Bombay High Court
Gidvani Marg vs M/S Contract Advertising India on 8 January, 2013
Author: R.D.Dhanuka
Bench: R.D.Dhanuka
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY.
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO.654 OF 2012
M/S MANEESH PHARMACEUTICALS
LIMITED, a company incorporated
under the provisions of The Companies Act, 1956,
and having their Registered Office at
23-24, Kalpataru Court, Dr. Choitram
Gidvani Marg, Chembur,
Mumbai 400 074. ... Petitioner.
V/s.
M/S CONTRACT ADVERTISING INDIA
PRIVATE LIMITED,
a company registered under the provisions
of The Companies Act, 1956, having their
Registered Office at Meadows, 6th Floor,
Sahar Plaza Complex, Andheri Kurla Road,
J.B.Nagar, Andheri (East),
Mumbai 400 059. ... Respondent.
Mr F. Pooniwala a/w/ Mr Prakash Shinde, Ms Jayashree Mani i/b M/s MDP
Partners for Petitioner.
Mr S.V. Doijode a/w Ms Taruna Nagpal and Mr Harsh Acharya i/b M/s Doijode
Associates for Respondent.
CORAM : R.D.DHANUKA, J.
Date of reserving the Judgment : December 18, 2012.
Date of pronouncing the Judgment : January 8, 2013.
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Judgment :
By this petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (for short "Act of 1996"), the petitioner seeks to challenge award dated 30th December 2011 delivered by the learned sole arbitrator directing the petitioner to pay to the respondent the principal sum of Rs.
69,17,551/- with interest @ 18% per annum on the said principal sum from 5th March 2009 till payment and/or realisation and cost of the arbitration proceedings quantified at Rs.2,45,000/- and rejecting the counterclaim made by the petitioner. Some of the relevant facts which emerge from the pleadings and documents filed by both parties are summarized as under.
2. By an agreement dated 19th February 2008 entered into between the petitioner and the respondent, respondent was appointed by the petitioner to handle all advertising and communication work required for the petitioner's brand "Disney Baby Care Products" with effect from 1st March, 2008.
3. By letter dated 19th February 2008, the petitioner's divisions "Svizewra Health Remedies" appointed respondent's division "Core Consulting" as the petitioner's consulting agent for "Disney Baby Care Products" at the total assignment fee of Rs.16,00,000/- for 4 months.
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4. It is the case of the respondent that February, 2008 onwards, the respondent and its division, Core Consulting carried out the work assigned to it by the petitioner and submitted estimates for the proposed work, all the estimates were approved and accepted by the Petitioner, invoices were raised on the Petitioner from time to time after the work was complete in terms of the corresponding estimates, all the invoices were duly received and liability thereunder was accepted by the Petitioner, the Respondent was paid against some of the invoices and was unconditionally assured for the balance payment.
5. On 11th March 2008, the respondent sent an e-mail to the petitioner referring to the meeting held between them and pursuant thereto attached the Pert Chart showing that the launch kit was to be ready by 2nd June 2008 and also attached some other documents for the petitioner's perusal.
6. It is the case of the respondent that various e-mails were sent by the respondent demonstrating that the respondent was always ready with the work and there was no whisper regarding any dissatisfaction by the petitioner. By a letter sent by e-mail on 23rd October 2008, the petitioner extended the contract with Core Consulting Division of the respondent for six months from October 2008 to March 2009 for total assignment fee of Rs.16,00,000/-.
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7. On 5th May 2009, the respondent sent an e-mail to the petitioner, reminding the petitioner to acknowledge the outstanding amount payable by the petitioner and provide a payment schedule and also enclosed the statements showing outstanding amount payable to the respondent and Core Consulting respectively along with the list of unapproved estimates.
8. By letter dated 10th June 2009, the respondent sent copies of all the relevant documents to the petitioner and requested to send the schedule of payment by end of the week. On 17th June 2009, the respondent received an e-
mail from the petitioner confirming that the finance team of the petitioner would co-ordinate with the finance team of respondent in order to send the schedule of payment to the respondent based on the file of invoices sent by the respondent's to the petitioner. On the same day i.e. 17th June 2009, the respondent sent an e-
mail to the petitioner requesting to send the schedule of payment to the respondent by that weekend itself and to release some payments in the month of June, 2009. The respondent sent reminder to the petitioner on 19th June 2009 to send the schedule of payment.
