Bangalore District Court
M/S Jnanasarovara Educational Trust vs M/S Pearson India Education Services on 30 June, 2022
1 Com.A.P.No.54/2020
IN THE COURT OF THE LXXXVIII ADDL. CITY CIVIL &
SESSIONS JUDGE (EXCLUSIVE COMMERCIAL COURT):
BENGALURU CITY. (CCH-89)
Present: Sri. P.J. SOMASHEKARA, B.A., LL.M,
LXXXVIII Addl. City Civil & Sessions Judge
Bengaluru City.
Dated this the 30th day of June 2022
Com.A.P.No.54/2020
Appellant: 1. M/s Jnanasarovara Educational Trust,
Registered Office at No.580, 26th Main,
II Stage, J.P. Nagar, Kille Mohalla,
Mysuru - 570 008, Represented by its
President Mr. Sudhakar S. Shetty.
2. Mr. Sudhakar S. Shetty,
S/o late T.K. Sanjeeva Shetty,
Aged about 62 years,
R/at No.580, 26th Main, II stage,
J.P. Nagar, Khille Mohalla, Mysuru - 08
3. Mrs. Sukhalatha S. Shetty,
W/o Sudhakar S. Shetty,
Aged about 51 years,
R/at No.580, 26th Main, II stage,
J.P. Nagar, Khille Mohalla, Mysuru - 08
(By Sri. S.N., Advocate)
-vs-
Respondent: M/s Pearson India Education Services
2 Com.A.P.No.54/2020
Pvt. Ltd., No.II A Wing, Ground Floor,
Divyashree Chambers, Shengnesee
Road, Longford Gardens, Bengaluru.
Rep. by its Managing Director.
(By Sri. Y.H., Advocate)
JUDGMENT
This is a suit filed by the plaintiffs against the defendant under Sec.34 of the Arbitration and Conciliation Act r/w Sec.10 of the Commercial Courts Act and sought for to set aside the award dated 30.05.2020 passed by the arbitral tribunal in A.C.No.4/2016.
2. Nut shell of the plaintiffs case are as under:
The plaintiffs being the respondents and the defendant being the claimant before the arbitral tribunal, feeling aggrieved by the award which passed by the arbitrators has filed the instant suit alleging that the 1st plaintiff is a trust engaged in running of school built in the land bearing resurvey No.399, measuring an extent of 4 acres, 30 guntas excluding 10 guntas of A kharab, survey No.402 measuring an extent of 4 acres, Sy.No.403 measuring an extent of 2 acres 11 guntas, Sy.No.404 measuring an extent of 4 acres, Sy.No.405 measuring an extent of 17 guntas and Sy.No.506 measuring an extent of 4 acres in total to an extent of 19 acres, 18 guntas sitauted at Hanchya village, Kasaba 3 Com.A.P.No.54/2020 Hobli, Mysuru under the name and style of M/s Jnanasarovara International Residential School having its registered office in the address mentioned. The 2nd plaintiff is a managing trustee of the 1st plaintiff trust and the 3rd plaintiff is the principal No.2 of the 1 st plaintiff trust. The 1st plaintiff is a trust engaged in importing education and currently it is running the school which affiliated to ICSE Board, Delhi and PUC Board, Karnataka. The defendant is a company incorporated under the Companies Act 1956 having its registered office at No.10, 3rd Main, Ashwini Layout, Intermediate Ring Road, Koramangala, Bangalore engaged in providing educational services support to the educational institutions and they were desire to improve the standard of education in the school run by the trust have placed the proposal with the defendant with a request to provide educational services support, for which the defendant has agreed the same. Themselves and the defendant were entered into a services agreement dated 27.06.2011 on various terms and conditions and the rights and obligation of the parties set out briefly in the said services agreement and the said service agreement was brought into force in between them, during the year 2014 certain differences arose in between them, as a result of which the defendant has issued a legal notice on 25.07.2014 terminating the services agreement 4 Com.A.P.No.54/2020 dated 27.06.2011, in response to the said legal notice they have decided to invoke arbitral clause of said agreement and accordingly they were appointed Sri. Vijaya Singh, Advocate, Mysore as a arbitrator for their side and the defendant also appointed Sri. Bolar Yeshwanth Kumar, Retired District Judge as arbitrator on its side and the said arbitrators appointed Kukkaje Ramakrishna Bhat, Retired District Judge as a presiding arbitrator, due to ill-health of Bolar Yeshwanth Kumar one of the co-
arbitrator has resigned on 13.03.2018 and in his place Sri. V.N. Ravindra, Retired District Judge has been appointed as Co- Arbitrator on 29.03.2018 and the arbitration tribunal was reconstituted accordingly. As per Clause 16(4) of the services agreement dated 27.06.2011, the venue and seat of the arbitration proceedings was decided to be held at Bangalore at No.116/6501, II floor, Next to Union Bank, opposite to Mangaluru Stores, 11th Cross off Sampige Road, Malleshwaram, Bangalore and thereafter the arbitration proceedings has been conducted accordingly in the said venue.
3. The plaintiffs in their plaint they have further alleged that the notice of appointment of arbitrator was received by the arbitrators prior to 29.11.2016 and the presiding arbitrator has issued a notice to the parties on 29.11.2016, since the actual 5 Com.A.P.No.54/2020 date of service of notice of appointment of arbitrators is not available with them. So on 29.11.2016 is the date of 1 st sitting of the tribunal, as such the said date is to be treated as the date of which tribunal has entered appearance and the same shall be the date of reference of the dispute to the arbitrators. The dispute has been numbered as A.C.No.4/2016.
4. In response of the notice, the defendant has filed its claim statement before the arbitration tribunal on 30.12.2016 and they have also filed their objection and counter claim on 30.01.2017 and the defendant has filed its rejoinder and objection to the counter claim on 28.02.2017. Thus on 28.02.2017 is to be taken as the date on which the pleadings of the parties have been completed. In the statement of claim filed before the tribunal the defendant company detailed the allegation against them and raised 7 claims and prayed for award a interest @ 14% p.a. from the date of filing of claim petition till its realization and the heads of the claims which sought by the defendant has been summarized as stated below:
Sl.No. PARTICULARS AMOUNT-INR 1. Balance security Deposit Rs.13,86,00,000/-
2. Interest at 14% on the security deposit from Rs.10,60,57,479/-
27.06.2011 to 15.12.2016
3. Fixed assets investments made by claimant Rs.85,05,638/-
4. Short term funding for the deficit in Rs.30,81,379/- 6 Com.A.P.No.54/2020
operational expenses provided by pearson on 01.01.2014 vide RTGS
5. Management fees outstanding as on Rs.48,68,226/-
30.06.2014
6. Liquidated damages as per clause 14.4 of Rs.4,56,49,408/-
agreement
7. Amount pending towards installation ICT Rs.42,00,000/-
boards (as per agreement No.ICT board as per agreement No.ICT 11-616 and 775/-) TOTAL Rs.31,09,62,130/-
5. The plaintiffs in their plaint they were alleged that in the objection statement coupled with the counter claim also detailed allegations against the defendant company and also prayed for the dismissal of the claim petition and to allow their claim and prayed for award of interest at 12% p.a. on the counter claim from the date of termination of the said service agreement dated 27.06.2011 and the relief which sought in the counter claim stated below:
Sl.No. PARTICULARS AMOUNT
1. Loss due to leaving of students from school Rs.20,70,00,000/-
and also due to reduction in admission of
students.
2. Loss due to breach committed by the claimant Rs.1,00,00,000/-
in fulfilling the clause (b) and (c) of Annexure
(c)
3. Liquidated damages as per clause 14.5 of the Rs.2,10,00,000/-
agreement
4. Damages for loss of dignity standard and Rs.1,20,00,000/-
reputation of respondents school
5. Amount towards outstanding bills cleared by Rs.63,23,838.26/-
the respondents
TOTAL Rs.26,63,23,838.26/-
7 Com.A.P.No.54/2020
So based on the pleadings of the parties, tribunal framed in all 12 issues and one additional issue and both parties were led the evidence and got exhibited the documents and after hearing the arguments on both side, passed the impugned arbitration award dated 30.05.2020 upholding the claim of the defendant in part and totally rejecting their counter claim.
