Prema V. Shetty v. Saraswat Co-operative Bank Ltd.

(ii) Full Bench of the Kerala High Court in Arya

Autherjanam Vs. Kerala State Electricity Board 2

(iii) Division Bench of the Delhi High Court in MMTC

Ltd. Vs. M/s H.J. Baker & Bros., Inc. 3

(iv) Division Bench of the Bombay High Court in

Rainbow Ace Shipping S.A. Panama Vs. Lufeng Shipping Co. Ltd. 4

(v) Division Bench of the Karnataka High Court in

Goetze (India) Ltd., & Anr., Vs. H.R. Thimappa Gowda 5

(vi) Delhi High Court in S.M. Murray Vs. M/s Fenner

13. Mr. Khan has submitted that the aforementioned decisions have not been considered by the learned Arbitrator who has proceeded on the basis of entirely incorrect and misconceived position of law. 1 [AIR 1969 Bom 373 @ paras 3-7, Pgs. 4-10] 2 [AIR 1996 Ker 309 @ Paras 17-21, Pgs. 6-8] 3 [2009 SCC Online Del 2143 @ paras 8-20, Pgs. 3-9] 4 [(2020) 2 Bom CR 135 @ paras 22-28, Pgs. 11-14] 5 [ILR 2016 Kar 1057 @ paras 13-18, Pgs. 1073-1077] 6 [ILR 1988 Del 619 @ paras 18-27, Pgs.628-633]

14. Mr. Khan has submitted that the learned Arbitrator could not in ignorance of binding precedents of this Court, place reliance on decisions of other High Courts specially when there is a conflict between this Court and other High Courts on the issue of onus to mitigate damages. He has placed reliance upon the decision of this Court on Enercon GmbH Vs. Yogesh Mehra 7 in support of this contention.

15. Mr. Khan has submitted that incorrect invocation of law is a facet of patent illegality and is a ground for setting aside an Award under Section 34 of the Arbitration and Conciliation Act. He has placed reliance upon the decision of this Court in Union of India Vs. Recon, Mumbai 8 which followed the judgment of the Supreme Court of India in SsangYong Engg. & Construction Co.Ltd. Vs. NHAI 9.

16. Mr. Khan has made submissions on the Award being passed on material beyond the record / taken behind back of the parties. He has submitted that the decision in the impugned Award in respect of Issue No.1 and 3, travels beyond the submissions of the parties which were put forth before the learned Arbitrator. He has referred to the 7 [2017 SCC Online Bom1744 @ paras 45-50, Pgs.15-21] 8 [2020 (6) MhLJ 5095 @ paras 15(f), (g), Pgs. 517-518] 9 [(2019) 15 SCC 131 @ para 37, Pg. 170] Petitioners’ submissions recorded in the impugned Award at Paragraph 15-16, 34-36 and Respondent’s submission at Paragraph 17-35, pages 36-41 in this context. He has submitted that the learned Arbitrator has recorded findings which do not find mention in the submissions recorded in the impugned Award. In particular he has relied upon the finding of the learned Arbitrator in paragraph 77 which is as under: “It would be difficult to immediately find a third party to give out the said premises on lease or leave and license basis”. “It would have, on a reasonable basis, taken sometime to appoint brokers, etc., negotiate, finalise and enter into an agreement and give out the said premises to a third party.”

17. He has submitted that these findings of fact would typically be found in evidence led by parties and then subject to cross examination, which in the present case finds no place.

18. Mr. Khan has submitted that an Award containing findings based on material not put forth by the parties is a finding based on no evidence and therefore is said to suffer from patent illegality and liable to be set aside.

19. Mr. Khan has submitted that the learned Arbitrator has unilaterally relied on material, factors and aspects put forth by neither of the parties and hence, the parties have had no opportunity to comment. He has accordingly submitted that the impugned Award is in violation of the principles of natural justice which is a ground for setting aside the impugned Award. He has placed reliance upon the decisions of the Supreme Court in Recon (supra) and Ssang Yong (supra) in this context.

20. Mr. Khan has submitted that the factors taken into consideration by the learned Arbitrator while computing the compensation for unexpired / balance period of lock-in is contrary to the legal position that once it is held that the termination within a lock-in period by a licensee is illegal, no further proof of loss is required and an order ought to be made directing payment of the rent / license fee for the balance duration of the lock-in. He has placed reliance upon the decision of this Court in India Bulls Properties Pvt. Ltd. Vs. Treasure World Developers Pvt. Ltd. 10. He has submitted that this decision was carried in appeal before the 10 [(2014) 4 Bom CR 76 @ paras 59-65, Pgs. 19-21] Division Bench and while admitting the appeal, by an order dated 15th July, 2014, the Division Bench observed that it was of the prima facie view “...that the licensee was liable to pay the entire license fees, maintenance charges and car parking fees for the entire unexpired lock-in”. He has referred to the order of the Division Bench dated 15th July, 2014 passed in Appeal No.179 of 2014 at Paragraph 14 in this context.

