JUDGMENT
Gita Mittal, J.
1. This petition has been filed by the petitioner under Section 34 of the Arbitration and Conciliation Act, 1996 placing its objections to the arbitration award dated 27th May, 2004. So far as the essential facts giving rise to the petition are concerned, there is no material dispute thereto and, to the extent necessary for adjudication of the present petition, the same are noticed hereinafter.
2. The petitioner was allegedly running its business from property bearing No. 1/1142 B-1143, 1st floor, Railway Road, Shahdara. The Union of India and the Government of National Capital Territory of Delhi, in order to cut down the load of traffic on the existing roads and to ensure smooth flow of traffic has conceptualised the `Mass Rapid Transit System’. In order to implement this project, it had necessitated evacuation of what was termed as the `Project Affected Persons’.
3. The petitioner has submitted that with the intention of rehabilitating such project affected persons, a circular dated 31st January, 2002 was issued by the Government of National Capital Territory of Delhi. As per this circular, a decision dated 10th December, 2001 had been taken by the Cabinet that the project affected shopkeepers as were verified by the concerned ADM/LAC would be recommended to DDA for making alternative allotment of developed plots at `pre-determined price’. This circular contains guidelines for relocation or rehabilitation of affected persons evacuated for acquisition of property for the project of Delhi Metro Rail Corporation (hereinafter referred to as `DMRC’ for brevity).
4. The respondent/DMRC has contended that the DMRC had no scheme or policy to rehabilitate affected persons. It simply places its requirement of land before the Government of NCT of Delhi who acquires land and allots it to DMRC on payment of requisite amount of consideration. The DMRC has also stated that it is not a land acquiring agency for the purposes of the Land Acquisition Act, 1894.
5. So far as the land of the petitioner is concerned, the same was acquired by the Government of NCT of Delhi pursuant to a notification under Section 4(1) read with Section 17(1) of the Land Acquisition Act, 1894 issued on the 12th June, 1997 notifying the acquisition of this property. The declaration under Section 6 of the Statute followed on 28th July, 1997. the petitioner before this Court had staked a claim for compensation as also a right to a suitable alternative site. The Land Acquisition Collector has made an award dated 20th July, 1999. The petitioner has filed a reference against the same in accordance with Section 18 of the Land Acquisition Act, 1894.
6. The petitioner has placed reliance on an assurance allegedly given by the respondent No. 1 for providing inbuilt rehabilitation/re-settlement scheme in its project to the project affected persons. This position is disputed by the respondents who submit that they have no liability to make such allotments in law and further that the circular dated 31st January, 2002 is not applicable and cannot be enforced against the respondents.
7. Both parties are, however, ad idem that they had executed a license agreement dated 6th September, 2000 which is the basis of the claim made by the petitioner. Perusal of this license agreement shows that the respondents had agreed to provide covered space measuring about 15 sq. mtrs. to the petitioner who was a project affected shopkeeper on a license for a period of 50 years starting from the date of handing over possession on the terms and conditions stated in the license deed. So far as the location of the shop was concerned, Clause 2 of this license agreement clearly provided that the allotted shop would be on an appropriate floor matching the existing shop being dismantled and the exact location would be decided after construction of the new shops by lottery to be held in public with due notice to all concerned.
8. The respondent No. 1 constructed shops at the metro railway road track station at Shahdara Railway Road from where the shop of the petitioner was acquired. The respondent has also stated to have constructed shops at Bhola Nath Nagar Road which was considered for allotment to the petitioner and other persons similarly placed. The petitioner was notified of a draw of lot which was to be conducted for allotment of shops on the 23rd December, 2003. In this draw of lots, the petitioner drew shop No. B-28 in the Bholanath Nagar Road Complex which was so allotted to him.
9. The petitioner was not satisfied with the allotment of this shop and had consequently agitated claim urging that the petitioner was entitled to allotment of one of those shops being shop Nos. 4, 11, 15, 16, 17 & 18 which were constructed under the elevated Metro Railway Road Track at the Shahdara Railway Road or in the alternative to one of the shops being Nos. A-16, A-17, A-30, A-31, A-34 & A-36 located in the complex constructed at the Bhola Nath Nagar Road. It was contended that the respondents have made the allotments in terms of Clauses 10 & 11 of the license agreement and that the shops which have been allotted are commercially not viable.
10. The petitioner had filed a petition under Section 9 of the Arbitration and Conciliation Act, 1996 which came up for hearing on 13th April, 2004. On this date, a request was made on behalf of the petitioner and in other similar petitions, that an arbitrator be appointed to adjudicate upon the disputes between the parties. Accordingly, the matter was referred for adjudication to Hon’ble Mr. Justice K.S. Gupta (Retd.) who was appointed as an arbitrator to adjudicate upon the disputes between the parties by an order dated 13th April, 2004.
