Himachal Pradesh High Court
Eih Limited And Others vs The State Of Himachal Pradesh And Others on 25 February, 2016
Author: Dharam Chand Chaudhary
Bench: Dharam Chand Chaudhary
IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA
Arb. Case No.60 of 2005.
.
Judgment reserved on 26th November, 2015.
Date of Judgment: 25th February, 2016.
____________________________________________________
EIH Limited and others .. Petitioners
of
Versus
The State of Himachal Pradesh and others.
rt .. Respondents.
Coram
Hon'ble Mr. Justice Dharam Chand Chaudhary, Judge.
Whether approved for reporting1? Yes.
For the petitioners: Mr. Parag P. Tripathi and Mr. R.L.
Sood, Senior Advocates, with M/s.
Ramesh Singh, Nipun Malhotra, B.C.
Negi, Arjun Lall and Ms. Manisha
Handa, Advocates.
For the respondents: Mr. P.S. Narasimha, Additional
Solicitor General of India and Mr.
Shrawan Dogra, Advocate General
with M/s. Sunil Muraka, Prabhat
Whether reporters of the Local papers are allowed to see the judgment? Yes.
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Kumar and Ishan George,
Advocates, for respondent No.1.
.
None for respondents No.2 to 7.
____________________________________________________
Dharam Chand Chaudhary, J.
Disputes and differences between the of petitioners, EIH Limited, M/s. Mashobra Resorts Limited (MRL in short), its allied Companies and Directors, rt hereinafter referred to as "Claimant No.1" and the State of Himachal Pradesh alongwith Special Area Development Authority, the respondents, hereinafter to be referred as "Claimant No.2", were referred by a Division Bench of this Court vide order dated 17.12.2003, passed in Civil Review No.35 of 2003 and Company Appeal No.1 of 2003, to a single Member Arbitral Tribunal appointed with their consent. The award to be given by the Arbitral Tribunal was agreed to be binding upon the parties. The Division Bench of ::: Downloaded on - 15/04/2017 19:46:50 :::HCHP -3- this Court has indicated the subject matter of .
arbitration in the order ibid, which reads as follows:
"(1) The entire adjudication by the Arbitral Tribunal with respect to the legality or otherwise of the action of the State Government canceling the joint venture of agreement and taking consequential action, which was the subject matter of rtthe adjudication by the Company Law Board which ultimately became the subject matter of Company Appeal No.1 of 2003.
(2) Whether the petitioners have rightly and properly constructed the building of the hotel and as to whether the construction of this building (the entire building) is in accordance wand in conformity with a valid sanction/ permission granted by the competent authority of the State. (3) Whether the petitioners, in raising the construction of the building (the entire building) or in completion thereof, have ::: Downloaded on - 15/04/2017 19:46:50 :::HCHP -4- deviated from any sanctioned plan or have they constructed any part of the .
building in excess, or in violation of any sanction, validly and/or legitimately granted by the competent authority of the State.
of (4) If upon consideration, the Arbitral Tribunal finds that any violation has been rt committed in the construction of the building, is such violation compoundable under law, or has it already been compounded by the order of any competent authority, if so, with what result and/or consequence, and if not already compounded, is it legally capable of being compounded in future and if so, on what terms and which is the authority to compound?
(5) If the Arbitral Tribunal finds that violation(s) if committed in the construction of the building, if not compoundable, whether coercive measures can or should be taken by the ::: Downloaded on - 15/04/2017 19:46:50 :::HCHP -5- State and in that event, what would be the consequences, including the .
consequences of demolition of the building or any part of it?
(6) If the Arbitral Tribunal ultimately finds, after adjudication, on a totality of of circumstances and on consideration of all relevant aspects, that the partnership rt between the State Government and EIH Ltd. is not workable any more and that in the considered opinion of the Arbitral Tribunal, parting of the ways is, and would be the most ideal and conducive situation in public interest as well as in the interest of the parties, the Arbitral Tribunal's award also indicate the terms on which such parting of ways can best be achieved and also in the process, indicate as to whether fastening of any liability and/or pecuniary or financial obligation upon the parties or any of them would be a consideration for ::: Downloaded on - 15/04/2017 19:46:50 :::HCHP -6- parting of the ways and indicate the terms thereof.
.
(7) It shall be open to the parties to file claims/counter claims before the arbitral Tribunal, including the claims for compensation/damages with respect to of any arising out of any alleged acts of omission or commission against each rt other."
2. Hon'ble Mr. Justice (Retired) R.P. Sethi, former Judge, Supreme Court of India, was appointed as a single Member Arbitral Tribunal and requested to enter upon the reference immediately, of course, subject to His Lordship's convenience and to complete the arbitral proceedings at the earliest and in a shortest possible time.
3. Learned Arbitral Tribunal affording the parties opportunity to file their claims and counter claims, holding full trial and after hearing them, has ::: Downloaded on - 15/04/2017 19:46:50 :::HCHP -7- given its award Annexure "A" on 23.7.2005 at Shimla in .
the presence of learned Counsel for the parties. It is this award which is under challenge in these proceedings.
4. Before coming to the grounds of of challenge it is desirable to make a mention to the historical importance of the property in dispute and rt the circumstances leading to the present controversy.
5. The property in dispute between the parties is Wild Flower Hall situated at Chharabra over a piece of land measuring 102.19 bighas (77471 square meters). In fact, this is a heritage property. The record (affidavit Ext. RW1/B) shows that the property originally was the residence of Lord Kitchener, the then Commander-in-Chief of the British Indian Army. It was constructed before first world-war under the supervision of Major Briggs. The construction of the ::: Downloaded on - 15/04/2017 19:46:50 :::HCHP -8- building commenced in 1850. Thousands of convicts .
and labourers were employed in the construction work. The property finds mention in various old records of the British time.
6. After independence of the country, of building came to be owned by the State of Himachal Pradesh and converted into a Hotel. The hotel was rt being operated by HP Tourism Development Corporation. In the year 1993 the building was gutted in an incident of fire. Perhaps on account of financial constraints and lack of upto-date knowledge in the running of the hotel business, Claimant No.2 entered into a Joint Venture Agreement with M/s. East India Hotel (EIH) Limited, Claimant No.1 on 30.10.1995.
Petitioner No.2 Mashobra Resorts Limited (MRL) was incorporated under the JVA. The members of the Company are the EIH Limited and its associate ::: Downloaded on - 15/04/2017 19:46:50 :::HCHP -9- companies on the one hand and the respondent-
.
State on the other. According to the agreement, the MRL had to construct and operate a luxury resorts under the name and style of Wild Flower Hotel. The extent of the share of the parties, the terms and of conditions which govern their relationship, the working and management of the Company were detailed in rt the agreement executed between the parties.
7. The claim of the petitioner/Claimant No.1 is that the land on which the resort proposed to be constructed was transferred to it by means of a registered conveyance deed dated 6.2.1997. The price of the land was fixed by Claimant No.2 at `7.5 crores. Claimant No.1 accepted the evaluation of the property as made without any objection.
8. Further that with the change of political executive in the State of Himachal Pradesh in the year ::: Downloaded on - 15/04/2017 19:46:50 :::HCHP
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1992 an adverse attitude was adopted by the .
successor Government. As a result thereof Claimant No.2 started entertaining second thought regarding the transaction between the parties and wanted that the terms of the agreement already executed are of changed and the property re-conveyed to it by Claimant No.1, rt though much construction and development work had commenced on the site.
Many hurdles were created in the matter of completion of the construction of the resort in October, 2000. The resort was made fully operational but in order to pressurize Claimant No.1 at the instance of Claimant No.2 its registration as hotel was denied on false and flimsy grounds. On an application filed by Claimant No.1 on 31.10.2000 only registration of 28 rooms out of 85 was allowed and qua remaining rooms objections were raised. Claimant No.1 had ::: Downloaded on - 15/04/2017 19:46:50 :::HCHP
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removed the objections so raised and requested .
Claimant No.2 on 18.4.2001 to incorporate additional rooms in the original certificate of registration, but of no avail and as a result thereof Claimant No.1 had filed Civil Writ Petition No.1266 of 2001 in this Court for of issuance of a command to the State for inclusion of the additional rooms in the original certificate of rt registration.