21. Mr. Khan has further submitted that the Delhi High Court in DAG Pvt. Ltd. Vs. Ravi Shankar Institute for Music and Performing has followed the decision of this Court in India Bulls Properties (supra).

22. Mr. Khan has submitted that during the arguments Mr. Narichania, learned Senior Counsel for the Respondent had contended that there are no grounds specifically pleaded in the present Petition which supports the case of the Petitioners. This contention is misconceived as there are adequate grounds pleaded in the present Petition. He has referred to the grounds A, B, D, E and K of the Petition which are in context of breach of natural justice, illegal invocation of law/patent illegality and grounds A, C, J and K which 11 [2023 SCC OnLine Del 3293] are on the award considering material outside the record. He has submitted that it is a settled position in law that pleadings ought to be liberally construed and that a pedantic approach ought not to be adopted to defeat justice. It is open to this Court to ascertain the substance of the pleadings and that undue emphasis ought not be placed on the form of pleadings. He has placed reliance on the decision of the Supreme Court in Ram Sarup Gupta Vs. Bishun Narian Inter College & Ors.,12 in this context. He has accordingly submitted that the present Petition be allowed and the impugned Award be set aside.

23. Mr. Narichania, learned Senior Counsel appearing for the Respondent has submitted that inspite of there being no specific issue regarding mitigation, it is the duty of the Arbitrator to consider the doctrine of mitigation of loss and that he cannot overlook the same. He has placed reliance upon the decision of this Court in Shah Jagshi Jethabai Vs. J.N. Construction 13 passed by the learned Single Judge of this Court in this context. He has accordingly submitted that the Arbitrator was bound to decide the issue of mitigation of loss even if the defence was not taken. 12 [(1987) 2 SCC 555]

24. Mr. Narichania has submitted that it is the duty of the Claimants to plead and prove mitigation of loss. He has in this context placed reliance on the following decisions: a. Manju Bagai Vs. Magpie Retail Ltd. 14 b. Tower Vision India Vs. Procall Pvt. Ltd. 15 c. Pannalal Jugatmal Vs. State of M.P. 16 d. Auto Craft Engineers Vs. Akshar Automobiles 17

25. Mr. Narichania has submitted that the Claimants have led evidence to prove mitigation of loss which has been referred to at Paragraph 73 of the Arbitration Award viz. that the Claimants were unable to lease said premises to any third party despite several attempts. Further, the Petitioners in grounds G, F and I of the present Petition have categorically asserted that it had led evidence. Although, there is an observation by the learned Arbitrator in Paragraph 73 of the Arbitral Award that there has been no cross examination of the Claimants’ witness on the aspect of mitigation, the Arbitral Tribunal has found it obligatory to consider the evidence of 14 (2010) 175 DLT 212 [Para 13 and 14] 15 (2014) 183 Company Case 364 [Para 12 and 13 (iii)] 16 AIR 1963 MP 242 [Para 15] 17 2016 SCC OnLine Bom 5185 [Para 63, 64, 65 and 66] the Claimants and take into account this factor whilst granting or rejecting the claim for compensation.

26. Mr. Narichania has submitted that a Court whilst considering a Section 34 of the Petition cannot reappreciate or reappraise the evidence before the Arbitrator. The learned Arbitrator having taken a view that the evidence produced by the Claimants was not satisfactory, no interference is called for. In this context, he has relied upon the decision of this Court in Jagannath Parmeshwar Mills Vs. Agility Logistics 18. He has further relied upon the decision of the Supreme Court in Ssangyong Engg. (supra) [Para 24, Internal Page 160].

27. Mr. Narichania has submitted that since the Claimants have failed to discharge the onus of proof; no onus of proof shifts on the Respondent to prove that the Claimants failed to mitigate their losses.

28. Mr. Narichania has submitted that the Court in a Section 34 Petition is only required to ascertain whether the view of the learned Arbitrator is a possible view (even if it does not agree with that 18 2022 (5) AIR Bom R 18 [Para 22, Internal Page 7] view). He has submitted that the Courts having taken conflicting views as has been noted in the decision of the Kerala High Court in Arya Autherjanam (supra) which has been relied upon by the Petitioners and in particular, Paragraph 21 thereof. Given the fact that there are no Supreme Court Judgments on the onus of proving mitigation of damages, the view taken by the learned Arbitrator cannot be said to be bad, if he has followed one set of views. He has submitted that this Court in a recent judgment in Auto Craft Engineers (supra), has held that the duty of mitigation of loss is on the Claimants.

