The Delhi High Court has held that an arbitral award that is not in consonance with the judicial decisions and principles laid down by the courts of India would be in violation of the fundamental policy of Indian law and thus in conflict with the public policy of India under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act).
The Bench, consisting of Justices Mukta Gupta and Neena Bansal Krishna, upheld the order of the Single Judge setting aside the arbitral award under Section 34 on the ground that the Arbitrator had failed to apply the basic fundamental law as contained in the Limitation Act, 1963 and the Transfer of Property Act, 1882.
Subhash Chand Roy, the deceased father of the appellant Sanjay Roy and respondent no. 2, 3 and 4, was the absolute owner of a property. He executed a Will bequeathing the said property in favour of his wife Kalyani Roy. Subsequently, after the death of the testator a Conveyance Deed was executed in favour of the legatee Kalyani Roy with respect to the said property.
During her lifetime, Kalyani Roy entered into a Collaboration Agreement with respondent no.1 Sandeep Soni, for re-development of the said property.
Aggrieved by the said Collaboration Agreement, the appellant Sanjay Roy filed a suit for injunction. Thereafter, the respondent no. 1 filed an application under Section 11 of the A&C Act and the parties were referred to arbitration.
The Arbitrator held that in case of inconsistent clauses in the Will, the latter clause shall prevail. The Arbitrator thus passed an award holding that Kalyani Roy only had a life interest and not full ownership in the said property and thus, she was not competent to enter into a Collaboration Agreement with respondent No. 1 during her lifetime.
The respondent no. 1 Sandeep Soni challenged the arbitral award by filing an application under Section 34 of the A&C Act before the Single Judge. The Single Judge ruled that the second part of the Will of the testator Subhash Chand Roy was easily reconcilable with the first part of the will. The Single Judge added that the testator's intention was to bequeath the said property to his wife as an absolute owner and without any limitation, and it was only when she did not alienate or exercise ownership rights that the said property, as per the second part of the will, was to devolve amongst the testator's children, i.e., the appellant and respondent no. 2, 3 and 4, after the legatee Kalyani Roy's lifetime.
The Single Judge held that Kalyani Roy could not be held to have been conferred a limited interest without power of alienation and that the interpretation adopted by the Arbitrator amounted to re-writing the terms of the Will. Thus, the Single Judge held that the legatee Kalyani Roy was the absolute owner of the said property and was competent to enter into the Collaboration Agreement with respondent no.1.
The appellant Sanjay Roy filed an appeal against the order of the Single Judge before the Division Bench of the Delhi High Court under Section 37 of the A&C Act.
The appellant submitted before the High Court that as per Section 88 of the Indian Succession Act, 1925, where two clauses of a gift or a will are irreconcilable and cannot stand together, then the later clause shall prevail. The appellant added that the award passed by the Arbitrator was based on correct interpretation of the Will of the testator Subhash Chand Roy and its reversal by the Single Judge under Section 34 of the A&C Act suffered from patent illegality.
The Court observed that as per the law laid down by the Supreme Court in the case of Shyamal Kanti Guha versus Meena Bose (2008), in a case where two clauses of a Will are inconsistent and irreconcilable to each other, if possible, the Court must give effect to both the clauses which apparently appear to be irreconcilable.
The Court noted that in view of the decision of the Supreme Court in the case of M.S. Bhawani versus M.S. Raghu Nandan (2020), once a testator has given an absolute right and interest in his entire property to a devisee, it is not open to the testator to further bequeath the same property in favour of a second set of persons in the same Will.
The Court reiterated that a testator cannot create successive legatees in his Will and once an absolute right is conferred on anyone, any subsequent bequest in favour of other persons in respect to the same property would be repugnant to the first bequest and would be invalid.
Thus, the Court held that the Will of the testator Subhash Chand Roy as a whole clearly reflected the intention of the testator to bequeath his property to his wife as an absolute owner with all the rights and privileges.
The Court observed that under Section 34 of the A&C Act, a domestic arbitral award can be set aside if it is in conflict with the "public policy of India". Also, the Court observed that as per Section 34, an award in contravention with the fundamental policy of Indian law would be in conflict with the public policy of India.
The Court noted that as per the decision of the Supreme Court in the case of Renusagar Power Co. Ltd. versus General Electric Co. (1994), disregarding the orders passed by superior courts would adversely affect the administration of justice and consequently an award passed in such disregard to the orders of superior courts would also be a violation of the fundamental policy of Indian law.
The Court held that in view of the decision of the Supreme Court in the case of Vijay Karia versus Prysmian Cavi E Sistemi SRL (2020), mere violation of any enactment shall not be a breach of fundamental policy of Indian law unless the same comprises the most basic values and principles that form the basic policy of laws in the country.
The Court ruled that the Will or the Conveyance Deed cannot be challenged by the appellant 22 years after it was brought to effect. The Court added that the limitation period for challenging the Conveyance Deed is three years as per Article 59 of the Limitation Act, 1963 and that as per Section 27 of the Limitation Act any person's right to sue for recovery of possession of immovable property is extinguished upon expiration of the specified limitation period.
Thus, the Court observed that the Arbitrator had failed to apply the basic fundamental law as contained in the Limitation Act, 1963 and the Transfer of Property Act, 1882. The Court added that the award was also not in consonance with the judicial decisions and principles laid down by the courts of India. Therefore, the Court held that the findings of the Arbitrator were in breach of the fundamental policy of Indian law.
The Court thus held that the arbitral award was rightly set aside by the Single Judge. The Court therefore dismissed the appeal of the appellant.
Case Title: Sanjay Roy versus Sandeep Soni & Ors.
Citation: 2022 LiveLaw (Del) 506
Counsel for the Appellant: Mr. Lalit Bhardwaj & Mr. Jatin Anand Dwivedi, Advocates
Counsel for the Respondents: Mr. Rakesh Saini, Advocate for R-1; Mr. Jai Sahai Endlaw & Mr. Ashutosh Rana, Advocates for R-2 & 3