Himachal Pradesh High Court
Eih Limited (Formerly Known As vs Delhi Development Authority (2015) 3 ... on 13 October, 2022
Bench: Tarlok Singh Chauhan, Chander Bhusan Barowalia
REPORTABLE
IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA
.
ON THE 13th DAY OF OCTOBER, 2022.
BEFORE
HON'BLE MR. JUSTICE TARLOK SINGH CHAUHAN
&
HON'BLE MR. JUSTICE CHANDER BHUSAN BAROWALIA
ARBITRATION APPEAL NO. 11 of 2016
BETWEEN:-
1.
EIH LIMITED (FORMERLY KNOWN AS
EAST INDIA HOTELS LTD.) WITH ITS
REGISTERED OFFICE AT 4, MANGOE
KOLKATA-700001 THROUGH ITS
AUTHORISED SIGNATORY MR.
DHARMESH SRIVASTAVA. ALSO AT
ITS CORPORATE OFFICE, 7, SHAM
NATH MARG, DELHI - 110054.
2. MASHOBRA RESORT LTD. WITH ITS
REGISTERED OFFICE AT HOTEL
WILDFLOWER HALL CHHABARA,
SHIMLA, HIMACHAL PRADESH,
THROUGH MR. ARJUN OBEROI,ITS
MANAGING DIRECTOR.
3. OBEROI HOTELS PVT. LTD. WITH
ITS REGISTERED OFFICE AT 4,
MANGOE KOLKATA-700001,
THROUGH ITS AUTHORISED
SIGNATORY MR. DHARMESH
SRIVASTAVA.
4. OBEROI PROPERTIES PVT. LTD.
WITH ITS REGISTERED OFFICE
AT 4, MANGOE KOLKATA -
700001, THROUGH ITS
AUTHORISED SIGNATORY MR.
DHARMESH SRIVASTAVA.
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2
5. OBEROI INVESTMENTS PVT. LTD.
WITH ITS REGISTERED OFFICE AT 4,
.
MANGOE KOLKATA-700001,
THROUGH ITS AUTHORISED
SIGNATORY MR. DHARMESH
SRIVASTAVA.
6. OBEROI HOLDINGS PVT. LTD.
WITH ITS REGISTERED OFFICE AT 4,
MANGOE KOLKATA-700001,
THROUGH ITS AUTHORISED
SIGNATORY MR. DHARMESH
SRIVASTAVA.
7. MR. P.R.S. OBEROI, S/O LATE SH.
M.S. OBEROI, 4, MANGOE KOLKATA-
700001, THROUGH ITS
CONSTITUTED ATTORNEY MR.
DHARMESH SRIVASTAVA.
8. MR. S.S. MUKHERJEE, S/O LATE SH.
SAILENDRA NATH MUKHERJEE, 4,
MANGOE KOLKATA-700001,
THROUGH ITS CONSTITUTED
ATTORNEY MR. DHARMESH
SRIVASTAVA.
9. MR. ARJUN SINGH OBEROI, S/O LATE
TILAK RAJ OBEROI, 4, MANGOE
KOLKATA-700001.
10. MR. T.K. SIBAL, S/O LATE SH.
DEVNATH SIBAL, 4, MANGOE
KOLKATA-700001, THROUGH ITS
CONSTITUTED ATTORNEY MR.
DHARMESH SRIVASTAVA.
......APPELLANTS (ORIGINAL OBJECTORS)
(BY SH. R .L. SOOD, SENIOR
ADVOCATE WITH SH. ARJUN
LALL, ADVOCATE)
AND
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3
1. THE STATE OF HIMACHAL PRADESH,
THROUGH THE FINANCIAL
COMMISSIONER-CUM-SECRETARY
.
(TOURISM) TO THE GOVERNMENT
OF HIMACHAL PRADESH, SHIMLA-
171002.
2. THE SPECIAL AREA DEVELOPMENT
AUTHORITY, THROUGH ITS
CHAIRMAN, (COLLECTOR SHIMLA),
KUFRI SHIMLA.
3. MR. HARSH GUPTA, I.A.S. (FORMER
CHIEF SECRETARY TO THE
GOVERNMENT OF HIMACHAL
PRADESH AND EX OFFICIO
CHAIRMAN OF MASHOBRA RESORT
LTD., C/O THE GOVERNMENT OF
HIMACHAL PRADESH, CIVIL
SECRETARIAT), SHIMLA-171002.
4. MR. S.K. SOOD, I.A.S. (NOW
DECEASED) FORMER FINANCIAL
COMMISSIONER-CUM-SECRETARY
(FINANCE) TO THE GOVERNMENT
OF HIMACHAL PRADESH, CIVIL
SECRETARIAT, SHIMLA-171002.
5. MR. ASHOK THAKUR, I.A.S. FORMER
FINANCIAL COMMISSIONER-CUM-
SECRETARY (TOURISM) TO THE
GOVERNMENT OF HIMACHAL
PRADESH, CIVIL SECRETARIAT,
SHIMLA-171002.
6. MRS. RAJENDRA BHATTACHARYA,
I.A.S. (FORMER CHIEF SECRETARY
TO THE GOVERNMENT OF
HIMACHAL PRADESH AND EX
OFFICIO CHAIRMAN OF MASHOBRA
RESORT LTD., C/O THE
GOVERNMENT OF HIMACHAL
PRADESH, CIVIL SECRETARIAT),
SHIMLA-171002.
......RESPONDENTS (ORIGINAL NON-OBJECTORS)
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4
7. MERCURY TRAVELS LTD. WITH ITS
REGISTERED OFFICE AT 4,
.
MANGOE KOLKATA-7I00001,
THROUGH ITS COMPANY
SECRETARY.
.....PROFORMA RESPONDENT (ORIGINAL OBJECTOR NO.7)
(BY SH. DHRUV MEHTA, SENIOR
ADVOCATE WITH SH. PRABHAT
KUMAR, SHRI SHYAM R.
AGGARWAL, ADVOCATES AND
SH. ASHOK SHARMA,
ADVOCATE GENERAL, SH.
VINOD THAKUR, SH. SHIV PAL
MANHANS, ADDITIONAL
ADVOCATES
r GENERAL, SH.
BHUPINDER THAKUR AND SH.
YUDHBIR SINGH THAKUR,
DEPUTY ADVOCATES GENERAL,
FOR RESPONDENTS-STATE.
Reserved on : 18.08.2022.
________________________________________________________________
This appeal coming on for hearing this day, Hon'ble Mr.
Justice Tarlok Singh Chauhan, passed the following:
JUDGMENT
The appellants have filed the instant appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (for short the 'A & C Act') against the judgment rendered by the learned Single Judge on 25.02.2016, whereby the objections filed by them to the award rendered by the sole Arbitrator dated 23.07.2005 have been ordered to be dismissed with a prayer to accept the appeal and consequently set aside the judgment ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 5 rendered by the learned Single Judge as also the award passed by the sole Arbitrator on 23.07.2005.
.
2. Respondent No.1 was the owner of the property named 'Hotel Wildflower Hall, Chharabra, near Shimla', which was being used for running a hotel by the Himachal Pradesh State Tourism Development Corporation. In or around 1993, a devastating fire broke out in the hotel and the same got completely and totally burnt down. It is thereafter that respondent No.1 decided to explore various methods and possibilities of putting the hotel back in operation including that of using the assistance of reputed Companies already operating and established in the public sector in the business of hotel industry and tourist trade. In furtherance thereto, respondent No.1 floated global tenders inviting offers from various interested parties for making and running of a Five Star Hotel at that site.
3. Appellant No.1 which already had most established hotel chain in the Country as also abroad participated in the tender process. A High Power Committee of respondent No.1 comprising of its senior and experienced officers participated and prolonged deliberations, discussions and negotiations took place between appellant No.1 (EIH Limited) and the State of Himachal Pradesh. Ultimately, the State Government decided to partner ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 6 with the Appellant East India Hotels Limited (hereinafter, "EIH") owing to the latter's experience in running hotels in Shimla and .
based upon special representations/offers viz., (a) appellant was to make fully commercially operational a Five Star Deluxe Hotel in 4 years, (b) total cost of project was estimated at 40 crores with shareholding of State to be not less than 35%, (c) appellant was to provide technical services for construction, management and marketing the Hotel and was not to charge any royalty, money or consideration in cash or kind either from the state or the Joint Venture Company to be incorporated for running the hotel. Under the Joint Venture option, the State envisaged effective participation in all significant decisions which require mandatory approval of the State which was incorporated in Article 23 of Articles of Association of the Joint venture Company.
The State was continued to have substantial interest in the property under the Joint Venture to ensure good administration of the property in public interest as this was an invaluable asset of the State.
4. Vide Joint Venture Agreement dated 30.10.1995 (hereinafter, "JVA") executed by and between the State Government and EIH, the parties agreed to incorporate a Joint Venture Company by the name of "Mashobra Resorts Ltd."
(hereinafter, "MRL") for the purpose of running a 5 Star Deluxe ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 7 Hotel at Wild Flower Hall. As per Clauses 5.4 to 5.6 of the JVA, the State Government was to enjoy shareholding of not less than .
35% in MRL whereas EIH was to enjoy shareholding of not less than 36% but not more than 55%. The balance 10% was to be reserved for public issue. Article 6 of the Articles of Association of the MRL provided that the basic proportion of holdings of shares in no circumstances were to be derogated. The State Government was to be allotted shares in lieu of the land at Wild Flower Hall which land was to be conveyed to MRL (Clause 5.2 JVA), EIH undertook the responsibility for constructing, running and managing the hotel (Clause 5.8 JVA). The State Government was entitled to terminate the JVA by a written notice in the event the hotel was not made fully commercially operational within 4 years from the date of handing over of possession of land.
However, the State Government may in its discretion choose not to terminate the agreement even after expiry of 4 years, in that case a penalty of Rs.2 crores per annum was to be payable by EIH to the State Government. After expiry of 6 years from the effective date (date of agreement), if the hotel was still not fully commercially operational, the JVA was to stand automatically terminated (Clause 10.1 JVA). Upon termination of the JVA, the entire land of Wild Flower Hall was to revert back to the State Government (Clause 11 JVA). It was specifically provided in the ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 8 JVA that no agreement varying the JVA will be binding on the parties unless made in writing and signed by duly authorized .
officer which writing must contain an express reference to the JVA (clause 1.2.4 JVA).
