UNION OF INDIA AND ORS. versus M/S. BANWARI LAL AND SONS (P) LTD.

Citation: [2004] 3 S.C.R. 1194 · Decided: 12-04-2004 · Supreme Court of India · Bench: V.N. KHARE · Disposal: Appeal(s) allowed
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Judgment (excerpt)

A 
B 
UNION OF INDIA AND ORS. 
v. 
MIS. BANWARI LAL AND SONS (P) LTD. 
APRIL 12, 2004 
(V.N. KHARE, CJ., S.H. KAPADIA AND S.B. SINHA, JJ.] 
Arbitration-Non-residential premises-Assessment of damages for use 
and occupation-Property requisitioned under Requisitioning and Acquisition 
C of Immovable Properties Act-After lapse of Act, occupant allowed time by 
Court to vacate-Assessment of damages referred to arbitrator-Arbitrator 
treating the occupation as illegal awarding mesne profits-Held, where 
possession though not wrongful in the beginning assumes a wrongful character 
when it is unauthorisedly retained, owner is not entitled to claim mesne profits, 
but only the fair rent-On facts, occupant allowed to use and occupy the 
D property under orders of Court possession cannot be said to be illegal and 
wrongful-Factors to be taken into consideration for assessment of fair rent, 
discussed-Requisitioning and Acquisition of Immovable Properties Act, 1952. 
Arbitration-Award-Setting aside of-Grounds discussed. 
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Certain commercial properties of the respondent were requisitioned 
under the Requisitioning and Acquisition of immovable Properties Act, 
1952. Before the said Act lapsed on 10.3.1987, a notification under s.4 of 
the Land Acquisition Act, 1894 had been issued and declaration under ss.6 
and 17 had been published. The respondent challenged the acquisition by 
F filing a writ petition which was allowed by the High Court. Appellant's SLP 
was rejected by the Supreme Court, and they were allowed time to vacate 
the premises. The arbitrator made an award assessing damages@ Rs. 15 
per sq. ft. per month for covered area, Rs. 10 sq.ft. per month for larger 
open space and Rs. 7 per sq.ft. per month for smaller open space. On 
dismissal of appellants' objections under ss.30 and :B of the Arbitration 
G Act, by the Single Judge and the consequent appeal by the Division Bench 
of the High Court, the appellants filed the present appeal. 
It was contended for the appellant that the arbitrator erred in 
assessing the dainages on the assumption that possession of the appellant 
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after 10.3.1987 was illegal and in the nature of trespass. It was submitted 
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U.0.1. v. BANWARI LAL AND SONS (P) LTD. 
1195 
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that the appellants having been allowed time till 31.3.1993 by the Court, A 
use and occupation of the property was not illegal but permissible, and 
the respondent was entitled to claim rent only and not the mesne profits. 
It was also contended that the open land being part of the building, the 
arbitrator erred in assessing damages for open space separately when 
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damages were assessed @ Rs. JSper sq.ft for built up area; and that 
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arbitrator failed to take into considerations the relevant facts in assessing 
damages and erred in taking into account a non-comparable property. 
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Allowing the appeal, the Court 
HELD: Per Kapadia, J. (For himself and for Khare, CJ.) 
c 
I. Where the possession though not wrongful in the beginning 
assumes a wrongful character when it is unauthorisedly retained, the 
owner is entitled to claim damages not on the basis of mesne profits but 
only on the basis of the fair rent. In the present case, in view of the 
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permission granted by the Court enabling the appellant to use and occupy 
the property up to 31.3.1993, it cannot be said that the possession of the D 
appellant was illegal and wrongful and in the nature of trespass. In the 
circumstancess, damages were claimable not on the basis of mesne profits 
bqt on the basis of fair rent (1201-C-D] 
Law of Damages and Compensation by Kameshwara Rao 5th Edn. Vol. 
E 
I Page 528, referred to. 
2.1. An award can be set aside when an arbitrator has misconducted 
the proceedings. Misconduct refers to legal misconduct which arises if the 
arbitrator on the face of the award arrives at a decision ignoring material 
documents. [ 1202-G-H] 
F 
r 
K.P. Poulose v. State of Kera/a and Anr., AIR (1975) SC 1259 v. 
Trustees of the Port of Madras v. Engineering Constructions Corporation 
Limited, AIR (1995) SC 2423, relied on. 
Municipal Corporation of Delhi v. Ms. Jagan Nath Ashok Kumar and 
Anr., AIR (1987) SC 2316, held inapplicable. 
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2.2. Jn the instant case, the arbitrator was required to assess damages 
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by applying correct principles of valuation. The property was under 
requisition upto 10.3.1987. Damages were required to be assessed for use 
and occupation of the premises after 10.3.1987 by the appellant und
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