In FAO(OS) (COMM) 92/2022-DEL HC-Domestic arbitral award can be set aside u/s 34 of Arbitration & Conciliation Act if it is in conflict with public policy of India: Delhi HC Justices Mukta Gupta & Neena Bansal Krishna [20-05-2022]

Read Order:  SH. SANJAY ROY v. SANDEEP SONI & ORS 

Mansimran Kaur

New Delhi, May 25, 2022: The Delhi High Court has recently held that the grounds of challenge to the arbitral award fell within the scope of Section 34 of Arbitration and Conciliation Act, 1996 as the Arbitrator failed to apply the basic fundamental law as contained in the Limitation Act, 1963, Transfer of Property Act, 1882 and the award was also not in consonance with judicial principles as laid down by the Courts of India. 

Observing that the findings of the Arbitrator were in breach of the fundamental policy of Indian law, the Division Bench of  Justice Mukta Gupta and Justice Neena Bansal Krishna said, “Section 34 of the Act, 1996, provides the ground for setting aside the domestic arbitral award if it is in conflict with public policy of India. It has been explained that in conflict with public policy of India means (i) the award is induced or affected by fraud; or (ii) is in contravention with the fundamental policy of Indian Law; or (iii) is in conflict with the most basic notions of morality of justice.”

The conspectus of facts was that Late Shri Subhash Chand Roy, deceased father of the appellant and the respondents (second to fourth), executed a Will bequeathing the suit property in favor of his wife, Smt. Kalyani Roy. His wife also executed a will wherein she bequeathed the suit properly equally to the children. She died on January 1, 2017 and during her lifetime she entered into a collaboration agreement with the first respondent as the owner of the suit property. 

The cause of dispute arose with respect to this agreement. The appellant was aggrieved on the ground that his mother was residing with the second respondent, however, her name was not present in possession of the property nor did she have any ownership right in the suit property. It was further the case of the appellant that the entire agreement was manipulated by the second respondent along with her husband. In pursuance of the same, the appellant sent a legal notice and filed a suit for injunction. An application was also filed under Section 11 of the Arbitration and Conciliation Act, 1996 by the first respondent.Thus, the parties were referred to arbitration.  In view of the same, the award was granted by the Arbitrator which was assailed under Section 34 of the Act, 1996 by the first respondent. The objections raised were allowed by the Single Judge through impugned judgment and it was that late Smt. Kalyani Roy was the absolute owner of the property and was competent to enter into the Collaboration Agreement with the first Respondent-builder. Aggrieved by the order, the present appeal was filed by the appellant under Section 37 of the Act, 1996. 

The Bench referred to the judgments of the Top Court in Shyamal Kanti Guha vs. Meena Bose, Madhuri Ghosh and Another vs. Debobroto Dutta &Another, , M. S. Bhawani vs. vs. M.S. Raghu Nandan and observed that the Will of Shri. Subhash Chand Roy as a whole clearly reflected the intention of the testator to bequeath his property  as an absolute owner with all the rights and privileges. It was further evident that on the demise of Shri Subhash Chand Roy she got the property mutated in her name for which her children submitted their No Objections. It was further held by the Court that when the appellant himself had given No objection and always knew about the Conveyance Deed, so any challenge now to the ownership/ title was clearly time barred. 

It was also noted by the Court that the limitation for challenging the Deed is three years as per Article 59 of the Limitation Act and as per Section 27 the right to sue for recovery of possession of immovable property is extinguished upon  expiration of the period of limitation provided.  Holding that the Single Judge had rightly set aside the arbitral award as the findings of the Arbitrator were in breach of the fundamental policy of Indian law, the Bench dismissed the appeal.