Karnataka High Court
Trishul Developers vs Smart Asset Services India Pvt Ltd on 15 December, 2022
Bench: G.Narendar, P.N.Desai
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 15th DAY OF DECEMBER, 2022
PRESENT
THE HON'BLE MR. JUSTICE G. NARENDAR
AND
THE HON'BLE MR. JUSTICE P.N.DESAI
COMMERCIAL APPEAL NO.305 OF 2022
BETWEEN:
1. TRISHUL DEVELOPERS,
A REGISTERED PARTNERSHIP FIRM,
HAVING ITS OFFICE AT MITTAL TOWERS,
NO.109, 'B' WING, FIRST FLOOR,
NO.6, M G ROAD,
BANGALORE- 560 001.
REPRESENTED BY ITS
MANAGING PARTNER,
Mr. NIRAJ MITTAL.
THE APPELLANT NO.2 HEREIN
2. MR. NIRAJ MITTAL,
MAJOR,
MANAGING PARTNER,
TRISHUL DEVELOPERS,
MITTAL TOWERS, NO.109,
'B' WING FIRST FLOOR,
NO.6, M G ROAD,
BANGALORE- 560 001.
3. MR. O.P MITTAL,
MAJOR,
PARTNER, TRISHUL DEVELOPERS,
MITTAL TOWERS, NO.109,
'B' WING, FIRST FLOOR,
2
NO.6, M.G ROAD,
BANGALORE- 560 001.
4. MRS. UMA MITTAL,
MAJOR,
PARTNER, TRISHUL DEVELOPERS,
MITTAL TOWERS, NO.109,
'B' WING, FIRST FLOOR,
NO.6, M G ROAD,
BANGALORE- 560 001.
5. MRS. JYOTI MITTAL,
MAJOR,
PARTNER, TRISHUL DEVELOPERS,
MITTAL TOWERS, NO.109,
'B' WING, FIRST FLOOR,
NO.6, M.G ROAD,
BANGALORE- 560 001.
APPELLANT NOS.3 TO 5 ARE REPRESENTED
BY THEIR SPECIAL POWER OF ATTORNEY
HOLDER MR. NIRAJ MITTAL
THE APPELLANT NO.2 HEREIN.
... APPELLANTS
(BY SRI. DHANANJAY.V.JOSHI, SENIOR COUNSEL FOR
SMT. KAVITHA. D, ADVOCATE)
AND:
SMART ASSET SERVICES INDIA PVT. LTD,
HAVING ITS REGISTERED OFFICE AT:
NO.151, 9TH MAIN,
6TH SECTOR, HSR LAYOUT,
BANGALORE- 560 102.
REPRESENTED BY ITS
AUTHORISED SIGNATORY,
Ms. DIANA NINU MATHEW. ... RESPONDENT
(BY SRI.SHIVAPRASAD SHANTANAGOUDAR, ADVOCATE)
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THIS COMMERCIAL APPEAL IS FILED UNDER SECTION
13(1-A) OF THE COMMERCIAL COURT ACT R/W 37(1)(C) OF
THE ARBITRATION AND CONCILIATION ACT, 1996, PRAYING
THAT TO SET ASIDE THE IMPUGNED JUDGMENT DATED
15/06/2022, PASSED BY THE HONBLE LXXXIII ADDITIONAL
CITY CIVIL AND SESSIONS JUDGE AT BENGALURU CITY (CCH-
84) IN COM.A.S.NO.64/2019 AND CONSEQUENTLY SET ASIDE
THE IMPUGNED AWARD DATED 28/12/2018 PASSED BY THE
LEARNED ARBITRATOR IN AC NO.37/2018. B) TO DIRECT THE
RESPONDENT TO BEAR THE ENTIRE COSTS OF THE
ARBITRATION PROCEEDINGS AS WELL AS OF THE PRESENT
APPEAL, AND C) TO ISSUE SUCH FURTHER AND OTHER
ORDERS AND / OR DIRECTIONS AS THIS HONBLE COURT MAY
DEEM FIT AND PROPER IN THE FACTS AND CIRCUMSTANCES
OF THE CASE.
THIS COMMERCIAL APPEAL HAVING BEEN HEARD AND
RESERVED FOR JUDGMENT AND COMING ON FOR
PRONOUNCEMENT OF JUDGMENT, THIS DAY, P.N DESAI J.,
DELIVERED THE FOLLOWING:
JUDGMENT
This commercial appeal is filed challenging the judgment of dismissal of appellants' suit by learned LXXXIII Addl. City Civil and Sessions Judge, Bengaluru(CCH-84) on 15.06.2022 in Com.A.S.No.64/2019. The appellants have prayed to set- aside the impugned award dated 28.12.2018 passed by learned Arbitrator in A.C.No.37/2018 and also the judgment of the Trial Court.
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2. The brief contention of the Appellants is that the appellant No.1 is a partnership firm engaged in the business of real estate. Appellant No.2 is the managing partner of the Appellant No.1 partnership firm, Appellant Nos.3, 4 and 5 were at the relevant time, the partners of Appellant No.1 firm.
3. The appellant No.1 was engaged in the development of a residential apartments complex in Bengaluru known as 'Mittal Palms'. It is further contended that one Vikram Chari met appellant No.2 through his acquaintance with Mr. N.S. Narendra, who was then the Director on the Board of Smart Owner Services India Private Limited-respondent which was owned and controlled by Mr. Vikram Chari who represented to appellant No.2 that he was in the business of broking and investing for clients in real estate projects and that he regularly bought and sold immovable properties for high-net-worth individuals on a regular basis. Sri. Vikram Chari made several representations to 5 book/block several apartments for his clients. Accordingly, the appellant No.1 executed an Agreement with Vikram Chari's company viz., Smart Owner Services India Private Limited titled as "Services Agreement' on 08.12.2012,. However, Vikram Chari failed in his obligation to sell the apartments agreed under the Agreement and appellant No.1 questioned Vikram Chari as to why he should be paid excess high rate of brokerage commission. Accordingly, Vikram Chari proposed appellant No.2 that appellant No.1 should enter into Agreements of sale and Construction Agreements with another company owned and controlled by him. Then on the request of Vikram Chari, appellant No.1 entered into an Supplemental Agreement with Vikram Chari and on the request of Vikram Chari, appellant No.1 furnished the cheques under the Supplemental Agreements and the cheques were to be presented only if it failed to complete the shell and core of the project building within 18 months. On 04.04.2013, an Exclusive Marketing Rights Agreement was entered by Vikram 6 Chari's earlier company Smartowner Services India Private Limited-respondent herein with appellant No.1 under which the appellant No.1 was restrained from marketing and/or selling any of the apartments in the project. In respect of Supplementary Agreements dated 01.02.2013 and 24.05.2013, an Addendum dated 08.09.2014 was also executed.
