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MEERA GOYAL vs PRITI SARAF

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$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI

+ O.M.P. 5/2020 & I.A. 6813/2020

MEERA GOYAL …. Petitioner
Through: Mr. Ashwini Kumar Mata, Sr. Adv. with Mr. Abhishek Puri, Mr. V. Siddharth and Mr. Surbhi Gupta and Mr. Karan Gaur, Advs.

versus

PRITI SARAF ….. Respondent
Through: Ms. Manisha Parmar, Mr. Kapil Chaudhary, Advs.

CORAM:
HON’BLE MR. JUSTICE C. HARI SHANKAR

J U D G M E N T
% 04.12.2023

[Statutory provisions have been reproduced in footnotes only to the extent they are relevant.]

1. Meera Goyal (“Meera” hereinafter) challenges, in this petition under Section 341 of the Arbitration and Conciliation Act 1996 (“the 1996 Act”), award dated 8 May 2020 passed by the learned Sole Arbitrator in an arbitration instituted against Meera by the respondent Priti Saraf (“Priti” hereinafter).

2. The learned Arbitrator has awarded Priti ? 38 crores along with interest thereon, @ 9 % p.a. w.e.f., 30 January 2013 till realisation.

Facts

3. The dispute emanates from an Agreement to Sell (ATS) dated 24 December 2011 executed between Meera and Priti. By the said agreement, Priti agreed to purchase 1205.23 sq. yds. of a property owned by Meera situated at 37, Friends Colony (East), New Delhi (“the disputed property”). Meera came into possession of the disputed property vide sale deed dated 4 May 2005. The total area of the property, as owned by Meera, was 3930 sq. yds. The following covenants of the ATS are relevant:

“1. That in consideration of the aforesaid total sale consideration of Rs. 63,28,50,750/- (Sixty Three Crores Twenty Eight Lacs Fifty Thousand Seven Hundred and Fifty Only) and upon the terms and conditions contained herein, the VENDOR doth hereby agree to sell, convey, transfer and assign the SAID PROPERTY (fully described above) with all fittings, fixtures, connections, structure standing thereon, free from all encumbrances, unto the VENDEE.

2. (a) That out of the total sale consideration, the VENDEE has paid to the VENDOR a sum of Rs. 12,50,00,000/- (Rupees Twelve Crores Fifty Lacs Only), as earnest money at the time of execution of this Agreement to Sell, vide Manager’s Cheque No. 068829, dated 24.12.2011, drawn on HDFC Bank, New Friends Colony, New Delhi, the receipt of which the VENDOR hereby admits and acknowledges.

(b) The payment of the balance sale consideration of Rs. 50,78,50,750/- (Rupees Fifty Crores Seventy Eight Lacs Fifty Thousand Seven Hundred and fifty only) will be paid by the VENDEE to the VENDOR on or before 07.04.2012, subject to completion of the Compulsory Requirements by the VENDOR, simultaneously when the vacant physical possession of the SAID PROPERTY will be delivered by the VENDOR to the VENDEE and also all the deeds and documents as may be required by the VENDEE for the conveyance, transfer and sale of the SAID PROPERTY will also be executed and registered by the VENDOR in favour of the VENDEE or her nominee.

3. That upto 24.03.2012, the VENDOR shall complete the following Compulsory Requirements, at her own cost and expenses:-

a) Pay/Settle/Clear all the dues of the said Bank and also obtain No Dues Certificate and get all the original title deeds released from the Bank.
b) Get the building plan sanction from the authorities concerned for the re-construction of the ENTIRE PROPERTY (for which drawings on the SAID PROPERTY shall be provided by the VENDEE to the VENDOR upto 10.01.2012), as an incidence whereof, the VENDEE be permitted to construct/re-construct a fresh residential building comprising of Basement, Stilts, Ground, First, Second and Third Floors with Terrace on the SAID PROPERTY by utilizing proportionate FAR and proportionate number of dwelling units as may be available for the entire plot of land. It is clarified that the costs and expenses incurred in getting such building plans sanctioned shall be paid and borne by the VENDEE, immediately so being demanded by the VENDOR, which cost have bene mutually agreed between the parties to be approx. 20 to 22 lacs. Further, it is agreed that the drawings/ plans to be provided by the VENDEE shall adhere to building byelaws.

herein referred to as ‘THE COMPULSORY REQUIREMENTS’. Upon completion of the Compulsory Requirements, the Vendors will inform the VENDEE by registered A.D. Post.

4. That the actual physical vacant possession of the SAID PROPERTY will be delivered by the VENDOR to the VENDEE, on receiving the balance sale consideration.

5. That is has been specifically agreed between the parties, that time is the essence of this Contract, and in case the VENDEE fails to make the payment of balance sale consideration to the VENDOR, within the stipulated period upto 10.04.2012, subject to the completion of the compulsory requirements by the VENDOR, then the earnest money so received by the VENDOR from the VENDEE shall stand forfeited and this Agreement to Sell shall be treated as cancelled without any further reference to the VENDEE by refund of the remaining amount hereby received back to the VENDEE. HOWEVER, in case the VENDOR fails to complete the compulsory requirements upto 24.03.2012 and thereafter execute and register sale deed in respect of the SAID PROPERTY in favour of the VENDEE or her nominee(s) within the period as herein agreed, despite the VENDEE being ready and willing to pay the balance sale consideration, then the VENDEE shall have right to get this transaction enforced through the court of law by specific performance at the cost and expenses of the VENDOR.

*****

9. That pending completion of the sale, the VENDOR shall not enter into any agreement of sale in respect of the SAID PROPERTY or any part thereof nor the VENDOR will in any manner create any charge, mortgage and or deal with the SAID PROPERTY in any manner or enter into any arrangement in respect of the SAID PROPERTY.

*****

11. That self attested Photostat Copies of all relevant documents in respect of the ENTIRE PROPERTY have been handed over by the VENDOR to the VENDEE and all original documents in respect of the ENTIRE PROPERTY as are presently available (viz. Sale Deed dated 04.05.2005, in favour of the Vendor) shall be kept by the VENDOR, for the VENDEE and other owners of the ENTIRE PROPERTY and hereby undertakes to show/produce the same as and when asked/required by the VENDEE and hereby further undertakes not to encumber the same with respect to the SAID PROPERTY, under any circumstances.

*****

23. That any dispute or difference arising out of or in relation to or in connection with this agreement including without limiting the disputes relating to a breach or non-compliance with the terms of this Agreement shall be settled by arbitration by a Sole Arbitrator appointed by the parties. The sole arbitrator shall be mutually appointed by the parties within 30 days of the dispute occurring, failing which the arbitrator shall be appointed in accordance with the Arbitration & Conciliation Act, 1996. The seat and venue of arbitration shall be at New Delhi and the arbitration proceedings shall be conducted in accordance with the Arbitration & Conciliation Act, 1996 and rules made thereunder for the time being in force.”