5. On 13.12.1995, MRL was incorporated as a company under the Companies Act, 1956 and possession of the land at Wildflower Hall was handed over to MRL on 03.05.1996.
6. On 06.02.1997, registered conveyance deed was executed by the State Government in favour of MRL qua the land at Wildflower Hall.
7. On 03.05.2000, the period of four years from the date of handing over of possession expired without the hotel at Wildflower Hall being made fully commercially operational. The State Government, in its discretion, chose not to terminate the JVA, however, EIH failed to pay the penalty amount of Rs. 2 crores per annum for the period beyond four years as prescribed under Clause 10.1 of the JVA.
8. On 31.10.2000, upon purported completion of the hotel, MRL submitted application for registration of entire 85 rooms of the hotel to the Tourism Department of the State Government. The Tourism Department issued a letter dated 04.12.2000 to MRL stating that after carrying out inspection of the hotel premises it was found that out of a total of 85 rooms, ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 9 only 28 rooms were fully functional and ready for occupation.
Accordingly, the Tourism Department directed MRL to obtain .
completion certificate from Town and Country Planning Department for 28 rooms, without which registration of the rooms could not be granted (at Page 437 of Vol. II of Arbitrator's Record).
9. On 09.02.2001, the Town & Country Planning Tourism Department r to Department granted NOC to MRL. On the basis of this NOC, the granted registration certificate 30.03.2001 qua 28 rooms to MRL. Subsequently, MRL filed Writ dated Petition No. 1226/2001 seeking a mandamus to the Tourism Department for registering the additional 53 rooms in the hotel which was disposed of by this Court vide order dated 11.09.2003 by granting liberty to MRL to make a representation to the Special Area Development Authority, Kufri (hereinafter, "SADA").
Against the order dated 11.09.2003, MRL preferred Review Petition No. 35/2003 before this Court.
10. Meanwhile, since there was breach of material terms of the JVA by the Appellant and the very essence of the JVA was destroyed, the State Government issued order dated 06.03.2002 terminating the JVA with EIH inter alia on the ground that the latter had failed to make the hotel at Wildflower Hall fully commercially operational even after lapse of 6 years from the ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 10 date of execution of the JVA which expired on 30.10.2001. On 07.03.2002, Board Resolution was passed in a meeting of the .
Board of MRL wherein it was recorded that upon termination of the JVA, the shares of EIH stood transferred to the State Government and nominee Directors of EIH were ceased to hold office. EIH filed Company Petition No.12/2002 before Company Law Board (hereinafter, "CLB") impugning actions taken an arbitral tribunal pursuant to the Board Meeting dated 07.03.2002. EIH also invoked the arbitration clause under the JVA and consequently, comprising of Hon'ble Justice Y.V. Chandrachud, Hon'ble Justice R.S Pathak and Hon'ble Justice M.J. Rao was appointed.
11. On 14.11.2002, CLB allowed the company petition filed by EIH holding that Resolution passed in Board Meeting on 07.03.2002 was an act of oppression and, therefore, null and void. State Government preferred Appeal against the CLB's order dated 14.11.2002 before this Court being Appeal No.1/2003.
12. On 17.12.2003, this Court, by way of a consent order disposed of both the Review Petition as well as the Company Appeal by referring all outstanding disputes between the parties to a sole arbitrator and dissolving the pre-existing 3-member Arbitral Tribunal. Shri Justice (Retd.) R.P. Sethi, retired judge of the Hon'ble Supreme Court, was appointed as the Sole Arbitrator.
::: Downloaded on - 13/10/2022 20:03:12 :::CIS 11The terms of reference formulated by this Court by agreement of the parties consisted of a total of 7 issues/terms.
.
13. The learned Arbitrator on the basis of pleadings of the parties, on 25.04.2004, framed 16 issues, which are as under:-
1. Whether and to what extent the Joint Venture Agreement is valid and binding on the parties and is capable of conferring rights on them?
O.P. Parties
2. Whether the Claimant No. 2 was legally entitled to cancel the Joint Venture Agreement and take consequential action, which was the subject matter of adjudication by the Company Law Board and/of Company Appeal No. 1 of 2003?
O. P. Claimant No. 23. Whether the Claimant No. 1 have rightly and properly constructed the building of the hotel and the construction is in accordance and in-conformity with the sanction and permission granted by the competent authority of the State?
O.P. Claimant No. 14. Whether Claimant No. 1 in raising the construction of the entire building or any part thereof, have deviated from the sanction plan or have constructed any part of the building in excess or in violation of any sanction, validity and/or legitimately granted by the competent authority of the State?
::: Downloaded on - 13/10/2022 20:03:12 :::CIS 12 O. P. Claimant No. 25. Whether the withholding of registration of the .
additional 57 rooms and the non-inclusion of the same in the certificate of registration already granted to the Hotel, was justified and valid?
O.P. Claimant No. 26. In case it is found that the Claimant No. 1 have committed any violation in the construction of the building, whether such a violation has already been compounded, if not, whether it is compoundable, if not, whether it is compoundable and if so, by which authority?
O.P. Claimant No. 17. In case issue No. 5 is proved in affirmative, what are its consequences?
O. P. Parties
8. In case it is found, that violation have been committed in the construction of the building or any part thereof, which is not compoundable, whether coercive measures can be taken by the State?
O.P. Claimant No. 29. In case Issue No. 8 is proved whether demolition of the building, which is already constructed, is justified?
O. P. Claimant No. 2.
::: Downloaded on - 13/10/2022 20:03:12 :::CIS 1310. Whether Claimant No. 2 is guilty of lapses, inaction and non-performance of the condition of the .
contract?
O. P. Claimant No. 111. Whether the Claimant No. 1 is entitled to claim damages, if so, to what extent?
O.P. Claimant No. 112. Whether Claimant No. 2 is not entitled to claim any damages from Claimant No. 1, as per the claim filed before the Arbitral Tribunal?
r O. P. Claimant No. 113. In case, the Issue No. 12 is not proved, to what extent the Claimant No. 2 is entitled to damages, if any?
O. P. Claimant No. 214. Whether the Partnership between the parties is not workable and if so, how the same can be terminated or dissolved and what relief can be granted to the parties?
O. P. Parties
15. Whether the relief's sought in C.P. No. 12/02, Co.A. 1/03, C.W.P. 1266/01, Civil R.P. 35/03 cannot be granted to the Claimant No. 1?
O. P. Claimant No. 216. To what relief the parties are entitled?
O. P. Parties ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 14
14. After recording evidence and evaluating the same, the learned Sole Arbitrator vide his award dated 23.07.2005, .
held as follows:-
(i) That the terms of the JVA were legally valid and binding on all parties including MRL;
(ii) That although the termination order dated 06.03.2002 issued by the State Government was premature, however, the latter was legally entitled to terminate the JVA on 03.05.2002 (6 years from the date of handover of possession to MRL) as the hotel was not fully commercially operational even as on that date;
(iii) That the termination of the JVA would be effective from 17.12.2003 (date of reference order passed by this Hon'ble Court), however, MRL would have an option to continue in possession of Wildflower Hall as lessee of the State Government and lease deed would be executed by the parties if MRL chose to exercise this option;
(iv) Upon execution of the lease deed, the State Government would transfer all its shares in MRL to EIH for consolidated amount of Rs. 12 crores;
(v) In the event MRL and EIH refused to accept the leasehold arrangement, the consequences of the termination order dated 06.03.2002 and Board Resolution dated 07.03.2002 would follow and the State Government would be entitled to forthwith ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 15 takeover the management and possession of Wildflower Hall;
.
12. EIH challenged the Award dated 23.07.2005 before this Hon'ble Court by filing an application under Section 34 of the Arbitration & Conciliation Act, 1996 (hereinafter, "A&C Act") being Arb. Case No. 60 of 2005. The Ld. Single Judge, vide judgment dated 25.02.2016 was pleased to dismiss EIH's objections to the Award holding that the Arbitrator had decided on all points referred to him by this Hon'ble Court vide order dated 17.12.2003 and it could not be said that the Arbitrator had exceeded his jurisdiction.
Furthermore, it was held that the Award was not vitiated by patent illegality.
13. On 01.06.2016, the captioned appeal was filed under Section 37 of the A&C Act against the judgment dated 25.02.2016 passed by the Ld. Single Judge of this Hon'ble Court.
15. At the outset it needs to be noticed that the objections in the instant case have been filed prior to the Arbitration and Conciliation (Amendment) Act, 2015, therefore, they are required to be determined and adjudicated in terms of the ratio laid by the Hon'ble Supreme Court in Associate Builders vs. Delhi Development Authority (2015) 3 SCC
49. These objections are, thus, required to be adjudicated from the following standpoints:-
::: Downloaded on - 13/10/2022 20:03:12 :::CIS 16I. Fundamental Policy of India Law
(i) Compliance with statutes and judicial precedents .
(ii) Need for Judicial approach
(iii) Natural Justice compliance
(iv) Wednesbury reasonableness II. Interest of India III. Justice or Morality
(i) Justice
(ii) Morality r to IV. Patent Illegality
(i) Contravention of substantive law of India
(ii) Contravention of A & C Act, 1996
(iii) Contravention of the terms of the contract
16. Since, the parties have addressed the arguments issue wise, therefore, we would proceed to decide the appeal issue wise.
Submissions:
Issue No.1- Whether and to what extent the Joint Venture Agreement is valid and binding on the parties and is capable of conferring rights on them?
17. The appellants have argued that the JV Agreement was executed only between EIH and the State Govt. and as such, it could not bind MRL which had not even been incorporated on ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 17 that date. It has further been argued that the learned Arbitrator could not have invoked the provisions of the JVA in order to affect .
the rights of MRL.
18. The question as to whether a pre-incorporation contract like the JVA would bind MRL was considered elaborately by the learned Arbitrator as is evident from discussion appearing at pages 153-157 of the Paper book. Relying upon various the Specific Relief r Act, judgments, it was held that in India, by virtue of Section 19(e) of 1963, pre-incorporation executed by promoters of a company were binding on the contracts company, provided the latter ratified the contract after its incorporation.
