Delhi High Court

Hughes Communications India Pvt. ... vs Imaging Solutions Pvt Limited on 26 April, 2023

Author:
Chandra Dhari Singh

Bench:
Chandra Dhari Singh

NEUTRAL CITATION NO. 2023:DHC:2814

IN THE HIGH COURT OF DELHI AT NEW DELHI
% Reserved on : 15th March, 2023
Pronounced on: 26th April, 2023

+ O.M.P.(COMM) 28/2019 AND I.A. No.776/2019

HUGHES COMMUNICATIONS INDIA PVT. LIMITED
..... Petitioner
Through: Mr.Arvind K. Nigam, Senior
Advocate with Mr.Dharmesh
Mishra and Mr. Prateek Luthra,
Advocates

versus

IMAGING SOLUTIONS PVT LIMITED ..... Defendant
Through: Mr.Varun Kumar, Advocate
CORAM:
HON'BLE MR. JUSTICE CHANDRA DHARI SINGH

JUDGMENT

CHANDRA DHARI SINGH, J.

1. The present petition filed under
Section 34
of the Arbitration and
Conciliation Act, 1996, seeks to challenge the impugned Award dated 4 th
October 2018 to the extent that the registered Agreement dated 23rd
March 2001 for sale of immovable property has been held to be
determinable in nature and therefore not enforceable. The petitioner has
also contended that the impugned Award is beyond the scope of reference
and jurisdiction of the Learned Arbitrator. It has been prayed as under:

―a}. This Hon'ble Court may be pleased to set aside the award
of the Learned Sole Arbitrator dated 04.10.2018 to the extent
challenged above for the reasons and grounds mentioned above

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and this Hon'ble Court may further be pleased to refer the
matter to that extent for adjudication by way of arbitration as
per the arbitration agreement between the parties, upon setting
aside the award.

b}. pass such other order / orders as this Hon'ble Court deems
fit and proper in the interest of justice.
c}. Costs of the present proceedings be award in favour of the
petitioner and against the respondent.‖

FACTUAL MATRIX

2. The background of the case is that on 3rd June 1997, the respondent
was allotted land in Plot No. 1, Sector 18, Electronic City, Gurgaon,
Haryana admeasuring 1000 sq. meters by Haryana Urban Development
Authority (HUDA) and the petitioner on 17th March 1999 issued a letter
offering the plot on lease to the petitioner. Between 20 th February 1999
to 6th December 1999 various letters/mails were sent by the respondent to
the petitioner for letting out the plot with entitlement to the petitioner to
construct a building thereon, and with an option to purchase the plot
subject to permission of law and on 14th February 2000, Power of
Attorney was granted by the respondent to the petitioner and the Lease
Deed was executed between the parties for a period of 20 years.

3. On 28th August 2000, the respondent obtained a Conveyance Deed
dated 28th August 2000 from HUDA for 1000 sq. metres plot and later
obtained a Conveyance Deed dated 24th March 2003 for an additional
area of 200 sq. metres and on 10th December 2000, the respondent
secured possession of the said plot measuring 1200 sq. metres from
HUDA. The parties entered into an Agreement dated 23rd March 2001 as
per the terms offered by the respondent and became effective from 1 st
June 2000.

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4. In year 2002, the petitioner, having taken possession of the plot,
constructed and completed building over the said plot and HUDA upon
inspection of building in the year 2003 and after raising the receipt of
demand with respect to compounding for deviation from sanctioned plans
and FAR, granted and issued Occupation Certificate dated 1 st September
2003.

5. On 27th July, 2006, upon expiry of six years of the term, the
petitioner in writing elected and exercised the option vested and granted
to it to purchase the property and offered to pay the agreed pre-
determined sale consideration.

6. The petitioner on 2nd January 2007, asked the respondent to
discharge its obligation to convey the title. The same was asked by the
petitioner again vide e-mails dated 29th March 2007, 3rd April 2007, 15th
May 2007 and subsequently vide Notice dated 21st December 2007,
notified that upon failure to discharge its obligation, Arbitration shall be
invoked.

7. On 8th February 2008, the petitioner invoked Arbitration and called
upon the named Arbitrator. The named Arbitrator, on 3 rd April 2008,
entered upon reference and first Arbitral hearing was held on 28 th April
2008 wherein schedule for filing of pleadings and other directions were
issued by the Learned Arbitrator.

8. On 28th May 2008, the petitioner filed a Statement of Claim
seeking specific performance and enforcement of Agreement to Sell to
which the respondent on 11th July 2009, filed its Statement of Defence
and subsequently, rejoinder was filed by the petitioner on 24 th September
2008.

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Digitally Signed

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9. The respondent on 19th July 2011 filed an application before the
Learned ADJ, Gurgaon for termination of the mandate of the Learned
Arbitrator under
Section 14
of the Arbitration and Conciliation Act, 1996
which was dismissed by the Learned ADJ vide Order dated 2 nd December
2011. The Order of the Learned ADJ was set aside by the High Court of
Punjab and Haryana in Civil Revision Petition no. 7687/2011. The
Hon'ble Supreme Court vide Order dated 14th December 2012 in SLP (C)
no. 36603/2012 appointed a new arbitrator. The Learned Sole Arbitrator
vide Order dated 4th August 2018 made and published the impugned
Award. Aggrieved by the same, the instant petition has been filed.
SUBMISSIONS
(On behalf of the petitioner)

10. Learned counsel for the petitioner submitted that the Learned Sole
Arbitrator went beyond the scope of reference and the jurisdiction while
ascertaining that the agreement is determinable in nature and therefore
not enforceable.

11. Learned counsel for the petitioner submitted that the Learned Sole
Arbitrator rejected the claim of the petitioner for specific performance of
sale of immovable property by applying
Section 14(1)(c)
of Specific
Relief Act, 1963 and concept of per se determinability of the Contract. It
is further submitted that the dispute was not even referred to the
Arbitration in the Statement of Defence and that the Learned Sole
Arbitrator committed error of jurisdiction by going beyond the scope of
Contract.

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12. Learned counsel for the petitioner submitted that the impugned
Award suffers from patent illegality and is liable to be set aside to the
extent it has been challenged for being in clear contravention of
Section
28(3)
of the Arbitration and Conciliation, 1996. Learned counsel for the
petitioner submitted that option to terminate was only with the petitioner
under Clause 9 but the Contract was neither terminated by the petitioner
and nor by the respondent either before or after the Contract was put to
enforcement.

13. Learned counsel for the petitioner submitted that impugned Award
suffers from inherent contradictions because on one hand it was held that
on exercise of option to purchase the agreement transforms into an
agreement to sell, which as per Clause 6 is enforceable and on the other
hand even upon an option vested with the petitioner to terminate having
not being exercised in terms of clause 9, on hypothetical and academic
basis it has been held that contract is determinable therefore not
enforceable.

14. Learned counsel for the petitioner submitted that
Section 14(1)(c)

of the Specific Relief Act, 1963 is not applicable in the facts of the case
and instead
Section 10
is applicable. It is further submitted that all the
judgments relied upon by the Learned Arbitrator to hold that
Section
14(1) (c)
is applicable pertained to movable goods or contract of services
in which the contract had been terminated and party aggrieved was
seeking injunction or performance. Thus, in these circumstances it was
held that determinable contracts cannot be enforced. These are
inapplicable to the terms of contract in present case and facts of present
case.

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15. In view of the aforesaid, the impugned Award dated 4th October
2018 to the extent that the registered Agreement dated 23rd March 2001
for sale of immovable property has been held to be determinable in nature
and therefore not enforceable, be set aside.