9. By letter dated 19th June 2009, petitioner assured the respondent that schedule of payment would be received by 24th June 2009. On 19th June 2009, Asmita 4/40 ::: Downloaded on - 09/06/2013 19:33:00 ::: .. 5 .. ARBP-654/12 the respondent sent an e-mail to the petitioner whereby it requested the petitioner to make the payment of the outstanding amount in the month of June itself. The petitioner did not reply to the respondent's aforementioned e-mail dated 19th June 2009. On 24th June 2009, the respondent by an e-mail sent another reminder to the petitioner to send the schedule of payment. On 24th June 2009 itself, Mr Jyotindra Gange, the Chief Finance Officer of the petitioner sent an e-mail to the respondent thereby informing the respondent that he was on leave and would revert to the respondent as soon as possible.
10. On 25th June 2009, as the petitioner failed to revert, the respondent sent an e-mail to the petitioner requesting the petitioner to send the schedule of payment that day itself. On 25th June 2009, the respondent received an e-mail from Mr Gange stating that he was with bankers and was attending office irregularly as he was undergoing a dental treatment and that no payment could be planned for that particular month and till 5th July 2009. On 25th June, 2009, the respondent sent an e-mail to the petitioner and reminded to make the payment against the outstanding amount payable by the petitioner in the month of June 2009 itself and requested the petitioner to send the schedule of payment by 26th June 2009.
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11. On 3rd July 2009, as the petitioner failed to send the schedule of payment to the respondent or pay the outstanding amount or reply to the e-mail sent by the respondent, the respondent by its e-mail sent another reminder to the petitioner to send the schedule of payment to the respondent and to pay the outstanding amount. On 3rd July 2009, Mr Gange, the representative of the petitioner sent an e-mail to the respondent stating that he was on leave and would resume on 6th July 2009 and that he would look into the matter as soon as possible.
12. On 7th July 2009, the respondent once again reminded the petitioner to pay the outstanding amount to the respondent and to send the schedule of payment. On 8th July 2009 Mr Gange sent an e-mail to the respondent thereby giving another excuse that though he had resumed on 6th July 2009, he had been out of office for work and assured that he will revert on 9th July 2009. On 9th July 2009, the respondent by its e-mail reminded the petitioner of its obligation.
On 9th July 2009, the respondent received an e-mail from Mr Gange stating that he is out of office till 13th July 2009, and due to meetings with visitors he did not do the needful as requested by the respondent and once again assured the respondent that he would do the needful at the earliest.
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13. The respondent thereafter by letters dated 13th July 2009, 16th July 2009, 21st July 2009, 27th July 2009 and 29th July 2009, sent further reminders to the petitioner to send the schedule of payment and to make payment against its long outstanding dues.
14. In response to some of these letter sent by e-mail through Mr Gange, the petitioner assured the respondent that it would do the needful at the earliest.
By letter dated 21st July 2009, Mr Gange informed the respondent that he was busy in arranging finance and that he would send a credible plan by the end of that week itself. By letter dated 29th July 2009, the petitioner assured the respondent that it would send the schedule of payment to the respondent that day itself. By letter dated 29th July 2009, the petitioner informed the respondent that it had reviewed the relevant files and invoices and that certain issues need to be cleared internally at its end and it would complete the said work by 30th July 2009.
15. On 31st July 2009, the respondent received an e-mail from the petitioner stating that it had arrived at a credit balance of Rs.30,11,024/- and that it would try and fit some payment in the cash flow for August and requested the respondent to once again send copies of certain invoices with approved estimates.
Asmita 7/40 ::: Downloaded on - 09/06/2013 19:33:00 :::.. 8 .. ARBP-654/12 On 31st July 2009, the respondent sent an e-mail to the petitioner whereby it informed the petitioner that the total outstanding amount payable to the respondent is Rs.70,15,025/- and not the amount wrongly stated by the petitioner in its e-mail dated 31st July 2009 and again forwarded the statement of outstanding amount payable by the petitioner to the respondent for its reference and requested the petitioner to pay the same. The respondent also informed the petitioner that it had sent the invoices with the approved estimates to Ms Gauri Sapte on 16th June 2009.
