Kerala High Court
M/S.Leo Activation vs The 49Th All India Congress Of ... on 26 August, 2020
Bench: C.T.Ravikumar, K.Haripal
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE C.T.RAVIKUMAR
&
THE HONOURABLE MR. JUSTICE K.HARIPAL
WEDNESDAY, THE 26TH DAY OF AUGUST 2020 / 4TH BHADRA, 1942
Arb.A.No.15 OF 2012
AGAINST THE ORDER IN OP(ARB) 1223/2008 DATED 04-10-2011 OF II
ADDITIONAL DISTRICT COURT,ERNAKULAM
APPELLANT/PETITIONER:
M/S.LEO ACTIVATION,DIVISION OF BLACK PENCIL ADVERTISING
PVT.LTD.,BIG APPLE "A", DR.SHIRODKAR ROAD,
PAREL,MUMBAI-400012, AND SINCE THE ORDER OF
AMALGAMATION DATED 8TH JULY 2011,APPROVED BY THE HIGH
COURT OF BOMBAY IN COMPANY SCHEME PETITION NOS.226 AND
227/2011 IS NOW A DIVISION OF TLG INDIA PRIVATE LTD.,
BIG APPLE "A" DR.SHIRODKAR ROAD, PAREL, MUMBAI-400012,
REP.BY ITS DIRECTOR.
BY ADVS.
SRI.S.VINOD BHAT
SRI.LEGITH T.KOTTAKKAL
RESPONDENT/RESPONDENT:
THE 49TH ALL INDIA CONGRESS OF OBSTETRICS AND
GYNECOLOGY,JANUARY, 5TH TO 9TH 2006, KOCHI, KERALA
REPRESENTED BY ITS ORGANIZING COMMITTEE CHAIRMAN,
DR.V.P.PAILY, CONGRESS SECRETARIAT, SUIT NO.316, RAJI
NURSING HOME, THIRSSUR-680 001.
R1 BY ADV. SRI.DIJO SEBASTIAN
R1 BY ADV. SRI.PAUL ABRAHAM VAKKANAL
R1 BY ADV. SRI.SUNIL SHANKER
R1 BY ADV. SMT.VINEETHA SUSAN THOMAS
THIS ARBITRATION APPEALS HAVING BEEN FINALLY HEARD ON 22-07-
2020, THE COURT ON 26-08-2020 DELIVERED THE FOLLOWING:
Arb.A.No.15 of 2012 :2:
C.R.
JUDGMENT
Haripal, J.
This is an appeal preferred under Section 37 of the Arbitration and Conciliation Act, 1996, hereinafter referred to as 'the Act", challenging the correctness of the order of the learned II Additional District Judge, Ernakulam in O.P.(Arb) No.1223/2008, an application filed under Section 34 of the Act, whereby the legality of the award passed by the learned Arbitrator in a dispute between the appellant and the respondent was adjudicated in ARC No.2/2006.
