Calcutta High Court
The Jute Corporation Of India Ltd vs Abl International Ltd. (Now ... on 10 May, 2023
IN THE HIGH COURT AT CALCUTTA
CIVIL APPELLATE JURISDICTION
ORIGINAL SIDE
Present:
The Hon'ble Justice Soumen Sen
And
The Hon'ble Justice Saugata Bhattacharyya
A.P.O. 171 of 2018
With
A.P. 455 of 2014
The Jute Corporation of India Ltd.
Vs.
ABL International Ltd. (now Sudera Realty Pvt. Ltd.)
And
A.P.O No. 172 of 2018
with
A.P. No.456 of 2014
Jute Corporation of India Limited
Vs.
Vineet Private Limited
A.P.O. No.180 of 2018
With
A.P. No.616 of 2014
Sudera Realty Private Limited
Vs.
The Jute Corporation of India Ltd.
And
A.P.O No. 181 of 2018
With
A.P. No.618 of 2014
Sudera Realty Private Limited
Vs.
The Jute Corporation of India Ltd.
For the Appellants in : Mr. Tilak Bose, Sr. Adv.
APO 171/2018 and APO 172 of 2018 : Mr. Anuj Singh, Adv.
And Respondents in APO 180 of 2018 : Mr. Debabrata Das, Adv.,
And APO 181 of 2018 : Mr. Partha Banerjee, Adv.,
: Mr. Saptarshi Mukherjee, Adv.
For the appellants in : Mr. Jishnu Saha, Sr. Adv.,
2
APO 180 of 2018 and APO 181 : Mr. U.S. Menon, Adv.,
of 2018 and respondents in : Mr. Zeeshan Haque, Adv.,
APO 171 of 2018 and 172 of 2018 : Mr. Abhirup Chakraborty, Adv.
: Mr. Ishaan Saha, Adv.
Hearing concluded on : 27th April, 2023
Judgment Date : 10th May, 2023
Soumen Sen, J.:- These present appeals and cross-appeals are
arising out of a common judgment and order dated April 23, 2018 passed by
a learned Single Judge in connection with four applications for setting aside
of two arbitral awards both dated December 20, 2013 under Section 34 of
the Arbitration and Conciliation Act, 1996 (hereinafter 'the 1996 Act').
I. Summary of Facts
2. The facts relevant for the purpose of deciding these appeals, are
summarised below:-
I. Sudera Enterprises Pvt. Ltd. executed a deed of lease in favour of the
award-debtor, i.e. Jute Corporation India Ltd. (hereinafter 'the
Corporation'), on December 5, 1972 in respect of 5th floor of premises
no.1, Shakespeare Sarani, Kolkata - 700 071 (hereinafter referred to
as 'the said premises'). Subsequently the parties have entered into
another lease agreement regarding the 7th floor of the said premises
on January 1, 1976. The successors-in-interest of Sudera
Enterprises Pvt. Ltd. in respect of the 5th and 7th floor of the said
premises are Vineet Pvt. Ltd. and ABL International Pvt. Ltd
respectively. They shall be described as 'lessors' of both floors of the
said premises to avoid confusion.
II. Both the lease agreements were for a period of 21 years, with an
option for renewal for a term of ten years on certain terms and
conditions being fulfilled. The lease for the 5th floor and the 7th floor
of the said premises expired due to efflux of time on September 1,
1994 and January 1, 1997 respectively. The Corporation, however,
did not vacate the two floors upon the expiry of the leases.
III. On April 21, 1995, the lessor of the 5th floor filed a suit in this Court,
being Suit No. 138 of 1995, against the Corporation praying inter alia
for khas possession of the 5th floor of the said premises and mesne
profits. The Corporation filed a counter-suit being Suit No. 134 of
1996 for a decree for specific performance of the agreement in
respect of the 5th floor of the said premises and renewal of the lease
by a further period of ten years. The suit filed by the lessor was
allowed and a decree for eviction and mesne profits was passed on
March 12, 1998, and the suit filed by the Corporation was dismissed.
IV. In the meantime, the lessor of the 7th floor also filed another suit in
this Court, being Suit No. 93B of 1997, against the Corporation in
respect of the 7th Floor with similar reliefs. In the said suit, the lessor
filed an application for summary judgment under Chapter XIIIA of
the Original Side Rules of this Court. By a judgment and decree
dated July 14, 1998, a Learned Single Judge of this Hon'ble Court
allowed the said application and directed the Corporation to hand-
over vacant possession of the 7th floor of the said premises to the
lessor on or before March 1, 1999. The learned Single Judge also
appointed a Special Referee to assess mesne profits for the period of
overstay by the Corporation.
V. Aggrieved by the orders passed in both the proceedings, the parties
filed three separate appeals. The first two appeals were filed by the
lessors and the Corporation respectively against the order of the
Single Judge dated March 12, 1998 in respect of the 5th floor of the
said premises. The third appeal was filed by the Corporation against
the order of the Single Judge dated July 14, 1998 allowing the
Chapter XIIIA application of the landlord in respect of the 7th floor of
the said premises.
VI. A Division Bench of this Court was pleased to dispose of the first two
appeals by an order dated August 24, 1999. In regards the third
appeal, a Division Bench of this Court, by an interim order dated
April 19, 1999, after recording the undertaking of the Corporation to
pay occupational charges at the rate of Rs.60/- per sq. ft. per month
inclusive of air conditioning and service charges, granted a stay on
the operation of the judgement and decree of the Single Judge dated
July 14, 1998. Ultimately, the said third appeal was dismissed by the
Division Bench by a judgment and order dated August 11, 1999. The
Division Bench however, granted stay of operation of the said order
on the prayer of the Corporation on an undertaking to pay a sum of
Rs.50 lakh to the lessor.
VII. Thereafter, the parties filed separate Special Leave Petitions in the
Hon'ble Supreme Court, against the orders passed by the Division
Bench dated August 11, 1999 and August 24, 1999 respectively. The
Special Leave Petitions filed by the lessor against the order dated
August 24, 1999 were registered as S.L.P. Nos. 13567-13568 of
1999, whereas the Special Leave Petitions filed by the Corporation
were registered as S.L.P. Nos. 14726-14727 of 1999. In regards the
order dated August 11, 1999, the Special Leave Petition was filed by
the Corporation was registered as S.L.P. (C) No. 13827 of 1999.
VIII. On September 24, 1999, the Hon'ble Supreme Court, in respect of
the appeals against the order dated August 24, 1999, directed the
counsel for the parties to seek instructions for proper determination
of the rent so as to bring quietus to the litigation in respect of the 5th
floor of the said premises. On October 1, 1999, the Supreme Court,
in respect of the appeal against the order dated August 11, 1999
directed the Corporation to pay as per the undertaking given by it
before the Division Bench on April 19, 1999, as a precondition for
considering the question of admitting the Special Leave Petition.
IX. Thereafter, several discussions took place between the parties and
two lease deeds were executed between the parties with respect to
the 5th and 7th floor of the said premises respectively on January 24,
2000. In these new lease deeds, it was agreed that the period of lease
would be for ten years commencing from September 1, 1994 for the
5th floor of the said premises, while the lease in respect of the 7th
floor of the said premises would end on January 1, 2007.
X. In both lease deeds, it was agreed that the consolidated rent would
be @ Rs.27.35 per sq. ft. per month only. This consolidated rent
would include Rs.3.33 per sq. ft. per month as basic rent, Rs.4.95
per sq.ft. per month as the service charge, and Rs.19.07 per sq. ft.
per month as air conditioning charge, cleared of all deductions,
effective from December 1, 1999. The Corporation also agreed to pay
arrears of rent up to November, 1999 @ Rs.23.33 per sq.ft. per
month. These new lease deeds with respect to both floors of the said
premises were placed before the Hon'ble Supreme Court. The Hon'ble
Supreme Court disposed of all the Special Leave Petitions on
February 14, 2000, whilst recording in its order that the parties had
arrived at a settlement and that the parties shall approach the High
Court at Calcutta to withdraw all suits and proceedings pending in
the Hon'ble Court in accordance with the settlement arrived at
between the parties.
XI. The lessors called upon the Corporation on April 28, 2000 and May
23, 2000 respectively to get the new lease deeds both dated January
24, 1999 in respect of the 5th and 7th floor of the said premises
registered but the Corporation failed to do so. On August 31, 2000,
the Corporation gave notice surrendering the lease of the 5th and 7th
floor of the said premises, which was objected to by the lessors. The
Corporation ultimately vacated both floors of the said premises on
and from October 31, 2000. Thus leading to dispute.
XII. In accordance with the two lease deeds dated January 24, 2000, the
parties initiated arbitration proceedings for resolving their disputes.
An application was filed in the Hon'ble Court, being A.P. No. 53 of
2001, under Section 11(6) of the 1996 Act for the appointment of an
arbitrator. This Hon'ble Court, by an order dated September 26,
2002, appointed the Hon'ble Mr. Justice (Retd.) S.N. Bhattacharya, a
former Judge of this Court, as the sole arbitrator with regard to the
dispute between the parties in relation to the new lease deeds. Due to
the demise of Mr. Justice Bhattacharya, by an order dated
September 11, 2008, the Hon'ble Mr. Justice (Retd.) Suhas C. Sen, a
former Judge of the Supreme Court, was appointed as the new
arbitrator.
XIII. Mr. Justice Suhas C. Sen passed the impugned awards both dated
December 20, 2013. In the first award in respect of the 5th floor of
the said premises in A.P. No. 53 of 2013, Mr. Justice Sen held that
the new lease deed was in the nature of a "package deal", whereby
the occupation of the 5th floor of the said premises by the
Corporation was regularized retrospectively at the agreed rate of rent.
It was held that the Corporation had clearly violated the agreement
between the parties since the lease deed did not have a termination
clause by which the Corporation could have terminated the lease.
The Corporation could not take advantage of the non-registration of
the lease deed on its part and was therefore liable to pay damages for
the breach of the new lease deed.
XIV. On the question of the quantum of damages, the consolidated rent
agreed upon by the parties was considered and it was held that the
air conditioning charges were not an integral part of the lease rent.
The liability of the respondent was only to pay the basic rent @
Rs.3.33 per sq.ft. per month as damages. The learned arbitrator on
the basis of such finding passed an award of Rs.35 lakh as damages
in favour of the lessors whilst stipulating that if the said amount was
not paid within a period of three months from the date of the award,
the Corporation would be liable to pay interest at the rate of 10 per
cent per annum from the date of the award till the date of final
payment.
XV. In the award in respect of the 7th floor of the said premises in A.P.
No. 52 of 2001, the learned arbitrator gave an award of Rs.50 lakh in
favour of the lessors on the same reasoning and same conditions as
mentioned in the award in relation to the 5th floor of the said
premises.
II. Proceedings before the Learned Single Judge
3. Being aggrieved by the two awards, the lessors filed two
applications under Section 34 of the Arbitration and Conciliation Act, 1996
for setting aside of the awards being A.P. No. 616 and A.P. No. 618 of 2014.
The Corporation also filed two applications for setting aside being A.P. No.
