Sardar Sarovar Narmada Nigam ... vs Aniha Corporation
2021 Latest Caselaw 13804 Guj

     C/FA/2544/2015                               JUDGMENT DATED: 13/09/2021




             IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                      R/FIRST APPEAL NO. 2544 of 2015


FOR APPROVAL AND SIGNATURE:


HONOURABLE MS. JUSTICE SONIA GOKANI

and
HONOURABLE MR. JUSTICE NIRZAR S. DESAI

==========================================================

1    Whether Reporters of Local Papers may be allowed                   NO
     to see the judgment ?

2    To be referred to the Reporter or not ?                            NO

3    Whether their Lordships wish to see the fair copy                  NO
     of the judgment ?

4    Whether this case involves a substantial question                  NO
     of law as to the interpretation of the Constitution
     of India or any order made thereunder ?

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                SARDAR SAROVAR NARMADA NIGAM LIMITED
                                Versus
                         ANIHA CORPORATION
==========================================================
Appearance:
MR HS MUNSHAW(495) for the Appellant(s) No. 1
MR KV SHELAT(834) for the Defendant(s) No. 1
==========================================================

    CORAM:HONOURABLE MS. JUSTICE SONIA GOKANI
          and
          HONOURABLE MR. JUSTICE NIRZAR S. DESAI

                              Date : 13/09/2021

                      ORAL JUDGMENT

(PER : HONOURABLE MS. JUSTICE SONIA GOKANI)

1. The appellant is the original applicant who is aggrieved

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and dissatisfied with the order dated 14.07.2015 delivered by

the learned District and Sessions Judge, Gandhinagar

rejecting the Civil Misc. Appeal No. 168 of 2014 preferred by

the present appellant and confirming the award dated

23.04.2014 declared by the arbitrator.

2. The brief facts leading to the present appeal are as

follows: -

2.1. The claimant - opponent Aniha Corporation is a

proprietor firm managed through its proprietor Shri

Chetankumar Ramanlal Shah. The Aniha Corporation is

interested in the development of land and therefore, it

entered into an agreement with the appellant Sardar Sarovar

Narmada Nigam Limited ('SSNNL' hereinafter).

2.2. A tender was invited by SSNNL by issuing public

advertisement in the newspaper for the lease of plot no.2

admeasuring 2064 sq.mtrs situated at Gandhinagar Airport

Road on LHS downstream, Mouje Sughad of District

Gandhinagar. A plot was to be developed for tourism purpose

and the development was to take place as per the terms and

conditions mentioned in the tender. The claimant - opponent

being the successful bidder, the SSNNL agreed to entered

into the lease agreement with it. The SSNNL agreed to lease

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out the plot no.2 to the opponent on payment of premium

equivalent to the market value to develop the said property

and on acceptance of the tender, a communication was sent in

writing on 15.02.2007. A cheque of Rs.19,50,000/- was issued

on 26.02.2007 and the additional security of six months' rent

to the tune of Rs. 60,000/- had been also given.

2.3. A lease deed came to be executed after the parties

entered into the understanding on 05.06.2007. The

construction plan was prepared by the respondent and

architecture design also was made. It was sent for the

approval as per the terms and conditions of the agreement to

the appellant on 11.10.2007.

2.4. It was averred by the opponent that the request was

made to process the plan so that the project can be proceeded

further. A communication was also sent to the Executive

Engineer, Narmada Canal Section 4 to verify and approve the

plans. It was sent to the Gandhinagar Urban Development

Authority (GUDA) and Ahmedabad Urban Development

Authority (AUDA). There was a request that after once it is

sanctioned, the same is to be sent to the SSNNL. After about

10 months, a communication was received by the opponent

that it cannot construct multi storied building and the plans

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were sent back to the opponent. It was insisted that the

opponent was also get the plan sanctioned from the local

development authority.

2.5. According to the opponent before 05.08.2008, on regular

basis, the payment was made of the rent and frequent

inquiries were made with the corporation with regard to the

process whether was in the right direction. On 12.09.2008, it

was communicated by the appellant to the opponent -

claimant that it should start the development of subject plot

and submit the schedule of development. It also was asked to

get the sanction of the Urban Development Authority for the

construction plan. It is all throughout alleged by the opponent

- claimant that the appellant failed to fulfill the obligations of

verifying and approving the construction plans and getting

approval from the appropriate authorities since the subject

land was owned by the appellant. The grievance on the part

of the opponent - claimant is that it never supplied the

information as requested for and therefore for want of

necessary details and on the ground of zoning which had been

asked for by the order, the matter got delayed.

