Delhi High Court
Airwil Jkm Infracon Pvt. Ltd. vs Cadillac Infotech Private Ltd. on 29 November, 2021
IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 29.11.2021
+ O.M.P. (COMM) 490/2018 & IA 16600/2018, IA 8557/2021
AIRWIL JKM INFRACON PVT. LTD. ..... Petitioners
versus
CADILLAC INFOTECH PRIVATE LTD. ..... Respondent
Advocates who appeared in this case:
For the Petitioner :Mr Saurabh Kirpal, Senior Advocate with
Mr Saket Sikri, Mr Manik Dogra, Mr
Davinder Singh, Mr Ajay Pal Singh Kultar,
Mr Arun Rathi, Advocates.
For the Respondent :Mr Harish Malhotra, Senior Advocate with
Mr Kartik Yadav, Mr Manhar Singh Saini,
Mr Karanvir Singh Goraya and Ms Sumedha
Chadha, Advocates.
CORAM
HON'BLE MR JUSTICE VIBHU BAKHRU
JUDGMENT
VIBHU BAKHRU, J
1. The petitioner (hereinafter referred to as 'AJIPL') has filed the
present petition under Section 34 of the Arbitration and Conciliation
Act, 1996 impugning an arbitral award dated 16.10.2018 (hereafter 'the
impugned award') delivered by an Arbitral Tribunal constituted by
Justice (Retired) Sh Sudhir Kumar Katriar, a former Judge of the Patna
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High Court as the Sole Arbitrator (hereafter the 'Arbitral Tribunal').
The arbitral proceedings were conducted under the aegis of the Delhi
International Arbitration Center (DIAC) and in accordance with its
rules.
2. In terms of the impugned award, AJIPL has been directed to hand
over vacant and physical possession of the property bearing plot nos. 1,
2, 10, 11 and 12 measuring 20,000 sq. meters situated in Sector 135,
Noida, District Gautam Budh Nagar, Uttar Pradesh (hereafter 'the
Subject Land') to the respondent (hereafter 'CIPL') within a period of
four weeks from the date of the award. In addition, the Arbitral Tribunal
has awarded CIPL an amount of ₹20,00,000/- per month with effect
from 18.07.2015 till the date of payment along with simple interest at
the rate of 9%, as damages resulting from AJIPL retaining possession
of the Subject Land. The Arbitral Tribunal has further directed CIPL to
refund the amount of ₹8,22,56,500 (Rupees Eight Crores, Twenty-Two
Lakhs, Fifty Six Thousand and Five Hundred) along with 9% simple
interest for the period with effect from 18.07.2015 till the date of
payment and, has further directed that this amount be adjusted against
the amount awarded in favour of CIPL. The Arbitral Tribunal has also
awarded costs of arbitration quantified at ₹25,00,000/- along with
interest at the rate of 9% from the date of the award till the date of the
payment in favour of CIPL.
Factual Background
3. The disputes between the parties arose in connection with a
Property Development Agreement dated 06.09.2014 (hereafter 'the
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PDA'), which was entered into between the parties for development of
the Subject Land. The parties had agreed that AJIPL would develop an
IT Project on the Subject Land, which would include structures,
buildings, recreational areas, open spaces, parking spaces, landscaping,
developments, etc. in accordance with the plans sanctioned by the
concerned authority (hereafter the 'Project').
4. AJIPL holds leasehold rights in respect of the Subject Land in
terms of lease deed(s) executed by New Okhla Industrial Development
Authority (NOIDA) in favour of AJIPL. The Subject Land was allotted
by NOIDA for setting up buildings for IT and IT Enabled Services.
5. In terms of the PDA, AJIPL was granted the exclusive
development rights in respect of the Subject Land. It was agreed that
AJIPL would develop the Project and the parties would share the gross
sale revenue in a specified ratio: AJIPL was entitled to 53.75% of the
gross sales revenue generated from the sale/allotment of the saleable
area of the Project and CIPL was entitled to the remaining 46.25% of
the gross sale revenue.
6. In terms of Clause 4 of the PDA, AJIPL agreed to pay a sum of
₹15,00,00,000/- (Rupees Fifteen Crores only) to CIPL as deposit. Out
of the aforesaid sum, ₹10,00,00,000/- was agreed to be interest-free
refundable deposit and the remaining ₹5,00,00,000/- was agreed to be a
non-refundable deposit. Against the aforesaid amount, AJIPL paid a
sum of ₹1,00,00,000/- and CIPL acknowledged its receipt in the PDA.
