Bombay High Court
Harkisandas Tulsidas Pabari And Anr vs Nandkishor Anandrao Acharya And 2 Ors on 22 July, 2025
2025:BHC-OS:11535-DB
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION APPEAL NO.62 OF 2007
1. Harkisandas Tulsidas Pabari
Venkatesh Chambers, 3rd floor,
Prescot Road, Mumbai - 400 001.
2 Manish Harkisandas Pabari
Venkatesh Chambers, 3rd floor,
Prescot Road, Mumbai - 400 001. ....Appellants
Versus
1 Rajendra Anandrao Acharya
(Deleted)
1(a) Sushant Rajendra Acharya
(Deleted)
1(a) Nikita Sushant Acharya
Legal heir of Respondent No.1
of Mumbai, Indian inhabitant
Residing at 9, 3rd floor,
Mayur Corner, Prabhat Lane No.4,
Near Deccan Gymkhana,
Pune 411 004.
2 Nandkishor Anandrao Acharya
(Deleted)
2(a) Alok Nandkishor Acharya
of Mumbai, Indian Inhabitant
Residing at A-1, A-3,Parnali
Society, Damle Path,
Off. Law College Road,
Erandwane, Pune - 411 004.
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3. R.C. Sampat,
Arbitrator, Deccan Court,
259, S.V. Road, Bandra (West),
Mumbai - 400 050. ....Respondents
WITH
ARBITRATION APPEAL NO.63 OF 2007
1. Harkisandas Tulsidas Pabari
Venkatesh Chambers, 3rd floor,
Prescot Road, Mumbai - 400 001.
2 Manish Harkisandas Pabari
Venkatesh Chambers, 3rd floor,
Prescot Road, Mumbai - 400 001. ....Appellants
Versus
1 Nandkishor Anandrao Acharya
(Deleted since deceased)
1(a) Alok Nandkishor Acharya
of Mumbai, Indian inhabitant
Residing at A-1, A-3,
Parnali Society, Damle Path,
Off Law College Road,
Erandwane, Pune - 411 004.
2 Rajendra Anandrao Acharya
(Deleted since deceased)
2(a) Nikita Sushant Acharya
Legal heir of Respondent No.2,
of Mumbai, Indian inhabitant
Residing at 9, 3rd floor,
Mayur Corner, Prabhat Lane No.4,
Near Deccan Gymkhana,
Pune - 411 004.
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3 R.C. Sampat,
Arbitrator, Deccan Court,
259, S.V. Road, Bandra (West),
Mumbai - 400 050. ....Respondents
_________
Dr. Virendra Tulzapurkar, Senior Advocte with Mr. Rajiv Narula
and Mr. Milind Mane i/b M/s. Jhangiani, Narula & Associates for
the Appellants in Appeal No.62 of 2007.
Mr. Rajiv Narula with Mr. Milind Mane i/b M/s. Jhangiani, Narula
& Associates for Appellants in Appeal No.63 of 2007.
Mr. Rahul Sarda with Ms. Rajalakshmy Mohandas, Ms. Mukta
Chorge and Ms. Nehal Farukh i/b M/s. Rajalakshmy Associates for
Respondent No.1A in Appeal No.62 of 2007 and for Respondent Nos.2A
in Appeal No.63 of 2007.
Mr. Abhijeet Joshi i/by Chaitanya R. Kulkarni for Respondent No. 2A
in Appeal No.62 of 2007 and for Respondent Nos. 1A in Appeal No.63 of
2007
__________
CORAM: ALOK ARADHE, CJ. &
SANDEEP V. MARNE, J.
RESERVED ON : 11 JULY 2025 &
17 JULY 2025.
PRONOUNCED ON : 22 JULY 2025.
JUDGMENT (Per : Sandeep V. Marne, J.)
A. THE CHALLENGE
1. These Appeals are filed by the Appellants challenging the
order dated 11 October 2006 passed by the learned Single Judge of
this Court allowing Arbitration Petition Nos.114 of 2006 and 119 of
2006 and setting aside the Award dated 21 September 2005 passed
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by the learned sole Arbitrator. By the Award, claim filed by the
Appellants for specific performance of the Memorandum of
Understanding was allowed by the Arbitral Tribunal.
B. FACTS
2. A Memorandum of Understanding (MoU) dated 20 July 1994
was executed between the original Respondents and the Appellants
under which the original Respondents Mr. Rajendra Acharya and
Mr. Nandkishor Acharya agreed to sale their respective undivided
shares, right, title and interest in the property situated at Paper Mill
Lane, bearing City Survey Nos.1596 and 1597 at Girgaon Division,
admeasuring 370 square meters (said property). The Memorandum
of Understanding contemplated utilization of the entire FSI in
respect of the said property as permitted by the local authorities.
