Madras High Court
V.Jayakumar vs Teleperformance Business Services ... on 9 August, 2022
Author: C.Saravanan
Bench: C.Saravanan
Arb.O.P.(Comm.Div.) No.434 of 2023
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on 13.02.2024
Delivered on 04.06.2024
CORAM
THE HONOURABLE MR. JUSTICE C.SARAVANAN
Arb.O.P.(Com.Div.) No.434 of 2023
and
A.No.1747 of 2023
1.V.Jayakumar,
S/o.S.Venkatachalam,
Owner of AJ. IT Park,
R.S.No.15/5 and 6, Vazhudhavur Road,
Kurumampet, Pondicherry-605009.
2.J.Anbarasi,
W/o.V.Jayakumar,
Owner of AJ. IT Park,
R.S.No.15/5 and 6, Vazhudhavur Road,
Kurumampet, Pondicherry-605009. ... Petitioners
Vs.
Teleperformance Business Services India Ltd.
(Formerly known as Sparsh BPO Services Ltd.)
Regd. Office: Teleperformance Towers,
Plot CST No.1406-A/28, Mindspace,
Goregaon (West), Mumbai – 400 104
Rep. By its Authorised Representative
Mr.Biju Karthikeyan. ... Respondent
Prayer: Original Petition filed under Section 34(2)(a)(iv) and 2A of the
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Arb.O.P.(Comm.Div.) No.434 of 2023
Arbitration and Conciliation Act, 1996 r/w. Rule 2.2 of the Madras High
Court (Arbitration) Rules, 2020, praying
(a) to set aside the Arbitration Award dated 09.08.2022 passed by
the Arbitral Tribunal to the extend it
i. directed the petitioners/counter claimants to pay
Rs.20,15,298/- towards refund of security deposit to
respondent/claimant by the petitioners/counter claimants
with interest at 18% per annum from 25.08.2018 till the
date of payment,
ii. directed the petitioners/counter claimants to pay
Rs.9,43,000/- towards electricity security deposit made by
the respondent/claimant with Electricity Department,
Puducherry with interest at 18% per annum from
25.08.2018 till the date of payment, and
iii. dismissed the counter claim of the petitioners/counter
claimants and allowed the counter claim of the
respondent/claimant;
and
(b) to direct the respondent to pay cost.
For Petitioners : Mr.L.Sathish
For Respondent : Mr.Karthik Sundaran
*****
ORDER
_______________ https://www.mhc.tn.gov.in/judis Page No. 2 of 29 Arb.O.P.(Comm.Div.) No.434 of 2023 This Arbitration Original Petition has been filed against the Impugned Award dated 09.08.2022 passed by the Arbitral Tribunal.
2. By the Impugned Award, the Arbitral Tribunal has partly allowed the claim of the respondent to the extent of Rs.29,58,298/- [Rs.20,15,298/- + Rs.9,43,000/-] as against the total claim for a sum of Rs.55,05,755/- as detailed below:-
i. Petitioners are liable to pay Rs.20,25,298/-
towards refund of security deposit with interest from 25.08.2018 till the date of payment; ii. The claim of Rs.12,21,457/- towards electricity consumption is rejected;
iii. The petitioners are liable to pay Rs.9,43,000/-
towards electricity security deposits with interest from 25.08.2018 till the date of payment; iv. The claim of the respondent for Rs.14,16,000/-
towards purchase of assets is rejected; v. The counter claim of petitioner of Rs.1,00,00,000/-
towards loss of rent, additional parking space, repair etc is rejected.
Partly allowed the claim of Rs.20,25,298/- being the amount due to be paid by the petitioner after adjusting an amount of Rs.42,00,000/-. Plus the Rs.9,43,000/- towards the electricity board security deposit.
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3. The Tribunal framed the following issues:-
i. Whether the Claimant is entitled to all or any of the Claims made by it in its Claim Statement; ii. Whether the Respondents are entitled to all or any of the Counter Claim made by it in its Statement of Defence;
iii. Whether the Claimant and the respondents are entitled to claim interest on the amount claimed by them and if so what is the rate of interest and for what period;
iv. Whether the Claimant and the respondents are entitled to any cost and if so what is the cost; v. To what other reliefs the parties are entitled to?
4. The petitioners and the respondent had earlier entered into Ex.C-2 Lease Agreement dated 22.10.2008 for a period of ten years. The petitioner’s immovable property was leased out by the respondent under Ex.C-2 Lease Agreement dated 22.10.2008. There have been two modifications to the aforesaid Ex.C-2 Lease Agreement dated 29.10.2008. They are not relevant for the purpose of disposal of this Original Petition.
