Delhi High Court
Housing And Urban Development ... vs Leela Hotels Ltd. on 9 November, 2004
Author: Anil Kumar
Bench: Anil Kumar
JUDGMENT Anil Kumar, J.
1. This order will dispose of this appeal under Section 37(1)(b) of Arbitration and Conciliation Act, 1996 filed by the appellant against the judgment dated January 20TH, 2003 passed by learned single Judge in OMP No. 308/2002 dismissing the petition of the appellant under Section 34 of the Arbitration and Conciliation Act, 1996 for setting aside the arbitral award dated June 25th, 2002.
2. The facts relevant to appreciate the controversies are that the appellant, Housing and Urban Development Corporation (HUDCO, in short), advertised inviting tender for a hotel site at HUDCO Place, Andrews Ganj, New Delhi. The appellant had been allotted 42.6 acres of land by the Government of India by its letter dated 27th September, 1992. Tenders were invited by HUDCO after an injunction order was vacated in another litigation for construction of a five star Hotel.
3. M/s. Leela Hotels Limited, respondent, was the highest bidder after pre-bid clarificatory meetings for the hotel site, car parking space and the underground linkage space. The highest bid amount of Rs. 201 crores was payable in three installments of 40%, 30% and 30% by the respondent. The appellant issued a letter of allotment reference No. HUDCO/AG/Hotel/97 dated 31st March,1997 incorporating the terms and conditions for allotment.
4. A perpetual lease with the Government of India was entered on 4th July, 1997 with HUDCO for 99 years for an area measuring 17.6 acres. On the same date HUDCO, appellant, executed an agreement to sub lease which incorporated the terms and conditions stipulated in the allotment letter dated 31st March,1997 under which the respondent was to pay Rs. 201 crores comprising of cost of the land for the hotel site, Rs. 16.85 crores for car parking space and Rs. 9.30 lakhs for underground linkage space between the Hotel site and the underground car parking space. The appellant was paid first installment of 40% amounting to Rs. 87,17,72,000/- by the respondent on April 10, 1997 in terms of the letter of allotment dated 31st March, 1997. The respondent paid the second installment of Rs. 65,38,29,000/- along with interest of Rs. 3,26,01,884/- @ 20% in consonance with the terms agreed between the parties. The respondent also paid ground rent amounting to Rs. 2,45,95,046/- up to 31st December, 1998. The last and the third installment of 30% amounting to Rs. 65,38,29,000/- was payable on 31st March, 1999.
5. The respondent alleging breaches on the part of the appellant, HUDCO, therefore, wrote a letter on 31st March, 1999 that on account of breaches committed by the appellant, respondent was under no obligation to pay the third installment. The respondent also called upon the appellant to appoint an independent arbitrator. The respondent also issued reminders. However, on 5th May,1999, appellant replied demanding payment of last installment with interest by 30th June, 1999.
6. Since, despite the respondent raising a demand to appoint an arbitrator in terms of arbitration agreement between the parties, as the appellant did not appoint an arbitrator and agreed for appointment, the respondent filed a petition before the High Court on 21st June,1999. However, on 23rd June, 1999. HUDCO nominated Justice R.S.Pathak a retired Chief Justice of India as Arbitrator. High Court of Delhi approved appointment of Justice R.S.Phathak as an arbitrator.
7. The disputes which had arisen between the parties were taken up after the claims and counter claims were filed by the parties before the Arbitrator and on the basis of same the learned Arbitrator framed issues. After considering the pleas and the evidence and the documents of the parties, learned Arbitrator gave an award on 25th June 2002. The learned Arbitrator held that the respondent is entitled to recover and the appellant is liable to pay the amounts of the first and the second installment along with interest paid by respondent to the appellant less the amount refunded by the appellant to the respondent under letter dated 8th July, 1999. The learned Arbitrator also awarded interest @ 20 per cent per annum on the amount retained as property to for the period during which the amount remained with the appellant until payment to the Municipal Corporation of Delhi and also awarded interest @ 20 per cent on the balance amount from the date of respective payments made initially by the respondent to the appellant till the date of award. The learned Arbitrator also held that the respondent would be entitled to recover and the appellant shall be liable to pay Rs. 10,24,82,546/- received by the appellant on account of ground rent with interest at 20% per annum on the amount of ground rent paid for the period ending 30th June, 1998 and the amount of ground rent paid for period ending 31st December, 1998 from the date of respective payments to the date of the award. The learned Arbitrator also granted future interest to the respondent at 15% per annum from the date of the award to the date of recovery. The learned Arbitrator, however, rejected the claim raised by the respondent holding that the relief for a declaration in respect of amount deducted as property tax had become infructuous. The learned arbitrator also did not allow claim of respondent on account of expenses incurred.
8. Aggrieved by the award of the learned Arbitrator dated 25th June, 2002, appellant filed objections under Section 34 of the Arbitration and Conciliation Act. The objections were heard by the learned single Judge and were dismissed by a reasoned order dated 20th January, 2003. The present appeal has been filed by the Appellant impugning the order dated 20th January,2003 dismissing its objections.
9. The learned senior counsel, Mr. R.N. Trivedi, for the appellant has impugned the order of the Learned Single Judge mainly on three counts. He has submitted that the act of the appellant not granting permission to the respondent to mortgage or create charge on the hotel site in compliance with clause xviii of Agreement to sub lease was not fundamental to the Agreement to Sub lease and non-grant of permission did not entitle the respondent to repudiate the agreement to sub lease. His second contention is that the term of payment of consideration was the essence of the agreement and the time could not be extended beyond the period permitted under the agreement to sub lease on any account and on failure to pay third installment within the stipulated tie, resulted into automatic cancellation without any further reference to the intended sub lease and in such an eventuality on automatic termination of agreement to sub lease, the liability of the appellant was only to pay 50% of the amount paid till that date without any interest. The Learned Counsel further contented that the respondent had knowledge about the pendency of the revised plans as on March 21st, 1998 and despite knowledge of the revised plans, the respondent paid the second installment along with interests for delayed payment and, therefore, the respondent acquiesced regarding non-availability of the revised sanctioned plan and any right which could have accrued to the respondent on account of plan not being sanctioned was therefore waived be respondent. It was also contended that as per the terms of the agreement to sublease, no interest was to be paid by the appellant to the respondent. Mainly on these grounds, the award of the learned arbitrator as well as the impugned order passed by the learned Single Judge has been assailed before us.
10. Regarding the scope of interference by the Court in an award by an Arbitrator, the counsel for the appellant relied on , Oil and Natural Gas Corporation Ltd Vs. Saw Pipes Ltd. and other judgments to contend that the Court will be justified in interfering and setting aside the award on the basis of said authorities. He contended that the power of the Arbitral Tribunal is prescribed under the Act and if the award is dehors the said provisions, it would be, on the face of it, illegal. According to him the decision of the Tribunal must be within the bounds of its jurisdiction conferred under the Act or the contract and in exercising jurisdiction, the Arbitral Tribunal cannot act in breach of some provision of substantive law or the provisions of the Act. Relying on Saw Pipes Ltd. (Supra) he contended that the award can be set aside, if the Arbitral Tribunal had not followed the mandatory procedure prescribed under Sections 24, 28 or 31(3), which affected the rights of the parties. According to appellant under sub-section (1)(a) of Section 28 there is a mandate to the Arbitral Tribunal to decide the dispute in accordance with the substantive law for the time being in force in India and admittedly, substantive law would include the Indian contract Act and other such laws in force. He further contended that the Arbitral Tribunal had to decide the disputes in accordance with the terms of the contract.
11. Learned counsel for the appellant Shri Trivedi contended that the Arbitral Tribunal has not decided the disputes in accordance with the terms of the contract and have ignored the terms of the contract and the award is based on erroneous propositions of law and since the award is in contravention of the terms of the contract and based on erroneous propositions of law, it can be set aside by the court. The Appellant relied on a division Bench of the High Court of Andhra Pradesh, , State of A.P. Vs Associated Engineering Enterprises, Hyderabad where it was held that the clause 59 of the standard terms and conditions of the contract provided that neither party to the contract shall claim compensation `on account of delays or hindrances of the work from any cause whatsoever', and an award given by the Arbitrator ignoring such express terms of the contract was bad. Appellant contended that the said judgment of the Division Bench of Andhra Pradesh was approved by the Supreme Court in General Manager, Northern Railways and Anr. Vs Sarvesh Chopra, . According to him an incorrect assumption of facts or an incorrect application of law, will satisfy the requirement of the order being erroneous and for this he has relied on ; Malabar Industrial Company Limited Vs. Commissioner of Income Tax. He has relied on para 7 of the judgment where it was observed:
''There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer; it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law, will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind.''
12. Learned counsel for the appellant also relied on ; Nand Kishor Vs, State of Punjab. Relevant portion of the judgment on which reliance has been placed is as under:
''when this Court strikes down a statutory provision holding it to be unconstitutional, it derives its authority to do so under the Constitution. Under Article 141, the law declared by it is of a binding character and as commandful as the law made by a legislative body or an authorized delegatee of such body. The Court is thus a ''competent authority'' within the scope of the words above emphasized. On the other hand the majority view expressed in the Full Bench decision that ''the Courts of record including the Supreme Court only interpret the law as it stands but do not purport to amend the same. Their Lordships' decisions declare the existing law but do not enact any fresh law'', is not in keeping with the plenary function of the Supreme Court under Article 141 of the Constitution, for the Court is not merely the interpreter of the law as existing but much beyond that. The Court as a wing of the State is by itself a source of law. The law is what the Court says it is. Patently the High Court feel into an error in its appreciation of the role of this Court.
13. The counsel for the appellant thus contended that the Arbitrator and Learned Single Judge failed to follow the law laid down by the Supreme Court which is binding in character and as commandful as the law made by the legislative bodies.
14. Learned counsel for the appellant contented that the award is in conflict with the public policy of India and is liable to be set aside under section 34(2)(b)(ii) of the Arbitration and Conciliation Act, 1996. It was contended that the explanation added to Section 34(2)(b)(ii) refers to public policy generally but public policy will also include (i) an award induced or affected by the fraud and corruption or (ii) which is in violation of section 75 or section 81. It was contended that public policy has not been defined and thus the general principles relating to public policy are applicable which do not have a fixed meaning as they change with time. According to the appellant the rule of law excludes arbitrariness and the award has to conform to the rule of law and if reasons are against the plain term of the contract, award will be invalid and if the reasons are irrational or arbitrary it can be interfered with. It has been further contended that if two opinions are not reasonably possible in interpreting a clause of the contract, it can be a ground for interference under Section 34 of the Act. The contention of the appellant is thus, that the law declared by the Supreme Court under Article 141 is not only binding on all courts but also on the arbitrator.
15. Counsel for appellant has challenged the award on the ground that clause III of the agreement obliged the respondent to pay installments within the time stipulated under the Agreement, which was the essence of the agreement irrespective of whether the intended sub lessee had been able to start the construction on the land or not due to `any reason whatsoever'. He contended that the said term of payment was absolute and admitted no exceptions. Reliance was placed by the counsel for the appellant on , Thawardas Pherumal and Anr. Vs Union of India. The Appellant also relied on a division Bench of the High Court of Andhra Pradesh, State of A.P Vs Associated Engineering Enterprises, Hyderabad (Supra).
16. It was contended that term `due to any reason whatsoever' in clause III includes appellant's default, although there was no default by appellant and therefore, notwithstanding the allegation of respondent, respondent was liable to pay the third installment. The term of payment, clause III is as under :-
III. In case the cost of said demised premises i.e. the Hotel site, the Car Parking spaces and underground linkage space, intended to be paid in installments is not paid on or before the due dates, then the intended Sub-Lessee shall have the option to pay the second and third installments with interest on the outstanding amount of consideration at the rate of 20% (twenty per cent) per annum within three months of the due date specified with the intimation to the Corporation about the intention to pay as her this clause. The interest for the period on the outstanding consideration shall be paid along with each payment of the consideration stated in the preceding clause. If the Intended Sub-lessee fails to pay the second and third installments within the permitted time hereunder, the allotment shall stand automatically cancelled without any further reference to the Intended Sub-lessee and in that event 50% of the amount paid up to that date shall stand forfeited and the balance 50% will be refunded to the allottee without interest. Thereupon the Corporation will be free to re-auction the demised premises, car parking spaces, and the underground linkage space. The time for payment of the premium as stated hereunder shall be the essence of the contract and irrespective of whether the Intended Sub-Lessee has been able to start the construction on the demised premises or not due to any reason whatsoever.''
17. It was further contended that the learned arbitrator as well as learned single Judge misinterpreted the term of the contract, i.e., Clause XVII that the delay, if any, in sanctioning plans frustrate the contract, on such frustration, the claimant was entitled for refund of the amount paid without interest, as Clause XVII expressly barred the payment of damages or interest under such circumstances. Consequently award was beyond jurisdiction in awarding damages and interest.
18. Another plea of the counsel for the appellant is that that the term of the agreement to sub lease regarding permission to mortgage to the respondent was not fundamental to the agreement. Appellant relied on the lease dated July 4, 1997 which was executed between the President of India and the appellant in respect of land measuring 17.6 acres in village Pinjrapole, Delhi known as Andrews Ganj pursuant to which an Agreement to sub lease dated 4th July,1997 was executed with respondent. According to his the lease deed dated 4th July,1997 executed with the appellant categorically stipulated that sub-lessee with the previous consent in writing of the Lesser could mortgage on such terms and conditions as may be deemed appropriate by the Lesser.