6. Feeling aggrieved by the said award were filed the instant suit for the following:
GROUNDS A. The award is a domestic award and the same suffers from patent illegality on the face of the records and the finding which recorded by the tribunal is perverse and irrational and no reasonable person would have arrived on a such conclusion and the tribunal has taken into account various factors irrelevant in coming to the decision and failed to take note of the fact that the claim of the respondent is contrary to the terms of the service agreement dated 27.06.2011.
B. The impugned award which passed by the arbitration tribunal is illegal, erroneous, and improper committed a grave error in rejecting their counter claim before the arbitral tribunal which is in contravention of the law of the land and it is in conflict with the most basic notion of morality and justice and failed to appreciate the contention which raised by them before it and also not appreciated the oral and documentary evidence which produced by them before the arbitral tribunal and the award which 8 Com.A.P.No.54/2020 passed by the arbitral tribunal is against to the public policy and the principles of natural justice.
C. The impugned award is one sided and suffers from legal infirmities and tribunal has dealt with a dispute not contemplated by or not falling within the terms of the submission to arbitration and the award contains decision on matter beyond the scope of the submission to the arbitration. The award which passed by the arbitration tribunal after the expiry of the mandated period prescribed under the Arbitration and Conciliation Act and same is contravention of the Act.
D. The arbitration tribunal ought to have terminated the proceedings after the completion of one year from the date of reference of the dispute to the tribunal, since no consent for extension of another period of 6 months was made by both parties within the completion of one year, as such the mandate of the arbitral tribunal seizes to end on 28.11.2017. E. The award which passed by the arbitral tribunal without considering the limitation as the only remedy left to the parties is only to approach the competent court seeking extension of time, term of arbitral tribunal, but no such application was moved before the competent court for extension of time for completion of arbitration proceedings as contemplated under Sec.29A of the Arbitration and Conciliation Act, but in contravention of the provision, tribunal has completely lost his sight of the said provision and passed the impugned award on 30.05.2020 without permission of the court which is illegal, non-est in the eye of law.
F. The award which passed by the arbitral tribunal after the expiry of mandate period which stipulates 9 Com.A.P.No.54/2020 under Sec.29A of the Arbitration and Conciliation Act amounts to an award passed by the tribunal was "Functus-Officio" as on the date of passing of the award as such award deserved to be set aside at the outright without looking into the merits and demerits of the parties and the findings of the tribunal suffers from vice of irrationality and perversity and the award which passed is outside the contract and has committed error of jurisdiction and the same is contravention of Sec.34(2-A) of the Arbitration and Conciliation Act and the award which passed is without following the procedure prescribed and without following the provisions under the Arbitration and Conciliation Act, 1996 which vitiated by patent illegality appearing on the face of the award and the arbitral tribunal has treated the claim and counter claim unequivocally has failed to give effect to the true intent of the clauses of the arbitral agreement in its true sense and ignored the clause 4 and 5 of the agreement which taken place in between them and the tribunal has failed to take note of the said clause while allowing claim No.1 of the claim statement filed by the defendant before the arbitral tribunal and there is no other clause in the arbitration agreement regarding the mode of refund of security deposit. G. The arbitral tribunal while passing the award, awarded an amount of Rs.85,05,638/- being the value of fixed assets investment made by the defendant has considered only the statement which produced by the defendant knowing that no documents are placed by the defendant before the arbitral tribunal to show the exact value of the fixed assets and ignored the general principles of valuation of the fixed assets, no depreciation value of the said assets has been deducted and the finding which recorded by the tribunal is without any basis and same is oppose to the public policy.
10 Com.A.P.No.54/2020H. The arbitral tribunal on the basis of issue No.6 was framed has arrived at an improper conclusion without any basis to arrive at such conclusion while awarding the liquidated damages has not made clear on which had stuck it has awarded a sum of Rs.4,18,91,474/- and same has been awarded without there being any basis to arrive at such conclusion or the valuation and has not considered the well settled principles of law in giving the finding on issue No.6 while considering the liquidated damages has relied on clause 1.1.1 of the services agreement dated 27.06.2011 which is itself is in contingent in nature and in violation of the provisions of the Indian Contract Act, 1956.
I. The tribunal has awarded the liquidated damages blindly without any basis and assessed the figures placed before it and the compensation can only be given for actual damages or loss suffered as the law of liquidated damages in India under Sec.74 of the Contract Act, 1956 only reasonable damages can be awarded against a party committing breach of contract subject to the upper limit of the estimation of liquidated damages made under the contract, but the arbitral tribunal has not taken into consideration. J. The arbitral tribunal while allowing an amount of Rs.42,00,000/- towards the installation of ICT board by the defendant has not interpreted the terms contained in Annexure B and C of the service agreement dated 27.06.2011 and the tribunal has gone out of the jurisdiction vested in it and tribunal has not interpreted the clauses of the agreement in a true sense as per clause 14.8 (b) of the agreement dated 27.06.2011 the defendant has removed the ICT boards and without considering the same the tribunal has awarded the cost of the said boards to the 11 Com.A.P.No.54/2020 defendant which is against to the public policy and the tribunal has not considered clause 4.5 of the service agreement, since the defendant has not fulfilled the terms of the said clause and the tribunal has failed to interpret the same in its true sense. So the award suffers from irrationality.
7. The cause of action to challenge the arbitral award has been arising on 30.05.2020 when the arbitral tribunal signed copy of the award has been received by them on 06.06.2020 and the period of 90 days expires on 04.09.2020 and they were filed the instant suit within the period of limitation and the arbitration proceedings has been held in Bangalore and as per clause 16.04 of the service agreement dated 27.06.2011 entered in between them, this court having the jurisdiction to adjudicate the matter and prays for allow the suit and set aside the award which passed by the arbitrators in A.C.No.4/2016 dated 30.05.2020.
8. In response of the summons, the defendant has been appeared through its counsel and filed the objection statement, stating that the suit which filed by the plaintiffs is not maintainable in law or on facts, since the plaintiffs have not made out any of the grounds which are enumerated under Sec.34 of the Arbitration and Conciliation Act to set aside the award and the award which passed by the arbitral tribunal is not warrants to interfere of this court and the plaintiff has not proved with cogent 12 Com.A.P.No.54/2020 evidence that the impugned award suffers from any patent illegality or is contrary to the substantive provisions of law or the provisions of the Act nor which against to the terms of the contract and the award which passed by the arbitral tribunal is well reasoned speaking award to the extent of the claims decided and does not suffer from any illegality and it is the grievance of the plaintiffs that the arbitral tribunal has traveled beyond 4 corners of the contract and awarded reliefs which were never prayed by either party, but the award based on well reasoned speaking award. So, question of interference of this court does not arise and the plaintiff has sought for re-appreciation of the evidence by this court which is not permissible under law and the arbitral tribunal after considering not only oral evidence, but also documentary evidence has reached a correct conclusion. So question of interference of this court does not arise, as the arbitration has considered in all the aspects and the objection which raised while deciding the issue in between them and the suit which filed by the plaintiffs is deserved for dismissal and as per Sec.29-A of the Act was inserted by the Arbitration and Conciliation Act i.e. on 23.10.2015. The arbitration proceedings between the parties had commenced vide the notice of invocation dated 02.08.2014. Therefore the notice of invoking the 13 Com.A.P.No.54/2020 arbitral clause or in other words the request for referring the dispute to the arbitration has been made in terms of Sec.21 of the Act much before the amendment came into existence. Thus Sec.29A of the Arbitration and Conciliation Act would have no effect on the arbitral proceedings.