It was agreed that the remaining amount would be paid within forty-five
days of signing of the PDA. Clause 4 of the PDA is set out below: -
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"4. DEPOSIT
4.1. As security towards compliance of its
obligations under the Development
Agreement, the Developer agrees to pay to
Owner a sum of Rs.15,00,00,000/- (Rupees
Fifteen Crore Only) out of which
Rs.10,00,000/- ten crore only) shall be the
interest free refundable deposit ("Refundable
Deposit") whereas the remaining
Rs.5,00,00,000/- (Rs. Fifteen Crore only)
shall be the non refundable deposit (Non
Refundable Deposit"). The said deposits
shall be payable on signing of this
Agreement.
The owner hereby acknowledges the rerceipt
of Rs.1,00,00,000/- (Rupees One Crore only)
from the developer details are as follows:
Cheque no. 354558 dated 11.06.2013 for
Rs.1,00,00,000/- drawn on HDFC Bank,
branch at Sector-16, Noida, issued by M/s
JBK Developers Pvt. Ltd.
The remaining amount i.e. Rs.14,00,00,000/-
(Rupees Fourteen Crore only) of security
deposit shal be paid by the developer to the
owner with 45 day from the signing of
present agreement.
4.2. The Refundable Deposit shall be refunded to
the Developer from the revenue share of the
Owner from Ist sale as will be agreed to
between the parties."
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7. AJIPL failed to pay the due amount of ₹14,00,00,000/- within the
agreed period of forty-five days. In this regard, CIPL sent notices to
AJIPL for payment of the balance amount and thereafter, issued a legal
notice dated 18.06.2015 to AJIPL for termination of the PDA under
Clause 10.2(i) of the said agreement, with effect from 18.07.2015. CIPL
also called upon AJIPL to deliver vacant and peaceful possession of the
Subject Land. But AIJPL did not do so. On 05.07.2015, AJIPL
published an advertisement inviting bookings for the proposed
construction on the Subject Land.
8. CIPL issued a legal notice on 29.07.2015 objecting to the
publication of the advertisement by AJIPL and once again called upon
AJIPL to deliver vacant and peaceful possession of the Subject Land as
AJIPL had failed to pay the balance amount due under Clause 4 of the
PDA.
9. AJIPL responded to the legal notice and requested for extension
of time till 31.03.2016 for payment of the balance amount under the
PDA. CIPL agreed to the said request, however, it claims that AJIPL
paid only an amount of ₹4,70,00,000/- till 06.05.2016.
10. Accordingly, CIPL issued another legal notice dated 06.05.2016
whereby it revived its earlier legal notice dated 18.06.2015 and called
upon AJIPL to deliver vacant and peaceful possession of the Subject
Land. CIPL, in its legal notice, asserted that AJIPL was in un-authorised
occupation of the Subject Land since 18.06.2015 and was liable to pay
use and occupation charges quantified at ₹75,00,000/- per month.
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AJIPL did not respond to the said legal notice.
Arbitral Disputes
11. In view of the above dispute, CIPL issued a notice dated
03.06.2016 invoking the arbitration agreement as embodied in Clause
12 of the PDA and sought reference of the disputes to arbitration.
Accordingly, a Sole Arbitrator was appointed. The parties referred the
dispute to the Arbitral Tribunal.
12. Before the Arbitral Tribunal, CIPL filed its Statement of Claims
claiming an amount of ₹15,75,00,000/- on account of usage and
occupation charges of the Subject Land along with interest at the rate of
18% per annum from the date of filing the Statement of Claims till the
date of realisation. CIPL claimed that, AJIP had failed and neglected to
perform its contractual obligations in terms of the PDA and caused a
wrongful loss on account of its failure to pay the remaining security
deposit. AJIPL had continued occupation/possession of the Subject
Land without payment of the amounts due. CIPL claimed that despite
several assurances, AJIPL had not paid the remaining security deposit
and had therefore, deceived CIPL into signing the PDA. CIPL further
claimed that AJIPL failed to vacate the Subject Land despite being
called upon to do so, even after the PDA was terminated by CIPL on
account of AJIPL's failure to perform the contractual obligations.