19. Reliance was placed by the counsel for the appellant on clause xviii (a) and (b) of agreement to sub lease dated July 4th, 1997. According to him clause xviii (a) had put a complete bar on right of sub-lessee to sell, transfer, assign or otherwise part with the possession of the whole or any part of the demised premises without prior written approval of the Lesser/corporation. According to him, clause (b) gave a discretion to the appellant/ HUDCO to grant or not to grant consent in writing to the intended sub-lessee to raise funds for construction of hotel building and the required equipment and machinery. He contended that consent could be granted by the appellant on such terms and conditions as would have been appropriate in absolute discretion of the appellant.
20.The appellant contended that consent for permission to mortgage was within the absolute discretion of the appellant and the respondent/ intended sub-lessee could not claim it as a matter of right.
21. The counsel for the appellant further contended that a fundamental term would be a term which is absolute, unambiguous and capable of performance at the sole and compulsive volition of the promisor and promiseand whose non performance would enable either party to repudiate or terminate the contract. Consequently, clause contemplating grant of permission could not be a fundamental term.
22. Counsel for the appellant contended that mortgage was not the only source for finance for the respondent and there were other sources for raising funds. Since an element of discretion on the part of appellant was involved, it could not be a fundament al term of the agreement. According to appellant the provision of clause xviii (b) could not be construed to mean only one option and that is to grant permission.
23. Counsel for the appellant further contended that the concept of reasonableness as propounded in the realm of administrative law could not be applied to the contracts. According to him the reasons expounded for not applying administrative law principle to contractual matters were that in case of contract, rationality, reasonableness and lack of arbitrariness can not be ground for invalidating the acts of any party. It was stated that before entering into a contract, State has to act in a reasonable, air and bona fide manner, however, after the agreement is entered between the parties, rights of the parties are to be determined strictly in accordance with the terms and conditions of the contract and the principles of administrative law can not be applied.
24. The learned counsel for the appellant relied upon 2000 (3) All England Reports 51; Bank of Credit and Commerce International SA (in Liquidation) Vs. Ali and Others; where it was held that the principle of equity have nothing to do with the process of construction. The relevant portion relied on by the counsel for appellant is as under:-
''22. In my judgment, there are no such things as rules of equitable construction of documents. And there are no rules of construction that are peculiar to releases. There are rules of construction that are applicable to all documents. Under these rules the court must try and ascertain the intentions of the party in question, if the document is unilateral, or of the parties, if more than one person is party to it, and, in the light of those intentions, objectively ascertained, determine the meaning that should be attributed to the words used in the document. Principles of equity have, in my opinion, nothing to do with the process of construction.''
25. The other judgment relied on by the appellant is 2001(1) All England Reports 961; Bank of Credit and Commerce International SA (in Liquidation) Vs. Ali and Others; where the observations made in (2000) 3 All England Reports 51 at page 58 were approved holding that there are no such things as rules of equitable construction of documents.
26. According to the counsel for the appellant, request for grant of permission to mortgage was considered in accordance with terms of agreement to sub lease and it cannot be stated that the appellant had to act reasonably and not according to the terms of contract. Conduct of both the parties was regulated by the Agreement to sub-lease only. The act of refusal to grant permission to mortgage to the respondent can not be invalidated on the ground of rationality, reasonableness and being arbitrary. In the circumstances refusal to grant such permission, thus cannot be treated to be a fundamental breach of the agreement to sub lease.
27. Another argument of the counsel for the appellant was that arbitrator did not consider his plea that the Government being a third party to the transaction is necessary for adjudication. According to him, it was categorically raised before the arbitrator. The counsel contended that Lesser which was not party to the arbitration could not be subjected to any resolution of dispute between the appellant and the respondent. Appellant contended that the Government of India even if perceived to have acted unreasonably, no direction could be issued to the Government of India and if final order of rejection could not be subjected to judicial review, equally refusing permission by the appellant could not be put to judicial review in absence of any agreement to which the Government of India was not a party. Appellant contended that its decision not to grant permission even if was unreasonable, was of no consequence since the Government of India which was a Lesser was not a party to the arbitration and being a superior Lesser and being not a party to the arbitration, no relief could be granted against appellant declining permission by letter dated 26th June, 1999. Appellant contended that the finding of arbitrator on this aspect is contrary to his submission and consequently Arbitrator's inferences are also not correct. It was contended that as consent from Union of India and appellant was required, both should have been subject to arbitration and in absence of Union of India, the arbitrator should not have adjudicated about these matters.
28. The appellant contended that the revised layout plan was submitted not only for the hotel site but for group housing, community center, open and green area and service plans regarding roads, sewerage and water pipe lines were subject to it. The content lion of the appellant is that the respondent was aware of pendency of revised layout plan on March 30, 1998 as Municipal Corporation of Delhi had sent a notice raising 50 objections to the building plans of respondent. Respondent despite having knowledge of the revised layout plan pending with the Municipal Corporation of Delhi had paid the amount of second installment of Rs. 65,38,29,000/- along with interest of Rs. 3,26,01,884/- and the ground rent up to December 31, 1998 amounting to Rs. 2,45,95,046/-. The appellant relied on the letter dated June 26th, 1998 of the respondent categorically stipulating that the respondent had the knowledge of pendency of revised layout plan of appellant for the entire plot at the Andrews Ganj.
29. The appellant contended that the respondent is imputing the liability on the appellant on the ground that there was misrepresentation by the appellant regarding the sanctioned plans and that the respondent was unaware of the revised layout plan having been submitted by the appellant to the Municipal Corporation of Delhi which had not been approved and unless the revised layout plan had been approved, the building plan of the respondent could not be considered for sanction by Municipal Corporation of Delhi and consequently the project of the respondent was considerably delayed. The appellant contended that the building plans were got prepared by the respondent from its architect which were based on the layout of the hotel site which was already approved. On 20th March 1998, the plans which were forwarded by appellant to the Municipal Corporation of Delhi were accepted and processed by Municipal Corporation of Delhi. The counsel for the appellant contended that respondent with full knowledge elected to continue the contract by paying second installment on 30th June, 1998 and further affirmed the contract by continuing to act under it until 31st March, 1999. According to appellant, the respondent was not entitled to rescind the contract but could on by claim damages for the alleged delay, if any, that it could prove. The appellant also contended that the revised layout plan submitted to the Municipal Corporation of Delhi proposed changes in the general pool housing section only and not in the community centre and non-sanction of the building plans with the submission of the revised layout plan has been linked arbitrarily. According to the appellant, the agreement to sub lease in the facts and circumstances will be voidable and not void. He relied on 1968 SC 956 (958) Para 4; Ningawwa Vs. Byrappa Shiddappa Hirenknrabar and Others where it was held that a contract or other transaction induced or tainted by fraud is not void but only voidable at the option of the party defrauded. The relevant observation of the Supreme Court is as under:
''4.-------It is well established that a contract or other transaction induced or tainted by fraud is not void, but only voidable at the option of the party defrauded. Until it is avoided, the transaction is valid, so that third parties without notice of the fraud may in the meantime acquire rights and interests in the matter which they may enforce against the party defrauded.'' ''The fact that the contract has been induced by fraud does not make the contract void or prevent the property from passing, but merely gives the party defrauded a right on discovering the fraud to elect whether he shall continue to treat the contract as binding or disaffirm the contract and resume the property. If it can be shown that ''the party defrauded'' has at any time after knowledge of the fraud either by express words or by unequivocal acts affirmed the contract, his election is determined for ever. The party defrauded may keep the question open as long as he does nothing to affirm the contract.''
30. Another plea of the counsel for the appellant is that appellant is not liable to pay any amount as interest on the amount paid by the respondent in terms of the Clause III of the agreement to sub-lease dated July 4th, 1997. According to him the respondent had failed to pay the third installment within the permitted time and consequently allotment stood automatically cancelled without any further reference to the respondent. Therefore, the liability of the appellant was only to return 50% of the amount paid by the respondent without interest. It has been further contended that in any case the agreed rate of 20 per cent per annum was not for the appellant to pay to respondent. The interest rate of 20% per annum was payable only by respondent to appellant on exercising his option to pay the second and third installment with interest. Appellant contended that since there was no agreed rate of interest, award of future interest at the rate of 15 per cent per annum on the monies (including interest) awaded to respondent from the date of the award to the date of recovery is contrary to the agreement.
31. The appellant relied on various other clauses in the agreement to sub-lease categorically stipulating that no interest was payable to the respondent. He categorically relied on Clause XVII which was pertaining to parties obtaining requisite clearance is and approval and in case requisite approvals by the concerned authorities not granted, in that event refund to the respondent of all payments made to the appellant, was to be without any interest and the respondent was not entitled to claim any amount owards compensation or damages of any nature whatsoever. The appellant also relied on Clause XXV of agreement to sub-lease under which it was agreed that allotment of the site was subject to the outcome of suits pending in respect of site and in the even of any decree being passed necessitating refund of the consideration paid by respondent to appellant, no interest was payable by appellant to the respondent. The appellant, therefore, submitted that the arbitrator's award granting of 20% per annum on the monies payable and award of 15% interest per annum as future interest is contrary to the terms of the agreement to sub-lease.
32. On behalf of the respondent, the Learned Senior Counsel Shri Ashok Desai contended that the present appeal against the dismissal of the objections of the appellant is not like an appeal in other cases where the findings on the question of facts or law are to be re-appreciated. What is to be seen and considered, according to him, is whether the view taken by the Learned Arbitrator was feasible and a probable view and whether any findings given by the Arbitrator are per se perverse. In this context regarding the scope of the Court to interfere with the findings of the Arbitrator, he has relied on , Sudarshan Trading Co Vs. Government of Kerala where it was observed by the Supreme Court that an award is not invalid merely because by a process of inference and argument it may be demonstrated that the arbitrator has committed some mistake in arriving at his conclusions. Shri Ashok Desai has also relied on Food Corporation of India Vs. Joginderpal Mohinderpal, (1989) 2 SCC 346 contending that what is to be seen is whether the construction given by an arbitrator is conceivable or possible. If it is assumed that there was some mistake in the construction, such a mistake is not amenable to be corrected in respect of the award by the court. Reling on H.P. State Electricity Board Vs. R.J.Shah and Co, it has been contended by the respondent that if an award is in excess of jurisdiction then it is liable to be set aside but if the award is within jurisdiction then on the basis of construction of the contract which the arbitrator was required to do, the Court cannot set it aside merely because another view was possible. According to the respondent even if the arbitrator has committed an error in coming to the conclusions and the Court feels that the conclusions should have been otherwise, it is not open to the Court to interfere with the award on that score and for this reliance has been placed on Indu Engineering and Textile Ltd. Vs. Delhi Development Authority; .
33. Shri Ashok Desai further contended that the learned Arbitrator has passed as award directing for refund of the amount actually paid by the respondent to the appellant along with interest which has been unjustifiably retained by the appellant after payments to the appellant were made by the respondent. He contended that the Learned Arbitrator after referring to the various clauses of the Arbitration Agreement held that non-grant of permission to mortgage was a breach of the fundamental term of the contract and that the appellant did not act in a reasonable manner in refusing such grant of approval. According to him arbitrator has interpreted clauses of Agreement in a particular manner and has taken a decision which is a possible view and it is not permissible for the Court to substitute its own evaluation of the conclusion of law or fact. The findings recorded by the arbitrator are findings based on appreciation of evidence and the Court is not empowered to re-appreciate the said evidence and findings to come to contrary findings. Such findings based on appreciation of evidence are not amenable to interference by the Court. The Court has no jurisdiction and cannot sit in appeal over the conclusions of the arbitrator and re-examine or re-appreciate the evidence which had been considered by the arbitrator.
34. It has been further contended that in construing the clause, the principle of ''reading down'' must be applied. Applying the said principle, the rigor of the term has to be watered down especially as the appellant cannot be allowed to take advantage of its own wrong. He relied on ; B.V. Nagaraju Vs. Oriental Insurance Company Limited, Divisional Officer, Hassan.
35. It has been contended on behalf of the respondent that the appellant cannot be allowed to take advantage of his own wrong in not consenting to grant permission to mortgage or create charge in order to raise finances by the respondent. The respondent has relied on ; Ghaziabad Development Authority Vs. Union of India and Anr. where it was held that the Development Authority despite having a provision that it will not be liable to pay any interest in the event of an occasion arising for return of the amount will be applicable only in such cases in which claimant itself was responsible for creating circumstances providing occasion for the refund.
36. Shri Ashok Desai contended that the law laid down by the Supreme Court of India contemplates consideration of surrounding circumstances and he relied on Modi and Co Vs. Union of India, where the Supreme Court observed in paragraph 8 which is as follows:-
''-The question therefore resolves in the ultimate analysis upon the construction of the terms of the contract between the parties. In this connection it is well established that in construing such a contract it is legitimate to take into account the surrounding circumstances for ascertaining the intention of the parties.''
37. Repelling the contention of the appellant that in the realm of contracts there is no equity, learned Counsel for the respondent contended that the distinction between the private and public law as applicable in England has virtually gone in India. Relaying on the observations in Kumari Srilekha Vidyarthi Vs State of U.P, which was a case of termination of contract where it was held that the power of judicial review would be available and the unreasonableness of a term could be considered especially in contracts where the bargaining power is unequal and the contracts are standard form contracts between the un-equals. The facts of the case were that, by one stroke, the Government of State of U.P terminated by a general order, appointment of all government counsel in all districts of the State of U.P. In deciding whether such state action was valid, Supreme Court in paragraph 20 (page 235) made the following observations:-
'' Applicability of Article 14 to all executive actions of the state being settled and for the same reason its applicability at the threshold to the making of a contract in exercise of the executive power being beyond dispute, can it be said that the state can thereafter cast off its personality and exercise unbridled power unfettered by the requirements of article 14 in the sphere of contractual matters and claim to be governed therein only by private law principles applicable to private individuals whose rights flow only from the terms of the contract without anything more? We have no hesitation in saying that the personality of the state, requiring regulation of its conduct in all spheres by requirements of article 14, does not undergo such a radical change after the making of a contract merely because some contractual rights accrue to the other party in addition. It is not as if the requirements of article 14 and contractual obligations are alien concepts, which cannot co-exist.''
