M/S B. N. Hotel (Pvt.) Limited ... vs M/S Shri Ram Multicom Private ...
2023 Latest Caselaw 3248 Jhar

     IN THE HIGH COURT OF JHARKHAND AT RANCHI
               (Commercial Appellate Jurisdiction)

                         Commercial Appeal No. 11 of 2018
M/s B. N. Hotel (Pvt.) Limited through its Director Sri Rajendra Kumar Gupta,
aged 63 years, s/o Late Baijnath Gupta, having place of business at Gupta
Bhawan, Main Road, Jharia, PO and PS Jharia, District Dhanbad
                                                            ... ... Appellant
                                      Versus
M/s Shri Ram Multicom Private Limited, Zonal Centre, First Floor, Ashok
Nagar Colony, Dhanbad, previously mentioned as Principal Office of Shri
Ram Plaza, Bank More, PO & PS Bank More, District Dhanbad
                                                 ... ... Respondent
                               ------
CORAM : HON'BLE MR. JUSTICE SHREE CHANDRASHEKHAR
          HON'BLE MR. JUSTICE RATNAKER BHENGRA
                                       -------
For the Appellant               : Mr. Ajit Kumar, Sr. Advocate
                                  Mr. Vikalp Gupta, Advocate
For the Respondent              : Mr. Indrajit Sinha, Advocate
                                  Ms. Sonal Jaiswal, Advocate
                                      -------

                                 JUDGMENT

C.A.V on 17/05/2023                                  Pronounced on 30/08/2023
Per, Shree Chandrashekhar, J.

This commercial appeal challenges the judgment dated 1st October 2018 in Original Suit No. 19 of 2017 rendered by the Commercial Court at Dhanbad and, in turn, questions the arbitral award dated 16th January 2013 on the grounds as set out in the petition under section 34 of the Arbitration and Conciliation Act, 1996.1

2. A development agreement dated 8th August 2007 was executed between M/s B. N. Hotels (Pvt.) Limited2 and M/s Shri Ram Multicom Private Limited 3 for construction of a multi-story building. The development agreement was in respect of a piece of land admeasuring about 73 decimals owned and possessed by the B. N. Hotels and in terms of this agreement the claimant-company paid Rs.55 lacs to the B. N. Hotels towards security. On 26th March 2008 a power of attorney was executed by the B. N. Hotels

in short, "AC Act"

in short, B.N. Hotels

in short, claimant-company 2 Commercial Appeal No. 11 of 2018

constituting Mr. Pradeep Kumar Sonthalia who is a director of the claimant- company as its constituted attorney to look after, manage, and deal with the subject-property. The claimant-company states that possession of the subject- property was handed over by the B. N. Hotels by executing a "handing over" document but soon thereafter a dispute arose between the parties. The claimant-company issued letter dated 30th April 2009 raising certain issues and requested the B. N. Hotels to honour the commitments under the development agreement. Simultaneously, the claimant-company approached the civil Court at Dhanbad for prohibitory and mandatory injunctions against the B. N. Hotels by filing a petition under section 9 of the AC Act which was registered as Misc. Arbitration Case No. 44 of 2009. The claimant-company has pleaded that legal notices dated 25 th October 2010 and 20th November 2010 were served but no response was received from the B. N. Hotels and, therefore, an application under section 11(6) of the AC Act was filed by the claimant-company for appointment of an Arbitrator. By an order dated 6 th January 2012 the Arbitration Application No. 1 of 2011 was allowed and Justice Vikramaditya Prasad a former Judge of the High Court was appointed as the sole Arbitrator. During pendency of the Arbitration Application before the High Court the B. N. Hotels revoked the power of attorney dated 26th March 2008 and terminated the development agreement dated 8 th August 2007. In the meantime, Misc. Arbitration Case No. 44 of 2009 was allowed on 22nd July 2011 by the Court at Dhanbad and this order was set aside in Arbitration Appeal No. 13 of 2011 by the High Court by an order dated 25 th November 2011.

3. While claiming specific performance of the development agreement the claimant-company is also seeking damages for the loss caused to it on account of egregious breach of the fundamental terms of the development agreement. In the arbitral proceeding the claimant-company examined 4 witnesses and produced a bundle of documents to claim the following reliefs:

"(i) An Award declaring that revocation of power of attorney dated 26/03/2008 and cancellation of development agreement dated 08/08/2007 are void and non-est in the eye of law.

And as a corollary an order for specific performance of development agreement dated 08/08/2007 coupled with compensation amount of Rs. 9,68,50,932/-(Rupees Nine Crores, sixty-eight lakhs fifty thousand nine hundred thirty-two only) with pendent-lite and future interest thereon @ 18% p.a. as enumerated in schedule-A contained in Annexure-17 hereto 3 Commercial Appeal No. 11 of 2018

may kindly be passed in favour of the claimant and against the respondent.

(ii) Alternatively, without prejudice to the above prayer if it is found that the decree for specific performance is not permissible or feasible on the facts of the case and in law, in that event an order for payment of Rs. 32,55,07,537/- (Rupees Thirty-two crores fifty-five lakhs seven thousand five hundred thirty-seven only), being the amount of compensation of the damages, as detailed in schedule-B, contained in Annexure-18 hereto may kindly be passed directing the respondent to pay the said sum with pendent-lite and future interests @ 18% p.a. to the claimant.

(iii) Other and further Awards, orders, directions, majors which the claimant is found entitled to may kindly be passed and/or ordered."

4. The claimant-company claimed (a) refund of the security deposit of Rs. 55 lacs (b) refund of expenses incurred in the project to the tune of Rs.2,95,04,689/- (c) interest on (a) and (b) amounting to Rs.2,26,55,200/-

(d) refund of administrative expenses, salary, and wages, depreciation etc. to the tune of Rs.1,91,40,959/- (e) Rs.17,22,686/- towards interest on administrative expenses, salary and wages, depreciation, etc. (f) loss of profit to the tune of Rs.11,67,26,252/- (g) Rs. 58,86,400/- for payment to sub-contractor for shuttering materials installed (h) loss of goodwill to the tune of Rs.11,80,00,000/- and (i) the cost of Rs.25 lacs.

5. The B. N. Hotels contested the aforementioned claims by filing its statement of defence and raised a counter-claim for Rs.18,54,99,377/-. The counter-claim is made under two heads viz. (a) loss of income for 28% of its share in the commercial complex amounting to Rs.12,48,55,544/- and

(b) interest from January 2010 till July 2012 @ 18% per annum compounded monthly amounting to Rs.6,06,43,833/-. The B. N. Hotels produced a few documents in support to its counter-claim which included the order passed in a petition under section 9 of the AC Act, balance sheet of the World Metal Movers, notices issued and FIRs lodged on its behalf, etc. However, as the proceedings before the Arbitrator would disclose no witness was produced by the B. N. Hotels to establish its counter-claim or to oppose the claims made by the claimant-company.

6. The Arbitrator accepted the claimant's evidence and allowed the claims for security deposit and expenses incurred in the project with interest thereon at the rate of 10% from 8th May 2009 till 15th January 2013. He has also allowed the claim for loss of profit to the tune of Rs.8,75,44,689/- but the claims for administrative expenses, interest over the administrative expenses, and loss of goodwill were declined by the Arbitrator. The cost for arbitration 4 Commercial Appeal No. 11 of 2018

was assessed at Rs.9,50,000/- which included Rs.4,50,000/- towards the share of the Arbitrator's fees due from the B. N. Hotels.

