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Judgment
The present Petition has been filed by the Petitioner under Section 34 of the Arbitration and Conciliation Act, 1996 [“A&C Act”] challenging the Award dated 21.12.2010 [“Impugned Award”] passed by the Ld. Arbitral Tribunal. Vide the Impugned Award, the Ld. Arbitral Tribunal has awarded as under:
“(1)Respondent - Delhi Development Authority shall immediately take steps for inclusion of plot No.E-265 in Amar Colony, Lajpat Nagar-IV, New Delhi in the lay-out plan of the area within three months of the Award and give intimation to the Claimants within one month of the inclusion of the said plot of land in the lay-out plan of the area.
(2)No ground rent of the plot of land E-265, in Amar Colony, Lajpat Nagar-IV, New Delhi is payable by the Claimants to the Delhi Development Authority till the said plot of land is included in the lay-out plan of the area and the Claimants are intimated of the same.
(3)Claimants shall pay ground rent of the Plot No. E-265, in Amar Colony, Lajpat Nagar-IV, New Delhi to Delhi Development Authority as may be due from the date the plot is included in the lay-out plan of the area and duly intimated to them. In case Claimants commit default in payment of ground rent as claimed by Delhi Development Authority within one month of receipt of intimation of the plot of land having been included in the lay-out plan of the area, DDA shall be entitled to recover ground rent and take such other steps as are available under the terms of contract including its right to enter on the plot of land.
(4)Claimants shall be entitled to interest @ 9% per annum on the amount of Rs.15,01,250/- from 23.9.1996 - the date of auction and at the same rate of interest on Rs.45,03,795/- from 18.12.1996. The amount of interest upto 23.12.2010 comes to Rs.76,00,134/-(Rupees seventy six lakh one hundred thirty four only).
(5)Claimants shall also be entitled to interest @ 9% per annum on the amount of Rs.76,00,134/- from the date of the award till the plot is included in the lay-out plan of the year. However, no such interest shall be payable in case Delhi Development Authority includes the plot in the lay-out plan within three months from the date of the award.
(6)Claimants shall also be entitled to cost of arbitration proceedings from DDA which I assess at Rs 1.5 lakh (Rupees one and half lakh).”
The facts of the case as borne out of the records are as under:
In an open auction organized by the Petitioner on 23.09.1996, the Respondent made the highest bid of Rs.60,05,000/- for the sale of a residential plot being Plot No. E-265, Amar Colony, Lajpat Nagar – IV, New Delhi [“the Plot”] on an „as is where is basis‟. On the very same day, the Respondent deposited 25% of the bid amount i.e., Rs. 15,01,250/-.
The bid of the Respondent was accepted by the Petitioner on 09.10.1996. Thereafter, the Petitioner sent a demand notice dated 18.11.1996 to the Respondent calling upon the Respondent to deposit the balance 75% of the bid amount as well as documentation charges on or before 15.12.1996.
Material on record indicates that on 02.12.1996, one Raj Rani Khanna sent a letter to the Respondent claiming to be the owner of the plot on the basis of adverse possession. In this letter, the Raj Rani Khanna also intimated the Respondent about the pendency of a Suit bearing No.379/1996, wherein she had laid claim of ownership of the plot. Thereafter, it is stated that the Respondent was also made a party to the said Suit. It is pertinent to mention that the Impugned Award notes that instead of a Suit, a writ petition bearing CW-(C) 2991/1997 was pending before this Court by Raj Rani Khanna, which came to be dismissed vide Order dated 24.02.1999. Notwithstanding this disparity, it is an undisputed fact that as per the demand notice dated 18.11.1996, the Respondent deposited a sum of Rs.45,03,795/- with the Petitioner.
It is stated that sometime in January, 1997, the Respondent deposited a further sum of Rs.30,303/- towards stamp duty and submitted all the other necessary documents to the Petitioner.
In anticipation of the execution of the lease deed for the Plot, the Petitioner vide a letter dated 09.06.1997 asked the Respondent to take possession of the Plot on 01.07.1997 at 11:00 AM and further directed the Respondent to be present at the Plot on the said date and time.
Accordingly, possession of the Plot was handed over by the Petitioner to the Respondent on 01.07.1997. However, upon gaining possession, the Respondent noted that there was an encroachment in the Plot in the form of a stone wall and chain link on its fence. The Respondent forthwith informed the Petitioner regarding this encroachment, however, when no immediate action was taken by the Petitioner, the Respondent informed the Petitioner that no ground rent for the Plot shall be paid from 01.07.1997, as the possession handed over by the Petitioner was serving no purpose in view of the encroachment.
