Construction Of Contract's Terms Is Task Of Arbitrator, Cannot Be Interfered With U/S 34 Unless Construction Is Unreasonable: Madras HC

The Madras High Court bench of Justices M.Sundar And K.Govindarajan Thilakavadi affirmed that the construction of the terms of a contract is primarily for an Arbitrator to decide unless the Arbitrator construes the contract in such a way that it could be said to be something that no fair-minded or reasonable person could do then only interference under section 34 of the Arbitration Act is justified. Brief Facts This is an Appeal under Section 37 of the Arbitration and Conciliation Act, 1996, (hereinafter 'the Act') against the order dated 06.09.2021 passed by the learned Single Judge of this Court in O.P.No.903 of 2019, whereby the application preferred by the appellant herein under Section 34 of the Act for setting aside the award dated 06.08.2019 of the Sole Arbitrator was rejected. A License Agreement dated 29.11.2010 was execited between the claimant and the respondents in which a license was granted to the claimant to carry out the ground handling activities in the Chennai Airport. Ex.C-2 dated 05.01.2011 is the Subordinate License Agreement for lease of space/land/facilities accorded to the Claimant for office/maintenance and parking of its equipments within the airport area. The said agreement was stated to have been subsequently renewed under Ex.C-3 dated 23.06.2014. The dispute arose when the Respondents issued the Circular Letter under Ex.C-5 dated 20.11.2014 by which the Lease Rental/License fee rates were revised with effect from 01.10.2014 in an astronomical manner. The sole Arbitrator after hearing the respective parties pronounced the award dated 06.08.2019. The award so made by the learned sole Arbitrator was challenged by the claimant under Section 34 of the 1996 Act before the Commercial Division. A vast variety of contentions urged on behalf of the parties were duly considered by the Court and the relevant points were answered in favour of the respondents and thereby, the award was upheld while rejecting the application under Section 34 Contentions The appellant submitted that the award passed by the sole Arbitrator dated 06.08.2019 as well as the impugned order dated 06.09.2021 rejecting the application under Section 34 of the Act in O.P.No.903 of 2019 suffers from patent illegality, thus it is liable to be set aside. That under Clause 26 of Ex.C-1 dated 29.11.2010, it is stipulated that the Claimant as a licensee would only be required to pay rental for built up space and land as applicable from time to time subject to 7.5% annual escalation or as determined by Airport Authority of India from time to time other than electricity and water charges, the claim for escalation with compounded effect itself was not justified and the Claimant did not raise any objection to it, as it found to be a trivial one..That the land which was given on lease to the Claimant was a barren land without any construction and the office space was comparatively low in market value and the argument that the other licensees accepted the increase cannot be a ground for insisting such astronomical increase by the Claimant and the Respondents' claim for astronomical increase was also hit by the principle of legitimate substantive expectation of the Claimant. Per contra, the respondents submitted that the dispute as raised before this Tribunal is not maintainable, as the Claimant cannot be meted out with special treatment when the revision of Land Lease Rent was applicable to all the licensees and when all the licensees accepted the same and continue to pay at the revised rates, the Claimant alone cannot be given a concession and that would result in violation of Article 14 of the Constitution. That since the award letter, the agreements and the general terms and conditions form part of the contract they are to be interpreted cumulatively and the Claimant cannot be permitted to dismember a particular clause or word to support its stand and the principle of contra proferentem does not apply to the interpretation of commercial contract apart from the fact that there was no ambiguity as claimed by the Claimant.That the Airport premises occupied by the Claimant cannot be compared with other premises in the locality, having regard to the special nature of the Airport premises and therefore the reliance placed upon by the Claimant on the rental values prevailing in and around Airport premises cannot be taken into account for the purpose of comparison.That the theory of legitimate expectation cannot be pleaded as against the terms of the concluded commercial contract, where the terms of the contract alone will be binding. Reliance was placed upon the decision of C.V.Enterprises Vs. Braithwaite & Co. Ltd. (1984). Court's Analysis The court, at the outset, referred to the findings of the learned arbitrator wherein it was observed that the claimant with its eyes wide open having understood the terms and...

Construction Of Contract's Terms Is Task Of Arbitrator, Cannot Be Interfered With U/S 34 Unless Construction Is Unreasonable: Madras HC

Mohd Malik Chauhan

Tags