7. Before the Commercial Court at Dhanbad the challenge laid by the B. N. Hotels for setting aside the award dated 16th January 2013 was on the grounds that: (a) the Arbitrator could not have entertained the claim which was primarily for specific performance of the contract (b) ejaculatory relief for revocation of the power of attorney and cancellation of development agreement dated 8th August 2007 were not entertainable and (c) the Arbitrator acted beyond the jurisdiction and entered into the merits of consequential relief. The aforementioned grounds of challenge were formulated on the basis of the stipulations under the development agreement read with sections 21 and 34 of the Specific Relief Act, section 75 of the Indian Contract Act and the judgments in "Oil and Natural Gas Corporation Ltd."4, "Forbes"5, "Radha Sundar Dutta" 6 , "Durga Chand Kaushish" 7 , "Sulaikha Clay Mines"8, "Impex Corporation"9, "Naresh Kanayalal Rajwani"10, "Kanchan Udyog Ltd."11 , "R.S. Sharma and Co."12, "ONGC Ltd."13 and "Associate Builders"14.

8. The Presiding Officer of the Commercial Court referred to "Olympus Superstructures (P) Ltd." 15 and "Rodemadan India Ltd." 16 to arrive at a conclusion that the Arbitrator has jurisdiction to decide the dispute between the parties, and held that notwithstanding the non-cooperation of the B. N. Hotels several adjournments were given by the Arbitrator and equal treatment was accorded to both parties. The Presiding Officer has further held that both sides were granted equal opportunity but the objector was not ready to argue the case on merits.

9. In Original Suit No. 19 of 2017 the Presiding Officer of the Commercial Court at Dhanbad has held as under:

"8. Section 31 (3) of the Arbitration and Conciliation Act 1996 provides that the arbitral award shall state the reasons upon which it is based

Oil and Natural Gas Corporation Ltd. v. Schlumberger Asia Services Ltd.: 2006 (91) DRJ 370 Delhi

Forbes v. Git: AIR 1921 PC 209

Radha Sundar Dutta v. Mohd. Jahadur Rahim: 1959 SCR 1309

DDA v. Durga Chand Kaushish: (1973) 2 SCC 825

Sulaikha Clay Mines v. Alpha Clays :2004 SCC OnLine Ker 79

Impex Corporation v. Elenjikal Aquamarine Exports Ltd.: 2007 SCC OnLine Ker 125

Naresh Kanayalal Rajwani v. Citi Financial Consumer Finance India Ltd.: 2015 (6) Mh. L.J 444

Kanchan Udyog Ltd. v. United Spirits Ltd.: (2017) 8 SCC 237

DDA v. R.S. Sharma and Co.: (2008) 13 SCC 80

ONGC Ltd. v. Saw Pipes Ltd.: (2003) 5 SCC 705

Associate Builders v. DDA: (2015) 3 SCC 49

Olympus Superstructures (P) Ltd. v. Meena Vijay Khetan : (1999) 5 SCC 651

Rodemadan India Ltd. v. International Trade Expo Centre Ltd.: AIR 2006 SC 3456 5 Commercial Appeal No. 11 of 2018

unless the parties have agreed that no reasons are to be given or the award is an arbitral award on agreed terms U/s 30. The learned counsel of the Objector has discussed in detail the order passed by the Ld. Arbitrator by citing different dates particularly order no. 12 dated 23-12- 12, order dated 24-12-12 and order dated 26-12-12. It is argued that since adjournment were given only for one or two dates without even given proper notice so the petitioners were not able to present their case. It is well settled that the party shall be given sufficient time and notice for hearing and for any meeting for tribunal for the purpose of inspection of documents means and other properties as provided in section 24 (1) (2) (3) of the Arbitration and Conciliation Act 1996 and the reliance may be placed upon the case of Sulaikha Clay Mines Vs Alpha Clays and others reported in AIR 2005 Ker 3. After going through the Award I find that both the sides were given equal opportunity but for one reason or another the objector were not ready to produce their side of the case and argue the case on merit. So it cannot be said that sufficient opportunities were not given to the opposite party by the Ld. Arbitrator. It is well settled that scope of interference for the court U/s 34 of the Arbitration and Conciliation Act 1996 is extremely Limited. This court is not sitting in appeal of Award rather this court is strictly guided by section 34 of the Arbitration and Conciliation Act 1996 which clearly set out the conditions under which the application for setting aside the arbitrator Award can be allowed and for this part of my findings the reliance may be placed upon the case of Navodaya Mass Entertainment Limited Vs J. M. Combines reported in 2014 (144) AIC 265. It is well settled that the court could not be justified in re appreciating the material on record and substantiating its own view. From the plain reading of Award it is apparent that petitioner/opposite party was extremely non cooperative and restored to various dilatory tactics to delay and defeat not only the arbitration but even the earlier arbitration by keeping themselves absent after appearing in the proceeding in initial stage. So it cannot be said that sufficient opportunities by the Ld arbitrator were not given to M/s B. N. Hotel Private Limited to argue their case and for this part of my findings the reliance may be placed upon the case of Pradip Kumar Mondal V SSK Broking Services Private Limited and others reported in AIR 2005 Calcutta 353. It is alleged that the Ld arbitrator was asking for exorbitant fees but as per the ICA rules the Ld Arbitrator was well within his jurisdiction to claim for the settled fees. For the above discussed reason the case of the Impex Corporation and others Vs Elenjikal Aquamarine Exports Limited reported in AIR 2008 Ker 119 is of no use to the objector/opposite party and for the same reason the case of Naresh Kanayalal Rajwant and others Vs Citi Financial Consumer Finance India Limited, New Delhi and another reported in 2015 (6) Mh L. J 444 is of no use to the Objector/Opposite party. I have already discussed that the Ld. Arbitrator was well within his jurisdiction to decide the question, of substantiate law as provided U/s 28 of the Arbitration and Conciliation Act 1996 so case of Kanchan Udyog Limited Vs United Spirits Limited reported in (2017) 8 8CC 237 is of no use to the Objector.

9. It has been stated by the Objector that claimant has prayed for two separate sets of claim before the Arbitrator. Schedule A (Claim for Specific Performance coupled with monthly compensation) and schedule B (claim for monthly compensation) but later on schedule A claim were withdrawn by the claimant. It is stated by the counsel of the objector that Ld. Arbitrator has calculated the claim of the claimant in higher side. On perusal of the Award I find that for refund of the amount paid to the land owner towards security deposit as Item 1.A for Rs. 55,00,000/- was properly awarded. Likewise, for refund expenses incurred in project towards MADA sanction fees and labour expenses Rs. 2,95,04,689/- was awarded which is just and proper. The claimant have claimed for Award of Rs. 2,26,55,200/- as interest but the Ld. Arbitrator has Awarded Rs. 1,29,27,759/- only. On calculating Bank rate interest 6 Commercial Appeal No. 11 of 2018

and considering the fact that it was of business purpose interest of 10% was awarded in the head of interest on administrative expenses, salary and wages as well depreciation nothing was awarded although claim was Rs. 17,22,680/-. Like wise for the loss of profit the claimant has asked for the award of Rs. 11,67,26,252/- but the Ld. Arbitrator after discussing the same has awarded only Rs. 8,75,44,689/- after giving elaborate reason. It is not as such that the Ld. Arbitrator has awarded the claimant undue money by showing any favour to them. Outstanding bill towards shuttering of the material, Rs. 58,86,400/- were rightly awarded. For the loss of goodwill nothing was awarded by the Ld. Arbitrator though the amount claimed was of Rs. 11,80,00,000/- instead of amount for cost of Rs. 25,00,000/- the Ld. Arbitrator has Awarded only Rs. 9,50,000/-. In this way the total Award is of Rs. 14,23,13,537/- which is just and proper in my opinion."