5. Suffice to state that at the time of determination of the lease when the respondent issued Ex.C-6 termination notice dated 26.02.2018 to the petitioners, the respondent was paying a monthly rental of Rs.5,29,000/- to _______________ https://www.mhc.tn.gov.in/judis Page No. 4 of 29 Arb.O.P.(Comm.Div.) No.434 of 2023 the petitioners. The respondent had paid a sum of Rs.42,00,000/- as security deposit.
6. Over and above the aforesaid rental advance of Rs.42,00,000/-, the respondent had invested by way of security deposit for a sum of Rs.9,43,000/- to the Pondicherry Electricity Board for getting High Tension Connection (HT) Connection for running a BPO (Business Process Outsourcing) at the lease premises. Over and above, the respondent had also paid a further sum of Rs.13,03,200/- to the Pondicherry Electricity Board towards additional security deposit.
7. By Ex.C13.3 dated 29.05.2019, Electricity Board agreed to refund only a sum of Rs.89,805/- out of Rs.13,03,200/- after adjusting the consumption charges of Rs.12,21,457/- for the period between September, 2018 to April, 2019 for terminating the HP service.
8. By Ex.C-12 E-mail dated 27.08.2018, the first petitioner namely Mr.V.Jayakumar admitted that after adjusting the rent dues payable for the month of May 2018 to August 2018, balance would be refunded back to _______________ https://www.mhc.tn.gov.in/judis Page No. 5 of 29 Arb.O.P.(Comm.Div.) No.434 of 2023 the respondent. Thus, a sum of Rs.20,25,298/- (Rs.42,00,000 - Rs.21,84,702) would be refunded back to the respondent.
9. By Ex.C-12 E-mail dated 27.08.2018, the first petitioner also undertook to purchase movable assets of the respondent on as is where is basis for a sum of Rs.14,16,000/- inclusive of GST.
10. The first petitioner also undertook to arrange for refund of Rs.9,43,000/- of security deposit paid to the Pondicherry Electricity Board by the respondent for getting the High Tension Connection (HT) Connection. To this effect, the respondent also sent suitable communications to the Pondicherry Electricity Board vide Ex.C-13-1 dated 25.10.2018 for cancellation of the High Tension Connection (HT) Connection for refund of the aforesaid security deposit of Rs.9,43,000/-.
11. In this background, there have been several rounds of communication exchanged between the petitioner and the respondent, wherein the respondent was called upon the petitioner to pay a sum of Rs.34,41,298/- being the balance sum of security deposit of _______________ https://www.mhc.tn.gov.in/judis Page No. 6 of 29 Arb.O.P.(Comm.Div.) No.434 of 2023 Rs.20,15,298/- and the assets which the first petitioner agreed to purchase from the respondent on as is where is basis vide Ex.C-12 E-mail dated 27.08.2018.
12. However, the petitioner paid only a sum of Rs.1,00,000/- out of the aforesaid amount of Rs.34,41,298/- to the respondent which has been duly acknowledged vide Ex.C-20 dated 05.04.2019. Since the petitioner failed to settle the balance amount, the respondent invoked the arbitration clause under Ex.C-2 Lease Agreement dated 22.10.2008 by issuing Ex.C-21 notice dated 23.05.2019 under Section 21 of the Arbitration and Conciliation Act, 1996.
13. Since the petitioners failed to consent for appointment of the Arbitrator, the respondent thus filed O.P.No.519 of 2019 under Section 11(6) of the Arbitration and Conciliation Act, 1996. By an Order dated 09.01.2020, this Court appointed the learned Arbitrator. Pursuant to which, the learned Arbitrator entered upon reference and has just passed the impugned Award.
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14. Before the learned Arbitrator, the respondent had claimed the following amounts:-
Sl. Description Amount
No.
1. Towards security deposit after adjustment of Rs.20,25,298/- Rental Arrears
2. Towards purchase of assets by petitioners Rs.14,16,000/-
3. Towards dues cleared to the electricity Rs.12,21,457/- commission (Sept 2018 to April 2019)
4. Towards advance amount Rs.9,43,000/-
5. Minus the Rs.1,00,000/- that the petitioner Rs.1,00,000/-
had already paid
Total Rs.55,05,755/-
(including 18% interest on all claims)
15. Before the Tribunal, the respondent had marked 22 Exhibits viz., Ex.C-1 to Ex.C-22 through CW1 & CW2 as detailed below:-
Sl. Date Exhibits Nature of Documents
No.
