Delhi District Court
Nitika Duggal vs Aakash Educational Services Limited on 18 November, 2021
DLCT010000292020
IN THE COURT OF DISTRICT JUDGE (COMMERCIAL
COURT)-01,
CENTRAL, TIS HAZARI COURTS, DELHI
PRESIDED BY: MR. BHARAT PARASHAR
IN THE MATTER OF:
OMP (COMM) NO. 06/2020
NITIKA DUGGAL
D/o Sh. KESHAV DUGGAL
R/o 176, GHALIB APARTMENTS, PITAMPURA,
NEW DELHI-110034
...OBJECTOR/PETITIONER
VERSUS
AAKASH EDUCATIONAL SERVICES LIMITED
REGD. OFFICE: AAKASH TOWER, PLOT NO. 8,
PUSA ROAD, KAROL BAGH,
NEW DELHI-110005
.........RESPONDENT
Page No. 1 of 48
DATE OF INSTITUTION : 08.01.2020
DATE OF RESERVING JUDGMENT : 10.11.2021
DATE OF PRONOUNCEMENT OF : 18.11.2021
JUDGMENT
JUDGEMENT
1. Petitioner Nitika Duggal has filed the present petition under Section 34 of Arbitration & Conciliation Act, 1996 (herein after referred to as "Arbitration Act") against Aakash Educational Services Limited (hereinafter referred to as AESL) seeking setting aside of arbitral award dated 26.08.2019 passed by Ld. Sole Arbitrator Sh. S.C. Rajan.
2. Briefly stated the facts as stands emanated from the petition are as under: -
Respondent company AESL is stated to be engaged in the business of running coaching institute through its various branches/centers and also through live online classes, imparting coaching to students preparing for various competitive examinations. Petitioner Nitika Duggal joined the services of respondent company as an Assistant Professor Grade -1 in the Chemistry Department on 17.07.2015. At the time of joining the service with AESL, she entered into a bond to serve the respondent company for a period of two years. The said period was to thus expire on 16.07.2017. At the time of joining her services the petitioner also admittedly signed a document titled "Service Rules Manual for Faculty Members" as the same was Page No. 2 of 48 containing various terms and conditions regulating her services with the respondent company.
3. It has been however stated that the said "Service Rules Manual" was drafted in such a manner that it only favoured the respondent company by imposing harsh, unfair and unjust conditions on the petitioner. It has been further stated that the terms of contract of service were also grossly unreasonable, arbitrary and unfair towards the petitioners. It has been further stated that the said "Service Rules Manual" also provided for auto renewal of contract of service for another period of two years without seeking any fresh consent of the faculty members. The said condition is thus stated to be against the public policy of India.
4. It has been further stated that the petitioner remained committed to her work and served the respondent company for around two years and nine months. However due to the hostile and unstable work environment wherein petitioner claimed to have been transferred from one branch to another on multiple occasions, she finally sent her resignation to the Assistant Director Digital Team at Gurgaon office via e-mail on 16.04.2018. However, when no reply was received by the petitioner, so she sent another e-mail dated 24.04.2018 for reconsideration of her resignation request. On this occasion, the respondent company vide e-mail dated 25.04.2018 however refused the resignation request of the petitioner.
Page No. 3 of 485. A number of other circumstances relating to the working environment in the respondent company have also been mentioned in extensive details in the petition beside also mentioning a number of personal circumstances including death of her grandmother and accident of her mother which forced the petitioner to resign from the services of respondent company.
6. It has been further stated that the petitioner was even told by the officers of HR Department of respondent company that as per the policy of the respondent company and as also contained in the "Service Rules Manual for faculty members", an employee could resign only in the month of December and that too from the date 1st to 15th. She was also told that in case she resigns at any other time during the year, then she will forfeit her "sincerity fund".
7. It has been further stated that subsequent to sending her resignation via e-mail dated 16.04.2018, the petitioner was served with a "desertion cum demand" letter dated 04.05.2018 by the respondent company demanding a sum of Rs. 13,52,501/- to be remitted by way of a demand draft within 7 working days. Subsequently vide letter dated 25.09.2018, the petitioner was also informed by the respondent company about the appointment of Sh. S.C. Rajan as a sole Arbitrator to adjudicate the disputes between the petitioner and the respondent company. It has been thus stated that the petitioner was not at all consulted in the appointment of Ld. Sole Arbitrator who in fact was unilaterally appointed by the Chairman AESL.
Page No. 4 of 488. It has been further stated that the Ld. Sole Arbitrator thereafter initiated the arbitration proceedings and conducted the entire proceedings in an utterly unfair and arbitrary manner without following the basic procedure of rule of law. Ld. Arbitrator finally passed an award dated 26.08.2019 in favour of respondent company and against the petitioner without recording the objections raised by the petitioner and also failed to appreciate the evidence put forth by the petitioner.
9. The award has thus been challenged primarily on the following grounds: -
The entire arbitration proceedings are stated to have been carried out in a mechanical manner and in support thereof number of glaring self-contradictory mistakes have been pointed out in the proceedings as well as in the award passed by the Ld. Arbitrator.
The award is stated to be bad in law as the Ld. Sole Arbitrator was not only unilaterally nominated and appointed by the managing director of the respondent company but also without any consent of the petitioner and thus the very appointment of Ld. Arbitrator is stated to be bad in law.
That the Ld. Arbitrator failed to give any cogent reasoning or conclusive finding while allowing the claim of respondent company.
The award is stated to be unreasoned, non-speaking and without application of mind and thereby patently illegal Page No. 5 of 48 and against the settled principles of natural justice. The computation carried out in the award is also stated to be without any reasoning and legal basis. The Ld. Arbitrator is stated to have not considered the cross examination carried out by the petitioner or the documentary evidence placed on record including her other claims.
The grant of interest @ 8 % per annum is also stated to be patently illegally and without any legal basis. The award of cost is also stated to be completely arbitrary and awarded with a biased mind.
The award is thus stated to have been passed in a biased and arbitrary manner so as to shock the conscious of the court.
For all the aforesaid reasons/grounds the award is stated to be bad in law and has thus been prayed to be set aside.
Proceedings before the Court
10. After notice of the petition was issued to the respondent company then a detailed reply thereto was filed wherein the various allegations levelled by the petitioner regarding the hostile or unstable working conditions in respondent company or the award having been passed with a biased mind or it being without any reasons, were vehemently denied.
11. It was however also stated that the present petition having been filed beyond the period of three months from the date of Page No. 6 of 48 receipt of arbitral award by the petitioner is clearly barred by limitation as provided under Section 34 of the Arbitration and Conciliation Act, 1996.
12. The detailed response submitted to the various averments made in the petition, shall be however referred to at a later stage of the present order when the various issues/grounds raised by the petitioner shall be discussed in detail.
13. In the meantime, the petitioner however also filed a rejoinder to her petition. During the course of proceedings, as above, Arbitral record was also received.
14. I have heard the arguments and carefully perused the record.
Appreciation of Arguments
15. Before proceeding to deal with various grounds on which the petitioner has sought to challenge the arbitral award, it will be appropriate to first decide the preliminary objection raised by the respondent company that the present petition is barred by limitation.
WHETHER THE PETITION IS BARRED BY LIMITATION
16. Admittedly the present petition was filed on 08.01.2020 and as mentioned in the petition itself, the arbitral award dated 26.08.2019 was received by the petitioner on 19.09.2019. Thus, Page No. 7 of 48 as the petition has been filed 18 days after the expiry of three months period from the date of receiving the award so the petitioner also filed an application U/s 34(3) of the Arbitration Act seeking condonation of said delay of 18 days in filing the petition.
