Case Note & Summary
The petitioners, heirs of the original lessor, filed a Commercial Arbitration Petition under Section 34 of the Arbitration and Conciliation Act, 1996, seeking to set aside a portion of an arbitral award dated 20th September, 2019. The dispute arose from a Lease Deed dated 23rd April, 2016, between the original lessor and the respondent bank for a five-year term from 1st April, 2016 to 31st March, 2021, with a lock-in period of three years. The respondent terminated the lease prematurely on 1st July, 2017, citing safety concerns. The arbitrator awarded damages for only 6 months of the unexpired lock-in period, holding that the petitioners failed to mitigate damages by not re-letting the property. The petitioners argued that the arbitrator's finding on mitigation was perverse and contrary to the lease terms, which stipulated damages for the entire lock-in period. The court agreed, noting that the lease deed expressly provided for damages for the unexpired lock-in period and that the arbitrator's reasoning was flawed. The court set aside the award to the extent it limited damages to 6 months and remanded the matter to the arbitrator for fresh determination of quantum, directing that the petitioners be awarded damages for the entire unexpired lock-in period, subject to any evidence of actual loss or mitigation.
Headnote
A) Arbitration - Setting Aside Award - Section 34 of the Arbitration and Conciliation Act, 1996 - Damages for Breach of Lease - The petitioners sought to set aside a portion of the arbitral award that limited damages for premature termination of lease to 6 months instead of the entire unexpired lock-in period. The court held that the arbitrator's finding that the lessor failed to mitigate damages was perverse and contrary to the terms of the lease deed, which provided for damages for the entire lock-in period. The court set aside the award to the extent it denied damages for the full lock-in period and remanded the matter for fresh determination of quantum. (Paras 1-23)
Issue of Consideration
Whether the Arbitrator erred in awarding damages for only 6 months of the unexpired lock-in period instead of the entire unexpired lock-in period under the Lease Deed dated 23rd April, 2016.
Final Decision
The court allowed the petition in part, setting aside the arbitral award to the extent it denied damages for the entire unexpired lock-in period and remanded the matter to the arbitrator for fresh determination of quantum, directing that the petitioners be awarded damages for the entire unexpired lock-in period, subject to any evidence of actual loss or mitigation.
Law Points
- Damages for breach of contract
- Lease deed
- Lock-in period
- Mitigation of damages
- Section 73 of the Indian Contract Act
- 1872
- Arbitral award
- Setting aside award under Section 34 of the Arbitration and Conciliation Act
- 1996
Case Details
2023 LawText (BOM) (09) 61
Commercial Arbitration Petition No. 502 of 2021
Mr. Mutahhar Khan a/w Mr. Pranav Nair i/b Parinam Law Associates for Petitioners; Mr. Rahul Narichania, Senior Advocate a/w Ms. Shyamali Gadre a/w Ms. Harshita Bhanushali i/b Little & Co. for Respondent
Saraswat Co-operative Bank Ltd.
Subscribe to unlock Case Details (Citation, Judge, Date & more)
Subscribe Now
Nature of Litigation
Commercial Arbitration Petition under Section 34 of the Arbitration and Conciliation Act, 1996 seeking to set aside a portion of an arbitral award.
Remedy Sought
Petitioners sought setting aside of the arbitral award to the extent it did not award damages for the entire unexpired lock-in period under the Lease Deed.
Filing Reason
The arbitrator awarded damages for only 6 months of the unexpired lock-in period instead of the entire period, which the petitioners contended was contrary to the lease terms and perverse.
Previous Decisions
The Sole Arbitrator passed an award dated 20th September, 2019, awarding damages for only 6 months of the unexpired lock-in period.
Issues
Whether the arbitrator's finding that the petitioners failed to mitigate damages is perverse and contrary to the terms of the lease deed.
Whether the petitioners are entitled to damages for the entire unexpired lock-in period under the Lease Deed.
Submissions/Arguments
Petitioners argued that the lease deed provided for damages for the entire lock-in period and the arbitrator's finding on mitigation was perverse.
Respondent argued that the petitioners failed to mitigate damages by not re-letting the property and that the award was reasonable.
Ratio Decidendi
The court held that the arbitrator's finding that the lessor failed to mitigate damages was perverse and contrary to the express terms of the lease deed, which stipulated damages for the entire lock-in period. The court emphasized that the duty to mitigate does not override contractual stipulations for liquidated damages, and the arbitrator's award was patently illegal under Section 34 of the Arbitration and Conciliation Act, 1996.
Judgment Excerpts
By this Commercial Arbitration Petition, the Petitioners/Original Claimants are seeking the setting aside of a portion of impugned Award dated 20th September, 2019 passed by the Arbitrator to the extent that it did not award damages for the entire unexpired lock-in period under the Lease Deed dated 23rd April, 2016.
The court held that the arbitrator's finding that the lessor failed to mitigate damages was perverse and contrary to the terms of the lease deed.
Procedural History
The original lessor and respondent entered into a Lease Deed on 23rd April, 2016. Disputes arose, and the respondent terminated the lease on 12th April, 2017. The petitioners (heirs of the original lessor) initiated arbitration. The Sole Arbitrator passed an award on 20th September, 2019, awarding damages for only 6 months of the unexpired lock-in period. The petitioners filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 on 28th July, 2023, and judgment was pronounced on 26th September, 2023.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 34
- Indian Contract Act, 1872: Section 73