4. Thus, sub-clauses (a) to (c) of clause 3 of the ATS required Meera to comply with certain Compulsory Requirements on or before 24 March 2012. Three such requirements were envisaged. Sub-clause (a) required Meera to clear the dues payable to the State Bank of Patiala (hereinafter “the Bank”), from whom Meera had availed a loan, obtain a No Dues Certificate from the Bank and get the original title deeds of the disputed property released from the Bank. Sub-clause (b) required her to get the building plans of the disputed property sanctioned from the Municipal Corporation of Delhi (MCD) for the purposes of reconstruction. Sub-clause (c) required her to get the property demarcated by installation of pillars. Meera was required to convey, to Priti, the compliance of the aforesaid Compulsory Requirements by Registered AD post.

5. The ATS recorded that the total sale consideration for the disputed property was ? 63,28,50,750/-, out of which ? 12.5 crores was paid by Priti to Meera at the time of execution of the ATS as earnest money. The balance amount of ? 50,78,50,750/- was payable by Priti to Meera on or before 7 April 2012, subject to completion of the afore-noted Compulsory Requirements by Meera. In that event, vacation and physical possession of the property was also required simultaneously to be handed over by Meera to Priti along with all documents necessary for transfer of title in respect of the disputed property.

6. Clause 5 of the ATS envisaged time as being of the essence of the contract, and provided for the consequence in the event of default either by Meera or by Priti of their respective obligations. In the event of completion, by Meera, of the Compulsory Requirements, and failure on the part of Priti to make payment of the balance sale consideration to Meera till 10 April 2012, the earnest money of ? 12.5 crores paid by Priti to Meera would stand forfeited and the ATS would be liable to be treated as cancelled, with Priti being entitled to refund only of the further amount of ? 5.4 crores paid by her. If, however, Meera failed to comply with the Compulsory Requirements up to 24 March 2012 and thereafter to execute and register the sale deed in respect of the disputed property in favour of Priti, within the time stipulated in that regard, despite Priti being ready and willing to pay the balance sale consideration, Priti would have the right to have the transaction enforced through the court of law by seeking specific performance.

7. On 24 December 2011, Meera handed over 11 postdated cheques (PDCs) to Priti as security, covering a total amount of ? 25.5 crores. According to Meera, the said cheques included the earnest money amount of ? 12.5 crores paid by Priti to her. The cheques, being of three months’ validity, expired between 10 August 2012 and 30 August 2012.

8. The case of Priti, as set up before the learned Arbitrator, was that Meera failed to comply with the Compulsory Requirements before the terminus ad quem of 24 March 2012, though additional time in that regard was also granted by Priti.

9. The impugned award has substantially rejected this contention of Priti. The learned Arbitrator holds that sub-clauses (b) and (c) of Clause 3 of the ATS were in fact fulfilled by Meera and clause (a) was also partly fulfilled, to the extent of clearance of the dues of the Bank and obtaining of a No Dues Certificate. The learned Arbitrator has found Meera, however, to be remiss in her obligation under Clause 3 of the ATS to the extent of the requirement of getting the original title deeds of the disputed property released from the bank.
10. The findings against Priti, to the extent of substantial compliance, by Meera, with the Compulsory Requirements envisaged by Clause 3 of the ATS, are not under challenge by Priti. They have, therefore, to be taken as correct. The only default, on Meera’s part, in respect of compliance with the Compulsory Requirements envisaged only in Clause 3 of the ATS was, as per the impugned award, therefore, only in failing to have the original title deeds of the disputed property released from the bank.

11. Meera’s contention, both before the learned Arbitrator and before this Court, is, however, that she had complied with the Compulsory Requirements envisaged in Clause 3 of the ATS, albeit belatedly. The delay in compliance with the Compulsory Requirements, according to Meera, was because Priti defaulted in her obligation to submit the building plans in respect of the disputed property on or before the last week of January 2012. Meera contends, however, that, even if it were to be presumed that there was delay on her part in complying with the Compulsory Requirements envisaged by Clause 3 of the ATS, that did not extend the date of 10 April 2012, by which date Priti was required to pay the balance sale consideration to Meera. The additional time granted by Priti to Meera to comply with the Compulsory Requirements, too, according to Meera, did not extend the said date.

12. Meera’s case, before the learned Arbitrator as well as before this Court, is that it was Priti who defaulted in her obligation to pay the balance sale consideration to Meera on or before 10 April 2012.
13. On 11 May 2012, Meera wrote to Priti, informing her that the building plans, in respect of disputed property, had been sanctioned by the MCD. On 2 June 2012, No Dues Certificate was obtained by Meera from the bank, and the requirement of the demarcation of the dispute property by erection of pillars was also fulfilled. According to Meera, with this, the Compulsory Requirements envisaged in Clause 3 of the ATS stood met by her. At the highest, therefore, contends Meera, Priti would have had to make the balance payment of the sale consideration within 17 days (being the difference between 10 April 2012 and 24 March 2012) from 2 June 2012, which also expired on 19 June 2012. Priti, however, failed to make the balance payment even by 19 June 2012.

14. On 23 May 2012, Priti made an additional payment of ? 5.4 crores to Meera. According to Meera, this payment was made only because the building plans in respect of the disputed property had been sanctioned by the MCD on 11 May 2012. According to Priti, however, the said payment was made at Meera’s request.

15. As the 11 PDCs for ? 25.5 crores, handed over by Meera to Priti, had expired, Priti wrote on 26 February 2013 to Meera, requesting her to revalidate the cheques and hand over the possession of the disputed property to Priti. Further, according to Priti, as Meera had failed to comply with the Compulsory Requirements on or before 24 March 2012, it was agreed between the parties that Priti could pay the balance sale consideration as per mutual agreement between them.

16. Meera has, however, denied both these assertions, i.e., that Priti requested Meera to revalidate the cheques and hand over possession of the disputed property to her and that there was any agreement, between them, re-scheduling the period within which Priti was to make payment of the balance sale consideration to Meera.

17. According to Priti, the default, on Meera’s part, in complying with the Compulsory Requirements envisaged in Clause 3 of the ATS by 24 March 2012 resulted in novation of Clause 3 of the ATS within the meaning of Section 622 of the Indian Contract Act.