17. Certainly, as per Section 34(3) of the Arbitration Act, 1996 an application for setting aside an arbitral award need to be made within three months from the date on which the party making the application has received the arbitral award. However, proviso to the section also provides that if a Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months then it may entertain the application within a further period of 30 days, but not thereafter.
18. Thus, as the present petition though has been filed after expiry of a period of three months from the date of receipt of arbitral award by the petitioner but the same has certainly been filed within a period of next thirty days. Accordingly, the question before the Court is whether the petitioner was prevented by sufficient cause from filing the present petition beyond the period of three months, or not.
19. In the application seeking condonation of delay, it has been submitted by Ld. Counsel for petitioner that when the award was received at the residence of petitioner then she was out of town and was traveling for a considerable period. It has been further Page No. 8 of 48 stated that subsequently when she intended to file the petition to challenge the impugned award then for certain reasons there was a change of counsel and it accordingly took some time for the petitioner to collect and organize the relevant documents to handover to a new counsel. It has thus been submitted that in all the aforesaid process a delay of 18 days took place beyond the period of three months.
20. On the other hand, Ld. Counsel for respondent has strongly opposed the application stating that the petitioner has miserably failed to show any sufficient cause which prevented her from filing the petition within the initial period of three months. In support of his arguments, he relied upon the judgment of Hon'ble Delhi High Court in M/S Chintels India Limited vs M/S Bhayana Builders Pvt. Ltd., OMP. COMM. 444/2019 decided on 04.06.2020 submitting that the Hon'ble Court in the said case rejected the application for condonation of delay of the Petitioner observing that the reason of change in counsel does not meet the strict requirement of 'sufficient cause' under proviso to Section 34(3) of the Act so as to enable the court to exercise its discretion.
21. Ld. Counsel for respondent also placed reliance upon the case Simplex Infrastructure Vs. Union of India, (2019) 2 SCC 455 submitting that in the said case also Hon'ble Apex Court while reiterating the earlier principles of strictly following the time line provided under the Act, again observed that an Page No. 9 of 48 application to set aside the arbitral award must be made within the strict statutory time line. It was also observed by Hon'ble Court that administrative difficulties cannot be a valid reason for condoning the delay in challenging an arbitral award.
22. Ld. Counsel for respondent also referred to the observations of Hon'ble High Court of Delhi in the case Delhi Development Authority vs. Durga Construction, 2013 SCC OnLine Del 4451 wherein it was held as under:
"Although, the courts would have the jurisdiction to condone the delay, the approach in exercising such jurisdiction cannot be liberal and the conduct of the applicant will have to be tested on the anvil of whether the applicant acted with due diligence and dispatch. The applicant would have to show that the delay was on account of reasons beyond the control of the applicant and could not be avoided despite all possible efforts by the applicant."
23. Petitioner however subsequently filed a rejoinder to her application wherein she placed on record certain documents to show that during the relevant period when the award in question was delivered at her residence then she was out of town and it was only when she returned back that she took the necessary steps for filing the present petition for challenging the impugned award under Section 34 of Arbitration Act.
24. Ld. Counsel for petitioner also submitted that the case law relied upon by Ld. Counsel for respondent does not apply in the Page No. 10 of 48 facts and circumstances of the present case as in M/s Chintels India Ltd. case (Supra), the Hon'ble High Court was primarily dealing with the issue of delay in refiling of the petition and also the fact that no application for seeking condonation of delay was even filed at the time of initial filing of the petition.
25. It has also been submitted that even otherwise the delay being dealt with by the Hon'ble Court in the other cases relied upon by Ld. Counsel for respondent was for a period of 514 days, whereas in the present case the delay is only of 18 days and that too within the outer limit of 120 days from the date of receiving the award.
My Discussion
26. Certainly, there cannot be any dispute with the proposition as laid down in the case law relied upon by Ld. Counsel for respondent that condonation of delay in filing a petition under Section 34 of the Arbitration Act beyond the period of initial three months from the date of receiving the award ought not to be condoned on the mere asking of petitioner, unless a sufficient cause has been shown by the petitioner.
27. It is also true that the Court lacks any power to condone delay in filing an application under Section 34 of the Arbitration Act, if the same is beyond a period of thirty days after the expiry of initial period of three months from the date of receiving the award.
28. In these circumstances, it is thus required to be seen whether sufficient cause has been put forth by the petitioner Page No. 11 of 48 which may warrant condonation of delay of 18 days in filing the present petition beyond the initial period of three months or not.
29. No doubt, the initial application moved for seeking condonation of delay was sketchy in nature but the rejoinder subsequently filed sufficiently explains the reasons for which the present petition could not be filed within the initial period of three months from the date of receiving the award at the residence of petitioner.
30. In fact, from the nature of proceedings as were conducted by Ld. Arbitrator and as I shall be discussing in detail at a later stage of the present order, there was no way for the petitioner to anticipate the likely date when the award in the matter shall be passed. Moreover, petitioner has claimed that during the relevant period she was working at Bangalore and thus after conclusion of arguments before the Ld. Arbitral tribunal, she could not have been expected to be available at her home simply to wait for the passing of award and to receive a copy thereof. The documents of her travel placed on record by her also support her claim that during the relevant period she was not in Delhi. The documents placed on record by the petitioner in this regard have also not been disputed by the respondent.
31. Furthermore, I also find myself in agreement with the submissions of Ld. Counsel for petitioner that the case law relied upon by Ld. Counsel for respondent does not apply to the facts and circumstances of the present case. In the M/S Chintels India Limited case (Supra) as rightly pointed out by Ld. Counsel for petitioner, the Hon'ble Court was faced with a situation where Page No. 12 of 48 petitioner not only failed to file any application for seeking condonation of delay at the time of initial filing of the petition itself but even subsequent thereto there was a delay of 28 days in refiling the petition and no plausible reason much less sufficient reason could be put forth by the petitioner to explain the said delay. Similarly, in the other cases i.e. Simplex Infrastructure case (Supra) and the case DDA Vs. Durga Construction (Supra) the delay was much beyond the maximum permissible limit of 120 days as contrasted to from the present case wherein the petition has been moved within the outer limit of 120 days of receiving the award.
32. In view of my aforesaid discussion, I am thus of the considered opinion that the petitioner has been able to establish that there was sufficient cause which prevented her from filing the present petition within the initial period of three months from the date of receiving the award. In other words, she has been able to sufficiently explain the delay of 18 days in filing the present petition.
The objection of Ld. Counsel for respondent company that the present petition is barred by limitation thus does not hold ground and is accordingly rejected.
33. However, before proceeding to discuss the various other issues as have been raised in the petition, it will be also appropriate to briefly discuss the scope of section 34 Arbitration Act, especially in the light of arguments raised in this regard by Ld. Counsel for respondent.
Page No. 13 of 48Limited scope of interference u/s 34 Arbitration Act
34. It has been submitted by Ld counsel for respondent that the Hon'ble Supreme Court of India in umpteen number of cases has time and again repeated that the scope of judicial interference in deciding a petition u/s 34 Arbitration Act is very narrow and the Court must take the approach towards protecting the Award rather than setting it aside and that the Courts must respect the finality of award and party autonomy. Reference in this regard has been made to the following observations of the Hon'ble Court as were made in the case Dyna Technologies Pvt. Ltd. Vs. Crompton Greaves Ltd.; 2019 SCC Online SC 1656.