4. It is further contended that the project being developed within the proposed Arkavathy Layout Phase I by Bangalore Development Authority('BDA' for short), the BDA had almost completed the formation and laying of an 18 meters public road. But suddenly, by an order dated 10.05.2013, the BDA denotified the lands adjacent to the project in which the 18 meters wide public road had been formed by the BDA. Then the plaintiff/appellant No.1 challenged the de-notification before the High Court in W.P.Nos.18300-18304/2014 and the High Court granted a status-quo order. Then on 28.08.2014, the BBMP issued an order cancelling the sanctioned plan to 7 the project on the ground that the project has lost its road access. The same was challenged by appellant No.1 before the High Court by filing W.P.Nos.53809- 53813/2015. During the pendency of the arbitration proceedings, the appellant No.1 purchased an easementary right from the neighbouring land owner to provide road access to the project and he was in the process of obtaining a modified plan. Therefore, as appellant No.1 was prevented by factors beyond its control from continuing with the development of the project and as Vikram Chari being aware of these factors, appellant No.1 contended that he could not be held liable or in any manner accountable for non-performance of any obligation due to force majeure.
5. However, on 22.06.2017, the respondent issued a notice seeking adjudication of its alleged claim arising out of the Agreements of Sale and Construction Agreements for refund of sale consideration together with compound interest. Upon Arbitral Tribunal being 8 constituted, the appellant No.1 filed an application under section 16 of the Arbitration and Conciliation Act, 1996(for short hereinafter referred as 'Act') in A.C.No.37/2018 contending that the claims raised by the respondent are not arbitrable as they relate to persons who were not parties to the arbitration proceedings and that the claims are outside the scope of Agreements to Sell and Construction Agreements.
6. The learned Arbitrator framed issue Nos.1 to 19 and parties have led the evidence. Award was passed directing the appellants to pay Rs.26,92,80,169/- together with pendente lite and post-award interest at the rate of 9% per annum thereon. Being aggrieved by the award, the appellants filed an Arbitral suit under section 34 r/w section 16(6) of the Arbitration and Conciliation Act, 1996 which has been dismissed. Being aggrieved by the impugned judgment, this appeal is filed.
7. Heard Sri. Dhananjay V. Joshi, learned Senior Counsel for Smt. Kavitha. D. for the appellants and 9 Sri. Shivaprasad Shantanagoudar, learned counsel for the respondent.
8. Learned Senior Counsel for the appellants argued that the impugned judgment is perverse and contrary to the facts and evidence. Learned District Judge has grossly erred in understanding the scope and jurisdiction under section 34 of the Arbitration and Conciliation Act. Learned counsel argued that as per section 7 of the Act, all the partners have not signed the agreements. There is no previty of contract between appellant Nos.3 to 5 and the respondent. There is no arbitration agreement between appellant Nos.3 to 5 and the respondent. Section 92 of the Partnership Act states that one of the partners cannot refer the matter to Arbitration. Section 92 is an exception though the authority is generally implied. Learned Senior Counsel further argued that the sanction plan of the appellants was cancelled by BBMP as there was no approach road in view of the de-notification by the BDA. In the 10 Construction Agreements, there was no arbitral clause. The Arbitrator has not considered the point whether there is any arbitration clause or not. But only relying on the order of the High Court held that the matter is arbitral. Learned Senior Counsel argued that though under sections 34 and 37 of the Act, interference of the Trial Court and the Appellate Authority is limited, the court has to see whether the view taken by the Arbitrator is tenable or plausible. But in this case, the view taken by the Arbitrator needs interference. The claim Ex-P53 is totally different and independent and it does not contain the arbitration clause. The claim does not emanates under Exs-P1 to P48. In view of the inception of Ex-P53, obligation and rights are changed and there is no reference to Ex-P1 to P48 in Ex-P53.
9. The learned Senior Counsel relied on the decision of Associated Engineering Co. vs. Government of Andhra Pradesh and Another, (1991) 4 SCC 93 and argued that the Arbitrator acts in 11 this case is disregard of contract and Arbitrator acted without jurisdiction. This view of Arbitral Tribunal and District Court is patently illegal in view of the decision of the Hon'ble Supreme Court in the case of Duro Felguera S.A. v. Gangavaram Port Limited, (2017) 9 SCC
729. The learned Senior Counsel submitted that the impugned award is in contravention of fundamental policy of Indian Law and contrary to section 56 of the Indian Contract Act. Therefore, because of act of BDA and BBMP, the project lost its road access and was delayed. So appellants cannot be held liable. He relied on the decision of Satyabrata Ghose v. Mugneeram Bangur & Co & Anr, AIR 1954 SC 44, wherein the Hon'ble Supreme Court discussed section 56 of the Indian Contract Act. With these main arguments, the learned Senior Counsel prayed to allow the appeal, as prayed.
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10. Learned Senior Counsel for the appellants relied on the following decisions:-
1. National Small Industries Corporation Limited vs. Punjab Tin Printing & Metal Industries & Ors., ILR (1979) 1 Delhi
381.
