Delhi District Court
Ram Kishore And Sons vs Rahul Fashion Private Limited on 25 March, 2025
DLCT010170722023
IN THE COURT OF SH. SANJEEV KUMAR AGGARWAL :
DISTRICT JUDGE (COMMERCIAL) -01 : CENTRAL, TIS
HAZARI COURTS, DELHI
OMP (Comm) No. 175/23
M/s Ram Kishore Nagarmal Marketing Private Limited
Through its Director
Mr. Shivansh Bansal
Having registered office at :
902, Indra Prakash Building,
Barakhamba Road,
New Delhi-110001
Email ID : [email protected]
Mob. No. :+91-9810056055
.... Petitioner
Versus
1. M/s Rahul Fashion Pvt. Ltd.
Through its Director
Having its registered office at :
9/774, Prem Gali No. 3,
Gandhi Nagar, Delhi-110031,
Also at :
B-4, Sector-65, Noida, UP-201309,
Also at :
D-391, Sector-10, Noida, UP-201301,
Also at :
D-227, Sector-6, Noida, UP-201309
Email : [email protected]
[email protected]
OMP (Comm.) No. 175/23
RAM KISHORE AND SONS Vs. RAHUL FASHION PRIVATE LIMITED Page No. 1 of 27
[email protected]
Ph. No.: +011204271311,
+011201278734
+919899898958
2. Mr. Rahul Seth
Director
R/o C-6, Preet Vihar,
New Delhi-110092.
Email : [email protected]
[email protected]
[email protected]
Ph No.: +011204271311,
+011201278734
+919899898958
.... Respondents.
PETITION UNDER SECTION 34(2) OF THE ARBITRATION
& CONCILIATION ACT, 1996 FOR CHALLENGING THE
AWARD DATED 06.08.2023.
Date of Institution : 04.12.2023
Date of reserving Order : 09.01.2025
Date of pronouncement of Order : 25.03.2025
ORDER
1. Vide this order, I shall decide the instant petition filed by petitioner under Section 34(2) of the Arbitration and Conciliation Act, 1996 (in short 'the Act') to challenge the award dated 06.08.2023 passed by Ld. Sole Arbitrator Sh. Dilbag Singh Punia (in short impugned award) along with an application u/s 34 (3) of the Arbitration and Conciliation Act, 1996 seeking condonation of delay in filing the petition.
2. Arguments were heard from Sh. Kaushal Gautam, Ld. Digitally signed by SANJEEV SANJEEV KUMAR KUMAR AGGARWAL AGGARWAL Date:
OMP (Comm.) No. 175/23 2025.03.25
17:24:24 +0530
RAM KISHORE AND SONS Vs. RAHUL FASHION PRIVATE LIMITED Page No. 2 of 27 Counsel for petitioner and Sh. Shiv Gupta & Sh. Rohin Singh Pande, Ld. Counsel for respondent. First of all I will decide application for condonation of delay.
Application u/s 34(3) of the Arbitration and Conciliation Act, 1996
3. Petitioner in the application for condonation of delay in filing the present petition in which he has stated that the impugned award was passed on 06.08.2023, hence, there was three months to file the petition which expired on 07.11.2023 and petitioner's wife was admitted to hospital as she was pregnant and petitioner had to visit with her regular checkups and only on 18.11.2023 petitioner visited his counsel and on 25.11.2023 petitioner's counsel sent the present petition for signing to petitioner and on 30.11.2023 the present petition was filed by petitioner's counsel. Thus, there is delay of 23 days in filing the present petition.
4. Reply to the said application was filed by respondent no.1. In reply it is stated that applicant has not rendered any proof that the petitioner was prevented by sufficient cause for not filing the present petition with in stipulated time and applicant in general way has stated that since his wife was pregnant and delivery was due in the month of Nov. 2023 and simply annexed the document of his wife visiting to the hospital on various date but said documents does not suggest any serious complication, rather it shows his wife was admitted on 16.10.2023 in hospital and discharge on 17.10.2023 but he visited to the Counsel only on 18.11.23 i.e. after expiry of limitation period. The circumstance arising for delay must accrue prior to expiry of limitation period and not after to constitute sufficient cause. Thus, application is OMP (Comm.) No. 175/23 RAM KISHORE AND SONS Vs. RAHUL FASHION PRIVATE LIMITED Page No. 3 of 27 liable to be dismissed.
5. It is argued by Ld. Counsel for petitioner qua the application for condonation of delay that though petition has to be been file with in 3 months but same has been file with extended period of 30 days as provided in section 34 (3) of Act and there is only delay of 23 days in filing the present petition and said delay was caused as petitioner's wife was pregnant and he has to visit with her several times to regular checkups hence petitioner could not contact his counsel on time and thus same is sufficient cause for condonation of delay of 23 days.
6. Section 34 (3) of the Arbitration & Conciliation Act, 1996, provides the time period to file objection. Same is reproduced as under : -
(3)An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal: Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.
7. From aforesaid section 34(3) the Act, am agree with the contention of Ld. Counsel for respondent that objections for setting aside the award can be file with in three months from the date on which the copy of award has been received and further, this section provides that if the court is satisfied that the objector / petitioner was prevented by sufficient cause in making application / objection within the three months, it can grant further period of thirty days.
