Bangalore District Court
As The Quarrying Operation Was Stopped ... vs To Solve The Local Problems Which Was Its on 17 January, 2022
1
Com.AS.No.183/2015
IN THE COURT OF LXXXII ADDL.CITY CIVIL & SESSIONS
JUDGE, AT BENGALURU (CCH.83)
THIS THE 17TH DAY OF JANUARY 2022.
PRESENT:
SRI.DEVARAJA BHAT.M., B.COM, LL.B.,
LXXXII ADDL.CITY CIVIL & SESSIONS JUDGE,
BENGALURU.
Com.A.S.No.183/2015
BETWEEN:
M/s. Naveena Granites,
A Partnership firm
having its office at
Thilagavathy Illam, 5-A,
South Railway Lane,
Kumaraswany Pet
Dharmapuri - 636 703,
represented by its
Partner, Sri. P.K.
Pounraj.
: PETITIONER
(Petitioner is
represented by Sri. A
Sampath- Advocate)
AND
M/s Mysore Minerals
Ltd., TTMC-A Block, 5th
Floor, BMTC Building,
2
Com.AS.No.183/2015
K.H. Road, Shanthinagar,
Bengaluru - 560 027,
represented by
Managing Director.
(Represented by Smt.
Girija Shankar -
Advocates)
: RESPONDENT
Date of Institution of the 04.12.2015
suit
Nature of the suit (suit on
pronote, suit for Petition for setting aside Arbitral
declaration & Possession, Award
Suit for injunction etc.)
Date of commencement of
recording of evidence - Nil -
Date on which judgment 17.01.2022
was pronounced
Date of First Case -
Management Hearing
Time taken for disposal
from the date of 41 days
conclusion of arguments
Total Duration Year/s Month/s Day/s
6 01 13
(DEVARAJA BHAT.M),
LXXXII Addl. City Civil & Sessions Judge,
Bengaluru.
3
Com.AS.No.183/2015
JUDGMENT
This is a Petition filed under Section 34 of the Arbitration & Conciliation Act, 1996 for setting aside the Arbitral Award dated 19.09.2015 passed in A.C.No.6/2003 by the learned Sole Arbitrator.
2. The Petitioner "M/s. Naveena Granites" had invoked the Arbitration Agreement and preferred certain Claims against "M/s Mysore Minerals Limited" the Respondent.
3. The Brief facts leading to the case are as follows:-
That the Respondent is a established, created and owned by the Government of Karnataka which holds 100% shares, that the Directors of Respondent are officers of the Government, that the Respondent being a Government Company it is entitled to preferential rights under the KMMC Rules for grant of quarrying lease in various lands belonging to the State of Karnataka, that the Respondent represented to the Petitioner that it had quarrying lease in respect of the land bearing Sy. No. 418, 419, 420, 421 situated at Maralebekuppi, Kanakapura Taluk, Bengaluru Rural District, that as per the representation of the Respondent, that the quarry lease in respect of the said property was granted in the year 1981, that the Respondent 4 Com.AS.No.183/2015 had the quarrying lease of the schedule property bearing M.L. No. 5797 and M.L No. 5183 to quarry to an extent of 125.25 acres, that the Respondent further represented that it was undergoing loss due to various reasons and therefore intended to sub-lease the said property, that it is also called for public tender but no person had come forward to the the same, that the Petitioner could take the said property for quarrying lease on certain terms and conditions, that on negotiation, that the Respondent insisted the Petitioner should pay a sum of Rs. 20,00,000/- as an advance amount for undertaking of removing and selling of granite block from the said property, that as per the negotiations it was further agreed that the Petitioner shall pay a sum of Rs. 2,104/- for CBM of the granite blocks which are exported out of the country and a sum of Rs.1,105/- for CBM for local sales, that after negotiating the terms and conditions, an agreement dated 24.09.1999 came to be entered into where under the Petitioner was appointed as a raising-cum-sales agent to remove over burden, excavate and develop transport granite blocks from the said property, that the Petitioner upon entering into an agreement dated 24.09.1999 that the Petitioner deposited a sum of Rs. 20,00,000/- in terms of Clause (21) of the agreement, that the Petitioner after making huge advance payment of Rs. 20,00,000/- mobilized men, machinery and material for the purpose of excavation of granite blocks in terms 5 Com.AS.No.183/2015 of the agreement dated 24.09.1999, that the Petitioner incurred huge expenditure running into several lakhs of rupees in setting up the infrastructure, machinery, men and material, that the Petitioner as the quarrying operation was stopped and as the area promised was not available, the Petitioner requested the Respondent to solve the local problems which was its fundamental duty under the terms of the agreement, that the Petitioner also caused a notice which was received by the Respondent without any response, that the Petitioner at the beginning of the contract itself having faced numerous problems and having caused a notice without any response invoked Clause (23) of the agreement dated 24.09.1999 which provides for resolving the dispute by way of arbitration, that the Petitioner when the arbitrator was considering the claim of the Petitioner, that the Respondent came forward to resolve the dispute outside the Arbitral Tribunal and appointed committee of officials to go into several claims of the Petitioner, that the committee constituted by the Respondent recommended that only 28 acres would be available for carrying quarrying operations while an extent of 12 acres was available for the purpose of dumping wastage and debris, that the Petitioner had found that the Deputy Director of Mines and Geology had written a letter to the officer of the Respondent instructing them to stop the quarrying operations on the ground that the land 6 Com.AS.No.183/2015 belonged to one Mr. Vinodkumar though it was Sy. No. 715 and further by an Order dated 29.06.2002 the mineral dispatch permits were stopped by the Deputy Director of Mines and Geology from transporting the granite blocks form the said property, that the Deputy Director of Mines and Geology issue a Notice dated 06.07.2003 and 22.07.2003 and after conducting a survey gave a report that the area where the quarry was conducted belonged to Mr. Vinodkumar and Sri. D.C. Ramesh and categorically stated that the area does not belonged to the Respondent, that the Petitioner sought for a claim of Rs. 28,47,50,000/- against the Respondent, that after enquiry the learned Arbitrator partly allowed the said claims as per the Impugned Award.
4. Being aggrieved by the said Arbitral Award, the Petitioner has challenged the same on several grounds, which will be discussed later in the body of the Judgment.
5. The Respondent has filed its detailed objections on 03.11.2016 and prayed to dismiss this petition.
6. The Learned Arbitrator has produced Arbitral Records on 13.12.2018. Thereafter, this case was transferred to this Court as per the Orders dated 13.07.2020. Thereafter, on 21.10.2021, 7 Com.AS.No.183/2015 the Advocate for the Petitioner prayed time to submit his arguments. On 24.11.2011, also the Advocate for the Petitioner prayed time to submit arguments. On that day time was granted subject to condition that he has to argue on the next occasion itself without fail. However, thereafter the Petitioner has not appeared and argued the matter. On 07.12.2021, the Advocate for the Respondent has filed his written arguments, which is nothing but repetition of his statement of objection filed on 03.11.2016. Since, this is a 5 years old case, I proceeded to reserve the matter for pronouncement of Judgment.
7. Based on the above contentions of both parties, following Points arise for my consideration:-
1. Whether there are grounds to set aside the Impugned Award under Section 34 of the Arbitration & Conciliation Act?
2. What Order?
8. My findings on the above points are as follows:-
Point No.1:- In the Negative.
Point No.2:- As per the final Order for the following reasons.8
Com.AS.No.183/2015 REASONS
9. Point No.1: - The Petitioner has preferred a Claim Petition before the Learned Arbitrator and the same was partly allowed and that the counter-claim preferred by the Respondent is rejected. It is to be noted that the Respondent has not challenged the portion of award so far as its relates to rejection of his counter-claim.
