Jai Parkash Power Ventures Ltd. now known as Himachal Baspa Company Power Limited vs State of H.P. & Anr.

IN THE HIGH COURT OF HIMACHAL PRADESH, SHIMLA Arb.C. No. 93 of 2016 Reserved on: 01.11.2017 Decided on: 29.11.2017

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Jai Parkash Power Ventures Ltd. now known as Himachal Baspa Company Power Limited ...Petitioner Versus State of H.P. & Anr. ...Respondents

Coram The Hon'ble Mr.Justice Tarlok Singh Chauhan, Judge. Whether approved for reporting? Yes.

For the petitioner: Mr. R.L. Sood, Sr. Advocate with Mr. Sunil Mohan Goel and Mr. Ashish Jamalta, Advocates.

For the respondents: Mr. Neeraj K. Sharma, Advocate, for

respondent No. 1.

Mr. J.S. Bhogal, Sr. Advocate, with Mr. Suneet Goel, Advocate, for respondent No. 2.

Justice Tarlok Singh Chauhan, Judge

This petition has been filed under Section 34 of the

Arbitration and Conciliation Act, 1996 (for short the Act) against the

award dated 20.05.2016.

2. Brief facts necessary for the adjudication of this petition

are that an Implementation Agreement (Annexure C-2) was entered

into on 01.10.1992 between the petitioner Company with the

government of Himachal Pradesh (Respondent No. 1 herein) for the

implementation of 300 MW Baspa Hydro Electric Project, Stage-II (for

short 'Project'), in District Kinnaur Himachal Pradesh.

::: Downloaded on - 30/11/2017 23:54:30 :::HCHP 2 3. As per this Implementation Agreement (for short the

'Agreement'), the petitioner being a generating Company was

granted right to establish, own, operate and maintain this project

.

subject to the approval of the Central Electricity Authority, including

transmission system upto Jhakri Sub Station of Nathpa Jhakri Hydro

Electric Project and permission to generate and sell power from the

above mentioned project for an initial period of 40 years from the

date of commissioning of project extendable for further period of 20

years.

4. As per Clauses 6 and 7 of the agreement, the

government was to acquire land for the company, such private

lands within the state of Himachal Pradesh as may be required by

the Company for the construction, operation and maintenance of

the project.

5. Clause 38 contained an arbitration clause wherein it

was provided that all disputes or differences out of or relating to or in

connection with the agreement, which could not be settled

amicably by the parties were to be referred to and settle by

arbitration.

6. Consequent upon the signing of the agreement, a

meeting was held in the office of Chairman of Himachal Pradesh

State Electricity Board (for short 'HPSEB') (Respondent No. 2) on

11.12.1992, wherein, as per para-3 of the record of discussion, it was

mentioned that:

::: Downloaded on - 30/11/2017 23:54:30 :::HCHP 3 "It was pointed out that the case for transfer of 48 bighas of land in possession of Himachal Pradesh State Electricity Board to the claimant company had been submitted to the Government for approval and it was decided that 48 bighas of land in possession of HPSEB may be transferred to the

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petitioner Company w.e.f. 01.01.1993 on lease basis."

7. As per record of discussion, the rate of lease and other

formalities were to be worked out with respondent No. 1 and the

rate of lease was to be applicable from the date when possession of

the land would be handed over to the petitioner.

8. That pursuant to the above, the Chief Engineer

(Projects), HPSEB vide his letter No. CEP/PBT-13/285/92-17974-75

dated 31.3.1993 (Annexure C-4) and letter No. CEP/PBT-13-285-93-

7451 dated 14.10.1993 (Annexure C-5) informed that the lease

charges shall be at the rate of 18% of the market rate per annum.

However, since the market rate had not been determined, the

petitioner deposited ` 50,000/- immediately which were to be

adjusted as and when the market rates were determined by the

Deputy Commissioner, Kinnaur.

9. Thereafter, a Status Review Committee meeting was

held on 25.03.1998 in the office of the Chairman, HPSEB,

(Respondent No. 2), which was attended to by the representatives

of the claimant Company also. The minutes of the said meeting

were circulated by the Chief Engineer (P&M) of the Himachal

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Pradesh State Electricity Board dated 17.04.1998. Para-3 of the said

Minutes of the Meeting reads as under:-

"Land Acquisition:- Shri Aggarwal requested Government of Himachal Pradesh to help in expediting the lease agreement

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and 48.1 bighas land at Sholtu. In this regard, it was intimated

that as the land belongs to the Department of MPP & Power, necessary formalities with regard to the signing of lease

agreement will be done by Joint Secretary (Board). The Company is to provide necessary lease papers on standard format to the JS (P) through the concerned Deputy Commissioner."

10. In the meanwhile, the petitioner company which was

earlier known as M/s Jaiparkash Industries Ltd. came to be changed

to that of M/s Jaiparkash Hydro Power Limited (JHPL)

11. Consequent to the aforesaid meeting, land measuring

48 bighas and 1 biswa i.e. 03-61-57 hectares comprised in Khasra No.

87, 88, 94, 97, 107, 121/1, 195, 197, 199, 200, 201, 202, 203, 204, 205,

209, 210, 211, 211/1, 228, 235, 242, 257, 207, 216, 217 & 218 kitta 27

measuring 3-61-57 hectare in Sholtu, District Kinnaur was handed

over to the petitioner Company on 16.01.1993. Later on land

measuring 27 bighas 7 biswas (02-04-20 hectares) comprised in

Khasra No. 99, 100, 194, 190, 187, 188, 189, 189/1, 229, 230, 231, 232,

233, 236, 283, 185, 109, 110, 112, 141, 89, 70, 76, 78, 84, 85, 220, 225,

248, 244, 240, 239, 237, 184, 243, 241, 238, 247, 83 & 250 kitta 40

measuring 2-04-20 hectare was handed over to the claimant

Company on 21.09.1998. Thus, in all, total land measuring 75 bighas 3

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biswas (05-65-77 hectares) at Up Muhal, Punang (Sholtu) was

handed over to the petitioner Company.

12. Earlier to that land measuring 00-69-75 hectares

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comprised in Khasra No. 425, 426, 427, 428, 429, 430, 431, 432, 434,

435, 436 & 437 Kitta 12 measuring 0-69-75 hectare at Kuppa, District

Kinnaur was also handed over to the petitioner Company on

16.02.1993 by respondent No. 2.

13. According to the petitioner, the aforesaid lands were

handed over to the petitioner Company on the terms and

conditions to be decided by the Himachal Pradesh Government

according to Himachal Pradesh Lease Rules, 1993, for which purpose

it had been constantly pursuing the matter with the government and

eventually the lease deeds were finalized and signed between

respondent No. 2 and the petitioner vide Annexure C-7.

14. As per lease deed so executed, the lease money for the

land measuring 03-61-57 hectares in Sholtu was fixed @ ` 1241/- per

annum on the basis of the rates so fixed by the Deputy

Commissioner, Kinnaur. This lease was for a period of 50 years and

deemed to have commenced from 16.01.1993. Similarly, lease deed

for area measuring 02-04-20 hectares in Punang (Sholtu) was

executed for lease money of `47,458/- per annum, on the bases of

the rates so fixed by the Deputy commissioner, Kinnaur. This lease

deed was for a period of 45 years and was deemed to have

commenced from 21.09.1998. As far as, third lease deed of the land

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at Kuppa is concerned, the lease was for a period of 50 years and

was deemed to have commenced from 16.02.1993. However, lease

amount for this land was not determined as no rates were intimated

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by the Deputy Commissioner, Kinnaur at the time of signing of the

lease deed and the same was to be intimated subsequently.

15. After signing of the aforesaid lease deed, the petitioner

approached respondent No. 2 for grant of 'No Objection

Certificate' for mortgaging the land with the financial

institutions/banks vide letter dated 04.01.2001. At that stage, it was

insisted by respondent No. 2 that the petitioner will have to give an

undertaking to permit the respondent No. 2 to revise the lease deed

on the ground that the rent had not been fixed by the Deputy

Commissioner in case of one out of three lease deeds. Consequent

upon the signing of such undertaking the respondent No. 2 issued

desired 'No Objection Certificate'.

