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Arbitration-Non-residential premises-Assessment of damages for use and occupation-Property requisitioned under Requisitioning and Acquisition of Immovable Properties Act-After lapse of Act, occupant allowed time by Court to vacate-Assessment of damages referred to arbitrator-Arbitrator treating the occupation as illegal awarding mesne profits-Held, where possession though not wrongful in the beginning assumes a wrongful character when it is unauthorisedly retained, owner is not entitled to claim mesne profits, but only the fair rent-On facts, occupant allowed to use and occupy the property under orders of Court possession cannot be said to be illegal and wrongful-Factors to be taken into consideration for assessment af fair rent, discussed-Requisitioning and Acquisition of Immovable Properties Act, 1952. Arbitration-Award-Setting aside of-Grounds discussed. Certain commercial properties of the respondent were requisitioned under the Requisitioning and Acquisition of immovable Properties Act, 1952. Before the said Act lapsed on 10.3.1987, a notification under s.4 of the Land Acquisition Act, 1894 had been issued and declaration under ss.6 and 17 had been published. The respondent challenged the acquisition by filing a writ petition which was allowed by the High Court Appellant’s SLP was rejected by the Supreme Court, and they were allowed time to vacate the premises. The arbitrator made an award assessing damages @ Rs. 15 per sq. ft. per month for covered area, Rs. 10 sq.ft. per month for larger open space and Rs. 7 per sq.ft. per month for smaller open space. On dismissal of appellants’ objections under ss.30 and 33 of the Arbitration Act, by the Single Judge and the consequent appeal by the Division Bench of the High Court, the appellants filed the present appeal. It was contended for the appellant that the arbitrator erred in assessing the damages on the assumption that possession of the appellant after 10.3.1987 was illegal and in the nature of trespass. It was submitted that the appellants having been allowed time till 31.3.1993 by the Court, use and occupation of the property was not illegal but permissible, and the respondent was entitled to claim rent only and not the mesne profits. It was also contended that the open land being part of the building, the arbitrator erred in assessing damages for open space separately when damages were assessed @ Rs. 15per sq.ft for built up area; and that arbitrator failed to take into considerations the relevant facts in assessing damages and erred in taking into account a non-comparable property. =Allowing the appeal, the Court HELD: Per Kapadia, J. (For himself and for Khare, CJ.) 1. Where the possession though not wrongful in the beginning assumes a wrongful character when it is unauthorisedly retained, the owner is entitled to claim damages not on the basis of mesne profits but only on the basis of the fair rent. In the present case, in view of the permission granted by the Court enabling the appellant to use and occupy the property up to 31.3.1993, it cannot be said that the possession of the appellant was illegal and wrongful and in the nature of trespass. In the circumstancess, damages were claimable not on the basis of mesne profits but on the basis of fair rent. [1201-C-D] Law of Damages and Compensation by Kameshwara Rao 5th Edn. Vol. I Page 528, referred to. 2.1. An award can be set aside when an arbitrator has misconducted the proceedings. Misconduct refers to legal misconduct which arises if the arbitrator on the face of the award arrives at a decision ignoring material documents. [1202-G-H] K.P. Poulose v. State of Kerala and Anr., AIR (1975) SC 1259 v. Trustees of the Port of Madras v. Engineering Constructions Corporation Limited, AIR (1995) SC 2423, relied on. Municipal Corporation of Delhi v. Ms. Jagan Nath Ashok Kumar and Anr., AIR (1987) SC 2316, held inapplicable. 2.2. In the instant case, the arbitrator was required to assess damages by applying correct principles of valuation. The property was under requisition upto 10.3.1987. Damages were required to be assessed for use and occupation of the premises after 10.3.1987 by the appellant under orders of the Court. The rent of the property which was accepted by the respondent and the building being a dilapidated; one its value as such shown in the municipal record have not been taken into account by the arbitrator. The respondent has not relied upon any valuation report nor has it examined any expert valuer in support of his claim for damages. The arbitrator has given his award based on evidence of lay persons. The sales/lease instances do not appear to be comparable. Besides, there was no reason for arbitrator to assess damages for open space separately as it formed part of the main building. The rent method for assessing damages has not at all been considered by the arbitrator. Even while applying the income/profit method the expenses, the cost of investment etc, have not been taken into account Therefore the impugned award stood vitiated and is set aside. [1202-F-H; 1203-B-D] Per Sinha, J. Concurring. 1. It is now well settled that when a question of law is referred to the arbitrator the award cannot be set aside only if a different view is possible. However, it is also trite that if no specific question of law is referred, the decision of the arbitrator on that question would not be final, however much it may be within his jurisdiction and indeed essential for him to decide the question incidentally. Only in a case where specific question of law touching upon the jurisdiction of the arbitrator was referred for determining his jurisdiction by the parties, then the finding of the arbitrator on the said question between the parties may be binding. It is also trite that where the award contains reasons, the same may be interfered, inter alia, when it is based on a wrong proposition of law. However, when the view of the arbitrator is a plausible one, the Court would not normally interfere. It is further trite that an arbitrator cannot clothe himself with the jurisdiction when it has none. [1204-F-G; 1205-A; G] Rajasthan State Mines and Minerals Ltd. v. Eastern Engineering Enterprises and Anr., [1999] 9 SCC 283; Pure Helium India (P) Ltd. v. Oil and Natural Gas Commission, [2003] 8 SCC 593; Bharat Coking Coal Ltd., v. Annapurna Construction, [2003] 8 SCC 154 and M/s. Sathyanarayana Brothers (P) Ltd. v. Tamil Nadu Water Supply and Drainage Board, (2003) 9 SCALE 769, relied on. 2. Correct determination of the quantum of damages by the arbitrator would depend upon application of the correct principles therefor. The authorities on valuation of property lay down such principles. It has not been shown that the Arbitrator in determining the quantum of damages adopted any known or accepted principle of valuation. Determination of quantum of damages would depend upon the fact of the matter as also the terms of the contract and other relevant factors. [1205-B-C] M.D. Army Welfare Housing Organisation v. Sumangal Services Pvt. Ltd., (2003) 8 SCALE 424, relied on. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1531 of 1999,

