Calcutta High Court
Deepak Bhargava & Ors vs Jagrati Trade Services Pvt. Ltd. & Ors on 5 March, 2025
Author: Soumen Sen
Bench: Soumen Sen
IN THE HIGH COURT AT CALCUTTA
COMMERCIAL APPELLATE DIVISION
ORIGINAL SIDE
COMMERCIAL DIVISION
BEFORE:
The Hon'ble Justice Soumen Sen
and
The Hon'ble Justice Biswaroop Chowdhury
AO-COM/38/2024
WITH
AP-COM/388/2024
DEEPAK BHARGAVA & ORS.
VS.
JAGRATI TRADE SERVICES PVT. LTD. & ORS.
With
AO-COM/37/2024
JAGRATI TRADE SERVICES PRIVATE LIMITED
VS.
DEEPAK BHARGAVA & ORS.
For the Appellant : Mr. S.N. Mookherjee, Sr. Adv.,
in item No.6 and Mr. Suman Dutt, Sr. Adv.
Respondent in Item no.7 Mr. P. Sinha, Adv.
Mr. K. K. Pandey, Adv.
Mr. Zeeshan Haque, Adv.
Mr. Shubhrajit Mookherjee, Adv.
Ms. Yamini Mookherjee, Adv.
Ms. Easha Manchanda, Adv.
Ms. Pooja Sett, Adv.
For Jagrati Trade Services : Mr. Ratnanko Banerji, Sr. Adv.
Mr. Anirban Ray, Sr. Adv.
Mr. Rudrajit Sarkar, Adv.
Mr. Jai Kumar Surana, Adv.
Mr. Debanghsu Dinda, Adv.
Ms. Arundhuti Barman Roy, Adv.
Mr. Abhimonyu Ray, Adv.
Hearing concluded on : 26th February, 2025
Judgment on : 5th March, 2025
2
Soumen Sen, J.
1. The appeal and the cross-appeal are arising out of a composite
order dated 4th September, 2024 disposing of two applications for setting
aside of arbitral awards on grounds stated therein under Section 34 of the
Arbitration and Conciliation Act, (in short, “the 1996 Act”).
2. The dispute is arising out of a Share Purchase Agreement (SPA)
dated 24th March, 2021 entered into between the parties. The appellants in
APOT No.328 of 2024 were the respondents in the arbitration proceeding
and also in the proceeding for setting aside of the award initiated by the
present appellants in AP-COM No.388 of 2024 (Old case No. AP 777 of 2023)
(Deepak Bhargava & Ors. v. Jagrati Trade Services Pvt. Ltd. & Ors.)
3. The respondent No.1 in the said arbitration proceeding claimed
specific performance of contract along with damages for the breach of the
contract whereas the appellants by way of counterclaim prayed for specific
performance of their version of the self-same agreement.
4. The aforesaid counterclaim was dismissed and had also resulted
in an application for setting aside of the award limited to the refusal of the
claim for interest from the date of payment of consideration till the date of
commencement of the arbitration proceeding. The learned arbitrator allowed
interest @ 9 per cent per annum from the date of filing of the statement of
claim till realisation. The learned arbitrator rejected the claim for specific
performance of the contract as claimed by the present appellants. However,
the appellants were directed to refund the sum of Rs.19.90 crores
(approximately) which was admittedly received by the appellants from the
claimants towards consideration. Interest was also granted on the same. The
3
learned Single Judge has upheld the award and dismissed both the
applications. This order is now under challenge by both the parties.
5. Briefly stated the appellant Nos.1 to 10 and respondent Nos. 4
and 5 were shareholders of the appellant No.11 company (hereinafter
referred to as ‘company’). The appellant Nos.1 to 10 and the respondent
No.4 and 5 are treated as transferors and described collectively as Deepak
and the respondent Nos.1, 2 and 3 are referred to as transferees and
described allegedly as Jagrati for the sake of convenience. Jagrati was the
claimant in the arbitration. The respondent Nos.2 and 3 were respondent
No.14 and 15 in the arbitration respectively.
6. The appellant No.11 is a company and was a long term lessee of
premises No.6, JLN Road, Kolkata-700013 measuring 2 bighas 13 cottah,
11 chittaks and 23 sq. Ft. There were six buildings in the premises all
occupied by tenants. The Transferees agreed to acquire 100% shares of the
appellant No.11 company through purchase of 100% shares in the same.
7. Three (3) agreements, all dated March 24, 2011, were entered
into between the Transferors and Transferees. The agreements included i)
Share Purchase Agreement, ii) Supplemental Agreement and iii) an Escrow
Agreement.
8. Under the Share Purchase Agreement as relied upon by Deepak
the transferors are required to pay a total consideration of Rs.82 crores for
such transfer. Out of the said consideration of Rs.82 crores, the transferors
have paid Rs.20 crores as share consideration for acquiring 36278 fully
paid-up shares and Rs. 62 Crore was paid as a loan amount.
4
9. The Supplemental agreement provided for obtaining the vacant
and peaceful possession of the premises in the occupation of the tenants of
the company.
10. The Escrow Agreement provided for appointment of an Escrow
Holder who would hold the share certificates in trust till completion of the
transaction. The said Escrow agreement provided that the Share Purchase
Agreement, Supplemental Agreement and all other documents would be
prepared in triplicate, each set being in the possession of the transferor,
transferees and the Company.
11. The Transferees inter-se entered into an understanding dated
March 28, 2011 whereby they agreed that the Respondent No. 1,
Respondent No. 2, and the Respondent No. 3 would acquire 40%, 40% and
20% shares, respectively in the appellant No. 11 company. Such agreement
was further revised on August 04, 2011 whereby the share of the transferees
was fixed as 46% for Respondent No.2, 36% for Respondent No. 1 and 18%
for the respondent No. 3.
12. Another Memorandum of Understanding dated June 21, 2012
had been signed between the Respondent No. 1 and one, Tirupati Vancom
Private Limited for assigning respondent No. 1’s rights for 18% out of 36%
shares at and for a consideration of Rs. 14.76 Crores i.e. exactly 50% of its
obligations under the SPA.
13. The payment obligation of the Transferees on the basis of the
shares to be acquired by them is reproduced as follows:-
5
TRANSFEREE PAYMENT ON PAYMENT ON TOTAL
ACCOUNT OF ACCOUNT OF PAYMENT
SHARES LOANS
Jagrati (R1)(36%) 7.2 cr 22.32 cr 29.52 cr
Orbit (R2) (46%) 9.2 cr 28.52 cr 37.72 cr
Damani (R3)(18%) 3.6 cr 11.16 cr 14.76 cr
Total(100%) 20 cr 62 r 82 r
14. The respondent No. 2 claimed to have made excess payment of
Rs.42.45 crores against its payment obligation of Rs.37.72 crores and
respondent no.3 claimed to have paid Rs.11.26 crores out of the Rs.14.76
crores. The respondent no.2 agreed to adjust the excess amount paid by it
against the deficit of Respondent no. 3 which was done.
15. The respondent No.1 only paid Rs.19.92 Crores out of Rs.29.52
Crores and alleged to have breached its payment obligations. A substantial
part of the share consideration of the respondent No. 1 was claimed to have
been paid by Tirupati Vancom Private Ltd.: Rs. 4.73 Cr. to the Company and
Rs.1.84 Cr. to individual shareholders of the company. It is further alleged
that Goldsmith Infrabuild Private Ltd. had paid Rs.69 lakhs to the individual
shareholders of Deepak.
16. Disputes and differences arose between the parties in view of
the non-payment of the balance consideration by Jagrati along with other
consequential breaches. An attempt was made by Jagrati to obtain an
injunction against the shares which failed vide the refusal of an order of
injunction by an order dated 18th June, 2018 and thereafter disputes were
referred to arbitration.
6
17. Jagrati as Claimant in the arbitration proceeding claimed an
award for specific performance of the SPA dated March 24, 2011. Deepak as
respondents also filed a counter claim for specific performance of the SPA by
directing Jagrati to make payment of the balance amount due under the
SPA. Orbit filed a statement of defence to the statement of claim filed by
Jagrati. The respondent No. 3 did not participate in the arbitration
proceedings.
18. The relief for specific performance as claimed by Jagrati was
refused. The Tribunal held that the respondent No. 1 relied upon a false,
suspicious and inadmissible version of the SPA and had failed to perform its
payment obligations under the SPA and on other grounds as well, namely,
delay and failure to discharge its 36% obligation.
19. The counter-claim filed by Deepak was refused on the ground of
delay in making the claim, though not barred by limitation.
20. The learned arbitrator on 29th June, 2023 passed an award. In
the impugned award the learned arbitrator has directed as follows:
(a) Refund of Rs.19,92,30,500/- to the Respondent No.1;
(b) Interest at the rate of 9% per annum on the principal sum
of Rs.19,92,30,500/- from the month of December, 2019;
Costs were not awarded by the arbitrator to the party.
21. Thereafter, on 27th July, 2023 an application was filed by
Deepak under Section 33(2) and 33(4) of the Arbitration and Conciliation Act
1996, praying,inter alia, for correction of the aforesaid award towards
payment of cost on the basis of computation of the share of fees of the sole
Arbitrator, the clerk and stenographer’s charges for a sum of Rs.
7
26,65,500/-.A further prayer was made for an additional award for a grant
of a sum of Rs.83,70,622 on account of legal express incurred by Deepak
towards payment of fees of advocates on record and counsel and arbitration
venue costs as indicated in paragraph 8 of the application. In short, it is an
application for awarding costs claimed to have been incurred in the
arbitration proceeding. The learned Arbitrator dismissed the said application
reiterating that the Tribunal has exercised its discretion in terms of Section
31A of the Act in not granting cost to Deepak inasmuch as it is not coming
within the purview of computation, clerical or typographical error or error of
a similar nature and relied upon the case of Gyan Pakash Arya v. Titan
Industries Limited1.
22. Deepak filed an application under Section 34 of the Arbitration
and Conciliation Act, 1996, being AP-Com 388 of 2024.
23. Jagrati did not challenge the refusal of specific performance but
only that portion of the Award as regards to the quantum of interest granted
on refund of Rs. 19,92,30,500/-. The said application was renumbered as
AP-Com 389 of 2024.
24. In the application filed by Jagrati being A.P-Com. 388 of 2024
the following grounds have been urged:-
a) The Tribunal, having held that the claimant has relied
upon a doctored document and was not entitled to relief for
specific performance, ought not to have granted an award in
its favour for Rs. 19,92,30,500/-;
1
2023 (1) SCC 153
8
b) A direction for refund of the said sum would tantamount
to granting a premium to a litigant who approached the
Tribunal on the basis of a fraudulent document with unclean
hands;
c) The prayer for refund in the alternative for specific
performance was not pleaded nor prayed for in the Statement
of Claim nor introduced by way of subsequent amendment
as required by law. Hence, could not have been awarded;
d) The question of payment of interest in any event does not
arise and the same would tantamount to the claimant being
awarded a premium on the teeth of the finding that it was in
breach;
e) The claimant was not entitled to refund of the entire sum
or any part thereof, as it had already assigned 50% of its
rights to Tirupati Vancom Private Ltd prior to the Award;
f) The Award of Rs. 19,92,30,500/- in favour of the claimant
with interest tantamounts to unjust enrichment of the
claimant at the cost of the appellants herein.
25. The Learned Single Judge heard both the applications under
Section 34 together and was pleased to pass the impugned order dated
September 04, 2024 (hereinafter also referenced as “the impugned order”).
By the impugned order, the Learned Single Judge had dismissed both the
applications under Section 34 and upheld the award in its entirety.
26. The aforesaid order is under challenge under Section 37 of the
1996 Act.
9
27. Mr. S.N Mookherjee, learned Senior Counsel appearing on
behalf of the appellants has submitted that the learned arbitrator after
arriving at a finding that the claimant has relied on an incorrect, suspicious
and doctored agreement and therefore inadmissible document could not
have allowed refund of the consideration amount as a party making out a
false case cannot be allowed to succeed on the basis of its wrong conduct.
Mr. Mookherjee in this regard has referred to various paragraphs of the
award to show the findings of the learned arbitrator with regard to the
genuineness and authenticity of the SPA agreement being CD-1 annexed to
the statement of claim. Moreover, the claimant has not prayed for refund of
the consideration amount in terms of Section 22 of the Specific Relief Act.
28. Mr. Mookherjee has submitted that in deciding the admissibility
of the SPA as disclosed by the claimant in the arbitration proceeding being
marked as CD-1, the learned arbitral tribunal observed that one of the most
crucial questions to be decided in this Arbitration proceeding is whether the
photocopy of SPA disclosed by the Claimant along with the Statement of
Claim, marked as CD-1, is a true version of the SPA or whether the SPA
disclosed by the Respondent Nos.1 to 13 in their Statement of Defence cum
Counter Claim as Annexure-A is a correct version of the SPA.
29. Mr. Mookerjee has referred to the following observation of the
learned arbitrator in the course of deciding the said issue to demonstrate
that on the basis of the said findings no award could have been passed at all
in favour of Jagrati:
“55. The Respondent Nos. 1 to 13 in their SOD while referring to the
SPA dated 24th March, in paragraph 6 thereof have referred to it as
10Annexure-A but the Claimant in its Statement of Claim has referred
to the said SPA but has nowhere stated that it is annexing a copy of
the SPA as an Annexure to the SOC. The Claimant has merely filed
along with the Statement of Claim three volumes of documents and
in volume-1, serial no.-1 is the SPA. No one on behalf of the Claimant
has pledged his oath that the document which is annexed as SPA
and in respect of which the Claimant is seeking specific performance
is a true copy of the SPA which was signed and executed between
the parties.
56. The Claimant in the SOC has also not given any details of the
circumstances how the alleged errors were noticed in the SPA and
which were later on rectified and pages after rectification were
replaced and why the Claimant’s representative Mr.Sarda had to
leave the place after such alleged detection of mistakes. All these
explanations by the Claimant have been incorporated in the
Rejoinder. This Tribunal after hearing the parties and considering
the records carefully does not find that the case allegedly made out
by the Claimant in its Rejoinder about alleged detection of mistakes
in the SPA after its execution and Mr. Sarda’s leaving the place in
view of an urgent work and subsequent rectification and
replacement of the pages is very plausible in view of the reasons
discussed hereinbelow.
