JAGJEET SINGH LYALLPURI (DEAD) THROUGH LRS. & ORS. versus M/S UNITOP APARTMENTS & BUILDERS LTD. on 3 December 2019

JAGJEET SINGH LYALLPURI (DEAD)THROUGH LRS. & ORS.

v.

M/S UNITOP APARTMENTS & BUILDERS LTD.

(Civil Appeal No. 692 of 2016)

DECEMBER 03, 2019

[R. BANUMATHI, A.S. BOPANNA ANDHRISHIKESH ROY, JJ.]

Arbitration and Conciliation Act, 1996 :

ss. 19 and 34(2) – Agreement between appellants andrespondent-Company – For joint-venture for construction ofresidential-cum-commercial complex – On the land owned by theappellants – Construction not completed by the Company withinthe time stipulated in the agreement – Compromise between the parties – New management of the Company filed application u/s. 9 of theAct seeking to restrain the appellants from damaging or demolishingthe construction – Company also sought appointment of Arbitrator– The Arbitrator, by his Award rejected the claim as well as thecounter-claim of the parties – The Award was affirmed in the appealu/s. 37 – High Court remanded the matter to the Arbitrator on theground that parties were not granted appropriate opportunity totender evidence and that the Arbitrator had not considered thequestion as to extent of construction on the land and the amount ofexpenditure thereon – Appeal to Supreme Court – Held : When thechallenge to arbitral award is on the ground of proceduralirregularity, it would fall u/s. 34(2)(a)(iii) – As per s.19, the rules ofprocedure to be followed by the Arbitrator is flexible and can be asagreed upon by the parties – In the present case, procedure for theproceedings was as agreed upon by the parties and no objectionthereto was raised – It is evident from the Award that the Arbitratorhas adverted to the question of extent of construction and thequantum of expenditure thereon –The challenge to the award doesnot fall under any of the clauses of s.34 – However, in the peculiarfacts of the case, in the interest of justice, in exercise of power u/Art. 142 of the Constitution, landowner is directed to pay a sum ofRs. 45 lacs to the Company whereupon they would be entitled toassume possession of the subject land.

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ADisposing of the appeal, the Court

HELD: 1.1 When a challenge is raised on the ground thatthe appropriate procedure was not followed and there was denialof opportunity, it would at best fall under Section 34 (2) (a) (iii) ofArbitration and Conciliation Act, 1996. [Para 12][443-B-C]

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1.2 Section 19 of the 1996 Act provides that the ArbitralTribunal is not bound by the Code of Civil Procedure or theEvidence Act. Further, it provides that the parties are free toagree on the procedure to be followed by the Arbitral Tribunal.The rules of procedure to be followed by an Arbitral Tribunal isCflexible and can be agreed upon by the parties as provided underSection 19 of the 1996 Act. [Para 12 and 11][442-F; 443-H]

1.3 In the present case, in the proceedings dated 28.11.2009(Annexure P-15) before the Arbitrator, the procedure to befollowed has been discussed and recorded. That apart by the veryDproceedings dated 28.11.2009 the points on which argumentswould be addressed were also treated as the issues forconsideration and has been formulated and recorded in the ordersheet. From a perusal of the proceedings dated 28.11.2009 itwould be clear that both contentions raised by the counsel forthe respondent and which were accepted by the Single Judge ofEthe High Court to ultimately remand the matter, would not bejustified. Firstly, in the presence of the parties and their counsel,it had been recorded that they do not wish to cross-examine anyof the witnesses whose affidavits have been filed by the partiesconcerned and one of the witness who was present was dischargedFwithout being cross examined and no grievance was made eitherby the parties or their counsel who were present. It is in thatview, the evidence was taken as closed on 28.11.2009 and theissues for consideration was settled for arguments on the sameday. In that circumstance having consented to the said procedure,it would not be open for the respondent to approbate andGreprobate so as to raise a different contention at this point. Havingaccepted the said procedure, the respondent is estopped fromraising such contention before the Single Judge that the arbitratormisconducted himself by not permitting the parties to cross-examine the witness and also that the Arbitrator being more than H