9. Instead of conceding the prayer of Claimant No.1, Claimant No.2 had attempted to revoke the original JVA to coerce Claimant No.1 for conceding to its illegal demands. Attempts were also made to oust the nominees-Directors of Claimant No.1 and its associate companies from the Board of Directors of MRL. Claimant No.2 had instigated the Environment and Pollution Control Board to initiate action for closing down the operation of the hotel.
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MRL was, therefore, forced to file Civil Writ Petition .
No.419 of 2002 in this Court. In the interim, the impugned action was ordered to be stayed and the writ petition admitted for final hearing. At the instance of Claimant No.2, criminal cases were registered of against several executives of the Company and its lawyers. The criminal proceedings later on, of course, rt were quashed by this Court.
10. It is in this background; Claimant No.1 has claimed that disputes arose between the parties which were subject matter of dispute in Company Appeal No.1 of 2003, Civil Writ Petition No.1266 of 2001 and Civil Review No.35 of 2003. Such disputes were pending for adjudication before an Arbitral Tribunal comprising Hon'ble Justice Y.V. Chandrachud, Hon'ble Justice R.S. Pathak, former Chief Justices of Supreme Court of India and Hon'ble Justice M.J. Rao.
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The parties, however, agreed for appointment of a .
single Member Arbitral Tribunal during the course of hearing in Civil Review No.35 of 2003 and its connected matters and as a result thereof Division Bench of this Court has been pleased to appoint of Hon'ble Shri Justice R.P. Sethi (Retired) as a single Member Arbitral Tribunal.
rt
11. As per further claim of Claimant No.1, its equity shares in the Company are 2,59,99,995 of Rs.10 each. Claimant No.2 owns 70,00,000 equity of Rs.10 each. The deal with Claimant No.1 was struck consequent upon floating of global tenders and keeping in mind its reputation which enjoyed all over the world on account of owning a well-known chain of Five Star Hotels. Before signing the agreement and finalizing the deal, Claimant No.2 had got the whole matter examined by a high power committee ::: Downloaded on - 15/04/2017 19:46:50 :::HCHP
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comprising of its Officers. The authorized share capital .
of Joint Venture Company was Rs.25 crores divided into 2,50,00,000 shares of Rs.10 each. Claimant No.2 was to subscribe to an extent of not less than 35%, whereas Claimant No.1 to the extent of 36%-55%. The of remaining 10% or more was to be subscribed by the general public. It was agreed that the share capital of rt Claimant No.2 to an extent of 35% will be the cost of the property. The Chairman of the MRL was to be a nominee of Claimant No.2, whereas Managing Director was to be appointed by Claimant No.1. The agreement between the parties could have only been terminated by giving a notice. According to Claimant No.1, it has fulfilled all the conditions of JVA and to the contrary Claimant No.2 has withheld the registration of the resort without any justifiable cause.
Claimant No.1 has, therefore, made the following ::: Downloaded on - 15/04/2017 19:46:50 :::HCHP
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prayers by way of claims preferred before the Arbitral .
Tribunal:
(a) grant leave under Order 2 Rule 2 of the CPC or under principles analogous thereto permitting the Claimant to subsequently file its claim in respect of damages suffered by it and to allow of such claim as may be specified and detailed subsequently;
(b) rt declaration that the purported notice of termination of the JVA dated March 6, 2002 issued by the Respondent is in violation of the Joint Venture Agreement dated October 30, 1995 which is illegal, invalid, null and void;
(c) order of permanent injunction restraining the Respondent, its servants and agents from giving effect or further effect to the notice dated March 6, 2002;
(d) declaration that all actions consequent to and relying upon the aforesaid notice of termination dated March 6, 2002 are illegal, invalid and of no legal effect;::: Downloaded on - 15/04/2017 19:46:50 :::HCHP
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(e) that this Tribunal may declare that the meeting of the Board of Directors purported to have .
been held on March 7, 2002 was illegal and invalid and/or the purported resolutions passed or sought to be passed therein are illegal, invalid, null and void;
of
(f) declare that all consequential acts of commission and omission pursuant to the aforesaid Board Resolution dated March 7, rt 2002 taken Respondent, its nominees including Shri Srikant Baldi, the purported Executive Director cum OSD of the Company are illegal, invalid and void'
(g) hold and declare that Claimant No. 1 continue as shareholders and members of Mashobra Resorts Limited in respect of equity shares held by them as per details given in the claim;
(h) hold and declare that the nominee Directors of the EIH continue to hold their office as Director/Managing Director of Mashobra Resorts Limited;
(i) pass such other and further orders with a view to bringing to an end the matter complained of ::: Downloaded on - 15/04/2017 19:46:50 :::HCHP
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in the Petition and as may be deemed necessary in the interest of justice and may .
pass any or all the directions provided in Section 402 of the Companies Act including the purchase of shares or interest of Respondent by Claimant;
of
(j) hold that the Respondent No. 1, State, has wrongly, withheld the incorporation of the additional 57 rooms in the Original Certificate of rt Registration dated 30th March, 2001. The Tribunal may further direct and order the Respondent No. 1, State to amend the Original Certificate of Registration, by incorporating therein the additional 57 rooms and to issue the Amended Certificate of Registration by reflecting therein all the 85 rooms and suites in Hotel Wildflower Hall Chharabra, Shimla;
(k) hold that the building of Hotel Wildflower Hall, Chharabra, Shimla, has been constructed, completed and built-up in accordance with the Sanctioned and Revised Sanctioned Plans and in accordance with the provisions of law. Further, that the deviations, if any, stand ::: Downloaded on - 15/04/2017 19:46:50 :::HCHP
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compounded and that the structure is in conformity with the provisions and requirements .
of law.
(l) restrain the respondents permanently from interfering in the use, occupation and possession of the building known as Hotel of Wildflower Hall, Chharabra, Shimla; and
(m) award costs of these proceedings be paid by the Respondent State to the Claimant.
rt
12. In their statement of claim, Claimant No.2 has admitted the execution of Joint Venture and JVA and also the shareholders agreement, however, it is claimed that the value of the property in dispute was much more than its value as agreed upon mutually assessed. Claimant No.2 has not disputed the terms and conditions in the agreement executed between the parties and rather admitted the same to be true and correct. The complaint, however, is that all terms and conditions have been breached by Claimant ::: Downloaded on - 15/04/2017 19:46:50 :::HCHP
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No.1. The time limit fixed for completion of the project .
expired without completion and its cost was over run by 150% more than to Rs.104 crores. The MRL's articles were amended rendering thereby inconsistent the terms of the JVA. The minimum equity share of of Claimant No.2 in the MRL was diluted to 21%.
Claimant No.2 was not allowed to have access and rt inspect all books of accounts and records of MRL.
When Claimant No.1 and MRL failed to remedy various violations and breaches, the JVA was terminated by Claimant No.2 and consequential action taken. It is claimed that Claimant No.2 is entitled to re-enter the Wild Flower Hall property and to resume MRL by owning all shares and having only its Directors on the Board. The action of Claimant No.2 to terminate the JVA is, therefore, valid, legal and in accordance with law. In case any procedural ::: Downloaded on - 15/04/2017 19:46:50 :::HCHP
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deficiency of lacuna or for any other reason, action .
taken by Claimant No.2 is not upheld as valid, a prayer was made to permit the State-claimant to overcome the same or follow the procedure afresh as required.
of
13. Also that the conveyance deed executed between the parties on 6.2.1997 is in the nature of rt Government grant under the Government Grants Act, 1895. The deed, therefore, is required to be construed and given effect in accordance with the provisions of the Act and not in accordance with the Transfer of Property Act. The conveyance is said to be a conditional Government grant being subject to the conditions not only in the recitals but also explicitly in Clause (3) thereof and that it is made fundamentally, intrinsically, unreservedly, completely and only for the purposes of, subject to and in terms of the JVA dated ::: Downloaded on - 15/04/2017 19:46:50 :::HCHP
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20.10.1995. Therefore, on account of violation of the .
terms of the agreement, the breaches committed and the violation incurred, Claimant No.1 has lost the right to hold the property and Claimant No.2 is said to have rightly revoked the agreement and re-enter the of property. Claimant No.2 claimed the following reliefs before learned Arbitral Tribunal:
rt (1) the averment, plea and stand in Para No. 7 of the Statement of Claim filed by the Claimant No.1, amounts to a renunciation and repudiation by MRL of the conditions-
precedent recitals of the Government grant effected vide conveyance dated 06-02-1997; (2) the Government grant of Wildflower or property is liable to be re-entered by and resume to the State;
(3) the averment, plea and stand of MRL in Para No.3 of the Statement of Claim of the Claimant No. 1 amounts to renunciation and repudiation by MRL of the conditionality of the Government ::: Downloaded on - 15/04/2017 19:46:50 :::HCHP
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grant affected by vide conveyance dated 06.02.1997;
.