57. Even if it is accepted that the Agreement namely SPA was
drafted by mutually appointed Solicitor, Mr. Sarda’s explanation that
the Agreement was being drafted when price negotiations were
underway is prima-facie not very plausible. In an Agreement of this
description where each party is investing several crores of rupees,
fixation of price is a very major part of the exercise which is normally
finalized before the drafting of the Agreement takes place. This is
consistent with normal human conduct. Therefore, the alleged
version of the Claimant that fixation of price is still under process
while the Agreement was being drafted is an unnatural state of
things. Apart from that the version given in paragraph 4 of the
11Rejoinder Affidavit where Mr. Sarda has stated that after signing of
the Agreement it was realized by the parties that price of both the
acquisition of share and also the amount of loan to be infused in
Respondent No. 13 have been wrongly printed in the Agreement by
the concerned advocates is also very strange. Normally these vital
things are verified before the document is signed. Mr. Sarda’s next
version is that pages 13, 14 and 15 of the said Agreement were
replaced. Mr. Sarda has not given any explanation when the prices
were agreed upon and fixed by the parties and how after fixation of
the price by parties it could be wrongly printed in the Agreement and
why such wrong printing of price in the Agreement was not detected
by the parties prior to the signing of the Agreement. The absence of
these explanations by Mr. Sarda appears to any man of ordinary
prudence as missing links in the background of the execution of SPA
dated 24th March, 2011. The SOC filed in this proceeding wherein
specific performance of the SPA is prayed for is totally silent on these
circumstances stated above.
64. What Mr. Sarda has disclosed before this Tribunal is not the
original of the document which was forwarded to him but a
photocopy of the same. This appears from his answer to Q. no. 65
where the photocopy of the document that is the SPA was marked
Exhibit CD-1.
65. In the course of hearing before this Tribunal, Mr. Sarda has
never produced the original of the document from which he has
made a photocopy. In the course of Claimant’s argument, in order to
prove what has been disclosed by Mr. Sarda as the SPA is a genuine
one, it has been urged that Mr. Sarda has given evidence before this
Tribunal as a signatory to the said Agreement along with other
signatories except of course not signing those three crucial pages
where consideration for share price and loan amount have been
mentioned.
It was argued on behalf of Mr. Sarda that those three pages where
consideration was mentioned was signed by the other parties
12namely on behalf of Respondent Nos. 1 to 12, and Respondent Nos.
14 and 15. It was argued on behalf of the Claimant, that Mr. Dilip
Singh Mehta affirmed the Statement of Defense of Respondent Nos.
1 to 13 but he did not come to give evidence in this Arbitration
proceeding. Mr. Prakash Damani who was also a signatory did not
come to give evidence, nor did Mr. Deepak Bhargava the signatory in
the Agreement, come to give evidence. The Agreement was marked
Exhibit CD-1 without any objection of the Respondents. The further
arguments of the Claimant is the only other person who signed the
Agreement was Sanjit Singh, who was the Escrow Agent and he
came to give evidence. Mr. Sanjit Singh specifically denied to
produce the Agreement dated 24th March, 2011 when he was called
upon to produce the original of the said Agreement being CD-1 which
was supposed to be in his possession. But he refused to answer and
explained why he did not produce.
66. However, the aforesaid stand of the Claimant in the written-
notes of submission is not borne out from the records of this
Tribunal. In his Examination-in-Chief, Sanjit Singh, produced the
original Share Purchase Agreement before this Tribunal. The said
original Share Purchase Agreement which was produced by Shri
Sanjit Singh (RW-1) was marked-‘A’ by this Tribunal subject to
objection and is lying in the custody of his Tribunal.(Question 8 of
the Examination-in-Chief of Sanjit Kumar Singh, RW-1).
Mr. Sanjit Singh was asked how he came to be in possession of the
original SPA dated 24th March, 2011, and to that he answered that
as the authorized representative of Respondent Nos. 1 to 12, he
came to have the original (Q. 9 in Chief). Then he was asked
whether he knew of the contents of the Deed and he answered in the
affirmative (Q. 10 in Chief). He was also asked whether he was
present at the time of execution of the document, to that also he
answered in the affirmative (Q. 13 in Chief). He was also asked to
identify signatories on the SPA and which he did (Qs. 11 and 12 in
Chief).
13
67. While cross-examining Mr. Sanjit Singh (RW-1), the learned
Counsel for the Claimant hardly ever questioned him on the SPA
which he had filed with the Tribunal and claimed to be the original
and which has been marked Exhibit-A.
Only once, vide question no. 261, a suggestion was given that too
very generally about the genuineness of SPA which he filed as
Annexure-A to SOD and to that Mr. Sanjit Singh stood his ground
and answered “I do not agree. This is the correct document”. Apart
from this question Exhibit-A which is at page 75 of the SOD filed by
Mr. Sanjit Singh and an original of which has been filed with the
Tribunal was not at all assailed by the learned Counsel for the
Claimant in his cross-examination of RW-1, Mr. Sanjit Singh.
68. The learned Counsel for the Claimant had only shown RW-1 one
page of CD-1 and suggested to the witness that signature which
appears at page 32 of CD-1 on behalf of Respondent No. 14, whether
that is of Mr. Dilip Singh Mehta and to that RW-1 says “Yes”. But by
showing only one page of the document its authenticity or
genuineness cannot be proved.
69. On the question whether a CD-1 is the correct version of SPA this
Tribunal can consider the evidence of Mr. Sarda, the Claimant’s
witness and which will show that CD-1 apart from being a
photocopy, there are various Annexures to it which are admittedly
missing from the photocopy but those Annexures are in the original
SPA which has been disclosed by the Respondents 1 to 13 in their
SOD.
70. About the alleged detection of mistakes in the SPA in respect of
which the Claimant made out its case in the Rejoinder Affidavit
discussed earlier, Mr. Sarda (CW-1) was asked in question no. 102,
when the so called mistakes were noticed by him. To that Mr. Sarda
answered that it was at the same moment but because it was taking
some time and discussion was going on and the issues were dealt
with by the common Solicitors and since he had an urgent work, he
had to leave. Then he was asked in question no. 103 whether he
14recorded such mistakes in any letter or correspondence with the
Solicitor or with the parties. To that Mr. Sarda answered that this
was not required. Then in question no. 105 Mr. Sarda was positively
asked when the mistake that was noticed and who noticed it. To
that Mr. Sarda answered that he does not exactly remember and
then said obviously the Solicitors have realized the mistake while
proof-reading it.
71. Mr. Sarda was then asked question on a comparison between
the SPA disclosed by the Claimant (CD-1) and the SPA disclosed by
the Respondents Nos. 1 to 13 in their SOD. Mr. Sarda was asked
with reference to Annexure-B of CD-1 at page 35. The said
Annexure-B is referred to in paragraph (vii) (page 10 of CD-1). Mr.
Sarda was asked with reference to said Annexure-B in question no.
246 and in question no.247. Mr. Sarda was asked, whose
signatures are at the bottom of page 35. To that he answered it is
the signature of Mr. Bhargava, Mr. Damani and probably the third
signature is of Mr. Mehta. Mr. Sarda admits that photocopies are not
very legible. Then Mr. Sarda was asked vide question no. 248 why
only three persons signed Annexure-B which formed part of the SPA
relied on by the Claimant. Mr. Sarda could not give any answer and
replied “I cannot recall whether it was missed or it was amended by
the common Solicitors”. Then Mr. Sarda was confronted with
Annexure-B of SPA disclosed and relied on by the Respondents and
he was asked whether he finds that all five persons including
himself had signed Annexure-B. To that Mr. Sarda could not give
any satisfactory answer except by saying that he cannot comment
on the document which the Claimant had not relied upon and the
document should not have been existing. Mr. Sarda was also asked
vide question no. 252 to tell the Tribunal whether his signature
appears on Annexure-B of the SPA disclosed by the Respondent Nos.
1 to 13 at page 114 of SOD and Mr. Sarda refused to answer that
question.
15
72. It will thus appear that the SPA allegedly relied upon by the
Claimant does not contain signatures of all the parties on Annexure-
B which is part of SPA whereas the one which has been filed by the
Respondent vide Annexure-A to SOD of Respondents 1 to 13,
contains the signature of all the parties. From this unimpeachable
piece of evidence it is clear to this Tribunal that the version of the
SPA which the Claimant has annexed as CD-1 to the SOC is not a
correct version of the SPA.” (emphasis supplied)
30. The underlined highlighted portions are the portions of the
award on which Mr. Mookherjee has emphasised in contending that having
regard to the aforesaid finding no award could have been passed in favour of
Jagrati.
31. Mr. Mookherjee has submitted that the aforesaid paragraphs
would clearly show that there is a definite finding that no one had alleged
that the SPA in the statement of claim is a true copy. The witness of Jagrati
could not state the urgent reason for which he had to leave the place of
execution after signing the agreement inasmuch as an attempt was made to
explain about the error in the respondent No.1’s copy of SPA in rejoinder
and not prior thereto. During the proceeding Jagrati had never produced the
original copy of the share agreement of its Share Purchase Agreement but
the other version has been produced by Sanjit Singh (RW1). In view of such
unreliable testimony coupled with the fact that the document was held to be
doctored, no relief could have been granted to the respondent No.1 in the
said proceeding.
32. Mr. Mookherjee submits that allowing any such relief in the
aforesaid background facts would likely to shock the conscience of the court
16
and is against the fundamental policy of Indian law and most and basic
notions of justice as reiterated in various decisions of the Hon’ble Supreme
Court including the following:
a) S.P Chengalvaraya Naidu (Dead) by LRS vs.
Jagannath (Dead) by LRS & Ors. reported in (1994)
1 SCC 1 (paragraph 6).
b) Dalip Singh vs. State of Uttar Pradesh & Ors.
reported in (2010) 2 SCC 114, paragraphs 1, 2, 4, 7, 10.
c) Associated Builders v. DDA reported in (2015) 3 SCC
49 (Paragraphs18, 27 & 36-39).
d) Ssangyong Engineering and Construction Company
Limited v. National Highways Authority of India
(NHAI) reported in (2019) 15 SCC 131 (Paragraphs 36,
37, 70-77).
e) The learned Senior Counsel has submitted that it is a
trite law that a party cannot take advantage of his own
wrong and in this regard he has referred to the decision of
the Hon’ble Supreme Court in Devendra Kumar v. State
of Uttaranchal & Ors. reported in(Paragraphs 18 to 26),
2007 12 SCC 621 (Paragraph 14).
33. The said decision is cited in the context of allowing the claim for
refund by the learned arbitrator in favour of the respondent No.1 inspite of a
finding that CD-1 is a suspicious agreement.
34. Mr. Mookherjee submits that in any event and in any view of the
matter having regard to the fact that the respondent No.1 had failed to make
17
payment of Rs.29.52 crores in terms of the SPA and a memorandum of
understanding dated 21st June, 2012 had been signed between Jagrati and
one Tirupati Vancom Private Limited for assigning its rights for 18% out of
36% of share transferred to it at a consideration of Rs.14.76 crores that is
exactly 50% of the obligation under the SPA, the claimant could not have
proceeded with the reference and no award could have been passed in
favour of the claimant. It is further argued even after assigning, Jagrati paid
only Rs.19.92 crores out of the stipulated Rs.29.52 crores as per its
payment obligations. Out of the total amount paid by Jagrati, a substantial
part of it was paid by Tirupati Vancom Private Limited Rs.4.73 crores to the
appellant no.11 company and Rs.1.84 crores to individual shareholders of
the said company. A further sum of Rs.69 lakhs was paid by one Goldsmith
Infrabuild Private Ltd. to the shareholders of appellant no.11 company.
35. Therefore, since Jagrati was in breach of its obligations, the said
respondent was not entitled to any equitable consideration in its favour.
Accordingly, it is submitted that no relief could have been granted to
Jagrati.
36. It is submitted that the learned Single Judge however, negated
the aforesaid argument of the appellants with regard to refund based on the
finding of the learned arbitrator that during the arbitration proceeding the
appellants have offered to refund the said sum of Rs.19.92 cores.
37. It is submitted that the appellant’s offer to refund was
conditional that it would not pay any interest, if called upon to refund. The
Tribunal could not have accepted a part offer and rejected a portion of the
same. The offer, if at all, ought to have been taken as a whole.
18
38. The statement made in paragraph 6 of the application for
modification of the order dated 13 September, 2023 was made in a post
Award Section 9 application. The appellants were faced with an order of
injunction attaching their bank account to the extent of Rs.
26,34,82,336.25/-. The statement made in the application under Section 36
was required to have been viewed in such background and not as an
acknowledgment of the portion of the Award directing refund of principle
with interest. Thus, there is no question of volunteering to give up such
right and/or waiver and/or estoppel.
39. In questioning the discretion and wisdom of the ld. Arbitrator in
allowing refund Mr. Mookherjee has submitted that the finding of the
Learned Arbitrator that it has a discretion to give a refund even though
there was no prayer for amendment is against the basic notion of justice
merely as Jagrati as a claimant had relied upon a fraudulent document
before the Tribunal. The discretion to the Court/Tribunal to direct refund is
essentially to balance the equities. Both the Tribunal and the Learned Single
Judge erred in not appreciating that fraud and equity do not dwell together.
40. It is submitted that the arbitral tribunal and also the learned
Single Judge have failed to take into consideration that in the statement of
claim the appellants have not prayed for refund. Even the concession made
during the arbitration proceeding with regard to refund of the said sum was
hedged with condition and after the said offer was not accepted by Jagrati,
the appellants have made it clear that they would argue on the entire claim
of the claimant on merits. Even at that stage no attempt was made to amend
the statement of claim. In absence of any pleadings to that effect in the
19
statement of claim the appellant could not deal with the said issue in its
rejoinder. In fact, no issue was framed by the learned arbitrator in this
regard. The learned arbitrator in allowing the said claim for refund had
travelled beyond the pleadings and submissions made by either party. The
same is a valid and just ground for setting aside the award. The said
direction in the award violates Section 28(2) read with Section 34(2)(a)(iv) of
the Arbitration and Conciliation Act, 1996.
41. The appellants have never authorised the learned Arbitrator to
adopt such a procedure.
42. Mr. Mookherjee has submitted that in Ssangyong (supra) and
PSA Sical Terminals Pvt. Ltd. vs. Board of Trustee of V.O.
Chidambranar Port Trust Tuticorin & Ors.,2 the law has been clearly laid
down with regard to the power of the arbitrator to decide the dispute. It has
to be in accordance with the agreement and the arbitrator cannot travel
beyond the scope of reference. The said two decisions are in the context of
the learned tribunal allowing refund although such issue was never raised
or referred to for arbitration. The issue was limited to the claim for specific
performance of SPA.