70 years of age and suffering from knee problem has pressurizedthe respondent to speed up the matter and the evidence wasclosed. [Para 12 and 13][444-A, E-H; 445-A-B]

1.4 Though the respondent was represented by theircounsel and the order dated 28.11.2009 was passed whilerecording the proceedings of that day, neither any applicationhad been filed before the Arbitrator to recall the said order andprovide opportunity to tender evidence or cross examine, norwas a challenge raised by initiating any other proceedings, beforethe award was passed. It is only subsequent to the award beingpassed, such contention is being raised as an afterthought, whichin such event cannot be accepted. [Para 14][445-C-E]

1.5 That apart, the agreement being entered into on14.12.1996 and the work not having progressed subsequent toMarch,1999 was not seriously in dispute and in that circumstance,based on the affidavit, the admitted documents have been takennote by the Arbitrator due to which the non-cross-examination inany event has not prejudiced the respondent. [Para 14][445-E]

1.6 Since through the very order dated 28.11.2009, theissues for consideration on which the arguments would beaddressed was settled and the matter was proceeded on thatunderstanding without raising any objection, the grievance putforth by the respondent and accepted by the Single Judge of theHigh Court that the Arbitrator has not answered each of the claimsseparately in the award, cannot also be accepted. A perusal of theaward would indicate that the Arbitrator has adverted to all aspectsin a sequential manner and has recorded his conclusion in answerto the contentions that were put forth. [Para 15][446-B-C]

2.1 A perusal of the award passed by the Arbitrator wouldindicate that after having arrived at the conclusion that therespondent has committed the breach, the Arbitrator has alsoadverted to the contention relating to the cost incurred for theextent of construction made, as claimed and has rejected thesame. [Para 16][446-E-F]

2.2 It had been noticed by the Arbitrator relating to thechange of Directors and shareholders of the company in 2007 as A

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Aagainst the shareholders who existed as on 30.09.2005 and alsothat the erstwhile Directors/shareholders who had personalknowledge have not been examined by filing their affidavits andeven though an application dated 12.09.2009 for summoning themas witnesses was filed, the same was not pressed and the evidencewas closed on 28.11.2009 with the consent of the parties. TheBArbitrator has in fact recorded that none of them have comeforward to render assistance in the proceedings. In suchcircumstance when the respondent, who were themselves theclaimants before the Arbitrator have not conducted the matter inan appropriate manner by securing affidavit evidence of theCerstwhile directors/shareholders, they cannot at this stage turnaround and contend that the Arbitrator has misconducted himself.In any event the challenge to the award does not fall under any ofthe clauses of Section 34 of Act, 1996. [Para 17][447-E-H; 448-A]

D2.3 Except raising some columns, there is no majorconstruction that is put up. In so far as the expense as claimed bythe respondent, as indicated by the Arbitrator, there is noconclusive evidence to that effect. Though such columns areraised, admittedly construction activity has not taken place beyondMarch, 1999 and already two decades have elapsed. In view ofEthe breach and the respondent failing in the present lis, therewould be no absolute right in their favour since the inevitableloss suffered by the appellants by not being able to enjoy theproperty for the last more than two decades also cannot be lostsight. The appellant who is the owner of the property will have toFenter into a fresh contract and the need and manner ofdevelopment may not be the same at this point and in such eventthe appellant herein also would be put to some loss to undertakethe demolition process themselves or there would be reductionthat would be made by the alternate developers who would undertake the project. Further, the actual quantum in any eventGcannot be determined and also when a breach has been committedthrough the predecessor directors/shareholders of the respondentcompany and when the present directors/shareholders haveentered the scene in the midst of the breach they would have tobear the loss, if any, to that extent. Therefore, without referenceHto the actual loss suffered by the parties, while putting an end to the litigation between the parties, in the peculiar circumstanceand in the interest of justice, notwithstanding the fact that theorder of the Single Judge is not sustainable, in exercise of powerunder Article 142 of the Constitution of India, the appellant isdirected to pay the sum of Rs. 45,00,000/- (Rupees Forty-FiveLakhs only) to the respondent whereupon they would be entitledto assume possession of the subject land and proceed to enjoythe same in accordance with law. [Para 18][448-C-H]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 692 of2016.