16. On 21st August 2009 Mr Gange sent an e-mail to Ms Gauri Sapte with a copy to the respondent whereby it referred to the three invoices mentioned in it's previous e-mail and informed that it would start clearing outstandings by paying Rs.5,00,000/- per month and desired to reconcile the accounts.
17. On 24th August 2009, the respondent by its e-mail requested the petitioner to meet to reconcile the accounts. On 28th August 2009, Mr Srinivas Bhat and Ms Rohini Kaul, representatives of the respondent met with Mr Gange at the petitioner's office to reconcile the accounts as requested. Mr Bhat and Ms Kaul also handed over the duplicate invoices required by the petitioner with approvals thereof.
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18. On 24th September 2009, the petitioner addressed a letter to the respondent and admitted the liability to pay to the extent of Rs.41,05,057/- and the petitioner informed the respondent that it had not accounted for the retainer invoices for the months of December, 2008.
19. It is the case of the respondent that the petitioner admitted its liability to pay the amount due to the respondent in its ledger accounts for the period 1st April 2009 to 31st December 2009. It is the case of the respondent that on 29 th October 2009 as the respondent did not receive the payments in spite of repeated reminders to the petitioner and the commitment of the petitioner to pay Rs.
5,00,000/- monthly, Mr Umesh Shrikhande, CEO of the respondent and Mr Srinivas Bhat met Mr Vinay Sapte of the petitioner to discuss the outstanding payment whereby Mr Sapte requested for certain clarifications on the film project and Mr Sapte confirmed that soon after receiving the clarifications, the petitioner will release the post dated cheques for the total outstandings as immediate payment was not possible due to liquidity crunch. On 31st October 2009, the respondent, sent an e-mail to the petitioner whereby it provided a note on the complete status of the film project and requested the petitioner to clear the film related issues and to issue post dated cheques for the outstanding amount undisputedly payable by the petitioner. On 31st October 2009 Mr Sapte replied Asmita 9/40 ::: Downloaded on - 09/06/2013 19:33:00 ::: .. 10 .. ARBP-654/12 to the respondent's e-mail whereby it thanked the respondent for the said note and assured that he would revert back.
20. By letter dated 3rd December 2009 and 17th December 2009, the respondent once again sent reminder to the petitioner to pay the outstanding amount with the respondent. On 6th January 2010, the respondent issued a credit note for an amount of Rs.42,135/- for writing off the two items for Rs.15000/-
and Rs.22500/- in invoice No.CMP108000884. On 6th January 2010, the respondent replied to the letter dated 24th September 2009 sent by the petitioner and after reconciling the accounts, informed the petitioner that the outstanding amount payable to the respondent by the petitioner is not Rs.41,05,057/- as wrongly stated by the petitioner in its said letter and that the petitioner had not taken into account the amount payable by it towards the invoices dated 4 th December 2008, 5th January 2009 and 4th February 2009. The respondent thereafter referred to the meeting held on 29th October 2009. With respect to Core Consulting, the respondent stated that Rs.14,24,888/- is payable by the petitioner's division. Svizera Health Remedies. By the said e-mail, the respondent once again called upon the petitioner to pay the long outstanding amount to the respondent.
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21. By letter dated 22nd January 2010, the petitioner for the first time raised disputes that services were not being delivered to it and the quality of services was not up to the mark and rendered late resulting in revenue loss to the petitioner. On 11th February 2010, the respondent sent a statutory notice of demand under Section 434 of the Companies Act, 1956 to the petitioner calling upon the petitioner to pay to the respondent an outstanding amount of Rs.
69,17,551/- together with interest thereon at the rate of 18% per annum from the respective due dates of the invoices till payment or realisation within 7 (seven) days from the receipt thereof by the petitioner, failing which, the petitioner was put on notice that the respondent would adopt appropriate proceedings against the petitioner.
22. On 1st April 2010, the respondent filed Company Petition (146 of 2010) in this Court for winding up of the petitioner company. On 5th October 2010, this Court disposed of the said Company Petition and directed the petitioner to provide an unconditional bank guarantee in the sum of Rs.
50,00,000/- in favour of the learned Prothonotary & Senior Master, High Court, Bombay and referred all the disputes forming the subject matter of the said petition to the sole arbitration of Mr Snehal Shah, Advocate with a direction to the learned arbitrator to endevour to pass an award within a period of six months Asmita 11/40 ::: Downloaded on - 09/06/2013 19:33:00 ::: .. 12 .. ARBP-654/12 from the date of the order.
