Manvel Tuscano vs DLF Limited

This arbitration petition challenges an award passed by a sole arbitrator in a reference. The reference arose out of an umbrella agreement, under

which the Petitioner had agreed to procure land so as to transfer the same to the Respondent.

The facts of the case may be briefly stated as follows:Â​

The Petitioner is the sole proprietor of a firm known as 'M/s. Manvel Land Empire', whilst the Respondent is engaged in the business of real estate

development. The Respondent was interested in acquiring land in Raigad District in Maharashtra for the purposes of development. To that end, the

parties entered into a memorandum of understanding dated 31 January 2006 (hereinafter referred to as “original “MOUâ€), under which the

Petitioner agreed to acquire land at various places in Taluka Khalapur, District Raigad and transfer the same to the Respondent. The agreement was

supplemented by a supplementary agreement dated 21 February 2006. Under these agreements, various payments were made by the Respondent to

the Petitioner aggregating to Rs.91 lakhs for procurement of land. It is the case of the Respondent that no land was procured by the Petitioner in

pursuance of the agreements and that the Petitioner was thus liable to refund the whole amount of Rs.91 lakhs paid by the Respondent to him in

pursuance of the agreements. It is, on the other hand, the case of the Petitioner that he had procured land and caused the same to be transferred to a

nominee/assignee of the Respondent in pursuance of the agreement between the parties and that it was the Respondent, who had failed to pay the

agreed consideration between the parties towards such procurement and transfer. The disputes between the parties were referred by an order passed

under Section 11 of the Arbitration and Conciliation Act, 1996 to the sole arbitration of the learned arbitrator herein. Both parties led oral and

documentary evidence before the learned arbitrator. The learned arbitrator, after taking into account the evidence and hearing the parties, ordered

refund of the said amount of Rs.91 lakhs to the Respondent. The present petition challenges that award.

The evidence produced before the learned arbitrator clearly shows that the parties had entered into the original MOU as an umbrella agreement for

procurement and transfer of different parcels of land in favour of the Respondent. The villages, in which agricultural lands were to be procured and

conveyed to the Respondent, were described in the MOU. The MOU provided for the price of the lands at the rate of Rs.5,30,000/Â per acre, and

payment of earnest money of Rs.21 lakhs to the Petitioner on the date of the execution of the agreement and a commitment on the part of the

Respondent to pay the balance consideration at or upon the execution and registration of conveyance deed/s for lands, as and when the same were

bought by the Petitioner from the respective owners, directly to the owners of the properties as per the schedule of payment mutually decided by and

between the parties. The MOU entitled the Respondent to assign its rights thereunder to any other person. The original MOU was modified by a

supplemental memorandum of understanding executed between the parties on 21 February 2006 (“supplemental MOUâ€​). The supplemental MOU

inter alia recorded and acknowledged the fact that the Petitioner had already begun the work of acquisition of land in the village of Lodhivali as per the

requirements of the Respondent and made investments and entered into MOU with one Sulochana Mohan Kalyankar and others as also with one

Namdev Kadam and another. The supplemental MOU recorded the representation of the Petitioner that funds were required towards payment to

Sulochana Kalyankar and others, and provided for payment of a further sum of Rs.20 lakhs to the Petitioner upon deposit of the original MOU with

Sulochana Kalyankar and others. Subsequent to the supplemental MOU, on or about 24 March 2006, the Petitioner admittedly addressed a letter to

the Respondent communicating to the latter of his having made arrangements for purchase of the property of Sulochana Kalyankar and others

admeasuring approximately 50 acres for the Respondent's group company as per the terms of the original MOU and supplemental MOU and

requesting the Respondent to release a further sum of Rs.10 lakhs so that the property of Sulochana Kalyankar could be fenced. In pursuance of

these arrangements, a further memorandum of understanding appears to have been entered into between the Petitioner and the Respondent's group

company, Belden Homes Pvt. Ltd. This memorandum records the history of the transaction including the MOU entered into by the Petitioner with

Sulochana Kalyankar for procurement of land at Village Lodhivali, Taluka Khalapur, District Raigad. The memorandum records the Petitioner's

proposal to request Sulochana to execute a conveyance in his favour after payment of consideration. The memorandum also records the Petitioner

having taken possession of the property from Sulochana vide possession receipt of 22 March 2006 and assures Belden Homes Pvt. Ltd. to execute a

conveyance in its favour in respect of the property, after first purchasing the same in his own name from Sulochana. The memorandum settles the

price to be paid by Belden Homes Pvt. Ltd. to the Petitioner and the manner of its payment. This memorandum was followed by a further

communication of the Petitioner to the Respondent herein issued on 7 April 2006 confirming inter alia the arrangements made by the former for

procurement of land for the Respondent's group company as per the terms of the original MOU, and requesting the latter to release a further sum of