2. Food Corporation of India vs. Rama Mills, Shahbad Markanda, 1988 SCC Online P & H 117.
3. JJLB Engineers & Contractors vs. Manmohan Harjinder & Associates & Anr., 2000 SC Online Bom 670.
4. S.N. Soni vs. Taufiq Farooki and others, AIR 1976 Delhi 63.
5. Sanganer Dal and Flour Mill vs. FCI & Ors., (1992) 1 SCC 145.
6. Associated Engineering Co. vs. Government of Andhra Pradesh and Another, (1991) 4 SCC 93.
7. M R Engineers and Contractors Private Limited v. Som Datt Builders Limited, (2009) 7 SCC, 696.
8. Duro Felguera S.A. v. Gangavaram Port Limited, (2017) 9 SCC 729.
9. Satyabrata Ghose v. Mugneeram Bangur & Co & Anr, AIR 1954 SC 44.13
10. MD, Army Welfare Housing Organisation v. Sumangal Services (P) Limited, (2004) 9 SCC 619.
11. Rozan Mian v. Tahera Begum & Ors, (2007) 12 SCC 175.
12. K. Lubna and Ors. V. Beevi and Ors.(2020) 2 SCC 524.
11. Against this, learned counsel for the respondent argued that the learned Arbitrator has considered all the aspects. Ex-P53 - Addendum to the Supplemental Agreements is not different or independent. There is no Novation of contract in view of section 56 of the Contract Act. Learned counsel submits that the Arbitrator has considered all the documents and held as to how the Arbitrator has got jurisdiction. That issue is independently considered by the Arbitrator.
12. Learned counsel for the respondent submitted that non-performance of the agreements due to denotification of the land wherein approach road was formed, does not fall under the category of force majeure and it is not act of God in view of specific clause in this 14 regard. First Agreement is modified only as per Ex-P53 after the cheques were dishonoured. The contention that other members or partners have not signed the agreements is not at all urged before the Arbitrator. Such contention cannot be taken for the first time in this Appeal. Learned counsel also argued that viewed from any angle, both the Arbitration Award and the reasoning of the Tribunal are considered, then, there is no scope for interference.
13. Learned counsel argued the appellants/developers failed to discharge their obligation under both Supplemental Agreements dated 01.02.2013 and 24.05.2013 within a period of 18 months from the date of execution of the respective Supplemental Agreements and as per clause 3 of the Supplemental Agreements, it was agreed that if the appellants/developers are unable to complete the shell and core of the building, it would return the total consideration amount paid under Definitive Agreements 15 alongwith interest at 25% p.a. Learned counsel contends that the appellants have failed to refund and re-sell the apartments within 18 months. As per their request, an Addendum was executed on 08.09.2014 to Supplementary Agreements dated 01.02.2013 and 22.05.2013, wherein the appellants/developers had agreed to resell the apartments within 12 months and if they fail to do so, the appellants had agreed to pay an amount of Rs.3,924/- per sq.ft. to the respondent. The appellants have failed to perform their obligation and committed willful default of agreements. In view of terms of the agreements and subsequent agreements which are continuation of earlier agreements, the application for appointment of Arbitrator was allowed.
14. Learned counsel for respondent further argued that the contention now raised by the appellants and urged before this Court are urged before the Arbitrator and also before the Commercial Court. They are rejected by a reasoned order. Under section 37 of the Arbitration 16 and Conciliation Act, this Court being Appellate Court, interference in the well reasoned judgment is very limited. It is only on the grounds mentioned under Section 37 of the Act. But no such grounds are made out by the appellants. With these contentions, he prayed to dismiss the appeal.
15. The learned counsel for respondent relied on the following decisions:-
1. Haryana Tourism Ltd. v. Kandhari Beverages Ltd. reported in (2022) 3 SCC
237.
2. Union of India and another v. Annavaram Concrete Pvt Ltd. reported in 2021 SCC Online Del 4211.
3. M/s. Movie Times Cineplex Pvt. Ltd. v.
M/s. MRG Developers Pvt. Ltd & Ors.
dated 04.04.2022.
4. Lata Construction and others v. Dr Rameshchandra Ramniklal Shah and another reported in (2000) 1 SCC 586.
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16. We have perused the impugned order and records of the case. From the above arguments and records, the point that arise for our consideration is:
"Whether the order impugned passed by the learned Trial Judge exercising the power Section 34 of the Act is justifiable? Or needs interference by this Court."
JURISDICTION OF ARBITRAL TRIBUNAL
17. The first contention of the appellants is that appellant Nos.3 to 5 are not signatories to the agreements and the appellant Nos.3 to 5 have not in any manner ratified the action of appellant No.2 in entering into the agreements on behalf of the partnership firm so as to bind the other partners to an arbitration agreement. In fact they have filed an application under section 16 of the Act and disputed the reference to arbitration, learned Senior counsel also argued that there is no arbitration agreement between appellant Nos.3 to 5 and the respondent as contemplated under section 7 of the Act. 18 He further submits that section 7(3) of the Act requires an arbitration agreement to be in writing and that appellant Nos.3 to 5 have not signed any agreement with the respondent and that does not bind them.
18. In this regard, learned Senior counsel relied on the decision of Associated Engineering Co. v. Government of Andhra Pradesh, (1991) 4 SCC 93, wherein in paras 24, 25 and 26, it is held as under:-
24. The arbitrator cannot act arbitrarily, irrationally, capriciously or independently of the contract. His sole function is to arbitrate in terms of the contract. He has no power apart from what the parties have given him under the contract. If he has travelled outside the bounds of the contract, he has acted without jurisdiction. But if he has remained inside the parameters of the contract and has construed the provisions of the contract, his award cannot be interfered with unless he has given reasons for the award disclosing an error apparent on the face of it.
25. An arbitrator who acts in manifest disregard of the contract acts without jurisdiction. His authority is derived from the contract and is governed by the Arbitration Act which embodies principles derived from a specialised branch of the law of agency (see Mustill and Boyd's Commercial Arbitration, 2nd edn., p. 641). He commits misconduct if by his award he decides 19 matters excluded by the agreement (see Halsbury's Laws of England, Volume II, 4th edn., para 622). A deliberate departure from contract amounts to not only manifest disregard of his authority or a misconduct on his part, but it may tantamount to a mala fide action. A conscious disregard of the law or the provisions of the contract from which he has derived his authority vitiates the award.
26. A dispute as to the jurisdiction of the arbitrator is not a dispute within the award, but one which has to be decided outside the award.
