Section 34 sub clause (2)(b) of the Act, 1996 provides that an arbitral award may be set aside by the Court only if it is in conflict with the public policy of India. Section 34(2)(b)(i) & (ii) of the Act 1996 are quoted herein as under:

" i. the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or

ii. the arbitral award is in conflict with the public policy of India.

Thus, it is apparent that if while determining the quantum of compensation under the provisions of National Highways Authority Act, 1956, the Arbitrator has not followed the procedure or has not considered the parameters as given under Clause 3G sub clause (7) and the parameters mentioned therein, then that would be an award against public policy.

8. It would be relevant here to consider the definition of public policy as has been expanded in the recent judgements of Hon'ble Supreme Court. Needless to say that the definition of term public policy has been expanded to a very great extent and in this regard reference may be made to the judgement rendered in the case of Oil & Natural Gas Corporation Ltd. Vs. Saw Pipes Ltd.; (2003) 5 SCC 705. Relevant extact of the said judgement is being quoted herein below:

"16. The next clause which requires interpretation is clause (ii) of sub-section 2(b) of Section 34 which inter alia provides that the Court may set aside the arbitral award if it is in conflict with the 'Public Policy of India'. The phrase 'Public Policy of India' is not defined under the Act. Hence, the said term is required to be given meaning in context and also considering the purpose of the section and scheme of the Act. It has been repeatedly stated by various authorities that the expression 'public policy' does not admit of precise definition and may vary from generation to generation and from time to time. Hence, the concept 'public policy' is considered to be vague, susceptible to narrow or wider meaning depending upon the context in which it is used. Lacking precedent the Court has to give its meaning in the light and principles underlying the Arbitration Act, Contract Act and Constitutional provisions."

"17. For this purpose, we would refer to few decisions referred to by the learned counsel for the parties. While dealing with the concept of 'public policy, this Court in Central Inland Water Transport Corporation Limited and another v. Brojo Nath Ganguly and another [(1986) 3 SCC 156] has observed thus:

"92. The Indian Contract Act does not define the expression "public policy" or "opposed to public policy". From the very nature of things, the expressions "public policy", "opposed to public policy", or "contrary to public policy" are incapable of precise definition. Public policy, however, is not the policy of a particular government. It connotes some matter which concerns the public good and the public interest. The concept of what is for the public good or in the public interest or what would be injurious or harmful to the public good or the public interest has varied from time to time. As new concepts take the place of old, transactions which were once considered against public policy are now being upheld by the courts and similarly where there has been a well recognized head of public policy, the courts have not shirked from extending it to the new transactions and changed circumstances and have at times not even flinched from inventing a new head of public policy. There are two schools of thought- "the narrow view" school and "the broad view" school. According to the former, courts cannot create new heads of public policy whereas the latter countenances judicial law-making in this area. The adherents of "the narrow view" school would not invalidate a contract on the ground of public policy unless that particular ground had been well- established by authorities. Hardly ever has the voice of the timorous spoken more clearly and loudly than in these words of Lord Davey in Janson v. Driefontein Consolidated Gold Mines Ltd. [(1902) AC 484, 500] : "Public Policy is always an unsafe and treacherous ground for legal decision". That was in the year 1902. Seventy-eight years earlier, Burrough, J., in Richardson v. Mellish [(1824) 2 Bing 229, 252] described public policy as "a very unruly horse, and when once you get astride it you never know where it will carry you." The Master of the Rolls, Lord Denning, however, was not a man to shy away from unmanageable horses and in words which conjure up before our eyes the picture of the young Alexander the Great taming Bucephalus, he said in Enderby Town Football Club Ltd. v. Football Assn. Ltd. [(1971) Ch. 591, 606]; "With a good man in the saddle, the unruly horse can be kept in control. It can jump over obstacles". Had the timorous always held the field, not only the doctrine of public policy but even the Common Law or the principles of Equity would never have evolved. Sir William Holdsworth in his "History of English Law",

In fact, a body of law like the common law, which has grown up gradually with the growth of the nation, necessarily acquires some fixed principles, and if it is to maintain these principles it must be able, on the ground of public policy or some other like ground, to suppress practices which, under ever new disguises, seek to weaken or negative them.

It is thus clear that the principles governing public policy must be and are capable, on proper occasion, of expansion or modification. Practices which were considered perfectly normal at one time have today become obnoxious and oppressive to public conscience. If there is no head of public policy which covers a case, then the court must in consonance with public conscience and in keeping with public good and public interest declare such practice to be opposed to public policy. Above all, in deciding any case which may not be covered by authority our courts have before them the beacon light of the Preamble to the Constitution. Lacking precedent, the court can always be guided by that light and the principles underlying the Fundamental Rights and the Directive Principles enshrined in our Constitution.