2.6. On 15.12.2008, the opponent was informed that the

Narmada Main Canal had a special structure and had a

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certificate in that regard. In wake of the background of AUDA

regulations and restrictions, it was not possible to carry out

the construction as per the plan. A communication was also

received by the opponent to get the plan sanctioned with the

local development authority and it was promised the permit

use of places surrounded the subject plot as condition no.5 of

the tender agreement.

2.7. It was since not legally feasible to develop the plot at

one stage, it was asked to take a revised plan. Eventually a

stand was taken by the appellant and the lease deed was

terminated as the opponent - claimant failed to develop plot

no.2 in a given time period. The termination was imposed with

immediate effect from the date of communication i.e.

07.02.2011. The premium amount and the rent amount paid

by the claimant had been forfeited and the possession of plot

had been restored to the SSNNL immediately. This, according

to the opponent, is a clear case of breach of contractual terms

and conditions / obligations and assurance given to the

opponent and therefore, it challenged the notice of

termination of lease agreement as contrary to law.

2.8. On breach of provisions of Transfer of Property Act on

account of forfeiture of lease, the legal notice had been issued

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seeking reference to the arbitration under the provisions of

Arbitration Act and request was made for the arrangement of

sole arbitrator. It also sought the relief in its statement of

claim as follows: -

"(A) Hold that the actions of the respondent corporation are in breach of the obligations arising from representations and assurances and bundle of contracts and that such breach is illegal, unjust, arbitrary, malafide, discriminatory and the consequential alleged termination of the registered lease deed be declared as illegal, unilateral, unwarranted, discriminatory and violating the rights of the claimant adversely;

(B) By holding that the claimant's liability to raise construction on the subject property within the specified period was and is attributable to the inaction, misrepresentation, omissions and consequent breach on the part of the respondent corporation in providing sanctioned plans as promised and under any circumstances the alleged breach was waived and could not have been the basis of contract without considering the grounds as to why the development permission was not accorded within six months;

(C) xxx xxx xxx xxx

(D) be pleased to quash and set aside the termination of the lease effected by the Respondent Corporation by holding the lease as a continuing one by restoring the subject land in question with required directions to extend the period of lease pro rata and with a direction to the respondent to comply with the representations, assurances and the bundle of contractual obligations by and between the parties by getting the plans for development approved;

(E) In view of the breach and inaction of the covenants by and between the parties, by the respondent corporation and its agents, the

C/FA/2544/2015 JUDGMENT DATED: 13/09/2021

forfeiture of the lease and the forfeiture of rent and premium amount of Rs. 39,50,000/- be declared illegal, arbitrary, unreasonable and contrary to Section 112 of the Transfer of Property Act, and the premium amount with the rent paid so far, be ordered to be refunded to the claimant with commercial rate of interest 18% from the date of deposit till realization be ordered;

(F) The claim from Losses and compensation of Rs. 1,10,00,000/- collectively, being amount for expenditure incurred in preparation of plans, in preparing architectural drawing, the Loss of Business and the difference between the market rate prevalent on the date of termination of lease and the premium price of Rs. 39,50,000/- be ordered to be awarded in favour of claimant against the Respondent corporation and

(G) Be pleased to hold finally that having regard to the site topography, situation of the subject plot, and non permissibility of constructed development in major portion of the subject plot, the contract of lease stood frustrated and respondent be directed to give similar/deficit area of plot for development adjacent to the subject plot and to continue the lease contract."

3. The matter was decided by the Arbitral Tribunal.

Learned Arbitrator framed following issues and answered the

same as follows: -

"Issues: -

(1) Whether the claimant proves that the contract to develop the subject plot as lease holding property is void and/or voidable as alleged?

(2) Whether floating of the tender regarding subject plot was illegal, unjust and devoid of authority in view of the location of the plot?

(3) Whether the claimant proves that in view of either impossibility or on account of legal

C/FA/2544/2015 JUDGMENT DATED: 13/09/2021

disability, the development of the subject plot, contract was a frustrated contract from its inception?

(4) Whether the claimant proves that any eventuality has resulted into frustration of the contract for the reasons beyond control of the parties to the contract? If yes, what is consequences?

(5) Whether the respondent proves that termination of the contract/lease and forfeiture of the amount of premium of Rs. 39.5 lakh is legal and proper?

(6) Whether the claimant was aware about the Development and Ribbon Development Rules when he entered into contract of the respondent Corporation? If yes, then what is the consequence?

(7) Whether the claimant is entitled to the amount of claim of Rs. 1,10,00,000/- as averred in the statement of claim with interest?

(8) Whether the respondent proves that the claimant has failed in developing the plot as alleged in the reply affidavit filed, though the development of the plot was possible and/or otherwise permissible?

(9) Whether the claimant is entitled to interest? If yes, at what rate?

(10) What award?