The consideration agreed for the transaction was Rs.18,00,000/-
payable to the Respondents in equal proportion. On 20 July 1994,
the General Power of Attorney was executed by the original
Respondents authorizing the Appellants to do various acts, deeds
and things for development of the said property and to negotiate
with tenants and arrive at arrangements. Between 1994 to 1996
Appellants paid amount of Rs.7,50,000/- to the original
Respondents. The Appellants apparently started negotiations with
the tenants in January 1996 and were apparently successful in
securing consent of two tenants. However, on 4 November 1996
original Respondent No.1 terminated the Memorandum of
Understanding on the ground that the second installment of
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Rs.7,50,000/- was not paid, in addition to raising issues of few other
breaches allegedly committed by the Appellants. The Appellants
disputed the contents of the said notice vide reply dated 2
December 1996. Respondents issued rejoinder dated 21 January
1997
3. In the above background, original Appellant No.1 referred the
dispute to arbitration by addressing a letter dated 1 July 1997 to the
nominated Arbitrator Mr. R.C. Sampat. Appellants filed statement of
claim in October/November 1997, which was served on the
Respondents on 15 November 1997. Original Respondent No.1-
Mr. Rajendra Acharya requested the Arbitrator for supply of
attested copy of papers and also forwarded a sum of Rs.1,500/-
towards Arbitrator fees. In November 1997 Respondent No.1 Mr.
Rajendra Acharya filed his written statement before the learned
Arbitrator raising various defences. He also filed a Counterclaim
seeking recovery of amount of Rs.30,00,000/- for mental agony. The
learned Arbitrator proceeded to pass Award dated 1 April 1998
awarding the claim in favour of the Appellants. Respondents
challenged the Award dated 1 April 1998 by filing Arbitration
Petition No.225 of 1998. By order dated 28 September 1998 passed
by this Court, the Award was set aside on the ground that notice of
closure of arbitration proceedings was not given to the Respondents.
The original records were sent back by this Court to the learned
Arbitrator. Appellants approached the Arbitrator Mr. R.C. Sampat,
who proceeded to fix date of hearing in arbitration proceedings vide
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letter dated 31 October 1998. One of the Respondents objected to
continuation of the learned Arbitrator vide letter dated 4 December
1998 alleging that he was biased against the Respondents. By
another letter of 7 December 1998 objection to continuation of
Mr. Sampat as arbitrator was raised. The objection was rejected by
the learned Arbitrator on 18 December 1998. Respondent No.1-
Shri Rajendra Acharya thereafter filed his Reply in Counter-Claim
on 28 October 1999. Respondents also sought stay of arbitration
proceedings, which application was rejected by the learned
Arbitrator. Both the parties led oral evidence.
4. On 21 September 2005 the learned Arbitrator delivered award
holding that the Memorandum of Understanding dated 20 July 1994
is binding on the parties. Respondents were directed to handover
original documents and title deeds of the said property to the
Appellants with further directions to comply the obligations under
the Memorandum of Understanding. The Respondents were
directed to get building plan sanctioned within a period of three
months. Various other directions were also issued in the Award.
Appellants were directed to pay balance consideration of
Rs.7,50,000/- on sanctioning of the building plans, out of which the
amount of Rs.2,75,000/- was already found to have been paid. It was
therefore directed on payment of balance consideration of
Rs.4,75,000/-, Appellants were directed to be put in possession of
the said property. For ease of reference, the operative directions
given in the above order dated 21 September 2015 are extracted
below:
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(a) That the Memorandum of Understanding dated 20.7.1994
entered and executed by the parties is binding upon the parties.
(b) The counter claim of Respondent no. 1 is rejected.
(c) I direct the Respondents to hand over the original documents
and title deeds of the disputed property in their possession to
the Advocate of the Disputants within two weeks from the
receipt of the intimate of this award.
(d) I direct the Respondents to comply with their obligations under
the said Memorandum of Understanding with the co-operation
of Disputants in obtaining of the consent of the
tenants/occupants of the property within one month from this
Award.
(e) The Respondents shall get the building plans sanctioned as
prepared by the Architect for the Disputants in consultation
with the Disputants in accordance with the present
Development Control Rules within three months from the date
of the Award.
(f) I direct the Respondents to earmark a car parking space as
shown in the sketch plan alongwith the report dated 20.02.2003
Architect H.M. Panchal in Shingne Building compound and
hand over the same to the Disputants on
consideration/payment of No. 10,000/-in lump sum at the time
of Commencement certificate,
(g) I direct Respondents to make available a pathway passing over
the Shingne Building property for ingress and egress purpose
to the occupants of the building to be constructed on the said
property as at time of commencement certificate as shown in
the sketch plan alongwith the report dated 20.3.2002 and
Architect H. M. Panchal.
(h) I direct Respondents to provide space for storage of
construction materials in the Shingne Building property upto
the completion of construction at the time of intimation of
Disapproval, as shown in the sketch plan alongwith the report
dated 20.2.2002 of Architect H.M. Panchal.
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(i) The Disputants to pay sum of Rs.7,50,000/- each (min.
Rs.2,75,000/- already paid) on the building plans being
sanctioned.
(j) On payment of above sum of Rs.4,75,000/-the Respondents
shall put the Disputants in possession of the property.
(k) Disputants to pay sum of Rs. 50,000/-in cash to the
Respondents on execution of final deed of conveyance and
relevant deeds and documents in favour of Disputants or in
favour of nominee or nominees, within period of 6 months
from the date of commencement Certificate.
(l) I direct the Disputants and Respondents to pay all out of pocket
expenses including stamp duty and registration charges and
relevant documents in equal share.