93. The normal rule of Common Law has been that a party who seeks to enforce an agreement which is opposed to public policy will be non-suited. The case of A. Schroeder Music Public Co. Ltd. v. Macaulay [(1974) 1 WLR 1308], however, establishes that where a contract is vitiated as being contrary to public policy, the party adversely affected by it can sue to have it declared void. The case may be different where the purpose of the contract is illegal or immoral. In Kedar Nath Motani v. Prahlad Rai [(1960) 1 SCR 861], reversing the High Court and restoring the decree passed by the trial court declaring the appellants' title to the lands in suit and directing the respondents who were the appellants' benamidars to restore possession, this Court, after discussing the English and Indian law on the subject, said.

The correct position in law, in our opinion, is that what one has to see is whether the illegality goes so much to the root of the matter that the plaintiff cannot bring his action without relying upon the illegal transaction into which he had entered. If the illegality be trivial or venial, as stated by Williston and the plaintiff is not required to rest his case upon that illegality, then public policy demands that the defendant should not be allowed to take advantage of the position. A strict view, of course, must be taken of the plaintiff's conduct, and he should not be allowed to circumvent the illegality by resorting to some subterfuge or by misstating the facts. If, however, the matter is clear and the illegality is not required to be pleaded or proved as part of the cause of action and the plaintiff recanted before the illegal purpose was achieved, then, unless it be of such a gross nature as to outrage the conscience of the court, the plea of the defendant should not prevail.

The types of contracts to which the principle formulated by us above applies are not contracts which are tainted with illegality but are contracts which contain terms which are so unfair and unreasonable that they shock the conscience of the court. They are opposed to public policy and require to be adjudged void."

9. Therefore, in a case where the validity of award is challenged there is no necessity of giving a narrow meaning to the term 'Public Policy of India' on the contrary, a wider meaning is required to be given so that the "patently illegal award" passed by the Arbitrator Tribunal would be set aside.

10. In the same judgement of O.N.G.C. (Supra), the Apex Court has further held in Paragraph Nos. 26, 27, 28, 31 which are quoted herein as under:

"26. It is true that Legislature has not incorporated exhaustive grounds for challenging the award passed by the arbitral tribunal or the ground on which appeal against the order of the Court would be maintainable."

"27. On this aspect, eminent Jurist & Senior Advocate Late Mr. Nani Palkhivala while giving his opinion to 'Law of Arbitration and Conciliation' by Justice Dr. B.P. Saraf and Justice S.M. Jhunjhunuwala, noted thus:-

"I am extremely impressed by your analytical approach in dealing with the complex subject of arbitration which is emerging rapidly as an alternate mechanism for resolution of commercial disputes. The new arbitration law has been brought in parity with statutes in other countries, though I wish that the Indian law had a provision similar to section 68 of the English Arbitration Act, 1996 which gives power to the Court to correct errors of law in the award.

I welcome your view on the need for giving the doctrine of "public policy" its full amplitude. I particularly endorse your comment that Courts of law may intervene to permit challenge to an arbitral award which is based on an irregularity of a kind which has caused substantial injustice.

If the arbitral tribunal does not dispense justice, it cannot truly be reflective of an alternate dispute resolution mechanism. Hence, if the award has resulted in an injustice, a Court would be well within its right in upholding the challenge to the award on the ground that it is in conflict with the public policy of India."

11. From this discussion it would be clear that the phrase 'public policy of India' is not required to be given a narrower meaning. As stated earlier, the said term is susceptible of narrower or wider meaning depending upon the object and purpose of the legislation. Hence, the award which is passed in contravention of Sections 24, 28 or 31 could be set aside. In addition to Section 34, Section 13(5) of the Act also provides that constitution of the arbitral tribunal could also be challenged by a party. Similarly, Section 16 provides that a party aggrieved by the decision of the arbitral tribunal with regard to its jurisdiction could challenge such arbitral award under Section 34. In any case, it is for the Parliament to provide for limited or wider jurisdiction to the Court in case where award is challenged. But in such cases, there is no reason to give narrower meaning to the term 'public policy of India' as contended by learned senior counsel. In our view, wider meaning is required to be given so as to prevent frustration of legislation and justice. The Court in Rattan Chand Hira Chand v. Askar Nawaz Jung (Dead) By LRs and others [(1991) 3 SCC 67], observed thus:-

"17. .. It cannot be disputed that a contract which has a tendency to injure public interests or public welfare is one against public policy. What constitutes an injury to public interests or welfare would depend upon the times and climes. ... The legislature often fails to keep pace with the changing needs and values nor as it realistic to expect that it will have provided for all contingencies and eventualities. It is, therefore, not only necessary but obligatory on the courts to step in to fill the lacuna. When courts perform this function undoubtedly they legislate judicially. But that is a kind of legislation which stands implicitly delegated to them to further the object of the legislation and to promote the goals of the society. Or to put it negatively, to prevent the frustration of the legislation or perversion of the goals and values of the society."