19. The view, so taken is in consonance with the judgment rendered by a Division Bench of the Patna High Court in Commissioner of Income Tax, Bihar and Orissa vs. Bhurangiya Coal Co., AIR 1953 Pat. 298, wherein it was held that a contract of sale entered into by the promoters of a company is binding on the company which subsequently comes into existence and enters into possession of the property on the faith of that contract.
20. The view also finds support by a Division Bench judgment of the Andhra Pardesh High Court in Vali Pattabhirama Rao and another vs. Sr Ramanuja Ginning ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 18 and Rice Factor (P) Ltd and others, AIR 1984 AP 176, wherein it was held that if a promoter purchases a property from .
third party, he would be acquiring the title though apparently in his name for the benefit of the company yet to be formed. The property vests in him for the benefit of the company though his assurance is sufficient to clothe the company after its birth to claim full title. Hence, the property acquired by a promoter can
21.
r to become the property of the company by its acceptance and adoption after its birth without any need for conveyance.
Since, the MRL had accepted/ratified JVA in various documents like MoA, AoA and the conveyance deed, it has rightly been held by the learned Arbitrator that the JVA would be valid and binding on MRL as well.
22. The learned Arbitrator also held that the State Govt.
had already acted upon the JVA by conveying the land in favour of MRL. Thus, having received benefit under the JVA, MRL was estopped from claiming that it was not bound by the JVA.
23. It is settled law that a party cannot approbate and reprobate or blow hot and cold at the same time. Reference in this regard can conveniently be made to the judgment rendered by the Hon'ble Supreme Court in Cauvery Coffee Traders vs. Hornor Resources (2011) 10 SCC 420 paras. 33-36, wherein in paras 33 to 36, it was held as under:-
::: Downloaded on - 13/10/2022 20:03:12 :::CIS 1933. In R.N. Gosain v. Yashpal Dhir, AIR 1993 SC 352, this Court has observed as under:-
.
"10.Law does not permit a person to both approbate and reprobate. This principle is based on the doctrine of election which postulates that no party can accept and reject the same instrument and that "a person cannot say at one time that a transaction is valid and thereby obtain some advantage, to which he could only be entitled on the footing that it is valid, and then turn round and say it is void for the purpose of securing some other advantage."
34. A party cannot be permitted to "blow hot and cold", "fast and loose" or "approbate and reprobate". Where one knowingly accepts the benefits of a contract or conveyance or an order, is estopped to deny the validity or binding effect on him of such contract or conveyance or order. This rule is applied to do equity, however, it must not be applied in a manner as to violate the principles of right and good conscience. (Vide: Nagubai Ammal & Ors. v. B. Shama Rao & Ors., AIR 1956 SC 593; C.I.T. Vs. MR. P. Firm Maur, AIR 1965 SC 1216; Maharashtra State Road Transport Corporation v. Balwant Regular Motor Service, Amravati & Ors., AIR 1969 SC 329; P.R.Deshpande v. Maruti Balaram Haibatti, AIR 1998 SC 2979; Babu Ram v. Indrapal Singh, AIR 1998 SC 3021; Chairman and MD, NTPC Ltd. v. Reshmi Constructions, Builders & Contractors, AIR 2004 SC 1330; Ramesh Chandra Sankla & Ors. v. Vikram Cement & Ors., AIR 2009 SC 713; and Pradeep Oil Corporation v. Municipal Corporation of Delhi & Anr., (2011) 5 SCC 270).
35. Thus, it is evident that the doctrine of election is based on the rule of estoppel- the principle that one cannot approbate and reprobate inheres in it. The doctrine of estoppel by election is one of the species of estoppels in pais (or equitable estoppel), which is a rule in equity. By that law, a person may be precluded by his actions or ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 20 conduct or silence when it is his duty to speak, from asserting a right which he otherwise would have had.
.
36. In the facts and circumstances of the case, as the respondents resorted to clause 5 of the Purchase Agreement dated 28/6/2008, regarding price adjustment and the offer so made by the respondents has been accepted by the applicants and agreed to receive a particular sum offered by the respondents as a full and final settlement, the dispute comes to an end. The applicants cannot take a complete somersault and agitate the issue that the offer made by the respondents had erroneously been accepted.
24. The learned Sole Arbitrator also recorded a finding that the provisions of the JVA did not violate any of the provisions of the Companies Act, 1956 (hereinafter, "the 1956 Act"), particularly, Sections 9, 75, 100 and 108 of the Act as is evident from the perusal of pages 160-169 of the main Paper Book.
25. Section 75 of the 1956 Act mandates the filing of return with the Registrar of Companies pursuant to allotment of shares by the company whereas Section 108 provides that the company would not register a transfer of shares without an instrument of transfer duly executed by the transferor and transferee. The learned Sole Arbitrator held that the provisions in the JVA for surrender of shares by EIH in favour of the State Government upon termination of the JVA would not per se violate Sections 75 and 108 of the 1956 Act, as at best, non compliance with the said legal provisions would only invalidate the action but ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 21 not the concerned terms in the JVA. Moreover, it was found that the necessary compliances under the 1956 Act could not be .
undertaken by the State Government as proceedings were initiated by EIH soon after the termination order dated 06.03.2002. Furthermore, the learned Arbitrator relied upon judgments including Sri Gopal Jalan vs. Calcutta Stock Exchange AIR 1964 SC 250 para.9 in order to hold that
26.
r to surrender or forfeiture of shares by a company would not result in reduction of share capital.
Adverting to the award passed by the learned Sole Arbitrator on this issue, we find no reason to interfere as the JVA nowhere prescribed that the necessary compliances under the 1956 Act could be dispensed with for effectuating the compulsory transfer of shares from EIH to the State Government.
As such, it cannot be said that the JVA derogates from any of the provisions of the 1956 Act.
27. It was also submitted by the appellants before the learned Sole Arbitrator as well as before this Court that the clauses in the JVA pertaining to reversion of land in favour of the State as a consequence of termination of JVA were in the teeth of Sections 100 to 104 of the Companies Act.
28. On this issue, the learned Arbitrator held that mere reversion of the land in favour of the State Government would ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 22 not result in reduction of MRL's share capital, and therefore, Sections 100-104 were not attracted at all.
.
29. The Hon'ble Supreme Court in Shyamapada Chakraberty vs. Controller of Insurance, AIR 1962 SC 1355, held as under:-
9. Mr. Sinha then says that the transfer was bad as it involved a reduction of share capital of the transferor company. His point is that as all the assets ware gone, there was necessarily a reduction of its share capital. He says that a reduction of share capital can be effected only as provided in S. 55 and the succeeding sections of the Companies Act. This contention is, in our view, wholly misconceived. Reduction of share capital under these sections is not brought about by loss of assets. A bare perusal of the sections, we think, is enough to establish that. The disappearance of the assets of the Company, for whatever reason, does not cause a reduction of the share capital.
30. Tested on the anvil of the aforesaid exposition of law, we are clearly of the view that the findings recorded by the learned Arbitrator are in consonance with the aforesaid exposition of law.
31. Therefore, the finding of the learned Arbitrator on Issue No. 1 does not suffer from patent illegality and is not against the fundamental policy of Indian law.
Issue 2: Whether the termination of the JVA and consequential actions taken by the State Govt. were legally valid? (pgs. 169-192) ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 23 With .
Issue 5: Whether the Tourism Department ought to have granted registration for the balance 57 rooms? (pgs. 198-202) With Issue 10: Whether State Government is guilty of delay, lapses and non-performance of the JVA? (pgs. 207-09)
32. The learned Arbitrator's conclusions in respect of the abovesaid three issues are provided hereunder:
(a) On Issue 2 (pages 186-87 & 191 of the main Paper Book)- The termination of the JVA vide notice dated 06.03.2002 with effect from 30.10.2001 was premature and illegal as six years from the date of handover of possession of the property only expired on 03.05.2002. Consequently, the Board Resolution dated 07.03.2002 was also illegal. However, the evidence on record clearly shows that even as on 03.05.2002, the hotel was not fully commercially operational, and therefore, the State Government was entitled to terminate the JVA after 03.05.2002.
The JVA is declared to be terminated with effect from 17.12.2003 (date of reference order by this Court) subject to findings on Issue No.14.
::: Downloaded on - 13/10/2022 20:03:12 :::CIS 24(b) Issue No.5 (pages 199 & 202 of the main Paper Book)- In light of findings on Issue No.2 that the hotel .
was not fully commercially operational even upto 03.05.2002, the Tourism Department was entitled to withhold registration of the balance 57 rooms.
(c) Issue No.10 (page 207 of the main Paper Book)-
In light of findings on Issues No. 1 & 2, this issue was decided against the appellants herein.
33. The appellants submitted that learned Arbitrator erred in holding that the hotel was not fully commercially operational by 03.05.2002. Unconditional NOC dated 09.02.2001 issued by Town & Country Planning Department was evidence that the hotel was complete in all respects. Registration of all the hotel rooms could not be obtained due to defaults on the part of the Tourism Department for which MRL cannot be blamed.
34. It was further submitted by appellants that there was no legal requirement for completion certificate under the relevant HP local laws and the Tourism Department was wrong in insisting on the same as a condition-precedent for granting registration of the hotel.
35. It was also submitted by the appellants that the denial of registration was actuated by malice on the part of the ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 25 Tourism Department and Mr. Ashok Thakur, in particular who was serving as Secretary in the Department at the relevant time. Mr. .
Thakur, who was also the nominee Director on the Board of MRL, had proposed alteration in the business arrangement between EIH and the State Government whereby the joint-venture was to be dissolved and the land was to be granted on lease to EIH for running the hotel. Since EIH did not accede to the proposal, Mr.
36.
r to Thakur used his position in the Tourism Department to delay the grant of registration to MRL.
In this regard, it would be noticed that the learned Arbitrator, after detailed appreciation of evidence arrived at a categorical finding that the hotel was not fully commercially operational by 03.05.2002 and that the NOC dated 09.02.2001 only pertained to 28 rooms and not to the entire hotel as is evident from the pages 176-191 of the Paper Book. It is settled law that the Court under Section 34 or for that matter even under Section 37 of the Act cannot re-appreciate evidence or disturb findings of fact arrived at by the arbitrator, unless the findings are perverse.