23. The respondent filed statement of claim. The petitioner filed counterclaim. Oral evidence was led by the parties. Various applications were made by the petitioner before the learned arbitrator. On 30th December 2011, the learned arbitrator made an award allowing claims made by the respondent and rejecting the counterclaim.
24. Mr Pooniwala, the learned counsel appearing for the petitioner made following submissions :
That the impugned award is in violation of principles of natural justice by not permitting the petitioner to lead further oral evidence to prove counterclaim. The learned arbitrator has rejected the counterclaim on the ground of lack of evidence on the part of the petitioner. The learned arbitrator ought to have given opportunity to the petitioner to lead evidence to prove the quantum of counterclaim. The award is thus, in conflict with public policy. The learned arbitrator has not treated both parties equally. The petitioner was unable to present its case. The petitioner has raised sufficient grounds on this issue in para No.(aaa) and (hhh) of the petition. The learned counsel, on this issue referred to certain documents, dates and events which are summarized as under.Asmita 12/40 ::: Downloaded on - 09/06/2013 19:33:00 :::
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(a) On 18th February 2011, affidavit of evidence of respondent's
witness was filed. On 25th February 2011, cross examination of the respondent's witness commenced and remained incomplete. Arbitration meeting was fixed on 12th March 2011 to enable the petitioner to complete and cross examine the respondent's witness. The petitioner's Advocate, however, could not remain present due to some differences with petitioner and its Advocate, however Mr Chakrawarti, representative of the petitioner was present who requested for adjournment of the meeting. The learned arbitrator rejected the application for adjournment. Evidence of respondent's witness was concluded without any further cross examination of the petitioner. The learned arbitrator though condoned the delay in filing petitioner's counterclaim, however, the same was subject to the petitioner examining only one witness in respect of its counterclaim and the affidavit of evidence of the petitioner's witness was directed to be filed on or before 31st March 2011. The learned arbitrator though reopened the evidence of the witness of the respondent, it was subject to petitioner's paying cost to the respondent of the hearing held on 12th March 2011 and 17th March 2011 as condition precedent. Cross examination of petitioner's witness was concluded on 27th April 2011. The petitioner closed its case.
(b) On 29th April, 2011, petitioner made an application for being permitted to lead further evidence in order to prove the extent of damages Asmita 13/40 ::: Downloaded on - 09/06/2013 19:33:00 ::: .. 14 .. ARBP-654/12 alleged to be payable by the respondent to the petitioner. On 3 rd May 2011, the learned arbitrator rejected the said application made by the petitioner for leading further evidence.
25. Based on these dates and events and the documents forming part of the record, the learned counsel submits that application for leading further evidence was made withing 7 days from the date of conclusion of cross examination of petitioner's witness and the petitioner closing its case. No prejudice would have caused if petitioner would have been allowed to examine further witness who could be subjected to cross examination. It is submitted that on one hand, the learned arbitrator has rejected the application of the petitioner to lead further oral evidence to prove quantification of the damages and on the other hand, has rejected counterclaim on the ground of lack of evidence. The petitioner could be put to payment of cost and ought to have allowed to lead further evidence. It is submitted that the award is thus, in gross violation of principles of natural justice and deserves to be set aside.
26. Mr Doijode, the learned counsel appearing for the respondent on the other hand on this issue, submits that the petitioner cannot be allowed to make any submission on the issue of principles of natural justice as the petitioner has Asmita 14/40 ::: Downloaded on - 09/06/2013 19:33:00 ::: .. 15 .. ARBP-654/12 not raised any specific ground in the petition on this issue. The petitioner ought to have raised specific ground demonstrating as to how the impugned award was in violation of principles of natural justice so as to give an opportunity to the respondent to deal with the same. In absence of any such specific grounds with details, petitioner shall not be allowed to make any oral submissions on the issue of principles of natural justice. The learned counsel placed reliance on the Division Bench Judgment of this Court in case of Patel Engineering Co. v.