(4) the re-entry of the State in the disputed property is automatic without registration;
(5) the State is entitled, at its sole option, to have the re-entry of the disputed property recorded of by itself under a registered document or else the re-entry is required to be recorded under a registered document with a further declaration rt that the State is entitled to proceed to have it done;
(6) the registration does not require execution and presentation by MRL and the State acting by itself in this regard is competent or alternatively the MRL is liable to execute and present for its part towards registration with a further direction to MRL to do so or appoint and direct a representative to do so and act legally in its name and on its behalf all deemed that this is done in the eyes of law;
(7) that for various breaches and violation of JVA including the Articles of MRL, the JVA was liable to be and was legally terminated by the State ::: Downloaded on - 15/04/2017 19:46:50 :::HCHP
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and alternatively if there is any deficiency of procedure or other lacuna in terminating the .
JVA, the State is entitled to overcome the deficiency and the lacuna or follow the procedure afresh or any other procedure as may be advised being suitable and available;
of (8) the disputed property became liable to be and was re-entered by and resumed to the State on account of various breaches and violations of rt on termination of the JVA;
(9) on proof of breaches and violation of the Articles of JVA particularly relating to technical services, EIH is liable to be disqualified from continuing as member and be expelled from the membership of MRL and its shares liable to be surrendered and forfeited to MRL towards acquisition investing of such shares in MRL and liable to be allotted by MRL to the State in terms of its Articles 8.1, 10, 10.1, and 10.2 read with Clauses 3.3 and 3.5 of the Allotment Agreement between MRL and EIH and Clauses 4.4 of the Allotment Agreement between MRL and the State and Clause 5 of the SHA as also ::: Downloaded on - 15/04/2017 19:46:50 :::HCHP
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Article 18 read with Clause 3.4 of the Allotment Agreement between MRL and EIH, Clause 6.8 .
of the JVA and Clause 5.3 of the SHA predicating the removal and vacation of the EIH nominee Directors from Directorship of MRL and disentitling them from participating in of decision making process; on the valuation prescribed in Clause 4.4 of the Allotment Agreement between the MRL and the State;
rt (10) the State became and is entitled to take action through its nominee Directors on MRL's Board and to become the sole shareholder of MRL having its nominee Directors as the only directors on the Board of MRL;
(11) the breach and violation of JVA provisions and Articles and other breaches and violations rendered EIH liable at the States option to transfer/sell its shares to the State under Article 32 of MRL on the valuation prescribed in the proviso to Clause 11.1 (b) of the JVA and Clause 5.2 of the SHA are alternatively declared that in the event the compulsory sale from EIH to the State of its shares affected ::: Downloaded on - 15/04/2017 19:46:50 :::HCHP
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6th/7th March 2002 is held to be legally invalid even then the State is entitled to take action .
through its nominee Directors on the Board of MRL and thus become the sole shareholder of MRL and to have its nominee Directors as the only Directors on the Board of MRL or that EIH of became and is liable to take all steps and cooperate in so transferring/selling its shares by accepting the payment tendered towards its rt and completing all necessary formalities with a direction to its representative to so do and act legally in its name and on its behalf or be deemed that the same is done in the eyes of law;
(12) in the event, the compulsory sale dated 6/7th March 2000 is held legally invalid and for any reason EIH continues to hold the shares, it is liable to exercise its voting right in such manner so as to cause the transfer on a "as is where is"
basis on the deemed direction of the State to do so on the principle of 'c' est qui trust', it be deemed to have done so;::: Downloaded on - 15/04/2017 19:46:50 :::HCHP
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(13) the various actions of the State in relation to the property dispute are legal, valid and according .
to law and in case of any deficiency the State is entitled to overcome the same by having recourse to the new procedure; (14) the property in dispute as well as the Company of MRL forfeited by MRL and EIH in favour of the State on account of the various breaches and violations committed against the State;
rt (15) the State is entitled to damages actual and exemplary which are liable to be paid by EIH and MRL and for award of such other and further damages towards loss of profits and towards unaccounted sums of money said or claimed to have been incurred by and on the behalf of MRL.
14. Learned Arbitral Tribunal taking into consideration the claims and counter claims as discussed supra, has framed the following issues:
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1. Whether and to what extent the Joint Venture Agreement is valid and binding on the parties .
and is capable of conferring rights on them?
O.P. Parties
2. Whether the Claimant No. 2 was legally entitled to cancel Joint Venture Agreement and take of consequential action, which was the subject matter of adjudication by the Company Law Board and/of Company Appeal No. 1 of 2003?
rt O.P. Claimant No. 2.
3. Whether the Claimant No. 1 have rightly and properly constructed the building of the hotel and the construction is in accordance and in-
conformity with the sanction and permission granted by the competent authority of the State?
O.P. Claimant No. 1.
4. Whether Claimant No. 1 in raising the construction of the entire building or any part thereof, have deviated from the sanctioned plan or have constructed any part of the building in excess or in violation of any sanction, ::: Downloaded on - 15/04/2017 19:46:50 :::HCHP
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validly and/or legitimately granted by the competent authority of the State?
.
O.P. Claimant No. 2.
5. Whether the withholding of registration of the additional 57 rooms and the non-inclusion of the same in the certificate of registration of already granted to the Hotel, was justified and valid?
rt O.P. Claimant No. 2.
6. In case it is found that the Claimant No. 1 have committed any violation in the construction of the building, whether such a violation has already been compounded, if not, whether it is compoundable and if so, by which authority?
O.P. Claimant No. 1.
7. In case issue No. 6 is proved in affirmative, what are its consequences?
O.P. Parties
8. In case it is found, that violation have been committed in the construction of the building or any part thereof, which is not compoundable, whether coercive measures can be taken by the State?
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O.P. Claimant No. 2.
9. In case Issue No. 8 is proved whether demolition .
of the building, which is already constructed, is justified?
O.P. Claimant No. 2.
10. Whether Claimant No. 2 is guilty of lapses, of inaction and non-performance of the condition of the contract?
rt O.P. Claimant No. 1.
11. Whether the Claimant No. 1 is entitled to claim damages, if so, to what extent?
O.P. Claimant No. 1.
12. Whether Claimant No. 2 is not entitled to claim any damages from Claimant No. 1, as per the claim filed before the Arbitral Tribunal?
O.P. Claimant No. 1.
13. In case, the issue No. 12 is not proved, to what extent the Claimant No. 2 is entitled to damages, if any?
O.P. Claimant No. 2.
14. Whether the Partnership between the parties is not workable and if so, how the same can be ::: Downloaded on - 15/04/2017 19:46:50 :::HCHP
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terminated or dissolved and what relief can be granted to the parties?
.
O.P. Parties
15. Whether the relief's sought in C.P. No. 12/02, Co.A 1/03, C.W.P 1266/01, Civil R.P. 35/03 cannot be granted to the Claimant No. 1?
of O.P. Claimant No. 2.
16. To what relief the parties are entitled?
rt O.P. Parties
15. After holding full trial, hearing the parties on both sides and taking into consideration the material available on record, learned Arbitral Tribunal after recording findings on each and every issue has answered the reference made to it as under:
(1) that all the terms and conditions of the JVA are legal, valid and binding on the parties to these proceedings including the MRL; (2) that the Claimant No.2 was legally entitled to cancel the Joint Venture Agreement and take consequential actions but only after 03.05.2002;::: Downloaded on - 15/04/2017 19:46:50 :::HCHP
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(3) that action of the Claimant No.2 of terminating the JVA on 04.03.2002 and .
conveying its decision to Claimant No.1 on 06.03.2002 vide Annexure 'N' page 331, Vol.II-B is not sustainable and is liable to be set aside; (4) that the JVA is declared to have been of terminated with effect from 17.12.2003. The termination of the JVA shall be subject to the directions given while deciding Issue No.14 that rt the Claimant No.1 shall continue to hold and possess the property of the MRL upon executing a lease deed in favour of Claimant No.2 on the terms and conditions as specified while deciding Issue No.14;
(5) that upon the execution of the lease deed in its favour, the Claimant No.2 shall transfer all its shares in favour of the Claimant No.2 or its nominee/nominees. The Claimant No.2 shall also facilitate the transfer of shares under the provisions of the Companies Act; (6) That in case the lease deed is not executed as per the award, the Resolution and orders passed by Claimant No.2 on 07.03.2002 ::: Downloaded on - 15/04/2017 19:46:50 :::HCHP
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shall be deemed to have been revived and passed afr3esh in the discretion of Claimant .