4. Briefly summary of the substance of the case made out by the
parties before Justice I.P. Mukherjee is indicated below:
(i) The lessor's Case before the Learned Single Judge:
5. The primary grievance of lessors was that the learned arbitrator
in the two awards had held that the landlord was only entitled to damages @
Rs.3.33 per sq. ft. per month for the residual period of the leases from the
Corporation disregarding the consolidated rent agreed between the parties @
Rs.27.35/- per Sq Ft. per month.
6. The consolidated rent would include air conditioning and
service charges. The learned arbitrator had ignored his own finding of fact
that the lease agreement was in the nature of a "package deal" between the
parties. There was no finding that the service charge was not part of the
lease rent. The learned arbitrator had ignored the fact that the payment of
air conditioning charges would be irrespective of functioning of AC.
7. The lease agreement provided for increase in air conditioning
charges due to increase in rate of charges per unit of electricity
consumption. It did not provide for the converse scenario of decrease in
charges due to decrease in electricity costs. The lessors, inter alia, have
prayed for setting aside of the impugned awards and grant of damages @
Rs.27.35 per sq. ft. per month from the Corporation instead of Rs.3.33/- per
sq. ft. along with interest.
(ii) The Corporation's Case before the Single Judge:
8. The primary grievance of the Corporation was that the learned
arbitrator did not consider the fact that the lessors were unable to show that
it had taken steps to mitigate its loss. The duty to mitigate fell on the lessors
and the burden of proof to show that it had exercised its duty to mitigate
was on the lessors. The application claimed that, initially, the documents
and oral evidence disclosed by the lessors before the arbitrator did not
disclose any steps being taken to mitigate. However, later, there was an
attempt to disclose documentary evidence for showing that sincere attempts
have been made to mitigate the damage. In the application it was alleged
that the objections of the Corporation to the filing of the new evidence were
not taken into account and were not mentioned in the impugned awards.
9. The two awards were challenged on the ground of patent
illegality and violation of public policy.
(iii) The Judgment of the Learned Single Judge
10. On consideration of the pleadings, materials on record and the
arguments of the parties, Justice I.P. Mukerji passed the impugned
judgment and order dated April 23, 2018. The learned Single Judge found
that the lease deeds of the said premises were grossly under-stamped and
unregistered.
11. The argument that the said lease deeds merely extended the
already existing tenancy was rejected. It was held that the extension of a
lease occurs when there is an underlying demise, and such an extension
does not require registration or payment of stamp duty, since there is no
fresh demise of the property or any fresh creation of interest therein. In
contrast, when a lease comes to an end another lease is created by a fresh
demise, which requires payment of stamp duty and registration if it is for
more than one year under Section 107 of the Transfer of Property Act, 1882
read with Section 17 of the Registration Act, 1908 and the Indian Stamp
Act, 1899. In reaching this conclusion, the learned Single Judge had placed
reliance on the following authorities:
1. Banker v Merckel, reported in 1960 (1) All E.R. 668,
2. State of U.P. & Ors. v. Lalji Tandon (Dead) Through L.R.s.,
reported in 2004 (1) SCC 1,
3. Provash Chandra Dalui v. Biswanath Banerjee, reported in 1989
Supp (1) SCC 487,
4. State of Gujrat & Ors. v. Nirmalaben S. Mehta & Anr., reported in
2016 (9) SCC 240,
5. Sociedade De Fomento Industrial (P) Ltd. v. Hede & Company,
reported in 2007 (5) SCC 614.
12. Applying this interpretation of the law to the facts, the learned
Single Judge agreed with the findings of the learned arbitrator that in the
present case there was no extension of an already existing lease but the
creation of a new lease altogether. The learned Single Judge held that under
Section 49 of the Registration Act, the lease deeds could not be received in
evidence, since they were not registered, It was also held that no right in the
property in question was transferred. However, Justice Mukerji has stated
that the Court could look into the lease deeds for collateral purposes, as
held in K.B. Saha & Sons Private Ltd. v. Development Consultant Ltd.,
reported in 2008 (8) SCC 564. Placing reliance on SMS Tea Estates Pvt.
Ltd. v. Chandmari Tea Company Pvt. Ltd., reported in 2011 (14) SCC
66, it was held that the subject of the lease deeds could not be looked into
for any purposes under Section 35 of the Indian Stamp Act and in such
circumstances, the lease was to be treated as one that was from month to
month being terminable by 15 days' notice as held in Food Corpn. of India
& Ors. v. Babulal Agarwal, reported in 2004 (2) SCC 712 and Rabindra
Nath Pal v. Dr. Subodh Chandra Halder, reported in (2006) 110 C.W.N.
227.
13. It was also held that handing over vacant possession of the
premises could not have caused any damage, meaning thereby that the
lessee was not liable to recompense the lessor for any alleged loss. Hence, it
was held that the lease deeds could not be looked into by the learned
arbitrator to ascertain the terms and conditions thereto. However, the
learned Single Judge noted that the arbitrator's view that there was an
equitable lease over and in respect of the said premises is a view supported
by authorities like Suleman Haji Ahmed Umar v. P.N. Patel, reported in
AIR 1933 Bom 381 and Section 53A of the Transfer of the Property Act.
Keeping this in mind and placing reliance on Associate Builders v. D.D.A.,
reported in 2015 (3) SCC 49, the learned Single Judge held that the view of
the arbitrator was one of two equally tenable views, and since a court in a
setting aside application was not hearing an appeal, the learned Single
Judge was inclined not to interfere with the learned arbitrator's award in
this regard.
14. The learned Single Judge declined to accept the argument that
the lessee could not have relinquished the said premises within the time
fixed by the demise. The argument that the stipulation as to rent was to be
taken as the minimum amount payable by the lessee on quitting the said
premises prior to the expiry of the leases was also rejected. In
distinguishing the cases cited, the learned Single Judge stated that in the
instant case there was at best an equitable lease, rather than a legal lease,
in favour of a lessee with the stipulation that the lessee could not leave the
premises before the expiry of a particular period of time, without paying
liquidated damages. In any case, His Lordship has stated that he could not
find any concrete term in the lease deeds specifying an amount payable in
case of breach.
15. The learned Single Judge in considering the issue whether the
award of damages by the learned arbitrator was in accordance with law
answered this question by referring Section 73 of the Indian Contract Act,
1872. It was held that, for the purposes of estimating loss or damage under
the said section, one has to take into consideration the circumstances that
existed for the party suffering the breach to reduce his loss and damage.
Justice Mukherjee was of the view that the plaintiff could not claim the
damages as quantified by them for he has a duty to reasonably reduce the
damages as far as possible so that the damages awarded to him is
reasonable. In this regard, Justice Mukherjee has relied upon the
observations of Viscount Haldane in British Westinghouse Electric &
Manufacturing v Underground Electric Railways Co. of London Ltd.,
reported in [1912] A.C. 673 at page 689. This principle had been approved
in Murlidhar Chiranjilal v Marishchandra Dwarkadas & Ors., reported
in AIR 1962 SC 366 and restated in The Soholt, reported in [1983] 1
Lloyd's Rep. 608. It was held that whether a loss was avoidable by a
reasonable action on the part of the plaintiff is a question of fact not of law,
as held in Payzu Ltd. v. Saunders, reported in [1919] 2 K.B. 581.
16. Furthermore, the learned Single Judge quoted a judgment of the
Division Bench of the Madhya Pradesh High Court in Pannalal Jugatmal
v. State of M.P., reported in AIR 1963 MP 242 and made reference to the
case of Mt. Aliya Begam & Ors. v. Mt. Mohini Bibi & Ors., reported in
AIR 1943 Oudh 17, to state that Section 73 of the Indian Contracts Act
casts a burden upon the claimant to show that he did not possess the
means of remedying the inconvenience caused by the non performance of
the contract and the burden is placed on the claimant to show that being
that the innocent party should make a reasonable exertions to render the
injury as light as possible.
17. On such consideration it was held that the lease rent could not
be taken as the only factor in calculating damages. It was the duty of the
Landlord to show how they could have mitigated their damages by
indication of another lessee for the whole of the unexpired period of the
lease or part of it. Thus, the learned Single Judge held that on this point on
the mitigation of damages, the impugned award was against the substantive
law of India and was plainly unreasonable, irrational based on no evidence.
18. The learned Single Judge set aside the impugned award in so
far as a dealt with the question of damages and appointed Hon'ble Mr.
Justice Dipak Saha Roy, a retired Judge of this Court, as the arbitrator to
decide the claim for damages and remitted the award for further
consideration on this issue only. His Lordship stated that before the learned
arbitrator would embark on deciding the question of damages another
opportunity would be given to the parties to disclose the evidence examine
witnesses, produce documents and make arguments on the question of
damages only.
III. Submissions of the Parties in Appeal
iv. Submissions on behalf of the Corporation
19. Mr. Bose submits that the success and failure of the appeal
would depend upon a decision on issue nos. 6 and 7. The said issues are:
"6. Whether the claimant is entitled to any compensation for the
illegal breach of contract?
7. If so, to what extent?"
20. Mr. Tilak Bose, learned Senior Counsel for the Corporation, has
argued that under Section 73 of the Indian Contract Act, 1872 damages
have to be reasonable and foreseeable, i.e. not remote. In estimating such
loss and damage, the means which existed for remedying the inconvenience
caused by the non-performance of the contract must be taken into account,
as provided in the Explanation to Section 73. Mr. Bose submits that the
onus is clearly on the claimant to prove such damages and the learned
Single Judge has come to a finding that this onus has not been discharged
by the claimant, lessors.
21. The finding of learned Single Judge based on an interpretation
of Section 73 of the Contract Act as placed by Mr. Bose is as follows:-
"The plaintiff cannot claim the entire damages that has occurred
during the breach of the defendant. He has a duty to reduce the
damages as far as possible so that the sum to him is reasonable."
"The learned Arbitrator has not considered the question of mitigation
of damages at all. In one line he has dealt with the issue accepting
the evidence of the claimant that they could not get a lessee or
tenant for those two floors....."
"If the respondent had determined the contract abruptly then the
lease rent should not be taken as the only factor in calculating
damages ....."
"It was the duty of the claimant to show how they could have
mitigated these damages by induction of another lessee or tenant for
the whole of the unexpired period of the lease or part of it."
22. Mr. Bose submits that there was no evidence in support for the
claim on account of damage. There is simply no whisper in the award of ABL
International Ltd. However, the learned Arbitrator has noted that "the facts
and points of law in this case are similar to the dispute raised in the case of
Vineet Pvt. Ltd....."
and "in view of the reasons given in the case of Vineet Pvt. Ltd. in A.P.
No.63 of 2991, the case is disposed of by a similar award."
23. For Vineet Pvt. Ltd. now Sudera Realty Pvt. Ltd. as noted by
learned Single Judge in the impugned order and judgment "in one line he
has dealt with the issue, accepting the evidence of the claimant that they
could not get a lessee or tenant for those two floors....."