10. The Petitioner has challenged the said Impugned Award in this proceeding. The Hon'ble High Court in the Judgment dated 17.04.2021 in Com.A.P.No.25/2021 (Union of India vs. M/s Warsaw Engineers) has laid down certain guidelines/principles about the writing of Judgments in a Petition filed under Section 34 of the Arbitration & Conciliation Act. Keeping in my mind the said guidelines, I now propose to examine each and every ground urged by the Plaintif specifically with reference to the submissions made by both Advocates.
11. The First Ground is that the Impugned award is contrary to the substantive provision of law, illegal, perverse, against public policy, beyond the jurisdiction of the Arbitral Tribunal, hence is liable to be set aside.
9Com.AS.No.183/2015
11.a. This is a general ground and the same may be discussed along with other grounds urged by the Petitioner.
12. The Second Ground is that the learned Arbitrator has taken into consideration extraneous matter which are not on record to arrive at a conclusion that the Petitioner was fully aware of the facts prior to entering into the agreement Ex.C.43 with regard to the status of the leased property, hence there was no misrepresentation by the Respondent, that the finding of the learned Arbitrator is illegal and against the oral and documentary evidence on record, hence is not sustainable and is liable to be set aside.
12.a. In order to appreciate this ground, the relevant aspects of facts of the case is narrated below.
12.b. The quarry lease No. 5183 of Maralabekuppe Village and No. 5797 of Puradoddi Village had been granted by the Government of Karnataka in favour of Respondent for a period of 5 years with efect from 16.07.1987 and 18.10.1989 respectively.
12.c. On 24.09.1999 Ex.C.43/ Agreement was entered between the parties. The duration of lease was for 5 years. In pursuance of the Agreement the Petitioner deposited a sum of 10 Com.AS.No.183/2015 Rs. 20 Lakhs, and mobilized its men, machinery and materials by spending several lakhs to conduct the operations besides establishing a site office at Karnataka at huge cost.
12.d. On 12.11.1999, the Respondent wrote a letter to the Government pointing out that it was not in a position to carry out the quarrying activities by also indicating that the cost of production is more than Rs. 14,500/- per CBM.
12.e. On 19.04.2001, the Minutes of the discussions has been held between parties and discussed about the rates at which the premium is to be paid under the agreement and other certain matters. After the Agreement came to be executed, in view of the difficulties faced by the Petitioner, certain disputes arisen pursuant to which there was a settlement also as recorded in the minutes of this meeting. Further Ex.C.45/Ex.C.62/Supplemental Agreement came into existence on 19.04.2001 amending/ altering the certain terms of the contract. The learned Arbitrator has held that by going through Ex.C.45/Ex/C.62, it cannot be said that Ex.C.43 was altogether wiped out giving birth to a new contract. The learned Arbitrator has relied on a decision reported in A.I.R. - 2000 -S.C. - 380 (Lata Constructions vs. Dr. Ramesh Chandra Ramniklal Shah). I have gone through the said decision. In the said decision, the builder had expressed their inability to provide 11 Com.AS.No.183/2015 flat in accordance with the written agreement and entered into a fresh agreement, that because of their failure to honour the commitments under both the agreements, it was held that it was a case of continuing cause of action. In view of the ratio of the said decision the finding of the learned Arbitrator that Ex.C.43 and Ex.C.45 form one component/comprehensive document creating rights and liabilities of the parties and any condition on an aspect in Ex.C.43 contrary to the terms of Ex.C.45 no longer survives and there is no novation of the entire contract of Ex.C.43, cannot be held as perverse or illegal.
12.f. Further, as could be seen from Para No.20, at Page No. 60 of the Impugned Award based on the cross-examination of CW.1, the learned Arbitrator has held that the Claimant/Petitioner had inspected the quarry area before entering into the agreement, that the CW.1 being the proprietor of the M/s. Sathya Granites, which admittedly was carrying on quarrying in Yedamanahalli and Mahimanahalli which was just to four and five kilometers from the disputed property and in respect of the said quarrying, agreement has been entered into with the Respondent and hence the Petitioner was aware of the status of the lease even before entering into Ex.C.43. For the said finding apart from the above oral evidence the learned Arbitrator has also considered Ex.C.66/written statement fight 12 Com.AS.No.183/2015 by the Petitioner in O.S. No. 168/2002, Ex.C.67/Writ Petition filed by the Petitioner in WP. No. 3777/2002.
12.g. When such being the case, the learned Arbitrator has not taken into consideration any extraneous matter as alleged by the Petitioner in this ground. His finding is based on oral and documentary evidence produced before the Arbitral Tribunal. The award cannot be set aside on the said ground. Hence, this ground is not available for the Petitioner under Sub-section (2) and Sub-section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of arbitral award on this ground is thwarted and rejected.
13. The Third Ground is that the learned arbitrator has relied of the ruling of the Hon'ble Supreme Court to say that the contract has to be interpreted as per the wording in the agreement itself has imported its own meaning to the same, that the Respondent represented that it was of lessee of the disputed property and it has the right to lease the same, that nowhere in the Agreement dated 24.09.1999 it can inferred that the Respondent had honestly disclosed that the lease had expired and that it had filed an application for renewal which was pending consideration, that there is absolutely no material 13 Com.AS.No.183/2015 on record to show or establish that the Respondent had at any point of time disclosed that it did not have a subsisting lease, that the learned arbitrator on the contrary purely on assumptions and presumptions has held that the Petitioner was aware of the status of the lease.
13.a. The learned Arbitrator after referring to the decision reported in A.I.R. - 2013 - S.C. - 1241 (RISD Corporation vs. Diamond and Gem Development Corporation Limited), interpreted the terms of Ex.C.43 and Ex.C.45.
13.b. On perusal of the Impugned Award with the terms of the contract between the parties, it cannot be held that the learned Arbitrator has completely ignored the terms of the contract and traveled beyond all the terms of the contract while interpreting the same.
13.c. Section 34 of the Arbitration & Conciliation Act, 1996 does not empower the Courts to re- appreciate and re-evaluate the evidence produced before the Arbitral Tribunal and thereafter to judge if the findings of the Arbitral Tribunal are correct or wrong. The Superior Courts have repeatedly held that it is not permissible to a Court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings. The findings of fact by the Arbitral Tribunal, if based on 14 Com.AS.No.183/2015 evidence, even where a diferent opinion can be held on the basis of that evidence, the findings given by the Arbitrator has to be accepted and the Courts cannot substitute its opinion. The power to interpret the contract also lies with the Arbitrator. It is to be noted that in the decision reported in 2006 (1) - S.C.C. - 86 (State of Rajastan vs. Nav Bharat Construction Company), it is held that if an interpretation of the contract is involved then the interpretation of the arbitrator must be accepted unless it is one which could not be reasonably possible. Therefore, if the Arbitrator interpreted the terms of contract in a particular way based on the material before him and the evidence adduced before him, even if another view is possible to be taken on the same materials and evidence, the Court cannot interfere the said findings of the learned Arbitrator, as held by the Hon'ble Supreme Court in the decision reported in 2009(6) - S.C.C. - 414 (G.Ramachandra Reddy & Company vs. Union of India & another), wherein it is held that the interpretation of a contract will fall within the realm of arbitrator, that the Court while dealing with an award would not re-appreciate the evidence, that an award containing reasons may not be interfered unless they are found to be perverse or based on a wrong proposition of law. In another decision reported in 2009 (10) - S.C.C. - 63 (Steel Authority of India Limited vs. Gupta Brothers Steel Tubes Limited), it 15 Com.AS.No.183/2015 is held that once the arbitrator has constructed Clause 7.2 of the contract of the said case, in a particular manner and such construction is not absurd and appears to be plausible, it is not open to the Court to interfere with the award of the arbitrator.