After a lapse of more than a year, the Petitioner vide its letter dated 18.01.1999 informed the Respondent that the departmental files relating to the Plot were not traceable and the Respondent was asked to submit about 59 documents to the Petitioner relating to the Plot with the Petitioner‟s office to enable the reconstitution of records and taking further necessary action.
It is further stated that the Respondent deposited a copy of the Perpetual Lease Deed duly stamped by the Collector of Stamps with the Petitioner and again requested the Petitioner to take steps for removing encroachment in the plot.
It transpires that while the removal of encroachment was under process, the Petitioner vide its letter dated 17.09.1999 raised a demand of ground rent to the tune of Rs.4,26,129.5/- from 01.07.1997 along with interest. In response to that, the Respondent reiterated that the ground rent would only be payable from the date on which the plot would become available for construction which could not be done previously on account of encroachment.
In the interregnum, the Respondent came to know that the plot was not in the lay-out plan of the area and for this reason no construction plan whatsoever could be sanctioned. To enquire about this, the Respondent made several enquiries to the Petitioner, however, to no avail.
Though no clarity on the inclusion of the plot in the lay-out plan could be gained by the Respondent, the encroachment on the plot was removed by the Petitioner on 14.10.1999.
Against the inordinate delay in proper handing over of the plot as well as illegal demands raised by the Petitioner, the Respondent approached the National Consumer Disputes Redressal Commission [“NCDRC”] claiming, inter alia, compensation to the tune of Rs. 91,27,143/-.
The NCDRC vide its Order dated 01.03.2004 awarded compensation to the Respondent while also directed the Petitioner to execute the Lease Deed for the plot within a period of eight (08) weeks from the date of the Order. The NCDRC also observed that the Petitioner was liable for deficiency in service and the handing over of the possession to the Respondent was ineffective in view of the encroachment and as such, the Petitioner could not have demanded the ground rent from 01.07.1997.
Against the Order dated 01.03.2004 passed by the NCDRC, both the Parties filed cross-appeals before the Apex Court, being Civil Appeal 3474/2004 filed by the Respondent and Civil Appeal 661/2005 filed by the Petitioner. The Apex Court vide Order dated 24.01.2010, referred the Parties to arbitration and appointed a Sole Arbitrator to resolve the dispute.
The Ld. Arbitral Tribunal vide the Impugned Award dated 21.12.2010 held that the plot was not included in the lay-out plan and yet it was auctioned by the Petitioner. In this regard, the Ld. Arbitral Tribunal observed that when an auction is conducted by the Petitioner, there is an assumption in the minds of the Auction Purchasers that the plots being auctioned is included in the lay-out plan of the area and are free from all encumbrances.
The Ld. Arbitral Tribunal also observed that it was an undisputed position that no construction could be made on the plot till it was included in the lay-out plan of the area by the Petitioner. For that matter, it is observed in the Impugned Award that the Petitioner itself was not aware that the plot was not included in the lay-out plan.
Lastly, it was observed by the Ld. Arbitral Tribunal that there was no merit in the Petitioner‟s case that it was the Respondent who should have done due diligence before bidding for the plot as the obligation is cast upon the Petitioner to prepare the master plan, zonal plan and the lay-out plan of the area as per the provisions of the DDA Act, 1957. In view of these observations, the Ld. Arbitral Tribunal, inter alia, directed the Petitioner to take immediate steps for including the plot in the lay-out plan while further directed the Respondent to pay the ground rent of the plot from the date on which the same has been included in the lay-out plan.
It is this Impugned Award dated 21.12.2010 which is under challenge in the present petition.
Before addressing the contentions raised by the Parties, it is pertinent to note that vide Order dated 09.11.2022 passed by this Court, the present petition came to be dismissed for non-prosecution. Thereafter, an application being I.A. 24843/2023 was filed by the Petitioner seeking restoration of the petition and setting aside of the Order dated 09.11.2022 passed by this Court. On 02.02.2026, the said application seeking restoration of the petition was allowed by this Court and on that day itself, the petition was heard on merits.
Learned Counsel appearing for the Petitioner has submitted the following arguments:
At the very outset, it is submitted that without executing a Perpetual Lease Deed, the plot could not be included in the layout plan and this very Lease Deed could not be executed as it is the Respondent who failed to pay the ground rent from the date it was due as per the terms and conditions of the auction.
It is submitted that the Petitioner is not the sanctioning authority of the layout plan and it is the Respondent who failed to fulfil the requirements and carry out the due diligence for sanctioning the lay-out plan.
It is further submitted that the Ld. Arbitral Tribunal failed to consider that the argument of non-inclusion of the plot in the area‟s lay-out plan was raised by the Respondent for the first time before the NCDRC in 2001 while the liability to pay the ground rent arose way back on 01.07.1997.