24. The finding in the award in relation to 5th floor (Vinet Pvt. Ltd.)
by Learned Arbitrator is as follows:-
"However, the claimant has adduced evidence to show that the
disputed premises could not be let out during the unexpired lease
period. The respondent has not produced any evidence to the contrary."
25. Mr. Bose submits that:
i) the entire finding is based on no evidence.
ii) Learned Arbitrator did not even choose to discuss any part of the
evidence or documents which were attempted to be used on
behalf of the claimant in Vineet Pvt. Ltd.
iii) Mr. Bose submits that in the 3rd sitting held on 30.04.2009,
learned Sr. Counsel appearing on behalf of Jute Corporation of
India Ltd. moved a formal application before Arbitral Tribunal for
recalling the order of 25.11.2008 by which fresh evidence was
allowed when directions were given to such application.
Arguments in this regard were made at the 5th sitting held on
5.8.2009. At the 6th sitting held on 6.8.2009, an order was
passed by learned Arbitrator that the evidence of Panmal Sethia
would be subject to objection as to admissibility. There is no
discussion regarding admissibility of the evidence of Panmal
Sethia by learned Arbitrator in the award. In the absence or
failure on the part of the claimant to prove its claim, the award
should be set aside on that ground alone. Mr. Bose submits that
there is an error apparent on the face of the award. The Learned
Arbitrator has equated the claim of the landlord to the proof of
the claim inasmuch as apart from few statements made by
Panmal Sethia there was practically no evidence on the basis of
which the Learned Arbitrator could have passed an award
towards damages as held in State of Rajasthan & Ors. v. Ferro
Concrete Construction Pvt. Ltd., reported in 2009 (12) SCC 1,
[paragraphs 52-55]. It is further submitted that the expression
"whether or not actual damage or loss is proved to have been
caused thereby" mentioned in Section 74 of the Indian Contract
Act, has been interpreted in Kailash Nath Associates v. D.D.A.
& Anr., reported in 2015 (4) SCC 136 to mean that where it is
possible to prove actual damage or loss, such proof is not
dispensed with. It is only in cases where damage or loss is
difficult or impossible to prove that the liquidated amount named
in the contract as a genuine pre-estimate of damage or loss can
be awarded. Mr. Bose submits that this principle has been clearly
stated in paragraphs 29-30, 33, 43 of the said report.
iv) Mr. Bose has argued that any finding on the breach and the
claim for damages is required to be supported with reasons and
in absence of any reason in view of Section 31(3) of the
Arbitration and Conciliation Act, 1996, the entire award is liable
to be set aside. In fact there are no reasons except a bald one line
statement and such statements are regarded in law as findings
without reasons.
1. State of West Bengal -vs- Bharat Vanijya reported in 2020
(1) WBLR Cal 199.
v) Division Bench Judgment of the Madras High Court in
Hindusthan Petroleum v Banu Construction decided on 9th
February, 2021.
26. The Tribunal could not have decided the claim for damages
merely on the basis of the statements of Panmal Sethia. In fact, one Mr.
Gautam Roy on behalf of the claimants adduced evidence. However, damage
and mesne profits were attempted to be proved by one Atanu Mitra who filed
on affidavit of evidence. After the erstwhile arbitrator died and Justice S.C.
Sen (Retd.) was appointed an attempt was made to file fresh evidence which
was opposed as before the previous learned Arbitrator arguments were
closed. However, fresh affidavit evidence was filed by Panmal Sethia on
behalf of the claimants and the learned arbitrator had allowed such evidence
to be taken on record after permitting withdrawal of earlier affidavit evidence
by Atanu Mitra.
27. Mr. Bose submits that an unregistered document can only be
used as an evidence for collateral purpose and it must be independent of the
transaction which by law requires registration, meaning thereby, that such
transaction would not create any right, title or interest in the property.
However, in view of non-registration the said lease agreement is
inadmissible in evidence and none of its terms can be admitted in evidence.
The reliance on tenure clauses by the lessors to show that it is for a definite
period of 10 and 7 years respectively cannot be looked into as it is an
important clause which cannot be used for any collateral purpose as would
be evident from the decision of Hon'ble Supreme Court in Park Street
Properties Private Limited v. Dipak Kumar Singh & Anr., reported in
2016 (9) SCC 268.
28. Even if it is assumed for the sake of agreement that the terms of
the lease deed can be looked into, it will be evident, according to Mr. Bose,
that there is no specific lock-in period. Even learned Single Judge in
impugned order and judgment dated 23rd April, 2013 has rejected the
argument based on lock-in-period by holding that lease did not provide for
the same in the following words:
"In my opinion argument concerning lock-in-period in the lease has no
manner of application in this case.......".
29. Fundamentally, in the commercial world, all contracts are
determinable in nature provided reasonable notice is given, even in the
absence of a specific clause enabling either party to terminate. Mr. Bose
submits that a contract can never be perpetual, and even if the contract
may not contain an express termination clause, Section 106 of the Transfer
of Property Act provides a mode of termination by allowing both the lessor
and the lessee the right to terminate by giving 15 days' notice.
30. Moreover, whoever wants to take benefit of registration of a
lease must have it registered. Usually, it is the tenant who wants protection
against eviction and therefore, get it registered. Section 32 of the
Registration Act casts duty on both lessor and lessee to register as observed
in Rabindra Nath Pal v. Subodh Chandra Halder reported at 110 CWN
227.
31. Mr. Bose submits that the learned arbitrator has proceeded that
"the agreement between the parties was in the nature of a "package deal"
and observed:
"The occupancy of the 7th floor by the respondent was regularized
retrospectively at an agreed rate of rent Rs.27.35 per square feet per
month. Having regard to the facts and circumstances discussed
above, I am of the view that the lease deed dated 24th January,
2000 was part of a packaged deal by which disputes and
differences between the parties were settled and on the basis of
which Supreme Court disposed of the cases pending before it." The
above findings of the learned Arbitrator have been sustained by the
Hon'ble Single Judge on the ground that the said view is "plausible
view".
32. Mr. Bose submits that the impugned awards are de hors the
contract, since whether or not the contract was a 'package deal' in
light of the prior proceedings before the Supreme Court was wholly
immaterial, and the arbitrator overstepped his jurisdiction by
considering the terms of the agreement "a package deal", when such
terms are clear and unambiguous. Hence, the finding of the arbitrator
that the contract was a package deal was patently illegal and against
the fundamental law of India.
33. Assuming it was indeed a package deal and documents in
connection with the agreement including its terms (whether collateral or
otherwise) can be looked into, the award is perverse and also unreasoned
since it fails to take into account such terms. Section 28(3) of the Arbitration
and Conciliation Act, 1996 enjoins a duty of the Arbitrator to pass an award
in terms of the contract prior to amendment in 2015. Thus it was duty of
learned Arbitrator to look into all terms of the contract which the learned
Arbitrator has regarded as "a package deal".
34. It is submitted that the documents which were forwarded by
Advocate on Record of Sudera Realty Pvt. Ltd. under cover of a letter dated
26th September, 2003 during the course of the arbitration proceedings were
completely ignored. If the award of learned Arbitrator was indeed on the
basis of a package deal then the terms of the "package deal" ought to have
been identified and considered. If such terms of the package deal are looked
into then the entire claim of Sudera Realty Pvt. Ltd. Would be without any
basis.
35. Mr. Bose referred to the following documents and relevant
clauses in such documents said to have been disclosed in the letter dated
26th September, 2003, they are:
i) Proposed Memorandum of Understanding 19th November, 1999.
It states the following:
"Clause 3(a) states that no A.C. charges to be paid when A.C.
service is not provided due to whatever reasons."
This is also reflected in the agreement dated 24th January, 2000 and
Clause 3(c) of the said agreement provides for inclusion of a
TERMINATION clause.
ii) A suggested order which was signed on behalf of Sudera Realty
Pvt. Ltd. On 3rd January, 2000 in clause 2 states that Jute
Corporation of India could vacate the occupied portion on 31st
August, 2004 for 5th floor and 31st December, 20006 (for 7th floor)
or earlier by giving three months' notice to Sudera.
36. Mr. Bose argues that the unregistered agreement dated January
24, 2000 being a lease deed containing the arbitration clause was
compulsory registrable in view of Section 17 and Section 49 of the
Registration Act, 1908 read with Section 35 of the Indian Stamp Act, 1899.
37. Mr. Bose asserts that the agreements were compulsorily
registrable and the Corporation was fully justified in exercising its statutory
rights under Section 106 of the Transfer of Property Act. Mr. Bose submits
that there can be no estoppels against a statute and the reliance placed by
Mr. Saha on Babulal Agarwal (infra) is wholly misconceived since the
judgment is concerned with moveable property. The said judgement is
related to a lease of hiring of plinths for storage of food grains (movable
property) and did not relate to lease of any immovable property. The said
judgement has to be read in its true perspective and in fact supports the
case of Jute Corporation of India. The said Judgement relied upon by the
claimant has rightly been distinguished by the Hon'ble Single Judge.
38. Mr. Bose submits that the entire set of documents annexed to
the affidavit of Panmal Sethia are either fraudulent documents or wholly
irrelevant. Eight documents annexed to the affidavit of evidence of Mr.
Sethia. The said documents with the comments of Mr. Bose are given in a
tabular form below:
Document Comment
i. Letter dated 16th October, This letter is to be compared
2003. with the with the letter of the
same date both purportedly
signed by Atanu Mitra.
It forms part of an affidavit
evidence of Atanu which was
later withdrawn and amongst
others it contains a landline
number that is, 22827615
which would clearly show
that the said document is
forged.
ii. Letter dated 2nd June, The said letter is signed
2004 disclosed in the apparently by Mr. Rampuria,
affidavit filed by Panmal Director. The phone number
Sethia. is clearly mentioned as
22827616. The said phone
number of ABL International
is incorrect as would be
apparent from pp.240,241,
242 and 243 of P.B.Vol.II
which are all annexed to the
affidavit of Atanu Mitra
which were not taken on
record.
iii. Letter dated 13.9.2004. A letter in response to an
advertisement and is also
near the end of tenure of
lease of 5th floor (Vineet),
that is, 31.12.2004.
iv. Letter dated 8.6.2004. The said letter too contains
an incorrect phone number
22827616 whereas the
correct phone number
22827615 as would appear
from the affidavit evidence of
Atanu Mitra.
v) Letter dated 2.6.2004. It was alleged to have been
signed by Director but has
incorect phone number
22827616 whereas the
correct number would be
22827615 as would appear
from affidavit evidence of
Atanu Mitra.
vi. Letter dated 15.12.2004. It was in respect of 1,40,000
sq. ft. area at a point of time
when tenure of lease for
Vineet had nearly expired,
namely 5th floor on 13th
December, 2004. It would
also appear from such
document that seven floors
were being offered.
vii. Letter dated 24.1.2005. It was written by Director,
Mr. Rampuria by which date
the tenure of the lease for
Vineet (5th floor) had already
expired. It would also appear
from the purported letter that
three floors have been
mentioned.
On the basis of the aforesaid unreliable documents it is now sought to
be contended and argued that there were some evidence before learned
Arbitrator to support such one line unreasoned finding of the learned
Arbitrator.