18. Besides refuting the plea of novation, Meera further averred, before the learned Arbitrator, that there was no pleading to the said effect. Priti, however, sought to point out, before the learned Arbitrator, that a specific plea to this effect was contained in sub-paras (v) to (xii) of the Statement of Claim (SOC), filed by Priti, before the learned Arbitrator, which read thus:

“v. That, after completion of the aforesaid requirements, which was to be done by the Respondent latest by 24.03.2012, the Claimant was to pay the balance Sale Consideration to the Respondent by 10.04.2012. It was specifically agreed between the parties in the said Agreement that time was the essence of the contract and in case the Respondent failed to complete the aforesaid requirements by 24.03.2012 and as a result thereof failed to execute and register a Sale Deed in favour of the Claimant within the stipulated period, the Claimant shall have the right to get the transaction through a Court of Law.

vi. It is pertinent to mention herein that despite the fact that the Respondent had to fulfil the aforesaid compulsory requirements before the execution and registration of the Sale Deed, the Claimant still paid such a huge sum of Rs. 12,50,00,000/- to the Respondent at the stage of execution of the Agreement, purely at the insistence of the Respondent who purportedly was in dire need of money at that time. That in order to secure the interests of the Claimant, the Respondent handed over certain post-dated cheques for a sum of Rs. 25,50,00,000/- to the Claimant as security with the clear understanding that in case the transaction is not effected due to any default on the part of the Respondent, the Claimant shall be entitled to the amount of Rs. 25,50,00,000/- towards damages and injury by encashing the said cheques.

vii. However, despite the clear and unequivocal terms and conditions enumerated in the Agreement, the Respondent failed to complete the aforesaid requirements within the time stipulated in the Agreement (i.e. on or before 24.03.2012). That the Respondent approached the Claimant and requested her to extend the time period for completing the said requirements on the pretext that the Respondent was trying to complete the requirements at the earlier. Even though time was the essence of the contract, as was also categorically enumerated therein, the Claimant agreed to grant some additional time to the Respondent for completing the requirements.

viii. The building plans were sanctioned on 11.05.2012 and at the request of the Respondent, the Claimant paid a further sum of Rs. 5,40,00,000/- (Rupees Five Crore and Forty Lakhs) to the Respondent. However, the Respondent still did not manage to obtain a No Dues Certificate from the State Bank of Patiala, which was one of the mandatory requirements under the Agreement. It is pertinent to mention herein that since the Respondent had failed to complete the aforesaid compulsory requirements enumerated in the Agreement on or before 24.03.2012, it was agreed by the Respondent that the balance sale consideration amount of Rs. 50,78,50,750/-, which was payable by the Claimant to the Respondent under the terms of the Agreement, would be paid by the Claimant in the manner which would be mutually agreed to between the parties subsequently. Accordingly, Clause 5 of the Agreement, under which the Claimant was to pay the balance sale consideration to the Respondent, subject to the completion of the aforesaid compulsory requirements by the Respondent on or before 24.03.2012, stood novated by the conduct of the Respondent. It is pertinent to mention herein that as a result of the omissions of the Respondent in completing the compulsory requirements within the stipulated time the Claimant had lost her trust in the Respondent and accordingly at the time of payment of the further amount of Rs. 5,40,00,000/- the Claimant requested the Respondent to either revalidate the cheque issues by the Respondent (for the amount of Rs. 22,50,00,000/-) or to handover the possession of the Property to the Claimant. However, the Respondent failed to either revalidate the cheques or handover the possession of the property to the Claimant.
ix. That on 30.01.2013, the Claimant was shocked to receive a purported termination letter dated 30.01.2013 issued by the Respondent thereby levelling false, frivolous and concocted allegations against the Claimant. The said letter was issued by the Respondent with a view to defraud and cheat the Claimant and was a clear attempt on the part of the Respondent to avoid her obligations under the Agreement. Along with the said letter, the Respondent sent a cheque of Rs. 5,40,00,000/- to the Claimant and retained the balance amount which had been paid by the Claimant towards the Sale Consideration. It is submitted that the said letter was issued by the Respondent in order to defeat the legitimate rights of the Claimant under the Agreement and to illegally and unlawfully grab the hard-earned money of the Claimant. It is clear that the purported termination letter was a feeble attempt on the part of the Respondent to take advantage of his own wrong as the aforesaid Clause 5 of the Agreement stood novated solely due to the conduct of the Respondent in not completing the compulsory requirements within the time stipulated in the Agreement.

x. That the Claimant, vide her letter dated 26.02.2013, duly replied to the purported termination letter, categorically stating therein that the Agreement was still valid, subsisting and binding and called upon the Respondent to perform her part of the Agreement. It was further stated in the said reply that since the Agreement was still valid and Clause 5 of the Agreement stood novated by the conduct of the Respondent, she was not entitled to forfeit the sum of Rs. 12,50,00,000/- paid by the claimant to the Respondent and she was also not entitled to invoke the provision for termination of the Agreement contained in Clause 5. Further, since the validity of the post-dated cheques issued by the Respondent to the claimant as security for the performance of the Agreement had expired, the Claimant called upon the Respondent to furnish fresh cheques for a sum of Rs. 25,50,00,000/- as security for the performance of the Agreement. Further, the Claimant even issued two further letters dated 13.03.2013 and 23.05.2013 to the Respondent thereby categorically reiterating that Clause 5 of the Agreement stood novated by the conduct of the Respondent and that the Agreement to Sell is still valid and subsisting and that the Respondent was not entitled to forfeit the amount of Rs.12,50,00,000/- paid by the Claimant to the Respondent.

xi. That upon the failure of the Respondent to perform her obligations under the Agreement or to pay the aforesaid amount of Rs.12,50,00,000/- to the Claimant, the Claimant approached the Economic Offences Wing of the Delhi Police on 24.11.2014 and filed a Complaint against the Respondent for fraud, cheating, criminal misappropriation and breach of trust. Further, on 04.05.2015, the Claimant also issued a letter to the Joint Commissioner of Police, Economic Offences Wing, New Delhi thereby reiterating the aforesaid Complaint against the Respondent. That the Claimant even filed an Application under Section 156(3) of the Code of Criminal Procedure, 1973 against the Respondent before the Court of the Chief Metropolitan Magistrate, Saket District Courts for the registration of an FIR against the Respondent, which was allowed by the Hon’ble Court vide its order dated 15.11.2016 and the Police were directed to register an FIR against the Respondent. However, the Respondent has still neither performed her obligations under the Agreement nor has she refunded the money along with the damages to the Claimant.

xii. That from the conduct of the Respondent, it became clear to the Claimant that right from the inception, the intention of the Respondent was to cheat and defraud the Claimant and to grab the hard-earned money of the Claimant and that the Respondent had no intention of parting with her property. Constrained by the failure of the Respondent to refund the money of the Claimant (along with the damages which had been agreed upon between the parties), the Claimant initiated arbitration proceedings against the Respondent by sending her a legal notice dated 28.01.2016 for invoking the arbitration clause in the Agreement and for commencement of arbitration proceedings to recover the money (along with damages) illegally and unlawfully retained by the Respondent.”