No.2 to be executable against Claimant No.1 without any further delay;
(7) that in case the Claimant No.1 opts to execute the lease deed and remain in of possession of the property of the MRL, the Claimant No.2 shall stand absolved of all its liabilities but be entitled to the right over the rt land in dispute as a lessor only;
(8) that in case the Claimant No.1 opts to execute the lease deed in favour of the State of H.P., the authorities under the Himachal Pradesh Registration of Tourists Trade Act, 1988 are directed to accord registration of additional 57 rooms in the original certificate of registration Annexure 'HH' of the Hotel without any further delay. The Registration shall, however, be subject to the provisions of the said Act and the MRL under an obligation to maintain the Hotel in accordance with the requirements of law. Till the competent authority accords the registration, the ::: Downloaded on - 15/04/2017 19:46:50 :::HCHP
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provisional permission granted by the High Court of H.P. on 17.12.2004 shall continue;
.
(9) that in case the Claimant No.1 decides not to obey the conditions of this award, the Claimant No.2 shall be entitled to take immediate possession and management of the of Hotel. The disputed accounts of the MRL shall be settled by the reputed Chartered Accountants to be appointed by the High rt Court. Non-settlement of accounts would not disentitle the Claimant No.2 to take possession and management of the Hotel;
(10) that the permission granted for construction of the Hotel as per Revised Sanctioned Plan though defective is upheld in the interests and for the benefit of the parties.
Such construction is, however, subject to the findings regarded deviations and compounding of such deviations; (11) that all the deviations are directed to be compounded by the Director, Town and ::: Downloaded on - 15/04/2017 19:46:50 :::HCHP
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Country Planning on payment of lump sum amount of `5 lakhs by the MRL;
.
(12) that no party is found entitled to claim damages against each other except to the extent as upheld in terms of Clause 10.1(b) of the JVA;
of (13) that in view of this award no party is entitled to any further relief as prayed for in the rt Company Petition, Company Appeal, Writ Petition and Review Petition;
(14) that no party shall have the right to initiate further litigation with respect to the property of the Wildflower Hall Hotel and the prayers for reserving such a right in terms of Order 2 Rule 2 of the CPC are rejected.
(15) that under the peculiar circumstances of the case and keeping in view that both the parties have been granted reliefs to certain extent, it is directed that they shall bear their own costs.
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16. Now if coming to the grounds of .
challenge, it has been averred that learned Arbitral Tribunal has misread and misinterpreted the terms and conditions of the JVA and as a result thereof recorded the findings erroneous and contrary to the material of available on record. The land, as a matter of fact, was transferred by Claimant No.2 to MRL through a rt registered conveyance deed. MRL, therefore, has every right and interest in the property in dispute.
Learned Arbitral Tribunal allegedly extinguished the freehold right of the said petitioner in the property in dispute unilaterally by converting the same into a leasehold right. The award to the extent that the same provides formula for parting of ways is without jurisdiction, beyond the powers of Arbitrator and the reference made by the Division Bench, as according to Claimant No.1-petitioner, the parties had agreed ::: Downloaded on - 15/04/2017 19:46:50 :::HCHP
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before the High Court that in the event of they failed .
mutually and operate together, the Arbitral Tribunal while passing the award was to indicate the terms on which the parting of the ways particularly any liability, pecuniary or financial could be best achieved. The of Arbitrator has no valid jurisdiction and power to alter the terms of the JVA in any manner whatsoever. The rt Arbitrator could have not indicated the ways and means which were never contemplated under the JVA. The findings that State-respondent had always the legal right over the property in dispute and the respondent-State never intended to part with its possession and effective control over the land in dispute, are stated to be in clear conflict with the public policy of India, particularly when the respondent-State at its own evaluation has executed a registered conveyance deed conveying the land to ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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petitioner No.2 for a consideration of Rs. 7.50 crores, .
viz. equal to the share of the said respondent in the Joint Venture Company. The award to the extent of directing petitioner No.1 to purchase the share of holding of respondent-State against payment of Rs.7.50 crores, is stated to be unjustifiable and rt unethical for the reason that originally respondent No.1 parted with the land in question for consideration. The findings that the land was inadequately valued at Rs.7.50 crores, are stated to be in conflict with the public policy of India being not only perverse but also contrary to the express terms of the contract. It is averred that Rs.7.50 crores were fixed as value of the land in dispute by respondent-
State after due deliberation and consultation with the experts from the Departments of Revenue and Forest.
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The same even was justified by the then Chief Minster .
also before the State Legislature. Therefore, it is stated that learned Arbitral Tribunal could have not directed the petitioner No.2 to pay a sum of Rs.1 crore as consolidated amount for user of the land in dispute of from 17.12.2003 the purported date of termination of JVA. rt
17. The Arbitrator can only interpret the contract and cannot impose fresh contractual arrangements between them. The Arbitral Tribunal in the present case, however, has created a relationship of lessor and lessee between the parties and thereby created a fresh contractual arrangement which according to Claimant No.1 is not legally sustainable.
The land belongs to petitioner No.2, therefore, no direction could have been issued to pay a sum of Rs.12 crores by the said petitioner to respondent-State.
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The Arbitrator while giving the award has allegedly .
rewritten the law and assumed jurisdiction not conferred upon it by the law or the parties. The direction to the petitioners to facilitate transfer of all the shares of respondent No.1 on payment of a of consolidated sum of Rs.12 crores in lump-sum to the said respondent is also stated to be opposed to the rt public policy of India, as according to the petitioners the value of the shares of respondent-State in the Company was only to the tune of Rs.7 crores. No direction to pay the amount over and above to the respondent could have been given. The award for payment of Rs.12 crores based on the findings that the petitioners had failed to make the subject hotel commercially operational by 3.5.2002 is again opposed to public policy of India. The award is also stated to be vitiated on account of violation of ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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principle of natural justice. Even assuming, of course, .
without admitting the respondents were entitled to terminate the JVA, the property and the hotel could have not been reverted back to respondent No.1 from petitioner No.2 being contrary to the provisions of contained under Sections 100 to 104 of the Companies Act, besides the provisions contained rt under the Transfer of Property Act. The findings that petitioner No.2 had accepted JVA are not only said to be perverse but contrary to well legal position and statutory provisions, hence in conflict with the public policy of India. The findings that petitioner No.2 could make the hotel operational only after 3.5.2002 and that the same was not operational on 30.10.2001 are stated to be perverse and contrary to the contents of the affidavit filed by the respondent. The efforts made by petitioners to make the hotel operational within the ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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stipulated period have not been appreciated and to .
the contrary various acts of omissions and commissions of various Departments of the respondent-State have been ignored. The registration qua 28 rooms was allowed only, when entire hotel of building was otherwise complete. Therefore, on 18.4.2001 when petitioner No.2 made an application rt for registration of the hotel comprising 53 rooms the building was complete in all respect and the hotel fully commercially operational. The findings to the contrary are in clear conflict with the public policy of India.
18. The findings that the petitioners failed to remove the deficiencies are again stated to be contrary to the records as the same on the face of the conditional NOC granted on 15.12.2000 were cured as is clear from the issuance of unconditional NOC on ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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9.2.2001. The findings that revised sanction in favour of .
petitioner No.2 dated 8.5.2001 was not granted by the competent authority are also stated to be in conflict with the public policy of India for the reason that the sanction was granted by the Officer of respondent of No.1 in his capacity as Member Secretary/ Planning Officer, SADA also. The findings that the State rt authorities were hand in glove with petitioner No.1 and wanted to complete the hotel complex without caring for the provisions of law, vis-a-vis the grant of sanction plan, are also stated to be perverse and based on no evidence. Learned Arbitral Tribunal has allegedly erred in holding that the Company Law Board was not competent to set aside the resolution of the Board of Directors of petitioner No.2 and the decision of the State Government taken on 7.3.2002 for want of challenge thereto. The impugned award ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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allegedly as enumerated in Sr. No.1 to 7, 9, 11, 13 and .