"26. There is no dispute that Section 34 of the Ar- bitration 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 interpreta- tion 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 fo- rum 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 resolu- tion would stand frustrated.
27. Moreover, umpteen number of judgments of this Court have categorically held that the Courts Page No. 14 of 48 should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The Courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays per- versity unpardonable under Section 34 of the Arbi- tration Act."
35. Reference was also made to the case State Trading Corporation of India Limited vs. TOEPFER International Asia Limited; (2014) SCC Online Del 3426 wherein it was observed in para 18 as under:
18. If we were to start analyzing the contract between the parties and interpreting the terms and conditions thereof and which will necessarily have to be in the light of the contemporaneous conduct of the parties, it will be nothing else than sitting in appeal over the arbitral award and which is not permissible.
36. The following observations of Hon'ble High Court of Delhi in the case Mahanagar Telecom Nigam Ltd. v/s M/S Gaurav Enterprises; FAO (OS) (Comm) 175 of 2018 on 25.09.2018 were also referred to:
"18. Also, the scope of this court is limited with re- gard to Section 34 and 37 of The Arbitration and Conciliation Act, 1996. The position of law stands crystallized today, that findings, of fact as well as of law, of the arbitrator/Arbitral Tribunal are ordi- narily not amenable to interference either under Sections 34 or Section 37 of the Act. The scope of interference is only where the finding of the tri- bunal is either contrary to the terms of the con- tract between the parties, or, ex facie, perverse, that interference, by this Court, is absolutely nec- essary. The Arbitrator/ Tribunal is the final arbiter Page No. 15 of 48 on facts as well as in law, and even errors, factual or legal, which stop short of perversity, do not merit interference under Sections 34 or 37 of the Act..."
37. It was also submitted that Explanation 2 to Section 34(2) itself provides that the Courts shall not entail a review on the merits of dispute.
38. While submitting that this court cannot look into the merits/demerits of the claims of the two parties, ld. Counsel for respondent also laid great emphasis on the nature of work/business being undertaken by the respondent company. It was submitted that the respondent is an educational institute and is engaged in the service of providing quality education to the students aspiring for various competitive examinations, which are conducted on yearly basis. The respondent institute was stated to be having one of the largest student base in India with students from far-flung areas of the country approaching the respondent institute to obtain quality education. The remuneration paid by the respondent was also stated to be one of the best in the industry. It was submitted that the respondent engages specialized faculties and pay them handsome salary. On the same pattern the salary of the petitioner was stated to be Rs.2,04,300/- (Rupees Two Lakhs Four Thousand Three Hundred Only) per month.
39. It has thus been submitted that immediate resignation of any member of the faculty during the mid-session, without even serving the notice period, disastrously affects the interest of Page No. 16 of 48 innocent students as the respondent has to arrange another qualified faculty member for the same which naturally takes some time and students are largely affected. Thus, in order to protect the interest of the students, it was submitted that the respondent institute had earlier imposed the condition that a faculty member can resign only during a particular window which would be co-terminus with the academic session.
40. It was thus submitted that in the case in hand, the petitioner had left the respondent institute with immediate effect from 16.04.2018 without any prior notice and without even serving the notice period of three months. Immediate resignation of the petitioner was thus stated to have caused massive loss to the respondent in terms of education to the students and reputation of the respondent.
41. It has also been submitted on behalf of the respondent that though the petitioner has raised an argument during oral submissions that Section 34(2)(a)(ii) mentions about the term Arbitration Agreement, hence, this Court has jurisdiction to interfere with the Contract but it was submitted that such an argument of petitioner is totally misconceived as Arbitration Agreement as defined under section 7 of the Act merely means an Arbitration Clause in an agreement or a separate Arbitration Agreement and not the entire contract between the parties.
My Discussion
42. Certainly, there cannot be any dispute with the well settled position of law as put forth by Ld. Counsel for respondent that Page No. 17 of 48 the court has limited jurisdiction U/s 34 Arbitration Act to interfere with an arbitral award and the said power can be exercised only if any of the grounds mentioned in the section are found to be existing.
43. However, I may state that in the present proceedings this court is not required to examine the entire "Service Rules Manual", being in consonance with law or whether the business model of respondent company necessitated the same or not. It is also equally true that petitioner did not raise any eyebrow during the period of two years nine months when she continued her employment with the respondent company and it is only thereafter when petitioner chose to resign from the services that the disputes arose and the various clauses of the manual have been challenged. Thus, this Court is neither required to examine the entire "Service Rules Manual" of respondent company which govern the services of its faculty members nor the circumstances which compelled the petitioner to resign from the services of respondent company. However, what is required to be seen is whether the impugned arbitral award can withstand the challenge under Section 34 of Arbitration and Conciliation Act,1996 or not. It is in that context only that the proceedings conducted by Ld. Arbitrator or the award finally passed is to be seen.
44. At the same time this Court is also not required to look into as to whether the terms and conditions so laid down in the "Service Rules Manual" for regulating the services of its employees were justified or were necessitated by the business model of respondent company, or not, but what is actually Page No. 18 of 48 required to be seen is whether any such terms and conditions are contrary to the public policy of India or not.
45. Thus, with the aforesaid narrow scope of Section 34 Arbitration Act, that I propose to examine the present petition as to whether the grounds/issues raised therein warrants setting aside of the impugned arbitral award or not.
RAISING DOUBTS AS TO THE INDEPENDENCE OF ARBITRATOR
46. While referring to the nature of declaration made by the Ld. Arbitrator u/s 12 of the Arbitration Act, 1996, Ld. Counsel for petitioner has raised doubts about the independence of the arbitrator stating that his appointment in the instant case was clearly hit by Rule 22 and 24 of the Fifth Schedule of the (Amendment) Act, 2015. It was submitted that the Ld. Arbitrator has served the respondent company in a number of matters and even a list of eleven such cases has been submitted wherein Sh. S C Rajan had acted as an arbitrator on behalf of respondent company in almost similar disputes with other faculty members. It was also submitted that from a bare perusal of the proceedings conducted by the Ld. Arbitrator it was evident that he was merely completing a formality at the dictates of the respondent company and that too without any application of mind. A number of glaring mistakes and contradictions were pointed out in the proceedings and also in the award finally passed to show that the Ld. Arbitrator acted in a mechanical manner without any application of mind.
Page No. 19 of 4847. In response thereto Ld. Counsel for respondent submitted that in the case HRD CORPORATION vs. GAIL INDIA 2018 (12) SCC 471, Hon'ble Supreme Court has held that mere appointment of an Arbitrator in more than three cases does not render subsequent appointment as void and rather it merely raises a justifiable doubt which can be adjudicated by the previous conduct of the Arbitrator and the Arbitration material placed on record. The Court further said that Schedule V of the Act merely raises doubts and does not make an Arbitrator ineligible ipso facto.
48. It was also submitted that the Ld. Arbitrator retired as an Additional District and Sessions Judge and that all allegations against the arbitrator qua his impartiality and unbiased approach are completely unwarranted. It was submitted that from a bare perusal of the award it was evident that the Ld. Arbitrator has not allowed the entire claim of the Respondent and even though the Respondent had claimed damages to the tune of Rs.14,25,950/- along with interest @ 12 percent p.a. but the Ld. Arbitrator awarded a claim of Rs. Rs.6,12,900/- only and that too with an interest of 10% p.a.
