M/s. Hideout Tourist Complex v. GAIL & Anr.

Brief facts of the present case are that respondent No.1 entered into an agreement of leave and license dated 28.12.1995 qua three furnished houses bearing House Nos.3-B/R, 3-B/M, 3-B/L and one additional unit on the first floor of House No.3-B/R situated at New Colony, Palwal for a monthly rent/licence fee of Rs.1,15,000/- per month. It is alleged by the petitioner that although possession of three furnished houses and one additional unit for office was handed over to respondent No.1 after getting them furnished in all respects, however, respondent No.1 failed to pay rent/license fee of the said premises at the rate of Rs.1,15,000/- per month. As per agreement, respondent No.1 was under obligation to pay interest free advance amounting to Rs.3,45,000/-, equivalent to three months rent, which was to be adjusted in three monthly installments. Respondent No.1 has paid the said amount of Rs.3,45,000/- after deducting income tax at source amounting to Rs.69,000/-; thereafter, respondent No.1 failed to pay the rent for the next three months qua one house and one additional unit amounting to Rs.45,000/- per month for the reasons best known to them. The dispute was referred for arbitration to respondent No.2. Respondent No.2 passed an award dated 28.4.2000, copy of which was received by the petitioner herein on 15.6.2000. The award was challenged under Section 34 of the Act before the Civil Judge, Junior Division, Palwal, on the ground that the arbitrator has mis-conducted and he has failed to take into consideration documentary evidence submitted by the petitioner during the arbitration proceedings qua handing over the possession of all the premises to respondent No.1; respondent No.2/arbitrator also over-looked the bills issued for hiring charges of air conditioner, colour television, food and beverages, fridge and telephone etc.. CR No. 7823 of 2009 3 The trial Court vide impugned order dated 11.2.2008, has held that award is challenged mainly on two grounds, first that the documentary evidence like house tax assessment receipts, air conditioner hiring charges bills, furniture hiring bills etc. have not been considered by the arbitrator while rejecting the claim of the petitioner, and second, that proper procedure under Section 19 of the Act has not been followed and the principles of natural justice have been violated by the arbitrator. The trial Court has further observed that the arbitrator has taken into account the correspondence between the parties while coming to the conclusion that third unit and the additional unit were not handed over to respondent No.1, hence, respondent No.1 was well within its jurisdiction not to pay rent for the third unit and additional unit. It is further observed by the trial Court that the arbitrator on the basis of the material available on record, has rightly recorded that only Rs.61,179/- are outstanding against respondent No.1 towards the bill of beverages etc.. The trial Court also observed that since opportunities were granted by the arbitrator to both the parties to place on record entire evidence and both the parties were heard, hence, there is no procedural irregularity nor principles of natural justice were violated. In an appeal filed by the petitioner herein, the first Appellate Court has concurred with the findings recorded by the trial Court and dismissed the appeal vide impugned judgement dated 12.5.2009. I have heard learned counsel for the parties and perused the record. Learned counsel for the petitioner vehemently argued that since respondent No.2 is an employee of respondent No.1, hence, applying the principle that “none can be a Judge of his own cause”, the award passed by CR No. 7823 of 2009 4 respondent No.2 is against public policy and he should not have acted as the arbitrator. Learned counsel for the petitioner further argued that if the award is unfair and unreasonable and shocks the conscious of the Court and is against morality, it should be set aside. Learned counsel for the petitioner further argued that in the house tax assessment, third unit as well as additional unit is shown in the possession of respondent No.1 and the petitioner has placed all the lease deeds executed between the petitioner and third-party to show that all the units were made available and handed over to respondent No.1, however, the same were ignored by the arbitrator, hence, the award of the arbitrator is vitiated. Learned counsel for the petitioner has placed reliance on the judgement in the matter of Delhi Development Authority Vs. R.S. Sharma, 2008(9) JT 362 and in the matter of Bihar State Mineral Development Corporation and another Vs. Encon Builders (I) Pvt. Ltd., 2003 AIR Supreme Court 3688. In Bihar Mineral’s case (supra), the Apex Court has held as under: - “There cannot be any doubt whatsoever that an arbitration agreement must contain the broad consensus between the parties that the disputes and differences should be