JUDGMENT 1. THE petitioner in this application under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter the Act) calls in question an award dated May 16, 2007 of the arbitrator, which was made in relation to the dispute between the parties arising out of hiring of premises no.13, Camac Street, Kolkata (hereafter the said premises) by the respondent no.1. 2. THE 6th, 7th, 8th and 9th floors of the said premises (hereafter the leasehold area) were let out in favour of the respondent no.1 at a monthly lease rental of Rs.22,224/- for a term of two years w.e.f. December 1, 1971 in pursuance of a deed of lease of even date executed by and between the petitioner and the President of India. The deed contained a condition for renewal. Despite expiry of two years w.e.f. December 1, 1971, the respondent no.1 did not seek renewal of the lease. It also did not vacate any portion of the leasehold area. The lease rent was also not increased. The lease deed provided for arbitration in the event of disputes and differences arising between the parties. The power to appoint arbitrator rested with the Secretary, Government of India, Ministry of Defence. 3. DISPUTES and differences having arisen between the parties, the Secretary, Government of India, Ministry of Defence on November 26, 1982 appointed Mr. K. Anantharaman, Additional Director General, Defence Land and Cantonments as arbitrator. The petitioner claimed de-hiring of the leasehold area and revision of rent in respect thereof at the market rate for the period from December 1, 1975 as also mesne profit. 4. THE arbitrator made his award on March 30, 1984. The claim of the petitioner for de- hiring was rejected. However, the arbitrator allowed revision of rent at fresh rates from June 1, 1977 till June 11, 1984 and also directed payment of interest. It was further observed by the arbitrator that rent w.e.f. June 12, 1984 may be determined in terms of Government of India, Ministry of Defence's letter dated June 2, 1984. Feeling aggrieved by the award, the petitioner challenged the same by filing an application under Sections 30 and 33 of the Arbitration Act, 1940 before this Court, giving rise to Matter No.777/1985. The application was allowed by judgment and order dated January 25, 1990. The respondent no.1 carried the same in appeal, giving rise to Appeal No.65 of 1990. Feeling aggrieved by the award, the petitioner challenged the same by filing an application under Sections 30 and 33 of the Arbitration Act, 1940 before this Court, giving rise to Matter No.777/1985. The application was allowed by judgment and order dated January 25, 1990. The respondent no.1 carried the same in appeal, giving rise to Appeal No.65 of 1990. By judgment and order dated November 12, 1998, the Division Bench of this Honourable Court was pleased to dispose of the said appeal by setting aside the impugned award in so far as it related to the right of the petitioner to claim rent at enhanced rate for the period subsequent to June, 1984 as also the petitioner's right to claim municipal rates and taxes. The Division Bench was further pleased to direct the Secretary, Ministry of Defence to appoint an arbitrator in terms of the arbitration agreement between the parties for deciding the disputes with regard to the claim of the petitioner for enhancement of rent in respect of the leasehold area for the period subsequent to June, 1984. The arbitrator was required to decide the dispute, in terms of the said order, within a period of 4 weeks from the date of entering on the reference. 5. AN application for modification of the appellate order followed at the instance of the petitioner. The said application was disposed of by judgment and order dated May 19, 2000 without granting modification as prayed for. 6. DESPITE direction of the Division Bench dated November 12, 1998, no arbitrator was appointed. Ultimately, an application under Section 11 of the Act was filed by the petitioner before this Court giving rise to A.P. No.408 of 2006. During its pendency, the petitioner was informed of appointment of Sri V.K. Srivastava, Additional Director General, Defence Estate as the sole arbitrator. It is not in dispute that the arbitrator, newly appointed, apart from receiving from the petitioner its statement of claim and from the respondent no.1 letters dated January 16, 2007, November 22, 2007 and April 30, 2007 did not record any oral evidence in course of arbitral proceedings conducted on December 21, 2006 and February 23, 2007, when the parties were directed to exchange their responses and documents. The last and final time the arbitrator conducted arbitral proceedings was on April 30, 2007. The last and final time the arbitrator conducted arbitral proceedings was on April 30, 2007. The records of proceedings of that date read as follows : "M/s. Tara Properties Pvt. Ltd. had submitted their claim in pursuance of proceedings of the