Delhi High Court
Sushant Gambhir & Ors. vs Mrj Infratech Limited & Ors. on 28 September, 2022
NEUTRAL CITATION NO: 2022/DHC/004132
$~30
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P. (COMM) 410/2022 & I.As. 16041/2022, 16042/2022
SUSHANT GAMBHIR & ORS. ..... Petitioners
Through: Mr. A.K. Singla, Sr. Adv. with
Mr. Rahul Shukla, Advocate
(M:9871735724,email:rahul.leg
[email protected])
versus
MRJ INFRATECH LIMITED & ORS. ..... Respondents
Through: Mr. Vineet Jhanji, Advocate
(M:9811191912)
CORAM:
HON'BLE MS. JUSTICE MINI PUSHKARNA
JUDGMENT
% 28.09.2022 O.M.P. (COMM) 410/2022
1. By way of the present petition, under Section 34 (4) of the Arbitration and Conciliation Act, 1996 (hereinafter called the Act), petitioner has challenged Award dated 13.07.2022 passed by sole Arbitrator. The petitioner prays for inclusion of certain reliefs as set out in the petition and for incorporation of the same by modification of Award.
2. By way of the impugned award dated 13.07.2022, an Award in the sum of Rs.6,76,00,000/- (Rupees Six Crores Seventy-Six Lakh) carrying an interest @ 6% per annum from the date of the Award has been passed in favour of the claimants, i.e., petitioners herein. Petitioners have been held entitled to refund of the aforesaid amount O.M.P. (COMM) 410/2022 Page 1 of 14 This is a digitally signed Judgement.
NEUTRAL CITATION NO: 2022/DHC/004132 paid by them under the concerned transaction, which as per finding of Ld. Arbitrator, cannot be permitted to be retained by the respondents.
3. It is the case of ld. Senior Counsel for petitioners that present petition has been filed since some claims of petitioners, i.e., claimants in the arbitration proceedings, have not been included and that the petitioner is aggrieved by non-inclusion, non-grant and rejection of such of their claims and prayers. Thus, present petition has been filed, with specific averments made in paragraph - 2 of the petition that petitioner is seeking prayer for remand of matter to the Ld. Arbitrator.
4. It is contended that petitioners are seeking remand to the ld. Arbitrator on certain accounts. Learned Arbitrator has not granted interest on the paid amount in favour of claimants, i.e., pre-reference period and pendente-lite period. Attention of this Court has been drawn to paragraphs 91 to 95 of the impugned award. It is further submitted that ld. Arbitrator has restricted the interest to only 6% per annum in view of the contractual stipulations. Ld. Senior Counsel for the petitioners submits that petitioners are entitled to higher rate of interest in view of Section 31(7)(a) of the Act read with Section 2(b) of the Interest Act, 1978. He further submits that there are no directions as regards payment of costs to the petitioners in accordance with mandate of Section 31A of the Act.
5. Ld. Senior Counsel for petitioners further submits that their application seeking amendment of prayers with respect to the amounts already paid to the respondents has been rejected erroneously. He submits that the rejection of the said application for amendment is in violation of Section 22(2) and Section 21(3) of the Specific Relief O.M.P. (COMM) 410/2022 Page 2 of 14 This is a digitally signed Judgement.
NEUTRAL CITATION NO: 2022/DHC/004132 Act, 1963.
6. It is submitted that Ld. Arbitrator has not included amount of Rs.13.26 Crores (Rupees Thirteen Crores twenty-Six Lakh) as amounts paid by claimants under the transaction in addition to the sum of Rs.6.76 Crores ordered to be refunded by way of the award, in view of the payment of said sum emerging as admission in the testimony of CW-4, Mr. Pankaj Sahni.
7. Learned Senior Counsel further submits that non-grant of compensation calculated @ Rs.6,62,18,127/- (Rupees Six Crores Sixty-Two Lakh Eighteen Thousand One Hundred & Twenty-Seven) and inclusion of direction to pay court fee on amounts ordered to be refunded i.e. Rs.6.76 crores, are issues that are required to be considered by ld. Arbitrator.