From the Judgment and Order dated 31.07.2015 of the High Courtof Punjab and Haryana at Chandigarh in FAO No. 5704 of 2012.

Shyam Divan, Sr. Adv., Ashok K. Mahajan, Advs. for theAppellants.

Sibo Sankar Mishra, Niranjan Sahu, Advs. for the Respondent.

The Judgment of the Court was delivered by

A. S. BOPANNA,J.

1. The appellants are before this Court assailing the order dated31.07.2015 passed by the High Court of Punjab and Haryana atChandigarh in FAO No. 5704 of 2012 (O&M). Through the said order,the High Court has remanded the matter to the sole Arbitrator Mr. JusticeKuldip Singh, retired Judge, Supreme Court of India for providingopportunity of leading evidence to both the parties and also grantopportunity to cross-examine the witnesses and thereafter decide eachand every claim and counter claim separately on merits. The said orderis passed in an appeal filed by the respondent herein under Section 37 ofthe Arbitration and Conciliation Act, 1996 (‘Act 1996’ for short). Theappellant herein who was the respondent in the said appeal is thereforebefore this Court claiming to be aggrieved by the said order.

2. The brief facts leading to the present situation is that theappellants herein are joint owners of the land measuring 14 Kanals and3 Marlas (8560 Sq. yards) situate at village Sunet, Tehsil and DistrictLudhiana, State of Punjab. The respondent company through itsrepresentatives claiming to be well-versed with construction anddevelopment of properties approached the appellants for joint venture in A

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Aconstructing a residential-cum-commercial complex on the subject land.Accordingly, an agreement dated 14.12.1996 was entered into and amongother terms agreed therein, the respondent had undertaken to completethe construction of the building consisting of at least six floors withinthree years from the date of obtaining the sanctioned plan from theLudhiana Municipal Corporation. The project was required to be fundedBby the respondent and a sum of Rs. 45,00,000/- (Rupees Forty-FiveLakhs only) was to be deposited with the appellant as a guarantee forcompletion of the project. In that view, the appellants were expected toretain the same if the building is not completed within the period of three years. The sale proceeds from the constructed building was to be sharedCin the ratio of 48:52 % between the appellants and the respondent.

3. Pursuant to such agreement the respondent secured the sanctionof the building plan from the Municipal Corporation on 04.07.1997. Theperiod of three years was to be computed from that point as per theagreement. Hence the construction ought to have been completed byD03.07.2000. According to the appellant, the respondent though commencedthe construction during August, 1997, the activity was undertaken until31.03.1999 and the project was abandoned by them thereafter. Sincethe construction was not completed by 03.07.2000 and no further progresswas made despite the appellant having waited beyond the said period,the appellants got issued a legal notice dated 01.11.2001 and terminatedEthe agreement dated 14.12.1996. The respondent though issued replydated 28.11.2001 did not proceed further to make progress in theconstruction.

4. The appellants further claim that in such circumstance theappellant and the respondent entered into a compromise and a cancellationFagreement dated 26.10.2004 was executed due to which an amount ofRs. 40,00,000/- (Rupees Forty Lakhs only) from the amount which wasreceived as security deposit was returned. Notwithstanding the same,since there was change of guard in the composition of the management,the respondent filed an application under Section 9 of the Act, 1996Gseeking to restrain the appellants from damaging or demolishing theconstruction which had been raised by the respondents. Immediatelythereafter a notice dated 23.11.2004 was issued by the respondentinvoking the arbitration clause for referring the matter to arbitration.The Arbitration Case No. 124 of 2006 under Section 11 of the Act, 1996filed by the respondent was allowed on 03.07.2009 and Mr. Justice KuldipH

Singh, retired Judge, Supreme Court of India was appointed as the solearbitrator to resolve the dispute between the parties.