13. AJIPL disputed the claims raised by CIPL. Before the Arbitral
Tribunal, AJIPL contended that CIPL and AJIPL's associate company,
Airwil JKM Infrastructure Pvt Ltd (hereafter the 'Infrastructure
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Company'), had entered into a Memorandum of Understanding dated
07.08.2013 for development of the Subject Land (hereinafter 'the
MOU'). At the material time, CIPL owned only four plots of land
(Plot_nos. 1, 2, 11 and 12 situated in Sector -135, Noida, District
Gautam Budh Nagar, Uttar Pradesh) measuring 16,000 sq. meters and
was in the process of acquiring the adjacent plot of land (plot no. 10)
measuring 4,000 sq. meters. Whereas buildings constructed on land
measuring 20,000 sq. meters and above could be sold in parts, buildings
constructed on land parcels less that 20,000 sq. meters could not be sold
in such manner. Therefore, acquisition of plot no. 10 was essential for
developing and monetizing the Project. It was pointed out that the MOU
expressly provided that a sum of ₹12 crores would be paid by the
Infrastructure Company to CIPL within a period of two months from
signing of the MOU and, the said amount would be utilized for
acquisition of the additional plot of 4000 sq. meters of land. The MOU
also contemplated that it would be superseded by a Property
Development Agreement (PDA) on the conditions precedent being met.
AJIPL further claimed that in all ₹16.75 crores was paid by the
Infrastructure Company and other group companies. It is stated that
CIPL had acknowledged the amount of ₹15.75 crores in its Balance
Sheet. In addition to the said amount, a further sum of ₹1 crore was paid
to AJIPL from the account of Airwel Business Park Private Limited by
two cheques of ₹50 lakhs each.
14. AJIPL contended that the terms of the MOU dated 07.08.2013
were substantially similar to the terms of the PDA and, in terms of the
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MOU, AJIPL had already paid a sum of ₹15,00,00,000/- and an
additional sum of ₹1,75,00,000/- to CIPL. However, CIPL had failed to
acquire one of the plots (that is, plot bearing no. 10) within the
prescribed period stipulated under the MOU and, accordingly the MOU
was cancelled.
15. AJIPL stated that on 21.07.2014, NOIDA granted CIPL
permission for amalgamation of the five plots constituting the Subject
Land. Sh D.K. Gupta, of CIPL once again approached Sh Vinod Kumar
Sachdeva of AJIPL for development of the Project on the Subject Land.
AJIPL claimed that the deposits by the Infrastructure Company made
in terms of the MOU would be adjusted or otherwise accounted for
under the fresh agreement.
16. The PDA was signed by Mr Manoj Kumar on behalf of CIPL and
Mr Vinod Sachdeva on behalf of AJIPL. The same persons had also
signed the MOU on behalf of the parties thereto. AJIPL claimed that it
was subsequently decided that CIPL would start refunding the amount
received under the MOU to the Infrastructure Company, and AJIPL
would correspondingly make payments of the respective amount to
CIPL under the PDA. It was further stated that Mr Vinod Sachdeva (of
AJIPL) had suggested that the amount paid under the MOU should be
mentioned in the PDA but Mr D.K. Gupta of CIPL had suggested
otherwise as according to him, it was not advisable for tax and
accounting purposes.
17. AJIPL claimed that the corporate veil of the parties and
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Infrastructure Company should be lifted as, essentially, the parties to
the MOU and PDA were one and the same.
18. In addition to the above, AJIPL further contended it could not
perform its obligations under the PDA for reasons attributable to CIPL.
CIPL had failed to execute a General Power of Attorney in favour of
AJIPL in terms of Clause 2.9 of PDA, which was necessary to obtain
sanction of the plans and to develop the Project. AJIPL contended that
both the MOU and PDA were signed by the same set of persons.
19. AJIPL also sought counter-claims, which are set out below:
"a. Pass an award of specific performance against the
claimant and in favour of the respondent thereby
directing the claimant to specifically perform its
obligation under the Property Development Agreement
dated 06.09.2014;
b. Pass an award against the claimant and in favour of
the respondent thereby directing the claimant to pay the
interest on the amount of Rs. 15,00,00,000/0 lying with
the claimant as deposit along with @15% per annum
from 06.09.2014 till the claimant performs its
obligations and the sanction plans of the project are
approved;
c. Pass an award, thereby directing the claimant to
refund of the excess amount of Rs. 1,75,00,000/- paid to
the claimant along with interest @ 15% p.a. w.e.f. fate
of respective payments till realization;
d. Pass an award, thereby directing the claimant to
refund the sum of Rs. 2,25,00,000/- paid to the claimant
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by the respondent along with interest @ 15% p.a. w.e.f.
date of respective payments till realization;
e. Award the costs of the false and frivolous proceedings
initiated by the claimant against the respondent in favour
of the respondent;
f. Such other and further relief(s) as this Hon'ble
Tribunal may deem just and proper in the circumstance
stated hereinabove."