2. Appellant was the claimant before the learned Arbitrator. It is a company registered under the Companies Act. It is claimed that it is a reputed advertising agency and also involved in marketing of events. M/s.Leo Activation, a division of the company is handling the business of marketing and production of events. The respondent is a registered Society of medical Arb.A.No.15 of 2012 :3: professionals practicing in the branch of Obstetrics and Gynaecology. The materials available before Court indicate that Federation of Obstetrics and Gynaecological Societies of India used to conduct annual conferences. The Annual Conference of 2005 was scheduled to be held at Cochin from 05.01.2006 to 09.01.2006. In connection with its organisation, the appellant company was authorised to garner sponsorship of pharmaceutical and non-pharmaceutical firms. It is the common case that the appellant and the respondent entered into an agreement by which it was agreed that as reward for the services rendered, the appellant will be given commission at the rate of 10% upto sponsorship value of Rs.1 crore, Rs.10 lakhs plus 15% of the amount exceeding sponsorship value between Rs.1 crore and Rs.1.5 crore and Rs.17,50,000/- plus 20% of the amount in excess of Rs.1.5 crores of the sponsorship value. The first agreement was executed in Mumbai on 30.12.2004 following which another agreement on 29.01.2005 at Cochin. The terms and conditions in both the agreements are more or less the same. It is also the common case Arb.A.No.15 of 2012 :4: that periodical interactions were made between the representatives of the appellant and the respondent for assessing the progress achieved in the matter of garnering sponsorship. However, it has come out that towards the end of October 2005, i.e. about two months prior to the conduct of the conference, the respondent felt that the appellant was not securing sponsorship as expected by them and thus, by notice dated 21.10.2005, the agreement was terminated unilaterally with effect from 06.11.2005. Though some steps were taken by the representatives of the appellant to contact the organisers of the respondent and rebuild the trust, that did not yield any result. Following such developments, an air of litigation spread between the parties; the respondent lodged caveat petitions in Ernakulam and Thrissur courts and the appellant filed an application under Section 9 of the Act for attachment of the bank accounts of the respondent. Ultimately, at the instance of the respondent, Hon'ble Mr.Justice R.Bhaskaran, a former Judge of this Court was appointed by this Court as the sole Arbitrator to resolve the disputes between the parties. A claim statement was filed Arb.A.No.15 of 2012 :5: before the Arbitrator, following which a counter statement was filed by the respondent along with a counter claim. Three witnesses were examined on the side of the appellant and Annexures 1 to 16 were marked. The organising secretary of the respondent gave evidence as RW1 and Annexures R1 to R10 were the documents produced by the respondent. After hearing the counsel on both sides, the learned Arbitrator, by the impugned award, allowed the appellant to claim an amount of Rs.4,85,250/- with interest at the rate of 9% from 12.01.2007 till realisation. The counter claim was declined.
3. Aggrieved by the said award the appellant filed O.P(Arb) No.1223/2008 before the District Court, Ernakulam. The learned II Additional District Judge, by the order dated 04.10.2011 dismissed the petition and now the appellant has impugned that order before this Court under Section 37 of the Act.
4. We heard the learned counsel on both sides elaborately. Arb.A.No.15 of 2012 :6:
5. Adv. Sri.Vinod Bhat, the learned counsel for the appellant submitted that, initially though he had raised disputes viz- a-vis Annexure-1 and Annexure-R2 agreements, now he does not press that contention and agrees with the finding of the learned Arbitrator that Annexure-R2 is the agreement which governs the parties. According to him, except in certain clauses, there is no substantial difference between Annexure-1 and Annexure-R2. Similarly, though it is true that the agreement was unilaterally terminated by the respondent, his claim for damages also need not be considered. According to him, the remaining question is, whether his claim for realisation of commission for Rs.1.68 crores, at the agreed rates, for the works rendered by the company is sustainable. According to the learned counsel, it is the value of money, that is the commission, due to him under the contract. The counsel also pointed out that though the respondent had raised a counter claim, that was considered and rejected by the learned Arbitrator against which no petition was moved by the respondent under Section 34 of the Act.
Arb.A.No.15 of 2012 :7:
6. According to the learned counsel, it is evident from the records that the appellant was the sole agency authorised to do the task of arranging sponsors for the conference. In fact, the officers of the appellant had worked earnestly, which was duly apprised to the office bearers of the respondent in the periodical meetings. They were also happy with the progress of the events. But the agreement was abruptly terminated without giving any hint whatsoever. Till giving the Annexure-7 communication, nothing was told by them with regard to the performance of the officers of the appellant; in the periodical weekly meetings also the respondent had no complaint that the performance of the appellant or their officers were not to their satisfaction; the respondent was fully aware of the fact that big companies were not prepared to leave money much in advance and that amounts would be paid only at the eve of the event. It was a strategic step taken by the respondent that the appellant's service was terminated without sending any prior communication or without showing any dissatisfaction regarding their performance and that they were taken by surprise. Arb.A.No.15 of 2012 :8: In fact they had worked for the respondent securing sponsorship to the tune of Rs.1.68 crores for the event. But material documents have been clearly suppressed by the respondent. In the nature of the contract, bipartite and tripartite agreements should have been reached and bipartite agreements and receipts of money consequent to such contract are with the respondent. Despite the fact that the appellant had moved for the production of records of the respondent, that was suppressed. Rule of best evidence is applicable in the facts of the case. The respondent has suppressed best evidence, so that, real facts have not been brought to the notice of the Arbitrator for making a proper adjudication of the disputed questions of facts. That would also prove the dishonest stand of the respondent to dishonour the genuine claim of the appellant. If it was shown that the appellant had turned up works exceeding Rs.1 crore or Rs.1.5 crores, that would have made the respondent liable to pay progressive rates of commission. The contract was abruptly terminated cleverly, to avoid payment of actual commission for the hard works done by the appellant.