38. Counsel for the respondent also placed reliance on Jamshed Hormusji Wadia v. Board of Trustees, Port of Mumbai, . It was held by the Supreme Court that the position of law is that the States and authorities including instrumentalities of States have to be just, fair and reasonable in all their activities including those in the field of contracts. It was observed by the Supreme Court as follows:-
''14. The Bombay Port Trust is an instrumentality of State and hence an ''authority' within the meaning of Article 12 of the Constitution. (See Dwarkadas Marfatia and Sons v. Board of Trustees of the Port of Bombay.) It is amenable to writ jurisdiction of the court. This position of law has not been disputed by either party. The consequence which follows is that in all its actions, it must be governed by Article 14 of the Constitution. It cannot afford to act with arbitrariness or capriciousness. It must act within the four corners of the statute which has created it and governs it. All its actions must be for the public good, achieving the objects for which it exists, and accompanied by reason and not whim or caprice.
16. The position of law is settled that the State and its authorities including instrumentalities of States have to be just, fair and reasonable in all their activities including those in the field of contracts. Even while playing the role of a landlord or a tenant, the State and its authorities remain so and cannot be heard or seen causing displeasure or discomfort to Article 14 of the Constitution of India.''
39. According to Mr. Desai, since the contractual relationship was between the appellant and the respondent and since the permission was delayed and thereafter refused unreasonably by the appellant, not granting permission by the Government of India is irrelevant. Obviously, according to him, the Government of India is not covered by the arbitration clause and what the Government of India did or did not do will not be relevant as the permission has been denied by the appellant on the ground that proceedings in an earlier suit were pending. He submitted that on construction of clause xviii (b) and the use of word ''its'' as opposed ''their'', the consent was to be given by a single person, i.e., by HUDCO and not by both as argued by the appellant. He further emphasized that in clause xviii, the words are Lesser/corporation whereas in clause X words ''the Lesser and/or the corporation'' are used. Similarly, in clause XIII words ''the corporation and/or the Lesser'' are used. Again in clause XVI (a) words '' Lesser and/or the corporation'' are used. According to respondent, when two different clauses have been used in the same document, it will be natural that they convey two different meanings. According to respondent, it goes without saying that wherever '' Lesser and/or corporation'' is used, two separate decision making bodies are contemplated in contrast to ''Lesser/corporation'' which will imply decision of a single person. The respondent also relied on solidus or stroke which has been defined as :-
''an oblique stroke used in writing fractions, to separate other figures and letters, or to denote alternatively (and/or).''
40. Relying on the decision of Supreme Court in Godhra Electricity Co. Limited Vs. State of Gujarat; , it was contended that it was permissible to look at acts done shortly after the contract. The relevant para of the said judgment reads as under :-
''In the case of an ambiguous instrument, there is no reason why subsequent interpreting statement should be inadmissible.
The question involved is this: Is the fact that the parties to a document, and particularly to a contract, have interpreted its terms in a particular way and have been in the habit of acting on the document in accordance with that interpretation, any admissible guide to the construction of the document? In the case of an unambiguous document, the answer is'' No''(see Odgers' Construction of Deeds and Statutes, fifth ed. by G. Dworkin, P.P.118-119).
But, as we said, in the case of an ambiguous one, the answer must be 'yes'.''
41. Regarding the subsequent conduct of the parties, the learned counsel relied on the correspondence between the partied specially the letter dated 16th October, 1997 for permission to mortgage with reminders on 23rd June, 1998, 11th March, 1996, 21st May, 1998, 10th March, 1999 and 31st March, 1999. It was contended that none of these letters were replied by the appellant except the last letter dated 31st March 1999 which was acknowledged by letter dated 5th May, 1999. In juxtaposition various letter written to Hon'ble Minister and the Secretary, Ministry of Urban Development on 4th May, 1998, 17th June, 1998 and 30th June, 1998 only requested their intervention to expedite the matter. Referring to various letters written by respondent to the appellant, he emphasized that what was perceived was the permission to mortgage by HUDCO and not by the Government in referring to letters written to the Government. According to him, the request was for intervention in the matter by the Government so that the ermission could be granted by HUDCO.
42. According to respondent, in the circumstances, it is apparent that it was the understanding of the parties that the appellant was to grant the consent which is also clear from the letter dated 21st March, 1998 from respondent to appellant. The counsel for the respondent further contended that the language of the letter dated 26th June 1999 also makes it apparent that since the appellant knew that the matter was going for arbitration yet the appellant refused the consent on the ground that the litigation for the same site was pending and not on the ground that Central Government has not granted the permission. According to him, the inevitable inference in the circumstances is that a single decision by the appellant was contemplated and was given by he appellant for unreasonable reasons reflecting appellant's arbitrariness.
43. Dealing with the argument of appellant regarding sanctioned layout plans, Mr. Desai contended that the misrepresentation about the sanctioned layout plan could not be waived. He has contended that in the clarification meeting held on December 12th, 1996, it was represented that there was a sanctioned layout plan. The respondent had given an offer on the basis of the representations made that there was a sanctioned layout plan. The revised layout plan was submitted by appellant on February 17, 1997.
According to him, the plans submitted by the respondent were not approved in absence of sanction of revised layout plans. The revised layout plans were approved only on August 30, 1999, and in the circumstances the construction of the hotel within three years from the date of handing over possession could not be completed which was a condition precedent for performance of the contract within the time schedule. It was contended that though there was approved layout and service plan sanctioned in 1994-9, on 17th February 1997, an application was submitted to the Municipal Corporation of Delhi by the appellant proposing a revised layout plan. According to respondent this aspect was suppressed when the letter of allotment and agreement to sub-lease were entered with him which tantamount to the material misrepresentation. According to the learned counsel for the respondent, consequence of misrepresentation can be culled from Section 19 of the Contract Act. He refuted the plea of the appellant that a contact caused by misrepresentation is voidable at the option of the party whose consent was so caused. It was contended that under Section 19, two options are available with the aggrieved party. Firstly, it permits a party to avoid contract on discovering that there had been misrepresentation, however, if the aggrieved party elects to affirm the contract, it follows that he cannot thereafter seek to avoid it and in case where the contract is not avoided and continues, the aggrieved party can insist not only that the contract be performed but that he shall be put in position in which it would have been if the representations made had been true. Counsel contended that the service plans regarding storage of water, drainage, sewerage and water supply were part and parcel of the layout plans and in absence of sanctioned layout and service plans for HUDCO place, the building plans for the hotel site could not be sanctioned. It is thus clear according to him that the appellant was in breach of implied obligation that it would procure the relevant sanction in order to enable respondent to proceed with the project diligently and not doing so amounted to breach on the part of the appellant and the appellant was in breach of Section 19 of the Contract Act and express and implied terms of agreement to sub-lease by failing to procure an unconditional sanctioned layout plan which was a condition precedent to the sanction of the building plans of the hotel site.
44. Further contention of the respondent is that the Section 31(7)(b) of the Act entitled the arbitrator to award interest at the rate of 18 per cent per annum and in the circumstances award of future interest by the learned Arbitrator at the rate of 15 per cent from the date of the award to the date of recovery cannot be in excess of jurisdiction conferred on the arbitrator. He has placed reliance on (1994) Supp 1 SCC 510; Union of India and ors Vs M/S Jamshedpur Engineering and Machines Manufacturing Co. Ltd where it was held that the objection that the Arbitrator should not have awarded interest at the rate of 15% on the amount pertain to the merit of the case and do not reflect on the conduct of the Arbitrator and is not entertainable as objection to the award. According to him appellant's contention relying on clause XVII of the agreement to sub-lease is also unfounded as the said clause provides that if required approvals are not granted by the concerned authority or authorities for genuine reasons then in that event the appellant shall return to the intended sub-lessee all payments made to the appellant without any interest and the intended sub-lessee shall not be entitled to claim any amount towards compensation or damages of any nature whatsoever.
45. It was contended on behalf of the respondent that in the case of Saw Pipes Ltd. (Supra) the Supreme Court has not differed from propositions laid down in earlier cases. The learned Counsel for the respondent contended that considering The Arbitration and Conciliation Act, 1996 and its main objectives it is apparent that objective is to minimize the supervisory role of Courts in Arbitration. According to him the Supreme Court in its various judgments have laid down various tests which have not been a andoned and the propositions laid down in Saw Pipes Ltd (Supra) are not departure from the earlier judgments.
46. In support of his contention, the learned counsel for the respondent cited Konkan Railway Corpn. Ltd and others Vs. M/s Mehul Construction Co; . The Supreme Court held that under the new law, the grounds on which an award of an arbitrator could be challenged before the Court have been severely cut down and such challenge is now permitted on the basis of invalidity of the agreement, want of jurisdiction on the part of the arbitrator or want of proper notice to a party of the appointment of the arbitrator or of arbitral proceedings. It was laid down authoritatively by the Supreme Court in the said decision that the Statement of Objects and Reasons of Act clearly enunciates that the main objective of the legislation was to minimize the suprevisory role of Courts in the arbitral process. In Olympus Superstrctures Pvt. Ltd. Vs. Meena Vijay Khetan; , it was held by the Supreme Court that Section 34 of the Act is based on article 34 of the UNCITRAL Model Law and it will be noticed that under the 1996 Act the scope of the provisions for setting aside the award is far less (than) the same under Section 30 or Section 33 of the Arbitration Act of 1940. He also cited a judgment of the Delhi High Court in G.M. Security Paper Mills Vs. Aristrocraft International Pvt. Ltd. (O.M.P. 218/2002).
47. We have given our careful consideration to the arguments advanced by learned counsel for both the parties. Perusal of the provisions of The Arbitration and Conciliation Act, 1996 reveals that it was enacted in the year 1996 basing on the UNCITRAL Model Law and Rules. The Act of 1996 repealed the old Act, 1940. One of the main objectives of making this legislation was to minimize the supervisory role of courts in arbitration. The working of the Act, 1996 shows that vast powers have been given to the parties and arbitrators without much intervention by the court. The arbitrators are chosen by the parties and the decision made by the arbitrators is binding on the parties. The Statement of Objects and Reasons contained in the Arbitration and Conciliation Bill, 1995 emphasized the objective of minimization of the interference of the courts in arbitration process besides for making comprehensive procedure for arbitral process; to provide that the arbitral tribunal gives reasons for its award; to ensure that the arbitral tribunal remains within its limits of jurisdiction; to permit the arbitral tribunal to use the other methods of alternative dispute resolution mechanisms, such as mediation and conciliation during the course of arbitral proceedings for settlement of disputes and to make the provision that the arbitral award is to be enforced as a court decree and to give similar status to the settlement arrived at, during the course of arbitral proceedings. Under the Act of 1996 from the commencement of arbitration proceedings till the award the interference by the Court is limited which can be discerned from some of the sections. Judicial intervention is restricted under Section 5 which says that ''notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part''. The act of 1996 provides for intervention under Section 8 for making reference in a pending suit which encourages the parties to go for arbitration. Under Section 9 and Section 34 minimum intervention of the court is apparent. However, under Section 34(2) the intervention is restricted to certain circumstances.
48. The explanation to sub section 34(2)(b) provides for avoidance of any doubt that an award will be in conflict with the public policy of India, if making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or section 81. Section 75 deals with confidentiality regarding the conciliation proceedings whereas Section 81 deals with admissibility of evidence of other proceedings. It is also apparent from the Act,1996 that if the application for setting aside the award is not made as prescribed under Section 34(3) of the Act,1996, the award can be enforced under the provisions of Code of Civil Procedure as if it were a decree and making the award rule of the Court has been done away with. Inevitable inference in he circumstances is that the scope of interference by the Court under the act of 1996 is narrower than under the Act of 1940.
49. It is no more res integra, from the decisions rendered under the Arbitration Act, 1940 as well as under Act of 1996 by the Supreme Court which unequivocally laid down that if an arbitrator has interpreted a clause in an agreement in a particular manner and has taken a decision which is a possible view, it is not permissible for the Court to substitute its own evaluation or the conclusion of law or fact. When the parties have chosen a forum to refer their disputes to be adjudicated not under a common aw forum or under a statute by filing a suit, Court while exercising appellate power will not substitute its opinion with that of the arbitrator. If the clauses in the contract are open to two plausible interpretations, it is legitimate for the arbitrator to accept one or the other available interpretation and even if the Court may think that the other view is preferable, the Court will not or should not interfere with interpretation of the Arbitrator. Reliance can be placed on Food Corporation of India Vs Joginderpal Mohinderpal and Another; , Puri Construction Pvt. Ltd Vs Union of India; , Gujarat Water Supply and Sewerage Board Vs Unique Erectors (Gujrat) P. Ltd and Another; and Hind Builders Vs Union of India; in this regard that this court while exercising appellate power should not substitute its opinion with that of the arbitrator.
50. Relying on various judgments cited by the parties it is apparent that an award is not invalid merely because by a process of inference and arguments it may be demonstrated that the arbitrator has committed some mistake in arriving at his conclusions.