10. The judgment of the Commercial Court has been challenged on the ground that the findings recorded therein while refusing to set aside the award dated 16th January 2013 are based on assumptions, surmises, and conjectures. According to the B. N. Hotels, the Arbitrator charged an exorbitant fee, was biased, and no opportunity for argument was given to it and the award was made in hot haste.

11. The exorbitant fee of the Arbitrator is an issue which has caused discomfort to the parties and the issue has now frequently been taken to the Courts by the aggrieved party. "Singh Builders Syndicate"17 takes note of the embarrassing situation of a party which was unable to afford high fee of the Arbitrator and reluctant on account of an apprehension that his refusal to pay high fee to the Arbitrator may prejudice his case or create a bias in favor of the other party which readily agreed to pay the high fee. Justice Vikramaditya Prasad (Retd.) was appointed the sole Arbitrator by an order dated 6 th January 2012 passed in Arbitration Application Case No. 1 of 2011 who entered the reference on 18th January 2012. Both parties agreed that the venue of arbitration shall be at Ranchi and remuneration per sitting of the arbitration shall be Rs. 10,000/- and office expenses Rs. 1,000/-, to be equally shared by both parties. However, after conducting the proceedings on the next three dates the Arbitrator returned the file to the High Court with the payment of Rs. 11,000/- received by him from the claimant-company. Thereafter, Justice D. N. Prasad (Retd.) was appointed the sole Arbitrator by the High Court by an order dated 11th May 2012 but he also did not start the arbitral proceeding and returned the file for personal reasons. Therefore, the High Court by an order dated 13th July 2012 appointed Justice Anand Prasad Sinha (Retd.) to

Union of India v. Singh Builders Syndicate : (2009) 4 SCC 523 7 Commercial Appeal No. 11 of 2018

adjudicate the claim/counter-claim of the parties. The Arbitrator entered the reference on 21st July 2012 when both parties were duly represented through their counsels and representatives. The claim petition dated 24 th March 2012 was taken on record with the liberty to the claimant-company to file a supplementary claim and the B. N. Hotels was directed to file the statement of defence on or before 4th August 2012.

12. The remuneration and fees for the arbitration were fixed with the consent of both parties - each party to pay Rs.50,000/- per sitting. The objection filed by the B. N. Hotels to the Arbitrator's fee was rejected on 10 th October 2012 and this order records that the Arbitrator's fee was based on several factors including the value of dispute. Therefore, the submission that the Arbitrator committed legal misconduct in fixing his fee on a higher side is not based on any rule of law or practice. In "R.L. Pinto"18 the demand of fees and expenses by the Arbitrator exclusively from the respondent even without the knowledge of the other party has been found not a legal misconduct. There are other reported instances wherein the Courts have taken a view that the issues relating to fee, remuneration, expenses etc. do not constitute legal misconduct.

13. One such case is "International Airport Authority"19 in which the venue of the arbitration was changed without consent of the other party and there was an allegation that the other party was providing air tickets and hotel accommodation to the Arbitrator. The Hon'ble Supreme Court has observed as under:

"11. The other point sought to be urged by the petitioner was that the venue of the arbitration was changed from conference room at Santa Cruz Airport, Bombay, to the conference room at Indian Merchants Chambers at Churchgate, Bombay. It is the claim of the petitioner that this change of venue was without the consent of the petitioner. It appears from the affidavit filed before the High Court that the venue was changed because of disturbance at the conference room at Santa Cruz and this fact was known to the petitioner all along. Change of venue in no manner would indicate that the arbitrator was prejudiced against the petitioner and no prayer was made to the arbitrator not to change the venue. This is solely a fallacious ground to make out a case of alleged bias. The other ground was that the petitioner and Respondent 2 used to share the costs of the air ticket of the arbitrator from Delhi to Bombay and back. It was submitted that since 9-6-1987 the petitioner has not paid for the ticket and also not provided for residential accommodation at Santa Cruz Airport. It was further submitted that Respondent 2 must be providing the air ticket and also hotel accommodation to the arbitrator and the receipt of these facilities was enough, according to the petitioner, to establish that the arbitration was

R.L. Pinto v. P.A.W. Barnard : 1995 Supp (4) SCC 657

International Airport Authority v. K.D Bali & Anr.: (1988) 2 SCC 360 8 Commercial Appeal No. 11 of 2018

likely to be biased. It is said that the petitioner made these allegations because the petitioner declined to contribute for the costs of the air ticket and providing for the accommodation. The petitioner obstructed at all stages of the proceedings of arbitration, what the arbitrator did he did openly to the knowledge of the respondents. As the learned Judge has rightly pointed out the petitioner after 9-6-1987 seems to have decided that the arbitrator should not proceed to hear the reference and in order to frustrate the arbitration proceedings started raising all sorts of frivolous and unsustainable contentions. Having failed and realised that Respondent 1 was not willing to submit to the dictates of the petitioner, the petitioner declined to contribute for the air ticket and providing for accommodation. No party should be allowed to throw out the arbitration proceeding by such tactics and if the arbitrator has not surrendered to pressure, in our opinion, the arbitrator cannot be faulted on that score nor the proceedings of the arbitrator be allowed to be defeated by such method.

12. There was another ground sought to be made before us that there was a loss of confidence. We find no reasonable ground for such loss of confidence. Every fancy of a party cannot be a ground for removal of the arbitrator. It was alleged that there were counter-claims made by the respondents. These counter-claims have not yet been dealt with by the arbitrator. Our attention was drawn to p. 188 of Vol. 2 of the paper book where a counter-claim had been referred to. It appears that the petitioner has separately treated these counter-claims. These counter-claims have not yet been considered by the arbitrator. That is no ground for any apprehension of bias. An affidavit was filed before us that on 6-3-1988 a letter was served indicating the dates for hearing as March 7 to 10, 1988. It appears that the matter was adjourned thereafter but by merely making an application for adjournment and refusing to attend the arbitration proceeding, a party cannot forestall arbitration proceeding.

13. We are in agreement with the learned Judge of the High Court expressing unhappiness as to the manner in which attempts had been made to delay the proceeding. There is a great deal of legitimate protest at the delay in judicial and quasi-judicial proceeding. As a matter of fact delay in litigation in courts has reached such proportion that people are losing faith in the adjudicatorv process. Having given our anxious consideration to the grounds alleged in this application, we find no ground to conclude that there could be any ground for reasonable apprehension in the mind of the petitioner for revocation of the authority of the arbitrator appointed by the petitioner itself. While indorsing and fully maintaining the integrity of the principle "justice should not only be done, but should manifestly be seen to be done", it is important to remember that the principle should not be led to the erroneous impression that justice should appear to be done than it should in fact be done. See the observations of Slade, J. in R. v. Camborne Justice ex parte Pearce. We are satisfied from the facts mentioned hereinbefore that there is no reasonable ground of any suspicion in the mind of the reasonable man of bias of the arbitrator. Instances of cases where bias can be found are given in Commercial Arbitration by Mustill and Boyd, 1982 Edn. The conduct of the present arbitrator does not fall within the examples given and the principles enunciated therein."