(On behalf of the respondent)

16. Learned counsel for the respondent submitted that the respondent
through various communications had categorically intimated the
petitioner that the property could not be transferred. It further submitted
that the Contract became unenforceable and determinable due to various
breaches committed by the petitioner. Moreover, it is submitted that the
Learned Sole Arbitrator went beyond the terms of the Contract by
granting compensation which was never sought by the petitioner.

17. Learned counsel for the respondent submitted that the Lease Deed
became revocable and determinable under the law as well as
Section
28(3)
of the Arbitration and Conciliation Act, 1996 and by violating the
terms of the Deed, the petitioner cannot seek recourse to the Clauses of
the Deed. Learned counsel for the respondent submitted that the
impugned Award is completely based on the interpretation of the Lease
Deed.

18. Learned counsel for the respondent submitted that the Award to the
extent it has been impugned in question, is neither patently illegal or in
contravention of fundamental policy of India because it has held the Deed
to be determinable, revocable and unenforceable. Moreover, it is also
submitted that the same is well reasoned on substantive law. Learned
counsel for the respondent submitted that if compensation is the remedy
available for breach of a Contract, then the same should be availed before

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the remedy becomes unavailable under
Section 21
of the Specific Relief
Act, 1963.

19. Learned counsel for the respondent submitted that the judgments
relied by the Learned Sole Arbitrator are relevant to the case at hand and
that every judgment is different but the ratio is what is to be gathered
from the judgment.

20. Learned counsel for the respondent submitted that the whole of the

Specific Relief Act
is applicable to the case and that the Deed was
determinable and unenforceable from inception.

21. Learned counsel for the respondent submitted that no rights or
interest could have vested in the petitioner and the building can be bought
back by the respondent under the buyback Clause in the Deed and the
respondent is ready and willing to do so.

22. Learned counsel for the respondent submitted that the respondent
had the right to terminate the Agreement and the same was rightly done
so and no right could have been vested in favour of petitioner as no right
could be transferred under the prevailing and current HUDA laws.

23. Learned counsel for the respondent submitted that no Agreement
can be irrevocable, non-determinable even if either party commits a
breach of the Contract, and such a Contract would itself be void ab initio.

24. Learned counsel for respondent submitted that the Lease Deed has
been terminated by the respondent and struck down by the Learned
Arbitral Tribunal. It is also submitted that the Lease Deed has not become
Agreement to Sell due to illegal acts and ill deeds of the petitioner.

25. Learned counsel for respondent submitted that the compensation
was never sought by the petitioner and therefore, that part of the

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impugned Award is bad in law and the respondent has filed a petition
under
Section 34
of the Act of 1996 to that effect.

26. Therefore, in view of the aforesaid it is submitted that the instant
petition being devoid of merits is liable to be dismissed.

QUESTION FOR ADJUDICATION

27. Heard learned counsels for the parties and perused the record.

28. The present petition filed under
Section 34
of the Arbitration and
Conciliation Act, 1996, seeks to challenge the impugned Award dated 4 th
October 2018 to the extent that registered agreement dated 23.03.2001 for
sale of immovable property has been held to be "determinable in nature
therefore not enforceable". It is the petitioner's averment that only on that
basis the claim of the petitioner for specific enforcement of agreement of
sale of immovable property has been rejected.

29. Therefore, the only question before this Court is to adjudicate that
whether the registered agreement dated 23.03.2001 for sale of immovable
property has rightly been held to be "determinable in nature therefore not
enforceable", and hence the dismissal of claim of the petitioner for
specific enforcement of agreement of sale of immovable property was
just and proper.

Spirit of the Arbitration Act

30. Before adjudicating upon the merits of the case, it is essential to
recapitulate the idea, purpose, goal and objective of the
Arbitration Act
as
well as
Section 34
of the Act to understand the implications the
provisions therein have on the powers and jurisdiction of this Court.

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31.
The Arbitration Act
was enacted for providing a mechanism to the
public to resolve their disputes in a process less rigorous, technical and
formal than that of a litigation. It has proven to be easier, more accessible,
efficient and even cost effective for the parties involved, whether at an
individual level or at the level of a business or corporation. The
alternative dispute mechanism is not only advantageous for the people
involved in disputes but has also been aiding the effective disposal and
release of burden on the Courts of the Country. The parties have a more
hands-on involvement in an Arbitration process and play an active role in
the adjudication process.

32. The Hon'ble Supreme Court in
Union of India vs. Varindera
Constructions Ltd.
, (2018) 7 SCC 794, while discussing the object of
arbitration held as under:-

―12. The primary object of the arbitration is to reach a final
disposition in a speedy, effective, inexpensive and expeditious
manner. In order to regulate the law regarding arbitration,
legislature came up with legislation which is known as

Arbitration and Conciliation Act, 1996
. In order to make
arbitration process more effective, the legislature restricted
the role of courts in case where matter is subject to the
arbitration.
Section 5
of the Act specifically restricted the
interference of the courts to some extent. In other words, it is
only in exceptional circumstances, as provided by this Act,
the court is entitled to intervene in the dispute which is the
subject-matter of arbitration. Such intervention may be
before, at or after the arbitration proceeding, as the case
may be. In short, court shall not intervene with the subject-
matter of arbitration unless injustice is caused to either of the
parties.‖

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33. Therefore, expeditious and effective disposal of matters are most
certainly considered the primary objectives of the enactment of the

Arbitration Act
. To fulfil the objective of introducing the
Arbitration Act
,
it has been deemed necessary by the legislature as well as the Hon'ble
Supreme Court to limit interference by the Courts in the process of
arbitration, whether before, during or after the conclusion of the
proceedings.

34. The petitioner before this Court has invoked
Section 34
of the
Arbitration Act to challenge the impugned Award. The relevant portion
of the said provision is reproduced hereunder for perusal and
consideration:-

―34. Application for setting aside arbitral award.--

(1) Recourse to a Court against an arbitral award may be
made only by an application for setting aside such award in
accordance with sub-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 establishes on the
basis of the record of the arbitral tribunal that--

(i) a party was under some incapacity, or

(ii) the arbitration agreement is not valid under
the law to which the parties have subjected it or,
failing any indication thereon, under the law for
the time being in force; or

(iii) the party making the application was not
given proper notice of the appointment of an
arbitrator or of the arbitral proceedings or was
otherwise unable to present his case; or

(iv) the arbitral award deals with a dispute not
contemplated by or not falling within the terms
of the submission to arbitration, or it contains

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decisions on matters beyond the scope of the
submission to arbitration:

Provided that, if the decisions on matters
submitted to arbitration can be separated from those
not so submitted, only that part of the arbitral award
which contains decisions on matters not submitted to
arbitration may be set aside; or
arbitral award which contains decisions on
matters not submitted to arbitration may be set
aside; or

(v) the composition of the arbitral tribunal or
the arbitral procedure was not in accordance
with the agreement of the parties, unless such
agreement was in conflict with a provision of
this Part from which the parties cannot
derogate, or, failing such agreement, was not in
accordance with this Part; or

(b) the Court finds that--

(i) the subject-matter of the dispute is not
capable of settlement by arbitration under the
law for the time being in force, or

(ii) the arbitral award is in conflict with the
public policy of India.

[Explanation 1.--For the avoidance of any doubt, it is
clarified that an award is in conflict with the public
policy of India, only if,--

(i) the making of the award was induced or
affected by fraud or corruption or was in
violation of section 75 or section 81; or

(ii) it is in contravention with the fundamental
policy of Indian law; or

(iii) it is in conflict with the most basic notions
of morality or justice.