Arb.A.No.15 of 2012 :9:
7. The learned counsel also pointed out that, within two months of termination of the agreement, the respondent could conduct the conference in a grand manner; but by suppressing material documents and accounts of the respondent, everyone has been kept in darkness. The conduct of the respondent not disclosing all the materials including statement of accounts has to be viewed seriously. In spite of a petition put in by the appellant for production of records, the respondent withheld the same which is a matter of adverse inference. The learned counsel is of the firm view that, in the nature of the contentions raised by the parties the burden is on the respondent to produce documents apprising the Arbitrator the actual amounts received from various sources. According to the learned counsel, since the learned Arbitrator had placed reliance on Annexure-4 document, Annexure-5 also should have been given very same treatment basing on which the remuneration of the hard labour put in by the appellant should have been recognised. From the conduct of the respondent and the averments, it cannot be inferred that the appellant had violated the Arb.A.No.15 of 2012 :10: terms of the contract. Still the Arbitrator found that the termination was not illegal. There is nothing to show that the appellant had failed to bring in non-pharmaceutical companies. From Annexure- R7, it cannot be said that the appellant was at fault. According to the learned counsel, the Arbitrator has gone wrong in appreciating his documents properly. The learned District Judge, who considered the O.P. under Section 34 of the Act also did not consider the validity or otherwise of the termination independently. The learned counsel thus pleaded for setting aside the arbitration award, even though he is the loser in taking such a course, he is prepared to take the risk.
8. On the other hand, Sri. Sunil Shanker, the learned counsel for the respondent was harping on the futility of placing implicit reliance on Annexure-5 document and setting aside the award for repeating the show again. According to him, the Arbitrator has done fairly and reasonably, taking a judicial approach. That was the only possible way out in resolving the Arb.A.No.15 of 2012 :11: controversy. While considering this appeal under Section 37 of the Act, the proceedings is on par with Section 100 of the Civil Procedure Code in contrast to Section 96 of the CPC, the court cannot re-appreciate evidence. An award by a trained Arbitrator can be held perverse only if it is found based on no evidence or irrelevant evidence or the outcome is ignoring vital evidence. Here, no such allegation can be attributed against the award. According to him, the question as to who was the Arbitrator is also relevant. Referring to the documents he said that a marketing agency was deployed for the first time in the history of the organisation. But, the performance of the appellant was not at all encouraging. Initially, though they had shown professionalism by producing the road map, etc., such a time-line was never adhered to. Annexure-R2 agreement was executed one year prior to the conference. But the appellant did not show any improvement in their performance; since sponsorships were not forthcoming, they had no option but to terminate the contract. Ultimately, the office- bearers themselves had to indulge in garnering sponsors with the Arb.A.No.15 of 2012 :12: help of their counterparts in other places which alone had yielded result. After the termination the appellant started working against the respondent. They jumped into litigation by filing application under Section 9 of the Act for attaching the bank account. According to him, Annexure-5 has no evidentiary value, which was manufactured for the purpose of producing along with the petition filed under Section 9 on 28.12.2005. It does not bear a date, signature or marks of authentication and figures shown with the mathematical calculation are wrong. It is true that they had not suggested a date for it. But nothing has been stated with regard to its date or authenticity either in the claim statement or in the pleadings. There is nothing to say that Annexure-5 had come into existence prior to the cancellation of the agreement. According to the counsel, there is no burden cast on the respondent to produce documents since adversarial system has to be followed by the Arbitrator. It is a civil dispute, there is no greater obligation on the respondent; if at all convinced, the Arbitrator could have called for records, exercising jurisdiction under the Civil Procedure Code. Arb.A.No.15 of 2012 :13: According to the learned counsel, since the Arbitrator had taken a fair and reasonable approach, the request for setting aside the award will be a futile exercise.