43. Mr. Mookherjee submits that the award is in conflict with the
justice and morality as it has not only granted relief for refund on the basis
of a SPA which was held to be inadmissible and suspicious but without any
pleading for refund. In this regard Mr. Mookherjee has referred to
Ssangyong (supra) and relied upon the following paragraphs:
2
AIR 2021 SC 4661:2021 SCC OnLine SC 508.
20
“35. It is important to notice that the ground for interference
insofar as it concerns “interest of India” has since been
deleted, and therefore, no longer obtains. Equally, the ground
for interference on the basis that the award is in conflict with
justice or morality is now to be understood as a conflict with
the “most basic notions of morality or justice”. This again
would be in line with paras 36 to 39 of Associate
Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015)
2 SCC (Civ) 204] , as it is only such arbitral awards that shock
the conscience of the court that can be set aside on this
ground.
36. Thus, it is clear that public policy of India is now
constricted to mean firstly, that a domestic award is contrary
to the fundamental policy of Indian law, as understood in
paras 18 and 27 of Associate Builders [Associate
Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , or
secondly, that such award is against basic notions of justice
or morality as understood in paras 36 to 39 of Associate
Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015)
2 SCC (Civ) 204] . Explanation 2 to Section 34(2)(b)(ii) and
Explanation 2 to Section 48(2)(b)(ii) was added by the
Amendment Act only so that Western Geco [ONGC v. Western
Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ)
12] , as understood in Associate Builders [Associate
Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] ,
and paras 28 and 29 in particular, is now done away with.
37. Insofar as domestic awards made in India are concerned,
an additional ground is now available under sub-section (2-A),
added by the Amendment Act, 2015, to Section 34. Here, there
must be patent illegality appearing on the face of the award,
which refers to such illegality as goes to the root of the matter
but which does not amount to mere erroneous application of
the law. In short, what is not subsumed within “the
fundamental policy of Indian law”, namely, the contravention
of a statute not linked to public policy or public interest, cannot
be brought in by the backdoor when it comes to setting aside
an award on the ground of patent illegality.” (emphasis
supplied)
44. The learned Senior Counsel has submitted that the learned
Single Judge has completely misconstrued Section 34 (2)(b)(i) and Section
21
34(2)(a) of the Arbitration and Conciliation Act, 1996 in deciding the
objections raised by the appellants with regard to the arbitral award being in
conflict with the public policy of India and was passed in contravention with
the fundamental policy of Indian law and the most basic motions of morality
or justice. The power of the court is not denuded if the court “finds” that the
award is vitiated by patent illegality appearing on the face of the award. Mr.
Mookherjee submits that the application for modification of the award was
made before the expiry of the time limit prescribed for setting aside of the
award. The award was passed on 29th June, 2023. The additional award was
passed pursuant of an application under Section 33 of the 1996 Act on 21
August, 2023. The application under Section 34 was filed by Deepak on 18 th
October, 2023 though the time period available to do the same was till 17 th
November, 2024 extendable by another 30 days to 17th December, 2023. The
said time period of 90 days extendable to 120 days is given by the statute to
the aggrieved party to take legal advice and challenged the award on any
and all grounds available to do. The modification application was filed on
10th October, 2023 that is before the time period on expiry for filing the
application for setting aside of the award under Section 34 of the 1996 Act.
In view thereof it was neither proper nor legally permissible for the Hon’ble
Single Judge to rely upon any statement made by Deepak in connection with
the application for modification of an order dated 13th September, 2023 in
connection with a best award under Section 9 of the application.
45. Mr. Mookherjee submits that once it is eminently clear that the
award contravenes public policy and fundamental policy of Indian law there
22
can be no estoppel against statute or against grounds related to public
policy being raised.
46. Mr. Mookherjee submits that the finding of the learned Single
Judge that since an aggrieved party can choose whether or not to file a
Section 34 application and this in turn makes the right of challenge under
the said provision waivable militates against the principle that there cannot
be any estoppel against the statute. The claim of the Appellants is that the
award is contrary to public policy of India and against the fundamental
policy of Indian Law. The said ground does not confer any discretion on the
Court to exercise or not to exercise discretion under Section 34. “May” in
Section 34 must be read as “shall” when public policy is involved. It
therefore becomes a mandatory provision. Therefore, there cannot be an
estoppel against law/statute. There cannot be waiver on the ground of
public policy.
47. For the proposition that the court may have the suo motu power
in an application for setting aside the award on grounds following under
Section 34 (2)(b) and 34 (2A) Mr. Mookherjee has referred to State of
Chhattisgarh vs. Sal Udyog Private Limited 3. Our attention has been
drawn to paragraphs 24 to 26 of the said report which reads as follows:-
“24. We are afraid, the plea of waiver taken against the
appellant State on the ground that it did not raise such an
objection in the grounds spelt out in the Section 34 petition
and is, therefore, estopped from taking the same in the appeal
preferred under Section 37 or before this Court, would also not
be available to the respondent Company having regard to the
language used in Section 34(2-A) of the 1996 Act that
empowers the Court to set aside an award if it finds that the3
(2022) 2 SCC 275
23same is vitiated by patent illegality appearing on the face of
the same. Once the appellant State had taken such a ground
in the Section 37 petition and it was duly noted in the
impugned judgment, the High Court ought to have interfered
by resorting to Section 34(2-A) of the 1996 Act, a provision
which would be equally available for application to an
appealable order under Section 37 as it is to a petition filed
under Section 34 of the 1996 Act. In other words, the
respondent Company cannot be heard to state that the
grounds available for setting aside an award under sub-
section (2-A) of Section 34 of the 1996 Act could not have been
invoked by the Court on its own, in exercise of the jurisdiction
vested in it under Section 37 of the 1996 Act. Notably, the
expression used in the sub-section is “the Court finds that”.
Therefore, it does not stand to reason that a provision that
enables a Court acting on its own in deciding a petition under
Section 34 for setting aside an award, would not be available
in an appeal preferred under Section 37 of the 1996 Act.
25. Reliance placed by the learned counsel for the respondent
Company on the ruling in Hindustan Construction Co.
Ltd. [State of Maharashtra v. Hindustan Construction Co. Ltd.,
(2010) 4 SCC 518 : (2010) 2 SCC (Civ) 207] is found to be
misplaced. In the aforesaid case, the Court was required to
examine whether in an appeal preferred under Section 37 of
the 1996 Act against an order refusing to set aside an award,
permission could be granted to amend the memo of appeal to
raise additional/new grounds. Answering the said question, it
was held that though an application for setting aside the
arbitral award under Section 34 of the 1996 Act had to be
moved within the time prescribed in the statute, it cannot be
held that incorporation of additional grounds by way of
amendment in the Section 34 petition would amount to filing a
fresh application in all situations and circumstances, thereby
barring any amendment, however material or relevant it may
be for the consideration of a Court, after expiry of the
prescribed period of limitation. In fact, laying emphasis on the
very expression “the Court finds that” applied in Section
34(2)(b) of the 1996 Act, it has been held that the said
provision empowers the Court to grant leave to amend the
Section 34 application if the circumstances of the case so
warrant and it is required in the interest of justice. This is
24
what has been observed in the preceding paragraph with
reference to Section 34(2-A) of the 1996 Act.
26. To sum up, existence of Clause 6(b) in the agreement
governing the parties, has not been disputed, nor has the
application of the Circular dated 27-7-1987 issued by the
Government of Madhya Pradesh regarding imposition of 10%
supervision charges and adding the same to cost of the Sal
seeds, after deducting the actual expenditure been questioned
by the respondent Company. We are, therefore, of the view
that failure on the part of the learned sole arbitrator to decide
in accordance with the terms of the contract governing the
parties, would certainly attract the “patent illegality ground”,
as the said oversight amounts to gross contravention of
Section 28(3) of the 1996 Act, that enjoins the Arbitral Tribunal
to take into account the terms of the contract while making an
award. The said “patent illegality” is not only apparent on the
face of the award, it goes to the very root of the matter and
deserves interference. Accordingly, the present appeal is
partly allowed and the impugned award, insofar as it has
permitted deduction of “supervision charges” recovered from
the respondent Company by the appellant State as a part of
the expenditure incurred by it while calculating the price of the
Sal seeds, is quashed and set aside, being in direct conflict
with the terms of the contract governing the parties and the
relevant circular. The impugned judgment dated 21-10-2009 is
modified to the aforesaid extent.”(emphasis supplied)
48. Mr. Mookherjee has referred to following observation in Bani
Prasad (Dead) through Legal Representatives vs. Durga Devi 4, in
furtherance of the aforesaid submission:
“19. In the decision in R.S. Maddanappa v. Chandramma
[R.S. Maddanappa v. Chandramma, AIR 1965 SC 1812], this
Court considered the object of estoppel. It was held that its
object is to prevent fraud and secure justice between the
parties by promotion of honesty and good faith. It was
therefore, further held that when one party makes a
representation to the other about a fact he would not be shut
out by the rule of estoppel if that other person knew the true4
2023 (6) SCC 708
25state of facts and must consequently not have been misled by
the misrepresentation.
20. In the decision in Pratima Chowdhury v. Kalpana
Mukherjee [Pratima Chowdhury v. Kalpana Mukherjee, (2014)
4 SCC 196 : (2014) 2 SCC (Civ) 504] , while considering Section
115 of the Evidence Act, this Court held that four salient
conditions are to be satisfied before invoking the rule of
estoppel. Firstly, one party should make a factual
representation to the other party. Secondly, the other party
should accept and rely upon the aforesaid factual
representation. Thirdly, having relied on the aforesaid factual
representation, the second party should alter his
position. Fourthly, the instant altering a position, should be
such, that it would be iniquitous to require him to revert back to
the original position. After holding so, it was further held that
the doctrine of estoppel would apply only when, based on a
representation by the first party, the second party alters his
position, in such manner, that it would be unfair to restore the
initial position.
21. In the decision in B.L. Sreedhar v. K.M. Munireddy [B.L.
Sreedhar v. K.M. Munireddy, (2003) 2 SCC 355] , this Court
held that when rights are invoked estoppel may with equal
justification be described both as a rule of evidence and as a
rule creating or defeating rights. The appellant relies on this
decision, more particularly para 30 of the said decision and it
reads thus : (SCC p. 370)
“30. If a man either by words or by conduct has intimated that
he consents to an act which has been done and that he will not
offer any opposition to it, although it could not have been
lawfully done without his consent, and he thereby induces
others to do that which they otherwise might have abstained
from, he cannot question the legality of the act he had
sanctioned to the prejudice of those who have so given faith to
his words or to the fair inference to be drawn from his
conduct.”
It is to be noted that in the said decision this Court clarified
that a legal status expressly denied by a statute could not be
conferred on the basis of estoppel.” (emphasis supplied)
26
49. Mr. Mookherjee submits that the learned arbitrator as well as
the learned Single Judge have failed to take into consideration that even if it
is considered for the sake of argument that a concession was made on
behalf of the appellants to refund the consideration, it was incumbent upon
the claimant Jagrati to show that based on such representation it has
altered its position to its detriment and it would be inequitable to require
him to revert back to the original position. There is no pleading or finding of
the learned arbitrator to that effect.
50. The statutory right to raise such dispute is even preserved
under Section 34 of the Arbitration and Conciliation Act as Section 34(2)(b)
and Section 34(2A) clearly mandate that if the court finds that the arbitral
award is in conflict with the public policy of India and is vitiated by patent
illegality appearing on the face of the award the court can on its own set
aside the award. This statutory right cannot be diluted even if it is
considered that the appellant had agreed to refund the consideration. In this
regard Mr. Mookherjee has referred to the following decisions:
1) Bhau Ram vs. Baij Nath Singh &Ors. reported in
AIR 1961 SC 1327 paragraphs 6,7,8,12
2) Prashant Ramchandra Deshpande v. Maruti
Balaram Haibatti reported in1995 Supp (2) SCC 539
paragraphs 2,3,5
3) P.R Deshpande vs. Maruti Balaram Haibatti
reported in (1998) 6 SCC 507 paragraphs 9,11, 12
51. Mr. Mookherjee has submitted that both the learned arbitrator
and learned Single judge have relied upon the decision of the Shenbagam
27
& Ors. v. K.K Rathinavel5 in overruling the objection that without specific
pleading no refund can be allowed overlooking the fact that in the said
decision in a suit for specific performance the respondent in the alternative
prayed for a refund of the advance amount. The effect of pleading for refund
according to Mr. Mookherjee has been conclusively settled in Desh Raj &
Ors. v. Rohtash Singh6 in which in paragraphs 33 to 36 the legal position
was discussed and it has held that:”In the absence of such a prayer, it is
difficult to accept that the courts would suo motu grant the refund of earnest
money irrespective of the fact as to whether Section 22(2) of the SRA Act is to
be construed directory or mandatory in nature.”(emphasis supplied)
52. In so far as the claim for interest is concerned Mr. Mookherjee
has submitted that the claim for refund arose in the course of arbitration
proceeding and even if it is assumed that it give rise to a cause of action the
claim for such amount would only arise once the bargain/contract between
the parties fail. Mr. Mookherjee has placed reliance upon a decision of the
Hon’ble Supreme Court in Revanasiddayya v. Gangamma Alias
Shashikala & Anr.7 in this regard and has drawn our attention to
Paragraphs 23 to 25 of the said judgment and more particularly the second
sentence in paragraph 24 which reads: “One cannot dispute the legal position
that once the bargain to sale/purchase of any land fails, the unsuccessful
buyer becomes entitled in law to claim refund of earnest money from the seller
under Section 22 of the Specific Relief Act, 1963.” In the instant case, the
5
2022 SCC Online 71
6
(2023) 3 SCC 714
7
2018 (1) SCC 610
28
bargain between the parties had not failed. Both sides were demanding
specific performance in response to allegations of breach of agreement.
There was no termination of the agreement. There was no recession and/or
repudiation of the contract. The parties did not pray for any reliefs as
such.Therefore, at the highest, the cause of action for claim of interest arose
when the Learned Arbitrator refused the prayers for specific relief, and
directed refund (albeit wrongly), and not prior to that. Therefore, interest
payable, if any is only from the date of the award and not prior to that. The
learned arbitrator therefore committed a palpable failure in exercising its
discretion under Section 31(7) of the 1996 Act by disregarding the well-
known principles of law in that regard.
53. Lastly, on the issue of costs it is submitted that the learned
Single Judge merely noted that the Ld. Sole Arbitrator had refused to grant
costs due to cost sheets not being filed though no direction for filing of the
same had been given.