39) Mr. Bose submits that damages are always assessed on the date of
the breach. There is simply no document on the record to show the steps
taken by the claimant to assess damages or to mitigate loss on the date of
the breach, that is, the date of notice dated 31st August, 2000. Those notices
are not under challenge and has taken into account by the learned Single
Judge in the impugned judgment.
40) Mr. Bose submits that the "one line" finding with regard to evidence
by learned Arbitrator is perverse.
41) The finding of learned Arbitrator regarding evidence of
mitigation is not supported with any reason.
42) Finding of learned Arbitrator on the basis of above fraudulent
and/or irrelevant documents will be regarded as a finding based on no
evidence.
43) What is more significant is that all the purported documents
annexed to the evidence of Panmal Sethia are in the letter head of ABL
International Ltd. and finding of learned Arbitrator in the detailed award is
based on 5th floor belonging to Vineet Pvt. Ltd. There is not a single
document in the letter head of Vineet (5th floor).
44) Mr. Bose has drawn our attention to the observation of the
learned Single Judge, that the claimant cannot claim damages for entire
unexpired period occurred due to alleged breach of the respondent. The
Claimant had a duty to "reasonably reduces the damages as far as possible
so that the sum awarded to him were reasonable" and it was the duty of the
claimants to show how they could have mitigated these damages by
induction of another lessee tenant for the whole of unexpired period of lease
or part of it."
45) Mr. Bose submits that it is a basic requirement in a claim for
damages that the claimant has to prove damages which are reasonable and
it is a duty of the court to assess and award damages in accordance with the
principle laid down in Section 73 of the Contract Act. The award of the
learned Arbitrator is unreasoned on the question of assessment or
reasonable damages envisaged under Section 73 of the Contract Act. Since
assessment of damages was a specific issue before the learned Tribunal the
award ought to have been passed on proper appreciation and understanding
of Section 73 of the Contract Act which states that damages must be
reasonable. The learned Single Judge has correctly observed that there is
inadequacy of evidence in support of damages.
46) Mr. Bose submits that the claimants want the court exercising
jurisdiction under Section 34 of the Act to interfere with the construction of
the contract clause given by learned Arbitrator in arriving at damages. The
learned Arbitrator has relied on the terms of the contract, namely, the lease
deed and in particular clause IV(i) in quantifying damages @ Rs.3.33 per sq.
ft. being the basic rent and denying any amount towards air condition. The
said clause reads:
"It is hereby confirmed, recorded and declared that in view of the order
passed by the Hon'ble Division Bench and the Supreme Court of India,
the consolidated rent hereby agreed is fair and reasonable rent and it is
arrived at by the parties hereto the rent prevailing in the vicinity at
present for similar premises and the parties hereto shall not be entitled
to challenge or dispute the same before any Forum in any manner
whatsoever or howsoever."
47) Mr. Bose submits that the claimants now want to contend that
the finding of the learned Arbitrator upon construction of the document that
air condition charges were not integral part of the lease rent cannot be
interfered with in this jurisdiction.
48) Our attention is drawn to clause 12 of the said agreement which
records:
"The said arrears have been calculated after deducting the sum
already paid by the lessee to the lessor pursuant to various
Courts' order and for the period during which air-conditioning
was not provided by the lessor to the lessee."
49) It is thus submitted that the agreement itself records that for
the period air-conditioning was not provided deduction would be made.
50) Mr. Bose in this regard has relied upon letter dated 22nd
October, 1999 in which Jute Corporation has stated that "while calculating
the arrear rent proportionate deduction in air conditioning charges would be
made for the period during which A.C facility was not provided at 5th and 7th
floors premises........." and letter dated 26th November, 1999 Jute
Corporation of India had forwarded a cheque for Rs.50 lacs towards arrears
and also finalized the MoU.
51) Our attention is also drawn to Clause 3(a) of the proposed MoU
which states as follows:
"But no AC charges to be paid when AC service is not provided due to
whatever reason."
52) The agreement which was finally executed on 24th January,
2000 clearly mentions that for the arrear rent, the air-conditioning charges
were discounted for the period when A.C. was not provided by the lessor to
the lessee.
53) There can be therefore no doubt that for the unexpired period of
the lease, air-conditioning charges could not be regarded as part of rent.
This is the interpretation given by learned Arbitrator and such construction
of documents and contract cannot be interfered with in an application under
Section 34 of the Arbitration & Conciliation Act, 1996. In fact, in the
impugned order and judgment dated 23rd April, 2018, this portion of the
award has not been interfered with in view of Associated Engineering
Builders vs. Delhi Development Authority reported in 2015(3) SCC 49
(para 41.3 and 42.3).
54) Mr. Bose submits that the circumstances under which an award
can be challenged, has been lucidly explained in Associated Engineering
Builders v. Delhi Development Authority reported in 2015(3) SCC 49
(paragraphs 41.3 and 42.3) and the ground of challenge on the construction
of the said agreement falls within the jurisdiction of the arbitrator and is not
amenable to scrutiny in this jurisdiction.
55) Mr. Bose submits that the learned Single Judge in deciding the
application for setting aside has given liberty to the claimant/landlord to
demonstrate that they were entitled to damages @ Rs.60/- per sq.ft. per
month when the quantum of damages had already been fixed for the
unexpired period by the learned Arbitrator on the basis of the construction
of the documents on record.
56) Mr. Bose has referred to page 432 of the paper book Vol.I and
drawn our attention to the following observation of the learned Single Judge:
"The factor for calculating damages would be the reasonable
letting out value of the premises for the whole of this unexpired
period."
57) Mr. Mitra has submitted that reasonable letting out value has
no manner of application and was not even claimed before the
Arbitral Tribunal.
58) Mr. Bose has submitted that the claimants before the learned
arbitrator has claimed damages @ Rs.27.35 per sq. ft. and the inflated figure
of Rs.60 towards damages although originally claimed was given up and in
this proceeding also they restricted their claim to the consolidated rent as
the basis for the quantification of the damages.
59) Mr. Bose submits that learned Single judge failed to appreciate
that it was not a case where Jute Corporation of India was in wrongful
occupation of the premises, as a result whereof, Sudera Realty Pvt. Ltd. was
unable to utilize the premises. Reasonable letting out value could not have
been a factor. The damages which could be claimed was not on the basis of
reasonable letting out value but the damages which Sudera Realty Pvt. Ltd.
alleged to have suffered because Jute Corporation of India did not stay for
the entire duration and as a result whereof did not pay the fixed rent for this
period.
60) Mr. Bose submits that the judgment of the learned Single
Judge in remanding the matter for fresh adjudication on damages is
contrary to law and liable to be set aside.
61) Mr. Bose submits that the learned Single Judge in the
impugned judgment has clearly erred in remanding the matter (if that was
at all possible) of the assessment of damages, instead of restricting such a
remand to the question of mitigation. The learned Senior Counsel submits
that Jute Corporation is not agreeable to a fresh reference and that it is trite
law that the remand of a matter to an arbitrator after disposal of an
application under Section 34 for fresh consideration is not permissible
under the law.
Submissions on behalf of the Landlord
62) Per contra, Mr. Jishnu Saha, learned Senior Counsel for the
landlord, submits that the arbitrator's finding that the lease deeds herein
were in the nature of the package deal that allowed the Corporation to
continue to occupy the said premises at a consolidated rent @ Rs.27.35 per
sq. ft. per month, subject to the Corporation continuing to remain in
possession for a further period of ten years since the lapse of the earlier
leases cannot be called into question. Mr. Saha asserts that it is not the
Corporation's case that no reasonable person could have taken the view that
has been taken by the learned arbitrator in the impugned awards, meaning
thereby that such finding cannot be disturbed.
63) The lease dated 24th January, 2000 is the settlement on the
basis whereof the Hon'ble Supreme Court dismissed the Special Leave
Petition filed before it (Order dated 14th February, 2000) with liberty to the
parties to approach the High Court to withdraw all pending proceedings.
64) The lease records in significant details, the circumstances in
which the same came to be executed. A summary of such detail is provided
hereunder:
i) The suit being Suit No. 93B of 1997 was filed by the respondent
for eviction of the appellant from the 7th floor of Premises No. 1,
Shakespeare Sarani, Kolkata on the expiration of a lease dated
1st January, 1976 by efflux of time. An application under
Chapter XIIIA of the Original Side Rules was filed in the said suit
which was decreed on 14th July, 1998 directing the eviction of
the appellant from the said 7th floor of the premises. The said
decree also appointed a Special Officer to determine the mesne
profits payable by the appellant for having continued in
occupation of the said premises after expiration of the lease.
ii) An appeal was preferred by the appellant against the said order.
Upon an appeal being preferred against the decree and Court was
pleased to pass an order on 19th April, 1999, recording the
undertaking of the appellant to pay @ Rs. 60/- per sq. ft. per
month for its occupation of the 7th floor premises. The decree
and order dated 19th April, 1998 was stayed on the basis of such
undertaking.
iii) During the pendency of the appeal, the Special Officer submitted
his report determining the mesne profits of the said 7th Floor
premises at Rs. 75/- per sq. ft. per month.
iv) The appeal filed by the appellant against the decree and order
dated 14th July, 1998 was thereafter dismissed on 11th August,
1999.
v) Against the judgment and order dated 11th August, 1999, the
Jute Corporation of India, the appellant herein filed a Special
Leave Petition. The Hon'ble Supreme Court passed an order in
the said Special Leave Petition recording that no payment had
been made by the appellant in spite of the direction of the High
Court which proceeded on the undertaking of the appellant to
pay @ Rs.60/- per sq. ft. per month. The order further recorded
that the parties will seek instruction with regard to the proper
determination of the rent to give a quietus to the litigation. The
Hon'ble Supreme Court thereafter passed a further order on 1
October, 1999 recording the undertaking given by the appellant
to the Division Bench of the High Court at Calcutta to pay rent @
Rs.60/- per sq. ft. per month and observing that only in the event
of the appellant showing its bonafide by obeying such
undertaking, the Court would be inclined to consider the
question of special leave. By the said order the appellant was
directed to furnish proof of deposit as per the undertaking dated
19th April, 1999 within a period of two weeks.
vi) Following the same, the appellant for the first time offered to
settle the matter with the respondent. This will be evident from
the following letters exchanged between the appellant and the
respondent:
a. The letter of the Corporation on 5th October, 1999.
b. Appellant's letter dated 11th October, 1999.
c. The letter of the claimant (Sudera) dated 15th October, 1999.
d. Letter dated 22nd October, 1999.
e. Letter dated 26th November, 1999 enclosing a draft MOU.
f. Letter dated 3rd January, 2000 enclosing a suggested order
for settling the dispute.
g. Sudera letter dated 19th January, 2000 enclosing the
respondent's suggested order.
vii) As will appear from the said letters, the appellant invited the
respondent to fix a date for holding discussions to mutually settle
the terms and conditions for renewal of the lease and to hold
further meetings to work out a mutually arrived settlement in the
matter. The respondent called upon the appellant to give its final
and firm offer in writing to which the appellant responded by
stating that the respondent had expressed its interest in a
composite settlement in renewal of the lease of both 5th and 7th
floors of the premises. The MOU that was forwarded by the
appellant under the cover of its letter dated 26th November, 1999
contained in clause 3(c), a term for inclusion of a termination
clause which was objected to by the respondent. The handwritten
endorsement on the top left-hand corner of the said document
mentioned that the said lease would have to be for at least 10
years. That the now illegible handwriting on the top left hand
corner of the said document provided for a lease for at least ten
years will be evident from Q. Nos. 80, 81 and 82 asked to the
claimant's witness Gautam Roy which was not controverted in
cross-examination. The draft suggested order forwarded by the
appellant under the cover of its letter dated 3rd January, 2000
also included a condition in clause 2 for determination of the
lease by giving three months' notice. This was not accepted by
the respondent. In the suggested order forwarded by the
respondent under the cover of its letter dated 19th January, 2000
which provided that "JCI undertakes to this Hon'ble Court to
vacate the occupied portion on the aforesaid seventh floor on
January 1, 2007.....". The said date of 1st January, 2007 was
suggested as the same would be the completion of tenth year
from the date of expiration of the lease dated 24th January, 2000
which was with effect from 1st January, 1997. This suggested
order was accepted by the appellant as would be evident from the
endorsement made on the right-hand bottom corner of the letter
dated 19th January, 2000 and would also appear from the Q. No.
