Gujarat High Court
Chamaria Fashions Pvt. Ltd vs Aniket Basant Agrawal on 9 June, 2023
Author: Ashutosh Shastri
Bench: Ashutosh Shastri
C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 1189 of 2023
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2023
In
R/FIRST APPEAL NO. 1189 of 2023
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE ASHUTOSH SHASTRI Sd/-
and
HONOURABLE MR. JUSTICE J. C. DOSHI Sd/-
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1 Whether Reporters of Local Papers may be allowed YES
to see the judgment ?
2 To be referred to the Reporter or not ? YES
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 ?
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CHAMARIA FASHIONS PVT. LTD.
Versus
ANIKET BASANT AGRAWAL
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Appearance:
MR DEVANG NANAVATI, SENIOR ADVOCATE with MS PRACHITI V
SHAH(9990) for the Appellant(s) No. 1,2
NATASHA SUTARIA(7907) for the Defendant(s) No. 1,2
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CORAM:HONOURABLE MR. JUSTICE ASHUTOSH SHASTRI
and
HONOURABLE MR. JUSTICE J. C. DOSHI
Date : 09/06/2023
CAV JUDGMENT
(PER : HONOURABLE MR. JUSTICE ASHUTOSH SHASTRI)
1. ADMIT. Learned advocate Ms. Natasha Sutaria waives service of notice of admission for and on behalf of respondents. Page 1 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023
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2. By way of present appeal under Section 37 of the Arbitration and Conciliation Act, 1996, appellants have challenged legality and validity of judgment and order dated 20.1.2023 passed by learned District and Sessions Judge, Nadiad in Commercial Civil Misc. Application No.2 of 2022 by virtue of which, award passed by learned Arbitral Tribunal dated 15.10.2022 was refused to be set aside and consequentially prayed to set aside said award as well.
3. The factual background which has given rise to present appeal is that appellant No.1 is a private limited company incorporated under the provisions of the Companies Act, 1956 and basically dealing with business of trading and export of cotton, suiting and fabrics. Whereas, appellant No.2 is also a private limited company, having authorized share capital of Rs.6 crore paid up capital of Rs.5,91,90,900/-, whereas respondents are individually engaged in the business of manufacturing and trading of textile garments.
4. Appellant No.2, i.e. V.S. Textile Mills Pvt. Ltd., was a corporate debtor of M/s. Reliance Commercial Finance Ltd. to Page 2 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 an extent of Rs.62,10,362/- and was faced with Company Petition No.299 of 2018 filed under Section 6 of the Insolvency & Bankruptcy Code, 2016 in the National Company Law Tribunal (NCLT) Ahmedabad. By way of an order dated 9.1.2019, learned NCLT was pleased to admit the petition and initiated insolvency resolution process by appointing Smt. Bhavi Shreyansh Shah as an Interim Resolution Professional of appellant No.2 mill company. Later on, appellant No.1 submitted a resolution plan which was accepted by the Committee of Creditors (CoC) which also came to be approved by learned NCLT, Ahmedabad vide order dated 1.1.2020 and as such appellant No.1 assumed management of appellant No.2 company under its control.
5. It is the case of appellants that appellant No.1 was desirous of joining hands with an interested person to give effect to the resolution plan and with a view to run appellant No.2 company as an ongoing concern by infusing fund and in response thereto, appellant No.1 was in deliberation with respondent Nos.1 and 2 herein and inclined to accept Memorandum of Understanding (MoU) which then was Page 3 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 accepted on 9.3.2021. However, even before signing MoU, vide email dated 27.2.2021, appellant asked details of respondents with a view to induct them as directors and appellants were always ready and willing to perform their part of agreement as per terms of MoU. In the interregnum, on account of the circumstances since debt of Canara Bank (being one of the creditors of appellant No.2) remained unpaid which resulted into filing of Interim Application No.449 of 2021 before learned NCLT, Ahmedabad, but then since payments were duly received and NOC was issued by Canara Bank, said Application No.449 of 2021 came to be disposed of as withdrawn vide order dated 17.3.2022.
6. In response to MoU which was executed on 9.3.2021, appellant No.1 and respondents herein have mutually decided rights and obligations of the parties and on account of such terms of MoU, an amount of Rs.99,67,250/- by each of respondents to be paid to appellants and upon such payments, respondents were to be appointed as directors in addition to transfer of equity and voting shares in appellant No.2. Page 4 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023
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7. It is the case of appellants that MoU also indicates that payment of additional amount of Rs.70,31,000/- paid by appellant No.1 to the creditors of appellant No.2 in view of resolution plan and MoU also confirms that respondents have paid 50% of Rs.70,31,000/-, i.e. an amount of Rs.35,15,000/- in total along with payment of Rs.5,00,000/- each of respondents towards advance against transfer of shares and as such according to appellants, undisputedly, an amount of Rs.94,67,250/- remained unpaid by each of respondents under MoU and MoU further clarified that in Clause (5) for performance of obligation, which clearly indicates that, "Upon receiving the full payment, party of first part shall make necessary arrangement for transferring of Equity shares and voting rights of corporate debtor in favour of parties of second part and third part". It is the grievance of appellants that despite appellant No.1 followed the respondents for further deposit of remaining amount, as indicated, no attention was paid to and instead knowing fully well the urgency of situation in making payment towards discharge of debt of corporate debtor, tried to prejudice interest of appellant Nos.1 and 2 by Page 5 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 writing a letter straightway to Canara Bank on 10.6.2021 falsely indicating that appellants have tried to sell material from appellant No.2 and as such on account of such attempt on the part of respondents, appellant had to pay an amount of Rs.4,44,00,000/- as principal amount in addition to Rs.16,59,542/- as interest including Rs.25 lacs towards resolution professional fees and additional interest due to delay in payment of Rs.23,64,754.99, totaling around Rs.5,09,24,296.99 to Canara Bank in due compliance of an order of NCLT passed in C.P. No.299 of 2018 and thereupon Bank was pleased to issue No Due Certificate to the appellants on 14.3.2022.
