Delhi District Court
Sobek Auto India Pvt. Ltd vs Vaibhav Gupta on 12 October, 2023
IN THE COURT OF SH. AJAY KUMAR JAIN:
DISTRICT JUDGE COMMERCIAL COURT 03 - SOUTH EAST
DISTRICT, SAKET COURTS, NEW DELHI.
IN THE MATTER OF:
OMP (COMM) No. 29/21
SOBEK AUTO INDIA PRIVATE LIMITED
Through its Authorized Representative
Having its registered office at:
5th Floor, Building 3B, DLF Corporate
Park, DLF City, Phase-3
M.G. Road, Gurgaon, Haryana- 122002 ..... Claimant/ Petitioner
VS.
MR. VAIBHAV GUPTA
S/o. Mr. Brij Mohan
R/o. E-41, 1st Floor, Greater Kailash
Enclave-1, Delhi- 110048
Also At :
1158, Ashok Vihar, Phase-III, Gurugram ....Respondent
Date of Institution : 01.09.2021
Date of Arguments : 10.10.2023
Date of Judgment : 12.10.2023.
JUDGMENT
1. Vide this judgment, I shall dispose of the petition under Section 34 of the Arbitration & Conciliation Act filed by petitioner for setting aside the impugned award dated 20.05.2021 passed by Ld. Sole Arbitrator.
OMP (COMM) 29/21 dated 12.10.2023 Pg. 1 of 13 Sobek Auto India Private Limited Vs. Mr. Vaibhav Gupta
2. Brief facts of the case are that the petitioner/claimant is the private company engaged in the business of buying and selling of used vehicle through its stores across the country under OLX Autos (earlier OLX CashMyCar). In November, December 2020, the respondent approached the petitioner for sale of his Audi Car and before handing over the car, a user acceptance form dated 02.12.2020 ('agreement') was signed by the respondent. The respondent in violation of Clause 11 of the said agreement disclosed that the car in question is defect free and merchantable. Believing his version, the petitioner agreed to procure the car for a sum of Rs. 7,84,500/-, however, a sum of Rs. 9500/- retained for checking of service history. It was discovered that the carrier assemble of the said car has been replaced therefore the amount of Rs. 9500/- deducted and an amount of Rs. 7,75,000/- was paid to the respondent. The petitioner resold the car to the petitioner's channel partner, however, after driving of 40 Kms., the engine flashed and therefore the petitioner constrained to take back the car from the channel partner, and duly inspected and number of engine related issues were found. The respondent was requested to take the said car back and refund the amount, and also sent a legal notice dated 15.01.2021. In reply the respondent denied all the responsibility and raised false narrative. Thereafter petitioner was constrained to invoke the arbitration clause and referred to institutional arbitration via an online dispute resolution platform 'SAMA'.
OMP (COMM) 29/21 dated 12.10.2023 Pg. 2 of 13 Sobek Auto India Private Limited Vs. Mr. Vaibhav Gupta
3. Ld. Sole Arbitrator considering the submissions of both the parties, dismissed all the claims of the petitioner vide impugned award dated 20.05.2021. The review application was also dismissed by the Ld. Sole Arbitrator vide order dated 03.06.2021. Thereafter the petitioner filed another application under section 33 (4) of the Arbitration and Conciliation Act for passing an additional award on the ground that the sole Arbitrator failed to give any finding, however, the same was also dismissed vide order dated 03.06.2021. Thereafter, the petitioner filed present petition.
4. Ld. Counsel for the petitioner submitted that the impugned award is against the public policy as passed without taking into consideration clause 11 of the agreement. Ld. Tribunal acted beyond the terms and clauses of the agreement by dismissing the claims of the petitioner. The interpretation of the Ld. Arbitrator is irrational and illogical. In terms of section 28 (1) (a) of the Arbitration and Conciliation Act, the arbitrator has to decide the dispute in terms of the contract but the Arbitrator ignored the relevant paras. The Ld. Arbitrator also ignored the provision of the Sales and Goods Act as the respondent is under obligation to disclose the defects. Ld. Counsel submitted that the Ld. Arbitrator committed patent illegality and acted against the public policy while passing award, hence, the impugned arbitral award is liable to be set aside.