8. The petitioner has undisputedly filed petition after 23 days of expiry of period of 3 months, therefor I am agree with the OMP (Comm.) No. 175/23 RAM KISHORE AND SONS Vs. RAHUL FASHION PRIVATE LIMITED Page No. 4 of 27 contention of Ld. Counsel for respondent that said delay can be condone only when petitioner is able to show there is sufficient cause for not filing the objection u/s 34 within 3 months from the date of service of the copy of impugned award. Undisputedly impugned award was passed on 06.08.2023. In the application it is not mentioned when the copy of award was delivered but it is mentioned that three month period expired on 07.11.2023, which is not even disputed by respondent. The petitioner has stated that his wife was pregnant and her due date was in November, therefore it is evident that from 06.08.23 his wife in six month pregnancy and therefore it cannot be rule out that petitioner was busy in taking care of his wife by taking her to hospital. Hence it cannot be said that petitioner cause delay in going to Counsel on 18.11.2023 to discuss the present case and thereafter some time was taken for drafting of petition. Hence considering the aforesaid facts I held that petitioner is able to show sufficient ground for condonation of delay in filing the petition. Hence, I allow the application and condone the delay.
Main petition
9. Brief facts as stated by the petitioner in the petition are that that petitioner is the lawful owner of Industrial Property no. D-227 Sector 63 Noida, District Gautam Budh Nagar, UP measuring 1800 sq. mtrs. Plot having covered area 4000 sq. ft. consisting of basement, ground first & second floor area of 4000 sq. ft. approximately (hereinafter called as said property) which was conveyed to it vide a 90 years lease deed executed in its favour by New Okhla Industrial Development Authority (Noida) on 10.08.2005. It is further stated that petitioner has been represented by its proprietor Sh. Anil Bansal until 25.03.2022 OMP (Comm.) No. 175/23 RAM KISHORE AND SONS Vs. RAHUL FASHION PRIVATE LIMITED Page No. 5 of 27 when he died. Sh. Anil Bansal is survived by three legal heirs, that is, his wife Mrs. Renu Bansal, his son Shivansh Bansal and a married daughter Mrs. Aakshi Gupta. However, all the three legal heirs by mutual understandings resolved that the petition before this Court will be contested by Sh. Shivansh Bansal.
10. It is further stated that respondent no. 1 is a private limited company engaged in the business of garment manufacturing and respondent no. 2 is the director of respondent no. 1 and he is responsible for the day to day affairs of respondent no. 2. The petitioner entered into an agreement with the respondent vide a registered lease deed dated 07.08.2015 wherein petitioner leased out the said property to the respondent for the period of five years commencing from 15.08.2015 till 14.08.2020. It is further stated that as per clause 18 of the said agreement, there was a lock-in period of five years with the condition that in the event the lessee leaves the premises before the lock-in period ends, he will have to pay the balance of monthly rent for five years. It is further stated that as per the clause 1 of the agreement, the rent for first three years was agreed upon between the parties as Rs. 3,90,000/- per month (excluding the service tax which was to be paid by the respondent in addition to the monthly rent at 14% over rent). Alongwith the signing of the said agreement, the respondent paid four months of advance rent Rs. 17,70,000/- as an interest-free security deposit. It is further stated as pr the terms of the said agreement the monthly lease rent was subject to one time increment by 15% after the completion of three years period of the said agreement. Hence, the monthly lease rent earlier which was of an amount of Rs. 3,90,000/- for the first three years commencing from 15.08.2015 was to be increased to an amount OMP (Comm.) No. 175/23 RAM KISHORE AND SONS Vs. RAHUL FASHION PRIVATE LIMITED Page No. 6 of 27 of Rs. 4,48,500/- from 15.08.2018 for the remaining 2 years. But despite this, the respondent sighting loss in business and financial exigencies and requested the petitioner to continue with the existing lease rent with the promise to pay the balance/ difference of the enhanced lease rent soon and the petitioner keeping in mind the long standing business relationship with the respondent agreed with the said proposal.
11. It is further stated that petitioner was shocked and surprised to receive an email dt. 08.10.2018 along with a letter titled Notice or Pre-Intimation to vacate the premises and informed by the respondent by said mail that they will vacate the premises before 28.02.2019 and will pay the rent till the date they will vacate the premises. It is further stated that aforesaid letter furthermore intimated to the petitioner that the respondent will pay rent "Till He Vacates' which is untenable, illegal and against the express provisions(supra) of the registered lease deed. It is further stated that petitioner being under the impression that the respondent would clear all its dues of revised rent and will duly comply with the conditions stipulated under the agreement which follow in the event of pre-mature vacation of property, waited for the respondent to comply with the same, however, even after displaying an endearing amount of patience for the respondent, the petitioner did not even receive any payment. It is further stated that respondent after declaring his unilateral intention to vacate the said property by 28.02.2019 in a most brazen and illegal manner stopped paying even the monthly lease rent after October, 2018. Despite repeated requests and reminders to fulfill contractual obligations fell on deaf ears and finally left with no alternative, the petitioner adjusted the four months advance OMP (Comm.) No. 175/23 RAM KISHORE AND SONS Vs. RAHUL FASHION PRIVATE LIMITED Page No. 7 of 27 security deposit in the month of January 2019 towards the arrears of monthly rent. The respondent finally vacated the said premises on 05.05.2019.