1. 27.03.2019 C-1 Copy of the Certificate issued by ROC
2. 22.10.2008 C-2 Copy of the Lease Deed between the
parties
3. 21.03.2017 C-3 Copy of the Amended Agreement
4. 22.10.2008 C-4 Copy of the Account Statement of
Claimant
5. 04.04.2014 C-5 Copy of the Amended Agreement
6. 26.02.2018 C-6 Copy of the termination notice
7. 03.04.2018 C-7 Copy of email from Claimant to
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Arb.O.P.(Comm.Div.) No.434 of 2023
Respondent
8. 25.08.2018 C-8 Copies of the email communication
31.05.2018 exchanged between respondent No.1 and
the claimant
9. C-9 Pictures of inner and outer areas of
demised premises
10. 10.07.2018 C-10 Copy of the email between claimant and
respondents
11. 16.08.2022 C-11 Copies of the both the letters issued by the
Claimant to Labour office
12. 27.08.2022 C-12 Copy of the email sent by the Respondent
13. 25.10.2018 C-13 Copy of the letter and EB Notices
16.11.2018
14. 29.08.2018 C-14 Copy of the trial email correspondences
21.09.2018
15. 17.11.2018 C-15 Copy of email by Respondent to Claimant
16. 19.11.2018 C-16 Copy of email by Claimant to Respondent
17. 05.12.2018 C-17 Copy of the Demand Notice issued by the
claimant
18. 13.12.2018 C-18 Copy of email sent by respondent to
claimant
19. 02.01.2019 C-19 Copy of email issued by the Respondent
20. 05.04.2019 C-20 Copy of proof of receipt of payment of
Rs.1,00,000/-
21. 23.05.2019 C-21 Copy of the notice for appointment of
Arbitrator
22. 09.01.2020 C-22 Copy of the order appointing Arbitrator
16. The petitioner herein had marked 7 Exhibits viz., Ex.R-1 to Ex.R-7 through RW1 & RW2 as detailed below:-
Sl. Date Exhibits Nature of Documents
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No.
1. 02.12.2019 R-1 Copy of the letter issued by the EB
2. R-2 Photos showing the leased premises
3. 20.10.2020 R-3 Tax Invoices for purchase of construction
to materials
29.09.2020
4. R-4 Copies of the Vouchers from S.No.4 to
S.No.101
5. R-5 GST Invoices for purchase of
construction materials
6. R-6 Sri Ganesh Electricals Bills
7. R-7 Angalamma Aluminium Fabrication
Quotation
17. Operative portion of the Impugned Award dated 09.08.2022 reads as under:-
Issue No.1 Whether the Claimant is entitled to all or any of the Claims made by it in the Claim Statement?
The Claimant is engaged in the business of providing information technology enabled services including business process outsourcing services from its call centre from various locations in the country. In the year 2008 Claimant was in need of a premises for the purpose of its business operations and approached the Respondent for letting/leasing out their premises "Ajit Park" bearing address R.Sno. 15/5&6, Vazhudavur Road, Kurmampet, Pondicherry admeasuring a total covered area of 52,000 sq.ft consisting of ground floor, first floor and second floor, certain common external area with car parking in specified places. The demised premises was leased out for a period of 10 years vide Lease Deed 2008 dt.22/10/2018: As per _______________ https://www.mhc.tn.gov.in/judis Page No. 10 of 29 Arb.O.P.(Comm.Div.) No.434 of 2023 the Lease Deed the Claimant had to pay a monthly rent of Rs.5,00,000/- and interest free security deposit of RS.25,00,000/- EX-C-1 Lease Deed. As per Ex-C-2 vide Amendment Lease Agreement dt. 4/4/2013, the monthly rent payable was increased to Rs.5,29,000/-p.m and further vide Amendment dt. 21/3/2017, the interest free security deposit was enhanced to Rs.40,00,000/- and thereafter by mutual discussion the same was enhanced to Rs.42,00,000/-.
The Claimant had a right to terminate the Lease Agreement beyond the lock-in- period of 60 months as per clause 6(iv) of EX-C-1 Lease Deed and accordingly issued an advance 6 months notice of termination dt.26/2/2018 which expires on 25/8/2018. There were exchanges of emails vide Ex-C-6, Ex-C-7 between the Claimant and the Respondents with regard to refund of security deposit, electricity connection and purchase of assets. According to the Respondent the Claimant did not vacate and handover possession of the Lease Premises after the expiry of the notice period and therefore they are not entitled for refund of security deposit as claimed. Further the email correspondences have not been proved as per sec 65-B of the IT Act and therefore they are inadmissible in evidence.
On perusal of the Lease Deed by the Tribunal it is evident that as per Clause 2(ii) the Lessee has a right to hold on to the possession of the demised premises after the expiry of the notice period, without paying any monthly rent or any other sum till the security deposit is refunded by the Lessor. The Respondent had also remitted a sum of Rs.1,00,000/- on 5/4/2019 to the Claimant towards part payment and had requested for further time to make the balance payment. The Respondents contention that since vacant possession was hot delivered, therefore they are not entitled for refund is unsustainable for the aforesaid reasons. The Respondents have not filed any evidence to prove that the Claimant is not entitled for the refund of _______________ https://www.mhc.tn.gov.in/judis Page No. 11 of 29 Arb.O.P.(Comm.Div.) No.434 of 2023 Security Deposit until the Leased Premises is vacated and surrendered possession. Since both the parties have relied on the email correspondences at the time of cross examination and arguments, the Respondent submission that they are inadmissible in evidence is unsustainable. Further strict provision of CPC and Evidence Act are not applicable to Arbitration Proceedings.