29. Mr. Narichania has submitted that no grounds which can be taken under Section 34 of the Arbitration Act have been taken in the present Petition. In absence of any valid ground taken under Section 34 of the Act, the plea cannot be entertained. In this context, he has relied upon the decision of this Court in Oil and Natural Gas Vs. Connex Services SA 19; Patel Engineers Vs. Konkan Railways 20 and Thonikkundam Bhagwati Mills Vs. Reena Ravindra Khona & Ors. 21. He has submitted that the Claimant having led evidence on 19 2003 SCC Online Bom 287 at Paragraph 6 and 7 20 2009 SCC OnLine 657 at Paragraph 15, 16 and 17 21 2007 SCC OnLine Bom 448 at Paragraph 9 and 10 mitigation, it must be taken that the Claimants were aware that it had a duty to prove that it taken steps to mitigate its losses.

30. Mr. Narichania has submitted that the portion of the impugned Award which has granted compensation of an amount of Rs.19,10,834.10 for the period from 1st November, 2017 to 31st January, 2018, being a three month period, cannot be challenged by the Petitioners in view of the compensation having been granted. The finding of the learned Arbitrator on mitigation viz. considering the fact that the said property is substantial large comprising of entire building of ground plus two floors admeasuring more than 3000 sq. ft., it would difficult to immediately find a third party to give out the said premises on lease or Leave & License basis is a possible view and cannot be interfered with by this Court in a Petition under Section 34 of the Arbitration Act. He has accordingly submitted that there is no merit in the Petition and hence, the Petition deserves dismissal.

31. Having considered the rival submissions, in my view the learned Arbitrator was justified in deciding the issue of mitigation of loss even when the defence had not been taken. The Claimants / Petitioners had in fact led evidence of its witness CW 1 (Mr. Sunil Shetty) to the effect that the Claimants were unable to lease the said property to any third party, despite several attempts. Although, there was no cross examination of the Claimants’ Witness on this aspect, the learned Arbitrator has justified in taking the evidence into account whilst considering the claim of compensation.

32. The decision relied upon on behalf of the Respondent viz. Shah Jagshi Jethabai (supra) has held that the Court / Arbitrator in determining compensation payable to the Claimants cannot overlook the doctrine of mitigation of loss. Thus, in my view, the learned Arbitrator was obligated to consider mitigation of loss particularly in view of the Claimants having it raised in evidence.

33. The learned Arbitrator for the purpose of considering on whom the duty to prove mitigation of loss lies has relied upon various decisions reproduced in Paragraph 74, 75 and 76 of the Arbitral Award. Further, I find from the decisions relied upon both on behalf of the Petitioners and Respondent that there are conflicting views taken with regard to the onus of proof of mitigation of loss. This has also been noted in the decision of Kerala High Court in Arya Autherjanam (supra) relied upon behalf of the Petitioners. There is a decision of this Court in Auto Craft Engineers (supra) which has been relied upon on behalf of the Respondent, wherein this Court has in Paragraph 63, 64 and 66 held as under: “63. Insofar as the claim for compensation awarded by the learned arbitrator in the impugned award for locking period is concerned, a perusal of the record clearly indicates that in the statement of claim the respondent had not pleaded about the steps, if any, taken in mitigating the loss during the said locking period. It was also not pleaded by the respondent in the statement of claim that during the said locking period, the suit premises were lying vacant or that the said premises could be given on leave and license by the respondent only after the expiry of locking period. The Supreme Court in case of Murlidhar Chiranjilal (supra) has held that a person who claims damages, a duty is imposed on such party to take reasonable steps to mitigate the loss consequent on the breach and if such steps are not taken, it debars him from claiming any part of damages which is due to his negligent to take such steps to mitigate the loss.

64. In my view, since the respondent failed to take any steps to mitigate the alleged loss suffered by the respondent even during the said locking period, the respondent could not have been awarded the said claim for compensation without such pleading and proof. In my view, the learned arbitrator could not have allowed the respondent to lead evidence beyond the pleadings filed by the respondent. The impugned award is liable to be set aside on this ground also.

65. ….

