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2023 Supreme(Del) 5513
IN THE HIGH COURT OF DELHI AT NEW DELHI
Suresh Kumar Kait, Shalinder Kaur, JJ.
M/s Rocks Buildcon Pvt Ltd & Anr. - Appellants
Versus
Ram Kishan Singh - Respondent
FAO(OS) (COMM) 68 of 2017
Decided On : 20-12-2023
Mr. Tanmaya Mehta, Advocate, for the Appellants.
Mr. Kartik Nayar and Mr. Rishab Kumar, Advocates, for the Respondent.
IMPORTANT POINT
The Court emphasized that an arbitral award cannot alter the terms of a valid contract and must align with the contract and the law, as mandated by Section 28(3) of the Act, 1996.
Headnote:
Arbitration and Conciliation Act - Dispute arising from brokerage agreement - Section 28(3) of the Act, 1996
Fact of the Case:
Dispute arose between the parties over a brokerage agreement for assistance in a property transaction. The Arbitral Tribunal dismissed all claims by the respondent and counter-claims by the appellants, retaining the advance fee paid to the respondent.
Finding of the Court:
The learned Single Judge set aside the Arbitral Award, holding that it did not abide by the mandate of Section 28(3) of the Act, 1996, and granted liberty to the respondent to seek a fresh arbitration.
Issues: Interpretation of the brokerage agreement, compliance with Section 28(3) of the Act, 1996, and the jurisdiction of the Arbitral Tribunal.
Ratio Decidendi: The Arbitral Tribunal's award was set aside as it did not align with the terms of the brokerage agreement and the mandate of Section 28(3) of the Act, 1996. The Court found that the Arbitral Tribunal misconstrued the terms of the agreement, leading to a perverse finding.
Final Decision: The appeal was dismissed, and the impugned award was set aside, granting the respondent liberty to seek a fresh arbitration in accordance with the law.
JUDGMENT
Shalinder Kaur, J. - The present Appeal under Section 37(1)(C) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the "Act, 1996") has been filed by the appellants impugning an order dated 09.01.2017 (hereinafter referred to as "impugned order") passed by the learned Single Judge of this Court in OMP (COMM) No. 486/2016 titled "Ram Kishan Singh v. Rocks Buildcon Pvt Ltd. & Anr. The respondent herein had filed an application under section 34 of the Act, 1996 impugning an arbitral award dated 23.04.2015 (hereinafter referred to as "impugned Award") delivered by an Arbitral Tribunal comprising of a Sole Arbitrator. The impugned Award was pronounced in the context of a dispute that arose between the parties in connection with an agreement dated 04.09.2011 (hereinafter referred to as `brokerage agreement') executed between the parties hereto in respect of a brokerage fee. The learned Single Judge had set aside the Arbitral Award holding that it is opposed to fundamental policy of Indian Law inasmuch as it does not abide by the mandate of Section 28(3) of the Act, 1996.
Factual background:
2. In order to appreciate the contention of the rival parties, certain facts deserve to be noted. The appellants had engaged the services of the respondent herein for the purpose of identifying an owner of land in Goa and for assistance in completion of the transaction of taking over of a company and/or sale of the land in Goa for the purpose of setting up a Hotel/Resort. For the aforesaid purpose, respondent informed that he would connect the appellants with the Overseas Sellers/Companies (hereinafter as "Sellers"), which have land as one of its assets at Varca Beach in Goa and that he would also assist the appellants in due diligence of the seller company and its assets.
3. In pursuance of this, appellants vide letter dated 15.06.2011 requested respondent to arrange a meeting with seller and for procuring relevant information/documents and also to conduct due diligence for this property. A letter dated 17.06.2011 was issued by the appellants giving the offer of Rs.111.25 crores for purchase of the land on successful & satisfactory completion of due diligence. Another letter dated 17.06.2011 was sent to respondent settling with him that all inclusive payment of Rs.13.75 crores to be made to the respondent after completion of due diligence. Subsequent thereto, an advance payment of Rs.50 lacs was made to respondent.
4. Thereafter, the brokerage agreement dated 04.09.2011 was entered into between the appellants and respondent revising and reducing the brokerage fee to Rs.11.55 crores with mutual discussion, subject to deduction of applicable taxes exclusive of service tax as applicable, which will be in addition thereto commission and brokerage, for providing assistance in completion of a transaction which includes the brokerage after adjusting the advance of Rs.50 Lakhs already paid to respondent. The brokerage agreement contained all the terms and conditions of engaging the services of the respondent, this agreement also contained an arbitration clause.
5. On 04.10.2011, a share purchase agreement was executed between the appellants and the seller, being the shareholders of the company namely M/s W. Investering India Pvt. Ltd. (WIIPL) for transferring the entire share holding of M/s WIIPL held by them in favour of the appellants herein for a consideration of Rs.112.23 crores. The appellants are said to have deposited 25% of the purchase consideration of Rs.112.23 crores through its nominee in an ESCROW account. It appears that certain dispute arose between the seller and the appellants herein and the seller defaulted in performance of its part of the contract under the share purchase agreement despite the extended time having lapsed on 14.12.2011. It also appears that there was some problem in title of the land. Accordingly, on 13.12.2011, the respondent offered to the appellants to walk away from the transaction. On 23.