19. On 28 December 2012, Meera wrote to Priti alleging that Priti had failed to pay the balance sale consideration on or before 10 April 2012 and further stating that, if the said amount was not paid by Priti within 15 days, Meera would terminate the ATS, forfeit the earnest money of ? 12.5 crores paid by Priti and return, to Priti, the later payment of ? 5.4 crores made by her.

20. Meera contends that Priti failed to pay the balance sale consideration even within this later period of 15 days stipulated by Meera in her letter dated 28 December 2012 so that, on the expiry of the said period of 15 days, Meera became entitled to terminate the ATS, and forfeit the earnest money of ? 12.5 crores paid by Priti after refunding, to Priti, the second payment of ? 5.4 crores made by her.

21. On 30 January 2013, Meera again wrote to Priti, stating that she was terminating the ATS and enclosing, with the letter, a cheque for ? 5.4 crores. The said cheque was admittedly encashed by Priti. Meera’s contention is that this act of encashment amounted to deemed acceptance, by Priti, of the terms of the letter dated 30 January 2013 including the factum of termination of the ATS. She relies, for this purpose, on Section 8 of the Contract Act as well as the judgment of the Supreme Court in Bhagwati Prasad Pawan Kumar v. U.O.I.3. The said communication was followed up by reminders on 13 March 2013 and 23 May 2013.

22. That both the aforesaid letters dated 28 December 2012 and 30 January 2013 were in fact received by Priti, is manifest from the fact that Priti provided a consolidated response vide letter dated 26 February 2013, addressed to Meera. Priti asserted, in the said reply, that Clause 5 of the ATS, which envisaged the balance sale consideration being made by Priti on or before 10 April 2012, stood novated by the default, on Meera’s part, to comply with the Compulsory Requirements stipulated in Clause 3 of the ATS on or before the cut off date of 24 March 2012. As such, she refuted Meera’s contention that she was entitled to terminate the ATS. Priti asserted that the ATS continued to remain valid and subsisting and called upon Meera to comply with her obligations thereunder. She also asserted, therefore, that Meera had no right to forfeit the earnest money of ? 5.4 crores paid by Priti. Priti reiterated her request to Meera to revalidate the cheques of ? 25.5 crores handed over by Meera which had expired by efflux of time.

23. As none of the communications elicited any response from Meera, Priti addressed a notice, under Section 214 of the 1996 Act, to Meera on 28 January 2016, purporting to invoke arbitration in terms of Clause 23 of the ATS.

24. Meera, however, denies receipt of the aforesaid notice dated 28 January 2016, addressed by Priti to her.

25. This denial constitutes a main bone of contention between Meera and Priti. Meera’s contention is that the original notice dated 28 January 2016, and the postal receipt evidencing service of the said notice on Meera, never saw the light of day and that Priti only filed a certified copy of the said notice before the learned Arbitrator after conclusion of arguments. She further contends that, as the notice dated 28 January 2016 is not a public document, no presumption of validity attaches to it under the Indian Evidence Act, 1872 and that, therefore, Priti had necessarily to prove the document by moving an application to lead secondary evidence. Meera relies, for this proposition, on the judgment of the Supreme Court in Dr. Gurmukh Ram Madan v. Bhagwan Ram Madan5.

26. Priti contends, per contra, that the plea of non-receipt of the notice dated 28 January 2016 has no legs whatsoever to stand on. She points out that reference to the said notice figures in para 9 of the Arb. Pet. 585/2016 filed by her before this Court (in which this Court referred the dispute to arbitration), which reads thus:

“9. Owing to the failure of the Respondent to perform her obligations under the Agreement or to pay the aforesaid amount to the Petitioner, the Petitioner was constrained to initiate arbitration proceedings against the Respondent by issuing her a legal notice dated 28.01.2016 for invoking the arbitration clause in the said Agreement and for commencement of arbitration proceedings. That the said notice was duly received by the Respondent. Annexed hereto and marked as Annexure P-6 (Colly) is the Legal Notice dated 28.01.2016 along with original postal receipts.”

27. The contents of the said paragraph, she submits, were not denied by Meera in the corresponding paragraph of her reply to Arb. Pet. 585/2016, which, however, is seen to read thus:
“9-10 That in response to the contents and averments made in paras 9 and 10 it is submitted that Respondent did not receive the alleged legal notice dated 28.01.2016.”

28. Priti further points out that the legal notice as well as the original postal receipt evidencing dispatch and service thereof on Meera were filed along with Arb. Pet. 585/2016 before this Court.

29. Priti further seeks to substantiate the fact of receipt of notice dated 28 January 2016 by Meera on the basis of order dated 15 March 2019, passed by this Court in Crl. M.C. 1718/2017, which records Meera’s contention that the parties had invoked arbitration in terms of the agreement between them. Invocation of arbitration, contends Priti, could only be by way of the notice dated 28 January 2016, as there is no other communication, cited by Meera, whereby arbitration was invoked.

30. As there was no response from Meera to the aforesaid notice dated 28 January 2016, Priti instituted Arb. Pet. 585/2016 before this Court, seeking appointment of an arbitrator to arbitrate on the dispute between Meera and Priti. The said petition was disposed of, by this Court, vide order dated 4 November 2016, appointing Hon’ble Mr. Justice Mukul Mudgal, an eminent former Judge of this Court and Chief Justice of the High Court of Punjab and Haryana as sole arbitrator to arbitrate on the dispute.

31. Mukul Mudgal, J. recused from the arbitral proceedings, whereupon this Court, vide order dated 14 December 2018, appointed Hon’ble Ms. Justice Indermeet Kaur, also a learned retired Judge of this Court, to arbitrate on the dispute. The impugned award has come to be passed by Hon’ble Ms. Justice (Retd.) Indermeet Kaur.

Rival stands before the learned Arbitrator

32. Predicated on the above assertions, Priti, in her SOC filed before the learned Arbitrator, submitted that, as the ATS could not be effectuated owing to the default on Meera’s part in complying with the Compulsory Requirements envisaged in Clause 3 of the ATS on or before 24 March 2012, Priti had become entitled to damages of ? 25.5 crores, apart from a refund of the earnest money of ? 12.5 crores paid by her. Thus, Priti claimed, in the arbitral proceedings, the aforesaid amount of ? 25.5 crores and ? 12.5 crores, totalling to ? 38 crores, apart from pre-arbitration interest and interest from the date of institution of the arbitral proceedings till the payment of the aforesaid amount.