14 below issue No.16 being perverse, has been sought to be set aside. Similarly the award as enumerated in Sr. No.8, 10, 12 and 15 below issue No.16 has also been sought to be quashed and set aside.
of
19. The petition has been resisted and contested on the grounds, inter alia that the rt objections to the award preferred by the petitioners do not disclose either of the grounds envisaged under Section 34(2) of Arbitration and Conciliation Act, 1996.
The averments that the award deals with dispute beyond the scope of the reference are unfounded and rather the Arbitral Tribunal has indicted the arrangement which suggests the terms on which parting of ways could have been best achieved. The object and purpose of referring all disputes between the parties before different fora including the High ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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Court was to give quietus to multiple litigation .
enabling thereby the Arbitral Tribunal to consider and decide all the disputes between the parties. The award, therefore, cannot be challenged. The Arbitrator has exercised the jurisdiction rightly and has of passed a reasoned award. The contentions to the contrary in the petition have, therefore, been denied, rt being wrong.
20. Respondents No.3 to 6 in their reply-
affidavits filed separately have adopted the reply to the petition filed on behalf of the respondent-State.
21. The petitioners have also filed rejoinders denying the contentions to the contrary in the reply being wrong.
22. On such pleadings of the parties, following issues were framed in this petition on 8.5.2006:
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1. Whether the award deals with a dispute not contemplated by or not falling within the .
terms of reference to the Arbitrator? OPP.
2. Whether the award contains decision on matters beyond the scope of reference to Arbitrator? If so its effect? OPP.
of
3. Whether the award is in conflict with the public policy of India? If so its effect? OPP.
4. Relief.
rt
23. Parties were called upon to produce evidence by way of affidavits. Objector-Claimant No.1 in turn has produced affidavit Ext.OW-1/A of Shri Gautam Ganguli, its Principal Officer (OW-1), Ext.OW-
2/A that of Shri Anil Malik, Chartered Accountant (OW-2) and Ext.OW-3/A that of Shri Rajeev Verma, an Architect (OW-3). On the request of the respondent-
non-objector-Claimant No.2 all of them were called for cross-examination and subjected to lengthy cross examination.
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24. No evidence, however, was produced on .
behalf of the respondents. Learned Counsel appearing on behalf of respondents No.2 to 6 has stated at the Bar that the evidence produced before learned Arbitral Tribunal be treated evidence on their of behalf in this petition also. In this way, on the completion of record both parties have been heard rt at length viz-a-viz evidence available on record.
25. Mr. Parag P. Tripathi, learned Senior Advocate, assisted by a battery of lawyers including Mr. R.L. Sood, learned Senior Advocate, M/s. Ramesh Singh, Nipun Malhotra, B.C. Negi, Arjun Lall and Ms. Manisha Handa, Advocates, has vehemently argued that learned Arbitral Tribunal has traveled beyond the scope of the reference and that the award is against the public policy of India, hence not legally sustainable. He has made reference to various ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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provisions under the Arbitration and Conciliation Act, .
Companies Act, Transfer of Property Act, Himachal Pradesh Registration of Tourist Trade Act, the terms and conditions of the JVA, the Articles of Association and also other agreements executed between the of parties. The arguments so addressed shall be referred to appropriately in the later part of this judgment.
rt
26. Now if coming to the arguments addressed on behalf of Claimant No.2, Mr. P.S. Narasimha, Additional Solicitor General of India, assisted by Mr. Shrawan Dogra, learned Advocate General, Himachal Pradesh, M/s. Sunil Muraka, Prabhat Kumar and Ishan George, Advocates and has also made reference to various provisions of law as well as terms and conditions of JVA and sister agreements six in number and has urged that in the given facts and circumstances the award which is ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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reasoned one calls for no interference more .
particularly when learned Arbitral Tribunal has adjusted equity by allowing Claimant No.1 to retain possession of the land in dispute and hotel constructed thereon for a period of 40 years on lease, of of course on payment of rent as discussed in the award. rt
27. This Court has appreciated the evidence available on record and also taken into consideration the arguments addressed on both sides.
28. For the reasons to be recorded hereinafter, my findings on the aforesaid issues are as under:
Issue No.1 No.
Issue No.2 No.
Issue No.3 No.
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4. Relief The petition is dismissed as
per operative part of the
.
judgment.
REASONS FOR FINDINGS:
ISSUES NO.1 TO 3:
29. All these issues being interlinked and of interconnected can conveniently be disposed of together in order to avoid the repetition and also the rt findings.
30. At the very outset, it would not be improper to say that the evidence as has come on record by way of the affidavits of OW-1 Shri Gautam Ganguli (Ext.OW-1/A) that of OW-2 Shri Anil Malik (Ext.OW-2/A) and of OW-3 Shri Rajeev Verma (Ext.OW-
3/A) and their testimony in cross-examination while in the witness box, is hardly of any help to decide the fate of the controversy under the issues ibid framed for determination. Even learned Counsel for the parties ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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on both sides have also not made any reference .
thereto during the course of arguments. Therefore, the fate of this petition has to be decided in terms of the record of learned Arbitral Tribunal.
31. Before coming to the grounds of of challenge as aforesaid it is deemed appropriate to discuss the law applicable in a matter of this nature.
rt
32. This Court in State of Himachal Pradesh and another v. Ashok Kumar Thakur, Latest HLJ 2014 (HP) Suppl. 201, following the ratio of the judgment of Apex Court in Oil and natural Gas Corporation Limited v. Western Geco International Limited, (2014) 9 SCC 263 and M/s. J.G. Engineers Pvt. Ltd. v. Union of India and another, 2011 AIR SCW 2849, has held that the findings recorded by the Arbitrator cannot be questioned unless perverse being not as per the record and not tenable. Also that question of facts ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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cannot be raised as objections to the award and that .
the Court should not reappraise the evidence produced during the course of arbitral proceedings nor to look into the sufficiency or insufficiency of the evidence produced before learned Arbitrator.
of
33. A reference in this behalf can also be made to the judgment of the Apex Court in Trustees of rt the Port of Madras v. Engineering Constructions Corporation Limited, AIR 1995 SC 2423, which reads as follows:
"......In short, this is not a case where the Division Bench has interfered on the ground that the award suffers from an error of law apparent on the face of award. This is a case where a new ground - and that too factual in nature - was made out for the first time at the letters patent appeal stage for setting aside the award, a reading of the judgment of the Division Bench shows that the Bench approached the matter as if it was sitting in ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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first appeal over the award. The judgment does not even indicate on which recognised .
ground is it setting aside the award. It does not say either that the award is vitiated by an error of law apparent on the face of it nor does it say that the learned umpire was guilty of any misconduct in conducting the of proceedings or otherwise. We are of the firm opinion that this could not have been done. "
34. rt This Court is also not oblivious to the legal position that the Court should not interfere with an award which is speaking one.
35. In view of the legal position discussed hereinabove and also that learned Single Member Arbitral Tribunal has discussed each and every aspect of the case, it is not deemed appropriate to look into each and every claim objected to by the defendant and rather to look into the main grounds of challenge ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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discussed hereinabove would serve the ends of .
justice.
36. It has been held by a Division Bench of High Court of Madras in Union of India (UOI) rep. by the Chief Engineer, MES v. G. Ramjachandra Reddy of and Co. (OSA No. 172 of 2000 decided on 4.10.2004) that the Courts of law have a duty and obligation to rt maintain purity of standards, preserve full faith and inspire confidence in alternate dispute redressal mechanism like arbitration and unless the reasons are erroneous the challenge to the award of the Arbitrator cannot sustain. As per further observations of the Bench perverse understanding or misreading of the material available on record would render the award to be in utter disregard of law.
37. Mr. Tripathi, learned Senior Advocate, during the course of arguments while submitting that it ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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is controversy under issues No.1, 2, 5 and 14 framed by .
learned Arbitral Tribunal and the findings recorded thereon need reappraisal vis-à-vis evidence available on record, has considerably cut short the controversy to be adjudicated upon by this Court in these of proceedings.