37. Here, it may be fruitful to refer to the judgment rendered by the Hon'ble Supreme Court in Rashtriya lspat vs. Dewan Chand (2012) 5 SCC 306, wherein in paras, 43-45, it was observed as under:-
::: Downloaded on - 13/10/2022 20:03:12 :::CIS 2643. In any case, assuming that clause 9.3 was capable of two interpretations, the view taken by the arbitrator was .
clearly a possible if not a plausible one. It is not possible to say that the arbitrator had travelled outside his jurisdiction, or that the view taken by him was against the terms of contract. That being the position, the High Court had no reason to interfere with the award and substitute its view in place of the interpretation accepted by the arbitrator.
44. The legal position in this behalf has been summarized in paragaph 18 of the judgment of this court in SAIL vs. Gupta Brother Steel Tubes Ltd. (supra) and which has been referred to above. Similar view has been taken later in Sumitomo Heavy Industries Ltd. vs. ONGC Ltd. reported in [2010 (11) SCC 296] to which one of us (Gokhale J.) was a party. The observations in paragraph 43 thereof are instructive in this behalf.
45. This paragraph 43 reads as follows:
"43. .........The umpire has considered the fact situation and placed a construction on the clauses of the agreement which according to him was the correct one. One may at the highest say that one would have preferred another construction of Clause 17.3 but that cannot make the award in any way perverse. Nor can one substitute one's own view in such a situation, in place of the one taken by the umpire, which would amount to sitting in appeal. As held by this Court in Kwality Mfg. Corpn. v. Central Warehousing Corpn*. The Court while considering challenge to arbitral award does not sit in appeal over the findings and decision of the arbitrator, which is what the High Court has practically done in this matter. The umpire is legitimately entitled to take the view which he holds to be the correct one after considering the material before him and after interpreting the provisions of the agreement. If he does so, the decision of the umpire has to be accepted as final and binding."::: Downloaded on - 13/10/2022 20:03:12 :::CIS 27
38. We may also refer to another judgment of the Hon'ble Supreme Court in Associate Builders' (supra), .
wherein while reiterating the legal position, it was held as under:-
33. It must clearly be understood that when a court is applying the "public policy" test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score[1]. Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts. In P.R. Shah, Shares & Stock Brokers (P) Ltd. v. B.H.H. Securities (P) Ltd., (2012) 1 SCC 594, this Court held:
"21. A court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or reappreciating the evidence. An award can be challenged only under the grounds mentioned in Section 34(2) of the Act. The Arbitral Tribunal has examined the facts and held that both the second respondent and the appellant are liable. The case as put forward by the first respondent has been accepted. Even the minority view was that the second respondent was liable as claimed by the first respondent, but the appellant was not liable only on the ground that the arbitrators appointed by the Stock Exchange under Bye-law 248, in a claim against a non-member, had no jurisdiction to decide a claim against another member. The finding of the majority is that the appellant did the transaction in the name of the second respondent and is therefore, liable along with the second respondent. Therefore, in the absence of any ground under Section 34(2) of the Act, it is not possible to re-examine the facts to find out whether a different decision can be arrived at."::: Downloaded on - 13/10/2022 20:03:12 :::CIS 28
39. In the instant case, learned Arbitrator has copiously referred to correspondence between MRL, Tourism Department .
and TCP which disclosed that pursuant to an inspection conducted by Tourism Department on 04.12.2000, only 28 rooms were fully functional.
40. Moreover, even after grant of the unconditional NOC on 09.02.2001, MRL issued letters dated 18.04.2001 (page 482 Vol. IIB) and 08.11.2001 to (page 484 Vol. IIB) seeking amendment in the registration certificate as additional rooms had become ready and functional. Therefore, MRL's own correspondence shows that as on 09.02.2001, the entire set of 85 rooms in the hotel were not ready for occupation by guests and as such, the said NOC was limited to only 28 rooms.
41. As per Section 10 of the HP Registration of Tourist Trade Act, every hotel must obtain a registration certificate for operating as a hotel in the State. Under Section 12(g), the promoter of the hotel must furnish proof that the hotel has been completed as per HP Town and Country Planning Act and other relevant laws. Therefore, MRL was statutorily bound to obtain NOC/completion certificate for the entire hotel, without which it could not claim grant of registration for all the 85 rooms.
42. The other submission of the appellants that Wildflower Hall being a hotel run by the government would be ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 29 exempted from the provisions of the Act under Section 2 thereof only needs to be stated to be rejected. Evidently, the hotel was .
being run by MRL which is a separate and distinct entity from the State Government.
43. In coming to such conclusion, we are duly fortified by the observations made by the Hon'ble Supreme Court in Western Coalfields vs. S.A.D. Authority (1982) 1 SCC 125, wherein it was held that even if the entire share capital of the appellant companies therein had been subscribed by the Government of India, it still could not be predicated that the companies themselves are owned by the Government of India. It was further held that the companies, which were incorporated under the Companies Act, have a corporate personality of their own, distinct from the Government of India. The lands and buildings are vested in and owned by the companies; the Government of India only owns the share capital.
44. It shall be apt to reproduce the relevant observations as contained in paras 21 to 23, which read thus:-
21. The third contention of the Attorney General flows from the provisions of article 285(1) of the Constitution which says that the property of the Union shall, save in so far as Parliament may by law otherwise provide, be exempt from all taxes imposed by a State or by any authority within a State. Section 127A(2) of the Madhya Pradesh Municipalities Act and section 136 of the Madhya Pradesh Municipal Corporation Act also provide that the ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 30 property tax shall not be leviable, inter alia, on "buildings and lands owned by or vesting in the Union Government".
.
Relying on these provisions, it is contended by the Attorney General that since the appellant companies are wholly owned by the Government of India, the lands and buildings owned by the companies cannot be subjected to property tax. The short answer to this contention is that even though the entire share capital of the appellant companies has been subscribed by the Government of India, it cannot be predicated that the companies themselves are owned by the Government of India. The companies, which are incorporated under theCompanies Act, have a corporate personality of their own, distinct from that of the Government of India. The lands and buildings are vested in and owned by the companies: the Government of India only owns the share capital. In Rustom Cavasjee Cooper v. Union of India (The Banks Nationalisation case) it was held:
"A company registered under the Companies Act is a legal person, separate and distinct from its individual members. Property of the Company is not the property of the shareholders. A shareholder has merely an interest in the Company arising under its Articles of Association, measured by a sum of money for the purpose of liability, and by a share in the profit."
22. In Heavy Engineering Mazdoor Union v. The State of Bihar & Ors., the Heavy Engineering Corporation Limited was incorporated under the Companies Act and its entire share capital was contributed by the Central Government. It was therefore a Government Company under section 617 of the Companies Act. On the question as to whether the Corporation carried on an industry under the authority of the Central Government within the meaning of section 2(a) of the Industrial Disputes Act, 1947, it was held by this ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 31 Court that an incorporated company has a separate existence and the law recognises it as a juristic person, .
separate and distinct from its members. The mere fact that the entire share capital of the respondent company was contributed by the Central Government and the fact that all its shares were held by the President and certain officers of the Central Government did not make any difference to that position.
23. The decision of this Court in the Andhra Pradesh State Road Transport Corporation v. The Income-tax Officer & Anr. puts the matter beyond all doubt. In that case, the Andhra Pradesh Road Transport Corporation claimed exemption from taxation under article 289 of the Constitution by which, the property and income of a State is exempt from union taxation. This Court, while rejecting the Corporation's claim, held that though it was wholly controlled by the State Government it had a separate entity and its income was not the income of the State Government. Gajendragadkar, C. J., while speaking for the Court, referred to the judgment of Lord Denning in Tamlin v.
Hansaford in which the learned Judge observed:
"In the eye of the law, the corporation is its own master and is answerable as fully as any other person or corporation. It is not the Crown and has none of the immunities or privileges of the Crown. Its servants are not civil servants, and its property is not Crown property. It is as much bound by Acts of Parliament as any other subject of the King. It is, of course, a public authority and its purposes, no doubt, are public purposes, but it is not a government department nor do its powers fall within the province of government".
In Pennington's Company Law, 4th Edition, pages 50-51, it is stated that there are only two decided cases where the court has disregarded the separate legal entity of a company and that was done because the company was ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 32 formed or used to facilitate the evasion of legal obligations. The learned author, after referring to English .
and American decisions, has summed up the position in the words of an American Judge, Sanborn, J. to the effect that as a general rule, a corporation will be looked upon as a legal entity and an exception can be made "when the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud, or defend crime", in which case, "the law will regard the corporation as an association of persons". In cases such as those before us, there is no scope for applying the doctrine of lifting the veil in order to have regard to the realities of the situation. The appellant companies were incorporated under the Companies Act for a lawful purpose. Their property is their own and it vests in them. Under section 5(1) of the Coal Mines (Nationalisation) Act, 26 of 1973, which applies in the instant case, the right title and interest of a nationalised coal mine vest, by direction of the Central Government, in the Government company. If the lands and building on which respondent 1 has imposed the property tax cannot be regarded as the property of the Central Government for several other purposes like attachment and sale, there is no reason why, for taxing purposes, the property can be treated as belonging to that Government as distinct from the company which has a juristic personality.
45. At this stage, another submission of the appellants to the effect that the composition of the Board of Director tilted in favour of the Government and, therefore, it was exempted from the provision of the Act as aforesaid can conveniently be rejected in view of the observations made by the Hon'ble Supreme Court ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 33 in Western Coalfiled's (Supra), more particularly, para-21 thereof, which stands extracted above.
.
46. Furthermore, as per Clause 5.8 of the JVA (Page 10 of Vol.IIA of Arbitrator's record), the responsibility of managing the hotel and providing all technical services was that of EIH itself. Clause 5.8 of the JVA, reads thus:-
5.8 It is agreed between the parties that the party of the SECOND PART or its Associate companies shall:
(a) provide all technical services for ensuring the construction of the Hotel complex;
(b) render technical assistance/services for the management and making the Hotel commercially operational;
(c) market the Hotel in India and abroad with good will of the party of the SECOND PART and or its associate companies:
and shall further provide services advice and technical know-how like data, formulae, information, knowledge, guidance, expertise and skill; or permit use of its brand name and good- will; necessary and required for reconstruction, setting-up, commissioning, marketing and running, in business like manner, the Five Star Deluxe Hotel Resort at the said Wild Flower Hall premises and shall not charge any royalty, money for consideration, in cash or kind, either from the party of the FIRST PART or fro the Joint Venture Company except the consideration as ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 34 agreed by the parties in this Agreement. PROVIDED ALWAYS that out of pocket expenses .
incurred for the specific promotion of the Wild Flower Hall Hotel shall be reimbursed by the JVC, subject to the approval of the Board of Directors of the JVC. It is clearly understood that the provision of the technical services by the party of the SECOND PART to the Joint Company at no additional cost is the basis of this agreement to be entered into between the parties inter alia and with the proposed Joint Company either individually or together.