33. Apart from the submissions already noted hereinbefore, Meera, in her Statement of Defence (SOD), submitted, before the learned Arbitrator, that, Priti’s claims were hopelessly barred by time. It was submitted that, as the ATS had been terminated on 15 January 2013, the period of limitation, for claiming refund of earnest money deposit, expired, at the latest, on 15 January 2016. The notice invoking arbitration – even if it were to be treated as having been received – having been issued only on 28 January 2016, was barred by time. Similarly, it was contended that Priti’s claim of ? 25.5 crores, relatable to the expired cheques tendered by Meera was also barred by time, as the last cheque had expired on 30 August 2012. Without prejudice, Meera contended that Priti could have encashed the said cheques before they became invalid.

34. Meera further categorically denied receipt of the notice dated 28 January 2016, whereunder Priti purportedly invoked arbitration. An arbitral proceeding, which is not preceded by a Section 21 notice, contended Meera, was ab initio invalid, for which purpose reliance was placed on the judgment of this Court in Alupro Building Systems Pvt Ltd v. Ozone Overseas Pvt Ltd6.

35. Meera emphatically denied the charge of any default, on her part, in complying with the Compulsory Requirements envisaged in Clause 3 of the ATS. She submitted that all requirements stood complied with, and that the question of return of the original title deeds was never an issue between the parties. Meera sought to place reliance on the cross-examination of her husband, Suresh Chand Goyal, who deposed as RW-1, in which, according to her, RW-1 had specifically admitted that he had received back the original title deeds from the Bank and that they were lying with him. However, in the same breath, Meera also contended before the learned Arbitrator, that the evidence of RW-1 could not be relied upon, as it was contradictory in terms and as he had specifically stated that he was not personally aware of the relevant facts.

36. Insofar as the delay in complying with the Compulsory Requirements was concerned, Meera contended that the delay was attributable only to the delay on Priti’s part in providing the relevant drawings. Inasmuch as the Compulsory Requirements stood fulfilled by Meera, and Priti, nonetheless, failed to pay the balance sale consideration by 10 April 2012 or even up to 15 January 2013, Meera contended that she had correctly forfeited the earnest money deposit of ? 12.5 crores made by Meera. She relied, for this purpose, on the judgment of the Supreme Court in Satish Batra v. Sudhir Rawal7.

37. Meera also disputed Priti’s claims for interest, as she submitted that Priti’s claim was not covered by Section 38 of the Interest Act, 1978. She relied, for this purpose, on the judgment of the Supreme Court in State of Rajasthan v. Ferro Concrete Construction Pvt. Ltd.9. Moreover, she submitted that Priti had not claimed any interest in her notice dated 28 January 2016, whereunder she purportedly initiated arbitral proceedings against Meera.

The Impugned Award

38. The learned Arbitrator held, with respect to the various issues which arose for consideration, as under.
39. Re. limitation

39.1 In this context, the learned Arbitrator first addressed the submission of Meera that she had not received the notice dated 28 January 2016 issued by Priti under Section 21 of the 1996 Act. She observed that the said notice was a document which found mention in all pleadings filed by Priti since inception. It also found mention in OMP (I) 28/2016 filed by Priti under Section 9 and Arb. Pet. 585/2016 filed by Priti under Section 11 of the 1996 Act, as well as in the SOC filed by Priti before the learned Arbitrator. She also noted that, admittedly, the notice dated 28 January 2016, as well as the postal receipt evidencing service of the said notice on Meera had been annexed with OMP (I) 28/2016 and Arb. Pet. 585/2016.

39.2 The postal receipt, notes the learned Arbitrator, showed that the notice dated 28 January 2016 had, in fact, been received by Meera, whose name was mentioned on the Registered AD cover. She also notes that the tracking number and the name of the respondent as it figured on the receipt column tallied. The address reflected on the registered AD cover was admittedly the address of Meera, where she was residing even at that stage. As such, there was a legal presumption, under Section 114(g)10 of the Evidence Act, about receipt of the notice by Meera.

39.3 The learned Arbitrator also noted that, in para 6 of Arb. Pet. 585/2016, Priti had clearly stated that the original postal receipt was attached with the notice. Meera, even while denying receipt of the notice, did not dispute the fact that the original postal receipt was filed with Arbitration Petition. Submission to that effect was only made belatedly at the stage of final arguments before the learned Arbitrator.

39.4 The learned Arbitrator also relied on the order dated 15 March 2019 of this Court in Crl. M.C. 1718/2017, which recorded Meera’s statement that the parties had invoked arbitration, which was pending. The only notice invoking arbitration was the letter dated 28 January 2016. Having admitted that arbitration had been invoked, Meera could not now seek to contend that she had not received the notice dated 28 January 2016.

39.5 In view of all these facts, the learned Arbitrator held that the fact of issuance of notice dated 28 January 2016 by Priti, and receipt thereof by Meera on 30 January 2016 stood duly proved.

39.6 The learned Arbitrator also found the submission of Meera that the ATS was terminated on 15 January 2013 to be incorrect. She noted that the termination notice was dated 30 January 2013, which Meera herself relied upon. The notice dated 30 January 2013 unequivocally stated that the ATS was “hereby terminated with immediate effect”.

39.7 Inasmuch as arbitration was invoked on 28 January 2016, which was within a period of 3 years reckoned from 30 January 2016, the learned Arbitrator found that the invocation of arbitration was within limitation.

39.8 She also noted, in this context, that the cause of action for both the claims in the claim petition i.e. for the claim or ? 12.5 crores and 25.5 crores arose only after termination of the ATS. Similarly, there was no question of claiming pre-suit interest at any earlier point of time. As such, all claims filed by Priti were found to be within limitation. The plea of limitation, urged by Meera was, therefore, rejected.

40. On merits

40.1 On merits, the learned Arbitrator holds that Clause 5 of the ATS was clear and categorical in requiring payment of the balance sale consideration to be made by Priti on or before 10 April 2012 only subject to compliance, by Meera, with the Compulsory Requirements envisaged in Clause 3 on or before 24 March 2012. There were three Compulsory Requirements, envisaged in sub-clauses (a) to (c) of Clause 3 of the ATS. The Compulsory Requirements envisaged in sub-clauses (b) and (c) of Clause 3 had been fulfilled by Meera. Insofar as the Compulsory Requirements in sub-clause (a) of Clause 3 were concerned, though Meera had obtained a No Dues Certificate from the Bank, there was no evidence either oral or documentary, indicating that the original title deeds of the property had been collected by Meera from the Bank at any point of time. The requirement of obtaining the original title deeds of the disputed property from the Bank was not an empty formality, but was necessary in view of Clauses 9 and 11 of the ATS, of which Clause 9 proscribed Meera, pending completion of sale of the disputed property, to enter into any agreement qua the said property with any third party and Clause 11 required the original documents in respect of the disputed property to be retained by Meera, pending completion of sale of the disputed property, with Priti having the right to inspect and peruse the documents. The letter dated 2 June 2012 from the Bank to Meera clearly stated that the original title deeds of the disputed property were still with the Bank, and advised Meera to have them collected. There was no evidence to indicate that Meera heeded this advice and had the original title deeds collected from the Bank. The learned Arbitrator also holds that, even before her, Meera was unable to produce the original title deeds.