Explanation 2.--For the avoidance of doubt, the test as

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to whether there is a contravention with the
fundamental policy of Indian law shall not entail a
review on the merits of the dispute.]
[(2A) An arbitral award arising out of arbitrations other than
international commercial arbitrations, may also be set aside
by the Court, if the Court finds that the award is vitiated by
patent illegality appearing on the face of the award:

Provided that an award shall not be set aside merely on the
ground of an erroneous application of the law or by
reappreciation of evidence.] ...‖

35. The contents of the provision clearly show that the intention of
legislature while enacting the
Arbitration Act
, as well as while carrying
out amendments to the same, was that there should be limited
intervention of the Courts in arbitral proceedings, especially after the
proceedings have been concluded and an Award thereto has been made
by the concerned Arbitral Tribunal. Any claim brought forth a Court of
law under
Section 34
of the Arbitration Act shall be in accordance with
the principle of the provisions laid down under the
Arbitration Act
as well
as interpreted by the Hon'ble Supreme Court.

36. The Law Commission of India in its 246 th Report has also
elaborated upon the background of introducing
Section 34
of the
Arbitration Act and laid down as under:-

―3.
The Arbitration and Conciliation Act, 1996
(hereinafter
"the Act") is based on the UNCITRAL Model law on
International Commercial Arbitration, 1985 and the
UNCITRAL Conciliation Rules, 1980.
The Act
has now been
in force for almost two decades, and in this period of time,
although arbitration has fast emerged as a frequently chosen
alternative to litigation, it has come to be afflicted with
various problems including those of high costs and delays,

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making it no better than either the earlier regime which it
was intended to replace; or to litigation, to which it intends
to provide an alternative. Delays are inherent in the
arbitration process, and costs of arbitration can be
tremendous. Even though courts play a pivotal role in giving
finality to certain issues which arise before, after and even
during an arbitration, there exists a serious threat of
arbitration related litigation getting caught up in the huge
list of pending cases before the courts. After the award, a
challenge under
Section 34
makes the award inexecutable
and such petitions remain pending for several years. The
object of quick alternative disputes resolution frequently
stands frustrated.

4. There is, therefore, an urgent need to revise certain
provisions of the Act to deal with these problems that
frequently arise in the arbitral process. The purpose of this
Chapter is to lay down the foundation for the changes
suggested in the Report of the Commission. The suggested
amendments address a variety of issues that plague the
present regime of arbitration in India and, therefore, before
setting out the amendments, it would be useful to identify the
problems that the suggested amendments are intended to
remedy and the context in which the said problems arise and
hence the context in which their solutions must be seen.

25. Similarly, the Commission has found that challenges to
arbitration awards under
Sections 34
and
are similarly
kept pending for many years. In this context, the Commission
proposes the addition of
Sections 34(5)
and
48(4)
which
would require that an application under those sections shall
be disposed of expeditiously and in any event within a period
of one year from the date of service of notice. In the case of
applications under
Section 48
of the Act, the Commission has
further provided a time-limit under
Section 48(3)
, which
mirrors the time-limits set out in
Section 34(3)
, and is aimed
at ensuring that parties take their remedies under this section
seriously and approach a judicial forum expeditiously, and
not by way of an afterthought.‖

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37. With the repeal of
Arbitration Act
of 1940 by way of
Arbitration
Act, 1996
, the legislature sought to achieve the objective of reducing the
supervisory role of courts in arbitration proceedings. The amendment of

Section 34
was also to have the Courts readily and expeditiously
adjudicate upon any proceedings arising out of arbitration proceedings.
The challenge to an Award also must be disposed of as expeditiously
possible by the Courts.

38. It is clear that the speed and efficiency of disposal of disputes
between parties are few of the substantial and key purposes of the
introduction, development and promotion of resolving disputes by way of
alternate mechanisms of dispute resolution.

39. Hence, the objective, goal and purpose of the Act as well as the
intention of the legislature have to be given due consideration while
adjudicating a petition under
Section 34
of the Arbitration Act.

Scope of Powers of Arbitrator & Intervention of Courts

40. The Arbitrator, who in his wisdom, passes an Award, upon
conducting the arbitration proceedings with the participation of parties to
the dispute, considering the Statement of Claim and Statement of Defence
presented by and on behalf of the parties, the relevant documents placed
on record by the parties, is considered a Court for the purposes of
adjudicating the dispute before him. An unfettered intervention in his
functioning would defeat the spirit and purpose of the
Arbitration Act
, as
discussed in the foregoing paragraphs.

41. An Arbitrator has wide powers while adjudicating arbitration
proceedings. There is, undoubtedly, a scrutiny on the Arbitrator and the

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Awards passed by him, which has been stipulated under the
Arbitration
Act
. However, there is a deemed privilege of limited intervention from
the Courts which the Arbitrators have. The same has been reiterated by
the Hon'ble Supreme Court time and again.

42. There is an extent to the accountability put upon an Arbitrator
while passing an Award. This is evident from the fact that with the
enforcement of the
Arbitration and Conciliation Act, 1996
, an Arbitrator
needs only to adhere to and fulfil the requirements under
Section 31
of
the Act. The limited requirements under
Section 31
are reproduced
hereunder:-

―Form and contents of arbitral award. -

(1) An arbitral award shall be made in writing and shall be
signed by the members of the arbitral tribunal.
(2) For the purposes of sub-section (1), in arbitral
proceedings with more than one arbitrator, the signatures of
the majority of all the members of the arbitral tribunal shall
be sufficient so long as the reason for any omitted signature
is stated.

(3) The arbitral award shall state the reasons upon which it
is based, unless--

(a) the parties have agreed that no reasons are to be
given, or

(b) the award is an arbitral award on agreed terms
under
section 30
(4)
The arbitral award shall state its date and the place of
arbitration as determined in accordance with
section 20
and
the award shall be deemed to have been made at that place.
(5) After the arbitral award is made, a signed copy shall be
delivered to each party.

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(6) The arbitral tribunal may, at any time during the arbitral
proceedings, make an interim arbitral award on any matter
with respect to which it may make a final arbitral award. ...‖

43. In addition to the requirements laid down under the provision, an
Arbitrator, although acting in accordance with the requirements of the

Arbitration Act
, need not act as a formal Court while adjudicating a
dispute and pass an Award which is lengthy, detailed or speaking. The
Hon'ble Supreme Court has reiterated that an Award which is not
speaking shall be set aside by the Court only in exceptional cases.

44.
In
Anand Brothers (P) Ltd. vs. Union of India & Ors.
, (2014) 9
SCC 212, the Hon'ble Supreme Court on the question of a reasoned or
speaking Award observed and held as under:-

―7. Before we examine whether the expression ''finding"

appearing in Clause 70 would include reasons in support of
the conclusion drawn by the arbitrator, we consider it
appropriate to refer to the Constitution Bench decision of this
Court in
Raipur Development Authority v. Chokhamal
Contractors
wherein this Court was examining whether an
award without giving reasons can be remitted or set aside by
the Court in the absence of any stipulation in the arbitral
agreement obliging the arbitrator to record his reasons.
Answering the question in the negative, this Court held that a
nonspeaking award cannot be set aside except in cases where
the parties stipulate that the arbitrator shall furnish reasons
for his award. This Court held: (SCC pp. 750-51, para 33)
―33 . ... When the parties to the dispute insist upon
reasons being given, the arbitrator is, as already
observed earlier, under an obligation to give reasons.
But there may be many arbitrations in which parties to
the dispute may not relish the disclosure of the reasons
for the awards. In the circumstances and particularly
having regard to the various reasons given by the
Indian Law Commission for not recommending to the

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Government to introduce an amendment in the Act
requiring the arbitrators to give reasons for their
awards we feel that it may not be appropriate to take
the view that all awards which do not contain reasons
should either be remitted or set aside.‖
Having said that, this Court declared that the Government
and their instrumentalities should-as a matter of policy and
public interest-if not as a compulsion of law, ensure that
whenever they enter into an agreement for resolution of
disputes by way of private arbitrations, the requirement of
speaking awards is expressly stipulated and ensured. Any
laxity in that behalf might lend itself to and, perhaps justify
the legitimate criticism, that the Government failed to
provide against possible prejudice to public interest.