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CASE NO.:
Appeal (civil) 1531 of 1999

PETITIONER:
Union of India

RESPONDENT:
M/s. Banwari Lal & Sons(P) Ltd.

DATE OF JUDGMENT: 12/04/2004

BENCH:
S.B. Sinha.

JUDGMENT:
J U D G M E N T

S.B. SINHA, J :

 How the quantum of damages should be calculated by an arbitrator for 
occupation of a property by the appellant herein pursuant to or in furtherance 
of notification issued under the provisions of the Land Acquisition Act 
which was declared illegal is the short question involved in this appeal. 

 The premise in question admeasuring 50,328 sq. ft. is situated at 6, 
Ansari Road, Darya Ganj. It was requisitioned by Delhi Administration 
under the provisions of Requisition and Acquisition of Immovable Property 
Act, 1952. The said Act lapsed on 10th March, 1987. A notification was 
issued under Section 4 of the Land Acquisition Act for acquisition of the 
entire property on 6th March, 1987 whereafter a declaration purported to be 
in terms of Sections 6 and 17 thereof was issued on 10th March, 1987. The 
said notification was set aside by the High Court by a judgment dated 
04.02.1991 on a writ petition filed by the Respondent herein.

 The High Court while quashing the said acquisition proceeding 
appointed Justice T.V.R. Tatachari as an arbitrator to determine the damages 
payable by the Delhi Administration for occupation of the said property. It 
is not in dispute that this Court while permitting the appellant to remain in 
possession upto 31.03.1993 directed it to hand over vacant possession on or 
before the said date. It was, however, clarified that the arbitrator appointed 
by the High Court may give his award and file the same in the High Court 
for appropriate orders.

 Even if the contention of the appellant to the effect that its possession 
in relation to property in question was not of a trespasser is not accepted; 
what should be the reasonable amount of damages for occupation thereof 
was the question required to be determined by the Arbitrator. The learned 
Arbitrator posed unto himself a correct question when he said:

"It has to be remembered that the income a private 
property would fetch by being let out, is not a 
fixed and rigid figure, but would depend upon 
various factors such as the need and urgency of the 
lessee, the bargaining ability of the lessor, the 
prevailing competition in the locality and the like."

 The learned Arbitrator passed a reasoned award. Before the 
Arbitrator parties adduced evidences. As many as 16 issues were framed by 
the Arbitrator. The learned arbitrator was also required to determine a 
question as regard status of the appellant herein vis-`-vis the said property 
upon delivery of the judgment of the High Court dated 4.2.1991 declaring 
the acquisition proceedings to be illegal on the ground that Section 17 of the 
Land Acquisition Act could not have been taken recourse to. 