(m) I direct that the Disputants do execute an indemnity bond in
favour of Respondents during the period of construction.
(n) The Disputants and Respondents Nos. 1 & 2 to bear their own
and their respective Advocates costs.”
5. Respondents filed Arbitration Petition Nos.114 of 2006
(Nandkishor Anandrao Acharya) and Arbitration Petition No.119 of
2006 (Rajendra Anandrao Acharya) challenging the Award dated 21
September 2005. By impugned order dated 11 October 2006, the
learned Single Judge has allowed both the Arbitration Petitions and
has set aside the Award dated 21 September 2005 with direction to
the Appellants to pay costs of the Arbitration Petitions to the
Respondents. Aggrieved by the common judgment and order dated
11 October 2006 passed by the learned Single Judge in Arbitration
Petition Nos.114 of 2006 and 119 of 2006, the Appellants have filed
the present Appeals under provisions of Section 37 of the
Arbitration and Conciliation Act, 1996 (Arbitration Act).
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6. Dr. Tulzapurkar, the learned counsel appearing for the
Appellants in Appeal No.62 of 2007 would submit that the learned
Single Judge has clearly exceeded the jurisdiction conferred under
Section 34 of the Arbitration Act while interfering in the Award.
That the learned Single Judge has acted as an Appellate Authority
over the Award of the learned Arbitrator, which is clearly beyond
the scope of grounds enumerated for setting aside the Award under
Section 34 of the Arbitration Act. He would submit that the learned
Single Judge misread the contract while holding that the parties
were not sure whether the entire building was to be demolished or
reconstructed or whether only additional floors were to be built.
That the learned Single Judge has erroneously held that there is no
concluded contract between the parties ignoring the fact that the
Memorandum of Understanding dated 20 July 1994 provided for
the sale of the property. That various clauses of the Memorandum
of Understanding clearly contemplated execution of Deed of
Conveyance or a perpetual lease in favour of the Appellants. The
Memorandum of Understanding clearly described the property
which was supposed to be served together with agreed amount of
consideration and therefore the contract was capable of specific
performance. In support he would rely upon judgment of the
Hon’ble Apex Court in Kollipara Sriramulu vs. T. Aswathanarayan
and ors.1. That there was no necessity of specifying as to whether
the building was to be demolished for reconstruction or mere floors
were required to be added. That it was for the Appellants to decide
1 (1968) 3 SCR 387
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whether to reconstruct the property or raise additional floors. That
the learned Judge has misread the contract and got struck over
totally erroneous unwarranted and untenable eventualities. That
there was no obligation in clause 5 of the Memorandum of
Understanding to obtain tenant’s consent. It was the obligation of
the Respondents to secure consent of the tenants and that therefore
performance of the agreement did not depend on Appellants
securing consent of the tenants.
7. Dr. Tulzapurkar would further submit that the learned Single
Judge has erroneously set aside the Award on the ground that the
same cannot be performed. That the direction of the Arbitrator to
secure consent of the tenants is in consonance with covenant in
clause 5 of the Memorandum of Understanding. That mere failure
to carry out certain obligations cannot render a contract void or
unenforceable. That the learned Judge has erroneously held that the
rights of the tenants would be affected ignoring the fact that the
Memorandum of Understanding itself required securing consent of
the tenants while no directions have been given to the tenants. He
would submit that specific performance cannot be denied merely
because of the difficulties for one of the parties to carry out his
obligation. Non-grant of consent by tenants is a hypothetical
situation, erroneously assumed by the learned Judge while setting
aside the Award.
8. Dr. Tulzapurkar would further submit that the learned Single
Judge has erroneously held that there was non-compliance of
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provisions of Section 21 of the Arbitration Act on account of failure
to give notice before proceeding with arbitration. That this ground
was never raised in the Arbitration Petition and could not have been
held in favour of the Respondents by the learned Single Judge. But
even otherwise Respondents have participated in the arbitration
proceedings without any demur and that therefore they cannot be
permitted to turn around and question commencement of
arbitration proceedings before the learned sole Arbitrator.
Provisions of Section 21 of the Arbitration Act are not mandatory
and the requirements can clearly be waived. In support, he would
rely upon judgments of this Court in Malavika Rajanikant Mehta
and others vs. Jess Constuction2 and Veena wd/o Naresh Seth vs.
Seth Industries Ltd.3 and the judgment of the Apex Court in
Milkfood Limited vs. GMC Ice Cream Pvt. Limited 4.
Dr. Tulzapurkar would accordingly pray for setting aside the order
passed by the learned Single Judge and for upholding the Award
dated 21 September 2005.
9. Mr. Narulla, the learned counsel appearing for Appellant in
Appeal No.63 of 2007 would adopt the submissions canvassed by
Dr. Tulzapurkar.
10. Mr. Sarda, the learned counsel appearing for Respondent
No.1A in Appeal No.62 of 2007 and for Respondent No.2A in
Appeal No.63 of 2007 would oppose the Appeal submitting that
2 2022 SCC OnLine Bom 920
3 2011 (2) Mh.L.J. 226
4 (2004) 7 SCC 288
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interference is not warranted in well considered decision of the
learned Single Judge. That the learned Single Judge has rightly held
that the Award was passed in ignorance of contractual and statutory
provisions and that the Award was based on no evidence ignoring
the vital piece of evidence demonstrating breach of material terms
of Memorandum of Understanding on behalf of the Appellants.