47. It would be clearly evident from the perusal of the aforesaid Clause that the responsibility of managing the hotel and providing all technical assistance/service was that of the EIH itself, therefore, the exemption under Section 2 would otherwise not be applicable at all.
48. Apart from the above, we notice that the learned Arbitrator also relied upon the books of MRL, which disclosed that in 2002, huge sums of money were spent on construction work at the hotel site, fixtures and fittings, etc. Moreover, the Arbitrator extracted the admissions of the appellants' own witnesses during cross-examination where they had admitted that construction work was ongoing even upto August, 2002.
49. It is settled law that admission is the best evidence and we need not to multiply the precedents on the subject and ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 35 reference to one of the judgments of the Hon'ble Supreme Court in Avtar Singh vs. Gurdial Singh (2006) 12 SCC 552, will .
suffice wherein the law has been succinctly laid down as follows:-
8. Admission, it is well known, forms the best evidence. It may be that admission does not create any title. but the nature of the land can form subject matter of admission.
9. Section 58 of the Evidence Act postulates that things admitted need not be proved.
50. Thus, it cannot be said that the learned Arbitrator's finding is based on no evidence or in ignorance of vital evidence.
Clause 3(xiv) (at page 32 of Vol. IIA) of the Articles of Association defines "fully commercially operational" of the Hotel on commercial scale, which reads as under:-
(xiv) Fully commercially operational The operation of the Hotel on commercial scale in accordance with international standards of service as a Five Star Deluxe hotel with all and complete customer facilities for the total capacity envisaged for the hotel when fully constructed.
51. Since, the Hotel was not "fully commercially operational" as defined in the Articles of Association, more particularly Clause 3(xiv), on 03.05.2002, the leaned Arbitrator rightly held that the State Government had a right to terminate the JVA.
::: Downloaded on - 13/10/2022 20:03:12 :::CIS 3652. As regards the issue of malice on the part of Mr. Ashok Thakur in delaying the registration of the hotel, the same .
was raised for the first time during oral arguments by the appellants. No pleadings to this effect were made in the Statement of Claim (SoC) filed by EIH nor was any issue framed on this aspect by the learned Arbitrator. The learned Arbitrator in the Award also recorded that no mala fides had been attributed
53.
r to to the State or against any official (at page 209 of Main Appeal Paperbook).
Apart from the above, it would be noticed that in the writ petition filed by MRL seeking mandamus for registration of the hotel, Mr. Thakur was not even impleaded as a party. It is settled law that the standard for proving mala fides on the part of government officer is extremely high and the allegation must be supported by proper pleadings and the concerned officer must be impleaded as a party.
54. Reference in this regard can conveniently be made to the judgment of the Hon'ble Supreme Court in Indian Railway Construction vs. Ajay Kumar (2003) 4 SCC 579, wherein the Hon'ble Supreme Court after taking into consideration various judgments held that he who seeks to invalidate or nullify any act or order must establish the charge of bad faith, an abuse or a misuse by the authority of its powers. It was further held that a ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 37 specific allegation of malafides that too against specific person have to be set out and the burden of establishing the malafides .
is on who alleged it.
55. It shall be apt to reproduce relevant observations as contained in paras 22 to 24, which read thus:-
22. Neither learned Single Judge nor the Division Bench has examined the question as to practicability or otherwise of holding the enquiry in the correct perspective. They have proceeded on the footing as if the order was mala fide; even when there was no specific allegation of mala fides and without any specific person against whom mala fides were alleged being impleaded in the proceedings. Except making a bald statement regarding alleged victimization and mala fides no specific details were given.
23. Doubtless, he who seeks to invalidate or nullify any act or order must establish the charge of bad faith, an abuse or a misuse by the authority of its powers. While the indirect motive or purpose, or bad faith or personal ill-
will is not to be held established except on clear proof thereof, it is obviously difficult to establish the state of a man's mind, for that is what the employee has to establish in this case, though this may sometimes be done. The difficulty is not lessened when one has to establish that a person apparently acting on the legitimate exercise of power has, in fact, been acting malafide in the sense of pursuing an illegitimate aim. It is not the law that mala fide in the sense of improper motive should be established only by direct evidence. But it must be discernible from the order impugned or must be shown from the established surrounding factors which preceded ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 38 the order. If bad faith would vitiate the order, the same can, in our opinion, be deduced as a reasonable and .
inescapable inference from proved facts. (See S. Pratap Singh v. The State of Punjab, [1964] 4 SCR 733). It cannot be overlooked that burden of establishing mala fides is very heavy on the person who alleges it. The allegations of mala fides are often more easily made than proved, and the very seriousness of such allegations demand proof of a high order of credibility. As noted by this Court in R.P. Royappa v. State of Tamil Nadu and Anr., AIR (1974) SC 555, Courts would be slow to draw dubious inferences from incomplete facts placed before it by a party, particularly when the imputations are grave and they are made against the holder of an office which has a high responsibility in the administration.
24. The approach of the High Court, therefore, was not proper. But at the same time, the reasons which weighed with the disciplinary authority to dispense with enquiry equally do not appear to be proper.
56. The appellants also attacked the arbitral award by submitting that even after holding the termination order dated 06.03.2002 to be premature and consequential actions to be illegal, learned Arbitrator erroneously went on to hold that JVA stood terminated w.e.f. date of High Court's reference order viz.
17.12.2003.
57. It needs to be noticed that although the learned Arbitrator held that the termination order was premature, nevertheless, he went on to hold that the State Govt. had a right to terminate the JVA after 03.05.2002 (page 191). Since delay ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 39 beyond period of six years entailed automatic termination under the JVA without any requirement for any positive act on the part .
of the State Government taking the case of the appellant at its best, the JVA stood terminated as on 03.05.2002. However, by way of abundant caution, the learned Arbitrator in his wisdom still held that the termination would be effective from 17.12.2003. The postponing of the date of termination actually works for the benefit of the Appellant and it would, therefore, be absurd for the Appellant to assail this finding of the learned Arbitrator. Merely because the learned Sole Arbitrator has made the termination effective from 17.12.2003 would not make his decision upholding the termination illegal as is otherwise argued by the appellants.
58. The appellants also argued that there were various delays on the part of the State Government which contributed to delay in completion of the project. It was submitted by the appellants that these delays should be excluded for the purpose of calculating the period of 6 years under Clause 10.1(b) of the JVA. For instance, conveyance deed was executed only on 06.02.1997 ,i.e. almost a year after handover of possession to MRL, revised building plans were sanctioned only on 08.05.2001 even though application for revision of plans was submitted by MRL on 03.06.1998.
::: Downloaded on - 13/10/2022 20:03:12 :::CIS 4059. In this regard, it would be noticed that as per the strict language of Clause 10.1(b) of the JVA, the government was .
entitled to terminate the JVA if the hotel was not made commercially operational within four years "due to any reasons".
The only period that possibly could have been excluded is the time taken for incorporation of MRL. The categorical language of Clause 10.1(b) makes it more than evident that no other period was sought to be excluded. Since the JVA was entered into between the parties having equal bargaining power, it ought to be interpreted strictly.
60. In drawing such conclusion, we are duly fortified by the judgment rendered by the Hon'ble Supreme Court in Rajasthan State Industrial Development & Investment Corporation vs. Diamond & Gem Corporation Ltd. (2013) 5 SCC 470, wherein it was held that contract being a creature of an agreement between two or more parties has to be interpreted giving literal meaning unless there is some ambiguity therein. It is to be interpreted in such a way that the terms may not be varied. The contract has to be interpreted without giving any outside aid and has to be construed strictly altering the nature of the contract, as it may affect the interest of either of the parties adversely.
::: Downloaded on - 13/10/2022 20:03:12 :::CIS 4161. It shall be apt to reproduce relevant observations as contained in paras 23 & 24, which read as under:-
.
23. A party cannot claim anything more than what is covered by the terms of contract, for the reason that contract is a transaction between the two parties and has been entered into with open eyes and understanding the nature of contract. Thus, contract being a creature of an agreement between two or more parties, has to be interpreted giving literal meanings unless, there is some ambiguity therein. The contract is to be interpreted giving the actual meaning to the words contained in the contract and it is not permissible for the court to make a new contract, however is reasonable, if the parties have not made it themselves. It is to be interpreted in such a way that its terms may not be varied. The contract has to be interpreted without giving any outside aid. The terms of the contract have to be construed strictly without altering the nature of the contract, as it may affect the interest of either of the parties adversely. (Vide: United India Insurance Co. Ltd. v. Harchand Rai Chandan Lal, AIR 2004 SC 4794;Polymat India P. Ltd. & Anr. v. National Insurance Co. Ltd. & Ors., AIR 2005 SC 286).
24. In DLF Universal Ltd. & Anr. v. Director, T. and C. Planning Department Haryana & Ors., AIR 2011 SC 1463, this court held:
"13. It is a settled principle in law that a contract is interpreted according to its purpose. The purpose of a contract is the interests, objectives, values, policy that the contract is designed to actualise. ?It comprises joint intent of the parties. Every such contract expresses the autonomy of the contractual parties' private will. It creates reasonable, legally protected expectations between the parties and reliance on its results. Consistent with the character of purposive interpretation, the court is required to determine the ultimate purpose of a contract primarily by the joint intent of the parties at the time ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 42 the contract so formed. It is not the intent of a single party; it is the joint intent of both parties and the joint intent of the parties is to be discovered from the .
entirety of the contract and the circumstances surrounding its formation.
14. As is stated in Anson's Law of Contract:
"a basic principle of the Common Law of Contract is that the parties are free to determine for themselves what primary obligations they will accept...Today, the position is seen in a different light. Freedom of contract is generally regarded as a reasonable, social, ideal only to the extent that equality of bargaining power between the contracting parties can be assumed and no injury is done to the interests of the community at large."
