Refusing to interfere with the decision of the arbitrator, justice Mukundakam Sharma said, There can be no dispute to the fact that if an arbitrator has interpreted a clause in an agreement in a particular manner and has taken a decision which is a possible view, it is not permissible for the court to substitute its own evaluation on the conclusion of law or fact.
The arbitrator had held that Hudcos not allowing Leela Hotels to create a mortgage was a breach of the fundamental term of the contract and that Hudco did not act in a reasonable manner in refusing the approval.
As per the terms of the contract, Leela Hotels was to complete construction within three years and was to pay the money in three installments. While the first installment was paid by April 10, 1997, the last installment was payable by March 31, 1999 and the building was to be handed over to Hudco on July 6, 2000.
Senior counsels Arun Jaitley and Rajiv Nayar appearing for Leela Hotels submitted that despite repeated request by the company to grant it permission to create a mortgage to raise funds for the construction, Hudco did not grant it. Nor did Hudco extend the period of construction to five years as requested by Leela Hotels, said the counsels. Leela Hotels received no reply from Hudco and the agreement to sub-lease continued unchanged.
Leela Hotels then wrote a letter to Hudco that it had breached the terms of the contract and, therefore, it was under no obligation to pay the third installment. The dispute went for arbitration which was decided in favour of Leela Hotels.
Hudco challenged it as being in violation of public policy and said it had refused to grant permission for mortgage as a suit by MS Shoes East, who was the earlier allottee, was pending. The court, however, upheld the award of the arbitrator. Additional solicitor general RN Trivedi appeared for Hudco.