Gujarat High Court
Sardar Sarovar Narmada Nigam Limited vs Aniha Corporation on 13 September, 2021
Author: Sonia Gokani
Bench: Sonia Gokani, Nirzar S. Desai
C/FA/2544/2015 JUDGMENT DATED: 13/09/2021
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 2544 of 2015
FOR APPROVAL AND SIGNATURE:
HONOURABLE MS. JUSTICE SONIA GOKANI
and
HONOURABLE MR. JUSTICE NIRZAR S. DESAI
==========================================================
1 Whether Reporters of Local Papers may be allowed NO
to see the judgment ?
2 To be referred to the Reporter or not ? NO
3 Whether their Lordships wish to see the fair copy NO
of the judgment ?
4 Whether this case involves a substantial question NO
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
==========================================================
SARDAR SAROVAR NARMADA NIGAM LIMITED
Versus
ANIHA CORPORATION
==========================================================
Appearance:
MR HS MUNSHAW(495) for the Appellant(s) No. 1
MR KV SHELAT(834) for the Defendant(s) No. 1
==========================================================
CORAM:HONOURABLE MS. JUSTICE SONIA GOKANI
and
HONOURABLE MR. JUSTICE NIRZAR S. DESAI
Date : 13/09/2021
ORAL JUDGMENT
(PER : HONOURABLE MS. JUSTICE SONIA GOKANI)
1. The appellant is the original applicant who is aggrieved Page 1 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 and dissatisfied with the order dated 14.07.2015 delivered by the learned District and Sessions Judge, Gandhinagar rejecting the Civil Misc. Appeal No. 168 of 2014 preferred by the present appellant and confirming the award dated 23.04.2014 declared by the arbitrator.
2. The brief facts leading to the present appeal are as follows: -
2.1. The claimant - opponent Aniha Corporation is a proprietor firm managed through its proprietor Shri Chetankumar Ramanlal Shah. The Aniha Corporation is interested in the development of land and therefore, it entered into an agreement with the appellant Sardar Sarovar Narmada Nigam Limited ('SSNNL' hereinafter). 2.2. A tender was invited by SSNNL by issuing public advertisement in the newspaper for the lease of plot no.2 admeasuring 2064 sq.mtrs situated at Gandhinagar Airport Road on LHS downstream, Mouje Sughad of District Gandhinagar. A plot was to be developed for tourism purpose and the development was to take place as per the terms and conditions mentioned in the tender. The claimant - opponent being the successful bidder, the SSNNL agreed to entered into the lease agreement with it. The SSNNL agreed to lease Page 2 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 out the plot no.2 to the opponent on payment of premium equivalent to the market value to develop the said property and on acceptance of the tender, a communication was sent in writing on 15.02.2007. A cheque of Rs.19,50,000/- was issued on 26.02.2007 and the additional security of six months' rent to the tune of Rs. 60,000/- had been also given. 2.3. A lease deed came to be executed after the parties entered into the understanding on 05.06.2007. The construction plan was prepared by the respondent and architecture design also was made. It was sent for the approval as per the terms and conditions of the agreement to the appellant on 11.10.2007.
2.4. It was averred by the opponent that the request was made to process the plan so that the project can be proceeded further. A communication was also sent to the Executive Engineer, Narmada Canal Section 4 to verify and approve the plans. It was sent to the Gandhinagar Urban Development Authority (GUDA) and Ahmedabad Urban Development Authority (AUDA). There was a request that after once it is sanctioned, the same is to be sent to the SSNNL. After about 10 months, a communication was received by the opponent that it cannot construct multi storied building and the plans Page 3 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 were sent back to the opponent. It was insisted that the opponent was also get the plan sanctioned from the local development authority.
2.5. According to the opponent before 05.08.2008, on regular basis, the payment was made of the rent and frequent inquiries were made with the corporation with regard to the process whether was in the right direction. On 12.09.2008, it was communicated by the appellant to the opponent -
claimant that it should start the development of subject plot and submit the schedule of development. It also was asked to get the sanction of the Urban Development Authority for the construction plan. It is all throughout alleged by the opponent
- claimant that the appellant failed to fulfill the obligations of verifying and approving the construction plans and getting approval from the appropriate authorities since the subject land was owned by the appellant. The grievance on the part of the opponent - claimant is that it never supplied the information as requested for and therefore for want of necessary details and on the ground of zoning which had been asked for by the order, the matter got delayed. 2.6. On 15.12.2008, the opponent was informed that the Narmada Main Canal had a special structure and had a Page 4 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 certificate in that regard. In wake of the background of AUDA regulations and restrictions, it was not possible to carry out the construction as per the plan. A communication was also received by the opponent to get the plan sanctioned with the local development authority and it was promised the permit use of places surrounded the subject plot as condition no.5 of the tender agreement.