9. In reply, the learned counsel for the appellant submitted that the appellant had never put a case that Annexure 5 is dated 28.12.2005 and the Arbitrator who gave the date had shunted it on the premise that it was post-termination. According to him, Annexure-5 is the outcome of the periodical meetings on Thursdays and it must have originated prior to 21.10.2005, the date of termination and there was no cross-examination of PW1 on this score. He also pointed out that the mathematical error etc. highlighted against Annexure-5 have never been pleaded. Referring to Annexures 4, 5, 6 and R3, he said that these documents do not bear date and all are computer generated and unsigned. Regarding the non-production of documents by the respondent he said that, all the list of sponsors, list of commitments etc. are in the possession of the respondent and it was surplusage to call for Arb.A.No.15 of 2012 :14: records and in the circumstance, it was the obligation of the respondent to produce accounts before the Arbitrator to destabilise his claims based on Annexures 4, 5 etc. He also pointed out that against Annexure-4, which stands approved by the Arbitrator no petition has been moved by the respondent under Section 34 of the Act. According to the counsel, the defects in that Award can very well be cured invoking Section 34(4) of the Act. He also relied on the decision reported in Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd. [2020 (1) ARBLR 1 (SC)].
10. Before considering the rival contentions, the law on the subject can be looked into. It is the common case that, for resolving the dispute the respondent had moved this Court under Section 11 of the Act following which a former Judge of this Court was appointed as the sole Arbitrator who after taking evidence and hearing both sides passed the impugned award. Section 5 of the Act makes it abundantly clear that notwithstanding anything contained in any other law for the time being in force, in matters Arb.A.No.15 of 2012 :15: governed by this Part, no judicial authority shall intervene except where so provided in this Part. Section 5 brings out clearly the object of the Act, that of encouraging resolution of disputes expeditiously and less expensively and when there is an arbitration agreement, the Court's intervention should be minimal. (see P. Anand Gajapathi Raju v. P.V.G.Raju (AIR 2000 SC 1886). That means, Section 34 in conjunction with Section 5 makes it clear that an arbitration award governed by part I of the Act can be set aside only on grounds mentioned under Section 34(2) and (3) and not other case. The Apex Court in Delhi Development Authority v. M/s. R.S. Sharma & Co. [2008 (13) SCC 80] has summarised thus in paragraph 12:
"(a) An Award, which is
(i) contrary to substantive provisions of law ; or
(ii) the provisions of the Arbitration and Conciliation Act,1996; or
(iii) against the terms of the respective contract ; or
(iv) patently illegal, or
(iv) prejudicial to the rights of the parties, is open to interference by the Court under Section 34(2)of the Act.
(b) 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;
(c) The Award could also be set aside if it is so unfair and Arb.A.No.15 of 2012 :16: unreasonable that it shocks the conscience of the Court.
(d) It is open to the Court to consider whether the Award is against the specific terms of contract and if so, interfere with it on the ground that it is patently illegal and opposed to the public policy of India."
By way of amendment to the Act on 23.10.2015, sub-section (2-A) has been added, by which an arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award.
11. It is the settled proposition of law that an Arbitrator is a Judge chosen by the parties and his decision is final. The Court is precluded from reappraising the evidence. Even in a case where the award contains reasons, the interference therewith would still be not available within the jurisdiction of the Court unless the reasons are totally perverse or the judgment is based on a wrong proposition of law. An error apparent on the face of the records would not imply closer scrutiny of the merits of documents and materials on record. Once it is found that the view of the Arbitrator Arb.A.No.15 of 2012 :17: is a plausible one, the Court will refrain itself from interfering.