12. It is further stated that the leased premises were handed over to the petitioner in a completely dilapidated condition and the respondent promised to pay for the expenses that the petitioner may incur in repair and maintenance work of the premises. The petitioner spent Rs. 10,00,000 in the repair and the respondent did not pay the same. It is further stated that the respondent did not pay the enhanced rent, that is, Rs.4,48,500/- from 15.08.2018. It is further stated that the petitioner sent legal demand notice on 19.02.2021 which was served upon the respondent through speed courier. The petitioner approached to the Hon'ble High Court vide Arbitration petition no. 848 of 2021 wherein the Hon'ble High Court appointed Sh. Dilbag Singh Punia, as Ld. Sole Arbitrator, to adjudicate the dispute vide order dated 08.03.2022.
13. The petitioner has challenged the award mainly on following grounds :-
(a) That the Ld. Arbitrator has committed error while holding that petitioner is not entitled to any claim, however, as per the terms of the agreement respondent is contractually liable to pay the increased rent from 15.08.2018 to 15.05.2019 which tunes to an amount of Rs.5,26,500/- and further liable to make the payment of the balance rent for the 16 remaining months at the rate of Rs. 4,48,500/- per month comes to a total amount of Rs.71,76,000/- and penal interest @ 24% p.a. on the said amount.OMP (Comm.) No. 175/23
RAM KISHORE AND SONS Vs. RAHUL FASHION PRIVATE LIMITED Page No. 8 of 27
(b) That the award is patently illegal for the reason that it has been passed in contravention of S. 28 of the Arbitration and Conciliation Act which clearly lays down the mandate for the Arbitral Tribunal to decide the dispute in accordance with the substantive law for the time being in force in India. The Ld. Arbitrator failed to take into consideration that respondent has violated the contractual obligation.
(c) That the Ld. Arbitrator filed to appreciate that respondent is liable to pay the balance rent for 16 remaining months at the rate of Rs. 4,48,500/- per month which comes to Rs.71,76,000 and penal interest 24% p.a. to the overdue amount for every month default.
(d) That the arbitrator has failed to give justification for his decision on issue no. 1 and 2 and went on to hold his observation unsupported by any line of reasoning. Ld. Arbitrator has failed to consider that clause-1 of the said agreement stipulates that for the first three years the respondent was to pay the same rent and after completion of the first three year the rent was subject to increment at the rate of 15% commencing from 15.08.2018 which a revised monthly lease rent of Rs. 4,48,500/- and further Ld. Arbitrator has failed to consider that as per the Clause 2 of the agreement, the respondent was obligated to hand over the said property in a good tenantable order.
(e) That Ld. Arbitrator has failed to consider that as OMP (Comm.) No. 175/23 RAM KISHORE AND SONS Vs. RAHUL FASHION PRIVATE LIMITED Page No. 9 of 27 per Clause 17 and 18 of the agreement, there was the lock-in-period of five years commencing from 15.08.2015 till 14.08.2020 and respondent breached the said clause by vacating the premises on 05.05.2019 that is 16 months prior to the stipulated date of the termination of the said agreement.
14. The petitioner has prayed for setting aside the impugned award dt. 06.08.2023 and the respondent be directed to pay the petitioner a sum of Rs.1,47,82,658/- along with interest at the rate of 24 per cent per annum.
15. Respondent no. 1 has contested the petition by filing reply to the same. In the reply, respondent has taken the preliminary objections that:-
(i) that there are three legal heirs of late Sh. Anil Bansal, proprietor of M/s Ram Kishore & Sons i.e. Smt. Renu Bansal (wife), Sh. Shivansh Bansal (son) and Ms. Aakshi Gupta (daughter) but the petitioner has not filed any authority or affidavit on behalf of other legal heirs of late Sh. Anil Bansal to file the present petition hence petition has not been validly instituted.
(ii) that signatures of the petitioner Shivansh Bansal in the present petition and accompanied affidavit, statement of truth and application for condonation of delay and vakalatnama do not tally with his signatures affixed on the claim petition and its accompanying affidavit, therefore, same are fake and present petition is no petition in the eyes of law.
(iii) that award has been challenged primarily on two gound that award is against fundamental policy of law and and patent OMP (Comm.) No. 175/23 RAM KISHORE AND SONS Vs. RAHUL FASHION PRIVATE LIMITED Page No. 10 of 27 illegality but contention raised by petitioner do not meet the test laid down by Hon,ble Supreme Court for challenging the impugned award on said grounds.