16. According to the petitioner, as per the undertaking

given by it to respondent No. 2 before issuance of 'No Objection

Certificate', notification permitting the petitioner to mortgage the

land in favour of the financial institutions/banks, revised rates were to

be determined by the Electricity Board by 31.03.2001. However, no

such rates were determined or fixed by the Board or ever informed

to the petitioner Company by respondent No. 2 on or before

31.03.2001. On the contrary, the Chief Engineer (PSP&SO) of the

respondent-Board vide his letter dated 07.08.2001 sent draft lease to

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the petitioner, which according to it, in violation of the terms and

conditions and spirit of lease agreement signed on 30.12.2000, which

was to hold good for the period mentioned therein. Rates/revised

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rates which were now assessed and mentioned in the draft lease

deeds were extremely on the higher side, exaggerated or without

any basis or justification. The computation, calculation and

formulation of revised lease deeds and the rates contained therein

were done unilaterally and suo motu by respondent No. 2 and the

petitioner was not at all associated in preparation of the said revised

draft lease deeds. The revised draft lease deeds sent by respondent

No. 2 provided for the lease rent as mentioned below:-

Sl. Location Area in Lease money as per Amount as per No. Hectare original lease deeds revised lease signed on 30.12.2000 on deeds on the basis the basis of rates of DC, of HPSEB's own Kinnaur rates sent on 07.08.2001

1. Sholtu (Patch 03-61-57 ` 1241/- p.a ` 2,24,033/- p.a. No.1)

2. Sholtu 02-04-20 ` 47,458/- p.a. ` 2,48,641/- p.a

(Patch No.2)

3. Land at 00-69-75 Amount not intimated by ` 58,270/- p.a. Kuppa DC, Kinnaur at the time of

signing of lease deeds. It was to be intimated later on.

17. According to the petitioner, written undertaking

furnished by it as a principal condition for issuance of 'No Objection

Certificate' by respondent No. 2 did not confer upon it any arbitrary

right to increase the lease amount upto 180 times on the originally

fixed amount and, therefore, in these circumstances, it refused to

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accept the arbitrary conditions and took up the matter with the

Chairman of the respondent-Board, who, in turn, directed the Chief

Engineer (PSP) of respondent No. 2 to get the rates fixed as per the

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Himachal Pradesh Lease Rules, 1993.

18. Accordingly, the Chief Engineer (PSP) addressed a letter

to the Deputy Commissioner, Kinnaur dated 24.08.2002, who, in turn,

sent the requisite rates vide his letter dated 14.11.2002. However, the

petitioner did not receive any information in this behalf from the

respondent-Board and, therefore, it independently took exercise to

work out the lease rent amount as per calculated rates given by the

Deputy Commissioner, Kinnaur. According to the petitioner, the

lease rent amount worked out to ` 14,73,455/- up to 31.12.2013.

19. In addition to the above said amount of lease, the

petitioner also took on rent basis accommodations from respondent

No.2, the details whereof are as under:-

a) Four sets of one room each at Sholtu

b) One set of three rooms at Sholtu.

c) Repair shop at Kuppa.

d) Store shed at Kuppa.

20. Respondent No. 2 vide its letter dated 13.08.2003 urged

the petitioner to deposit the lease rent of the aforesaid

accommodation, which according to the petitioner was found to

be higher side and accordingly it made a representation to this

effect.

::: Downloaded on - 30/11/2017 23:54:30 :::HCHP 9 21. The petitioner has drawn a comparative table of the

rent worked out by HPSEB and the rent worked out by HPPWD to

show that the rates are excessive, which reads thus:-

.

Sl. Name of Building Plinth Annual Rent Annual Rent No. Area in as Charged as per HPPWD

Sqm. by HPSEB norms 1. Store shed at Kuppa (The 126.90 80,867/- 19,195 building was totally damaged on 31.03.2011 due to land slide

during the snowfall.) 2. Repair shop at Kuppa 61.08 72,948/- 9,208/- 15,789/- 3. Three room one set at Sholtu 70.00 21,550/- 10,794/- 4. One room four set at Sholtu 134.00 46,164/- 20,970/-

22. However regardless of the representation, respondent

No. 2 issued a final notice asking the petitioner to deposit lease rent

amounting to ` 3,95,40,698/- up to 31.12.2009 vide letter dated

09.09.2010.

23. In response, the petitioner made representation to the

Chairman of respondent No. 2 vide letter dated 18.09.2010 for

review of the amount as the same was unreasonable. However,

without acceding to the request of the petitioner, respondent No. 2

deducted the aforesaid amount of ` 3,95,40,698/- from the payment

of energy bill of the petitioner for the month of September, 2010 for

which according to the petitioner there was no such provisions in the

Power Purchase Agreement or the Implementation Agreement.

24. Subsequently, on 14.03.2014, respondent No. 2 again

sent a bill of lease rental charges of land and accommodation at

Sholtu and Kuppa amounting to `12,49,59,514/- for the period

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01.01.2010 to 31.12.2013. This constrained the petitioner to take up

the matter with respondent No. 2 and the government on various

occasions from time to time. However, respondent-Board did not

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accede to the said requests and kept on issuing bills for the lease

rental charges.

25. This constrained the petitioner to approach this Court by

way of petition under Section 9 of the Arbitration and Conciliation

Act, 1996 for interim measures of protection. This petition came up

for consideration on 10.12.2014 and instead of passing any interim

order, the Court proceed to appoint Arbitral Tribunal to adjudicate

the dispute between the parties, in view of the Arbitration Clause in

the Implementation Agreement.

26. Consequent upon the matter having been referred to

the Arbitral Tribunal, the petitioner filed its claim, however, during the

pendency of the claim petition, the respondent No. 2 deducted an

amount of `12,49,59,514/- as the lease rental from the energy bill,

constraining the petitioner to file supplementary claim.

27. The details of the claim including the supplementary

claim filed by the petitioner reads thus:-

Claim No. 1 - Declare the lease rentals as are being asked to be deposited by the respondent No. 2 HPSEBL for the land and accommodation taken on lease to be bad in law, exorbitant, exaggerated and not in consonance with the H.P. Lease Rules, 1993 as also H.P. Lease Rules, 2013 and prevailing market rates of the leased land and quash annexure C-19 and also set aside Bill dated 14.03.2014 (Annexure C-17), i.e.

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bill of lease rent charges of land and accommodation at Sholtu & Kuppa amounting to Rs.12,49,59,514/- from 01.01.2010 to 31.12.2013.

Claim No. 2 - Declare the act of the respondent No. 2 of fixing the lease rental of the land measuring 3-61-57 hectares

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comprised in Khasra No. 87, 88, 94, 97, 107, 121/1, 195, 197,

199, 200, 201, 202, 203, 204, 205, 209, 210, 211, 211/1, 228, 235, 242, 257, 207, 216, 217 & 218 Kita 27 and of land measuring

02-04-20 hectares comprised in Khasra No. 99, 100, 194, 190, 187, 188, 189, 189/1, 229, 230, 231, 232, 233, 236, 283, 185, 109, 110, 112, 141, 89, 70, 76, 78, 84, 85, 220, 225, 248, 244, 240, 239, 237, 184, 243, 241, 238, 247, 83 & 250 Kita 40 as arbitrary,

without jurisdiction for the reason that the Deputy Commissioner, Kinnaur had already fixed the lease rentals for these pieces of land and the respondent No. 2 HPSEBL had

no authority to fix arbitrarily exorbitant rates for these pieces

of land leased to the claimant and that too behind the back of the claimant.

Claim No. 3 - Direct the respondent No. 2 HPSEBL to refund to the claimant an amount of Rs.3,95,40,698/- which was

wrongly and illegally deducted by respondent No. 2 from the energy bills of claimant company for the month of September, 2010 alongwith interest @ 18% per annum.

