22 April 2019


Judgments

High Court of Delhi

Kiri Associates (P) Ltd. Vs. Pramod Kumar Mittal and Ors.

MANU/DE/1819/2017

03.07.2017

Arbitration

Concealment of material fact, and active representation that, title to suit lands were good and free from encumbrance, is fraud that results in avoidance of contract

Instant appeal questions judgment of a single judge dismissing objections to an arbitration award, preferred by a petition under Section 34 of the Arbitration and Conciliation Act, 1996. Present Appellant ("Kiri") had filed petition, challenging award of an arbitral tribunal. Appellant, urged that, award is patently erroneous as it is plainly contrary to Section 21 (5) of Specific Relief Act, 1963. That provision, it is emphasized, clearly contemplates that no compensation "shall be awarded" as an alternative to a claim for specific performance "unless Plaintiff has claimed such compensation in his plaint." It is urged that, in view of unambiguous phraseology of provision, Tribunal fundamentally erred in granting a relief that was barred.

In present case, facts clearly shows that, Appellant does not anywhere dispute that, claimant was kept in dark about a material and relevant fact, when the agreement to sell was entered into, i.e. acquisition proceedings. Agreement and representations held out by Appellant were that, property in question was free from encumbrances and had good marketable title. On faith of these representations, Claimant paid substantial amounts as advance to Kiri. Later discovered, that acquisition proceedings were initiated in 1997 and that seller Kiri had even initiated writ proceedings to challenge them in 1998. That these were not disclosed was established in arbitration proceedings. Furthermore, during proceedings another fact came to light, i.e. that, Appellant had "sold" same property to some third party, and litigation in that regard was pending before present Court.

High Court opined that, single judge concluded correctly that, prohibition in Section 21 (5) of Act, did not apply to this case, because of Kiri's lack of bona fides. Concealment of a material fact, and active representation that, title to suit lands were good and it was free from encumbrance, was a fraud or certainly a misrepresentation that ultimately resulted in avoidance of contract. In such circumstances, claimant was entitled to say that, it should not be disadvantaged, and should be restituted. Furthermore, there is no principle - either in law or in equity, which can sustain Appellant's claim to retain amount. Single judge correctly held that, arbitrator's conclusion with respect to entitlement to amount and preclusion of plea of forfeiture was justified. Therefore, Claimant was entitled to amount of advance, i.e. Rs. 1.5 crores with some interest.

Regarding justification of award of Rs. 25 lakhs, amendment, under proviso to Section 21 (5) of Act, was not sought by Claimant to seek damages. As long as basic ingredients, which make up cause of action are same (i.e. an agreement to sell, inability of seller, due to his fault or omission to honour it and injury to purchaser) party at receiving end of bargain is not remediless. Fact that, relief is admissible in law, but may not be granted sans a specific amendment by a Court, due to a procedural hurdle, in arbitration proceedings, a tribunal would be liberated from such an impediment. It has been observed by Supreme Court in case of Pasupuleti Venkateswarlu v. The Motor & General Traders that, "procedure is handmaid and not mistress of judicial process. If a fact, arising after lis has come to Court and has a fundamental impact on right to relief for manner of moulding it, is brought diligently to notice of Tribunal, it cannot blink at it or be blind to events which stultify or render inept decretal remedy". In these circumstances, it cannot be held that, grant of that relief, i.e. Rs. 25 lakhs is a "patent illegality" or that such damages are contrary, or unknown to law, or contrary to public policy. Court holds that, there is no merit in the appeal.

Relevant

Pasupuleti Venkateswarlu v. The Motor & General Traders MANU/SC/0415/1975
: AIR 1975 SC 1409

Tags : Award Validity Facts Concealment

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