54. Moreover, the Ld. Single Judge also highlighted the fact that the
Ld. Sole Arbitrator was aware of the parameters for granting of costs, since
the administration fees and remuneration of the Ld. Sole Arbitrator were
known to him, in addition to the distribution of costs being submitted to the
Ld. Sole Arbitrator on the first sitting.
55. Despite noting the above, the Ld. Single Judge failed to render
any decision on the awarding of costs. It is submitted that the material facts
pertaining to the costs incurred, such as Arbitrator fees and steno fees were
available in the 1″ Minutes itself of the meeting held on 13th August 2019
and was therefore before the Ld. Sole Arbitrator from the beginning of
29
arbitration proceedings. Hence, there could have been no reason for not
proper apportionment and award of costs.
56. Moreover, no direction or opportunity was given to file cost
sheet and therefore the Ld. Sole Arbitrator cannot rely on the absence of a
cost sheet to refrain from awarding costs.
57. It is argued that an order of costs even if discretionary has to be
a reasoned order as held in Associate Builders v. Delhi Development
Authority8 (paragraph 42.2):
“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.”
58. Per contra, Mr. Ratnanko Banerjee, learned Senior Counsel
appearing on behalf of the Cross-appellants has submitted that the
proceeding before the learned Arbitrator would clearly demonstrate that
Deepak and his group has consistently made an offer to refund a sum of
Rs.19.90 crores which was admittedly received by them from the claimant.
Mr. Banerjee in this regard has referred to paragraphs 121 and 123 of the
award dated 29th June, 2023, order dated 13th September, 2023 passed in
A.P 664 of 2023 and paragraphs 6, 7, 8, 9 and 11 of the modification
application being G.A 1 of 2023 filed in A.P 664 of 2023. Further reference is
made to paragraphs 57 and 58 of the impugned order dated 4th September,
2024.
8
(2015) 3 SCC 49
30
59. Mr. Banerjee in referring to the modification application filed by
Deepak and his group in connection with an application under Section 9 of
the 1996 Actbeing G.A No.01 of 2023 has specifically drawn our attention to
paragraph 6 of the said application to show that Deepak in the said
paragraph has categorically accepted the portion of the award directing
payment of the principal sum of Rs.19,92,30,500/- to Jagrati and was
willing to return the said sum. Further submission is made to the effect that
Deepak has clarified that the present appellants would intend to challenge
the portion of the award whereby interest had been awarded on the said
sum. Thus, the appellants themselves and through counsel have repeatedly
reiterated, reaffirmed and assured to refund the said sum of Rs.19.92 crores
(approximately) at various stages of the litigation and also at the post award
stage had unhesitatingly and unreservedly expressed their intention that
they are aggrieved by the interest component of the award and not with
regard to the refund of the principal sum.
60. Further, even after filing the Section 34 proceedings, the
Appellant Nos. 1, 2 and 11 in A.O. Com/38/2024 have filed a suit being
C.S. (Com) No. 764 of 2024 before this Hon’ble Court on 14th August, 2024,
inter alia, praying for a declaration that the Award dated 29th June, 2023 is
binding on Tirupati Vancom Private Limited and Goldsmith Infrabuild
Private Limited. In fact, in paragraph 29 of the plaint, it has been specifically
admitted that sums were paid by Tirupati Vancom Private Limited and
Goldsmith Infrabuild Private Limited on behalf of the Award Holder.
61. The aforesaid suit was filed after filing of the Section 34
application by the award debtor being C.S.(COM) 764 of 2024. In the plaint
31
the award debtor clearly accepted the entirety of the award including the
interest component. The learned Senior Counsel has specifically relied upon
prayer (b) in the plaint to show the admission of liability to the extent of
refund. It reads:
(b) Alternatively, a further decree of declaration that the award
dated 29th June, 2023 passed in the Arbitration between the
defendant no. 1 herein and the plaintiffs herein is binding on the
defendant nos. 3 and 4.
62. The money paid by Jagrati on behalf of the said Defendants in
the aforesaid suit is wholly irrelevant as such plea was never urged earlier
ever and in any event the Defendant No.4 (Tirupati Vancom Private Limited)
is not a party to the arbitration.
63. The repeated prayers of the Award Debtors namely the Bhargav
has to make payment of the principal sum awarded in the Award dated 29th
June, 2023 and also praying for a decree in terms of the Award, they should
be estopped from pursuing any further challenge to the award.
64. The cross appellants, Award Debtors for the first time in the
Section 34 proceedings have raised the contention that money has been
paid by diverse entities and not just the Award Holder.
65. The Award Debtors in the Arbitral Proceedings had always
admitted that the Award Holder had paid a sum of Rs.19,92,30,500/- out of
which a sum of Rs.3,68,94,500/-wastowards Share Purchase Consideration
and the balance sum of Rs.16,23,36,000/- was towards the loan advanced
to the Award Debtors. The said fact would be evident from Paragraph 121 of
the Award dated 29th June, 2023.
32
66. Any other contention is contrary to records and is also
untenable in law. The contention that money had been paid by Tirupati
Vancom Private Limited and Goldsmith Infrabuild Private Limited on behalf
of the Award Holders to the Award Debtors and hence the same should be
returned to these two companies was not the issue before the Learned
Arbitrator and the same is between the Award Holders and the two
companies.
67. Moreover, there is no privity of contract between the Award
Debtors and Tirupati Vancom Private Limited and Goldsmith Infrabuild
Private Limited and both the said entities are not part of the Arbitration
proceedings.
68. Tirupati Vancom Private Limited and Goldsmith Infrabuild
Private Limited can have no claim on the award debtor. Claim, if any by
Tirupati Vancom Private Limited and Goldsmith Infrabuild Private Limited
can only be against Jagrati Trade Services, being the award holder.
69. The Learned Senior Counsel has referred to paragraphs 34 to
39, 41 to 52, 56 to 57, 60 to 61 of the impugned order dated 4th September,
2024 to show that all these issues raised by the Award Debtors have been
considered by the Hon’ble Single Judge in the order dated 4 th September,
2024 in the said paragraphs.
70. The learned Senior Counsel has refuted the submission made
on behalf of Deepak with regard to non inclusion of any prayer for refund of
the consideration amount as according to Mr. Banerjee the provision of
Section 22(2) of the 1963 Act regarding a relief to be specifically pleaded and
33
asked before such relief could be granted is a technical objection and not
mandatory.
71. Mr. Banerjee referred to the proviso of the said section to show
that it contemplates amendment which could be done at any stage during
the course of the arbitration and the relief cannot be refused due to non
inclusion of the same in the original proceeding. It is further argued that
Section 22(2) is only to ensure that none of the parties are taken by surprise
by a particular claim. In the instant case, both the parties have extensibly
argued on the aspects of the matter namely the relief of refund and interest.
The learned Arbitrator dealt with both the issues in his own way and has
passed an award on consideration of all material facts and relevant evidence
in this regard.
72. Deepak and its group have repeatedly offered to refund the
principal amount at various stages of the proceeding and it does not stand
to reason as to why non-inclusion of such relief in the statement of claim
would disentitle the claimant from being granted such amount altogether.
73. The Award Debtors had offered to refund the consideration paid
by the Award Holder and did not press for the specific performance of its
Share Purchase Agreement as would be evident from Paragraph 135 of the
Award.
74. Section 22 of the Specific Relief Act ex-facie do not apply in the
instant case as this is not a case of specific performance of a contract for
transfer of an immoveable property and nor are the amounts of Rs.3.68
crore and Rs.16.23 crore are Earnest Money Deposits (EMD) for transfer of
immoveable property. Therefore arguments made on behalf of the award
34
debtor that there is a provision in law with regard to return of the
consideration without amendment of the claim are not applicable. The
appellants have failed to show that there is any bar in law for return of part
share consideration and loans given under the agreement of 24th March,
2011 to the award holder. The retention of the part consideration to one of
those parties to the agreement when specific performance has been refused
to the other party would amount to an unjust enrichment on the part of that
party and in this regard reliance has been placed on sections 65 and 70 of
the Contract Act. The said sections require any advantage received under an
agreement which is either becomes void or the consideration not having
been paid gratuitously, the party receiving the consideration or advantage
has to restore it to the persons whom he received it. The award for return of
such consideration while denying specific performance to the appellant by
the Arbitrator cannot be held to be an impossible view and therefore it is
submitted that the award does not call foran interference by this Court.
75. In so far as the argument of Mr. Mookherjee that no award
could have been passed on a doctored document it is submitted that refund
stands on a different footing than specific performance. The said claim was
allowed on the admitted fact the amount was paid by the claimant and not a
relief based on the authenticity of the agreement.
76. Mr. Banerjee has drawn our attention to Section 31(7) (a) of the
1993 Act and has argued that the contention of Deepak that there is no
provision in the agreement dated 24th March, 2011 for providing interest is
fallacious and contrary to the Share Purchase Agreement. It is submitted
that Section 31(7)(a)empowers the learned Arbitrator to grant interest for the
35
whole or any part of the period between the date on which the cause of
action arose and the date on which the award is made.Clause 9.2.(b) of the
Share Purchase Agreement as relied upon by the Petitioners mentions that
in case the Transferor Shareholders have committed a breached in their
obligations, the Transferee Shareholders have an option to have the money
paid by it as consideration refunded with interest of 12% p.a. In any event,
Rs. 16,23,36,000/- was admittedly provided as a loan by Jagrati. In terms of
the Agreement dated March 24, 2011, as disclosed by Deepak in their
Statement of Defence, interest of 12% p.a. was to be paid on such sum as
stipulated in Article 3.2. It is contended that since the learned Arbitrator
has awarded refund of the principal amount, the cause of action for interest
would also commence not from the date of the award but from the date of
the payment of such principal amount by the claimant, which was the cause
of action for the refund as well.
77. Mr. Banerjee has drawn our attention to Section 31(7)(a) of the
Arbitration and Conciliation Act, 1996 to show that the arbitrator has been
given the discretion to grant interest from the date when the cause of action
arises. The claim for refund is due to non-performance of the agreement by
the cross appellants. The entitlement to receive the money arises by reason
of failure on the part of the cross appellants to perform their obligation
under the contract. If the retention of the amount is held to be unjustified
and the learned arbitrator on that premise observed that refusal to direct
refund of the consideration would amount to unjust enrichment then the
benefit of such amount utilised by the cross appellants from the date when
such amount was received should have been the date to be reckoned for the
36
purpose of granting interest on such refunded amount. In fact, the
agreement contemplates interest to be paid on loan at the rate of 12% per
annum. The learned Arbitrator has not only failed to direct payment of
interest from the date of the transaction when the amount was received but
had reduced the rate of interest to 9%.
78. Mr. Banerjee has submitted that the learned Arbitrator has
misconstrued the said section and on an erroneous interpretation of law has
refused to grant interest from the date of payment of the principal amount.
79. The contention of Deepak that the Learned Arbitrator failed to
take into consideration that there was a forfeiture clause in the Agreement
dated March 24, 2011 is contrary to records and untenable in law as the
grounds for forfeiture as stipulated in both versions of the agreement were
different from the present facts of the case.
80. The Appellants cannot refuse to perform the contract on the
ground that the consideration is insufficient to perform the contract while at
the same time wrongfully retain the money which the claimant had paid in
course of a commercial transaction as consideration. However, the other
transferees Orbit and Damani despite having not paid their part of the
consideration, the shares were transferred in their favour and also the part
of the loan which was advanced by them to the Company was also returned.
81. Moreover, paragraph 126 of the award would show that no
argument has been advanced by appellants that they have right to forfeit or
confiscate the award in course of the Arbitration Proceeding.
82. On the question that costs should have been awarded to the
award debtor by the Learned Arbitrator, it is submitted that awarding of cost
37
is also a discretion of the Learned Arbitrator and there can be no question in
this case awarding any cost to the award debtor because it is also in the
losing side having failed to pursue or establish its claim for specific
performance of the agreement dated 23rd April, 2011. The arbitrator has
dealt with the cost issue which has been explained in the order dated 21st
August, 2023 rendered in an application under Section 33(2) and 33(4) filed
by the award debtors. The order clearly records as to why cost was refused
to the award debtors after holding that the award debtor was not the
successful parties to the proceedings.
83. Mr. Banerjee further submits that the scope of an appellate
court under Section 37 of the Arbitration and Conciliation Act is even
narrower to the scope in relation to the power exercised by the court under
Section 34 of the Arbitration and Conciliation Act.
84. The learned senior counsel has placed reliance on the following
judgments to show the nature and extent of power of a court in an
application for setting aside of an arbitral award:
a. UHL Power Company Limited v State of Himachal Pradesh,
reported in (2022) 4 SCC 116 (Para 16, 18 and 22);
b. Konkan Railway Corporation Ltd v Chenab Bridge Project
Undertaking, reported in (2023) 9 SCC 85 (Para 19 and 29);
c. Reliance Infrastructure Limited v State of Goa, reported in
(2024) 1 SCC 479(Para 57).
d. Punjab State Civil Supplies Corporation Limited & Anr. vs.
Sanman Rice Mills & Ors. reported in 2024 SCC OnLine SC
2632 (para-20);
38
e. Somdatt Builders-NCC- CEC(JV) vs. National Highways
Authority of India & Ors. reported in 2025 SCC OnLine SC 170
(para-27, 36)
85. It is submitted that the aforesaid judgments have conclusively
held that the power of the appellate court under Section 37 is narrower and
it cannot travel beyond the restrictions laid down under Section 34.
86. Attention is drawn to the grounds of challenge to show Deepak
have raised new grounds of challenge namely ground No.XV, LV, LVIII, LIX,
LX, LXI and LXXV in the Section 37 proceedings which were never taken
even at the stage of Section 34 proceedings and the same cannot be taken
into consideration.
87. In distinguishing the cases cited by Mr. S.N. Mookherjee, Senior
Counsel on behalf of the appellant it is submitted that no ground has been
disclosed by the Award Debtors for setting aside of the Award as mentioned
in the cases of Ssangyong (supra) Associate Builders (supra) or PSA Sical
(supra).
88. The cases of Shenbagam & Ors. (supra) and Desh Raj & Ors.
(supra) are pertaining to Section 22 of the Specific Relief Act, 1963 and are
not applicable in the instant case as they pertain to transfer of immovable
property and possession with respect to the same. The Shenbagam case on
the other hand has been relied on by the Learned Arbitrator at paragraph 41
for the proposition “given the blemished conduct of the Respondent/Plaintiff
in indicating his willingness to perform the contract, we decline in any event
to grant the remedy of specific performance of the contract. However, we
order a refund of the consideration together with interest @ 6% per annum.”