Claim No. 4 - Declare the deduction made from energy bills

by respondent No. 2 Board of Rs.12,49,59,514/- as lease rental from 01.01.2010 to 31.03.2013 and communicated to the claimant company, vide letter dated 06.02.2015 as annexure

C-21 as arbitrary, illegal and wholly unjustified since the respondent no. 2 is not entitled to the said amount. As such the said deduction by respondent No. 2 Board is bad in law and the claimant company is entitled to be refunded back the said amount of Rs.12,49,59,514/- from the date of recovery/adjustment till the date of actual payment of 18% per annum.

::: Downloaded on - 30/11/2017 23:54:30 :::HCHP 12 28. Respondent No. 1 - State of Himachal Pradesh despite

service did not put in appearance and was proceeded ex parte

vide order dated 18.07.2015, while respondent No. 2 appeared and

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contested the petition by filing reply wherein it raised various

preliminary issues/points to the effect that the statement of claim

had not been filed by a competent person on behalf of the

petitioner company, therefore, the same was liable to be dismissed.

It was stated that the claim petition was hopelessly barred by time

and the petitioner was stopped by its own acts, deeds and conduct

from filing the present claim petition and that the petitioner did not

have any cause of action against respondent No. 2.

29. In addition thereto, a preliminary objection was also

taken to the effect that declaration as sought by the petitioner

being a specific relief could only be granted by the regular Court

and the Tribunal, therefore, had no jurisdiction to try the case on this

count.

30. On merit, respondent No. 2 denied that the land, which

was transferred by the petitioner, was purchased by the State of

Himachal Pradesh on the payment of `2,08,053/- as alleged by the

petitioner and it was clarified that the land was in fact purchased by

respondent No. 2 itself from the Industry Department for a total

consideration of ` 5,29,564.65 paise. It was denied that the terms of

the lease were to be decided in accordance with the H.P. Lease

Rules, 1993 and it was rather clarified that while handing over the

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land to the claimant, it had been made clear that "Rate of the lease

and other formalities can be worked out in consultation with the

Government of H.P. as per minutes of meetings dated 11.12.1992

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(Annexure C-3)". It was further stated that the lease deed dated

30.12.2000 (Annexure C-7), was followed by an undertaking on the

same day i.e. 30.12.2000 (Annexure C-10). It was further stated that

after execution of the lease deed the petitioner had sought to

secure permission/no objection of respondent No. 2 to mortgage the

lease rights with financial institutions, which it would have not done

for the meagre value of the land as is being claimed by the

petitioner and it is on this count that petitioner had very cleverly not

mentioned the amount for which it had mortgaged the lease hold

rights with the financial institutions.

31. It was further submitted that even though the possession

of two tracts of land had been taken in 1993 and one part in 1998

respectively, yet the petitioner kept on delaying the execution of the

lease despite repeated requests from the respondent. The

undertaking (Annexure C-10) was given by the petitioner on the

same day i.e. 30.12.2000 when the lease deed was signed and in

terms thereof, respondent No. 2 was to fix the lease rates by

31.03.2001. However, the said rates were fixed on 31.05.2001 vide

annexure R-3. It has been specifically denied that the draft lease

deed sent vide letter dated 07.08.2001 was in violation of the terms

of the original agreement. In terms of the undertaking executed by

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the petitioner the rates of the lease were to be fixed by respondent

No. 2 in respect of three parcels of land including built up portion.

After the rates had been fixed the petitioner did not

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challenge/question the same at any point of time as the petitioner

had failed to pay due and outstanding amount. It was averred that

respondent No. 2 in the given circumstances was well within its right

to recover the said amount by deducting the same from the energy

bills of the petitioner.

32. The petitioner filed rejoinder wherein the contents of the

reply were denied and the contents of the petition were reiterated.

It was reiterated that the statement of claim had been filed by a

competent person. Likewise, the legal pleas as raised by respondent

No. 2 in its reply were also denied. It was reiterated that the rates of

the lease of the land which was handed over to the petitioner were

to be decided in accordance with the Himachal Pradesh Lease

Rules, 1993. It was also submitted that the undertaking filed by the

petitioner was being read out of context by the replying respondents

wherein the intent of the undertaking and the same had been given

by the petitioner on the instance of the respondents as 'No

Objection Certificate' was issued by it to mortgage the land to

financial institutions for achieving financial closure of the project itself

explains that the undertaking was to the satisfaction of the

respondents. It was further reiterated that the lease amount which

had been arrived at by respondent No. 2 were not only on higher

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side but also arbitrary and even arrived at unilaterally by respondent

No. 2 by applying parameters unknown to law.

33. The petitioner also annexed copy of award dated

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05.05.2011 in support of his contention that the actual cost of land

was only `42,567/- per biswa and not `1,04,000/- per biswa as had

been worked out by respondents that too not on the basis of the

actual value of ` 42,567/- as find mentioned in the award though

itself to be the matter of settlement arrived at between owner of the

land and HPPCL for whose benefit land was acquired wherein the

mutually settled rate of `1,04,000/- per biswa, which in no

circumstance can be said to be the actual value which remain at `

42,567/-. The petitioner has further reiterated that respondent No. 2

had no jurisdiction to deduct the lease amount from the energy bills

of the petitioner.

34. On the basis of the aforesaid pleadings, the Arbitral

Tribunal proceeded to determine the lis wherein only the petitioner

led evidence while respondent No. 2 did not chose to lead

evidence.

35. After recording evidence of the petitioner and

evaluating the same, the learned Tribunal at the time of its final

decision formulated the following points for determination:-

1. Whether the claim as filed on behalf of the claimant company is not by a competent person, if so, what is the effect?

::: Downloaded on - 30/11/2017 23:54:30 :::HCHP 16 2. Whether the relief of declaration as sought by the claimant is not arbitral and the Tribunal has no jurisdiction to adjudicate upon the same?

3. Whether the claim is barred by time?

4. Whether the claimant is estopped by its act and conduct

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from filing the present claim?

5. Whether the claimant is entitled to the relief as laid under claim No. 1 and claim No. 2?

6. Whether respondent No. 2 was justified in deducting the amount of Rs.3,95,40,698/- and Rs.12,49,59,514/- respectively from the energy bills of the claimant company as alleged and if not whether the amounts are

liable to be refunded to the claimant?

36. Points No. 1, 3, 4, 5 and 6 were answered in favour of

respondent No. 2 and against the petitioner, whereas point No. 2

was answered in favour of the petitioner and against respondent No.

2.

37. Admittedly, respondent No. 2 has not assailed the

finding on point No. 2 and the same has thus attained finality.

I have heard learned counsel for the parties and have

gone through the records of the case.

Scope and ambit of Section 34

38. The scope and ambit of Section 34 of the Act has been

considered by a Coordinate Bench of this Court in Arbitration Case

No. 60 of 2015, titled as Sh. Ashok Kumar Thakur versus State of

Himachal Pradesh & Anr., decided on 09.03.2016, 2016 (2) SLJ 640 =

2016 (2) ILR HP, and it was observed as under:-

::: Downloaded on - 30/11/2017 23:54:30 :::HCHP 17 "3. It is settled proposition of law that award can be set aside only within the exceptions stipulated under Section 34, which has to be read in conjunction with Section 5 of the Act, wherein it is provided that no judicial authority shall intervene with the award, save and except as provided in Part - I of the

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Act, wherein Section 34 also finds place.

4. Courts cannot proceed to comparatively adjudicate merits of the decision. What is to be seen is as to whether

award is in conflict with the Public Policy of India. Merits are to be looked into only under certain specified circumstances i.e. being against the Public Policy of India, which connotes public good and public interest. Award which is ex facie and

patently in violation of the statutory provisions cannot be said to be in public interest.

5. In Oil & Natural Gas Corporation Ltd. Vs. Saw Pipes Ltd.

(2003) 5 SCC 705 the Court reiterated the principle laid down

in Renusagar Power Co. Ltd. vs. General Electric Co., 1994 Supp (1) SCC 644 holding that the award can be set aside if it is contrary to: (a) the fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality, or (d) in

addition, if it is patently illegal. However, such illegality must go to the root of the matter and if it is trivial in nature, then it cannot be said to be against public policy. Only such of

those awards which, being unfair and unreasonable, shocks

the conscious of the court can be interfered with.

