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2024 Supreme(Bom) 496
IN THE HIGH COURT OF BOMBAY
B.P. Colabawalla, Somasekhar Sundaresan, JJ.
Ivory Properties & Hotels Private Limited & Ors. - Appellants
Versus
Vasantben Ramniklal Bhuta Since Deceased Through Legal Heirs & Ors. - Respondents
Commercial Appeal No. 90 of 2020 In Commercial Arbitration Petition No. 812 of 2019 with Commercial Appeal No. 91 of 2020 In Commercial Arbitration Petition No. 350 of 2017
Decided On : 25-06-2024
Mr. Rohit Kapadia, Senior Advocate a/w. Yash Kapadia, Hemlata Jain, Kaiwan Kalyaniwalla, Sanidhaa Vedpathak, Nijam-S-Sher S. Sani, Pooja Shah and Nirav Barot i/b Maneksha & Sethna, Advocates for Appellant in both Appeals-COMAP-90-2020 and COMAP-91-2020; Mr. Shailesh Shah, Senior Advocate a/w. Dibyajyoti Banerji, Aditya Udeshi, Netaji Gawade and Nayan Bhalekar i/b M/s. Sanjay Udeshi & Co., Advocates for Respondent Nos.1(a) to 1(d) in COMAP-90-2020 and for Respondent Nos.2(a) to 2(d) in COMAP-91-2020; Mr. T.N. Subramaniam, Senior Advocate a/w. Rubin Vakil, Nupur Desai i/b M/s. Markand Gandhi & Co., Advocates for Respondent No.2 in COMAP-90-2020 and for Respondent No.1 in COMAP-91-2020.
IMPORTANT POINT
An arbitral award can be set aside if it is found to be patently illegal or arbitrary, particularly when it fails to establish the existence of a valid and enforceable agreement.
Headnote:
ARBITRATION - Commercial Appeals - Arbitration and Conciliation Act, 1996 - Section 34, Section 37 - The court examined the validity of an arbitral award set aside by a single judge under Section 34 of the Arbitration and Conciliation Act, 1996. The court emphasized that the scope of review under Section 34 is narrow, focusing on whether the award is patently illegal or arbitrary. The court found that the arbitral award incorrectly concluded the existence of a supplemental agreement, which was merely a draft and not executed, thus lacking the essential elements for specific performance. The court upheld the single judge's decision, reinforcing the principle that an arbitrator's findings must adhere to basic notions of justice and adjudication.
Fact of the Case:
The dispute arose from a Development Agreement and a Memorandum of Understanding between Ivory Properties & Hotels Private Limited (Appellant) and the Respondents regarding the development of a property. The Appellant claimed a draft Supplemental Agreement modified the original agreements, while the Respondents contested its existence, leading to arbitration and subsequent appeals after the arbitral award was set aside by a single judge.
Finding of the Court:
The court agreed with the single judge's finding that the arbitral award was patently illegal as it relied on a non-existent supplemental agreement. The court noted that the draft was incomplete and lacked essential terms, rendering it unenforceable. The court emphasized the arbitrator's failure to apply basic adjudicatory standards.
Issues: The primary issues included the existence and enforceability of the draft Supplemental Agreement, the validity of the arbitral award, and whether the claims were barred by limitation.
Ratio Decidendi: The court held that an arbitrator's findings must be based on evidence and adhere to basic principles of justice. The existence of a contract capable of specific performance must be clear and unambiguous. The court found that the arbitral award failed to meet these standards, justifying its annulment under Section 34 of the Arbitration and Conciliation Act.
Final Decision: The court dismissed the appeals, upheld the single judge's decision to set aside the arbitral award, and ordered the Appellant to pay costs to the Respondents.
JUDGMENT
Somasekhar Sundaresan, J. -
Introduction:
1. This judgement disposes of two separate and concurrent Commercial Appeals (90 of 2020 and 91 of 2020), which essentially flow from the same source - an arbitral award dated 14th February, 2017 ('Arbitral Award'). The Arbitral Award came to be set aside by a Learned Single Judge of this Court vide a common judgement dated 28th January, 2020 ('Impugned Judgement'). The Impugned Judgement had disposed of Commercial Arbitration petitions under Section 34 of the Arbitration and Conciliation Act, 1996 ('the Act').
2. The Appellant in these appeals viz. Ivory Properties & Hotels Private Limited (for convenience, termed as the 'Appellant' throughout this judgement) was Respondent No. 1 in both the arbitration petitions before the Learned Single Judge.
3. Each of the Respondents in these appeals viz. Ms. Bhanumati Jaisukhbhai Bhuta and Ms.Vasantben Ramniklal Bhuta (for convenience, collectively termed as 'Respondents' throughout this judgement) was the Petitioner and the second Respondent respectively in the arbitration petitions before the Learned Single Judge. The former was the Petitioner in Commercial Arbitration Petition No. 350 of 2017. The latter was the Petitioner in Commercial Arbitration Petition No. 812 of 2019.
4. The dispute among the parties was essentially based on a Development Agreement dated 19th April, 1995 ('Development Agreement'), and a Memorandum of Understanding of the same date ('MoU'). Under these instruments, the Appellant, as a developer, had agreed to develop immovable property owned by the Respondents, which is situated on land bearing CTS No. 649/1, 649/2, 650, 652, 652/1 and 655 admeasuring 5456.94 sq. mtrs. at village Gundavali; Andheri Kurla Road, Andheri (East), Mumbai 400 069 ('Subject Property').
5. The bone of contention, however, is a 'draft Supplemental Agreement', which document, although not executed, the Appellant asserts, is a record of what was orally agreed between the parties about the development of the Subject Property. The Arbitral Award had concluded that the Development Agreement and the MoU had been validly amended by the draft Supplemental Agreement and that they lent themselves to specific performance. The Learned Single Judge, on the basis of the material on record, concluded that such a finding was patently illegal and manifestly arbitrary, and therefore, set aside the Arbitral Award in terms of Section 34 of the Act.
6. For reasons set out in this judgement, we are in agreement with the Impugned Judgement. We conclude that the two appeals filed under Section 37 of the Act, do not deserve to be allowed. In holding so, we have been conscious of the fact that under the Act, the scope of review permitted to the Learned Single Judge under Section 34 of the Act was a very narrow one, with no room for reappreciation of evidence. Therefore, we examined the record with such narrow scope in mind, refraining from weighing any portion of the evidence. We have refrained from setting up competing potential conclusions from the evidence, in order to make a choice. Instead, we find from a mere examination of the material on record, that there was no Supplemental Agreement among the parties, which is the core contract that the Arbitral Award purported to specifically enforce. We find that the so-called Supplemental Agreement was merely a 'draft' (as termed even by the Appellant itself) and that it was not even executed. We also find that, assuming it had been an oral agreement reduced to writing without signature, since some of its core and material contents were blank, the parties were not ad idem in terms of coming to an agreed position of a mutual bargain, for such instrument to lend itself to enforcement by law. In short, the Arbitral Award, is untenable and the Impugned Judgement deserves no interference.
7. In the process, we find that the manner in which the Learned Sole Arbitrator has drawn inferences and conclusions in the Arbitral Award, es
