Supreme Court Sets Aside Arbitration Award, Orders Possession to Plaintiffs in Long-Standing Property Dispute, Supreme Court rules arbitration award unenforceable, decrees in favor of plaintiffs, orders defendants to vacate property within two months.
In a significant ruling, the Supreme Court of India, comprising Justices J.K. Maheshwari and Atul S. Chandurkar, has set aside an arbitration award and decreed in favor of the plaintiffs in a protracted property dispute in the case of Ashok v. Padam Chand. The dispute centered around a three-storey commercial-cum-residential building in Sarafa Bazar, Lashkar, Gwalior, which had been the subject of multiple legal proceedings over several decades.
The case originated when the plaintiffs, led by Ashok, sought recovery of possession and mesne profits from the defendants, Padam Chand and others. The trial court had dismissed the plaintiffs' suit, citing an earlier arbitration award which the court deemed had attained finality. However, the Supreme Court found that the arbitration proceedings were conducted without adherence to Section 21 of the Arbitration Act, 1940, which mandates court leave for arbitration during the pendency of a suit. The Court also emphasized the lack of post-award consent required under the proviso to Section 47 of the Act to treat the award as a compromise.
The Supreme Court's judgment overturns both the trial court and the High Court's decisions, reinforcing the plaintiffs' ownership of the property as established in a prior court auction. The Court ordered the defendants to vacate and deliver possession of the property to the plaintiffs within two months and directed a trial court inquiry into mesne profits to be concluded within nine months. The Court also nullified a sale deed executed by the plaintiffs to the defendants during execution proceedings, as it was contingent upon the outcome of the suit.
This ruling underscores the importance of procedural compliance in arbitration proceedings, particularly when a suit concerning the same subject matter is pending before a court.
Bottom Line:
An arbitration award obtained during the pendency of a suit without compliance with Section 21 of the Arbitration Act, 1940, is legally ineffective unless all interested parties consent post-award to treat it as a compromise or adjustment under the proviso to Section 47 of the Act.
Statutory provision(s): Arbitration Act, 1940 Section 21, Arbitration Act, 1940 Section 47, Arbitration Act, 1940 Section 30, Civil Procedure Code, 1908 Order 23, Rule 3.