8. In support of their contentions, judgment in the case of Project Director, National Highways No. 45E and 220 National Highways Authority of India Vs. M. Hakeem and Another, (2021) 9 SCC 1, has been relied upon on behalf of petitioners to contend that in view of Sub-section 4 of Section 34, on receipt of an application under Section 34(1), Court may adjourn the Section 34 proceedings and give Arbitral Tribunal an opportunity to resume arbitral proceedings or take such actions as to eliminate the grounds for setting aside the arbitral award.
9. On the other hand, ld. Counsel appearing for respondent vehemently opposes the present petition. He submits that all these prayers with respect to non-inclusion of amount of Rs.13.26 crores as part of advance paid by claimants under transaction in question; non-
O.M.P. (COMM) 410/2022 Page 3 of 14This is a digitally signed Judgement.
NEUTRAL CITATION NO: 2022/DHC/004132 grant of interest on the paid amount for pre-reference period and pendente-lite period; limiting the rate of interest or awarded interest @6% per annum in view of the contractual stipulations and non- consideration and non-grant of relief vis-a-vis costs in accordance with mandate of Section 31A of the Act and rejection of prayers for amendment of claims under Section 22(2) and Section 21(3) of the Specific Relief Act, 1963 have specifically been considered by ld. Arbitrator. He submits that aforesaid issues have been considered in detail by ld. Arbitrator and they have been rejected by ld. Arbitrator by giving a reasoned award. He draws attention of this Court to paragraphs - 58, 59 and 104 of the award.
10. Ld. Counsel for respondent also draws attention of this Court to the judgment in the case of I-Pay Clearing Services Private Limited Vs. ICICI Bank Limited, (2022) 3 SCC 121: 2022 (1) RAJ 1(SC). He relies upon the said judgment to contend that the scope of Section 34(4) of the Act is very limited and that the said Section can be resorted to record reasons on the finding already given in the Award or to fill up the gaps in the reasoning of the Award. He further submits that remand under Section 34(4) of the Act can be resorted to by this Court only to supplement further reasons where some Award has been granted or rejected in favour of the claimants.
11. He submits that perusal of the present petition filed on behalf of the petitioners show that all the contentions as raised in the present petition, have already been specifically considered and rejected by ld. Arbitrator. Therefore, he submits that the present petition does not fall within the scope of Section 34 (4) of the Act. All the submissions as O.M.P. (COMM) 410/2022 Page 4 of 14 This is a digitally signed Judgement.
NEUTRAL CITATION NO: 2022/DHC/004132 made in the present petition, would be a ground for challenging the award and for setting aside/quashing the Award and not for remanding of the matter to the ld. Arbitrator.
12. I have considered the submissions made before this Court and have also perused petition and documents filed before this Court.
13. In the first instance reference may be made to Section 34(4) of the Arbitration and Conciliation Act, 1996 which is reproduced as under:
"34. Application for setting aside arbitral award.
(1) .....
(2) .....
(2A)....
(3).....
(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.
......."
14. Perusal of aforesaid categorically shows that scope of the said Section is only to the extent that there is a prayer in the petition for adjourning the proceedings for limited purpose of giving the Arbitral Tribunal an opportunity to resume 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.
15. While dealing with the scope of Section 34(4) of the Act, Hon'ble Supreme Court in the case of Kinnari Mallick and Anr. vs. O.M.P. (COMM) 410/2022 Page 5 of 14 This is a digitally signed Judgement.
NEUTRAL CITATION NO: 2022/DHC/004132 Ghanshyam Das Damani, (2018) 11 SCC 328 has held as follows:
"15. On a bare reading of this provision, it is amply clear that the Court can defer the hearing of the application filed under Section 34 for setting aside the award on a written request made by a party to the arbitration proceedings to facilitate the Arbitral Tribunal by resuming the arbitral proceedings or to take such other action as in the opinion of the Arbitral Tribunal will eliminate the grounds for setting aside the arbitral award. The quintessence for exercising power under this provision is that the arbitral award has not been set aside. Further, the challenge to the said award has been set up under Section 34 about the deficiencies in the arbitral award which may be curable by allowing the Arbitral Tribunal to take such measures which can eliminate the grounds for setting aside the arbitral award. No power has been invested by Parliament in the Court to remand the matter to the Arbitral Tribunal except to adjourn the proceedings for the limited purpose mentioned in sub-section (4) of Section 34. This legal position has been expounded in McDermott International Inc. [McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181] In para 8 of the said decision, the Court observed thus : (Bhaskar Industrial case [Bhaskar Industrial Development Ltd. v. South Western Railway, 2016 SCC OnLine Kar 8330], SCC OnLine Kar) "8. ... Parliament has not conferred any power of remand to the Court to remit the matter to the Arbitral Tribunal except to adjourn the proceedings as provided under sub-section (4) of Section 34 of the Act. The object of sub-section (4) of Section 34 of the Act is to give an opportunity to the Arbitral Tribunal to resume the arbitral proceedings or to enable it to take such other action which will eliminate the grounds for setting aside the arbitral award."