That the learned Single Judge has correctly applied the tests under
the Specific Relief Act, 1963 applicable to the issue of grant of
specific performance. On the contrary, the learned Arbitrator had
ignored the provisions of Specific Relief Act, 1963. That the
Arbitrator had re-written contract between the parties. That the
order passed by the learned Single Judge duly conforms to the
provisions under Section 34 of the Arbitration Act. It is not
necessary for the Judge exercising power under Section 34 of the
Arbitration Act to repeat the words of the section and what needs to
be examined is whether the Arbitrator has examined the Award
within the parameters laid down in Section 34 of the Arbitration
Act. That the impugned Award clearly suffered from the vice of
perversity and has been rightly set aside by the learned Single
Judge. That the learned Single Judge has rightly held that there is no
concluded contract between the parties, neither consent of the
tenements was obtained nor there is any contract between the
parties on the aspect of parking.
11. Mr. Sarda would further submit that continuation of
arbitration proceedings before the learned Arbitrator after remand
order made by this Court is clearly without jurisdiction. While
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remanding the proceedings, this Court did not constitute the same
Arbitrator, which had made the first Award. That mere forwarding
of documents to the learned Arbitrator did not mean that mandate
was given to conduct fresh arbitration proceedings after remand.
That Respondents had objected to continuation of the arbitral
proceedings by the learned Arbitrator right since inception by
addressing letters dated 3 December 1998 and 7 December 1998.
That the Award clearly suffered from absence of jurisdiction as the
learned Arbitrator unilaterally assumed jurisdiction while making
the impugned Award. Lastly, he would submit that the jurisdiction
of this Court under Section 37 of the Arbitration Act is even more
circumscribed than the one which can be exercised under Section 34
of the Arbitration Act by the learned Single Judge. That in absence
of any element of perversity in the order of the learned Single Judge,
the Appeals deserve to be dismissed.
12. Mr. Joshi, the learned counsel appearing for Respondent
No.2A in Appeal No.62 of 2007 and Respondent No.1A in Appeal
No.63 of 2007 would additionally submit that the learned Arbitrator
improperly assumed jurisdiction after remand order made by this
Court. That since the Award was set aside, parties were expected to
take steps for fresh constitution of Arbitral Tribunal. That therefore
reference to the earlier Arbitrator had come to an end. No letter was
issued by the claimant to the Respondents under Section 21 of the
Arbitration Act for commencing the arbitral proceedings. That the
learned Single Judge has rightly held that the Memorandum of
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Understanding does not constitute a concluded contract. That the
agreement is neither development agreement nor agreement for
sale. That the agreement was otherwise repudiated by the claimant
himself. That the Administrator was biased and was predetermined
to decide the arbitral proceedings against the Respondents. That
direction given for specific performance of the Memorandum of
Understanding or otherwise incapable of performance. That the
Award rightly been set aside by the learned Single Judge by
invoking valid grounds of non-issuance of notice under Section 21
of the Arbitration Act, Memorandum of Understanding was
repudiated and therefore arbitration agreement came to an end and
that the subject matter is not capable of being resolved by
arbitration. Mr. Joshi would accordingly pray for dismissal of the
Appeal.
D. REASONS AND ANALYSIS
13. The learned Single Judge has set aside the award of the arbitral
Tribunal on three grounds of (i) lack of authorisation to the learned
Arbitrator to recommence the arbitration proceedings, (ii) MoU not
constituting a concluded contract, (iii) impossibility of specifically
performing the MoU through execution of the award.
D.1 AUTHORISATION TO THE SAME LEARNED ARBITRATOR TO
RECOMMENCE THE ARBITRAL PROCEEDINGS
14. We would first take up the issue of lack of authorisation to the
learned Arbitrator to recommence the arbitration proceedings. As
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observed above, the learned arbitrator has made an award dated 1
April 1998 awarding the claim in favour of the Appellants.
Respondents had challenged the Award dated 1 April 1998 by filing
Arbitration Petition No. 225 of 1998 in this Court. By order dated 28
September 1998 passed by this Court, the Award was set aside on
the ground that sufficient opportunity was not given to the
Respondents by the learned Arbitrator. This Court found that the
learned Arbitrator did not give notice of closure of proceedings to
the Respondents that the proceedings would proceed exparte and
that therefore they did not have a fair opportunity of leading
evidence. Relevant part of the order dated 28 September 1998 reads
thus:
“6. The short question, therefore, is whether the notice dated 5 th
January, 1998 can be said to be a sufficient opportunity given to the
petitioners to present their. Even under the provisions of the Arbitration
Act, 1940 before the Arbitration closed the proceedings, the Arbitrator
was duty bound to give notice of closure of the proceedings, as the case
law has evolved pursuant to the judgment of various courts. This is for
the purpose that the parties would have a fair opportunity of leading
evidence if they have not so led before the proceedings are closed. In the
present case the Arbitrator having not given the notice that the
proceedings would proceed exparte nor decided the procedure for
conducting the arbitral proceedings. I am of the considered view that the
petitioner did not have sufficient opportunity to present their case. In
that context the impugned award is liable to be quashed and set aside
and the same is accordingly set aside.”
