Arbitrator & Principles of Equity in contractual matters.

Agreement of sale between the petitioner and the respondent nos.1 & 2 for purchase of the property.  The petitioner paid Rs.11,50,000/- out of total consideration of Rs.35,00,000/-. 

The agreement specifically provided that if the purchaser is at fault, the earnest money would stand forfeited.

In the Award dated 31.3.2022, on one hand, the Arbitrator recorded specific finding that the petitioner – purchaser was at fault and therefore, the prayer for specific performance of the agreement was rejected.   On the other hand, the direction to pay Rs.6.50 lakhs to the petitioner was given.

This direction of payment was challenged on the ground that it was against the specific terms of the contract since the petitioner was found at fault, the earnest money was liable to be forfeited.  

In that context, it was HELD that there was no scope to apply the principle of equity more so when the parties had not expressly authorized the Arbitrator to decide the matter ex aequo et bono or as amiable compositeur under Section 28(2) of the Act. 

Secondly, if a clause of an agreement mandates a specific consequence and if the arbitrator issues a direction in the teeth of the same, he travels beyond his jurisdiction for the reason that the learned arbitrator is a creature of the contract between the parties and he cannot ignore specific terms contained therein.

 Judgment and Order dated 23.3.2023 of the High Court of Bombay in Arbitration Petition No.355 of 2022 (OS) of John Peter Fernandes  Vs.   Saraswati Ramchandra Ghanate since deceased and others with connected matters