An umpire or arbitrator cannot widen his jurisdiction by deciding a question not referred to him by the parties or by deciding a question otherwise than in accordance with the contract. He cannot say that he does not care what the contract says. He is bound by it. It must bear his decision. He cannot travel outside its bounds. If he exceeded his jurisdiction by so doing, his award would be liable to be set aside. As stated by Lord Parmoor: [Attorney-General for Manitoba v. Kelly, (1922) 1 AC 268, 276 : 1922 All ER Rep 69] (AC p. 276) "It would be impossible to allow an umpire to arrogate to himself jurisdiction over a question which, on the true construction of the submission, was not referred to him. An umpire cannot widen the area of his jurisdiction by holding, contrary to the fact, that the matter which he affects to decide is within the submission of the parties." Evidence of matters not appearing on the face of the award would be admissible to decide whether the arbitrator travelled outside the bounds of the 20 contract and thus exceeded his jurisdiction. In order to see what the jurisdiction of the arbitrator is, it is open to the court to see what dispute was submitted to him. If that is not clear from the award, it is open to the court to have recourse to outside sources. The court can look at the affidavits and pleadings of parties; the court can look at the agreement itself. Bunge & Co. v. Dewar and Webb [(1921) 8 Ll L Rep 436] ."
19. In the light of the principles stated by the Hon'ble Supreme Court, we have meticulously considered the records and we are unable to accept the submission of the learned Senior Counsel. The Arbitral Tribunal and the Trial Court held that the Agreements of Sale and Construction Agreements were executed in the year 2013 and appellant Nos.3 to 5 nowhere disputed the execution of such documents. They have received the consideration amount and utilized the same for all these years. Appellant No.3 to 5 nowhere objected for entering such agreements and deriving benefits on it. Therefore, Appellant No.3 to 5 are deemed to have been consented for act of Appellant No.1 and 2 on behalf of all the partners of Firm. In order to appreciate the same, it is 21 useful to refer to the relevant provision of Indian Partnership Act.
20. Section 18 of the Indian Partnership Act reads as under:-
18. " Partner to be agent of the firm.--
Subject to the provisions of this Act, a partner is the agent of the firm for the purpose of the business of the firm.,"
Further Section 19 of the Indian Partnership Act states the implied authority of a partner as agent of the firm. Therefore, it is evident from said sections that there is implied authority that has been vested to bind the firm until and unless there is clause or any statement in this regard. So a partner has implied authority to carry on the business of the partnership firm and for such act, the other partners are liable. Unless there is contract contrary, they can seek exemption. It all depends upon the contract between the partners themselves. In this regard, it is useful to refer Delhi High Court decision in the case of S.N. SONI v. TAUFIQ FAROOKI and 22 Others, AIR 1976 DELHI 63. At paras 14 to 17, it is held as under:-
(14) As observed above, the provisions of section 19(2) of the Partnership Act did not create any statutory bar on the powers of the partners, but they are merely a statutory expression of the presumptions of the terms of the contract between the partners and also subject to the usage or custom of trade. The provision exists for the protection of interests of the partners and the restriction can surely be acquiesced, waived or ratified by the partners without any difficulty or legal bar. I am unable to read the aforesaid provision of law as a mandate of the legislature creating the bar and making the transaction per se illegal and incapable of being ratified. In my opinion, although the statute has helped in formulating the implied terms of the contract of partnership between the partners of the firm, the matter rests entirely in the will and capacity of the partners to extend or limit the implied authority and rebut the presumption which has been expressed by the statute. I do not see any difficulty as to why the partners can subsequently not agree to ratify and waive their objection to a legal act which had been done by a partner without their previous authority, but which could very well have been done with their authority.
(15) Section 18 of the Partnership Act provides that a partner is the agent of the firm for the purpose of the business of the firm. Section 19 prescribes the scope of the implied authority of the partner to carry on the business of the firm.
Section 20 expressly provides that the partners in 23 a firm may by contract between them, extend or restrict implied authority of any partner. The statute, therefore, recognises the partner to be an agent for the other partners. An agent within the meaning of Chapter X of the Contract Act when he is employed by a principal may have an express or implied authority. Section 196 to 199 lay down the statutory provisions for ratification of the authority of an agent. They may be referred to with advantage. Section 196 provides that where acts are done by one person on behalf of another, but without his knowledge or authority, he may elect to ratify or disown such acts; if he ratifies them, the same effects will follow as if they had been performed by his authority. Section 197 provides that ratification may be expressed or may be implied in the conduct of the person on whose behalf the acts are done. Section 198 and 199 provide that no valid ratification can be made by a person whose knowledge of the facts of the case is materially defective and a person ratifying any unauthorised act done on his behalf, ratifies the whole of the transaction of which such act formed a part. (16) Bowsteadon Agency, 13th Edn. lays down the rule of law in Article 15 thus : Where an act is done in the name or purportedly on behalf of a person by another person purporting to act as his agent, the person in whose name or on whose behalf the act is done may, by ratifying the act, make it as valid and effectual, as it had been originally done by his authority, whether the person doing the act was an agent exceeding his authority, or was a person having no authority to act for him at all. The rule is subject to exceptions specified in Articles 16 to 21, which have no application to the facts of the present case. If the rule of law is that the acts 24 of an agent performed in excess or without any authority can be ratified by a principal, this would apply with stronger force to the case of a partner, since, in my opinion, a partner is a co- proprietor and has an authority and interests of his own in addition to acting as an agent for the other partners so as to bind the firm. The same rule of law, therefore, would apply to the case of the authority of a partner. Lindley on Partnership, 13th Edn. page 167, has stated that if a partner exceeds his authority, and it is contended that the firm is bound by what he has done, on the ground that it has ratified his acts, evidence must be given to prove that at the time of the alleged ratification his co- partners knew of those acts and the ratification must be of the whole of the transaction. A more specific case of submission of a dispute to arbitration in excess of implied authority has been noticed by Lindley at page 168 and it has been observed that the partner actually referring the dispute is himself bound by the award and the other partners may become bound by ratification. In Marsh v. Joseph, (1897) 1 Ch. 213, the court of appeal observed at page 246, "To constitute a binding adoption of acts a priori unauthorised these conditions must exist : (1) the acts must have been done for and in the name of the supposed principal, and (2) there must be full knowledge of what those acts were, or such an unqualified adoption that inference may properly be drawn that the principal intended to take upon himself the responsibility for such acts, whatever they were". The Judicial Committee of the Privy Council in La Banque Jacques-Cartier v. La Banque d' Epargne De La Cite ed du District De Montreal, (1887) A C. 111, observed that, "acquiescence and ratification must be founded 25 on a full knowledge of the facts, and further it must be in relation to a transaction which may be valid in itself and not illegal, and to which effect may be given as against the party by his acquiescence in and adoption of the transaction."