38. Issues No. 1 and 2 framed by learned rt Arbitral Tribunal pertain to the legality and validity of the JVA and its binding nature on the rights and contentions of the parties and also the authority of Claimant No. 2 thereunder to cancel the same.
39. Now if coming to issue No. 5 the same pertains to the inclusion of additional rooms i.e. 57 in number in the certificate of registration of hotel already granted and issue No. 14 to the controversy that if partnership between the parties is not workable how the same can be terminated or dissolved viz.
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deciding the ways and means in the matter of parting .
with.
40. Now if coming to the order of reference, the same is in the form of judgment of this Court in Civil Review No. 35 of 2002 and its connected matter of i.e. Company Appeal No. 1 of 2002 and also CWP No. 1266 of 2001. This judgment is Annexure 'C' to the rt petition. Point No. 1 as formulated for adjudication by learned Arbitral Tribunal pertains to the legality and validity of the JVA and the authority of the State Government to cancel the same, whereas points No. 2 to 5 with regard to construction of the building of hotel in conformity with the valid sanction/permission granted by the competent authority of the State and in the event of any violation of the sanctioned plan or Rules and building bye-laws whether the same is compoundable under the law and if compoundable, ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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the authority of the State Government to take .
coercive measures including demolition of the building or any part thereof. Point No. 6 in the order of reference pertains to see the desirability of continuance of the partnership between the parties of to the petition and if workable to find out the ways and means for parting with. It was left open to the rt parties to file claims/counter-claims before learned Arbitral Tribunal including claims for compensation /damages with respect to the alleged acts of omission and commission against each other.
41. On the face of the issues framed by learned Arbitral Tribunal and the proceedings conducted, it would not be improper to conclude that learned Arbitral Tribunal was well within the jurisdiction vested in it under the order of reference referred supra for the reason that the controversy ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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under issues No. 1, 2, 5 and 14 and the findings .
recorded thereon by learned Arbitral Tribunal questioned by Mr. Tripathi in this petition are covered under the points referred by this Court vide judgment dated 17.12.2003 for adjudication. Even the remaining of issues framed by learned Arbitral Tribunal on the face of it are also well within the scope of the reference.
rt Learned Arbitral Tribunal, therefore, has not traveled beyond the jurisdiction vested in it and as such this Court is not in agreement with the submissions to the contrary made on behalf of Claimant No.1. The agreement was binding in nature upon both the parties. There cannot be any dispute in this regard and rather as per the admitted case of the parties the agreement was of binding nature. Therefore, Claimant No.1 is not justified in claiming that the agreement is not binding upon MRL, i.e., petitioner ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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No.2 herein because alongwith JVA there are six sister .
agreements including the Articles of Association of MRL and the purpose of sister agreements is to facilitate the implementation of principal agreement, viz. JVA. A reference in this regard can be made to of the judgment of the Apex Court in Chloro Controls India Private Limited v. Severn Trent Water Purification rt Inc and others, (2013) 1 SCC 641. This judgment reads as follows:
"76.... In the case of composite transactions and multiple agreements, it may again be possible to invoke such principle in accepting the pleas of non-signatory parties for reference to arbitration. Where the agreements are consequential and in the nature of a follow-up to the principal or mother agreement, the latter containing the arbitration agreement and such agreements being so intrinsically intermingled or inter- dependent that it is their composite performance which shall discharge the ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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parties of their respective mutual obligations and performances, this would be a sufficient .
indicator of intent of the parties to refer signatory as well as non-signatory parties to arbitration. The principle of 'composite performance' would have to be gathered from the conjoint reading of the principal and of supplementary agreements on the one hand and the explicit intention of the parties and rt the attendant circumstances on the other."
42. The ratio of the judgment rendered by the Apex Court in V.B. Rangaraj v. V.B. Gopalakrishnan and others, 1992 (1) SCC 160 is, therefore, not applicable in this case.
43. It is worth mentioning that the subject matter of dispute before learned Arbitral Tribunal was subject matter of dispute in Civil Review No.15 of 2002, Company Appeal No.1 of 2003 and CWP No.1266 of 2001. Both parties agreed before this ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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Court to go for arbitration by a Single Member .
Arbitral Tribunal qua adjudication thereof. Therefore, it is with the consent of the parties, Single Member Arbitral Tribunal comprising Hon'ble Shri Justice R.P. Sethi (Retd.) was appointed by this Court. When of Claimant No. 1 has agreed for adjudication of the dispute by way of arbitration, it is doubtful that it is rt open to the said claimant to have any objection to the award and to challenge the same before this Court in this petition. So far as Claimant No. 2 is concerned, the award has been accepted as no objection thereto has been filed under Section 34 of the Arbitration and Conciliation Act.
44. Any how, as is canvassed by Mr. Tripathi, the pivotal point around which the controversy revolves is as to whether Claimant No. 2 has exercised the power to cancel the JVA legally or ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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without any authority and competence to do so .
vested in it under the Act. Claimant No. 2 has resorted to terminate the JVA under Clause 10 thereof, most probably under Clause 10.1.(i)(b) thereof at the pretext that Claimant No. 1 has failed of to make the hotel fully commercially operational within four years from the date of handing over the rt possession of the land and the premises i.e. Wildflower Hall, Chharabra, as Five Star Deluxe Hotel Resort. The Joint Venture Company i.e. MRL was formed under the JVA. The construction of building of the hotel as per the agreement was to be raised by Claimant No. 1. The capital share of the respondent-State in the Company was Rs. 7.5 crores and it has contributed Rs.7 crore in the form of price of land in dispute as agreed upon mutually and ` 50 ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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lacs in the form of loan. As per terms of Clause .
10.1.(i)(b), the construction of the hotel building was to be raised within four years from the date of handing over of possession of the property in question to the Company i.e. MRL-petitioner No. 2 of herein. The failure to do so extends a right to respondent-State rt to terminate the agreement.
Learned Arbitral Tribunal in the findings recorded on issue No. 2 has taken note of the terms and conditions enshrined in the JVA, therefore, in order to avoid repetition the same are not being referred to in this judgment.
45. The 1st part of sub-clause (b) of Clause 10.1.(i) leave no manner of doubt that for the purpose of calculating the period for making the Wildflower Hall fully commercially operational the relevant date is 3.5.1996, i.e. the day when the ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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possession of the premises and the land is delivered .
to the Company. The 2nd part of sub-clause (b) of Clause 10.1.(i) provides that the time for the purpose of calculating the period of six years to terminate the agreement automatically, the relevant date is of 30.10.1995, the day when the same was executed.
The notice to terminate the agreement is dated rt 6.3.2002, admittedly after the expiry of four years as contemplated under 1st part of sub-clause (b) of Clause 10.1.(i) of the JVA. Now, if the date of issuance of the notice is seen from the date of execution of the agreement i.e. 30.10.1995, the same definitely is beyond the period of six years. Meaning thereby that under 2nd part of sub-clause (b) of Clause 10.1.(i) of the JVA, it was a case of termination of the agreement automatically.
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46. Mr. Tripathi, learned Senior Advocate .
though made efforts to satisfy this Court that the hotel was made fully commercially operational as Five Star well within the stipulated period, however, unsuccessfully for the reason that over whelming of evidence brought on record by the respondent-
State and taken into consideration by learned rt Arbitral Tribunal leads to the only conclusion that the hotel was not made functional within the period of four years and as such, respondent-State was well within its right to terminate the agreement. In the case in hand, the respondent-State has not resorted to the provisions contained under Clause 10.1 of the agreement immediately on the expiry of four years from the date of delivery of possession of the property in question, however, after a period over five years. Therefore, Claimant No. 1 cannot said to ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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have any grievance in this regard. The ratio of the .
judgment of this Court in M/s. S.A. Builders Ltd. v.
H.P.S.E.B. and others, 1996 (1) Sim.L.C. 27, however, is distinguishable on facts. Otherwise also, in the case in hand, there was no request for extension of time.
of At the cost of repetition, it is pertinent to mention here that the Claimant No.1 did not approach rt Claimant No.2 for extension of further time.