14. The finding of the Commercial Court that the B. N. Hotels was afforded sufficient opportunity to present its case but was not ready to argue the case has been criticized with reference to ex-parte proceedings conducted between 15th December 2012 and 23rd December 2012. The B. N. Hotels has pleaded that a petition under section 14(2) vide Misc. (Arbitration) Case No. 36 of 2012 was filed and letters dated 6 th, 16th and 19th November 2012 were sent to the Arbitrator to stay the arbitral proceedings during pendency of 9 Commercial Appeal No. 11 of 2018

the said case. The grievance raised is that the Arbitrator adjourned the arbitral proceeding to 15th December 2012 but on subsequent dates heard the counsel for the claimant-company in absence of the B. N. Hotels and permitted the claimant-company to adduce evidence without any intimation to it. Mr. Ajit Kumar, the learned senior counsel for the B. N. Hotels has contended that hearing of one party in the absence of the other violates the fundamental principles of natural justice. According to the learned senior counsel, the proceedings on 11th and 12th sittings were conducted in violation of section 24(2) as notice of hearing was not given to the B. N. Hotels and the Arbitrator is guilty of misconduct because he has made the award dated 16th January 2013 without giving a distinct notice as to closing of the proceedings. It is submitted that the deliberate departure by the Arbitrator ignoring the applicable laws shall amount to misconduct and may even tantamount to malafide.

15. The audi alteram partem rule is incorporated in sub-section (2)(a)(iii) of section 34 which provides that an arbitral award may be set aside by the Court if the party making the application furnishes proof that he was not given proper notice (a) of the appointment of an Arbitrator or of the arbitral proceedings or (b) was otherwise unable to present his case. This provision is somewhat similar to the provisions under Order IX Rule 13 of the Code of Civil Procedure and the aforementioned plea raised on behalf of the B. N. Hotels can be examined in the light of the principles similar to those applied for setting aside the ex-parte decree. The provisions under Order IX Rule 13 of the Code of Civil Procedure restrict the powers of the Court inasmuch as an ex-parte decree can be set aside only if the aggrieved party satisfies the Court that summons was not duly served or he was prevented by sufficient cause from appearing when the suit was called on for hearing. Obviously in a case where the aggrieved party had notice of the date of hearing and sufficient time to appear in the Court the ex-parte order or decree cannot be set aside on mere absence of the aggrieved party on the date of hearing. The proviso to Order IX Rule 13 of the Code of Civil Procedure puts a further rider on the powers of the Court to set aside an ex-parte decree wherever it is demonstrated that the aggrieved party had notice of the date of hearing and sufficient time to appear and answer the claim of the other party. Therefore, in all cases to examine the grounds under clause (a)(iii) 10 Commercial Appeal No. 11 of 2018

of sub-section (2) to section 34 of the AC Act the Court is required to examine the grounds set forth by the aggrieved party from the viewpoint of a cautious man. This means that the aggrieved party was not acting in a negligent manner, was acting diligently, and had not remained inactive. This is also necessary to find out whether there was a want of bonafide on the part of the complaining party. This is a well accepted proposition in law that the technicalities of law cannot prevent the Court from doing substantial justice and in doing away the illegality perpetuated by the judgment under challenge. Quite obviously, to achieve this object the Courts are necessarily required to examine whether the aggrieved party honestly intended to participate in the proceeding and did his best to remain present when the matter was posted for hearing but for the special circumstances pleaded by it. Therefore, if it can be demonstrated without entering into the realm of appreciation of evidence that is to say without any strenuous exercise that the arbitral award is made without affording opportunity of hearing to the B. N. Hotels or that the B. N. Hotels was unable to present its case due to the manner in which the arbitral proceedings were conducted, the Arbitrator shall be guilty of legal misconduct which shall vitiate the arbitral proceedings.

16. The Commercial Court dealt with this plea in paragraph no.7 of the judgment and has recorded the following findings:

"7. ... It is alleged that Ld. Arbitrator has not given sufficient opportunities to the opposite party but after going through the Award I find that the Ld. Arbitrator has specifically mentioned the proceeding on date to date basis and how it was tried to derail the proceeding. As per section 18 of the Arbitration and Conciliation Act 1996 the parties shall be treated equally and each party shall be given full opportunity to present his case. On perusal of Award I find that in spite of non cooperation of the opposite party several dates were given by the Ld. Arbitrator. So it cannot be said that equal treatment was not given by the Ld. Arbitrator to both the sides. Section 28(1)(a) of Arbitration and Conciliation Act read as where the place of arbitration is situated in India an arbitration other than an international commercial arbitration, the arbitral tribunal shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India. The learned counsel of the petitioner states that most important substantive law in this case is Indian Contract Act 1872. Interpretation of contract falls within contours of Indian Contract Act but the Award militantly violates the provisions of the same on both count. Section 28 (1) of the Arbitration and Conciliation Act 1996 stipulate in an arbitration other than international commercial arbitration, that the arbitral tribunal shall decide the dispute submitted to arbitration in accordance with law for the time being in force in India. Specific Relief Act and Indian Contract act are no doubt substantive law so Ld. Arbitrator has in my view jurisdiction to decide the dispute relating to the parties and reliance may be placed upon the case of Olympus Super Structure Private Limited Vs Meena Vijay Ketan reported in AIR 1500 SC 2102 and also on the case of Rodemadan India Limited Vs International Trade Expo Centre Limited reported in AIR 2006 SC 3456."

17. Now the orders passed by the Arbitrator which may unfold the 11 Commercial Appeal No. 11 of 2018

story are necessary to be seen. The orders dated 20th November 2012, 15th December 2012, 22nd December 2012 and 23rd December 2012 passed in the arbitral proceeding are extracted below :

20.11.2012 Arbitration proceeding arising out of AA No. 1/2011 in the matter of M/s. Shriram Multicon Pvt. Limited, Zonal Centre, 1st Floor, Ashok Nagar Colony, Dhanbad ............Claimant Versus M/s. B.N. Hotels Pvt. Ltd., Gupta Building Main Road, Jharia, P.O. Jharia, Dist. Dhanbad, PIN- 828111 .......... Opposite Party

Shri Delip Jerath, Advocate, Shri Ashutosh Anand, Advocate, Shri Pradeep Kumar Sonthalia, Director in Claimant Company and Shri A.K. Upadhyay, employee of Claimant company are present on behalf of Claimant.

2. Shri Vikalp Gupta, Authorized representative of Opposite party and Shri Manoj Kumar, Legal Advisor has appeared on behalf of the opposite party.

3. Two petitions of the opposite party are brought on record by the opposite party. One petition dated 16/11/2012 which has been sent by post and another petition dated 19/11/2012 has been filed today by the opposite party. Both the petitions are taken up at the request and instance of Shri Gupta, authorized representative of the opposite party.