49. Ld. Counsel for respondent in this regard also relied upon the following observations of Hon'ble Delhi High Court made in the case Sudesh Prabhakar and Ors. vs. EMAAR Constructions Pvt. Ltd. [2018 (2) Arb. LR 538 (Para 11):
11. A reading of the above judgment would show that the Supreme Court has held that the disquali-Page No. 20 of 48
fication contained in item 22 and 24 is not abso- lute and even an Arbitrator who has been ap-
pointed on two or more occasions by the parties or affiliates in the past three years, may yet not to be disqualified on showing that he was independent and impartial on the earlier two occasions. In any case, distinction has to be drawn between ineligi- bility to be appointed as an Arbitrator for the rea- son contained in the Seventh Schedule of the Act and the reasons which may give rise to justifiable doubts as to their independence or impartiality as contained in Fifth Schedule of the Act. Where Sev- enth Schedule gets attracted, party may straight- way approach the Court under Section 14 of the Act, however, in cases of Fifth Schedule, such doubts as to independence or impartiality have to be determined as a matter of fact in the facts of the particular challenge made by the Arbitral Tribunal under Section 13 of the Act. If a challenge is not successful, and the Arbitral Tribunal decides that there are no justifiable doubts as to the indepen- dence or impartiality of the arbitrator/arbitrators, the Tribunal must then continue the arbitral pro- ceedings under Section 13(4) and make an award. It is only after such award is made, that the party challenging the arbitrator's appointment on grounds contained in the Fifth Schedule may make an application for setting aside the arbitral award in accordance with section 34 on the grounds on which such party had sought to challenge the au- thority of the arbitrator.
This ground of challenge to the arbitral award was thus stated to be completely devoid of any merits and was accord- ingly prayed to be rejected.
My Discussion
50. The purpose of the declaration as envisaged under section Page No. 21 of 48 12 of the Act is to grant an opportunity of introspection to the ar- bitrator to dwell into his consciousness and to fathom out any cir- cumstance which may give rise to any justifiable doubts as to his impartiality. Such information may not be available in the public domain and thus the Legislature in its wisdom has put the onus on the Arbitrator himself. He is thus the fountainhead of this dec- laration and generator of the relevant information. As the bias is a state of mind and only the Arbitrator best knows his state of mind and the factors that influence the same. Bias is subtle and direct evidence of the same and cannot ordinarily be found. The disclo- sure, therefore, ought to be as much and as fair as possible. It must be such that the parties concerned can inquire or investigate into the same.
51. However here is a case where Ld. Arbitrator has com- pletely failed to mention at all that he has been handling any number of arbitration(s) on behalf of the respondent company.
52. In this regard, it will be pertinent to refer to the nature of declaration made by the Ld. Arbitrator and also the nature of proceedings carried out during the arbitration proceedings.
53. The arbitral record shows that vide letter dated 25.09.2018 (available at page 102-103), the respondent company requested Sh. S.C.Rajan to arbitrate upon the disputes as have arisen be- tween the parties and in response thereto the Ld. Arbitrator ini- tially vide communication dated 17.11.2018 (available at page 40-41) gave his concurrence to the respondent company to act as a sole arbitrator. A bare perusal of the said communication shows Page No. 22 of 48 that the same seems to have been signed on a printed document generated on the basis of a template inasmuch as point 3 thereof read as under:
3) there are ....... ongoing arbitration cases.
54. The document further goes on to reiterate the language of the relevant provision i.e. section 12 Arbitration Act by stating that there are no circumstances which are likely to disqualify him to act as sole arbitrator or that he is independent of each of the par- ties or that there is no relationship with or interest in the subject matter. Strangely enough the Ld. Arbitrator failed to even men- tion as to how many arbitrations, if at all there were any, he was already conducting in disputes involving respondent company. The blank space left in the declaration at point 3 as above speaks volume about the manner in which Ld. Arbitrator was conducting the proceedings.
55. The aforesaid issue becomes all the more important when ld. Counsel for petitioner submitted a list of following 11 cases where Sh. S C Rajan has acted as a sole arbitrator in similar na- ture of disputes involving respondent company and various other faculty members: -
S. No. Name of the Case in which OMP COMM.
the Arbitrator had acted as No.
an Arbitrator
1 Avneesh Singh Vs. Aakash 93/2019
Educational Services Pvt.
Ltd.
Page No. 23 of 48
2 Vinay Kumar Pandey Vs. 107/2019
Aakash Educational Services
Pvt. Ltd.
3 Kaveti Nagaraju Vs. Aakash 109/2020
Educational Services Pvt.
Ltd.
4 Amit Dwiwedi Vs. Aakash 111/2019
Educational Services Pvt.
Ltd.
5 Pawan Kumar Saini Vs. 112/2019
Aakash Educational Services
Pvt. Ltd.
6 M/s Lotus Education and Ors 23/2020
Vs. Aakash Educational
Services Pvt. Ltd.
7 M/s Lotus Education and Ors 25/2020
Vs. Aakash Educational
Services Pvt. Ltd.
8 M/s Lotus Education and Ors 26/2020
Vs. Aakash Educational
Services Pvt. Ltd.
9 M/s Lotus Education and Ors 27/2020
Vs. Aakash
10 Ravi Bohra Vs. Aakash 122/20
Educational Services Pvt.
Ltd.
11 Pramod Kumar Pandey Vs. 09/2021
Aakash Educational Services
Pvt. Ltd.
Page No. 24 of 48
56. Ld. Counsel for respondent company has also not disputed the said list of cases or the fact that same arbitrator has adjudi- cated upon similar nature of disputes between respondent com- pany and other faculty members.
57. Proceeding further the arbitral record also shows that on 24.11.2018 (available at page 42) Ld. Arbitrator again gave his concurrence to act as an arbitrator and issued a notice dated 29.11.2018 (available at page 38-39) to AESL and also to respon- dent Nitika Duggal (petitioner herein) calling upon the petitioner to appear before him on 22.12.2018. In the said notice also simi- lar nature of averments have been made that the arbitrator is not aware about any circumstances which are likely to disqualify him to act as the sole arbitrator or that there are no circumstances past or present that may call into question his independence or partial- ity in the eyes of parties. He also declared that he has had no rela- tionship with or interest in any of the party or in relation to the subject matter in dispute.
58. The aforesaid proceedings or the notice are however again completely silent about any arbitration proceedings, if being, conducted by the Ld. Arbitrator involving respondent company.
59. Surprisingly enough a bare perusal of the arbitration proceed- ings also shows that there are two sets of order sheets having been recorded by the Ld. Arbitrator initially for the same date and thereafter adjourning the matter to two different set of date of hearings, without any explanation at all.
Page No. 25 of 4860. The arbitral record shows that on 22.12.2018 (available at page 43) none was present on behalf of respondent and it was recorded by Ld. Arbitrator that the respondent has been duly served but still in the interest of justice respondent is directed to appear on 12.01.2019 at 12.30 p.m. Thereafter, on 12.01.2019 (available at page 44) the order sheet recorded by Ld. Arbitrator shows that none was present on behalf of respondent and the re- spondent was ordered to be proceeded ex-parte and the case was fixed for recording of ex-parte evidence on 16.02.2019 at 2 p.m.