40.2 As such, the Compulsory Requirements envisaged in Clause 3(a) of the ATS were not fulfilled by Meera to the extent they required her to collect the original title deeds of the disputed property from the Bank.

40.3 In view of non compliance, by Meera, with the Compulsory Requirements envisaged in Clause 3 of the ATS by 24 March 2012, Priti could not be compelled to pay the balance sale consideration on or before 10 April 2012. The learned Arbitrator also relied, in this context, on a suggestion put to Priti, deposing as CW-1, by Meera, that Priti was willing to comply with her obligations under the ATS upto the end of January 2013. This clearly indicated that time was no longer of the essence of the contract.

40.4 The aforesaid circumstances also indicated that Clause 5 of the Agreement stood novated/altered by the conduct of the parties. The learned Arbitrator relies, in this context, on the judgment of the Supreme Court in Nathu Lal v. Phool Chand11, which holds that, where obligations under a contract are to be performed in a particular sequence, the obligation to perform a later act in that sequence would arise only after the earlier act was performed. Meera having defaulted in complying with the Compulsory Requirements envisaged in Clause 3(a) before 24 March 2012, the requirement of Priti having to comply with the obligation to pay the balance payment on or before 10 April 2012 never arose.

40.5 In that view of the matter, the learned Arbitrator holds that Meera could not have forfeited the EMD of ? 12.5 crores made by Priti, as Clause 5 of the ATS permitted forfeiture of the earnest money only when, in the first instance, there was compliance, by Meera, with the Compulsory Requirements envisaged in Clause 3, within the time stipulated therein. The amount of ? 12.5 crores was, therefore, required to be refunded to Priti. As time was no longer of the essence of the contract, and the obligation of Priti to pay the balance sale consideration in accordance with Clause 5 of the ATS had not arisen, it could not be said that Priti was in default of the requirement of making payment of the balance sale consideration on or before 10 April 2012. There was nothing to indicate that the said amount included the EMD of ? 12.5 crores initially paid by Priti. As there was default, on the part of Meera, in complying with the Compulsory Requirements envisaged in Clause 3 of the ATS within the time stipulated in that regard, Priti was entitled to encash the cheques for ? 25.5 crores paid towards damages and injury in accordance with the agreement between the parties.

Rival Submissions before this Court

41. Considerations of brevity dictate that I deal with each of the issues raised by Meera by way of challenge to the impugned Award, the response of Priti, and return my findings issue wise thereafter. Before doing so, however, it is necessary to appreciate the true scope of interference, by the Court, under Section 34 of the 1996 Act, with an arbitral award. Decisions on the point are numerous. One need only refer to the latest exposition of law, by the Supreme Court, on the issue, as it would reflect the existing and extant legal position.

42. The two most recent judgments, from the Supreme Court, on Section 34, are Indian Oil Corporation Ltd v. Shree Ganesh Petroleum12 (IOCL) and Konkan Railway Corporation Ltd v. Chenab Bridge Project Undertaking13.

43. Without entering the factual thicket in that case, suffice it to note that, in IOCL, a learned Single Judge of the High Court of Bombay, in a challenge to an arbitral award under Section 34 of the 1996 Act, preferred not to interfere, opining that there were two possible views regarding the correct construction to be placed on the contractual covenants, and that the Arbitral Tribunal had adopted one of them, which was a reasonable interpretation. The Division Bench, however, reversed the decision of the learned Single Judge and reinterpreted Clause 5.1.2 of the contract, holding that the said clause also included indirect taxes such as service tax, GST, Works Contract Tax, etc. In doing so, the Division Bench applied the ejusdem generis principle. Proceeding therefrom, the Division Bench held that the Arbitral Tribunal, and the learned Single Judge, had erroneously assumed that the tax liability of the items forming part of the Bill of Quantities was “inbuilt” in the quoted costs and that no evidence was supplied to substantiate the conclusion. The matter was carried to the Supreme Court.

44. Observing, at the outset, that the scope of jurisdiction under Section 34 and 37 of the 1996 Act was similar, the Supreme Court proceeded, on the aspect of the scope of interference with the arbitral awards by the Court, to rule thus:
“19.  Therefore, the scope of jurisdiction under Section 34 and Section 37 of the Act is not akin to normal appellate jurisdiction. [UHL Power Co. Ltd. v. State of H.P.14. See also: Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd.15] It is well-settled that courts ought not to interfere with the arbitral award in a casual and cavalier manner. The mere possibility of an alternative view on facts or interpretation of the contract does not entitle courts to reverse the findings of the Arbitral Tribunal. [Ibid; Ssangyong Engg. & Construction Co. Ltd. v. NHAI16; Parsa Kente Collieries Ltd. v. Rajasthan Rajya Vidyut Utpadan Nigam Ltd.17] In Dyna Technologies (P) Ltd., this Court held:

“24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated.

25. Moreover, umpteen number of judgments of this Court have categorically held that the courts should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act.”

20.  In the present case, the Arbitral Tribunal interpreted the contractual clauses and rejected the respondent’s claims pertaining to Disputes I, III and IV. The findings were affirmed [Chenab Bridge Project Undertaking v. Konkan Railway Corpn. Ltd.18] by the Single Judge of the High Court in a challenge under Section 34 of the Act, who concluded that the interpretation of the Arbitral Tribunal was clearly a possible view, that was reasonable and fair-minded in approach.

*****

22.  The Single Judge of the High Court affirmed the findings of the Arbitral Tribunal. The reason for upholding the decision of the Tribunal is not that the Single Judge exercising jurisdiction under Section 34 of the Act is in complete agreement with the interpretation of the contractual clauses by the Arbitral Tribunal. The learned Judge exercising jurisdiction under Section 34 of the Act kept in mind the scope of challenge to an Arbitral Award as elucidated by a number of decisions of this Court. Section 34 jurisdiction will not be exercised merely because an alternative view on facts and interpretation of contract exists.