It is now well settled that when a question of law is referred to the 
arbitrator the award cannot be set aside only if a different view is possible. 
However, it is also trite that if no specific question of law is referred, the 
decision of the Arbitrator on that question would not be final, however much 
it may be within his jurisdiction and indeed essential for him to decide the 
question incidentally. Only in a case where specific question of law touching 
upon the jurisdiction of the arbitrator was referred for determining his 
jurisdiction by the parties, then the finding of the arbitrator on the said 
question between the parties may be binding. (See Rajasthan State Mines & 
Minerals Ltd. Vs. Eastern Engineering Enterprises and Another [(1999) 9 
SCC 283] and Pure Helium India (P) Ltd. Vs. Oil & Natural Gas 
Commission [(2003) 8 SCC 593])

 It is also trite that where the award contains reasons, the same may be 
interfered, inter alia, when it is based on a wrong proposition of law. 
However, when the view of the arbitrator is a plausible one, the Court 
would not normally interfere.

 The questions raised in this appeal are required to be considered 
keeping in view the aforementioned legal principles. Correct determination 
of the quantum of damages by the arbitrator would depend upon application 
of the correct principles therefor. The authorities on valuation of property 
lay down such principles. It has not been shown that the learned Arbitrator 
in determining the quantum of damages adopted any known or accepted 
principle of valuation. Determination of quantum of damages would depend 
upon the fact of the matter as also the terms of the contract and other 
relevant factors. (See M.D. Army Welfare Housing Organisation Vs. 
Sumangal Services Pvt. Ltd., 2003 (8) SCALE 424) 
 In Bharat Coking Coal Ltd. Vs. Annapurna Construction [(2003) 8 
SCC 154], this Court in no uncertain terms held that the arbitrator cannot act 
arbitrarily, irrationally, capriciously or independent of the contract. It was 
further opined:
"There lies a clear distinction between an error 
within the jurisdiction and error in excess of 
jurisdiction. Thus, the role of the arbitrator is to 
arbitrate within the terms of the contract. He has 
no power apart from what the parties have given 
him under the contract. If he has travelled beyond 
the contract, he would be acting without 
jurisdiction, whereas if he has remained inside the 
parameter of the contract, his award cannot be 
questioned on the ground that it contains an error 
apparent on the face of the records."

The decision of this Court in Bharat Coking Coal Ltd. (supra) was 
followed in M/s. Sathyanarayana Brothers (P) Ltd. Vs. Tamil Nadu Water 
Supply & Drainage Board [2003 (9) SCALE 769] where it was emphasised 
that the arbitrator while making his award cannot ignore very material and 
relevant documents relevant for determining the controversy so as to render 
a just and fair decision.

It is further trite that an arbitrator cannot clothe himself with the 
jurisdiction when it has none. As the learned Arbitrator did not adopt any known method of 
valuation of the property, it must be held that while making the award he 
applied a wrong principle of law and, thus, the same cannot be sustained.For the aforementioned reasons, I respectfully concur with the 
judgment and order proposed to be delivered by Brother Kapadia, J.