66. The Delhi High Court in case of Tower Vision India Private Limited (supra) has considered the similar issue in case of locking period in a leave and license agreement and has held that if the licensor has not taken a reasonable steps to minimize the loss, he is not entitled to claim any compensation during the locking period. In my view, the judgment of the Delhi High Court in case of Tower Vision India Private Limited (supra) applies to the facts of this case. I am in respectful agreement with the views expressed by the Delhi High Court in the said judgment.”

34. In the said decision, this Court has held that in the facts of that case, the Claimant had failed to take steps to mitigate the alleged loss suffered even during the lock-in period and hence, the Claimant could not have been awarded the claim for compensation without such pleading and proof. This Court had noted the decision of the Delhi High Court in Tower Vision India (supra) which had considered a similar case of claim of compensation during the lock-in period in a Leave & License Agreement and held that if the licensor has not taken reasonable steps to minimize the loss, the Claimant is not entitled to the claim of compensation during the lock-in period. This Court has expressed its agreement with the view taken by the Delhi High Court in the said decision.

35. Thus, in my view, considering that this Court has already taken a view that the duty is on the Claimants to plead and prove mitigation of loss, the learned Arbitrator cannot be faulted in adopting such a view.

36. It is well settled that this Court exercising jurisdiction under Section 34 of the Arbitration Act cannot re-appreciate and / or reappraise the evidence before the Arbitrator. The Claimants have led evidence which has been reproduced in Paragraph 73 of the Arbitral Award viz. that they were unable to lease the said premises to any third party despite several attempts. The learned Arbitrator has considered such evidence and has in fact held that considering that situation involves a substantially large properly comprising of entire building of ground plus two floors admeasuring more than 3000 sq. ft., It would be difficult to immediately find a third party to give out the said premises on lease or Leave & License basis. It would have, on reasonable basis, taken some time to appoint brokers etc., negotiate, finalize and entered into an agreement and give out the said premises to a third party. After so holding the learned Arbitrator has granted, the Claimants compensation equivalent to three months rent aggregating to the awarded amount of Rs.19,10,834.10 and rejected compensation for the remaining period of lock-in. The view taken by the learned Arbitrator based on the evidence led by the Claimant is in my view a possible view and hence, cannot be interfered with in a Petition under Section 34 of the Arbitration Act.

37. The decision of the Supreme Court in SsangYong Engg. (supra) has referred to an earlier decision in P.R. Shah Shares & Stock Brokers (P) Ltd. Vs. BHH Securities (P) Ltd., 22, wherein the Supreme Court has held that the Court does not sit in appeal over the

Award of an Arbitral Tribunal by reassessing or re-appreciating the evidence. An Award can be challenged only under the grounds mentioned in Section 34(2) of the Arbitration Act. In absence of any ground under Section 34(2) of the Arbitration Act it is not possible to re-examine the facts to find whether a different decision can be arrived at.

38. In the present case, I do not find any valid ground of challenge to the Arbitral Award having been taken in the present Petition under Section 34 of the Arbitration and Conciliation Act. Further, it has been held by the Supreme Court in Oil and Natural Gas (supra); Patel Engineers (supra); Thonikkundam Bhagwati (supra) that where no ground has been taken in Section 34, the plea cannot be entertained.

39. I do not find any merit in the contentions on behalf of the Petitioners that there has been violation of the principles of natural justice in view of the learned Arbitrator not granting an opportunity to the parties to place either the correct legal position or deal with the factors and aspects taken into consideration by the learned Arbitrator.

40. I find that the learned Arbitrator had a duty to consider the aspect of mitigation of damages and has taken a possible view based on the authorities relied upon and evidence led on behalf of the Claimant and such possible view cannot be interfered with by this Court under Section 34 of the Arbitration and Conciliation Act. This particularly considering that there are decisions of this Court which support the view taken by the learned Arbitrator as aforementioned. The Claimants had invited such a finding on mitigation of damages by leading evidence of their witness on this issue. Thus, the learned Arbitrator was duly bound whilst determining compensation payable to the Claimants to decide the issue of mitigation of loss, even where defence was not taken.

41. Thus, in my view, the learned Arbitrator cannot be faulted in the findings on compensation payable to the Claimants during the lock-in period and particularly considering that this is a finding of fact which this Court will not interfere in a Petition under Section 34 of the Arbitration Act.

42. I further do not find any illegal invocation of law and / or patent illegality as contended on behalf of the Petitioners. Thus, considering that the Petitioners have not been able to raise any valid ground of challenge under Section 34 of the Arbitration Act, the relief sought for in the Petition cannot be granted.

43. Accordingly, the Commercial Arbitration Petition is disposed of.

44. There shall be no orders as to costs. [R.I. CHAGLA, J.]