15. After setting aside the Award dated 1 April 1998, this Court
considered the issue as to whether the proceedings were required
to be remanded to the said same Arbitrator. This Court however
held that sending back the proceedings to the same Arbitrator was
permissible only under the provisions of Sections 33 and 34(4) of
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the Arbitration Act and that the said power is to be exercised before
an Award is set aside. Since this Court had set aside the Award, it
did not go into the issue of remand of the proceedings to the same
Arbitrator. This Court however observed that it would be open to
the parties to move afresh, in which event, the time taken would be
saved by virtue of Section 43(4) of the Arbitration Act (though in the
typed copy of the order dated 28 September 1998, section 43(a) is reflected,
the same appears to be a typographical error). The operative portion of
directions issued by this Court in paragraphs 7 to 10 of the order
dated 28 September 1998 read thus:
“7. The question did arise in the circumstances, after quashing the
award whether the matter is to be remitted back to the same Arbitrator.
The only provisions are section 33 and 34 (a). That power is to be
exercised before an award is set aside. I do not propose to go into that
question in these matters as I am setting aside the Award.
8. It is however, made clear that it is always, open to the parties to
move afresh in which event the time taken would be save by virtue of
section 43(4) of the Arbitration and Conciliation Act, 1996.
9. In the circumstances, of the case there shall be no order as to
costs.
10. Office is directed to sent back the original records to the
Arbitrator.
(emphasis and underling added)
16. After the Award was set aside on 28 September 1998 and
liberty was granted to the parties to move afresh, Appellants
directly moved before the same Arbitrator without any notice to the
Respondents and the same Arbitrator commenced the proceedings
by issuing notice to the Respondents on 31 October 1998. Both Shri
Rajendra Acharya as well as Shri Nandkumar Acharya raised
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objections to continuation of the same Arbitrator. While the
objection raised by Shri Rajendra Acharya was restricted to the
allegation of bias, Shri Nandkumar Acharya raised specific
objection about lack of authority of the learned Arbitrator to
recommence arbitration proceedings, in addition to raiding the
allegation of bias. Thus, the jurisdiction of the learned Arbitrator to
recommence the proceedings after passing of order dated 28
September 1998 was specifically raised by one of the Respondents.
The learned Arbitrator however proceeded to reject the said
objection and continued the arbitration proceedings, leaving no
option for the Respondents to participate in the same.
17. The learned Single Judge, in the impugned order dated 11
October 2006, has dealt with this aspect as under:
“6. …
Thus, this Court has set aside the award and left the parties to their
remedy for initiating fresh arbitration Therefore, it can be safely
assumed that the arbitration clause between the parties did not come to
an end and continued to exist and therefore, in terms of paragraph 8 of
the order of this Court quoted above, the arbitration proceedings are to
be commenced afresh and therefore, in my opinion, section 21 of the
said Act has to be complied with. Section 21 reads as under:-
“21. Unless otherwise agreed by the parties, the arbitral proceedings in
respect of a particular dispute commence on the date on which request for
that dispute to be referred to arbitration is received by the respondent.”
Perusal of section 21 shows that in order to commence the arbitral
proceedings, the claimant has to make a request to the respondent for
referral of the dispute to arbitration and the date on which that request
is received by the respondent is the date commencement of the arbitral
proceedings. In the present case, an objection regarding jurisdiction of
the Learned Arbitrator to recommence the arbitral proceedings was
raised. The arbitrator made an order on 18 th December 1998. Paragraphs
2 and 3 of that order are relevant which read as under :-
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“In the light of clause 13 of Memorandum of understanding dated
20.07.84 and in view of the observation of Hon’ble High Court in its
order dated 28.09.98, it appears that the Hon’ble Court has not
changed the Arbitrator appointed by all the parties and hence
original record have been sent back to me in order to enable the
parties to move afresh before me.
Hence I am unable to accept the request of the said Acharyas of not
conducting arbitration meeting before me. I now Fix arbitration meeting
before me on Wednesday, the 6th January 1999 at 4 p.m. at my office.”
It is clear from the above that according to the Learned Arbitrator, as
the High Court has not changed the Arbitrator and as this Court has
sent back the record to the Arbitrator, he has jurisdiction to
recommence the arbitral proceedings. Same thing is repeated by the
Learned Arbitrator in the award in paragraph 11(b). Paragraph 11 (b)
reads as under :-
“11(b) Accordingly the notices were issued to both the parties and the
correspondence also made before and after commencement of arbitration
proceeding, which is on record and award also made on 01/04/1998 date
but the same was set aside on technical ground and the papers have been
sent back to me.”