16. On merits, it is stated by respondent no.1 that the petitioner has concealed the fact from the Ld. Arbitral Tribunal that the petitioner had sold the demised premises vide transfer-cum-sale deed dated 13.08.2021 much before filing of the claim before arbitral tribunal and thus made false statement that he is Lawful and absolute owner of the demise premises. The petitioner has not produced any authority on behalf of other legal heirs of Late Sh. Anil Bansal thay they have authorize petitioner to pursue the petition. The tax invoice were raised by petitioner till 28.02.2019 at monthly rent of Rs. 390000/- plus taxes. Hence same disentitle petitioner to claim increased rent to Rs. 585000/-. ( wronly types as 58500/-). Petitioner failed to produce any document that it spent Rs. 1000000/- towards repairs of tenanted premises. Vacant possession of the tenanted premises was offered on 28.02.2019 vide letter dt. 06.10.2018 but Late Sh. Anil Bnsal did not take the possession hence petitioner not entitle to claim rent from 01.03.2019 to 05.05.2019. Petitioner has not pleaded any loss due to vacation of premises by respondent prior to expiry of lease period rather document EXCW1/R2 shows petitioner has rented out the demised premises for monthly rent of Rs. 675000/- plus GST, hence considering the same Ld. Arbitrator has rightly rejected the claim of petitioner. Thus, it is prayed for dismissal of the petition.
17. Ld. Counsel for petitioner has argued that the respondent was tenant of Late Sh. Anit Bansal vide lease deed dt. 07.08.2015 for a period of 5 years which expired on 14.08.2020 for a OMP (Comm.) No. 175/23 RAM KISHORE AND SONS Vs. RAHUL FASHION PRIVATE LIMITED Page No. 11 of 27 monthly rent of Rs. 390000/- for first three year i.e. till 14.08.2018 and thereafter rent was to be increased for 15% hence from 15.08.2018 rent was to be paid @ 448500/- plus GST and since as per clause 18 there was lock in period of 5 year therefore respondent breached the said condition by vacating the premises on 05.05.2019 and thus respondent was liable to pay damages @ 448500/- per month plus GST for remaining 16 months total amounting to Rs. 7176000/- besides difference of rent @ 58500/- from 15.08.2018 till 05.05.2019 amounting to Rs. 526500/- but Ld. Arbitrator despite the said explicit clause did not awarded the said amount in impugned award hence impugned award is againt fundamental law of land and suffered from patent illegality, as learned arbitrator has rejected the claim of the petition for rent of unexpired premises of tenancy though Ld. Arbitrator has to hold the contractual obligations. He further argued that Ld. Arbitrator has also wrongly rejected the claim of petitioner for Rs. 10 lakhs as the cost of repair to bring the property in a tenantable condition which petitioner has suffered due to damage on the suit property. Hence impugned award be set aside.
18. On the other hand, Ld. Counsel for respondent has argued that there is no illegality in the impugned award and same is well reasoned as the petitioner has failed to point out that it suffered any loss due to vacating the tenanted premises by the respondent prior to expiry of the lease period. He argued that Ld. Arbitrator has rightly considered that petitioner has failed to produce any document that petitioner spend any amount in repairing the premises and further argued that petitioner is not entitled rent as respondent has offered to hand over the premises OMP (Comm.) No. 175/23 RAM KISHORE AND SONS Vs. RAHUL FASHION PRIVATE LIMITED Page No. 12 of 27 to the father of the petitioner who was the proprietor of M/s Ram Kishore & Sons but he has refused to take possession of the same and that is why he has not raised any invoice for the rent which was mandatory, therefore, petition is liable to be dismissed.
19. I have considered the submissions and gone through the record. Section 34 (3) of the Arbitration and Conciliation Act deals with the limitation in filing the petition under Section 34 of Arbitration and Conciliation Act 1996 which is reproduced as below :-
"34 Application for setting aside arbitral award. --
(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3). (2) An arbitral award may be set aside by the Court only if--
(a) the party making the application furnishes proof that--
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the Court finds that--
(i) the subject-matter of the dispute is not capable of OMP (Comm.) No. 175/23 RAM KISHORE AND SONS Vs. RAHUL FASHION PRIVATE LIMITED Page No. 13 of 27 settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation. --Without prejudice to the generality of sub- clause (ii) it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81.
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal: Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.
(4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.
20. Hon'ble Supreme Court has given broad principles on which an award can be set aside in Delhi Airport Metro Express Pvt. ... vs Delhi Metro Rail Corporation Ltd., SCC Online SC 695 as under:
"23. For a better understanding of the role ascribed to courts in reviewing arbitral awards while considering applications filed under Section 34 of the 1996 Act, it would be relevant to refer to a judgment of this Court in Sangyong Engineering and Construction Company Limited v. National Highways Authority of India (NHAI) 5 wherein R.F. Nariman, J. has in clear terms delineated the limited area for judicial interference, taking into account the amendments brought about by the 2015 Amendment Act. The relevant 2 (2020) 2 SCC 455 3 2021 SCC OnLine SC 8 4 (2012) 5 SCC 306 5 (2019) 15 SCC 131 passages of the judgment in Ssangyong OMP (Comm.) No. 175/23 RAM KISHORE AND SONS Vs. RAHUL FASHION PRIVATE LIMITED Page No. 14 of 27 (supra) are noted as under: -
"34. What is clear, therefore, is that the expression "public policy of India", whether contained in Section 34 or in Section 48, would now mean the "fundamental policy of Indian law" as explained in paras 18 and 27 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204] i.e. the fundamental policy of Indian law would be relegated to "Renusagar" understanding of this expression. This would necessarily mean that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] expansion has been done away with. In short, Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] ,as explained in paras 28 and 29 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Court's intervention would be on the merits of the award, which cannot be permitted post amendment.