11. The learned arbitrator had permitted the parties to file their respective pleadings. Both parties submit that the learned arbitrator had conducted spot inspection of the site as well and proceeded to make and publish an award dated 27th May, 2004. Upon receipt of a copy of the award, the present objections have been filed by the petitioner urging that the learned arbitrator had erred in not giving an opportunity to the petitioner to lead evidence in support of his contention, that the award deserves to be set aside also for the reason that the respondent has failed to give explanation as to why no ground floor shop was allotted to him despite the statement of the respondent that he was entitled to preferential treatment.
12. I have heard learned Counsel for the parties and have perused the record which has been placed before this Court.
13. So far as the first objection is concerned, the admitted position is that the petitioner did not make any request for leading any evidence before the arbitrator. The petitioner has also not objected to the proceedings being closed after the completion of the pleadings, the spot inspection and hearing of arguments by the arbitrator. It is apparent that the petitioner was satisfied that no evidence was required for the purposes of adjudicating upon his claim.
14. It is also the admitted position that the rights of the petitioner were governed by the terms and clauses of license agreement dated 6th September, 2000 and the petitioner cannot expand or claim anything beyond the specific stipulations contained therein. I find that Clause 2 of the license agreement clearly stated that the allocation would be made at `appropriate floor matching the existing shop being dismantled’. The petitioner has stated even before this Court that its shop which was taken over for the purposes of DMRC project, was located on the first floor. In the light of the petitioner having so covenanted in the license deed, the petitioner cannot be heard to contend that he was entitled to allotment of any other floor.
15. A grievance has been made with regard to the fact that despite shops being available on the ground floor and the respondents having held that the petitioner was entitled to preferential treatment, the petitioner was not considered for such allotment.
16. In order to ensure a fair and non-arbitrary allotment of public property, it has been repeatedly held that allotment by public draw of lots is the most egalitarian. All persons who are being considered for allotment would be thrown together and a draw of lots is conducted out of the available properties. The project affected persons have been given a preferential treatment inasmuch as they have been made allotments by a draw of lots out of the properties which were earmarked for allotment to them at a fixed rate. The petitioner has himself stated that the remaining shops have been auctioned by the respondents for the purposes of drawing best rates for them. The petitioner has been required to make payment of a fixed amount and has claimed to have deposited Rs. 52,500/-. Even as per the claim filed by the petitioner in respect of the auctioned shops, the respondents have charged over Rs. 2,50,000/- as security and Rs. 10,000/- to Rs. 12,000/- as lease rental against the newly constructed shops apart from amounts which were to be paid in the auctions. In these facts, the petitioner cannot be permitted to contend that he has not been given a preferential treatment for allotment of the shops in question.
17. Even otherwise, it is necessary to bear in mind the parameters within which the court can judicially review an award made under the provisions of Arbitration and Conciliation Act, 1996. The parameters thereof have been statutorily delineated under Section 34 of the enactment. The petitioner has contended that the objections raised by him fall within the meaning of the expression `opposed to public policy’ and that the award in the instant case is opposed to the public policy in India.
18. In this behalf, it would be useful to consider the scope and meaning of the expression “Public Policy” under Section 34 of the Statute. It is well settled that an arbitrator is a creation of the agreement between the parties and the limits of his jurisdiction are prescribed by the agreement between the parties. A challenge to an award made by the arbitrator is prescribed under the provisions of Section 34 of the Arbitration and Conciliation Act, 1996. As per this provision, the jurisdiction of the court under Section 34 is limited and an arbitral award can be set aside only on the grounds stated in para 34 Sub-section 2 of the Arbitration Conciliation Act, 1996 which reads thus:
34. (1) xxx xxx xxx
(2) An arbitral award may be set aside by the court only if:
(a) the party making the application furnishes proof that-
(i) a party was under some incapacity; or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present the case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling with the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement wa sin conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the court finds that-
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
19. In this behalf, Section 28(3) of the enactment specifically provides that `arbitral tribunal’ shall decide in accordance with the terms of the contract. By virtue of Section 28(2), an arbitrator is required to decide ex aequo et bono (according to what is just and good) only if the parties expressly authorised him to do so.
20. In the instant case, I find that there is no challenge to the award on any other grounds other than a submission that the arbitral award is in conflict with the public policy of India.