6. The principles continued to be reiterated by the apex

Court in McDermott International Inc. vs. Burn Standard Co.

Ltd. (2006) 11 SCC 181 and Centrotrade Minerals & Metals Inc. vs. Hindustan Copper Ltd. (2006) 11 SCC 245.

7. Eventually in DDA vs. R. S. Sharma and Co. (2008) 13 SCC 80 the Court culled out the following principles:

"21. From the above decisions, the following principles emerge:

::: Downloaded on - 30/11/2017 23:54:30 :::HCHP 18 (a) An award, which is

(i) contrary to substantive provisions of law; or

(ii) the provisions of the Arbitration and Conciliation Act, 1996; or

(iii) against the terms of the respective contract; or

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(iv) patently illegal; or

(v) prejudicial to the rights of the parties;

is open to interference by the court under Section 34(2) of the Act.

(b) The award could be set aside if it is contrary to:

(a) fundamental policy of Indian law; or

(b) the interest of India; or

(c) justice or morality.

(c) The award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court.

r (d) It is open to the court to consider whether the award is against the specific terms of contract and if so, interfere with

it on the ground that it is patently illegal and opposed to the public policy of India."

8. Recently the apex Court in Associate Builders vs. Delhi

Development Authority (2015) 3 SCC 49 has further explained the meaning of the words "fundamental policy of Indian

law"; "the interest of India"; "justice or morality"; and "patently illegal". Fundamental policy of Indian law has been

held to include judicial approach, non violation of principles of natural justice and such decisions which are just, fair and reasonable. Conversely such decisions which are perverse or

so irrational that no reasonable person would arrive at, are held to be unsustainable in a court of law. The Court observed that:-

"29. It is clear that the juristic principle of a "judicial approach" demands that a decision be fair, reasonable and objective. On the obverse side, anything arbitrary and

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whimsical would obviously not be a determination which would either be fair, reasonable or objective.

30. The audi alteram partem principle which is undoubtedly is a fundamental juristic principle in Indian law is also contained in Sections 18 and 34 (2)(a) (iii) of the Arbitration

.

and Conciliation Act. These sections read as follows:

"18. Equal treatment of parties. - The parties shall be treated with equality and each party shall be given

a full opportunity to present his case.

* * *

34. Application for setting aside arbitral award. - (1) * * *

(2) An arbitral award may be set aside by the court only if -

(a) the party making the application furnishes proof that -

r ***

(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case'"

31. The third juristic principle is that a decision which is

perverse or so irrational that no reasonable person would have arrived at the same is important and requires some degree of explanation. It is settled law that where:

(i) a finding is based on no evidence, or

(ii) an Arbitral Tribunal takes into account something

irrelevant to the decision which it arrives at; or

(iii) ignores vital evidence in arriving at its decision,

such decision would necessarily be perverse."

9. Further, in the very same decision, while relying upon Excise and Taxation Officer-cum-Assessing Authority vs. Gopi Nath & Sons, 1992 Supp (2) SCC 312; Kuldeep Singh vs. Commr. of Police, (1999) 2 SCC 10; and P. R. Shah, Shares & Stock Brokers (P) Ltd. vs. B.H.H. Securities (P) Ltd., (2012) 1 SCC 594, the Court clarified the meaning of the expression 'perverse'

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so as to include a situation where the Arbitrator proceeds to ignore or exclude relevant material or takes into consideration irrelevant material resulting into findings which are so outrageous, that it defies logic and suffers from the vice of irrationality. What would be "patent illegality" was

.

clarified in the following terms:-

"42. In the 1996 Act, this principle is substituted by the "patent illegality" principle which, in turn, contains three

subheads:

42.1. (a) A contravention of the substantive law of India would result in the death knell of an arbitral award. This must be understood in the sense that such illegality must go to the root of the matter and cannot be a of a trivial nature.

This again is really a contravention of Section 28(1)(a) of the Act, which reads as under:

"28. Rules applicable to substance of dispute. - (1) Where the place of arbitration is situated in India - r (a) in an arbitration other than an international commercial arbitration, the Arbitral Tribunal shall

decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India;"

42.2. (b) A contravention of the Arbitration Act itself

would be regarded as a patent illegality - for example if an arbitrator gives no reasons for an award in contravention of Section 31(3) of the Act, such award will be liable to be set aside.

42.3.(c) Equally, the third subhead of patent illegality is really a contravention of Section 28(3) of the Arbitration Act, which reads as under:

"28. Rules applicable to substance of dispute. -

(1) - (2) * * *

(3) In all cases, the Arbitral Tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction."

This last contravention must be understood with a caveat. An Arbitral Tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award

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can be set aside on this ground. Construction of the terms of a contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said to be something that no fair-minded or reasonable person could do.

43. In McDermott International Inc. vs. Burn Standard Co. Ltd. (2006) 11 SCC 181, this Court held as under:

.

"112. It is trite that the terms of the contract can be express or implied. The conduct of the parties would also be a relevant factor in the matter of construction of a contract. The

construction of the contract agreement is within the jurisdiction of the arbitrators having regard to the wide nature, scope and ambit of the arbitration agreement and they cannot be said to have misdirected themselves in passing the award by taking

into consideration the conduct of the parties. It is also trite that correspondences exchanged by the parties are required to be taken into consideration for the purpose of construction of a contract. Interpretation of a contract is a matter for the arbitrator to r determine, even if it gives rise to determination of a question of law. [See: Pure

Helium India (P) Ltd. v. Oil and Natural Gas Commission, (2003) 8 SCC 593 and D.D. Sharma v. Union of India, (2004) 5 SCC 325].

113. Once, thus, it is held that the arbitrator

had the jurisdiction, no further question shall be raised and the court will not exercise its jurisdiction unless it is found that there exists any bar on the face of the award."

44. In MSK Projects (I) (JV) Ltd. v. State of Rajasthan, (2011) 10 SCC 573, the Court held:

"17. If the arbitrator commits an error in the construction of the contract, that is an error within his jurisdiction. But if he wanders outside the contract and deals with matters

not allotted to him, he commits a jurisdictional error. Extrinsic evidence is admissible in such cases because the dispute is not something which arises under or in relation to the contract or dependent on the construction of the contract or to be determined within the award. The ambiguity of the award can, in such cases, be resolved by admitting extrinsic evidence. The rationale of this rule is that the nature of the dispute is something which has to be determined outside and independent of what appears in

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the award. Such a jurisdictional error needs to be proved by evidence extrinsic to the award. [See: Gobardhan Das v. Lachhmi Ram, AIR 1954 (SC) 689, Thawardas Pherumal v. Union of India, AIR 1955 (SC) 468, Union of India v. Kishorilal Gupta & Bros., AIR 1959 (SC) 1362, Alopi Parshad & Sons Ltd. v. Union of India, AIR 1960 (SC) 588, Jivarajbhai Ujamshi

.

Sheth v. Chintamanrao Balaji, AIR 1965 (SC)

214 and Renusagar Power Co. Ltd. v. General Electric Co., (1984) 4 SCC 679.]"

45. In Rashtriya Ispat Nigam Ltd. v. Dewan Chand

Ram Saran, (2012) 5 SCC 306, the Court held:

"43. In any case, assuming that Clause 9.3 was capable of two interpretations, the view taken by the arbitrator was clearly a possible if not a plausible one. It is not possible to say that the

arbitrator had travelled outside his jurisdiction, or that the view taken by him was against the terms of contract. That being the position, the High Court had no reason to interfere with the award and substitute its view in place of the interpretation accepted by the arbitrator.