9. The defendant in its objection statement has alleged that the arbitral tribunal has dealt with all the issues which framed has decided the same after duly considering the documents on record and the legal submission of both the parties and the plaintiffs were intentionally not placed the entire arbitral record before this court and the arbitral tribunal after considering all the materials passed the award and the plaintiffs have not alleged either in the plaint nor placed any materials to show that the grounds urged in the suit falls within the purview of Sec.34 of the Arbitration and Conciliation Act and the tribunal appreciated the contention which taken by the plaintiffs before it and the plaintiffs were filed the instant suit and sought for re-appreciation of the evidence which is not permissible under Sec.34(2) of the Arbitration and Conciliation Act, as it is barred either re-appreciation of the oral nor the documentary evidence and the plaintiffs have not made out the award which passed by the arbitral tribunal against the public policy and the principles of natural justice and the plaintiffs 14 Com.A.P.No.54/2020 were not placed any materials to show the arbitral tribunal exceeds its jurisdiction, merely made a bald assertion in the plaint, it does not mean that the arbitral tribunal exceeds its jurisdiction and the plaintiffs have not placed any materials that the award which passed by the arbitral tribunal suffers from irrationality and perversity and the averments which made by the plaintiffs has no merit without proof or corroboration and it is the duty bound on the plaintiffs to refund the security deposit amount under clause 4.5 of the service agreement in 20 equal installments of Rs.70,00,000/- each and the arbitral tribunal has considered all the aspects and passed the award. So, question of adjudication by this court does not arise and the arbitral tribunal after considering all the clauses which appeared in the service agreement and the contract which taken place in between the parties, passed the award.
10. The defendant in his objection statement has alleged the arbitral tribunal while awarding the value of fixed assets, investment has considered the materials on record and passed the award and plaintiffs were miserably failed to adduce any oral and documentary evidence and to deny the fixed assets investment and the arbitral tribunal after considering all the materials which placed passed the award. So question of 15 Com.A.P.No.54/2020 interference of this court does not arise and the allegations which made by the plaintiffs are vague without any basis and the plaintiffs in the plaint were averred for re-appreciation of the evidence by this court without raising any feasible ground under Sec.34(2) of the Arbitration and Conciliation Act and it is a settled law which do not allow either reopening of the evidence nor appreciation of the evidence in view of Sec.34 of the Arbitration and Conciliation Act and the award which passed by the arbitrators based on the oral and documentary evidence and arrived a proper conclusion in passing the award and the plaintiffs have not made out any grounds that the tribunal has arrived at any improper conclusion while awarding the liquidated damages and the plaintiffs have not placed any materials to substantiate their claim nor placed the materials that the defendant has breached the service agreement. On the other hand, the plaintiffs were breached the service agreement. That is the reason why terminated the service agreement and arbitral proceedings has been initiated and the arbitrators after considering all the materials passed the award and also raised the other objection which are raised in the objection statement and prays for reject the suit.
11. Both counsels were filed the written arguments. 16 Com.A.P.No.54/2020
12. Heard the arguments on both sides.
13. On the basis of pleading of the parties the points that arise for consideration of this court are as under:
1) Whether the plaintiffs were made out any of the grounds which are enumerated under Sec.34 of the Arbitration and Conciliation Act to set aside the award?
2) What order?
14. My answer to the above points are as under:
Point No.1: In the Negative;
Point No.2: As per final order, on the following;
REASONS
15. POINT NO.1: The plaintiffs being the respondents and the defendant being the claimant before the arbitral tribunal in A.C.No.4/2016, feeling aggrieved by the award, the respondents being the plaintiffs were approached this court on the ground the service agreement was taken place in between them on 27.06.2011 to provide education support service. Pursuant to the said service agreement, the defendant has deposited with the plaintiffs a sum of Rs.14 crores as refundable interest free security deposit to secure the performance of its covenants and obligations, as well as the provisions the education support services. At the time of agreement, the plaintiffs owned to 17 Com.A.P.No.54/2020 housing and urban development corporation certain sum as term loan, thereafter at the request of the plaintiffs the defendant out of Rs.14 crores to be deposited with the plaintiff No.1 had issued a cheque for Rs.10 crores in the name of HUDCO at the time of agreement, balance amount to be paid on compliance of conditions in clause 4.4 of the service agreement and in the agreement specifically provided the said amount was refundable by the plaintiffs in 20 equal yearly installments of Rs.70,00,000/- each irrespective of the income from the school, under the agreement the responsibility has been given to the defendant for collection of annual gross revenues as narrated in the agreement from the students expecting the expenses directly incurred by the school that are reimbursed by the students and whatever the revenues which collected is to be deposited in bank account of respondent No.1 trust and the said account jointly operated by two signatories one from respondent No.1 side and another from the defendant and also agreed to deposit of all the amounts collected from the students for the academic year 2011-2012 to the said joint account, but the plaintiffs have failed to deposit the revenue to the said account deposit, thereby the dispute was arise in between them and initiated the arbitral proceedings and both parties were led the evidence and after hearing the 18 Com.A.P.No.54/2020 arguments passed the award in partly in favour of the defendant by rejecting the counter claim of the plaintiffs, thereby the plaintiffs were filed the instant suit.
16. The learned counsel for the plaintiffs apart from his arguments has submitted that the plaintiff No.1 is the educational trust namely Jnanasarovara Educational Trust and the plaintiff No.2 is the managing trust, respondent No.3 is the wife of plaintiff No.2 and the principal No.2 and she was impleaded in the course of arbitration proceedings. The plaintiff No.1 expressed desire to appoint a defendant company as the authorized agent of the plaintiff No.1 trust to provide education support service, thereby entered into service agreement dated 27.06.2011 as the plaintiffs have believed the defendant company for providing scientific service, even though the plaintiffs were running the school very well, believed the version of the defendant company and agree to take service from the defendant and in the year 2011 they have entered into agreement of service with the defendant as per clause 1.1.7 for 20 years, but the defendant failed to complete its terms and to provide services as agreed in the service agreement and because of the failure on the part of the defendant, entire quality administration and admission of the school has been collapsed and the same has resulted in huge loss to the plaintiffs. 19 Com.A.P.No.54/2020 The defendant knowing fully well because of non discharging of its obligations, the plaintiffs have sustained the loss. Knowing the same the defendant has not changed anything in the education trust in terms of the service agreement. Though the defendant has changed its name without intimation nor the consent, since they have not entered into any agreement with M/s Pearson India Education Service Pvt. Ltd., and even the plaintiffs were not admitting the agreement and the claim which made by the defendant and as per the terms of the agreement, entire financial aspect of the school has been looked after by the defendant and also the officers of the defendant company, since the defendant company has been deputed the officers to lookout the administration of the school and the defendant has breached the agreement without any fault on the part of the plaintiffs, because of the breach of agreement on the part of the defendant, the plaintiffs have sustained huge loss in terms of money and also in terms of reputation of the school. Therefore, the plaintiffs are not liable to pay any amount which sought, though this fact was brought to the notice of the arbitral tribunal by leading evidence and also placing the materials which was not taken into consideration by the arbitral tribunal and the entire claim which made by the defendant before the arbitral tribunal is illegal and 20 Com.A.P.No.54/2020 violation of the terms of the agreement and also on the basis of illegal termination of agreement the defendant has made the claim which is liable for dismissal and they were also narrated the said facts in their statement of objection before the arbitral tribunal and sought for counter claim which was not taken into consideration by the arbitral tribunal. Though the defendant has made allegation against the plaintiffs on the ground that the plaintiffs have breached the service agreement, but the defendant itself has breached the service agreement, because of its attitude not only reduced the admission but also in the percentage wise, because of negligence on the part of the defendant. Thereby the plaintiffs have made the counter claim before the arbitral tribunal by placing the oral and documentary evidence which was not taken into consideration by the arbitral tribunal. The award which passed by the arbitral tribunal patently illegal which is deserved for set aside and the arbitrators award is perverse and irrational and no reasonable person would have arrived on such a conclusion and the award which passed is in contravention of the law of the land which is illegal, erroneous and improper. Therefore, interference of this court is necessary to set aside the award, though the plaintiffs were brought to the notice of the arbitral tribunal regarding non-extension of time to 21 Com.A.P.No.54/2020 pass the award as tribunal has passed the award after the expiry of mandate period stipulated under Sec.29A of the Arbitration and Conciliation Act which amounts to an award passed by the tribunal was Functus-Officio as on the date of passing of the award itself such an award deserves to be set aside at the outright without looking into the merits and demerits of the case and prays for allow the plaint and set aside the award passed in A.C.No.4/2016 dated 30.05.2020.