*****

25.  The principle of interpretation of contracts adopted by the Division Bench of the High Court that when two constructions are possible, then courts must prefer the one which gives effect and voice to all clauses, does not have absolute application. The said interpretation is subject to the jurisdiction which a court is called upon to exercise. While exercising jurisdiction under Section 37 of the Act, the Court is concerned about the jurisdiction that the Section 34 Court exercised while considering the challenge to the arbitral award. The jurisdiction under Section 34 of the Act is exercised only to see if the Arbitral Tribunal’s view is perverse or manifestly arbitrary. Accordingly, the question of reinterpreting the contract on an alternative view does not arise. If this is the principle applicable to exercise of jurisdiction under Section 34 of the Act, a Division Bench exercising jurisdiction under Section 37 of the Act cannot reverse an award, much less the decision of a Single Judge, on the ground that they have not given effect and voice to all clauses of the contract. This is where the Division Bench of the High Court committed an error, in re-interpreting a contractual clause while exercising jurisdiction under Section 37 of the Act. In any event, the decision in Radha Sundar Dutta v. Mohd. Jahadur Rahim19, relied on by the High Court was decided in 1959, and it pertains to proceedings arising under the Village Chaukidari Act, 1870 and Bengal Patni Taluks Regulation of 1819. Reliance on this judgment particularly for interfering with the concurrent interpretations of the contractual clause by the Arbitral Tribunal and Single Judge under Section 34 of the Act is not justified.

26.  As far as the decisions in South East Asia Marine Engg. and Constructions Ltd. v. Oil India Ltd.20 and Patel Engg. Ltd. v. North Eastern Electric Power Corpn. Ltd. (NEEPCO)21 are concerned, in both the cases, this Court affirmed the interference by a court exercising jurisdiction under Section 37 of the Act, with the concurrent findings of the Arbitral Tribunal as well as the Court under Section 34 of the Act, for good and valid reasons. In South East Asia Marine Engg. and Constructions, the Section 37 Court interfered with the award as the Arbitral Tribunal allowed the claim for price escalation for High-Speed Diesel under the “Change in Law” clause, by construing the circular increasing the HSD price as having “force of law”. The “Change in Law” clause therein provided for reimbursement of any additional costs on account of “change in or enactment of any law or interpretation of existing law”. The High Court, exercising jurisdiction under Section 37 of the Act, and this Court, found that the Arbitral Tribunal incorrectly construed the “Change in Law” clause as akin to a force majeure clause and allowed the claims. This was held to not be a possible interpretation of the contract and hence, the award was set aside. Similarly, in Patel Engg., the arbitral award was found to be based on irrelevant facts and the outcome was found to result in unjust enrichment, the latter being in violation of public policy of India under Section 34(2) of the Act. Therefore, in both these cases, this Court was convinced that the view of the Arbitral Tribunal was not even a possible view, and hence, perverse in nature.

27.  In the present case, we have examined the appreciation of evidence by the Arbitral Tribunal as well as the Single Judge of the High Court. We are convinced that their appreciation of the facts and interpretation of the contract is reasonable, and comprises a possible view. Keeping in mind the mandate of Section 5 of the 1996 Act,:

“5.  Extent of judicial intervention. – Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part.” we note the observation of this Court in Vidya Drolia v. Durga Trading Corpn.22:

“18. Arbitration is a private dispute resolution mechanism whereby two or more parties agree to resolve their current or future disputes by an Arbitral Tribunal, as an alternative to adjudication by the courts or a public forum established by law. Parties by mutual agreement forgo their right in law to have their disputes adjudicated in the courts/public forum. Arbitration agreement gives contractual authority to the Arbitral Tribunal to adjudicate the disputes and bind the parties.”

28.  The conclusion of the Division Bench of the High Court that the award is liable to be set aside on the ground of perversity is incorrect, as it overlooks the principle laid down in Associate Builders v. DDA23, wherein this Court held:

“32. A good working test of perversity is contained in two judgments. In STO v. Gopi Nath & Sons24], it was held:

‘7. … It is, no doubt, true that if a finding of fact is arrived at by ignoring or excluding relevant material or by taking into consideration irrelevant material or if the finding so outrageously defies logic as to suffer from the vice of irrationality incurring the blame of being perverse, then, the finding is rendered infirm in law.’

In Kuldeep Singh v. Commr. of Police25:

‘10. A broad distinction has, therefore, to be maintained between the decisions which are perverse and those which are not. If a decision is arrived at on no evidence or evidence which is thoroughly unreliable and no reasonable person would act upon it, the order would be perverse. But if there is some evidence on record which is acceptable and which could be relied upon, howsoever compendious it may be, the conclusions would not be treated as perverse and the findings would not be interfered with.’

33. It must clearly be understood that when a court is applying the “public policy” test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score [ Very often an arbitrator is a lay person not necessarily trained in law. Lord Mansfield, a famous English Judge, once advised a high military officer in Jamaica who needed to act as a Judge as follows: “General, you have a sound head, and a good heart; take courage and you will do very well, in your occupation, in a court of equity. My advice is, to make your decrees as your head and your heart dictate, to hear both sides patiently, to decide with firmness in the best manner you can; but be careful not to assign your reasons, since your determination may be substantially right, although your reasons may be very bad, or essentially wrong”. It is very important to bear this in mind when awards of lay arbitrators are challenged.”     
 (emphasis supplied)

29.  Having considered the matter in detail, we are of the opinion that the Division Bench of the High Court committed an error in setting aside the concurrent findings of the Arbitral Tribunal and the Single Judge of the High Court. The award of the Arbitral Tribunal and the decision of the Single Judge of the High Court under Section 34 of the Act cannot be termed as perverse or patently illegal as concluded by the Division Bench of the High Court. The decision of the Arbitral Tribunal is a plausible view, and the Single Judge refrained from interfering with it under Section 34 of the Act. We are of the opinion that the Division Bench should not have interfered with these orders.”

(Italics and underscoring supplied)

45. Paras 41 to 53 of the decision in IOCL clearly delineate the scope of interference, by Courts with arbitral awards under Section 34 of the 1996 Act:
“41.  As held by this Court in Associate Builders, cited by Mr Prasenjit Keswani, learned counsel appearing on behalf of the respondent, Section 34 in conjunction with Section 5 of the 1996 Act makes it clear that an arbitral award that is governed by Part I of the 1996 Act, can only be set aside on grounds mentioned under Sections 34(2) and (3) of the said Act and not otherwise. The Court considering an application for setting aside an award, under Section 34 of the 1996 Act cannot look into the merits of the award except when the award is in conflict with the public policy of India as provided in Section 34(2)(b)(ii) of the 1996 Act.

42.  In Associate Builders, this Court held that an award could be said to be against the public policy of India in, inter alia, the following circumstances:

42.1.  When an award is, on its face, in patent violation of a statutory provision.

42.2.  When the arbitrator/Arbitral Tribunal has failed to adopt a judicial approach in deciding the dispute.

42.3.  When an award is in violation of the principles of natural justice.

42.4.  When an award is unreasonable or perverse.

42.5.  When an award is patently illegal, which would include an award in patent contravention of any substantive law of India or in patent breach of the 1996 Act.

42.6.  When an award is contrary to the interest of India, or against justice or morality, in the sense that it shocks the conscience of the Court.

43.  An Arbitral Tribunal being a creature of contract, is bound to act in terms of the contract under which it is constituted. An award can be said to be patently illegal where the Arbitral Tribunal has failed to act in terms of the contract or has ignored the specific terms of a contract.