44. The legal position in this behalf has been

summarised in para 18 of the judgment of this Court in SAIL v. Gupta Brother Steel Tubes Ltd., (2009) 10 SCC 63 and which has been referred to above. Similar view has been taken later in Sumitomo Heavy Industries Ltd. v. ONGC Ltd.,

(2010) 11 SCC 296 to which one of us (Gokhale, J.) was a party. The observations in para 43 thereof are instructive in this behalf.

45. This para 43 reads as follows: (Sumitomo case,

(2010) 11 SCC 296, SCC p. 313)

'43. ... The umpire has considered the fact

situation and placed a construction on the clauses of the agreement which according to him was the correct one. One may at the highest say that one would have preferred

another construction of Clause 17.3 but that cannot make the award in any way perverse. Nor can one substitute one's own view in such a situation, in place of the one taken by the umpire, which would amount to sitting in appeal. As held by this Court in Kwality Mfg. Corpn. v. Central Warehousing Corpn., (2009) 5 SCC 142 the Court while considering challenge to arbitral award does not sit in appeal over the findings and decision of the arbitrator, which is what the High Court has practically done in this matter.

::: Downloaded on - 30/11/2017 23:54:30 :::HCHP 23 The umpire is legitimately entitled to take the view which he holds to be the correct one after considering the material before him and after interpreting the provisions of the agreement. If he does so, the decision of the umpire has to be accepted as final and binding.' " "

.

39. At the outset, it may be observed that even though this

Court held marathon hearings but most of the points as raised by the

petitioner were never raised before the learned Arbitrator and some

of the objections have only been raised for the first time in the oral

arguments before the Court.

No procedure followed by Arbitral Tribunal

40. It is vehemently argued by Shri R.L. Sood, Sr. Advocate,

duly assisted by Mr. Sunil Mohan Goel, Advocate, that the arbitral

award on the face of it, is not sustainable, as the Tribunal has failed

to follow any procedure and even the procedure so followed and

adopted was never informed to the parties. That apart, even the

points of determination were only formulated at the time of

arguments.

41. Section 19 of the Act determines the rules of procedure

of the Arbitral Tribunal, which reads thus:-

"19. Determination of rules of procedure.- (1) The arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 (2 of 1905) or the Indian Evidence Act, 1872 (1 of 1872). (2) Subject to this Part, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings.

::: Downloaded on - 30/11/2017 23:54:30 :::HCHP 24 (3) Failing any agreement referred to in sub-section (2), the arbitral tribunal may, subject to this Part, conduct the proceedings in the manner it considers appropriate. (4) The power of the arbitral tribunal under sub-section (3) includes the power to determine the admissibility, relevance,

.

materiality and weight of any evidence."

42. Noticeably, the petitioner right through the entire

proceedings never ever objected to the procedure being followed

by the Arbitral Tribunal and having participated without any demure

is estopped from laying challenge to the award on this count.

Moreover, the petitioner has also not been in a position to show any

prejudice much less serious prejudice caused to it on account of

procedure followed by the Tribunal which in the instant case was

that of any civil proceeding.

Award not passed by majority

43. It is then argued by the petitioner that the award passed

by the Tribunal cannot be said to be an award by majority as two

members out of three members of the Tribunal were only dummies.

Even otherwise the petitioner was entitled to the benefit of

knowledge, wisdom and experience of all the arbitrators which

should have been reflected in the award. He further argued that in

absence of any joint deliberation, the mere signing of the award by

the two co-arbitrators would not make it an award passed by a

majority. In support of such contention, the petitioner has relied upon

the following judgments:-

::: Downloaded on - 30/11/2017 23:54:30 :::HCHP 25 1.Abu Hamid versus Gulam Sarvar, (1918) Cal 865 (866)

2.Sheikh Abdhulla versus MVRS Firm and Sons, 1924 Rangoon 153 (154).

3. Moti versus Sheroo (2009) 6 MHLJ 535

4.Maharashtra State Electricity Distribution Company versus

.

Deltron Electronics, 2016 SCC Online Bom. 9521

5.Maganlal Gangaram vs. Ramaji Bondarji, AIR 1966 Madhya Pradesh 177 D.B.

6. Kuldeep Krishan Sood vs. Gulmohar Tourist Complex, 2012 SCC Online HP 157 DB

7. Maharashtra State Electricity distribution Company Ltd. vs. Deltron Electronics, 2016 SCC Online Bombay 9521

44.

Even these contentions are simply without merit for the

reason that the award is duly signed by the Principal Arbitrator as

also two co-arbitrators. Nowhere have the co-arbitrators or any one

of them expressed even the slightest dissent to the award. The joint

deliberations between the arbitrators are amply proved from the

fact that all the arbitrators have joined in the deliberations and have

attended the important meetings in which the crucial questions for

decision were deliberated. No doubt one of the arbitrators had not

attended or has not signed the proceedings on 20.9.2015, 8.10.2015,

6.12.2015, 17.12.2015 and 15.1.2016 but even on those dates no

crucial questions for decision were deliberated upon. The judgments

relied upon by the petitioner would only apply in case there had

been implied or express dissent or disagreement by any one or both

of the co arbitrators with the Principal Arbitrator. In absence of any

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material to suggest even remotely that there was any dissent, the

judgments relied upon by the petitioner are of no avail.

45. All the authorities as relied upon by the learned counsel

.

for the petitioner only deal with the question that all the arbitrators

must join, act, deliberate and participate in all the proceedings and

must have discussion before making the award. How the ratio laid

down in those judgments helps the petitioner is anybody's guess as

there is nothing even remotely to suggest that there was no joint

deliberation of all the arbitrators before making the award, rather it

has specifically come on record that all the arbitrators had

participated in the effective hearings.

46. In fact, the Hon'ble Bombay High Court in Moti's case

(supra) as was relied upon by the learned counsel for the petitioner

has gone to the extent of holding that even if there was a failure of

one of the arbitrators to sign the arbitral award, the same would not

have any effect on the validity of the award. The reason being that

when the arbitral proceedings have been conducted by all the

arbitrators sitting together as a body and there is a joint participation

of all the arbitrators, then one arbitrator cannot stultify the

proceedings by inaction, though a majority has agreed upon and

signed its award.

47. The learned Division Bench of Bombay High Court has

taken note of the judgment of the Patna High Court in Raghubir

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Pandey and another vs. Kaiilesar Pandey and others, 1945 AIR(Pat)

140. In that case, though all the three arbitrators had jointly

deliberated upon the matter in controversy, one of the arbitrators

.

had not signed the arbitral award though as a matter of fact, he

was in agreement with the view of the majority. The Court rejected

the challenge to the validity of the arbitral award holding that the

fact that one of the arbitrators had not signed the award would not

impinge upon the validity of the award. The Court held thus:-

"......... A review of all these cases satisfies me that the true principle upon which the matter is to be decided is to find in a particular case whether all the arbitrators have joined in rthe deliberation or have attended the important meetings in

which the crucial questions for decision were deliberated. If one or more of the arbitrators have not joined in the deliberation, the award is invalid if it is not signed by an

arbitrator even though he may choose to sign it later on. Again, if all the arbitrators have joined in the deliberation and there is a distinct provision in the agreement between the

parties that the award of the majority will be binding, in that case the failure, deliberate or accidental, of one of the

arbitrators to sign the award will not make it invalid......."

48. The Division Bench further held that signing of the award

was not a judicial act but was merely a record of that which had

already been done in the judicial exercise of the functions of the

arbitrators.

::: Downloaded on - 30/11/2017 23:54:30 :::HCHP 28 49. Similar observations have been made by the Division

Bench of the Hon'ble High Court of Calcutta in Ramtaran Das vs.

Adhar Chandra Das and others, 1953 AIR(Cal) 646 and by Division

.

Bench of the Madras High Court in Johara Bibi and others vs.

Mohammad Sadak Thambi Marakayar and others, 1951 AIR(Mad)

997, wherein the Court held that the signing of the award is only a

formality once it was demonstrated that the arbitrator who refused

to sign the award had taken part in the arbitration proceedings

throughout and was a party to the decision.