13.d. For the same principle, I wish to refer another decision reported in 2019 (7) - S.C.C. - 236 (Parsa Kenta Collieries Limited vs. Rajasthan Rajya Vidyut Utpadan Nigam Limited). Once the courts reach to the conclusion that the Arbitrator has acted within its jurisdiction, even if the courts are of the view that the opinion of the arbitrator is wrong the same cannot be disturbed unless it is against the public policy.
13.e. Therefore, an award warrants interference by the Court under Section 34 of the Arbitration and Conciliation Act only when it contravenes a substantive provision of law or is patently illegal or shocks the conscious of the Court and that a plausible/reasonable view taken by an Arbitrator, even if the same is based on insufficient evidence, is not to be substituted by the Court. Hence, this ground is not available for the Petitioner under Sub-Section (2) and Sub-Section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of Arbitral Award on this count is thwarted and rejected.
16Com.AS.No.183/2015
14. The Fourth Ground urged is that the learned Arbitrator has wholly erred in not appreciating the law on the aspect of misrepresentation, the misrepresentation is a positive assertion, that reading the agreement clearly evidences that the Respondent has made a positive assertion that it had the subsisting lease, that the learned arbitrator has completely misread Section 18 of the Indian Contract Act, that reading of Section 18 of the Indian Contract Act with evidence on record clearly establishes that the Respondent has indulged in misrepresentation to induce the Petitioner to enter into the contract, which itself is illegal.
14.a. The learned Arbitrator has held that based on the evidence produced before the Arbitral Tribunal, it is evident that even prior to the Ex.C.43, the Petitioner was engaged as a contractor by the Respondent to raised granite, that the Petitioner inspected the quarry area before entering into the agreement, that M/s. Sathya Granites, to which the CW.1 was the Proprietor, was quarrying in Yedamanahalli and Mahimanahalli which was just four to five kilometers from the disputed property and in respect of said properties also agreement has been entered into with the Respondent, that none of the correspondence reveals that the Petitioner came to know about the status of lease only pursuant to stoppage order, 17 Com.AS.No.183/2015 that based on Ex.C.66/Written statement filed by the Petitioner in O.S.No. 168/2002 and Ex.C.67/Writ Petition in WP. No. 3777/2002, wherein no such averments made and hence the plea of misrepresentation by the Petitioner cannot be believed and rejected by the learned Arbitrator. When such being the case, the said findings of the Arbitrator cannot be held as perverse or illegal.
14.b. In this case, the grievance of the Petitioner is that, by false representations of the Respondent, the Petitioner was induced to enter into the contract in question. There has been positive assertions of incorrect matters and active concealment of material facts. The Petitioner has contended in this ground about Section 18 of the Indian Contract Act, 1872.
14.c. The terms 'fraud' and 'misrepresentation' are two loosely and widely used terms, often without comprehending the true legal connotation of the same. Since the claims are essentially seated upon 'misrepresentation' under Section 18 of the Contract Act, it would be apposite to refer to the said Section and the ingredients thereof along with Section 17 of the Contract Act, for a proper understanding of the case.
"17. 'Fraud' defined:- "Fraud" means and includes any of the following acts committed by a party to a 18 Com.AS.No.183/2015 contract, or with his connivance, or by his agents, with intent to deceive another party thereto his agent, or to induce him to enter into the contract;
(1) the suggestion as a fact, of that which is not true, by one who does not believe it to be true; (2) the active concealment of a fact by one having knowledge or belief of the fact;
(3) a promise made without any intention of performing it;
(4) any other act fitted to deceive;
(5) any such act or omission as the law specially declares to be fraudulent.
Explanation:- Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak, or unless his silence, is, in itself, equivalent to speech."
14.d. The Section 17 of the Contract Act, indicates five actions, the commission of any of which, would constitute 'fraud' if the said acts are committed with either an intent to deceive another or to induce him to enter into the contract. The mere commission of any of the five acts, by itself, are not sufficient to constitute fraud. The acts or any of them must have been committed either with intent to deceive or to induce to enter into the contract. Going by the Explanation to the Section, silence as to a particular fact will not constitute fraud 19 Com.AS.No.183/2015 unless, the circumstances involved cast a duty on the person to speak, or the circumstances are such that the silence in itself is equivalent to speech. Sub clause 2 of Section 17 embodies the latin maxim, "Supressio Veri Suggestio Falsi" which means, suppression of a material fact is treated as expression of positive words of falsehood. The application of the maxim presupposes the existence of a duty to speak. Therefore, whether silence of a party to the contract constitutes fraud or not depends on the question as to whether there was a duty to speak, which in turn depends on the factual circumstances.
8. Section 18 reads thus:-
"18. Misrepresentation" defined.-
"Misrepresentation" means and includes -
(1) the positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true;
(2) any breach of duty which, without an intent to deceive, gains an advantage to the person committing it, or anyone claiming under him; by misleading another to his prejudice, or to the prejudice of any one claiming under him;
(3) causing, however innocently, a party to an agreement, to make a mistake as to the substance of the thing which is subject of the agreement."
14.e. As per sub-section (1), to constitute misrepresentation, there must be positive assertion of a fact 20 Com.AS.No.183/2015 which is false but is believed to be true, but the maker's information did not justify the making of it. The information available with the maker, if was not sufficient enough to make the assertion, then it constitutes misrepresentation even if he believes the information to be true. As per sub-section (2) of the Section, any breach of duty, that misleads another to his prejudice and causes advantage to the maker, is misrepresentation. The element of intention is insignificant there. The third contingency taken in under the Section is an act of 'innocent misrepresentation' as is often referred to. There, the representation though innocently made, has caused the other party to commit a mistake on the subject of the agreement.
14.f. Having referred to Sections 17 & 18, it would be necessary to refer to Section 19 of the Contract Act also since it is practically interwoven with it. The Section reads thus:-
"19. Voidability of agreements without free consent :- When consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused.
A party to contract, whose consent was caused by fraud or misrepresentation, may, if he 21 Com.AS.No.183/2015 thinks fit, insist that the contract shall be performed, and that he shall be put on the position in which he would have been if the representations made had been true.
Exception:- If such consent was caused by misrepresentation or by silence, fraudulent within the meaning of section 17, the contract, nevertheless, is not voidable, if the party whose consent was so caused had the means of discovering the truth with ordinary diligence.
Explanation:- A fraud or misrepresentation which did not cause the consent to a contract of the party on whom such fraud was practised, or to whom such misrepresentation was made, does not render a contract voidable."
14.g. Therefore, when an agreement is vitiated by coercion, fraud or misrepresentation, the said contract is voidable at the hands of the party whose consent was so obtained. The Explanation to the Section makes it clear that fraud or misrepresentation would render the contract voidable only if the said act was the reason, the cause, for the grant of consent by the party. The exception to Section 19 provides that if the consent to the contract was caused by misrepresentation or fraudulent silence, still the contract would not be voidable if the party who give the consent could have discovered the truth with ordinary diligence.