The Impugned Award
20. The Arbitral Tribunal observed that the disputes relating to the
MOU could not be adjudicated in the present proceedings as the
Infrastructure Company which was a party to the MOU was not a party
to the PDA or the present proceedings. And, AJIPL was not a party to
the MOU. The Arbitral Tribunal also rejected AJIPL's contention that
the corporate veil of AJIPL and its other group companies including the
Infrastructure Company, be lifted. In this view, the Arbitral Tribunal
held that the need to examine the payments made under the MOU or to
refund same did not arise.
21. The Arbitral Tribunal rejected AJIPL's contention that the PDA
was a sequel to the MOU as it was AJIPL's own stand in the rejoinder
filed, in response to CIPLs reply to its counter-claims, that the group of
shareholders involving Mr Manoj Kumar and Mr Vinod Sachdeva did
not wish to involve another group of shareholders of the Infrastructure
Company, and thus, the PDA was entered into with AJIPL and not with
the Infrastructure Company.
22. The Arbitral Tribunal accepted CIPL's contention that the terms
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and conditions as agreed between the parties should be ascertained from
the express terms of the PDA and, if CIPL was required to account for
funds received under the MOU, the same would have been stated under
the express terms of the PDA. Since the the payments made under the
MOU were not referred to in the PDA, the same could not be accepted
as payments under the PDA.
23. The Arbitral Tribunal examined CIPL's claim regarding loss
caused on account of unauthorised use and occupation of the Subject
Land. It held that since the Subject Land was not handed over to CIPL
in due time, it had incurred a loss due to delay in development of the
Project. However, the Arbitral Tribunal further held that CIPL had not
substantiated the said claim. Notwithstanding the above finding, the
Arbitral Tribunal resorted to the principle of Best Judgment
Assessment, and assessed the loss at the rate of ₹20,00,000/- per month
with effect from 18.07.2015 till the date of handing over the possession
of the Subject Land.
24. The Arbitral Tribunal further held that CIPL had admittedly
received a sum of ₹8,22,56,500/- from AJIPL under the PDA and it was
liable to refund the same or adjust it against the amount of compensation
receivable for the unauthorised use and occupation of the Subject Land.
25. The Arbitral Tribunal also awarded interest at the rate of 9% on
the sums awarded to the parties. The Arbitral Tribunal also awarded
costs of arbitration quantified at ₹25,00,000/- along with interest at the
rate of 9% from the date of the award till the date of the payment.
26. Aggrieved by the impugned award, AIJPL has filed the present
petition.
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Submissions
27. Mr Kirpal, learned senior counsel appearing for AJIPL,
submitted that the principal dispute between the parties was whether the
payments made to CIPL under the MOU were required to be considered
as payments made under the PDA. The entire case of CIPL rests on the
allegation that AJIPL had failed to deposit the amounts as required
under Article 4 of the PDA and, CIPL was well within its right to
terminate the PDA and, seek possession of the Subject Land. Mr Kirpal
submitted that the Arbitral Tribunal had accepted the aforesaid
contention and disregarded a vital piece of evidence produced by
AJIPL. In this regard, he stated that AJIPL's witness had produced a
receipt dated 09.10.2014 signed by Mr D.K. Gupta of CIPL, which
clearly acknowledged the receipt of the deposits under the PDA.
However, that receipt (Ex.CW/X5) was rejected only on the ground that
it was produced at a belated stage, and the issues regarding payments
by the Infrastructure Company could not be adjudicated in the present
arbitration. Mr Kirpal contended that the aforesaid grounds were ex
facie erroneous. First of all, the receipt had not been produced at a
belated stage as it was mentioned in the rejoinder filed by AJIPL to
CIPL's reply to the counter-claims raised by AJIPL. He further
contended that the Arbitral Tribunal had also rejected AJIPL's request
for examining Mr D.K. Gupta, who had executed the said receipt and
thus, denied AJIPL full opportunity to present its case.
28. Mr Kirpal further contended that the Balance Sheet of CIPL
clearly acknowledged the receipt of payments, and thus, there was
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overwhelming evidence to establish that CIPL has been paid the
amounts as agreed in terms of the PDA. He submitted that the said
evidence was also erroneously rejected by the Arbitral Tribunal.