50. Section 29 of the Arbitration and Conciliation Act, 1996

provides that - unless otherwise agreed by the parties, in arbitral

proceedings with more than one arbitrator, any decision of the

arbitral tribunal shall be made by a majority of its members.

51. Sub Section (1) of Section 31 provides that an arbitral

award shall be made in writing and shall be signed by the members

of the Arbitral Tribunal. While sub section (2) lays down that the

purposes of sub section (1), in arbitral proceedings with more than

one arbitrator, the signature of the majority of all members of the

Arbitral Tribunal shall be sufficient so long as the reason for any

omitted signature is stated.

52. Indubitably in the present case, the award is unanimous

and there is no dissent by any of the arbitrators. It has also come on

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record that the proceedings were conducted by all the arbitrators

sitting together as a body and there was a joint participation of all

the arbitrators, therefore, none of the judgments as cited by the

.

learned counsel for the petitioner has any application to the fact

situation obtaining in the instant case.

Arbitral Tribunal acted against fundamental Policy of Law

53. Learned senior counsel for the petitioner would then

vehemently argue that learned Tribunal has erred in law and acted

against the declared fundamental policy of law in relying upon the

undertaking obtained from the petitioner by respondent No. 2 as the

same was in violation of Sections 91 and 92 of the Evidence Act as

the lease deed dated 30.12.2000 had been reduced to the form of

a document as required under law, the terms whereof were

protected and governed by Section 91 of the Indian Evidence Act.

As such the undertaking (Annexure C-10) could not have been read

in evidence to permit the respondent to revise/increase arbitrarily

the lease rental mentioned therein. In any case, the lease rental had

to be determined at the then prevailing rates i.e. at the time when

possession of the land was handed over by respondent No. 2 to the

petitioner.

54. On the other hand, Shri J.S. Bhogal, Senior Counsel,

would submit that the undertaking (Annexure C-10) given by the

petitioner authorizing the replying respondent to revise/increase the

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lease rental so executed by the petitioner knowing fully well that the

lease rate on the basis of the rate fixed by the Deputy Commissioner,

Kinnaur were on the lower side compared to the value of the land

.

leased out to the petitioner. The petitioner was also aware that on

account of the fact that there were very few sales in the area, it was

not possible for the Deputy Commissioner, Kinnaur to assess the fair

volition market rate and on that basis the petitioner had out of its

own free will and agreed to have the rate fixed by the answering

respondent. The provisions of the Evidence Act relied upon by the

petitioner are otherwise not applicable to the arbitration

proceedings in terms of Section 19 of the Arbitration and

Conciliation Act and, therefore, reliance placed on such provisions

by the petitioner is totally misplaced. The learned Tribunal has rightly

considered the contention of the petitioner in this regard and

thereafter passed the impugned award, which deserves to be

upheld.

55. Having regard to Section 1 read with Section 19 of the

Arbitration Act, this Court has no difficulty in concluding that the

provisions of the Evidence Act have not been made applicable to

the arbitral proceedings and, therefore, the bar created under

Sections 91 and 92 of the Evidence Act cannot by its own force

apply to the arbitration proceedings. Even though the basic

principle of judicial determination applied to such proceedings,

which would include the principles of natural justice as are required

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to be followed so as to ensure and maintain fairness and

reasonableness of procedure.

56. However, the learned counsel for the petitioner would

.

still maintain that no amount of oral evidence can be permitted to

be led by respondent wherein the terms of the lease deed and

further that Section 92 prohibits only the bearing of the dispositive

operative terms of the document and not the memorandum or

recital of facts contained therein. Therefore, Section 92 is a

substantive law and not a procedural law and consequently Section

92 of the Evidence Act will have application even in respect of

arbitration proceedings and it was, therefore, not open to the

second respondent to place reliance on the so called 'undertakings'

furnished by the petitioner.

57. Even though the learned counsel for the petitioner has

cited a number of judgments like Chanderbhan vs. Ganpatrai and

sons 1944 Cal. 127, Aboobkaker Latif vs. Reception Committee, 1937

Bim. 410, 416, Bengal Jute Mill vs. Lal Chand, 1963 Cal. D.B. 405 and

Roop Kumar vs. Mohan Thedani (2003) 6 SCC 595, in support of his

contentions with regard to scope and ambit of Sections 91 and 92 of

the Evidence Act, however, he has failed to convince this Court as

to how the provisions and thereafter the ratio of the judgment would

apply to the facts of the instant case, particularly, when it is not the

case of the petitioner that it did not execute the undertaking

(Annexure C-10) on 30.12.2000 thereby undertaking to pay the lease

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rental to respondent No. 2 at the rate as would be determined by

respondent No. 2 as is evident from clause 1 of the undertaking

which reads thus:-

.

"The lessee shall pay the lease rental to Himachal Pradesh

State Electricity Board at the rates as shall be determined by the Himachal Pradesh State Electricity Board by 31st March, 2001. Lease rentals shall be payable by lessee for the period

commencing from the date of handing over of the possession of land to the lessee."

58. As has rightly been observed and taken note of by the

Tribunal, the petitioner had never questioned the undertaking and

the only protest made by it vide its letter dated 18.09.2010 and even

thereafter was with regard to levy of compound interest @ 16% per

annum as would be evident from perusal of the aforesaid letter. The

relevant portion whereof reads thus:-

"1) Levy of Compound interest @ 16% per annum:

A copy of Clause 19 of the Implementation Agreement is

enclosed herewith as Annexure -"B". The levy of compound interest @ 16% is applicable to the one time payments

regarding investigation and infrastructure works of the Project. It is not applicable to recurring payments such as

lease rent, the payment of which is to be governed by lease deeds, in which there is no such provision.

2) In the discussions of various meeting held with the Committee constituted by HPSEB, we had pointed out that cost of construction of 22 KV Transmission Line from Jeori to Nigulsari, Nigulsari to Nichar and Nichar to Sholtu costing Rs.3,18,277.50 had been included in the cost of the land for working out of lease rent. We have requested this to be

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deleted. Similarly escalation has also been added on watch and ward establishment charges, which is unreasonable."

59. Notably, thereafter even in September, 2010, the

petitioner did not question the deduction of ` 3,95,40,698/- made by

.

respondent No. 2 as is clearly evident from the letter dated

14.12.2010 addressed by the petitioner to respondent, which reads

thus:-

"We are to bring to your kind notice that n amount of Rs.3,95,40,698/- has been deducted from our energy bill for

the month of Sept.' 2010. This deduction is not acceptable to us, as the issue of lease rent of HPSEB land and accommodation at Sholtu and Kuppa is under dispute and

yet to be finalized.

In this connection, a meeting was held with the Chief Engineer (Project-cum-Arb.) and other Officers of HPSEB Ltd. on 12.11.2010. Next meeting is now scheduled to be held on 19th January 2011. The payment for energy bill for the month

of Sept.' 2010 has been received by us under protest."

Pending final decision of the above issue, we request you to kindly make us the payment of Rs.3,95,40,698/- alongwith up-

to-date interest at the earliest.

60. Even though a faint protest was made by the petitioner

vide communication dated 14.12.2010 (Annexure C-16) but no steps

were taken by it to assail such recoveries and it is only in the year

2014 when the rentals were increased, the appellant approached

the Court by raising initially three claims out of which claim of rent

upto the period of September, 2010 being claims No. 2 and 3 were

held to be barred by limitation and as regards claim No. 1 rental

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w.e.f. 2010 to 2014, it was clearly held that the appellant had no

cause of action as it had itself agreed to pay the 18% of the market

value towards the lease amount and this position is not even

.

disputed before the Court.

61. It is settled law that a person who signed a document

which contains contractual terms is normally bound by them even

though he is ignorant of the precise legal effect. (Ref: Bihar State

Electricity Board vs. M/s Green Rubber, AIR 1990 SC 699, Jharkhand

Power Corporation Ltd. vs. ASP Sealing Products Ltd. 2009 (9) SCC

701).