94 asked to the claimant's witness Gautam Roy which has
remained uncontroverted in cross-examination.
viii) It is in these circumstance that the lease was executed on 24th
January, 2000 recording, inter alia, the following:
1)a) "...... The lessor has hereunto granted to the lessee all that
7th floor containing 17320 sq.ft. be a little more or less ........ to
HOLD the same unto the lessee for a further period of ten years
with effect from 1st January, 1997 ....... at a monthly consolidated
rent of Rs.27.35 (Rupees Twenty-Seven And Paise Thirty-Five) per
sq. ft. per month comprising of Rs.3.33 as basic rent and Rs.4.95
as service charges and Rs. 19.07 as air-conditioning charges
clear of all deductions to be effective from December 1, 1999 .......
and the lessee has further agreed to pay the arrear from 1st
January, 1997 upto November, 1999 on the basis of a
consolidated rent payable @Rs.23.33 per sq.ft. per month."
b) 7. In case of any default in payment of the air- conditioning
charges for any two months by the lessee, the lessor may in its
sole discretion, and upon prior written notice to the lessee,
discontinue or disconnect and/or withdraw the air-conditioning
facilities from the said floor without being liable for damages for
such discontinuance and/or disconnection and/or withdrawal,
provided, however, and in any event the lessee shall remain liable
to pay 50% of the monthly air-conditioning charges agreed to be
paid hereunder. The lessor shall not be bound to restore or
resume or continue the supply of the air-conditioning facilities
unless full payment of the arrears of such charges is made by the
lessee together with such amount towards reconnection charges
as the lessor in its sole and absolute discretion may determine."
c) "5.....This deed is only Memorandum recording the terms and
conditions which have already been agreed between the parties
hereto whereby the original lease dated January 1, 1976 for 21
years has been further extended by ten years and no demise has
been created by this deed-- --". (emphasis supplied)
d) "Clause 7- As contained in the earlier lease deed dated
January 1, 1976, the cost and expenses for execution and
registration of the lease such as stamp duty, registration charges
etc. shall be borne by the lessee."
e) "All pending suits and proceedings in the High Court at
Calcutta shall stand disposed of and on the terms and conditions
agreed upon and recorded herein."
f) It is on the basis of such lease and on the basis of the
obligation undertaken by the appellant to register the same that
the parties approached the Hon'ble Supreme Court on 14th
February, 2000 for recording the settlement whereupon the order
of settlement was passed by the Hon'ble Supreme Court taking
on record the lease deed dated 24th January, 2000 executed by
and between the parties.
65) Mr. Saha submits that the finding of the learned Arbitrator that,
it was a package deal, is the end result that can be reasonably inferred from
the aforesaid documents and the conduct of the parties.
66) The lease was executed on 24th January, 2000. The Hon'ble
Supreme Court recorded the settlement arrived at between the parties in
terms of the said lease on 24th January, 2000. Following the same, the
respondent proceeded to withdraw the suit filed by the appellant both in
respect of the 5th and 7th floors of the premises.
67) The learned Arbitrator taking into consideration cumulative
facts and circumstances resulting in the execution of the unregistered lease
agreement has arrived at a finding that it is a package deal.
68) Mr. Saha submits that the conduct of the Corporation is of great
importance. It is submitted that after the withdrawal of the suit, on 20th
March, 2000, the respondent wrote to the appellant calling upon it to
register the lease. Instead of proceeding to do so, the appellant responded by
serving on the respondent a notice dated 29th March, 2000 purporting to
terminate the lease with effect from 30th April, 2000.
69) The claimant vehemently objected to the purported termination
of the lease by the appellant by its letter dated 4th April, 2000 in view of the
clear agreement between the parties that the appellant would occupy the
property for ten years. Following the claimant's response, the Corporation
withdrew its notice dated 29th March, 2000 by a letter dated 17th April,
2000.
70) On 23rd May, 2000, the respondent once again called upon the
appellant to register the leas. Without taking any step to do so, the appellant
served on the respondent a fresh notice dated 31st August, 2000 (page
151/169) purporting to terminate the lease with effect from 31st August,
2000.
71) It is thus evident that the appellant wants to wriggle out of its
obligation and avoid to pay at least Rs. 60/- per sq. ft. per month for having
overstayed at the 7th floor of the premises after the expiration of the earlier
lease of 1st January, 1976 on the promise of occupying the leased premises
for a further period of ten years from the date of expiration of the earlier
lease, ending on 1st January, 2007, without having any intention of actually
honouring such promise even despite the fact that the rent was reduced to a
consolidated sum of Rs.27.35 per sq. ft. per month on the assurance of
continued occupation of the 7th floor premises for a further period of ten
years by the appellant. To wriggle out of the obligation of paying even such
reduced rent for the balance period of about seven years, the appellant
refused to register the lease despite having clearly agreed to do so.
Immediately after the withdrawal of the suits, the appellant instead of
registering the lease hurriedly proceeded to terminate the lease. While
alleging financial crunch as the cause for such termination in its first notice
dated 29th March, 2000, the same was not repeated as a ground in the
subsequent notice or in the pleading filed in the arbitration proceedings.
Despite it having been clearly agreed to avail of such reduced rent and that
the appellant would continue in occupation of the premises at least for ten
years after expiration of the earlier lease, which would inter alia, borne out
from the exchange of pleadings, correspondence, drafts the appellant never
intended to honour such obligation despite having induced even the Hon'ble
Supreme Court into believing that the settlement had been reached on the
basis of the appellant's agreement to continue in the premises for a further
period of ten years since the expiration of the earlier lease.
72) In the circumstances as aforestated, the respondent was
compelled to ultimately accept possession on 31st October, 2000 of the 7th
floor premises, albeit without prejudice to its right to claim damages.
73) It is in view of the disputes which had arisen between the
parties in view of the premature termination of the lease by the appellant
that the reference to arbitration was made.
74) In the statement of claim filed by the respondent the respondent
asserted that the appellant had expressly agreed to the extension of the
original lease for a further period of ten years till 1st January, 2007. Thus,
the respondent claimed damages at two separate rates, i.e., @Rs.60/- per
sq. ft. per month in view of the undertaking given by the appellant itself
before the Division Bench of the Hon'ble High Court and at the contractual
rate of Rs.27.35 per sq. ft. per month as provided in the lease.
75) Mr. Saha submits that in the counter statement the Corporation
has raised essentially the following defences, namely, i) the lease deed is
unregistered and in the absence of the registration it is void, nonest and
could not be given effect to. ii), The tenure mentioned in the lease indicated
the maximum period upto which the appellant would occupy. iii), The
transaction between the parties was a commercial transaction at arm's
length and not a concessional rate of consolidated rate as alleged by the
respondent. iv) It was immaterial that the lease dated 24th January, 2000
did not provide for termination.
76) Mr. Saha submits that at its 13th sitting the Arbitral Tribunal
framed 8 issues, however, significantly no specific issue was framed with
regard to mitigation of damages by reason of the fact that no such issue was
raised by the Corporation in its counter statement.
77) Notwithstanding such fact, the respondent proceeded to
examine witnesses to prove its attempt to mitigate the loss occasioned by
the appellant. Mr. Saha has referred to the order passed by the Tribunal on
6th May, 2009 taking on record the affidavit of evidence of the respondent's
second witness Panmal Sethia. It will be evident from the said order that the
same was a common order passed in both references for the 5th and 7th
floors. It will be evident from the cause title of the affidavit filed by Panmal
Sethia that the same was a common affidavit filed in both references. As will
appear from paragraphs 5 to 15 of the said affidavit, Panmal Sethia deposed
with regard to various attempts made by the respondent to let out 5th and
7th floors of the premises.
78) Two premises under two Lease Deeds dated 24th January 24
were situated in the 5th and 7th floors of the premises No.1, Shakespeare
Sarani, Kolkata. While the demised premises on the 5th floor measured
17320 sq.ft., the demised premises on the 7th floor measured 19035 sq. ft.
The aggregate area leased in the two floors was as such 36355 sq. ft. It is to
protect the income from such large area that the respondent agreed to lease
out the two demised premises to the appellant at a concessional rate of
Rs.27.35/- per sq. ft. per month, even though the appellant had agreed and
undertaken to pay Rs. 60/- per sq.ft. per month to the Hon'ble Supreme
Court, the mesne profits for the said premises had been determined by the
Special Referee at Rs.75/- sq.ft. per month. It is common knowledge that it
is difficult to find persons and entities who would be willing to take such a
large area on rent.
79) Mr. Saha emphasized that the respondent had led
evidence before the Arbitrator to the effect that in spite of the attempts
made by it to lease/let out the demised premises for the residue periods
of the leases it was unable to do so. There is no cross-examination of
the respondent's witness in this regard. Mr. Saha submits that in
answer to Question No.110 of examination in chief, the claimant's
witness Gautam Ray (CW-1) deposed that the respondent has suffered
loss and has disclosed the reasons thereof. Sudera was unable to let
out the premises and the premises have remained vacant since 1st
November, 2000. This would be further evident from the answer to the
Learned Arbitrator's question No.55 to Gautam Ray (CW-1) in
examination.
The evidence of Panmal Sethia, CW-2 (the witness of the claimants) on
mitigation of damages has been analysed by Mr. Saha in the manner
following:
a. Sudera/ABL engaged the services of property brokers to find
tenants for the property. These brokers had responded to
public advertisements for lease of large commercial space.