Konkan Railway Corporation Ltd 1 and more particularly para 11,14,16 and 17 which read thus :
11. The learned Single Judge has dealt with this objection raised on behalf of the appellant to the consideration of challenge to the award made against Claim No.7 in paragraphs 112, 113 and 114 of the order.
Paragraphs 112, 113 and 114 read as under :-
112. Mr. Chinoy had submitted that no ground had been made in the petition challenging the award relating to tunnel over-
breaks and that the ground relied upon in the petition viz. Ground
(q) was merely a general ground not adequate to entitle the petitioner to challenge the award in this regard. He further submitted that the material facts regarding this ground of challenge have not been pleaded. He, therefore, submitted that the petitioner was not entitled; to challenge the award in respect of Claim No.7. The submission is unfounded.
113. The petitioner had taken out a Notice of Motion being Notice of Motion No.1734 of 2004 for amendment of the petition. I dismissed that Notice of Motion on the ground that if the amendments sought constituted a new challenge it was barred by limitation in view of the judgment of this Court in Pushpa N.
1. 2009(5) Bom.C.R.256 Asmita 15/40 ::: Downloaded on - 09/06/2013 19:33:00 ::: .. 16 .. ARBP-654/12 Mulchandani Vs. Admiral R. Tahiliyani, 2001(1) Bom. C.R> 592(O.S.). On the other hand, if it was covered by an existing ground or was merely an amplification of an existing ground, the petitioner would be at liberty to urge the same. I had made it clear to the respondent that they were at liberty to deal with this ground of challenge including by filing a further affidavit or fresh documents. The respondent however did not choose to file any further affidavit or documents. In ground (q) the petitioner had expressly taken the ground that the arbitrators had while making the award ignored the mandate of the contract. It was further stated that the same amounted to re-writing the contractual terms which they had no power to do. The respondent, thereafter, illustrated this contention by furnishing two examples. The examples pertained to Claim No.1 and Claim No.10. The illustrations were prefaced with the words : " This amounts to re- writing of contract terms which no Court has the power e.g. (emphasis supplied). It is thus clear that the challenge on this ground was not restricted to Claim No.1 and Claim No.10.
114. In the circumstances, these grounds formed the basis of the challenge in respect of all the claims. It was not necessary for the petitioner in such circumstances to set out the claim numbers. Having challenged all the claims on this ground, it was again not mandatory for the petitioner to press its challenge in respect of all claims. Indeed, in the affidavit in reply to the petition, there is no grievance of ground (q) being vague. Nor was the petitioners in any manner called upon to specify the claims it intended to challenge. It often happens that various grounds are taken in pleadings, only some of which are finally pressed.
14. Perusal of the above quoted provisions shows that the award made by the Arbitral Tribunal can be challenged by making an application to the Court for setting aside such award. The section itself does not give any form of the application. But sub-section (2) of section 34 specifies the ground on which the award made by the arbitrator can be set aside by the Court. This Court has framed rules under the Arbitration Act. Rule 803-C(a) is relevant for the present purpose. It reads as under:-
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803-C(a) Every petition shall be divided into paragraphs numbered
consecutively and shall contain a concise form of statement of the material facts relied on and the nature of the relief asked for and shall clearly specify the persons liable to be affected thereby.
The original Arbitration Agreement or the Award or duly certified copy thereof, if any, shall whenever necessary be annexed to the petition.
16. In our opinion, therefore, it cannot be said that only on the basis of what is contained in ground (q), challenge to the arbitral award in relation to the Claim No.7 could be raised, It was contended on behalf of the respondent that the Court can under section 34(2)(b) of the 1996 Act suo motu consider setting aside the award regarding Claim No.7 and reliance has been placed in the decision in the case of (Hastimal Dalichand Vs. Hiralal Motichand), 1954 B.C.I. (soft) 108 : A.I.R. 1954 Bom. 243. Reference was also made to difference in the language used in section 34(2)(a) and section 34(2)(b) of the Act. Section 34(1) expressly stipulated that the award can be challenged only by an application for setting aside that award in accordance with sub-section (2) and sub section (3) and therefore, this excludes any suo motu action by the Court to invalidate an award. The decision of this Court in Hastimal's case was considered by the Supreme Court in its judgment in the case of (Madan Lal Vs Sunder Lal), 1967 DGLS (soft) 68 : A.I.R. 1967 S.C. 1233. The observations of the Supreme Court in paragraphs 8 and 10 of its judgment in the case of Madan Lal, in our opinion, are relevant. They read as under :
8. It is clear therefore from the scheme of the Act that if a party wants an award to be set aside on any of the grounds mentioned in section 30 it must apply within 30 days of the date of service of notice of filing of the award as provided in Article 158 of the Limitation Act. If not such application is made the award cannot be set aside on any of the grounds specified in section 30 of the Act. It may be conceded that there is no special from prescribed for making such an application and in an appropriate case an objection of the type made in this case may be treated as such an application, if it is filed withing the period of limitation. But if an objection like this has been filed after the period of limitation it Asmita 17/40 ::: Downloaded on - 09/06/2013 19:33:00 ::: .. 18 .. ARBP-654/12 cannot be treated as an application to set aside the award, for if it is so treated it will be barred by limitation.
