Arbitral Award Vitiated By Serious Fraud And Criminal Conspiracy Can Be Set Aside In A Writ Petition: Chhattisgarh High Court

The Division Bench of Chief Justice Anup Kumar Goswami and Justice Rajendra Chandra Samant further held that on a plain reading of Section 34 of the A&C Act, it is revealed that fraud and conspiracy are not the ground to challenge an arbitral award.

The Court held that a writ petition would be maintainable if the challenge to the award is made on the touch-stone of offences of fraud and conspiracy.

Facts

The lands of the appellants were acquired by the Respondent for the purpose of a Special Railway Project. The Additional Collector/Competent Authority determined the compensation payable to the appellants.

The appellants aggrieved by the quantum of compensation determined by the Competent Authority made reference to Arbitration. The Commissioner/Arbitrator enhanced the amount of compensation payable to the appellants for the acquisition of their land.

Thereafter, a news was published in the local daily about the discrepancies in the acquisition process. The District Collector taking cognizance of the report constituted a three-member committee to inquire into the allegation's veracity.

The committee submitted its report with the finding that the compensation determined by the competent authority and the arbitrator were erroneous and result of a conspiracy hatched between the Railway officials, Competent Authority, Arbitrator, the appellants and several others to award huge sums to the appellants.

Consequently, an FIR was lodged against the parties involved in the conspiracy including the appellants.

Thereafter, the appellants preferred the writ petition to quash the FIR. The respondent also filed a writ petition against the determination of compensation made by the competent authority and the arbitrator.

The High Court vide the impugned order allowed the writ petition filed by the respondent and dismissed the writ petitions for quashing the FIR.

Aggrieved, by the decision of the Single Bench, the appellants preferred a writ appeal against the impugned order.

The Contention Of The Parties

The appellants challenged the impugned order on the following grounds:

• The writ petition was not maintainable as the respondent had an alternative remedy available under Section 34 of the A&C Act.
• The Single Judge erred in not appreciating the fact that the respondent had after the filing of the writ petition filed an application under Section 34 of the A&C Act, therefore, the writ petition was clearly not maintainable.
• The prayer for setting aside the award was not made when the petition was filed and an amendment was sought at the stage of the final hearing to set aside the arbitral award which was allowed by the Single Judge. Such an exercise was wholly unwarranted.
• Such an amendment was also not possible after the application that was filed by the respondent under Section 34 of the A&C Act.
• The Single Judge erred in not deciding the objection of the appellant regarding the objection regarding the maintainability of the writ petition.

The respondent countered the submissions of the appellants on the following grounds:

• Availability of alternative remedy is not a bar to the power of the High Court under Article 226 of the Constitution of India.
• This was a case of large-scale corruption and huge discrepancy in the determination of the compensation in the acquisition process. Therefore, it was an exceptional case.
• The appellants were unjustly enriched by the Competent Authority and the arbitrator and the claims of the similarly placed people for enhancement were rejected by the authority and the arbitrator while allowing the claims of the appellants.
• The determination by the competent authority and the award of the arbitrator were void and non-est in law.
• The remedy under Section 34 of the A&C Act was not an adequate remedy.
• No application under Section 34 of the A&C act was pending at the time of institution of the writ petition, a subsequent application was filed which is not yet registered by the Court concerned.

Analysis By The Court

The Court held that an arbitral award that is vitiated by fraud and criminal conspiracy is void and non-est and can be set aside in a Writ Petition and the availability of an alternative remedy under Section 34 of the A&C Act is not a bar to the maintainability of the petition.

The Court held that on a plain reading of Section 34 of the A&C Act, it is revealed that fraud and conspiracy are not the ground to challenge an arbitral award.

The Court held that a writ petition would be maintainable if the challenge to the award is made on the touch-stone of offences of fraud and conspiracy.

The Court held that there was no infirmity in the order of the Single Judge in allowing an amendment to the writ petition at the stage of final arguments as the Court had considered the objection of the appellants to the amendment and the parties were heard on the objection before the judgment was delivered.

The Court further observed that under Section 34 of the A&C Act only the award of the High Court can be set aside, however, the respondent had not only challenged the award but also the determination of compensation made by the Competent Authority, therefore, the writ was maintainable.

Accordingly, the Court dismissed the writ appeals.

Case Title: Bali Nagwanshi v. State of Chattisgarh, WA No. 81 of 2022

Date: 28.06.2022

Citation: 2022 LiveLaw (Chh) 50 

Counsel for the Appellants: Mr. Prashant Bhusan, Senior Advocate with Mr. Amit Verma and Mr. Anurag Dayal Shrivastava

Counsel for the Respondents: Mr. Vikas Singh, Senior Advocate with Mr. Vaibhav Shukla, Mr. Ujjwal Choubey and Mr. Chandradeep Prasad and Ms. Astha Shukla (Government Advocate) with Mr. Vikram Sharma and Mr. Ramakant Mishra, ASG for Union of India.

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