61. Strangely enough the arbitration record also shows that apart from the aforesaid typed order sheets bearing signatures of Ld. Arbitrator there are handwritten order sheets also available under the signatures of Ld. Arbitrator for the same dates. One such or- der sheet is again dated 12.12.2018 (available at page no. 37) which shows that one advocate Mr. Prashant Kumar Yadav was present on behalf of respondent (Petitioner herein) and copy of statement of claim was ordered to be supplied to him and matter was adjourned for 05.01.2019 at 12.30 p.m. The order sheet also bears signatures of Mr. Vishal Rao, counsel for claimant and Mr. Prashant Kumar Yadav for non-claimant. There is another order sheet dated 05.01.2019 (available at page no. 36) which also marks the presence of Mr. Vishal Rao, counsel for claimant along with Mr. S.S. Meena, AR of claimant. It also mentions about the presence of respondent (petitioner herein) and the order sheet also bears the signatures of Mr. Vishal Rao and that of Ms. Page No. 26 of 48 Nitika. The copy of statement of claim was supplied to respon- dent and mater was adjourned to 02.02.2019 at 12.30 p.m.
62. Thereafter, on 02.02.2019 (available at page 35) again a handwritten order sheet exists under the signatures of Ld. Arbi- trator where the presence of counsel for claimant as well as AR of claimant is mentioned beside also mentioning the presence of counsel for respondent. It is further recorded therein that reply to the statement of claim has not been filed. The matter was there- after adjourned to 23.02.2019 at 12.30 p.m and accordingly the matter was thereafter taken up on 23.02.2019 (available at page
34).
63. Though I shall be subsequently also discussing the other pro- ceedings conducted by Ld. Arbitrator, but at this stage. it will be pertinent to mention that the record prepared by Ld. Arbitrator shows that two simultaneous proceedings were being conducted whereby in one set of proceedings the matter after being taken up on 22.12.2018 was adjourned to 12.01.2019 and thereafter was adjourned to 16.02.2019 while declaring that respondent be pro- ceeded ex-parte. The matter thereafter stood adjourned to 16.02.2019 for recording ex-parte evidence. As per the other set of handwritten proceedings the matter after being taken up on 22.12.2018 was adjourned to 05.01.2019 and thereafter was taken up on 02.02.2019 and then on 23.02.2019.
64. There is absolutely no explanation in the entire arbitral record about the circumstances in which two set of order sheets Page No. 27 of 48 came to be recorded and even during the course of arguments nothing could be explained by Ld. Counsel for respondent about the aforesaid blatant discrepancy.
65. Thus, from the aforesaid nature of proceedings conducted by Ld. Arbitrator, it is crystal clear that not only no declaration much less any proper declaration was made by Ld. Arbitrator un- der Section 12 of the Arbitration Act but the arbitration proceed- ings were also conducted in a mechanical manner without any application of mind. Ld. Arbitrator did not disclose at all as to whether he was conducting any arbitration proceedings involving claimant company or not. The fact that Ld. Arbitrator was actu- ally involved in 11 such arbitration proceedings involving claimant company and other faculty members having almost sim- ilar nature of disputes clearly strikes at the very root of the issue that the Ld. Arbitrator by no stretch of imagination can be said to be independent or having conducted the proceedings in an unbi- ased manner. There is no explanation at all as to what prevented Ld. Arbitrator from disclosing the said facts to the parties so that they could have made an informed decision about further partici- pating in the proceedings or in the alternative requesting Ld. Ar- bitrator to recuse or to challenge his appointment in a court of law.
66. In the case Alupro building System Pvt. Ltd. Vs. Ozone Overseas pvt. Ltd. 2017 SCC Online DEL 7228, it was ob- served by Hon'ble Delhi High Court that the fact that one other arbitration of the party was also taken up by the Arbitrator and Page No. 28 of 48 the same was not disclosed in the declaration, was sufficient in it- self to set aside the award. Thus, appointment of Ld. Arbitrator in 11 similar arbitrations involving claimant company and other fac- ulty members gives rise to justifiable doubts as to his indepen- dence or impartiality. Non-disclosure of such an important fact clearly amounts to misconduct and raises doubts about the fair- ness, integrity and impartially of Ld. Arbitrator.
67. At this stage, it would be also pertinent to mention that though the Ld. Arbitrator has attempted to frame the impugned arbitral award in such a manner that it may appear that he has passed a reasoned award considering the case of both the parties before arriving at the conclusion towards the end, but a bare pe- rusal of the award shows that it is completely bereft of any rea- sons whatsoever and merely reiterates the averments made by the claimant. Strangely enough at page 8 of the award Ld. Arbitrator has mentioned as follows:
"I have also gone through the evidence led by the claimant and the exhibited documents placed on record but I found that there is no evidence on behalf of the respondent Simply filing an affidavit which has not been tendered in the evi- dence."
68. Once again, the said fact recorded in the award by the Ld. Arbitrator before proceeding to give his findings on various claims is contrary to the record of arbitration proceedings.
69. A perusal of the order sheet dated 21.05.2019 (available at page 21) recorded by Ld. Arbitrator shows that on that day respondent /non-claimant Ms. Nitika Duggal was present and she Page No. 29 of 48 tendered her affidavit and thereafter she was also cross examined by Mr. Vishal Rao, Advocate for claimant. It was thereafter that evidence on her behalf was closed. Record also shows that at page 134-135 of the arbitral record there exists deposition of Ms. Nitika Duggal wherein she has been duly cross examined by Ld. Counsel Mr. Vishal Rao on behalf of claimant.
70. Thus, once again it is apparent on the face of record that the award so passed by the Ld. Arbitrator is per se contrary to the proceedings conducted and I find complete force in the submis- sions of Ld. counsel for petitioner that the Ld. Arbitrator did not consider the submissions / evidence led on record by the respon- dent / non-claimant at all.
In my considered opinion, the aforesaid circumstances are thus sufficient in themself for setting aside the impugned ar- bitral award.
Unilateral Appointment of Arbitrator by Respondent Company
71. Another objection raised against the impugned award is that the Ld. Arbitrator was unilaterally appointed by the respondent company and thus the procedure so followed was against the sub- stantive law of the land. Though Ld. Counsel for the respondent company while relying upon the case Central Organization for Railway Electrification Vs. M/s. EVI-SPIC-SMO- MCML,2019 SC 1635 has submitted that in the said case Page No. 30 of 48 Hon'ble Supreme upheld the arbitration clause allowing one party to nominate arbitrator and also held that it being the condi- tion in the agreement between the parties and general conditions of the contract so the High Court is not justified in appointing an independent sole arbitrator ignoring clauses of general condi- tions. It was also submitted that in the light of the conflicting de- cisions passed in Central Organization for Railway Electrifica- tion case(supra), Perkins Eastman Architects DPC Vs. HSCC (In- dia) Ltd., 2019 SCC Online SC 1517 and Bharat Boardband Net- work Vs. United Telecoms Ltd., (2019) 5 SCC 755, the Hon'ble Apex Court has referred the issue of unilateral appointment to the larger bench and the same is pending adjudication.
My discussion
72. In order to appreciate the aforesaid issue, it would be appro- priate to first refer to the relevant arbitration clause-58 as is men- tioned in the "Service Rules Manual". The same read as under: -
58. In case of any dispute or difference between you and the company regarding payment or non payment of any claim(s), tenure of services, transfer of employees, termination of services, compensation and any other dispute arising out or relating to the contract whether arising during the services or thereafter shall be referred to sole arbitrator appointed by the chairman of M/s. Aakash Educational Services Pvt.Ltd. This clause has been duly read by me and accepted without any objection or disapproval.