OMP (COMM) 29/21 dated 12.10.2023 Pg. 3 of 13 Sobek Auto India Private Limited Vs. Mr. Vaibhav Gupta
5. Ld. Counsel for the respondent submitted that in present jurisdiction this court cannot re-appreciate the evidnece, the petitioner has not challenged the order dated 03.06.2021 passed in review, therefore, the present challenge in not permitted in law. The petitioner has failed to place on record the audio recordings, affidavit of evidence of the respondent filed before the Sole Arbitrator. The car is sold by the petitioner during the pendancy of the arbitrator,however, till date it is registered in the name of respondent. Ld. Counsel submitted that as per Sale letter dated 02.12.2020, the petitioner categorically stated that they have taken the physical delivery and will provide the transfer RC as well as post ownership transfer details. The petitioner is responsible for any issues and misuses post the delivery date and the time mentioned below till the time ownership gets transferred. Ld. Counsel submitted that vide impugned award dated 20.05.2021, the Ld. Arbitrator found that the sold car was not sent to any authorized workshop since last three years, therefore, respondent plea that he has no knowledge of any defect and he was not in a position to declare any defect is credible. Ld. Counsel submitted that there is no patent illegality or any violation of public policy in the impugned award. Therefore, the present petition is liable to be dismissed, relied upon 'NHAI Vs. M/s BSC-RBM-Pati Joint Venture, FAO (OS) (COMM) 107/2017, dt. 24.01.2018, DHC'.
6. Both the counsels for the parties also filed written submissions.
Heard. Record perused.
OMP (COMM) 29/21 dated 12.10.2023 Pg. 4 of 13 Sobek Auto India Private Limited Vs. Mr. Vaibhav Gupta
7. The relevant findings of the Ld. Arbitrator in the impugned award dated 20.05.2021 as under :
"FINDINGS
11. Looking to the Dispute Resolution Policy of the Claimant company, clear-cut,speaking and specific provisions of various policies, pre arbitration notice dated 25/01/2021 sent to the respondent by the claimant and no response thereof to the claimant by the respondent. I am of the considered view that this arbitral tribunal has jurisdiction to consider the dispute and resolved it through online manner on ODR platform of SAMA as per SAMA arbitration Rules read with provisions of Act.1996 and mere statement/denial that such admission and execution of the documents were not voluntary does not help in any way to the Respondent at this later stage. 12. Amongst the all admitted facts, the disputes cover on following two points as per Clause 11[b] of the agreement regarding non- declaration of:- [A] Material defects in the car, and [B] Merchantability of car
13. So far non declaration of material defects is concern, it is revealed from the record that prior to sale the Claimant had conducted thorough physical & Mechanical inspection through his experienced and trained team of qualified engineers and after thorough inspection only one defect in the nature of esembled the carrier unofficially under the defect-head "Exterior and structural repaired/damaged" was found and for the removal of same defect Rs.9500/ was deducted from the sale consideration. Any other material defects were in the car and the in the notice of the Respondent & he did not intentionally declare them, was not duly proved by the Claimant. Contrary to it, as per the Annexture-4 which was submitted with reply to the Claim it is found that sold car was not sent to authorized workshop since last three years for service or any repair. This alone fact is sufficient to show that the Respondent had no knowledge of any defect, therefore he was not in a position to declare any defect or alleged defects. Such defects first time came in picture during the driving by subsequent purchaser after sold out car by the Claimant. In these circumstances, it OMP (COMM) 29/21 dated 12.10.2023 Pg. 5 of 13 Sobek Auto India Private Limited Vs. Mr. Vaibhav Gupta cannot be said that those defects were very well in the notice and knowledge of the Respondent and he intentionally suppressed this fact, hence this fact couldn't proved by the Claimant.
14. Similarly, the fact of Non- Merchantability of the car is also not duly proved from the available records by the Claimant. In the context of Vehicle, the meaning of Merchantable is "An vehicle is deemed merchantable, if it is reasonably fit for ordinary such product are manufactured/sold". In the light of above definition all papers were/are complete purpose for as per Law with every aspect to transfer the sold car, car was also in position to use it and it is immaterial that some repairs were required since such requirements are integral part of smooth use it is also not the case of Claimant that the sold car was totally scrap, condemned and in unrepairable condition, hence non-merchantable and all these facts were within the knowledge but he intentionally did not disclosed Contrary to it, the car was merchantable, this fact also proved as that car was admittedly further sold during the pendency of this proceeding and as soon as this sale was taken place, the issue of non-merchantable became infructuous.
15 In this continuation, the sale letter dated 02/12/2020 Annexure- 2 is equally important, wherem specifically mentioned Sobek Auto India Private Limited (OLX Cashmycar is responsible for any issues or misuse post the delivery date & time mentioned below till the time ownership gets transferred- Date 02/12/2020 Time 3.30pm This is also supported by the audio clips Annexures- 7 & 8 submitted along with the reply to the Claim. These proofs goes against the Claimant.
16. At this stage, we cannot ignore the facts that agreement in this matter is a concluded contract since in compliance of sale-agreement, exchange of possession of the vehicle and sale consideration have been taken place and further sale transaction has been also made. Profit & Loss are the part and parcel of the business. If any one suffers from loss due to his own act/wrong, for that alone he is responsible none else. In the present case also, the Claimant having all opportunities and skilled team, if OMP (COMM) 29/21 dated 12.10.2023 Pg. 6 of 13 Sobek Auto India Private Limited Vs. Mr. Vaibhav Gupta could not found any defect after due diligence no one other than himself is liable. In this situation the principle of" THE CEVEAT EMPTOR" is attracted.
