Bombay High Court
John Distilleries Pvt Ltd vs The Brihan Maharashtra Sugar Syndicate ... on 28 February, 2023
Author: K. R. Shriram
Bench: K. R. Shriram
Digitally
signed by
GAURI AMIT 1/9 906.APP-81-2022.doc
GAURI GAEKWAD
AMIT Date:
GAEKWAD 2023.03.02 IN THE HIGH COURT OF JUDICATURE AT BOMBAY
10:34:38 ORDINARY ORIGINAL CIVIL JURISDICTION
+0530
APPEAL NO.81 OF 2022
IN
ARBITRATION PETITION NO.874 OF 2015
John Distilleries Pvt. Ltd. .....Appellant
Vs.
The Brihan Maharashtra Sugar Syndicate Ltd. .....Respondent
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Mr. Aditya Bapat i/b. Mr. Nachiket V. Khaladkar for appellant.
None for respondent.
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CORAM : K. R. SHRIRAM &
RAJESH S. PATIL, JJ.
DATED : 28th FEBRUARY 2023 P.C. :
1 This is an appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (the Act) impugning an order and judgment dated 14th January 2019 passed by the learned Single Judge of this Court under Section 34 of the Act. The learned Single Judge had dismissed the petition that appellant had filed.
2 Before we proceed further, it will be apposite to reproduced paragraphs 16 to 18 of the judgment of the Apex Court in UHL Power Company Ltd. V/s. The State Of Himachal Pradesh1 which read as under :
16. As it is, the jurisdiction conferred on Courts under Section 34 of the Arbitration Act is fairly narrow, when it comes to the scope of an appeal under Section 37 of the Arbitration Act, the jurisdiction of an Appellate Court in examining an order, setting aside or refusing to set aside an award, is all the more circumscribed. In MMTC Limited v. Vedanta Limited 7, the reasons for vesting such a limited jurisdiction on the High
1. 2022 (4) SCC 116 Gauri Gaekwad 2/9 906.APP-81-2022.doc Court in exercise of powers under Section 34 of the Arbitration Act has been explained in the following words :
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 [Associated Provincial Picture Houses v. Wednesbury Corpn., (1948) 1 KB 223 (CA)] 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.
17. A similar view, as stated above, has been taken by this Court in K. Sugumar v. Hindustan Petroleum Corporation Ltd.8, where it has been observed as follows :
2. The contours of the power of the Court under Section 34 of the Act are too well established to require any reiteration. Even a bare reading of Section 34 of the Act indicates the highly constricted power of the civil court to interfere with an arbitral award. The reason for this is obvious. When parties have chosen to avail an alternate mechanism for dispute resolution, they must be left to reconcile themselves to the wisdom of the decision of the arbitrator and the role of the court should be restricted to the bare minimum.
Interference will be justified only in cases of commission of misconduct by the arbitrator which can find manifestation in different forms including exercise of legal perversity by the arbitrator.
18. It has also been held time and again by this Court that if there are two plausible interpretations of the terms and conditions of the contract, then no fault can be found, if the learned Arbitrator proceeds to accept one interpretation as against the other. In Dyna Technologies (P) Ltd. V. Crompton Greaves Ltd., the limitations on the Court while exercising powers under Section 34 of the Arbitration Act has been Gauri Gaekwad 3/9 906.APP-81-2022.doc highlighted thus :
24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various Courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the Court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction.
The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the Courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated." 3 We shall, therefore, consider this appeal keeping in mind that the jurisdiction conferred on Courts under Section 34 of the Act is fairly narrow and when it comes to the scope of an appeal under Section 37 of the Act, the jurisdiction of an Appellate Court in examining an order, setting aside or refusing to set aside an award, is all the more circumscribed. 4 Appellant is engaged in the business of manufacturing, blending and bottling of India Made Foreign Liquor (IMFL). On or about 1st March 2007 an agreement was entered into between appellant and respondent by which the services of respondent was engaged for manufacture, on priority basis, of various liquor products of appellant in the State of Maharashtra. Respondent, who is not present before us, was the claimant in the arbitral proceedings.