If the arbitrator to whom the matter is originally referred becomes dejure or defacto, unable to Page No. 31 of 48 perform his duties or refuses to act for any reason whatsoever the chairman AESPL as aforesaid at the time of such inability to act shall appoint any other person to act as an arbitrator in accordance with the term and conditions of the agreement. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor, if both the parties consent to this effect, failing which the arbitrator will be entitled to proceed denovo.
The proceedings shall be conducted at New Delhi subject to the provisions of Arbitration & Conciliation Act 1996 and the courts at Delhi only shall have the jurisdiction over the matter.
74. A bare reading of the aforesaid clause-58 clearly shows that the same is contrary to the fundamental principles of public pol- icy that no one can be a judge in his own case. The respondent no.1 cannot be allowed to override considerations of fairness im- partiality, neutrality and unbiasedness. In this regard it will be ap- propriate to refer to the following observations of Hon'ble Supreme Court in the case Perkins Eastman Architects Vs. HSCC (India) 2019 (9) SCC Online SC 1517:
'a person having an interest in the dispute or in the outcome or decision thereof must not only be ineligible to act as an arbitrator but must also not be eligible to appoint any one else as an arbitrator and that such person cannot and should not have any role in charting out any course to the dispute resolution by having the power to appoint a sole arbitrator'.
75. Reliance in this regard is also placed upon the case TRF Page No. 32 of 48 Ltd. Vs. Energo Engineering Projects Ltd (2017) 8 SCC 377.
76. Ld. Counsel for the respondent no.1 has contended that the autonomy of the parties to choose the procedure is the foundation pillar of arbitration. It was thus submitted that the parties are at liberty to choose the procedure for appointment of arbitrator and the petitioner by agreeing to the terms of 'Service Rules Manual' of her own will and without coercion agreed for appointment of the arbitrator as per terms of clause 58. It was thus submitted that respondent no.1 in appointing the arbitrator has accordingly acted in terms of the agreement between the parties.
77. Certainly, Ld. Counsel for respondent no.1 is correct in stat- ing that the autonomy of parties to the choice of procedure is the foundational pillar of arbitration. However, in this regard it will be also appropriate to refer to the following observations of Hon'ble Delhi High Court made in the case Proddatur Cable TV Digi Services Vs. Siti Cable Network Ltd. O.M.P (T) (COMM.) 109/2019 and I.A. 17896/2019 delivered on 20.01.2020:
24. ........The underlying principle in arbitration no doubt is party autonomy but at the same time fairness, transparency and impartiality are virtues which are equally important. If the Authority appointing an Arbitrator is the Head or an employee of a party to the agreement then its interest in its outcome is only natural. It goes without saying that once such an Authority or a person appoints an Arbitrator, the same ineligibility would translate to the Arbitrator so Page No. 33 of 48 appointed. The procedure laid down in the Arbitration Clause cannot be permitted to override considerations of impartiality and fairness in arbitration proceedings.
25. Insofar as the reliance by the respondent no.1 on the judgments permitting unilateral appointment by the Authority designate of one party to the agreement is concerned, in my view, the same will have no relevance in view of the judgment of the Supreme Court in the case of Perkins (supra). The argument of the respondent no.1 that in the Arbitration Clause before the Supreme Court in the case of Perkins was with regard to the power of a Managing Director to appoint an Arbitrator whereas in the present case it is the Company only merits rejection.
First and foremost, one has to see the rationale and the reasoning behind the judgment in the case of Perkins (supra). The Supreme Court held that the Managing Director was ineligible from appointing an Arbitrator on the simple logic that a Managing Director of a Company would always have an interest in the outcome of the arbitration proceedings. The interest in this context takes the shape of bias and partiality. As a natural corollary, if the Managing Director suffers this disability, even if he was to appoint another person as an Arbitrator, the thread of biasness, partiality and interest in the outcome of the dispute would continue to run. Seen in this light, it can hardly be argued that the judgment in Perkins (supra) will not apply only because the designated Authority empowered to appoint an Arbitrator is other than a Managing Director.
29. Lastly, the reliance of the respondent no.1 on the judgment of the Supreme Court in the case of Central Organisation (supra) is also of no avail to the respondent no.1. In the said case, the Supreme Court was dealing with an arbitration Page No. 34 of 48 clause which required a panel of Arbitrators to be provided by the Railways to the other party to the contract, in terms of clause 64.3(a)(ii) of the GCC. The Court held that since one party was to provide a panel and the other party had the choice to short list the Arbitrator of its choice from the panel and only from the shortlisted names, Railways was bound to appoint at least one Arbitrator to constitute the Arbitral Tribunal, the parties had a level playing field. The Arbitrator appointed by the Railways of its choice was balanced by the second Arbitrator being of the choice of the other party. Thus, the elements of fairness, transparency and impartiality were taken care of.
78. Accordingly in view of the aforesaid observations, the contentions raised by Ld. Counsel for respondent company cannot be sustained. The arbitration clause empowering the respondent company to unilaterally appoint the sole arbitrator clearly stands vitiated in light of the pronouncements made by the Hon'ble Supreme Court in Perkins case and by the Hon'ble High Court in Proddatur case. Consequently, the ineligibility of the respondent company to appoint a sole arbitrator unilaterally would clearly percolate to the arbitrator so appointed by it and therefore, the Ld. Sole Arbitrator was ineligible to arbitrate in the matter.
79. As regard the case of Central Organization for Railway Electrification Vs. ECI (supra) as relied upon by Ld. Counsel for respondent company, I may state that the same in the light of peculiar nature of facts and circumstances of the said case is not at all applicable to the present case. In this regard, it would be Page No. 35 of 48 worthwhile to refer to a very recent judgment of Hon'ble Delhi High Court in the case City Life Line Travels Pvt.Ltd. Vs. Delhi Jal Board Arb. P. 1/2021 and I.A. 31/2021 decided on 27.01.2021.
21. The reliance placed by Mr. Singh on the decision in the case of Central Organization for Railway Electrification v. ECI (supra) is misplaced. In that case, the Arbitration Clause provided for the Arbitral Tribunal to be constituted by Gazetted Railway Officers or three retired Railway Officers above a certain rank. The petitioner (Railways) was required to send names of four empanelled retired Railway Officers and the contractor was required to suggest two names out of the said panel for appointment as its nominee. The General Manager was required to appoint one of the names out of the two names as suggested by the contractor as the contractor's nominee and the remaining Arbitrator from the panel or outside the panel. The Supreme Court noted that the procedure adopted also took into account the option of the contractor. The Court was of the view that since the agreement provided for the appointment of an Arbitral Tribunal out of the panel of serving/retired officers, the procedure as agreed by the parties ought to have been followed. In the present case, the Clause does not entail any such procedure for suggesting any names out of the panel of Arbitrators maintained by the DJB. Therefore, the contention that the decision of the DJB to nominate an Arbitrator must be sustained since the Arbitrator appointed was one from the panel maintained internally, is unpersuasive. The question whether the DJB maintains a panel of Arbitrators is its internal matter. The Arbitration Clause does not contemplate the appointment of any Arbitrator Page No. 36 of 48 from the panel of Arbitrators maintained by the DJB and therefore, the decision in the case of Central Organization for Railway Electrification v. ECI (supra) is, wholly inapplicable in the facts of the present case.