16. Scrutiny of the impugned Award clearly manifests that present is not a case of non-inclusion of certain claims, as contended by ld.
O.M.P. (COMM) 410/2022 Page 6 of 14This is a digitally signed Judgement.
NEUTRAL CITATION NO: 2022/DHC/004132 Senior Counsel for petitioners. Rather perusal of the Award passed by ld. Arbitrator shows that the various claims as raised by claimants/petitioners herein have been specifically dealt with and rejected by Arbitral Tribunal. Following paragraphs from the Award are reproduced for the sake of convenience:
"58. In the instant case, though it was a deal of sale and purchase of shares of the Respondent No. 1 Company, but in essence it was for sale and purchase of valuable land at Dharuhera owned by the company Respondent No. 1. The Claimants‟ case is that a huge amount of cash was allegedly paid to the Respondents before the date of agreement. How much was that amount, was not stated in the statement of claim. In the statement of CW3 Pankaj Sahni, who was the broker from the side of the Claimants it is stated that an amount of Rs.13 crores or so was paid. The witness was given the suggestion in the cross- examination that what he was stating is a false statement to that effect. A similar statement has been made by the CW2 Sushant Gambhir and CW3 Manu Manchanda. This is the amount purported to have been paid by deceased Madan Lal Gambhir.
59. Since, there is no documentary evidence by way of „katcha‟ or „pucca‟ receipt of the payment of any amount in cash much less an amount of Rs.13 Crores or so in cash and there is only oral testimony of CW2 & CW3 to that effect. This Tribunal loath to accept the bald statements of the witness in this regard. Therefore, this Tribunal holds that the Claimants have failed to prove that any amount whatsoever was paid in cash to the Respondents. ......
71. I have carefully considered the submissions of the respective sides. I have also gone through the provisions on the strength of which the claimants are not only O.M.P. (COMM) 410/2022 Page 7 of 14 This is a digitally signed Judgement.
NEUTRAL CITATION NO: 2022/DHC/004132 claiming the refund of the entire amount paid by the claimants but are also claiming compensation.
72. Under Section 21 of the Specific Relief Act, in a case of specific performance of a contract, the plaintiff (which in the instant case would be the Claimants) may also claim compensation for its breach or in addition to such performance and the court has a power to grant such a relief.
73. No doubt this is the power of the Court in a suit for specific performance and it will also govern a case with regard to a statement of claim in an Arbitration matter, in which an award is sought by the claimant in this regard. But the most important question is a whether the Tribunal has the power to grant such a relief, where such a relief is neither pleaded nor proved. Further another question which arises for consideration would be whether this a relief to be granted separately or it could be granted in addition to specific performance only. In the instant case a statement of claim came to be filed by the claimant before the Arbitral Tribunal where only two reliefs were prayed namely one for specific performance of the agreement dated 05.04.2017 and the addendum at 19.07.2017. The second relief was for mandatory injunction. The third prayer was the omnibus relief which is normally prayed as a matter of course in almost all suit or claims.
74. No relief of compensation was sought by the claimants originally. It was also not claimed even during the pendency of proceedings of the Arbitral Tribunal.
75. It is not a case that the claimant could not have incorporated such a relief in the claim but it could have been done only by amending the claim during the pendency of the proceedings and relief to that effect could have been claimed. But principles of seeking amendment are that an amendment to the plaint and for that matter O.M.P. (COMM) 410/2022 Page 8 of 14 This is a digitally signed Judgement.