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14.h. Therefore, it will have to be found out as to whether the assertions/representations and silence on the part of the Respondent as regards the matters narrated above would constitute misrepresentation under Section 18, and as to acts of silence, whether there a duty to speak. In spite of the misrepresentation and the fraudulent silence, if any, if the plaintif had the means of discovering the truth with ordinary diligence, then the contract would not be voidable. In this circumstances, as discussed above, as per the findings of the learned Arbitrator, that the Petitioner had knowledge of the said facts while entering into the contract and his conduct in the earlier litigations at Ex.C.66 and Ex.C.67, the Petitioner has not proved the aspect of misrepresentation. The said findings cannot be considered as perverse or illegal. Hence, this ground is not available for the Petitioner under Sub-Section (2) and Sub-Section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of Arbitral Award on this count is thwarted and rejected.
15. The Fifth Ground urged is that the Respondent has not produced any document worth consideration to prove that they had disclosed about the fact of lease being expired or an application for renewal was pending consideration, if that was 23 Com.AS.No.183/2015 the oral and documentary evidence on record, the learned arbitrator could not assured otherwise.
15.a. In fact, this ground is in the nature and tenor of appeal. Section 34 of the Arbitration & Conciliation Act, 1996 does not empower the Courts to re- appreciate and re-evaluate the evidence produced before the Arbitral Tribunal and thereafter to judge if the findings of the Arbitral Tribunal are correct or wrong. The Superior Courts have repeatedly held that it is not permissible to a Court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings. The nature of proceedings under Section 34 of the Act is summary in nature as held in the decision reported in (2019)
- S.C.C. Online - S.C. - 1244 = (2019) 9 - S.C.C. - 462 (Canara Nidhi Limited vs. M. Shashikala). Hence, this ground is not available for the Petitioner under Sub-section (2) and Sub-section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of arbitral award on this ground is thwarted and rejected.
16. The Sixth Ground urged is that the finding of the learned Arbitrator that there was no misrepresentation is absolutely illegal more so in view of the fact that there is clear 24 Com.AS.No.183/2015 evidence on record to evidence that the Respondent was under
huge debt and was unable to quarry on the schedule property. DW.1, witness of the defendant has admitted that the Defendant was unable to quarry and hence decided to lease out the same, that RW.1 has clearly admitted in the cross examination.
16.a. In order to answer this ground, I have to re-appreciate the oral evidence adduced before the Arbitral Tribunal. Section 34 of the Arbitration & Conciliation Act, 1996 does not empower the Courts to re- appreciate and re-evaluate the evidence produced before the Arbitral Tribunal and thereafter to judge if the findings of the Arbitral Tribunal are correct or wrong. The Superior Courts have repeatedly held that it is not permissible to a Court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings. The nature of proceedings under Section 34 of the Act is summary in nature as held in the decision reported in (2019) - S.C.C. Online - S.C. - 1244 = (2019) 9 - S.C.C. - 462 (Canara Nidhi Limited vs. M. Shashikala). Hence, this ground is not available for the Petitioner under Sub-section (2) and Sub-
section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the 25 Com.AS.No.183/2015 setting aside of arbitral award on this ground is thwarted and rejected.
17. The Seventh Ground urged is that the admission of RW.1 clearly establishes that Respondent did not disclose that the disputed property was already granted to others, that this admission itself shows that there is a misrepresentation by the Respondent, that non-disclosure by the Respondent as to the status of the property leased clearly proves misrepresentation by the Respondent, that while this is available was evidence on record the learned Arbitrator has completely erred to holding that the Plaintif was aware of the status of the lease property and hence there was no misrepresentation by the Respondent.
17.a. In order to answer this ground, I have to re-appreciate the oral evidence adduced before the Arbitral Tribunal. Section 34 of the Arbitration & Conciliation Act, 1996 does not empower the Courts to re- appreciate and re-evaluate the evidence produced before the Arbitral Tribunal and thereafter to judge if the findings of the Arbitral Tribunal are correct or wrong. The Superior Courts have repeatedly held that it is not permissible to a Court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings. The nature of proceedings under Section 34 of the Act is summary 26 Com.AS.No.183/2015 in nature as held in the decision reported in (2019) - S.C.C. Online - S.C. - 1244 = (2019) 9 - S.C.C. - 462 (Canara Nidhi Limited vs. M. Shashikala). Hence, this ground is not available for the Petitioner under Sub-section (2) and Sub- section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of arbitral award on this ground is thwarted and rejected.
18. The Eighth Ground urged is that apart from misrepresentation about the subsistence of the lease it has also misrepresented with regard to the available area. RW.1 has admitted that as on the date of Ex.C.43 the leased land were already granted to several person. The relevant portion is extracted as follows:-
" It is true that even before the agreement Ex.C.43 was entered into the State Government had granted some portions of the leased area in Sy No. 418 to 421 to various other individuals. We did not disclose this aspect of grants in favour of other in these areas to the claimants at the time of entering into agreements Ex.C.43".
18.a. In order to answer this ground, I have to re-appreciate the oral evidence adduced before the Arbitral Tribunal. Section 27 Com.AS.No.183/2015 34 of the Arbitration & Conciliation Act, 1996 does not empower the Courts to re- appreciate and re-evaluate the evidence produced before the Arbitral Tribunal and thereafter to judge if the findings of the Arbitral Tribunal are correct or wrong. The Superior Courts have repeatedly held that it is not permissible to a Court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings. The nature of proceedings under Section 34 of the Act is summary in nature as held in the decision reported in (2019) - S.C.C. Online - S.C. - 1244 = (2019) 9 - S.C.C. - 462 (Canara Nidhi Limited vs. M. Shashikala). Hence, this ground is not available for the Petitioner under Sub-section (2) and Sub- section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of arbitral award on this ground is thwarted and rejected.
19. The Ninth Ground urged is that the learned Arbitrator failed to appreciate that the Petitioner had invested crores of rupees to quarry in terms of the contract at Ex.C.43, that the Petitioner would not have invested any amount if only it was aware that Respondent did not have the subsisting lease and that the very same land was already granted to several persons even before the entering into the agreement at Ex.C.43, that 28 Com.AS.No.183/2015 every rupee invested by the Petitioner is only on the representation of the Respondent and Petitioner could never imagine that a Government of Karnataka Company could made a false representation and mislead the Petitioner, hence the award contrary to the above is liable to be set aside.
19.a. This ground is similar to that of Ground No.4 and I have discussed in detail about the said aspect while answering Ground No.4. Moreover, this ground is in the nature and tenor of an appeal. Section 34 of the Arbitration & Conciliation Act, 1996 does not empower the Courts to re- appreciate and re-evaluate the evidence produced before the Arbitral Tribunal and thereafter to judge if the findings of the Arbitral Tribunal are correct or wrong. The Superior Courts have repeatedly held that it is not permissible to a Court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings. The nature of proceedings under Section 34 of the Act is summary in nature as held in the decision reported in (2019)
- S.C.C. Online - S.C. - 1244 = (2019) 9 - S.C.C. - 462 (Canara Nidhi Limited vs. M. Shashikala). Hence, this ground is not available for the Petitioner under Sub-section (2) and Sub-section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of arbitral award on this ground is 29 Com.AS.No.183/2015 thwarted and rejected.
20. The Tenth Ground urged is that the entire finding of the learned Arbitrator that the Petitioner was aware of the status of the subject property and has invested under the agreement knowing about the same is absolutely baseless and against the material available on record, that in view of the fact that no documents or evidence is placed on record to evidence that the Petitioner was aware of it and took upon itself to invest in spite of knowing the same, that the finding of the learned Arbitrator that the Petitioner has entered into the contract and invested the amounts in spite of knowing the same is absolutely erroneous and liable to be set aside.