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Discussion

3 thoughts on “Arbitration-Non-residential premises-Assessment of damages for use and occupation-Property requisitioned under Requisitioning and Acquisition of Immovable Properties Act-After lapse of Act, occupant allowed time by Court to vacate-Assessment of damages referred to arbitrator-Arbitrator treating the occupation as illegal awarding mesne profits-Held, where possession though not wrongful in the beginning assumes a wrongful character when it is unauthorisedly retained, owner is not entitled to claim mesne profits, but only the fair rent-On facts, occupant allowed to use and occupy the property under orders of Court possession cannot be said to be illegal and wrongful-Factors to be taken into consideration for assessment af fair rent, discussed-Requisitioning and Acquisition of Immovable Properties Act, 1952. Arbitration-Award-Setting aside of-Grounds discussed. Certain commercial properties of the respondent were requisitioned under the Requisitioning and Acquisition of immovable Properties Act, 1952. Before the said Act lapsed on 10.3.1987, a notification under s.4 of the Land Acquisition Act, 1894 had been issued and declaration under ss.6 and 17 had been published. The respondent challenged the acquisition by filing a writ petition which was allowed by the High Court Appellant’s SLP was rejected by the Supreme Court, and they were allowed time to vacate the premises. The arbitrator made an award assessing damages @ Rs. 15 per sq. ft. per month for covered area, Rs. 10 sq.ft. per month for larger open space and Rs. 7 per sq.ft. per month for smaller open space. On dismissal of appellants’ objections under ss.30 and 33 of the Arbitration Act, by the Single Judge and the consequent appeal by the Division Bench of the High Court, the appellants filed the present appeal. It was contended for the appellant that the arbitrator erred in assessing the damages on the assumption that possession of the appellant after 10.3.1987 was illegal and in the nature of trespass. It was submitted that the appellants having been allowed time till 31.3.1993 by the Court, use and occupation of the property was not illegal but permissible, and the respondent was entitled to claim rent only and not the mesne profits. It was also contended that the open land being part of the building, the arbitrator erred in assessing damages for open space separately when damages were assessed @ Rs. 15per sq.ft for built up area; and that arbitrator failed to take into considerations the relevant facts in assessing damages and erred in taking into account a non-comparable property. =Allowing the appeal, the Court HELD: Per Kapadia, J. (For himself and for Khare, CJ.) 1. Where the possession though not wrongful in the beginning assumes a wrongful character when it is unauthorisedly retained, the owner is entitled to claim damages not on the basis of mesne profits but only on the basis of the fair rent. In the present case, in view of the permission granted by the Court enabling the appellant to use and occupy the property up to 31.3.1993, it cannot be said that the possession of the appellant was illegal and wrongful and in the nature of trespass. In the circumstancess, damages were claimable not on the basis of mesne profits but on the basis of fair rent. [1201-C-D] Law of Damages and Compensation by Kameshwara Rao 5th Edn. Vol. I Page 528, referred to. 2.1. An award can be set aside when an arbitrator has misconducted the proceedings. Misconduct refers to legal misconduct which arises if the arbitrator on the face of the award arrives at a decision ignoring material documents. [1202-G-H] K.P. Poulose v. State of Kerala and Anr., AIR (1975) SC 1259 v. Trustees of the Port of Madras v. Engineering Constructions Corporation Limited, AIR (1995) SC 2423, relied on. Municipal Corporation of Delhi v. Ms. Jagan Nath Ashok Kumar and Anr., AIR (1987) SC 2316, held inapplicable. 2.2. In the instant case, the arbitrator was required to assess damages by applying correct principles of valuation. The property was under requisition upto 10.3.1987. Damages were required to be assessed for use and occupation of the premises after 10.3.1987 by the appellant under orders of the Court. The rent of the property which was accepted by the respondent and the building being a dilapidated; one its value as such shown in the municipal record have not been taken into account by the arbitrator. The respondent has not relied upon any valuation report nor has it examined any expert valuer in support of his claim for damages. The arbitrator has given his award based on evidence of lay persons. The sales/lease instances do not appear to be comparable. Besides, there was no reason for arbitrator to assess damages for open space separately as it formed part of the main building. The rent method for assessing damages has not at all been considered by the arbitrator. Even while applying the income/profit method the expenses, the cost of investment etc, have not been taken into account Therefore the impugned award stood vitiated and is set aside. [1202-F-H; 1203-B-D] Per Sinha, J. Concurring. 1. It is now well settled that when a question of law is referred to the arbitrator the award cannot be set aside only if a different view is possible. However, it is also trite that if no specific question of law is referred, the decision of the arbitrator on that question would not be final, however much it may be within his jurisdiction and indeed essential for him to decide the question incidentally. Only in a case where specific question of law touching upon the jurisdiction of the arbitrator was referred for determining his jurisdiction by the parties, then the finding of the arbitrator on the said question between the parties may be binding. It is also trite that where the award contains reasons, the same may be interfered, inter alia, when it is based on a wrong proposition of law. However, when the view of the arbitrator is a plausible one, the Court would not normally interfere. It is further trite that an arbitrator cannot clothe himself with the jurisdiction when it has none. [1204-F-G; 1205-A; G] Rajasthan State Mines and Minerals Ltd. v. Eastern Engineering Enterprises and Anr., [1999] 9 SCC 283; Pure Helium India (P) Ltd. v. Oil and Natural Gas Commission, [2003] 8 SCC 593; Bharat Coking Coal Ltd., v. Annapurna Construction, [2003] 8 SCC 154 and M/s. Sathyanarayana Brothers (P) Ltd. v. Tamil Nadu Water Supply and Drainage Board, (2003) 9 SCALE 769, relied on. 2. Correct determination of the quantum of damages by the arbitrator would depend upon application of the correct principles therefor. The authorities on valuation of property lay down such principles. It has not been shown that the Arbitrator in determining the quantum of damages adopted any known or accepted principle of valuation. Determination of quantum of damages would depend upon the fact of the matter as also the terms of the contract and other relevant factors. [1205-B-C] M.D. Army Welfare Housing Organisation v. Sumangal Services Pvt. Ltd., (2003) 8 SCALE 424, relied on. CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1531 of 1999,

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