NEUTRAL CITATION NO: 2022/DHC/004132 amendment to the statement of claim, could have been made only during the pendency of the proceedings. But once the evidence of the parties is closed and the matter is fixed for argument as was done in the present case the application for seeking the prayer for amendment of claim for incorporating the relief of compensation in the Tribunal‟s view could not be entertained. ..........
102. This Tribunal feels dehors the applications seeking amendment of prayer seeking refund it would be unfair or unjust to leave the claimants in lurch by not ordering the respondents to refund the amount of Rs. 6.76 Crores. This is admittedly not a small amount which can be permitted to be retained by the Respondents. But simultaneously by awarding the Respondents to refund this amount of Rs. 6.76 Crores to the claimant without payment of court fees would also result in loss to the revenue when he is taking the help of the state machinery in retrieving his money, then the Claimants must not be permitted to get money without paying to the revenue.
103. Therefore, an award is passed in favour of the Claimants and against the Respondents only to the effect that Claimants are entitled to refund of the amount of Rs. 6.76 Crores subject to their depositing the ad-valorem court fees in the Hon‟ble Court where they seek the execution of the award after obtaining requisite permission.
104. So far as the payment of interests is concerned, the Tribunal feels that the Claimants is entitled to interest @ 6% only from the date of this award. The Tribunal is purposely directing the payment of interests only from date of award because the claim for refund was made only at the stage of arguments and not originally. Further, the claim of Specific Performance was given up by the claimants themselves and the prayer of grant of compensation is untenable in law."O.M.P. (COMM) 410/2022 Page 9 of 14
This is a digitally signed Judgement.
NEUTRAL CITATION NO: 2022/DHC/004132
17. Thus, it is seen that the ld. Arbitrator has categorically dealt with the claims as raised by the claimants/petitioners herein and they have been rejected. It is not a case of non-inclusion of claims as contended on behalf of petitioners. The claims as raised by petitioners have been specifically dealt with and rejected on merits. All the contentions raised in the present petition would constitute grounds that petitioners may raise for setting aside an Award under Section 34 of the Act. The intent behind Section 34 (4) of the Act is to make the Award enforceable by curing deficiency in the Award due to lack of reasoning for a finding that has already been recorded in the Award. However, where it is a case of challenge to an Arbitral Award based on complete perversity in the reasoning, then the same would constitute as a ground to challenge the Award under Section 34(1) of the Act.
18. It is important to note that Section 34(4) of the Act does not in any manner permit an Arbitrator to change or reverse its findings. An Arbitral Tribunal does not have power to review its own Award. Therefore, an Arbitral Tribunal cannot review its Award on merits under Section 34(4) of the Act. Arbitral Tribunal can make good the reasons in support of its findings already recorded in the record, where there is inadequate reasoning or to fill up the gaps in the reasoning under mandate of Section 34(4) of the Act. Thus, this Court will exercise its jurisdiction under Section 34(4) of the Act only if the grounds are such that are capable of elimination by an Arbitral Tribunal. Section 34(4) certainly does not envisage re-writing of an O.M.P. (COMM) 410/2022 Page 10 of 14 This is a digitally signed Judgement.
NEUTRAL CITATION NO: 2022/DHC/004132 Award.
19. Hon'ble Supreme Court in the case of I-Pay Clearing Services Private Limited (Supra)*1 has held as follows:
"34. In the judgment in Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd. [Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd., (2019) 20 SCC 1] , it was a case where there was no inquiry under Section 34(4) of the Act and in the said case, this Court has held that the legislative intention behind Section 34(4) of the Act, is to make the award enforceable, after giving an opportunity to the Tribunal to undo the curable defects. It was not a case of patent illegality in the award, but deficiency in the award due to lack of reasoning for a finding which was already recorded in the award. In the very same case, it is also clearly held that when there is a complete perversity in the reasoning, then the same is a ground to challenge the award under Section 34(1) of the Act.
.......
39. Further, Section 34(4) of the Act itself makes it clear that it is the discretion vested with the Court for remitting the matter to Arbitral Tribunal to give an opportunity to resume the proceedings or not. The words "where it is appropriate" itself indicate that it is the discretion to be exercised by the Court, to remit the matter when requested by a party. When application is filed under Section 34(4) of the Act, the same is to be considered keeping in mind the grounds raised in the application under Section 34(1) of the Act by the party, who has questioned the award of the Arbitral Tribunal and the grounds raised in the application filed under Section 34(4) of the Act and the reply thereto.