5. In that view the parties appeared before the learned Arbitratorand filed their respective claim, counter-claim and objection thereto. Theevidence by way of affidavit and the documents of respective partieswas also filed, where after the learned Arbitrator on hearing the learnedcounsel for the parties passed the award dated 13.01.2010 through whichboth the claim as well as the counter claim was dismissed. The respondentherein claiming to be aggrieved by the same filed a petition under Section34 of the Act, 1996 in the Court of the Additional District Judge, Ludhianawhich was registered in Arbitration Case No. 3 dated 29.01.2010. Thelearned Additional District Judge through the order dated 13.09.2012affirmed the award by dismissing the petition. It is in that view therespondent herein filed an appeal under Section 37 of the Act, 1996before the High Court. The learned Single Judge of the High Court hasarrived at the conclusion that the parties have not been grantedappropriate opportunity by the learned arbitrator to tender evidence byexamining witness and to cross-examine the witnesses, whose affidavitswere filed. It is further held by the High Court that the learned Arbitratorhas not considered the aspect relating to the extent to which theconstruction was put up and the amount that was expended by therespondent herein and no determination, in that regard has been made.The said observation was made after holding, though the time was notthe essence of the contract but yet the long delay would not be justified.It was held, even in that circumstance the other aspects requiredconsideration. In that background the matter was remanded to the learnedArbitrator for fresh consideration.

6. Mr. Shyam Divan, learned senior counsel for the appellant whileassailing such conclusion by the High Court has taken us through theappeal papers and has referred to the agreement dated 14.12.1996 andthe clauses governing the parties. It is contended that when a dispute isreferred to the learned Arbitrator, Section 19 of the Act, 1996 providesthat the Arbitrator can determine the rules of procedure. In that regardit is pointed out that in the hearing held on 28.11.2009 the learnedArbitrator has in the course of the proceedings finalised the procedureand recorded the same in the order. It is pointed out that the respondentwas represented by a senior advocate in the arbitration proceedingswherein it has been agreed that the parties would rely upon the affidavits A

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Aand documents that were filed and the procedure of cross-examinationcould be dispensed. In that background the learned arbitrator has referredto the materials on record in the background of the claim put forth andthe affidavits filed in support thereof while arriving at the conclusion.Hence, he contends that the procedural lapse as attempted to be madeout at this stage is not justified.B

7. It is further contended by Mr. Shyam Divan that in a proceedingswhere the consideration ought to be limited to the extent provided underSection 34 of the Act, 1996 and when the learned Additional DistrictJudge has in that light examined and confirmed the award, theconsideration ought not to have been expanded by the learned SingleCJudge in a proceedings under Section 37 of the Act, 1996 wherein alsothe scope is limited. On the factual aspect it is contended that despitethe terms agreed in the agreement dated 14.12.1996, no progress wasmade in the construction even until the point when the proceedings wereinitiated before the learned Arbitrator after it was abandoned in MarchD1999. In that circumstance when the learned Arbitrator has taken intoconsideration these aspects and arrived at the conclusion, the learnedsingle judge could not have interfered with the award. The learned seniorcounsel in that regard has taken us through the award to point out that adetailed consideration has been made by the learned Arbitrator on allaspects including the fact that the cancellation of the agreement wasEagreed between the parties. On the contention urged relating to theconstruction incurring an amount of Rs.1,22,00,000/- (Rupees One CroreTwenty-Two Lakhs only) said to have been made by the respondentalso a consideration has been made. In that circumstance when thecontention was adverted to and a view was taken by the learnedFArbitrator based on a finding of fact, the learned Single Judge was notjustified in commenting that the said aspect had not been adverted to bythe learned Arbitrator. It is therefore contended that the award is liableto be sustained and the order passed by the learned Single Judge be setaside.

G8. Mr. Shibo Shankar Misra, learned counsel for the respondentin his attempt to sustain the order passed by the learned Single Judgecontends that the respondent had raised twelve claims before the learnedArbitrator and each claim should have been decided separately. It is hiscase that the learned Arbitrator has proceeded to reject the claim onlyon the conclusion that time is the essence of the contract. Though theH