47. On the other hand, for the purpose of imposing of penalty upon Claimant No. 1 on its failure to make the hotel fully commercially operational within the stipulated period viz. six years as prescribed under 2nd part of sub-clause (b) of Clause 10.1.(i), such period from the date of execution of the JVA i.e. 30.10.1995 was already over on 30.10.2001, i.e. well before 6.3.2002, when the respondent-State served Claimant No. 1 with notice ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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showing its intention to terminate the JVA. In such a .
situation, the penalty has also been rightly imposed upon Claimant No. 1.
48. Mr. Parag.P. Tripathi, learned Senior Advocate no doubt has argued with vehemence of that the hotel was constructed and made fully commercially operational within the period of six rt years, however, unsuccessfully as he failed to substantiate such contentions with the help of relevant record. The meaning of "fully commercially operational" finds mentioned under Clause 3(xiv), under the heading "Definitions" in the articles of association of petitioner-Objector No. 2 and the same reads as under:
"the operation of the Hotel on commercial scale in accordance with international standards of service as a Five Star Deluxe hotel with all and complete ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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customer facilities for the total capacity envisaged for the hotel when fully .
constructed".
49. Claimant No. 2 has not placed anything on record to show that the hotel was operational on of commercial scale with international standards of service and with all complete customer facilities for rt the total capacity. Learned Arbitral Tribunal has considered in detail this aspect of the matter and decided with the help of case law. The admitted position of facts is that the JVA was executed on 30.10.1995 between the parties. The possession of the property was delivered to Claimant No. 1 on 3.5.1996. As per Article 10.1(b), the Joint Company had to commence the business by making hotel fully commercially operation on or before 3.5.2000, i.e., within four years from the date of handing over the ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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possession of the premises, popularly known as .
"Wildflower Hall". Meaning thereby that the hotel was required to be made fully commercially operational on or before 3.5.2000. Admittedly, the building/hotel was not complete by that time; hence of the same could not be made fully commercially operational well within the period of four years.
rt
50. Now if coming to the arguments addressed on behalf of Claimant No.1 that the application for registration of the hotel was made on 31.10.2000, the same was not supported with the documents required for registration of the Wildflower Hall as Five Star Hotel. Therefore, the Tourism Department requested the Company to supply the requisite documents. The inspection was also conducted by the Officers of the Department and it is only 28 rooms found to have been completed and ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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fit for residential purpose. The certificate of .
registration of the said rooms was only issued and on the basis thereof, NOC was also given on 9.2.2001.
The registration on 9.2.2001 was allowed only with respect to 28 rooms and not that of all the rooms, as of per sanctioned plan. Therefore, Mr. Tripathi is not correct while submitting that NOC dated 9.2.2001 rt pertains to all rooms 85 in numbers and not 28 rooms alone. When the NOC was only granted with respect to 28 rooms, the same cannot be treated to have been issued qua full capacity of the hotel. This aspect of the matter has also been dealt with in detail by learned Arbitral Tribunal and decided on appreciation of the material available on record in its right perspective. Therefore, the respondent-State was justified in terminating the JVA not only on the failure of Claimant No.1 to make the hotel fully ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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commercially operational within four years but also .
within the extended period of six years as Claimant No.1 has failed to make the same fully commercially operational.51. The further case of Claimant No.1 that 53
of more rooms were ready for being occupied by guests and intimation to this effect was given to rt Tourism Department on 18.4.2001, is also without any substance because the communication so made was not accompanied by the certificate qua completion of construction which was to be issued by the Town and Country Planning Department. The Tourism Department, therefore, has rightly asked for the completion certificate from Claimant No.1 as required under Section 12(g) of the HP Registration of Tourist Trade Act, which was to be issued by Special Area Development Authority (SADA), as by that time ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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the area in question came under the jurisdiction of .
this Authority. The application for supply of completion certificate alongwith compounding fee was made to SADA on 22.10.2001. The same was not supplied till October, 2001. Meaning thereby that of when the construction was not complete by October, 2001, there was no question of coming the rt hotel in operation commercially that too as Five Star.
52. True it is that in second part of sub-clause
(b) of Clause 10.1.(i) of the agreement, there is provision of extension of time for a period of further two years at the discretion of the respondent-State, of course, on imposition of penalty to the tune of Rs.
2 crores upon Claimant No.1 and from the date of delivery of possession of the premises in question to Claimant No.1, i.e., 3.5.1996 and as such the JVA could have not been terminated on or before ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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3.5.2002. The notice of termination of JVA, no doubt, .
has been given to Claimant No.1 on 6.3.2002.
However, the hotel was not commercially operational even on 3.5.2002 also and rather was ordered to be made fully commercially operational of by this Court vide its judgment Annexure 'C', of course subject rt to outcome of the arbitral proceedings and on fulfillment of certain terms and conditions detailed in the judgment. Therefore, on this score also Claimant No.1 cannot be said to have any grievance.
53. As a matter of fact, to substantiate its case that the hotel was fully commercially operational, Claimant No.1 had to establish that the building of the hotel was complete as per the sanctioned plan with customers facility for total capacity within the stipulated period, i.e., four years ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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or at the most within the extended period viz. six .
years from the date of delivery of possession of the premises in question. There is no quarrel so as to imposition of penalty was a condition precedent for completion of the building within the extended of period, i.e., six years. Therefore, Claimant No.1 cannot be said to have aggrieved from imposition of rt such penalty as on account of its failure to complete the construction of the hotel to make the same fully commercially operational within the stipulated period.
54. Now if coming to the after-effects of termination of the JVA, the same find mention in Clause 11 thereof. The said Clause reads as follows:
"11 EFFECTS OF TERMINATION:
11.1 If this Agreement is terminated pursuant to Article 10, the Party terminating this Agreement shall be entitled to require the ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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party in breach to sell its own and its Associate Companies shareholdings in the .
Joint Company, at the option of the terminating party:
(a) to the terminating Party or its Associate Companies on the terms and conditions set forth in Article 9 thereof;
of
(b) to the public at large by a public offer:
rt Provided however that in the event that the termination of this Agreement is due to the default of the party of the SECOND PART failing to perform its obligations as regards the provision of technical services in the manner and time frame prescribed, the party of the SECOND PART shall sell its shares to the party of the FIRST PART on payment of Rs.10 at which the technical services are valued plus 50% of the face value of the paid up equity shares held by the party of the SECOND PART: and the part of the FIRST PART shall be entitled to acquire the same. 11.2 Notwithstanding the foregoing, in any such event, the land, buildings and structures ::: Downloaded on - 15/04/2017 19:46:51 :::HCHP
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on the Wild Flower Hall Estate (mentioned in Schedule "C") together with building, .
structures or any other immovable assets which might have been raised by the Joint Company shall revert to the party of the FIRST PART on payment stipulated in proviso to clause 11.1 of this Agreement."
of
55. The proviso to Clause 11 renders Claimant rt No.1 defaulter, hence liable to sell its share to Claimant No.2. Similarly in terms of Clause 11.2 supra there being default on the part of Claimant No.1, the land including structures or building(s) constructed thereon have rightly been reverted to respondent-
State of course, on payment as indicated in the proviso below Clause 11.1 of the agreement supra.
Therefore, Claimant No.2 on termination of the JVA had rightly taken the consequential actions.
56. There is no question of respondent-State having treated the petitioner indifferently in this case ::: Downloaded on - 15/04/2017 19:46:52 :::HCHP
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for the reason that the JVA has been terminated on .
violation of the condition to make the hotel fully commercially operational within the stipulated period and as such the ratio of the judgments of the Hon'ble Apex Court in Kerala State Electricity Board of and another v. Kurien E. Kalathil and others, (2000) 6 SCC 293 and National Highways Authority of India v.
rt Ganga Enterprises and another, (2003) 7 SCC 410 is not at all applicable in this case.
57. There is again no substance in the submissions that the property in dispute conveyed to the Company vide registered conveyance deed could have not been reverted back to Claimant No.2 for the reason that Clause 3 of the conveyance deed dated 6.2.1997 makes it crystal clear that the conveyance of the property in question was subject ::: Downloaded on - 15/04/2017 19:46:52 :::HCHP
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to and in terms of the provisions of JVA dated .
30.10.1995. The same reads as follows:
"3. The Conveyance herein contained is subject to and in terms of the provisions of Joint Venture Agreement dated 30th October, 1995 as hereinbefore mentioned."