20.a. This ground is similar to that of Ground No.2 and I have discussed in detail about the said aspect while answering Ground No.2. Moreover, this ground is in the nature and tenor of an appeal. Section 34 of the Arbitration & Conciliation Act, 1996 does not empower the Courts to re- appreciate and re-evaluate the evidence produced before the Arbitral Tribunal and thereafter to judge if the findings of the Arbitral Tribunal are correct or wrong. The Superior Courts have repeatedly held that it is not permissible to a Court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings. The nature of proceedings under Section 34 of the Act 30 Com.AS.No.183/2015 is summary in nature as held in the decision reported in (2019)
- S.C.C. Online - S.C. - 1244 = (2019) 9 - S.C.C. - 462 (Canara Nidhi Limited vs. M. Shashikala). Hence, this ground is not available for the Petitioner under Sub-section (2) and Sub-section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of arbitral award on this ground is thwarted and rejected.
21. The Eleventh Ground is that the learned Arbitrator has seriously erred in recording a finding that M/s. Sathya Granites in which Mr. P.K. Pounraj is a proprietor was involved in quarrying for the last 15 years and therefore had knowledge of status of the property is absolutely baseless and erroneous.
21.a. On perusal of Para No. 16 (b) & (c) at Page No. 54 of the Award, the learned Arbitrator after referring to the oral evidence of CW.1, Sri. P.K. Pounraj has held that he being the proprietor of the M/s. Sathya Granites, which had a raising come sale agreement with the Respondent pertaining to Edamarahalli and Mahimanahalli prior and also after the agreements pertaining to the disputed areas, which reflects that even prior to Ex.C.43, the Petitioner had raising come sale agreement with the Respondent and hence he had knowledge about the status of the property. The said finding is based on 31 Com.AS.No.183/2015 the oral evidence of CW.1. When such being the case, this Court cannot re-appreciate said oral evidence. Therefore, the said contention of the Petitioner cannot be accepted. Hence, this ground is not available for the Petitioner under Sub-section (2) and Sub-section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of arbitral award on this ground is thwarted and rejected.
22. The Twelfth Ground is that the learned Arbitrator has erred in recording a finding that the Petitioner has taken the risk of investing in the subject property merely because Sri. P.K. Pounraj had vast knowledge and experience in the field of quarrying, that it is the Petitioner's specific case that it did not and could not have doubted the credentials of Respondent representation as it was a Government Company, that since the Petitioner believed the representation of the Respondent to be true did not doubt the same and blindly entered into the agreement.
22.a. In fact, about the said aspect, I have already discussed while answering earlier grounds. Moreover, this ground is in the nature and tenor of an appeal. Section 34 of the Arbitration & Conciliation Act, 1996 does not empower the Courts to re- appreciate and re-evaluate the evidence produced 32 Com.AS.No.183/2015 before the Arbitral Tribunal and thereafter to judge if the findings of the Arbitral Tribunal are correct or wrong. The Superior Courts have repeatedly held that it is not permissible to a Court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings. The nature of proceedings under Section 34 of the Act is summary in nature as held in the decision reported in (2019) - S.C.C. Online - S.C. - 1244 = (2019) 9 - S.C.C. - 462 (Canara Nidhi Limited vs. M. Shashikala). Hence, this ground is not available for the Petitioner under Sub-section (2) and Sub- section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of arbitral award on this ground is thwarted and rejected.
23. The Thirteenth Ground is that the finding of the learned Arbitrator that the dispute with regard to misrepresentation has been resolved as per Ex.C.45 and hence the Petitioner is also not entitled to compensation/ damages is also without basis, that the learned Arbitrator has failed to appreciate that even the land that was given/ shown to the Petitioner was not belonging to the Respondent, that it is the specific case of the Petitioner that after the area was reduced as per meeting at Ex.C.45, Petitioner started quarrying 33 Com.AS.No.183/2015 operation by investing more than Rs.10 crores and when the material was ready for export it could not export as it belonged to Sri. D.C. Ramesh and Sri. Vinod Kumar.
23.a. In fact, I have already discussed about similar aspect while answering Ground No.4 above. Moreover, this ground is in the nature and tenor of an appeal. Section 34 of the Arbitration & Conciliation Act, 1996 does not empower the Courts to re- appreciate and re-evaluate the evidence produced before the Arbitral Tribunal and thereafter to judge if the findings of the Arbitral Tribunal are correct or wrong. The Superior Courts have repeatedly held that it is not permissible to a Court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings. The nature of proceedings under Section 34 of the Act is summary in nature as held in the decision reported in (2019) - S.C.C. Online - S.C. - 1244 = (2019) 9 - S.C.C. - 462 (Canara Nidhi Limited vs. M. Shashikala). Hence, this ground is not available for the Petitioner under Sub-section (2) and Sub-section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of arbitral award on this ground is thwarted and rejected.
34Com.AS.No.183/2015
24. The Fourteenth Ground is that the learned Arbitrator failed to appreciate that the Respondent was unable to get the permits for the exporting the granites, that this aspect of the matter read along with the order of refusal of permit clearly evidences that the Respondent had shown an area which did not belonging to it and wanted the Petitioner to quarry over that land.
24.a. This ground is in the nature and tenor of an appeal. Section 34 of the Arbitration & Conciliation Act, 1996 does not empower the Courts to re- appreciate and re-evaluate the evidence produced before the Arbitral Tribunal and thereafter to judge if the findings of the Arbitral Tribunal are correct or wrong. The Superior Courts have repeatedly held that it is not permissible to a Court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings. The nature of proceedings under Section 34 of the Act is summary in nature as held in the decision reported in (2019)
- S.C.C. Online - S.C. - 1244 = (2019) 9 - S.C.C. - 462 (Canara Nidhi Limited vs. M. Shashikala). Hence, this ground is not available for the Petitioner under Sub-section (2) and Sub-section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner 35 Com.AS.No.183/2015 calling for the setting aside of arbitral award on this ground is thwarted and rejected.
25. The Fifteenth Ground is that the finding of learned Arbitrator that the Petitioner was carrying on mining activity under the Respondent at Mahimanahalli and Yedamanahalli and therefore knew about the status of lease is wholly erroneous and illegal, hence liable to be set aside.
25.a. In fact, I have already discussed about similar aspect while answering Ground No. 11. Moreover, this ground is in the nature and tenor of an appeal. Section 34 of the Arbitration & Conciliation Act, 1996 does not empower the Courts to re- appreciate and re-evaluate the evidence produced before the Arbitral Tribunal and thereafter to judge if the findings of the Arbitral Tribunal are correct or wrong. The Superior Courts have repeatedly held that it is not permissible to a Court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings. The nature of proceedings under Section 34 of the Act is summary in nature as held in the decision reported in (2019) - S.C.C. Online - S.C. - 1244 = (2019) 9 - S.C.C. - 462 (Canara Nidhi Limited vs. M. Shashikala). Hence, this ground is not available for the Petitioner under Sub-section (2) and Sub-section (2-A) of 36 Com.AS.No.183/2015 Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of arbitral award on this ground is thwarted and rejected.
26. The Sixteenth Ground is that the finding of the learned Arbitrator that the Petitioner was a party to an illegality is without any evidence on record but merely upon assumptions and presumption that the Petitioner must be aware as it was rising contractor with the Respondent in some other area is erroneous and liable to be set aside.