Answers to the above issues: -

(1) In affirmative. The contract is found voidable.

(2) In affirmative. It is found unjust, improper and therefore illegal in view of the location of the plot.

(3) In affirmative.

C/FA/2544/2015 JUDGMENT DATED: 13/09/2021

(4) First part in affirmative and the claimant therefore is found entitled to the relevant consequential reliefs prayed for.

(5) In negative.

(6) The first part in affirmative. However, it is found that the same has no negative consequence on the claim as discussed.

(7) The claimant is held entitled to Rs. 1,73,700/-. Rest of the claim is dismissed.

(8) In negative.

(9) First part in affirmative. At the rate of 18%.

(10) As per final Award."

4. Eventually, the learned Arbitrator allowed the claimant

to recover the amount of Rs. 39,50,000/- with the interest at

the rate of 18%. It also awarded the claim of Rs. 1,73,700/-

under the head of loss, damages, etc. The claim beyond Rs.

1,73,700/- was not found acceptable and therefore, the same

was dismissed.

5. An application came to be preferred by the present

appellant under Section 34 of the Arbitration and Conciliation

Act before the District and Sessions Court, Gandhinagar by

way of Civil Misc. Application No. 168 of 2014 where the

Court decided the following issues: -

"Issues: -

                1.    Whether    the    applicant   proves        that       the




      C/FA/2544/2015                              JUDGMENT DATED: 13/09/2021

Learned Sole Arbitrator doesn't have jurisdiction to adjudicate the dispute between the parties?

2. As per the Gujarat Public Works Contract and Dispute Arbitration Tribunal Act, 1992, the Tribunal has jurisdiction to adjudicate the dispute between the parties?

3. What order?

Findings on the above issues: -

1. In the Negative.

2. In the Negative.

3. As per the final order."

5.1. The Court found the judgments sought to be relied upon

by the opponent - claimant appropriate and the ratio laid

down therein covering both the issues raised before it. It thus

dismissed the application in limini.

6. Aggrieved appellant is before this Court. It is also the

say of the appellant that there is a gross error committed by

the learned Arbitrator and the District Court holding the

appellant responsible for non-development of the plot. There

is a gross error in saying that the appellant is responsible for

non-development of the plot. The tender has been submitted

with open eyes and executed the lease deed at his sweet will

and therefore, the lease deed being a contract, it cannot shift

the liability to abide by the terms and conditions. Non-

fulfillment of the terms and conditions of the lease deed has

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resulted into forfeiture of amount as well as the taking over of

the possession of the land in question. The trial Court has

awarded 18% interest duly confirmed by the lower Court to

drop burden upon the public exchequer heavily, therefore, the

appellant sought the following prayers: -

"(a) This Hon'ble Court be pleased to admit this First Appeal.

(a) Be pleased to allow the present First Appeal by way of passing appropriate orders quashing and setting aside the impugned order dated 14.07.2015 delivered by the Ld. Sessions Judge at Gandhinagar rejecting the Civil Misc. Appeal No. 168 of 2014 preferred by the present Appellant and confirming the Award dated 23.04.2014 declaring by the Hon'ble Arbitrator by way of holding that the same is illegal, unjust, arbitrary and contrary to the facts and materials on record in the interest of justice.

(b) Be pleased to pass such other and further orders as the nature of the case may require."

7. The opponent had preferred caveat application under

Section 148(A) of the Code of Civil Procedure. It had urged

that the First Appeal filed under Section 37 of the Arbitration

and Conciliation Act, 1996 against the caveator by challenging

the judgment and order dated 14.07.2015 cannot be passed

by the learned Principal District Judge. In the challenge to the

judgment and award dated 14.07.2015 passed by the learned

Principal District Judge, Gandhinagar in Civil Misc.

Application No. 168 of 2014, it was urged not to proceed

further in the hearing.

C/FA/2544/2015 JUDGMENT DATED: 13/09/2021

8. This Court on 11.01.2016 while admitting the appeal had

directed the appellant to deposit the entire amount within six

weeks from the date of order i.e. 11.01.2016 with the registry

of the trial Court and the trial Court shall deposit the amount

with nationalized bank initially for three years' period.

9. We have heard learned advocate Mr. H.S.Munshaw who

has also given his written submissions. It is emphasized by

learned advocate Mr. Munshaw all along that for tourism

purpose the handing over of the possession of the plot was

made however, after three years, the appellant was compelled

to revoke and cancel the lease deed as also forfeit the amount

as not only after handing over the possession it has failed to

get the approval of the order, it has chosen not to abide by

any further conditions and therefore, payment of Rs. 39.50

lakhs with interest at the rate of 18% is extremely high. The

refund of amount of premium was completely unwarranted

and at the best the interest could have been 7% or 7.5%. It

also has further urged that the plan layout ought to have been

placed for the approval for order. In an identical case, the

learned Single Judge had directed to deposit Rs. 75 lakhs. He

therefore has urged to quash and set aside both the

authorities.