However, insofar as principles of natural justice are concerned, as contained in Sections 18 and 34(2)(a)(iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in para 30 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] .
35. It is important to notice that the ground for interference insofar as it concerns "interest of India" has since been deleted, and therefore, no longer obtains. Equally, the ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the "most basic notions of morality or justice". This again would be in line with paras 36 to 39 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , as it is only such arbitral awards that shock the conscience of the court that can be set aside on this ground.
36. Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law, as understood in paras 18 and 27 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204], or secondly, that such award is against basic notions of justice OMP (Comm.) No. 175/23 RAM KISHORE AND SONS Vs. RAHUL FASHION PRIVATE LIMITED Page No. 15 of 27 or morality as understood in paras 36 to 39 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 :
(2015) 2 SCC (Civ) 204] .
Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii) was added by the Amendment Act only so that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] ,as understood in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , and paras 28 and 29 in particular, is now done away with.
37. Insofar as domestic awards made in India are concerned, an additional ground is now available under sub-section (2- A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within "the fundamental policy of Indian law", namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.
38. Secondly, it is also made clear that reappreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.
39. To elucidate, para 42.1 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Para 42.2 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award.
40. The change made in Section 28(3) by the Amendment Act really follows what is stated in paras 42.3 to 45 in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , namely, that the construction of the terms of a contract is primarily for an OMP (Comm.) No. 175/23 RAM KISHORE AND SONS Vs. RAHUL FASHION PRIVATE LIMITED Page No. 16 of 27 arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair-minded or reasonable person would; in short, that the arbitrator's view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2-A).
41. What is important to note is that a decision which is perverse, as understood in paras 31 and 32 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 :
(2015) 2 SCC (Civ) 204] , while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse."
24. This Court has in several other judgments interpreted Section 34 of the 1996 Act to stress on the restraint to be shown by courts while examining the validity of the arbitral awards. The limited grounds available to courts for annulment of arbitral awards are well known to legally trained minds. However, the difficulty arises in applying the well-established principles for interference to the facts of each case that come up before the courts. There is a disturbing tendency of courts setting aside arbitral awards, after dissecting and reassessing factual aspects of the cases to come to a conclusion that the award needs intervention and thereafter, dubbing the award to be vitiated by either perversity or patent illegality, apart from the other grounds available for annulment of the award. This approach would lead to corrosion of the object of the 1996 Act and the endeavours made to preserve this object, which is minimal judicial interference with arbitral awards. That apart, several judicial pronouncements of this Court would become a dead letter if arbitral awards are set aside by categorising them as perverse or patently illegal without appreciating the contours of the said expressions.
OMP (Comm.) No. 175/23RAM KISHORE AND SONS Vs. RAHUL FASHION PRIVATE LIMITED Page No. 17 of 27
25. Patent illegality should be illegality which goes to the root of the matter. In other words, every error of law committed by the Arbitral Tribunal would not fall within the expression 'patent illegality'. Likewise, erroneous application of law cannot be categorised as patent illegality. In addition, contravention of law not linked to public policy or public interest is beyond the scope of the expression 'patent illegality'. What is prohibited is for courts to re-appreciate evidence to conclude that the award suffers from patent illegality appearing on the face of the award, as courts do not sit in appeal against the arbitral award. The permissible grounds for interference with a domestic award under Section 34(2-A) on the ground of patent illegality is when the arbitrator takes a view which is not even a possible one, or interprets a clause in the contract in such a manner which no fair-minded or reasonable person would, or if the arbitrator commits an error of jurisdiction by wandering outside the contract and dealing with matters not allotted to them. An arbitral award stating no reasons for its findings would make itself susceptible to challenge on this account. The conclusions of the arbitrator which are based on no evidence or have been arrived at by ignoring vital evidence are perverse and can be set aside on the ground of patent illegality. Also, consideration of documents which are not supplied to the other party is a facet of perversity falling within the expression 'patent illegality'.