10. Learned Counsel for the appellant however urges that section 17 gives power to the Court to set aside the award and that such power can be exercised even where an objection in the form of a written statement has been made more than 30 days after the service of the notice of the filing of the award as the Court can do so suo motu. He relies in this connection on Hastimal Dalichand Bora Vs. Hiralal Motichand Muthe and Saha & Co. Vs. Ishar Singh Kripal Singh. Assuming that the Court has power to set aside the award suo motu, we are of opinion that powser cannot be exercised to set aside an award on ground which fall under section 30 of the Act, if taken in objection petition filed more than 30 days after service of n otice of filing of the award, for if that were so the limitation provided under Article 158 of the Limitation Act would be completely negative. The two cases on which the appellant relies do not in our opinion support him. In Hastimal case it was observed that " if the award directs a party to do an act which is prohibited by law or if it is otherwise patently illegal or void it would be open to the Court to consider this patent defect in the award suo motu, and when the Court acts suo motu, and when the Court acts suo motu no question of limitation prescribed by Article 158 can arise". These observations only show that the Court can act suo motu in certain circumstances which do not fall within section 30 of the Act.
17. It is to be seen that so far as 1996 Act is concerned, there is no provision similar to the section 34 of the 1940 Act. Therefore, it cannot be said that in the scheme of 1996 Act there is any suo motu power in the Court to set aside an award and the power of the Court of suo motu setting aside an award in 1940 Act do not extend to set aside the award on the grounds which fall within section 30 of the 1940 Act. In our opinion, therefore the submission has no substance. It is to be seen that the challenge both under section 34(2)(a) and 34(2)(b) is adversarial and adjudicatory and is not suo motu or inquisitorial. Under both sub-sections 34(2)(a) and 34(2)(b) is appropriate grounds and material facts for such grounds, need to be stated in the petition. The only difference in section 34(2)(b) is regarding the burden of proof, Asmita 18/40 ::: Downloaded on - 09/06/2013 19:33:00 ::: .. 19 .. ARBP-654/12 apparently on the basis that a Court would be aware of the law for the time being in force and the public policy of India. In our opinion, therefore, the learned Single Judge was not justified in considering the challenge to the award in relation to Claim No.7 only on the basis of ground (q) in the petition. The order of the learned Single Judge to that extent is liable to be set aside.
27. In the alternative, the learned counsel appearing for the respondent submits that from the material placed on record before the learned arbitrator and in the present proceedings, it is clear that the learned arbitrator had shown enough indulgence to the petitioner. The petitioner was some how delaying the arbitration proceedings on one or the other flimsy ground. The learned counsel in support of this plea, invited my attention to various events emerging from the documents forming part of the record which are summarised as under :
In the preliminary meeting held on 25th November 2010 before the learned arbitrator, the petitioner sought six weeks time for filing written statement and counterclaim along with documents, which was granted by the learned arbitrator. On 3rd January 2011, the petitioner filed its written statement and sought extension of ten days from the date of said order to file counterclaim.
On 24th January 2011, petitioner requested for further time to file counterclaim and sought adjournment of hearing. The learned arbitrator rejected the application for adjournment and directed the petitioner to file an application to Asmita 19/40 ::: Downloaded on - 09/06/2013 19:33:00 ::: .. 20 .. ARBP-654/12 take the counterclaim on record as soon as the same was ready. In the meeting held on 28th January 2011, documents were marked by the learned arbitrator.