12. Similarly, in the decision in P.R.Shah, Shares & Stock Brokers (P) Ltd. v. B.H.H. Securities (P) Ltd. [(2012) 1 SCC 594] the Hon'ble Apex Court has held that the Court under Section 34(2) of the Act does not sit in appeal over the award of an arbitral tribunal by re-assessing or re-appreciating the evidence. An award can be challenged only under the grounds mentioned in Section 34(2) of the Act that, in the absence of any ground under Section 34(2) of the Act, it is not possible to re-examine the facts to find out whether a different decision can be arrived at.
13. In the decision in Sutlej Construction v. Union Territory of Chandigarh [2018 (1) SCC 718], while commenting against an order passed under Section 34 of the Act the Apex Court held that the Judge ought to have restrained himself from getting into the meanderings of evidence appreciation and acting like a second appellate court.
Arb.A.No.15 of 2012 :18:
14. Similarly, in MMTC Ltd. v. M/s.Vedanta Ltd. [2019 (4) SCC 163] the Apex Court has stated as to how a court should consider a petition under Section 34 of the Act, thus:-
"11. As far as Section 34 is concerned, the position is well settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii), i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the "fundamental policy of Indian law" would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury reasonableness. Furthermore, "patent illegality" itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract. It is only if one of these conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)(b) (ii), but such interference does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts."
15. Regarding the powers under Section 37 it has made succinctly clear that under Section 37 the Court cannot travel beyond the restrictions laid down under Section 34 of the Act. According to the Apex Court, the court cannot undertake an Arb.A.No.15 of 2012 :19: independent assessment of the merits of the award and must only ascertain that the exercise of power under Section 34 has not exceeded the scope of the provisions; in case an arbitral award has been confirmed by the court under Section 34, in an appeal under Section 37 the appellate court must be extremely cautious and slow in disturbing such concurrent findings.
16. We have to approach the contentions of the parties in a narrow compass, in the light of the authoritative pronouncements, confining within the fours of the statutory restrictions and injunctions made under Section 37 of the Act. To put in in other words, while exercising jurisdiction under Section 37 of the Act, this Court should keep on trucking through a very narrow path confining to the supervisory jurisdiction. As pointed out above, the Apex Court has compared this jurisdiction to that of an appeal under Section 100 of the Code of Civil Procedure. In that setting, this Court is not expected to re-visit or re-analyse the materials again. The Court need only to consider whether the Arbitrator has Arb.A.No.15 of 2012 :20: committed any patent illegality, whether his conclusions were perverse and whether he had made attempts to take a reasonable and plausible approach. Even if an erroneous view is taken by the Arbitrator in respect of finding of facts, the Courts should not interfere until and unless perversity or non-application of mind or error is writ large on the face of the award. Similarly, unless bias or partiality of the Arbitrator is made out, the award should not be interfered with. This Court is thus expected to take only a bird's eye-view, to consider whether the Arbitrator had adopted a fair and reasonable approach in the adjudicatory process.
17. After going through two fora, at first before the Arbitrator and then before the learned Additional District Judge under Section 34 of the Act, the appellant has come down to the area touching the opinion expressed by the learned Arbitrator with respect to Annexure-5. In other words, even though originally he had disputes as to which agreement had guided the parties, whether Annexure-1 or Annexure-R2, now he has no dispute that it is Arb.A.No.15 of 2012 :21: Annexure-R2 that has to be followed. Similarly, though arguments were raised with regard to the legality of the rescinding of the contract and the amounts claimed towards damages, that part of the claim also has not been pursued.
18. All the same, the learned counsel was very much sceptical about the opinion formed by the Arbitrator basing on Annexure-5. According to him, the learned Arbitrator who chose to accept Annexure-4 should not have hesitated to accept Annexure-5. Similarly, the appellant does not have a case that it was dated 28.12.2005, still by giving such a date, the Arbitrator has conveniently denied his legitimate claims. He was also vociferous on the non-production of the statement of accounts on time by the respondent, which prevented his opportunity to put probing questions to RW1 when he was examined.