(17) The aforesaid discussion leads me to the conclusion that the rule of law is that all the partners of the firm can ratify an act of a partner, which has been done by him in excess of the implied authority or without any authority, provided the act is such that it could be legally done with the authority of all the partners previously given and that the partners ratify the act with full knowledge of the facts. In the instant case the partners have given the promissory note in dispute to Krishan Avtar soon after his notice of retirement from the firm and by the deed of dissolution they mutually agreed that the promissory note in dispute has been allotted to Krishan Avtar, who has been authorised to deal with it in any way he liked and the other surviving partners of the firm have relinquished their right, title, interest or claim in the said promissory note altogether. They have, therefore, expressly permitted Krishan Avtar to deal with the promissory note in any manner he liked which certainly would include the recovery of the debt under it or compromise or relinquish or assign the debt by him, it were exclusively his own property."
21. Therefore, if the acts done by appellant No.2 is considered in the light of principles stated in the above referred decisions, then it shows that act of appellant 26 Nos.1 and 2 binds the other partners. Further, in another decision, the Hon'ble Supreme Court considered section 19 of the Partnership Act, as to how the conduct or an act of other partners amounts to ratification of contract entered by one of the partner on behalf of the firm. The circumstances under which court can infer binding effect of contract on other partners when the contract is entered only by one of the partner, the Hon'ble Supreme Court in the case of SANGANER DAL AND FLOUR MILL v. FCI & ORs, (1992) 1 SCC 145, held at para 2 as under:-
2. "The contention raised by Sri Sushil Kumar Jain, learned counsel for the appellant is that by operation of Sec. 19(2)(a) of the Indian Partnership Act, 1932 (for short as the 'Partnership Act') there is no implied authority given to one of the partners to refer the dispute relating to the business of the firm for arbitration and therefore the reference made by the court, pursuant to a contract entered into by Satya Narain on behalf of the firm, is without jurisdiction. The High Court found as a fact that none of the partners have entered into the witness box to deny the validity of the contract nor raised any objection that they had not authorised Satya Narain to enter into the contract nor that they were bound by any acts done by him. It is also found that Satya Narain 27 signed the tender and at that time no other partners raised objection regarding the signing of the tender by Satya Narain on behalf of the firm. In view of these facts it is clear that they ratified the contract. It is also further to be noted that in terms of the contract, the corporation had appropriated the security deposit made by the appellant-firm and that was not objected to at any time. This itself would fortify the conclusion that the firm had entered into a binding contract with the corporation and contract contained the arbitration clause which binds the partners. The contention raised that the contract is void and that in terms of the contract, making a reference is without jurisdiction bears no substance."
22. It is not in dispute that appellant No.1 is engaged in the business of construction/developer.
Appellant Nos.3 to 5 have not stated that they were not aware of such agreements in the beginning and on the other hand, they have ratified it by their conduct. It is also evident that appellant Nos.3 to 5 participated in the business of the firm. They have received consideration amount and utilized it. Now they cannot turn around and say that there is no agreement between them and the respondent and they are not liable for said contract and 28 there is no agreement entered between them. The appellants are estopped at this stage raising such contention having agitated the matter. Hence, this contention of the appellants cannot be accepted. Therefore, the contention of the appellants that the arbitration proceedings were barred under section 19(2)
(a) of Indian Partnership Act does not hold good.
23. Further, Sections 7 and 4 of the Arbitration and Conciliation Act will not help the appellants in view of facts of this case. On the other hand, the Agreements to sell at Ex-P1 to P24 provide arbitration clause at 10.2. Further, the Construction Agreements at Ex-P25 to P48 also contain at clause 8.2 an arbitration clause. These two agreements dated 01.02.2013 are Definitive agreements. In Ex-P49, Supplemental Agreement and Ex-50 Supplemental Agreement , there is no specific exclusion of arbitration clause. On the other hand, it is evident that the Definitive agreements shall continue to apply in full force and effect only to the extent modified 29 in the Supplemental Agreement. All other terms in the Definitive Agreement continues. Further, Ex-P51 and Ex-P52 the Exclusive Marketing Rights Agreements which clearly specifies at Clause 1.4 that the continuation of other terms of Definitive Agreements and they contain a specific clause 5.2 where the matter shall be resolved amicably and otherwise shall be settled according to Arbitration and Conciliation Act. The Addendum to Supplemental Agreement Ex-P53 also indicate that the Arbitration clause is not excluded. The Trial Court has discussed in detail as to how the Definitive Agreements continue to apply in full force. The learned Trial judge has referred to the evidence led before the Arbitral Tribunal and dealt in detail as to how the appellant Nos.3 to 5 have time and again participated in the business of the firm. The learned Arbitrator discussed in detail as to how the Arbitrator has jurisdiction and he has independently dealt that aspect and not relying only on High Court order regarding appointment of Arbitrator. As admitted by the appellants in their appeal memo that appellants 30 have not taken such contention before the Tribunal as evident from Grounds of Appeal at para 5.D (iii). The learned Trial Judge has referred at para 24 of the judgment in detail how the appellants who are plaintiffs 3 to 5 cannot go against the arbitration agreement entered by the firm represented by appellant No.2. We do not find any grounds to interfere with the said finding. Therefore, the decision relied by the appellant in Duro Felguera S.A. v. Gangavaram Port Limited reported in (2017) 9 SCC 729 is not applicable as we are not considering in this appeal as to whether High Court exceeded in its jurisdiction under section 11(6) of the Act. Similarly, the decisions relied by learned Senior Counsel for the appellants in National Small Industries Corporation Limited vs. Punjab Tin Printing & Metal Industries & Ors., ILR (1979) 1 Delhi 381, Food Corporation of India vs. Rama Mills, Shahbad Markanda, 1988 SCC Online P & H 117, JJLB Engineers & Contractors vs. Manmohan Harjinder & Associates & Anr., 2000 SC Online Bom 670, S.N. Soni vs. Taufiq Farooki 31 and others, AIR 1976 Delhi 63, Sanganer Dal and Flour Mill vs. FCI & Ors., (1992) 1 SCC 145, Associated Engineering Co. vs. Government of Andhra Pradesh and Another, (1991) 4 SCC 93, M R Engineers and Contractors Private Limited v. Som Datt Builders Limited, (2009) 7 SCC, 696. Rozan Mian v. Tahera Begum & Ors, (2007) 12 SCC 175, K. Lubna and Ors. V. Beevi and Ors. (2020) 2 SCC 524 have no application in view of the facts and records of this case and finding of Arbitral Tribunal and Trial Court. The facts of that case are totally different when compared to records of the case and finding of Tribunal and Court. On the other hand, if the documents produced in this case are considered and the Arbitral award and judgment of the Trial court are referred, it is evident that appellant No.2 has signed all the documents and acted on behalf of the appellant firm and he has received consideration amount and he represented the firm and given evidence on behalf of them. All the appellants have utilized the benefit and business of the firm and never objected for taking benefits under 32 agreements. Therefore, such contention of the appellants does not hold good.