2.7. It was since not legally feasible to develop the plot at one stage, it was asked to take a revised plan. Eventually a stand was taken by the appellant and the lease deed was terminated as the opponent - claimant failed to develop plot no.2 in a given time period. The termination was imposed with immediate effect from the date of communication i.e. 07.02.2011. The premium amount and the rent amount paid by the claimant had been forfeited and the possession of plot had been restored to the SSNNL immediately. This, according to the opponent, is a clear case of breach of contractual terms and conditions / obligations and assurance given to the opponent and therefore, it challenged the notice of termination of lease agreement as contrary to law. 2.8. On breach of provisions of Transfer of Property Act on account of forfeiture of lease, the legal notice had been issued Page 5 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 seeking reference to the arbitration under the provisions of Arbitration Act and request was made for the arrangement of sole arbitrator. It also sought the relief in its statement of claim as follows: -
"(A) Hold that the actions of the respondent corporation are in breach of the obligations arising from representations and assurances and bundle of contracts and that such breach is illegal, unjust, arbitrary, malafide, discriminatory and the consequential alleged termination of the registered lease deed be declared as illegal, unilateral, unwarranted, discriminatory and violating the rights of the claimant adversely;
(B) By holding that the claimant's liability to raise construction on the subject property within the specified period was and is attributable to the inaction, misrepresentation, omissions and consequent breach on the part of the respondent corporation in providing sanctioned plans as promised and under any circumstances the alleged breach was waived and could not have been the basis of contract without considering the grounds as to why the development permission was not accorded within six months;
(C) xxx xxx xxx xxx (D) be pleased to quash and set aside the termination of the lease effected by the Respondent Corporation by holding the lease as a continuing one by restoring the subject land in question with required directions to extend the period of lease pro rata and with a direction to the respondent to comply with the representations, assurances and the bundle of contractual obligations by and between the parties by getting the plans for development approved;
(E) In view of the breach and inaction of the covenants by and between the parties, by the respondent corporation and its agents, the Page 6 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 forfeiture of the lease and the forfeiture of rent and premium amount of Rs. 39,50,000/- be declared illegal, arbitrary, unreasonable and contrary to Section 112 of the Transfer of Property Act, and the premium amount with the rent paid so far, be ordered to be refunded to the claimant with commercial rate of interest 18% from the date of deposit till realization be ordered;
(F) The claim from Losses and compensation of Rs. 1,10,00,000/- collectively, being amount for expenditure incurred in preparation of plans, in preparing architectural drawing, the Loss of Business and the difference between the market rate prevalent on the date of termination of lease and the premium price of Rs. 39,50,000/- be ordered to be awarded in favour of claimant against the Respondent corporation and (G) Be pleased to hold finally that having regard to the site topography, situation of the subject plot, and non permissibility of constructed development in major portion of the subject plot, the contract of lease stood frustrated and respondent be directed to give similar/deficit area of plot for development adjacent to the subject plot and to continue the lease contract."
3. The matter was decided by the Arbitral Tribunal. Learned Arbitrator framed following issues and answered the same as follows: -
"Issues: -
(1) Whether the claimant proves that the contract to develop the subject plot as lease holding property is void and/or voidable as alleged?
(2) Whether floating of the tender regarding subject plot was illegal, unjust and devoid of authority in view of the location of the plot?
(3) Whether the claimant proves that in view of either impossibility or on account of legal Page 7 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 disability, the development of the subject plot, contract was a frustrated contract from its inception?
(4) Whether the claimant proves that any eventuality has resulted into frustration of the contract for the reasons beyond control of the parties to the contract? If yes, what is consequences?
(5) Whether the respondent proves that termination of the contract/lease and forfeiture of the amount of premium of Rs. 39.5 lakh is legal and proper?
(6) Whether the claimant was aware about the Development and Ribbon Development Rules when he entered into contract of the respondent Corporation? If yes, then what is the consequence?
(7) Whether the claimant is entitled to the amount of claim of Rs. 1,10,00,000/- as averred in the statement of claim with interest?
(8) Whether the respondent proves that the claimant has failed in developing the plot as alleged in the reply affidavit filed, though the development of the plot was possible and/or otherwise permissible?