It thus appears that the learned Arbitrator has held that he has
jurisdiction to resume the proceedings because the records have been
sent back him. Merely because the original record which was called by
the Court for perusal, because of request made by one of the parties
are sent back to the Arbitrator from whom they were received after
setting aside the award, would not authorise the Learned Arbitrator to
resume the arbitration proceedings. Therefore, the reason that has
been given in the award for holding that he has jurisdiction to
recommence the arbitral proceedings cannot be said to be proper. But
it appears that before the learned Arbitrator resumed the proceedings,
the respondents had written a letter dated 12th October 1998 to the
learned Arbitrator. On the basis of this letter, it was contended that
though this letter is not addressed to the petitioners and is addressed to
the Arbitrator, this letter should be treated as a letter issued under
section 21 of the said Act. Therefore, it becomes necessary to refer to that
letter. Perusal of that letter shows that in paragraph 1 reference is made
to the memorandum of understanding between the parties and the
award made by the learned Arbitrator. Then in paragraph 2 it is stated
thus:-
“2. However, on the petitions of the said Rajendra A. Acharya
and the said Nandkishore A. Acharya bearing No.225 of 1998
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k 19/29 16 arapp 62.07 n 17 63.07 db os.docand 295 of 1998 respectively, the Hon’ble High Court set aside
the said ‘Award passed by you on the ground that по reasonable
opportunity was given to the said Rajendra A. Acharya and
Nandkishore A. Acharya, but the Hon’ble High Court refused to
grant the request of the said Rajendra A. Acharya and
Nandkishore A. Acharya of not referring back the said matter to
you once again, but on the contrary the Hon’ble High Court by
sending back the original records to you clearly indicated and
clearly expressed that the parties or any of them should move you
the Arbitrator afresh. We are herewith sending you a copy of the
Order dated 28th September 1998 of the Hon’ble High Court
which speaks for itself.”
It is clear from what is stated above that according to the respondents,
because the Court did not accept the request of the petitioners to
change the Arbitrator and because the Court directed that the record
should be sent back to the Arbitrator and because the Court had
directed that the parties should move the Arbitrator afresh, the
Arbitrator was requested to start the arbitral proceedings afresh and
he was asked to give notice to the parties. Section 21 has been quoted
above. It contemplates that there shall be a request made by claimant
to the respondents for referring the dispute to arbitration. Reading of
this letter from any point of view would not show that this letter
contains a request made by the respondents to the petitioners to refer
their disputes to the Arbitrator. The tenor of the letter is that because
the High Court has not changed the Arbitrator and because the High
Court has directed that the record shall be sent back, the learned
Arbitrator is entitled to resume the proceedings. I have already found
that this position cannot be said to be correct position in law. Even
assuming that strict compliance of provisions of section 21 is not
necessary and that substantial compliance is enough, then also the letter
dated 12th October 1998, in my opinion, cannot be termed as even an
attempt made to substantially comply with the provisions of section 21.
In my opinion therefore for this reason also, the award is liable to be set
aside….
(emphasis and underlining added)
18. The learned Single Judge of this Court thus held that twin
errors had crept in the exercise of jurisdiction by the learned
Arbitrator. Firstly, it is held that this Court had not remanded the
proceedings to the same Arbitrator and that mere remittance of the
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original records to the learned Arbitrator did not mean that he had
an authority to resume the arbitration proceedings. Secondly, it is
held that Appellants did not complete the procedure mandated in
Section 21 of the Arbitration Act and no request was made to the
Respondents for commencement of the arbitration proceedings.
19. So far as the first aspect of absence of authorisation to the
learned Arbitrator is concerned, this Court had specifically
considered the issue of remand of proceedings in paragraph 7 of
the order dated 28 September 1998. After observing that the Award
was set aside, this Court examined the possibility of remitting back
the proceedings to the same arbitrator. However, this Court has
held that the proceedings could not be remitted back to the same
arbitrator as procedure for remand is envisaged only under
provisions of Sections 33 and 34(a) (sic) of the Arbitration Act and
recourse for the said provisions could be made only before passing
of award. Thus, the suggestion for remitting back the proceedings
to the same arbitrator was thus not accepted by this Court in order
dated 28 September 1998. Remission back of the proceedings to the
same arbitrator cannot be done after the award was set aside.
Therefore this Court granted liberty to the parties to move afresh,
meaning thereby to commence the proceedings afresh. This could
obviously be done by appointing the same arbitrator by serving
notice to the Respondents under Section 21 of the Act. However, in
the present case, Appellants never requested the Respondents for
commencing the arbitral proceedings afresh by suggesting the
name of the same arbitrator. If such suggestion was made and if the
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Respondents were not to object to the said suggestion, the same
learned arbitrator could conduct the fresh arbitration proceedings.
However, there was fundamental flaw on the part of the Appellants
and the arbitrator in comprehending the order passed by this
Court. Both erroneously presumed that this Court had remitted
back the arbitral proceedings to the same arbitrator. This
presumption was drawn by the arbitrator on twin reasons of (i) this
Court not changing the arbitrator and (ii) this Court sending back
the original records to the arbitrator. Both the reasonings adopted
by the learned arbitrator are flawed. There was no occasion for this
Court to change the arbitrator as this Court had granted liberty to
the parties to ‘move afresh’. This meant that the parties were
expected to take steps for fresh commencement of the proceedings
and in the event of parties not agreeing on a name of the arbitrator,
proceedings under Section 11 would be necessary. The second
reason of this Court sending back the proceedings to the arbitrator,
did not mean that there was a mandate for the same arbitrator to
recommence the proceedings. Since the proceedings travelled to the
Court from the arbitrator, the same were apparently directed to be
sent back to him. Thus, both the reasons recorded by the learned
arbitrator for recommencing the arbitral proceedings are flawed. In
the light of this position, we agree with the findings recorded by the
learned Single Judge that it was impermissible for the learned
Arbitrator to resume the arbitration proceedings.