(paragraphs 2 and 10 affidavit of evidence).
b. That through those brokers, negotiations had taken place with
several well known companies including banks. However, after
initial negotiations in support whereof documents have been
annexed to the affidavit, all the interested parties had backed
out, (Paragraphs 11 of affidavit of evidence).
c. That the property market was depressed at the relevant point
of time. This was especially so for the suit property since there
were new property developments in and around the said
premises and large commercial establishments like Brooke
Bond and Lipton had vacated their corporate head quarters
adjoining the said premises. As a result, there were no takers
for the premises in question.
d. That the same fate was met by Peerless General Finance &
Investment Company Limited the owner of the second, third
and fourth floors of the same premises. They had stopped
using those three floors previously occupied by them but
could not let or sell property. These three were unutilized and
vacant from 1995 till 2008 (Paragraphs 17 and 18 of affidavit
of evidence)
e. That the property market improved only after the year 2006
and Sudera/ABL was able to let out the premises in February,
2007 (fifth floor) and November 2007 (seventh floor).
f. That even during the time when the premises were vacant i.e.
from 1st November, 2000 till 2007, Claimants to bear the
proportionate cost of operating central air conditioning plant.
This was because central air conditioning plant, one of the
first of its kind in Kolkata installed in the 1972, cannot be
partly shut down. Therefore, even if ducts on the fifth and
seventh floors were shut, the air conditioning plant had to
operate as it is. Therefore, the air conditioning charges (based
actuals) which were payable in terms the agreement with the
Respondent that is 19.07/- sq. per month was incurred.
Claimants have given that the air conditioning charges which
the other tenants of the premises including National
Insurance Company Limited, had to pay during this period i.e.
Rs. 26.06/- per sq. ft. per month for the year 2000 upto Rs.
32.76/- per sq. ft. per month for the year 2007.
There is no cross examination on any of three aspects.
80) Various documents relied on by Panmal Sethia to prove that
such attempts were in fact made form part of the record in the arbitration
proceeding. Mr. Saha has drawn our attention to pages 294, 297, 298, 299,
303, 307,312 and 317 of the paper book which are correspondence
exchanged between the claimants and prospective lessors between June 2,
2004 and January 24, 2005.
81) The Learned Arbitrator in the award passed in A.P.O. No. 172 of
2018 has recorded his satisfaction as regards the respondent having led
sufficient evidence to demonstrate the attempts made by it to mitigate its
losses on account of the breach committed by the appellant.
82) Panmal Sethia's evidence was recorded as common evidence in
both proceedings. His cross-examination was as such also common in both
references relating to the 5th and 7th floors. It will appear therefrom that
there was no suggestion made to Panmal Sethia regarding there being no
effort made by the respondent to let out the premises or that the same could
have been let out but was not so done.
83) In the award passed in A.P. No. 53 of 2001, the learned
Arbitrator, inter alia, recorded that in the discussion held between the
parties, the Corporation had "committed themselves to retain the said two
floors for the said period". (A.P.O. No. 172 of 2018) and had agreed that
Sudera consequent on the change of its name would be entitled to
"consolidated rent of only Rs.27.35 per sq.ft. per month comprising of
Rs.3.33 per sq.ft. per month as basic rent, Rs.4.95 per sq.ft. per month as
service charge and Rs.19.07 sq.ft. per month as air-conditioning charge
clear of all deductions effective from December 1, 1999." (emphasis
supplied)
84) The Learned Arbitrator recorded that despite being called upon
to register the leases, the appellant had failed to do so and had instead
served on the respondent a notice surrendering the leases. It was recorded
that the appellant's case that there is no mention in the lease deed "that
fixation of rent was made conditional upon occupancy of the demised
premises for a minimum period of ten years" (Page 8 of A.P.O. No. 172 of
2018) was rejected by the Learned Arbitrator upon holding that "the
agreement between the parties were in the nature of a package deal."
(emphasis supplied)
85) The Learned Arbitrator further held that it was the duty of the
Corporation to get the lease deed registered. The Arbitrator further held that
even the unregistered lease deed could be looked at for the collateral
purpose of maintaining an action for damage for breach of contract relying
on the decision of the Hon'ble Supreme Court in Food Corporation of
India -Vs- Babulal Agarwal reported in (2004) 2 SCC 712. The Learned
Arbitrator held that despite the lease not being registered, the appellant was
liable to compensate the respondent. While holding that it was the obligation
of the appellant to register the lease, the Learned Arbitrator held that the
respondent had violated the agreement and also could not take advantage
its own failure to register the lease deed and was as such, liable to pay
damages.
86) While proceeding to assess the damages, the Learned Arbitrator
accepted the claimant's entitlement to claim damages in terms of the
contract entered into by it with the appellant, but in proceeding to compute
such damages, the Learned Arbitrator only proceeded to take into account
the basic rent of Rs.3.33 per sq.ft. per month ignoring the entire component
of services charge and air-conditioning charges.
87) Mr. Saha submits that the Arbitrator is the final word on the
interpretation of the contract. Accordingly, the Arbitrator's finding that the
lease agreement was in the nature of a "package deal" which allowed the
appellant to continue to occupy the premises at a consolidated rent of
Rs.27.35 per sq. ft. per month subject to the appellant continuing in
possession for a further period of ten years since the execution of the earlier
lease cannot be called into question. Mr. Saha in this regard has relied upon
the decision of the Hon'ble Supreme Court in Patel Engineering Limited -
Vs. North Eastern Electric Power Corporation reported in (2020) 7 SCC
167 (para 21). Mr. Saha submits that on the basis of the materials on record
it cannot be said that no fair minded or reasonable person could have taken
the view taken by the Learned Arbitrator or that such view was not even a
possible view to take.
88) That it was the appellant's obligation to register the lease deed
is not denied. That the appellant did not do so despite being called upon by
the respondent to register the leases also cannot be denied. In the event, the
leases had been registered, the appellant would not have been in a position
to contend that it was not obliged to continue to occupy the concerned
premises for a period of ten years from the expiration of the earlier leases.
Having induced the respondent to believe that it would continue to occupy
the premises for a further period of ten years at a consolidated rent of
Rs.27.35 per sq. ft. per month and having thereby induced the respondent
to withdraw the suits filed against the appellant and to absolve the appellant
of his undertaking to pay occupation charges for its occupation of the
concerned premises @ Rs.60/- per sq. ft. per month, the appellant is now
estopped from resiling from the promise clearly made by it before the
Hon'ble Supreme Court by bringing on record the lease deed recording the
settlement. Mr. Saha submits that estoppels operates against the
Corporations in denying payment of reasonable compensation resulted due
to such breach and in this regard the learned Senior Counsel has relied
upon the decision in V. L. Sreedhar & others -Vs- K. M. Munireddy (dead)
and others reported in (2003) 2 SCC 355 (paragraphs 13 to 20) and
Halsbury's Laws of England (3rd Edition) Vol. 15 page 175.
89) As the appellant had clearly agreed to register the lease, by
refusing to register the leases, the appellant cannot be allowed to take
advantage of its own wrong, as the appellant has evidently sought to do and
refers to the well known doctrine of "nullus commondom capere potest ex sua
injuria propria" that no person can take advantage of his own wrong. Mr.
Saha has also relied to Broom's Legal Maxim ((10th Edn.) Page 194, the
decision of the Hon'ble Supreme Court in Kusheshwar Prosad Singh -Vs-
State of Bihar & Ors. Reported in (2007) 11 SCC 447 (paras 13 and 14)
and Samir Narayan Bhojwani v. Aurora Properties and Investment &
Anr. reported in (2018)17 SCC 203 (para 29).
90) Mr. Saha has submitted that in any event the Hon'ble Supreme
Court in Food Corporation of India v. Babulal Agarwal reported in
(2004) 2 SCC 712 has clearly stated that where the parties had agreed to
occupy a particular property for a particular period of time and had
executed a lease for such period, even in the absence of registration of the
lease, the party having agreed to occupy the property for a particular
duration and has reached an agreement to that effect, will be liable to
compensate the other party in case of breach and in the said decision the
breach of the promise was enforced ex contractu. (paras 6, 7 and 8). Mr.
Saha has invited our attention to the observation of the Hon'ble Supreme
Court: "once the amount of monthly rent of the plinths was agreed, unless
there was some logical or cogent reasons to reduce the same, it could not be
done.". (emphasis supplied)
91) Mr. Saha submits that the Hon'ble Supreme Court in Babulal
(supra) has accepted that the basis of quantification of compensation of loss
would be the contractual rate of rent agreed to be paid.
92) The non-registration of the lease does not in any event prevent
consideration of the same for the collateral purpose for ascertaining the
damage resulting from the breach of promise in view of the provisions 49 of
the Registration Act, 1908 as held in the following decisions:
a) Food Corporation of India -Vs- Babulal Agarwal reported in
(2004)2 SCC 712 (Para 7).
b) Abhey Realtors Pvt. Ltd. -Vs- SSIPL Retail reported in (2010)2
CHN 203 (paras 22-23).
c) Muruga Mundaliar -Vs- Subba Reddyer reported in AIR 1951
Madras (Full Bench para 12).
93) The claimant in the two applications have adduced evidence to
show that it had indeed made attempts to mitigate its loss which has been
appreciated and judged by the learned Arbitrator and the Learned Arbitrator
has thereafter come to a conclusion that the claimants indeed took steps
and had adduced evidence in that regard. Such finding of the learned
Arbitrator after judging the quality and quantity of evidence cannot be
questioned today and cannot be held to be invalid in a proceeding under
Section 34 of the Arbitration and Conciliation Act, 1996.
94) It is now settled that the Arbitrator's appreciation of evidence is
final and cannot be interfered with in a challenge under Section 34 of the
Act of 1996 unless it is shown to be perverse. There is clearly no perversity
in Arbitrator's finding on the evidence led by the respondent that it had
attempted to mitigate the loss by letting out the premises but had failed to
do so.
95) Mr. Saha submits that in Muddasani Venkata Narsaiah v.
Muddasani Sarojana reported in (2016) 12 SCC 288, the Hon'ble
Supreme Court held that the effect of not cross examining a witness is that
the statement of the witness is not disputed and must be accepted. In view
thereof the entire case of the claimant on assessment of damages as
adduced by the claimant's second witness thus stands admitted.
96) The appellant has not by itself led any evidence to show that
there were persons willing to take the demised premises on lease/rent for
the residue periods of the leases but the respondent did not agree to lease or
let out the said premises and thus, failed to mitigate their loss and damage.
In the circumstances, the question of any violation on the part of the
respondent to mitigate the loss or damage suffered by it did not and could
not arise.
97) It is now settled law that in an attempt to mitigate loss or
damage consequent on the breach of a contract, the party suffering on
account of such breach is not obliged to attempt mitigation in every possible
manner. It is only reasonable steps which are required to be taken to
mitigate. Accordingly, the respondent was under no obligation to divide or
sub-divide the demised premises into smaller portions or to attempt to let
out or lease the same for the residue period of the lease.
98) Mr. Saha submits that Section 73 of the Indian Contract Act,
872 has been properly interpreted in the award excepting that in
determining the damages the other components of rent were discarded.
99) Mr. Saha submits that there cannot be any doubt that the
claimants have suffered loss and damage that was already pre-estimated
and pre-determined by way of fixed lease rent that the appellant had agreed
to pay for the entire period of lease.