4. In both the petitions dated 16/11/2012 and 19/11/2012, the aspect of pendency of the Miscellaneous Case No. 36/2012 has been highlighted and on the said ground it has been submitted that the hearing be stayed till disposal of the said miscellaneous case. Further, in petition dated 19/11/2012, time has been prayed for by the opposite party on the ground that the Learned conducting Advocate cannot come to attend the arbitration proceedings due to rituals of Chat festival as such the hearing be adjourned for the day. It has further been stated that the Miscellaneous Case is to be heard on 26/11/2012 and that the Opposite party is ready to deposit Rs. 25,000/- @ Rs. 5000/- per date of hearing including that of 20/11/2012.

5. Sri Jerath, Advocate for the Claimant opposed the said prayer and pointed out that the opposite party is only trying to linger the proceedings. It was submitted that in the earlier petitions of the opposite party and especially that dated 22/10/2012, the opposite party and his advocate had specifically stated that the opposite party shall / will not participate. It has further been stated that the aspects raised by the opposite party has already dealt with in the previous orders and especially the orders dated 10/10/2012 and 10/11/2012. It has further been stated that the claimant's argument is nearing completion and the claim application is required to be disposed off without any unnecessary delay and the claimant has already complied with the order dated 10/11/2012 and has deposited the share of the opposite party's arbitral fees also. It has further been stated that inspite of decision on the fees, till date the opposite party has not paid a single fees of the proceedings and the averment of payment is merely an eye-wash. Hence it has been submitted that petitions of the opposite party be rejected and that the hearings may proceed.

6. From the records, it appears that since the opposite party has not paid his share of the fees and the same was dues, as such the claimant was ordered to pay the share of the fees of the opposite party as well vide order date 10/11/2012 and that pursuant to the said order, the claimant has deposited the dues of the arbitral fees of the opposite party.

7. Perused the petitions of the opposite party and the submissions made on behalf of the parties. From the record, it is evident that the opposite party had deferred hearing of the matter on the ground of Arbitrator's fees which was sought to be first decided and only thereafter hearing was to take place. The question of the Arbitrator's fees has already been decided. The averment of pendency of Miscellaneous Case has also been dealt with in the previous order dated 10/11/2012.

12 Commercial Appeal No. 11 of 2018

8. Regarding grant of adjournment, a specific question was posed by me to the opposite party's representative - Shri Gupta who specifically stated that he and his counsel will henceforth participate in the arbitral proceedings and only because his counsel is / was not available today as such the proceedings be adjourned for the day.

9. Since, time has been sought for on the ground of personal difficulty of the advocate and considering all circumstances including the fact that in the past also, on one plea or the other, the proceedings has been delayed at the request/ instance of the opposite party, the hearing of the arbitral proceedings is adjourned to 15/12/2012 at 04.00 pm at the same place as a last chance. It is made clear that on the said date no adjournment will be granted on any ground to the opposite party and the hearings shall proceed. Since no hearing has been occasioned in the matter, no fees for arbitration is being charged for today.

10. The parties are requested to come prepared for further hearing in the matter on 15/12/2012 at 04.00 pm at the same place. The parties are further requested to co-operate in early disposal of the arbitral proceedings in terms of the observations of the Hon'ble High Court.

15.12.2012 Arbitration proceeding arising out of AA No. 1/2011 in the matter of

M/s. Shriram Multicom Pvt. Limited, Zonal Centre, 1st Floor, Ashok Nagar Colony, Dhanbad. ........................................................Claimant Versus M/s B.N. Hotels Pvt. Ltd, Gupta Building, Main Road, Jharia, P.O. Jharia, Dist. Dhanbad PIN-828111 ...........................................Opposite Party

1. Shri Delip Jerath, Advocate, Shri Ashutosh Anand, Advocate, Shri Pradeep Kumar Sonthalia, Director in claimant company and Shri A.K. Upadhyay, employee of claimant company appears on behalf of Claimant.

2. Neither the opposite party nor any representative nor any advocate appears on behalf of the opposite party. A letter/petition dated 13.12.2012 (sent by post alongwith copy for the claimant) has been received on behalf of the opposite party which is kept on record and the claimant's copy of the said letter / petition dated 13.12.2012 is handed over to the claimant.

3. It has been submitted on behalf of the claimant that the letter / petition of the opposite party is frivolous, baseless and irrelevant. It is submitted that the same is nothing but delaying tactics on part of the opposite party. It has further been prayed that the said letter / petition and prayer made therein be rejected and the hearing in the matter be continued.

4. Perused the petition of the opposite party dated 13.12.2012 wherein the opposite party has reiterated that the Arbitral Tribunal should wait till the disposal of the Miscellaneous Case No. 36/2012. The said contention of the opposite party has already been rejected vide order dated 10.11.2012. Further the statements made in para 5 of the petition dated 13.12.2012 of the opposite party is absolutely irrelevant as there is no question of the matter being sub-judice at all and further the said statement appears to be contrary to the basic rule of Administration of Justice in as much as the party involved in any dispute or even his lawyer can make his submissions in the matter and to form an opinion is the function of the concerned Judicial Officer / Presiding Officer / Tribunal authorized by law to adjudicate the concerned dispute. Hence the prayer made by the opposite party is hereby rejected. Further, in view of the order dated 20.11.2012, the claimant is directed to continue with his arguments.

5. Heard the counsel for the claimant at length. During course of argument, the claimant's counsel further submitted that he wants to adduce evidence in the matter by examining witnesses and files a petition to the said effect and prays for allowing him to adduce evidence.

13 Commercial Appeal No. 11 of 2018

6. Prayer made by the Claimant is allowed. The claimant is directed to produce his witness(es) on the next date of hearing and also file their Evidence on Affidavit.

7. The proceeding is being conducted strictly according to the spirit, words and the law contained in Arbitration and Conciliation Act, 1996. The proceeding is strictly falling the mandate of Hon'ble High Court for speedy disposal of the matter. The parties are requested to co-operate in early disposal of the matter in terms of the observations of the Hon'ble High Court.

8. The claimant has deposited his share of fees as well as that (share) of the opposite party by way of two separate Account payee Cheques.

9. Part Heard. Further hearing is continued to 22.12.2012 at 03.00 pm at the same place.

22.12.2012 Arbitration proceeding arising out of AA No.1/2011 in the matter of

M/s. Shriram Multicon Pvt. Limited, Zonal Centre, 1st Floor, Ashok Nagar Colony, Dhanbad. ............................................. Claimant Versus M/s. B.N. Hotels Pvt. Ltd., Gupta Building Main Road, Jharia, P.O. Jharia, Dist. Dhanbad, PIN- 828111...................................................Opposite Party

1. Shri Delip Jerath, Advocate, Shri Ashutosh Anand, Advocate, Shri Pradeep Kumar Sonthalia, Director in Claimant Company and Shri a. K. Upadhyay, employee of claimant company appears on behalf of the company.

2. Neither the opposite party nor any representative nor any Advocate has appeared on behalf of the opposite party.

3. Four witnesses have been examined namely Shri Pradeep Kumar Sonthalia, Subhash Kumar Baid, Atanu Das, Manoj Kumar Pandey. They have justified certain documents to be corrected.

4.The witnesses have also identified certain documents which have been produced today and they have marked to 37/1.