8. It is further case of the appellants that subsequently, without discharging their part of obligation and without making any payment towards their share of payment under MoU, respondents filed interlocutory application on 11.6.2021 being I.A. No.421 of 2021 before NCLT to seek 50% share holding and director-ship in appellant No.2 company knowing full well that they have not fulfilled their part of MoU. But, on account of such situation, learned NCLT vide order dated 5.7.2021 was pleased Page 6 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 to dismiss the application as being not maintainable since resolution plan was already approved and as such this has clearly clarified the intent of respondents who were not ready to make payment under MoU and made all efforts to push appellant No.2 into liquidation and tried to prejudice the interest of appellant No.1. On 14.6.2021, appellant wrote a letter to the respondents by indicating that MoU stands terminated on account of non-fulfillment of essential and material terms and conditions since respondents have not observed the conditions by making payment and as such, appellants returned amounts of Rs.5,00,000/- and Rs.17,67,750/- to each of the respondents which was initially paid by respondents. Cheque issued by appellants on 14.6.2021 was not accepted by respondent No.2 and refused which has further given an indication of intent of respondents. Later on, feeling aggrieved by termination of MoU which took place under aforesaid peculiar background, respondents without even reply to notice or making any efforts to clear the outstanding amount as per MoU straightway sought specific performance of MoU by filing a suit in the Court of learned Civil Court, Mirzapur, Page 7 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 Ahmedabad, but then same was withdrawn from Registry since MoU contains an arbitration clause.
9. It has been the assertion of appellants that thereafter Misc. Civil Application No.153 of 2021 came to be filed before learned Trial Court under Section 9 of the Arbitration Act seeking interim relief and said application No.153 of 2021 was partly allowed vide order dated 27.9.2021 and Court Commissioner came to be appointed to carry out inspection and to draw inventory of the plant and machinery of appellant No.2 company.
10. Feeling aggrieved by said attempt being made by respondents, appellant No.1 filed a petition before this Court being Special Civil Application No.15743 of 2021 inter alia challenging order dated 27.9.2021, but same came to be withdrawn vide order dated 25.10.2021 and subsequently, a petition came to be filed for seeking appointment of arbitrator being IAAP No.20 of 2022 and in response to said petition for seeking arbitration vide order dated 11.3.2022, sole arbitrator came to be appointed to adjudicate the disputes and later on, Page 8 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 arbitration proceedings were conducted. During the course of arbitration proceedings, an application under Section 17 was filed before Hon'ble Arbitral Tribunal which came to be disposed of vide order dated 8.6.2022 whereby respondents were directed to provide unconditional bank guarantee for an amount of Rs.94,67,250/- to be paid to appellant No.1 and later on, same was modified and respondents were directed to provide a fixed deposit of the said amount with further conditions. During the course of said arbitration proceedings, evidence of Mr. Arun Agrawal was led on behalf of appellants whereas respondents have chosen not to lead any evidence and thereafter, after adjudication, Hon'ble Arbitral Tribunal was pleased to pass an award on 15.10.2022 whereby direction was issued upon appellants to induct respondents as directors and thereafter, transfer 50% share-holding upon payment of Rs.94,67,250/- each along with simple interest at the rate of 14% per annum and final award came to be declared.
11. Feeling aggrieved by and dissatisfied with said final award dated 15.10.2022, appellants preferred an application under Section 34 of the Act challenging the said award. Said Page 9 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 application came up for consideration before learned 2 nd Additional District Judge, Kheda at Nadiad, who by his judgment dated 20.1.2023, was pleased to dismiss the same which has given rise to present First Appeal under Section 37 of the Act. With this factual background, present First Appeal was heard at length since both the sides were well represented by learned advocates and as such upon their request, appeal came to be heard in which learned senior advocate Mr. Devang Nanavati assisted by learned advocate Ms. Prachiti V. Shah has represented the appellants, whereas both respondents have been represented by learned advocate Ms. Natasha Sutaria. Accordingly, the appeal was heard.
12. Learned senior advocate Mr. Devang Nanavati has submitted that undisputedly, with open eyes with specific stipulations, a private commercial agreement in the form of MoU came to be executed between the parties and it is a settled legal position that commercial contract by itself by its very nature is determinable and as such by virtue of Section 14(d) of Specific Relief Act, 1963, contracts which are determinable in nature cannot be specifically enforced and to contend this, few Page 10 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 decisions have been relied upon, viz.
i. Rajasthan Breweries Ltd. Vs. The Stroh Brewery Company 2000 (55) DRJ (DB) 68 (paras 73, 75 and
76);
ii. Lindsay International Pvt. Ltd. And Ors. Vs. Laxmi Niwas Mittal and Ors.-MANU/WB/0102/2017 (para-
81);
iii. M/s. Resbird Technologies Pvt. Ltd. Vs. M/s. R.S. Travel & Tours (India) Pvt. Ltd. & Ors. 2018 SCC OnLine Del 7866 (para-15);
iv. Altus Group India Private Limited Vs. Darrameks Hotels & Developers Private Limited 2018 SCC OnLine Del 8263 (para-14-17, 18)
13. It has been further contended that even by virtue of amendment to Sections 10 and 14 of the Specific Relief Act in the month of October 2010, no specific performance of contracts can be granted which are of determinable in nature and to substantiate this contention, learned senior advocate has made a reference to few decisions:
i. Royal Orchids Vs. Kulbir Singh Kohli & Anr. 2022 SCC OnLine Del 2519 (paras-24, 34, 35);
ii. Inter Ads Exhibition Pvt. Ltd. Vs. Busworld International Cooperatieve Vennootschap Met Beperkte Anasprakelikheid 2020 SCC On Line Del 351 (paras-31, 32);
iii. Yassh Deep Builders LLP Vs. Sushil Kumar Singh & Anr 2021 SCC OnLine Del 1499 (paras-47, 61, 62, 65 Page 11 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 and 75).
14. It has further been contended by learned senior advocate Mr. Nanavati that both Hon'ble Arbitrator as well as learned Judge have committed a gross error which tantamount to be a patent illegality in issuing directions practically granting a relief of specific performance of MoU despite specific bar contained under Section 14(d) of the Specific Relief Act and as such impugned award as well as judgment passed by learned Court below suffer from patent illegality as both orders are in conflict with substantive law and to strengthen his submission, learned senior advocate has made a reference to decision in the case of Oil & Natural Gas Corporation v. Saw Pipes Ltd. reported I (2003) 5 SCC 705 (paragraphs 12- 15).
15. Learned senior advocate Mr. Nanavati has further submitted that no-doubt, scope of challenge to the arbitral award is very limited, but that does not mean that patent illegality like this which is prevailing here in the case on hand can be ignored. On the contrary, award itself is liable to set aside if it suffers from such patent illegality, against Page 12 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 fundamental policy of law of land and shocks the conscience of the Court and this position is holding the field even after amendment which took place in Arbitration Act, 1996 with effect from 23.10.2015 and to strengthen his submission, learned senior advocate has also placed replaced upon following decisions:-
i. Associate Builders Vs. Delhi Development Authority (2015) 3 SCC 49 (para 18, 27 and 34) ii. Ssangyong Engineering and Construction Company Ltd. Vs National Highways Authority of India (NHAI) (2019) 15 SCC 131 (Para 37-39) iii. Delhi Airport Metro Express Pvt. Ltd. Vs Delhi Metro Rail Corporation Limited-(2022) 1 SCC 131 (Para 29-
31)
16. It has further been contended by learned senior advocate Mr. Nanavati that even apart from that, in absence of any relief or declaration to the effect that notice of termination is bad, action for seeking for specific performance of MoU itself is not maintainable and as such whether said issue is framed or not OR decided or not is of no consequence since main substantive action seeking specific performance itself is not maintainable and to canvass this submission, learned senior advocate Mr. Page 13 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 Nanavati has referred to following decisions:-
i. I.S. Sikandar (Dead) By Lrs. Vs, K. Subramani & Ors.