17. All the above, for the sake of discussion, the nature of present agreement is 'Voidable Contract". Such type of contract is not ab initio void but may be declared void at the instance of aggrieved party. In the present proceeding, in the beginning, the Claimant came with the same stand with the prayers that the Respondent be directed to take back the car and return the sale consideration received etc. But during the arbitral proceedings the Claimant stating that rights given under the agreement, sold the car without the permission of this tribunal, without protest and not reserving his rights. Looking to the nature of business of purchase & sale of vehicles, of the Claimant, above steps of the Claimant regarding sale the car under proceeding/agreement amounts the waiver of his all rights of actionable claim pleaded in the Claim. Only on the basis of above, this claim became infructuous.
18. As per the above discussion, the Claim of the Claimant is liable to reject against the Respondent with cost of proceeding Rs.5,000/ and exemplary cost Rs 5000/."
8. Ld. Arbitrator held that it is revealed from the record that prior to the sale, the claimant had conducted thorough physical and mechanical inspection, and only one defect in the nature of assembled the carrier unofficially detected, therefore, deducted Rs. 9500/- from the sale consideration. Any other material defects which were alleged to be not declared intentionally by the respondent were not duly proved by the claimant/petitioner. The said car admittedly not sent to service center for last three years is sufficient to show that the respondent has no knowledge of any defects therefore not in a position to declare any defects, therefore, it cannot be held that the respondent having notice and knowledge of the OMP (COMM) 29/21 dated 12.10.2023 Pg. 7 of 13 Sobek Auto India Private Limited Vs. Mr. Vaibhav Gupta defect which he intentionally suppressed. As far as the factum of 'non- merchantability' is concerned. It is not the case of the claimant that the car was a total scrap, condemn or in unrepairable condition, contrary it was sold during the pendency of this proceedings. It is also observed by the Ld. Arbitrator that the petitioner is responsible in terms of letter dated 02.12.2020 for any issues and misuse post the delivery date and time mentioned, and this is also supported by the audio clips annexure 7 & 8 annexed with the claim. Ld. Arbitrator also observed that in present case, the claimant having all the opportunities and the skilled team and if the said team could not find any defects then the petitioner himself is responsible and the principle of 'The Caveat Emptor' is attracted.
9. The Ld. Arbitrator has duly appreciated the facts and circumstances of the case and considered all the material documents placed before him. Ld. Arbitrator also considered the relevant clauses of the agreement, however, unable to come to the conclusion that the respondent willfully not declared the material defects in the car or the merchantability of the car. The Ld. Arbitrator duly appreciated the circumstances and there is nothing perverse or patent illegality in his findings. It is settled law that the Arbitrator is the final arbiter on facts as well as on law and do not merit any interference in the present circumstances. This court cannot interfere in the arbitral award merely on the possibility of alternative view.
OMP (COMM) 29/21 dated 12.10.2023 Pg. 8 of 13 Sobek Auto India Private Limited Vs. Mr. Vaibhav Gupta
10. Scope of interference under section 34 of Arbitration and Conciliation Act with Arbitrator's award is very limited. The Court would not be justified in reappraising the material on record and substituting its own view in place of the view taken by Arbitrator. Once the Arbitrator has applied his mind to the matter before him, the Court cannot reappraise the matter as if it were an appeal and even if two views are possible, the view taken by the Arbitrator would prevail as held by Hon'ble Supreme Court in the case of Navodaya Mass Entertainments Ltd. v. J.M. Combines reported in (2015) 5 SCC 698.
11. Hon'ble Supreme Court in the case of 'Sutlej Construction Ltd. v. State (UT of Chandigarh) reported in (2018) 1 SCC 718' has held that when it comes to setting aside of an award under the public policy ground, it would mean that the award should shock the conscience of the court and would not include what the court thinks is unjust on the facts of the case seeking to substitute its view for that of the arbitrator to do what it considers to be "justice. Paragraph nos. 10 to 13 of the said judgment are extracted below:-
"10. We are not in agreement with the approach adopted by the learned Single Judge. The dispute in question had resulted in a reasoned award. It is not as if the arbitrator has not appreciated the evidence. The arbitrator has taken a plausible view and, an in our view, as per us the correct view, that the very nature of job to be performed would imply that there has to be an area for unloading and that too in the vicinity of 5 km as that is all that the appellant was to be paid for. The route was also determined. In such a situation to say that the respondent owed no obligation to make available the site cannot be accepted by any OMP (COMM) 29/21 dated 12.10.2023 Pg. 9 of 13 Sobek Auto India Private Limited Vs. Mr. Vaibhav Gupta stretch of imagination. The unpreparedness of the respondent is also apparent from the fact that even post- termination it took couple of years for the work to be carried out, which was meant to be completed within 45 days. The ability of the appellant to comply with its obligations was interdependent on the respondent meeting its obligations in time to facilitate appropriate areas for unloading of the earth and for its compacting. At least it is certainly a plausible view.
