quantum of damages

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,

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 … Continue reading →