TaxTMI 
TaxTMI 
2023 (3) TMI 1605
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.... Arbitration Petition (L) No. 24217 of 2022, is aggrieved by the direction in the impugned award to pay amount of Rs. 6,50,000/- along with interest @ 8% per annum, towards refund of amounts received from the rival party. The dispute between the parties concerns registered agreement dated 6th October 2003, clauses of which fall for consideration in these petitions. 2. The facts in brief leading to filing of these two petitions are that John Peter Fernandes, the petitioner in Arbitration Petition No. 355 of 2022 (hereinafter referred to as 'Mr. Fernandes') entered into an agreement with respondent Nos. 1 and 2 in the said petition, whereby Mr. Fernandes agreed to purchase from the respondents the subject property with the intention of opening a restaurant. It is stated that Mr. Fernandes was working as a waiter and that he had arranged for part of the consideration from his relatives and the remainder in the form of a loan from a Co-operative Bank. The agreed consideration was Rs. 35,00,000/. The agreement dated 6th October 2003 was registered and although it was recorded that the entire consideration had been paid, it is common ground between the parties....
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....s under the reference. In pursuance thereof, the arbitral tribunal consisting on an advocate practicing in this Court was constituted and the learned arbitrator commenced the arbitration proceedings. 7. The rival parties placed their contentions on record. The learned arbitrator passed the impugned award on 31st March 2022, rejecting the prayer of Mr. Fernandes for granting specific performance of the agreement dated 16th October 2003, but directed the respondent [petitioner in accompanying Arbitration Petition (L) No. 24217 of 2022] to pay an amount of Rs. 6,50,000/- with simple interest @ 8% per annum to Mr. Fernandes. The learned arbitrator found that Mr. Fernandes had failed to prove readiness and willingness to perform his part of the contract and further that an amount of Rs. 5,00,000/-, alleged to have been paid by cash to the respondents, was not proved by cogent evidence. It is for this reason that the learned arbitrator deducted the aforesaid amount of Rs. 5,00,000/- from the amount of Rs. 11,50,000/- and directed the respondents to pay Rs. 6,50,000/- with simple interest @ 8% per annum to Mr. Fernandes. Aggrieved by the said award, the ri....
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....t of readiness and willingness by the learned arbitrator were perverse and wholly unsustainable. In this situation, the learned senior counsel submitted, that rejecting the prayer for grant of specific performance and instead directing refund of truncated amount to Mr. Fernandes demonstrated the error committed by the learned arbitrator. 10. The learned senior counsel sought to rely upon judgement of the Supreme Court in the case of ONGC Limited Vs. Saw Pipes Limited, (2003) 5 SCC 705, but, when it was put to him that post-amendment of the aforesaid Act, the position of law had changed as clarified by the Supreme Court in Ssangyong Engineering and Construction Company Limited Vs. National Highway Authority of India, (2019) 15 SCC 131, the learned senior counsel fairly submitted that the award could be tested only on the basis of the position of law now clarified by the Supreme Court. It was submitted that even if the said test was to be applied to the facts of the present case, since vital evidence was ignored and the finding was based on an unreasonable approach, the award could be said to be patently illegal. On this basis, the learned senior counsel appearing for Mr. Fernande....
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....rified by the Supreme Court in the case of Ssangyong Engineering and Construction Company Limited Vs. National Highway Authority of India (supra), post amendment of the said Act. 13. Learned counsel for the respondents relied upon judgement of this Court in the case of Union of India Vs. Recon, Mumbai, 2020 (6) Mh.L.J. 509, to contend that the finding rendered by the learned arbitrator leading to the second direction in the impugned award was perverse and hence the award, to that extent, was rendered patently illegal. The learned counsel further relied upon judgement of this Court in the case of Vilayati Ram Mittal Pvt. Ltd. Vs. Reserve Bank of India, 2017 SCC OnLine Bom 8479, to contend that by giving the impugned direction in the teeth of the specific terms of the contract, the learned arbitrator had travelled beyond his jurisdiction. Reliance was further placed on judgement of this Court in the case of Board of Control for Cricket in India Vs. Deccan Chronicle Holdings Limited, 2021 SCC OnLine Bom 834, to contend that the learned arbitrator could not have invoked the principle of equity in favour of Mr. Fernandes. Reference was made to Section 28(3) of the Act, added by way o....