From the judgment it is clear that the refund was ordered on the basis of a
39
prayer also made for a refund of the advance made as recorded in paragraph
5 of the judgement and pointed out by the appellant. The case of SP
Chengalvaraya Naidu (supra) was not pertaining to Arbitration and in that
case preliminary decree was obtained by fraud. In the present case, the
Award Holders had led evidence to prove its version of the Share Purchase
Agreement.
89. The case of Dalip Singh (supra) was not pertaining to
Arbitration and in that case the Court had been misled to pass order in
favour of the Petitioner and the issue of law was pertaining to the power of a
Court to grant relief under Article 226 of the Constitution of India.
90. The case of Devendra Kumar (supra) was also not pertaining to
Arbitration. In that case, the service of constable had been terminated as he
had suppressed pending criminal proceedings against him.
91. The above cases are not at all relevant because they are all
cases on the principle that a party who suppresses documents is not
entitled to any relief from court. The matter does not involve suppression of
any document at all. The Arbitrator in his wisdom has refused to grant
specific performance to the award holders on more than one ground
including the ground, according to him, that the agreement was doctored.
Such finding cannot in any manner affect the question of refund to the
award holder as on the other grounds the award debtors have also been
refused the specific performance.
92. The case of Revanasiddayya (supra) is also not pertaining to
Arbitration and the issue in that case is not relating to Section 31(7)(a) of
the 1996 Act. As such, no reliance on the same can be placed to argue that
40
the Learned Arbitrator failed in exercising his discretion under Section
31(7)(a) of the 1996 Act.
93. In the case of State of Chattisgarh (supra) the issue of law was
whether additional ground could be taken in Section 37 proceedings which
was not taken in the petition filed under Section 34 of the 1996 Act.
94. The judgments passed in the cases of Bhau Ram (supra),
Prashant Ramchandra Deshpande (supra), P.R Deshpande (supra) and
Bani Prasad (supra) are not pertaining to principles of estoppel in
Arbitration proceedings.
95. All the above cases are on the principle that a statutory right to
appeal cannot be taken away by reason of the appellant abiding by or taking
advantage of something done under the decree. In P.R Deshpande (supra)
the Court had required an undertaking to be given by the tenant for stay of
operation of the judgment and it was held that such undertaking would not
deprive the tenant to a right of appeal. These cases do not apply to the acts
of the award debtors as they were under no compulsion to make any
statement with regard to satisfaction of the award as has been done in
modification application being G.A. NO.1 of 2023 filed in A.P. No.664 of
2023. This was a wholly voluntary act and voluntary statements being made
on the merits of the matter and including their filing the suit [C.S. (COM)
No. 764 of 2024). In spite of a voluntary act of submitting to the award and
wanting to satisfy the award cannot be treated as losing a right of a
statutory appeal.
96. In his brief reply Mr. S.N. Mookherjee has argued that the
Tribunal having held that the copy of the agreement relied upon by the
41
respondents was doctored could not have directed repayment of funds based
on such doctored document. The relief for refund of principal of
Rs.19,92,30,500/- was based on purported admission that a portion of the
funds was received from the respondent. In fact, the respondent never
claimed the refund but throughout the Arbitration proceeding insisted on
specific performance of the Agreement dated 24th March, 2011.
97. Significantly, the learned Single Judge in paragraph 30 of the
impugned order has not dealt with the case made out by Deepak Bhargava
and others (the appellants in APOT 328 of 2024) regarding refund and only
dealt with it as a technical defence. The relief of refund of the money with
interest was not granted on admission or on the basis that the appellants
i.e. Deepak Bhargava and others gave up its claim for specific performance.
In fact, the award denies relief of specific performance on merits.
98. In so far as the suit filed by the cross appellant is concerned it
is submitted that the plaint has been filed without prejudice to the rights of
the appellants and in the pending Section 34 application which was pending
on that date as would appear from paragraph 20 to 32 of the plaint. There is
no acceptance of the award made in the plaint. The written statement filed
by the defendant no. 4 in the said suit bears testimony to the fact that the
learned Arbitrator has erroneously directed refund of the sums of money to
the respondent herein, without the respondent obtaining No Claim
Certificate from Tirupati Vancom Private Limited and Goldsmith Infrabuild
Private Limited. It now appears that the stand of the defendant no. 4 that is,
Tirupati Vancom Private Limited in the suit is in sync with the argument
42
recorded in paragraph 10 of the impugned order dated 4th September,
2024.
99. There was no claim for interest prayed by the respondent before
the Arbitrator. The offer to refund the money advanced without interest was
an offer to settle but was refused by the Respondent. No pleadings were
made before the Arbitrator by the respondent as to its right to claim interest.
The claimant i.e. Jagrati did not deal with the decision cited by the appellant
that “cause of action” for refund would only arise if the bargain to purchase
failed as held in Revanasiddayya (supra) at para 23 to 25 of the said
report.
100. The Trial Court has held that award of interest is in the
discretion of the Tribunal under the Act. It was submitted that such
discretion has to be exercised based on such legal principles. The right to
claim interest on a money claim is deprivation of use of money. The
respondent became entitled to the money on the suo motu direction of the
Tribunal to refund the advanced paid to avoid unjust enrichment. There was
no pleading claiming interest.
101. The Arbitrator in paragraph 109 of the Award has held that the
respondent has also committed breach in performance of its obligation.
Having so held, to compensate the claimant by directing the refund of
money advanced with interest tantamounts to giving a premium to such
default committed by the respondent.
102. Mr. Mookherjee has submitted that the decision relied upon by
the appellants on the scope of Section 22(2) of Specific Relief Act clearly
43
mandates that in absence of any prayer for refund the court would have no
jurisdiction to direct refund.
103. Section 22 of the Specific Relief Act, 1963 is a mandatory
provision. A prayer for refund is a sine qua non for grant of the relief of
refund. In the instant case, admittedly, there was no prayer at any point of
time made by the claimant for refund of the consideration it had allegedly
paid. Further, the Learned Arbitral Tribunal had erred in granting the relief
of refund de-hors the provision of Section 22 of the Specific Relief Act, 1963.
104. The decision in Shenbagam (supra) is irrelevant in the facts
and circumstances of the case and the directions passed in paragraph 41 of
the said decision cannot be taken out of the context. In paragraph 41 of the
said decision, the Hon’ble Supreme Court had ordered a refund of the
consideration (along with interest), while declining the prayer for specific
performance. However, on a perusal of the said judgment itself, it is evident
that the Plaintiff therein had already prayedfor the refund of advance with
interest as would appear from paragraph 5 of the report. Therefore, the
decision of the Hon’ble Supreme Court is in consonance with section 22 of
the Specific Relief Act, 1963 and therefore this decision does not enure to
the benefit of the claimant.
105. The ratio of the decision in Punjab State Civil Supplies
Corporation Limited (supra) and Somdatt Builders NCC (supra) are not
relevant since the said decisions arrived at a finding that the view taken by
the arbitrator was a plausible view and there was no reason to interfere with
the award under Section 37 read with the Section 34. The view on
interpretation of the contract by the arbitrator was found to be a plausible
44
view. The learned Single Judge has not interpreted the contract and hence
the said decision cannot have any manner of application.
106. Moreover, in Punjab State Civil Supplies Corporation
Limited (supra) the arbitral award was held to be not against the public
policy whereas in the instant case, the learned Single Judge has clearly
erred in upholding the award which is against the public policy and the
fundamental policy of Indian Law. Under Section 34(2) of the Arbitration
and Conciliation Act, 1996 if the award is against the public policy which,
inter alia, would include any decision of an arbitrator contrary to a decision
of a court the award so passed is required to be set aside. Under such
circumstances reviewing the said decision is permissible under Section 37 of
the Arbitration and Conciliation Act, 1996. In view of the fact that the
challenge of the impugned order was that the award is against the
fundamental policy of Indian Law and contrary to Section of the Specific
Relief Act and principles underlying the said provision the decisions in
Reliance Infrastructure Limited (supra) may not have any application. It
is submitted that one cannot disregard that Section 22 of the Specific Relief
Act is part of substantive law of India and any award contrary to such
substantive law would be against the fundamental policy of Indian Law. The
modification application on which reliance has been placed has to be read
as a whole as the alleged admission was not unconditional.
107. The learned Senior Counsel has referred to several orders
namely the orders dated 13th September, 2023, 20th November, 2023 read
with 24th November, 2023, 6th December 2023 and 18th December, 2023 to
demonstrate that neither the court nor the claimants have relied upon or
45
acted upon or had altered their position on the basis of the alleged
admission. Furthermore, in the affidavit in opposition to Section 34 of the
application the cross appellants/claimants has not pleaded that it had relied
upon or altered his position pursuant to such alleged admission made by
the appellant. Under such circumstances there is no question of any bar or
estoppel operating against the claimant in preferring its application under
Section 34 or in challenging the entirety of the award. The plea of estoppel
has to be pleaded or proved. In absence of any such pleading or proof in
view of the law laid down in Bani Prasad (supra) and more particularly
paragraph 21 of the said decision which clearly lays down the law that there
can be no estoppel against law or a statute argument of the cross appellant
the cross appeal must fail and the award is required to be set aside.
108. In this background, the challenge to the order of the learned
Single Judge needs to be examined.
109. The essential dispute is with regard to refund of the
consideration amount with interest.While Deepak have assailed the award
as a whole, the limited ground of challenge to the award by the cross
appellants are in respect of the period for which interest was not granted
that is to say, prior to the filing of the statement of claim.
110. In an application for setting aside of the award under Section 34
of the Arbitration and Conciliation Act, 1996 it is now well settled by catena
of decisions that the Court does not act and function as a court of appeal
over the arbitral award and may interfere on merits limited to the grounds
mentioned in Section 34 (2) of the said Act. It is relevant to note that by way
of amendment in 2016 Sub-section (2A) has been inserted in Section 34
46
which provided that in case of domestic arbitration violation of public policy
of India would also include patent illegal ex facie must appear on the face of
the award. However, the ground of patent illegality would not be available in
the event an application for setting aside of the award is filed prior to
amendment in 2005 i.e. 23rd October, 2015 [See Ssangyong(supra)]. The
application for setting aside of the award was filed on 18th October, 2023. By
way of clarification in the amendment it was made clear that the award shall
not be set aside merely on the ground of an erroneous application of law or
by re-appreciation of evidence which is merely a reiteration of the earlier
views expressed by the Hon’ble Supreme Court that in deciding the
application for setting aside the award the court is not exercising its
jurisdiction as an appellate authority and the powers of the appellate court
would not be available to a court deciding such an application. The scope of
jurisdiction under Section 34 and Section 37 of the Act is not akin to normal
appellate jurisdiction. The powers of the Court are circumscribed by the
limited grounds as mentioned in Section 34. The reason being that the
arbitration proceedings are not considered and comparable to judicial
proceedings before the Court and a party can opt for an arbitration before
any person who is not required to have a degree in law or any prior legal
experience. Once the parties have consented to an appointment of an
arbitrator it should be presumed that they have bestowed their faith and
trust on the arbitrator and wanted a decision in an informal manner. This
was recognised in Dyna Technologies (p) Limited v. Crompton Greaves
Ltd.9 in which it is observed in paragraph 29: “There is no gainsaying that
9
2019 (20) SCC 1
47
arbitration proceedings are not per se comparable to judicial proceedings
before the Court. A party under the Indian Arbitration Law can opt for an
arbitration before any person, even those who do not have prior legal
experience as well. In this regard, we need to understand that the intention of
the legislature to provide for a default rule, should be given rational meaning
in light of commercial wisdom inherent in the choice of arbitration” and
reiterated in K. Suguman vs. Hindustan Corporation Limited10 in the
following words:
“When parties have chosen to avail an alternate mechanism for
dispute resolution, they must be left to reconcile themselves to the
wisdom of the decision of the arbitrator and the role of the court
should be restricted to the bare minimum”.
111. In Vidya Drolia & Ors. v. Durga Trading Corporation 11 it is
stated:
“18. Arbitration is a private dispute resolution mechanism
whereby two or more parties agree to resolve their current or
future disputes by an Arbitral Tribunal, as an alternative to
adjudication by the Court or a public forum established by law.
Parties by mutual agreement forgo their right in law to have their
disputes adjudicated in the courts/public forum. Arbitration
agreement gives contractual authority to the Arbitral Tribunal to
adjudicate the disputes and bind the parties.” (emphasis
supplied)
112. In Konkan Railway Corporation Ltd. (supra) a three judge
bench in paragraph 18 stated thus:
“Scope of interference by a court in an appeal under Section 37
of the Act in examining an order, setting aside or refusing to set
aside an award, is restricted and subject to the same grounds10
2020(12) SCC 539 at 540
11
2021(2) SCC 1
48as the challenge under Section 34 of the Act.” (emphasis
supplied)
113. The aforesaid view has been reiterated in paragraph 26 in
Bombay Slum Redevelopment Corporation Pvt. Ltd. v. Samir Narain
Bhojwani12. It was held thus:
“26. The jurisdiction of the appellate court dealing with an appeal
under Section 37 against the judgment in a petition under Section
34 is more constrained than the jurisdiction of the Court dealing
with a petition under Section 34. It is the duty of the appellate court
to consider whether Section 34 Court has remained confined to the
grounds of challenge that are available in a petition under Section
34. The ultimate function of the appellate court under Section 37 is
to decide whether the jurisdiction under Section 34 has been
exercised rightly or wrongly. While doing so, the appellate court can
exercise the same power and jurisdiction that Section 34 Court
possesses with the same constraints.” (emphasis supplied)
114. If it appears to the court under Section 37 on a reading of the
award along with grounds of challenge made in the application for setting
aside of the award that the court in deciding such application has failed to
take into consideration that the finding in the award was based on no
evidence at all or if the award had ignored vital evidence in arriving at its
decision and thereby render itself liable to be set aside on the ground of
patent illegality or where the court in deciding the application has interfered
with the finding on facts and appreciation of evidence or interference with
the interpretation of the terms of the contract or refuse to accept the view of
the arbitrator which could be a possible, plausible and alternative view on
12
2024 (7) SCC 218
49
facts the court in exercise of its power under Section 37 may either set aside
or uphold the award as the case may be. However, the aforesaid illustrations
are not exhaustive and it depends upon the nature of the order of the court
deciding the application for setting aside of the application.