(2013) 15 SCC 27 (Para 32.1, 37, 38, 55);
ii. Yassh Deep Builders LLP Vs. Sushil Kumar Singh & Anr 2021 SCC OnLine Del 1499 (Para 47, 75).
17. It has further been contended that any award which has been passed in violation of statutory provisions, such as provisions contained under Specific Relief Act, Contract Act as well as Limitation Act can be said to be suffering from patent illegality and in violation of fundamental policy of Indian Law and to strengthen his submission, learned senior advocate Mr. Nanavati has made a reference to the decision in the case of Amazing Research Laboratories Ltd. v. Krishna Pharma reported in 2023 SCC OnLine Del 1498 (para 54-60).
18. In addition to it, learned senior advocate Mr. Nanavati has further submitted that MoU in question contemplates making the respondents as directors of appellant No.2 company which basically a contract of agency and it is a settled position of law that such agency contracts are always determinable in nature and to substantiate his contention, Mr. Nanavati has referred to Page 14 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 following decisions:-
i. Ram Pershad Vs. The Commissioner of Income Tax, New Delhi- MANU/SC/0330/1972 (Para 8);
ii. DLF Home Developers Limited Vs. Shipra Estate Limited & Ors. 2021 SCC OnLine Del 4902 (Para 82 and 94).
By canvassing such submissions, learned senior advocate Mr. Nanavati has requested that both impugned award as well as order passed by the Court below deserve to be quashed and set aside.
19. As against this, learned advocate Ms. Natasha Sutaria has contended that issue with regard to contract being determinable in nature is not at all raised by the appellants during the course of arbitration proceedings and therefore, at this stage, it is not open for appellants to raise such hyper-technical plea and it is settled position of law that in the absence of any clause in the contract, MoU not to be treated as determinable in nature which may attract Section 14 of the Specific Relief Act. This aspect of termination as well as determinability though was not specifically raised has also been examined and considered by learned sole Arbitrator which can be seen from the award itself Page 15 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 and as such, issue about determinability is ill-founded and cannot be accepted. It has further been contended that here is a case in which termination of MoU unilaterally is found to be nullity, non est as being also without authority since said termination is not at the instance of appellant No.1 and as such this issue of termination of MoU has been specifically examined by Hon'ble Arbitral Tribunal and having found that same is not sustainable, award came to be passed and directions which are issued are always permissible to be issued by learned Arbitrator and that being so, appeal lacks merit.
20. Learned advocate Ms. Sutaria has further submitted that here is a case in which every aspect has been gone into by Hon'ble Arbitral Tribunal and only thereafter, a well reasoned award came to be passed and as such when there is no patent illegality nor any perversity nor any fundamental policy being violated, looking to the scope contained under Section 37 of the Act, no interference may be made. In fact, scope of appeal under Section 37 of the Act is well defined in catena of decisions and as such in view of this narrow scope of Section 37 proceedings, appeal may not be entertained. Following Page 16 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 decisions are relied upon to substantiate this contention:-
i. Swan Gold Mining Limited v. Hindustan Copper Limited (2015) 5 SCC 739 (para-18);
ii. Delhi Airport Metro Express Pvt. Ltd. v. Delhi Metro rail Corporation Ltd. 2022 (1) SCC 131 (para 29, 30);
iii. UHL Power Company Limited v. State of Himachal Pradesh (2022) 4 SCC 116 (Para 14, 15, 16, 18, 21)
21. Learned advocate Ms. Sutaria has further submitted that it is a settled position of law that whenever there are two views possible, possible view which has been taken by learned Arbitral Tribunal cannot be disturbed or substituted. Nature of conditions incorporated in MoU, its scope and import in law and its applicability are the questions to be examined by learned Arbitrator and an attempt which has been made to touch the merit by resorting to conditions contained under MoU would be outside the purview of scope of Section 37 of the Act and as such when there is no breach of public policy in any manner, present proceedings deserves to be dismissed and to substantiate her contentions, she relied upon following decisions:-
i. Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran 2012 SCC OnLine SC 372 (para 43) Page 17 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 ii. Haryana Tourism Limited v. Kandhari Beverages Limited (2022) 3 SCC 237 (para 2.2., 2.3, 8 and 9) iii. State of Chhattisgarh v. Sal Udyog Private Limited (2022) 2 SCC 275 (para 14)
22. Learned advocate Ms. Sutaria has further submitted that amendment which has taken place in Section 10 of Specific Relief Act is avowed with an object to provide specific performance of contracts and this amendment has taken place on the basis of report of experts committee dated 26.4.2018 and as such, any interference would frustrate the very object for which amendment has taken place and rationale and object of amendment is to change the approach from damages being the rule and specific performance being an exception and as such object is that specific performance being rule and damages being alternative remedy, hence keeping this position in mind, when directions are issued by learned Arbitrator, there is hardly any justifiable reason for appellants to contend that award is in conflict with public policy or suffering from vice of patent illegality. In addition to this, by referring to judgments which are cited by learned counsel for appellants, it has been contended that in view of this specific background of facts, said Page 18 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 decisions which are referred to are not of any assistance to the appellants and has then submitted few more decisions which are applicable here to support the stand of respondents, and has requested to dismiss the appeal being merit-less.
23. Following are the decisions given across in completion of submissions along with written arguments which may be dealt with at an appropriate place in the present order:-
i. Times Internet Limited v ALT Digital Media Entertainment Limited 2019 SCC Online Del 11948 (para-23);
ii. Indian Oil Corporation Lid v. Nilofer Siddiqui and Ors 2015 SCC OnLine SC 1273 (para-39) iii. DLF Home Developers Limited v. Shipra Estate Limited and Ors 2021 SCC OnLine Del 4902 (Para- 80, 81) iv. TO Abraham v Jose Thomas 2017 OnLine Ker 19872 (para-18) v. Swan Gold Mining Ltd. v. Hindustan Copper Ltd., (2015) 5 SCC 739 (para-18) vi. Delhi Airport Metro Express Pvt. Ltd. v. Delhi Metro Rail Corporation Ltd. (2022) 1 SCC 131 (para-29, 30) vii. UHL Power Co., Ltd. v. State of H.P., (2022) 4 SCC 116 (para-16,21) viii. Haryana Tourism Limited v. Kandhari Beverages Page 19 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 Limited (2022) 3 SCC 237 (para-9) ix. Ssangyong Engineering & Construction Co. Ltd. v.