C/FA/2544/2015 JUDGMENT DATED: 13/09/2021

9.1. In his written submission he has further urged that the

opponent was under obligation for tourism activities. He was

also well conversant with the location of the plot. It is further

his say that it also failed to develop the plot within six months.

In spite of completion of time limit for the development of the

plot, according to the appellant, as per the terms and

conditions of the lease agreement, despite repeated

instructions nothing happened and therefore, the notices

dated 08.04.2010 and 24.09.2010 came to be issued.

According to the appellant, the sole arbitrator declared the

award by allowing various claims and ordered to pay Rs.

39.50 lakhs with interest at the rate of 18%.

10. Before adverting to the facts and submissions made at

length by the other side, the law on the subject needs

reference at this stage.

10.1. The Apex Court redressed in case of Mcdormott

International Inc. vs. Burn Standard Co.; reported in

(2006) 11 SCC 181, where there was an agreement between

the parties in relation to the technical collaboration in terms

whereof the Mcdormott International Inc. agreed to transfer

technology to the BSNL with regard to design, construction

and operation of a fabrication yard. The said agreement

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contained a separate arbitration clause between the parties. A

contract was entered into by and between BSNL and ONGC

for fabrication and installation of offshore platforms and a

part of the said contract work was assigned to MII in respect

of fabrication, transportation and installation of structures,

modules, platforms and pipeline components. The Court held

that the intervention of the court is envisaged in few

circumstances only, like, in case of fraud or bias by the

arbitrators or violation of natural justice, however, where the

Arbitrator has gone contrary to or beyond the expressed law

of the contract or granted relief in the matter not in dispute,

would come within the purview of Section 34 of the Act. The

Arbitrator before the Apex Court had taken recourse to the

Emden formula which is widely accepted. The Court also held

that the 1996 Act makes 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, in case of fraud or bias by the arbitrators or

violation of natural justice. The court cannot correct errors of

the arbitrators. It can only quash the award leaving the

parties free to begin the arbitration again, if it is desired.

Therefore, the scheme of the provision is to keep the

supervisory role of the court at minimum level and this can be

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justified as parties to the agreement make a conscious

decision to exclude the court's jurisdiction by opting for

arbitration which they prefer with expediency and finality

attached to it.

10.2. Thus, the vital points which have been culled out that

the courts cannot correct the errors of the arbitrator however,

it has a power to quash the award, if it desired and notices the

fraud or bias or a clear violation of principles of natural

justice. It also was held that once the matter is referred to the

arbitrator within a reasonable time, the party invoking the

arbitration clause may proceed on the basis that the other

party to the contract has denied or disputed his claim or is not

otherwise interested in referring the dispute to the arbitrator.

10.3. This Court (Coram: - Mr. K.S.Jhaveri and Mr.

A.G.Uraizee, JJ.) in Jayantibhai Chelabhai Prajapati vs.

Sardar Sarovar Narmada Nigam Limited; rendered in

Special Civil Application No. 4753 of 2011 on

06.08.2014; where the petitioner has called in question the

decision of the respondent SSNNL whereby the lease deed

was executed by and between the petitioner and respondent

which was terminated and the amount of premium of Rs. 1

crore and advance rent paid by the petitioner had been

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forfeited. It was an advertisement inviting the bids from the

public for leasing out different plots of land near Narmada

Main Canal Highway, Ahmedabad for a period of 30 years.

The petitioner submitted the tender bid which was accepted

by the respondent - SSNNL. It was subject to the fulfillment

of the terms and conditions specified in the letter. The

petitioner was to pay the premium amount of Rs. 1 crore and

thereafter the lease deed was to be executed by and between

the parties. The petitioner addressed communication to the

respondent intimating that it had initiated the process for

obtaining approval from the Ahmedabad Urban Development

Authority for the development of club in the name of "Akruti

Club" and once the approval of AUDA was obtained, it would

obtain the necessary approval from the respondent. By

another communication addressed to the respondent, the

petitioner specified the activities which it intended to develop

on the lease land. However, the respondent informed the

petitioner that the activities specified by the petitioner were

different then the object for which the tender bid was invited.

The legal notice was issued to explain the breach of terms and

conditions. The reply had been given and eventually the

respondent terminated the lease deed and the amount of

premium of Rs. 1 crore along with the advance rent paid by

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the petitioner had been forfeited.