5. Heard Shri Jerath in detail. He says that apart from his argument in support of the claim will be on the next date.

6. It be recalled that at specifically stated that the arbitration proceeding should be concluded on or within ten hearings and very expeditiously. It appears that the arbitration proceeding has been lingered unnecessarily and that being so it is not possible to give any long adjournment. Under the circumstances the next hearing is fixed the next date on 23.12.2012. It will be convenient also since the High Court is closed.

7. The claimant has paid his share of fees by Account Payee Cheque and also paid the share of fees payable by the opposite party.

8. Part heard. The hearing is adjourned to 23rd December 2012 at 10.00 AM at the same place.

23.12.2012 Arbitration proceeding arising out of AA No. 1/2011 in the matter of

M/s. Shriram Multicom Pvt. Limited, Zonal Centre, 1st Floor, Ashok Nagar Colony, Dhanbad. ...........................................................Claimant Versus M/s B.N. Hotels Pvt. Ltd., Gupta Building, Main Road, Jharia, P.O. Jharia, Dist. Dhanbad, PIN-828111....................................................Opposite Party

1. Shri Delip Jerath, Advocate, Shri Ashutosh Anand, Advocate, Shri Pradeep Kumar Sonthalia, Director in claimant company and Shri A.K. Upadhyay, employee of claimant company appears on behalf of Claimant.

14 Commercial Appeal No. 11 of 2018

2. Neither the opposite party nor any representative nor any advocate appears on behalf of the opposite party

3. Sri Delip Jerath has concluded his arguments and has placed all the documents in the matter on part of the claimant. Sri Jerath further submits that his argument vis-a-vis Claimant's claim is now concluded and he has nothing more to say thereon.

4. A petition has been filed on behalf of the claimant on the point as to whether the opposite party has deposited Rs. 1.5 crores or any amount before this Arbitral Tribunal pursuant to the order dated 23.11.2012 passed in Special Leave to Appeal (Crl) No. 8563/12 passed by the Hon'ble Supreme Court of India.

5. Perused the petition and the order dated 23.11.2012 passed by the Hon'ble Supreme Court of India in Special Leave to Appeal (Crl) No. 8563/12, it is clarified that the opposite party has not deposited any amount in the present Arbitral proceedings whatsoever nor Rs. 1.5 Crores as observed by the Hon'ble Supreme Court of India.

6. The claimant has paid his share of fees by Account Payee cheque and also paid the share of fees payable by the opposite party.

7. The hearing is adjourned to 29th and 30th of December 2012 at 11.00 am to consider the Statement of Defence and the Counter Claim very minutely and exhaustively.

18. The aforesaid orders clearly demonstrate that there were justifiable reasons for the Arbitrator to proceed with the arbitral proceeding and the grievance of the B. N. Hotels was just a pretention. According to the claimant-company, the reason why the B. N. Hotels did not participate in the arbitral proceeding on 15th December 2012 was that it had moved the Hon'ble Supreme Court in SLP (Crl.) No. 8563 of 2012 and the matter was posted for hearing on 14th December 2012. In course of the hearing, Mr. Indrajit Sinha, the learned counsel for the claimant-company referred to the orders passed in SLP (Crl.) No. 8563 of 2012 in the proceeding of which the B.N. Hotels undertook to make a deposit which was not honored by it. A glance at the proceedings before the Hon'ble Supreme Court reveals that on a statement made on behalf of the B. N. Hotels on 23rd November 2012 that Rs. 6 crores shall be deposited in four equal installments, the Hon'ble Supreme Court stayed the further proceedings in the criminal case lodged against the B. N. Hotels vide CP No. 154 of 2012. However, the B. N. Hotels filed a petition for modification of the order dated 23rd December 2012 on the ground that on account of inadvertence an incorrect statement was made before the Court undertaking to deposit Rs. 6 crores with the Arbitrator. This petition was numbered as Criminal M.P. No. 26566 of 2012 and has been dismissed by an order dated 14th December 2012. Thereafter, the B. N. Hotels again raised the bogey of pendency of Misc. Case No. 36 of 2012 and filed petitions dated 16th and 19th November 2012 seeking adjournment which were dismissed by the Arbitrator on 20th November 2012 with a clear indication that as a last chance 15 Commercial Appeal No. 11 of 2018

adjournment was granted. The B. N. Hotels had thus knowledge of the next date of the arbitral proceeding but it chose not to appear on 15th December 2012 and also on the next two dates of the arbitral proceedings which were conducted on 22nd and 23rd December 2012.

19. Now challenging the aforesaid ex-parte proceedings conducted on 11th and 12th sitting of the Arbitrator three petitions were filed by the B. N. Hotels viz. (i) under section 18 of the AC Act for withdrawal/recall of the orders dated 15th and 22nd December 2012 (ii) withdrawal of the Arbitrator from the proceeding and (iii) a proposal under section 30 of the AC Act for encouraging settlement of disputes. The first two petitions were dismissed on 29th December 2012 in the presence of the lawyers for the B. N. Hotels and the next date of hearing was fixed on 6th January 2013 with a specific indication that no further adjournment shall be granted. The order drawn on 6th January 2013 records that the B. N. Hotels intended that the proceeding should never be concluded and must linger indefinitely. The actions of the B. N. Hotels during the arbitral proceedings targeted the Arbitrator who became so perturbed that he was constrained to draw orders narrating the conduct of the B. N. Hotels. The Arbitrator has expressed his anguish in the arbitral award in the following words:

"To me it appears that extreme provocation was directed at me by one of the party so that I may also pull back my hands from the arbitral proceedings and the dispute may not be resolved at all as was done in the case of the other two High Court Judges who were appointed before me and they withdrew from the proceedings. The reason to keep calm and remain unaffected was the mandate of the Hon'ble High Court by which I was appointed as an Arbitrator in the instant proceedings. The Hon'ble High Court while appointing me as the Arbitrator had directed the parties to cooperate in early disposal of the matter and further observed that 'It goes without saying that Justice A.P. Sinha will conclude the proceedings expeditiously.' I assured the learned lawyers and both parties that I have no bias against anyone of them. I kept going with hearing the matter inspite of several hard sentences used by the learned Advocate Shri P.K. Bhattacharya.

Many a times specific allegations were tended to be levied against me possibly for the motive that I might get annoyed or loose my patience and return the file. Further, on many occasions specific statements were made by both Shri P.K. Bhattacharya and the opposite party that they will not appear and that the ordersheet be not sent to them. However, I continued to discharge my duties as per Law.

Inspite of the specific stand taken by Shri P.K. Bhattacharya and the opposite party on numerous occasions that they will not appear and further continued to absent themselves, thereafter both of them duly appeared and ultimately participated to some extent in the proceedings.

Further, inspite of giving a specific petition that the ordersheet be not sent to the opposite party, the same was duly sent by me. However, on 29.12.2012, Shri P.K. Bhattacharya appeared and filed a petition raising grievance regarding late receipt of ordersheet and that the Arbitrator ought to have informed him the next date of hearing by telephone. It appeared that Shri P.K. Bhattacharya either on account of his old age or failing memory or 16 Commercial Appeal No. 11 of 2018

otherwise, forgot about the previous written statements made by him and his client that they will not appear and be not communicated in the matter. Such allegations and statements did not provoke or stir me.