(9) Whether the claimant is entitled to interest?
If yes, at what rate?
(10) What award?
Answers to the above issues: -
(1) In affirmative. The contract is found voidable. (2) In affirmative. It is found unjust, improper and therefore illegal in view of the location of the plot.
(3) In affirmative.
Page 8 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022
C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 (4) First part in affirmative and the claimant therefore is found entitled to the relevant consequential reliefs prayed for.
(5) In negative.
(6) The first part in affirmative. However, it is found that the same has no negative consequence on the claim as discussed.
(7) The claimant is held entitled to Rs. 1,73,700/-. Rest of the claim is dismissed.
(8) In negative.
(9) First part in affirmative. At the rate of 18%. (10) As per final Award."
4. Eventually, the learned Arbitrator allowed the claimant to recover the amount of Rs. 39,50,000/- with the interest at the rate of 18%. It also awarded the claim of Rs. 1,73,700/- under the head of loss, damages, etc. The claim beyond Rs. 1,73,700/- was not found acceptable and therefore, the same was dismissed.
5. An application came to be preferred by the present appellant under Section 34 of the Arbitration and Conciliation Act before the District and Sessions Court, Gandhinagar by way of Civil Misc. Application No. 168 of 2014 where the Court decided the following issues: -
"Issues: -
1. Whether the applicant proves that the Page 9 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 Learned Sole Arbitrator doesn't have jurisdiction to adjudicate the dispute between the parties?
2. As per the Gujarat Public Works Contract and Dispute Arbitration Tribunal Act, 1992, the Tribunal has jurisdiction to adjudicate the dispute between the parties?
3. What order?
Findings on the above issues: -
1. In the Negative.
2. In the Negative.
3. As per the final order."
5.1. The Court found the judgments sought to be relied upon by the opponent - claimant appropriate and the ratio laid down therein covering both the issues raised before it. It thus dismissed the application in limini.
6. Aggrieved appellant is before this Court. It is also the say of the appellant that there is a gross error committed by the learned Arbitrator and the District Court holding the appellant responsible for non-development of the plot. There is a gross error in saying that the appellant is responsible for non-development of the plot. The tender has been submitted with open eyes and executed the lease deed at his sweet will and therefore, the lease deed being a contract, it cannot shift the liability to abide by the terms and conditions. Non-
fulfillment of the terms and conditions of the lease deed has Page 10 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 resulted into forfeiture of amount as well as the taking over of the possession of the land in question. The trial Court has awarded 18% interest duly confirmed by the lower Court to drop burden upon the public exchequer heavily, therefore, the appellant sought the following prayers: -
"(a) This Hon'ble Court be pleased to admit this First Appeal.
(a) Be pleased to allow the present First Appeal by way of passing appropriate orders quashing and setting aside the impugned order dated 14.07.2015 delivered by the Ld. Sessions Judge at Gandhinagar rejecting the Civil Misc. Appeal No. 168 of 2014 preferred by the present Appellant and confirming the Award dated 23.04.2014 declaring by the Hon'ble Arbitrator by way of holding that the same is illegal, unjust, arbitrary and contrary to the facts and materials on record in the interest of justice.
(b) Be pleased to pass such other and further orders as the nature of the case may require."
7. The opponent had preferred caveat application under Section 148(A) of the Code of Civil Procedure. It had urged that the First Appeal filed under Section 37 of the Arbitration and Conciliation Act, 1996 against the caveator by challenging the judgment and order dated 14.07.2015 cannot be passed by the learned Principal District Judge. In the challenge to the judgment and award dated 14.07.2015 passed by the learned Principal District Judge, Gandhinagar in Civil Misc. Application No. 168 of 2014, it was urged not to proceed further in the hearing.
Page 11 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022
C/FA/2544/2015 JUDGMENT DATED: 13/09/2021
8. This Court on 11.01.2016 while admitting the appeal had directed the appellant to deposit the entire amount within six weeks from the date of order i.e. 11.01.2016 with the registry of the trial Court and the trial Court shall deposit the amount with nationalized bank initially for three years' period.
9. We have heard learned advocate Mr. H.S.Munshaw who has also given his written submissions. It is emphasized by learned advocate Mr. Munshaw all along that for tourism purpose the handing over of the possession of the plot was made however, after three years, the appellant was compelled to revoke and cancel the lease deed as also forfeit the amount as not only after handing over the possession it has failed to get the approval of the order, it has chosen not to abide by any further conditions and therefore, payment of Rs. 39.50 lakhs with interest at the rate of 18% is extremely high. The refund of amount of premium was completely unwarranted and at the best the interest could have been 7% or 7.5%. It also has further urged that the plan layout ought to have been placed for the approval for order. In an identical case, the learned Single Judge had directed to deposit Rs. 75 lakhs. He therefore has urged to quash and set aside both the authorities.
