Case: Malik Brothers Vs. Narendra Dadhich

3. The brief facts leading to the judgment under appeal are that the Indore Development Authority issued a notice of holding of a public auction in respect of a plot of land in Indira Complex at Naulakha Road, Indore. the auction was scheduled to be held on 15.4.81. The appellant was the highest bidder in the auction and the bid amount was Rs. 25,10,000/-. The said bid was accepted and the appropriate authority called upon the appellant to deposit the amount and to procedure a relevant stamp paper for execution of the lease deed. The appellant however defaulted in making the deposit within the period stipulated in the notice. On account of such default the initial premium which had been deposited to the extent of Rs. 6,27,500/- was forfeited. The appellant however challenged the order of forfeiture and requested the Indore Development Authority, to whom Indira Complex scheme has been transferred in the meantime by the State Government, for making a reference to the arbitrator. Initially this request had been rejected but by letter dated 8.6.90, Shri K.S. Bhatnagar, a retired I.A.S. Officer was appointed as arbitrator. The arbitrator ultimately passed an award. The respondent No. 1 herein, considering the award to be a serious public injury, approached the High Court by way of a public interest litigation and by an interim order, the High Court restrained the Development Authority from delivering the possession of the land to the appellant but prior to the aforesaid interim order, the possession had been delivered on 8.1.91. It was contended in the aforesaid public interest litigation petition that the value of the land would be much more than for which the same is going to be handed over pursuant to the award of the arbitrator and parting with a valuable piece of land for the small price would be grossly prejudicial to the public interest. The present appellant as well as the Development Authority filed their counter affidavits before the High Court, indicating therein that there has been no illegality in referring the dispute to the arbitrator and the said arbitrator considered the matter in several sittings and passed the award which is the subject matter of an application filed under Section 14 of the Arbitration Act. It was also indicated by the Indore Development Authority that the board considered the dispute between the appellant and the board in several meetings and finally thought it appropriate to refer the matter to the arbitrator and such reference is a bona fide decision of the board on the facts and circumstances of the case and it cannot be said that such reference has caused public injury. The High Court by the impugned judgment after considering the provisions of Section 21 of the Arbitration Act and the law on the subject, came to the conclusion that there has been a gross violation of the aforesaid provision of the Arbitration Act and it is not known why respondent No. 1 (Indore Development Authority) elected to appoint the arbitrator. The High Court also came to the further conclusion that the land would not have been disposed of even on lease basis through arbitration and the Indore Development Authority committed an error of law and consequent public injury by revival of a close issue by appointment of an arbitration and by its attempt benefited the present appellant at the cost of public revenue. With the aforesaid conclusion, the High Court quashed the resolution of the Indore Development Authority, referring the dispute to the arbitrator as well as the award of the arbitrator and passed certain consequential directions.

Reasoning:
In our view, Section 21 of the Arbitration Act does not debar the parties to refer a dispute between them to an arbitrator, particularly when the litigation in normal course has become not only expensive but also continues for years together. If any informal forum is chosen by the parties for expeditious decision of their disputes, it would not be safe for a court of law to come to a conclusion that such decision has been taken for any extraneous consideration without any supporting material in that regard. In the case in hand, the High Court of Madhya Pradesh committed serious error of law by invoking its discretionary jurisdiction under Article 226 of the Constitution of India at the behest of a person who has no interest in the litigation in question and in quashing the decision of the Indore Development Authority of referring the dispute to the arbitrator as well as the award of the competent arbitrator, by entering into an arena of conjecture and by assuming that the price of land must have gone up without having before them any materials in that respect. We have no hesitation, therefore to set aside the impugned judgment of the High Court and we accordingly do so. Necessarily, therefore, the award of the competent arbitrator remains operative and the rights of the parties flowing therefrom have to be worked out in accordance with law.