National Highways Authority of India (NHAI) (2019) 15 SCC 131 (para 34, 37, 38) x. State of Chhattisgarh v. SAL Udhyog (P) Ltd., (2022) 2 SCC 275 (para-14) xi. Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran 2012 SCC OnLine SC 372 (para-43) And by referring to aforesaid decisions, a contention is reiterated that appeal does not deserve to be entertained.
24. In rejoinder to this submission, learned senior advocate Mr. Nanavati appearing on behalf of appellants has submitted that judgments which have been cited by respondents of Kerala High Court reported in 2017 SCC OnLine Ker 19872 as well as Delhi High Court reported in 2021 SCC OnLine Del. 4902 are apparently not of any assistance to the respondents and then has reiterated that contracts of agency, partnership are by their very nature always determinable, hence by virtue of bar contained under Section 14 of the substantive law, i.e. Specific Relief Act, award itself is not sustainable. It has further been contended that order of Hon'ble Apex Court dismissing the SLP does not make a binding precedent in view of the fact that said Page 20 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 order of Hon'ble Apex Court refusing to grant special leave petition under Article 136 of the Constitution of India is a non- speaking order and is not a declaration of any law by Hon'ble Apex Court which would attract Article 141 of the Constitution of India and to substantiate his submission, Mr. Nanavati has made a reference to following two decisions delivered by Hon'ble Apex Court:
i. Kunhayammed & Ors. v. State of Kerala & Anr.
(2000) 6 SCC 359 (para-21,22, 27, 31 and 44);
ii. Supreme Court Employees Welfare Association v.
Union of India and Anr. (1989) 4 SCC 187 (para-22) And by contending this, it has been submitted that manner in which specific performance has been granted of a contract, which is determinable in nature, award itself is reflecting patent illegality and is in contravention of fundamental policy of Indian Law. Hence, in view of this peculiar background of facts, relief prayed in the appeal deserves to be granted.
25. Having heard learned advocates appearing for the parties and having gone through the material on record, before examining the rival submissions, we may refer to the proposition of law laid down by the Hon'ble Apex Court and Page 21 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 scope of appeal under Section 37 of the Act.
26. While dealing with said issue, Hon'ble the Apex Court in a recent past in the case of UHL Power Company Limited v. State of Himachal Pradesh reported in (2022) 4 SCC 116 has propounded that jurisdiction conferred on the Court under Section 34 of the Act is fairly narrow and scope under Section 37 is all the way more circumscribed. Observations contained in paragraphs 15 to 21 are reproduced hereunder:-
15. This Court also accepts as correct, the view expressed by the Appellate Court that the learned Single Judge committed a gross error in re-appreciating the findings returned by the Arbitral Tribunal and taking an entirely different view in respect of the interpretation of the relevant clauses of the Implementation Agreement governing the parties inasmuch as it was not open to the said Court to do so in proceedings under Section 34 of the Arbitration Act, by virtually acting as a Court of Appeal.
16. As it is, the jurisdiction conferred on Courts under Section 34 of the Arbitration Act is fairly narrow, when it comes to the scope of an appeal under Section 37 of the Arbitration Act, the jurisdiction of an Appellate Court in examining an order, setting aside or refusing to set aside an award, is all the more circumscribed. In MMTC Limited v. Vedanta Limited 7 , the reasons for vesting such a limited jurisdiction on the High Court in exercise of powers under Section 34 of the Arbitration Act has been explained in the following words:
"11. As far as Section 34 is concerned, the position is well- settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b) (ii) i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian Page 22 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the "fundamental policy of Indian law" would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury [Associated Provincial Picture Houses v. Wednesbury Corpn., (1948) 1 KB 223 (CA)] reasonableness. Furthermore, "patent illegality" itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract."
17. A similar view, as stated above, has been taken by this Court in K. Sugumar v. Hindustan Petroleum Corporation Ltd.8 , where it has been observed as follows:
"2. The contours of the power of the Court under Section 34 of the Act are too well established to require any reiteration. Even a bare reading of Section 34 of the Act indicates the highly constricted power of the civil court to interfere with an arbitral award. The reason for this is obvious. When parties have chosen to avail an alternate mechanism for dispute resolution, they must be left to reconcile themselves to the wisdom of the decision of the arbitrator and the role of the court should be restricted to the bare minimum. Interference will be justified only in cases of commission of misconduct by the arbitrator which can find manifestation in different forms including exercise of legal perversity by the arbitrator."
18. It has also been held time and again by this Court that if there are two plausible interpretations of the terms and conditions of the contract, then no fault can be found, if the learned Arbitrator proceeds to accept one interpretation as against the other. In Dyna Technologies (P) Ltd. V. Crompton Greaves Ltd. 9 , the limitations on the Court while exercising powers under Section 34 of the Arbitration Act has been highlighted thus:
"24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various Courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the Court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility Page 23 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the Courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated."
19. In Parsa Kente Collieries Limited v. Rajasthan Rajya Vidyut Utpadan Nigam Limited10, adverting to the previous decisions of this Court in McDermott International Inc. v. Burn Standard Co. Ltd. And Others11 and Rashtriya Ispat Nigam Ltd. V. Dewan Chand Ram Saran12, wherein it has been observed that an Arbitral Tribunal must decide in accordance with the terms of the contract, but if a term of the contract has been construed in a reasonable manner, then the award ought not to be set aside on this ground, it has been held thus:
"9.1 ...........It is further observed and held that construction of the terms of a contract is primarily for an Arbitrator to decide unless the Arbitrator construes the contract in such a way that it could be said to be something that no fair-minded or reasonable person could do. It is further observed by this Court in the aforesaid decision in paragraph 33 that when a court is applying the "public policy" test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the Arbitrator on facts has necessarily to pass muster as the Arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. It is further observed that thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score.
9.2 Similar is the view taken by this Court in NHAI v. ITD Cementation (India) Ltd. (2015) 14 SCC 21, para 25 and SAIL v. Gupta Brother Steel Tubes Ltd. (2009) 10 SCC 63, para 29."
[emphasis supplied]
20. In Dyna Technologies (P) Ltd. (supra), the view taken above has been reiterated in the following words:
Page 24 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023
C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 "25. Moreover, umpteen number of judgments of this Court have categorically held that the courts should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act."