20. There is yet another reason why the learned Arbitrator
could not have resumed the arbitration proceedings. The learned
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Single Judge, while granting liberty to the parties to ‘move afresh’,
specifically directed that the intervening period would be saved by
virtue of provisions of Section 43(4) of the Arbitration Act. Section
43(4) of the Arbitration Act provides thus:
“(4) Where the Court orders that an arbitral award be set aside, the
period between the commencement of the arbitration and the date of the
order of the Court shall be excluded in computing the time prescribed
by the Limitation Act, 1963 (36 of 1963), for the commencement of the
proceedings (including arbitration) with respect to the dispute so
submitted.”
21. Thus, under provisions of sub-section (4) of Section 43 of the
Arbitration Act, where the arbitral Award is set aside, the period
between commencement of arbitration and the date of the order of
the Court needs to be excluded in computing the time prescribed
by the Limitation Act for ‘commencement’ of the proceedings. Thus
Section 43(4) of the Arbitration Act applies only when arbitration
proceedings are to be freshly commenced. Therefore reference
made by this Court while setting aside the award to provisions of
Section 43(4) of the Act again makes the position clear that what
was contemplated was commencement of fresh proceedings and
not remand of proceedings to the same arbitrator.
22. When it comes to ‘commencement’ of proceedings under
Section 43(4) of the Act, provisions of Section 21 become relevant.
Section 21 of the Arbitration Act provides thus:
“21. Commencement of arbitral proceedings.-
Unless otherwise agreed by the parties, the arbitral proceedings
in respect of a particular dispute commence on the date on which
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the respondent.”
Thus for ‘commencement’ of the arbitral proceedings after setting
aside of the Award by taking benefit of limitation under Section
43(4) of the Arbitration Act, the procedure under Section 21
becomes mandatory.
23. In our view therefore, the order passed by this Court on 28
September 1998 setting aside the previous arbitral Award dated 1
April 1998 warranted commencement of arbitral proceedings afresh
and not resumption of the arbitration proceedings by the same
Arbitrator.
24. As observed above, the arbitral proceedings would commence
after passing of order dated 28 September 1998 only in accordance
with provisions of Section 21 of the Arbitration Act, under which it
was mandatory for the claimants to make a request to the
Respondents for reference of the dispute for arbitration. The fact
that this Court envisaged application of provisions of Section 43(4)
of the Arbitration Act would itself indicate that the fresh arbitration
proceedings were required to be commenced. If arbitration
proceedings were merely required to be resumed by the same
Arbitrator there would have been no question of application of
period of limitation. The fact that this Court envisaged that
limitation will have to be computed, it clearly meant
commencement of fresh arbitral proceedings after setting aside of
the Award.
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25. The contention raised on behalf of the Appellants that the
Award was not challenged on the ground of failure to issue notice
under Section 21 of the Arbitration Act, does not any ice. Failure to
serve notice under Section 21 of the Arbitration Act is merely an
additional defect as the very act of the Arbitrator in recommencing
the proceedings is found to be erroneous. One of the Respondents
had clearly raised an objection to continuation of arbitration
proceedings by the same learned Arbitrator, both before the
Arbitrator as well as in the Petition filed under Section 34 of the
Arbitration Act.
26. In our view therefore, the learned Single Judge has rightly held
the Award to be vitiated on account of improper constitution of the
arbitral Tribunal.
D. 2 NON-COMPLIANCE WITH PROVISIONS OF SECTION 21
27. Coming to the aspect of non-fulfillment of requirements of
Section 21 of the Arbitration Act, it is an admitted position that the
Appellants never requested Respondents to refer the disputes to
arbitration after passing of order dated 28 September 1998. The
Appellants unilaterally wrote to the arbitrator on 12 October 1998
for resumption of the arbitral proceedings by representing to the
arbitrator that “…but the Hon’ble High Court refused to grant the
request of the said Rajendra A. Acharya and Nandkishore A. Acharya of
not referring back the said matter to you once again, but on the contrary
the Hon’ble High Court by sending back the original records to you clearly
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indicated and clearly expressed that the parties or any of them should move
you the Arbitrator afresh.’ The Arbitrator acted on this representation
made by the Appellant and straightaway proceeded to fix a date of
hearing of the arbitral proceedings by issuing letter to the
Respondents. On account of fundamental flaw in comprehension of
the order passed by this Court and by erroneously presuming that
this Court directed remission of proceedings to the same arbitrator,
the Appellants failed to follow the procedure prescribed in Section
21 of the Act.
28. Both the above aspects have been correctly appreciated by the
learned Single Judge while setting aside the impugned Award. Even
if the requirement provided under Section 21 of the Arbitration Act
is held to be directory, still the impugned Award did not pass the
muster of authorization for the arbitral Tribunal to resume the
arbitration proceedings.
29. In our view therefore, since there was improper constitution of
the arbitral Tribunal, the learned Single Judge was justified in
setting aside the Award.
