ANSAL PROPERTIES & INFRASTRUCTURE LTD. v. HOUSING & URBAN DEVELOPMENT CORPORATION LTD.

XXIII. Clauses XV & XXIII have already been produced hereinabove. Clause XI reads as under:

“XI. The Intended sub-lessee shall be liable to pay all rents, taxes, charges, claims and other payments in respect of the said demised premises, i.e., the Shopping Arcade and the Common facilities on and from the date of possession of demised premises and thereafter.”

11. It has been thereafter observed in the impugned order that in terms of the Perpetual Lease deed dated 4.7.1997 the preamble acknowledged that up to 1996 the ground rent was paid by the respondent and, thus, it could not claim ground rent from the appellant prior to the year

1997. The dispute pertained to the demand raised by the respondent on the appellant concerning ground rent payable from the date the appellant took over possession of site on 10.11.1995. On 13.8.1997 the appellant had paid a sum of `3,92,50,000.00 representing ground rent for a period of one year only although the ground rent was due from 10.11.1995 to 31.12.1997. Thus, the respondent filed an application before the learned arbitrator with regard to the ground rent in the arbitration proceedings which commenced in June, 1998. The opinion of the learned arbitrator that rights were acquired only from 23.7.1997 were taken note of but the learned Single Judge did not agree with the same. In fact, the conclusions are contained only in three paragraphs – paras 15 to 17 stating that there was no ambiguity in the relevant clauses in terms of which ground rent was payable by the appellant. The conditions of the LoA had been made part and parcel of the Agreement to Sub-lease and clause 6 (viii) of the LoA had stated that the appellant was liable to pay ground rent from the date of handing over possession of the shopping arcade site. The Certificate of Provisional Entry being dated 10.11.1995, the same evidenced the handing over of possession of the shopping arcade to the appellant. The learned Single Judge referred to the note at the end of the Certificate of Provisional Entry (which is actually part of the certificate itself being the last sentence), which reads as under: “The licensee shall not entry upon the said permission be deemed to have acquired any right, title or interest in the same except to the extent mentioned in the Agreement.”

12. The aforesaid, however, was held not to mean that it negated the factum of the possession of the site in question being given to the appellant on 10.11.1995 nor did it mean that clause 6(viii) of the LoA in terms whereof the ground rent became payable from the date of possession of the site.

13. The reference by the learned arbitrator to clause XV of the agreement to sub-lease has been held to be misplaced. The opening words of the clause “upon completion of construction” has been held to refer to the period from which the sub-lease became effected and is alleged to do nothing from the date from which the ground rent became payable. Similarly the clause of the Perpetual Lease deed between the Union of India and the respondent has been held to have no bearing on the relevant clauses of the Agreement to Sub-lease dated 1.8.1995. The conclusion, thus, reached is that irrespective of the date till when the respondent was paying ground rent to Union of India, the appellant was liable to pay ground rent to the respondent from the date of possession of shopping arcade site handed over to it. The appellant’s case:

14. Learned senior counsel for the appellant contended before us that the dispute before the arbitrator only related to interpretation of documents and nothing else and, thus, this decision of the arbitrator was not open to challenge. The interpretation put forth by the learned arbitrator must prevail even if two plausible views exist, unless a conclusion is reached that the learned arbitrator acted contrary to the terms of the contract or arrives at an absurd interpretation or an interpretation contrary to law. It was pleaded that in the present case there is not even a finding or observation by the learned Single Judge that the view taken by the learned arbitrator of the aforementioned four documents was not a plausible view or that the arbitrator had acted contrary to the terms of the agreement or that the interpretation was absurd.

15. Learned counsel for the appellant referred to judicial pronouncements to support of this plea which are discussed herein below: i. M/s. Kapoor Nilokheri Co-op. Dairy Farm Society Ltd. Vs. Union of India &Ors. (1973) 1 SCC 708 – The Supreme Court agreed with the submission of the learned Additional Solicitor General that if the claims are based on the agreement and nothing else, the arbitrator has to decide a question of law, i.e., of interpreting the document and his decision is not open to challenge. It was observed in para 12 as under:

iii. M/s. Kapur Air Products Vs. Municipal Corporation of Delhi AIR 1988 Delhi 26 – A Division Bench of this Court relied upon the judgement in M/s. Tarapore & Co. Vs. Cochin Shipyard AIR 1984 SC 1072 laying down that if a question of law is specifically referred and it becomes evident that the parties desired to have a decision on the specific question from the arbitrator about the specific question from the arbitrator about that rather than one from Court, then the Court will not interfere with the award of the arbitrator on the ground that there is an error apparent on the face of the award, even if the view taken by the arbitrator does not accord with the view of the Court. In that context it was held whether a question of law has been specifically referred to the arbitrator has to be determined in the facts & circumstances of each case. iv. Indian Farmers Fertiliser Co-operative Ltd. Vs. Duggal Constructions (India) Ltd. 186 (2012) DLT 658 (DB) – In the facts of the case the learned Single Judge had not agreed with the interpretation of the clauses of the arbitrator tribunal. In that context it was observed that interpretation of terms of a contract by the arbitral tribunal ought not to be interfered with unless such interpretation was absurd or contrary to law. As long as the view taken by the arbitral tribunal is plausible, though perhaps not the only correct view, the Court could not interfere or substitute its own opinion. Arbitrator was a Judge chosen by the parties. However, if the arbitrator acted contrary to the terms of the contract or finds an absurd interpretation or an interpretation contrary to any law, the Court is not without jurisdiction to interfere with the same. The respondent’s case:

16. On the other hand, learned counsel for the respondent relied upon clause 6(viii) of the LoA to canvas that the same clearly spelt out that the ground rent is to be paid from the handing over of the possession of the shopping arcade while clause XV of the agreement to sublease is only to the effect regarding grant of sub-lease and has nothing to do with the date from which the ground rent become payable. It was pleaded that there was no inconsistencies between clause 6(viii) of LoA dated 10.3.1995 and clause XV of the sub-lease dated 1.8.1995 and, thus, the findings of the arbitrator were pleaded to be absurd. It was further pleaded that the learned arbitrator had, in fact, re-written the contract by using the word “meaningful possession”, thus, going beyond the terms of the contract which was contrary to the mandate of Section 28 (3) of the said Act.

17. In support of his contentions learned counsel for the respondent referred to the following judgements: i. Rajasthan State Mines & Minerals Limited Vs. Eastern Engineering Enterprises & Anr.(1999) 9 SCC 283 – para 21 of the judgement was referred to qua the observations that by ignoring the terms of the contract the arbitrator has travelled beyond his jurisdiction as his existence depends upon the agreement and his function is to act within the limits of the said agreement. ii. Steel Authority of India Ltd. Vs. J.C. Budharaja, Government and Mining Contractor (1999) 8 SCC 122 – The clauses of the contract prohibited claim for damages with breaches mentioned in those clauses and the only consequence was extension of time for completion of work. It was, thus, held that it was not open to the arbitrator to ignore the conditions which are binding on the contracting parties and by ignoring them he had acted beyond the jurisdiction conferred upon him. It was observed that the arbitration act did not given power to the arbitrator to act arbitrarily or capriciously and his existence depends upon the agreement and his function is to act within the limits of the said agreement. So in order to find out whether the arbitrator has travelled beyond his jurisdiction and acted contrary to the terms of the agreement between the parties, the agreement is required to be looked into while interpretation of a particular condition in the agreement was within the jurisdiction of the arbitrator; where there is no question of interpretation of any term of the contract but of solely reading the same as it is, the arbitrator cannot ignore it and award amounts despite the prohibition in the agreement. iii. New India Civil Erectors (P) Ltd. Vs. Oil & Natural Gas Corporation (1997) 11 SCC 75 – it was, once again, observed that it is axiomatic that the arbitrator being a creature of the agreement must operate within the four corners of the agreement and cannot travel beyond it. More particularly, he cannot award any amount which is ruled out or prohibited by the terms of the agreement. iv. Associated Engineering Co. Vs. Government of Andhra Pradesh & Anr.(1991) 2 SCR 924 – The Supreme Court observed that the arbitrator cannot act arbitrarily, irrationally, capriciously or independently of the contract as his sole function is to arbitrate in terms of the contract. He has no power apart from what the parties have given him under the contract. Thus, if he travels outside the bounds of the contract, he has acted without jurisdiction. But if he has remained inside the parameters of the contract, the construction of the provisions of the contract would be within his domain. Thus, an arbitrator who acts in manifest disregard of the contract acts without jurisdiction as his authority is derived from the contract. v. Oil & Natural Gas Corporation Ltd. Vs. Saw Pipes Ltd. (2003) 5 SCC 705 – The observations in para 28 dealing with the phrase “public policy of India”, have been referred, to canvas that this expression is not required to be given a narrow meaning. Thus, if contractual terms are ignored, the award on the face of it would become erroneous and in violation of the terms of the contract and thereby violates Section 28 (3) of the said Act. In the facts it was held that reference to the arbitral tribunal was not with regard to the interpretation of the question of law but it was only a general reference with regard to the claim of the respondent therein which could be interfered with. Conclusion:

18. On a conspectus of the aforesaid submissions, we considered it appropriate to peruse the record, and have taken into consideration the order of reference to arbitration. This is contained in a letter dated 16.6.1998 issued by the Chairman & Managing Director of the respondent and reads as under: “No.HUDCO/AG/SA/APIL/98 June 16, 1998 Sub: Arbitration between M/s. Ansal Properties and Industries Ltd. (APIL) and Housing & Urban Development Corporation Ltd. regarding construction of Shopping Arcade at Andrews Ganj New Delhi – payment of ground rent under Agreement to Sub-Lease dated 1st August, 1995 Disputes have arisen between the above named parties in respect of the payment of ground rent. The said dispute between the parties is required under clause XXI of the Agreement to Sub- Lease to be referred to the sole arbitration of a person appointed by HUDCO. I, therefore, appoint Dr. Y.P.C. Dangay, Arbitrator, in the Ministry of Urban Affairs and Employment, New Delhi as an Arbitrator to decide and make award regarding the dispute relating to the payment of ground rent by APIL to HUDCO and any counter claims of HUDCO against M/s. APIL in connected therewith and to make his award in the matter. Sd/-

V. SURESH

Chairman & Managing Director Dr. YPC Dangay Arbitrator, Ministry of Urban Affairs and Employment, Govt. of India, 6th Floor, Middle Wing, Janpath Bhawan, New Delhi-110001.”