Page 12 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022
C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 9.1. In his written submission he has further urged that the opponent was under obligation for tourism activities. He was also well conversant with the location of the plot. It is further his say that it also failed to develop the plot within six months. In spite of completion of time limit for the development of the plot, according to the appellant, as per the terms and conditions of the lease agreement, despite repeated instructions nothing happened and therefore, the notices dated 08.04.2010 and 24.09.2010 came to be issued. According to the appellant, the sole arbitrator declared the award by allowing various claims and ordered to pay Rs. 39.50 lakhs with interest at the rate of 18%.
10. Before adverting to the facts and submissions made at length by the other side, the law on the subject needs reference at this stage.
10.1. The Apex Court redressed in case of Mcdormott International Inc. vs. Burn Standard Co.; reported in (2006) 11 SCC 181, where there was an agreement between the parties in relation to the technical collaboration in terms whereof the Mcdormott International Inc. agreed to transfer technology to the BSNL with regard to design, construction and operation of a fabrication yard. The said agreement Page 13 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 contained a separate arbitration clause between the parties. A contract was entered into by and between BSNL and ONGC for fabrication and installation of offshore platforms and a part of the said contract work was assigned to MII in respect of fabrication, transportation and installation of structures, modules, platforms and pipeline components. The Court held that the intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators or violation of natural justice, however, where the Arbitrator has gone contrary to or beyond the expressed law of the contract or granted relief in the matter not in dispute, would come within the purview of Section 34 of the Act. The Arbitrator before the Apex Court had taken recourse to the Emden formula which is widely accepted. The Court also held that the 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances, in case of fraud or bias by the arbitrators or violation of natural justice. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again, if it is desired. Therefore, the scheme of the provision is to keep the supervisory role of the court at minimum level and this can be Page 14 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 justified as parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for arbitration which they prefer with expediency and finality attached to it.
10.2. Thus, the vital points which have been culled out that the courts cannot correct the errors of the arbitrator however, it has a power to quash the award, if it desired and notices the fraud or bias or a clear violation of principles of natural justice. It also was held that once the matter is referred to the arbitrator within a reasonable time, the party invoking the arbitration clause may proceed on the basis that the other party to the contract has denied or disputed his claim or is not otherwise interested in referring the dispute to the arbitrator. 10.3. This Court (Coram: - Mr. K.S.Jhaveri and Mr. A.G.Uraizee, JJ.) in Jayantibhai Chelabhai Prajapati vs. Sardar Sarovar Narmada Nigam Limited; rendered in Special Civil Application No. 4753 of 2011 on 06.08.2014; where the petitioner has called in question the decision of the respondent SSNNL whereby the lease deed was executed by and between the petitioner and respondent which was terminated and the amount of premium of Rs. 1 crore and advance rent paid by the petitioner had been Page 15 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 forfeited. It was an advertisement inviting the bids from the public for leasing out different plots of land near Narmada Main Canal Highway, Ahmedabad for a period of 30 years. The petitioner submitted the tender bid which was accepted by the respondent - SSNNL. It was subject to the fulfillment of the terms and conditions specified in the letter. The petitioner was to pay the premium amount of Rs. 1 crore and thereafter the lease deed was to be executed by and between the parties. The petitioner addressed communication to the respondent intimating that it had initiated the process for obtaining approval from the Ahmedabad Urban Development Authority for the development of club in the name of "Akruti Club" and once the approval of AUDA was obtained, it would obtain the necessary approval from the respondent. By another communication addressed to the respondent, the petitioner specified the activities which it intended to develop on the lease land. However, the respondent informed the petitioner that the activities specified by the petitioner were different then the object for which the tender bid was invited. The legal notice was issued to explain the breach of terms and conditions. The reply had been given and eventually the respondent terminated the lease deed and the amount of premium of Rs. 1 crore along with the advance rent paid by Page 16 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 the petitioner had been forfeited.