17. The learned counsel for the defendant apart from written arguments has submitted that the suit which filed by the plaintiffs is not maintainable in law or on facts, since the plaintiffs have not made out any of the grounds which are enumerated under Sec.34 of the Arbitration and Conciliation Act to set aside the award and the award which passed by the arbitral tribunal is not warrants to interfere of this court and the plaintiff has not proved with cogent evidence that the impugned award suffers from any patent illegality or is contrary to the substantive provisions of law or the provisions of the Act nor which against to the terms of the contract and the award which passed by the arbitral tribunal is well reasoned speaking award to the extent of the claims decided and does not suffer from any illegality and it is the grievance of the plaintiffs that the arbitral tribunal has 22 Com.A.P.No.54/2020 traveled beyond 4 corners of the contract and awarded reliefs which were never prayed by either party, but the award based on well reasoned speaking award. So, question of interference of this court does not arise and the plaintiff has sought for re- appreciation of the evidence by this court which is not permissible under law and the arbitral tribunal after considering not only oral evidence, but also documentary evidence has reached a correct conclusion. So question of interference of this court does not arise, as the arbitration has considered in all the aspects and the objection which raised while deciding the issue in between the parties and the suit which filed by the plaintiffs is deserved for dismissal and as per Sec.29-A of the Act was inserted by the Arbitration and Conciliation Act i.e. on 23.10.2015. The arbitration proceedings between the parties had commenced vide the notice of invocation dated 02.08.2014. Therefore the notice of invoking the arbitral clause or in other words the request for referring the dispute to the arbitration has been made in terms of Sec.21 of the Act much before the amendment came into existence. Thus Sec.29A of the Arbitration and Conciliation Act would have no effect on the arbitral proceedings.
23 Com.A.P.No.54/2020
18. The learned counsel for the defendant in his arguments has further submitted that the arbitral tribunal has dealt with all the issues which framed has decided the same after duly considering the documents on record and the legal submission of both the parties and the plaintiffs were intentionally not placed the entire arbitral record before this court and the arbitral tribunal after considering all the materials passed the award and the plaintiffs have not alleged either in the plaint nor placed any materials to show that the grounds urged in the suit falls within the purview of Sec.34 of the Arbitration and Conciliation Act and the tribunal appreciated the contention which taken by the plaintiffs before it and the plaintiffs were filed the instant suit and sought for re-appreciation of the evidence which is not permissible under Sec.34(2) of the Arbitration and Conciliation Act, as it is barred either re-appreciation of the oral nor the documentary evidence and the plaintiffs have not made out the award which passed by the arbitral tribunal against the public policy and the principles of natural justice and the plaintiffs were not placed any materials to show the arbitral tribunal exceeds its jurisdiction, merely made a bald assertion in the plaint, it does not mean that the arbitral tribunal exceeds its jurisdiction and the plaintiffs have not placed any materials that the award which 24 Com.A.P.No.54/2020 passed by the arbitral tribunal suffers from irrationality and perversity and the averments which made by the plaintiffs has no merit without proof or corroboration and it is the duty bound on the plaintiffs to refund the security deposit amount under clause 4.5 of the service agreement in 20 equal installments of Rs.70,00,000/- each and the arbitral tribunal has considered all the aspects and passed the award. So, question of adjudication by this court does not arise and the arbitral tribunal after considering all the clauses which appeared in the service agreement and the contract which taken place in between the parties, passed the award and prays for dismiss the suit.
19. It is an admitted fact the plaintiffs are being the respondents before the arbitral tribunal feeling aggrieved by the award which passed by the arbitrators have filed the instant suit on the ground the arbitrators have not taken into consideration about the oral and documentary evidence on record, thus before considering the arguments which advanced by both counsels and the materials on record, it is just and necessary to consider the legal aspects first for the proper appreciation of the arguments which advanced by both counsels.
1. What is arbitration?
2. When court can interfere with arbitral award? 25 Com.A.P.No.54/2020
3. What is the scope of Court's power to interfere with the arbitral award?
4. What are the grounds are required to set aside the award?
5. Setting aside of arbitral award when permissible?
Let me decide one by one for proper appreciation of the materials on record. Thus this court drawn its attention on Sec.2(1)(a) of the Arbitration and Conciliation Act, 1996 which reads like this:
2(1)(a). The definition arbitration means any arbitration whether or not administered by permanent arbitral institution.
Arbitration is a private dispute resolution mechanism agreed upon by the parties. Arbitration is a binding voluntary alternative dispute resolution process by a private forum chosen by the parties.
Arbitration is a process of settlement extra curses curiae and the parties are at liberty to choose their judge. "The essence of arbitration without assistance or intervention of the court is settlement of dispute by a tribunal of the own choosing of the parties." Law of arbitration aids in implementation of arbitration agreement contract between the parties which remains a private adjudication by a forum consequently chosen by the parties and made on consequential reference.
Now let me know when court can interfere with the arbitral award. Thus this court drawn its attention on Sec.34(43) of the Arbitration and Conciliation Act, 1996 which reads like this:26 Com.A.P.No.54/2020
43. Principles of interference with arbitral award:-
The principles of interference with an arbitral award under Sec.34(2) of the Act are as follows:
(1) An award, which is -
(i) contrary to substantive provisions of law; or
(ii) The provisions of Arbitration and Conciliation Act, 1996, or
(ii) against the terms of the respective contract; or
(iv) Patently illegal or
(v) Prejudicial to the rights of the parties; is open to interference by the court under Sec.34(2) of the Act.
(2) The award could be set aside if it is contrary to:
(a) fundamental policy of Indian Law; or
(b) the interest of India; or
(c) justice or morality.
(3) The award could also be set aside, if it is so unfair and unreasonable that it shocks the conscience of the court.
(4) It is open to the court to consider whether the award is against the specific terms of the contract and if so interfere with it on the ground that it is patently illegal and opposed to the public policy of India.
So, by virtue of the provision which stated above, the court can interfere with the arbitral award in the grounds which mentioned above.
27 Com.A.P.No.54/2020
Now let me know what is the scope of Court's power to interfere with the arbitral award? Thus this court drawn its attention on Sec.34 of the Arbitration and Conciliation Act which reads like this;
Scope of Court's power to interfere with the arbitral award:
The scope of the interference by the court's in regard to arbitral award is limited. Courts do not sit in appeal over the findings and decision of the arbitrator, nor can it reassess or re- appreciate evidence or examine the sufficiency or otherwise of the evidence.
So, by virtue of the provision which stated supra, the scope of interference by the court in regard to the arbitral award is limited scope. The scope of interference under Sec.34 of the Act is limited in view of the judgment of the Hon'ble Supreme Court of India which reported in AIR 2003 SC 2629 in between Oil and Natural Gas Corporation Ltd., V/s Shah Pipes Ltd., and in the said judgment, their Lordship held that;
'an award can be set aside if it is contrary to fundamental policy of Indian Law, the interest of India, justice or morality, if it is patently illegal and unfair and unreasonable it shocks the conscience of the court'.
Now let me know what are the grounds are required to set aside the award which passed. Thus this court drawn its attention 28 Com.A.P.No.54/2020 on Sec.34(18) of the Arbitration and Conciliation Act which reads like this:
18. Grounds to set aside award:- Under the new Act, 1996 misconduct of arbitrator is no ground to set aside an award but court may set aside an award in the following grounds:
(1) if the composition of the arbitral tribunal was not in accordance with the agreement of the parties.