15. The Court assumes:
"that the parties to the contract are reasonable persons who seek to achieve reasonable results, fairness and efficiency...In a contract between the joint intent of the parties and the intent of the reasonable person, joint intent trumps, and the Judge should interpret the contract accordingly."
62. Therefore, the findings of the learned Arbitrator on Issues No. 2, 5, and 10 do not suffer from patent illegality and are not against the fundamental policy of Indian law.
Issue No.14- Whether the partnership between the parties is not workable and if so, how the same can be terminated or dissolved and what relief can be granted to the parties?
With Issue No. 16- To what reliefs are the parties entitled?
63. The appellants submitted that the arrangement prescribed by the learned Arbitrator while deciding Issue No. 14 ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 43 (at page 219) whereby MRL has been converted into a lessee and EIH has been directed to acquire the entire shareholding of .
the State Government for a sum of Rs. 7.5 crores is beyond his jurisdiction. It was the case of the appellants that the terms of reference as per the order dated 17.12.2003 only permitted, the learned Arbitrator to indicate the means for parting of ways and he could not have pronounced a binding decision on this aspect.
64. In this regard, it would be necessary to refer to reference order, whereby this Court had sought to refer all outstanding disputes between the parties to an arbitrator in order to bring a quietus once and for all to the multifarious litigation between the parties. The terms of reference formulated by the High Court were based on consent of both the parties.
Therefore, it cannot be said that the arbitrator was not empowered to decide the terms of separation between the parties when the intent of both the parties at the time of the reference order was clearly that the arbitrator should decide everything in order to prevent future rounds of litigation.
65. Arbitration is an adjudicatory process whereunder Arbitrator is not called to give merely an opinion, rather he renders a decision on a given issue termed as Award which is enforceable as a decree.
::: Downloaded on - 13/10/2022 20:03:12 :::CIS 4466. The appellants would vehemently argue that the learned Arbitrator was only to indicate the reasons and not .
adjudicate, as has been done, therefore, the award stands vitiated. However, we find no force in this contention that if the appellant thought that the learned Arbitrator had no jurisdiction to decide this issue, it should have filed an application under Section 16 before the learned Arbitrator, however, this was not done. Objection to the learned Arbitrator's jurisdiction cannot be raised at belated stage as per Section 34 or Section 37 proceedings.
67. Moreover, the submissions made by Appellant itself before the learned Arbitrator disclosed that Appellant had acknowledged learned Arbitrator's jurisdiction to decide terms of parting of ways, even if the terms were not strictly in accordance with JVA. This is clearly evident from the fact that the submission of Appellant has been recorded in the award that State Government may be awarded Rs. 7.5 crores in consideration for giving up all stake and interest in the land as well as MRL (page
218). Furthermore, the Appellant EIH in its Statement of Claim (SoC) before the learned Arbitrator prayed for exercise of powers under Section 402 of the Companies Act, 1956 in order to direct the State Government to sell its entire shareholding in MRL to EIH (prayer (1) at page 87 of Main Appeal Paper Book).
::: Downloaded on - 13/10/2022 20:03:12 :::CIS 4568. We otherwise have no hesitation in observing that while deciding Issue No.14, the learned Arbitrator sought to do .
justice between the parties by avoiding expulsion of the Appellant from the business of running the hotel and demolition of the hotel. By virtue of the Award, the Appellant has in fact been saved from the harsher consequences of the termination order passed by the State Government which would have
69.
r to entailed reversion of the land as well as acquisition of all the shares of the appellants in MRL.
Furthermore, the rent fixed by the learned Arbitrator while conferring leasehold rights upon the Appellant was extremely reasonable and based on the bids submitted by Appellant and other parties during the tendering process.
Therefore, it cannot be said that the fixation of rent by the arbitrator was arbitrary.
70. The learned Arbitrator listed a number of factors on the basis of which he concluded that the relationship between the parties was damaged beyond repair and parting of ways was the only solution ( at pages 213-15). Among these was the fact that the State's shareholding had been diluted down to 21% which was not done in accordance with law (Finding at page
214) and that MRL had paid substantial amounts towards ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 46 technical fees to sister concerns of EIH in derogation of the provisions of the JVA.
.
71. It was next submitted by the appellants that the arrangement prescribed by the learned Arbitrator while deciding Issue No. 14 is in derogation of the terms of the JVA and amounts to rewriting the JVA. It was argued that the learned Arbitrator has decided the matter de hors the terms of the contract between the parties and ex debitojustitae.
72. In support of their submissions, the appellants have relied upon the judgment of the Hon'ble Supreme Court in Food Corporation of India vs. Chandu Construction and Another (2007) 4 SCC 697, more particularly, the observations made in paragraphs 11 to 15, which read as under:-
11. It is trite to say that the arbitrator being a creature of the agreement between the parties, he has to operate within the four corners of the agreement and if he ignores the specific terms of the contract, it would be a question of jurisdictional error on the face of the award, falling within the ambit of legal misconduct which could be corrected by the Court. We may, however, hasten to add that if the arbitrator commits an error in the construction of contract, that is an error within his jurisdiction. But, if he wanders outside the contract and deals with matters not allotted to him, he commits a jurisdictional error (see:
Associated Engineering Co. Vs. Government of Andhra Pradesh and Anr.(1991) 4 SCC 93 and Rajasthan State Mines & Minerals Ltd. Vs. Eastern Engineering Enterprises & Anr.(1999) 9 SCC 283).::: Downloaded on - 13/10/2022 20:03:12 :::CIS 47
12. In this context, a reference can usefully be made to the observations of this Court in M/s. Alopi Parshad and .
Sons, Ltd. Vs. Union of India AIR 1960 SC 588, wherein it was observed that the Indian Contract Act does not enable a party to a contract to ignore the express covenants thereof, and to claim payment of consideration for performance of the contract at rates different from the stipulated rates, on some vague plea of equity. The Court went on to say that in India, in the codified law of contracts, there is nothing which justifies the view that a change of circumstances, "completely outside the contemplation of parties" at the time when the contract was entered into will justify a Court, while holding the parties bound by the contract, in departing from the express terms thereof. Similarly, in The Naihati Jute Mills Ltd. Vs. Khyaliram Jagannath AIR 1968 SC 522, this Court had observed that where there is an express term, the Court cannot find, on construction of the contract, an implied term inconsistent with such express term.
13. In Continental Construction Co. Ltd. Vs. State of Madhya Pradesh (1988) 3 SCC 82, it was emphasised that not being a conciliator, an arbitrator cannot ignore the law or misapply it in order to do what he thinks is just and reasonable. He is a tribunal selected by the parties to decide their disputes according to law and so is bound to follow and apply the law, and if he does not, he can be set right by the court provided his error appears on the face of the award.
14. In Bharat Coking Coal Ltd. Vs. Annapurna Construction (2003) 8 SCC 154 while inter alia, observing that the arbitrator cannot act arbitrarily, irrationally, capriciously or independent of the contract, it was observed, thus:
::: Downloaded on - 13/10/2022 20:03:12 :::CIS 48"22. There lies a clear distinction between an error within the jurisdiction and error in excess of .
jurisdiction. Thus, the role of the arbitrator is to arbitrate within the terms of the contract. He has no power apart from what the parties have given him under the contract. If he has travelled beyond the contract, he would be acting without jurisdiction, whereas if he has remained inside the parameters of the contract, his award cannot be questioned on the ground that it contains an error apparent on the face of the record."
15. Therefore, it needs little emphasis that an arbitrator derives his authority from the contract and if he acts in disregard of the contract, he acts without jurisdiction. A deliberate departure from contract amounts to not only manifest disregard of his authority or a misconduct on his part, but it may tantamount to a mala fide action [Also see: Associated Engineering Co. Vs. Government of Andhra Pradesh & Anr. (supra)].
73. It is further argued by learned counsel for the appellants that when this Court could not have re-written the contract, then there was no question of the arbitrator having re-
written the same.
74. In this regard, we need to refer to Para 6 of the Terms of Reference as framed by the High Court in its order dated 17.12.2003, which clearly authorized the learned Sole Arbitrator to prescribe terms for parting of ways "in public interest" and "in ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 49 the interests of the parties". "Public interest" has been defined in Black's Law Dictionary as follows:
.
"Something in which the public, the community at large, has some pecuniary interest, or some interest by which their legal rights or liabilities are affected."
75. A perusal of Para 6 of the Terms of Reference discloses that a very wide jurisdiction had been conferred upon the learned Sole Arbitrator by this Court with consent of both the parties. The very fact that the Arbitrator was authorized to decide in "public interest" itself shows that very wide powers were given to the learned Arbitrator to resolve the various disputes between the parties in order to give quietus to the litigation. Clearly the parties as well as the High Court recognized that since the property in dispute, namely Wildflower Hall, was extremely vast and formed part of the proud heritage of the people of Himachal Pradesh, the public interest would also had to be kept in mind by the Arbitrator while deciding the dispute in order to ensure that the property was not dissipated.
Furthermore, this would also be in accordance with the duty of the State Government as a trustee of all natural resources/property in the State, to use the property for the benefit and welfare of the people of the State.
76. We may at this stage note that from the date of the JVA, the State Government has barely earned any revenue from ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 50 the hotel. Only in 2014, MRL had offered to pay dividend of Rs.
49 lakhs to the State Government which was deposited in a .
separate account by the State Government as per order dated 08.12.2014 passed by the learned Single Judge of this Court owing to the pending disputes between the parties. The said dividend is a meager return for the State Government, considering the length of time for which MRL has occupied
77. Alternatively, r to Wildflower Hall which is an extremely valuable property.
the learned Sole formulated an alternate award (at page 220) wherein it has Arbitrator also been provided that in the event EIH fails to abide by the leasehold arrangement prescribed in the award (at page 219), the Board Resolution dated 07.03.2002 would revive and the consequences of termination as prescribed in Clause 11 of the JVA would follow. Therefore, at the very least, the alternate award cannot be said to be in the teeth of the JVA. If EIH chooses to treat the Arbitrator's leasehold arrangement as merely a suggestion and disregards the same, then the alternate award would be applicable. In such a case also, EIH cannot raise a grievance that the award is in derogation of the contractual terms.
78. It was further submitted by the appellants that the learned Arbitrator could not have directed that the land would ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 51 revert to the State Government upon termination of the JVA without cancelling the registered conveyance deed in favour of .