10.4. The Court after hearing both the sides held that as per the terms and conditions of the lease deed, the petitioner was required to develop the land in question within the stipulated time period which was six months from the signing of the lease deed and he was required to obtain the requisite permissions and approvals relating to the development plans as specified in the project and to complete the construction within a period of two years with the requisite and proper facilities, amenities and other conveniences in accordance with the sanctioned plan. More than two years have passed and no development took place and the land in question continued to remain as it was. Clause 13 of the terms and conditions of lease deed speaks of the termination of lease deed and forfeiture of the rent and premium paid. 10.5. The Court noticed the chronology of events of issuance of legal notice and number of hearing having been availed to the petitioner. Noticing the due opportunity was already availed before exercising the powers, as provided in Clause 13 of the terms and conditions of the lease deed coupled with the fact that the respondent has not committed any illegality or impropriety while terminating the lease deed and forfeiting Page 17 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 the amount of premium and advance rent, the Court upheld the action of the respondent authority.
10.6. It also took the help of the decision of the Apex Court in rendered in case of Dina Nath v. State of Uttar Pradesh and others; reported in (2010) 15 SCC 218 , which says that the Courts cannot be a silent spectator in matters of public interest and that it is bound to perform its constitutional duty for ensuring that public property is not frittered away by unscrupulous elements in the power corridors and that acts of grabbing public land are property are enquired into and appropriate remedial action is taken. According to the Court, by proposing the development of land, the very object of lease was being frustrated and therefore, if the public property is not put to use for the purpose for which it was meant, it chose to uphold the action of the respondent. The market value of the land was approximately 12.50 crores. The compromise was suggested for the issue by accepting refund of 50% of the forfeited amount. It dismissed the petition with the cost of Rs. 25,000/-.
10.7. When travelled to the Supreme Court in Civil Appeal No. 187 of 2018, the Court directed the petitioner to deposit Rs. 75 lakhs before the registry within six months. The Court Page 18 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 was disinclined to enter into the merits of the rejection of the representation taking note of the fact that the High Court had granted the status-quo and the matter remained pending the Court sorted out the problem and directed Rs.75 lakhs lying with the registry to be refunded along with accrued interest and out of Rs. 1 crore lying and deposit with the respondent, Rs. 25 lakhs had been forfeited in the special facts and circumstances and the refund of Rs. 75 lakhs carried no interest.
11. In this background, the award of the arbitrator shall need to be examined by this Court.
12. It is an admitted fact that both the learned Arbitrator and the District Court under Section 34 of the Arbitration and Conciliation Act have concurrently held in favour of the opponent - original claimant. The amount forfeited by the present appellant also has been refunded with 18% interest. Therefore, this Court needs to address as to whether any such indulgence is necessary on the part of this Court. Ordinarily, the Court in its supervisory jurisdiction under Section 37 of the Arbitration and Conciliation Act is required to review the arbitral award for the purpose of ensuring fairness and in limited circumstances the intervention and indulgence of the Page 19 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 Court is warranted like the case of fraud or bias by the arbitrator or violation of principle of natural justice etc.
13. At the outset, it is required to be noted that the decision sought to be relied upon by the appellant would require a close scrutiny.
13.1. The decision of Dina Nath v. State of Uttar Pradesh and others (supra) when is closely perused, it makes it obligatory for the Court to zealously guard against the unwarranted and unscrupulous elements which attempted to grab the public land. When anyone attempts to usurp the public property under the garb of development of land, and when that very object of lease is being frustrated by the party, which is dishonest and untrue, the Court has chosen to come down heavily upon such litigants.
13.2. At the same time, the decision of this Court which is heavily banged upon by the appellant of course has similar facts. In SCA 4753 of 2011, as discussed above, the termination of lease deed and forfeiture of the amount of premium and the amount of advance rent taken was upheld by the Court essentially on the ground that one of the clauses of lease deed had permitted termination of lease deed and the forfeiture of the advance rent and premium. It was also a case Page 20 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 where requisite permissions and approvals were to be obtained by the lessee who was to develop the land within a stipulated time period. It was also obligated to complete the task of construction with all amenities. In absence of any development in a period of two years, after the service of legal notice, when the lease deed was terminated with the forfeiture of the amount of premium and advance rent, the Court did not find any illegality.
13.3. It is to be noted that the petitioner of the above petition had called in question the decision of Sardar Sarovar Narmada Nigam Limited dated 25.03.2011 and the lease deed of 14.07.2008 had been terminated with an amount of premium of Rs. 1 crore along with forfeiture of advance rent. It was straightway challenged under Article 226 of the Constitution of India before this Court without approaching any other Court for the process of arbitration. The Court chose to intervene in a petition under Article 226 of the Constitution of India and the matter thereafter travelled to the Apex Court by preferring Civil Appeal No. 187 of 2018. It is not clear whether lease deed had any clause of arbitration.