21. An identical line of reasoning has been adopted in South East Asia Marine Engg. & Constructions Ltd.[SEAMAC Limited] V. Oil India Ltd. 13 and it has been held as follows:
"12. It is a settled position that a court can set aside the award only on the grounds as provided in the Arbitration Act as interpreted by the courts. Recently, this Court in Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd. [Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd., (2019) 20 SCC 1 : 2019 SCC OnLine SC 1656] laid down the scope of such interference. This Court observed as follows : (SCC pp. 11-12, para 24) "24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various Courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the Court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the Courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated."
13. It is also settled law that where two views are possible, the Court cannot interfere in the plausible view taken by the arbitrator supported by reasoning. This Court in Dyna Technologies [Dyna Technologies (P) Ltd. V. Crompton Greaves Ltd., (2019) 20 SCC 1 : 2019 SCC OnLine SC 1656] observed as under : (SCC p.12, para 25) Page 25 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023
25. Moreover, umpteen number of judgments of this Court have categorically held that the Court should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The Courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act."
[emphasis supplied] .
27. Even it is a settled position of law that a possible view normally not to be disturbed unless suffers from patent illegality. At this stage we may also refer to a decision in the case of Anglo American Metallurgical Coal Pty. Ltd. v. MMTC Limited reported in (2021) 3 SCC 308, in which it has been propounded that in absence of any patent illegality or violation of fundamental policy of Indian law, a possible view may not be disturbed. For that purpose, relevant observations contained in paragraphs 48 and 50 of the said decision we deem it proper to quote hereunder:-
48. Given the parameters of judicial review laid down in Associate Builders (supra), 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 documentary evidence led in the case, which cannot be characterized as being either perverse or being based on no evidence.
50. Likewise, in Dyna Technologies Pvt. Ltd. v. Cromptom Greaves Ltd., 2019 SCC Online SC 1656, ["Dyna Page 26 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 Technologies"], this Court held:
"26. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various Courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the Court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the Courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated.
27. Moreover, umpteen number of judgments of this Court have categorically held that the Courts should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The Courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act."
The principle about the scope of interference under Sections 34 and 37 is also well founded from a decision delivered by the Hon'ble Apex Court in the case of Delhi Airport Metro Express Private Limited v. Delhi Metro Rail Corporation Limited reported in (2022) 1 SCC 131 and keeping said salutary principle in mind, we are of the opinion that no case is made out to call for any Page 27 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 interference.
28. In the light of the aforesaid scope underlying under Section 37 of the Act, we may peruse and examine the conclusion arrived at by learned Arbitrator on the core issue and for that purpose, some factual background needs to be dealt with.
29. As said that by virtue of order dated 1.1.2020, National Company Law Tribunal approved the resolution plan by which respondent No.1 has been put in the management of respondent No.2 company. Case of the original claimants is that respondent No.1 approached the claimants somewhere in August 2020 for running respondent No.2 company since respondent No.1 was facing financial crunch. Claimants thereupon started investing in respondent No.2 company and Board of Directors of respondent No.1 passed a resolution on 9.3.2021 agreeing to join hands with claimants for better implementation of the resolution plan and shareholders of respondent No.1 also agreed to sell 50% stack of respondent No.2 company, as a result of which Memorandum of Understanding was executed Page 28 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 between respondent No.1 company and claimants on 10.3.2021. In response to execution of said MoU, which records that claimants have paid 50% of sum of Rs.70.31 lacs paid by respondent No.1 to the creditors of respondent No.2 company and as such claimants between them contributed a sum of Rs.35,15,500/- before signing said MoU. MoU has further recorded that each claimant would pay a further sum of Rs.99,67,250/- of which Rs,5,00,000/- was paid by claimants. Claimants would further pay a sum of Rs.94,67,250/- to respondent No.1 company and as per said terms of MoU, claimants would be included in the Board of Directors immediately upon signing of MoU and upon payment of further sum of Rs.94,67,250/-, equity shares and voting rights in proportion of 25% each would be allotted to claimants. Relevant clauses contained in MoU read as under:-
1. Party of the First Part confirms that the Rs.70,31,000/-
has paid to Creditors of the Corporate Debtor as per resolution plan and it has already received 50% (ie. Rs.35,15,500/-) from the Parties of the Second and Third Part in their respective ratio.
2. The management of the corporate debtor is in the hand of party of the first part and it agrees that immediately after signing of the MOU, it will appoint two directors from the side of party of the second and third part) Further, proposed appointee from the side of party of first, second and third part will provide necessary documents for the complete the process of an appointment.
Page 29 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 Concluded that that there will be total 5 Directors in the board of a corporate debtor. 50% Share Holding will be represented by party of the Second and Third part of this MOU If the number of Directors is to be increased/ decreased, the same can happen with explicit written consent off all the parties of this agreement.
3. Parties of the Second and Third part each have agreed to invest 25% amount in the corporate debtor totaling 50% jointly. Party of the Second and Third part have additionally paid Rs 5 lakhs cach to the party of the first part towards advance against the transfer of shares.
Name of Party Amount in (Rs.) Cheque Bank Name No. Aniket Agarwal 5,00,000/- 000 578 ICICI Bank Ltd. Priyank Saraff 5,00,000/- 335622 Axis Bank Ltd. Party of the first part confirms the receipt of the same subject to realization of the mentioned cheque.
4. As per Net Dues to be paid to Creditors, balance payment of Rs.94 67,250 (25% of Rs. 3.98.69.000 Rs 99,67.250- Advance Rs 5,00,000 -Rs 94,67,250) shall be paid by each Party of the Second and Third part to the Party of the First Part against which Party of the First Part is also agreeing to transfer the Equity Shares and Voting Rights of the Corporate Debtor in favor of Party of the Second Part and Third Part. Further the shares shall be transfer upon realization and receiving a full payment.
5. Upon receiving the full payment Party of the First Part shall make necessary arrangement for transferring of Equits shares & voting Rights of Corporate Debtor in favour of Parties of Second Part and Third Part, in the following Ratio Sr. No. Name of Party Percentage of equity shares & Voting rights 1 Mr. Priyank Deepak Saraff 25.00% 2 Mr. Aniket Basant Aggrawal 25.00% Page 30 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 The balance 50.00% of equity shares and voting rights may be held either by party of the first part and any other as it deems fit.
6. Party of the first part confirms that necessary approvals of its board of directors and shareholders is annexed to this MOU and no claims of any director / shareholder later can endanger the rights of the party of second part and third part.