terms as contained in the agreement dated 14.12.1996 is not disputed,the learned counsel contends that the delay caused resulting in non-completion of the project is solely attributable to the appellant. Theappellants had not parted with the title documents relating to the land inquestion due to which the respondent was not in a position to raise thefunds from the bank by creating mortgage. Apart from the securityamount the respondent has suffered loss to the extent of Rs. 1,22,00,000/- (Rupees One Crore Twenty-Two Lakhs only) being the cost ofconstruction which was put up. Specific claim was raised under differentheads before the learned Arbitrator. Despite such contentions and claimsbeing put forth the learned Arbitrator has not considered the same. Inthat regard it is contended that clause 11 of the agreement which providesrelating to the expenditure incurred has not been properly appreciated.The learned counsel contended that the learned Additional District Judgein the proceedings under Section 34 of the Act, 1996 has also not advertedto these aspects of the matter. However, the learned Single Judge takingnote of these aspects and also keeping in view the decision in the caseof Oil and Natural Gas Corporation Ltd. vs. SAW Pipes Limited2003 (5) SCC 705 has arrived at the conclusion that an award of thepresent nature cannot be sustained and has accordingly remanded thematter to the learned Arbitrator to provide opportunity to the parties andtake a fresh decision. It is contended that in such circumstance whenboth parties would have an opportunity, the appellant herein cannot makeout any grievance. He therefore contends that the above appeal bedismissed.

9. In the light of the contentions put forth we have perused theappeal papers and made reference to the material on record. With regardto the agreement dated 14.12.1996 and the clauses contained therein toregulate the parties there is no serious dispute between the parties. Thevery fact that a contention has been raised by the respondent seeking toattribute the delay and the non-completion of the project to the appellantby contending that the non-furnishing of the title documents had preventedthe respondent from raising loan would by itself indicate that no progresswas made except putting up the initial construction and the project wasnot completed within the period of three years or thereafter, though thebuilding plan was sanctioned on 04.07.1997. In that light the appellanthad issued a notice dated 01.11.2001 and terminated the agreement,which had resulted in a dispute between the parties. In that background ABC

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Athe matter was placed before the learned Arbitrator who had beenappointed in a proceeding under Section 11 of the Act, 1996. A perusalof the award dated 30.01.2010 available at Annexure P-12 to the appealpapers would indicate that a detailed consideration has been made bythe learned Arbitrator on all aspects of the matter. In that backgroundBwhen the petition under Section 34 of the Act, 1996 was filed before thelearned Additional District Judge, the learned Additional District Judgein fact has also adverted to all aspects of the matter and since no groundfor interference as contemplated under Section 34 of the Act, 1996 wasmade out, the learned Additional District Judge through his order dated 13.09.2012 has upheld the award.C

13.09.2012 has upheld the award.C

10. In that backdrop when the learned Arbitrator and the learnedAdditional District Judge have arrived at a concurrent opinion, it isnecessary for us to take note as to whether the learned Single Judge inan appeal filed under Section 37 of the Act, 1996 could have advertedinto the merits of the contention beyond the scope available under SectionD34 (2) of the Act, 1996 so as to set aside the award and remand thematter. In that regard whether the contentions which were put forth toassail the award by picking holes in the procedure adopted by the learnedArbitrator is to be accepted or not also requires examination, keeping inview the scope of Section 34 (2) of the Act, 1996 and determine as toEwhether such ground is made out.

11. Since the learned Single Judge has presently accepted thecontention raised on behalf of the respondent herein that the procedurefollowed by the learned Arbitrator is contrary to law and has prejudicedthe respondent herein since the witnesses were not cross-examined,Fthis aspect of the matter is required to be noticed at the outset. As rightlypointed out by the learned senior counsel for the appellant, the rules ofprocedure to be followed by an Arbitral Tribunal is flexible and can beagreed upon by the parties as provided under Section 19 of the Act,1996 which reads as hereunder; G19. Determination of rules of procedure – (1) The arbitraltribunal shall not be bound by the Code of Civil Procedure, 1908(5 of 1908) or the Indian Evidence Act, 1872 (1 of 1872).

(2) Subject to this Part, the parties are free to agree on theprocedure to be followed by the arbitral tribunal in conducting itsHproceedings.

(3) Failing any agreement referred to in sub-section (2), the arbitraltribunal may, subject to this Part, conduct the proceedings in themanner it considers appropriate.

(4) The power of the arbitral tribunal under sub-section (3) includesthe power to determine the admissibility, relevance, materialityand weight of any evidence.