100) As such, the award cannot be questioned on the ground that
even upon the rent for the residue period of the lease being exactly
quantified in the lease deeds themselves, the respondent did not lead further
evidence to establish loss or damage suffered or that even in the absence of
any further evidence being led by the claimants, the Arbitrator proceeded to
determine loss and damage suffered by the claimants.
Our view:-
101) The essential dispute is with regard to quantification of damage.
The arbitrator allowed damages based on basic rent and disallowed air-
condition and service charges. The learned Single Judge remanded the
matter for fresh adjudication of the damages. Corporation is aggrieved by
such order of remand and a fresh reference. We need to decide if the award
is assailable within the limited grounds under Section 34 of the 1996 Act
prior to amendment in 2015. The approach of the court in interfering with
the award is limited and circumscribed by the grounds mentioned in Section
34 of the 1996 Act.
102) There were various changes which were brought about in the
1996 Act from the 1940 Act. The purpose of the new Act was to have speedy
disposal through the forum of arbitration.
103) The strive towards achieving the aim, the Act proceeds to give a
sense of finality to the awards of the arbitral proceedings. The new Act is
based mostly on the UNCITRAL model law. The object of the new Act was
to make the law less technical than it has been hitherto. As compared to the
1940 Act the 1996 Act restricts the court interference with the awards
passed by the arbitrator. The major difference between the acts can be
mapped through the reading of Sec30 of the 1940 Act and Sec34 of the 1996
Act, which covers the grounds on which an arbitral award could be set off.
Arbitration and Conciliation Act, Arbitration and Conciliation Act,
1940 1996
Section 30: Grounds for setting aside Section 34: Application for setting
award aside arbitral award
Grounds: Grounds:
(a) "Misconduct" of an arbitrator or (a) If the party proves that:
umpire (i) That party was under some
(b) "Invalidity" of arbitration incapacity
proceedings or by an order of (ii) That arbitration is invalid
court the arbitration is superseded. under the law to which parties
(c) Award is improperly procured or have been subjected or under
is "other-wise invalid"
the law being in time force
(iii) That the award passed is beyond
the scope of the submission or not
falling within the terms of the
submission to arbitration.
(Provided: if decisions on matters not
submitted can be separated from
those which are submitted then only
the award based on the former may
be set aside)
(iv) Composition of the arbitral
tribunal or procedure was not in
accordance to the agreement of the
parties unless it was in conflict with
the provisions of the Part from which
parties cannot derogate or failing
such agreement, was not in
accordance with this Part.
(b) If the Court finds out:
(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 award is in conflict with the
public policy of India.
Explanation: An award is in conflict
of the public policy of the India if the
award was induced or affected by
fraud or corruption or was in
violation of S.75 or S.81.
104) The aforesaid Table lays down the grounds which were given in
the respective Act with respect to setting aside of arbitral awards. It is
important to understand how the grounds for setting aside an award under
the 1996 Act are more restricted than the grounds given in the 1940 Act.
105) The 1940 Act, has grounds like "misconduct of arbitrator",
"invalidity of arbitrational proceedings" and "award other-wise invalid" were
wide, sweeping and open ended which used to give an extensive power to the
courts to set aside an award. These expressions were usually interpreted
widely by the courts and the awards were most often set aside - especially
on the basis of "misconduct" inter alia apparent error of law in the award.
Thus, the aim of arbitration which is to reduce the burden of the courts was
not being achieved. Rather, due to the number of opportunities in the hand
of the litigants to ask the court for intervention regarding the award --the
burden was increasing on the courts.
106) To make the arbitration proceedings effective and binding on the
parties who choose for arbitrational proceedings, it was imperative to
structure a new Act to fill in the loopholes of the 1940 Act. The 1996 Act
was thus brought into the picture which tried to fill in the gaps of the
previous law of arbitration in the country. The need of an arbitrational
system favoring nation was to reduce the workload of the courts and give
certainty and finality to the arbitration proceedings and the awards thereon.
Thus, the 1996 Act under S.34 lays down restrictive grounds of interference
of the courts with the arbitral awards.
107) Section 34 introduces itself by saying that the grounds
mentioned thereunder are the "only" grounds on which an arbitral award
may be set aside. However, apart from the grounds mentioned under S.34,
the Act also provides for other grounds as under S.13, S.16, S.75 and S.81
on the basis of which the award can be set aside.
108) The grounds given under S.34(2)(a) are crisp and precise and
lay the law as it is without the inclusion of any open-ended expression
which otherwise would have given the courts an opportunity to widen their
scope of interference with the arbitral awards. The only open-ended
expression which can be and has been of concern is the ground of public
policy of India. It has been under many cases defined as an unruly horse
thus giving the interpretation that it can never be defined or be a certain
thing. However, for the purpose of achieving the aim of the new Act, the Act
of 1996 - the legislature while drafting the Act limited the scope of public
policy in its explanation restricted it to:-
a) Fraud
b) Corruption
c) S.75 or S.81 (confidentiality breach or admissibility of evidence)
109) The scope of public policy was, however, widened after Supreme
Court in its decision of Oil & Natural Gas Corporation Ltd. v. Saw Pipes Ltd.
(2003 (5) SCC 705) (also referred to as : "Saw Pipes Case") interpreted it to
include "patent illegality" in its definition.
110) Interpretation of a contract is a matter for the arbitrator to
determine, even if it gives rise to determination of a question of law. It is a
settled law that interpretation of the contract and appreciation of the
evidence by the arbitral tribunal cannot be reopened by arguing that the
award is contrary to the contract. Arbitration is consensual and some
amount of laxity should be given while scrutinizing an award. A sense of
informality is attached to such proceeding. It cannot be scrutinized with an
Eagle's eye or eye of a needle and as an appellate authority. A possible view
by the arbitrator on facts has necessarily to pass muster as the arbitrator is
the ultimate master of the quantity and quality of evidence to be relied upon
when he delivers his arbitral award. Thus an award based on little evidence
or on evidence which does not measure up in quality to a trained legal mind
would not be held to be invalid on this score.
111) Once it is found that the arbitrator's approach is not arbitrary
or capricious it has to be accepted. He is the last word on facts. The
construction of the terms of the contract is primarily for an arbitrator to
decide unless the arbitrator construes the contract in such a way that it
could be said to be something that no fair minded or reasonable person
would do, of course, the arbitrator cannot wander outside the contract and
deals with the matters not forming the subject matter or allotted to him as
in that case he would commit jurisdictional error.
112) In Delhi Development Authority v. R.S. Sharma, 2008(13)
SCC 80 the Hon'ble Supreme Court summarized the law thus:
"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 S.34(2) of the Act.
(b) Award could be set aside if it is contrary to:
(i) Fundamental policy of Indian Law; or
(ii) The interest of India; or
(iii) Justice or morality;
(iv) The Award could also be set aside if it is so unfair and
unreasonable that it shocks the conscience of the Court;
(v) 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."
113) The Supreme Court in Mc Dermott International v. Burn
Standard Co. Ltd.; 2006 (11) SCC 181, has commented on the scope of the
powers of the arbitrator to interpret terms of the contract, and the
permissible interference by the courts on the assessment of the arbitrator. It
was held:-
" It is trite that the terms of the contract can be express or implied.
The conduct of the parties would also be a relevant factor in the
matter of construction of a contract. The construction of the contract
agreement, is within the jurisdiction of the arbitrators having regard
to the wide nature, scope and ambit of the arbitration agreement
and they cannot, be said to have misdirected themselves in passing
the award by taking into consideration the conduct of the parties. It
is also trite that correspondences exchanged by the parties are
required to be taken into consideration for the purpose of
construction of a contract. Interpretation of a contract is a matter for
the arbitrator to determine, even if it gives rise to determination of a
question of law. The 1996 Act makes the provision for the
supervisory role of courts, for the review of the arbitral award only to
ensure fairness. Intervention of the Court is envisaged in few
circumstances only, like, in case of fraud or bias by the arbitrator,
violation of natural justice, etc. The court cannot correct the errors of
the arbitrators. It can only quash the award leaving the parties free
to begin the arbitration again if it is desired. So, the scheme of the
provision aims at keeping the supervisory role of the court at
minimum level and this can be justified as parties to the agreement
make a conscious decision to exclude the court's jurisdiction by
opting for arbitration as they prefer the expediency and finality
offered by it."
114) The Court will not judge the reasonableness of a particular
interpretation accorded by the arbitrator to the terms of the contract. Even
an error in interpretation, unless patently illegal, will only amount to an
error within the jurisdiction of the arbitrator.
115) In KV Mohd. Zakir v. Regional Sports Centre reported at AIR
2009 SC (Supp) 2517 it held that the courts should not interfere unless
reasons given are outrageous in their defiance of logic or if the arbitrator has
acted beyond his/her jurisdiction.
116) In P.R. Shah Shares & Stock Brothers v. M/s. B.H.H.
Securities (P) Ltd.; 2012 (1) SCC 594 it states that a court does not sit in
appeal over the award of an arbitral tribunal by re-assessing or re-
approaching the evidence. An award can be challenged only on the grounds
mentioned in S.34(2) of the Act.
117) In Steel Authority of India Ltd. v. Salzgitter Mannesmann;
OMP No.736 of 2009, decided on 18th April, 2012 (Delhi HC) it refused to
set aside the award in view of court's limited and restricted powers for
judicial intervention as under S.34 of the Act. The court relied upon the
judgment in P.R. Shah Shres (supra) and held that the court cannot sit in
appeal over the award of the tribunal by re-assessing and re-evaluating the
evidence.
118) Mr. Saha has argued that the rent mentioned in the two several
lease deeds are required to be taken as a whole without any bifurcation for
the purpose of determination of damages as the said amount represents a
genuine pre-estimate as the measure of reasonable compensation which
would be clearly discernible from the course of conduct of the parties
resulting in the execution of the lease deed.
119) The existence of the lease deed is not in dispute.
120) The Corporation has never raised any dispute with regard to the
existence, validity and the terms of the lease deed. In fact, the lease deed
was also acted upon before it was unilaterally terminated by the Corporation
although the Corporation before the execution of the lease deed objected to
the inclusion of any termination clause as proposed by the claimants in the
draft lease deed thereby clearly evincing its intention and willingness to
continue for the periods fixed in the lease deeds. The bifurcation of the rent
to basic rent and air-conditioning charges and service charges and thereby
allowing compensation for the basic rent is what is objected to by the
claimants.
121) Mr. Saha has drawn our attention to Clause 7 of the lease
agreements to show that in case of any default in payment of the air-
conditioning charges for any two months by the lessee discontinue and/or
disconnect and/or withdraw the air-conditioning facilities from the said floor
without being liable for damages for such discontinuance and/or
disconnection and/or withdrawal. And the lessor would not be bound to
restore or resume continue the air-conditioning facilities unless full payment
of the arrear of such charges is made by the lessee together with
reconnection charges and it would be in the sole and absolute discretion of
the lessor.