115. In view of the nature of proceeding interference to an arbitral
award is extremely limited and would be justified only in cases of
commission of misconduct by an arbitrator which can find manifestation in
different forms including exercise of legal perversity by the arbitrator. (See
K. Sugumar (supra). This insulation of an award acts as a guard-wall from
an assault on the award on the ground of misappreciation of evidence or
interpretation of the contract or application of erroneous legal principle. It is
for this protection and immunity that an award enjoys the courts have held
that :
(i) 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 can be said to be something that no fair-
minded or reasonable person could do. A possible view by the
arbitrator on facts has necessarily to pass muster as the
arbitrator is the ultimate master of the quantity and quality of
evidence to be relied upon when he delivers his arbitral award
(Per Justice M.R. Shah in Parsa Kenta Collieries Ltd. v.
Rajasthan Rajya Vidyut Utpadan Nigam.13
ii) Court should not interfere with an award merely because an
alternative view on facts and interpretation of contract exists
(Dyna Technologies (supra).
(iii) Unless the court comes to a conclusion that the perversity of
the award goes to the root of the matter without there being a
possibility of alternative interpretation which may sustain the
arbitral award an arbitral award should not be interfered with in
a casual and cavalier manner (Dyna Technologies (supra).
13
AIR 2019 SC 2908: 2019 (7) SCC 236
50
(iv) It is well settled law that where two views are possible, the
court cannot interfere if the plausible view taken by the
arbitrator is supported by reasoning. In other words if there are
two plausible interpretations of the terms and conditions of the
contract, then no fault can be found, if the learned arbitrator
proceeds to accept one interpretation as against the other.
(Dyna Technologies (supra) followed in South East Asia
Marine Engineering and Construction Ltd. (SEAMEC Ltd.) v.
Oil India Limited; 2020(5) SCC 164 and UHL Power
Company Ltd. (supra).
116. There were various changes which were brought about in the
1996 Act from the 1940 Act. The purpose of the new Act was to have speedy
disposal through the forum of arbitration.
117. Section 34 introduces itself by saying that the grounds
mentioned thereunder are the “only” grounds on which an arbitral award
may be set aside. However, apart from the grounds mentioned under S.34,
the Act also provides for other grounds as under S.13, S.16, S.75 and S.81
on the basis of which the award can be set aside.
118. The grounds given under S.34(2)(a) are crisp and precise and
lay the law as it is without the inclusion of any open-ended expression
which otherwise would have given the courts an opportunity to widen their
scope of interference with the arbitral awards. The only open-ended
expression which can be and has been of concern is the ground of public
policy of India. It has been under many cases defined as an unruly horse
thus giving the interpretation that it can never be defined or be a certain
thing. However, for the purpose of achieving the aim of the new Act, the Act
of 1996 – the legislature while drafting the Act limited the scope of public
policy in its explanation restricted it to:-
a) Fraud
51
b) Corruption
c) S.75 or S.81 (confidentiality breach or admissibility of
evidence). The scope of public policy was, however, widened after
Supreme Court in its decision of Oil & Natural Gas Corporation
Ltd. v. Saw Pipes 62 Ltd.14 (also referred to as : “Saw Pipes Case”)
interpreted it to include “patent illegality” in its definition.
119. Interpretation of a contract is a matter for the arbitrator to
determine, even if it gives rise to determination of a question of law. It is a
settled law that interpretation of the contract and appreciation of the
evidence by the arbitral tribunal cannot be reopened by arguing that the
award is contrary to the contract. Arbitration is consensual and some
amount of laxity should be given while scrutinizing an award. A sense of
informality is attached to such proceeding. It cannot be scrutinized with an
Eagle’s eye or eye of a needle and as an appellate authority.
120. Once it is found that the arbitrator’s approach is not arbitrary
or capricious it has to be accepted. He is the last word on facts. The
construction of the terms of the 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
would do, of course, the arbitrator cannot wander outside the contract and
deals with the matters not forming the subject matter or allotted to him as
14
2003 (5) SCC 705
52
in that case he would commit jurisdictional error. (See Delhi Airport Metro
Express (P) Ltd. v. DMRC)15
121. In Delhi Development Authority v. R.S. Sharma 16, the
Hon’ble Supreme Court summarized the law on the subject. In paragraph 21
it is stated:
“21.From the above decisions, the following principles emerge:
(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
(iv) Patently illegal, or
(v) Prejudicial to the rights of the parties, is open to interference by
the Court under S.34(2) of the Act.
(b) 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;
(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.”
122. In KV Mohd. Zakir v. Regional Sports Centre 17 it held that
the courts should not interfere unless reasons given are outrageous in their
defiance of logic or if the arbitrator has acted beyond his/her jurisdiction.
15
2022 (1) SCC 131
16
2008(13) SCC 80
53
123. In P.R. Shah Shares & Stock Brothers v. M/s. B.H.H.
Securities (P) Ltd.18 it is clearly stated that a court does not sit in appeal
over the award of an arbitral tribunal by re-assessing or re-approaching the
evidence. An award can be challenged only on the grounds mentioned in
S.34(2) of the Act.
124. In Associate Builders (supra) the Supreme Court has laid
down the principle on which an award can be held to be perverse. The Apex
Court held:
“32. A good working test of perversity is contained in two
judgments. In Excise and Taxation Officer-cum- Assessing
Authority v. GopiNath& Sons [1992 Supp (2) SCC 312], it was
held: (SCC p. 317, “7. … It is, no doubt, true that if a finding of
fact is para 7) arrived at by ignoring or excluding relevant
material or by taking into consideration irrelevant material or if
the finding so outrageously defies logic as to suffer from the vice
of irrationality incurring the blame of being perverse, then, the
finding is rendered infirm in law.” In Kuldeep Singh v. Commr.of
Police [(1999) 2 SCC 10: 1999 SCC (L&S) 429], it was held: (SCC
p. 14, para 10)“10. A broad distinction has, therefore, to be maintained between
the decisions which are perverse and those which are not. If a
decision is arrived at on no evidence or evidence which is
thoroughly unreliable and no reasonable person would act upon
it, the order would be perverse. But if there is some evidence on
record which is acceptable and which could be relied upon,
howsoever compendious it may be, the conclusions would not be
treated as perverse and the findings would not be interfered with.
33. It must clearly be understood that when a court is applying
the “public policy” test to an arbitration award, it does not act as
a court of appeal and consequently errors of fact cannot be
corrected. A possible view by the arbitrator on facts has
necessarily to pass muster as the arbitrator is the ultimate
master of the quantity and quality of evidence to be relied upon
when he delivers his arbitral award. Thus an award based on17
AIR 2009 SC (Supp) 2517
18
2012 (1) SCC 594
54little evidence or on evidence which does not measure up in
quality to a trained legal mind would not be held to be invalid on
this score.” (emphasis supplied)
125. Even if the reasoning provided in the award is implied, unless
such award portrays “perversity unpardonable” under Section 34 of the
Arbitration and Conciliation Act, it cannot be set aside [See paragraph 25 of
Dyna Technologies (supra)].
126. Once it is found that the arbitrators’ approach is not arbitrary
or capricious then he is the last word on facts.
127. Reasonableness of the decision cannot be a matter of judicial
review in deciding an application for setting aside and award.
128. Once the arbitrator has come to a finding the Court should not
interfere with the award unless reasons given are outrageous in their
defiance of logic or if the arbitrator has acted beyond his jurisdiction.
Moreover, the Court does not sit in appeal over the award of the arbitral
tribunal by re-assessing, re-approaching or re-appreciating the evidence. It
is well settled that the Court does not sit in appeal over an award. It is not
for this Court to reassess the evidence on record. It is also not for this Court
to weigh the quality and quantity of the evidence put forward before the
Arbitration. In Ravindra Kumar Gupta & Co. v. Union of India 19 it is
reiterated that reappraisal of evidence by the Court is not permissible.
Where the reasons have been given by the arbitrator in making the award
the court cannot examine the reasonableness of the reasons. If the parties
have selected their own forum, the deciding forum must be conceded the
power of appraisement of evidence. The arbitrator is the sole judge of the
19
2010 (1) SCC 409
55
quality as well as the quantity of evidence and it will not be for the court to
take upon itself the task of being a Judge on the evidence before the
arbitrator. The award can be challenged only on the ground mentioned in
Section 34(2) of the Act.
129. An erroneous application of the law by itself is not a ground to
challenge an award under Section 34 of the Arbitration and Conciliation Act.
For an award to be set aside there must be a patent illegality, an error which
goes to the very root of the matter and affects the jurisdiction of the
arbitrator in deciding a dispute. If the arbitrator lacks the authority to
decide the dispute the award is a nullity. If the disputes are by nature non-
arbitrable the assumption of jurisdiction would be an illegality.
The judgment in Associate Builders (supra), which was passed in relation
to a domestic award also recognized and reaffirmed the settled law that
where a cause or matters in differences are referred to an arbitrator,
whether lawyer or layman, he is considered to be the sole and final judge of
all questions of law and of fact obviously with the limited grounds of
interference, namely, if it is opposed to fundamental policy of Indian Law,
interest of India, justice or morality and patent illegality. If an award is
perverse it would be against the public policy of India.
130. Violation of Indian statutes linked to public policy or public
interest and disregarding orders of superior courts in India would be
regarded as being contrary to the fundamental policy of Indian law. It would
also mean that the arbitral award is against basic notions of justice or
morality. An arbitral award can be set aside on the ground of patent
56
illegality i.e. where the illegality goes to the root of the matter but re-
appreciation of evidence cannot be permitted under the ground of patent
illegality. (See. Ssangyong (supra))
131. In PSA Sical (supra) is has been reiterated as under:
“40. … The ground for interference on the basis that the award
is in conflict with justice or morality is now to be understood as
a conflict with the “most basic notions of morality or justice”. It
is only such arbitral awards that shock the conscience of the
court, that can be set aside on the said ground. An award
would be set aside on the ground of patent illegality appearing
on the face of the award and as such, which goes to the roots
of the matter. However, an illegality with regard to a mere
erroneous application of law would not be a ground for
interference. Equally, re-appreciation of evidence would not be
permissible on the ground of patent illegality appearing on the
face of the award.” (emphasis supplied)
132. A patent illegality would mean an illegality which goes to the
root of the matter and not a mere erroneous application of the law is the
view in Associate Builders (supra) which was reiterated in Ssangyong
(supra) in paragraphs 37, 39, 40 and 41 of the said report which reads:
“37. Insofar as domestic awards made in India are concerned,
an additional ground is now available Under Sub-section (2A),
added by the Amendment Act, 2015, to Section 34. Here, there
must be patent illegality appearing on the face of the award,
which refers to such illegality as goes to the root of the matter but
which does not amount to mere erroneous application of the law.
In short, what is not subsumed within “the fundamental policy of
Indian law”, namely, the contravention of a statute not linked to
public policy or public interest, cannot be brought in by the
backdoor when it comes to setting aside an award on the ground
of patent illegality.
39. To elucidate, paragraph 42.1 of Associate Builders (supra),
namely, a mere contravention of the substantive law of India, by
itself, is no longer a ground available to set aside an arbitral
award. Paragraph 42.2 of Associate Builders (supra), however,
would remain, for if an arbitrator gives no reasons for an award
57and contravenes Section 31(3) of the 1996 Act, that would
certainly amount to a patent illegality on the face of the award.
40. The change made in Section 28(3) by the Amendment Act
really follows what is stated in paragraphs 42.3 to 45 in
Associate Builders (supra), namely, that the construction of the
terms of a contract is primarily for an arbitrator to decide, unless
the arbitrator construes the contract in a manner that no fair-
minded or reasonable person would; in short, that the arbitrator’s
view is not even a possible view to take. Also, if the arbitrator
wanders outside the contract and deals with matters not allotted
to him, he commits an error of jurisdiction. This ground of
challenge will now fall within the new ground added Under
Section 34(2A).
41. What is important to note is that a decision which is
perverse, as understood in paragraphs 31 and 32 of Associate
Builders (supra), while no longer being a ground for challenge
under “public policy of India”, would certainly amount to a patent
illegality appearing on the face of the award. Thus, a finding
based on no evidence at all or an award which ignores vital
evidence in arriving at its decision would be perverse and liable
to be set aside on the ground of patent illegality. Additionally, a
finding based on documents taken behind the back of the parties
by the arbitrator would also qualify as a decision based on no
evidence inasmuch as such decision is not based on evidence led
by the parties, and therefore, would also have to be characterised
as perverse.”
133. The “fundamental policy of Indian law” has been recently
considered in Batliboi Environmental Engineers Limited v. Hindustan
Petroleum Corporation Limited & Ors.20 It has been opined in paragraph
43 of the report that the said expression includes “all fundamental principles
providing as basis for administration of justice and enforcement of law in this
country. There were three distinct and fundamental juristic principles which
form a part and parcel of “fundamental policy of Indian law”. The first and
foremost principle is that in every determination by a court or an authority
20
2024 (2) SCC 375
58
that affects the rights of a citizen or leads to civil consequences, the court or
authority must adopt a judicial approach. Fidelity to judicial approach entails
that the court or authority should act in an arbitrary capricious or whimsical
manner. The court or authority should act in a bona fide manner and deal
with the subject in a fair, reasonable and objective manner. Decision should
not be actuated by extraneous considerations. Secondly, the principles of
natural justice should be followed. This would include the requirement that
the Arbitral Tribunal must apply its mind to the attending facts and
circumstances while taking the view one way or the other. Non-application of
mind is a defect that is fatal to any adjudication. Application of mind is best
done by recording reasons in support of the decision”. (emphasis supplied)
134. Given the facts and circumstances of the case and as it reveals
from the proceedings there has been a clear representation by Deepak in
course of arbitration and also in subsequent proceedings wherever the issue
of refund of the consideration amount came up for consideration and they
had agreed to refund the said amount. The subsequent conduct as would be
evident from the application for modification of the order passed in a post
award Section 9 application has to be read along with the observations of
the learned Arbitrator in paragraph 123 of the award. For the sake of
convenience and brevity paragraphs 123 and 124 of the award are
reproduced below.
123) In the course of argument, Mr. Jishnu Saha, the
learned Senior Counsel for the Respondent Nos. 1 to 13 offered to
refund the amount paid by the Claimant back to the Claimant
without any interest. The learned Counsel for the Claimant
refused to accept that money paid by it without interest.