14. The fact remains that in the matter on hand, there has been no direct Writ Petition under Article 226 of the Page 21 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 Constitution of India nor is there any attempt to overreach the process of alternative remedy. The arbitration clause was invoked and the parties went to the learned Arbitrator under the Arbitration and Conciliation Act and the present appellant since was aggrieved, it moved the Civil Misc. Application No. 168 of 2014 under Section 34 of the Arbitration and Conciliation Act.
14.1. The learned District and Sessions Judge, Gandhinagar vide its order dated 14.07.2015 chose not to entertain the application and dismissed the same in limini. The Court also noted the fact that the order of High Court appointing a Sole Arbitrator is not challenged by the appellant and thus, that aspect reached the finality. The competence and jurisdictional part of the Arbitrator has also not been questioned. The Court also therefore was of the opinion that any objection to the jurisdiction of the Arbitrator should be deemed to have been waived of. The Court also sought to rely on the decision of the Apex Court rendered in case of Union of India vs. M/s. Pam Development Private Limited; reported in 2014 (11) SCC 366 to hold that when there was no challenge to the appointment, that aspect of appointment of the arbitrator becomes final and final. The District Court also relied on the decision of the Division Bench of this Court Page 22 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 wherein in Clause 38 it speaks that provisions of the Arbitration Act would be applicable in case of dispute between the parties. It also held that in case of dispute between the parties, the award of the Arbitrator appointed under the Arbitration Act would need to be treated as final. 14.2. Thus, not only there is a clause incorporated in the lease deed itself of appointment of the arbitrator but, the arbitrator also had been appointed who had extensively dealt with all the issues which have been raised by the rival parties and when the outcome of the judgment and award of the arbitrator was challenged, the District Court, Gandhinagar found no substance and therefore, the application made under Section 34 of the said Act has been dismissed in limini.
15. When the challenge is made by the present appellant, its reliance on the decision of Jayantibhai Chelabhai Prajapati vs. Sardar Sarovar Narmada Nigam Limited (supra), is misplaced. The basic facts may be similar but the subsequent events which have taken place, have been dealt with by the learned Arbitrator threadbare. In absence of any challenge to the appointment of the arbitrator, such challenge when could not lie before the District Court, the same is not sustainable before this Court. This Court has also not required to interfere Page 23 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 as there are very few circumstances under which the intervention of this Court is held justifiable.
16. Judgment in case of Mcdormott International Inc. vs. Burn Standard Co. (supra), speaks of the 1996 Act which makes provision for the supervisory role of the Courts, for the review of arbitral award only to ensure fairness. In case of fraud or bias by the arbitrators, the Court is not expected to correct the errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again, if it is desired. Thus, the scheme of provision, as per the said decision, is to keep the supervisory role of the Court at minimum. Expediency and the finality offered by the process of arbitration has been expected by the litigants. The mis- conscious decision of excluding the Court's jurisdiction should not be forgotten by the Court when it is asked to perform the supervisory role. The Court also went to an extent of saying that the term of contract can be express and implied. The conduct of the parties would also be a relevant factor in a matter of construction of a contract. The construction of contract agreement is within the jurisdiction of arbitrators having regard to the wide nature, scope and ambit of arbitration agreement and they cannot be said to have misdirected themselves into passing of the award by taking Page 24 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 into consideration the conduct of the parties. It is also trite that the correspondences exchanged by the parties are required to be taken into consideration for the purpose of construction of contract. The interpretation of contract is a matter of arbitration to determine, even if it gives rise to determination of a question of law.
16.1. In this decision, so far as the aspect of interest is concerned, it has been held by the Apex Court that the power of arbitrator to award interest for pre-award period, interest pendent lite and interest post-award period is not in dispute. Section 31(7)(a) provides that the arbitral tribunal may award interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which award is made i.e., pre-award period. The question is as to whether the interest is to be paid on the whole or the part of the amount or whether it should be awarded in the pre-award period would depend upon the facts and circumstances of each case. The discretion needs to be exercised by the arbitral tribunal as regards (i) at what rate interest should be awarded, (ii) whether interest should be awarded on whole or part of the award money, and (iii) whether interest should be awarded for whole or any part of Page 25 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 the pre-awarded period.