It is submitted that despite the handing over of the possession of the plot on „as is where is basis‟ as per the terms and conditions of the auction, the observations of the Ld. Arbitral Tribunal that no ground rent would be payable till the plot is included in the lay-out plan of the area is erroneous and arbitrary. It is submitted that charging of the ground rent was merely a contractual demand and the Ld. Arbitral Tribunal could not have interfered with the Petitioner‟s demand of the same.
It is submitted that a document was in fact produced before the Ld. Arbitral Tribunal indicating that the plot was in fact included in the lay-out plan, however, the Ld. Arbitral Tribunal has passed the Impugned Award in complete ignorance of that document on which the entire case of the Respondent hinges. f) It is submitted that since the Ld. Arbitral Tribunal has ignored a vital document, the Impugned Award suffers from patent illegality and as such must be set aside.
Per contra, learned Senior Counsel appearing for the Respondent by opposing the Petition has advanced the following arguments:
The Petitioner had acted with complete misfeasance and negligence from the very beginning.
It is stated that despite several enquiries made by the Respondent, no communication or information was given regarding the inclusion or otherwise of the Plot in the lay-out plan. Rather it was only after passing of the Impugned Award that the Petitioner came to file a new document with the present Petition to state that the Plot was always included in the lay-out plan of the area.
It is submitted that no reason was given by the Petitioner for filing this crucial document after a lapse of nearly twelve years, in the course of which the Petitioner had constantly taken the stand that the Plot was never included in the lay-out plan of the area.
It is submitted that under Section 34 of the A&C Act, the maximum delay in filing objections is only till the ninetieth day, of which the Petitioner has already taken benefit of. There is no provision in the A&C Act which would permit the amendment of pleadings or bringing on record additional documents thereafter, in the proceedings under Section 34 of the A&C Act.
Not only did the Petitioner keep going on back and forth on its stand, even in the present petition, the Petitioner has stated that the Ld. Arbitral Tribunal failed to consider that the lay-out plan would only get sanctioned once the final Lease Deed is executed. For this reason, the entire case of the Petitioner starting from its defence before the NCDRC is riddled with contradictions.
For the above reasons, it cannot be stated that the Impugned Award was passed based on no evidence, as it was abundantly clear from material on record that the Petitioner‟s case has always been that the Plot was not included in the lay-out plan of the area.
Heard learned Counsels appearing for the Parties and perused the material on record.
It is a settled position of law that while exercising jurisdiction under Section 34 of the A&C Act, this Court cannot sit as a court of appeal over the findings of the Ld. Arbitral Tribunal. The scope of judicial interference is very limited and is only allowed on the grounds specifically enumerated under Section 34 of the A&C Act. This means that this Court cannot re-appreciate the evidence, re-assess the factual matrix or conduct a mini-trial as if an appeal on facts is being heard.
In SsangyongEngg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131, the Apex Court has spelt out the contours of the limited scope of judicial interference in reviewing the arbitral awards under the 1996 Act and observed thus:
“34.What is clear, therefore, is that the expression “public policy of India”, whether contained in Section 34 or in Section 48, would now mean the “fundamental policy of Indian law” as explained in paras 18 and 27 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] i.e. the fundamental policy of Indian law would be relegated to “Renusagar” understanding of this expression. This would necessarily mean that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] expansion has been done away with. In short, Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] , as explained in paras 28 and 29 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Court's intervention would be on the merits of the award, which cannot be permitted post amendment. However, insofar as principles of natural justice are concerned, as contained in Sections 18 and 34(2)(a)(iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in para 30 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204].
35.It is important to notice that the ground for interference insofar as it concerns “interest of India” has since been deleted, and therefore, no longer obtains. Equally, the ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the “most basic notions of morality or justice”. This again would be in line with paras 36 to 39 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , as it is only such arbitral awards that shock the conscience of the court that can be set aside on this ground.
36.Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law, as understood in paras 18 and 27 of Associate Builders[Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , or secondly, that such award is against basic notions of justice or morality as understood in paras 36 to 39 of Associate Builders [Associate Buildersv. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] . Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii) was added by the Amendment Act only so that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] , as understood in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , and paras 28 and 29 in particular, is now done away with.
37.Insofar as domestic awards made in India are concerned, an additional ground is now available under sub-section (2-A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within “the fundamental policy of Indian law”, namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.
38.Secondly, it is also made clear that reappreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.
39.To elucidate, para 42.1 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Para 42.2 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award.
40.The change made in Section 28(3) by the Amendment Act really follows what is stated in paras 42.3 to 45 in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair-minded or reasonable person would; in short, that the arbitrator's view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2-A).