Arbitrator on 23.02.2007. The letter-dated 12.03.2007 was submitted by the claimant. UOI through Defence Estates Officer had also submitted their response today i.e. on 30.04.2007. The claimant appeared along with their Advocate Shri Jishnu Chowdhury and requested time for submitting their response to the letter dated 23.02.2007 and letter dated 30.04.2007. The DEO Kolkata has requested further time to consult his superior for suggested rent. However, time of ten (10) days is hereby permitted to the claimant, M/s Tara Properties Pvt. Ltd., for giving their response by post to the Arbitrator with a copy to the DEO Kolkata Circle, Kolkata. The DEO Kolkata is also permitted to suggest the rates of rent with the permission of his higher authorities. The Arbitrator along with the parties had a round of the premises under consideration. No further hearing of the proceedings will be held, hereafter." 7. THE respondents had contended that (i) the petitioner is not entitled to revision of rent based on the valuation report of Talbot and Company submitted by it since such report is fully discredited and is, therefore, unreliable; (ii) the petitioner is estopped from making any claims regarding taxes, municipal charges etc. since the agreement of 1971 having been accepted, invited and enforced through fiats of Courts stood validated legally at least till August 31, 2006; (iii) multistoried building tax or surcharge and property tax is waivable, if occupied by the government; and (iv) since different directors of the petitioner produced conflicting claims, interest on fair rents from 1984 is not maintainable in view of settled judgment of the Apex Court that fictitious litigation cannot be a ground for claiming financial benefit. 8. ULTIMATELY, an award was made and published by the arbitrator, referred to above. For better appreciation of the issue involved in this application, the entirety of paragraph 7 as well as paragraph 8 containing the observations of the arbitrator is quoted below : "7. I have carefully gone through the arguments of claim and counterclaim of the parties. My observations and award are as follows : (a) The claimant has asked rent from 12-6-84 to 31-8-2006 only. I have carefully gone through the arguments of claim and counterclaim of the parties. My observations and award are as follows : (a) The claimant has asked rent from 12-6-84 to 31-8-2006 only. (b) I don't agree with rates claimed by claimant based on the evaluation by the valuer M/s Talbot and Co. due to the following reasons : (i) The rent rate for commercial organization in a well maintained building has been taken as a base where as the present building is in a bad state of repairs. One set of stair case and three lifts are not functioning. Various windows/doors don't have grills/doors. I totally disagree from the statement of valuer that building is maintained in fair state of repairs. (ii) There is no basis of particular percentage increase or decrease of rent on various account, mentioned in valuation report. (iii) The element of municipal tax has been included as a maximum of 20% of increase in rent whereas municipal tax leviable has been claimed separately. (c) I also don't rely on the rate of rent as certified by Land Acquisition Collector of West Bengal as no basis has been given to come to such a conclusion. (d) The Arbitrator vide his award dated 30-3-85 had fixed the rates of rent as follows : (i) Rs.2.50 per square feet per month with effect from 1-6-77 to June 1980 as per demand of the claimant. (ii) Rs. 2.75 per square feet per month with effect from 1-6-1980 to 1-6- 1983 (iii) Rs. 3.025 per square feet per month with effect from 1-6-1983 to 1-6- 1984. Rs. 2.50 per square feet per month was the initial demand of the owner with effect from 1-12-1976. The 10% increase in rent after every completion of 3 years period starting from 1-6-77 till 11-6-84 was accepted by the claimant and it withstood the legal scrutiny by High Court of Kolkata, in their judgment dated 12 Nov 98 and further amendment vide judgment on 19-5-2000 in Appeal No.65 of 1999. (e) It was noticed that the premises were occupied by Central Govt. under tenancy under West Bengal Premises Tenancy Act after the lease agreement expired on 30-11-75. According to provisions of Section 18 of West Bengal Tenancy Act, 1997 fair rent was to be automatically increased by five percent every three years. (e) It was noticed that the premises were occupied by Central Govt. under tenancy under West Bengal Premises Tenancy Act after the lease agreement expired on 30-11-75. According to provisions of Section 18 of West Bengal Tenancy Act, 1997 fair rent was to be automatically increased by five percent every three years. If the intention was to restrict the enhancement of rent to what is permissible under the above Act, Govt. would have filed an application before the Rent Controller instead appointing an