29. Next, he submitted that the entire transaction was a commercial
transaction and was required to be considered in that perspective. There
was clear evidence that CIPL had entered into an MOU for development
of the Project on the Subject Land; that the Infrastructure Company was
a related party belonging to the same group as AJIPL; that the MOU
had been signed on behalf of the respective parties by the same persons
who had signed the PDA; payments had been made under the MOU
which were in performance of similar obligations as undertaken by
AJIPL in terms of Article 4 of the PDA; and, CIPL had not taken any
immediate precipitate steps for non-payment of the money under the
PDA as it already held funds albeit provided in terms of the MOU.
Thus, the facts clearly evidenced that AJIPL had discharged its
obligations under the PDA.
30. He contended that the Arbitral Tribunal had completely ignored
the group of companies doctrine as accepted by the Supreme Court in
Chloro Controls (India) (P) Ltd. v. Severn Trent Water Purification
Inc. and Ors.: (2013) 1 SCC 641 and, had further overlooked the settled
principles which warranted lifting of the corporate veil. He submitted
that if the said principles were applied, it would be clear that the identity
of AJIPL and the Infrastructure Company was the same; yet, the
Arbitral Tribunal declined to examine this aspect.
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31. Lastly, Mr Kirpal submitted that the Arbitral Tribunal had found
that CIPL had failed to establish its claim for charges for unauthorised
use and occupation of the Subject Land and yet, has awarded a sum of
₹20 lacs per month on account of alleged loss suffered by CIPL.
Reasons and Conclusion
32. As is apparent from the above, there are four principal questions
that arise for consideration. First, whether the impugned award is
vitiated by patent illegality on the face of the record as the Arbitral
Tribunal has rejected the evidence produced by AJIPL (the receipt dated
09.10.2014) purportedly issued by CIPL acknowledging the receipt of
₹15 crores. Second, whether the impugned award is liable to be set aside
as AJIPL was not given a full opportunity to present its case as required
under Section 18 of the A&C Act. Third, whether the impugned award
is opposed to the fundamental policy of Indian law and no reasonable
person could possibly accept the Arbitral Tribunal's view. And fourth,
whether the award in favour of CIPL for an amount of ₹20 lacs per
month as a loss on account of unauthorised use and occupation of the
Subject Land, is patently illegal and contrary to the public policy of
India as CIPL had failed to substantiate the same.
33. The Arbitral Tribunal had evaluated the material and evidence
produced by the parties. It found that the MOU was executed between
the Infrastructure Company on one part and CIPL on the other part and
did not include an arbitration clause. The Arbitral Tribunal held that
without an arbitration agreement to refer the disputes in connection with
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the MOU to arbitration, and in absence of the Infrastructure Company
as a party to the arbitral proceedings, AJIPL's contention that the
corporate veil of the Infrastructure Company and AJIPL should be lifted
could not be accepted. The Arbitral Tribunal held that it was imperative
that the Infrastructure Company be a party to the arbitral proceedings
before any claim, involving the Infrastructure Company could be
adjudicated. Considering that the Infrastructure Company was not a
party to the arbitral proceedings and the MOU did not include an
Arbitration Clause, the Arbitral Tribunal held that no issue arising out
of the MOU could be adjudicated in the given proceedings.
34. More importantly, the Arbitral Tribunal found that even
according to AJIPL's pleadings, the identity of the Infrastructure
Company was not the same as AJIPL. The Infrastructure Company
included a group of shareholders who were not shareholders in AJIPL.
The relevant extract from the rejoinder filed by AJIPL to CIPL's reply
to its counter-claim is set out below:
" .... After cancellation of the Agreement dated
07.08.2013, since the group of Mr. Manoj
Kumar did not wish to involve one of the group
shareholders of Airwil JKM Infrastructure Pvt.
Ltd. in the project as such the new Agreement
was entered into with the respondent herein
wherein only the two groups were shareholders,
one group being the group of Sri Vinod
Sachdeva."
35. In view of the above, the Arbitral Tribunal reasoned that the
aforesaid pleadings indicated that Mr Manoj Kumar and Mr Vinod
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Sachdeva were dealing with the Subject Land in their personal capacity
rather than as corporate entities and, this completely demolished
AJIPL's case that the PDA was a sequel to the MOU. Clearly, if the
shareholders /shareholding pattern of the Infrastructure Company and
AJIPL were not common - as is apparent from AJIPL's pleadings - the
decision of the Arbitral Tribunal to reject AJIPL's case for lifting the
corporate veil, cannot be faulted.