8. The following passage is in this regard apposite: (
Raipur
Development Authority
case, SCC pp. 752-53, para 37)
―37. There is, however, one aspect of non-speaking
awards in non-statutory arbitrations to which
Government and governmental authorities are parties
that compel attention. The trappings of a body which
discharges judicial functions and is required to act in
accordance with law with their concomitant
obligations for reasoned decisions, are not attracted to
a private adjudication of the nature of arbitration as
the latter, as we have noticed earlier, is not supposed
to exert the State's sovereign judicial power. But
arbitral awards in disputes to which the State and its
instrumentalities are parties affect public interest and
the matter of the manner in which Government and its
instrumentalities allow their interest to be affected by
such arbitral adjudications involve larger questions of
policy and public interest. Government and its
instrumentalities cannot simply allow large financial
interests of the State to be prejudicially affected by
non-reviewable---except in the limited way allowed by
the statute-non-speaking arbitral awards. Indeed, this
branch of the system of dispute resolution has, of late,

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acquired a certain degree of notoriety by the manner
in which in many cases the financial interests of
Government have come to suffer by awards which
have raised eyebrows by doubts as to their rectitude
and propriety. It will not be justifiable for
Governments or their instrumentalities to enter into
arbitration agreements which do not expressly
stipulate the rendering of reasoned and speaking
awards. Governments and their instrumentalities
should, as a matter of policy and public interest-if not
as a compulsion of law-ensure that wherever they
enter into agreements for resolution of disputes by
resort to private arbitrations, the requirement of
speaking awards is expressly stipulated and ensured. It
is for Governments and their instrumentalities to
ensure in future this requirement as a matter of policy
in the larger public interest. Any lapse in that behalf
might lend itself to and perhaps justify, the legitimate
criticism that Government failed to provide against
possible prejudice to public interest.‖

9. Reference may also be made to the
Arbitration and
Conciliation Act, 1996
which has repealed the
Arbitration
Act, 1940
and which seeks to achieve the twin objectives of
obliging the Arbitral Tribunal to give reasons for its arbitral
award and reducing the supervisory role of courts in
arbitration proceedings.
Section 31(3)
of the said Act obliges
the Arbitral Tribunal to state the reasons upon which it is
based unless the parties have agreed that no reasons be
given or the arbitral award is based on consent of the
parties. There is, therefore, a paradigm shift in the legal
position under the new Act which prescribes a uniform
requirement for the arbitrators to give reasons except in the
two situations mentioned above. The change in the legal
approach towards arbitration as an alternative dispute
resolution mechanism is perceptible both in regard to the
requirement of giving reasons and the scope of interference
by the court with arbitral awards. While in regard to
requirement of giving reasons the law has brought in

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dimensions not found under the old Act, the scope of
interference appears to be shrinking in its amplitude, no
matter judicial pronouncements at time appear to be heading
towards a more expansive approach that may appear to some
to be opening up areas for judicial review on newer grounds
falling under the caption ―public policy‖ appearing in

Section 34
of the Act. We are referring to these developments
for it is one of the well-known canons of interpretation of
statutes that when an earlier enactment is truly ambiguous in
that it is equally open to diverse meanings, the later
enactment may in certain circumstances serve as the
parliamentary exposition of the former.

14. It is trite that a finding can be both: a finding of fact or a
finding of law. It may even be a finding on a mixed question
of law and fact. In the case of a finding on a legal issue the
arbitrator may on facts that are proved or admitted explore
his options and lay bare the process by which he arrives at
any such finding. It is only when the conclusion is supported
by reasons on which it is based that one can logically
describe the process as tantamount to recording a finding. It
is immaterial whether the reasons given in support of the
conclusion are sound or erroneous. That is because a
conclusion supported by reasons would constitute a "finding"

no matter the conclusion or the reasons in support of the
same may themselves be erroneous on facts or in law. It may
then be an erroneous finding but it would nonetheless be a
finding. What is important is that a finding presupposes
application of mind. Application of mind is best
demonstrated by disclosure of the mind; mind in turn is best
disclosed by recording reasons. That is the soul of every
adjudicatory process which affects the rights of the
parties....‖

45. Therefore, while considering a challenge to an Arbitral Award
where private parties are involved, the Court need not examine the
validity of the findings or the reasoning behind the findings given by an
Arbitrator. The extent to which a Court may exercise supervisory powers

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in this respect is limited to examining whether the Award and the
conclusion drawn therein is supported by findings and not whether the
findings themselves are erroneous or sound.

46. It has also been reiterated that, while adjudicating a challenge
under
Section 34
of the Arbitration Act, the Courts must limit themselves
to examining the Award itself and not the facts of the case. A Court shall
not conduct a roving enquiry into the facts and evidence of the matter and
neither shall the Court sit in appeal against the Award of the Arbitrator.

47.
In
UHL Power Co. Ltd. vs. State of Himachal Pradesh
, (2022) 4
SCC 116, the Hon'ble Supreme Court reiterated the narrow scope under

Section 34
of the Arbitration Act and held as under:-

―16. As it is, the jurisdiction conferred on courts under

Section 34
of the Arbitration Act is fairly narrow, when it
comes to the scope of an appeal under
Section 37
of the
Arbitration Act, the jurisdiction of an appellate court in
examining an order, setting aside or refusing to set aside an
award, is all the more circumscribed.
In
MMTC Ltd. v.
Vedanta Ltd.
5, the reasons for vesting such a limited
jurisdiction on the High Court in exercise of powers under

Section 34
of the Arbitration Act have been explained in the
following words: (SCC pp. 166-67, para 11)
―11. As far as
Section 34
is concerned, the position is
well-settled by now that the Court does not sit in
appeal over the arbitral award and may interfere on
merits on the limited ground provided under
Section
34(2)(b)(ii)
i.e. if the award is against the public policy
of India. As per the legal position clarified through
decisions of this Court prior to the amendments to the
1996 Act in 2015, a violation of Indian public policy,
in turn, includes a violation of the fundamental policy
of Indian law, a violation of the interest of India,
conflict with justice or morality, and the existence of

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patent illegality in the arbitral award. Additionally, the
concept of the "fundamental policy of Indian law"

would cover compliance with statutes and judicial
precedents, adopting a judicial approach, compliance
with the principles of natural justice, and
Wednesbury6 reasonableness. Furthermore, "patent
illegality" itself has been held to mean contravention
of the substantive law of India, contravention of the
1996 Act, and contravention of the terms of the
contract.‖

17. A similar view, as stated above, has been taken by this
Court in
K. Sugumar v. Hindustan Petroleum Corpn. Ltd.
7,
wherein it has been observed as follows: (SCC p. 540, para

2)
―2. The contours of the power of the Court under

Section 34
of the Act are too well established to
require any reiteration. Even a bare reading of
Section
of the Act indicates the highly constricted power of
the civil court to interfere with an arbitral award. The
reason for this is obvious. When parties have chosen to
avail an alternate mechanism for dispute resolution,
they must be left to reconcile themselves to the wisdom
of the decision of the arbitrator and the role of the
court should be restricted to the bare minimum.