By purporting to construe the contract the Court can not and should not take upon itself the burden of saying that the view taken was contrary to the contract and, as such, beyond jurisdiction. What is to be seen is whether construction placed by the Arbitrator is ex-facie contrary to facts, terms of contract and law and the arbitrator has proceeded illegally and is liable to be corrected by the Court? What is to be seen is whether the view taken by the Learned Arbitrator is feasible and whether any findings given by the Arbitrator are per se perverse? If on a view taken of a contract, the decision of the arbitrator on some matters is a possible view though perhaps not the only correct view, the award cannot be examined by the court. In Sudershan Tradin Company (Supra) it was observed by the Supreme Court:
''31. ''An award may be remitted or set aside on the ground that the arbitrator in making it had exceeded his jurisdiction and evidence of matters not appearing on the face of it will be admitted in order to establish whether the jurisdiction had been exceeded or not, because the nature of the dispute is something which has to be determined outside the award - whatever might be said about it in the award or by the arbitrator. See in this connection, the observations of Russell on The Law of Arbitration, 2 th Edn., 427. Also see the observations of Christopher Brown Ld. v. Genossenschaft Oesterreichischer and Dalmia Dairy Industries Ltd. v. National Bank of Pakisthan (1978) 2 Loyd's Rep. 223. It has to be reiterated that an arbitrator acting beyond his jurisdiction is a different ground from the error apparent on the face of the award. In Halsbury's Laws of England II, (4th Edn., Vol. 2, para 622) one of the misconducts enumerated, is the decision by the arbitrator on a matter which is not included in the agreement or reference. But in such a case one has to determine the distinction between an error within the jurisdiction and an error in excess of the jurisdiction. See the observations in Anisminic Ltd. v. Foreign Compensation Commission (1969) 2 AC 147 and Regina v. Noseda, Field, Knight and Fitzpatrick (1958) 1 WLR 793. But, in the instant case the court had examined the different claims not to find out whether these claims were within the disputes referable to the arbitrator, but to find out whether is arriving at the decision, the arbitrator had acted correctly or incorrectly. This, in our opinion, the court had no jurisdiction to do, namely, substitution of its own evaluation of the conclusion of law or fact to come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. Whether a particular amount was liable to be paid or damages liable to be sustained, was a decision within the competency of the arbitrator in this case. By purporting to construe the contract the court could not take upon itself the burden of saying that this was contrary to the contract and, as such, beyond jurisdiction. It has to be determined that there is a distinction between disputes as to the jurisdiction of the arbitrator and the dispute as to in what way that jurisdiction should be exercised. There may be a conflict as to the power of the arbitrator to grant a particular remedy. See Commercial Arbitration by Sir N.J. Mustill and Stewart C. Boyd, p 84.''
35.''In the instant case, the High Court seems to have fallen into an error of deciding the question on interpretation of the contract. In the aforesaid view of the matter, we are of the opinion that the High Court was in error. It may be stated that if on a view taken of a contract, the decision of the arbitrator on certain amounts awarded, is a possible view though perhaps not the only correct view, the award cannot be examined by the court in the manner done by the High Court in the instant case.''
36. ''In light of the above, the High Court, in our opinion, had no jurisdiction to examine the different items awarded clause by clause by the arbitrator and to hold that under the contract these were not sustainable in the facts found by the arbitrator.''
51. In yet another matter Food Corporation of India Vs Joginderpal Mohinderpal, it was held by the Supreme Court:
''9. Dr L.M. Singhvi, learned counsel for the appellant, urged before us that the arbitrator was wrong in not awarding 50 per cent of the added penalty as claimed by the appellant, as mentioned hereinabove. The appellant had claimed the price of Rs. 165 per qtl. The arbitrator was of the view that the expression 'Economic Rate' had not been defined. It is true that the expression 'Economic Rate' has not been used, but the expression 'Economic Cost' has been used. The arbitrator has noted that the market rate did not exceed that amount at that time. The amount of Rs. 100 per qtl. is mentioned of (sic) such a rate as the arbitrator had noted, could only be pre-estimated damages but this was not so according to the arbitrator. The arbitrator had construed the effect of clause g(i) of the contract as mentioned hereinbefore. It cannot be said that such a construction is a construction which is not conceivable or possible. If that is the position assuming even for the sake of argument that there was some mistak in the construction, such a mistake is not amenable to be corrected in respect of the award by the court. This was a fair order after considering all the records. The conclusion arrived at by the arbitrator is a plausible conclusion. The court has, in our opinion, no jurisdiction to interfere or modify the award in the manner sought for by the appellant and in the manner done by the learned Subordinate Judge in the first instance in this case. In that view of the matter, the learned Additional District budge was justified in correcting the order of the learned Subordinate Judge and the High Court was also justified in not interfering with the order of the Additional District Judge. The award on the aspects canvassed before us by Dr L.M. Singhvi is a plasible construction of clause g(i) of the contract. It cannot, in our opinion, be interfered with either on the ground that there was error apparent on the face of the award or on the ground that the arbitrator has misconducted himself in not giving the effect to the penal rate as contemplated under clause g(i) of the contract referred to hereinbefore in the award. Dr Singhvi sought to urge that as per the terms of the contract the arbitrator was obliged to award penal rate in terms of clause g(i) of the contract. The arbitrator has apparently not done so. He has given reason why he has not done so. It was submitted that he was wrong in not doing so. We do not agree. The arbitrator has discussed the effect of clause g(i). He has noted that unless there way evidence about which incidentally there was none, this amount could not be treated as a pre-estimate of damage. If that be so then it was penalty. It was not recoverable. Reasons may not be apparent, latent was there. Dr Singhvi's objection therefore cannot be accepted.''
52. Similarly in H.P. State Electricity Board Vs R.J.Shah and Co, it was held that if an award is in excess of jurisdiction then it is liable to be set aside but if the award is within jurisdiction, on the basis of construction of the contract which the arbitrator was required to do, then the Court cannot set it aside merely because another view was possible. In the facts of said case it was held that the award was not in excess of jurisdiction. The Supreme Court held:
''24. A two-Judge Bench of this Court in K.R. Raveendranathan v. State of Kerala observed that on the question that whether the arbitrator had exceeded its jurisdiction, there appeared to be a conflict between the decision of Sudarsan Trading Co. case and Associated Engg. Co. case. By this order the case was referred to a larger Bench. On reference a Division Bench of three Judges in K.R. Raveendranathan case held as follows: (SCC p. 410, para 2) ''2. The learned counsel for the appellant points out that the question in issue in the present appeals is squarely covered by the decision of this Court in Hindustan Construction Co. Ltd. v. State of JandK. In particular, it drew our attention to para 10 of the judgment and the portion extracted from the decision in Sudarsan Trading Co. case wherein it was said that by purporting to construe the contract the Court could not take upon itself the burden of saying that this was contrary to the contract and, such, beyond jurisdiction. That is exactly what the Court has done in the instant case. Therefore, the issue stands covered by this decision and the learned counsel for the respondents could not in the face of this decision argue otherwise.''
25. ''From the aforesaid decisions of this Court, and the last one in particular, it is clear that when the arbitrator is required to construe a contract then merely because another view may be possible the court would not be justified in construing the contract in a different manner and then to set aside the award by observing that the arbitrator has exceeded the jurisdiction in making the award.''
53. The observations of the Supreme Court in Indu Engineering and Textile Ltd. Vs Delhi Development Authority; are also relevant where it was held that even assuming that the arbitrator had committed an error in coming to the conclusions that the appellant, in that case, was entitled to the claim of the escalated price of the commodity under the terms of the agreement and the Division Bench felt that the conclusions should have been otherwise, it was not open to the Court to interfere with the award on that score. Similarly in Smita Conductors Ltd. v. Euro Alloys Ltd., (2001) 7 SCC 728, at page 740 it was observed by the Supreme Court that if a view taken by the Arbitrator is plausible and not impossible, it will not be appropriate to substitute the view of the arbitrator. The Supreme Court observed as under: -
''15. The view taken by the arbitrators on the effect of the force majeure clause in the light of Reserve Bank of India's directives is a plausible view and cannot be ruled out as impossible of acceptance, and, therefore, the question of substituting our view for that of the arbitrators would not arise. Question of public policy would have arisen if there was complete restriction on the implementation of the terms of the contract. There was no such restriction imposed. But, on the other hand, certain restrictions were imposed which could have been worked out by resorting to appropriate measures in terms of the contract as held by the arbitrators. In that view of the matter, we do not think any question of public policy as such arises for consideration on a situation of this sort. The argument is almost a red herring and does not constitute a valid reason for interference with the award. Therefore, we reject the contentions raised on behalf of the appellant.''
54. The proposition that when the arbitrator is required to construe a contract then merely because another view may be possible, the court would not be justified in construing the contract in a different manner and then set aside the award by observing that arbitrator has exceeded the jurisdiction in making the award, therefore in our view, is not negated by the judgments relied on by the appellant.
55. In Thawardas Pherumal and Anr. Vs. UOI (supra) the admitted position was that CPWD had not removed the burnt bricks, with the result the kuccha bricks were destroyed during rains as there was lack of space. The Supreme Court while interpreting the relevant clause of the agreement, despite default of the CPWD, came to the conclusion that the CPWD could not be held liable for damages in view of the stipulation that CPWD would not be held responsible if it did not lift the bricks `due to any cause whatsoever'. The Court held that the phrase was vide enough to cover the default of the CPWD. It was observed:
'' We are clear that the arbitrators went wrong in law. Government departments have their difficulties, no less than contractors. There is trouble with labour, there is the likelihood of machinery breaking down in out of the way places and so forth; there was also the danger of thunderstorms and heavy showers of rain in the month of May; it will be remembered that the last date of delivery was 25.5.46.
If, with that in view, government expressly stipulated, and the contractor expressly agreed, that government was not to be liable for any loss occasioned by a consequence as remote as this, then that is an express term of the contract and the contractor must be tied down to it. If he chose to contract in absolute terms that was his affair.
But having contracted he cannot go back on his agreement simply because it does not suit him to abide by it. This is not to say that government is absolved from all liability, but all it can be held responsible for is for damages occasioned by the breach of its contract to remove the puce bricks which it had undertaken to remove. But what would such a breach entail?''
56. However, there is no force in the arguments of the appellant that in view of Clause III and the words occurring 'for any reason whatsoever', even if the appellant was in breach, appellant was not required to fulfilll the main object of construction of hotel and in spite of the fact that though appellant had not granted permission to mortgage, in view of the 'whatsoever reason' occurring in the clause, no liability can be fastened on the appellant. In our considered opinion that cannot be the intention of the parties entering into a contract of this nature as has been rightly held by the arbitrator.
57. The learned Arbitrator considered the judgment relied on by the Appellant in support of his contention `due to any reason whatsoever' in clause III of the agreement to sub lease and he has observed in the award:-
''. . Good reason suggests that the context in which the expression `due to any reason whatsoever' in clause III of the Agreement to sub lease has been used negatives its application to a case where a party who has committed a breach of that agreement sees to benefit from the breach and put the innocent party to disadvantage. On the same principle, the words `automatically cancelled' in clause III of the Agreement to sub lease should be taken to refer to a case where the failure to pay is attributable to the volition of the party obliged under the contract to pay and not where non payment is prompted by the breach of other party.''
58. Reliance placed by the appellant on Saw Pipes Limited (Supra) does not help the case of the appellant as in the said case the award was vitiated on the ground that there was delay on the part of Saw Pipes Limited in supplying the goods/pipes and for the delay Oil and Natural Gas Corporation was entitled to recover agreed liquidated damages. In that case, the award passed by the arbitrator was on the face of it was illegal and erroneous as it arrived at the conclusion that the Oil and Natural Gas Corporation was required to prove the loss suffered by it before recovering the admitted liquidated damages. In that case arbitral tribunal misinterpreted the law on the subject and award was passed by the arbitrator granting interest on the liquidated damages and same was against the specific terms of the contract, namely, Clause 34.4 of the agreement which provided that on disputed claim no interest would be payable. The Supreme Court had laid down the parameters on which the award can be interfered. No such position exist in the case before us.
59. Ratio of the case of Assistant Excise Commissioner and Others (Supra) relied on by the appellant is clearly distinguishable. In the said case, the Supreme Court laid down that the while interpreting a contract, the terms are not to be altered or added. However, in the facts and circumstances of the present case, it cannot be said that there was an attempt on the part of arbitrator to add or alter the contract. Considering the entire contract and using the commercial interpretation and concept of reading down, the terms of the contract has been rightly interpreted. What has been inferred by the Learned Arbitrator is that the `discretion' which was with the appellant ought to have been exercised by him in a reasonable, fair and non-arbitrary manner. The Appellant contentions that even for his own default, if any, he is not liable, has not been accepted by Learned Arbitrator. The State and its instrumentalities while exercising their discretion should act with reasonableness and without arbitrariness and they cannot contend that they have an absolute discretion to exercise the discretion under a contract even unreasonably and arbitrarily.
60. In B. V. Nagaraju Vs. Oriental Insurance Company Ltd. (supra), the insurance company was denying its liability as the term of the insurance stipulated 'vehicle not having employees exceeding six in number', however, vehicle involved in accident had nine persons. It was held that on account of nine persons traveling in the vehicle, though it could be stated that there was misuse of the vehicle but it was not so fundamental misuse in nature so as to put an end to the contract. The Hon'ble Supreme Court, relying on `Skandia Case', paved the way towards reading down the contractual clause. It was observed :-
''when the option is between opting for a view which will relieve the distress and misery of the victims of accidents or their dependants on the one hand and the equally plausible view which will reduce the profitability of the insurer in regard to the occupational hazard undertaken by him by way of business activity, there is hardly any choice. The Court cannot but opt for the former view. Even if one were to make a strictly doctrinaire approach, the very same conclusion would emerge in obeisance to the doctrine of 'reading down' the exclusion clause in the light of the 'main purpose' of the provision so that the 'exclusion clause' does not cross swords with the 'main purpose' highlighted earlier. The effort must be to harmonize the two instead of allowing the exclusion clause to snipe successfully at the main purpose.''