The Tribunal therefore concludes that the Claimant is entitled for the refund of Security Deposit after adjustment of rental dues for the notice period, for the balance amount of Rs.20,15,298/ with interest @ 18% p.a from 25/8/2018 to till date of payment.
Issue No.2 & 3 -Prayer b and c With regard to the EB dues a sum of Rs.12,21,457/- to be paid by the Respondent to the Claimant and Rs.9,43,000/- paid as Security Deposit to EB by the Claimant at the time of obtaining HT connection.
According to the Claimant vide email Ex-C-6 dt.27/6/2018 and EX-C-7 dt 10/7/2018 had informed the Respondents for refund of EB Security Deposit sum of Rs.9,43,000/- The Respondent vide Ex-C-7 has informed the Claimant that the EB deposit will be transferred to them directly and they will do the needful for the same. In the same email the Respondent has agreed that till Aug 2018, the Claimant are responsible for the EB charges and thereafter from Sep 2018 the Respondent will pay the EB charges. The Claimant thereafter vide letter dt. Ex-C-8 has informed the EB about the cancellation of the Electricity connection in the demised premises. The EB vide letter dt 29/5/2019 has intimated the Claimant that there are EB charges due for a sum of Rs.12,21,457/- from Sep 18, to April 2019 and unless the said sum is paid they will not cancel the HT EB connection which stands in the name of the Claimant. Thereafter on 2/12/2019 EX-R-1 the EB has intimated that _______________ https://www.mhc.tn.gov.in/judis Page No. 12 of 29 Arb.O.P.(Comm.Div.) No.434 of 2023 the EB dues is been adjusted from the Security Deposit amount of Rs.13.03,200/- available with them and the balance amount to be refunded after adjustment is Rs.87,805/-. The Respondent contention is that both the aforesaid claims are not arbitrable dispute and does not fall within the scope of arbitration tribunal. Further it is only because the Claimant were in occupation of the Leased premises even after the expiry of notice of termination there has been electricity consumption in the premises which the EB has adjusted and they are therefore not liable for the same.
The Tribunal therefore concludes that both the above claims are arbitrable disputes and they fall within the scope of the Arbitrable Tribunal, as the Claims relating to the EB dues and connection are in respect of the Leased premises only and further the Lease Agreement clauses also has recitals towards the same.
With regard to claim in prayer b it is evident from the submissions and email correspondences that the Claimant has not paid the said sum of Rs.12.21.457/- as claimed by them towards the EB charges due from Sep 2018 to Apr 2019 after the expiry of the Lease Period and the same has been adjusted by the EB from the Security Deposit paid by the Claimant. Hence the Tribunal concludes that the Claimant is not entitled for the aforesaid from the Respondent and the claim is rejected herewith.
With regard to Claim in Prayer C- the Claimants are entitled for a sum of Rs.9,43,000/- being the sum paid towards security deposit to EB from the Respondent, as the EB had adjusted the same towards EB dues for the month from Sep 2018 to April 2019 which the Respondent had agreed to pay vide email dt.27/8/2018. Further if the Respondents had returned the security deposit the Claimant would have vacated the premises as per the terms of the Lease deed.
_______________ https://www.mhc.tn.gov.in/judis Page No. 13 of 29 Arb.O.P.(Comm.Div.) No.434 of 2023 The Tribunal therefore concludes that the Claimant is entitled for the aforesaid sum of Rs.9,43,000/-with interest @ 18%p.a.from 25/8/2018 to till date of payment from the Respondents.
The Claimant will not be entitled for a sum of Rs.14,16,000/- towards purchase of their assets from the Respondents as the same does not fall within the disputes arising out of the Lease agreement. The Claimant though have raised the dispute in the notice dt. 23/5/2019 and the Respondent have agreed to pay the said sum in the email dt.25/5/2018, as the same is beyond the scope of arbitrable dispute, the said claim is rejected herewith.
The Claimants are thus entitled for the refund of Rs.20,15,298/- towards security deposit and sum of Rs.9,43,000/- towards EB security deposit alone from the Respondents together with interest @18% p.a from 25/8/2018 to till date of payment.
With regard to the Counter Claim of the Respondents claiming for total restricted sum of Rs.1,00,00,000/- with interest @18% p.a from 25/8/2018 till realisation. Out of the aforesaid amount a sum of Rs.60,00,000/- is claimed towards loss of rental income for the second floor of the lease demised premises.