Rs.50 lakhs, so as to enable the Petitioner to tie up the property from the vendor. In pursuance of these arrangements, an MOU for sale was entered

into between the Petitioner and Belden Homes Pvt. Ltd. concerning the property acquired/to be acquired from Sulochana. Likewise there have been

other agreements/memoranda between the Petitioner and Belden Homes Pvt. Ltd. for various other properties procured by the Petitioner in Lodhivali,

Taluka Khalapur, District Raigad. There is also on record a resolution passed by Belden Homes Pvt. Ltd. authorising one R.K. Sharma, who was the

original signatory, in his capacity as an authorised representative of the Respondent to the umbrella agreement contained in the original MOU, inter

alia to negotiate further terms and conditions for the sale. It is not in dispute that land admeasuring approximately 49 acres was procured by the

Petitioner and transferred in favour of Belden Homes Pvt. Ltd. Also on record are minutes of meeting between the parties recording what transpired

between them on 28 September 2006. These minutes record the various transactions between the Petitioner and the Respondent concerning

agreements for sale of different parcels of land owned by different vendors. The minutes are signed by one Alok Agarwal as a constituted attorney of

the Respondent. (Alok Agarwal was also one of the authorised representatives of Belden Homes Pvt. Ltd. in the latter's resolution referred to above.)

Lastly, we have on record a letter addressed by Belden Homes Pvt. Ltd. to the Petitioner as of 22 May 2007 dealing with the latter's demand for a

sum of Rs.70,58,600/Â. The letter inter alia records payments made to the Petitioner under various agreements for lands admeasuring approximately

48.89 crores in addition to the advance of Rs.91 lakhs, and claims that in view of such payments no amount was due and payable by Belden Homes

Pvt. Ltd. to the Petitioner. (The letter also incidentally calls for refund of Rs.91 lakhs, for reasons which are not disclosed in the letter.)

On this evidence, it is but a foregone conclusion that in pursuance of the umbrella agreement contained in the original MOU between the parties,

the Petitioner procured land in Village Lodhivali, Taluka Khalapur, District Raigad of over 49 acres and transferred the same to Belden Homes Pvt.

Ltd., which is admittedly a group company of the Respondent. As against this, the foundation of the impugned award passed by the learned arbitrator

is that the Petitioner had failed to procure even a single inch of land in pursuance of the original MOU and was, in the premises, liable to refund the

entire amount of Rs.91 lakhs paid to him by the Respondent. The learned arbitrator strangely has come to a conclusion that Belden Homes Pvt. Ltd.

was an altogether separate concern which had nothing to do with the original MOU or supplemental MOU and the land procured by the Petitioner and

transferred in favour of Belden Homes Pvt. Ltd. could not be said to be in pursuance of the umbrella agreement contained in the original MOU read

with the supplemental MOU. In arriving at this conclusion, the arbitrator appears to have laid great emphasis (possibly, conclusive emphasis) on the

fact that the Petitioner's witness had admitted in his crossÂexamination that there was no document to show that the Petitioner had handed over any

land to the Respondent; that there was no agreement entered into by the Petitioner with the Respondent for sale of any land to the Respondent. Even

a cursory reading of the concerned answer, in the light of the question posed to the witness in his cross examination, would bring out the folly of this

observation. The question and answer are quoted below:

 “Q9. From the record can you show a single agreement which you have caused to be executed between DLF Universal Ltd./DLF Ltd. and

yourself or any farmers effecting the sale of even a single inch of land in favour of DLF Universal Ltd./DLF Ltd.?

Ans. I have not produced any document to show that I have handed over any land to the DLF Universal Ltd./DLF Ltd. There was no agreement

entered into by me with the DLF Universal Ltd./DLF Ltd. for sale of land to DLF Universal Ltd./DLF Ltd.â€​

In the face of a question as to whether or not there was on record any agreement executed between the Petitioner and the Respondent effecting sale

of any land, the witness had no option but to say that there was no such agreement. The case of the Petitioner was not that any document of sale was

executed in favour of the Respondent but that, at the bidding of the Respondent, the land procured for it in Village Lodhivali, Taluka Khalapur, District

Raigad, was transferred to its nominee/assignee, namely, Belden Homes Pvt. Ltd., which was a sister concern of the Respondent. The

executives/officers, including the directors of the two, were common and even their address was common. It was the Petitioner's case that the

documents, which were produced on record, conclusively showed that the procurement and transfer of land in favour of Belden Homes Pvt. Ltd. was

in terms of the umbrella agreement contained in the original MOU executed between the parties. The answer in the crossÂexamination quoted above

was perfectly in sync with this case and does not alter it one way or the other.