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5 The agreement provided for matters such as specifications of
the products as well as names of the brand, products covered under the agreement for sharing of revenues and sums payable by appellant to respondent for manufacture of the products. The agreement provided for payment of Rs.30/- per case of product (excluding 90/60 ml size), inter alia, for the brand "Original Choice Whisky". It was respondent's case before the Arbitral Tribunal that in a meeting held on 29 th July 2008 at Hotel Le Meridian, Pune, between the representatives of the parties, it was agreed that these bottling charges would be increased by Rs.10/- per case. Respondent claimed to have sent an email alongwith a letter requesting appellant to confirm the minutes of meeting. Though there was no response in writing from appellant, with consent of appellant respondent went on adjusting from a jointly operated account payments towards bottling charges at the rate of Rs.40/- per case, i.e., with an addition of Rs.10/- per case. It was appellant's case that as of November 2009 a sum of Rs.40,46,165.87 was due and payable by appellant to respondent after adjustment of payments as noted above. Correspondence was exchanged between the parties and it was respondent's case that at a meeting held on 22nd January 2009 at respondent's office at Pune, appellant's representative confirmed the amount of Rs.40,46,165.87 as due and payable by appellant to respondent and agreed to pay the same in four installments. As no payment was made, a notice for recovery of the amount was sent and the dispute was referred to arbitration.
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6 The Arbitral Tribunal held that respondent had proved the
agreement dated 1st March 2007 as also its variation on 29 th July 2008 by which bottling charges were revised from Rs.30/- per case to Rs.40/- per case. The learned Arbitrator in the award has held that respondent's witness had deposed that there was a meeting held at Le Meridian, Pune on 29th July 2008 with regard to revision of the prices of bottling charges and that the meeting was attended by him and other persons. The witness has also deposed that Chairman of appellant orally agreed for revision of the bottling charges. The learned Arbitrator has held that respondent have proved that a meeting was held on 29 th July 2008 and appellant had agreed for revision of the prices of bottling charges from Rs.30/- to Rs.40/- per case. The learned Arbitrator has also observed that appellant did not examine their Chairman or Director or any other person who attended the meeting and the learned Arbitrator correctly drew adverse inference against appellant. The learned Arbitrator, therefore, awarded this amount to respondent together with interest by holding that appellant failed to pay the agreed amount and as a result, awarded a sum of Rs.64,08,685.82 comprising of principal amount of Rs.40,46,165.87 and balance interest. That was the award which was challenged in the petition under Section 34 of the Act. This view of the learned Arbitrator has been accepted by the learned Single Judge and we agree with the learned Single Judge. Paragraphs 4 to 6 of the impugned judgment read as under :
4. The learned arbitrator inter alia came to a finding that the Gauri Gaekwad 6/9 906.APP-81-2022.doc oral agreement between the parties in the meeting held at Hotel Le Meridian, Pune on 29 July 2008 between senior executives of the parties, including the Chairman of the Petitioner, was proved by oral and documentary evidence led by the parties. The arbitrator held that the Respondent's witness (CW-3) had deposed to this meeting, which was personally attended by him along with others. The learned arbitrator believed in his testimony and held that in the meeting, the Petitioner had agreed to a revision of bottling charges. The learned arbitrator observed that the Petitioner, for its part, did not examine its Chairman or its Director, both of whom were present in the meeting held on 29 July 2008 and that, in the premises, an adverse inference could be drawn against it. The arbitrator also observed that the testimony of the Petitioner's witness (R.W.1) showed that from 1 August 2008 to 17 December 2009, the Petitioner had never objected to the Respondent raising bills at the enhanced rate as also debiting the designated bank account towards such additional bottling charges. The learned arbitrator noted that this account was being operated jointly by the representatives of the parties and it was improbable that the Petitioner did not know about the debits in the account towards bottling charges at revised rate. The learned arbitrator, in the premises, held that there was a consensus between the parties insofar as the revision of the bottling charges was concerned.
5. The learned arbitrator's view in this behalf is clearly a possible view, which is supported by evidence. It does not suggest a finding based on no evidence. As long as there is some evidence to sustain a finding, the challenge court under Section 34 of the Act does not interfere with the award.
Sufficiency of evidence is something for the arbitral forum alone to rule on.