10.4. The Court after hearing both the sides held that as per

the terms and conditions of the lease deed, the petitioner was

required to develop the land in question within the stipulated

time period which was six months from the signing of the

lease deed and he was required to obtain the requisite

permissions and approvals relating to the development plans

as specified in the project and to complete the construction

within a period of two years with the requisite and proper

facilities, amenities and other conveniences in accordance

with the sanctioned plan. More than two years have passed

and no development took place and the land in question

continued to remain as it was. Clause 13 of the terms and

conditions of lease deed speaks of the termination of lease

deed and forfeiture of the rent and premium paid.

10.5. The Court noticed the chronology of events of issuance

of legal notice and number of hearing having been availed to

the petitioner. Noticing the due opportunity was already

availed before exercising the powers, as provided in Clause 13

of the terms and conditions of the lease deed coupled with the

fact that the respondent has not committed any illegality or

impropriety while terminating the lease deed and forfeiting

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the amount of premium and advance rent, the Court upheld

the action of the respondent authority.

10.6. It also took the help of the decision of the Apex Court in

rendered in case of Dina Nath v. State of Uttar Pradesh and

others; reported in (2010) 15 SCC 218 , which says that the

Courts cannot be a silent spectator in matters of public

interest and that it is bound to perform its constitutional duty

for ensuring that public property is not frittered away by

unscrupulous elements in the power corridors and that acts of

grabbing public land are property are enquired into and

appropriate remedial action is taken. According to the Court,

by proposing the development of land, the very object of lease

was being frustrated and therefore, if the public property is

not put to use for the purpose for which it was meant, it chose

to uphold the action of the respondent. The market value of

the land was approximately 12.50 crores. The compromise

was suggested for the issue by accepting refund of 50% of the

forfeited amount. It dismissed the petition with the cost of Rs.

25,000/-.

10.7. When travelled to the Supreme Court in Civil Appeal

No. 187 of 2018, the Court directed the petitioner to deposit

Rs. 75 lakhs before the registry within six months. The Court

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was disinclined to enter into the merits of the rejection of the

representation taking note of the fact that the High Court had

granted the status-quo and the matter remained pending the

Court sorted out the problem and directed Rs.75 lakhs lying

with the registry to be refunded along with accrued interest

and out of Rs. 1 crore lying and deposit with the respondent,

Rs. 25 lakhs had been forfeited in the special facts and

circumstances and the refund of Rs. 75 lakhs carried no

interest.

11. In this background, the award of the arbitrator shall

need to be examined by this Court.

12. It is an admitted fact that both the learned Arbitrator

and the District Court under Section 34 of the Arbitration and

Conciliation Act have concurrently held in favour of the

opponent - original claimant. The amount forfeited by the

present appellant also has been refunded with 18% interest.

Therefore, this Court needs to address as to whether any such

indulgence is necessary on the part of this Court. Ordinarily,

the Court in its supervisory jurisdiction under Section 37 of

the Arbitration and Conciliation Act is required to review the

arbitral award for the purpose of ensuring fairness and in

limited circumstances the intervention and indulgence of the

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Court is warranted like the case of fraud or bias by the

arbitrator or violation of principle of natural justice etc.

13. At the outset, it is required to be noted that the

decision sought to be relied upon by the appellant would

require a close scrutiny.

13.1. The decision of Dina Nath v. State of Uttar

Pradesh and others (supra) when is closely perused, it

makes it obligatory for the Court to zealously guard against

the unwarranted and unscrupulous elements which attempted

to grab the public land. When anyone attempts to usurp the

public property under the garb of development of land, and

when that very object of lease is being frustrated by the party,

which is dishonest and untrue, the Court has chosen to come

down heavily upon such litigants.

13.2. At the same time, the decision of this Court which

is heavily banged upon by the appellant of course has similar

facts. In SCA 4753 of 2011, as discussed above, the

termination of lease deed and forfeiture of the amount of

premium and the amount of advance rent taken was upheld by

the Court essentially on the ground that one of the clauses of

lease deed had permitted termination of lease deed and the

forfeiture of the advance rent and premium. It was also a case

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where requisite permissions and approvals were to be

obtained by the lessee who was to develop the land within a

stipulated time period. It was also obligated to complete the

task of construction with all amenities. In absence of any

development in a period of two years, after the service of legal

notice, when the lease deed was terminated with the

forfeiture of the amount of premium and advance rent, the

Court did not find any illegality.

13.3. It is to be noted that the petitioner of the above

petition had called in question the decision of Sardar Sarovar

Narmada Nigam Limited dated 25.03.2011 and the lease deed

of 14.07.2008 had been terminated with an amount of

premium of Rs. 1 crore along with forfeiture of advance rent.

