The Honourable Ms.JUSTICE P.T.ASHA O.P.No.555 of 2019 and A.No.5216 of 2019–P .T.ASHA, J. In the result, the OP is allowed and the impugned Award is set asid

[5/4, 08:27] Sekarreporter: OP.No.555 of 2019
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 20.12.2019
CORAM
The Honourable Ms.JUSTICE P.T.ASHA
O.P.No.555 of 2019
and
A.No.5216 of 2019

  1. Mr. G.G. Srinivasan
  2. M/s. Venkateswara Diagnostice Centre,
    Medavakkam,
    Represented by its Proprietrix,
    Mrs. J. Bhuvanasankari
    No.11/237, Bharathi 1st Street,
    Medavakkam,
    Chennai- 600 100.
    …Petitioners
    Vs.
  3. Mr. K. Babu
  4. Mrs. Meera Babu
    Respondents
    Prayer : Petition is filed under Section 34 of the Arbitration and Conciliation Act, 1996
    praying to set aside the Award dated 16.05.2019 and allow the counter claim of the
    petitioners.

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For petitioners : Ms. Tanya Kappor
Mr. Yashwanth Rajan
For Respondents : Mr. K. V. Babu, caveator counsel
O R D E R
The unsuccessful respondent before the Arbitral Tribunal has
challenged the award in the above OP.

  1. The Main grounds of challenge by the petitioner is that the
    Arbitral Tribunal has not comprehended the terms of the contract
    entered into between the claimant and the respondent, as a result of
    which the Arbitral award has dealt with issues totally out of the
    purview of the Memorandum of Understanding which by itself is not
    admissible as the same was not registered. It is necessary to narrate
    the events culminating in the passing of the award which has led to the
    challenging of the award. The parties are referred to as the claimants
    and respondents respectively.
  2. Claimant’s Case
    3.1. The claimants had moved the arbitral proceedings and had
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    submitted the following claim before the Tribunal. The claimants who
    are husband and wife have filed the Claim A.F. No. 591 of 2018 before
    the Tribunal for a direction that the first respondent should execute
    and release 20 per cent share in the property situated at ‘Sakthi
    Elegance’, Flat No. A1, 320, Velachery High Road, Velachery, Chennai-
    600 042 (hereinafter for the sake of brevity, referred as “the
    Property”) in favour of first claimant in terms of the Memorandum of
    Understanding dated 31.05.2016.
    3.2. The claimants would submit that the first claimant and the
    first respondent were carrying on the partnership business in the name
    and style of ‘Venkateswara Diagnostic Centre’, hereinafter referred as
    “VDC”, at the property. The second respondent was the sole
    proprietory concern of the first respondent’s wife Bhuvanasankari, who
    was also carrying on business in the name and style of M/s.
    Venkateswara Diagnostic Centre at Medavakkam hereinafter referred
    as ‘MVDC’.
    3.3. Apart from the above firm, the first claimant and the first
    respondent along with others were shareholders in a Private Limited
    Company called ‘M/s. Venkateswara Imaging and Diagnostic Private
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    [5/4, 08:28] Sekarreporter: OP.No.555 of 2019
    contrary to the terms of the agreement.”
    7.9. The Hon’ble Supreme Court in the Judgment in Associate
    Builders Vs. Delhi Development Authority reported in [(2015) 3
    Supreme Court page 49] after discussing the various judicial
    pronouncements with regard to the grounds of challenge to the Arbitral
    Award provided under Section 34 of the Act elaborated on
    circumstances under which an award could be termed as a ‘Patent
    illegality’. In the course of the discussion, the Hon’ble Supreme Court
    had observed as follows:
    “42.3. (c) Equally, the third subhead of
    patent illegality is really a contravention of
    Section 28(3) of the Arbitration Act, which
    reads as under:
    “28. Rules applicable to substance of
    dispute-(1)-(2)
    (3) In all cases, the Arbitral Tribunal shall
    decide in accordance with the terms of the
    contract and shall take into account the usages
    of the trade applicable to the transactions.”
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    This last contravention must be understood
    with a caveat. An Arbitral Tribunal must decide
    in accordance with the terms of the
    contract,but if an arbitrator construes a term of
    the contract in a reasonable manner, it will not
    mean that the award can be set aside on this
    ground. Construction of the terms of a contact
    in such a way that it could be said to be
    something that no fair-minded or reasonable
    person could do.”
    7.10. Therefore on a conspectus of the facts narrated
    hereinabove and the dicta laid by the Hon’ble Supreme Court it is
    clearly evident that award suffers from a patent illegality since the
    learned Arbitrator has not adverted to the terms of the Memorandum
    of Understanding particularly the provisos to Clause 1.7 thereby
    violating the provisions of Section 28(3) of the Act.
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    P .T.ASHA, J.
    mrn
    In the result, the OP is allowed and the impugned Award is set
    aside. No costs. Consequently, connected Miscellaneous Petition is
    closed.
    20.12.2019
    Index:Yes / No
    mrn
    O.P.No.555 of 2019
    and
    A.No.5216 of 2019
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