As per the Lease Agreement EX-C-2 dt. 2/10/2008 a total extent area of 52,000 sq.ft was the area leased out to the Claimant by the Respondent. The Lease Agreement clause (1) and Lessors'Covenant clause 8 (xv) clearly proves that the extent leased is including the 2nd floor which was under construction at the time of entering into the lease agreement. Hence the Respondents contention that the 2nd Floor was leased only subsequently at a discount of 20% less in the monthly rent as per the amended lease deed dt.
20/3/2017 is incorrect as the same is not found therein. The _______________ https://www.mhc.tn.gov.in/judis Page No. 14 of 29 Arb.O.P.(Comm.Div.) No.434 of 2023 Tribunal therefore concludes that the Respondents are not entitled for the aforesaid claim of sum of Rs.60,00,000/-. With regard to the use of parking area in the counter claim made by the Respondent for a sum of Rs.40,88,880/- from the Claimant.
As per the Lease agreement Ex-C1 Lessors's Covenant clause 8(vii) the Lessee_ shall be entitled to use the parking space in front of the building, on the drive way and in the back of the building as per the plan. Additional parking/utility space at the rear of the plot will be made available if Lessee so desires and makes a request in writing, through a separate lease agreement to be entered into later. Mutually agreed charges for such additional car parking and utility area will be paid by the Lessee to the designated party/parties.
According to the Respondents the Claimant did not pay parking rental charges for plot no.16,17 S.No.16/8 from 1/1/2009 to 25/8/2018 which amounts to Rs.40,88,880/-. On perusal of the aforesaid clause 8 (vii) it is evident that only for the plot's rear portion of the parking area if the Lessee needs it in addition, he has to make a request vide separate Lease Agreement for the same through mutually agreed charges for such additional car parking. In the Respondent Statement of Defence and Counter Claim in (iii) of it, it is not specifically mentioned that it's for the rear portion of the demised premises parking area used by the Claimant the counter claim is made. It is only stated that for plot no.16,17 in S.no.16/8 parking area that rental charges are claimed. At the time of cross examination of CW-1 (Q.No 128) Q.No.128- The reference to the rear of the plot for additional parking in Ex-C-2 Clause 8(vii) is the plot which is mentioned in Q.No.126.
_______________ https://www.mhc.tn.gov.in/judis Page No. 15 of 29 Arb.O.P.(Comm.Div.) No.434 of 2023 Ans: Since in clause 8(vii) rear of the plot is mentioned and the additional parking plot used by us was not in the rear side of the building, I am not certain.
From the above it is clear that the additional car park utilised by the Claimant in the demised premises was not the rear portion as mentioned in clause 8(vii) of the Lease Deed Ex-C-2 and also the Respondents pleadings are bereft of the specific additional cark park area used by the Claimant. The Respondents have not claimed for it even in the email correspondences after the expiry of the notice period. There was no mutual agreement with regard to the additional car utilised by the Claimant as mandated in the Lease Agreement.
The Tribunal therefore concludes that the Respondents are not entitled for the sum of Rs.40,88,880/- towards additional car park utilised by the Claimant. With regard to the expenses incurred for repairing of electricity, flooring and damages to the Leased Premises, the Respondents have a made a claim of Rs.53,86,305/-. The Respondents have made the above counter claim for the expenses spent towards repair of the building which was extensively damaged when the Claimant were in occupation of the Leased Premises. The Claimant had employed more than 1500 employees in the Leased premises during the term of the Lease Period. They were not ordinary wear and tear as alleged by the Claimant. Further there was no joint inspection of the Premises before the Claimant vacated after the expiry of the notice period and hence the Claimant is liable for the aforesaid sum.
According to the Claimants they were in occupation of the premises for 10yrs and they are only normal wear and _______________ https://www.mhc.tn.gov.in/judis Page No. 16 of 29 Arb.O.P.(Comm.Div.) No.434 of 2023 tear. The Claimants submitted that the delivery address of all the construction materials in EX-R 5, 6 and 7 are all the residential premises of the Respondents and it is not the address of the Leased premises. Further the Co name mentioned in the invoices from where the building construction materials were purchased are from the Respondents own Co, which has been admitted by him in his cross examination and therefore these invoices and receipts cannot be relied on by them. Further though the Lease agreement does not mandate any joint inspection before handing over of the vacant possession to the Respondents, however the same had been done which is proved vide emails. The Respondents also have not raised this issue earlier in any of the email correspondences. On perusal of the email correspondences between the Claimant and Respondents dt.25/5/2018 and 27/8/2018, 2/1/2019 it is evident that the Respondents nowhere has mentioned about the extensive damages caused to the Leased Premises and that the Claimant are responsible for the same either during the notice period or at the time when the Claimant vacated the Premises. The Respondents vide email dt. 25/5/2018 has informed that there will be no claim for any damages in future. The Photo series marked do not have the dates to show as to when they were taken. Further all the receipts/vouchers which has been filed by the Respondents Ex-R-1 to Ex-R-7 were much later to the Claimant vacating the premises during the covid lockdown. The Respondents have not established that the extensive damages were there at the time when the Claimant vacated the premises and that they are not ordinary wear and tear. The Claimant state that there was a joint inspection of the premises after the expiry of the notice period and the Respondents deny the same. The Respondents while admitting the payment to be made to the Claimant in the emails, have not mentioned anything about the extensive damage been caused to the Leased premises. On the contrary they have only mentioned in the email dt _______________ https://www.mhc.tn.gov.in/judis Page No. 17 of 29 Arb.O.P.(Comm.Div.) No.434 of 2023 25/5/2018, that there is no any other future claim towards any damages and has made a party payment of Rs.1,00,000/- to the Claimant.