12. Further, keeping in view that the contention put forth beforethe High Court by the respondent herein to assail the award was in themanner as noticed above with regard to the appropriate procedure notbeing followed and there being denial of opportunity and in that view therespondent not being able to put forth the case appropriately before thelearned Arbitrator, the effect of the same is required to be examined.When a challenge is raised on that ground, in our opinion it would at bestfall under Section 34 (2) (a) (iii) which reads as follows; “34. Application for setting aside arbitral award – (1)Recourse to a Court against an arbitral award may be made onlyby an application for setting aside such award in accordance withsub-section (2) and sub-section (3).

—(2) An arbitral award may be set aside by the Court only if —(a) the party making the application furnishes proof that

(i) xxxxxxxxxxxxxxxx

(ii) xxxxxxxxxxxxxxx

(iii) the party making the application was not given propernotice of the appointment of an arbitrator or of the arbitralproceedings or was otherwise unable to present his case;or”

(emphasis supplied)

Therefore, in order to consider whether the challenge is sustainableon the ground available in law, at the outset it is necessary to examinewhether the procedural lapse if any is committed by the learned Arbitratorin unilaterally denying the opportunity to the parties so as to make theaward invalid and to set aside the same exercising the power underSection 34 or in an appeal under Section 37 of the Act, 1996. In thisregard as noticed, Section 19 of the Act, 1996 provides that the ArbitralTribunal is not bound by the Code of Civil Procedure or the IndianEvidence Act. Further, it provides that the parties are free to agree on A

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Athe procedure to be followed by the Arbitral Tribunal. In this back dropit is noticed that in the case on hand, in the proceedings dated 28.11.2009(Annexure P-15) before the learned Arbitrator, the procedure to befollowed has been discussed and recorded, which reads as hereunder; “The parties and their learned counsel have been heard. WhateverBfurther pleadings, documents and list of witnesses were to befiled by the parties in terms of the proceedings dated 10.10.2009,have been done. The evidence of the claimant as well as of therespondents was to be recorded today. Mr. Ram Lal, whom the-respondents want to crossexamine, is present before theArbitrator. The learned counsel for the parties have, however,C-agreed and consented before me they do not wish to crossexamine any of the witnesses whose affidavits have been filed bythe parties concerned. In view of the consent of the learnedcounsel of the parties and parties themselves who are present, Iclose the evidence. The parties will rely on the affidavits alreadyDfiled and the documents and other pleadings already placed onthe record.”

(emphasis supplied)

That apart by the very proceedings dated 28.11.2009 the pointson which arguments would be addressed were also treated as the issuesEfor consideration and has been formulated and recorded in the ordersheet.

13. From a perusal of the proceedings dated 28.11.2009 it wouldbe clear that both contentions raised by the learned counsel for therespondent herein and which were accepted by the learned Single JudgeFto ultimately remand the matter, would not be justified. Firstly, in thepresence of the parties and their learned counsel it has been recordedthat they do not wish to cross-examine any of the witnesses whoseaffidavits have been filed by the parties concerned and one of the witnesswho was present was discharged without being cross examined and noGgrievance was made either by the parties or their learned counsel whowere present. It is in that view the evidence was taken as closed on28.11.2009 and the issues for consideration was settled for argumentson the same day. In that circumstance having consented to the saidprocedure, it would not be open for the respondent herein to approbateand reprobate so as to raise a different contention at this point. Having H

accepted the said procedure the respondent is estopped from raisingsuch contention before the learned Single Judge that the arbitratormisconducted himself by not permitting the parties to cross-examine thewitness and also that the learned Arbitrator being more than 70 years ofage and suffering from knee problem has pressurized the respondent tospeed up the matter and the evidence was closed. It is rather intriguingfor us to note that such contention has not only been permitted to beraised, but also accepted by the learned Single Judge to remand thematter, which is wholly unjustified.