59
Ultimately however the learned Senior Counsel for the
Respondent Nos. 1 to 13 argued that as there is no prayer by the
Claimant for refund of that amount and the Tribunal cannot
refund the said amount and in support of that contention cited
judgments.
124) The facts which the Tribunal has to consider is that
Claimant has admittedly paid an amount of Rs. 19.92 crores
which may be inadequate for it to seek specific performance of
the contract as it does not fulfil its obligation to pay 36% of 82
crores towards share price and loan amount, which is the
admitted amount under SPA, the original of which is lying with
the Tribunal. (emphasis supplied)
135. The said paragraphs are to be read along with the paragraph 6
to 9 of the modification application being GA 01 of 2023 filed in AP 664 of
2023 which reads as follows:
“6. The Applicants accept the portion of the award dated 29th
June, 2023 directing payment of the principal sum of Rs.
19,92,30,500/- to the petitioner and intend to pay the said sum
at the earliest. The Applicants further intend to challenge the
portion of the award whereby interest has been awarded to the
petitioner on the said sum of Rs. 19,92,30,500/-. The Applicants
intend to do so within the statutory period available under the
provisions of the Arbitration and Conciliation Act, 1996.
8. The Applicants state and respectfully submit that the
Applicants reasonably and bona fide expects to be able to pay
the entire principal awarded sum of Rs. 19,92,30,500/- on or
before March, 2024. The Applicants accordingly propose to pay
into this Hon’ble Court the entirety of the sum of Rs.
19,92,30,500/- on or before March, 2024 for being made over to
the petitioner and / or its associates towards satisfaction of the
principal sum awarded under the award dated 29th June, 2023.
9. As will appear from the award dated 29th June, 2023 the said
sum of Rs. 19,92,30,500/- has been directed to be refunded to
the petitioner as the moneys paid by the petitioner to the
Respondents No.1 to 13 towards purchase of 36% shares in the
Respondent No. 13 company. It is, however, matter of record that
the said sums have been paid by the petitioner and by one
Tirupati Vancom Private Limited and one Goldsmith Infrabuild
60Private Limited for and on its behalf. This will, inter alia, be
evident from the payment schedule annexed by the petitioner in
its Statement of Claim filed in the Arbitral Proceeding and the
acknowledgment of payments, made by or on behalf of the
petitioner, by the Respondents No. 1 to 13 in their Statement of
Defense cum Counter Claim filed in the same proceeding. Copies
of such payment statements are annexed hereto and marked
withthe Letter – “D” and “E” respectively. In the circumstances, the
Applicants pray that the sum of Rs. 7.00 Crores being presently
paid into the Hon’ble Court towards part satisfaction of the
awarded amount of Rs. 19,92,30,500/- and further amount that
the Applicants will pay into Court towards satisfaction of the
entirety of the principal sum awarded to the petitioner, be
released to the petitioner only upon the petitioner furnishing, to
the satisfaction of this Hon’ble Court, appropriate “No Claim
Certificate of the said Tirupati Vancom Private Limited and one
Goldsmith Infrabuild Private Limited in favour of the Respondents
No. 1 to 13.
11. The instant application is made bona fide and with the object
of relieving the Applicants from the burden of interest on the
principal amount of Rs. 19,92,30,500/- awarded against them.
Asstated hereinabove, the Applicants intend to challenge the
award of interest on the said sum of Rs. 19,92,30,500/-in an
application filed under Section 34 of the Arbitration and
Conciliation Act, 1996 within the statutory period available for
the same. The Applicants, however, intend to secure even such
claim, first by the security of the entire seventh floor of the
building at the Premises No. 6, Jawaharlal Nehru Road, Kolkata –
700013 and twelve car parking spaces thereat and thereafter by
making a cash deposit in Court out of the first receipt of the
proceeds from such sale.” (emphasis supplied)
136. The said application was filed for modification of the order dated
13th September, 2023 in which an interim order was passed, relevant
portion whereof is stated below:-
“Considering all the facts and material presented on behalf of the
parties, this Court deems it fit to direct that the respondent no.1-13 will
not operate their individual or collective bank accounts without keeping
aside a sum of Rs.26,34,82,336.25/-. The interim order will remain in
place for a period of ten weeks from today or until the respondent nos.
61
1-13 and/or the award-debtors apply for stay of the Award and obtain
necessary orders therein, whichever is earlier.”
137. Subsequent thereto in January, 2025 the appellants filed the
suit in this court being CS (Com) 764 of 2024 praying inter alia, for the
following reliefs:
“a. A decree of declaration declaring that the plaintiffs are
discharged of all liability to the defendant no.3 and 4 in respect of
payment of the said amount of Rs.69,47,250/- and
Rs.6,57,90,250/- together with interest thereon upon deposit of the
same with the Registrar, Original Side, High Court at Calcutta in
terms of orders passed in AP No.664 of 2023.
b. Alternatively, a further decree of declaration that the award
dated 29th June, 2023 passed in the Arbitration between the
defendant no.1 herein and the plaintiffs herein is binding on the
defendant nos. 3 and 4.
c. A decree of permanent injunction restraining the defendants and
each of them from claiming a sum of Rs.7,27,37,500/- together with
interest, if any, as any part or portion thereof from the plaintiffs.
d. Mandatory injunction directing the defendant nos. 3 and 4 to
have their claims against the plaintiffs for alleged advance made on
behalf of defendant no.1 be entered and adjusted from the fund
deposited with the Registrar, Original Side in terms of the order
dated 18th December, 2023 passed in AP NO. 664 of 2023.
e. Receiver.
f. Injunction.
g. Costs.
h. other reliefs.” (emphasis supplied)
138. In the plaint after referring to the award it has been stated in
paragraphs 28 and 29 that a sum of Rs.69,47,250/- has been paid by the
Goldsmith Private Limited and a sum of Rs.6,57,90,250/-has been paid by
62
Tirupati Private Limited respectively on behalf of Jagrati Private Limited. The
appellants alleged that in spite of depositing the entire awarded sum in the
High Court the other two entities have demanded payment. It was thus,
contended that by reason of depositing the aforesaid sums the appellants
are discharged from any liability in respect of the sums due to Goldsmith
and Tirupati and in the suit had prayed for declaration to that effect.
139. In the facts and circumstances of the case and having regard to
the conduct of the parties during the arbitration proceeding and subsequent
thereto it is not possible for us to go to a conclusion that the award is
patently illegal or against the public policy of India. In order to succeed on
the ground of patent illegality it has to be established that the award was
passed in contravention of the substantive law of India, contravention of the
1996 Act and contravention of the terms of the contract or that it shocks the
conscience of the court. In terms of Section 34(2)(b)(ii) an arbitral award can
be interfered with only when the findings of the arbitrator are found to be
arbitrary, capricious or perverse or when the conscience of the court is
shocked or when the illegality goes to the root of the matter. A possible view
passed on facts does not call for any interference [See PSA Sical (supra)].
140. Section 22(2) the said section relates to refund of consideration
money in an agreement for sale of immovable property. The said section may
not have any application in relation to the present dispute, although the
principle as regards a prayer for refund may have some relevance. The
contention that in the absence of the pleading with regard to a definite claim
for refund of the consideration amount even by way of an amendment does
not hold good since Deepak knew that they had consciously made a clear
63
representation to refund the principal amount and only dispute was with
regard to the interest component. The acceptance of the said amount by
Deepak is not in dispute. By way of reiteration paragraph 6 of the
modification application would clearly reaffirm that the stand of Deepak
before the Arbitral Tribunal was to settle the issue by payment of the
principal sum. Deepak was never taken by surprise by reason of an award
against Deepak with regard to the refund of the principal sum. The plaint in
C.S (Com) No. 764 of 2024 filed by the appellants bears testimony to such
conduct. Deepak was clearly estopped by conduct and representation as
would be clearly manifest from the record before the learned arbitrator and
the subsequent proceedings. The decision in Desh Raj (supra) was
distinguished by the learned Arbitrator in paragraph 131 and 132 of the
Award which are reproduced below:
“131) Mr. Jishnu Saha, the learned Senior Counsel for the
Respondents as noted above, cited two decisions to contend that
in the absence of a prayer by the Claimant claiming return of the
amount paid by it, the amount cannot be returned.
So ultimately the objection to return the amount boils down to
only an absence of prayer by the Claimant. Initially as noted
above the same learned Counsel in the course of his argument
offered to pay the money back to the Claimant without interest,
which the Claimant’s Counsel refused to accept.
The first decision cited on this point was rendered in the case of
Desh Raj and Others versus Rohtash Singh reported in (2022)
SCC OnLine SC 1719. The learned Counsel relied on paragraphs
31 to 33 of the judgment. The Court was dealing with a suit for
specific performance and in paragraph 30, the question which
was asked by the Court is whether Respondent was entitled to
recover earnest money. From the relevant clause relating to
earnest money, quoted in paragraph 30 of the judgment, it is
clear that there is a provision for confiscation of the earnest
64
money. Here Claimant is not asking for return of earnest money,
nor is there any provision for confiscation.
In that factual background, the court in paragraph 31 referred to
Section 22 of the Specific Relief Act which permits the relief of
refund of earnest money or deposit provided the party seeking
such refund seeks an amendment of the plaint at any stage of the
proceeding.
The Court found in that case the Respondent did not amend the
prayer and as such Court cannot “suo moto” grant the refund of
earnest money. The Court however did not decide whether
Section 22(2) of Specific Relief Act is mandatory or not.
132) That case is distinguishable both on facts and law.
Section 22 of Specific Relief Act which applies to a suit refers to
Civil Procedure Code and Section 22 has been given an overriding
effect on the Code.
Admittedly while dealing with Arbitration, an Arbitral Tribunal is
not bound by the Code even though fundamental principles will
apply. Amendment of a plaint “at any stage of the proceeding is
purely a procedural matter.
Here it is not Respondent’s case that they are taken by surprise
in the absence of an amendment by the Claimant.
The Claimant’s prayer for refund of the money paid by it with
interest was argued by the Claimant and the Respondents were
initially agreeable to refund it without interest which the Claimant
did not accept Apart from that in Desh Raj (Supra), it was the
case of refund of earnest money. The clause in the Contract (pare
30) show if the Sale Deeds executed within the prescribed date,
the first party will be entitled to confiscate the earnest money.
Here there is no such clause in SPA. Neither confiscation or
forfeiture of the money held by the Clement has been argued.
So the decision in Desh Raj (supra) does not apply in the present
case.”
141. The argument of Mr. Mookherjee that the award of the learned
arbitrator is contrary to the law laid down by the Hon’ble Supreme Court in
Desh Raj (supra) would fall within the expression fundamental policy of
65
Indian law is not acceptable having regard to the fact that the issue before
the learned arbitrator was with regard to the interest on the amount already
advanced. The acceptance of such consideration amount was never in
dispute. The learned arbitrator has upon consideration of the conduct of the
parties during the proceeding decided the issue upon taking into
consideration the relevant factors. The ratio of the judgement in
Shenbagam (supra) is in paragraph 41 where it was held that the
“blemished conduct” does not disentitle the Plaintiff from receiving back the
advance even though specific performance was not granted to the Plaintiff.
The direction for refund of the amount with interest has to be considered in
the background of the conduct of the parties and their admissions in the
proceeding. The proceeding before an arbitrator is not a proceeding before a
court of law. An element of informality is attached to such proceeding and
the views of the arbitrator as appear from the award is required to be
considered in the said perspective and keeping in mind the immunity that
an award enjoys under the Act.
142. The conduct of the parties clearly supports the view taken by
the Learned Arbitrator that there may not be any requirement to make a
separate prayer for refund of the consideration amount when the willingness
on the part of Deepak and its group is clearly evident. Even at the
subsequent stages of the proceeding they had agreed to refund
notwithstanding an objection being recorded in paragraph 123 of the award
regarding payment of interest on the refunded amount. It is quite manifest
that in course of arbitration proceeding the appellants were willing to refund
the principal sum and the same stand has been reiterated in the post award
66
stage whenever the issue was considered. Deepak is estopped by conduct
and pleading from raising such issues in the application for setting aside of
the award. In such circumstances, the argument advanced on behalf of
Deepak that the said award has been passed disregarding Section 22(2) of
the Specific Relief Act and hence it is in conflict with the public policy of
India or is vitiated by patent illegality is not plainly acceptable. A mere
contravention of the substantive law of India, by itself is no more a ground
available to set aside an arbitral award in view of paragraph 39 of
Ssangyong (supra). At the highest it could be said to be erroneous
application of the law, although we are not agreeable to accept such
submission and the view expressed by the learned Single Judge in this
regard is accepted.
143. For an award to be set aside there must be a patent illegality, an
error which goes to the very root of the matter and affects the jurisdiction of
the arbitrator in deciding a dispute. If the arbitrator lacks the authority to
decide the dispute the award is a nullity. If the disputes are by nature non-
arbitrable the assumption of jurisdiction would be an illegality.
144. The view taken by the learned arbitrator is a rational view
having regard to the conduct of parties during arbitration. The conduct of
Deepak in course of arbitration has clearly induced a belief in the mind of
the claimant that there is no requirement or necessity to amend the
Statement of Claim as the dispute was only restricted to payment of interest
on refund which has been the stand and canvassed even after the award
was passed.
67
145. The decision of the Arbitral Tribunal in the instant case is a
possible view and an acceptable outcome which is clearly defensible in
respect of the facts and law.
146. The jurisdiction of the Court in interfering with an award has
been pithily stated in Mt. Aftab Begam Vs. Haji Abdul Majid Khan21 in
the following words:-
“They may be right, they may be wrong, it is no business of the
court. Judges cannot be reminded too often that an arbitrator in
substance, ousts the jurisdiction of the Court, except for the
purpose of controlling the arbitrators and preventing misconduct,
and for regulating the procedure after the award. So far as the
hearing of the merits is concerned and the decision contained in
the award, the court has nothing to say, good, bad or indifferent.
It has no right to review it or to consider it…..”