Arbitrator. Therefore the increase of 10% of rent every three years have been awarded by the Arbitrator considering the demand from the claimant. In case the same principle is followed the fair rent subsequent to 12th June 1984 becomes as follows : Rs. 3.33 per square feet per month with effect from 12-6-84 to 11-6-87 Rs. 3.66 per square feet per month with effect from 12-6-87 to 11-6-90 Rs. 4.03 per square feet per month with effect from 12-6-90 to 11-6-93 Rs.4.43 per square feet per month with effect from 12-6-93 to 11-6-96 Rs. 4.87 per square feet per month with effect from 12-6-96 to 11-6-99 Rs. 5.36 per square feet per month with effect from 12-6-99 to 11-6-02 Rs. 5.89 per square feet per month with effect from 12-6-02 to 11-6-05 Rs.6.48 per square feet per month with effect from 12-6-05 to 31-8-06 As such I direct that above patter of enhancement in rent be given effect to. (f) The rate of interest awarded earlier as 9% on unpaid amount of arrear of rent is retained same for the period subsequent to 12-6-1984 till it is fully paid. (g) Regarding payment of municipal taxes by the tenant, it has been noted that the person primary liable to pay property tax for rented property is the lessor as per section 193(1)(a) of the Kolkata Municipal Corporation Act, 1980. Even the occupier from whom the property tax has been recovered by Municipal Commissioner becomes entitled to get reimbursement from the person primary liable to pay tax as per Sec 195(2) of the Kolkata Municipal Corporation Act 1980. Even the occupier from whom the property tax has been recovered by Municipal Commissioner becomes entitled to get reimbursement from the person primary liable to pay tax as per Sec 195(2) of the Kolkata Municipal Corporation Act 1980. On the basis of such provision the municipal taxes are to be paid by the M/s. Tara Properties Private Ltd. In the circumstances the claim in respect of municipal taxes multistoried building taxes and the interest thereon is not accepted and the same is to be paid by M/s. Tara Properties Private Ltd. keeping in view the provisions regarding liability of paying property tax in Kolkata Municipal Corporation Act, 1980 and provision of Clause 7 of the agreement based on which the premises were leased to the Govt. by M/s. Tara Properties Private Ltd." Mr. Sen, learned senior advocate representing the petitioner raised several grounds to assail the award of the arbitrator. The award, according to him, is patently illegal, unreasonable and perverse. No reason was assigned for rejection of the report of Talbot and Co. The arbitrator, it was contended, based his award on his personal knowledge without letting the petitioner know his mindset. No opportunity was given to the petitioner to clear any doubt that he might have had after the so-called inspection made by him. It was also urged that the arbitrator failed to consider the terms of the agreement which provided that it was for the lessee to call upon the lessor if any maintenance work was required to be carried out in the leasehold area or common space, and the absence of any request from the lessee in this behalf. Referring to the location of the said premises, it was contended that the respondents were occupying prime area in the heart of the city and paying a paltry amount. The arbitrator applied wrong principles in determining rent payable by the respondents. Accordingly, he prayed for orders to quash the award and for a fresh decision on the disputes between the parties. 9. SEVERAL decisions were cited by Mr. Sen, to which I shall advert at a later stage of this judgment. 10. MR. Chatterjee, learned advocate for the respondents opposed the application by contending that the award is perfectly justified and does not merit interference. 9. SEVERAL decisions were cited by Mr. Sen, to which I shall advert at a later stage of this judgment. 10. MR. Chatterjee, learned advocate for the respondents opposed the application by contending that the award is perfectly justified and does not merit interference. He contended that the High Court while considering an application under Section 34 of the Act does not sit in appeal over an award and examine its reasonableness. It is only when either of the several conditions specified in Section 34 of the Act is satisfied that interference would be called for. However, in the present case, not a single condition for interference being satisfied, he urged the Court to uphold the award. It was further contended that there are no pleadings in the application that the arbitrator had committed misconduct while making the award or in support of the contention that has been urged that inspection of the said premises made by the arbitrator had occasioned a failure of justice and, therefore, the point ought not to be allowed to be taken for the first time in course of hearing. He referred to sub-section (3) of Section 20 of the Act to justify the action of the arbitrator in inspecting the premises. It was contended that the arbitrator conducted inspection in the presence of the petitioner, as is evident from the records of proceedings dated April 30, 2007, and no grievance having been voiced by the petitioner in course of arbitral proceedings that the agreed procedure was violated, the point raised by Mr. Sen must be rejected as an afterthought. 