14. We are of such opinion for the reason that the procedure to befollowed in arbitration proceedings was settled by a separate order dated28.11.2009 during the course of the proceedings before the learnedArbitrator. Thereafter the award was passed only on 13.01.2010. Thoughthe respondent was represented by their learned counsel and the orderdated 28.11.2009 was passed while recording the proceedings of thatday, neither any application had been filed before the learned Arbitratorto recall the said order and provide opportunity to tender evidence orcross examine, nor was a challenge raised by initiating any otherproceedings, before the award was passed. It is only subsequent to theaward being passed such contention is being raised as an afterthought,which in such event cannot be accepted. That apart, the agreementbeing entered into on 14.12.1996 and the work not having progressedsubsequent to March,1999 was not seriously in dispute and in thatcircumstance based on the affidavit, the admitted documents have beentaken note by the learned Arbitrator due to which the non-cross-examination in any event has not prejudiced the respondent herein. Oneaspect of the matter no doubt was with regard to the claim that was putforth by the appellant herein that a cancellation agreement dated26.10.2004 was entered into and the security deposit of Rs. 40 Lakhsand the advance of Rs. 23 Lakhs has been re-paid to Mr. S. SurinderSingh which was disputed by the respondent. On that aspect the learnedArbitrator in any event has concluded that the said payment if any cannotbe considered as a payment made to the respondent company but hasbeen received by Mr. Surinder Singh who had made gain unto himself.In such event since the respondent has not filed the affidavit of Mr.Surinder Singh disputing the same, it is an inter-se matter to claim fromMr. Surinder Singh and therefore, the non-cross-examination on thataspect also has not resulted in any prejudice. Be that as it may, as already AB

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Ataken note, the procedure to be followed in the arbitral proceedings hasbeen agreed to by the parties. Hence the respondent cannot be heard tocomplain as and when it suits them.

15. Further, since through the very order dated 28.11.2009 theissues for consideration on which the arguments would be addressedBwas settled and the matter was proceeded on that understanding withoutraising any objection, the grievance put forth by the respondent andaccepted by the learned Single Judge that the learned Arbitrator has notanswered each of the claims separately in the award, cannot also beaccepted. A perusal of the award would indicate that the learnedArbitrator has adverted to all aspects in a sequential manner and hasCrecorded his conclusion in answer to the contentions that were put forth.

16. One other aspect which has been recorded by the learnedSingle Judge as the reason for which the matter requires reconsiderationby the learned Arbitrator is that the claim put forth by the respondentthat the sum of Rs. 1,22,00,000/- spent by them has not been consideredDby the learned Arbitrator. In that regard the learned Single Judge hasheld that though the respondent herein would not be entitled to continuethe project due to lapse of time the learned Arbitrator has not consideredthe right of the parties relating to the extent of the cost incurred for theexisting construction and the manner in which it is to be dealt with. OnEthis aspect, a perusal of the award passed by the learned Arbitratorwould indicate that after having arrived at the conclusion that therespondent has committed the breach, the learned Arbitrator has alsoadverted to the said contention relating to the cost incurred for the extentof construction made, as claimed and has rejected the same. Theconsideration as made is as hereunder;F

“I may examine, at this stage the claimant’s contention thatconstruction worth about Rs. 1 crore 20 lacs has been done onthe project. The claimant has primarily relied on the balance sheetof the Company for the relevant year in support of this argument.The balance sheet is Annexure-K at page 118-126 of the statementGof Claim. In the schedule forming part of the accounts for theyear ending 31[st] March, 1999, the balance sheet shows anexpenditure of about 1 crore 20 lacs on the project in process.This includes Rs. 44 lacs as advance given to the respondents(land owners) as guarantee money. Expenditure incurred has beenshown under various headings such as advertisement and publicity, H

salary, entertainment, iron and steel, cement, GC sheets, stand,bricks, marble, crusher, electrical, GI pipes, gate, professionalcharges, telephone expenses, electricity expenses, labour andconstruction charges. An amount of Rs. 56,58,530/- has beenshown under the heading purchase. It is not indicted so as to whatwas purchased. All the items required for the construction of theproject have been shown separately but it is not clear on whatpurchase/purchase this amount was spent. No explanation isforthcoming from the claimant in this respect. Mr. Mahajan whilecontroverting the argument of Mr. Lekhi has stated that LocalCommissioner’s report Annexure-W makes it clear that theamount which may have been spent on the construction was muchless. Be that as it may there is no expert evidence on the recordto show as to how much money was spent on the construction.The claimant company did receive some money as advance againstflats and offices to be constructed. It is in the evidence that Rs.23 lacs was received by the Company in this respect. The balancesheet as on 31[st] March, 1999 at page 121 shows that the Companyreceived Rs. 19,79,488/- as advance against flats and offices. Inthe absence of reliable evidence on the record, it is not possible toaccept the argument of the learned counsel for the claimant.”