44.  However, a distinction has to be drawn between failure to act in terms of a contract and an erroneous interpretation of the terms of a contract. An Arbitral Tribunal is entitled to interpret the terms and conditions of a contract, while adjudicating a dispute. An error in interpretation of a contract in a case where there is valid and lawful submission of arbitral disputes to an Arbitral Tribunal is an error within jurisdiction.

45.  The Court does not sit in appeal over the award made by an Arbitral Tribunal. The Court does not ordinarily interfere with interpretation made by the Arbitral Tribunal of a contractual provision, unless such interpretation is patently unreasonable or perverse. Where a contractual provision is ambiguous or is capable of being interpreted in more ways than one, the Court cannot interfere with the arbitral award, only because the Court is of the opinion that another possible interpretation would have been a better one.

46.  In Associate Builders, this Court held that an award ignoring the terms of a contract would not be in public interest. In the instant case, the award in respect of the lease rent and the lease term is in patent disregard of the terms and conditions of the lease agreement and thus against public policy. Furthermore, in Associate Builders the jurisdiction of the Arbitral Tribunal to adjudicate a dispute itself was not in issue. The Court was dealing with the circumstances in which a court could look into the merits of an award.

47.  In this case, as observed above, the impugned award insofar as it pertains to lease rent and lease period is patently beyond the scope of the competence of the arbitrator appointed in terms of the dealership agreement by the Director (Marketing) of the appellant.

48.  The lease agreement which was in force for a period of 29 years with effect from 15-4-2005 specifically provided for monthly lease rent of Rs 1750 per month for the said plot of land on which the retail outlet had been set up. It is well settled that an Arbitral Tribunal, or for that matter, the Court cannot alter the terms and conditions of a valid contract executed between the parties with their eyes open.

49.  In Ssangyong Engg. & Construction, this Court held :

“76. However, when it comes to the public policy of India, argument based upon “most basic notions of justice”, it is clear that this ground can be attracted only in very exceptional circumstances when the conscience of the Court is shocked by infraction of fundamental notions or principles of justice. It can be seen that the formula that was applied by the agreement continued to be applied till February 2013 — in short, it is not correct to say that the formula under the agreement could not be applied in view of the Ministry’s change in the base indices from 1993-1994 to 2004-2005. Further, in order to apply a linking factor, a circular, unilaterally issued by one party, cannot possibly bind the other party to the agreement without that other party’s consent. Indeed, the circular itself expressly stipulates that it cannot apply unless the contractors furnish an undertaking/affidavit that the price adjustment under the circular is acceptable to them. We have seen how the appellant gave such undertaking only conditionally and without prejudice to its argument that the Circular does not and cannot apply. This being the case, it is clear that the majority award has created a new contract for the parties by applying the said unilateral circular and by substituting a workable formula under the agreement by another formula dehors the agreement. This being the case, a fundamental principle of justice has been breached, namely, that a unilateral addition or alteration of a contract can never be foisted upon an unwilling party, nor can a party to the agreement be liable to perform a bargain not entered into with the other party. Clearly, such a course of conduct would be contrary to fundamental principles of justice as followed in this country, and shocks the conscience of this Court. However, we repeat that this ground is available only in very exceptional circumstances, such as the fact situation in the present case. Under no circumstance can any court interfere with an arbitral award on the ground that justice has not been done in the opinion of the Court. That would be an entry into the merits of the dispute which, as we have seen, is contrary to the ethos of Section 34 of the 1996 Act, as has been noted earlier in this judgment.”

50.  In PSA Sical Terminals (P) Ltd. v. V.O. Chidambranar Port Trust26, this Court referred to and relied upon Ssangyong Engg. & Construction, and held:

“85. As such, as held by this Court in Ssangyong Engg. & Construction, the fundamental principle of justice has been breached, namely, that a unilateral addition or alteration of a contract has been foisted upon an unwilling party. This Court has further held that a party to the agreement cannot be made liable to perform something for which it has not entered into a contract. In our view, re-writing a contract for the parties would be breach of fundamental principles of justice entitling a court to interfere since such case would be one which shocks the conscience of the Court and as such, would fall in the exceptional category.”

51.  In PSA Sical Terminals this Court clearly held that the role of the arbitrator was to arbitrate within the terms of the contract. He had no power apart from what the parties had given him under the contract. If he has travelled beyond the contract, he would be acting without jurisdiction.

52.  In PSA Sical Terminals this Court referred to and relied upon the earlier judgment of this Court in Army Welfare Housing Organisation v. Sumangal Services (P) Ltd.27 and held that an Arbitral Tribunal is not a court of law. It cannot exercise its power ex debito justitiae.

53.  In Satyanarayana Construction Co. v. Union of India28, a Bench of this Court of coordinate strength held that once a rate had been fixed in a contract, it was not open to the arbitrator to rewrite the terms of the contract and award a higher rate. Where an arbitrator had in effect rewritten the contract and awarded a rate, higher than that agreed in the contract, the High Court was held not to commit any error in setting aside the award.
(Emphasis supplied)

46. I have also attempted, in my judgment in Calcom Cement India Ltd v. Binod Kumar Bawri29, to summarize the legal position that presently applies to Section 34 of the 1996 Act, in the following passages:
“49.  Section 34(2)(a)(iv) of the 1996 Act, as it stood prior to its amendment by the Arbitration and Conciliation (Amendment) Act 2016, expressly envisaged interference with an arbitral award, insofar as the merits of the award were concerned, only where
(i) the award dealt with a dispute which was not contemplated by, or falling within the terms of the submission to arbitration or
(ii) the award contained decisions on matters beyond the scope of the submission to arbitration.

50.  Apart from this, the only other provision which envisaged interference with an arbitral award, on the merits of the award, was Section 34(2)(b)(ii), which permitted such interference where the arbitral award was “in conflict with the public policy of India”. In this regard, the explanation to the said clause clarified that an award would be treated as in conflict with the public policy of India if
(a) its making was induced or affected by fraud or corruption,
(b) the award was violative of Section 7530 or
(c) the award was violative of Section 8131 of the 1996 Act.

51.  However, the Explanation was specifically “without prejudice to the generality of” Section 34(2)(b)(ii). The generally wide scope and ambit of the expression “public policy of India” was not, therefore, compromised by the Explanation. The scope of interference with arbitral awards, on merits, under the pre-amended Section 34 had, therefore, to be restricted to cases where the award was in conflict with the “public policy of India”. In this regard, guidelines are to be found in the judgments of the Supreme Court in ONGC Ltd. v. Saw Pipes Ltd.32 and Associate Builders. Both these decisions advocate a wide interpretation of the expression “public policy of India”. Read together, they hold that an arbitral award would be co