61. Clause III contemplates that the time for payment of installments shall be essence of the contract and whether said term could mean that irrespective of whether the intending sub lessee start the construction or has not been able to start the construction for any reason whatsoever he had to make the payment of third installment. The Learned Arbitrator relying on the legal principles enunciated by the Supreme Court has held that the expression ` due to reason whatsoever' will not cover defaults committed by the appellant.
62. In coming to such conclusion the Learned Arbitrator has not proceeded illegally nor his findings are based on erroneous legal perception or application of law. He has relied on B.V Nagaraju (Supra) and Amalgamated Building Contractors Ltd Vs Waltham Holy Cross Urban District Council (1952) 2 ALL E R 452. He relied on Fernbrook Trading Co. Ltd Vs Taggart (1979) 1 NZLR S.S 556 where it was held:-
''.. it can be fairly said that the respondent acted in a manner in breach of its contract that actually prevented or made it impossible for the appellant to perform its obligation at the proper time. To hold that despite this absolute prevention, the appellant under the circumstances could not have so performed, would, I suggest with respect, have the effect of permitting the respondent to take full advantage of its own wrong.''
63. We also uphold the view of the Arbitrator that HUDCO cannot take advantage of its own wrong. In any case in an appeal against the finding of the Arbitrator when arbitrator has interpreted clauses of Agreement in a particular manner and has taken a decision which is a possible view, it will not be proper for the Court to substitute its own evaluation on the conclusion of law or fact. The findings arrived at by the arbitrator are findings based on appreciation of evidence and the inferences are based on due application of law and can not be termed to be erroneous legal propositions or based on erroneous application of law. The interpretation of `due to any reason whatsoever' by the Arbitrator can not be termed as impossible or implausible or contrary to the law laid down by the Supreme Court. Reliance on the proposition laid down by the Supreme Court in B.V. Nagaraju (Supra) and Ghaziabad Development Authority (supra) by the Arbitrator can not be termed perverse or using devices to circumvent the poposition laid down by the highest court.
64. Perusal of the award unequivocally reflect that the learned arbitrator has taken into consideration all these aspects and have reached a plausible conclusion. Some relevant observations and inferences of the Learned Arbitrator are as under :-
21.2 Clause III and XXII of the Agreement to Sub-Lease cannot be invoked by HUDCO in relation to the time for payment of the third Installment of the premium inasmuch as the breaches committed by HUDCO released Leela Hotels from complying with the condition as to time and consequently also deprived HUDCO of the right of forfeiture provided by those clauses. It is true that Clause III declares that the time for payment of the premium shall be the essence of the contract and irrespective of whether the In ended Sub-Lessee has been able to start the construction or has not been able to do so for any reason whatsoever. It seems to me that if HUDCO has committed breaches which released Leela Hotels from its obligations under the Agreement to Sub-Lease in relation to the element of time for payment, that period is set at large and the provision declaring that the time for payment of the premium shall be the essence of the contract doe not apply. Nor can the expression ''due to reason whatsoever'' cover defaults committed by HUDCO.
21.3 It is well settled that when construing a contract a party thereto cannot be permitted to take advantage of its own wrong as against the other party. If necessary, the provisions in the contract should be read down in order to serve that principle.
See: B.V. Nagaraju V. Oriental Insurance Company Ltd. and Amalgamated Building Contractors Ltd. v. Waltham Holy Cross Urban District Council (1952) 2 All E.R. 452. In Fernbrook Trading Co. Ltd. v. Taggari (1979) NZLR S.C. 556, it was observed:
''it can be fairly said that the respondent acted in a manner in breach of its contract that actually prevented or made it impossible for the appellant to perform its obligation at the proper time. To hold that despite this absolute prevention, the appellant under the circumstances could not have so performed, would, I suggest with respect, have the effect of permitting the respondent to take full advantage of its own wrong.'' In Ghaziabad Development Authority v. Union of India and Anr. , the Supreme Court pointed out:
'' The provision contained in the brochure issued by the Development Authority that it shall not be liable to pay any interest in the event of an occasion arising for return of the amount should be held applicable only to such cases in which the Claimant is itself responsible for creating circumstances providing occasion for the refund. In the cases under appeal, the fault has been found with the Authority. The Authority doe not, therefore, have any justification for resisting refund of the Claimant's amount with interest.'' 21.7 My attention was also drawn by HUDCO to Thawardas Pherumal and Anr. v. Union of India . The Naihati Jute Mills Ltd v. Khyaliram Jagannath, , and Akerib v. Booth and Ors. (1960) 1 All E.R. 481, in support of the contention that the expression ''due to any reason whatsoever'' in Clause III of the Agreement to Sub-lease extends to situations where Leela Hotels could not start construction due to HUDCO's default. The essential question in Thawardas Pherumal (supra) was whether the contractor could claim compensation for damage suffered by unburnt bricks on account of the rains. The claim also related to damage suffered by burnt bricks. The court held that the contractor was not entitled to compensation in respect of the unburnt bricks as the damage was remote and not direct. In the Naihati Jute Mills Ltd. (supra) nothing said therein, in my opinion, bears on the meaning of the expression ''due to any reason whatsoever''. Some observations in Akerib (supra)do support the contention advanced by HUDCO but I find it difficult to accept the view taken therein. Good reason suggests that the context in which the expression ''due to any reason whatsoever'' in Clause III of the Agreement to Sub-Lease has been used negatives its applecation to a case where a party who has committed a beach of that agreement seeks to benefit from the breach and put the innocent party to disadvantage. On the same principle, the words ''automatically cancelled'' in Clause III of the Agreement to Sub-Leas should be taken to refer to a case where the failure to pay is attributable to the volition of the party obliged under the contract to pay and not where non-payment is prompted by the breach of the other party.
21.8 It is clear that Leela Hotels accepted the repudiation of the Agreement to Sub-Lease by HUDCO, and by accepting the repudiation it was no longer bound by the obligation to pay the third Installment of the premium. Its conduct in not paying the installment evidences its intention to bring the Agreement to an end. Consequently, the Agreement must be regarded as terminated by Leela Hotels. That opened the door for a claim by Leela Hotels to damages.''
65. We are in agreement with the view of the Arbitrator in this regard. The findings arrived at by the arbitrator are findings based on appreciation of evidence and the inferences are based on due application of law. The interpretation of `due to any reason whatsoever' considering the entire contract can not be termed as impossible or implausible or contrary to the law laid down by the Supreme Court.
66. Now let us deal with the next submission regarding non-grant of permission to mortgage was fundamental breach of the term or not. In order to appreciate this dispute, lets consider term III (6) of the Agreement to Sub- Lease deed dated 4th July,1997 which is as under:-
''The Sub-lessees may with the previous consent in writing of the Lesser, sell, transfer, mortgage or charge their respective interest in sites/built spaces as may be approved by the Lesser in his absolute discretion. PROVIDED that in the event of the consent being given, the Lesser may impose such terms and conditions as he thinks fit and the Lesser shall be entitled to claim and recover a portion of the unearned increase in the value (i.e., the difference between the premium paid and the market value) of the said plot of land at the time of sale, transfer, assignment, or parting with the possession of such interest in the site/built space, the amount to be recovered being fifty percent of the unearned increase and the decision of the Lesser in respect of the market value shall be final and binding. PROVIDED FURTHER that the Lesser shall have the pre-emptive right to purchase the interest in the property or any part thereof that may be subject of sale, transfer, assignment or otherwise parting with the possession, as the case may be, after deducting fifty percent of the unearned increase as aforesaid.''
67. The term in the letter of allotment had also stipulated prior permission for mortgage for raising loan only for construction of the building and for equipment. The term in para IV (xiii) of the letter of allotment reference HUDCO/AG/Hotel/97 dated March 31st, 1997 which was executed in favor of the respondent is as under:
''You shall not have any right to sell, transfer, assign or otherwise part with the possession without the prior permission of the Lesser/HUDCO. You may at the discretion of HUDCO, be permitted to raise loan only for construction of the building and equipment, to mortgage the premises subject to such terms and conditions including recovery of 50% unearned increase in the value of this land as will be laid down in the lease documents and subject to the first charge of HUDCO for the unpaid cost of land for the Hotel Site as well as other dues payable hereunder.''
68. The agreement to sub lease dated 4th July,1997 categorically incorporated that the letter of allotment dated March 31st, 1997 shall be deemed to be part and parcel of the agreement to sub lease.
69. The Learned arbitrator as well as learned single Judge took into consideration that respondent was liable to complete the construction of the hotel within three years from the date of handing over possession on license basis on the terms and conditions as were to be specified by the Government of India/HUDCO. The offer categorically stipulated that the allottee could at the discretion of appellant be permitted to raise loan only for construction of the building and equipment to mortgage the land subject to such terms and conditions including recovery of 50% unearned increase in the value of the land. Regarding the terms of offer, clarifications were given by appellant during the pre-bid meeting held on December 12th, 1996, which was communicated to the respondent by letter dated December 20th, 1996. Clause IV of the said clarification stipulated that the hotel building will be constructed within a period of '5 years' from the date of allotment. Regarding readiness of appellant to sign the mortgae dead in favor of financial institutions, it was stated that no mortgage will be permissible for raising loan for purchase of land of the hotel site, however, in case of allotment, the allottee itself will have to create mortgage after obtaining approva from HUDCO. The relevant query and comment is as under:
''Queries Comments Please advise, in such a case whether HUDCO will be ready to sign the Mortgage Deed in favor of Financial Institutions and Banks, since funds will be raised from them towards payment of bid money payable to HUDCO.
No mortgage will be permissible for raising loan for the purchase of land of the hotel site. HUDCO will not execute any mortgage deed in favor of the financial institutions or banks. In case of allotment, the allottee itself will have to create mortgae after obtaining approval from HUDCO at relevant time for purposes of raising loans for construction purposes.''
70. It was further clarified that even after execution of lease deed in favor of appellant by the Government, it may permit the allottee to raise loans on mortgage subject to first charge of appellant. The clarification which was given is as under:
''Queries Comments
7) When is the Lease Deed expected to be signed between Govt. of India and HUDCO and what are the present rights of HUDCO on this piece of land. Keeping in view that no formal Lease Deed as been signed between Government of India and HUDCO? Whether in such a situation, HUDCO will be able to create security by way of mortgage in favor of Banks and Financial Institutions or whether such security by way of mortgage is to be created by Government of India?
The lease deed is being executed shortly. The querry for creation of mortgage in favor of banks and financial institutions has already been clarified above. However, for raising construction loan on the allotted hotel site, HUDCO may permit the allotte to raise loans on mortgage subject to first charge of HUDCO for the unpaid price and other due charges payable under the terms of allotment.''
71. In the clarifications which were given in the meeting held on December 12th, 1996, it was stated about the action taken by HUDCO in the matter pending before the Hon'ble High Court by the M.S. Shoes (East) Limited. On the basis of the offer and the clarifications given in the meeting held on December 12th, 1996, the letter of allotment dated March 31st, 1997 was issued which also incorporated time to complete the construction which was five years from the date of handing over possession of the hotel site on license basis. In clause xiii of the allotment letter, it was stated that the respondent, at the discretion of appellant will be permitted to raise loan only for construction of building and equipment. However, in the agreement to sub-lease dated July 4th, 1997, the period of construction and completion of hotel site was reduced to three years. The agreement to sub-lease categorically stipulated that in the event of inconsistency or repugnancy in the terms and conditions of allotment letter an the terms and conditions of agreement, the terms and conditions of agreement shall prevail. Clause xviii (a) and (b) of the agreement to sub lease dated 4th July,1997 are as under:-
''(a) The Intended sub-lessee shall not have the right to sell, transfer, assign or otherwise part with the possession of the whole or any part of the said demised premises without the written prior approval of the Lesser/Corporation except the license to use and occupy the demised premises solely for the purposes of constructing and executing a hotel building.
(b) Notwithstanding anything contained in Sub-clause (a) above, the Intended Sub-Lessee may to enable him to raise funds for construction of the hotel building and the required equipment and machinery with the previous consent in writing of the Lesser/Corporation and subject to first charge of the Lesser/Corporation to the extent of its outstanding dues payable hereunder mortgage or charge the said premises to such person and on such terms and conditions as the Lesser/Corporation may specify in its absolute discretion.''
72. It is apparent that the clause is an uncommon clause and it is more in favor of the respondent. The provision of strictly limited period for construction, i.e., initially from 5 years it was reduced to 3 years also emphasized the urgency with which project was to be completed. Therefore, the clause has to be read facilitating generation of finances for construction of Hotel and permission in this regard to a licensee. The respondent a public corporation had an obligation to act reasonably even in matters of contract. From the harmonious construction of Clauses reproduced above, sub-clause (b) postulates an enabling provision for raising funds for construction of building and required equipment and machinery for which permission had to be granted be appellant subject to its first charge to the extent of its outstanding dues payable, however, the terms and conditions of such permission were in discretion of HUDCO. Therefore, appellant did not have absolute discretion and was expected to act reasonably and for relevant considerations to give its permission. Its function was advancement of the sole objective of the agreement for the construction of a Hotel. Holding it otherwise would be negation of relevant aspect of the matter. In the facts and circumstances the appellant was bound to give permission to the respondent to mortgage.
73. Therefore, after taking into consideration condition stipulated in the letter of allotment 31st March, 1997 and taking into consideration the Clause xviii of the agreement, the learned arbitrator held that core object of the agreement was to construct a five star hotel by the respondent and its breach, was breach of fundamental term of agreement.