NOVATION OF CONTRACT:
24. Second contention of Appellants is that therein is Novation of Contract. Learned Senior counsel Sri. Dhananjay Joshi submitted there is Novation of Contract. The earlier contract is substituted by subsequent agreement which does not contain arbitral clause. Hence, earlier agreement cannot be invoked for reference to Arbitration. The Novation Contract is explained in Section 62 of the Indian Contract Act, 1872. It is useful to refer said section. It reads as under:-
62. Effect of novation, rescission, and alteration of contract.--If the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed."
25. It is evident from said section that a contract is said to be novated by another only when one contract is substituted by another contract which supersedes, abrogates another contract in clear terms, which means, 33 the parties to contract agree to replace terms of obligation with a new set of terms or where contracting parties are restored with a new party and the said act shall be done in mutual harmony of the contracting parties concerned.
26. We have perused the said agreements. Said Agreements and Addendum to Supplemental agreements dated 01.02.2013 and 22.05.2013 does not show that there is Novation of contract or agreement. Supplemental agreements dated 01.02.2013 and 24.05.2013, Exclusive Marketing Rights Agreement dated 01.02.2013, 04.04.2013 and 24.05.2013 and Addendum to Supplementary Agreement dated 08.09.2014 are only for the limited purpose specified in their respective contracts.
27. Learned counsel for the respondent drawn our attention to the definition of Novation, Supplement and Addendum as stated in Law Lexicon which are as follows:-
34
"NOVATION" as per Law Lexicon Dictionary means the substitution by mutual agreement of one debtor or of one creditor for another whereby the old debt is extinguished, or the substitution of the new debt or obligation for an existing one, which is whereby extinguished. It is mode of extinguishing one obligating by another the substitution, not of a new paper or note, but of a new obligation in lieu of an old one-the effect of which is to pay, dissolve or otherwise discharge it.
"SUPPLEMENT" means is that which supplies a deficiency; that which fills up, completes or makes an addition to something already organized, arranged or set apart; a part added to or a continuation of something. It is used sometimes as a synonym of appendix.
"ADDENDUM" is defined as a thing that is added or is to be added.
28. Therefore, as per the definition given in Law Lexicon, Novation is the substitution by mutual agreement. Supplement means which supplies a deficiency in the earlier agreement, wherein in addition to the same, already mentioned, a part added to or a continuation of something.
29. If the terms of the agreements in this case as discussed in above paras are considered, in the light of 35 section 62 of Contract Act and the definitions referred above, it is evident that these Supplemental Agreements and Addendum to Supplemental agreements do not constitute separate contracts, but are executed in addition to Definitive Agreements. They have no separate existence. On the other hand, Supplemental Agreements (clause 2) and Addendum(clause 11) clearly states that the terms and conditions of Definitive agreements shall apply in full force and effect and the Supplemental Agreement and Addendum will only prevail over the Definitive Agreements only with respect to the terms mentioned therein. On the other hand, the parties derive their rights from the Definitive Agreements. Therefore, the agreements agreed upon by the parties under the Definitive agreements would not wipe out by execution of the Addendum to Supplemental Agreements or any other subsequent contracts. The arbitration clause is not wiped out in view of addendum. In this regard, on a similar set of facts, the learned counsel for the respondent relied upon a decision of Madras High Court in the case of 36 Chaitanya Builders and Leasing (P) Ltd., v. Dr. Tulsi Ram and Another reported in 2014(1) MWN (Civil) 7 wherein at para 5.4. it is held as under:-
"5.4 .........The disputes between the parties have arisen only in the interpretation of their respective allotments of plots/villas/OSR area, extent of site, etc. That is the reason why the Supplemental Agreement dated 17.2.2009 came into existence. Further more, as noted earlier, the Development Agreement dated 27.3.2006 itself speaks about the fact that the villas ear-marked to the parties will be identified and finalised through consequential Agreement later. Therefore, the consequential Agreement covers only the dispute which has arisen subsequent to the earlier Development Agreement dated 27.3.2006. With that factual position, if we see Clause 11 of the Supplemental Agreement dated 17.2.2009, it is very clear that the Agreement clause mentioned in the earlier Agreement would stand incorporated in the subsequent one as well. More over, even in the Suit filed, the Appellant has traced the cause of action from 27.3.2006, which is the date of the Development Agreement. Therefore, the Appellant seeks the relief based upon the Agreements. The Supplemental Agreement by its own nomenclature is in addition to the main agreement as it merely supplements. Hence, both the documents are read together. There is also no intention on the parties to dispense with the Arbitration clause. On the contrary, the definite intention of the parties is to 37 resolve the dispute by way of Arbitration. Therefore, we have no hesitation in holding that the Arbitration clause contained in the Development Agreement dated 27.3.2006 would stand incorporated in the Supplementary Agreement dated 17.2.2009 as well. In such view of the matter, we do not find any illegality or irregularity in the Order passed by the learned Single Judge. Accordingly, this Original Side Appeal is dismissed. No costs. Consequently, connected Miscellaneous Petition is also dismissed."
30. The Hon'ble Supreme Court in the case of Grasim Industries Limited v. State of Kerala reported in (2018) 14 SCC 265, held at para 4 as under:-
"4................That the supplementary agreements which are executed pursuant to the execution of the parent agreement, does not substitute the parent agreements and therefore the arbitration clause in the earlier agreement do not extinguish by itself."
