The court held that an arbitral award compelling the renewal of a determinable contract is legally unsustainable and suffers from patent illegality under Section 34 of the Arbitration and Conciliation Act.

JUDGMENT :

P.VELMURUGAN, J.

This Original Side Appeal is filed challenging the order dated 06.03.2020 passed by the learned Single Judge in O.P.No.584 of 2019, whereby the learned Single Judge dismissed the petition filed by the Railways under Section 34 of the Arbitration and Conciliation Act, 1996 and upheld the arbitral award dated 07.01.2019.

2. The brief facts of the case are that the respondent belongs to the Scheduled Tribe community and, under a scheme earmarking certain catering stalls for persons belonging to the Scheduled Tribe category, the Railway Administration invited bids for grant of licence to run Catering Stall No.SMU-5 at Platform No.2A/3 of Chennai Central Railway Station. Pursuant to the said tender, the respondent submitted her bid, which was accepted, and a Letter of Acceptance dated 02.02.2015 was issued in her favour granting licence to run the said catering stall for a period of five years, from 04.03.2015 to 03.03.2020. As per the terms of the allotment, the respondent paid a provisional licence fee of Rs.93,000/- and also remitted a security deposit calculated at 10% of the total licence fee for the entire licence period. The total licence fee for the said five-year period was fixed at Rs.46,50,000/-, payable annually in accordance with the terms of the agreement. Thereafter, the respondent commenced business in March 2015. During the course of the licence period, the Railway Administration conducted several inspections and alleged certain irregularities, such as misuse of space, sale of food packets without proper stamping, lack of adequate hygiene, and engagement of staff without proper identity cards and medical certificates. On the basis of these alleged violations, fines were imposed and warnings were issued. Subsequently, the licence was terminated by the Railway Administration by proceedings dated 22.08.2017, though the stall had already remained closed from March 2017. Aggrieved by the said termination, the respondent invoked the arbitration clause, and the sole Arbitrator, upon consideration of the claims and counterclaims, allowed the claim of the respondent holding that the termination was unjustified and rejected the counterclaims of the Railways.

3. The Railways challenged the arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996, by filing O.P.No.584 of 2019. The learned Single Judge dismissed the petition, by holding that the scope of interference under Section 34 is limited to specific grounds such as patent illegality or violation of public policy. The Court cannot re-appreciate evidence or substitute its own view for that of the arbitrator. The arbitrator had considered the inspection reports and the explanations offered by the respondent and arrived at factual findings. The learned Judge concluded that the award did not suffer from any patent illegality, nor was it contrary to public policy, and therefore it could not be interfered with.

4. Challenging this order, the Railways have now filed the present appeal.

5. The learned senior counsel appearing for the appellant submitted that the order passed by the learned Single Judge is contrary to law and suffers from errors apparent on the face of the record. It was contended that the learned Judge failed to appreciate that the arbitral award is vitiated by patent illegality within the meaning of Section 34(2A) of the Arbitration and Conciliation Act, 1996. The learned senior counsel further submitted that the relief granted by the learned Arbitrator is legally unsustainable. According to the appellant, the claim made before the Arbitral Tribunal itself was barred under Section 14(d) of the Specific Relief Act, 1963 (formerly Section 14(1) (c) prior to the 2018 amendment), since the contract in question is determinable in nature. The licence granted to the respondent to run a catering stall is only a licence within the meaning of Section 52 of the Easement Act, which merely confers permission to carry on an activity