26. Section 34 (2) (b) refers to the other grounds on which a court can set aside an arbitral award. If a dispute which is not capable of settlement by arbitration is the subject-matter of the award or if the award is in conflict with public policy of India, the award is liable to be set aside. Explanation (1), amended by the 2015 Amendment Act, clarified the expression 'public policy of India' and its connotations for the purposes of reviewing arbitral awards. It has been made clear that an award would be in conflict with public policy of India only when it is induced or affected by fraud or corruption or is in violation of Section 75 or Section 81 of the 1996 Act, if it is in contravention with the fundamental policy of Indian law or if it is in conflict with the most basic notions of morality or justice. In Ssangyong (supra), this Court held that the meaning of the expression 'fundamental policy of Indian law' would be in accordance with the understanding of this Court in Renusagar Power Co. Ltd. v. General Electric Co.6 In Renusagar (supra), this Court observed that violation of the Foreign Exchange Regulation Act, 1973, a statute enacted for the 'national economic interest', and disregarding OMP (Comm.) No. 175/23 RAM KISHORE AND SONS Vs. RAHUL FASHION PRIVATE LIMITED Page No. 18 of 27 the superior courts in India would be antithetical to the fundamental policy of Indian law. Contravention of a statute not linked to public policy or public interest cannot be a ground to set at naught an arbitral award as being discordant with the fundamental policy of Indian law and neither can it be brought within the confines of 'patent illegality' as discussed above. In other words, contravention of a statute only if it is linked to public policy or public interest is cause for setting aside the award as being at odds with the fundamental policy of Indian law. If an arbitral award shocks the conscience of the court, it can be set aside as being in conflict with the most basic notions of justice. The ground of morality in this context has been interpreted by this Court to encompass awards involving elements of sexual morality, such as prostitution, or awards 6 1994 Supp (1) SCC 644 seeking to validate agreements which are not illegal but would not be enforced given the prevailing mores of the day".
21. The ratio of aforesaid judgment is that this Court has very limited ground to set aside the award and same can be set aside only on the ground as mentioned in section 34 (2) of the Act.
22. Considering the submissions and in view of aforesaid judgments, it is evident that the award can be set aside only if there is patent illegality. From perusal of the statement of claim filed by the petitioner before Ld. Arbitrator it is evident that petitioner has raised 5 claim i.e. claim no. A demanding Rs. 5,26,500/- as unpaid rent from 15.08.2018 to 05.05.2019 @ Rs. 58500/- and claim no. B demanding an amount of Rs. 71,76,000/- as balance rent of 16 remaining months of unexpired lease @ Rs. 4,48,500/- and claim no. C demanding interest @24% p.a. on the aforesaid amount and claim no. D demanding Rs. 10 lakhs as the cost of repair to bring the property in a tenantable condition and claim No. E demanding Rs. 4 lakhs as cost of the award proceedings.
23. It is worthwhile to mention here that respondent has filed the reply of the said claim as well as counter claim in which it is denied that petitioner is entitled to said amount and rather OMP (Comm.) No. 175/23 RAM KISHORE AND SONS Vs. RAHUL FASHION PRIVATE LIMITED Page No. 19 of 27 claimed Rs. 1,68,800/- towards the refundable security deposit alongwith interest@24% p.a. from 28.02.2019 till 10.08.2022 and Rs. 1,86,869/- for maintaining the demised premises w.e.f. 01.03.2019 till 05.05.2019 alongwith interest @24% p.a. from 05.05.2019 till 10.08.2022 and pendente lite & future interest @24% p.a.
24. From impugned award the Ld. Arbitrator has framed a single issue no. Issue No.1 qua all the 5 claim of petitioner and framed issue no. 2 qua the objection raised by Respondent/ objector through its reply to the claim. The issue framed by Ld. Arbitrator as under:
1. Whether the claimant is entitled to the reliefs claimed in para-17 of the statement of claim dated 4 th June, 2022 ? OPC
2. Whether the claim of the claimants is not maintainable in view of the objections of the respondent in statement of defense dated 08th February 2022 ? OPCC
25. On answering both the issues, Ld. Arbitrator has held that since the claimant / petitioner(herein) did not demand rent for the period of 01.03.2019 to 05.05.2019, therefore, only inference that can be drawn is that the claimant had accepted the notice / factum of vacation of demised premises in the end of February, 2019. The claimant has admitted that the respondents had informed their intention / plan to vacate the premises vide their letter dated 06.10.2019 and admittedly, the claimant did not object or protest the early termination of the lease agreement for more than two years. The relevant paras are as under :-
33. Admittedly, both the Claimants and Respondents have failed to prove that there was or there was no mutual agreement for not enhancing the monthly rent, after three OMP (Comm.) No. 175/23 RAM KISHORE AND SONS Vs. RAHUL FASHION PRIVATE LIMITED Page No. 20 of 27 years of the execution of the Lease Agreement. However, it has emerged on the record that the Claimant asked the Respondents to pay the revised monthly rent after three years. The Claimant has, also, admitted that no invoice was raised regarding the increased monthly rent after 15.08.2018. The Claimant could not testify, if any written document was executed with the Respondents, regarding deferment of the revised rent. The Claimant has admitted that the rent invoices were raised @ Rs.3,90,000/- + taxes upto December, 2018. The Claimant also admitted that no invoice was raised for monthly rent after February, 2019.
The Claimant has explained that no invoices were raised after February, 2019 since, the Respondent had addressed letter dated 06.10.2018 informing their intention/ decision to vacate the demised premises in the end of February, 2019. The Claimant, however, adjusted the amount of Security Deposit towards the outstanding rent for the months of November, 2018 till February, 2019.