Interference will be justified only in cases of
commission of misconduct by the arbitrator which can
find manifestation in different forms including exercise
of legal perversity by the arbitrator.‖

48.
In
Delhi Airport Metro Express Pvt Ltd vs. Delhi Metro Rail
Corporation
, (2022) 1 SCC 131, the Hon'ble Supreme Court to this
aspect held as under:-

―28. The limited grounds available to Courts for annulment
of arbitral awards are well known to legally trained minds.
However, the difficulty arises in applying the well established

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principles for interference to the facts of each case that come
up before the courts. There is a disturbing tendency of Courts
of setting aside arbitral awards, after dissecting and
reassessing factual aspects of the cases to come to a
conclusion that the award needs intervention and thereafter,
dubbing the award to be vitiated by either perversity or
patent illegality, apart from the other grounds available for
annulment of the award.‖

49. Further, in
State of Jharkhand vs. HSS Integrated DSN
, (2019) 9
SCC 798, the Hon'ble Supreme Court held that even when there are more
than one plausible views and the Arbitrator, in his wisdom, adopts one of
them, having given reasons for his findings, the Courts shall not interfere
with such an Award. It was observed as under:-

―6.1. In Progressive-MVR3, after considering the catena of
decisions of this Court on the scope and ambit of the
proceedings under
Section 34
of the Arbitration Act, this
Court has observed and held that even when the view taken
by the arbitrator is a plausible view, and/or when two views
are possible, a particular view taken by the Arbitral Tribunal
which is also reasonable should not be interfered with in a
proceeding under
Section 34
of the Arbitration Act.
6.2. In Datar Switchgear Ltd., this Court has observed and
held that the Arbitral Tribunal is the master of evidence and
the findings of fact which are arrived at by the arbitrators on
the basis of the evidence on record are not to be scrutinised
as if the Court was sitting in appeal. In para 51 of the
judgment, it is observed and held as under: (SCC pp. 169-70)
―51. ..... The proposition of law that the Arbitral
Tribunal is the master of evidence and the findings of
fact which are arrived at by the arbitrators on the
basis of evidence on record are not to be scrutinised as
if the Court was sitting in appeal now stands settled by
a catena of judgments pronounced by this Court
without any exception thereto.‖

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50. Hence, the law which has been settled by the Hon'ble Supreme
Court is that the scope of interference with an Arbitral Award under

Section 34
of the Arbitration Act is fairly limited and narrow. The Courts
shall not sit in an appeal while adjudicating a challenge to an Award
which is passed by an Arbitrator, the master of evidence, after due
consideration after facts, circumstances, evidence and material before
him. Therefore, it is clear that this Court shall also limit itself to the
Award in question and not re-appreciate evidence and all material before
the Arbitrator.

ANALYSIS

51. Upon perusal of the pleadings and hearing the parties at length, this
Court opines that the controversy between the parties qua the impugned
Award may be narrowed down to adjudicate the following issues:

i. Whether the Learned Sole Arbitrator went beyond its
jurisdiction by holding that the Agreement dated 23rd March
2001 is a Determinable Agreement.

ii. Whether the impugned Award is patently illegal and in
conflict with the Public Policy of India.
Issue no. 1

52. The impugned findings of Arbitrator on the question of agreement
being determinable while declaring the Arbitral Award are enclosed
below:

―47. I will first deal with the contention of the learned counsel
for the Respondent that agreement being determinable under
Clauses 9 thereof, is not capable of being specifically enforced
under
Section 14(1)(c)
of the Specific Relief Act, 1963 and the

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plea of the learned counsel for the Claimant that
Section
14(1)(c)
is not at all attracted to the facts of the case.

48. In order to appreciate the contentions of learned counsel for
the parties, it will be necessary to extract clauses 9.1 and 9.2 of
the agreement:

9.1 At the Option of the Lessee

The Lessee may any time during the term hereof
terminate this agreement at its sole option by a 60-day
written notice.

The Lessee shall not be liable to pay or incur any
charges, costs or expenses or for any incidental,
consequential, direct. or indirect damages including
loss of opportunity or anticipated profits.

9.2 Termination due to default of Lessor

The Lessee may terminate this agreement by a 30 day
written notice due to failure of the Lessor to adhere to
any of its obligations under this Agreement. In such an
event the Lessee shall not be liable to pay or incur any
payment; compensation charges, costs of expenses or
for any incidental, consequential, direct or indirect
damages including loss of opportunity of anticipated
profits.

In the event this Agreement is terminated in terms of
either clauses 9.1. or 9.2 the Lessor undertakes to
buyback the Building at the book value from the
Lessee.

49. As is evident from the aforesaid clauses the agreement is
terminable at the option of the Lessee. Question that arises for
consideration is whether such an agreement which is
determinable can be enforced. The answer to the question lies
in
Section 14
of the Act...

50. According to sub-
section 1
of
Section 14
, agreements that
fall within the ambit of any of its sub-clauses cannot be

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enforced. In the instant proceeding the Claimant seeks an
award in its favour and against the Respondent for specific
performance of the agreement to sell land admeasuring 1200
Sq. Meters and a three storied Building standing thereon shorn
of details the Claimant seeks specific performance of a
determinable contract. Since the agreement is determinable it
attracts clause c of sub
section 1
of
section 14
. This being so, as
per the mandate of the provision, the agreement cannot be
specifically enforced.‖

53. Upon a bare perusal of the impugned Arbitral Award, this Court is
of the opinion that the Learned Sole Arbitrator has correctly deduced its
findings while passing the Arbitral Award and has correctly interpreted
the terms of Agreement dated 23rd March 2001.

54. In any case,
Section 14(1)
of the Act prior to amendment and as
applicable to the instant case, clearly delineates the contracts which
cannot be specifically enforced, and under
Section 14(1)(c)
, specific
performance cannot be granted in a contract which is determinable in
nature.

55. As rightly observed by the Learned Arbitrator and in view of
clauses 9.1 and 9.2 of the Agreement, the same is determinable at the
option of the lessee. Therefore, the findings of the learned arbitrator on
the question of agreement being determinable do not suffer from any
illegality whatsoever.

56. Issue No. 1 stands adjudicated accordingly.

Issue No. 2

57. The ground taken by the petitioner while assailing the Arbitral
Award is that the impugned Arbitral Award is ex-facie erroneous and

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suffers from patent illegality, contrary to the fundamental policy of Indian
Law. The law regarding patent illegality and public policy of India is no
more res integra and has been authoritatively clarified by the Hon'ble
Supreme Court in a number of judicial pronouncements.

58. Since, it has been settled that the scope of interference under

Section 34
of the Arbitration Act is limited, it is now pertinent to see the
considerations that are to be considered while adjudicating upon a
challenge and in what circumstances may an Award may be set aside.

59. On a bare reading of the invoked provision
Section 34
of the
Arbitration Act as quoted above, it has become evident the words used
therein are that "An arbitral award may be set aside by the Court only if",
which signifies the intent of limiting the scope of interference by Courts
in an Arbitral Award, passed after thorough procedure, involvement of
parties, and appreciation of facts, evidence and law, "only" in the event of
the circumstances delineated in the provision being met. The limited
grounds which may invite the intervention and action thereupon by the
Courts are explicitly laid down under the provision. What is to be seen by
a Court exercising jurisdiction under
Section 34
of the Arbitration Act is
that an Award passed by an Arbitral Tribunal may only be set aside if it is
patently illegal, against the public policy of India, based on no evidence
and delineates no reason for passing the Award.