It was straightway challenged under Article 226 of the

Constitution of India before this Court without approaching

any other Court for the process of arbitration. The Court

chose to intervene in a petition under Article 226 of the

Constitution of India and the matter thereafter travelled to the

Apex Court by preferring Civil Appeal No. 187 of 2018. It is

not clear whether lease deed had any clause of arbitration.

14. The fact remains that in the matter on hand, there

has been no direct Writ Petition under Article 226 of the

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Constitution of India nor is there any attempt to overreach the

process of alternative remedy. The arbitration clause was

invoked and the parties went to the learned Arbitrator under

the Arbitration and Conciliation Act and the present appellant

since was aggrieved, it moved the Civil Misc. Application No.

168 of 2014 under Section 34 of the Arbitration and

Conciliation Act.

14.1. The learned District and Sessions Judge,

Gandhinagar vide its order dated 14.07.2015 chose not to

entertain the application and dismissed the same in limini.

The Court also noted the fact that the order of High Court

appointing a Sole Arbitrator is not challenged by the appellant

and thus, that aspect reached the finality. The competence

and jurisdictional part of the Arbitrator has also not been

questioned. The Court also therefore was of the opinion that

any objection to the jurisdiction of the Arbitrator should be

deemed to have been waived of. The Court also sought to rely

on the decision of the Apex Court rendered in case of Union of

India vs. M/s. Pam Development Private Limited; reported in

2014 (11) SCC 366 to hold that when there was no challenge

to the appointment, that aspect of appointment of the

arbitrator becomes final and final. The District Court also

relied on the decision of the Division Bench of this Court

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wherein in Clause 38 it speaks that provisions of the

Arbitration Act would be applicable in case of dispute between

the parties. It also held that in case of dispute between the

parties, the award of the Arbitrator appointed under the

Arbitration Act would need to be treated as final.

14.2. Thus, not only there is a clause incorporated in the

lease deed itself of appointment of the arbitrator but, the

arbitrator also had been appointed who had extensively dealt

with all the issues which have been raised by the rival parties

and when the outcome of the judgment and award of the

arbitrator was challenged, the District Court, Gandhinagar

found no substance and therefore, the application made under

Section 34 of the said Act has been dismissed in limini.

15. When the challenge is made by the present appellant, its

reliance on the decision of Jayantibhai Chelabhai Prajapati vs.

Sardar Sarovar Narmada Nigam Limited (supra), is

misplaced. The basic facts may be similar but the subsequent

events which have taken place, have been dealt with by the

learned Arbitrator threadbare. In absence of any challenge to

the appointment of the arbitrator, such challenge when could

not lie before the District Court, the same is not sustainable

before this Court. This Court has also not required to interfere

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as there are very few circumstances under which the

intervention of this Court is held justifiable.

16. Judgment in case of Mcdormott International Inc. vs.

Burn Standard Co. (supra), speaks of the 1996 Act which

makes provision for the supervisory role of the Courts, for the

review of arbitral award only to ensure fairness. In case of

fraud or bias by the arbitrators, the Court is not expected to

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. Thus, the scheme of provision, as per the said

decision, is to keep the supervisory role of the Court at

minimum. Expediency and the finality offered by the process

of arbitration has been expected by the litigants. The mis-

conscious decision of excluding the Court's jurisdiction should

not be forgotten by the Court when it is asked to perform the

supervisory role. The Court also went to an extent of saying

that the term of contract can be express and implied. The

conduct of the parties would also be a relevant factor in a

matter of construction of a contract. The construction of

contract agreement is within the jurisdiction of arbitrators

having regard to the wide nature, scope and ambit of

arbitration agreement and they cannot be said to have

misdirected themselves into passing of the award by taking

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into consideration the conduct of the parties. It is also trite

that the correspondences exchanged by the parties are

required to be taken into consideration for the purpose of

construction of contract. The interpretation of contract is a

matter of arbitration to determine, even if it gives rise to

determination of a question of law.

16.1. In this decision, so far as the aspect of interest is

concerned, it has been held by the Apex Court that the power

of arbitrator to award interest for pre-award period, interest

pendent lite and interest post-award period is not in dispute.

Section 31(7)(a) provides that the arbitral tribunal may award

interest, at such rate as it deems reasonable, on the whole or

any part of the money, for the whole or any part of the period

between the date on which the cause of action arose and the

date on which award is made i.e., pre-award period. The

question is as to whether the interest is to be paid on the

whole or the part of the amount or whether it should be

awarded in the pre-award period would depend upon the facts

and circumstances of each case. The discretion needs to be

exercised by the arbitral tribunal as regards (i) at what rate

interest should be awarded, (ii) whether interest should be

awarded on whole or part of the award money, and (iii)

whether interest should be awarded for whole or any part of

C/FA/2544/2015 JUDGMENT DATED: 13/09/2021

the pre-awarded period.