In the face of the voluminous evidence before the learned arbitrator, a substantial part of which is referred to hereinabove, it was impossible for any

fair and judiciously minded person to come to a conclusion which the learned arbitrator has arrived at in the present reference. Not only has the

learned arbitrator disregarded altogether the evidence of the two communications of 24 March 2006 and 7 April 2006 addressed by the Petitioner to

the Respondent and the resolution of Belden Homes Pvt. Ltd., which were admitted documents on record, and which have a very critical bearing on

the controversy before the learned arbitrator, but the learned arbitrator has completely misread the supplemental MOU executed between the parties

on 21 February 2006 as also the letter of 22 May 2007 addressed by Belden Homes Pvt. Ltd. to the Petitioner in pursuance of the original MOU and

the supplemental MOU. The supplemental MOU very clearly records that an amount of Rs.20 lakhs was paid by the Respondent to the Petitioner for

procurement of land at Village Lodhivali owned by Sulochana Kalyankar and others. The two communications of 24 March 2006 and 7 April 2006,

respectively, call for payments of Rs.10 lakhs and 20 lakhs for completing the transaction of the land owned by Sulochana Kalyankar. It is these

amounts, namely, the sum of Rs.20 lakhs, which is reflected in the supplemental MOU and further sum of Rs.50 lakhs paid from out of the sums

demanded by the communications dated 24 March 2006 and 7 April 2006, which together with the earnest money of Rs.21 lakhs, make up the

aggregate amount of Rs.91 lakhs, for which a claim was made by the Respondent before the learned arbitrator. These documents make it very clear,

and there are no two views possible on the subejct, that these amounts were paid by the Respondent to the Petitioner for procurement of land owned

by Sulochana Kalyankar and others and which land was to be transferred to their group company, namely, Belden Homes Pvt. Ltd. and which was

admittedly so transferred. In the face of this fullÂproof documentary case, it was impermissible for the learned arbitrator to come to a conclusion that

the Petitioner had not obtained a single inch of land in pursuance of the umbrella agreement between the parties contained in the original MOU. No

fair or judiciously minded person, duly instructed in law, would have ever arrived at such a conclusion. The arbitrator's emphasis on the purported

answer given in cross examination has already been dealt with above. The second and equally drastic basis, and a completely impermissible one at

that, was the arbitrator's observation that the amount of Rs.91 lakhs, which was reflected in the communication of Belden Homes Pvt. Ltd. of 22 May

2007, and which was clearly described as something paid in advance towards the original MOU and supplemental MOU, had nothing to do with

Builden Homes Pvt. Ltd. The arbitrator simply appears to have accepted the oral submission of the Respondent's Counsel that this letter, which in no

uncertain terms showed that the transaction between the Petitioner and Belden Homes Pvt. Ltd. was no different from the transaction between the

Petitioner and the Respondent contained in the original MOU, was in fact addressed by the Respondent and not Belden Homes Pvt. Ltd., but the

letterhead of Belden Homes Pvt. Ltd. was wrongly used for the same. No such case was made out or even suggested in the evidence by the

Respondent. Merely on Counsel's submission a crucial point such as this could not have been accepted by the learned arbitrator as a matter of fact

and, if he does so, he clearly acts in breach of a fundamental principle of judicial procedure, which forms part of the fundamental policy of our law,

namely, a “judicial approachâ€​ which demands the whole adjudicatory process to be fair, reasonable and objective.

In sum, in arriving at his conclusions, the learned arbitrator has, in the first place, disregarded the most vital evidence, which has a critical bearing on

the controversy before him and, secondly, has completely misconstrued documents, which were placed before him and considered by him, such that

that no reasonable person duly instructed in law could have done. The award is accordingly vitiated by contravention of public policy of India within

the meaning of that term consistent with Explanation 1 to subÂsection (2) of Section 34 of Arbitration and Conciliation Act, 1996. As explained by the

Supreme Court in the case of Associate Builders vs. Delhi Development Authority (2015) 3 SCC 49, and observed by this Court of Fermenta Biotech

Ltd. vs. K.R. Patel Arbp/545/17 dated 11 October 2018, it is one of the three fundamental juristic principles accepted by Indian law that any perverse

or irrational decision, such that no reasonable person would have arrived at, cannot be countenanced by the Court as a fair or judicious decision. So

also, ignoring vital evidence in arriving at the conclusion is one of the measures of perversity or irrationality as considered by the Supreme Court in

Associate Builders' case and explained by this Court in Fermenta Biotech.

In the premises, the impugned award cannot be sustained. The arbitration petition is accordingly allowed and the award is set aside. In the

circumstances of the case, there will be no order as to costs.

The Petitioner has, in pursuance of an order passed by this Court on 10 July 2012 in Arbitration Petition No.1 of 2012, deposited a sum of Rs.50

lakhs for allowing it to agitate its challenge to the original exÂparte award. This exÂparte award has since been set aside by this Court by remanding

the matter to the learned arbitrator, whereupon the impugned award has come to be delivered. Since the Petitioner succeeds in his challenge, the

amount will have to be refunded to him. The office is accordingly directed to refund the amount with such interest, as may have accrued thereon, to

the Petitioner.

At the request of learned Counsel for the Respondent, learned Counsel for the Petitioner agrees not to seek refund in pursuance of these directions

for a period of six weeks from today. The statement is accepted.