60. The petitioner has raised the ground of patent illegality as well as
contravention to public policy while impugning the Award dated 4th
October 2018.

61. The Hon'ble Supreme Court in BCCI vs. Cricket Association &
Ors. (2015) 3 SCC 251, on the question of public policy, held as under:-

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―90. The validity of Rule 6.2.4 as amended can be examined
also from the standpoint of its being opposed to "public
policy". But for doing so we need to first examine what is
meant by "public policy" as it is understood in legal
parlance. The expression has been used in
Section 23
of the
Contract Act, 1872 and in
Section 34
of the Arbitration and
Conciliation Act, 1996 and host of other statutes but has not
been given any precise definition primarily because the
expression represents a dynamic concept and is, therefore,
incapable of any straitjacket definition, meaning or
explanation. That has not, however, deterred jurists and
courts from explaining the expression from very early times.

91. Mathew, J. speaking for the Court in
Murlidhar
Aggarwal v. State of U.P.
27 referred to Winfield's definition
in Public Policy in English Common Law 42 Harvard Law
Review 76 to declare that: (SCC p. 482, para 31)
―31. Public policy does not remain static in any given
community. It may vary from generation to generation
and even in the same generation. Public policy would
be almost useless if it were to remain in fixed moulds
for all time.‖

92. The Court then grappled with the problem of ascertaining
public policy if the same is variable and depends on the
welfare of the community and observed: (Murlidhar
Aggarwal case27 , SCC pp. 482-83, para 32)
―3 2. If it is variable, if it depends on the welfare of the
community at any given time, how are the courts to
ascertain it? The Judges are more to be trusted as
interpreters of the law than as expounders of public
policy. However, there is no alternative under our
system but to vest this power with Judges. The
difficulty of discovering what public policy is at any
given moment certainly does not absolve the Judges
from the duty of doing so. In conducting an enquiry, as
already stated, Judges are not hidebound by
precedent. The Judges must look beyond the narrow
field of past precedents, though this still leaves open

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the question, in which direction they must cast their
gaze. The Judges are to base their decisions on the
opinions of men of the world, as distinguished from
opinions based on legal learning. In other words, the
Judges will have to look beyond the jurisprudence and
that in so doing, they must consult not their own
personal standards or predilections but those of the
dominant opinion at a given moment, or what has been
termed customary morality. The Judges must consider
the social consequences of the rule propounded,
especially in the light of the factual evidence available
as to its probable results. Of course, it is not to be
expected that men of the world are to be subpoenaed
as expert witnesses in the trial of every action raising
a question of public policy. It is not open to the Judges
to make a sort of referendum or hear evidence or
conduct an inquiry as to the prevailing moral concept.

Such an extended extra-judicial enquiry is wholly
outside the tradition of courts where the tendency is to
'trust the Judge to be a typical representative of his
day and generation'. Our law relies, on the implied
insight of the Judge on such matters. It is the Judges
themselves, assisted by the Bar, who here represent the
highest common factor of public sentiment and
intelligence. No doubt, there is no assurance that
Judges will interpret the mores* of their day more
wisely and truly than other men. But this is beside the
point. The point is rather that this power must be
lodged somewhere and under our Constitution and
laws, it has been lodged in the Judges and if they have
to fulfil their function as Judges, it could hardly be
lodged elsewhere.‖

93. In Central Inland Water Transport Corpn. this Court was
also considering the import of the expression "public policy"

in the context of the service conditions of an employee
empowering the employer to terminate his service at his
sweet will upon service of three months' notice or payment of
salary in lieu thereof. Explaining the dynamic nature of the

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concept of public policy this Court observed: (SCC pp. 217-
18, para 92)
―92. . . . Public policy, however, is not the policy of a
particular Government. It connotes some matter which
concerns the public good and the public interest. The
concept of what is for the public good or in the public
interest or what would be injurious or harmful to the
public good or the public interest has varied from time
to time. As new concepts take the place of old,
transactions which were once considered against
public policy are now being upheld by the courts and
similarly where there has been a well recognised head
of public policy, the courts have not shirked from
extending it to new transactions and changed
circumstances and have at times not even flinched
from inventing a new head of public policy ....
It is thus clear that the principles governing public
policy must be and are capable, on proper occasion, of
expansion or modification. Practices which were
considered perfectly normal at one time have today
become obnoxious and oppressive to public
conscience. If there is no head of public policy which
covers a case, then the court must in consonance with
public conscience and in keeping with public good and
public interest declare such practice to be opposed to
public policy. Above all, in deciding any case which
may not be covered by authority our courts have
before them the beacon light of the Preamble to the
Constitution. Lacking precedent, the court can always
be guided by that light and the principles underlying
the fundamental rights and the directive principles
enshrined in our Constitution.‖

94. We may also refer to the decision of this Court in ONGC
Ltd. v. Saw Pipes Ltd., wherein this Court was considering
the meaning and import of the expression "public policy of
India" as a ground for setting aside an arbitral award.
Speaking for the Court M.B. Shah, J. held that the expression

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"public policy of India" appearing in the Act aforementioned
must be given a liberal meaning for otherwise resolution of
disputes by resort to arbitration proceedings will get
frustrated because patently illegal awards would remain
immune to court's interference. This Court declared that
what was against public good and public interest cannot be
held to be consistent with public policy. The following
passage aptly summed up the approach to be adopted in the
matter: (Saw Pipes Ltd. case, SCC pp. 727-28, para 31)
―31. Therefore, in our view, the phrase 'public policy
of India' used in
Section 34
in context is required to be
given a wider meaning. It can be stated that the
concept of public policy connotes some matter which
concerns public good and the public interest. What is
for public good or in public interest or what would be
injurious or harmful to the public good or public
interest has varied from time to time. However, the
award which is, on the face of it, patently in violation
of statutory provisions cannot be said to be in public
interest. Such award/judgment/decision is likely to
adversely affect the administration of justice. Hence, in
our view in addition to narrower meaning given to the
term 'public policy' in Renusagar case it is required to
be held that the award could be set aside if it is
patently illegal. The result would be-award could be
set aside if it is contrary to:

(a) fundamental policy of Indian law; or

(b) the interest of India; or

(c) justice or morality, or

(d) in addition, if it is patently illegal.

Illegality must go to the root of the matter and if the
illegality is of trivial nature it cannot be held that
award is against the public policy. Award could also
be set aside if it is so unfair and unreasonable that it
shocks the conscience of the court. Such award is

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opposed to public policy and is required to be
adjudged void.‖

95. In ONGC Ltd. v. Western GECO International Ltd., this
Court was examining the meaning of "fundamental policy of
Indian law", an expression used by this Court in Saw Pipes
case. Extending the frontiers of what will constitute "public
policy of India" this Court observed: (Western GECO
International Ltd. case , SCC pp. 278-80, paras 35 & 38-39)
―35. What then would constitute the 'fundamental
policy of Indian law' is the question. The decision in
ONGC does not elaborate that aspect. Even so, the
expression must, in our opinion, include all such
fundamental principles as providing a basis for
administration of justice a and enforcement of law in
this country. Without meaning to exhaustively
enumerate the purport of the expression 'fundamental
policy of Indian law', we may refer to three distinct
and fundamental juristic principles that must
necessarily be understood as a part and parcel of the
fundamental policy of Indian law. The first and
foremost is the principle that in every determination
whether by a court or other authority that affects the
rights of a citizen or leads to any civil consequences,
the court or authority concerned is bound to adopt
what is in legal parlance called a 'judicial approach'
in the matter. The duty to adopt a judicial approach
arises from the very nature of the power exercised by
the court or the authority does not have to be
separately or additionally enjoined upon the fora
concerned. What must be remembered is that the
importance of a judicial approach in judicial and
quasi-judicial determination lies in the fact that so
long as the court, tribunal or the authority exercising
powers that affect the rights or obligations of the
parties before them shows fidelity to judicial
approach, they cannot act in an arbitrary, capricious
or whimsical manner. Judicial approach ensures that
the authority acts bona fide and deals with the subject

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in a fair, reasonable and objective manner and that its
decision is not actuated by any extraneous
consideration. Judicial approach in that sense acts as
a check against flaws and faults that can render the
decision of a court, tribunal or authority vulnerable to
challenge.