36. Next, the Arbitral Tribunal found that the terms of the PDA were
clear and did not make any reference to the MOU or acknowledge that
the payments made under the MOU were required to be considered as
payments under the PDA. It is AJIPL's case that the parties had agreed
that CIPL "shall start refunding the said Deposit to Airwil JKM
Infrastructure Pvt. Ltd. (Infrastructure Company) and correspondingly
the respondent (AJIPL) shall make payment of the respective amounts
to the claimant (CIPL) under the new Property Development Agreement
dated 06.09.2014 (PDA)". However, the PDA did not record any such
understanding or agreement between the parties. The Arbitral Tribunal
accepted that in terms of Sections 91 and 92 of the Indian Evidence Act,
1872, oral evidence cannot be led for the purposes of contradicting,
varying, adding to, or subtracting from the terms of the written contract.
37. AJIPL's claim that the PDA was a sequel to the MOU, is contrary
to its own pleadings. According to AJIPL, the MOU had been cancelled
as CIPL had failed to acquire the plot no. 10. The same was acquired
after cancellation of the MOU and the permission for amalgamation of
the plots (bearing nos. 1, 2, 10, 11 and 12) was granted by the NOIDA
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Authorities on 21.07.2014. Therefore, as far as the MOU is concerned,
it was AJIPL's case that the same was terminated. However, Mr D.K.
Gupta of CIPL had again approached Mr Vinod Kumar Sachdeva of
AJIPL to take up development of the Subject Land and a fresh
agreement (PDA) was entered into.
38. In view of the above, the decision of the Arbitral Tribunal to
accept CIPL's claim that AJIPL had breached the terms of the PDA by
not depositing the funds as agreed in terms of Clause 4 of the PDA,
cannot be held to be perverse or patently illegal.
39. The contention that the impugned award is vitiated by patent
illegality as the Arbitral Tribunal has disregarded vital evidence, of the
receipt produced by AJIPL, is also unmerited. This is so for several
reasons. First, that the Statement of Defence and the counter-claims
filed by AJIPL did not mention the receipt. Second, the contents of the
receipt runs contrary to AJIPL's pleadings in its Statement of Defence
and counter-claims. It was not AJIPL's case that it had made the deposit
under Article 4 of the PDA by making deposit of the requisite amount.
It was its case that the amounts paid by the Infrastructure Company to
CIPL under the MOU was required to be refunded by CIPL and the
parties had agreed that on such refunds being made, AJIPL would make
a corresponding deposit with CIPL. In view of these pleadings, a receipt
purportedly acknowledging receipt of funds on account of AJIPL would
run contrary to AJIPL's pleadings before the Arbitral Tribunal.
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40. In the aforesaid respect, Mr Kirpal had referred to the averments
made in the rejoinder filed by AJIPL to CIPL's reply to its counter-
claims. Paragraph 4 of the rejoinder as referred to, is set out below:
"4. ...It is further reiterated that whenever the
respondent through its directors insisted on
expediting the refund etc. they were told by the
directors of the claimant that the claimant is not
insisting on the Deposit under the Property
Development Agreement dated 06.09.2014 as they
have already received the said Deposit under the
earlier MOU dated 07.08.2013 and as such no
prejudice is being caused to the respondent due to the
delay in refund. In fact, one receipt was also executed
by the claimant through its Director Shri. D.K. Gupta
at the relevant time for the comfort of the
respondent."
41. It is apparent from the above that AJIPL did not mention any
particulars of the receipt. More importantly, it did not set up a case that
CIPL had received the deposit under the PDA. It reiterated its stand
that CIPL was required to refund the deposit made by Infrastructure
Company under the MOU and AJIPL was to make payments under the
PDA. However, for the first time, in its rejoinder AJIPL mentioned that
a receipt had been executed by it "for the comfort" of AJIPL. Thus, even
according to AJIPL, the receipt was not issued as an acknowledgement
of payment under the PDA but only 'for comfort' and, once the
Infrastructure Company would receive the funds paid under the MOU,
AJIPL would make payments under the PDA.
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42. The Arbitral Tribunal found that the receipt was produced at a
belated stage. It was not a part of the documents as disclosed. The only
reference made to a receipt (without any particulars) was in the
rejoinder to the reply to the counter claims and, CIPL had no occasion
to controvert the same. The receipt was also disputed. In this context,
the Arbitral Tribunal found that the receipt did not inspire any
confidence. This Court finds no reason to interfere with the said finding.
The scope of interference with the award on the ground of patent
illegality is very limited. This Court cannot re-evaluate and reappreciate
the evidence as the first appellate court to supplant its opinion over that
of the Arbitral Tribunal. The view expressed by the Arbitral Tribunal
is, clearly, a plausible one and thus, the impugned award cannot be set
aside in these proceedings on this ground.