"31. Therefore, in our view, the phrase 'Public Policy of India' used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term 'public policy' in Renusagar's case (supra), it is required to be held that the award could be set aside if it is patently illegal. Result would be - award could be set aside if it is contrary to: -

(a) fundamental policy of Indian law; or

(b) the interest of India; or

(d) in addition, if it is patently illegal."

12. The question, therefore, which requires consideration is--whether the award could be set aside, if the Arbitral Tribunal has not followed the mandatory procedure prescribed under Sections 24, 28 or 31(3), which affects the rights of the parties. Under sub-section (1)(a) of Section 28 there is a mandate to the Arbitral Tribunal to decide the dispute in accordance with the substantive law for the time being in force in India. Admittedly, substantive law would include the Indian Contract Act, the Transfer of Property Act and other such laws in force. Suppose, if the award is passed in violation of the provisions of the Transfer of Property Act or in violation of the Indian Contract Act, the question would be--whether such award could be set aside. Similarly, under sub-section (3), the Arbitral Tribunal is directed to decide the dispute in accordance with the terms of the contract and also after taking into account the usage of the trade applicable to the transaction. If the Arbitral Tribunal ignores the terms of the contract or usage of the trade applicable to the transaction, whether the said award could be interfered. Similarly, if the award is a non-speaking one and is in violation of Section 31(3), can such award be set aside? In our view, reading Section 34 conjointly with other provisions of the Act, it appears that the legislative intent could not be that if the award is in contravention of the provisions of the Act, still however, it couldn't be set aside by the court. If it is held that such award could not be interfered, it would be contrary to the basic concept of justice. If the Arbitral Tribunal has not followed the mandatory procedure prescribed under the Act, it would mean that it has acted beyond its jurisdiction and thereby the award would be patently illegal which could be set aside under Section 34.

13. ... in our view, the phrase `public policy of India' used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term public policy in Renusagar case, it is required to be held that the award could be set aside if it is patently illegal. The result would be --award could be set aside if it is contrary to:

a) fundamental policy of Indian law; or

(b) the interest of India; or

(d)in addition, if it is patently illegal.

Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void.

14. From the above decisions, the following principles emerge:

(a) An Award, which is

(i) contrary to substantive provisions of law ; or (ii)the provisions of the Arbitration and Conciliation Act, 1996 ; or

(iii)against the terms of the respective contract ; or

(iv)patently illegal, or

(v) prejudicial to the rights of the parties, is open to interference by the Court under Section 34(2) of the Act.

(b) Award could be set aside if it is contrary to :

(a) fundamental policy of Indian Law; or

(b) the interest of India; or

(d) It is open to the Court to consider whether the Award is against the specific terms of contract and if so, interfere with it on the ground that it is patently illegal and opposed to the public policy of India.

15. In Mcdermott International Inc. Vs. Burn Standard Co. Ltd. And Others; (2006) 11 SCC 181, definition of pubic policy as defined in the case of O.N.G.C. (Supra) was followed and the case was affirmed. As even in recent past in the case of J.G. Engineers Private Ltd. Vs. Union of India And Another; (2011) 5 SCC 758, the Supreme Court has again adhered to the definition of public policy as defined in the case of O.N.G.C. (Supra).

16. Nothing has been shown by the appellant that the award is contrary to the policy or against the interest of the nation or against the justice or morality. The learned court below has also relied on 2009 Allahabad All.CJ 1388 where it was held that jurisdiction of the Court to interfere with an award of Arbitrator is limited one. Court has limited power to set aside the award of Arbitrator but has no authority of law to grant any further relief.

17. The party challenging the award has to discharge the burden of proof by adducing sufficient credible evidence to show the existence of any one of such ground which has been mentioned under Section 34 of the Arbitration Act. In addition to the above fact, the learned court has also considered the consent letter in form of compromise submitted by the parties including appellant before the Arbitrator/ District Magistrate who proceeded to decide and dispose of the case in light of the consent letter/compromise. It has been further discussed in the order that total area was not covered under non agricultural land. It was divided between to parts agricultural and non agricultural and the rate applicable was applied and paid to the claimant as amount of compensation.

18. In light of above facts, we are of the view that the learned court below has proceeded in accordance with Section 34 of the Act and there is no illegality or irregularity in deciding the application. The appeal lacks merit and deserves to be dismissed. Accordingly the appeal is dismissed. The lower court record be immediately sent back to the court concerned in safe custody and sealed cover.

Order Date :- 27.11.2017

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