34. Interestingly, the Claimant did not recollect/ testify if any demand of the monthly rent was made in writing from the Respondent for the period 01.03.2019 to 05.05.2019. It, however, stands established from the testimony of the Claimant that the monthly rent was not revised and no demand was made for the increased rent. It, also, stands established on record that the Claimant did not demand the rent for the period 01.03.2019 to 05.05.2019, when the possession of the demised premises was taken from the Respondent. Since neither the monthly rent was revised nor any demand for monthly increased rent was made nor any demand was made for the monthly rent for the period of 01.03.2019 to 05.05.2019, the only inference that can be drawn is that there was some sort of understanding or mutual Agreement between the parties for not enhancing the monthly rent. Further, since the Claimant did not OMP (Comm.) No. 175/23 RAM KISHORE AND SONS Vs. RAHUL FASHION PRIVATE LIMITED Page No. 21 of 27 demand rent for the period of 01.03.2019 to 05.05.2019, the only inference that can be drawn is that the Claimant had accepted the notice/ factum of vacation of demised premises in the end of February, 2019. The Claimant has admitted that the Respondents had informed their intention/ plan to vacate the premises vide their letter dated 06.10.2018. Admittedly, the Claimant did not object or protest the early termination of the Lease Agreement, for more than two years.
35. It has clearly emerged over the record that the Claimants had issued the first demand notice for rent (differential, arrears of rent and rent for the balance period (16 months)) of lease Agreement and other expenses etc. on 19.02.2021 and invoked the Arbitration Clause vide notice dated 20.03.2021 U/Sec-21 of the Arbitration and Conciliation Act, 1996. The Claimant has admitted that the subject/ demised property was sold/ transferred in June, 2021. The Claimant has, also, admitted that a new tenant viz. M/s Radnik Exports was inducted in the demised premises with effect from 01.07.2019 till 30.06.2024 on a monthly rent of Rs.6,75,000/- + GST. It therefore, becomes evident that the Claimant did not keep the demised premises vacant for the entire period of the Lease- Agreement. The Claimant, thus, did not leave any option for Respondent to resume tenancy, if the situation so warranted. Further, it is evident that the Claimant got much higher monthly rent than what would have been received from the Respondent, even at the enhanced rate. It is crystal clear that the Claimant did not suffer any loss on account of early termination of Lease Agreement. Rather, the Claimant has earned profit.
36. In view of the discussion hereinabove, the contention of the Ld. Counsel for the Claimant that the Respondent committed the breach of Lease-Agreement and irrespective OMP (Comm.) No. 175/23 RAM KISHORE AND SONS Vs. RAHUL FASHION PRIVATE LIMITED Page No. 22 of 27 of the fact whether any loss was suffered or not, the Claimant is entitled to claim made by them, has not merit whatsoever and hence rejected.
26. In my view, the said findings given by the Ld. Arbitrator that petitioner is not entitle to revise rent and accepted unrevised rent can led to inference that there was some sort of understanding not to enhance monthly rent despite there being clause in lease deed to increase 15% rent after three year cannot be said to be perverse finding or against any fundamental law of land or patently illegal, similarly the finding of Ld. Arbitrator that petitioner has failed to prove it suffer any loss due to vacating premises prior to expiry of lease period after considering the fact that petitioner rent out the tenanted premises at much higher rate i.e. @ 675000/- then what let to respondent i.e. 390000/- per month and petitioner first time demanding rent for for said unexpired period on 19.02.2021 i.e. after considerable delay of respondent vacating the premises also cannot be said to be perverse finding or against any fundamental law of land or patently illegal. I am not agreed with the contention of Ld. Counsel for petitioner that just because respondent vacated the premises prior to expiry of lease period he suo moto become liable to pay the rent of unexpired period, the petitioner need to prove that it suffer losses due to said violation which petitoner has failed to prove. Further Ld. Arbitrator has also held petitioner himself as violated the terms of lease deed s he failed to provide electricity load as per clause 20 of lease deed but at the same time refused to grant compensation to respondent for said violation of term OMP (Comm.) No. 175/23 RAM KISHORE AND SONS Vs. RAHUL FASHION PRIVATE LIMITED Page No. 23 of 27 of lease deed and dismissed his counter claim on the ground that respondent did not demand for enhancement of electricity load and raised the said issue after 2 year. The petitioner has not disputed said finding of Ld. Arbitrator. As stated in above mentioned judgements this Court did not sit in appeal while deciding the objections under Section 34 of the Arbitration and Conciliation Act, 1996, therefore, cannot replace its own view to change the findings of Ld. Arbitrator which is well reasoned. Hence, I held that petitioner has failed to point out any error in the impugned judgment which make the impugned judgment has patent illegality or against the fundamental policy of the law of land, therefore, in my view, there is no ground to set aside the impugned award so far as the claimed of petitioner is concerned.