7. Party of the first part agrees that after appointing the Party of the Second and Third part to the Director, it will not remove them without their explicit written consent before/after the 50% share is transferred to them as per above agreement
8. No parties to the MOU shall remove/change/add any directors from the board of corporate debtors or change shareholding ratio and if in any case, any change is needed, then the same should be done through unanimous consent of board of a corporate debtor.
9. Further, if any other liabilities including but not limited to interest, arises during the implementation of resolution plan shall be borne by all the parties to this MOU in their investment ratio. Similarly, any income or undisclosed asset of Corporate Debtor discovered during or after implementation of resolution plan, shall be distributed by all the parties to this MOU in their investment ratio.
30. In view of these clauses, claimants have alleged that respondent No.1 company is in breach of the terms of said MoU and though specifically agreed, respondent No.1 did not include the claimants in the Board of Directors of respondent No.2 company, instead respondent No.1 has added two more directors in the said company which is in violation of MoU and it is further the case put up by claimants that respondent No.1 Page 31 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 was illegally selling off the plant and machinery of respondent No.1 company to frustrate the MoU. Whereas, claimants were always ready and willing to perform their part of contract, hence original claimants have agitated that there is a breach of terms of MoU by respondent company.
31. As against this, stand of appellants herein was to the effect that claimants did not deposit remaining amount of Rs.94,67,250/- each with respondent No.1 and thereby did not fulfill their part of contract and on 14.6.2021, respondent No.1 conveyed to claimants that it is not possible to continue the MoU and same was terminated. This rival stand which was put up before learned Arbitrator was adjudicated in detail by framing Issues and after considering detailed submissions and upon examination of the material on hand, learned Arbitrator came to the conclusion that grievance of claimants deserves consideration. Hence, an award came to be passed in following terms:-
Award
(i) By way of specific performance of the Memorandum of Understanding dated 10.3.2021. Respondent No. I is directed to first include the Claimants in the board of directors of Respondent No. 2 Company. This shall be done Page 32 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 latest by 30.11.2022:
(ii) After Respondent No. 1 carries out the direction contained in clause (1) above, the Claimants shall pay latest by 31.12.2022 + || - sum of Rs.94.67.250 each to Respondent No. I along with simple interest @ 14% p.a. from 1.4.2021 till actual payment. For making such payment, the lien on the fixed deposits taken out by the Claimants as per the directions contained in Minutes of Meeting dated 22.6.2022 shall be lifted and the Claimants would be free to utilize the fixed deposit amounts even by premature encashment thereof, if so desired;
(iii) Upon the Claimants carrying out these directions contained in clause (ii) above. Respondent No. I shall allot 50% shares and voting rights of Respondent No. 2 Company in favour of the Claimants in equal measures. This shall be done within one month from the Claimants fulfilling the condition contained in clause (ii) above;
(iv) The Respondents shall bear their own cost. In addition, Respondent No. I shall bear the costs of the arbitration of the Claimants. These costs shall comprise of the payments made by the Claimants to the arbitration center. towards the Arbitrator's fees and the charges of the arbitration centre in relation to the arbitration proceedings and a sum of Rs.1,00,000/- towards lawyer's fees, clerical and incidental expenditure total of which comes to Rs.4.12,813- Arbitration proceedings disposed off accordingly.
32. While coming to aforesaid conclusion and passing of an award, learned Arbitrator upon examination of the material on record found that in the MoU, there is no clause pertaining to termination of contract and a contract which is bilaterally executed cannot be rescinded unless the contract itself provides for the same upon arising of certain eventuality and it was observed that even if there was a default on the part of Page 33 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 claimants to make further payments as per MoU, whether the party of the first part could terminate the MoU would be a matter of dispute and debate and such dispute had to be resolved through arbitration as agreed upon and after coming to such conclusion, learned Arbitrator has concluded with observations which we deem it proper to quote hereunder:-
47. To summarize the discussions on Issues No. 1 to 5. my conclusions are that the Claimants had performed the initial part of their liabilities under the MOU at which stage, Respondent No. 1 had the obligation to include them on the board of directors of Respondent No. 2 company which Respondent No. I without any valid reasons failed to do so. In view of this breach by Respondent No. 1. the Claimants had no further liability to make payment of remaining amounts till this failure was cured. The Claimants have not only declared but also demonstrated their readiness and willingness to perform remaining part of the agreement.
48. This takes me to the discussion on Issues No. 6 to 9.
Essentially, these issues pertain to the reliefs that the Claimants would be entitled to in view of my conclusions noted above. In the claim petition, the Claimants have prayed for two substantive reliefs which read as under:
"i. this Hon'ble Tribunal be pleased to direct Respondent No. 1 to perform its obligations under the Memorandum of Understanding dated 10.3.2021 and consequently appoint the Claimants as directors of Respondent No. 2 and transfer 50% shares of Respondent No. 2 in favour of the Claimants;
j. The Hon'ble Tribunal be pleased to direct the Respondent No.1 make payment of 50% of the entire amount received as income or undisclosed assets of Respondent No. 2 discovered during or after implementation of resolution plan".
49. The Claimants have also prayed for cost of litigation and made a general prayer of any other or further reliefs. Of the two principal prayers noted above, Learned Counsel for the Claimants under instructions had stated during the oral Page 34 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 hearing that the Claimants are not pressing for the relief clause (j), Consequently, the main prayer surviving before the Tribunal is prayer clause (i) which is reproduced above. As a result, the Issue No. 8 which is directly correlated to relief clause (j) becomes redundant.
