Shri Ramesh Chand Kathuria and another v. M/s Trikuta Chemicals (P) Ltd. and anr | M/s Trikuta Chemicals pvt. Ltd. v. Ramesh Chand Kathuria and another Coram

At a glance

Parties

Ramesh Chand Kathuria and Ashish Jain v. M/s Trikuta Chemicals (P) Ltd. and M/s J.K. Alloys (cross-applications)

Case no.

A.A. No. 12/2012, MP No. 10/2014, connected with A.A. No. 04/2016

Forum and rules

Domestic arbitration under the J&K Arbitration and Conciliation Act, 1997; challenge to the award under Section 34

Treaty

Memorandum of Understanding dated 18 March 2008 (arbitration clause; venue Jammu)

Court

High Court of Jammu and Kashmir at Jammu, Justice Tashi Rabstan

Underlying award(s)

Award of 27 January 2012 by sole arbitrator Justice K.K. Gupta (Retd)

Sector

Industrial real estate (leasehold industrial plots, steel melting project)

Outcome

Both applications to set aside the award were dismissed, and the award was upheld on 17 July 2018.

Amount

Earnest money paid: Rs.1.01 crore. Award: Rs.50.50 lacs to be refunded to Kathuria and Jain, and Rs.50.50 lacs forfeited; all other claims and counter-claims rejected.

The dispute

Under an MOU of 18 March 2008, M/s J.K. Alloys and M/s Trikuta Chemicals (P) Ltd. agreed to transfer leasehold rights in two industrial plots (8 and 16 Kanals) at SIDCO Industrial Estate, Bari Brahmana, Jammu, together with a 1000 KVA power connection, to Ramesh Chand Kathuria and Ashish Jain for Rs.4.61 crores. The buyers wanted to set up a steel melting furnace there. They paid Rs.1.01 crore on signing. Further payments depended on the sellers converting J.K. Alloys into a private company, transferring the lease and the power connection, and obtaining permission from the Industries Department. On 27 March 2008 the Central Government cut the excise exemption from 100% to 39%. In November 2008 the buyers revoked the MOU and demanded a refund with 24% interest. The sellers said the buyers had failed to provide a detailed project report (DPR), and they claimed forfeiture of the Rs.1.01 crore plus losses. The sole arbitrator found both sides at fault and split the earnest money. Each side then applied under Section 34 to set aside the part of the award that went against it, arguing that it was contrary to the contract, unreasoned, perverse and against public policy.

Key holdings

1. Under Section 34 read with Section 5 of the J&K Arbitration and Conciliation Act, 1997, an award can be set aside only on the grounds listed in Section 34. The merits are examined only where the award conflicts with public policy, that is, where it breaches the fundamental policy of the law, the interest of India, justice or morality, or is patently illegal. ¶¶ 43–52
2. A court applying the public policy test does not act as a court of appeal and cannot correct errors of fact. The arbitrator had dealt with the facts and the evidence comprehensively, and his approach was not arbitrary or capricious, so he is the last word on the facts. ¶¶ 65–67
3. The arbitrator had found that the sellers formed a new company on 9 April 2008, but that the other conditions of Clause 2 remained unfulfilled eight months later. He also found that under Clause 5 both parties had to cooperate, and that both had failed in their duties. On that basis he ordered a refund of Rs.50.50 lacs. The Court endorsed this reasoning. ¶¶ 30–33
4. No patent illegality appears on the face of the award. Construing the contract is a matter for the arbitrator. Where his view is a possible one, the court cannot substitute its own construction. ¶¶ 68–75
5. The arbitrator's construction of the MOU is consistent with Supreme Court principles, and his views are possible views. Both A.A. No. 12/2012 and A.A. No. 04/2016 were dismissed, the award of 27 January 2012 was upheld, and interim directions were vacated. ¶¶ 76–77

Procedural history

1. 18 March 2008The MOU is executed, and Rs.1.01 crore is paid on signing.
2. November 2008The buyers revoke the MOU and demand a refund; the notice is received on 15 November 2008. The sellers reject the demand by letter of 18 November 2008.
3. 5 June 2009In A.A. No. 32/2008 the High Court appoints Justice K.K. Gupta (Retd) as sole arbitrator, with the parties' consent.
4. 16 October 2010With the parties' consent, the arbitrator orders that the claims and counter-claims be treated as the issues.
5. 27 January 2012Award: Rs.50.50 lacs to be refunded and Rs.50.50 lacs forfeited; all other claims rejected.
6. 2012 and 2016Section 34 applications are filed: A.A. No. 12/2012 by Kathuria and Jain, and A.A. No. 04/2016 by Trikuta Chemicals and J.K. Alloys.
7. 17 July 2018The High Court of Jammu and Kashmir dismisses both applications and upholds the award.

Tribunal, counsel and experts

Decided by

• Tashi Rabstan Judge, High Court of Jammu and Kashmir
• K.K. Gupta Sole arbitrator — appointed by a court (author of the underlying award of 27 January 2012)

For the claimant

Z. A. Shah · Vipin Gandotra

For the respondent

Harish Malhotra · C. S. Azad

Run a conflict check on these names →

Keywords

• set-aside
• Section 34
• J&K Arbitration and Conciliation Act 1997
• public policy
• patent illegality
• perversity
• forfeiture of earnest money
• memorandum of understanding
• leasehold industrial plots
• SIDCO Bari Brahmana
• steel melting
• excise exemption
• detailed project report
• contract interpretation by arbitrator
• ONGC v. Saw Pipes
• Associate Builders
• New York Convention Article V(2)(b)

Summary generated with AI from the published documents — refer to the award for the authoritative text.