(2) falling such agreement, the composition of arbitral tribunal was not in accordance with the part I of the Act.
(3) if the arbitral proceeding was not in accordance with -
(a) the agreement of the parties.
(b) failing such agreement - the arbitral procedure was not in accordance with part I of the Act. However exception for setting aside the award on the ground of composition of arbitral tribunal or illegality of arbitral procedure is that the agreement should not be in conflict with the provisions of part I of the Act from which parties cannot derogate;
(c) if the award passed by the arbitral tribunal is in contravention of the provisions of the Act or any other substantive law governing the parties or is against the terms of the contract.29 Com.A.P.No.54/2020
An award can be set aside, if it is against the public policy of India that is to so it is contrary to:
(1) fundamental policy of Indian law, (2) the interest of India, or (3) justice or morality , or (4) if it is patently illegal.
It could be challenged -
(a) as provided under Sec.13(5); and
(b) Sec. 16(6) of the Arbitration and conciliation Act. So the court can set aside the award, if the grounds found which stated supra.
So, if the petitioner is made out the grounds which stated supra, court can set aside the award. Now let me know about the setting aside of arbitral award when permissible. Thus this court drawn its attention on Sec.34(4) of the Arbitration and Conciliation Act, 1996 which reads like thus:
4. Setting aside of arbitral award when permissible:-
That the court can set aside the arbitral award under Sec.34(2) of the Arbitration and Conciliation Act if the party making the application furnishes the proof that:
(i) a party was under some incapacity
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for time being in force.
(iii) the party making the application was not given proper notice of the appointment of an 30 Com.A.P.No.54/2020 arbitrator or of the arbitral proceedings or otherwise unable to present his case.
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitrator or it contains visa decisions on matters behind the scope of the submission to arbitration.
(2) The court may set aside the award: (I) (a) if the composition of the arbitral tribunal was not in accordance with the agreement of the parties.
(b) falling such agreement, the composition of the arbitral tribunal was not in accordance with part-1 of the Act.
(ii) if the arbitral procedure was not in accordance with:
(a) the agreement of the parties, or
(b) failing such agreement, the arbitral procedure was not in accordance with part-1 of the Act.
However exception for setting aside the award on the ground of composition of arbitral tribunal or illegality of arbitral procedure is that the agreement should not be in conflict within the provisions of part-1 of the Act from which the parties cannot derogate.
(c) If the award passed by the arbitral tribunal is in contravention of provisions of the Act or any other substantive law governing the parties or is against the terms of the contract. 31 Com.A.P.No.54/2020 (3) The award could be set aside if it is against the public policy of India, that is 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.
(4) It could be challenged-
(a) as provided under Sec.13(5); and
(b) Section 16(6) of the Act."
"B. Further held as follows in this case: (1) The impugned award requires to be set aside mainly on the grounds:
(I) There is specific stipulation in the agreement that the time and date of delivery of the goods was the essence of the contract;
(ii) in case of failure to deliver the goods within the period fixed for such delivery in the schedule, ONGC was entitled to recover from the contractor liquidated damages as agreed;
(iii) it was also explicitly understood that the agreed liquidated damages were genuine pre- estimate of damages;
(iv) on the request of the respondent to extend the time limit for supply of goods, ONGC informed specifically that time was extended but stipulated liquidated damages as agreed would be recovered;
(v) liquidated damages for delay in supply of goods were to be recovered by paying authorities from the bills for payment of cost of material supplied by the contractor;
(vii) there is nothing on record to suggest that stipulation for recovering liquidated damages was by way of penalty or that the said sum was in any way unreasonable.32 Com.A.P.No.54/2020
(viii) in certain contracts, it is impossible to asses the damages or prove the same. Such situation is taken care by section 73 and 74 of the Contract Act and in the present case by specific terms of the contract" - Oil and Natural Gas Corporation V Shah Pipes Ltd. (2003)5 SCC 705 : AIR 2003 SC 2629; see also Moona Abousher V M/s. Cholamandalam DBS Finance Ltd. AIR 2019 Mad 233.
The above provisions which referred above are very much clear when court can interfere with the arbitral award and what is the scope of court's power to interfere with the arbitral award and what are the grounds are required to be set aside the award as well as setting aside of arbitral award when permissible.
20. So, apart from legal aspects which referred above it is just and necessary to reproduce the claim of the defendant/claimant and the counter claim of the plaintiffs/respondents for the proper appreciation of the arguments which advanced by both counsels. The counter claim of the plaintiffs/respondents before the Arbitral tribunal which reads like thus:
Sl.No. Particulars Amount
1 Loss due to leaving of students from 20,70,000,00-00
school and also due to reduction in
admission of students
2 Loss due to the breach committed by the 1,00,00,000-00
33 Com.A.P.No.54/2020
claimant in fulfilling the clause(b) and (c) of Annexure-C 3 Liquidated damages as per clause 14.5 of 2,10,00,000-00 the agreement dated: 27.06.2011 4 Damages for loss of dignity, standard and 1,20,00,000-00 reputation of respondent's school 5 Amount towards outstanding Bills cleared 63,23,838-26 by the respondent/s Total 25,63,23,838-26 The above counter claim of the plaintiffs it is clear that the plaintiffs who are the respondents before the Arbitral tribunal sought for counter claim towards Rs.20 Crore 74 Lakhs for the loss due to leaving of students from school and also due to reduction in admission students due to the negligence on the part of the defendant and Rs.1 Crore towards the loss due to breach committed by the defendant in fulfilling the clause B and C of Annexure C i.e., to provide the education support services so as to enhance the effectiveness and efficiencies of education delivery mechanisms with a high level of professionalism and skill. Be under an obligation to provide required active support and coordination to enable the trust to comply with all education loss, Rs.2,10,00,000/- towards liquidated damages as per clause 14.5 of the service agreement dated 27.06.2011 i.e., in the event of termination for reasons attributable to the company, the company shall be liable to pay the trust as and by way of 34 Com.A.P.No.54/2020 liquidated damages and not by way of penalty an amount equivalent to consideration paid by the trust to the company in the immediately proceedings 5 academic years, Rs.1,20,00,000/- towards damages for loss of dignity standard and reputation of school and Rs.63,23,838.26 towards outstanding bills cleared by the plaintiffs in total Rs.25,63,23,838.26/-, whereas the defendant being the claimant before the Arbitral tribunal has sought for the relief which stated below.
Sl.No. Particulars Amount-INR
1 Balance Security Deposit Rs.13,86,00,000.00/-
2 Interest at 14% on the Security deposit Rs.10,60,57,479.00/-
from 27.06.2011-15.12.2016
3 Fixed Assets Investments made by Rs. 85,05,838.00/-
claimant
4 Short term funding for the deficit in Rs. 30,81,379.00/-
operational expenses provided by
Pearson on 1.1.2014 vide RTGS
5 Management Fees outstanding as on Rs. 46,68,226.00/-
30.06.2014
6 Liquidated damages per clause 14.4 of Rs. 4,56,49,408.00/-
the Agreement
7 Amount pending towards installation of Rs. 42,00,000.00/-
ICT board (As per Agreement No.ICT 11-
616 & 775)
Total Rs.31,09,62,130.00/-
21. The defendant being the claimant before the Arbitral tribunal sought for Rs.13,86,00,000/- towards balance security deposit and Rs.10,60,57,479.00/- towards interest @ 14% on the security deposit from 27.06.2011 to 15.12.2016, 35 Com.A.P.No.54/2020 Rs.85,05,638.00/- towards fixed assets investment which made by the defendant in the first plaintiff trust school, Rs.30,81,379,00/- towards short term funding for the deficit in operational expenses provided on 01.01.2014 vide RTGS, Rs.48,68,226.00/- towards Management fee outstanding as on 30.06.2014, Rs.4,56,49,408.00/- towards liquidated damages as per clause 14.4 i.e., in the event of termination for the reasons attributable to the trust or the principles, including by way of breach the trust and the principles shall, jointly and severally be liable to pay the company an amount equivalent to the Annual minimum fund contributions earned by the trust during the immediately proceedings 5 academic years, the amount shall be payable as and by way of liquidated damages and not by way of penalty and Rs.42,00,000/- towards installation of ICT boards as per the agreement No.ICT11-616 & 775 in total of Rs.31,09,62,130/- which claimed by the defendant before the Arbitral tribunal. So, for the proper appreciation of the arguments which advanced by both counsels it is just and necessary to reproduce the award which passed by the Arbitral tribunal dated 30.05.2020 as stated below.