26.a. This ground is in the nature and tenor of an appeal. Section 34 of the Arbitration & Conciliation Act, 1996 does not empower the Courts to re- appreciate and re-evaluate the evidence produced before the Arbitral Tribunal and thereafter to judge if the findings of the Arbitral Tribunal are correct or wrong. The Superior Courts have repeatedly held that it is not permissible to a Court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings. The nature of proceedings under Section 34 of the Act is summary in nature as held in the decision reported in (2019)
- S.C.C. Online - S.C. - 1244 = (2019) 9 - S.C.C. - 462 (Canara Nidhi Limited vs. M. Shashikala). Hence, this ground is not available for the Petitioner under Sub-section (2) 37 Com.AS.No.183/2015 and Sub-section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of arbitral award on this ground is thwarted and rejected.
27. The Seventeenth Ground is that the learned arbitrator has failed to take note of the aspect that it had invested crores of rupees towards clearing the over burden, excavated the granite blocks, got the same polished and was ready for export, that the learned Arbitrator has utterly failed in not granting damages in favour of the Petitioner as claimed, that more so in view of the fact that the Respondent has clearly and categorically admitted that the Petitioner has excavated the granite and the same could not be exported/ transported for want of permits.
27.a. This ground is in the nature and tenor of an appeal. Section 34 of the Arbitration & Conciliation Act, 1996 does not empower the Courts to re- appreciate and re-evaluate the evidence produced before the Arbitral Tribunal and thereafter to judge if the findings of the Arbitral Tribunal are correct or wrong. The Superior Courts have repeatedly held that it is not permissible to a Court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his 38 Com.AS.No.183/2015 findings. The nature of proceedings under Section 34 of the Act is summary in nature as held in the decision reported in (2019)
- S.C.C. Online - S.C. - 1244 = (2019) 9 - S.C.C. - 462 (Canara Nidhi Limited vs. M. Shashikala). Hence, this ground is not available for the Petitioner under Sub-section (2) and Sub-section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of arbitral award on this ground is thwarted and rejected.
28. The Eighteenth Ground is that he learned Arbitrator has failed in neither awarding the compensation for misrepresentation nor cost of the granites which is completed illegal, unsustainable and hence is liable to be set aside.
28.a. This ground is in the nature and tenor of an appeal. Section 34 of the Arbitration & Conciliation Act, 1996 does not empower the Courts to re- appreciate and re-evaluate the evidence produced before the Arbitral Tribunal and thereafter to judge if the findings of the Arbitral Tribunal are correct or wrong. The Superior Courts have repeatedly held that it is not permissible to a Court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings. The nature of proceedings under Section 34 of the Act 39 Com.AS.No.183/2015 is summary in nature as held in the decision reported in (2019)
- S.C.C. Online - S.C. - 1244 = (2019) 9 - S.C.C. - 462 (Canara Nidhi Limited vs. M. Shashikala). Hence, this ground is not available for the Petitioner under Sub-section (2) and Sub-section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of arbitral award on this ground is thwarted and rejected.
29. The Nineteenth Ground is that the even with regard to imposing interest on refund of security deposit at the rate of 6% per annum is wrong and against several judgments of Hon'ble High Court of Karnataka and Hon'ble Supreme Court of India. Further, the refund of security deposit is ordered with interest to be calculated from 29.06.2002 while amount was deposited on 24.09.1999.
29.a. The learned Arbitrator after interpreting Clause 21 of Ex.C.43 and also after referring of Cross-Examination of CW.1 and the cross-examination of the RW.1 as answered about the aspect of refund of security deposit with rate of interest at 6% per annum. As already discussed the interpretation of terms of the contract lies with the Arbitrator. This Court cannot interfere with said finding of the learned Arbitrator lightly. The Petitioner has not produced any Judgments of the Hon'ble High Court of 40 Com.AS.No.183/2015 Karnataka and Hon'ble Supreme Court as mentioned in this ground. When such being the case, the said finding of the learned Arbitrator cannot be considered as perverse and illegal. Hence, this ground is not available for the Petitioner under Sub- section (2) and Sub-section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of arbitral award on this ground is thwarted and rejected.
30. The scope of this court is limited with regard to Section 34 of the Act. The position of law stands crystallized today, that findings, of fact as well as of law, of the arbitrator/Arbitral Tribunal are ordinarily not amenable to interference under Section 34 of the Act. The scope of interference is only where the finding of the Tribunal is either contrary to the terms of the contract between the parties, or, ex facie, perverse, that interference, by this court, is absolutely necessary. The arbitrator is the final arbiter on facts as well as in law, and even errors, factual or legal, which stop short of perversity, do not merit interference under Section 34 of the Act. The Hon'ble High Court of Delhi in the decision reported in 2015 - S.C.C. OnLine - Del - 13192 (P.C.L. Suncon (JV) vs. NHAI), in Paragraph No. 24 has held as follows :-
41Com.AS.No.183/2015 "24. As a postscript, this Court believes that it is imperative to sound a word of caution.
Notwithstanding the considerable jurisprudence advising the Courts to remain circumspect in denying the enforcement of arbitral awards, interference with the awards challenged in the petitions before them has become a matter of routine, imperceptibly but surely erasing the distinction between arbitral tribunals and courts. Section 34 jurisdiction calls for judicial restraint and an awareness that the process is removed from appellate review. Arbitration as a form of alternate dispute resolution, running parallel to the judicial system, attempts to avoid the prolix and lengthy process of the courts and presupposes parties consciously agreeing to submit a potential dispute to arbitration with the object of actively avoiding a confrontation in the precincts of the judicial system. If a court is allowed to review the decision of the arbitral tribunal on the law or on the merits, the speed and, above all, the efficacy of the arbitral process is lost."
31. The Hon'ble Supreme Court in the decision reported in (2006) 11 - S.C.C. - 181 ( McDermott International Inc. vs. Burn Standard Co. Ltd. and Ors.), has held as follows :-
"52. The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias 42 Com.AS.No.183/2015 by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it."
32. Thus, it is observed and held that the arbitral award is not marred by any patent illegality, as there is no contravention of the substantive law of India, which would result in the death knell of an arbitral award. It is also observed that there is no patent illegality in the arbitral award, which must go to the root of the matter. The arbitral award is also a well reasoned and a speaking award. The arbitral award is also held to not be in contravention of Section 28(3) of the Act, which pertains to the terms of the contract, trade usages applicable to the nature of contract and substance of dispute.
33. The Arbitration and Conciliation (Amendment) Act, 2015 made major changes to Section 34. The changes were suggested by the 246th Report of the Law Commission of India on Amendments to the Arbitration and Conciliation Act, 1996 of 43 Com.AS.No.183/2015 August 2014 and the Supplementary to the 246th Report of the Law Commission of India on Amendments to the Arbitration and Conciliation Act, 1996 of February 2015. These changes were aimed at restricting Courts from interfering with arbitral awards on the ground of "public policy." Accordingly, the amendment added "Explanation 2" to Section 34(2) as well as Section 2A. Explanation 2 of Section 34(2) states -
"For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian Law shall not entail a review on the merits of the dispute."
34. Because of this amendment, Courts would no longer be able to interfere with the award passed by the arbitrator. The explanation makes it especially clear that in no way would a Court be entailed to review the award on merits of the dispute. After amendment to Arbitration and Conciliation Act, Section 2A also curtails the scope of interpretation of "patently illegal" as propounded in the decision reported in 2003 (5) - S.C.C. - 705 (ONGC vs. Saw Pipes Limited). Section 2A states :-
"An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiate by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of law 44 Com.AS.No.183/2015 or by reappreciation of evidence."
35. Thus, Courts can no longer reappraise evidence or set aside awards merely because the Arbitral Tribunal has made errors when dealing with the same.