11. It has been opined by this Court that when it comes to setting aside of an award under the public policy ground, it would mean that the award should shock the conscience of the Court and would not include what the Court thinks is unjust on the facts of the case seeking to substitute its view for that of the arbitrator to do what it considers to be "justice".
12. The approach adopted by the learned Additional District Judge, Chandigarh was, thus, correct in not getting into the act of re-appreciating the evidence as the first appellate court from a trial court decree. An arbitrator is a chosen Judge by the parties and it is on limited parameters can the award be interfered with. 13. The learned Single Judge ought to have restrained himself from getting into the meanderings of evidence appreciation and acting like a second appellate court. In fact, even in second appeals, only questions of law are to be determined while the first appellate court is the final court on facts. In the present case, the learned Single Judge has, thus, acted in the first appeal against objections dismissed as if it was the first appellate court against a decree passed by the trial court."
12. The scope of interference with an arbitral award under Section 34 of the Act has been considered and discussed by Hon'ble Supreme Court in a judgment rendered in the case of 'MMTC Ltd. v. Vedanta Ltd. reported in (2019) 4 SCC 163'. Paragraph nos. 11 to 14 of the said judgment are extracted below:
OMP (COMM) 29/21 dated 12.10.2023 Pg. 10 of 13 Sobek Auto India Private Limited Vs. Mr. Vaibhav Gupta "11. As far as Section 34 is concerned, the position is well-settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii) i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the "fundamental policy of Indian law" would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury reasonableness. Furthermore, "patent illegality" itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract.
12. It is only if one of these conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)(b)(ii), but such interference does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts.
13. It is relevant to note that after the 2015 Amendment to Section 34, the above position stands somewhat modified. Pursuant to the insertion of Explanation 1 to Section 34(2), the scope of contravention of Indian public policy has been modified to the extent that it now means fraud or corruption in the making of the award, violation of Section 75 or Section 81 of the Act, contravention of the fundamental policy of Indian law, and conflict with the most basic notions of justice or morality. Additionally, sub-section (2-A) has been inserted in Section 34, which provides that in case of domestic arbitrations, violation of OMP (COMM) 29/21 dated 12.10.2023 Pg. 11 of 13 Sobek Auto India Private Limited Vs. Mr. Vaibhav Gupta Indian public policy also includes patent illegality appearing on the face of the award. The proviso to the same states that an award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciation of evidence.
14. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the court under Section 34 and by the court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings."
13. In the case of 'Maharashtra State Electricity Distribution Company Ltd. v. Datar C.C.L. Ltd. reported in (2018) 3 SCC 133' it has been held by Hon'ble Supreme Court that "the proposition of law that the Arbitral Tribunal is the master of evidence and the findings of fact which are arrived at by the arbitrators on the basis of evidence on record are not to be scrutinized as if the Court was sitting in appeal now stands settled by catena of judgments pronounced by this Court without any exception thereto."
14. Ld. Arbitrator has passed the award upon consideration of material placed before him. There is nothing perverse or patent illegality in the findings of the Ld. Arbitrator.
OMP (COMM) 29/21 dated 12.10.2023 Pg. 12 of 13 Sobek Auto India Private Limited Vs. Mr. Vaibhav Gupta
15. The Ld. Sole Arbitrator has drawn inferences and conclusions after the factual appreciation in the light of the legal principles. The views of the Ld. Sole Arbitrator can not be found fault with only for the reason that some other views can emerge by appreciating the same set of facts and evidence, until and unless it is shown that such a view is totally obnoxious and unsupported by the sound legal principles.
16. This Court cannot substitute its own views or the views of the parties with the view taken by the Ld. Arbitral Tribunal, if the view taken by the Ld. Arbitrator is not in conflict with the settled legal position. There is nothing to suggest that the findings and conclusions rendered by the Ld. Arbitrator are per-se perverse, illegal or non- sustainable or against public policy.
17. Accordingly, the present petition under Section 34 of the Arbitration and Conciliation Act as pressed into service by the petitioner is therefore not sustainable within the scope and ambit of the provision, hence, the present petition is dismissed and disposed of.
18. File be consigned to record room after necessary compliance.
Announce in the open Court
on 12th October, 2023 (Ajay Kumar Jain)
District Judge(Commercial Courts 03),
SouthEast District, Saket Courts, ND.
OMP (COMM) 29/21 dated 12.10.2023 Pg. 13 of 13
Sobek Auto India Private Limited Vs. Mr. Vaibhav Gupta