MRL as per Section 31 of the Specific Relief Act.
79. Reliance in this regard was placed by the appellants on the judgment of the Hon'ble Supreme Court in Thota Ganga Laxmi & Anr. vs. Govt. of Andhra Pradesh (2010) 15 SCC 207, wherein in paras 2 to 5, it was observed as under:-
2. It appears that the father of the appellants purchased the plot in question from Respondent 4 by a registered sale deed dated 21-6-1983 and since then the appellants have been in possession and enjoyment of the said property. Subsequently, it appears that the fourth respondent purported to get the said sale deed cancelled unilaterally, executing the cancellation deed dated 4-8-2005 and the same was registered by the third respondent without any notice to the appellants.
3. A writ petition was filed seeking declaration that the cancellation deed is illegal and that has been disposed of by the impugned judgment holding that the appellants should approach the civil court.
4. In our opinion, there was no need for the appellants to approach the civil court as the said cancellation deed dated 4.8.2005 as well as registration of the same was wholly void and non est and can be ignored altogether. For illustration, if A transfers a piece of land to B by a registered sale deed, then, if it is not disputed that A had the title to the land, that the title passes to B on the registration of the sale deed (retrospectively from the date of the execution of the same) and B then becomes the owner of the land. If A wants to subsequently get that sale deed cancelled, he has to file a civil suit for cancellation or else he can request B to sell the land back to A ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 52 but by no stretch of imagination, can a cancellation deed be executed or registered. This is unheard of in law.
.
5. In this connection, we may also refer to Rule 26(k)
(i) relating to Andhra Pradesh under Section 69 of the Registration Act, 1908, which states:
"(i) The registering officer shall ensure at the time of preparation for registration of cancellation deeds of previously registered deed of conveyances on sale before him that such cancellation deeds are executed by all the executant and claimant parties to the previously registered conveyance on sale and that such cancellation deed is accompanied by a declaration showing natural consent or orders of a competent Civil or High Court or State or Central Government annulling the transaction contained in the previously registered deed of conveyance on sale:
Provided that the registering officer shall dispense with the execution of cancellation deeds by executant and claimant parties to the previously registered deeds of conveyances on sale before him if the cancellation deed is executed by a Civil Judge or a government officer competent to execute government orders declaring the properties contained in the previously registered conveyance on sale to be government or assigned or endowment lands or properties not registerable by any provision of law."
A reading of the above Rule also supports the observations we have made above. It is only when a sale deed is cancelled by a competent court that the cancellation deed can be registered and that too after notice to the parties concerned. In this case, neither is there any declaration by a competent court nor was there any notice to the parties. Hence, this Rule also makes it clear that both the cancellation deed as well as registration thereof were wholly void and non est and meaningless transactions.
80. Reliance was also placed on the another judgment of the Hon'ble Supreme Court in Satya Pal Anand vs. State of Madhya Pradesh (2016) 10 SCC 767, wherein it was again ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 53 held that the remedy of cancellation of registration of document after its registration is only before the Civil Court alone and none .
of the authorities/officers under the Registration Act have power in this regard.
81. It was also argued on behalf of the appellants that once the registered conveyance deed stood executed in favour of MRL, any condition in the JVA or the conveyance deed providing for reversion of the property would be in violation of Sections 10 and 11 of the Transfer of Property Act and hence void.
82. We have considered the submission and find that in the instant case the conveyance deed was a conditional conveyance under Section 31 of the Transfer of Property Act which provides for conveyances where the transferred interest in the property reverts to the transferor when a particular uncertain event happens or does not happen. This is clearly borne out from a perusal of Clause 3 of the Conveyance Deed (at page 139 of Vol. IIA) which states that the same would be "subject to" the provisions of the JV Agreement. Clause 11.2 of the JV Agreement (at page 22 of Vol. IIA) provides for reversion of the property in favour of the State Government as a consequence of termination. Therefore, since the conveyance deed was "subject to" the JVA, the provision regarding reversion in the JVA would be ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 54 deemed to have been incorporated as a condition of transfer in the conveyance deed.
.
83. In taking this view, we are duly fortified by the judgment rendered by the Hon'ble Supreme Court in Petroleum & Natural Gas Regulatory Board vs. Indraprastha Gas Limited (2015) 9 SCC 209, more particularly, the observations contained in paras 23 and 24, which read as under:-
23. At this stage, it is necessary to appositely understand the said expression. In The Commissioner of Wealth Tax, Andhra Pradesh, Hyderabad v. Trustees of H.E.H. Nizam's Family, 1977 3 SCC 362, this Court was dealing with the expression "subject to" in the context of the Wealth Tax Act, 1957. Section 3 of the said Act imposed the charge of wealth tax subject to other provisions of the Act. In that context, the Court opined that Section 3 has to be made expressly subject to Section 21 and it must yield to that Section insofar as the latter makes a special provision for assessment of a trustee of a trust. In Ashok Leyland Ltd. v.
State of T.N. and Another, 2004 3 SCC 1, it has been held that "subject to" is an expression whereby limitation is expressed. In K.R.C.S. Balakrishna Chetty and Sons & Co. v. The State of Madras AIR 1961 SC 1152, this Court was interpreting Section 5 of the Madras General Sales Tax Act, 1939 wherein the Legislature had appended the expression "subject to" and while interpreting the said words, the Court ruled that they are meant to effectuate the intention of law and the correct meaning of the expression is "conditional one".
24. In South India Corporation (P) Ltd. v. Secretary, Board of Revenue, Trivandrum and another, AIR 1964 SC 207, the Constitution Bench ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 55 has ruled that the expression "subject to" in the context convey the idea of a provision yielding place to another .
provision or other provision to which it was made subject to. In B.S. Vadera and another v. Union of India and others AIR 1969 SC 118, this Court while dealing with the expression "any rule so made shall have effect, subject to provisions of any Act occurring in the proviso to Article 309" ruled that:-
"24. It is also significant to note that the proviso to Article 309, clearly lays down that 'any rules so made shall have effect, subject to the provisions of any such Act'. The clear and unambiguous expressions, used in the Constitution, must be given their full and unrestricted meaning, unless hedged- in, by any limitations. The rules, which have to be 'subject to the provisions of the Constitution, shall rhave effect, 'subject to the provisions of any such Act'. That is, if the appropriate legislature has passed an Act, under Article 309, the rules, framed under the proviso, will have effect,-subject to that Act; but, in the absence of any Act, of the appropriate legislature, on the matter, 'in our opinion, the rules, made by the President, or by such person as he may direct, are to have full effect, both prospectively, and, retrospectively. Apart from the limitations, pointed out above, there is none other, imposed by the proviso to Article 309, regarding the ambit of the operation of such-rules."
84. In the instant case, the failure of the Appellant to make the hotel fully commercially operational by 03.05.2002 resulted in automatic reversion of the property to the State Government. The Appellant ceased to enjoy any interest in the said property after 03.05.2002.
85. In taking this view, we are duly supported by the judgment of the Hon'ble Supreme Court in Indu Kakkar vs. Haryana State Industrial Development Corporation 1999 ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 56 (2) SCC 37, wherein the respondent-Corporation allotted certain land subject to the condition that allottee shall complete .
construction of industrial unit on the plot within a period of two years. Upon failure to comply with the condition, the respondent
- Corporation resumed the land. The allottee filed a civil suit challenging the resumption order during the pendency of which he bought the right in the plot. Now, the question was whether the failure on the part of the allottee to raise construction resulted in automatic resumption of the property. Holding the said contention, it was held as under:-
2. M/s York Printers filed the suit on the following facts:
On 28.7.1997 a plot of land admeasuring approximately 450 Sq. metres has been allotted to M/s York Printers ( which will hereinafter be referred to as the allottee) as per a letter of allotment issued by Haryana State Industrial Development Corporation United Corporation"
for short). The said plot is situated within the industrial complex at Dundahera in Gurgaon District (Haryana). The price for such allotment was tentatively fixed as Rs.l3,455/- and the allottee was put in possession thereof. On completion of remittance of the entire amount payable by the allottee a registered Deed of Conveyance was executed on 10.12.1982 by the Corporation in favour of the allottee. In fact the said plot was transferred by Haryana Urban Development Authority (MUDA its acronym) in favour of the Corporation for facilitating the objects and purposes of Haryana Urban Development (Disposal of Land and Bulldings) Regulation 1978.
::: Downloaded on - 13/10/2022 20:03:12 :::CIS 573. As the allottee failed to establish the industrial unit till the end of 1983 a notice was issued by the Corporation on .
6,1,1984 calling upon the allottee to show cause why the plot should not be resumed. In the reply which allottee sent to the Corporation certain reasons were highlighted for showing why It could not complete construction of the building for the proposed industrial unit. But the Corporation was not satisfied with the reply and hence on 16.3.1984 the Corporation resumed the plot.
12. The proforma of the agreement is produced as Annexure P42. Petitioner cannot escape from the position that he is to abide by the terms and conditions of the agreement admitted to have been executed between the parties. If that agreement was not in accordance with the proforma it is for the petitioner to show that there was some other agreement which is different from it. However, petitioner has not even chosen to adduce any evidence in that line. Hence, we have no difficulty to believe that the agreement was executed In the said proforma. Clause 7 of the aforesaid agreement reads thus:
"That the allottee shall start on the said site construction of the building for setting up the aforesaid Industry within a period of 6 months and complete the construction thereof within two years from the date of Issue of the allotment letter, the plans of which shall be In accordance with the rules made and with the directions given from time to time by the Town and Country Planning and Urban Estates Department in respect and approved by the Director, Town Country Planning Department or any other office duly authorized by him In this behalf. Further the allottee shall complete the erection and Installation of machinery and commence production within a period of 3 years from the date of allotment of plot falling which the plot be Iiable to be resumed by the corporation.
Provided that the time under this clause may be extended by the M.D., HSIDC Ltd. In case the failure ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 58 to complete the building and commencement or production by the stipulated date was due to reasons beyond the control of the allottee.
.
The Corporation shall also have the right to call for periodical reports every six months from the allottee starting from one year after the date of delivery about the progress In implementation of the project and If after hearing the allottee In the opinion of the M.D. the progress, Is found to be unsatisfactory he may order the plot resumed."