21. So far as the expression `Public Policy of India’ is concerned, the same has been considered by the Apex Court in its pronouncement reported at Oil and Natural Gas Corporation of India v. Saw Pipes. In this matter, the court was required to consider as to what meaning can be assigned to the phrase `Public Policy of India’. The court noticed that this expression does not attempt of a precise definition and has to be given meaning in the light and principles underlining the Arbitration Act, Contract Act and the Constitutional provisions. In this case, the court considered the principle which was laid down in the earlier pronouncement reported at Central Inland Water Transport Corporation of India v. Brojo Nath Ganguly wherein the court has stated thus-
93. The normal rule of Common Law has been that a party who seeks to enforce an agreement which is opposed to public policy will be non-suited. The case of A. Schroeder Music Publishing Co. Ltd. v. Macaulay, however, establishes that where a contract is vitiated as being contrary to public policy, the party adversely affected by it can sue to have it declared void. The case may be different where the purpose of the contract is illegal or immoral. In Kedar Nath Motani v. Prahlad Rai, reversing the High Court and restoring the decree passed by the trial court declaring the appellants’ title to the lands in suit and directing the respondents who were the appellants’ benamidars to restore possession, this Court, after discussing the English and Indian law on the subject, said (at page 873):
The correct position in law, in our opinion, is that what one has to see is whether the illegality goes so much to the root of the matter that the plaintiff cannot bring his action without relying upon the illegal transaction into which he had entered. If the illegality be trivial or venial, as stated by Williston and the plaintiff is not required to rest his case upon that illegality, then public policy demands that the defendant should not be allowed to take advantage of the position. A strict view, of course, must be taken of the plaintiff’s conduct, and he should not be allowed to circumvent the illegality by resorting to some subterfuge or by misstating the facts. If, however, the matter is clear and the illegality is not required to be pleaded or proved as part of the cause of action and the plaintiff recanted before the illegal purpose was achieved, then, unless it be of such a gross nature as to outrage the conscience of the court, the plea of the defendant should not prevail.
The types of contracts to which the principle formulated by us above applies are not contracts which are tainted with illegality but are contracts which contain terms which are so unfair and unreasonable that they shock the conscience of the court. They are opposed to public policy and require to be adjudged void.
22. It was also noticed that in Renu Sagar Power Company Ltd. v. General Electronic Company 1994 Civil (1) SCC 644, it was held that a violation of the provisions of the Foreign Exchange Regulation Act which was enacted to safeguard the economic interests of India, would be contrary to the public policy of India as was envisaged under Section 7(1)(b)(i) of the Foreign Exchange Regulation Act and that the enforcement of foreign award on the ground that it is contrary to public policy if such enforcement would be contrary to (i) fundamental policy in Indian Law (ii) the interest of India (iii) justice on morality.
23. After detailed consideration of the principles laid down in various judicial pronouncements, the Apex Court laid down the principles on which an arbitration award could be set aside under Section 34 of the Arbitration & Conciliation Act, 1996. The principles were succinctly laid down in para 31 of the judgment which reads thus:
31. Therefore, in our view, the phrase “public policy of India” used in Section 34 in contenxt is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of stautory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term “public policy” in Renusagar case it is required to be held that the award could be set aside if it is patently illegal. The result would be – award could be set aside if it is contrary to:
(a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality, or
(d) in addition, if it is patenty illegal.
Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void.
24. In the light of these principles, the court held that so far as the objections under Section 34 were concerned, the term `public policy of India’ was required to be interpreted in the context of the jurisdiction of the court where the validity of the award is challenged before it becomes final and executable.
25. The award would be required to be set aside on the ground of `patent illegality’, if the award is patently against the statutory provisions of substantiative law which is enforced in India or is passed without giving an opportunity of hearing to the parties as provided under Section 24 or without giving any reason in a case where parties have not agreed that no reasons are required to be awarded.
26. From the submissions noticed above, it is apparent that none of the grounds afore-noticed have been made out. The Award in the present case cannot be held to be opposed to public policy in India only for the reason that the allotment has been made to the petitioner in terms of the agreement between the parties and the petitioner has desired to have an allotment on some other basis which has not been accepted by the arbitrator.
27. The allotment to the petitioner has been made in terms of what was promised under the license agreement and it is not the petitioner’s case that he has not been made the allotment on terms or at the rates at which the respondent made to other similarly placed persons. Even the dispossession of the petitioner from its earlier property was only after the petitioner had entered into the license agreement with the respondent.
28. In my view, none of the objections raised by the petitioner fall within the permissible parameters of a challenge thereto under Section 34 of the Arbitration & Conciliation Act, 1996. It cannot be held that the award is opposed to public policy in India.
Consequently, I find that there is no merit in the petition and the same is dismissed.