122) Mr. Saha submits that once the learned Arbitrator has accepted
that it was a "package deal" meaning thereby that the Corporation could not
have an exit prior to the fixed period mentioned in the two several lease
deeds for the purpose of determination of damages, component towards air-
conditioning charges is also required to be taken into consideration. Merely
because the Corporation left the premises notwithstanding their obligation
to continue for the fixed period for the purpose of determination of damage
would not absolve them from paying the rents stipulated in the agreements
as it represents a genuine pre-estimate. This amount is also a backdrop to
be taken into consideration.
123) However, we are unable to accept the submission of Mr. Saha in
this regard.
124) The arbitrator has given a view on interpretation of the two
agreements with regard to entitlement of air-conditioning charges which
does not appear to be unreasonable, improbable or irrational. Any
interference of such finding of the learned Arbitrator would fall foul with the
well established principle that the interpretation of the contract is within the
exclusive domain by the learned Arbitrator. The arbitrator has allowed the
claim towards damages based on the basic rents mentioned in the two
deeds. The arbitrator denied air-conditioning charges as it was discontinued
due to sudden exit of the corporation.
125) The decision of the learned Arbitrator is a possible view and an
acceptable outcome which is clearly defensible in respect of the facts and
law.
126) Even in a civil trial, a finding of fact is not to be reversed unless
it can be established that the trial Judge made a palpable and overriding
error which means an error that gives rise to the reasonable belief that the
trial judge must have forgotten, ignored or misconceived the evidence in a
way that it affected his conclusion or an obvious deficiency in the trial
Judge's finding of fact that affects the outcome of the trial. The Court in
this jurisdiction, however, is not exercising such sweeping power. It is
settled law that where a finding is based on no evidence or an arbitral
tribunal takes into account something irrelevant to the decision which it
arrives at or excludes as ignores vital evidence in arriving at its decision,
such decision would necessarily be perverse and on those grounds, an
award can be set aside.
127) In the instant case the award is based on evidence. The reason
may be brief.
128) In Oil & Natural Gas Corporation Ltd. Vs. Saw Pipes Ltd.
reported at (2003) 5 SCC 705 the Hon'ble Supreme Court followed Maula
Bux v. Union of India reported at 1970 SCR (1) 928 and summarized the
law in paragraph 68 which reads:
"68. From the aforesaid discussions, it can be held that: (1) Terms of the
contract are required to be taken into consideration before arriving at
the conclusion whether the party claiming damages is entitled to the
same.
(2) If the terms are clear and unambiguous stipulating the liquidated
damages in case of the breach of the contract unless it is held that such
estimate of damages/compensation is unreasonable or is by way of
penalty, party who has committed the breach is required to pay such
compensation and that is what is provided in Section 73 of the Contract
Act.
(3) Section 74 is to be read along with Section 73 and, therefore, in
every case of breach of contract, the person aggrieved by the breach is
not required to prove actual loss or damage suffered by him before he
can claim a decree. The court is competent to award reasonable
compensation in case of breach even if no actual damage is proved to
have been suffered in consequence of the breach of a contract.
(4) In some contracts, it would be impossible for the court to assess the
compensation arising from breach and if the compensation
contemplated is not by way of penalty or unreasonable, the court can
award the same if it is genuine pre-estimate by the parties as the
measure of reasonable compensation." (emphasis supplied)
129) It is equally well-settled that the damage is a compensation for
the injury sustained that the sum of money to be given for reparation of
damages suffered should be, as nearly as possible be the sum which will put
to injured party in the same position as he would have been if he had not
sustained the wrong for which he is getting the damages. (B.R. Herman &
Mohatta v. Asiatic Steam Navigation Co. Ltd., AIR 1941 Sind 146).
130) The award on the damages cannot be said to be without
evidence. The learned arbitrator has considered the agreements between the
parties and the affidavit evidence filed by Mr. Sethia to show that the
periods for which damages have been claimed the claimants in spite of due
diligence could not find a suitable lessee. Mr. Sethia had said that
considering the largeness of the area under occupation of the Corporation
the claimants could not find out any lessee with similar requirements. The
example of peerless was given by Mr. Sethia in his evidence. It cannot be
said to be an award based on no evidence. Moreover, the amounts
mentioned can be considered to be genuine pre-estimate agreed by the
parties as the measure of reasonable compensation having regard to the
correspondence exchanged and the circumstances culminating to the
executing of two deeds. However, in assessing damages two components
were not allowed as corporation left the premises prematurely.
131) In Associate Builders (supra) the Supreme Court held that it
must be clearly understood that when a Court is applying 'public policy' test
to an arbitral award, it does not act as a Court of appeal and consequently
the errors of fact cannot be corrected. A possible view by the arbitrator on
facts has necessarily to be accepted as the arbitrator is the ultimate master
of the quantity and quality of evidence to be relied upon, when he delivers
his arbitral award. Thus, an award based on little evidence or no evidence,
which does not measure up in quality to a trained legal mind would not be
held to be invalid on this score. Once it is found that the arbitrators'
approach is not arbitrary or capricious then he is the last word on facts.
132) Reasonableness of the decision cannot be a matter of judicial
review in deciding an application for setting aside and award.
133) Once the arbitrator has come to a finding the Court should not
interfere with the award unless reasons given are outrageous in their
defiance of logic or if the arbitrator has acted beyond his jurisdiction.
Moreover, the Court does not sit in appeal over the award of the arbitral
tribunal by re-assessing, re-approaching or re-appreciating the evidence. It
is well settled that the Court does not sit in appeal over an award. It is not
for this Court to reassess the evidence on record. It is also not for this
Court to weigh the quality and quantity of the evidence put forward before
the Arbitration. In Ravindra Kumar Gupta & Co. v. Union of India
reported at 2010 (1) SCC 409 it is reiterated that reappraisal of evidence by
the Court is not permissible. Where the reasons have been given by the
arbitrator in making the award the court cannot examine the
reasonableness of the reasons. If the parties have selected their own forum,
the deciding forum must be conceded the power of appraisement of
evidence. The arbitrator is the sole judge of the quality as well as the
quantity of evidence and it will not be for the court to take upon itself the
task of being a Judge on the evidence before the arbitrator. The award can
be challenged only on the ground mentioned in Section 34(2) of the Act.
134) Mr. Saha has argued that amendment to the 1996 Act in 2015
has clarified when can an award to be held to be in conflict with the "public
policy of India" and significantly in clause 2(A) in the proviso it has been
clearly stated that an award shall not be set aside merely on the ground of
an erroneous application of the law or by the reappreciation of evidence.
135) We accept the said submission. An erroneous application of the
law by itself is not a ground to challenge an award under Section 34 of the
Arbitration and Conciliation Act. For an award to be set aside there must be
a patent illegality, an error which goes to the very root of the matter and
affects the jurisdiction of the arbitrator in deciding a dispute. If the
arbitrator lacks the authority to decide the dispute the award is a nullity. If
the disputes are by nature non-arbitrable the assumption of jurisdiction
would be an illegality.
136) The judgment in Associate Builders (supra), which was passed
in relation to a domestic award also recognized and reaffirmed the settled
law that where a cause or matters in differences are referred to an
arbitrator, whether lawyer or layman, he is considered to be the sole and
final judge of all questions of law and of fact obviously with the limited
grounds of interference, namely, if it is opposed to fundamental policy of
Indian Law, interest of India, justice or morality and patent illegality.
137) A patent illegality would mean an illegality which goes to the root
of the matter and not a mere erroneous application of the law is the view in
Associated Builders (supra) which was reiterated in SSangyong
Engineering & Construction Company Ltd. v. National Highway
Authority of India, reported in 2019(15) SCC 131 in paragraphs 37, 39,
40 and 41 of the said report which reads:
"37. Insofar as domestic awards made in India are concerned, an
additional ground is now available Under Sub-section (2A), added
by the Amendment Act, 2015, to Section 34. Here, there must be
patent illegality appearing on the face of the award, which refers
to such illegality as goes to the root of the matter but which does
not amount to mere erroneous application of the law. In short,
what is not subsumed within "the fundamental policy of Indian
law", namely, the contravention of a statute not linked to public
policy or public interest, cannot be brought in by the backdoor
when it comes to setting aside an award on the ground of patent
illegality.
39. To elucidate, paragraph 42.1 of Associate Builders (supra),
namely, a mere contravention of the substantive law of India, by
itself, is no longer a ground available to set aside an arbitral
award. Paragraph 42.2 of Associate Builders (supra), however,
would remain, for if an arbitrator gives no reasons for an award
and contravenes Section 31(3) of the 1996 Act, that would
certainly amount to a patent illegality on the face of the award.
40. The change made in Section 28(3) by the Amendment Act
really follows what is stated in paragraphs 42.3 to 45 in
Associate Builders (supra), namely, that the construction of the
terms of a contract is primarily for an arbitrator to decide, unless
the arbitrator construes the contract in a manner that no fair-
minded or reasonable person would; in short, that the arbitrator's
view is not even a possible view to take. Also, if the arbitrator
wanders outside the contract and deals with matters not allotted
to him, he commits an error of jurisdiction. This ground of
challenge will now fall within the new ground added Under
Section 34(2A).
41. What is important to note is that a decision which is perverse,
as understood in paragraphs 31 and 32 of Associate Builders
(supra), while no longer being a ground for challenge under "public
policy of India", would certainly amount to a patent illegality
appearing on the face of the award. Thus, a finding based on no
evidence at all or an award which ignores vital evidence in
arriving at its decision would be perverse and liable to be set
aside on the ground of patent illegality. Additionally, a finding
based on documents taken behind the back of the parties by the
arbitrator would also qualify as a decision based on no evidence
inasmuch as such decision is not based on evidence led by the
parties, and therefore, would also have to be characterised as
perverse."
138) The arbitrator's view on the 'package deal' is backed up by years
of training and experience as a judge and, in effect, is a rational view on the
interpretation of the termination clause in the backdrop of the conduct of
the parties. The conduct of the Corporation in inducing the claimants to
withdraw all proceedings which saved them from huge financial liabilities
following the decree of eviction and thereafter suddenly terminate the lease
after having agreed to continue for a fixed period of time is a relevant factor.
In fact, it is clear from evidence that the Corporation raised objection to the
termination clause suggested by the claimants in the draft lease. They have
even agreed to execute the lease. It happens that such representations were
made by the Corporation without any intention to discharge their
obligations finally. It is a commercial immorality on the part of the
corporation.
139) The arbitrator based on such oral and documentary evidence and
having considered the conduct of the parties was persuaded to hold the
agreements as "package deal". The conduct of the parties prior to the
execution of the lease deeds was also considered.
140) The correspondence exchanged by and between the parties prior
to the preparations of lease deed clearly suggest that the Corporation
wanted to continue the relationship for a fixed period without any break.
The view taken by the arbitrator is a possible and plausible view.
141) Any other interpretation on the facts would be inequitable. In any
event such interpretation of the contract is exclusively within the domain of
the arbitrator.
142) Under such circumstances, the awards are upheld.
143) The appeals and the cross objections stand dismissed.
144) However, there shall be no order as to costs.
I agree
(Soumen Sen, J.)
(Saugata Bhattacharyya, J.)