17. In that circumstance when the learned Arbitrator has noticedthe contention and recorded a finding of fact it cannot be accepted thatthe learned Arbitrator has not adverted to the same so as to requirereconsideration. To be fair to the learned Arbitrator, it has in fact beennoticed by the learned Arbitrator relating to the change of Directors andshareholders of the company in 2007 as against the shareholders whoexisted as on 30.09.2005 and also that the erstwhile Directors/shareholders who had personal knowledge have not been examined byfiling their affidavits and even though an application dated 12.09.2009for summoning them as witnesses was filed, the same was not pressedand the evidence was closed on 28.11.2009 with the consent of theparties. The learned Arbitrator has in fact recorded that none of themhave come forward to render assistance in the proceedings. In suchcircumstance when the respondent herein, who were themselves theclaimants before the learned Arbitrator have not conducted the matterin an appropriate manner by securing affidavit evidence of the erstwhiledirectors/shareholders, they cannot at this stage turn around and contendthat the learned Arbitrator has misconducted himself. In any event the AB

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Achallenge to the award does not fall under any of the clauses of Section34 of Act, 1996. In such circumstance the reliance placed by the learnedSingle Judge on a decision in the case of ONGC (supra) is highlymisplaced. Therefore, the order dated 31.07.2015 passed by the learnedSingle Judges is not sustainable and the same is liable to be set aside.

B18. During the course of hearing we had also made an endeavourto see that the parties amicably settle the matter by enabling therespondent herein to receive some amount towards the expended portion,also by not ignoring the loss suffered by the appellants due to delay.From the photographs produced before us we have noticed that exceptraising some columns, there is no major construction that is put up. In soCfar as the expense as claimed by the respondent, as indicated by thelearned Arbitrator as extracted above, there is no conclusive evidenceto that effect. Though such columns are raised, admittedly constructionactivity has not taken place beyond March, 1999 and already two decadeshave elapsed. In view of the breach and the respondent herein failing in Dthe present lis there would be no absolute right in their favour since theinevitable loss suffered by the appellants by not being able to enjoy theproperty for the last more than two decades also cannot be lost sight.The appellant herein who is the owner of the property will have to enterinto a fresh contract and the need and manner of development may notbe the same at this point and in such event the appellant herein alsoEwould be put to some loss to undertake the demolition process themselvesor there would be reduction that would be made by the alternatedevelopers who would undertake the project. Further, the actual quantumin any event cannot be determined and also when a breach has beencommitted through the predecessor directors/shareholders of theFrespondent company and when the present directors/shareholders haveentered the scene in the midst of the breach they would have to bear theloss, if any, to that extent. Therefore, without reference to the actualloss suffered by the parties, while putting an end to the litigation betweenthe parties, in the peculiar circumstance and in the interest of justice,notwithstanding the fact that we have held the order of the learned SingleGJudge as not sustainable, in exercise of our power under Article 142 ofthe Constitution of India the appellant is directed to pay the sum ofRs. 45,00,000/- (Rupees Forty-Five Lakhs only) to the respondentwhereupon they would be entitled to assume possession of the subjectland and proceed to enjoy the same in accordance with law.

H

19. In the result the appeal is disposed of with the following order:

(i) The order dated 31.07.2015 passed by the High Court of Punjaband Haryana in FAO No. 5704 of 2012 (O&M) is set aside. Consequently,the award dated 13.01.2010 passed by the learned Arbitrator is restored.

(ii) The appellant is directed to pay the sum of Rs. 45,00,000/-(Rupees Forty-Five Lakhs only) in full quit of all claims, to the respondentwithin three months.

(iii) Immediately on payment of the said amount the appellantshall be entitled to resume possession of the subject land in the status asit exists and enjoy the same in accordance with law.

(iv) Parties to bear their own costs.

Kalpana K. Tripathy

Appeal disposed of.

A

B

C

D

E

F

G

H