2010 (10) TMI 931 - HC - Companies Law

Petition under section 34 of the Arbitration & Conciliation Act, 1996 to challenge an award dated 1st December, 2006 Held that - The award so far as it grants compensation of eighteen per cent per annum on the value of the first and the second floor is liable to be set aside also on the ground that the dispute in this regard did not fall within the arbitration agreement and on the ground that the award in this regard contains no reasons.In this view of the matter, it is not necessary for me to consider Mr.DeVitre s submission that the claim of compensation at eighteen percent per annum on the value of the property was without any particulars or evidence and is therefore bad. Having come to the conclusion that he had no jurisdiction to consider the issue of tenancy raised by the original Petitioner, the arbitrator could not have made any observations in regard thereto. Mr.Kamdar also fairly stated that the question of the Petitioners being required to pay the monetary amount would arise only in the event of the issue of tenancy being decided against the Petitioners. He stated that the RAD suit filed by the original Petitioner has been dismissed for default only recently. Had I upheld the award, the amounts would have been payable only in the event of the order of dismissal attaining finality and subject to any further proceeding that the Petitioners may adopt in respect of their alleged tenancy. The award of compensation regarding the first floor is therefore set aside.It cannot therefore be said that the learned arbitrator did not considered the affidavit. The arbitrator was not bound to accept the contents thereof merely because original Respondent No.3 was not cross-examined. The arbitrator weighed the evidence, analyzed the circumstances and drew inferences which were entirely within his jurisdiction. The submission in this regard is, therefore, rejected.

Summary

Issues Involved:
1. Jurisdiction of the Arbitrator
2. Validity of the Award
3. Consideration of Relevant Evidence

Detailed Analysis:
1. Jurisdiction of the Arbitrator:
(I) The arbitrator had no jurisdiction to decide the claims:
- Reassignment of Property: The arbitrator directed the original Petitioner to reassign the mortgaged property and deliver it to the first Respondent, despite the first Respondent not explicitly praying for such relief. This submission was rejected as the claim was clearly made in the statement of claim.
- Scope of Claims: The arbitrator awarded claims sought in the statement of claim but not raised in the letter invoking arbitration. The court held that the letter/notice of invocation of arbitration does not need to stipulate and crystallize the claims unless the arbitration agreement itself requires it.
- Memorandum of Understanding (MoU): The MoU deals with the sale of properties and not inter-se disputes. However, the arbitration clause in the MoU was broad enough to cover disputes "in relation to or in connection with" the MoU.
- Specific Performance: The arbitrator wrongly proceeded on the basis that the first Respondent sought specific performance of the MoU. The court noted that the arbitrator's conclusion that the claims fall within the scope of the arbitration clause was valid.
- Presidency Small Cause Courts Act: The arbitrator had no jurisdiction to decide disputes arising from the license allegedly created by Respondent No.1 in favor of the original Petitioner due to the provisions of the Presidency Small Cause Courts Act, 1882, particularly Section 41.
- Inter-se Disputes: The disputes and claims did not fall within the arbitration agreement contained in clause 12 of the MoU. The court found that disputes relating to the title of the parties in respect of properties mentioned in the MoU fall within the ambit of the arbitration clause.

(IIA) The arbitrator had no jurisdiction to consider the issue of tenancy raised by the original Petitioner:
- The arbitrator made observations regarding the claim of tenancy despite concluding that he had no jurisdiction to decide it. The court clarified that the appropriate court should decide the tenancy issue on its own merits, uninfluenced by the arbitrator's observations.

(IIB) The arbitrator was not entitled to grant monetary compensation:
- The award of monetary compensation was based on the arbitrator's conclusion that the original Petitioner's claim of tenancy was not established. The enforceability of the award of monetary amounts would depend on the findings/judgment of the appropriate court regarding the Petitioner's claim of tenancy.

2. Validity of the Award:
(III) The award is contrary to the record and is, therefore, patently absurd:
- The award of monetary compensation for the alleged illegal use of the first floor was unsustainable and contrary to the record, as it was the Respondent's case that possession of the first floor was given to the first Respondent after the order dated 20th December 1996. The court set aside the award of compensation regarding the first floor.

(IV) The arbitrator did not consider the relevant evidence:
- The arbitrator disregarded an affidavit dated 5th November 2005 of Janak Raj Seth, original Respondent No.3. The court found that the arbitrator had considered the affidavit but weighed the evidence and drew inferences within his jurisdiction.

3. Consideration of Relevant Evidence:
- The court noted that the arbitrator had considered the relevant evidence, including the affidavit of Janak Raj Seth, and made a decision based on the circumstances and the evidence presented. The submission that the arbitrator did not consider relevant evidence was rejected.

Conclusion:
The court set aside the entire award, finding that the arbitrator lacked jurisdiction to decide certain claims and that the award was contrary to the record in some respects. The court also clarified that the appropriate court should decide the issue of tenancy on its own merits. The petition was dismissed with no order as to costs.