50. In view of my conclusions that (1) the Claimants had performed their part of the obligations under the MOU, ny they are always ready and willing to perform the remaining part, (m) they had not breached any part of the MOU, Respondent No. I had breached the MOU and llegally terminated the same, the question arises whether the Claimants are entitled to the specific performance of the agreement. In this context, we may recall the Specific Relief Act has undergone significant amendments by the Amending Act 18 of 2018. Section 20 of the Act which in the unamended form gave much wider discretion to the courts to refuse specific performance of an agreement has been substituted in its entirety. The unamended Sub-section (1) of Section 20 provided that the jurisdiction to decree specific performance is discretionary and the court is not bound to grant such relief merely because it is lawful to do so. With substitution of Section 20 and other corresponding amendments made in Section 10 and 14. entire approach has shifted to the decree for specific performance being the rule and damages by way of compensation being the (exception) Specific performance would therefore normally be granted in favour of a person who establishes breach of the contract unless of course such Relief is covered under any of the negative covenants contained in Sections 11(2), 14 and 16 of the Specific Relief Act In the unamended form, Section 10 began with the expression. "except as otherwise provided in this chapter, specific performance of any contract may, in the discretion of the court be enforced." After amendment Section 10 provides that the specific performance of a contract shall be enforced by the court subject to the provisions contained in sub-section 11(2), 14 and 16. Section 11(2) which pertains to a trustee executing an agreement in excess of his power or breach of trust, clearly has no application. Section 14 in the substituted form after amendment contains four clauses (a) to (d), where if the case falls, the specific performance is to be refused. Section 16 on the other hand pertains to personal bars for grant of relief of specific performance. It is not necessary to examine in detail these clauses since it was not even argued before me by the Counsel for the Respondents that the case of the Claimants falls under any of these clauses. Page 35 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023
33. So, in substance, learned Arbitrator has considered not only the terms of MoU but was also pleased to examine the effect of Section 20 of the Specific Relief Act as well as Sections 10 and 14, including Section 11(2) and 16 of the Specific Relief Act and after analyzing the clauses contained in Section 14 and has observed that there is a distinction between readiness and willingness to perform the contract and both ingredients are necessary for the relief of specific performance and after considering the effect of Section 14(1)(A) pre-amended stage and subsequent to amendment has observed that nature of agreement indicates that there are no grounds to deny the relief claimed by original claimants, especially when this is not a case where undue hardship to the respondents if specific performance is granted has been pleaded or proved. Now, while coming to this conclusion, learned Arbitrator has also considered the relevant provisions which deal with specific performance in respect of the contract and though provision remained in the realm of Court's discretion was converted into a mandatory provision prescribing a power, the Court had to exercise when ingredients were fulfilled.
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34. At this stage, we may also refer to one of the decisions delivered by Hon'ble Apex Court in the case of Olympus Superstructures Pvt. Ltd. v. Meena Vijay Khetan and others reported in (1999) 5 SCC 651, wherein it has been culled out that specific performance of an agreement with respect to contractual rights, parties can agree to a particular forum to shorten the litigation in regular courts and refer the issues relating to specific performance to arbitration. Merely because sections of Specific Relief Act confer discretion on Courts to grant specific performance of a contract does not mean that parties cannot agree that the discretion will be exercised by a forum of their choice, namely the Arbitrator. Relevant observations contained in paragraphs 34 and 36 we deem it proper to reproduce under:-
34. In our opinion, the view taken by the Punjab, Bombay and Calcutta High Courts is the correct one and the view taken by the Delhi High Court is not correct. We are of the view that the right to specific performance of an agreement of sale deals with contractual rights and it is certainly open to the partiess to agree - with a view to shorten litigation in regular courts - to refer the issues relating to specific performance to arbitration. There is no prohibition in the Specific Relief Act, 1963 that issues relating to specific performance of contract relating to immovable property cannot be referred to arbitration. Nor is there such a prohibition contained in the Arbitration and Conciliation Act, 1996 as contrasted with Section 15 of the English Arbitration Act, 1950 or section Page 37 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 48(5)(b) of the English Arbitration Act, 1996 which contained a prohibition relating to specific performance of contracts concerning immoveable property.
36. Further, as pointed in the Calcutta case, merely because there is need for exercise of discretion in case of specific performance, it cannot be said that only the civil court can exercise such a discretion. In the above case, Ms.Ruma Pal,J.
Observed:
".....merely because the sections of the Specific Relief Act confer discretion on courts to grant specific performance of a contract does nto means that parties cannot agree that the discretion will be exercised by a forum of their choice. If the converse were true, then whenever a relief is dependent upon the exercise of discretion of a court by statute e.g. the grant of interest or costs, parties chould be precluded from referring the dispute to arbitration."
We agree with this reasoning. We hold on Point 3 that disputes relating to specific performance of a contract can be referred to arbitration and Section 34(2)(b)(i) is not attracted. We overrule the view of the Delhi High Court. Point 3 is decided in favour of respondents.
In view of the aforesaid discussion also, we are of the view that relief granted by learned Arbitrator and which has not been disturbed by the Court below does not suffer from any patent illegality. Hence, appeal lacks merits.
35. So, from reading of the aforesaid award which has been passed, it appears that learned Arbitrator not only has considered at length the terms of MoU but has also considered the effect of relevant Statute and after satisfying even on the Page 38 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 issue of readiness and willingness of the claimants has arrived at a conclusion, as indicated above, and as such it is not the case where issues which have been raised have not been dealt with by learned Arbitrator. In fact, each relevant submission and material is taken into consideration and as such we see no perversity in the award which has been passed by learned Arbitrator. Looking to the fact that every issues have been dealt with and there is no perversity, we see even no patent illegality in the award which has been passed and as such view taken by learned Arbitrator is a possible view which cannot be said to be suffering from any patent illegality and as such considering the scope underlying under Section 37 of the Act, which is more circumscribed than Section 34 proceedings, we refrain ourselves from interfering with the award which has been passed by learned Arbitrator.
36. In the light of the aforesaid discussion, stand which has been taken by learned counsel appearing for the appellants that all commercial contracts are by their very nature are determinable and as such cannot be specifically enforced under Section 14(d) of the Specific Relief Act and to substantiate this, Page 39 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 learned counsel appearing for appellants has drawn our attention to certain decisions which are on the issue. But, having perused the same, we found that this issue of specific performance since has been considered by learned Arbitrator at great length, we are not inclined to disturb the same.
37. At this stage, learned senior counsel Mr. Nanavati has strenuously tried to pursue us by raising a contention that by virtue of effect of Section 14 of the Specific Relief Act, commercial contracts of this nature are not possible to be specifically enforced. At the best, remedy of seeking damages can be availed of. Mr. Nanavati has drawn our attention to one of the decisions delivered by High Court of Delhi in the case of Rajasthan Breweries Ltd. Vs. The Stroh Brewery Company reported in 2000 (55) DRJ (DB) to contend that private commercial transactions between parties could terminate a contract even without assigning any reason within a reasonable period of notice in terms of such a clause in the agreement. Now here, clauses contained in the MoU have been analyzed by learned Arbitrator which are different and as such the judgment which is tried to be relied upon is of no assistance to the Page 40 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 appellants.
38. Yet another decision of Delhi High Court which is relied upon is in the case of M/s. Resbird Technologies Pvt. Ltd. Vs. M/ s. R.S. Travel & Tours (India) Pvt. Ltd. & Ors. reported in 2018 SCC OnLine Del 7866. But, a close perusal of that case indicates that facts of said case are quite distinct from the facts of the case on hand and as such when learned Arbitrator has examined at great length the terms of MoU while coming to the conclusion, we see no assistance to the appellants from the aforesaid decision. There are few other decisions of Delhi High Court which have also been referred to to canvass and substantiate said submission on Section 14, but we may reiterate that effect of Section 14 pre-amendment and post- amendment has been taken into consideration while passing the award and as such we are of the opinion that decisions which have been brought to our notice are of no assistance.