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....on of the principles of natural justice is a ground for challenge as one under Section 18 read with Section 34(2)(a)(iii) - that is to say, not under the 'fundamental policy' head nor the 'patent illegality' head, but distinctly under this sub-section. (iii) A lack of reasons is a patent illegality under Section 34(2A). (iv) In interpreting the contract, the arbitral view must be fairminded and reasonable. If the view is one that is not even possible, or if the arbitrator wanders beyond the contract, that would amount to a 'patent illegality'. (v) 'Perversity' as understood in Associate Builders, is now dishoused from 'fundamental policy' (where Western Geco put it), and now has a home under 'patent illegality'. This includes: (A) a finding based on no evidence at all; (B) an award that ignores vital evidence; and (C) a finding based on documents taken behind the back of the parties. I believe this is not an exhaustive listing. Combining (iv) and (v) above, therefore, while the explicit recognition or adoption of the Wednesbury unreasonableness standard (introduce....
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....s of Mr. Fernandes, in the backdrop of his prayer for grant of specific performance of the registered agreement dated 6th October 2003, the learned arbitrator found that Mr. Fernandes was not justified in claiming that amount of Rs. 11,50,000/- was paid to the respondents. While reaching the said finding, the learned arbitrator appreciated the evidence on record, including the receipts placed on record and found that amount of Rs. 6,50,000/- had been paid; Rs. 1,50,000/- by way of cheque and the remainder by way of cash on various dates. Learned arbitrator specifically found that the receipt pertaining to amount of Rs. 5,00,000/- recorded that it was paid by way of a cheque drawn on Bank of India, bearing a specific number. The learned arbitrator also appreciated the evidence on record and found that Mr. Fernandes had admitted that the said receipt at Exhibit - I4 was in respect of a cheque issued, which was never encashed by respondent No. 2. The learned arbitrator also found that Mr. Fernandes in cross-examination admitted that other than his word, there was no evidence on record to prove or establish payment of Rs. 5,00,000/- by cash to the responde....
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.... to require specific performance of this Agreement by the Purchaser and to claim all costs charges and expenses incurred by the Vendor or (b) to forfeit the earnest money or deposit and claim all loss and damages suffered and to the payment of all costs incurred by the Vendor." 21. The second clause, amongst the two clauses quoted hereinabove, specifically provides that if the purchaser i.e. Mr. Fernandes is at default, and the transaction is not completed, the respondents could either seek specific performance of the agreement or the amount towards earnest money or deposit would stand forfeited. The learned arbitrator in the impugned award has completely ignored the said specific term in the agreement dated 6th October 2003. It is clear from the above quoted clauses that if the respondents were at fault, Mr. Fernandes could have either sought specific performance of the agreement or repayment of the amount of earnest money or deposit with interest @18% p.a. 22. In the present case, the learned arbitrator found that Mr. Fernandes was at default and yet ended up granting a direction of refund and on the question of interest, he referred to the rate of 18% p.a. contained in the....
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....and may instead follow equitable principles. An amiable compositeur in arbitration law is an arbitrator empowered by consensus of parties to settle a dispute on the basis of what is 'equitable and good'. 233. Given the wording of the Arbitration Act, a longer examination of the antecedents of these concepts is unnecessary. The statute itself is clear and unambiguous; and in Associate Builders, the Supreme Court in paragraph 42.3 extracted Section 28 and said that a contravention of it is a sub-head of patent illegality. Ssangyong Engineering does not change this position. Given this now-settled position in law, it is unnecessary to examine the additional authorities on which Mr. Mehta relies, all to the same effect. They also say this: commercial arbitrators are not entitled to settle a dispute by applying what they conceive is 'fair and reasonable,' absent specific authorization in an arbitration agreement. Section 28(3) also mandates the arbitral tribunal to take into account the terms of the contract while making and deciding the award. Section 28 is applicable to all stages of proceedings before the arbitral tribunal and not merely to the making of the ....