74. The learned arbitrator held regarding the said clause as under :-
''13.2 It seems to me that the submission unduly narrows down the concept of a fundamental term. It is perfectly conceivable, to my mind, that a term may be a fundamental term even if an element of discretion is factored into it. Its character as a fundamental term would depend upon the position which it holds in the context of the entire contract and the consequences which would floe if there was a breach of it. The element of discretion is a constituent of the mode merely in which compliance with the term is stipulated. Given that the discretion is exercised as the contract intends it to be, there is little to distinguish between a term which requires direct compliance and a term which involves the exercise of discretion so far as its nature as a fundamental term is concerned.'' ''13.3. The provision of a strictly limited period emphasises the urgency which was placed on the completion of the hotel project. The urgency is clearly manifested by certain basic indications of an uncommon nature. The first is that possession way delivered to Leela Hotels when it was still a mere Licensee and had not yet acquired the status of a sub-lessee. Then, Clause xviii(b) of the Agreement to Sub-lease enables a mere licensee to raise funds by creating a mortgage or charge on the hotel site for the purpose of funding the construction of the hotel. That provision would have facilitated not only the raising of funds on the basis of a ready security, but it would have avoided or reduced recourse to the burden of alternative and more onerous sources of financing. There was also the need for funds of a very high order. It was estimated that a fund of Rs. 500 crores would be needed for the construction of the hotel, of which about Rs. 271.06 crores could be found by recourse to Clause xviii(b) 13.4 Thus the central object of the Agreement to Sub-lease, that a Five Star Hotel be established within a short time constraint was intended to be realized by a Scheme of which Clause xviii(b) was an integral component and in which it occupied a vitally significant position. So vital was the establishment of the hotel that, by another unusual provision, Leela Hotels could become a sub-lessee of the site only after it completed the hotel project.
13.5 As will be presently discussed, the contents of Clause xviii(b) have been carefully crafted and specially designed. It is an uncommon provision in favor of a mere licensee. It incorporates a Scheme with one single purpose - the advancement of the core object of the Agreement to Sub-lease. In my opinion, a breach of Cause xviii (b) would be a breach of a fundamental term of the Agreement to sub-Lease.'' 13.6 As will be noted hereinafter, this aspect of Clause xviii(b) has a decisive effect on the construction of its provisions and the manner in which they should be understood.
75. Even otherwise agreement has to be understood in the commercial sense consistent with business sense and clause xviii (b) should be given a commercial interpretation. Considering the entirety of circumstances, it is apparent that the appellant committed breaches of clause xviii (b) on two counts. Firstly, appellant allowed the application of consent to remain pending for an unreasonable period, thereby depriving respondent of the opportunity to raise funds in time for commencing the construction of the hotel so that it could be completed by 6th July 2000. Second breach lies in the order dated 6th July 1999 declining consent. Both breaches were of a fundamental nature to the term of the Agreement to Sub-lease. Arbitrator has rightly held that a termay be a fundamental term even if an element of discretion is inherent in it. Its character as a fundamental term would even depend upon the position which it holds in the context of the entire contract and the consequences which would flow on its breach. Discretion is a constituent of the mode merely in which compliance with the term is stipulated. Such discretion ought to have been exercised as the contract intended it to be. For the interpretation of the document observation of Lord Steyn in Manni investment Co. Ltd Vs Eagle Star Life Assurance Co. Ltd. 1997 (2) W.L.R 945 can be relied on :-
''There has been a shift from strict construction of commercial instruments to what is sometimes called purposive construction of such documents. Lord Diplock deprecated the use of that phrase in regard to the construction of private contracts as opposed to the construction of statutes: Antaios Compania Naviera S.A Vs Salen Rederierna A.B [1985] A.C 191,201D. That is understandable. There are obvious differences between the processes of interpretation in regard to private contracts and public statues. or a perceptive exploration of the differences in the context of United States law, see Roberts S. Summers, ''Statutes and contracts as Founts of Formal Reasoning,'' in Essays for Patrick Atiyah, edited by Peter Cane and Jane Stapleton (1991), pp.71 et. se. It is better to speak of a shift towards commercial interpretation. About the fact of the change in approach to construction there is no doubt. One illustration will be sufficient. In Antaios Compania Naviera S.A V Salen Rederierna A.B [1985] A.C 191 201, Lord Diplock in a speech concurred in by his fellow Law Lords observed:
''if detailed semantic and syntactical analysis of a word in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense.'' ''In determining the meaning of the language of a commercial contract, and unilateral contractual notices, the law therefore generally favors a commercially sensible construction. The reason for this approach is that a commercial construction is more likely to give effect to the intention of the parties. Words are therefore interpreted in the way in which a reasonable commercial person would construe them. And the standard of the reasonable commercial person is hostile to technical interpretations and undue emphasis on niceties of language.''
76. Principle of acting reasonably and fairly in contractual matters has been applied by the Supreme Court in Kumari Shrilekha Vidyarthi v. State of U.P. (supra). Supreme Court held in paragraphs 20 and 21 as under :-
''20. Even apart from the premise that the 'office' or 'post' of DGCs has a public element which alone is sufficient to attract the power of judicial review for testing validity of the impugned circular on the anvil of Article 14, we are also clearly of the view that this power is available even without that element on the premise that after the initial appointment, the matter is purely contractual. Applicability of Article 14 to all executive actions of the State being settled and for the same reason is applicability at the threshold to the making of a contract in exercise of the executive power being beyond dispute, can it be said that the State can thereafter cast off its personality and exercise unbridled power unfettered by the requirements of Article 14 in the sphere of contractual matters and claim to be governed therein only by private law principles applicable to private individuals whose rights flow only from the terms of the contract without anything more? We have no hesitation in saying that the personality of the State, requiring regulation of its conduct in all spheres by requirements of Article 14, does not undergo such a radical change after the making of a contract merely because some contractual rights accrue to the other party in addition. It is not as if the requirements of Article 14 and contractual obligations are alien concepts, which cannot co-exist.
''21. We have no doubt that the Constitution does not envisage or permit unfairness or unreasonableness in the State actions in any sphere of its activity contrary to the professed ideals in the preamble. In our opinion, it would be alien to the Constitutional scheme to accept the argument of exclusion of article 14 in contractual matters. The scope and permissible grounds of judicial review in such matters and the relief which may be available are different matters but that does not justify the view of its total exclusion. This is more so when the modern trend is also to examine the unreasonableness of a term in such contracts where the bargaining power is unequal so that these are not negotiated contracts but standard form contracts between unequal. ''
77. It was also observed in paragraphs 28 and 48 as under:-
''28. Even assuming that it is necessary to import the concept of presence of some public element in a State action to attract article 14 and permit judicial review, we have no hesitation in saying that the ultimate impact of all actions of the state or a public body, being undoubtedly on public interest, the requisite public element for this purpose is present also in contractual matters. We, therefore, find it difficult and unrealistic to exclude the state actions in contractual matters, after the contract has been made, from the purview of judicial review to test its validity on the anvil of Article 14.''
48. ''In our view, bringing the State activity in contractual matters also within the purview of judicial review is inevitable and is a logical corollary to the stage already reached in the decisions of this Court so far. Having fortunately reached this point, we should not now turn back or take a turn in a different direction or merely stop there. In our opinion, two recent decisions in Dwarkadas Marfatia and Sons and Mahabir Auto Stores also lead in the same direction without saying so in clear terms his appears to be also the trend of the recent English decisions. It is in consonance with our commitment to openness which implies scrutiny of every State action to provide an effective check against arbitrariness and abuse of power. We would much rather be wrong in saying so rather than be wrong in not saying so. Non-arbitrariness, being a necessary concomitant of the rule of law, it is imperative that all actions of every public functionary, in whatever sphere, must be guided by reason and not humour, whim, caprice or personal predilections of the persons entrusted with the task on behalf of the State and exercise of all power must be for public good instead of being an abuse of the power.''
78. The Supreme Court also held in the case of Dwarkadas Marfatia Vs Board of Trustee of the Port of Bombay, about the board of trustees, a statutory authority, who owned vast areas of South Bombay which were completely tenanted, were exempted from the operation of the relevant Rent Act. The question was whether the action of the Port Trust in evicting one of the tenants and granting permission to one M/S Dhanji Mavji was proper and right. On behalf of the tenant it was argued that the action of the respondent in terminating the appellant's contractual tenancies had a public law character attached to it and was accordingly subject to judicial review. It was asserted that every action of the respondent which was `State' within article `2' of the Constitution, whether it be in the field of the contract, or in any other field, was subject to article 14 of the constitution and must be reasonable and taken only upon lawful and relevant grounds of public interest. The plea of the appellant was contested on the ground that the Port Trust stood on the same ground as any other citizen and would in respect of such activity not be subject to public law duty. A three judge bench of the Supreme Court, however, held that every activity of the Bombay Port trust was subject to Article 14 and must be reasonable and taken only upon lawful and relevant grounds of public interest. Where there is arbitrariness in State action, article 14 springs in and judicial review strikes such an action down. Every action of the executive authority must be subject to rule of law and must be informed by reason. So whatever be the activity of the public authority it should meet the test of article 14.
79. Even in style (Dress Land) v. Union Territory, Chandigarh, , the Supreme Court has observed :
''10. In the absence of the rules, the action of the respondents regarding imposition of the terms and conditions of the lease including the enhancement of rent is required to be fair and reasonable and not actuated by considerations which could be termed as arbitrary or discriminatory. The Government cannot act like a private individual in imposing the conditions solely with the object of extracting profits from its lessees. Governmental actions are required to be based on standards which are not arbitrary or unauthorised. This Court in Ramana Dayaram Shetty v. International Airport Authority of India while agreeing with the observations of Mathew, J. held: (SCC pp. 505-06, para 12).
''12. We agree with the observations of Mathew, J., in V. Punnen Thomas v. State of Kerala that:
'The Government is not and should not be as free as an individual in selecting the recipients for its largesse. Whatever its activity, the Government is still the Government and will be subject to restraints, inherent in its position in a democratic society. A democratic Government cannot lay down arbitrary and capricious standards for the choice of persons with whom alone it will deal.' The same point was made by this Court in Erusian Equipment and Chemicals Ltd. v. State of W.B. where the question was whether blacklisting of a person without giving him an opportunity to be heard was bad? Ray, C.J., speaking on behalf of himself and his colleagues on the Bench pointed out that blacklisting of a person not only affects his reputation which is, in Poundian terms, an interest both of personality and substance, but also denies him equality in the matter of entering into contract with the Government and it cannot, therefore, be supported without fair hearing. It was argued for the Government that no person has a right to enter into contractual relationship with the Government and the Government, like any other private individual, has the absolute right to enter into contract with anyone it pleases. But the Court, speaking through the learned Chief Justice, responded that the Government is not like a private individual who can pick and choose the person with whom it will deal, but the Government is still a Government when it enters into contract or when it is administering largesse and it cannot, without adequate reason, exclude any person from dealing with it or take away largesse arbitrarily. The learned Chief Justice said that when the Government is trading with the public, 'the democratic form of government demands equality and absence of arbitrariness.... The activities of the Government have a public element and, therefore, there should be fairness and equality. The State need not enter into any contract with anyone, but if it does so, it must do so fairly without discrimination and without unfair procedure'. This proposition would hold good in all cases of dealing by the Government with the public, where the interest sought to be projected is a privilege. It must, therefore, be taken to be the law that where the Government is dealing with the public, whether by way of giving jobs or entering into contracts or issuing quotas or licenses or granting other forms of largesse, the Government cannot act arbitrarily at its sweet will and, like a private individual, deal with any person it pleases, but its action must be in conformity with standard or norms which is not arbitrary, irrational or irrelevant. The power or discretion of the Government in the matter of grant of largesse including award of jobs, contracts, quotas, licenses, etc., must be confined and structured by rational, relevant and non-discriminatory standard or norm and if the Government departs from such standard or norm in any particular case or cases, the action of the Government would be liable to be struck down, unless it can be shown by the Government that the departure was not arbitrary, but was based on some valid principle which in itself was not irrational, unreasonable or discriminatory.''
80. The strict provision regarding the completion of the hotel project indicates certain uncommon features of the agreement. The possession was given to the respondent as a licensee as he had not acquired the status of sub-lessee. Under clause xviii(b) it was intended to realize the object of construction of five star hotel within the time agreed. From the perusal of the documents on record it can safely be inferred that there was need for funds of very high order out of which a very substantial amount had to be generated by recourse to clause xviii(b). Appellant has not denied this nor the appellant could deny this. Despite this appellant kept application for consent pending for unreasonable period as the hotel project had to be completed within there years from handing over of possession and it was to be completed by 6th July, 2000. Since the mortgage or creation of charge was the main source of finance for construction of Hotel, machinery and equipment, granting permission for the said purpose was necessary to the project and appellant ought to have taken all these factors into consideration while exercising discretion to grant permission.
81. Considering the proposition as laid down in Manni Investment Co. Ltd Vs.Eagle Star Life Assurance Co. Ltd. (Supra) and West Brownwich B.S. (Supra) where it was emphasized that the rules of commercial interpretation ought to be applied, applicability of commercial interpretation has also been resorted to by the Supreme Court in Modi and Company (Supra). It is legitimate to take into account the surrounding circumstances for ascertaining the intention of the parties. The respondent being a public corporation could not contend that while exercising discretion to grant the permission to mortgage, appellant could be unreasonable and arbitrary after contract has been entered into. The submission of the appellant that since it had the absolute discretion, the concept of reasonableness and fairness will not be applicable seems to be illogical. If the discretion has to be exercised in a reasonable and fair manner, a fortiori, absolute discretion should also be exercised with reasonableness and in a fair manne without arbitrariness.
82. The discretion had to be exercised by the appellant in a reasonable manner and consequently the permission to mortgage could not be denied on irrelevant reasons reflecting a sheer arbitrariness. Considering the entire gamut of circumstances, there is little distinction between a term which required direct compliance and a term which involved exercise of discretion. In our opinion also, such a term in the facts and the circumstances of the present case would be a fundamental term.
