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
- Mr. G.G. Srinivasan
- 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. - Mr. K. Babu
- 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.
- 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. - 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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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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