16. However, the allottee has contended before the trial court that clause 7 of the Agreement Is unenforceable In view of Section II of the TP Act. But that contention was repelled according tons rightly, because the Deed of Conveyance had not created any absolute interest In favour of the allottee In respect of the plot conveyed. For a transferee to deal with interest in the property transferred as if there were no such direction" regarding the particular manner of enjoyment of the property, the Instrument of transfer should evidence that an absolute Interest In favour of the transferee has been created. This Is clearly discernible from Section II of the TP Act. The Section rests on a principle that any condition which is repugnant to the interest created Is void and when property Is transferred absolutely it must be done with all its legal Incidents. That apart, Section 31 of the TP Act Is enough to meet the aforesaid contention. The Section provides that "on a transfer of property an interest therein may be created with the condition superadded that It shall cease to exist In case a specified uncertain event shall happen, or in case a specified uncertain event shall not happen, or in case specified uncertain event shall not happen"
Illustration (b) to the Section makes the position clear, and It reads:::: Downloaded on - 13/10/2022 20:03:12 :::CIS 59
"(b) A transfers a farm to B, provided that. If B shall not go to England within three years after the date of the transfer, his interest in the farm shall cease. B .
does not go to England within the term prescribed.
His Interest in the farm ceases."
17. All that Section 32 of the Transfer of Property Act provides is that in order that a condition that an interest shall cease to exist may be valid, It Is necessary, that the event to which It relates be one which could legally constitute the condition of the creation of an Interest^ If the condition is invalid It cannot be set up as a condition precedent for crystallization of the interest created . The condition that the Industrial unit shall be established within a specified period falling which the Interest shall cease, is a valid condition. Clause 7 of the Agreement between the parties is, therefore, valid and is binding on the parties thereto.
86. Sections 10 & 11 of the T&CP Act pertain to restriction on alienation of the property or restrictions on its enjoyment, and as such, have no application to the facts of the instant case.
87. The State Government in its Statement of Claim (SoC) had specifically sought resumption/reversion of the land upon termination of the JVA. In this regard, the following reliefs from the SoC are relevant (at page 91):
"(2)the Government grant of Wildflower or property is liable to be re-entered by and resume to the State (3).....::: Downloaded on - 13/10/2022 20:03:12 :::CIS 60
(4) the re-entry of the State in the disputed property is automatic without registration;
.
88. Furthermore, once the learned Sole Arbitrator upheld the termination of the JVA, albeit with effect from 17.12.2003, the consequences must necessarily ensue. The Board Resolution dated 07.03.2002 was itself based on the termination order dated 06.03.2002 which specifically stated that pursuant to the termination of the JVA, the entire Wildflower Hall property inclusive of land and buildings would stand resumed by the State (at pages 402-03 of Appeal). All necessary formalities, including registration of cancellation deed, would inevitably be performed by the State Government on the basis of the Award.
89. The judgments relied upon by the appellants are clearly distinguishable on facts. In Thota Ganga Laxmi (supra.), the vendor of the concerned suit property, after executing registered sale deed in favour of the vendee, proceeded to unilaterally execute and register a cancellation deed in respect of the suit property. The Court held that this could not be done without suit for cancellation of sale deed being decreed by a civil court. In Satya Pal Anand (supra.) also, it was held that a registered instrument could only be cancelled by a civil court. As already held hereinabove, the arbitral award has in the alternative already directed that in case the leasehold arrangement is not accepted by the appellants, the termination ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 61 order dated 06.03.2002 and Board Resolution dated 07.03.2002 would revive alongwith its attendant consequences.
.
90. Therefore, we are of the considered view that the findings of the learned Arbitrator on Issues No. 14 and 16 are neither patently illegal nor are they against the fundamental policy of Indian law.
Remaining issues adjudicated by the learned Sole Arbitrator:
91. The remaining issues adjudicated by the learned Sole Arbitrator, namely Issues no. 3 and 4 (pertaining to deviations from sanctioned plans). 6-9 (pertaining to compounding of building violations) and 11-13 (pertaining to claims for damages raised by the contesting parties) were not impugned by the appellants before the learned Single Judge in the petition under Section 34 of the A&C Act. In fact, the submission of the learned senior counsel appearing for the appellants has been recorded by the learned Single Judge, wherein it was stated that he was contesting the findings of the learned Arbitrator only on Issues No. 1, 2,5 and 14 (at para 37 pages 366-67). Therefore, having given up the challenge to the learned Arbitrator's findings on the remaining issues before the learned Single Judge, it would not be open for the appellants to impugn the said findings in the captioned appeal under Section 37 of the A&C Act.
::: Downloaded on - 13/10/2022 20:03:12 :::CIS 62(ii) Judgment of the learned Single Judge of this Court:
.
92. The appellants sought to argue that the judgment of the learned Single Judge deserves to be set aside as by way of the said judgment, the arbitral award was effectively modified which is impermissible under Section 34 of the A & C Act. This argument is clearly misconceived as the learned Single Judge has in fact upheld the operative directions in the arbitral award in entirety and refused to interfere in any manner with the award.
93. It is true that the learned Single Judge differed with the finding of the learned Arbitrator that the termination order dated 06.03.2002 issued by the State Government was premature. The learned Single Judge, upon a construction of Clause 10.1 of the JVA, found that the six years period for making the hotel fully commercially operational was to be computed from the date of execution of the JVA, which expired on 30.10.2001 (pages 375-76 of Main Appeal Paperbook).
However, notwithstanding the same, the learned Single Judge did not disturb or upset the operative direction of the learned Arbitrator that the JVA would be deemed to have been terminated with effect from 17.12.2003.
94. The learned Single Judge found that as per the evidence on record, it could not be said that the hotel was made fully commercially operational within the period prescribed under ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 63 the JVA, and thus, the finding of fact in the award was not liable to be interfered with.
.
95. Furthermore, it was also found that the learned Arbitrator had not exceeded his jurisdiction while deciding Issue No.14 as the same formed part of the terms of reference in the order dated 17.12.2003 passed by this Court. Therefore, the learned Single Judge correctly exercised the jurisdiction under
96.
r to Section 34 of the A & C Act by refusing to interfere with the arbitral award.
For all the reasons stated above, the instant case is not a fit case for this Court to exercise its jurisdiction, as under
Section 37 of the A & C Act, the appellate court only has to satisfy itself that the jurisdiction under Section 34 while rejecting the challenge to the arbitral award has been correctly exercised by the learned Court below.
97. This would be in tune with the judgment of the Hon'ble Supreme Court in Punjab State Civil Supplies vs. M/s Ramesh Kumar 2021 SCCOnline SC 1056=AIR 2021 SC 5758, wherein in paras 10 to 12, it was held as under:-
10. The Single Judge of the High Court was exercising jurisdiction under Section 37 of the 1996 Act. The award of the sole arbitrator dated 20 December 2005 contains an analysis of the evidence. Both the respondents as well as the appellants adduced evidence before the arbitral tribunal. It was on the basis of the evidence that the sole ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 64 arbitrator upheld the defence of the appellants on the ground that right from the inception the respondents had .
been mixing sub-standard material with goods in accordance with the tender specifications. As a consequence of this, the loss and damage which has been caused to the appellants was duly quantified and in this backdrop, the sole arbitrator held that the respondents were not entitled to the payment of the balance of the principal or to recover the security deposit.
11. While considering a petition under Section 34 of the 1996 Act, it is well-settled that the court does not act as an appellate forum. The grounds on which interference with an arbitral award is contemplated are structured by the provisions of Section 34. The District Judge had correctly come to the conclusion that there was no warrant for interference with the arbitral award under Section 34. The High Court seems to have proceeded as if it was exercising jurisdiction in a regular first appeal from a decree in a civil suit. The jurisdiction in a first appeal arising out of a decree in a civil suit is distinct from the jurisdiction of the High Court under Section 37 of the 1996 Act arising from the disposal of a petition challenging an arbitral award underSection 34 of the 1996 Act.
12. In the present case, the High Court was required to determine as to whether the District Judge had acted contrary to the provisions of Section 34 of the 1996 Act in rejecting the challenge to the arbitral award. Apart from its failure to do so, the High Court went one step further while reversing the judgment of the District Judge in decreeing the claim in its entirety. This exercise was clearly impermissible. The arbitrator was entitled to draw relevant findings of fact on the basis of the evidence ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 65 which was adduced by the parties. This was exactly what was done in the arbitral award. The award of the arbitrator .
was challenged unsuccessfully by the respondents under Section 34 of the 1996 Act. In this backdrop, there was no basis in law for the High Court to interfere with the judgment of the District Judge and, as we have noted earlier, to even go a step further by decreeing the claim.
98. This would further be in tune with another recent judgment of the Hon'ble Supreme Court in Haryana Tourism Ltd. vs. Kandhari Beverages (2022) 3 SCC 237, wherein in paras 8 & 9, it was observed as under:-
8. So far as the impugned judgment and order passed by the High Court quashing and setting aside the award and the order passed by the Additional District Judge under Section 34 of the Arbitration Act are concerned, it is required to be noted that in an appeal under Section 37 of the Arbitration Act, the High Court has entered into the merits of the claim, which is not permissible in exercise of powers under Section 37 of the Arbitration Act.
9. As per settled position of law laid down by this Court in a catena of decisions, an award can be set aside only if the award is against the public policy of India. The award can be set aside under Sections 34/37 of the Arbitration Act, if the award is found to be contrary to, (a) fundamental policy of Indian Law; or (b) the interest of India; or (c) justice or morality; or (d) if it is patently illegal. None of the aforesaid exceptions shall be applicable to the facts of the case on hand. The High Court has entered into the merits of the claim and has decided the appeal under Section 37 of the Arbitration Act as if the High Court was deciding the appeal against the judgment and decree passed by the ::: Downloaded on - 13/10/2022 20:03:12 :::CIS 66 learned trial Court. Thus, the High Court has exercised the jurisdiction not vested in it under Section 37 of the .
Arbitration Act. The impugned judgment and order passed by the High Court is hence not sustainable.
99. In view of the aforesaid discussion and for the reasons stated herein above, we find no merit in this appeal and the same is accordingly dismissed, leaving the parties to bear their own costs.
(Tarlok Singh Chauhan) Judge (Chander Bhusan Barowalia) Judge 13th October, 2022.
(sanjeev) ::: Downloaded on - 13/10/2022 20:03:12 :::CIS