83. The arbitrator by detailed reasoning, held that clause xviii(b) of the agreement to sub-lease was a fundamental term of the agreement. How the Learned Arbitrator had discussed and given his reasoning regarding discretion of the appellant and grant of permission to mortgage is as follows :-
''14.4.As I have observed, the provision for mortgage or charge is an integral part of the project for establishing a Five Star Hotel. That project is central to the development of the Community Centre of the HUDCO Place Complex. To ensure that Clause X VIII(b), a key provision of the project, fulfillls its purpose, it has been drafted carefully. The fact that its language has been varied from the original, demonstrates that the drafting mind was concerned with restricting the play of discretion given to the Lesser/Corporation. In my opinion, there is some substance in Leela Hotels' submission that there is a shift in emphasis when we pass from the Letter of Allotment to the Agreement to Sub-lease. Discretion does not rule over the entire matter of whether a mortgage or charge should be permitted. At the same time, I cannot agree that there is no discretion at all, and consent is mandatory. To say that consent is mandatory is a contradiction in terms. Consent may be granted or withheld. A discretion is involved. But discretion as to what? (a) Only as to the person with whom the transaction will be joined, and (b) as to the terms and conditions governing the consent. Thus the element of discretion travels over a narrower area.
''14.5. Whereas Clause (xiii) of the Letter of Allotment provides for discretion in granting permission in respect of all the features of the transaction, including whether at all the hotel site should be allowed to be mortgaged or charged, under clause xviii(b) of the Agreement to Sub-Lease the area of discretion has been narrowed down to considering the suitability of the proposed mortgagee or the person in whose favor the charge is created. If the person with whom the transaction is proposed to be joined is considered suitable by the Lesser/HUDCO, the consent to mortgage or charge has to be given. What needs to be decided now is what should be the terms and conditions to be attached to the consent. In my opinion, the emphasis has shifted in favor of Leela Hotels insofar as the totality of the area over which clause (xiii) of the letter of Allotment travels stands reduced in Clause xviii(b) to the area indicated above.
''15.2 It is beyond dispute that in making its decision on the application for consent HUDCO, a corporation affected with public interest, must act reasonably in all matters. By using the expression ''absolute discretion'' the clause cannot deny the true nature of the Corporation and the constraints of reasonableness and fair play in its functioning. To allow a literal interpretation to the words ''absolute discretion'' would be to deny the public nature of HUDCO's acts and decisions. In this day and age, it is not possible to accept the doctrine of absolute power in a public corporation. Public institutions and public corporations in a constitutional democracy must at all times act reasonably and fairly, no matter what the language of plenitude power conferred on them. The conscience of reason and the ethic of fair play must at all times inform their judgment.''
84. Permission to mortgage by the appellant has been declined on the ground that litigation with M.S.Shoes was pending. The litigation with M.S. Shoes was pending even at the time when the appellant decided to invite offers for sub-leasing the hotel site for construction of a five star hotel. Pendency of litigation had been stipulated even before execution of letter of allotment and agreement to sub-lease by the appellant and it was mentioned in the brochure and the minutes of pre-bid meeting. This as not been the case of any of the parties that the nature of litigation pending with M.S. Shoes had changed after letter of allotment and agreement to sub-lease executed by the appellant in favor of the respondent necessitating refusal of permission to mortgage. This is also not disputed that the rights of the respondent were subject to the decision of the litigation of M.S. Shoes. Despite the pendency of the litigation, the appellant had been representing to the Government about the permission to mortgage to the respondent. There has been complete absence of any evidence or pleading regarding change in circumstances in the litigation of M.S. Shoes which would have forced the appellant not to exercise the discretion to grant permission for mortgage.
As has been rightly observed by learned arbitrator that if pendency of the litigation could be a reason for declining consent to mortgage or charge, it would have made clause xviii(b) in agreement to sub-lease irrelevant and without any rational. The learned Arbitrator observed :-
18.1A serious question arises as to whether the refusal to consent contained in HUDCO's letter dated 26 June 1999 on the ground that the M.S. Shoes litigation is pending can be regarded as valid. Admittedly, the M.S. Shoes litigation was pending at the time when HUDCO decided to invite offers for sub-leasing the hotel site for construction of a five Star Hotel. The pendency of the litigation was mentioned in the Brochure of October 16, 1999 and the Pre-bid Meeting held on 12 December 1996 as well as the Letter of Allotment dated 31 March 1997 and the Agreement to Sub-Lease dated 4 July 1997. It was specifically understood on the basis of the provisions set out in those documents that the validity and the effectiveness of the Letter of Allotment and the Agreement to Sub-Lease would be subject to the fate of the M.S. Shoes litigation. The entire course of proceedings, beginning with the Offer Brochure of October 16, 1996, proceeded on that basis. So long as the M.S. Shoes litigation did not concluden a decision which could affect the validity of the Agreement to Sub-lease, HUDCO was obliged to work out the said Agreement and to discharge its obligations under the Agreement without being impeded by the existence of the M.S. Shoes litigation. It is not open to HUDCO to say that it is entitled to enter into the Agreement to Sub-lease and claim rights under it notwithstanding the pendency of the M.S. Shoes litigation and, at the same time, to refuse to discharge one of its obligations under the said Agreement on the ground that the M.S. Shoes litigation was pending. The pendency of the M.S. Shoes litigation was a pre-existing fact. It was a constituent element of the foundation on which the entire edifice, including the Letter of Allotment and the A reement to Sub-Lease, rested. While its fate could have the effect of destroying the edifice as a whole, it could not be used as a factor affecting an individual transaction within that edifice. Individual transactions turned on the inter-play of mutual rights and obligations between Leela Hotels and HUDCO operating within the Agreement to Sub-Lease. To determine those internal issues on the basis that the M.S. Shoes litigation is pending is wholly irrational. If the pendency of that litigation can be a reason for declining consent to a mortgage or charge, where was the point of incorporating Clause xviii(b) in the Agreement to Sub-Lease? That litigation was pending when the Agreement to Sub-Lease was entered into. Taking the pendency of the M.S. Soes litigation as a ground for refusing consent to an Intended Sub-lessee would render Clause xviii(b) meaningless and the proceeding pursuant to it a senseless exercise.''
85. Had the permission to mortgage been granted by the appellant on certain terms and conditions and had the respondent disputed the same on any of the grounds, the whole scenario would have been different and the appellant may have been justified in cont ending that the terms for granting the permission for mortgage could not be at the discretion or liking of the respondent. However, in the present case, the ground for refusing permission by any stretch of imagination is unreasonable and the appellant cannot be permitted to contend that in the matter of contract it can act with unreasonableness and with arbitrariness. The findings arrived at by the arbitrator are findings based on appreciation of evidence and the inferences are based on due application of law. We cannot persuade ourselves to take different view with the view taken by the arbitrator in the facts and circumstances of the case. We are in agreement with the findings of the arbitrator and the same can not be faulted on the grounds raised by the appellant. The opinion of the arbitrator is plausible and a possible view and it can not be said that the inference is impossible and improbable.
86. Dealing with the argument regarding layout plans, it must be noticed that layout plans had been sanctioned and sanctioning of the construction plans of the respondent was dependent upon it. In the clarification meeting held on December 12, 1996, the appellant had represented that there was a sanctioned layout plan and the respondent had given the offer on the representation made that there was layout plan. However, a revised layout plan was submitted by the appellant on February 17, 1997. The plans for construction of Hotel of the respondent were not approved as the sanction of revised layout plans of the appellant was pending. The revised layout plans submitted by the appellant were only approved on August 13th, 1999. Therefore, in these circumstances, the construction of the hotel within three years from the date of handing over possession could not be completed which was a condition precedent for performance of the contract within the time schedule. The appellant can not be permitted to contend that not providing the information regarding the submission of the revised layout plans and revised service plans did not introduce complexities in the whole project. What is glaring is that it was almost after one year, the period for completion of project was three years, that the respondent discovered that the revised layout plans were pending and consequently the construction plans could not be approved. Great emphasis was led on the part of appellant regarding objections raised by the Municipal corporation of Delhi to the building plans submitted by the respondent. In our opinion, it will not absolve the appellant of the consequence of non-disclosure of the fact that the revised layout plans had been submitted by the appellant to the Municipal corporation of Delhi and they had not been sanctioned and this fact was not communicated to the respondent who embarked upon this project involving considerable finance. The contention of the appellant that the revised layout plans related to general pool housing area and not of the community centre in which the hotel site was located, is also of not much help to the appellant. Even if such revised layout plans were not directly related to the approval of the building plans of the respondent, the fact about the pendency or submission of revised layout plan ought to have been communicated to the respondent, as without the sanctioned lay out plan, construction plans of the respondent would not have been approved. From the facts as pleaded, it is apparent that the entire HUDCO project at Andrews Ganj was one and in the circumstances the plea of the appellant that the revised layout plans did not concern the hotel site is of not much help to the appellant. The approval granted by the Municipal Corporation of Delhi by its resolution dated 25th March, 1994 was an approval in respect of HUDCO Place in its entirety and not for distinct or separate parts. Contention of the appellant that the respondent was aware of the pendency of the revised layout plans in Aril, 1998 whereas the respondent contended that they came to know about it in June, 1998, is also not of much help to appellant. It is not material whether the respondent came to know in April 1998 or June 1998; what is material is that this relevant information was not given to the respondent by the appellant at the time of execution of letter of allotment and thereafter on 4th July, 1997 at the time of execution of agreement to sub-lease. The respondent gained a right in the facts and circumstances and under law on account of misrepresentation on the part of the appellant and attributable to the appellant and this right cannot be denied to the respondent on the ground that the respondent had acquiesced with the acts of misrepresentation on the part of appellant by paying second installment with interest and ground rent on 30th June,1998. As a matter of fact that shows the bona fide and genuineness of the respondent in executing the agreement. The respondent on account of non-disclosure of correct situation regarding the revised layout plans did not repudiate or avoid the contract but merely intended that the breaches committed by the appellant be remedied and sought extension of time and contended that the time to pay the 3rd installment stood enlarged and opted for performance of contract which is apparent from the letter dated 31st May, 1999 of the respondent. In these circumstances, it goes without saying that the appellant committed beaches which released the respondent under the obligation to agreement to sub-lease in relation to the time for payment nor the appellant can capitalize on his own default and take shelter under the expression ''due to reason whatsoever''. In this context, let us see how the arbitrator has examined the whole controversy. Observations of the Learned Arbitrator are as under:-
20.20 The Letter of Allotment provided 5 years, but when the Agreement to Sub-Lease was drawn up by HUDCO it was regarded that 3 years was sufficient. Leela Hotels wanted the time enlarged to 5 years, and to persuade HUDCO to agree to do so. Leela Hotels described it as a typographical error. But HUDCO made no response. It neither confirmed nor denied that there was an error and the period continued to be 3 years only. HUDCO pleads now that it was a typographical error but the pleading is not supported by evidence and it is possible that the plea has been adopted by reason of the events that have taken place in the course of implementing the Agreement to Sub-Lease. The plea amounts to a tacit admission by HUDCO that in view of the submission of the Revised Layout Plan and the need for Revised Services Plans it would have been necessary to provide a period of 5 years. That, in my opinion, establishes the gross complexities introduced in the time constrained project by the submission of the Revised Layout Plan and Revised Services Plans. If, at the time of executing the Agreement to Sub-Lease, HUDCO had informed the intending Sub-Lessee of the submission of the Revised Layout Plan, Leela Hotels would have come to know of the new scenario and then ecided whether, having regard to the time constraint of 3 years, it was in a position to undertake the obligations projected in the Agreement to Sub-Lease. By withholding that information, HUDCO allowed Leela Hotels to continue under the impression at the time of signing the Agreement to Sub-Lease that there was an approved Layout Plan and approved Services Plans enabling it to embark upon and complete the construction of the hotel. It was not until almost one year of the three years had passed that Lela Hotels discovered that the scenario present to its mind was very different from the ground reality. Knowledge of the new scenario was vital in deciding whether to enter upon the project and sign the Agreement to Sub-Lease because, as it turned out, MD took the decision that the building Plan of Leela Hotels would not be approved until the Services Plans had been approved afresh. In other words, HUDCO by withholding the information of the submission of the Revised Layout Plan denied Leela Hotels a factor critical to its acceptance or non-acceptance of the Letter of Acceptance and the proposed Agreement to Sub-Lease. In fact, as it turned out, the Revised Services Plans were approved only on 30 August 1999, 6 September 1999 and 7 September 1999 and it was thereafter that the building plans could be effectively considered for approval and Leela Hotels could then consider whether the construction of the hotel could be commenced and completed during the few months remaining. It is clear that HUDCO way guilty of misrepresentation by withholding fundamental information critical to the decision whether the Letter of Allotment and the proposed Agreement to Sub-Lease should be accepted or not.
20.23 It seems to me that HUDCO was under a duty to inform Leela Hotels of the filing of a Revised Layout Plan before the Agreement to Sub-Lease was signed by Leela Hotels. There was no intent by HUDCO to deceive Leela Hotels, because apparently it considered that as the changes proposed by it in the Revised Layout Plan did not affect the hotel site, it was not necessary to inform Leela Hotels of the submission of the Revised Layout Plan. Nevertheless HUDCO gained an advantage inasmuch as Leela Hotels signed the Agreement to Sub-Lease and entered upon the hotel project in the belief that an approved Layout Plan existed on the basis of which it could execute the project within the time constraint prescribed by that Agreement. In that manner, Leela Hotels acted to its prejudice. It would appear that the case falls within Section 18 of the Indian Contract Act 1872, which defines ''misrepresentation'' to mean and include:
1. **************.