39. A further decision which is tried to be relied upon is the decision in the case of I.S. Sikandar (Dead) By LRs. Vs. K. Subramani & Ors.. reported in (2013) 15 SCC 27, wherein it Page 41 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 was held by Hon'ble the Apex Court that terms of agreement, conduct of parties and surrounding circumstances should be examined by Court and on facts of that case, it was found that plaintiff having failed to perform his part of agreement, agreement already terminated by defendant vendor and hence, in absence of plaintiff's prayer for seeking declaratory relief that termination of agreement was bad in law, suit for specific performance not maintainable. Now, while coming to this conclusion, in paragraph 47, Hon'ble the Apex Court in aforesaid decision has observed and found that there is nothing on record to show that plaintiff could have made arrangement for payment of the balance consideration amount to them and findings of the Trial Court records that plaintiff had no money for payment of balance of sale consideration. So, in that peculiar background of circumstance, Hon'ble the Apex Court has observed. Whereas, here, as said earlier, it was a categorical conclusion of learned Arbitrator that original claimants were willing to pay their remaining amount and delay cannot be attributed to the claimants. So, in view of the specific background of facts, when this would be the conclusion, there is Page 42 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 hardly any reason for the appellants to apply the aforesaid decision in a different factual matrix and as such said judgment is of no assistance.
40. Many judgments have been referred to and relied upon, one of which is the decision in the case of Intercontinental Hotels Group-India Private Limited and Anr. v. Shiva Satya Hotels Private Limited reported in 2013 SCC OnLine Guj 8678, wherein learned Single Judge of Gujarat High Court has analyzed as to what is meant by "determinable". Now, going through the said judgment, precisely paragraph 47, we found that such issue was in the context of facts where there was a termination letter and reply to it by appellant of that case. So, factual scenario prevailing on said case is not possible to be equated with present case on hand and as such since the law on precedent is clear to the effect that if facts are different, even one additional fact would make a world of difference in applying the ratio. It is trite law that if facts are different, ratio may not be applied as a straitjacket formula and said proposition is laid down by Hon'ble Apex Court in the case of State of Madhya Pradesh Vs. Narmada Bachao Andolan and Another Page 43 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 reported in (2011) 7 SCC 639. Since we have considered the same, we deem it proper to quote relevant observations contained in paragraph 64 thereof, which reads as under:-
64. The Court should not place reliance upon a judgment without discussing how the factual situation fits in with a fact-situation of the decision on which reliance is placed, as it has to be ascertained by analysing all the material facts and the issues involved in the case and argued on both sides. A judgment may not be followed in a given case if it has some distinguishing features. A little difference in facts or additional facts may make a lot of difference to the precedential value of a decision. A judgment of the Court is not to be read as a statute, as it is to be remembered that judicial utterances have been made in setting of the facts of a particular case. One additional or different fact may make a world of difference between the conclusions in two cases. Disposal of cases by blindly placing reliance upon a decision is not proper. (Vide MCD v. Gurnam Kaur, Govt. of Karnataka v. Gowramma and State of Haryana v. Dharam Singh) Same view is reiterated in a decision delivered by Hon'ble Apex Court on 5.5.2022 in Civil Appeal No.3657 of 2022 in case of Delhi Airport Metro Express Private Ltd. v. Delhi Metro Rail Corporation. Hence, on going through the decisions which are cited before us by learned counsel for the appellants, we observe that same are not of any assistance more particularly when we are exercise appellate jurisdiction under Section 37 of the Act.
41. At this stage, we may also observe that award is assailable before the Court only when award is in conflict with public Page 44 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023 C/FA/1189/2023 CAV JUDGMENT DATED: 09/06/2023 policy of India and what is meant for is also propounded by Hon'ble the Apex Court in a decision in the case of Associate Builders Vs. Delhi Development Authority reported in (2015) 3 SCC 49. We feel it necessary to quote relevant observations contained in paragraphs 33 and 34 of the said decision hereunder:-
33. It must clearly be understood that when a court is applying the "public policy" test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score[1]. Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts. In P.R. Shah, Shares & Stock Brokers (P) Ltd. v. B.H.H. Securities (P) Ltd., (2012) 1 SCC 594, this Court held:
"21. A court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or reappreciating the evidence. An award can be challenged only under the grounds mentioned in Section 34(2) of the Act. The Arbitral Tribunal has examined the facts and held that both the second respondent and the appellant are liable. The case as put forward by the first respondent has been accepted. Even the minority view was that the second respondent was liable as claimed by the first respondent, but the appellant was not liable only on the ground that the arbitrators appointed by the Stock Exchange under Bye-law 248, in a claim against a non- member, had no jurisdiction to decide a claim against another member. The finding of the majority is that the appellant did the transaction in the name of the second respondent and is therefore, liable along with the second respondent. Therefore, in the absence of any ground under Section 34(2) of the Act, it is not possible to re-examine the facts to find out whether a different decision can be arrived at."Page 45 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023
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34. It is with this very important caveat that the two fundamental principles which form part of the fundamental policy of Indian law (that the arbitrator must have a judicial approach and that he must not act perversely) are to be understood. The observations contained in the aforesaid paragraphs appear to be relevant and from reading of the said decision, we found that it is clear that juristic principle of judicial approach demands that decision be fair, reasonable and objective. On the obverse side, anything arbitrary and whimsical would obviously not be a determination which would either be fair, reasonable and objective and as such moment it is found that Arbitrator's approach is not arbitrary or capricious, then he is the last words on the facts and Court does not sit in appeal over the award. Hence, keeping in mind such proposition in the context of conclusion arrived by learned Arbitrator, we are of the opinion that award does not suffer from any patent illegality nor is violating any public policy and as such learned Trial Judge has also rightly not interfered with the award in exercise of power under Section 34 of the Act. Accordingly, we have no reason to interfere with the award as well as order passed by learned Trial Judge. Hence, the Appeal stands DISMISSED with no order as to costs.
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42. Since the main appeal is dismissed, connected Civil Application stands consigned to record.
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(ASHUTOSH SHASTRI, J) Sd/-
(J. C. DOSHI,J) OMKAR FURTHER ORDER After pronouncement of judgment, learned advocate Ms. Prachiti Shah appearing on behalf of appellants has requested to grant some reasonable time so as to enable the appellants to approach the higher forum. But, considering the facts which are emerging on the record, we see no reason to grant any stay as prayed for. Accordingly, request stands REJECTED.
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(ASHUTOSH SHASTRI, J) Sd/-
(J. C. DOSHI,J) OMKAR Page 47 of 47 Downloaded on : Mon Jun 12 20:36:57 IST 2023