43. Admittedly, the Balance Sheet of CIPL did not acknowledge any
payment from AIJPL. According to AJIPL, CIPL's Balance Sheet
reflected ₹ 12,50,00,000/- outstanding to the Infrastructure Company
and receipt of various amounts aggregating to ₹2,50,00,000/- from other
group companies of AJIPL. In view of the Arbitral Tribunal's decision
to reject AJIPL's contention that the corporate veil of these companies
should be lifted, these amounts could not be considered as paid by
AJIPL under the PDA.
44. The contention that the Arbitral Tribunal had violated Section 18
of the A&C Act as it had denied AJIPL full opportunity to present its
case, is equally unmerited. AJIPL had full opportunity to produce the
documents at the relevant stage and also lead oral testimony. AJIPL
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applied for summoning of Mr D.K. Gupta after it had examined three
witnesses in defence, and that too for proving a receipt which was not
disclosed at an earlier stage nor did it find any mention in its Statement
of Defence.
45. Section 18 of the A&C Act cannot be construed to mean that a
party would be entitled to summon witnesses at any stage of the
proceedings. Clearly, denial of AJIPL's request does not amount to
denying it an opportunity to present its case.
46. Written submission filed on behalf of AJIPL also includes
submissions in regard to the counter claims set up by AJIPL. It is
contended that CIPL had breached the covenants of the PDA and the
same disentitles CIPL from seeking any relief. Mr Kripal had not made
any oral submissions to the aforesaid effect. Notwithstanding the same,
this Court has examined the same and finds no merit in the submission
that the arbitral award is required to be interfered with on this ground.
The Arbitral Tribunal had found that the alleged defaults (non-
execution of GPA in favour of AJIPL and mortgage of the Subject
Land) was not of much relevance. No prejudice had been caused to
AJIPL on that count as the stage at which AJIPL could have possibly
been impeded in securing sanction for developments of the plans had
not reached. The Arbitral Tribunal held that AJIPL had defaulted in
depositing the amount as required under Article 4 of the PDA (which
was to be done within a period of forty-five days from signing of the
PDA) and, the stage where a GPA was required to enable AJIPL to
perform its other obligation, had not reached. The said view is a
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plausible view. The same is, clearly, outside the limited scope of
interference under Section 34(2) or Section 34(2)(A) of the A&C Act.
47. Mr Kirpal's contention that the entire matter is required to be
looked at from a commercial perspective, is persuasive. The Balance
sheet of CIPL reflected the amounts paid by the Infrastructure Company
and certain other companies which AJIPL asserted were from the same
group. CIPL had acknowledged receipt of a cheque of ₹ 1 crore in the
PDA and the same cheque was also referred to in the MOU. But the
PDA did not mention other payments. Perhaps, the Arbitral Tribunal
could have taken a view different. Clearly, the defence raised by AJIPL
was not insubstantial. However, as stated above, the scope of
examination under Section 34 of the A&C Act does not extend to
reappreciation or re-evaluation of the evidence to determine the
correctness of an arbitral award. The decision of the Arbitral Tribunal,
both on questions of law and on fact, is final. Although the award can
be interfered with on the ground of patent illegality or as offending the
Public Policy of India; but as explained by the Supreme Court, in Delhi
Airport Metro Express Pvt. Ltd. v. Delhi Metro Rail Corporation Ltd.:
2021 SCC OnLine SC 695, the same does not entail re-evaluation and
reappreciation of evidence. An award may be erroneous but that does
not warrant any interference under Section 34 of the A&C Act. The
award would be vitiated by patent illegality if it goes to the root of the
matter and the Arbitral Tribunal's view is, ex facie, so perverse that no
reasonable person could possibly take that view.
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48. The last question to be examined is whether the decision of the
Arbitral Tribunal to award loss quantified at ₹20 lacs per month in
favour of CIPL is patently illegal. The Arbitral Tribunal had returned a
clear finding that CIPL had not taken any care to substantiate its claim
and yet the Arbitral Tribunal had awarded a sum of ₹20 lacs per month
as damages for the loss suffered by it. Paragraph 21 of the impugned
award reads as under:
"21. The Claimant has claimed charges for
unauthorised use and occupation charges for the five
plots at the rate of Rs. seventy-five lacs w.e.f.
