1998 (10) TMI 527 - SC - Companies Law

Whether Party No.1 has suffered any damages, if so, is entitled to any compensation? Whether the claim is barred by acquiescence, laches, estoppel, limitation and res judicata? Held that - In any event, we do not find it possible to accept learned counsel s submission that granting compensation for the alleged lost potential of the land was permissible moulding of the relief. It was not the case of the appellants in the writ petition, even in the alternative, that the land could not be reclaimed and there was no claim for compensation for the slleged lost potential of the land or averments or particulars in support thereof. The relief that was sought was direction to the second respondent to reclaim the appellants land; awarding compensation for the alleged lost potential of the land was not moulding the relief that was sought. We hold that the award of Rs.77,19,800 for loss of potential of land and interest thereon falls outside the scope of the reference to arbitration and is not in relation to a dispute contemplated thereby. The award dated 2nd January, 1998 is set aside.

Summary

Issues Involved:

1. Scope of the arbitration agreement and reference.
2. Award of compensation for loss of potential of land.
3. Award of damages for crops.
4. Alleged violation of natural justice due to non-provision of the inspection report.
5. Award of interest without jurisdiction.

Analysis:

1. Scope of the Arbitration Agreement and Reference:

The appellants filed a writ petition in the High Court of Punjab and Haryana against the respondents, alleging damage to their agricultural lands, crops, and residential properties due to effluents from the second respondent's fertilizer plant. The writ petition sought a direction to close the plant, damages of Rs. 1 crore, and reclamation of agricultural land. The petition was dismissed by the High Court, and the appellants sought special leave to appeal to the Supreme Court. The parties agreed to go to arbitration, and the disputes were referred to two named arbitrators. The arbitration agreement referred to "disputes and differences arising between the parties in S.L.P. (Civil) No.17106 of 1996," which arose from the writ petition.

2. Award of Compensation for Loss of Potential of Land:

The appellants claimed that their land had become unfit for cultivation due to chemical pollutants and fly ash, and sought compensation for the total loss of land value. The arbitrators awarded Rs. 77,19,800 for the loss of potential of the land. The learned Attorney General argued that this award fell outside the scope of the reference to arbitration, as the writ petition did not claim damages for the loss of potential of the land. The Supreme Court held that the award for loss of potential of the land was not within the scope of the reference and was not related to a dispute contemplated by the arbitration agreement.

3. Award of Damages for Crops:

The arbitrators awarded Rs. 5,14,347.50 for damage to crops other than the orchard for the years 1984, 1986, 1987, 1988, 1990, and 1991. The learned Attorney General did not specifically argue against this award. The Supreme Court noted that this item of the award was easily separable from the rest and did not set it aside, allowing the appellants to agitate their claim for reclamation of the land in the appeal.

4. Alleged Violation of Natural Justice:

The learned Attorney General contended that the award made copious references to an inspection report by the arbitrators, which was not provided to the second respondent, thus violating the principles of natural justice. The Supreme Court did not find it necessary to address this argument in detail, as the award for loss of potential of the land was set aside on other grounds.

5. Award of Interest Without Jurisdiction:

The learned Attorney General argued that the award of interest was without jurisdiction, as there was no claim for interest in the writ petition. The Supreme Court did not specifically address this argument, as the award for loss of potential of the land, which included the interest component, was set aside.

Conclusion:

The Supreme Court set aside the award dated 2nd January 1998, holding that the award of Rs. 77,19,800 for loss of potential of land and interest thereon fell outside the scope of the reference to arbitration. The appellants' application to take the award on record and dispose of the appeal in terms thereof was dismissed, and the second respondent's application to set aside the award was allowed. The appeal was directed to be heard on its merits in the ordinary course, with no orders as to costs.