16.2. The 1996 Act provided for 18% of interest whereas in the matter before the Apex Court, the rate of interest granted by the arbitrator was 10% for the principal amount as also for the interim. The interest was up to the date of award as also the future interest was at the rate of 18% per annum. Considering the long lapse of time, the Apex Court held that the respondent may have to pay the huge amount by way of interest and therefore, it directed the award to carry interest at the rate of 6% per annum instead of 18% per annum, in case of Pure Helium India (P) Ltd. Vs. Oil and Natural Gas Commission; reported in 2003 (8) SCC 593. Whereas in case of Mukand Ltd. Vs. Hindustan Petroleum Corporation; reported in 2006 (4) SCALE 453, the Apex Court reduced the interest awarded by the learned Single Judge subsequent to the decree from 11% p.a. to 7.5% p.a. observing that it has been a reasonable rate of interest which could be directed to be paid.
17. With this background, if one considers the facts of the instance case, the appellant is a Government Company incorporated under the Companies Act. The respondent Aniha Corporation is a proprietary firm which entered into a tender Page 26 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 agreement with the SSNNL for the purpose of laying canal. A public advertisement had been issued for grant of 30 years of lease of earmarked plot adjacent to the Narmada Main Canal. The respondent had given his offer in relation to Plot No. 2 admeasuring 2064 sq.mtrs for the plot located at Gandhinagar State Highway.
17.1. The purpose was for development of tourism activities on the said leasehold plot. The respondent being the highest bidder in the tender process, his bid was accepted for the lease of plot no.2 on 15.02.2007. The respondent paid the amount of Rs. 39.50 lakhs through cheque to the appellant on 26.02.2007 and also additional security deposit of six months' rent fees being the sum of Rs. 60,000/-. The registered lease deed was finalized on 05.06.2007.
17.2. The record is indicative of the fact that the construction plan and architectural design were prepared by the respondent and sent to the appellant on 11.10.2007 as also on 30.10.2007. The SSNNL was required to approve the plan which is the condition precedent for putting up the construction. The statutory authorities like AUDA would not be permitting the sanction of the development plan unless approved by the SSNNL. It is thus quite clear that the Page 27 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 condition was made absolutely clear that no construction activities can be carried out over the leased plot unless the plan is approved by the SSNNL and the plan had already been submitted by the present respondent to the appellant in the month of October, 2007 for the development of the plot for the purpose of activities which were expected to be carried out on the leased premise. They continued to be with the respondent for about 10 months and on 05.08.2008, the appellant rejected the same on the ground that multistoried buildings were impermissible and therefore changes were necessary. The appellant was also asked to approach the local authority and get the plan sanctioned. Therefore, on 12.09.2008, the plans had been submitted.
18. Essentially on four grounds the appellant had blamed the respondent.
18.1. The tender had been floated for the development of tourism and the activities to be carried out was of children park, disco theater, landscape garden, fountain park etc. The respondents are alleged to have failed in complying with the condition nos. 26 and 27 of the tender document although, there was no permanent construction to be put up unless the local or urban authority grants such permission. The approval Page 28 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 for permanent construction ought to have been obtain from the AUDA, AMC etc. 18.2. Again, the agreement entered into by way of lease deed was on "as is where is" basis. The stipulated time period for taking permission and approval of development was six months from the date of signing of the lease agreement and construction was to be completed in two years' period. This time limit was not adhered to and it is alleged to be a clear breach of agreement entitling the appellant to terminate the contract and forfeit the amount deposited.
18.3. The third aspect which is alleged against the appellant is that the obligation to pay the monthly rent was upon the lessee and on expiry of terms granted to the lessee, he was to hand over the vacant and clear possession of the property.
18.4. So far as the fourth point is concerned, it was alleged that the respondent had visited the site as a successful bidder before entering into the formal lease agreement. He was also aware of leaving of margin and other provisions for putting up construction. According to the appellant, the reliance placed on the communication of AUDA dated 01.12.2010 is impermissible as the same was not addressed to Page 29 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 the respondent and moreover, the said document is indicative of the fact that there was no attempt made to get the plans approved.
19. Thus, all in all, according to the appellant, termination of contract cannot be found faulted with. It could be noticed that learned Arbitrator has dealt with each of the four contentions elaborately and threadbare. It also has elaborately discussed the evidence which has been recorded.