16.2. The 1996 Act provided for 18% of interest whereas

in the matter before the Apex Court, the rate of interest

granted by the arbitrator was 10% for the principal amount as

also for the interim. The interest was up to the date of award

as also the future interest was at the rate of 18% per annum.

Considering the long lapse of time, the Apex Court held that

the respondent may have to pay the huge amount by way of

interest and therefore, it directed the award to carry interest

at the rate of 6% per annum instead of 18% per annum, in

case of Pure Helium India (P) Ltd. Vs. Oil and Natural Gas

Commission; reported in 2003 (8) SCC 593. Whereas in case

of Mukand Ltd. Vs. Hindustan Petroleum Corporation;

reported in 2006 (4) SCALE 453, the Apex Court reduced the

interest awarded by the learned Single Judge subsequent to

the decree from 11% p.a. to 7.5% p.a. observing that it has

been a reasonable rate of interest which could be directed to

be paid.

17. With this background, if one considers the facts of the

instance case, the appellant is a Government Company

incorporated under the Companies Act. The respondent Aniha

Corporation is a proprietary firm which entered into a tender

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agreement with the SSNNL for the purpose of laying canal. A

public advertisement had been issued for grant of 30 years of

lease of earmarked plot adjacent to the Narmada Main Canal.

The respondent had given his offer in relation to Plot No. 2

admeasuring 2064 sq.mtrs for the plot located at Gandhinagar

State Highway.

17.1. The purpose was for development of tourism

activities on the said leasehold plot. The respondent being the

highest bidder in the tender process, his bid was accepted for

the lease of plot no.2 on 15.02.2007. The respondent paid the

amount of Rs. 39.50 lakhs through cheque to the appellant on

26.02.2007 and also additional security deposit of six months'

rent fees being the sum of Rs. 60,000/-. The registered lease

deed was finalized on 05.06.2007.

17.2. The record is indicative of the fact that the

construction plan and architectural design were prepared by

the respondent and sent to the appellant on 11.10.2007 as

also on 30.10.2007. The SSNNL was required to approve the

plan which is the condition precedent for putting up the

construction. The statutory authorities like AUDA would not

be permitting the sanction of the development plan unless

approved by the SSNNL. It is thus quite clear that the

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condition was made absolutely clear that no construction

activities can be carried out over the leased plot unless the

plan is approved by the SSNNL and the plan had already been

submitted by the present respondent to the appellant in the

month of October, 2007 for the development of the plot for

the purpose of activities which were expected to be carried

out on the leased premise. They continued to be with the

respondent for about 10 months and on 05.08.2008, the

appellant rejected the same on the ground that multistoried

buildings were impermissible and therefore changes were

necessary. The appellant was also asked to approach the local

authority and get the plan sanctioned. Therefore, on

12.09.2008, the plans had been submitted.

18. Essentially on four grounds the appellant had

blamed the respondent.

18.1. The tender had been floated for the development of

tourism and the activities to be carried out was of children

park, disco theater, landscape garden, fountain park etc. The

respondents are alleged to have failed in complying with the

condition nos. 26 and 27 of the tender document although,

there was no permanent construction to be put up unless the

local or urban authority grants such permission. The approval

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for permanent construction ought to have been obtain from

the AUDA, AMC etc.

18.2. Again, the agreement entered into by way of lease

deed was on "as is where is" basis. The stipulated time period

for taking permission and approval of development was six

months from the date of signing of the lease agreement and

construction was to be completed in two years' period. This

time limit was not adhered to and it is alleged to be a clear

breach of agreement entitling the appellant to terminate the

contract and forfeit the amount deposited.

18.3. The third aspect which is alleged against the

appellant is that the obligation to pay the monthly rent was

upon the lessee and on expiry of terms granted to the lessee,

he was to hand over the vacant and clear possession of the

property.

18.4. So far as the fourth point is concerned, it was

alleged that the respondent had visited the site as a successful

bidder before entering into the formal lease agreement. He

was also aware of leaving of margin and other provisions for

putting up construction. According to the appellant, the

reliance placed on the communication of AUDA dated

01.12.2010 is impermissible as the same was not addressed to

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the respondent and moreover, the said document is indicative

of the fact that there was no attempt made to get the plans

approved.

19. Thus, all in all, according to the appellant, termination of

contract cannot be found faulted with. It could be noticed that

learned Arbitrator has dealt with each of the four contentions

elaborately and threadbare. It also has elaborately discussed

the evidence which has been recorded.