27. In view of aforesaid discussion, I do not find any error apparent on face of award or any patent illegality in the impugned award to the extent of claim A, which is regarding payment of par of Rent totalling Rs. 526.500/- and claim no. B which is regarding payment of rent of 16 months totalling Rs. 7176000.- and and claim C which is about interest on the aforesaid claim and and claim no. E i.e. fees of Arbitrator however on perusal of the impugned award I found that Ld. Arbitrator has not discussed at all about the claim no. D i.e. grant of Rs. 10 lakh which petitioner has claim towards repair of premises, the Ld. Arbitrator has not discussed the same at all in his finding of issue no.1 and has not given any finding whethrer said claim is admitted or denied. In National Highway Authorities vs Trichy Thanjavur Expressway Ltd., OMP( COM) 95/2023 dt. 21.08.2023 the Honble Supreme Court has held that OMP (Comm.) No. 175/23 RAM KISHORE AND SONS Vs. RAHUL FASHION PRIVATE LIMITED Page No. 24 of 27 part of award can be set aside which is separable from other part. The relevant para of the said judgement is read as under:
40. Undoubtedly, an award may comprise a decision rendered on multiple claims. Each claim though arising out of a composite contract or transaction may be founded on distinct facts and flowing from separate identifiable obligations. Just as claims may come to be preferred resting on a particular contractual right and corresponding obligation, the decision which an AT may render on a particular claim could also be based on a construction of a particular covenant and thus stand independently without drawing sustenance on a decision rendered in the context of another. If such claims be separate, complete and self-contained in themselves, any decision rendered thereon would hypothetically be able to stand and survive irrespective of an invalidity which may taint a decision on others. As long as a claim is not subordinate, in the sense of being entwined or interdependent upon another, a decision rendered on the same by the AT would constitute an award in itself. While awards as conventionally drawn, arranged and prepared may represent an amalgam of decisions rendered by the AT on each claim, every part thereof is, in fact, a manifestation of the decision rendered by it on each claim that may be laid before it. The award rendered on each such claim rules on the entitlement of the claimant and the right asserted in that regard. One could, therefore, validly, subject of course to the facts of a particular case, be entitled to view and acknowledge them as binding decisions rendered by the AT on separate and distinct claims.
41. The Court notes in this regard that Mr. Mukhopadhaya, Mr. Rajshekhar Rao, learned senior counsels as well as Mr. Ashim Sood had urged that while an award as ultimately rendered may contain findings on numerous claims, the decision rendered in respect of each such claim is entitled to be viewed as an award in itself. This, according to learned counsels, clearly flows from the power of the AT to not just render a final award but also and in the course of arbitral proceedings render interim awards in respect of various claims. It was rightly pointed out by learned counsels that each such decision on a claim could stand independently and be final and binding in itself.
Those findings or decisions in relation to various claims that stand placed before the AT may each constitute an award itself and the OMP (Comm.) No. 175/23 RAM KISHORE AND SONS Vs. RAHUL FASHION PRIVATE LIMITED Page No. 25 of 27 operative directions framed representing the disposition of all such claims. As was rightly contended by Mr. Mukhopadhaya, the declaration with respect to entitlement and the award of a money claim consequent thereto would be liable to be viewed as independent Arbitral Awards. Mr. Sood had chosen to describe such a disposition of claims as being an "agglomeration" of awards. The Court accords its emphatic and wholehearted acceptance to the aforenoted submissions and comes to the conclusion that an award is thus liable to be viewed and understood accordingly. It thus comes to conclude that each such decision rendered by an AT could be validly viewed as the decision rendered on a particular claim and thus constituting an independent award in itself.
42. Once an award is understood as comprising of separate components, each standing separately and independent of the other, there appears to be no hurdle in the way of courts adopting the doctrine of severability and invoking a power to set aside an award partly. The power so wielded would continue to remain one confined to ―setting aside‖ as the provision bids one to do and would thus constitute a valid exercise of jurisdiction under Section 34 of the Act. That takes us to the question whether the adoption of such a course would be contrary to what the Supreme Court had forbidden in M. Hakeem. 43. The Supreme Court in M. Hakeem, as would be evident from the passages of that decision extracted hereinabove, has enunciated the setting aside power as being equivalent to a power to annul or setting at knot an Arbitral Award. It has essentially held that bearing in mind the plain language of Section 34 coupled with the Act having desisted from adopting powers of modification or remission that existed in the erstwhile 1940 Act, a court while considering a challenge under
28. In my view the claim no. D has no bearing with respect to other claim and entirely separable from other claim, therefore, impugned award is liable to set aside to the extent that petitioner is at liberty to take step for decide claim no. D a fresh whereas there is no merit to set aside the impugned award to the extent of remaining claim of petitioner. As far as the counter claim filed by OMP (Comm.) No. 175/23 RAM KISHORE AND SONS Vs. RAHUL FASHION PRIVATE LIMITED Page No. 26 of 27 the respondent is concerned, findings of the same has not been challenged either by the petitioner or by the respondent, therefore, there is no ground to set aside the findings given in issues no. 3 & 4 which qua the counter claim filed by respondent in the impugned award by the Ld. Arbitrator. Petition is disposed off accordingly.
File be consigned to record room after due compliance.
Original award file be returned. Digitally signed
by SANJEEV
SANJEEV KUMAR
KUMAR AGGARWAL
AGGARWAL Date:
2025.03.25
17:24:31 +0530
Announced in the open Court (Sanjeev Kumar Aggarwal)
on 25.03.2025 DJ (Commercial)-01, Central,
Tis Hazari Courts/Delhi
OMP (Comm.) No. 175/23
RAM KISHORE AND SONS Vs. RAHUL FASHION PRIVATE LIMITED Page No. 27 of 27