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1993 DIGILAW 212 (SC)

State Of Maharashtra v. Oswal Agro Mills Limited

1993-03-01

A.S.ANAND, M.N.VENKATACHALIAH, N.VENKATACHALA

body1993
JUDGMENT : 1. We have heard Sri K. Madhava Reddy, learned senior counsel for the State of Maharashtra and Sri F.S. Nariman, learned senior counsel for the respondents. 2. The matter arises out of Mediator's Award dated 9th March, 1992 rendered pursuant to the order dated 30th September, 1991 of the High Court of Bombay in Appeal No. 559/91 (in Writ Petition No. 209 of 1991). The dispute before the High Court concerned the quantum of premium payable by the Oswal Agro Mills Ltd., respondent, (company) to the State Government on the `unearned income' upon the transfer of certain properties from the Union Carbide India Ltd. to the said company. The High Court directed that the dispute be settled by an Award of a Mediator to be appointed by mutual consent with the super-added condition that the Award would not be susceptible to challenge in any court of law and that both parties do accept the result of the mediation. Both parties had signified their consent in this behalf. 3. According to the respondents, they had suggested to the High Court the name of Justice Chandrachud, a former Chief Justice of India, as the Mediator but the State of Maharashtra itself came-up with and suggested the name of Justice P.N. Bhagwati, another former Chief Justice. It is asserted by the respondents that the High Court appointed Justice P.N. Bhagwati as Mediator at the suggestion and instance of the State of Maharashtra itself. The Mediator gave his Award on 9th March, 1992. When the award was sought to be made a rule of the court, the State of Maharashtra challenged the Award on several grounds before the High Court. Those grounds, significantly, did not include the one which is now raised for the first time before this Court and to which we will presently advert. The High Court found no merit in the grounds of challenge and relying on the terms as to finality and binding nature of the award and its immunity from challenge, upheld the Award. The order of the High Court is dated the 15th June, 1992. The State of Maharashtra has brought up the said order before this Court for leave to appeal. 4. The order of the High Court is dated the 15th June, 1992. The State of Maharashtra has brought up the said order before this Court for leave to appeal. 4. It is not necessary for us at this stage to go into the question whether such peremptory pre-conditions excluding challenge to the Award on any ground in any court of law, are valid or not. Suffice it to say that those were the specific terms of the mutual consent. However, for the first time, after several dates of hearing of this petition here, a new ground was sought to be raised and urged by the State of Maharashtra by way of an additional affidavit dated 3rd November, 1992 of Sri Ram Govind Vartak. That ground is reflected in para 4 of the affidavit. It reads : "4. I most respectfully submit that after the filing of this special leave petition in this Hon'ble Court, it has come to the notice of the petitioners that the Hon'ble Mediator has tendered his opinion to the contesting respondents herein on the 1st December, 1989. A photostat copy of this opinion is annexed hereto and marked as Annexure Al." Annexed to this affidavit, is a copy of the legal opinion dated 1.12.1989 said to have been furnished by the Mediator himself to the respondent-company on the subject-matter of the very dispute. The additional ground raised is that the Award is vitiated by bias of the Mediator. M/s. Oswal Agro Mills Ltd. has filed counter affidavit dated 3rd December, 1992 in which while indicating that Mrs. Kiran Choudhry, a learned counsel appearing for the company in the proceedings before the High Court, was requested by the company to communicate to the State of Maharashtra the fact that the Mediator had earlier furnished his op n on the matter, however, averred that the position was fully known to the State of Maharashtra and that, indeed, the choice of the Mediator was wholly at the instance of the State of Maharashtra itself. In the said affidavit filed by Sri R.K. Singhania, the then `Director-Finance' of the company, it is averred : "h) After the order of 9th September, 1991 I informed our Delhi Advocate Mrs. Kiran Choudhry, who was appearing for the Respondent company from the stage of filing of writ petition in Bombay, that Mr. In the said affidavit filed by Sri R.K. Singhania, the then `Director-Finance' of the company, it is averred : "h) After the order of 9th September, 1991 I informed our Delhi Advocate Mrs. Kiran Choudhry, who was appearing for the Respondent company from the stage of filing of writ petition in Bombay, that Mr. Justice P.N. Bhagwati had given an opinion on 1st December, 1989 to the Respondent company opining that the State Government would be entitled to claim from the Union Carbide India Limited half the "unearned income" but that it was impossible to split the slump consideration and to hold what consideration out of it was received by the Union Carbide India Limited for the transfer of the said land. I gave a xerox copy of that opinion to Mrs. Kiran Choudhry which she said she would hand over to the other side." In the additional affidavit filed on 3.12.1992 by Mr. Anil Bhalla on behalf of the respondent-company it is contended : "So far as the allegations made in paragraph 5 of the said additional affidavit, I say and submit that from the events that have happened it is beyond doubt that the petitioners had with them a copy of the opinion of Mr. Justice P.N. Bhagwati (Retd.) prior to the petitioners choosing him as a Mediator on 30th September, 1991. That being so, the petitioners who despite the specific knowledge not only chose Mr. Justice Bhagwati as a Mediator, but took part in the proceeding before him and having taken a chance the petitioners cannot be permitted to now level allegations of bias in order to wriggle out of the decision of the Learned Mediator." 5. It was; accordingly, urged that the imputation of any bias to the Mediator was wholly unjustified. The respondents also refer to the impropriety in the State of Maharashtra clandestinely laying hands on and using the legal advice between a legal advisor and client without explaining the date, on which and the means and the source from which it claimed to have obtained the document. 6. The State of Maharashtra, by its further affidavit, while denying that Mrs. Kiran Choudhry had ever communicated to it the possible 'interest' of the Mediator, however, did not choose to say anything about the manner or the date on which it came into possession of the legal opinion relied upon. 7. 