36 Com.A.P.No.54/2020
Award:
1. Claim petition is allowed in part. Respondents are jointly and severally liable to pay the outstanding amount of Rs.20,11,46,717/- to the Claimant Company.
2. Claimant Company is entitled to pendente lite interest at 9% per annum from the date of filing the claim petition till the date of award on the award amount of Rs.20,11,46,717/- from the respondents.
3. Claimant Company is entitled to future interest at 9% per annum from the date of award till the date of realization on the above said award amount.
4. Both the parties to bear their own costs.
5. Send the signed original awards to Claimant and Respondents 1 to 3 by registered post acknowledgment due.
So, the Arbitral tribunal though the defendant has sought for Rs.31,09,62,130/- but allowed the claim of the defendant in part and held that the respondents jointly and severally liable to pay outstanding amount Rs.20,11,46,717/- and awarded the interest at 9% per annum from the date of filing of the claim petition till the date of award on the award amount of Rs.20,11,46,717/- and held that the defendant is entitle future interest at the rate of 9% from the date of award till the date of realization and held in the body of the award that the plaintiffs have miserably failed to prove their counter claim amount. Accordingly, the Arbitral tribunal has not considered the counter claim which sought by the plaintiffs.
37 Com.A.P.No.54/2020
22. So, keeping the provisions and the claim of both parties as well as the award which passed by the arbitral tribunal referred above in mind, now let me know the arguments which advanced by both counsels, as the learned counsel for the plaintiffs while canvassing his arguments has much argued that the Arbitral tribunal has not taken into consideration of Section 21 of Arbitration and Conciliation Act as the tribunal passed the award after expiry of mandate period as per Sec.29(A) of Arbitration and Conciliation Act. Thus this court drawn its attention of Sec.21 of the Arbitration and Conciliation Act which reads like thus:
21. Commencement of arbitral proceedings.--Unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.
The above provision is very much clear, unless otherwise agreed by the parties a particular dispute commence on the date on which request for that dispute referred to Arbitration has been received by the respondent, for which the learned counsel for the defendant while canvassing his arguments has submitted that according to the plaintiffs, the Arbitration proceedings between the parties has been commenced on 29.11.2016 the date on which both the parties were appeared before the Arbitral tribunal, 38 Com.A.P.No.54/2020 but the plaintiffs were trying to misguide the Court purposefully suppressing the date of notice of invocation which is to be considered in terms of Sec.21 of Arbitration and Conciliation Act, as the notice of invocation has been issued by the very plaintiffs on 02.08.2014, in the form of reply to the termination dated 25.07.2014. So, if the date of invocation of Arbitration dated 02.08.2014 is taken into consideration Sec.29(A) of Arbitration and Conciliation Act cannot be taken into consideration and the notice invoking the Arbitration has issued by the defendant on 04.12.2014. Therefore, Sec.29(A) of Arbitration and Conciliation Act is not applicable to the case on hand. Ex.R.30 is the notice which was issued about the initiation of Arbitration process as per the agreement. Ex.R.31 is the reply notice which issued by the Jnanasarovara Educational Trust by admitting Ex.R.30 i.e., the notice for initiation of the Arbitral proceedings. So, if the Ex.R.30 & 31 are taken into consideration along with the provision which referred above the Arbitral proceedings commenced on the date on which a request for that dispute to be referred to Arbitration is received by the Respondent. So, one thing is clear Arbitral proceedings notice has been received by the plaintiffs and Arbitral proceedings has been commenced from the date of receipt of the notice. So, the Ex.R30 & 31 are supports the 39 Com.A.P.No.54/2020 arguments which advanced by the learned counsel for the defendant. Thus one thing is clear prior to amendment of Sec.29(A) of the Arbitration and Conciliation Act the Arbitral proceedings has been initiated by issuing a notice. Therefore, by virtue of Arbitration and Conciliation Act, the Arbitral proceedings has been commenced soon after receipt of notice by the plaintiffs and the plaintiffs were received the notice prior to amendment of Sec.29(A) of Arbitration and Conciliation Act which effects from 23.03.2015 on this aspect the learned counsel for the defendant has drawn the Court attention on the Judgment of the Hon'ble High Court of Madhya Pradesh passed in AC No.41/2018 in between M/ s.G.S.Developers & Contractors Pvt., Ltd., Vs Dev Developers & Contractors Pvt., Ltd., clubbed with AC No.38/2018. In the said judgment his lordship held that in terms of Sec.21 of the Arbitration and Conciliation Act 1996, the arbitration proceedings commenced on the day on which the request for the dispute to be referred to the arbitrator is received by the respondent. The scheme of Sec.26 is clear that the amendment Act is prospective in nature and will apply to those arbitral proceedings that are commenced, as understood by Sec.21 of the Principal Act or after the amendment Act and to court proceedings which have commenced on or after the Amendment Act came into force and 40 Com.A.P.No.54/2020 as per Sec.21 of the Act of 1996 had commenced on 29.01.2015 when the notice with request to refer the dispute to arbitration was received by the respondent prior to the coming into force of amendment act therefore the provisions of Sec.29A of the Amendment Act 2015 are not applicable to the proceedings which are pending before the learned arbitrator appointed by the order of the court. In the instant case as per Ex.P.30 and P.31 which referred above the intimation has been issued for initiation of the arbitral proceedings which has been received by the plaintiffs, since they have replied to the said notice prior to the Amendment Act, 2015. Therefore, the judgment which relied by the learned counsel for the defendant is applicable to the case on hand.
23. The learned counsel for the defendant has drawn the court attention on the judgment of Delhi High Court passed in CS(Com.9/2019) in between Republic of India through Ministry of Defence Vs M/s Agusta Westland International Ltd. In the said judgment his lordship held that explanation to Sec.29A and Sec.21 of the Arbitration and Conciliation Act parties can agree as to when arbitral proceedings would commence in the absence of any agreement between the parties, the commencement is from the issuance of notice invoking arbitration when there is no agreement to the contrary that either party has pointed out, in 41 Com.A.P.No.54/2020 the instant case by virtue of Ex.P.30 and P.31 are clear the notice has been issued for invoking the arbitration which received by the plaintiffs, therefore the judgment which relied by the learned counsel for the defendant is applicable to the case on hand.
24. The learned counsel for the defendant drawn the court attention on the judgment of Hon'ble Supreme Court which reported in 2018(6) SCC 287 in between Board of Control for Cricket in India Vs Kochi Cricket Pvt. Ltd., & Ors. In the said judgment their lordship held that the general prospective effect of Amendment Act 2015 in relation to both arbitral proceedings and court proceedings in relation thereto unless the parties agreed to be governed by the Amendment Act 2015 is in the prospective nature. Admittedly, the arbitral proceeding initiation notice has been issued and which was served prior to the Amendment Act which came into force on 23.10.2015. Thus judgment which relied by the learned counsel for the defendant is applicable to the case on hand.