38. Equally important and indeed fundamental to the
policy of Indian law is the principle that a court and so
also a quasi-judicial authority must, while determining
the rights and obligations of parties before it, do so in
accordance with the principles of natural justice.
Besides the celebrated audi alteram partem rule one of
the facets of the principles of natural justice is that the
court/authority deciding the matter must apply its mind
to the attendant facts and circumstances while taking a
view one way or the other. Non-application of mind is
a defect that is fatal to any adjudication. Application
of mind is best demonstrated by disclosure of the mind
and disclosure of mind is best done by recording
reasons in support of the decision which the court or
authority is taking. The requirement that an
adjudicatory authority must apply its mind is, in that
view, so deeply embedded in our jurisprudence that it
can be described as a fundamental policy of Indian
law.

39. No less important is the principle now recognised
as a salutary juristic fundamental in administrative
law that a decision which is perverse or so irrational
that no reasonable person would have arrived at the
same will not be sustained in a court of law. Perversity
or irrationality of decisions is tested on the touchstone
of Wednesbury Principle of reasonableness. Decisions
that fall short of the standards of reasonableness are
open to challenge in a court of law often in writ
jurisdiction of the superior courts but no less in
statutory processes wherever the same are available.‖

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96. To sum up: public policy is not a static concept. It varies
with times and from generation to generation. But what is in
public good and public interest cannot be opposed to public
policy and vice versa. Fundamental Policy of Law would also
constitute a facet of public policy. This would imply that all
those principles of law that ensure justice, fair play and
bring transparency and objectivity and promote probity in
the discharge of public functions would also constitute public
policy. Conversely, any deviation, abrogation, frustration or
negation of the salutary principles of justice, fairness, good
conscience, equity and objectivity will be opposed to public
policy. It follows that any rule, contract or arrangement that
actually defeats or tends to defeat the high ideals of fairness
and objectivity in the discharge of public functions no matter
by a private non-governmental body will be opposed to
public policy. ....‖

62. While discussing the fundamentals of patent illegality, the Hon'ble
Supreme Court in
State of Chhattisgarh vs. Sal Udyog (P) Ltd.
, (2022) 2
SCC 275 held as under:-

―14. The law on interference in matters of awards under the
1996 Act has been circumscribed with the object of
minimising interference by courts in arbitration matters. One
of the grounds on which an award may be set aside is "patent
illegality". What would constitute "patent illegality" has been
elaborated in
Associate Builders v. DDA
, where "patent
illegality" that broadly falls under the head of "Public
Policy", has been divided into three sub-heads in the
following words: (SCC p. 81, para 42)
―42. In the 1996 Act, this principle is substituted by
the "patent illegality" principle which, in turn,
contains three sub-heads:

42.1. (a) A contravention of the substantive law of
India would result in the death knell of an arbitral
award. This must be understood in the sense that such
illegality must go to the root of the matter and cannot

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be of a trivial nature. This again is really a
contravention of
Section 28
(1 )(a) of the Act, which
reads as under:

'28. Rules applicable to substance of dispute.-(])
Where the place of arbitration is situated in
lndia,-

(a) in an arbitration other than an international
commercial arbitration, the Arbitral Tribunal
shall decide the dispute submitted to arbitration
in accordance with the substantive law for the
time being in force in India;'
42.2. (b) A contravention of the
Arbitration Act
itself
would be regarded as a patent illegality - for example
if an arbitrator gives no reasons for an award in
contravention of
Section 31 (3)
of the Act, such award
will be liable to be set aside.

42.3. (c) Equally, the third sub-head of patent illegality
is really a contravention of
Section 28
( 3) of the

Arbitration Act
, which reads as under:

'28. Rules applicable to substance of dispute.-

(1)-(2) * * *
(3) In all cases, the Arbitral Tribunal shall
decide in accordance with the terms of the
contract and shall take into account the usages
of the trade applicable to the transaction.'

15. In Ssangyong Engg. & Construction Co. Ltd. v. NHAJ9,
speaking for the Bench, R.F. Nariman, J. has spelt out the
contours of the limited scope of judicial interference in
reviewing the arbitral awards under the 1996 Act and
observed thus: (SCC pp. 169-71, paras 34-41)
"34. What is clear, therefore, is that the expression
"public policy of India", whether contained in
Section
or in
Section 48
, would now mean the "fundamental
policy of Indian law" as explained in paras 18 and 27
of Associate Builders8 i.e. the fundamental policy of

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Indian law would be relegated to "Renusagar"

understanding of this expression. This would
necessarily mean that Western Geco expansion has
been done away with. In short, Western Geco, as
explained in paras 28 and 29 of Associate Builders,
would no longer obtain, as under the guise of
interfering with an award on the ground that the
arbitrator has not adopted a judicial approach, the
Court's intervention would be on the merits of the
award, which cannot be permitted post amendment.
However, insofar as principles of natural justice are
concerned, as contained in
Sections 18
and

34(2)(a)(iii)
of the 1996 Act, these continue to be
grounds of challenge of an award, as is contained in
para 30 of Associate Builders.

35. It is important to notice that the ground for
interference insofar as it concerns "interest of India"

has since been deleted, and therefore, no longer
obtains. Equally, the ground for interference on the
basis that the award is in conflict with justice or
morality is now to be understood as a conflict with the
"most basic notions of morality or justice". This again
would be in line with paras 36 to 39 of Associate
Builders , as it is only such arbitral awards that shock
the conscience of the court that can be set aside on this
ground.

36. Thus, it is clear that public policy of India is now
constricted to mean firstly, that a domestic award is
contrary to the fundamental policy of Indian law, as
understood in paras 18 and 27 of Associate Builders,
or secondly, that such award is against basic notions
of justice or morality as understood in paras 36 to 39
of Associate Builders8. Explanation 2 to
Section
34(2)
(b )(ii) and Explanation 2 to
Section 48(2)
(b )(ii)
was added by the Amendment Act only so that Western
Geco, as understood in Associate Builders8, and paras
28 and 29 in particular, is now done away with.

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37. Insofar as domestic awards made in India are
concerned, an additional ground is now available
under sub-section (2-A), added by the Amendment Act,
2015, to
Section 34
. Here, there must be patent
illegality appearing on the face of the award, which
refers to such illegality as goes to the root of the
matter but which does not amount to mere erroneous
application of the law. In short, what is not subsumed
within "the fundamental policy of Indian law", namely,
the contravention of a statute not linked to public
policy or public interest, cannot be brought in by the
backdoor when it comes to setting aside an award on
the ground of patent illegality.