As and when Shri P.K. Bhattacharya and the opposite party appeared, I gave them full opportunity to place their case and without any demur allowed them to participate in the proceedings. I am really happy and grateful that they have participated in the proceedings off and on and especially on 29.12.2012 and 06.01.2013, the penultimate and last date of hearing when I decided to conclude the hearing and fix the matter for publication of the Award.

In spite of the various provocations being made, I kept full control of both my head and heart to remain impartial and unbiased moreso on account of the fact that one day when I had taken oath as a Judge and I had sworn to do my duties without fear or favour and without affection and ill will and with the Grace of God I have been successful in rendering an impartial Award doing justice which was best in the facts and circumstances of the case.

20. A party to the arbitral proceeding which appeared before the Arbitrator as and when it wanted to appear and did not participate on many occasions including the 11th and 12th sittings cannot complain about those proceedings being conducted in its absence. In "Combined Chemicals Company" 20 a party to the arbitration after seeking adjournment on the ground that a petition was pending before the High Court did not participate on the next dates has been held to blame itself for the ex-parte award. The Hon'ble Supreme Court held that the Arbitrator had every reason to proceed with the matter and pass the award. In "Sohan Lal Gupta"21 it has been held that if a party after being given proper notice chooses not to appear then the proceeding may properly continue in his absence. The conduct of the parties shall be a relevant factor in circumstances like the present one. The filing of the petition after petition, finding fault at every stage of the proceeding before the Arbitrator, and non-participation in the arbitral proceedings on several dates demonstrate that the B. N. Hotels was determined to frustrate the arbitration. Having regard to the manner in which the B. N. Hotels tried to scuttle the arbitration, the Arbitrator cannot be said to have misdirected himself in passing the award by taking into consideration the materials before him. This appears from the proceedings drawn by the Arbitrator that he gave due consideration to the request for adjournment made by the B. N. Hotels and conducted the proceedings in accordance with law. The Arbitrator entered upon the reference on 21st July 2012, conducted 14 sittings, and closed the arbitral proceedings on 6th January 2013. In the ex-parte proceeding held on 23rd December 2012 the Arbitrator fixed the date for hearing the arguments of

State of Uttar Pradesh & Ors. v. Combined Chemicals Company Private Limited : (2011) 2 SCC 151

Sohan Lal Gupta v. Smt. Asha Devi Gupta & Ors.: (2003) 7 SCC 492 17 Commercial Appeal No. 11 of 2018

the B. N. Hotels and its counsel appeared on 29th December 2012 but again filed three petitions which were rightly rejected by the Arbitrator. The matter was posted for 6th January 2013 on the request of the counsel for the B. N. Hotels and on that day also the matter was not prosecuted on its behalf by the counsel. In"Udaichand Panna Lall"22 the Court has held that if in spite of a warning the party did not appear before the Arbitrator he cannot have a real grievance and approach the Court to set aside the award on the ground of alleged defect in procedure.

21. It is contended that the claimant-company was permitted to produce further documents and no opportunity was granted to the B. N. Hotels to lead evidence in rebuttal. In "Ssangyong Engg. & Construction Co. Ltd."23 the Hon'ble Supreme Court has held that where materials are taken behind the back of the other party by the Arbitral Tribunal on which the other party had no opportunity to comment, the ground under section 34(2)(a)(iii) would be made out.

22. The Hon'ble Supreme Court23 has held as under:

"51. Sections 18, 24(3) and 26 are important pointers to what is contained in the ground of challenge mentioned in Section 34(2)(a)(iii). Under Section 18, each party is to be given a full opportunity to present its case. Under Section 24(3), all statements, documents, or other information supplied by one party to the Arbitral Tribunal shall be communicated to the other party, and any expert report or document on which the Arbitral Tribunal relies in making its decision shall be communicated to the parties. Section 26 is an important pointer to the fact that when an expert's report is relied upon by an Arbitral Tribunal, the said report, and all documents, goods, or other property in the possession of the expert, with which he was provided in order to prepare his report, must first be made available to any party who requests for these things. Secondly, once the report is arrived at, if requested, parties have to be given an opportunity to put questions to him and to present their own expert witnesses in order to testify on the points at issue."

23. The Arbitrator is required to follow a judicial approach which undoubtedly demands that he should observe the rules of natural justice. Section 18 of the AC Act puts the Arbitrator under a legal obligation to accord equal treatment to the parties and to give a full opportunity to them to present their case. The misconduct by an Arbitrator may not always be a moral lapse on his part in the sense that the misconduct alleged has no connection with his personal conduct. A legal misconduct that can be a ground to set aside the award may arise in various other ways, one instance of which may be non- adherence to the rules of natural justice. As the case laws on the subject would

Udaichand Panna Lall v. Debibux Jewanram: AIR 1920 Cal 853

Ssangyong Engg. & Construction Co. Ltd. v. NHAI: (2019) 15 SCC 131 18 Commercial Appeal No. 11 of 2018

suggest a legal misconduct must be manifest on a mere glance at the proceedings before the Arbitrator. As regards the mandate under section 18, Mr. Indrajit Sinha, the learned counsel for the claimant-company has contended that it was a mere bald allegation and no specific instance of denying equal opportunity to it was pleaded by the B. N. Hotels. We find that except a few which are not relevant at all the documents produced by the parties were marked as exhibits in 3rd sitting held on 27th August 2012 and 4th sitting held on 2nd September 2012. The proceedings before the Arbitrator further disclose that no application for recall of the witnesses or permission to cross-examine the claimant's witnesses was moved. The B. N. Hotels had sufficient notice and knowledge about the arbitral proceeding to be held on 15th December 2012 and as regards the sittings held on 22nd, and 23rd of December 2012 the least that was expected of a party to the arbitral proceeding was that it should have made inquiry and ascertained the next date of hearing. There is no such material in the records to suggest that in spite of its best efforts the B. N. Hotels could not ascertain the date for the next sitting of the Arbitrator. This is also not a case set up by the B. N. Hotels that on account of unavoidable reasons it could not participate in the arbitral proceedings on those dates. The filing of a petition under section 18 of the AC Act was a desperate attempt by the B. N. Hotels to seek recusal of the Arbitrator. Having regard to these circumstances, we are certain in our view that the ground mentioned under sub-section 2(a)(iii) of section 34 of the AC Act is not available to the B. N. Hotels. So we would now turn to the other aspects of the matter.

24. With reference to "Ferro Concrete Construction" 24 the award dated 16th January 2013 has been challenged on the ground that the Arbitrator failed to consider the materials on record and, moreover, compensation has been granted against the terms to the development agreement and the counter- claim has been rejected without even discussing the claims. Under section 30 of the Arbitration Act, 1940 there were only three grounds to attack the award including legal misconduct of the Arbitrator and error apparent on the face of record. Under the present regime, the Court is precluded from re-appraising the evidence unless the reasons are totally perverse or the judgment is based on a wrong proposition of law. In "MMTC Ltd."25 the Hon'ble Supreme Court

State of Rajasthan v. Ferro Concrete Construction Private Limited : (2009) 12 SCC 1

MMTC Ltd. v. Vedanta Ltd.: (2019) 4 SCC 163 19 Commercial Appeal No. 11 of 2018

exposited on the limited scope of interference under section 34 and section 37 of the AC Act and held that the interference by the Court under section 34 does not entail a review of the merits of the dispute.