Although the above decision was rendered in the context of the old law
and even before the Arbitration Act of 1940 Act but the said decision is
equally applicable under the 1996 Act. Though the underlying philosophy
in arbitration law in this country has undergone a sea-change from what it
was under the Arbitration Act, 1940 to what it is now under the 1996 Act
and several Supreme Court judgments caution against interpreting the
provisions of the 1996 Act by referring to the 1940 Act, the fundamental
basis in dealing with a challenge to an arbitral award remains unaltered. In
the most traditional approach, the court would not step in to correct every
perceived wrong complained of by a challenger simply on the ground that
since the challenger was a party to an agreement that took the assessment
away from the sovereign forum to a private forum, the challenger had to live
with the decision of the forum of its choice. The same proposition, put in a
21
AIR 1924 All 800
68
different form, is simply this: when there is a proper submission, whether of
fact or of law, to arbitration, it is not for the court to sit as an ordinary court
of appeal over an arbitral award because the arbitrator has taken a view of
law or of fact which a court of law may not have taken if such court were
trying the dispute. The everlasting principle, unaffected by the paradigm
shift in the arbitration law in this country, is that except to the extent
expressly or by necessary implication permitted by the governing statute,
the court will not revise, remit or set aside an arbitral award. [See State of
West Bengal v Pam Developments Private Limited22]. The Court is not
hearing an appeal from the award. The recent decision of the Hon’ble
Supreme Court in Associate Builders (supra) has also recognized the same
principle.
147. The Learned Arbitrator has also observed that there is no
provision in the SPA for forfeiture/confiscation of the amount which has
been admittedly paid by the claimant but which is inadequate to cover its
obligation to ensure specific performance and no argument has been
advanced by Deepak that they have a right to forfeit or confiscate the
amount paid by the claimant. It was in that context the learned arbitrator
applied the principle of unjust enrichment as denial of such relief would
mean that a party having received the money would be allowed to retain the
said sum at the expense of the another person.When there is a clear
representation that the principal amount shall be refunded retention of the
said amount and denying such benefit would amount to unjust
enrichment.We have to keep in mind that the award was not passed by a
22
2017 SCC OnLine Cal 13272
69
layman. The observations and finding by the learned Arbitrator, a former
judge by the Hon’ble Supreme Court, is backed by years of experience as a
judge and is a rational view.
148. Reasonableness of a decision becomes relevant when certain
questions that come up before the tribunal do not lend themselves to one
specific, particular result. Instead, they may give rise to a number of
possible, reasonable conclusions. Tribunals have a margin of appreciation
with a range of rational and acceptable solutions. The decision of the
Learned Arbitral Tribunal falls within a range of possible, acceptable
outcomes and are defensible in respect of the facts and law. Even when the
court exercise its power of judicial review decision of an administrative
action, which is not hedged with restrictions in comparison to the limited
scope of enquiry as specifically indicated in Section 34 of the Arbitration and
Conciliation Act, 1996, the reviewing courts have consistently refused to
exercise its discretionary jurisdiction when the view of the administrative
authority is a reasonable and possible view. The scrutiny of the award is
more restricted and requires less invasive intervention having regard to the
clear provision of Section 34 of the 1996 Act and the object of the Act is to
ensure minimum interference with an arbitral award. The court deciding an
application for setting aside is not exercising the power of judicial review as
commonly understood. The views of the learned arbitrator in our opinion is
a possible, plausible and rational view and rightly accepted by the learned
Single Judge.
149. The award can be interfered only on the limited grounds as
envisaged under the Act. Moreover, when the view taken by the arbitrator is
70
a possible view the court in deciding an application for setting aside the
award shall not interfere with such a view or substitute such view with its
own view. Once the interpretation given by the arbitrators are backed by
logic and are reasonable the same is required to be upheld as held in:
i) MMTC Ltd. v. Vedanta Ltd. reported in 2019(4) SCC 163
paragraph 14
ii) UHL Power Company Ltd. v. State of Himachal Pradesh
reported at 2022 (4) SCC 116 paragraphs 18 and 22.
150. The jurisdiction of the court under section 37 of the Act, as
clarified in MMTC (supra) and reiterated in Konkan Railway Corporation
Ltd. (supra) is akin to the jurisdiction of the court under Section 34 of the
Act. The scope of interference by a court in an appeal under Section 37 of
the Act, in examining an order setting aside or refusing to set aside an
award, is restricted and subject to the same grounds as the challenge under
Section 34 of the Act. The jurisdiction under Section 34 of the Act is
exercised only to see if the Arbitral Tribunal’s view is perverse or manifestly
arbitrary. [See Konkan Railways Corporation Ltd. (supra)].
151. In Somdatt Builders (supra) the Hon’ble Supreme Court in
referring to M/s. Larsen Air Conditioning and Refrigeration Company v.
Union of India23 and Reliance Infrastructure Ltd. v. State of Goa 24 has
observed that:
“It is necessary to remind the courts that a great deal of restraint is
required to be shown while examining the validity of an arbitral award23
2023 INSC 708
24
2024 (2) SCC 613
71when such an award has been upheld, wholly or substantially, under
Section 34 of the 1996 Act. Section 37 of the 1996 Act grants narrower
scope to the appellate court to review the findings in an arbitral award
if it has been upheld or substantially upheld under Section 34.
Frequent interference with arbitral awards would defeat the very
purpose of the 1996 Act.” (emphasis supplied)
152. The aforesaid view has been reiterated in a fairly recent
decision in C & C Construction Ltd. v. Ircon International Ltd.25 in
which it has been stated that “in appeal, Section 37 of the Act grants
narrower scope to the appellate court to review the findings in an award, if it
has been upheld, or substantially upheld under Section 34“. The views
expressed by the Arbitral Tribunal have been accepted by Justice
Sabyasachi Bhattacharyya and therefore the court under Section 37 would
be extremely chary and circumspect in scrutinizing the award.
153. In the context of the fact stated and narrated in the award, we
are of the view that the decision to refund is not amenable to a judicial
scrutiny under Section 34 of the Arbitration and Conciliation Act, 1996. The
direction to return the principal amount was with a view to prevent unjust
enrichment. The learned arbitrator has felt that the retention of the said
principal sum would be unjust and inequitable. The retention of the money
would be contrary to justice or against equity. The concept of unjust
enrichment and equitable doctrine has been recognised in several decisions
of the Hon’ble Supreme Court including the decision in Sahakari Khand
Udyog Mandal Ltd. v. Commissioner of Central Excise & Customs 26 in
25
2025 SCC OnLine SC 218
26
(2005) 3 SCC 738
72
which Hon’ble justice C.K Thakker speaking on behalf of the Bench had
stated the principle in the following words:
“31. Stated simply, “unjust enrichment” means retention of a
benefit by a person that is unjust or inequitable. “Unjust
enrichment” occurs when a person retains money or benefits
which in justice, equity and good conscience, belong to someone
else.
32. The doctrine of “unjust enrichment”, therefore, is that no
person can be allowed to enrich inequitably at the expense of
another. A right of recovery under the doctrine of “unjust
enrichment” arises where retention of a benefit is considered
contrary to justice or against equity.
33. The juristic basis of the obligation is not founded upon any
contract or tort but upon a third category of law, namely, quasi-
contract or the doctrine of restitution.
34. In the leading case of Fibrosa v. Fairbairn [(1942) 2 All ER 122
: 1943 AC 32 : 167 LT 101] Lord Wright stated the principle thus :
(All ER p. 135 H)
“[A]nycivilised system of law is bound to provide remedies for
cases of what has been called unjust enrichment or unjust benefit,
that is, to prevent a man from retaining the money of, or some
benefit derived from, another which it is against conscience that
he should keep. Such remedies in English law are generically
different from remedies in contract or in tort, and are now
recognised to fall within a third category of the common law which
has been called quasi-contract or restitution.”
35. Lord Denning also stated in Nelson v. Larholt [(1947) 2 All ER
751 : (1948) 1 KB 339] : (All ER p. 752 E-F)
“It is no longer appropriate, however, to draw a distinction
between law and equity. Principles have now to be stated in the
light of their combined effect. Nor is it necessary to canvass the
niceties of the old forms of action. Remedies now depend on the
substance of the right, not on whether they can be fitted into a
particular framework. The right here is not peculiar to equity or
contract or tort, but falls naturally within the important category of
cases where the court orders restitution if the justice of the case
so requires.”
The above principle has been accepted in India. This Court in
several cases has applied the doctrine of unjust enrichment.”
(emphasis supplied)
73
154. The argument that Jagrati has approached the Arbitral Tribunal
with unclean hand is also not of much consequence as there are two
versions of the agreement and the dispute is with regard to the actual
consideration amount and payment obligations. Even if we consider their
version of the agreement executed on the same date i.e., 24th March, 2011,
Deepak had never disputed to have received Rs.19.92 crores and have
clearly evinced its intention to refund the said amount in course of the
arbitration proceeding and also subsequently to which reference have
already been made in the earlier paragraphs. In so far as the claim for
interest, the learned arbitrator has given the following reasons:
“137) But this Tribunal has held that this Claimant is entitled to a
refund of the amount admittedly paid by it or its entities namely
Rs. 19,92,30,500/-. From Annexure-J to the SOD of the
Respondent Nos. 1 to 13 it appears that the said amount has
been paid by the Claimant or its entities through bank-transfer on
diverse dates between 2011 and 2017. But the Claimant is not
entitled to get a refund of the aforesaid amount with interest from
those dates. The grant of interest and the rate of such interest
depends on the discretion of this Tribunal. The Claimant has filed
the SOC in connection with this arbitration proceeding on 26
November, 2019. As such the Claimant is entitled to claim
interest on the aforesaid amount of Rs. 19,92,30,500/- with
effect from the month of December, 2019. The Respondent has
claimed 18% interest in their Counter-Claim but however this
Tribunal is not willing to grant interest at that rate to the
Claimant.
138. It is not in dispute that the transaction between the parties
is a commercial transaction. The claimant has been deprived of
the use of the aforesaid money and the aforesaid amount which
the Claimant paid was lying at the disposal of the Respondents
for its business. Considering all these facts, the Tribunal grants
interest at the rate of 9% per annum which has to be paid by the
Respondents to the Claimants on the aforesaid amount of Rs.
19,92,30,500/- from the month of December, 2019, till the date of
the Award at a rate of 9% per annum, which comes to about Rs
74
26,34,82,335.25/- in total (ie. Rs. 19,92,30,500/- as principal
and Rs. 6,42,51,835.25/- by way of interest). Such amount has
to be paid to the Claimant by the Respondents within a period of
6 weeks from date. Failing which the Respondents will have to
pay the aforesaid amount of Rs. 25,34,82,335.25/, namely the
principle and the interest along with an interest at the rate of 11%
on the total amount from the date of default till the date of actual
payment.:”
155. Submissions have been made on behalf of Deepak that interest,
if at all allowed, it should be on and from the date when such claim is
adjudicated that is, the date of the award, is also not acceptable in view of
admission of its group of accepting the said amount of Rs.19.92 crores and
its utilization. They have enjoyed the said amount from the date when such
amount had received by Deepak. Subsequently, they agreed to refund the
principal amount. The reasoning of the learned Arbitrator as would reflect
from the aforesaid paragraphs in granting interest for the period mentioned
therein falls within the discretionary jurisdiction of the Arbitral Tribunal and
is not amenable to a challenge under Section 34 of the Arbitration and
Conciliation Act, 1996. In fact, we agree with the learned single judge that in
so far as the period to which the interest was a granted, that is to say, on
and from date of filing on the statement of claim was a lenient view and
such leniency also falls within the discretion of the tribunal. The tribunal
having held that the Deepak is liable to refund the entire consideration
amount despite no relief specifically included in that regard in the
Statement of Claim there cannot be any justifiable reason to hold that only
the interest component can be segregated and the cause of action held to
have arisen with the award. Once there is a clear finding that the claimant is
entitled to refund of the principal amount interest becomes a necessary
75corollary. We completely agree with the finding of the learned Single Judge
in this regard. The challenge to the interest component by either side fails
when considered in the context of the restricted and limited jurisdiction that
the court exercises under Section 34 and 37 of the Arbitration and
Conciliation Act, 1996. The scope of investigation is extremely myopic and
only confined to the grounds mentioned in the said section.
156. The challenge to the awarding of costs is also untenable. The
Tribunal in paragraph 139 of the Award has made the following finding:
“139. In this matter, the respondents have not filed any cost
sheet nor have they argued on the question of cost. Claimants
have filed a cost sheet but they are not entitled to any cost in
view of their conduct. Therefore, no cost is awarded to either of
the parties. Parties to bear their own cost.”
157. The cost issue was considered in an application under Section
33(2) and 33(4) by the cross appellant. In the said order in referring to the
observation made in paragraph 139 of the Award the learned Tribunal has
dealt with the issue in the manner following:
“(b) The learned counsel for the respondents did not challenge
the aforesaid recording of the fact by the Tribunal and accepted
that he did not argue before the Tribunal on the question of cost
nor did the respondents file any cost sheet.
(c) It is an accepted position that in the matter of grant of cost, the
Tribunal has a discretion (see section 31A of the Act)
(d) In the instant case, the Tribunal has exercised its discretion
for not granting cost to the respondents not only because they
did not pray for cost in their SODs and they did not argue for the
same, but because the respondents are not actually successful
parties to the proceedings.
(e) Respondents’ case was to oppose the claimant’s prayer for
refund of money which the claimant had admittedly deposited
towards specific performance. The respondents’ argument is that
76Claimant has no right to get refund of the money which it had
deposited in the absence of any prayer in the Statement of Claim
and the respondents cited authorities in support of their
contention.
(f) This Tribunal overruled those contentions and directed refund
of money to the claimant with interest for the reasons discussed
in the Award. Therefore, it is clear that before the Tribunal, the
respondents are not successful parties. However, the claimant
succeeded in a limited way. That is also one of the reasons
which weighed with the Tribunal in not granting cost. This might
not have been spelt out in so many words but this is clear from
the reasoning of the Tribunal.
(g) Assuming the Tribunal has made an error in its aforesaid
stand in refusing to award cost to the respondents, the same
does not come within the purview of computation, clerical or
typographical error or error of a similar nature. In this connection,
the judgment cited by the Claimant’s counsel is of considerable
assistance and the Tribunal follows the same.”
158. The aforesaid order clearly records the reason as to why no cost
was awarded to the cross appellant. The learned Arbitrator has given a
reason and the discretion exercised by the learned Arbitrator is not
amenable in a proceeding under Section 34 of the Arbitration and
Conciliation Act, 1996.
159. On such consideration we do not find any reason to interfere
with the impugned order passed by the learned Single Judge.
160. The appeal and the cross objection fail.
(Soumen Sen, J.)
I agree
(Biswaroop Chowdhury, J.)
77
Later:
On the prayer of the learned counsel for the appellant in AO-
COM/38/2024, the execution proceeding shall remain stayed for a period of
four weeks from date.
(Soumen Sen, J.)
(Biswaroop Chowdhury, J.)
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