11. HE took pains to invite the attention of the Court to various portions of the award wherein each and every point raised by the petitioner was carefully dealt with. 12. THE decisions reported in (2008) 16 SCC 128 (Associated Construction v. Pawanhans Helicopters Ltd.), (2009) 8 SCC 520 [Indian Oil Corporation Ltd. v. Raja Transport (P) Ltd.), (2007) 7 SCC 737 (Bharat Sewa Sansthan v. U.P. Electronics Corporation Ltd.) and 2004 (1) CHN 167 (SC) (M. Anasuya Devi v. M. Manik Reddy) were relied on by Mr. Chatterjee in support of his submissions that the award deserves to be upheld. Chatterjee in support of his submissions that the award deserves to be upheld. Of all the points urged for and on behalf of the petitioner, two points have appealed to this Court based whereon the award could be held to be contrary to the public policy of India, a ground on which an award is liable to be set aside in terms of Section 34(2)(b)(ii) of the Act and as amplified in the decision of the Supreme Court reported in AIR 2003 SC 2629 (Oil and Natural Gas Corporation Ltd. v. SAW Pipes Ltd.) 13. IN paragraph 75 of the said decision, the Supreme Court opined that an award could be set aside if it is against the public policy of India, i.e. to say, if it is contrary to (a) fundamental policy of INdian Law; (b) the interest of INdia; or (c) justice or morality; or (d) if it is patently illegal. 14. IT would appear from the impugned award that the arbitrator brushed aside a report of Talbot and Co. based on his personal impression that the said premises have not been maintained in fair state of affairs. In paragraph 2 of the award this is what the arbitrator recorded : "The Arbitrator has also inspected the premises under question. The premises under question was found in very poor state of maintenance and repair. Out of four lifts only one was found working. The windows' doors, floors, bathroom doors etc. found broken. The common area was also very dirty and in poor state of repairs." Mr. Sen relied on the decision of the Supreme Court reported in AIR 1970 SC 967 (Dewan Singh v. Champat and ors.). Heavy reliance was placed by him on paragraph 9 of the decision wherein it was held as follows : "9. This agreement does not empower the arbitrators either specifically or by necessary implication to decide the disputes referred to them on the basis of their personal knowledge. The recital in that agreement that the arbitrators may decide the disputes referred to them in "whatever manner" they think does not mean that they can decide those disputes on the basis of their personal knowledge. The proceedings before the arbitrators are quasi-judicial proceedings. They must be conducted in accordance with the principles of natural justice. The parties to the submission may be in the dark as regards the personal knowledge of the arbitrators. The proceedings before the arbitrators are quasi-judicial proceedings. They must be conducted in accordance with the principles of natural justice. The parties to the submission may be in the dark as regards the personal knowledge of the arbitrators. There may be misconceptions or wrong assumptions in the mind of the arbitrators. If the parties are not given opportunity to correct those misconceptions or wrong assumptions, grave injustice may result. It is nobody's case that the parties to the submission were informed about the nature of the personal knowledge, the arbitrators had and that they were given opportunity to correct any misconception or wrong assumption. Further in the present case there were as many as five arbitrators. It is not known whether the award was made on the basis of the personal knowledge of all of them or only some of them. Arbitration is a reference of a dispute for hearing in a judicial manner. It is true that parties to an agreement of reference may include in it such clauses as they think fit unless prohibited by law. It is normally an implied term of an arbitration agreement that the arbitrators must decide the dispute in accordance with the ordinary law: see Chandris v. Isbrandtsen Moller Co., 1951-1 KB 240 that rule can be departed from only if specifically provided for in the submission." 