19.1. By an exhaustive discussion, the arbitral tribunal

has held that the lease deed in the present case is voidable

document in as much as when the same was executed,

because of the Government Resolution of the year 1980 as

well as Ribbon Development Rules in GGCR Norms, there was

no scope for the development of the plot and hence, the

agreement was void and not binding to the respondent.

Learned Arbitrator has held in no unclear terms that the

leased plot was not available for the appropriate use for the

purpose for which it was intended to be leased. Learned

Arbitrator also lamented the fact that when the plot was

leased out for a special purpose, it would be obligatory on the

part of the appellant to satisfy the tribunal that plot could

have been successfully developed by tourism activities.

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19.2. In totality of the facts and circumstances, the

tribunal was of the opinion that the respondent could have

kept himself aware of the Ribbon Development Rules at the

time of entering into the agreement with the appellant -

Corporation but the appellant was equally unaware about the

facts and the laying of the service road as also of the Ribbon

Development Rules, GGCR guidelines. The appellant's conduct

is clear that it was of the view that permanent construction is

possible and permissible in the area and the respondent was

not responsible for the failure since the plot was not available

for the appropriate use for the purpose of which it was leased

and it also clearly held that an act of termination of contract

by the respondent is a face-saving exercise as there was no

enforceable or executable agreement. The Managing Director

of the company at one point of time was convinced that plot

no.2 was wrongly placed at the bidding process. The question

of termination of contract could not have arisen and in fact,

the respondent could have called and offered the refund of the

amount paid, accepting the error. It went to an extent of

saying rightly that the forfeiture of the amount was illegal and

improper and had respondent been aware that he would not

be in a position to develop the plot as a prudent businessman,

he would not have definitely paid the amount of premium.

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There are valid and satisfying reasons given for calculating

the amount of damage under the head of loss and damage.

20. Coming to the issue of interest, it has chosen to grant

18% interest from 30.06.2008 till realization. Admittedly,

between the parties, there is no agreement as to the rate of

interest.

20.1. Learned Arbitrator examined the scheme of Section

31(7) of the Arbitration and Conciliation Act, 1996 which

provides for 18% of interest per annum from the date of

award till the date of payment. Worthwhile it would be to

refer to Section 31(7) of the Act which provides that "unless

otherwise as agreed by the parties, where and in so far as

tribunal award is for the payment of money, the arbitral

tribunal may include in the sum for which the award is made

interest, at such rate as it deems reasonable, on the whole or

any part of money, for the whole or any part of the period

between the date on which the cause of action arose and the

date on which award is made."

21. As held in case of Mcdormott International Inc.

(supra), intervention of the Court is permissible in case of

fraud or bias by the arbitrators or violation of principles of

natural justice or where the Arbitrator has gone contrary to or

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beyond the expressed law of the contract or granted relief in

the matter not in dispute. Bearing in mind the supervisory

role of the Court for review of the arbitral award only for

ensuring the fairness, we do not find any need for interference

in absence of any fraud or bias by the arbitrators. Two

authorities have concurrently held in favour of the appellant.

This Court in case of Jayantibhai Chelabhai Prajapati

(supra) had entertained the decision of the respondent

SSNNL in a matter where lease deed was executed between

the parties which was terminated and the amount of Rs. 1

crore by way of premium and advance rent had been forfeited.

The Court directed Rs. 75,00,000/- lying with the Registry to

be refunded along with the accrued interest and out of Rs. 1

crore lying Rs. 25,00,000/- had been forfeited and the refund

of Rs. 75,00,000/- carried no interest.

22. Noticing the fact that the order which is sought to be

relied upon has no detailed adjudication and tried to sort out

the issue as there was a grant of status-quo on the part of the

High Court, in that view of the matter, what needs to be bear

in mind that in the instant case, after both the sides had been

permitted to lead evidence and both the authorities had an

occasion to address the issues raised before it and appreciate

the evidence, the outcome is before this Court. Therefore, in

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absence of any of the parameters set out for the indulgence of

Court, we find no reason to interfere except in the percentage

of interest which is 18%, in the opinion of this Court, the rate

of interest which is on a quite higher side, the same needs to

be reduced to 9%.

23. The appeal is accordingly partly allowed. So far as the

interest is concerned, this Court interferes and reduces the

rate to 9% instead of 18% in the Arbitral Award. Amount shall

be paid within eight (8) weeks from the date of receipt of copy

of this judgment. If not paid within the stipulated time, the

rate of interest shall be enhanced to 18% from the date of

award of the Arbitration till the date of payment.

24. The connected Civil Application Nos. 01/2018, 01/2020

and 01/2021 stands disposed of in view of the judgment

rendered in the main matter being First Appeal No. 2544 of

2015.

(SONIA GOKANI, J)

(NIRZAR S. DESAI,J) Bhoomi