25. The learned counsel for the plaintiff while canvassing his arguments has submitted that the award which passed by the arbitrators is deserved for set aside in view of Sec.21 and 29A of the Arbitration and Conciliation Act and the said counsel has drawn the court attention on the judgment of the Hon'ble Supreme Court which passed in C.A.2879-2880/2018 in between Board of 42 Com.A.P.No.54/2020 Control for Cricket in India Vs Kochi Cricket Pvt. Ltd. In the said judgment their lordship held that a statute which not only changes procedure but also creates new rights and liabilities shall be construed to be prospective in operation, unless otherwise provided either expressly or by necessary implication. It is inter- alia because timelines for the making of an arbitral award have been laid down for the first time in Sec.29A of the Amendment Act that parties were given the option to adopt such timelines which though procedural in nature create new obligation in respect of proceeding already began under the un-amended Act. So the Amendment Act is prospective in nature will apply to those arbitral proceedings that are commenced as understood by Sec.21 of the Principal Act on or after the Amendment Act. Therefore, the judgment which relied instead of helping the plaintiffs, it helps the defendant and the defendant is also relied the same judgment which referred above.
26. The learned counsel for the plaintiffs drawn the court attention on the judgment of Hon'ble High Court of Madras passed in O.P. No.592/2018 in between M/s Satyam Caterers Pvt. Ltd. Vs The Assistant Commercial Manager and Anr. In the said judgment their lordship held that Sec.29A (1)(2) and (4) of the Act, the arbitration proceedings shall have to be completed within one 43 Com.A.P.No.54/2020 year from the date of commencement of the arbitration with grace period of 6 months, thereafter that too with the consent of the parties to dispute in all the maximum time the arbitral tribunal can take for completion of arbitral proceedings is only 18 months, if extension is required beyond the period of 18 months the parties will have to approach the court for extension, otherwise the award which passed by the arbitral tribunal is patently illegal as it violates the provisions of Sec.29A of the Arbitration and Conciliation Act.
27. In the instant case, admittedly prior to the amendment of Sec.29A of the Arbitration and Conciliation Act 2015 which effects from 23.10.2015, arbitral proceedings notice has been issued which was served in view of Sec.21 of the Arbitration and Conciliation Act. Though the learned counsel for the plaintiffs has much argued that the award has been passed by the arbitral tribunal on 16.05.2018 is patently illegal as it violates the provision of Sec.29A of the Arbitration and Conciliation Act, as the arbitral proceedings has been commenced on 16.09.2016 and one year period has been expired on 01.07.2017 and by consent the period was also extended up to 31.12.2017, but the arbitral award was passed on 16.05.2018 beyond the period stipulated under Sec.29A of the Arbitration and Conciliation Act without the 44 Com.A.P.No.54/2020 permission of the court. It is an admitted fact arbitral proceedings has been initiated prior to the Amendment Act 2015. Therefore, Sec.29A of the Arbitration and Conciliation Act is not applicable to the case on hand as the said section came to be effected from 23.10.2015. Therefore, I do respect to the judgment which relied by the plaintiffs, but the facts and circumstances of the present case and the judgment which relied are different. So one thing is clear from the materials on record the arbitral initiation notice has been issued prior to the Amendment Act 2015 in view of Sec.21 of the Arbitration and Conciliation Act and Sec.29A of the Arbitration and Conciliation Act is not applicable to the case on hand. Therefore, the arguments which advanced by learned counsel for the plaintiff on this aspect holds no water.
28. The learned counsel for the plaintiffs while canvassing his arguments has much argued that the award which passed by the arbitral tribunal patently illegal, perverse, irrational and no reasonable person would be arrived on such conclusion and the tribunal has not considered the evidence which placed by the plaintiffs. It is an admitted fact as per Sec.34 of the Arbitration and Conciliation Act an arbitral award may be set aside if court finds that the award is vitiated by patent illegality appearing on the face of the award. So in order to bring the case within the 45 Com.A.P.No.54/2020 ambit of Sec.34 of the Arbitration and Conciliation Act, the plaintiffs have to place the grounds to set aside the award on the ground which are enumerated under Sec.34 of the Arbitration and Conciliation Act.
29. It is an admitted fact the plaintiffs were also sought for counter claim, for which rejoinder has been filed and both parties were led the evidence and the arbitral tribunal passed the award on 30.05.2020, the reasons best known to the plaintiffs did not challenge the counter claim by filing a separate suit. So the counter claim which was came to be dismissed by the arbitral tribunal reached finality, since the plaintiffs have not placed any materials on record that they were challenged the counter claim which filed by them. Similarly though the defendant has sought the claim in respect of liquidated damages as per clause 14.4 of the service agreement of Rs.4,56,408/- but the tribunal reduced that claim to 4,18,91,474/- and at the same time the tribunal has not granted the interest @ 14% on the security deposit from 27.06.2011 to 15.12.2016 for Rs.10,60,57,479/- for which also the defendant has not filed any appeal nor raised any objection regarding non-granting of interest on security deposit and reducing of the amount towards liquidated damages. So those 46 Com.A.P.No.54/2020 claims are remained unchallenged, since the defendant has not challenged the said aspect by filing a suit.
30. The learned counsel for the plaintiffs has much argued that the arbitral tribunal has not considered the materials which placed by the plaintiffs before the arbitral tribunal and the award which passed by the arbitral tribunal is perverse, irrational and no reasonable person would have arrived on such conclusion and the award which passed is illegal, erroneous, improper and against to the public policy and principles of natural justice. It is an admitted fact the defendant being the claimant before the arbitral tribunal has sought for in all 7 reliefs in total of Rs.31,09,62,130/- out of which the tribunal awarded an amount of Rs.21,11,46,717/- and not granted the interest on security deposit as sought for. So whatever the claim which granted in favour of the defendant has not been challenged by the plaintiffs which remained unchallenged, though the plaintiffs were challenged the award which passed by the tribunal, but nothing is placed on record to show that the finding which recorded by the arbitral tribunal is patently illegal, perverse, erroneous and improper, as the arbitral tribunal while granting the relief has not only considered oral evidence, but also materials on record and moreover the provisions under the Arbitration and Conciliation Act are not 47 Com.A.P.No.54/2020 empowers this court either re-appreciation of the oral evidence nor appreciation of the documentary evidence which is not permissible under law, as the tribunal while considering the relief as sought for has considered the breach which committed by the plaintiffs in terms of the service agreement in respect of the relief for refund of security deposit, as the defendant has sought for refund of security deposit of Rs.13,86,00,000/- as the Ex.P.2 is the service agreement in Clause No.4 it is clear the security deposit shall be refunded by the plaintiffs in equal installment of Rs.70,00,000/- every academic year. So, for the proper appreciation of refund of security deposit as per the agreement which taken place in between the plaintiffs and the defendant is necessary for re-production which reads like this:
Clause 4.5: The security deposit shall be refunded by the trust to the company in 20 equal installments of Rs.70,00,000/- every academic year, irrespective of whether there exist annual gross revenues in any academic year.
31. So by virtue of the clause which referred above, the plaintiffs shall refund the security deposit to the defendant in 20 equal installment of Rs.70,00,000/- every academic year, for which the tribunal held that the plaintiffs have not placed any materials on record to show that they have refunded entire 48 Com.A.P.No.54/2020 security deposit. However they proved about payment of Rs.14,00,000/- which paid by the plaintiffs to the defendant and the said amount has been deducted out of the security deposit and held that the defendant is entitled for refund of security deposit of Rs.13,86,00,000/- which payable by the plaintiffs, for which nothing is placed on record to show that the findings which given by the arbitral tribunal is perverse, illegal nor against to the public policy or the principles of natural justice.
32. It is an admitted fact, though the defendant has claimed the interest @ 14% but the tribunal after considering the clause which referred above found that the defendant is not entitle the interest on security deposit. The learned counsel for the plaintiffs has much argued that the arbitral tribunal has not taken into consideration about the assets of the school which invested by the plaintiffs, though the defendant has not placed any materials about the investment of the defendant has awarded an amount of Rs.85,05,638/- but where as in the award, the tribunal has considered about the entitlement of the amount of Rs.85,05.638/- by the defendant towards fixed assets investments which made by the defendant based on the materials on record and awarded an amount of Rs.85,05,638/- but the reasons best known to the plaintiffs have not placed any materials on record the grounds 49 Com.A.P.No.54/2020 which urged by them in the suit falls within the ambit of Sec.34 of the Arbitration and Conciliation Act. Therefore the arguments which advanced by learned counsel for the plaintiffs on this aspect holds no water.