referred to a domestic tribunal. The said domestic tribunal must be an impartial one. It is a well-settled principle of law that a person cannot be a judge of his own cause. It is further well- settled that justice should not only be done but manifestly seen to be done. Actual bias would lead to an automatic disqualification where the decision maker is shown to have an interest in the outcome of the case. Actual bias denotes an arbitrator who allows a decision to be influenced by partiality or prejudice and thereby deprives the litigant of the fundamental right to a fair trial by an impartial tribunal.” CR No. 7823 of 2009 5 In Bihar Mineral’s case (supra), the facts were that the Managing Director, who was named as the arbitrator, was competent to impose fine on the agency, if he finds that the working operation are not carried out in a workman like manner or payments to workmen are not made timely and according to proviso of the rules and regulations. Alleging bias against the arbitrator, an application was moved under Section 33 of the Act, wherein the arbitrator was restrained from acting as an arbitrator. The Apex Court in the facts of that case has held that when bias is proved, then it cannot be said that the domestic Tribunal is impartial one and in the facts of that case, arbitrator was removed to act as an arbitrator. While in the present case, bias has not been proved. Not only this, in the present case, Senior Manager, Law, has no role to play in the event of any breach is found having been committed by the petitioner to impose any fine. In the case of Indian Oil Corporation Ltd. Vs. Raja Transport Pvt. Ltd., 2009(8) SCC 520, the Apex Court has held as under: - “Arbitration is a binding voluntary alternative dispute resolution process by a private forum chosen by the parties. It is quite common for governments, statutory corporations and public sector undertakings while entering into contracts, to provide for settlement of disputes by arbitration, and further provide that the Arbitrator will be one of its senior officers. If a party, with open eyes and full knowledge and comprehension of the said provision enters into a contract with a government/ statutory corporation/ public sector undertaking containing an arbitration agreement providing one of Secretaries/Directors shall be the arbitrator, he can not CR No. 7823 of 2009 6 subsequently turn around and contend that he is agreeable for settlement of disputes by arbitration, but not by the named arbitrator who is an employee of the other party. No party can say he will be bound by only one part of the agreement and not the other part, unless such other part is impossible of performance or is void being contrary to the provisions of the Act, and such part is severable from the remaining part of the agreement. A party to the contract cannot claim the benefit of arbitration under the arbitration clause, but ignore the appointment procedure relating to the named Arbitrator contained in the arbitration clause. It is now well settled by a series of decisions of this Court that arbitration agreements in government contracts providing that an employee of the Department (usually a high official unconnected with the work or the contract) will be the Arbitrator, are neither void nor unenforceable. All the decisions proceed on the basis that senior officers government/statutory corporations/public sector undertakings are appointed as Arbitrators, they will function independently and impartially, even though they are employees of such Institutions/ organisations.” As observed hereinabove, neither bias is alleged nor proved nor it is the case where respondent No.2 - the arbitrator, played any role in withholding the rent or in creating the dispute. This Court is of the view that since the petitioner has with open eyes entered into the agreement, now cannot challenge the arbitration award saying that respondent No.2 is an CR No. 7823 of 2009 7 employee of respondent No.1. In the present case, both the Courts below have come to the conclusion that the arbitrator has placed reliance on the correspondence taken place between the parties to come to the conclusion that the third unit and the additional unit were not handed over to respondent No.1. Both the Courts below have also recorded finding of fact that the arbitrator has rightly come to the conclusion on the basis of the material available before him that only Rs.61,179/- are outstanding against respondents No.1. This Court finds that even if two views are possible, the view taken by the arbitrator should not be disturbed. This Court finds that none of the grounds available under Section 34 of the Act, is available to the petitioner to challenge the award and the petitioner could not prove that the award is against the terms and conditions of the arbitration agreement. The award does not seem to be against any public policy. No interference is called for. Petition is dismissed. .09.2010 sk. ( Alok Singh ) Judge