Case Note & Summary
The judgment concerns two arbitration petitions arising from a common arbitral award dated 31st March 2022. The dispute originated from a registered agreement dated 6th October 2003 between John Peter Fernandes (purchaser) and Saraswati Ramchandra Ghanate and others (sellers) for the sale of a property for Rs.35,00,000. Fernandes, a waiter, paid part of the consideration and arranged the rest through relatives and a bank loan. When he returned from his village in June 2004, he found the sellers carrying on business in the property. He filed Suit No.2412 of 2004 seeking specific performance. The suit was referred to arbitration by consent. The arbitral tribunal refused specific performance, finding that Fernandes was not ready and willing to perform his obligations, but directed the sellers to refund Rs.6,50,000 with interest at 8% per annum. Both parties challenged the award: Fernandes sought specific performance, while the sellers contested the refund direction. The High Court, under Section 34 of the Arbitration and Conciliation Act, 1996, held that the tribunal's findings were based on evidence and not patently illegal. The court found no ground to interfere with the refusal of specific performance. However, it modified the interest rate from 8% to 6% per annum, considering the circumstances and the fact that the sellers had use of the money. The petitions were disposed of accordingly, with the award modified only to the extent of the interest rate.
Headnote
A) Arbitration - Section 34 Arbitration and Conciliation Act, 1996 - Challenge to Award - The court considered whether the arbitral tribunal's refusal to grant specific performance and direction for refund of consideration with interest was patently illegal or against public policy. Held that the tribunal's findings were based on evidence and not perverse, but the rate of interest was reduced from 8% to 6% per annum considering the circumstances. (Paras 1-15)
B) Specific Performance - Agreement for Sale - Refund of Consideration - The dispute arose from a registered agreement dated 6th October 2003 for sale of property for Rs.35,00,000. The tribunal found that the purchaser failed to pay the balance consideration and was not ready and willing to perform, hence refused specific performance but directed refund of Rs.6,50,000 with interest. Held that the tribunal's decision was within its jurisdiction and not liable to be interfered with under Section 34. (Paras 2-10)
Issue of Consideration
Whether the arbitral tribunal erred in refusing specific performance of the agreement dated 6th October 2003 and in directing refund of Rs.6,50,000 with interest at 8% per annum.
Final Decision
The High Court dismissed both petitions challenging the refusal of specific performance and the direction to refund, but modified the interest rate from 8% per annum to 6% per annum. The award stands modified accordingly.
Law Points
- Specific performance
- Refund of consideration
- Interest on refund
- Arbitration award
- Section 34 Arbitration and Conciliation Act
- 1996
Case Details
2023 LawText (BOM) (03) 55
Arbitration Petition No.355 of 2022 with Interim Application No.3188 of 2022 and Arbitration Petition (L) No.24217 of 2022 with Interim Application (L) No.24223 of 2022
Mr. Santosh Paul, Senior Advocate a/w. M. Shetty and Ms. Anjali Gupta i/. Raval Shah & Co. for Petitioner/Applicant in ARBP/355/2022 and for Respondent No.1 in ARBPL/24217/2022; Mr. Amrut Joshi a/w. Mr. Nikhil Mishra for Respondent No.2 in ARBP/355/2022 and for Petitioner in ARBPL/24217/2022
John Peter Fernandes (in ARBP/355/2022) and Ramakant Ramchandra Ghanate (in ARBPL/24217/2022)
Saraswati Ramchandra Ghanate since deceased and others (in ARBP/355/2022) and John Peter Fernandes and another (in ARBPL/24217/2022)
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Nature of Litigation
Challenges to an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996.
Remedy Sought
John Peter Fernandes sought setting aside of the award refusing specific performance and grant of specific performance; Ramakant Ramchandra Ghanate sought setting aside of the direction to refund Rs.6,50,000 with interest.
Filing Reason
Both parties were aggrieved by the arbitral award dated 31st March 2022.
Previous Decisions
The suit was referred to arbitration by consent of parties in an appeal from a notice of motion.
Issues
Whether the arbitral tribunal erred in refusing specific performance of the agreement dated 6th October 2003.
Whether the direction to refund Rs.6,50,000 with interest at 8% per annum was proper.
Submissions/Arguments
Mr. Fernandes argued that the tribunal failed to consider that he was ready and willing to perform and that the sellers had breached the agreement.
The sellers argued that the refund direction was without basis as the agreement recorded full payment and the tribunal erred in awarding interest.
Ratio Decidendi
Under Section 34 of the Arbitration and Conciliation Act, 1996, the court cannot re-appreciate evidence or substitute its view unless the award is patently illegal or against public policy. The tribunal's findings on readiness and willingness were based on evidence and not perverse. However, the interest rate was reduced to 6% per annum as the sellers had use of the money and the circumstances warranted moderation.
Judgment Excerpts
Both the parties to the arbitration proceedings are aggrieved by the impugned award dated 31st March, 2022.
The petitioner in Arbitration Petition No.355 of 2022 is aggrieved by rejection of the prayer for grant of specific performance of agreement dated 6th October 2003, while the petitioner in Arbitration Petition (L) No.24217 of 2022, is aggrieved by the direction in the impugned award to pay amount of Rs.6,50,000/- along with interest @ 8% per annum, towards refund of amounts received from the rival party.
Procedural History
John Peter Fernandes filed Suit No.2412 of 2004 for specific performance. A notice of motion for interim relief was rejected. An appeal was filed, and by consent, the disputes were referred to arbitration. The arbitral tribunal passed an award on 31st March 2022. Both parties filed petitions under Section 34 of the Arbitration and Conciliation Act, 1996 challenging the award.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 34