6. The State of Maharashtra, by its further affidavit, while denying that Mrs. Kiran Choudhry had ever communicated to it the possible 'interest' of the Mediator, however, did not choose to say anything about the manner or the date on which it came into possession of the legal opinion relied upon. 7. On the previous occasion when the matter came up before us, having regard to all the 30 circumstances of the case we thought and put to the learned counsel on both sides that, without getting into the allegations and counter allegations would it not be proper that the Award of the Mediator be set aside, the amount of Rs. 12,39,53,908/- obtained by respondent-company pursuant to the said Award restored to the State of Maharashtra together with interest at 17 per cent per annum from 28.8.1992 till the date of such restitution; and the writ petition before 35 the High Court restored and directed to be disposed of on the merits. This suggestion was made in the larger interests of the petitioner - State itself as that course would afford to it the entire relief it had sought in this S.L.P. On the previous occasion we were left with the impression that if the respondent-company agreed to such a proposal, the petitioner would find that a reasonable basis for resolving what would otherwise be a matter 40 of serious controversy and of protracted litigation. 8. In response to that suggestion, Sri Nariman for the respondent-company suggested proposed Minutes for an agreed order. The proposals substantially answer the requirements of the suggestion made by the Court. The Company agreed to give-up its rights under the Award and restore the 12 and odd crores of rupees together with interest back to the State of 45 Maharashtra. It also specified its agreement to have the proceedings before the High Court disposed of on the merits. However, an additional stipulation was that, in the circumstances, it would be proper for the State of Maharashtra to unconditionally withdraw the allegations made in the two affidavits of Sri Ram Govind Vartak dated 3.11.1992 and 4.1.1993 respectively and, in particular, the allegations of bias made against the Mediator. 9. We asked Sri Madhava Reddy, if the petitioner-State of Maharashtra is to secure all the reliefs, would it yet be necessary for the State to press those allegations, though it may not unconditionally withdraw them. 9. We asked Sri Madhava Reddy, if the petitioner-State of Maharashtra is to secure all the reliefs, would it yet be necessary for the State to press those allegations, though it may not unconditionally withdraw them. Sri Madhava Reddy, as far as we are able to understand him, was non-commital and submitted that he had no occasion to discuss with and seek instructions from his client on the propriety or advisability of withdrawing those allegations or of not pressing them. He, however, added that if the Court was not inclined to investigate those allegations, he could not insist upon such investigation. This, we are afraid, is not the proper way of putting across a response to terms offered by the respondents on the suggestion of the Court under which the State would succeed fully in what it seeks by way of ultimate relief. From the tenor of his submissions Sri Madhava Reddy did not exhibit any positive response and could not be seen to be enthusiastic about it. He did not say that he thought the terms to be reasonable and would advise his client to accept them. His stand was that he would rather go by the strict instructions of his client which, as of now, were stated to be that it stood by those allegations. We made it clear to Sri Madhava Reddy, as we had done even earlier, that it is not our desire that the allegations should remain unexamined. It is our firm conviction that sunlight is the best disinfectant and that there is no question of the Court not being inclined to investigate into a dispute legitimately arising before it nor any matter being carried to its logical and legal conclusions. As long as the allegations are on record, these would require to be examined for whatever they are worth. The earlier suggestion was made by the Court to protect the interests of the State of Maharashtra against protracted litigation as, indeed, one of the allegations against it was that it had consciously, knowing all the facts, projected the name of the Mediator in question; and persuaded the Court to accept it having had in its possession the earlier opinion furnished by the Mediator. The company's accusation against the State of Maharashtra is that as the opinion furnished by the Mediator to the company apparently went in favour of the State on the points in controversy, the State deliberately chose him as Mediator and took the off- chance of success in the proceedings before him. 10. However, the wisdom of a settlement is for the parties and their learned counsel to evaluate and take their own decisions as to what is good for them. Now that Sri Madhava Reddy has made his stand clear, there is no point in pursuing the possibilities of an agreed solution. The grievance as to the alleged bias of the Mediator will be examined in an appropriate way and the contentions urged by both sides as to the validity and binding nature of the Award considered on the merits. 11. We, accordingly, direct the State of Maharashtra to disclose on affidavit the particulars as to the time, date and the source from which the opinion dated 1.12.1989 was served by it to find out whether at the time they proposed the name of the Mediator before the High Court, they had knowledge of the matter. Likewise, respondent may file, if they, can secure one, an affidavit of Mrs. Kiran Choudhary as to whether she had communicated the fact that the Mediator proposed by the State had earlier rendered a legal opinion in the matter to the respondent-company, and if so, when. 12. Sri Nariman suggested that as doubts are sought to be raised as to the impartiality of the Mediator, it would be appropriate to afford him an opportunity to make his comments. We agree that the Mediator should have that opportunity and right. We, accordingly, direct the Registrar-General of this Court to address a letter to the Mediator, enclosing therewith the two affidavits of Sri Ram Govind Vartak and the affidavits filed by the respondents along with a copy of the legal opinion, with a request that he may, if he so desires, place before the Court with four weeks any comments that he may wish to offer. A copy of these proceedings may also be furnished to the Mediator. The additional affidavit to be filed in four weeks. Call after 4 weeks.