15. MR. Sen further relied on the Bench decision of this Court reported in XIII CLJ 399 (Ganes Narayan Singh and ors. Vs. Malida Koer and ors.) wherein Honourable Mookerjee, J. (as His Lordship then was) had the occasion to observe as follows : "It was legal misconduct on the part of an arbitrator to make private enquiries and to base his award on information which he had no opportunity to check. In the case before us, the award recites on the face of it that the arbitrator held, partly on evidence taken before him and partly on private enquiries, that the will executed by Gunpat Narain was genuine. This it was not competent for him to do. See the authorities collected in the Laws of England, Ed. by Lord Halsbury, Vol. I, page 480, notes (f) and (g). Consequently, on this ground alone the award must be taken to have been vitiated." 16. MR. This it was not competent for him to do. See the authorities collected in the Laws of England, Ed. by Lord Halsbury, Vol. I, page 480, notes (f) and (g). Consequently, on this ground alone the award must be taken to have been vitiated." 16. MR. Chatterjee contended that the aforesaid decisions would have no application on facts and in the circumstances of the present case since it is apparent from the records of proceedings dated April 30, 2007 that the arbitrator along with the parties had been on a round of the said premises and, therefore, it cannot be said that inspection was made behind the back of the petitioner. This Court finds no reason to agree with him. On facts, the conclusion is inescapable that the petitioner was denied reasonable opportunity. 17. WHAT would constitute reasonable opportunity has been considered by the Supreme Court in its decision reported in (2003) 7 SCC 492 (Sohan Lal Gupta v. Asha Devi Gupta). It was ruled therein as follows: "23. For constituting a reasonable opportunity, the following conditions are required to be observed: 1. Each party must have notice that the hearing is to take place. 2. Each party must have a reasonable opportunity to be present at the hearing, together with his advisers and witnesses. 3. Each party must have the opportunity to be present throughout the hearing. 4. Each party must have a reasonable opportunity to present evidence and argument in support of his own case. 5. Each party must have a reasonable opportunity to test his opponent's case by cross-examining his witnesses, presenting rebutting evidence and addressing oral argument. 6. The hearing must, unless the contrary is expressly agreed, be the occasion on which the parties present the whole of their evidence and argument." 18. IT does not appear from the records of proceedings dated December 21, 2006 or February 23, 2007 that the arbitrator evinced interest to inspect the said premises. 6. The hearing must, unless the contrary is expressly agreed, be the occasion on which the parties present the whole of their evidence and argument." 18. IT does not appear from the records of proceedings dated December 21, 2006 or February 23, 2007 that the arbitrator evinced interest to inspect the said premises. That he had taken a round of the said premises along with the parties is indeed recorded in the records of proceedings dated April 30, 2007 but nowhere from the records of proceedings is it evident that the representatives of the petitioner were told of the mindset of the arbitrator that in the process of inspecting the said premises, whatever he would perceive through his senses would form the foundation of his decision on the disputes between the parties in respect of revision of rent. A casual walk around the said premises, without any indication as to whether the leasehold area was inspected internally or externally, could not have formed the basis of the conclusions reached. The petitioner's opponents i.e. the respondents did not lead evidence in support of a plea that the leasehold area and the common space were in a state of disrepair and lack of maintenance. In the absence of such plea and evidence in support thereof, the arbitrator could not have set up a plea on his own and make out a third case not traceable in the response of the respondents. In any event, even if it is conceded for the sake of argument that the arbitrator was justified in inspecting the said premises for giving a decision on the disputes referred to him, it is clear that he acted in the dual capacity of a witness as well as a judge and thereby imported his personal knowledge in the award without, however, allowing the petitioner to have the truth elicited as well as for clearing any doubt in his mind in respect of any particular aspect of the said premises, which according to him would play a decisive role in determining the inter se disputes between the parties. The arbitrator assumed the role of an invisible opponent of the petitioner, and hit it below the belt. This, the provisions of the Act, does not conceive. The arbitrator assumed the role of an invisible opponent of the petitioner, and hit it below the belt. This, the provisions of the Act, does not conceive. Importing personal knowledge in the award, to the mind of the Court, is patently illegal and has the effect of vitiating it and rendering it vulnerable to a challenge under