18.07.2015, the date on which the claimant
terminated PDA. But the claimant has not taken care
to substantiate the claim. There cannot be any doubt
about the two-fold position that the land is very
valuable, has immense commercial potential, the
claimant has surely been wronged, and has so far been
deprived of the benefits (which would have accrued
to the claimant) for reasons attributable to the
respondent. Furthermore, had the claimant received
possession of the land on 18.07.2015, it would have
started developing the lands earlier. I am, therefore,
left with the only option of resorting to the principle
of Best Judgment Assessment, if I can use the
expression and borrow the concept from taxation
jurisprudence. I, therefore, assess the losses to the
claimant at the rate of Rs. twenty lacs per month till
the date possession of the lands is handed over to the
claimant, and financial scores are settled."
49. Clearly, the aforesaid decision is unsustainable. After having
concluded that CIPL had failed to substantiate its claim, there was no
occasion for the Arbitral Tribunal to suo motu assess a sum of ₹20 lacs
per month as the quantum of loss suffered by CIPL on account of being
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deprived of possession of the Subject Land. This Court had pointedly
asked Mr Malhotra, learned counsel appearing for CIPL, whether there
was any material on record which could support the quantification of
loss of ₹20 lacs per month. He had fairly stated in the negative.
50. The Arbitral Tribunal had observed that it was assessing the loss
by borrowing from the concept of Best Judgment Assessment. Clearly,
the concept of Best Judgment Assessment has no relevance of assessing
a claim for damages. Under the provisions for Best Judgment
Assessment under the Income Tax Act, 1961, an Assessing Officer is
required to assess the income chargeable to tax on the material as
available before him. As the taxman, he has a duty to assess and recover
the tax for the State. There is no duty for an Arbitral Tribunal to embark
on an exercise of determining the loss especially when the party has
failed to prove the same. It is relevant to refer to Section 28(2) of the
A&C Act which expressly provides that the Arbitral Tribunal shall
decide "ex aequo et bono or as amiable compositeur" only if the parties
have expressly authorized it to do so and not otherwise. The phrase "ex
aecquo et bono" means according to equity and conscience. It
empowers the arbitrator to dispense with consideration of the law and
to take decisions on notions of fairness and equity. The term 'amiable
compositeur' is a French term and means an unbiased third party who
is not bound to apply strict rules of law and who may decide a dispute
according to justice and fairness.
51. In the present case, the Arbitral Tribunal was required to decide
CIPL's claim on the principles of law and not as an 'amiable
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compositeur'. Admittedly, CIPL could have established the loss
incurred by it by placing material and evidence on record. It is not
CIPL's case that such a loss could not be established. In these
circumstances, the finding of the Arbitral Tribunal that CIPL had not
taken care to substantiate its claim would be fatal to CIPL's claim for
compensatory damages for the loss incurred by it.
52. In Union of India v. Zeman Technogroup: OMP (COMM)
28/2015, decided on 02.03.2017, a Co-ordinate Bench of this Court has
held as under:
"24. It requires to be noticed that there is a very
categorical finding in the majority Award about the
failure of the Respondent to lead evidence to prove its
loss. The extracted paragraphs of the majority Award
unambiguously conclude that "the Claimant has made
no averments nor led any evidence to prove that the
boots produced by them were incapable of being sold
to a third party. They also did not place any material
on record to show that the boots got wasted lying in the
warehouse.
xxxx xxxx xxxx
27. In light of the above findings of the majority, and
its conclusion that "the Claimant has not been able to
set out its case insofar as the actual loss suffered by the
Claimant is concerned" it is inexplicable how it
proceeded to allow 25% of the total amount of
$7,494,480 as claimed by the Respondent. This part of
the Award suffers from a patent illegality and is
opposed to the fundamental policy of Indian law
inasmuch as it is based on no evidence and is not
supported by reasons. It is contrary to the statutory
requirement under Section 31(3) of the Act which
mandates that the conclusions of the AT have to be
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supported by reasons. In the present case, the reasons
given by the majority of the AT far from supporting the
above conclusion, contradict it. Consequently, the
Court has no hesitation in setting aside the impugned
majority Award to the extent that it awards to the
Respondent 25% of the total amount of $7,494,480."
53. In view of the above, the impugned award is set aside to the
limited extent that it directs payment of a sum of ₹20 lacs per month
from 18.07.2015, in favour of CIPL and against AJIPL for the
unauthorized use and occupation of the Subject Land.
54. The petition is disposed of, in the aforesaid terms.
VIBHU BAKHRU, J
NOVEMBER 29, 2021
pkv/RK
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