36. Hence, the scope of interference is only where the finding of the Tribunal is either contrary to the terms of the contract between the parties, or, ex facie, perverse, that interference, by this court, is absolutely necessary. The Arbitrator is the final arbiter on facts as well as in law, and even errors, factual or legal, which stops short of perversity, does not merit interference under Section 34 of the Arbitration & Conciliation Act, 1996. Courts can no longer reappraise evidence or set aside awards merely because the Arbitral Tribunal has made errors when dealing with the same.
37. In the decision reported in (2017) 13 - SCALE - 91 (SC) (Venture Global Engineering LLC and Ors vs. Tech Mahindra Ltd. and Ors), the Hon'ble Supreme court has held as follows:-
"The Award of an Arbitral Tribunal can be set aside only on the grounds specified in Section 34 of the Arbitration & Conciliation Act and on no other ground.45
Com.AS.No.183/2015 The Court cannot act as an Appellate Court to examine the legality of Award, nor it can examine the merits of claim by entering in factual arena like an Appellate Court."
38. A similar view is also taken in the decision reported in (2017) 14 - SCALE - 240 (SC) (Sutlej Construction vs. The Union Territory of Chandigarh).
39. In the decision reported in 2019 (15) - S.C.C. - 131 (Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India Ltd.), the Hon'ble Supreme Court has once again reiterated the law related to the examination by a Court of an Award under Section 34 of the Arbitration & Conciliation Act, 1996 and has held as under:-
"34. What is clear, therefore, is that the expression public policy of India, whether contained in Section 34 or in Section 48, would now mean the fundamental policy of Indian law as explained in paragraphs 18 and 27 of Associate Builders (supra), i.e., the fundamental policy of Indian law would be relegated to the "Renusagar" understanding of this expression. This would necessarily mean that the Western Geco (supra) expansion has been done away with. In short, Western Geco (supra), as explained in paragraphs 28 and 29 of Associate Builders (supra), would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Court's intervention would be on the 46 Com.AS.No.183/2015 merits of the award, which cannot be permitted post amendment. However, in so far as principles of natural justice are concerned, as contained in Sections 18 and 34(2) (a) (iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in paragraph 30 of Associate Builders (supra).
35. It is important to notice that the ground for interference in so far as it concerns "interest of India"
has since been deleted, and therefore, no longer obtains. Equally, the ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the "most basic notions of morality or justice". This again would be in line with paragraphs 36 to 39 of Associate Builders (supra), as it is only such arbitral awards that shock the conscience of the court that can be set aside on this ground.
36. Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law, as understood in paragraphs 18 and 27 of Associate Builders (supra), or secondly, that such award is against basic notions of justice or morality as understood in paragraphs 36 to 39 of Associate Builders (supra). Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii) was added by the Amendment Act only so that Western Geco (supra), as understood in Associate Builders (supra), and paragraphs 28 and 29 in particular, is now done away with.
37. Insofar as domestic awards made in India are concerned, an additional ground is now available under subsection (2A), added by the Amendment Act, 2015, to 47 Com.AS.No.183/2015 Section 34.Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within the fundamental policy of Indian law, namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the back door when it comes to setting aside an award on the ground of patent illegality.
38. Secondly, it is also made clear that re-
appreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.
39. To elucidate, paragraph 42.1 of Associate Builders (supra), namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Paragraph 42.2 of Associate Builders (supra), however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award.
40. The change made in Section 28(3) by the Amendment Act really follows what is stated in paragraphs 42.3 to 45 in Associate Builders (supra), namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair minded or reasonable person would; in short, that the arbitrator's view is not even a possible view to take.
48Com.AS.No.183/2015 Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2A).
41. What is important to note is that a decision which is perverse, as understood in paragraphs 31 and 32 of Associate Builders (supra), while no longer being aground for challenge under public policy of India, would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterized as perverse."
40. In the decision reported in 2019 (16) - SCALE - 823 (Hindustan Construction Company Limited & Anr. vs. Union of India & Ors.), the Hon'ble Apex Court has held as under:-
"49. Further, this Court has repeatedly held that an application under Section 34 of the Arbitration Act, 1996 is a summary proceeding not in the nature of a regular suit - see Canara Nidhi Ltd. v. M. Shashikala 2019 SCC Online SC 1244 at paragraph 20. As a result, a court reviewing an arbitral award under Section 34 does not sit in appeal over the award, and if the view taken by 49 Com.AS.No.183/2015 the arbitrator is possible, no interference is called for - see Associated Construction v. Pawanhans Helicopters Limited. (2008)16 SCC 128 at paragraph 17.
50. Also, as has been held in the recent decision Ssangyong Engineering & Construction Co. Ltd. vs. NHAI 2019 SCC Online SC 677, after the 2015 Amendment Act, this Court cannot interfere with an arbitral award on merits."
41. In the decision reported in 2020 - SCC Online - S.C. - 466 = 2020 (7) - S.C.C. - 167 (Patel Engineering Ltd. vs. North Eastern Power Corporation Ltd), the Hon'ble Supreme Court has once again exposited the 'patent illegality' ground, appearing in Section 34 (2A) of the Arbitration and Conciliation Act, 1996. The most significant part of this judgment is the recognition and re-affirmation given to the test of patent illegality, as set out in Paragraph (42.3) of the decision reported in 2015 (3) - S.C.C. - 49 (Associate Builders vs. DDA) and which was reiterated in Paragraph (40) of the decision reported in 2019 (15) - S.C.C. - 131 (Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India Ltd.). The aforementioned test of 'patent illegality' lays down that any contravention of Section 28 (3) of the Arbitration & Conciliation Act, 1996 is deemed to be a sub-head of patent illegality. According to it, an Arbitral Tribunal must decide in accordance 50 Com.AS.No.183/2015 with the terms of the contract, but if an Arbitrator construes a term of the contract in such a way that it could be said to be something that no fair minded or reasonable person could do, the same will render the award 'patently illegal'.
42. By keeping in mind about the said legal aspects, I am of the opinion that the Arbitral Award is not marred by any patent illegality, as there is no contravention of the substantive law of India, which would result in the death knell of an Arbitral Award. It is also observed that there is no patent illegality in the Arbitral Award, which must go to the root of the matter. The Arbitral Award is also a well reasoned and a speaking award. The Arbitral Award is also held to not be in contravention of Section 28(3) of the Arbitration & Conciliation Act, which pertains to the terms of the contract, trade usages applicable to the nature of contract and substance of dispute.
43. On a parting note, I would like to add, that the challenge to the various clauses of contract by the Petitioner under the present petition is not tenable. It is accordingly, held that the Arbitral Award is neither against the fundamental policy of India nor in contravention of law. Therefore, I find no perversity in the Arbitral Award and the same is upheld.
51Com.AS.No.183/2015
44. Having given my careful consideration to the submissions urged and the complete case record in the preceding paragraphs of this judgment, I am of the view that is not a fit and proper case for exercise the jurisdiction of this court under Section 34 of the Arbitration & Conciliation Act and interfere with the Arbitral Award and the same is upheld.
45. In the judgment of the Hon'ble Apex Court reported in 2021 - S.C.C. Online - S.C. - 508 (PSA Sical Terminals Pvt. Ltd. vs. Board of Trustees of V.O. Chidambranar Port Trust Tuticorin and Others), the Hon'ble Apex Court has held that a decision, which is perverse, though may not be a ground for challenge under public policy of India, however, the same can certainly amount to a patent illegality appearing on the face of the award. The Hon'ble Apex Court has further held that a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision, would be perverse and liable to be set aside.