19.1. By an exhaustive discussion, the arbitral tribunal has held that the lease deed in the present case is voidable document in as much as when the same was executed, because of the Government Resolution of the year 1980 as well as Ribbon Development Rules in GGCR Norms, there was no scope for the development of the plot and hence, the agreement was void and not binding to the respondent. Learned Arbitrator has held in no unclear terms that the leased plot was not available for the appropriate use for the purpose for which it was intended to be leased. Learned Arbitrator also lamented the fact that when the plot was leased out for a special purpose, it would be obligatory on the part of the appellant to satisfy the tribunal that plot could have been successfully developed by tourism activities. Page 30 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 19.2. In totality of the facts and circumstances, the tribunal was of the opinion that the respondent could have kept himself aware of the Ribbon Development Rules at the time of entering into the agreement with the appellant - Corporation but the appellant was equally unaware about the facts and the laying of the service road as also of the Ribbon Development Rules, GGCR guidelines. The appellant's conduct is clear that it was of the view that permanent construction is possible and permissible in the area and the respondent was not responsible for the failure since the plot was not available for the appropriate use for the purpose of which it was leased and it also clearly held that an act of termination of contract by the respondent is a face-saving exercise as there was no enforceable or executable agreement. The Managing Director of the company at one point of time was convinced that plot no.2 was wrongly placed at the bidding process. The question of termination of contract could not have arisen and in fact, the respondent could have called and offered the refund of the amount paid, accepting the error. It went to an extent of saying rightly that the forfeiture of the amount was illegal and improper and had respondent been aware that he would not be in a position to develop the plot as a prudent businessman, he would not have definitely paid the amount of premium. Page 31 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022
C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 There are valid and satisfying reasons given for calculating the amount of damage under the head of loss and damage.
20. Coming to the issue of interest, it has chosen to grant 18% interest from 30.06.2008 till realization. Admittedly, between the parties, there is no agreement as to the rate of interest.
20.1. Learned Arbitrator examined the scheme of Section 31(7) of the Arbitration and Conciliation Act, 1996 which provides for 18% of interest per annum from the date of award till the date of payment. Worthwhile it would be to refer to Section 31(7) of the Act which provides that "unless otherwise as agreed by the parties, where and in so far as tribunal award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of money, for the whole or any part of the period between the date on which the cause of action arose and the date on which award is made."
21. As held in case of Mcdormott International Inc. (supra), intervention of the Court is permissible in case of fraud or bias by the arbitrators or violation of principles of natural justice or where the Arbitrator has gone contrary to or Page 32 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 beyond the expressed law of the contract or granted relief in the matter not in dispute. Bearing in mind the supervisory role of the Court for review of the arbitral award only for ensuring the fairness, we do not find any need for interference in absence of any fraud or bias by the arbitrators. Two authorities have concurrently held in favour of the appellant. This Court in case of Jayantibhai Chelabhai Prajapati (supra) had entertained the decision of the respondent SSNNL in a matter where lease deed was executed between the parties which was terminated and the amount of Rs. 1 crore by way of premium and advance rent had been forfeited. The Court directed Rs. 75,00,000/- lying with the Registry to be refunded along with the accrued interest and out of Rs. 1 crore lying Rs. 25,00,000/- had been forfeited and the refund of Rs. 75,00,000/- carried no interest.
22. Noticing the fact that the order which is sought to be relied upon has no detailed adjudication and tried to sort out the issue as there was a grant of status-quo on the part of the High Court, in that view of the matter, what needs to be bear in mind that in the instant case, after both the sides had been permitted to lead evidence and both the authorities had an occasion to address the issues raised before it and appreciate the evidence, the outcome is before this Court. Therefore, in Page 33 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022 C/FA/2544/2015 JUDGMENT DATED: 13/09/2021 absence of any of the parameters set out for the indulgence of Court, we find no reason to interfere except in the percentage of interest which is 18%, in the opinion of this Court, the rate of interest which is on a quite higher side, the same needs to be reduced to 9%.
23. The appeal is accordingly partly allowed. So far as the interest is concerned, this Court interferes and reduces the rate to 9% instead of 18% in the Arbitral Award. Amount shall be paid within eight (8) weeks from the date of receipt of copy of this judgment. If not paid within the stipulated time, the rate of interest shall be enhanced to 18% from the date of award of the Arbitration till the date of payment.
24. The connected Civil Application Nos. 01/2018, 01/2020 and 01/2021 stands disposed of in view of the judgment rendered in the main matter being First Appeal No. 2544 of 2015.
(SONIA GOKANI, J) (NIRZAR S. DESAI,J) Bhoomi Page 34 of 34 Downloaded on : Sun Jan 16 14:17:54 IST 2022