40. Merely because an application is filed under Section 34(4) of the Act by a party, it is not always obligatory on the part of the Court to remit the matter to Arbitral *1 (2022) 2 SCC 121 O.M.P. (COMM) 410/2022 Page 11 of 14 This is a digitally signed Judgement.
NEUTRAL CITATION NO: 2022/DHC/004132 The discretionary power conferred under Section 34(4) of the Act, is to be exercised where there is inadequate reasoning or to fill up the gaps in the reasoning, in support of the findings which are already recorded in the award.
41. Under the guise of additional reasons and filling up the gaps in the reasoning, no award can be remitted to the arbitrator, where there are no findings on the contentious issues in the award. If there are no findings on the contentious issues in the award or if any findings are recorded ignoring the material evidence on record, the same are acceptable grounds for setting aside the award itself. Under the guise of either additional reasons or filling up the gaps in the reasoning, the power conferred on the Court cannot be relegated to the arbitrator. In absence of any finding on contentious issue, no amount of reasons can cure the defect in the award.
42. A harmonious reading of Sections 31, 34(1), 34(2-A) and 34(4) of the Arbitration and Conciliation Act, 1996, make it clear that in appropriate cases, on the request made by a party, Court can give an opportunity to the arbitrator to resume the arbitral proceedings for giving reasons or to fill up the gaps in the reasoning in support of a finding, which is already rendered in the award. But at the same time, when it prima facie appears that there is a patent illegality in the award itself, by not recording a finding on a contentious issue, in such cases, Court may not accede to the request of a party for giving an opportunity to the Arbitral Tribunal to resume the arbitral proceedings."
20. Considering the aforesaid law laid down by Hon'ble Supreme Court, it is clear that the scope of Section 34(4) of the Act is very limited. Section 34(4) of the Act can be resorted to only in places where the court finds there is a difference between the findings and O.M.P. (COMM) 410/2022 Page 12 of 14 This is a digitally signed Judgement.
NEUTRAL CITATION NO: 2022/DHC/004132 reasons in the Arbitral Award. However, pleadings in the present case constitute grounds for challenging an Award under Section 34(1), rather than demonstrating a case for exercise of discretion by this Court under Section 34(4) of the Act.
21. Even otherwise, the prayer clause in the present petition prays for modification of award dated 13.07.2022 passed by the ld. Sole Arbitrator, which prayer itself is not maintainable. Prayer clause in the present petition is reproduced as follows:
"18. PRAYER:
In the facts and circumstances of the case, it is, respectfully prayed that the Hon‟ble Court may kindly be pleased to order inclusion of reliefs set-out in para 3 of the present petition by directing reconsideration for inclusion of all such sums or any one of them for incorporation by way of modification to Award dated 13.07.2022 passed by Ld. Sole Arbitrator Justice V.K. Shali (former judge of Hon‟ble Court) in Case Reference No.DIAC/2314/12/2018 titled "Sushant Gambhir & Others". Hon‟ble Court may also pass such further order(s) which this Hon‟ble Court deems fit, proper and expedient in the circumstances of the case in favour of petitioners and against the respondents."
22. This Court has perused the pleadings as made in the present petition. The various submissions made in the present petition as well as averments made before this Court by ld. Senior Counsel for petitioner would tantamount to challenging the award passed by learned Arbitral Tribunal for the purposes of setting aside/quashing of the same. Therefore, the said grounds would be grounds for setting aside/quashing of the award under Section 34(1) (2) & (2A) of the Act. The pleadings as made out in the present petition do not fall O.M.P. (COMM) 410/2022 Page 13 of 14 This is a digitally signed Judgement.
NEUTRAL CITATION NO: 2022/DHC/004132 within the scope of Section 34(4) of the Act.
23. In view of the aforesaid discussion, this Court finds no merit in the present petition and accordingly the present petition is dismissed. All the pending applications are disposed of.
MINI PUSHKARNA, J SEPTEMBER 28, 2022 au/PB O.M.P. (COMM) 410/2022 Page 14 of 14 This is a digitally signed Judgement.