19. It is true that a statement of accounts was not produced by the respondent on time. RW1 was examined on 23.02.2008. Records show that Annexure-R10, Income and Expenditure Arb.A.No.15 of 2012 :22: Account for the period ended on 22 nd December, 2006 was produced before the Arbitrator on 10.03.2008. Still it was open to the appellant/claimant to recall RW1 for cross-examining him on the document produced on subsequent point of time. That was not attempted. We have rushed through the records including Annexure-R10, remaining within our precincts. In our view, the non-production of this document on time is of no relevance or consequence, in the above circumstance.
20. After evaluating the gamut of evidence, we do not find our way to describe the award unreasonable or unfair. It has come out that Annexure-R2 agreement was executed about one year before the proposed conference which was scheduled to be held from 5th to 7th January, 2006. Indisputably, it is an annual event being taken place at different places of the country. The 2005 conference had taken place at Aurangabad and the 2007 event was held in Kolkotta. Similarly, it is not disputed that it was for the first time the services of an outside agency was borrowed for garnering Arb.A.No.15 of 2012 :23: sponsorship for the programme. The appellant had started the work earnestly by producing the road-map, time-line, etc. This was a clear exhibition of professional standards. They had offered to bring in big companies, both pharmaceutical and non- pharmaceutical, as sponsors. There was also periodical meetings between the representatives, reviewing the progress of the work. But there are reasons to think that, to the utter dismay of the respondent, the appellant could not garner enough sponsors and the last minute termination of the contract was the manifestation of the failure on the part of the appellant in rising to the expectations of the respondent. Even though the learned counsel for the appellant vehemently argued that it was a strategy adopted by the respondent for denying progressive rates of commission agreed in the contract, which would have been payable to the appellant otherwise. But after rushing through the materials on record we are unable to endorse the submission. There is nothing on record to show that, by the efforts of the appellant big companies could be attracted, leave alone non-pharmaceutical companies like Skoda, Fiat, etc. Arb.A.No.15 of 2012 :24: There are also reasons to believe that the office-bearers of the respondent were panic-struck at the last minute, which made them to run hither-thither in search of sponsors; at last they had to seek support of office bearers of their parent organisation at Bombay and other counterparts in Delhi, where meetings were called for garnering sponsorship. These last minute efforts were made after the termination of the agreement with the appellant.
21. As pointed out by the learned Arbitrator, some of the entries in Annexure-R8 Minutes are sufficient to decipher that the respondent was not at all happy with the performance of the appellant and that made them to rescind the contract and take the path themselves.
22. We could not come across any satisfactory material to say that the appellant was instrumental in pursuing big companies to take sponsorship. In our view, the learned Arbitrator cannot be faulted for eschewing Annexure-5 document from consideration. On the face of it, it is a self-serving document. It was an internal Arb.A.No.15 of 2012 :25: communication. There is absolutely nothing to say that the document had come into existence prior to 28.12.2005 nor there are materials to trace its origin to the periodical interactions taken place between the parties. It does not have the stamp of approval of the respondent. Authenticity of the document is heavily at stake. It is too fragile a document capable of standing judicial scrutiny. The view taken by the learned Arbitrator on this document, in our considered view, cannot be described as perverse.
23. In the nature of the claims raised by the appellant, the burden is heavily on him. The fact that the respondent did not produce the statement of accounts on time, they could conduct the event successfully within a period of two months after the termination of the contract by collecting more than Rs.3 crores, that they have set apart Rs.25 lakhs for settlement of claims etc. are no grounds for giving a walk over for the appellant. He cannot win the case by pricking holes in the case of the respondent. In the circumstances, it is idle to remit the matter to the Arbitrator again. Arb.A.No.15 of 2012 :26:
On these considerations, the appellant is bound to fail. Appeal is dismissed. No costs.
Sd/-
C.T. RAVIKUMAR JUDGE Sd/-
K.HARIPAL JUDGE okb/10/8/2020 //True copy// P.S. to Judge