31. So in view of the principles stated in the above referred decisions, if the present agreements are considered, then, it is evident that there is no inconsistency between the Supplemental Agreements and 38 Addendum to Supplemental Agreements. Therefore, the arbitration agreement agreed by the parties under Definitive agreements will not take away the execution of Addendum to Supplemental Agreements or any subsequent contract. Therefore, second contention regarding Novation of Contract by the appellants does not hold good.
FORCE MAJEURE
32. The third contention of appellants is that in view of denotification of land adjacent to proposed construction of Apartment by BDA, the BBMP cancelled the sanction plan holding that there is no approach road to the project. As it is subsequent event and such act is nothing but Force Majeure, therefore the appellants could not proceed further with the project, they cannot be held liable for the act beyond their contract or not anticipated. The learned Senior counsel for the appellants submits that the award is in contravention of fundamental policy of India, inasmuch as, it is contrary to section 56 of the 39 Indian Contract Act and award is to be set-aside under section 34(2) (b) (ii) of the Act.
33. It is contention of the appellants that since BDA has passed denotification of certain lands adjacent to appellant No.1 project, which had road access over 18 meters that is formed by BDA, was blocked by the original land owners and the project lost its road access, he filed a writ petition and BBMP cancelled the sanction plan. The same was also challenged. Therefore, learned Senior counsel argued that neither appellant No.1 is responsible for the action of BDA or BBMP and in view of cancellation of sanction plan, appellants could not continue with the construction of residential apartments nor sell the same. Therefore, the agreement between appellant No.1 and respondent stood frustrated.
34. Learned counsel for respondent on the other hand argued that such contention of the learned Senior counsel for the appellants regarding force majeure, is not tenable as the appellants were also aware that there 40 were some issues with the road to the project. The said clause in agreement clearly excludes any such event of force majeure.
35. We have considered the agreements in this regard.
Ex-P49 agreement defines the Force Majeure and the said agreement clearly states Force Majeure Event shall specifically exclude any event that prevents access to the Apartments. Both the Arbitrator and the trial court have considered this aspect. It is also evident that the same was within the knowledge of appellants at the time of execution of Ex-P53 i.e., Addendum to the Supplemental Agreements and it is recorded as one of the clause and time was extended. Therefore, such a contention is not at all tenable. It is to be noted that section 56 of the Contract Act would arise only when an unforeseen event occurs which renders the performance of the contract impossible originally contemplated by the parties. Appellants were well aware about the issue with 41 regard to the road access and only on their request, Supplemental Agreements and Addendum to Supplemental Agreements were executed to resolve the issue and as stated already, appellants approached the Courts and cancellation of sanction plan is quashed by this Court and in that case, the respondent has sought damages also. Therefore, the appellants' contention regarding force majeure is liable to be rejected. SCOPE OF INTERFERENCE UNDER SECTION 37 OF THE ACT.
36. Learned counsel argued that the arbitral award is in contravention of the fundamental public policy of India and contrary to the Indian Contract Act. Therefore, the Arbitral award is to be set-aside under section 34(2)
(b) (ii) of the Act.
37. Whether the award is against the public policy of India and when an award can be set-aside on the ground that it is contrary to justice has been dealt by the 42 Hon'ble Supreme Court of India in the following decision:-
a. In Associate Builders v Delhi Development Authority, (2015) 3 SCC 49, the Hon'ble Apex Court has extensively considered the grounds on which arbitral award may be assailed. Caution on and limits on power of Court to interfere with arbitral awards under the various heads of public policy of India has been explained and emphasized. While dealing with the heading "Justice", it has been observed that the third ground of public policy is, if an award is against justice or morality, an award can be said to be against justice only when it shocks the conscience of the Court. The arbitral award awarding more than what has been claimed in the claim petition by the Arbitrator is held to be unjustifiable. Obviously, this would shock the conscience of the Court and the arbitral award would be liable to be set aside on the ground that it is contrary to "justice".43
38. The Hon'ble Apex Court has further laid down that 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.
39. In Patel Engineering Limited v. North Eastern Electric Power Corporation Limited, (2020) 7 SCC 167 , the Hon'ble Apex Court referring to Associate Builders, on the ground of Patent illegality as a ground and the public policy for setting aside the domestic award, held that the ground of patent illegality is the ground available under the statute for setting aside a domestic award if the decision of the arbitrator is found 44 to be perverse, or, so irrational that no reasonable person would have arrived at the same; or, the construction of the contract is such that no fair or reasonable person would take; or, that the view of the arbitrator not even a possible view.
40. In Ssangyong Engineering and Construction Company Limited, v. National Highways Authority of India, (2019) 15 SCC 131, it has been held that where an arbitral Tribunal has rendered an award which decides matters either beyond the scope of the arbitration agreement or beyond the disputes referred to the arbitral tribunal, the arbitral award could be said to have dealt with decisions on matters beyond the scope of submission to arbitration. However, it has been cautioned that in the guise of misinterpretation of the contract, and consequent "errors of jurisdiction", it is not possible to state that the arbitral award would be beyond the scope of submission to arbitration if otherwise the aforesaid misinterpretation 45 [which would include going beyond the terms of the contract], could be said to have been fairly comprehended as "disputes" within the arbitration agreement, or which were referred to the decision of the arbitrators as understood by the authorities. It has been observed that when it comes to the public policy of India, and the argument based upon "most basic notions of justice", such ground can be attracted only in very exceptional circumstances when the conscience of the Court is shocked by infraction of fundamental notions or principles of justice. The said judgment was rendered in the context of the Circular unilaterally issued by one party by substituting a workable formula under the agreement by another formula de-hors the agreement.
41. Further, the scope of interference and judicial scrutiny by the Appellate Court is dealt by the Delhi High Court with reference to decision of Supreme Court in Steel Authority of India. The Hon'ble High Court of Delhi in Rail Land Development Authority v. Parsvnath 46 Developers Limited and Another, 2019 (174) DRJ 625 (DB), has held that the scope of judicial scrutiny and interference by an appellate court under Section 37 of the Act is even more restricted in comparison to deciding objections to the Award under Section 34 of the Act. Reference has been made to Steel Authority of India V/s. Gupta Brothers Steel Tubes Limited, (2009) 10 SCC 63 wherein it has been laid down that an error relatable to interpretation of the contract by an arbitrator is an error within its jurisdiction and such error is not amenable to correction by Courts as such error is not an error on the face of the award. The Arbitrator having been made the final arbitral of resolution of disputes between the parties, the award is not open to challenge on the ground that the Arbitrator has reached a wrong conclusion. The Courts do not interfere with the conclusion of the Arbitrator even with regard to the construction of contract, if it is a plausible view of the matter.