46. In my humble opinion, it cannot be said, in the present matter, that finding recorded by the Learned Arbitrator is based on no evidence or it has ignored vital evidence before arriving at the decision. A bare perusal of the award passed by the 52 Com.AS.No.183/2015 Learned Arbitrator shows that evidence of both the parties have been considered in detail and the Learned Arbitrator has taken into account each and every submissions advanced by the parties before him, including appreciation of evidence in proper manner before arriving at the decision to pass the impugned award.
47. For the said aspect, I wish to refer a recent decision of the Hon'ble Apex Court reported in (2021) 3 - S.C.C. - 308 (Anglo American Metallurgical Coal Pty. Ltd. vs. MMTC Limited), wherein it has laid down the parameters of judicial review and Courts have been permitted to interfere only if there is a ground of patent illegality or violation of fundamental policy of Indian law and if a possible view is based on oral and documentary evidence led in the case, which cannot be characterized as being either perverse or being based on no evidence and as such, no interference is permissible. The relevant portion of the judgment is reproduced hereunder:-
"48. Given the parameters of judicial review laid down in Associate Builders, it is obvious that neither the ground of fundamental policy of Indian law, nor the ground of patent illegality, have been made out in the facts of this case, given the fact that the majority award is certainly a possible view based on the oral and 53 Com.AS.No.183/2015 documentary evidence led in the case, which cannot be characterized as being either perverse or being based on no evidence."
48. In the Judgment of the Hon'ble Supreme Court in Delhi Airport Metro Express Private Limited vs. Delhi Metro Rail Corporation Limited in Civil Appeal No.5627/2021 (arising out of SLP (C) No. 4115/2019) decided on 09.09.2021, the Arbitral Award which was challenged before the Hon'ble High Court under Section 34 was dismissed and in appeal under Section 37. The Division Bench of Hon'ble High Court has allowed the appeal and set aside the award. In this judgment, the Hon'ble Supreme Court has set aside the order of the Division Bench. In the said Judgment, the Hon'ble Supreme Court in Para 24 has held as under:-
"24. This court has in several other judgments interpreted Section 34 of the 1996 Act to stress on the restraint to be shown by courts while examining the validity of the arbitral awards. The limited grounds available to courts for annulment of arbitral awards are well known to legally trained minds. However, the difficulty arises in applying the well-established principles for interference to the facts of each case that come up before the courts. There is a disturbing tendency of courts setting aside arbitral awards, after dissecting and reassessing factual aspects of the cases to come to a conclusion that the award needs 54 Com.AS.No.183/2015 intervention and thereafter, dubbing the award to be vitiated by either perversity or patent illegality, apart from the other grounds available for annulment of the award. This approach would lead to corrosion of the objection of the 1996 Act and the endeavours made to preserve this court, which is minimal judicial interference with arbitral awards. That apart, several judicial pronouncements of this court would become a dead letter if arbitral awards are set aside by categorizing them as perverse or patently illegal without appreciating the contours of the said expressions."
49. The Hon'ble Supreme Court at Para 35 of the said Judgment has held that as the arbitrator is the sole judge of the quality as well as the quantity of the evidence, the task of being a judge on the evidence before the Tribunal does not fall upon the court in exercise of its jurisdiction under Section 34. The Hon'ble Supreme Court has also held in Para 39 of the said Judgment that construction of the contract is within the jurisdiction of the Tribunal and merely because another view is possible, the court cannot interfere with such construction and substitute its own view.
50. On going through these Judgments, it makes further clear that Arbitrator is sole judge of the quality and quantity of the evidence and construction of contract is within the jurisdiction of the Tribunal and the court cannot lightly interfere 55 Com.AS.No.183/2015 with the award passed by the learned Arbitrator. On considering the facts of the present case, as held in this Judgment there are no grounds to set aside the award of the learned Arbitrator under Section 34 of the Act. The Hon'ble Supreme Court in this Judgment has even held that patent illegality which do not go to the root of the matter and every error of law committed by the Arbitral Tribunal could not fall within the expression patent illegality.
51. No error is apparent in respect of the Impugned Award. I do not find any contradiction in the observations and findings given by Arbitral Tribunal. The Impugned Award does not sufer from vice of irrationality and perversity. The conclusion of the Arbitral Tribunal is based on a possible view of the matter, so the Court is not expected to interfere with the award. Even impugned award passed by Arbitral Tribunal cannot be set aside on the ground that it was erroneous. The award is not against any public policy nor against the terms of contract of the parties. No ground for interference is made out. None of the grounds raised by the Petitioner attract Section 34 of the Arbitration and Conciliation Act. Therefore, I answer this Point in Negative.
56Com.AS.No.183/2015
52. Point No. 2 :- Therefore, I proceed to pass the following Order.
ORDER The Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996, is dismissed.
The Award dated 19.09.2015 is hereby upheld.
The Petitioner shall pay the cost of this proceeding to the Respondent.
Office is directed to return the arbitral records to the Learned Arbitrator after the appeal period is over.
The Office is directed to send copy of this judgment to both parties to their email ID as required under Order XX Rule 1 of the Civil Procedure Code as amended under Section 16 of the Commercial Courts Act.
( Dictated to the Stenographer, typed by her directly on computer, verified and then pronounced by me in open Court on this the 17th day of January, 2022).
(DEVARAJA BHAT.M), LXXXII Addl. City Civil & Sessions Judge, Bengaluru.
57 Com.AS.No.183/2015 The Judgment is pronounced in Open Court. The operative portion of the said Judgment is as follows :-
ORDER The Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996, is dismissed.
The Award dated
19.09.2015 is hereby upheld.
The Petitioner shall pay
the cost of this proceeding to
the Respondent.
Office is directed to
return the arbitral records to
the Learned Arbitrator after
the appeal period is over.
The Office is directed to
send copy of this judgment to
both parties to their email ID
as required under Order XX
Rule 1 of the Civil Procedure
Code as amended under
Section 16 of the Commercial
Courts Act.
(vide my separate detailed
Judgment dated 17.01.2022 ).
(Typed to my dictation)
58
Com.AS.No.183/2015
LXXXII ACC&SJ, B'LURU.
The Petitioner had written a letter on 12.04.2002 to resolve the local problem.
The Deputy Director of Mines ordered on 29.06.2002 for stoppage of quarrying on the basis that there was a complaint of encroachment into the land of Sri. Vinod Kumar bearing Sy. No. 715.
During the pendency of the Writ Petition, the Deputy Director of Mine and Geology issued a Notice fixing the date 27.07.2002 for conducting the survey and to demarcate the land. As on that date, fully dressed 1,800/- CBM granite blocks were ready for transportation and remaining blocks were not dressed. In the said survey, it was made known that the area where the Petitioner was asked to conduct quarrying does not belong to the Respondent at all.
The Director of Mine and Geology has passed an Order on 04.09.2002, to the efect that unless there is a joint survey the mineral dispatch permits should not be issued to the Respondent.59
Com.AS.No.183/2015 The Petitioner enjoyed the rights of leased area (QL No. 5187 and 5797) from the date of the Agreement till the decision of the Government in withdrawing the area, i.e., from 24.09.1999 to December 2002.
On 06.01.2003, the Petitioner wrote a letter specifically indicating that when mineral dispatch permits are not obtained, the cheques shall not be presented and should not be the Petitioner.
In the letter dated 27.01.2003, it was admitted by the Managing Director of Respondent that some local people are trying to transport granite blocks and obtaining of the Mineral Dispatch permits is the responsibility of the Respondent.
In pursuance of an Order dated 29.06.2003, the issuance of mineral dispatch permit was stopped by the Deputy Director of Mines and Geology. As on the date of said Order, there was more than 3,500/- CBM Granite Blocks dressed and ready for export for outside the country.