2. any breach of duty which, without any intent to deceive, grains an advantage to the person committing it, or anyone claiming under him, by misleading another to his prejudice or to the prejudice of anyone claiming under him;
3. **************.
In Incledon V. Watson - (1862) 2 F.and F 841 and in With V. O'Flanagan - (1936 ) Ch.575, the Courts in England held that there was a duty on one party to inform the other party of circumstances which could materially affect the volition of the other to enter into a contract.
20.29 That position was confirmed in its letter dated 31 March 1999 to HUDCO in which the entire narrative of events ever since offers were invited by HUDCO was detailed. Reference was made to compliance by Leela Hotels with its obligations under the Agreement to Sub-Lease and of the breaches alleged against HUDCO because of the continued pendency of the application for consent to mortgage or charge the hotel site and also because of the want of sanction to the Building Plans by reason of the Revised Services Plans not being approved yet. Leela Hotels went on to say in that letter:
''Since the entire basis of the contract contained in the Agreement to Sub-Lease is knocked out for the reasons set out above and there has been a fundamental breach of the contract by HUDCO, two consequences follow. The first is that HUDCO is not entitled to demand payment of the third Installment of the premium which according to the Agreement to Sub-Lease falls due today, i.e. on 31st March 1999. Leela Hotels submits, without prejudice to this contention that the time of making payment of the third Installment would stand extended until the aforesaid breaches are remedied by HUDCO and in any event till 30th June 1999. Secondly, HUDCO has already recovered from Leela Hotels Ltd. an aggregate sum of Rs. 152,56,01,000/- representing the 1st and 2nd instaments of the premium when it was not lawfully entitled to do so and consequently HUDCO is liable to pay interest on the said Installments at the rate of 20% per annum from the respective dates of payment.
HUDCO is also not entitled to claim any amount by way of ground rent since the purpose for which the possession of the hotel site was handed over to Leela Hotels Ltd. is frustrated and HUDCO is therefore liable to return to Leela Hotels Ltd. the sum of Rs. 7,47,79,863/- representing the ground rent already paid, together with interest at the rate of 20% per annum.
We are making this claim against you without prejudice to our right to avoid the contract contained in the Agreement to Sub-Lease and to treat it as at an end.
If HUDCO does not accede to the above mentioned claims made by Leela Hotels Ltd. within 15 days from receipt of this letter, Leela Hotels Ltd. invokes the arbitration clause contained in Clause XXIII of the Agreement to Sub-Lease and requests HUDCO to appoint an independent arbitrator.
It will be noted that Leela Hotels did not repudiate or avoid the contract but merely intended that the breaches committed by HUDCO should be remedied. By stating that the time for the payment of the third Installment stood enlarged, Leela Hotels opted in favor of the performance of the contract and being put in a position in which it would have been if the representation that there was an operative approved Layout Plan relevant to the proposed Building Plans had been true.
20.31 Did filing of the application on 20 June 1999 by Leela Hotels under section 11(6) of the Arbitration and Conciliation Act, 1996 in the High Court for appointment of an Arbitrator amount to repudiation of the Agreement to Sub-Lease? It is common practice for a party to a contract to apply for the arbitration of a dispute arising during the operation of the contract in order that the disputes arising between the parties while the contract is in operation, be resolved through arbitration, thus enabling the parties to move forward with the working out of the contract. There was no repudiation of the Agreement by Leela Hotels. Even if it be assumed that by filing such an application Leela Hotels had repudiated the Agreement to Sub-Lease, the repudiation was not accepted. As is well settled, where a breach of contract or repudiation of an obligation by one party to a contract gives rise to a right in the other party to terminate the performance of the contract, the other party may exercise the rightly electing to terminate the performance. The law was stated by the House of Lords in Fercometal S.A.R.L. v. Mediterranean Shipping Company S.A. (1989) 1 AC 788.
When one party wrongly refuses to perform obligations this will not automatically bring the contract to an end. The innocent party has an option. He may either accept the wrongful repudiation as determining the contract and sue for damages, or he may inore or reject the attempt to determine the contract and affirm its continued existence.'' Vitol S.A. v. Norelf Limited (1996) AC 800, it was laid down that ''an act of repudiation requires no particular form, and it is sufficient that the communication or conduct clearly and unequivocally conveys to the repudiating party that the aggrieved arty is treating the contract as an end.''
87. The learned arbitrator has comprehensively dealt with the effect of non-disclosure of the status of layout plans by the appellant. Consequently on this ground it cannot be said that the arbitrator acted in excess of jurisdiction or that the arbitrator has committed an error in coming to the conclusions on the basis of the facts and law. It will also be not appropriate to set aside the findings of the arbitrator on assessing the reasons given by him as reproduced above.
88. Let us now deal with the argument of the appellant that permission from Government of India for mortgage was also required.
89. Clause xviii (b) of agreement to sub-lease is a much departure from the earlier clauses as the discretion has been given to the respondent on account of word 'may' in the said term. We are in agreement with the submission of respondent on the construction of said term xviii (b). The word 'its' signifies the permission from HUDCO in reference to the words 'Lesser/Corporation' used in the said Clause in contradiction to 'Lesser and/or Corporation' existing in other clauses of the agreement. The word ' its' cannot be read as 'their' on the construction of the said term especially in view of other terms of the said agreement. In clause X words ''the Lesser and/or the corporation'' are used. Similarly, in clause XIII words ''the corporation and/or the lesse'' is used. Again in clause XVI (a) words ''Lesser and/or the corporation'' are used. Since two different clauses have been used in the same document, it will be natural that they convey two different meanings and to construe otherwise will be contrary o the agreement. Therefore wherever ''Lesser and/or corporation'' is used, two separate decision making bodies are contemplated in contrast to ''Lesser/corporation'' which implies decision of a single person.
90. The appellant has also considered it so and has acted on this understanding which can be culled from the letter dated January 19th, 1998 by the appellant to the Secretary, Government of India, Ministry of Urban Affairs and Employment. From the legal opinion obtained from Solicitor General of India, and keeping in view the provisions of the agreement to sub lease, it was communicated to the Government that it may consider the request of the respondent on the terms and conditions stipulated there. The terms and conditions stipulated by the appellant in the said letter dated January 19th, 1998 are as under:
''a) The permission to mortgage will have to be restricted only for raising of the loan for raising construction and purchase of required equipment and machinery.
b) The mortgage permission cannot be granted for raising the loan for making payment for the cost of land.
c) The permission will have to be for a specific loan amount and in the name of specified financial institution(s) or bank(s) from whom Leela Hotels shall be raising loans for construction and equipments etc.
d) The permission to mortgage or charge will have to be subject to the first charge of HUDCO towards unpaid price and other dues which may become due and payable in terms of the Agreement to Sub-lease and on terms and conditions which may be imposed by the Lesser (Govt. of India) including the Right to Preemption in the event of foreclosure of mortgage.
e) Approval of building plans for construction purposes from the local authorities.''
91. The acts after the agreement to sub lease was executed can be considered. A reasonable conclusion is that the permission under the agreement to sub lease was to be given by appellant and was not required from the Government of India. This is also fortified from the fact that ultimately the permission to mortgage has been denied not on the ground that the Government of India has not considered the request for grant of permission.
92. The arbitrator held that the clause xviii (b) is different from the Clause III (6) of the perpetual lease and both are not congruent. Under the agreement to sub lease any clause not in consonance with the perpetual sub lease would have over riding effect and would have been binding on the intending sub lessee and so the clause III (6) could not be invoked. Relevant paras 16.3 and 16.4 of the award regarding this are as under: -
3 The words ''the Lesser/Corporation'' contained in Clause xviii(b) are separated by a ''slash''. A ''slash'' (or ''solidus'') is defined by the Concise Oxford Dictionary as ''an oblique stroke used in writing fractions, to separate other figures and letters, or to denote alternatives (and/or)''. In clause xviii(b) they indicate the Lesser or Corporation may be approached alternatively or both may be approached but individually and separately. In other words, the separate consent of each entity is contemplated. The consent of the Government or of HUDCO is required because their individual interests may be affected by the proposed mortgage or charge on the land. The grant of consent would be determined by considerations pertinent to those interests. But theconsent musts be the individual consent of the entity concerned. In the present case, although in its letter dated 16 October 1997 addressed to HUDCO, Leela Hotels purported to seek the consent of the ''Lesser/Corporation'' to mortgage or charge the land, and by its letter dated 12 November 1997 addressed to the Ministry of Urban Affairs and Employment it requested the consent of the Government of India as well as HUDCO, it actually pursued HUDCO for the grant of its consent all through thereafter. It conduct shows that in reality it sought HUDCO's consent. Leela Hotels sent repeated letters to HUDCO in that regards. About that time, a few letters were sent by Leela Hotels to the Ministry, but they merely requested the Ministry to ensure that HUDCO moved expeditiously in the matter. The consent of the Government of India would have been necessary if considerations pertinent to it were to be affected. In the present case, the evidence shows that HUDCO referred the matter to the Ministry in the Government of India. The Government of India consulted the Additional Solicitor General on two occasions, but did not come out with any order of its own. Apparently, the Government did not think that this was a case calling for an order by it on the application for consent. It left the matter to HUDCO's judgment, treating it as a case to be dealt with by an order from HUDCO. As is clear from HUDCO's letter dated 26 June 1999, it is HUDCO which refused consent.
16.4. It is contended by HUDCO that besides seeking HUDCO's consent Leela Hotels was bound to obtain the consent of the Government of India also. I am referred to Clause III(6) of the Perpetual Lease. It is pointed out that by virtue of Clause XXV of the Agreement to Sub-Lease, the terms and conditions of the Perpetual Lease Deed are binding on the Intended Sub-Lessee. In my opinion, Clause III(6) of the Perpetual Lease is not attracted at all. Clause III(6) is a general provision under which a sub-lessee is required to take the previous consent in writing of the Lesser in order to mortgage or charge his interest in a site. Clause xviii(b) of the Agreement to Sub-Lease is a special provision. It provides for a special case and is a complete provision in itself. It provides a case where an intended Sub-Lessee proposes to mortgage or charge the premises to enable him to raise funds for construction of the hotel building and required equipment and machinery. It is not necessary in such a case to reared to Clause III(6) of the permanent Lease in order to seek the previous consent of the Lesser. That provision is contained already in Clause xviii(b) of the Agreement to Sub-Lease. Had it been intended that Clause III(6) of the Permanent Lease should be rad with Clause xviii(b) of the Agreement to sub-Lease it would not have been necessary to refer to the Lesser in Clause xviii(b) of the Agreement to Sub-Lease. Clause xviii(b) of the Agreement to Sub-Lease stands on its own. It will be noticed that the terms in which Clause xviii(b) is framed, are different from the terms incorporated in Clause III(6) of the Permanent Lease. They are not congruent. They are not in consonance with Clause III(6) of the Permanent Lease. According to Clause XXV of the agreement to Sub-lease any clause in the Agreement to Sub-Lease not in consonance with the Perpetual Lease will have over-riding effect and will be binding on the Intended Sub-Lessee. In my opinion, Clause III(6) of the Perpetual Lease cannot be invoked.''
93. On consideration of the reasoning of the arbitrator, it cannot be inferred that the construction given by the arbitrator is improbable or impossible or that the arbitrator had proceeded illegally. The arbitrator has not exceeded in its jurisdiction.
By any stretch of reasoning, it cannot be said that the decision of the arbitrator is not plausible. Appellant's attempt to challenge the reasons given by the arbitrator is without any legal basis and can not be accepted nor the award can be set aside on this ground.
94. Lastly we deal with the award of interest by the arbitrator. Award of interest at @20% per annum by the arbitrator can not be termed beyond jurisdiction. Agreement to Sub-Lease contemplates interest @ 20% per annum, though it was for delay in payment of installment by the respondent to the appellant. On refund or return of the said amount which had been paid by installments, why the same rate should not be applicable if there is an overall breach of the agreement by the appellant. What the respondent has been agitating over last number of years is simply to get back the money which respondent has paid by two installments and under various heads. The appellant has committed the breach and has not performed its part of the obligation under the agreement and, therefore, holding the amount of the respondent was illegal and consequently appellant is bound to pay interest on the amount due to respondent on account of breaches on the part of appellant. Reliance was placed on some other clauses of the agreement to sub-lease including clause XVII. On plain reading of the clause XVII of the agreement to sub-lease, it is apparent that the said clause would be applicable only where the parties were required to obtain clearance and/or approval and in case of non grant of same, interest was not payable by the appellant. It will not be applicable in case of breach of terms of agreement to sub-lease by a party. The appellant has received interest @20% for the period of delay in making the payment of installment. The appellant can not contend that he is not liable to pay interest at the same rate on the amounts due from him. The appellant had to act reasonably. In the circumstances, in any case, it can not be said that awarding interest by the Learned Arbitrator at 20% per annum is contrary to the agreement or the law. Let us now deal with the award of interest on the amount of property tax. The learned arbitrator has not awarded the interest for the entire period on the amount of property tax which was paidly the respondent to the appellant. The award of interest on the said amount is for the period the amount remained with the appellant till it was deposited with the Municipal Corporation of Delhi. The decision of the arbitrator, therefore, to award interest cannot be faulted on this ground also.
95. We are in complete agreement with the findings of learned Single Judge and the reasoning of learned Arbitrator on all the points raised before us. By no stretch of arguments it can be inferred in the facts and circumstances that the award is contrary to the `public policy. Respondent has paid huge amount to the appellant. Appellant has to refund the said amount. During the hearing before learned Single Judge, appellant had deposited certain amount under the award. The respondent shall be entitled to the entire amount awarded by the arbitrator in terms of the award after adjusting the amount received by the respondent.
96. There is no merit in this appeal. Same is dismissed with costs throughout.