33. The learned counsel for the defendant has much argued on the award which awarded by the arbitral tribunal relating to short term funding for the deficit in operational expenses provided by Pearson on 01.01.2014 vide RTGS and management fee outstanding as on 30.06.2014 for which the arbitral tribunal not only considered the oral evidence, but also considered the documents which are marked as Ex.P.20 and Ex.P.2 as well as the clause 5.1 of the service agreement and held that the defendant is entitled to recover Rs.30,81,379/- towards short term funding towards the deficit in operational expenses and also held that the defendant is entitled to recover Rs.48,68,226/- towards outstanding management fees, for which the plaintiffs have not put forth any materials to show that the finding which recorded by the arbitral tribunal comes under the purview of Sec.34 of the Arbitration and Conciliation Act. In the absence of the materials and the grounds which urged, it is clear that the award which passed by the arbitral tribunal is reasoned award and interference of this court is not warranted, since the plaintiffs have not made 50 Com.A.P.No.54/2020 out any of the grounds which are enumerated under Sec.34 of the Arbitration and Conciliation Act to set aside the award.
34. The learned counsel for the plaintiffs while canvassing his arguments has much argued that the arbitral tribunal illegally, erroneously and improperly awarded the amount towards liquidated damages and amount pending towards installation of ICT boards, for which the tribunal has not considered the materials on record, nor considered the clause 14.4 of the service agreement and the document marked as Ex.R.2 and Ex.P.18 and held that the defendant is entitled the claim under the liquidated damages as well as amount pending towards installation of ICT boards, and failed to record the finding which falls within the purview of Sec.34 of the Arbitration and Conciliation Act. But the arbitral tribunal while passing the award not only considered the oral evidence but also considered the documentary evidence. Therefore, the arguments which advanced by learned counsel for the plaintiffs on this aspect holds no water.
35. The learned counsel for the plaintiffs while canvassing his arguments has much argued that the counter claim which filed by the plaintiffs has not been taken into consideration by the arbitral tribunal, but where as the finding which recorded by the tribunal 51 Com.A.P.No.54/2020 not only consider the oral evidence, but also considered the documents which placed on record and also considered the breach of the service agreement which committed by the plaintiffs and the documents which are marked as Ex.P.6, P.9, P.11, P.13(a), P.16(a), P.17(a), P.29, P.30, P.34 and P.38 are very much clear about the breach of the service agreement which committed by the plaintiffs. So the tribunal after considering the not only the documents which referred above but also other documents and found that the plaintiffs are not entitled the amount as sought in the counter claim, since the plaintiffs have not proved their relief as sought in the counter claim and the plaintiffs have not made out any of the grounds which are enumerated under Sec.34 of the Arbitration and Conciliation Act to show that the award which passed by the arbitral tribunal is patently illegal, perverse, irrational, illegal, erroneous, improper or against to the public policy and principles of natural justice. Therefore, looking from any angle, the plaintiffs were utterly failed to establish the grounds which are enumerated under Sec.34 of the Arbitration and Conciliation Act to set aside the award.
36. The learned counsel for the defendant has rightly submitted that the provisions under the Arbitration and 52 Com.A.P.No.54/2020 Conciliation Act are not empowers this court to remand the matter and the said counsel has drawn the court attention on the judgment of Hon'ble Supreme Court which reported in 2018 (11) SCC 328 in between Kinnari Mullick & Anr. Vs Ghanashyam Das Damani passed in C.A.No.5172/2017 dated 20.04.2017. In the said judgment their lordship held that the power of the court to remand the matter to the arbitral tribunal is only to adjourn the proceedings for limited purpose mentioned in Sec.34(4) of the Arbitration and Conciliation Act to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of the arbitral tribunal will eliminate the grounds for setting aside the arbitral award. So by virtue of the judgment which referred above, question of remanding the instant case does not arise, since the provisions of Arbitration and Conciliation Act are not empowers this court to remand the instant suit and the plaintiffs were utterly failed to prove the grounds which are enumerated under Sec.34 of the Arbitration and Conciliation Act to set aside the award. Therefore, the principles which are laid in the above judgment are applicable to the case on hand.
37. The learned counsel for the defendant has rightly submitted that there is no pleadings nor the particulars on record regarding the patent illegality nor the public policy to set aside 53 Com.A.P.No.54/2020 the award or established any of the grounds which are enumerated under Sec.34 of the Arbitration and Conciliation Act to set aside the award and the said counsel has drawn the court attention on the judgment of Hon'ble Supreme Court which reported in 2006(11) SCC 181 in between Mcdermott International Inc vs Burn Standard Co. Ltd. & Ors. In the said judgment their lordship held that interference on ground of patent illegality is permissible only if the same goes to the root of the matter and the public policy violation should be so unfair and unreasonable as to shock the conscious of the court and the public policy is a matter dependent upon the nature of the transaction and the statute relevance of pleadings and particulars on record has to be explained. But in the instant case the plaintiffs have not explained as per the judgment which relied by the learned counsel for the defendant. Therefore, the judgment which relied by the learned counsel for the defendant is directly applicable to the case on hand.
38. The learned counsel for the plaintiffs while canvassing his arguments has submitted that the plaintiffs have made out the grounds which are enumerated under Sec.34 of the Arbitration and Conciliation Act to set aside the award and the said counsel has drawn the court attention on the judgment of Hon'ble 54 Com.A.P.No.54/2020 Supreme Court passed in C.A.No.5172/2017 and the judgment of Hon'ble High Court of Karnataka passed in MFA No.103528/2015. On careful perusal of the said judgment, in the said judgment their lordship held that the powers confirmed under sub section 4 of Sec.34 of the Arbitration and Conciliation Act to facilitate the arbitration panel to take rectificatory steps is not an option in the matter. Moreover neither of the contesting party dispute have applied for additional award and Sec.34(4) of the Arbitration and Conciliation Act on bare reading it is clear that the court can defer the hearing of the application filed under Sec.34 of the Arbitration and Conciliation Act to set aside the award on a written request made by the party to the arbitration proceedings to facilitate the arbitral tribunal by resuming the arbitral proceedings or to take such other action is in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award and by virtue of Sec.34 of the Arbitration and Conciliation Act will not permit for remand of the case, as the plain reading of Sec.34 of the Arbitration and Conciliation Act will show that the parliament has not conferred any power of remand to the court to remit the matter to the arbitral tribunal, except to adjourn the proceedings as provided under sub section 4 of Sec.34 of the Arbitration and Conciliation Act. So, by virtue of the judgments which relied by 55 Com.A.P.No.54/2020 learned counsel for the plaintiffs, question of remand the case does not arise and the provisions of Arbitration and Conciliation Act will not empowers this court to remand the case in view of the judgment which relied by learned counsel for the plaintiffs. Therefore, looking from any angle, the plaintiffs have not made out any of the grounds which are enumerated under Sec.34 of the Arbitration and Conciliation Act to set aside the award. Hence, I am of the opinion that the point No.1 is answered as Negative.
39. POINT NO.2: In view of my answer to point No.1 as stated above, I proceed to pass the following;
ORDER
The petition under Sec.34 of the
Arbitration and Conciliation Act read with Sec.10 of the Commercial Courts Act filed by the plaintiffs is hereby dismissed.
No order as to costs.
(Dictated to the Stenographer, transcript thereof corrected by me and then pronounced in the open court on this the 30th day of June, 2022) (P.J. Somashekara) LXXXVIII Addl. City Civil & Sessions Judge, (Exclusive Commercial Court), Bengaluru City