22. It is also relevant to mention that in Union of India v. M/s Tantia Constructions Limited: SLP (C) 12670/2020 decided on 11.01.2021, a three judge bench of the Supreme Court upheld the decision of the High Court to appoint an independent Arbitrator and had dismissed the Special Leave Petition. However, since reliance had been placed by the petitioner on the decision in Central Organization for Railway Electrification v. ECI (supra), the Supreme Court had requested the Chief Justice of India to constitute a larger Bench to look into the correctness of the said decision. The said order is reproduced below:-
"Having heard Mr. K.M. Nataraj, learned ASG for sometime, it is clear that on the facts of this case, the judgment of the High Court cannot be faulted with. Accordingly, the Special Leave Petition is dismissed. However, reliance has been placed upon a recent three-Judge Bench decision of this Court delivered on 17.12.2019 in Central Organisation for Railway Electrification vs.M/s ECI-SPIC-SMO-MCML (JV) A Joint Venture Company, 2019 SCC OnLine 1635. We have perused the aforesaid judgment and prima facie disagree with it for the basic reason that once the appointing authority itself is incapacitated from referring the matter to arbitration, it does not then follow that notwithstanding this yet appointments may be valid depending on the facts of the case.
We therefore request the Hon'ble Chief Justice to constitute a larger Bench to look into the correctness of this judgment.Page No. 37 of 48
Pending application stands disposed of."
80. In view of the above pronouncement by Hon'ble Apex Court and Hon'ble Delhi High Court, I am thus of the considered view that unilateral appointment of Ld. Sole Arbitrator by the respon- dent company is invalid and is again a substantive ground for set- ting aside the impugned arbitral award in itself.
NON-APPLICABILITY OF JUDGMENT OF VIVEK RAI Vs. AAKASH INSTITUTE ; 2015 SCC OnLine Del 7814 CASE:
81. It has been submitted by Ld. counsel for respondent that though the petitioner has attempted to rely upon the observations of Hon'ble Delhi High Court in the Vivek Rai Judgment but the said observations are not at all applicable to the facts of the present case. It has been submitted that in the Vivek Rai case (supra) the Hon'ble High Court observed that the Ld. Arbitrator has simply gone by the clauses in the agreement without even scrutinizing the same and awarded the claim in toto. The Hon'ble High Court in fact also observed that the clauses appear to be unconscionable and opposed to public policy and an award based on above clauses would be clearly opposed to public policy. However, Ld. Counsel submitted that in the present matter the Ld. Arbitrator who is a retired ADJ allowed the claim only partially and also provided the findings and reasoning on Page 11 onwards of the Award.
82. It was also pointed out that under Claim 1 Ld. Arbitrator has clearly observed that the judgement in Vivek Rai's case is not Page No. 38 of 48 applicable to the facts and circumstances of the present case but he himself awarded damages to Respondent only for the mandatory notice period of three months amounting to Rs. 2,67,648/- and rejected the claim of respondent for higher damages.
83. It was also pointed out that the respondent-institute had also sought penal damages of Rs.2,00,000/- which is claim no. 2 but the same was also completely rejected by the Ld. Arbitrator.
84. On the other hand, Ld. Counsel for petitioner has submitted that from a bare perusal of the terms and conditions contained in the "Service Rules Manual" in the present case, it is clear that the same are identical to the one which were under consideration in the Vivek Rai's case (Supra) and thus the observations of Hon'ble Delhi High Court squarely apply to the present case also.
My Discussion
85. In this regard, I may state at the outset that a bare reading of the award goes to reflect that the learned Arbitrator has taken the agreement titled "Service Rules Manual" as sacrosanct, unimpeachable and hallowed. The learned Arbitrator has not cared to test as to whether the various clauses of the manual stand the scrutiny of law. The learned Arbitrator has simply gone by the clauses in the agreement without going into the question whether they are ex facie opposed to public policy or are hit by sections 23 and 28 of the Contract Act, 1872, or not.
Page No. 39 of 4886. Before proceeding further, it will be however appropriate to have a brief glance over some of the clauses of the said "Service Rules Manual"
"16(b) In the event you/an employee wishes to leave 'Aakash Educational Services Pvt. Ltd.' After completion of two years, you are required to give notice in writing giving clear three months' time to AESL so that such period co−terminates with expiry of the academic session. The said notice is required to be delivered through the Associate Director / Deputy Director /Senior Assistant Director / Assistant Director or your Head of the Department at the office of the Managing Director of AESPL at Delhi and obtain a valid receipt. The notice for 3 months can be given only between 01st December to 15th December in any year after completion of two years. If any employee gives notice at any time other than specified, it will not be invalid and shall not amount to termination of the contract. In case you do not submit notice between 01st December to 15th December, it will be assumed that you are willing to continue with the job for another term of two years. .................................... 16(d) In case you are unable to adhere to the said mandatory notice period, you would be liable to pay to AESPL the following in addition to forfeiture of Sincerity fund-
(i) a minimum pre−estimated and pre−determined damage to the tune of gross salary for the unexpired notice period or the remaining period of the academic year/contract period of two years, whichever is higher or as per discretion of Chairman / Managing Director/Director of the company. The pre-estimated & pre-determined damage shall be calculated in the manner explained e.g. if a person quits on 31st October, he/she will be required to pay 4.5 month gross salary (+) rupees as damages to AESPL. The damages are not punitive but Page No. 40 of 48 only a part compensation for the huge loss of face, reputation, brand equity, mind equity, future business losses due to your quitting without completing the academic year & leaving the students in a lurch.
(ii) It is made clear that training expenses as stated above are payable only in case of leaving the AESPL during the initial period of contract of two years but not in case of extended period of contract.
Such liability mentioned under clause 16(d)(i) shall automatically accrue once the breach is committed by you / the employee & no notice in this regard would be served upon you to claim the said pre-determined & pre-estimated damages. You undertake to pay the same within 7 (seven) days of your leaving. If AESPL does not receive the payments within 7 days of leaving towards the damages as stated above, AESPL shall have the right to recover the same along with interest @ x 10% p.a. through legal process (x=PLR + 3% ; where PLR is Prime Lending Rate of AESPL Bankers].
16(e) After the expiry of the initial & minimum contract period, this contract will continue till you attain the age of superannuation i.e. 58 yrs, subject to terms and conditions contained in this manual. After the superannuation you, if found with extraordinary achievements may be given extension to continue for such period you are found capable of rendering effective services in accordance with terms and conditions solely at the discretion of Managing Director.
16(f) Corollary of above clauses, if in the last year of the contract period of or extension thereof at AESPL, you / an employee do not submit resignation between 01st December to 15th December, it will be assumed that you have opted and are willing to continue job for another term of two years subject to the conditions contained in this manual.
16(g) It is agreed and undertaken by you that the present service manual is meant to be complied with and the terms and conditions stated there in are Page No. 41 of 48 towards compliance, to ensure continuity of coaching to the students, upholding AESPL tradition in high ethics & values, rather than committing breach of any of its terms.