Section 34(2)(b)(ii) of the Act. At this stage, the argument of Mr. Chatterjee based on Section 20(3) of the Act may be considered. Reading the provision literally does lead one to the conclusion that the venue of arbitration may be mutually agreed upon by the parties and in the event no consensus is reached, it is for the arbitrator to decide upon the venue that is convenient. Sub-section (3) authorises the arbitral tribunal to meet at any place it considers appropriate irrespective of the agreement of the parties, inter alia, for inspection of property. However, this provision does not absolve the arbitrator from making his intention known to the parties. In none of the proceedings did the arbitrator let the parties know that he would make an award based on his personal knowledge derived from inspection of the said premises as well as the leasehold area. Had he made it known, the petitioner could have brought to his notice the duties of the respondents, as provided in the agreement, which were not discharged and, therefore, the petitioner was not responsible. More so, the inspection having been conducted on April 30, 2007, that is the last time the arbitrator met the parties, there was no scope for the petitioner to voice a grievance before the arbitrator that he had violated the agreed procedure, as contended by Mr. Chatterjee. The argument based on Section 20(3) of the Act is misconceived and hence unacceptable. 19. ONE other aspect that has weighed with the Court is the determination of rent made by the arbitrator in respect of the leasehold area. It is true that the Court's scrutiny while exercising power under Section 34 of the Act must only be confined to the decision- making process and not the decision itself. The provisions of the West Bengal Premises Tenancy Act, 1997 (hereafter the 1997 Act) were noticed by the arbitrator in course of computation of rent payable for occupation of the leasehold area. The provisions of the West Bengal Premises Tenancy Act, 1997 (hereafter the 1997 Act) were noticed by the arbitrator in course of computation of rent payable for occupation of the leasehold area. The arbitrator was of the view that the Government was in occupation of under a tenancy governed by the 1997 Act. In particular, he noticed Section 18 providing for increase of fair rent every three years by 5% and certain rhetoric followed, as evident from paragraph 7(e) of the award extracted supra and 10% increase was awarded. It was as if an increase at double the statutory rate was being awarded. In the considered view of the Court, the arbitrator in the process completely overlooked Section 3 of the 1997 Act. Regard being had to the monthly lease rent vis-a-vis clause (e) of Section 3, the 1997 Act would have no application in respect of the leasehold area. Provisions of Section 18 of the 1997 Act did have a persuasive effect on the arbitrator regarding the rate at which the rent ought to be increased. Instead of the rate of increase specified in Section 18 of the 1997 Act, what should have, inter alia, exercised consideration of the arbitrator was the prevailing market rate of rent of similar properties either taken on lease by the Government or semi-Government organisations in and around South Kolkata and, thereafter, the arbitrator ought to have embarked on an exercise for computing the revised rent payable by the respondents for the leasehold area, in accordance with law. Taking the rate of increase of rent as is provided in Section 18 of the 1997 Act despite non-applicability thereof to the leasehold area as some sort of a guide or yardstick has rendered the award completely flawed and, thus, liable to interdiction. This is apart from the fact that the determination of revised rent payable by the respondents in respect of the leasehold area has shocked the conscience of the Court. The respondents being authorities within the meaning of Article 12 of the Constitution cannot in the present context continue to occupy sizable area of prime property in the heart of the city by paying a pittance, which in itself is contrary to the public policy. 20. IN the result, the impugned award stands set aside. The respondents being authorities within the meaning of Article 12 of the Constitution cannot in the present context continue to occupy sizable area of prime property in the heart of the city by paying a pittance, which in itself is contrary to the public policy. 20. IN the result, the impugned award stands set aside. The Secretary, Ministry of Defence shall proceed to appoint an arbitrator, other than the one whose award is set aside hereby, within four weeks from date of receipt of a copy of this order. The arbitrator after entering reference shall proceed to make and publish his award within six months thereafter. Urgent photo-stat certified copy of this judgment and order, if applied, may be furnished to the applicant at an early date.