25. In "MMTC Ltd."25 the Hon'ble Supreme Court has observed as under:

"11. As far as Section 34 is concerned, the position is well-settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii) i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the "fundamental policy of Indian law" would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury reasonableness. Furthermore, "patent illegality" itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract.

12. It is only if one of these conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)(b)(ii), but such interference does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts. (See Associate Builders v. DDA. Also see ONGC Ltd. v. Saw Pipes Ltd.; Hindustan Zinc Ltd. v. Friends Coal Carbonisation; and McDermott International Inc. v. Burn Standard Co. Ltd. )

13. It is relevant to note that after the 2015 Amendment to Section 34, the above position stands somewhat modified. Pursuant to the insertion of Explanation 1 to Section 34(2), the scope of contravention of Indian public policy has been modified to the extent that it now means fraud or corruption in the making of the award, violation of Section 75 or Section 81 of the Act, contravention of the fundamental policy of Indian law, and conflict with the most basic notions of justice or morality. Additionally, sub-section (2-A) has been inserted in Section 34, which provides that in case of domestic arbitrations, violation of Indian public policy also includes patent illegality appearing on the face of the award. The proviso to the same states that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.

14. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the court under Section 34 and by the court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings."

26. The claimant-company pleaded that the B. N. Hotels was under an obligation to extend all cooperation and not to interfere with the claimant's right to make construction over the property and to sell, assign, and/or dispose of its proportionate share in the constructions over the property. According to the claimant-company, the covenants under clauses 22.1 and 22.2 of the development agreement imposed negative obligations on the B. N. Hotels and 20 Commercial Appeal No. 11 of 2018

such obligations were mandatorily required to be adhered to by the B. N. Hotels so as to protect the interest of the claimant-company in the property which was created by virtue of the payment of Rs.55 lacs for redemption of the property from the mortgage with Union Bank of India.

27. Clauses 22.1 and 22.2 of the development agreement dated 8 th August 2007 are extracted below:

"22.1 The Owners hereby agree and covenant with the Developer not to cause any Interference or hindrance in the construction of the said building construction on the said plot by the Developer if nothing is going against the spirit of this agreement.

22.2 The Owners hereby agree and covenant with the Developer not to do any act, deed or thing whereby the Developer may be prevented from selling, assigning and/ or disposing of the whole premises except owner's share."

28. This is the case set up by the claimant-company that the acts of the B. N. Hotels in revoking the power of attorney dated 26 th March 2008 which was executed in favor of the director of the claimant-company and termination of the development agreement dated 8th August 2007 were illegal and the B. N. Hotels cannot be permitted to wriggle out of its obligations under the development agreement. The Arbitrator has held that there was no fault on the part of the claimant-company whereas the B. N. Hotels delayed handing over of the title deed and cancelled the development agreement for an unimaginable reason. In "Sudarshan Trading Company" 26 the Hon'ble Supreme Court has held that the interpretation of a contract is a matter for the Arbitrator to determine since the Arbitrator is a judge chosen by the parties whose decision the parties have agreed to be final. The claims for compensation and damages are made on the basis of (a) actual expenditure incurred for construction over the land (b) interest up to 31 st December 2011 over the expenditure incurred (c) projected profits and (d) loss of goodwill. The total claim was for Rs.32,55,07,537/- with interest pendente lite and future @ 18% per annum. The claimant-company laid in evidence the balance sheet for the year 2009-10 which reflected reserves and surplus of Rs.20,78,88,353/- sufficient to complete the project, and in order to claim business loss and expected profits pleaded that it had completed foundation work, basement, ground floor, and a part of first floor.

29. This is well settled that if the view taken by the Arbitrator is

Sudarshan Trading Company v. Government of Kerala: (1989) 2 SCC 38 21 Commercial Appeal No. 11 of 2018

logical and acceptable merely because two views are possible the Court in exercise of its supervisory jurisdiction shall not interfere with the arbitral award. In "U.P. SEB"27 the Hon'ble Supreme Court has held that the Court will refrain itself from interfering with an arbitral award if it is demonstrated that the view of the Arbitrator is a plausible one. Naturally the powers under section 37 of the AC Act which powers the High Court shall be exercising in a petition under section 13(1-A) of the Commercial Courts Act, 2015 cannot be wider than section 34 of the AC Act and is limited to situations where the findings of the Arbitrator are arbitrary or perverse or where the illegality goes to the root of the matter.

30. The award of Rs.8,75,44,689/- on account of expected profits is arbitrary and perverse. The Arbitrator has discussed this claim under the head (F) and recorded a finding at page no. 119 of the award dated 16th January 2013 that the projected sale receipts from the sale of 72% share of the claimant-company is admitted by the B. N. Hotels, inasmuch as, on the same rates and figures the B. N. Hotels has based its counter-claim. A claim for loss of profit cannot be allowed on mere producing some evidence as regards expected profits that could have been earned by the other party and, that too, on a premise that the rates for assessing the projected sale receipts are admitted by the B. N. Hotels. Even though there was a valuer's report and some other evidence as regards the market rate, the award of expected profits suffers from a fundamental flaw in law and such a claim can be awarded only when it is established that the aggrieved party has suffered losses, and not merely because work was stopped on account of a dispute between the parties. There cannot be a doubt to the proposition that an arbitral award can be affirmed while setting aside the impugned part which is severable [refer, "J.G. Engineers (P) Ltd." 28 ]. The award dated 16th January 2013 refers to Exhibit-2, Exhibit-31 to 37/1 which included the balance sheet, Ledger entries, CA certificate, valuer's report, report of the Civil Engineer, and takes into consideration other aspects of the matter except the counter-claim raised by the B. N. Hotels. Like any other ex-parte proceeding where the Court examines the evidence with added care and caution, the claim for expected profits can be allowed only upon proving of the facts necessary for establishing loss of profits and a decision thereon by the

U.P. SEB v. Searsole Chemicals Ltd. : (2001) 3 SCC 397

J.G. Engineers (P) Ltd. v. Union of India : (2011) 5 SCC 758 22 Commercial Appeal No. 11 of 2018

Arbitrator. A claim for loss of profit made by the other party needs to be separately examined by the Court and if it is found that the decision of the Arbitrator is arbitrary, capricious or perverse the Court is to set aside that part while affirming the arbitral award. The Arbitrator has based his decision on a perceived admission of the B. N. Hotels and the discussions thereon in the arbitral award dated 16th January 2013 as to the award of loss of profits are perverse and for this reason the award of expected profits to the tune of Rs.8,75,44,689/- is set aside.

31. In view of the aforesaid discussions, we set aside the claim raised under the head (F) as awarded by the Arbitrator to the tune of Rs.8,75,44,689/-. The award dated 16th January 2013 is affirmed as to the other claims awarded by the Arbitrator.

32. Commercial Appeal No. 11 of 2018 is disposed of in the aforesaid terms.

  I agree                                             (Shree Chandrashekhar, J.)


(Ratnaker Bhengra, J.)

                                                         (Ratnaker Bhengra, J.)
Jharkhand High Court, Ranchi
Dated:30/08/2023
R.K./Sudhir/Amit/Tanuj
A.F.R