From all the above it is clear and evident that the Respondents have not proved that the Claimant are responsible for the money spent towards repairing of the leased premises by them. The Tribunal therefore concludes that the Respondents are not entitled for the counter claim of Rs.53,86,305/- spent towards renovation of the building and other amenities.
Issue No.3 framed by the Tribunal:-
Whether the Claimant/Respondents are entitled to claim interest for the claim and counter claims made by them?
As per the Lease Agreement Ex-C-2 clause 2(ii), the Lessee shall be entitled for interest on the security deposit to be refunded by the Lessor, if the same was not refunded at the time of expiry of the notice period. Even assuming that the Claimant did not vacate the possession after the expiry of the notice period and they were holding on, they are entitled for interest as per the terms of the Lease Deed for the refund of security deposit sum of Rs20,15,298/-and Rs.9,43,000/- toward EB security deposit @18% interest p.a from 25/8/2018 to till date of payment.
Issue No.4 framed by the Tribunal:-
As per clause 16 of the Lease Agreement both the Lessor and the Lessee have agreed to share the cost of Arbitration proceedings equally and accordingly the cost has to be borne by the both the parties.
The Award has been prepared by this Tribunal and pronounced on this the 9th day of August 2022.” _______________ https://www.mhc.tn.gov.in/judis Page No. 18 of 29 Arb.O.P.(Comm.Div.) No.434 of 2023
18. The Impugned Award dated 09.08.2022 is challenged by the petitioner on the following grounds:-
i. The Tribunal failed to comply with the Rule 23 of Madras High Court Arbitration Proceedings Rule, 2017 which mandates the Tribunal to refer the dispute to mediation before opening the Seal of the Award and communicating the same to the parties, despite the Petitioners invoking the said rule in their Additional written Submission dated 13.06.2022; which vitiates the entire award;
ii. Email communications not admissible as evidences under S.65 B of the Indian Evidence Act;
iii. Claim for refund of Rs.9,43,000/- towards electricity security deposit by the respondent is not arbitrable dispute under clause 2(ii) of the lease agreement; iv. The Tribunal failed to notice that the respondent consumed electricity atleast till November 2018 (i.e., three months after the termination of the lease) and was disconnected only on 30.04.2019. The deduction / adjustment of security deposit by the department was for consumption of electricity and such consumption cannot be mulcted upon the petitioners; v. There was no agreement on payment of Interest on the award amount. Tribunal exceeded its jurisdiction. vi. The Tribunal is patently wrong in invoking class 2(ii) of the lease agreement.
vii.The Tribunal has ignored the claim of the petitioner for a sum of Rs.60,00,000/- towards rent payable for illegal occupation. (From 25.08.2018 to 31.12.2019).
19. The respondent has not filed any petition to modify or set aside the Award under Section 34 of the Arbitration and Conciliation Act, 1996, _______________ https://www.mhc.tn.gov.in/judis Page No. 19 of 29 Arb.O.P.(Comm.Div.) No.434 of 2023 in so far as other issues are concerned, rejecting rest of the claim of the respondent on the other issues.
20. I have considered the arguments advanced by the learned counsel for the petitioners and the learned counsel for the respondent. Scope of interference under section 34 of the Arbitration and Conciliation Act, 1996 is very limited.
21. This Court can neither sit as a court of appeal or re-appreciate the evidence placed before the Arbitral Tribunal or substitute the finding of the Arbitral Tribunal with its own conclusion on facts or evidence. In this connection the decision of the Honourable Supreme Court in The Project Director, NHAI V. M. Hakim, (2021) 9 SCC 1 is invited wherein it was held that the power to set aside an Arbitral Award under Section 34 of the Arbitration And Conciliation Act, 1996 does not include the authority to modify the award. It further held that an award can be 'set aside' only on limited grounds as specified in Section 34 of the Act and it is not an appellate provision. It further held that an application under Section 34 for setting aside an award does not entail any challenge on _______________ https://www.mhc.tn.gov.in/judis Page No. 20 of 29 Arb.O.P.(Comm.Div.) No.434 of 2023 merits to an award.