62. In Grasim Industries & others vs. Aggarwal Steel, AIR 2010

SCC 291 (Supp.), it was held that when a person signs a document,

there is a presumption, unless there is proof of force or fraud, that he

has read document property and understood it and only then he

has affixed his signature thereon, otherwise no signature on

document can ever be accepted. It would be difficult to accept

that the parties had signed the document under some mistake. In

particular, businessmen, being careful people (since their money is

involved) would have ordinarily read and understood a document

before signing it. Hence the presumption would be even stronger in

their case.

::: Downloaded on - 30/11/2017 23:54:31 :::HCHP 35 Arbitral Tribunal ignored Section 17 of the Registration Act

63. The learned senior counsel for the petitioner would then

bank upon and rely on the provisions of Section 17 of the Registration

.

Act to canvass that the subsequent and unregistered documents in

the teeth of registered documents could not be looked into and

moreover it is settled that a document which varies the essential

terms of the existing lease deeds such as the amount of rent must be

registered. In support of such contention he has cited the following

judgments:-

r1. Atul Krishna Bose vs. Zahed Mandal, 1941 Cal 102 (103 Sec 91)

2. Brahama Nand vs. Roshni Devi, 1989 HP Page 11

3. Lalit Mohan Gosh vs. The Gopali Chuck Coal Company (1911-12) 16 Cwn 55

4. Sunil Kumar Roy vs. Bhwara Kankanee Colories Limited

64. However, this question need not be gone into as the

same was neither raised before the Arbitrator nor does it find

mention in the memorandum of objection.

65. Even otherwise invoking of applicability of Section 17 of

the Registration Act is not a pure question of law and is a mixed

question of fact and law, therefore, in absence of any foundation,

this question cannot be gone into and is clearly an after thought.

::: Downloaded on - 30/11/2017 23:54:31 :::HCHP 36 Legal misconduct

66. It is then vehemently argued by the learned counsel for

the petitioner that the learned Arbitrators by ignoring and rejecting

.

the registered lease deed and further by not considering relevant

papers and documents have misconducted themselves. In support

of such submissions, reliance is placed on following judgments:-

1. Aboobaker Latif vs. Reception Committee, 1937 Bombay Page 411 and 414

2. FCI vs. Chandu Constructions (2007) 4 SCC 697

3. K.P. Poulose vs. State of Kerala (1975) 2 SCC 236 (239)

4. Sikkim Subba Associates vs. State of Sikkim, 2001 (5) SCC 629

5. Associate Builders vs. Delhi Development Authority

(2015) 3 SCC 49

67. A person urging the grounds of misconduct has to satisfy

the Court from the record of the arbitral proceedings that there has

been legal misconduct on the part of the arbitrator as a

consequence of which the award came to be vitiated. The question

of adducing any kind of oral evidence to substantiate the plea or

stand does not arise, it has to be shown from the proceedings

carried on before the arbitrator and the evidence adduced before

the arbitrator. However, nonetheless the person aggrieved should

have at least raised the plea of misconduct in the objection petition

under Section 34 of the Act. In absence of any grounds, I am afraid

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that the ground of legal misconduct cannot be permitted to be

raised for the first time in arguments.

Novation of Contract

.

68. It is then contended by the petitioner that the Arbitrator

while answering point No. 3 have decided that there was novation

of contract when the petitioner executed undertaking (Annexure C-

10) subsequently to the execution of the lease deed. It is contended

that the undertaking at best was a condition subject to the

determination of the lease rental which had to be positively done

and conveyed on or before 31.03.2011.

69. I am afraid that even such contention on behalf of the

petitioner is not tenable as the petitioner out of his own volition and

free will has executed the undertaking even though the petitioner

would contend that it was on account of economic duress and

coercion that it was forced to execute such undertaking.

70. As already observed above, the petitioner has virtually

never objected to or disowned the undertaking more specifically

before the competent Court within the prescribed period of

limitation and therefore in absence of any challenge that too within

the prescribed period such plea is clearly not tenable at this stage.

71. That apart, it would be noticed that in the instant case

there were no sale exemplars and the three lease deeds so

executed were only as a temporary measures because the actual

amount was only to be worked out later on as is clearly evident from

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the letter dated 14.10.1993 (Annexure C-5). The rates were

determined and communicated to the petitioner vide letter dated

07.08.2001 (Annexure C-11) alongwith which three drafts of

.

supplementary lease deeds were also annexed.

72. Admittedly, it was the petitioner who neither executed

the sale deed nor sought legal recourse either against the

undertaking so furnished by it or against the action of the

respondents asking it to execute the supplementary lease deed in

terms of the undertaking so furnished by it. Therefore, in such

circumstances all the pleas as are now being sought to be raised, be

it with respect to the legal misconduct, estoppels, undue investment,

applicability of Sections 91 and 92 of the Evidence Act, Section 17 of

the Registration Act, misconduct of the arbitrator etc., are nothing

but clearly an afterthought.

73. It needs to be reiterated that nowhere in the petition,

the plea of financial duress being raised nor the undertaking

(Annexure C-10) being questioned. Even the objections raised by the

petitioner in its letter dated 14.04.2010 Ex.RX-1 is with respect to the

bill of lease rental amounting to ` 3,95,40,698/- up to 31.12.2009 and

even thereafter no steps were taken by the petitioner to assail the

demand so raised.

74. On the other hand, the letter dated 31.01.2007 Ex. RX-6

clearly shows that a bill amounting to ` 2,19,01,490/- was prepared

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against the petitioner for which again no lawful recourse was taken

by the petitioner within the prescribed time.

Restitution and unjust enrichment

.

75. At this stage, it may be observed that the petitioner has

also taken up the plea of restitution and unjust enrichment, but I

really wonder how such plea is available to the petitioner.

76. Admittedly, the petitioner has not placed on record any

document on record to even remotely indicate as to what was the

actual loan amount availed by it on the three properties that had

been leased out by respondent No. 2 in its favour, so that the

Arbitrator or for that matter this Court could get a fair idea of the

market value of the properties. After all it was these documents

which alone could have gone a long way and proved the actual

market value.

77. This is despite the fact that respondent No. 2 had served

upon the petitioner a notice under Order 12 Rule 8 read with Section

151 CPC calling upon it to produce documents, wherein, apart from

the original lease deed dated 31.12.2000, respondent No. 2 had

asked the petitioner to produce the documents pertaining to the

monetary assistance given to it by financial institutions/banks against

the leased properties.

78. No doubt, reply was filed to this application but even

therein the petitioner had only stated that it was not in a position to

produce original lease deed dated 31.12.2000 and as regards the

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other documents regarding financial assistance it was stated that

these documents have no relevance whatsoever with the issue.

79. Obviously, the petitioner has concealed material

.

documents or else there was no reason why it should have not

produced the desired documents and then furnished a reply as if it

was the adjudicatory authority. Therefore, in the given

circumstances, the Court essentially is required to draw an adverse

inference against the petitioner for withholding the best evidence.

Would the petitioner have really been prejudiced by the

undertaking whereby it had been asked to cough-up more amount

than the one agreed to, then there was no occasion why the

petitioner would not have produced these documents, more

particularly, in teeth of the allegation of respondent No. 2 that the

properties valued therein was about ` 70-80 crores. This further

assumes significance as the parties are ad idem that the rate of rent

as per the lease deed was to be worked out @ 18% of the cost of the

land. If respondent No. 2 had charged more than this amount then

nothing prevented the petitioner from producing cogent and

convincing evidence to this effect. However, having deliberately

and willfully withheld the best evidence, the petitioner cannot claim

any relief and can blame no one except itself.

Award against Public Policy of India

80. The petitioner would then argue that the award is

declared against the public policy of India by contending that the

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award passed by the learned Tribunal below is blatant being against

the statutory provisions, thereby violating the fundamental policy of

Indian law and therefore deserves to be set aside.

.

81. This contention is clearly without any merit as this Court

has already observed that the majority of the objections as raised by

the petitioner are nothing but an afterthought and otherwise not

tenable in the eyes of law. It needs to be reiterated that during the

entire course of the arbitration proceedings till the passing of the

award, the petitioner did not raise even a little finger questioning the

procedure being adopted by the Arbitral Tribunal and therefore, the

procedure adopted by the Tribunal is not open to challenge at this

stage.