38. Secondly, it is also made clear that reappreciation
of evidence, which is what an appellate court is
permitted to do, cannot be permitted under the ground
of patent illegality appearing on the face of the award.

39. To elucidate, para 42.1 of Associate Builders,
namely, a mere contravention of the substantive law of
India, by itself, is no longer a ground available to set
aside an arbitral award. Para 42.2 of Associate
Builders8, however, would remain, for if an arbitrator
gives no reasons for an award and contravenes
Section
31(3)
of the 1996 Act, that would certainly amount to a
patent illegality on the face of the award.

40. The change made in
Section 28
( 3) by the
Amendment Act really follows what is stated in paras
42.3 to 45 in Associate Builders, namely, that the
construction of the terms of a contract is primarily for
an arbitrator to decide, unless the arbitrator construes
the contract in a manner that no fair-minded or
reasonable person would; in short, that the arbitrator's
view is not even a possible view to take. Also, if the
arbitrator wanders outside the contract and deals with
matters not allotted to him, he commits an error of
jurisdiction. This ground of challenge will now fall
within the new ground added under
Section 34
(2-A).

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41. What is important to note is that a decision which
is perverse, as understood in paras 31 and 32 of
Associate Builders8, while no longer being a ground
for challenge under "public policy of India", would
certainly amount to a patent illegality appearing on
the face of the award. Thus, a finding based on no
evidence at all or an award which ignores vital
evidence in arriving at its decision would be perverse
and liable to be set aside on the ground of patent
illegality. Additionally, a finding based on documents
taken behind the back of the parties by the arbitrator
would also qualify as a decision based on no evidence
inasmuch as such decision is not based on evidence led
by the parties, and therefore, would also have to be
characterised as perverse."

16. In Delhi Airport Metro Express (P) Ltd. referring to the
facets of patent illegality, this Court has held as under: (SCC
p. 150, para 29)
"29. Patent illegality should be illegality which goes to
the root of the matter. In other words, every error of
law committed by the Arbitral Tribunal would not fall
within the expression "patent illegality". Likewise,
erroneous application of law cannot be categorised as
patent illegality. In addition, contravention of law not
linked to public policy or public interest is beyond the
scope of the expression "patent illegality". What is
prohibited is for Courts to reappreciate evidence to
conclude that the award suffers from patent illegality
appearing on the face of the award, as Courts do not
sit in appeal against the arbitral award. The
permissible grounds for interference with a domestic
award under
Section 34
(2-A) on the ground of patent
illegality is when the arbitrator takes a view which is
not even a possible one, or interprets a clause in the
contract in such a manner which no fair-minded or
reasonable person would, or if the arbitrator commits
an error of jurisdiction by wandering outside the
contract and dealing with matters not allotted to them.

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An arbitral award stating no reasons for its findings
would make itself susceptible to challenge on this
account. The conclusions of the arbitrator which are
based on no evidence or have been arrived at by
ignoring vital evidence are perverse and can be set
aside on the ground of patent illegality. Also,
consideration of documents which are not supplied to
the other party is a facet of perversity falling within the
expression "patent illegality".‖

63. The abovementioned precedents have settled the position of a
challenge to an Arbitral Award. The facets under
Section 34
of the
Arbitration Act, specifically under Sub-
section 2
, provide the limited
purview of such a challenge.

64. In order to set aside an Award under
Section 34
the petitioner must
show that illegality which has been alleged goes to the root of the matter
and is not an illegality of trivial nature. In failure of the same the
impugned Award cannot be held to be against the public policy. Award
could also be set aside if it is so unfair and unreasonable that it shocks the
conscience of the court. Such award is opposed to public policy and is
required to be adjudged void.

65. To argue that the impugned Award before this Court is liable to set
aside in the instant petition it has been argued that the findings of the
learned Arbitrator are patently illegal and against the fundamental policy
of India. As stipulated by the aforementioned precedents, the words are
not to be construed in their plain meaning, but the essence to be
appreciated while adjudicating a challenge under
Section 34
of the
Arbitration Act is that the illegalities or deficiencies are such that they are
apparent on the face of record and/or shock the conscience of the Court
and can in no manner be sustained. In the case at hand, the petitioner has

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not been able to show that the impugned Award suffers from such
illegality that is apparent on the face of record and upholding the same
would be against the law.

66. A clear reading of the precedents cited proves that under the
limited scope of
Section 34
, the present case does not warrant the
interference of this Court, as the grounds stated by the petitioner in the
instant petition do not meet the scope of this section. Accordingly, with
reference to the aforesaid judgments and the impugned Arbitral Award,
the Petitioner cannot have the benefit of the "ground of patent illegality"

to assail the impugned Arbitral Award under
Section 34
of the Act, 1996.

67. Reiterating as previously observed, "patent illegality" is an
illegality that goes to the root of the matter but excludes the erroneous
application of the law by an arbitral tribunal or re-appreciation of
evidence by an appellate court. In this instant case, the Arbitral Award
was a well-reasoned award, with the findings being clearly arrived at
based on all the documents/evidence on record.

68. The learned Arbitrator has clearly considered Statement of Claim
relevant Clauses of the Terms of the Agreement to Sell dated 23 rd March
2001 and the ground that the Learned Sole Arbitrator has passed the
Arbitral Award which is beyond the scope of its jurisdiction does not
stand validated as per the submissions of the Petitioner and under the
observation of the Court. The impugned Award is in no way in
contravention of the
Arbitration and Conciliation Act, 1996
, to reason
that the Award is patently illegal.

69. Therefore, as regards to Issue No. II, this Court is of the considered
view that the petitioner has not been able to show that the grounds laid

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under
Section 34
of the Arbitration Act for setting aside the impugned
Award are made out on behalf of the petitioner. None of the impugned
findings of the learned Arbitrator is such that it shows that the impugned
Award is patently illegal to shock the conscience of the Court, against
public policy or fundamental policy of India or falls under the grounds
laid down in
Section 34
of the Arbitration Act.
CONCLUSION

70. In the lights of facts, submissions and contentions in the pleadings,
this Court find that the petitioner has failed to substantiate its grounds for
setting aside the impugned Arbitral Award on the ground that the Learned
Sole Arbitrator went beyond its jurisdiction by holding that the
Agreement is a Determinable Agreement and is patently illegal. The
Court is of the view that the Learned Sole Arbitrator was well within its
jurisdiction to declare the Agreement dated 23rd March 2001 as
Determinable Agreement in the view of Statement of Claim of the
respondent and Terms of the said Agreement.

71. It is settled law that the ground of Patent illegality gives way to
setting aside an Arbitral Award with a very minimal scope of
intervention. A party cannot simply raise an objection on the ground of
patent illegality if the Award is simply against them. Patent illegality
requires a distinct transgression of law, the clear lack of which thereof
makes the petition simply a pointless effort of objection towards an
Award made by a competent Arbitral Tribunal. Further, the petitioner has
not been able to prove that the impugned Arbitral Award is patently
illegal, and contrary to the fundamental policy of Indian Law, and hence
is liable to be set aside.

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72. Therefore, after consideration of the material on record, including
the impugned Arbitral Award, submissions on behalf of the parties this
Court is of the view that there is no finding or conclusion reached by the
learned Arbitrator which warrants interference of this Court. The
petitioner has not been able to substantiate her case for setting aside of
the impugned Award.

73. Accordingly, the instant petition is dismissed since there is no
cogent reason to set aside the impugned Award.

74. Pending applications, if any, also stand disposed of.

75. The judgment be uploaded on the website forthwith.

(CHANDRA DHARI SINGH)
JUDGE
APRIL 26, 2023
Sv/AK

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