Rajasthan High Court Holds Arbitral Award To Be Patently Illegal Due To Concealment Of Material Facts, Violation Of HC Order

Additionally, the court observed that the use of the word 'however' does not mean that the decision that Steering Group had no jurisdiction to extend the concession period becomes redundant. The Arbitral Tribunal held that the decision of the Steering Group for extension of concession is binding on the parties. The same being contrary to the judgment passed by the High Court is patently illegal.

Brief Facts:

The appellant has filed an appeal under Section 37 of the Arbitration and Conciliation Act, 1996 challenging the order passed by the Commercial Court, Jaipur. The Commercial Court dismissed the application filed under Section 34 and confirmed the award passed by the Arbitral Tribunal. The dispute arose between the parties with respect to a Build, Operate and Transfer Agreement (“BOT”) for a period of 11 years and 8 months, including the construction period of 18 months.

The appellant contended that the respondent filed a claim which was allowed. Also, the present award overlaps with the earlier award. Additionally, it was argued that the respondent concealed the material fact that the writ petition filed before the High court was dismissed and this was not brought to the notice of the arbitrator. This results in grave misconduct by the respondent, and this would be the sole ground to dismiss the award. However, the respondent opposed the appeal and argued that new grounds cannot be taken in appeal under Section 37. Further, the respondent contends that the scope under Section 34 is limited.

Observation of the court:

The court observed that the use of the word 'however' does not mean that the decision that Steering Group had no jurisdiction to extend the concession period becomes redundant. The Arbitral Tribunal held that the decision of the Steering Group for extension of concession is binding on the parties. The same being contrary to the judgment passed by the High Court is patently illegal.

The court noted that the present award clearly overlaps with the earlier award. Since, in the earlier award, the concession period was extended, if the period was not extended then the respondent will be paid a compensation of Rs.15.184 million.

The court held that the respondent has committed grave error in concealing the material fact. Since in that order, it was clearly held that the concession period cannot be extended based on the report of the Steering Group, and the State has to issue a notification in this regard. Therefore, the award was patently illegal, opposed to public policy and was in utter violation of the order of the High Court.

Thereafter, the court held that it was the bounden duty of the claimant to place the order passed in the writ jurisdiction before the Arbitral Tribunal and before the Commercial Court. Since, the respondent failed to do that and concealed the material fact. Therefore, the award cannot be sustained as it was patently illegal and opposed to public policy.

Finally, the court allowed the appeal under Section 37, quashing the order passed by the Commercial Court and the impugned award passed by the Arbitral Tribunal.

Case Title: State Of Rajasthan v. M/s Atlanta Ltd.

Case Number: 2024:RJ-JP:41526-DB

Counsel for the Petitioner: Mr. Rajesh Maharshi, Adv. with Mr. Lakshya Sharma, Adv.

Counsel for the Respondent: Mr. N.K. Maloo, Sr. Adv. assisted by Mr. Pratyush Sharma, Mr. Hansh Pratap Singh, Adv.

Date of Judgment: 25.10.2024