D. 3 MOU NOT A CONCLUDED CONTRACT AND IMPOSSIBILITY OF
SPECIFIC PERFORMANCE THEREOF
30. Having held that the constitution of the arbitral tribunal itself
was erroneous warranting setting aside of the award, it is not really
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necessary to go into the merits of the award. However, since the
learned Single Judge has recorded detailed findings on merits of the
Award, we proceed to briefly deal with the same. While holding
that the MoU did not constitute a concluded contract between the
parties, the learned Single Judge has taken into consideration the
fact that the building was occupied by tenants/occupants and that
the vendors (Respondents) were entitled to construct or reconstruct
additional floors on the existing building by consuming and
exploiting the additional FSI. The vendors sold their respective 50%
undivided share in the property together with right to exploit,
utilise, consume and take advantage of FSI in respect of the
property to the Appellants. Under clause 5 of the MoU, the
responsibility of obtaining consent of tenants/occupants was put
on the vendors. Such consent was to be obtained for either
reconstructing the building or for constructing additional floors on
the existing building. The learned Single Judge took note of clauses
3 and 5 of the MoU, under which the purchasers had the option of
either reconstruction of the entire building or construction of
additional floors thereon. The learned Single Judge held that in the
event of Appellants opting for reconstruction option, tenants were
required to vacate the structures which would have incurred
liability of payment of interim rent. If on the other hand only
additional floors were to be constructed, vacation of premises by
tenants was not necessary. The learned Single Judge therefore held
that the proposed course of action of either reconstructing the
building or constructing additional floors was not clearly set out
and parties were yet to agree on this vital aspect. It is for this reason
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that the learned Single Judge held that the parties did not arrive at a
concluded contract.
31. The learned Single Judge then took into consideration the
direction given by the learned Arbitrator to the Respondents to
comply with their obligations under the MoU by securing consent
of tenants/occupants within one month from the award. The
learned Single Judge therefore held that specific performance of the
MoU was impossible as the same depended on grant of consent by
the tenants.
32. This is how the learned Single Judge has set aside the Award
of the arbitral tribunal on the grounds of MoU not constituting a
concluded contract and impossibility of execution of directions
issued by the Arbitrator. We again do not find any element of
perversity in the findings recorded by the learned Single Judge. The
Award of the arbitral tribunal was rendered by excluding the
relevant material of clauses 3 and 5 of the MoU and this was a fit
ground for setting aside the Award.
33. Though it is sought to be suggested that the learned Single
Judge has acted as an Appellate Court while reversing findings of
the Arbitrator, it is seen that the learned Single Judge has also dealt
with the issue as to whether the operative directions issued by the
Arbitrator could at all be executed. Specific performance of the
MoU would require procurement of consent of the tenants by the
Respondents. If tenants were to refuse consent and were to not
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vacate possession of their premises, how the transaction of sale
would be executed has not really been examined by the learned
Arbitrator. So far as the nature of MoU is concerned, the learned
Single Judge has noticed that the exact course of action to be
adopted of either reconstruction of building or addition of floors
was not finalized between the parties and that therefore MoU could
not be treated as a concluded contract. This vital material was
excluded by the learned Arbitrator, who merely concentrated on
acceptance of part consideration by the Respondents. Exclusion of
vital material by the learned Arbitrator constitutes a valid ground
for setting aside the arbitral Award under Section 34 of the
Arbitration Act. We are therefore, not inclined to interfere in the
findings recorded by the learned Single Judge about MoU not
constituting a concluded contract and impossibility of specific
performance thereof.
34. In fact, the submissions canvassed on behalf of the Appellants
before us are as if we are exercising power of first Appellate Court
over the findings recorded by the learned Single Judge. Strenuous
attempt is made to demonstrate as to how the findings recorded by
the learned Single Judge about MoU not constituting concluded
contract are erroneous. We are afraid, our jurisdiction under Section
37 of the Arbitration Act is same as that of the jurisdiction of the
learned Single Judge under Section 34 of the Arbitration Act.
Appellants have made an attempt to urge before us that recording of
different conclusion of MoU constituting concluded contract is also
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possible as was done by the arbitrator. However, the same was done
by excluding the vital material on record. The learned Single Judge
has not exceeded the boundaries prescribed under Section 34 of the
Arbitration Act.
E. CONCLUSIONS
35. After considering the overall conspectus of the case, we
do not find that any valid ground is made out by the Appellants for
interference in the Order passed by the learned Single Judge in the
present Appeals. The learned Single Judge, while exercising power
under Section 34 of the Arbitration Act, has acted within the bounds
of its jurisdiction. The order passed by the learned Single Judge is
unexceptionable.
F. ORDER
36. We accordingly do not find any substance in the Appeals. The
Appeals are accordingly dismissed.
(SANDEEP V. MARNE, J.) (CHIEF JUSTICE) Digitally signed by SUDARSHAN SUDARSHAN RAJALINGAM RAJALINGAM KATKAM KATKAM Date: 2025.07.22 15:13:00 +0530 k Page No. 29 of 29 ::: Uploaded on - 22/07/2025 ::: Downloaded on - 22/07/2025 22:14:32 :::
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