22. The Hon’ble Supreme Court in Ssangyong Engineering and Construction Co., Ltd vs. National Highway Authority of India, (2019) 15 SCC 131 has held that an award can be set aside on the ground of patent illegality under section 34 (2-A) of the Arbitration And Conciliation Act, 1996 only where the illegality in the award goes to the root of the matter. It further held that erroneous application of law by an Arbitral Tribunal or the reappreciation of evidence by the court under section 34 (2-A) of the Arbitration and Conciliation Act, 1996 is not available.
23. The Court held that the above ground is available only where the view taken by the Arbitral Tribunal is an impossible view while construing the contract between the parties or where the award of the tribunal lacks any reasons. The Court further held that an award can be set aside only if an arbitrator/arbitral tribunal decide(s) the question beyond the contract or beyond the terms of reference or if the finding arrived by the Arbitral Tribunal is based on no evidence or ignoring vital evidence or is based on documents taken as evidence without notice to the parties. _______________ https://www.mhc.tn.gov.in/judis Page No. 21 of 29 Arb.O.P.(Comm.Div.) No.434 of 2023
24. The Honourable Supreme Court in Patel Engineering Ltd Vs. NEEPCO, (2020) 7 SCC 167 held that patent illegality as a ground for setting aside an award is available only if the decision of the arbitrator is found to be perverse or so irrational that no reasonable person would have arrived at the same or the construction of the contract is such that no fair or reasonable person would take or that the view of the arbitrator is not even a possible view.
25. The Honourable Supreme Court in McDermott International Inc. v. Burn Standard Co. Ltd, (2006) 11 SCC 181 held that while interpreting the terms of a contract, the conduct of parties and correspondences exchanged would also be relevant factors and it is well within the arbitrator's jurisdiction to consider the same.
26. The Honourable Supreme Court in Sutlej Construction Ltd. v. UT of Chandigarh, (2018) 1 SCC 718, held that when the award is a reasoned one and the view taken is plausible, re-appreciation of evidence _______________ https://www.mhc.tn.gov.in/judis Page No. 22 of 29 Arb.O.P.(Comm.Div.) No.434 of 2023 is not allowed while dealing with the challenge to an award under Section 34 of the Arbitration And Conciliation Act, 1996 for setting aside an award. It further held that the proceedings challenging the award cannot be treated as a first appellate court against a decree passed by a trial court.
27. The Honourable Supreme Court in Sheladia Associates Inc. V. TN Road Sector Project II, Represented by its Project Director, 2019 SCC OnLine Mad 17883 reminded itself of the Hodgkinson principle which has been explained by the Honourable Supreme Court in the oft- quoted and celebrated Associate Builders Case being Associate Builders V. Delhi Development Authority, (2015) 3 SCC 49. It held that Hodgkinson principle in simple terms means that the Arbitral Tribunal is the best judge with regard to quality and quantity of evidence before it. It further held that if there is no infraction of Section 28(3) of the Arbitration And Conciliation Act, 1996 the question of challenge on the grounds of public policy does not arise.
28. In Photo production Ltd. vs. Securicor Transport Ltd., [1980] AC 827, it has been held as follows:-
“ A basic principle of the common law of contract, to which there are to exceptions that are relevant in the _______________ https://www.mhc.tn.gov.in/judis Page No. 23 of 29 Arb.O.P.(Comm.Div.) No.434 of 2023 instant case, is that parties to a contract are free to determine for themselves what primary obligations they will accept. They may state these in express words in the contract itself and, where they do, the statement is determinative; but in practice a commercial contract never states all the primary obligations of the parties in full; many are left to be incorporated by implication of law from the legal nature of the contract into which the parties are entering. But if the parties wish to reject or modify primary obligations which would otherwise be so incorporated, they are fully at liberty to do so by express words.
........ These secondary obligations of the contract breaker and any concomitant relief of the other party from his own primary obligations also arise by implication of law - generally common law, but sometimes statute, as in the case of codifying Statutes passed at the turn of the century, notably the Sale of Goods Act 1893. The contract, however, is just as much the source of secondary obligations as it is of primary obligations; and like primary obligations that are implied by law, secondary obligations too can be modified by agreement between the parties, although, for reasons to be mentioned later, they cannot, in my view, be totally excluded. In the instant case, the only secondary obligations and concomitant reliefs that are applicable arise by implication of the common law as modified by the express words of the contract. Every failure to perform a primary obligation is a breach of contract. The secondary obligation on the part of the contract breaker to which it gives rise by implication of the common law is to pay monetary compensation to the other party for the loss sustained by him in consequence of the breach; but, with two exceptions, the primary obligations of both parties so far as they have not yet been fully performed remain unchanged. This secondary obligation to pay compensation (damages) for non- performance of primary obligations I will call the _______________ https://www.mhc.tn.gov.in/judis Page No. 24 of 29 Arb.O.P.(Comm.Div.) No.434 of 2023 "general secondary obligation". It applies in the cases of the two exceptions as well.”