47
42. In Haryana Tourism Limited v. Kandhari Beverages Limited, (2022) 3 SCC 237, the Hon'ble Apex Court has held at paras 8 and 9 as follows:
8. So far as the impugned judgment and order [Kandhari Beverages Ltd. v. Haryana Tourism Ltd., 2018 SCC OnLine P&H 3233] passed by the High Court quashing and setting aside the award and the order passed by the Additional District Judge under Section 34 of the Arbitration Act are concerned, it is required to be noted that in an appeal under Section 37 of the Arbitration Act, the High Court has entered into the merits of the claim, which is not permissible in exercise of powers under Section 37 of the Arbitration Act.
9. As per settled position of law laid down by this Court in a catena of decisions, an award can be set aside only if the award is against the public policy of India. The award can be set aside under Sections 34/37 of the Arbitration Act, if the award is found to be contrary to: (a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality; or (d) if it is patently illegal.
None of the aforesaid exceptions shall be applicable to the facts of the case on hand. The High Court has entered into the merits of the claim and has decided the appeal under Section 37 of the Arbitration Act as if the High Court was deciding the appeal against the judgment and decree passed by the learned trial court. Thus, the High Court has exercised the jurisdiction not vested in it 48 under Section 37 of the Arbitration Act. The impugned judgment and order [Kandhari Beverages Ltd. v. Haryana Tourism Ltd., 2018 SCC OnLine P&H 3233] passed by the High Court is hence not sustainable.
43. The Hon'ble Supreme Court in the case of UHL Power Company Ltd. v. State of Himachal Pradesh(2022) 4 SCC 116, held at paras 16, 17, 18 and 19 as under :
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 Ltd. v. Vedanta Ltd.
[MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163 : (2019) 2 SCC (Civ) 293] , the reasons for vesting such a limited jurisdiction on the High Court in exercise of powers under Section 34 of the Arbitration Act have been explained in the following words : (SCC pp. 166-67, para
11) "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 49 the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian 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 Ltd. 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 Corpn. Ltd. [K. Sugumar v. Hindustan Petroleum Corpn. Ltd., (2020) 12 SCC 539] , wherein it has been observed as follows : (SCC p. 540, para 2) "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 50 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. [Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd., (2019) 20 SCC 1] , the limitations on the Court while exercising powers under Section 34 of the Arbitration Act has been highlighted thus :
(SCC p. 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 51 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 Ltd. v.
Rajasthan Rajya Vidyut Utpadan Nigam Ltd. [Parsa Kente Collieries Ltd. v. Rajasthan Rajya Vidyut Utpadan Nigam Ltd., (2019) 7 SCC 236 : (2019) 3 SCC (Civ) 552] , adverting to the previous decisions of this Court in McDermott International Inc. v. Burn Standard Co. Ltd. [McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181] and Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran [Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran, (2012) 5 SCC 306] , 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 : (Parsa Kente Collieries case [Parsa Kente Collieries Ltd. v. Rajasthan Rajya Vidyut Utpadan Nigam Ltd., (2019) 7 SCC 236 :
(2019) 3 SCC (Civ) 552] , SCC pp. 244-45, para
9) "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 52 that no fair-minded or reasonable person could do. It is further observed by this Court in the aforesaid decision in para 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.
[NHAI v. ITD Cementation India Ltd., (2015) 14 SCC 21 : (2016) 2 SCC (Civ) 716] , SCC para 25 and SAIL v. Gupta Brother Steel Tubes Ltd. [SAIL v. Gupta Brother Steel Tubes Ltd., (2009) 10 SCC 63 : (2009) 4 SCC (Civ) 16] , SCC para 29."
(emphasis supplied)
20. In Dyna Technologies [Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd., (2019) 20 SCC 1] , the view taken above has been reiterated in the following words : (SCC p. 12, para 25) "25. Moreover, umpteen number of judgments of this Court have categorically held that the courts should not interfere with an award merely 53 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."
Therefore, in the light of the principles stated in the above referred decisions, if the appeal is considered, then it is evident that the contention of the appellants for setting aside the Arbitral award either under section 34 or under section 37 of the Arbitration and conciliation Act is not tenable. The learned Arbitrator has framed 19 issues and has dealt in detail all the contentions urged before him regarding each issue and arrived at a finding. The learned Arbitrator has independently dealt regarding jurisdiction of the Arbitrator and the question of Arbitral Agreement based on the records placed and dealt with maintainability of claim before the Tribunal. The decision relied by the appellants' counsel in McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 54 11 SCC 181 does not apply as there is nothing to show that there exits any fraud, bias or order is perverse or the Arbitrator acted beyond authority or it is opposed to public policy. The contention of the appellants' counsel that there is defect in the award has no basis at all. The contention regarding frustration of contract and appellants were not responsible for action of BDA and BBMP has no basis at all. Though the principles stated in Satyabrata Ghose v. Mugneeram Bangur & Co & Anr, AIR 1954 SC 44 by the Hon'ble Supreme Court and M.D. Army Welfare Housing Organisation V. Sumangal Services (P) Limited, (2004) 9 SCC 619 are well settled, but they are not applicable to the appellants' case. The decisions relied on by the appellants are on different footings and it has no applicability to the facts of the present case. The contention of the appellants regarding substitution of agreement has caused disappearance of arbitral clause also cannot be accepted in view of the discussion made above. Therefore, as the scope of interference by this Court 55 under section 37 of The Arbitration and Conciliation Act is limited and is tested with touchstone of the principles stated by the Hon'ble Supreme Court, then we are of the view that the appeal being devoid of merit is liable to be dismissed.
Accordingly, we pass the following ORDER The appeal is dismissed.
Sd/-
JUDGE Sd/-
JUDGE *mn/-