You hereby submit two cheques in favour of 'Aakash Educational Services Pvt. Ltd." The first cheque is towards the total training expenses incurred by the company on you, as stated herein before, and the second cheque equivalent to 3 months gross salary of employee as perthe calculation of salary sheet, towards a part discharge of your liabilities towards damages as per clause 16(d) of this agreement. You hereby agree to undertaken as under :-
I, ................. undertake to maintain the said bank accounts and keep sufficient balance on which the above mentioned cheques are drawn to ensure the encashment of the cheques mentioned herein below, and further authorize AESPL for presenting the cheques and to encash the same. I understand that in case of non compliance of the contract terms contained in this manual, the cheques become payable immediately. The said cheques are not the security cheques for legal or any other purposes and are issued by me in order to discharge liability:
Cheque nos are ............. and ................ drawn on .............. of amount Rs. ............. And Rs................ Signature.................. In case, the above said cheque(s) are not honored on its presentation to the banker for any reason including insufficient funds, a/c closed, stop payment or any other reason, I shall be deemed to have committed an offence u/s 138 NI Act as well as u/s 405, 406, 408, 415, 418 and 420 of Indian Penal Code and shall be liable for prosecution before the appropriate courts of law.
AESL is further authorized to take appropriate legal action to recover the balance amount if any. Willful Page No. 42 of 48 and intentional breach of this contract would attract liability upon me/ the employee for compensatory & exemplary damages in addition to contractual liabilities mention in clause 16(d) and 16(k) and under any other provision of this manual." 16(h) In the event of default, non−compliance or willful breach of the contract or sudden termination of the contract and/or your leaving the AESPL without following the proper procedure, as laid down in this manual, and the employee's refusal to meet his/her obligation towards AESPL in letter and spirit of the service rules, and the matter becoming subjudice, the employee shall be responsible for the entire litigation expenses including, arbitration proceedings, organizing hearing in the arbitration and other legal proceedings if any required to be initiated to facilitate arbitration proceedings. Needless to say, litigation expenses are subjective. However, such expenses cannot be less than Rs.10,000/− per hearing either before the Court or before the arbitrator apart from the other expenses as elucidated above. 16 (j) After leaving the company for any reason whatsoever, you shall not complete in any manner directly or indirectly with AESPL or shall not accept any employment or association with any organization i.e. competitors of AESPL for a period of not less than one year from the date of your leaving the company.
I categorically undertake not to compete or take any employment with any organization i.e. competitors of AESPL for minimum period of one year from the date of leaving the company; lest it shall amount to misappropriating and dishonestly using for myself and competitors I may join, the vital material, information, etc entrusted to me during training and from time to time during my employment and shall render me liable for being prosecuted for cheating and causing breach of trust.
16(k) If employee commits any act in violation to the provision of clause 16(j) of the agreement, with Page No. 43 of 48 intend to cause wrongful loss to AESL, shall be held liable to pay a fixed sum of Rs.2 lacs to AESL to- wards damages besides other demand raised by the company."
87. A bare reading of the above clauses goes to show that they are lopsided, lacks any equity and show that the dice is loaded in favour of respondent company. The damages have though been sought to be claimed as nonpunitive and only as compensation but in actuality it is not so. The compensation has been claimed on the basis of huge loss of face, reputation, brand equity, mind equity, future business losses due to the petitioner's quitting the job without completing the academic year and leaving the students in a lurch. However, no estimate of such damages has been given in the claim petition and they have ostensibly been claimed as a matter of right without establishing any basis or cause for the same. Thus it is crystal clear that though they are shown to be nonpunitive, but in their sumandsubstance they are exfacie punitive.
88. A bare reading of the terms and conditions is an indicator that though the language of the agreement is intended to reflect that there is free will of the petitioner while entering the contract but in practice it is not so. The freedom of the petitioner even to serve a notice to quit has been severely restricted and exists only on papers. The petitioner has been pushed against the wall to serve a quit notice only during a period of 15 days viz. Between 01st December to 15th December. Thus, the dominance of Page No. 44 of 48 respondent company has been writ large upon the face of record. The basic test, whether the terms of the agreement are in compliance with the Contract Act, has been clearly byepassed by the Ld. Arbitrator, albeit such an exercise is the sinequanon. The limited scope of interference in an arbitration award does not mean that the same should be to perpetuate the gross illegalities which are perse opposed to the public policy.
89. Clause 16 (b) provides that in case the petitioner does not submit his resignation between 1st December to 15th December, it will be presumed that she is willing to continue his job for another two years subject to the conditions contained in the manual. This also stipulates a condition where the petitioner has been pushed against the wall and has no freedom of choice. The choice of the respondent company has been superimposed upon her.
90. Another obnoxious condition which has been heaped upon the petitioner is to submit two undated cheques in favour of the respondent company towards training expenses incurred by the company. There is nothing on record to exhibit any such training expenses incurred by respondent company. It also provides that in case of noncompliance of the contract terms contained in the manual, the cheques shall become payable immediately. It has further been stipulated that the said cheques shall not be treated as a security cheque(s) for legal or any other purposes and that they shall be deemed to be in discharge of petitioners' liability Page No. 45 of 48 which may occur on account of damages as mentioned under clause 16(g) of the "Service Rules Manual".
91. A further condition has been imposed upon the petitioner that she shall keep sufficient balance in her bank account on which the said cheques are drawn to ensure encashment of the said cheques. A deemed liability of the offence under section 138 of the Negotiable Instruments Act has thus been imposed upon the petitioner. This stipulation is also obnoxious and against the intent of the Negotiable Instruments Act, where an offence gets committed only when a cheque is dishonoured for want of sufficient funds in the account or when it exceeds the arrangement, and thereafter when the drawer fails to pay the amount of cheque within 15 days of the receipt of a demand notice. It is at that point that the offence is deemed to have taken place. The stipulation in clause 16(g) is thus clearly an attempt to overreach the law.
92. In the same vein there is restraint on the future employment of the petitioner once she leaves the services of respondent company. The litigation expenses have been given a minimum value @ Rs. 10,000/ per hearing in total disregard of the fact as to what actual expenses are incurred. This is again an attempt of unjust enrichment which cannot be permitted under the law.
93. These clauses, on the face of it, appear to be wholly unconscionable and per se opposed to public policy. As such Page No. 46 of 48 they are hit by section 23 and various other provisions of the Contract Act.
94. It thus goes without saying that an award based on such clauses, has been ostensibly imposed upon the petitioner in order to impose upon her an unconscionable liability and which is in direct clash with the public policy of India.
95. Thus, a bare reading of the impugned award clearly goes to show that the Ld. Arbitrator has ostensibly proceeded on the premise that he is under no obligation to cull out if the terms of the agreement are per se opposed to the law of contract or public policy.
CONCLUSION
96. From the aforesaid discussion, it is thus clear beyond any doubts, that the Ld. Arbitrator was acting in a mechanical manner without any application of mind simply with a view to put a seal of approval on the claim of respondent company while taking the terms of the agreement at face value without any demur as a rule of thumb.
97. While passing the impugned award even a bare minimum scrutiny of the clauses of the agreement or statement of claim has not been done. Ld. Arbitrator mechanically proceeded to pass the impugned award in favour of the respondent no. 1 banking upon the various terms and conditions, which are patently illegal.
Page No. 47 of 4898. In these circumstances, I am thus of the considered opinion that there are sufficient grounds to set aside the impugned award and that judicial interference in the matter is warranted.
99. Accordingly, the impugned Award is hereby set aside and the petition stands allowed. In the facts and circumstances of the case the parties are however left to bear their own costs.
100. File be consigned to Record Room.
Pronounced in open Court on 18.11.2021.
(Bharat Parashar) District Judge (Commercial Court)-01, Central, Tis Hazari Courts,Delhi.
Page No. 48 of 48