41.What is important to note is that a decision which is perverse, as understood in paras 31 and 32 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , while no longer being a ground for challenge under “public policy of India”, would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse.”
It is equally well settled that the Ld. Arbitral Tribunal is the master of quantity and quality of evidence and the conclusion arrived at by the Ld. Arbitral Tribunal on appreciation of the evidence produced before it cannot be interfered with or substituted merely because another view might be possible.
Keeping in mind the permissible scope of interference, this Court shall now examine the observations made by the Ld. Arbitral Tribunal in light of the objections raised by the Petitioner as well as the arguments advanced on behalf of the Respondent.
The Ld. Arbitral Tribunal, at the very outset, on the basis of pleadings and evidence adduced by the Parties, has observed that the Plot was not included in the lay-out plan and it was on this account that the Municipal Corporation of Delhi refused to sanction any construction plan.
The Ld. Arbitral Tribunal has further taken note of the several communications between the Petitioner and the Respondent regarding payment of ground rent while noting that on one hand, the Respondent refused to pay the ground rent on account of there being an encroachment in the Plot, while on the other hand, the Petitioner claimed that no Lease Deed could be registered since the Respondent defaulted in making payment of ground rent. In this regard, the Ld. Arbitral Tribunal has specifically noted that on account of encroachment, the handing over the possession of the plot by the Petitioner was only partial and the actual physical possession was handed over after a lapse of more than two years when the encroachment was removed.
It is important to note that the Ld. Arbitral Tribunal has also considered that the demand for ground rent by the Petitioner from 14.10.1999 would have been justified in the event where the Plot was handed over to the Respondent after including it in the lay-out plan. However, the Ld. Arbitral Tribunal notes that since the entire material on record as well as the Petitioner‟s stand only points towards the inevitable conclusion that the Plot was not included in the lay-out plan, the action of the Petitioner to keep on demanding the ground rent was found to be unjustified.
What is further interesting is that while before this Court, the Petitioner claims that the Plot was always included in the lay-out plan of the area, before the Ld. Arbitral Tribunal, the Petitioner had constantly urged that onus was on the Respondent to exercise due diligence and enquire as to whether the Plot was included in the lay-out plan or not, whether there was an encroachment or whether any encumbrances were attached to the Plot.
Looking at the entire material on record and considering the arguments advanced by the respective counsels for the parties, this Court is of the opinion that there was no occasion at all for the Ld. Arbitral Tribunal to even consider whether the Plot was included in the lay-out plan or not, as no pleading or evidence was ever adduced for the same.
Attention of this Court is drawn to a communication dated 15.03.2024 which was sent by the Senior Town Planner to the Joint Director of the Petitioner-DDA, titled „Incorporation of p. no. E-265 in the approved layout plan of Lajpat Nagar, Amar Colony, New Delhi‟. Considering this along with the other documents produced by the Petitioner before the Ld. Arbitral Tribunal, any other view apart from the conclusion that the Plot was not included in the lay-out plan, is unmistakably implausible. As such, this Court finds itself in agreement with the observation of the Ld. Arbitral Tribunal that the Petitioner has acted negligently, so much so that it auctioned away a Plot that was never included in the lay-out plan of the area.
Therefore, solely on the basis of record of the Ld. Arbitral Tribunal, this Court finds no reason to interfere with the findings of the Ld. Arbitral Tribunal, as the same have been arrived at upon due appreciation of the pleadings and evidence adduced before it and as such does not disclose any perversity or illegality.
Lastly, as to whether this Court has the power to look into the additional document filed by the Petitioner along with I.A. No. 8004/2013 to state that the Plot had been included in the lay-out plan of the area since 1984, this Court is mindful of the recent developments brought on through some judgments of the Apex Court, wherein permission has been granted for adducing additional evidence at the stage of Section 34 of the A&C Act. However, this Court is also conscious that in these very case laws, the Apex Court has very specifically carved out a “strong exception,” which was required in the facts of those cases.
In the present case, apart from the fact that this Court finds no error in the observations of the Ld. Arbitral Tribunal, this Court is also of the opinion that with the varying stands of the Petitioner, it would be completely unjust to permit a document which paints a picture which is in complete contradiction to the one presented before not just the Ld. Arbitral Tribunal but also NCDRC. For that matter, in the event that this Court looks into the additional document filed by the Petitioner, it would also be constrained to consider the ones filed by the Respondent, which again indicate that the Plot was not included at the time of the auction.
With the above observations, the Petition i.e., O.M.P. (COMM) 175/2020, is dismissed, along with pending Application(s), if any.
OMP (ENF.) (COMM.) 230/2023 & EX.APPL.(OS) 1543/2023
List on 20.07.2026.