82. It is more than settled that this Court while deciding an

application under Section 34 of the Act which is in the nature of the

objections to the arbitral award, cannot re-appreciate evidence.

Moreover, it has been established on record that it was pursuant to

the undertaking given by the petitioner that the bills were raised by

respondent No. 2 and such bills except for the levy of compound

interest were never challenged by the petitioner.

83. Further, it is not in dispute that the majority of the

recoveries already stood effected in the year, 2010 while the arbitral

proceedings came to be initiated only in the year, 2014 and was

thus clearly barred by limitation.

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84. It is more than settled that burden to prove coercion

and contract lies on the party seeking to deny the contract on the

.

ground of coercion. The plea of coercion is required to be

specifically pleaded and in absence of any pleadings except a

remote mention therein in para 10 of the rejoinder (to which

respondent has no right of rebuttal) such plea is not tenable. It was

incumbent upon the petitioner to have specifically pleaded the

details of such coercion so that respondent No. 2 was required to

answer, must have full details and, therefore, would not be taken by

surprise. Therefore, raising the plea that too for the first time in

rejoinder does not meet and rather falls short of the requirement of

law.

85. In Bishundeo Narain & another vs. Seogeni Rai & others,

AIR (38) 1951 SC 280, the Constitutional Bench of the Hon'ble

Supreme Court observed as under:-

"25. It is also to be observed that no proper particulars have been furnished. Now if there is one rule which is better established than any other, it is that in cases of fraud, undue

influence and coercion, the parties pleading it must set forth full particulars and the case can only be decided on the particulars as laid. There can be no departure from them in evidence. General allegations are insufficient even to amount to an averment of fraud of which any Court ought to take notice, however strong the language in which they are couched may be, and the same applies to undue influence and coercion."

::: Downloaded on - 30/11/2017 23:54:31 :::HCHP 43 86. The said principle was followed in a later decision

rendered by another Constitutional Bench of the Hon'ble Supreme

.

Court in Ladli Parshad Jaiswal vs. The Karnal Distillery Co., Ltd. &

others, AIR 1963 SC 1279, wherein it was observed as under:-

"That a plea that a transaction is vitiated because of undue

influence of the other party thereto, gives notice merely that one or more of a variety of insidious forms of influence were brought to bear upon the party pleading undue influence and by exercising such influence, an unfair advantage was obtained

over him by the other. But the object of a pleading is to bring the parties to a trial by concentrating their attention on the matter in dispute, so as to narrow the controversy to precise

issues, and to give notice to parties of the nature of testimony required on either side in support of their respective case. A

vague or general plea can never serve this purpose; the party pleading must therefore be required to plead the precise nature of the influence exercised, the manner of use of the influence,

and the unfair advantage obtained by the other. This rule has been evolved with a view to narrow the issue and protect the party charged with improper conduct from being taken by

surprise. A plea of undue influence must, to serve that dual purpose, be precise and all necessary particulars in support of

the plea must be embodied in the pleading; if the particulars stated in the pleading are not sufficient and specific the Court

should, before proceeding with the trial of the suit, insist upon the particulars, which give adequate notice to the other side of the case intended to be set up."

87. The said principle was again reiterated in Subhash

Chandra Das vs. Ganga Parsad Das, AIR 1967 SC 878 and

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Varanasaya Sanskrit Vishwavidalaya vs. Dr. Raj Kishore Tripathi, AIR

1977 SC 615.

88. Even otherwise the undertaking furnished by the

.

petitioner was consensual because the same was neither

challenged nor withdrawn and this fact has been specifically

admitted by the Joint President of the petitioner company who while

appearing as PW1 has in his cross-examination deposed as under:-

"It is correct the company has not laid any challenge for the undertaking Annexure R-2 before the initiation of present

arbitration proceedings."

89. It is a settled law that there should be clear pleadings

pertaining to coercion and it must be specifically pleaded i.e. the

names, date, time etc., so that the party who is required to answer,

must have full details and is not taken by surprise. That apart, cogent

evidence should be adduced by the party to establish that case.

Lease not in accordance with H.P. Lease Rules, 1993

90. As a last ditch effort, the petitioner would contend that

the lease deeds were to be executed in terms of the H.P. Lease

Rules, 1993 and it was for this precise reason that even the format

upon which the lease deeds were executed was the one prescribed

under the Rules.

91. I am afraid that even this contention is not available to

the petitioner as it has failed to place on record any material which

would even remotely go to indicate that the lease to be executed

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by respondent No. 2 was to be in accordance with H.P. Lease Rules,

1993. To the contrary, respondent No. 2 has led sufficient evidence

on record to the effect that the land which was leased out to the

.

petitioner belongs to it after the same had been purchased from the

Industries department and it was thereafter that the same was

leased out as per mutual understanding of the parties coupled with

the undertaking (Annexure C-10) furnished by the petitioner.

92. In view of the aforesaid discussion, I find no merit in this

petition and the same is accordingly dismissed.

Claim not filed by a competent person

93. However, before parting, it needs to be observed that

the Arbitral Tribunal had decided Point No. 1 relating to the claim not

being filed by competent person against the petitioner. However, I

find the said finding to be unsustainable. PW1 Major General (Retd.)

Shyamdas Chaudhary has placed on record power of attorney

dated 01.08.2000 (Ex.C1) executed in his favour and therefore in

absence of anything to the contrary there was no reason much less

a valid or legal reason for the Tribunal to arrive at the aforesaid

conclusion. Even otherwise, it is more than settled that technical

plea has no place in suits instituted or defended by jurisdic person

like banks, corporation etc. as was so held by the Hon'ble Supreme

Court more than two decades back in United Bank of India vs.

Naresh Kumar, 1996 (6) SCC 660, wherein it was observed as under:-

::: Downloaded on - 30/11/2017 23:54:31 :::HCHP 46 "10. It cannot be disputed that a company like the appellant can sue and be sued in its own name. Under Order 6 Rule 14 of the Code of Civil Procedure a pleading is required to be signed by the party and its pleader, if any. As a company is a juristic entity, it is obvious that some person has to sign the

.

pleadings on behalf of the company. Order 29 Rule 1 of the

Code of Civil Procedure, therefore, provides that in a suit by or against a corporation the Secretary or any Director or

other Principal Officer of the corporation who is able to depose to the facts of the case might sign and verify on behalf of the company. Reading Order 6, Rule 14 together with Order 29, Rule 1 of the Code of Civil Procedure it would

appear that even in the absence of any formal letter of authority or power of attorney having been executed a person referred to in Rule 1 of Order 29 can, by virtue of the

office which he holds, sign and verify the pleadings on behalf

of the corporation. In addition thereto and dehors Order 29, Rule 1 of the Code of Civil Procedure, as a company is a juristic entity, it can duly authorise any person to sign the plaint or the written statement on its behalf and this would be

regarded as sufficient compliance with the provisions of Order 6, Rule 14 of the Code of Civil Procedure. A person may be expressly authorised to sign the pleadings on behalf

of the company, for example, by the Board of Directors

passing a resolution to that effect or by a power of attorney being executed in favour, of any individual. In absence thereof and in cases where pleadings have been signed by

one of its officers a Corporation can ratify the said action of its officer in signing the pleadings. Such ratification can be express or implied. The Court can on the basis of the evidence on record, and after taking all the circumstances of the case, specially with regard to the conduct of the trial, come to the conclusion that the corporation had ratified the act of signing of the pleading by its officer."

::: Downloaded on - 30/11/2017 23:54:31 :::HCHP 47 94. In view of the aforesaid discussion, even while

accepting the plea that the claim petition was filed by the petitioner

through a competent person, I, however, find no merit in the

.

application/objections and the same is accordingly dismissed,

leaving the parties to bear their costs. Pending application(s), if any,

stands disposed of.

(Tarlok Singh Chauhan), Judge.

November 29, 2017 sanjeev

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