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58. Therefore, when Claimant No.1 has failed to complete the construction of the hotel and make rt the same fully commercially operational as Five Star hotel within the stipulated period, i.e., four years and even within the extended period, i.e., six years, the land, structure(s)/building(s) constructed thereon were rightly reverted to Claimant No.2 on termination of the JVA. Otherwise also, the land belongs to the respondent-State.
59. As a matter of fact, the location of the site being prominent, the respondent-State wants to explicit the prominence of the land, however, ::: Downloaded on - 15/04/2017 19:46:52 :::HCHP
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executed the JVA with Claimant No.1 finding itself .
unable to do so on account of financial constraints.
The record amply demonstrates that the State Government never intended to sell or part with the land in question. No sale deed was ever executed.
of Only the contract is in the form of JVA and not in the form of sale deed. As a matter of fact, by executing rt this document with Claimant No.1, Claimant No.2 has intended to utilize the land in question for the well being of its objects.
60. Mr. Narasimha has pointed out that the JVA is not in dispute in the present lis and rightly so because Claimant No.1 has failed to make the hotel fully commercially operational within six years, as agreed upon, therefore, the termination of the agreement was automatic. Mr. Narasimha has also rightly pointed out that no prejudice has been ::: Downloaded on - 15/04/2017 19:46:52 :::HCHP
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caused to Claimant No.1 because irrespective of .
violation of the terms and conditions of the JVA, the Arbitrator's award extends a right in favour of the said claimant to retain the possession of the property for a period of 40 years on lease. The period of the of lease is further extendable, of course, at the discretion of Claimant No.2 and on the terms and rt conditions as deemed fit and appropriate. The Arbitrator, therefore, has adjusted the equity. The respondent-State has not challenged the award. Mr. Narasimha is absolutely justified while submitting that the respondent-State by not preferring objections to the award has intended to buy peace. As a matter of fact, Claimant No.1 has taken the transfer of the property in question as sale thereof in its favour.
However, the respondent-State has never agreed to do so and rather transferred the same for ::: Downloaded on - 15/04/2017 19:46:52 :::HCHP
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construction of a five star Hotel thereon and to run .
the same for the benefit of it's subject to terms of the JVA. As a matter of fact, sale deed was never executed by Claimant No.2 in favour of Claimant No.1 and the property, viz. Wildflower Hall and the of land was conveyed to Claimant No.1 conditionally as discussed in this judgment hereinabove.
rt
61. The provisions contained under Section 8, 25, 26 and 31 of the Transfer of Property Act have also been brought to the notice of this Court during the course of arguments. The parties agreed for resolution of dispute by the process of arbitration.
The award passed by learned Arbitral Tribunal being a decree has to be implemented. Learned Arbitral Tribunal has passed the award after due application of mind and taking into consideration the material available on record in its right perspective.
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62. As pointed out hereinabove, Claimant .
No.1 has failed to show from the record that the delay in completion of the building of the hotel was attributed to the Officers in various Government Departments where the matter for the purpose of of sanction, registration and issuance of NOC etc. was dealt with. Therefore, the judgment of the Apex rt Court in Hitech Electrothermics & Hydropower Ltd. v.
State of Kerala and others, (2003) 2 SCC 716, is not applicable in this case. The judgment of the Apex Court in Arosan Enterprises Ltd. v. Union of India and another, (1999) 9 SCC 449, is also not applicable because here not only the time was the essence of the contract but whatever the obligations of respondent thereunder were fully discharged.
63. Otherwise also, the Court in the exercise of the jurisdiction vested in it under Section 34 of the ::: Downloaded on - 15/04/2017 19:46:52 :::HCHP
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Arbitration and Conciliation Act cannot correct any .
error committed by the Arbitral Tribunal. The challenge to the award is beyond the scope of the parameters of Section 34 of the Arbitration and Conciliation Act. The law laid down by the Hon'ble of Apex Court in Oil and Natural Gas Corporation Limited v. Western Geco International Limited, (2014) rt 9 SCC 263, Oil & Natural Gas Corporation Ltd. v. Saw Pipes Ltd, (2003) 5 SCC 705 and Mcdermott International Inc. v. Burn Standard Co. Ltd. and others, (2006) 11 SCC 181 is not at all attracted to the given facts and circumstances of this case, as the Arbitral Tribunal has conducted the arbitral proceedings upon a reference of the Court and in the said order/reference there was specific direction to the Arbitral Tribunal to return the findings.
Therefore, the findings of the Arbitral Tribunal are ::: Downloaded on - 15/04/2017 19:46:52 :::HCHP
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within the ambit of the reference, hence there is no .
question of violation of public policy. On this score also the award of the Arbitral Tribunal calls for no interference.
64. In Associates Builders v. Delhi of Development Authority 2014 (14) Scale, 226, the Apex Court has held that when the Court applied rt the "public policy" test to an arbitration award, should not act as a Court of appeal to correct the errors of fact, if any. A possible view of the matter taken by the Arbitrator on the basis of the evidence available on record should not be interfered with.
The relevant portion of this judgment reads as follows:
"20.....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 ::: Downloaded on - 15/04/2017 19:46:52 :::HCHP
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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 of which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. Once it is found that the rt arbitrators approach is not arbitrary or capricious, then he is the last word on facts. In P.R. Shah, Shares & Stock Brokers (P) Ltd. v. B.H.H. Securities (P) Ltd., (2012) 1 SCC 594, this Court held:
"21. A court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or reappreciating the evidence. An award can be challenged only under the grounds mentioned in Section 34(2) of the Act. The Arbitral Tribunal has examined the facts and held that both the second respondent and the appellant are liable. The case as put ::: Downloaded on - 15/04/2017 19:46:52 :::HCHP
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forward by the first respondent has been accepted. Even the minority view was .
that the second respondent was liable as claimed by the first respondent, but the appellant was not liable only on the ground that the arbitrators appointed by of the Stock Exchange under Bye-law 248, in a claim against a non-member, had no jurisdiction to decide a claim against rt another member. The finding of the majority is that the appellant did the transaction in the name of the second respondent and is therefore, liable along with the second respondent. Therefore, in the absence of any ground under Section 34(2) of the Act, it is not possible to re-
examine the facts to find out whether a different decision can be arrived at."
It is with this very important caveat that the two fundamental principles which form part of the fundamental policy of Indian law (that the arbitrator must have a judicial approach and ::: Downloaded on - 15/04/2017 19:46:52 :::HCHP
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that he must not act perversely) are to be understood."
.
65. An award can also be set aside if it is contrary to the interest of India, however, nothing is on record to show as to how the award in question is of against the public policy of India or its interest.
66. The rt award is legal and factually sustainable and also not suffers from any illegality or inconformity. Therefore, the judgment of the Apex Court in Sikkim Subba Associates v. State of Sikkim (2001) 5 SCC 629, is not applicable in this case.
67. True it is that irrespective of strict rules of evidence do not apply in an arbitral proceedings, however, such rules founded with fundamental principles of justice and public policy also need to be observed by the Arbitral Tribunal. The present, however, is not a case where learned Arbitral ::: Downloaded on - 15/04/2017 19:46:52 :::HCHP
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Tribunal has discarded or misread the evidence .
produced by the parties on both sides. Therefore, the ratio of judgment of the High Court of Bombay in Jagmohan Singh Gujral v. Satish Ashok Sabnis and Another, (Arbitration Petition No.42 of 2002, decided of on 26.3.2003), is again not applicable in this case.
68. On the other hand, one should not loose rt sight of the fact that an award announced by an expert, i.e., a Single Member Arbitral Tribunal (Hon'ble Shri Justice R.P. Sethi (Retd.), former Judge, Supreme Court of India) should not normally be interfered with by this Court because the same in view of the discussions hereinabove is neither perverse nor in violation of any provisions of law. The same rather deserves to be upheld. I have drawn support in this regard from the judgment of the Apex Court in M/s.
Hind Builders v. Union of India, AIR 1990 SC 1340. All ::: Downloaded on - 15/04/2017 19:46:52 :::HCHP
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the issues are accordingly answered against the .
Objector-Claimant No.1.
RELIEF:
69. In view of what has been said hereinabove, no grounds are made out warranting of interference of this Court with that part of the award under challenge in this petition. The petition as such rt is dismissed.
February 25, 2016. (Dharam Chand Chaudhary), (rc) Judge.
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