6. Learned counsel for the Petitioner, however, relies on the principle of law discussed in the English judgment in Rock Advertising Limited (supra). Learned Counsel submits that 'no oral modification' clauses, such as clause 32 in the present agreement, which are commonly included in written agreements, are legally enforceable; the parties must be held to their bargain as to the form of variation agreed to by them in the original contract. In Rock Advertising Limited, learned Judges of the Supreme Court of UK appear to have considered the subject as a matter in principle. The question framed was whether a contractual provision requiring specified formalities to be observed for a variation should be given effect to as a matter of law or not. The learned Judges held that the principle of "party autonomy" could not be extended so as to allow the parties to override their intention originally expressed in the contract; Party autonomy operated upto the point when the contract was made, but thereafter only to the extent that the contract allowed. The learned Judges referred Gauri Gaekwad 7/9 906.APP-81-2022.doc to in this behalf the advantages of the common law's flexibility about formal validity and yet held that 'no oral modification' clauses were required to be honored, discussing the rationale behind including such clauses. The learned Judges held that there was no mischief in such 'no oral modification' clauses nor did they frustrate or contravene any policy of the law. It is one thing to say that 'no oral modification' clause, such as what we are concerned with in the present case, is by itself enforceable and should be ordinarily honoured, but quite another to say that the parties having not only made a variation in a manner different from the one agreed to, but having acted in pursuance of such variation, the party objecting to such variation later would be precluded by its conduct from relaying on a 'no oral modification' clause included in the original contract. There is no contradiction between the two propositions; both may well hold good. (In our case, the oral agreement was consistently acted upon by the parties for a long period of time). Besides, whatever view the court may take of a no oral modification clause generally or in the particular case we are concerned with, the mandate of the challenge court under Section 34 of the Act is to see whether the view taken by the arbitrator, even if it be on a question of law or its application to the facts of the case, is a possible view or view which a fair and judiciously minded person could well take. As the evidence before the arbitrator stood, which is briefly referred to above, the view taken by the learned arbitrator on this point could well be said to be a possible view. It is supported by evidence; it does not take into account any irrelevant or non-germane material or disregard any relevant or germane material. The view must in that case pass muster under Section 34 of the Act.
7 Mr. Bapat also made submissions on the second ground of attack reproduced in paragraph 7 of the impugned judgment and submitted that there was lack of evidence of any damage on account of TCS and VAT dues and, therefore, the Arbitral Tribunal could not have awarded the amount of Rs.40,46,165.87. The learned Single Judge rejected these submissions, and rightly so, because what respondent claimed was the amount of Rs.40,46,165.87 majority of which would be representing the TCS and VAT dues. The learned Arbitrator has obviously considered the Gauri Gaekwad 8/9 906.APP-81-2022.doc whole claim and in this behalf, the evidence of alteration of the agreement on 29th July 2008 and debiting of the bank account without any demur on the part of appellant towards additional bottling charges, the minutes of meeting between the parties held on 22 nd January 2010 and correspondence addressed by respondent to appellant in pursuance thereof to arrive at a conclusion on the quantum of dues payable by appellant. The learned Single Judge has correctly concluded that there was enough material before the learned Arbitrator to arrive at his finding on the quantum of dues and it is not as though the finding was without evidence. 8 A bare reading of Section 34 and 37 of the Act indicates the highly constricted power of the Civil Court to interfere with an arbitral award. The reason for this is obvious. When parties have chosen to avail an alternate mechanism for dispute resolution, they must be left to reconcile themselves to the wisdom of the decision of the Arbitrator and the role of the Court should be restricted to the bare minimum. Interference will be justified only in cases of commission of misconduct by the Arbitrator which can find manifestation in different forms including exercise of legal perversity by the Arbitrator. It is also settled law where if there are two plausible interpretations, then no fault can be found and the learned Arbitrator proceeds to accept one interpretation as against the other. 9 We find no merit in the appeal. Appeal accordingly dismissed with costs in the sum of Rs.50,000/-. This amount to be paid to PM Cares Gauri Gaekwad 9/9 906.APP-81-2022.doc Fund as donation and compliance affidavit to be filed within two weeks from today. The account details are as under :
Name of the Account : PM CARES Account Number : 60355358964 IFSC : MAHB0001160 Branch : UPSC - New Delhi
10 Mr. Bapat is seeking stay of the execution of the award. Stay rejected.
(RAJESH S. PATIL, J.) (K. R. SHRIRAM, J.) Gauri Gaekwad