29. In Central Inland Water Transport Corporation Limited and Another vs. Brojo Nath Ganguly and Another, (1986) 3 SCC 156, it has been stated as follows:-
87. In Photo Production Ltd. v. Securicor Transport Ltd.[(1980) AC 827] a case before the Unfair Contract Terms Act, 1977, was enacted, the House of Lords upheld an exemption clause in a contract on the defendants' printed form containing standard conditions.
The decision appears to proceed on the ground that the parties were businessmen and did not possess unequal bargaining power. The House of Lords did not in that case reject the test of reasonableness or fairness of a clause in a contract where the parties are not equal in bargaining position. On the contrary, the speeches of Lord Wilberforce, Lord Diplock and Lord Scarman would seem to show that the House of Lords in a fit case would accept that test. Lord Wilberforce in his speech, after referring to the Unfair Contract Terms Act, 1977, said: (at p. 843) “This Act applies to consumer contracts and those based on standard terms and enables exception clauses to be applied with regard to what is just and reasonable. It is significant that Parliament refrained from legislating over the whole field of contract. After this Act, in commercial matters generally, when the parties are not of unequal bargaining power, and when risks are normally borne by insurance, not only is the case for judicial intervention undemonstrated, but there is everything to be said, and this seems to have been Parliament's intention, for leaving the parties free _______________ https://www.mhc.tn.gov.in/judis Page No. 25 of 29 Arb.O.P.(Comm.Div.) No.434 of 2023 to apportion the risks as they think fit and for respecting their decisions.” (emphasis supplied) Lord Diplock said (at pp. 850-51):
“Since the obligations implied by law in a commercial contract are those which, by judicial consensus over the years or by Parliament in passing a statute, have been regarded as obligations which a reasonable businessman would realise that he was accepting when he entered into a contract of a particular kind, the court's view of the reasonableness of any departure from the implied obligations which would be involved in construing the express words of an exclusion clause in one sense that they are capable of bearing rather than another, is a relevant consideration in deciding what meaning the words were intended by the parties to bear.” (emphasis supplied) Lord Scarman, while agreeing with Lord Wilberforce, described (at p. 853) the action out of which the appeal before the House had arisen as “a commercial dispute between parties well able to look after themselves”and then added: “In such a situation what the parties agreed (expressly or impliedly) is what matters; and the duty of the courts is to construe their contract according to its tenor”.
30. In this case, the petitioner has not been able to establish that the Award passed by the learned Arbitrator suffers from any perversity so as to warrant interference on the ground of patent illegality under Section 34(2-A) or warrants interference under Section 34(2)(b)(ii) read with _______________ https://www.mhc.tn.gov.in/judis Page No. 26 of 29 Arb.O.P.(Comm.Div.) No.434 of 2023 explanation 2 (ii) to the Arbitration and Conciliation Act, 1996.
31. The conclusion arrived by the learned Arbitrator is one of the possible conclusions that could be arrived by the learned Arbitrator while passing the Impugned Award.
32. The arguments that the Tribunal has not followed Rule 23 of the Madras High Court Arbitration Rules, 2017, which mandates the Arbitral Tribunal to refer to the dispute for mediation before opening the seal of the Award and communicating the same to the parties despite the petitioner invoking the said rule in their additional submissions on 13.06.2022, cannot be countenanced as it has been made after the hearing was complete. It is not mandatory.
33. As far as violation of Section 65B of the Indian Evidence Act, 1872 is concerned, the aforesaid provisions strictly applies to proceedings in a Court and not to proceeding before departmental authorities and the Arbitrator.
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34. In any event, as per Section 19(1) of the Arbitration and Conciliation Act, 1996, the Arbitral Tribunal is not governed by strict rules of evidence. Therefore, the Impugned Award dated 09.08.2022 does not call for any interference at the behest of the petitioner and is confirmed.
35. Accordingly, the Arbitration Original Petition stands dismissed. Consequently, A.No.1747 of 2023 is also closed. The parties are directed to bear their own costs.
04.06.2024 Index: Yes/ No Neutral Citation: Yes / No Speaking Order / Non-Speaking Order RGM/JEN C.SARAVANAN, J.
RGM/JEN _______________ https://www.mhc.tn.gov.in/judis Page No. 28 of 29 Arb.O.P.(Comm.Div.) No.434 of 2023 Pre-Delivery Order made in Arb.O.P(Com.Div.) No.434 of 2023 and A.No.1747 of 2023 04.06.2024 _______________ https://www.mhc.tn.gov.in/judis Page No. 29 of 29