In Firm Rajasthan Udyog & Ors. v. Hindustan Engineering & Industries Ltd. in Civ App. 2376 of 2020 dated 24 April 2020, a very interesting question in respect of declaratory awards came up before the Supreme Court. In this case, the parties have referred their land dispute to the arbitrator only to the extent of fixation of price of land by the Arbitrator basis which such land will then be sold from one party to the other pursuant to an independent Agreement to sell which also provide an option to the party either to refuse to purchase land on such price or proceed further to execute the sale. The award determined the price of land in dispute but the Appellant Award Debtor has not provided its consent to sell the land on price fixed in the award. In the meantime, the Respondent Award Holder filed a suit for specific performance of Agreement to sell but later it was withdrawn unconditionally. Parallelly, the Respondent Award Holder proceeded with the execution of the award wherein the Court directed the enforcement of award. The Supreme Court while quashing the decision of the executing court inter alia held that it was the Agreement to sell which was enforceable and not the award as the latter has only determined the price of land which was then subject to conclusion of contract between the parties as per the Agreement to sell. In addition, the Court also held that the Respondent Award Holder has waived its right to seek enforcement of Agreement to sell by withdrawing the suit it has filed earlier specifically for this purpose. Therefore, what has not been awarded in the award cannot be awarded by the executing court in the execution of such award. Detailed case update provided hereunder:
The land of Appellant Award Debtor was acquired by the Government of Rajasthan by a notification for the benefit of the Respondent Award Holder. The notification was unsuccessfully challenged by the Appellant Award Debtor before the Single Judge of the High Court which was later quashed by the Division Bench of High Court. This decision was challenged and dismissed in the Supreme Court. During pendency of this litigation, parties entered into an Agreement to sell wherein it was agreed that a part of the disputed land would be retained by the Appellant Award Debtor whereas the rest will be sold to the Respondent Award Holder subject to the fixation of price of land, construction etc. to be finalised through Arbitration. If compensation was not acceptable to the Respondent Award Holder, it shall have an option of not accepting the same. Thus, the mandate of the arbitrator was limited to determination of compensation of the land to be sold to Respondent Award Holder.
Pursuant to that, the arbitrator awarded compensation amount for the land in question which was then filed by the Respondent Award Holder with the court to be made as the Rule of Court as required in the erstwhile regime of Arbitration Act of 1940. The award was objected to by the Appellant Award Debtor in view thereof the award was remanded back by the District Court to the arbitrator for rectification. The decision of the District Court was successfully challenged by the Respondent Award Holder before the High Court and the award was made Rule of Court. The award was then challenged before the Supreme Court but in vain.
After exhaustion of all remedies against the award, the Respondent Award Holder filed its execution petition wherein it was inter alia prayed before the Court to direct execution of Agreement to sell. The District Court allowed the prayer of the Award Holder Respondent which led Award Debtor Appellant file a revision before the High Court. Pertinently, during pendency of the aforesaid revision, the Award Holder Respondent filed a suit for specific performance of Agreement to sell only to withdraw it subsequently. Meanwhile the award was upheld in revision by the Executing court which led Appellant Award Debtor to knock the doors of the Supreme Court under Article 136 of the Constitution of India, 1950 in the present case.
Before the Court, the Appellant Award Debtor inter alia contended as under
- that the executing court has travelled beyond the award in asmuch as by the award, the arbitrator has only determined the prices of land and has not declare, create or confer any right, title or interest in the land.
- that the Respondent Award Holder had not acquired any enforceable right in the award, as there did not exist any concluded contract between the parties even at the time of the passing of the Award, as the contractual obligations of the parties were to arise subsequent to the passing of the Award and only after the Respondent Award Holder had exercised its option of purchasing the land at the price fixed by the Arbitrator as prescribed under the Agreement to sell.
- in execution, no direction for execution of the sale deed could have been issued by Executing Court, especially when the suit for specific performance of the Agreement to sell had been withdrawn by the Respondent Award Holder.
Per contra, the Respondent Award Holder contended as under:
- that the Court should not interdict with the award under Article 136 of the Indian Constitution since the Appellant Award Holder had agreed to sell the land in question in the Agreement to sell, at the price to be fixed by the Arbitrator, and once the Arbitrator had fixed price of land, the execution of the same, as directed by the Executing Court, was perfectly justified.
- that the power of the Executing Court was very wide and it has a duty to give effect to the Award of the Arbitrator. Thus, the Executing court was justified in ordering the execution of the Agreement to sell and by having done so, it was justified and suitable to enforce the award.
- that validity of the Agreement to sell was never challenged by the Appellant Award Debtor at any stage of litigation and thus, its enforcement cannot be questioned.
Question of Law before the Supreme Court
Thus, the question before the Court was whether the reference to the Arbitrator, in terms of the Agreement to sell was merely for fixation of price of land to be sold by the Appellant Award Debtor to the Respondent Award Holder in terms of the Agreement to sell, and if that be so, could a direction to execute the Agreement to sell have been issued by the Executing court?
While answering the above question in negative, the Court reasoned as under:-
- There was no certainty that the sale was to be executed at the price fixed by the Arbitrator
The Arbitrator was authorized to only fix the price of the land as per the Agreement to sell under which an option was given to the Respondent Award Holder to either accept the price fixed by the Arbitrator and go ahead with the sale deed, or to refuse to get the sale deed executed at the price fixed by the Arbitrator.
- The Respondent Award Holder had abandoned its claim of execution of the Agreement to sell by withdrawing its suit for specific performance
Once the award attained finality and made Rule of Court, the Respondent Award Holder has filed suit for specific performance of Agreement to Sell which was later withdrawn unconditionally. With the withdrawal of such suit for specific performance, the matter with regard to the execution of Agreement to sell came to an end. The effect of withdrawing would be that Respondent Award Holder had abandoned its claim of execution of the Agreement to sell, which would be clear from the provisions of Rule 1(4) of Order XXIII Civil Procedure Code, 1908 of India which reads as under:-
(4) Where the plaintiff–(a) abandons any suit or part of claim under sub-rule (1), or (b) withdraws from a suit or part of a claim without the permission referred to in sub-rule (3), he shall be liable for such costs as the Court may award and shall be preclude from instituting any fresh suit in respect of such subject-matter or such part of the claim.
- the Award passed by the Arbitrator could not be independently executed as the same was only for fixation of price of land and not for enforcement of the Agreement to sell. The Award was merely for the declaration of the price of the land, which would be subject to the agreement and it was not necessary for the Respondent Award Holder to get the sale deed executed at the price so determined by the Arbitrator. What was thus executable was the Agreement to sell, and not the Award.
- Thus, the relief granted by the Executing court for execution in terms of the Award, is thus outside the realm of law. Execution of an award can be only to the extent what has been awarded/decreed and not beyond the same.
- Going behind the decree for doing complete justice would not mean that the entire nature of the case could be changed, and what was not awarded in favour of the Respondent Award Holder, could be granted by the Executing court.