On 15th February 2011, the respondent filed affidavit of his witness No.1 in lieu of examination-in-chief. Cross examination of the first witness of the respondent was partly conducted on 25th February 2011. On 12th March 2011, Advocate for the petitioner did not attend the meeting and sought adjournment through a representative. The representative of the petitioner did not cross examine the witness of the respondent. The evidence of witness No.1 of the respondent was concluded. On 12th March 2011, the respondent opposed an application filed by the petitioner seeking condonation of delay in filing counterclaim and tendering before the learned arbitrator. On 17th March 2011, petitioner made an application for reopening of the evidence of witness No.1 of the respondent which was opposed by the respondent. The learned arbitrator, however, allowed the application filed by the petitioner for condonation of delay in filing counterclaim and the evidence of the first witness of the respondent was reopened and the counterclaim was taken on record. On 26 th March 2011, cross examination of witness No.1 of the respondent was continued and concluded.
The documents relied upon by the petitioner in support of the counterclaim were marked exhibits by the learned arbitrator on 26th March 2011. The respondent filed its reply to the counterclaim on 30th March 2011. On 9th April 2011, Asmita 20/40 ::: Downloaded on - 09/06/2013 19:33:00 ::: .. 21 .. ARBP-654/12 petitioner filed affidavit in lieu of examination-in-chief of the first witness and was taken on record. On 22nd April 2011, cross examination of the witness of the petitioner was concluded. The petitioner closed its case. Re-examination was concluded by the Advocate for the petitioner.
28. On 29th April 2011, the petitioner filed an application for leading further evidence on fresh issue. On 30th April 2011, petitioner filed an application for recalling of the respondent's witness. On 3rd May 2011, the learned arbitrator rejected both the applications. On 5th May 2011 arguments commenced by the respondent's counsel and were concluded on 25th June 2011.
29. On 5th July 2011, the learned arbitrator in response to the letter dated 4th July 2011 of the Advocate for the petitioner granted adjournment of hearing and directed the petitioner to file written submission on or before 27th July 2011.
On 27th July 2011, petitioner filed brief written submissions before the learned arbitrator. On 29th July 2011, the petitioner through counsel commenced arguments and concluded it on 30th July 2011. Both the counsel were also allowed to make further submissions by way of rejoinder and sir-rejoinder.
30. The grounds (aaa) and (hhh) read as under :
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(aaa) The impugned Award is against the principles of Natural
justice and equity.
(hhh) The Award is made in violation of principles of Natural
Justice.
31. From the perusal of aforesaid grounds raised by the petitioner on the issue of natural justice and equity, it is clear that the petitioner has not indicated as to how the award is against the principles of natural justice and equity or in violation thereof. In my view, these two sentences in the petition do not indicate the basis on which the petitioner has a grievance in respect of the impugned award passed in alleged violation of the principles of natural justice and equity.
The petitioner ought to have made adequate submissions in support of the ground raised in the petition. What is indicated in grounds (aaa) and (hhh) are in my view not sufficient or adequate. The petitioner, thus, cannot be allowed to supplement the submissions across the bar, otherwise the respondent would be deprived of opportunity to deal with such submissions made across the bar.
However, with a view to do complete justice in the matter, I have considered the material on record produced by both the parties to find out whether the award is in violation of principles of natural justice or equity.
32. Perusal of minutes of meeting held on 17th March 2011 by the learned Asmita 22/40 ::: Downloaded on - 09/06/2013 19:33:01 ::: .. 23 .. ARBP-654/12 arbitrator shows that though the record did not show sufficient reasons for condoning the delay, with a view not to give the respondents the opportunity to have a grievance that their counterclaim was not heard, and to avoid multiplicity of proceedings, the learned arbitrator condoned the delay and took the counterclaim on record subject to conditions stated therein. The learned arbitrator also recorded that the counsel for petitioner herein has tendered an apology on behalf of the Advocates and the petitioners. The learned arbitrator took the counterclaim on record and rejected the objections raised by the respondents in taking the same on record. It is relevant to note in the minutes of said meeting, the learned arbitrator recorded that the counterclaim was taken on record recording the submissions made by the counsel for the petitioner that the evidence with regard to the purported loss suffered by the petitioners shall be given compositely by the same witness of the petitioner who would testify on the issue of alleged delay and default committed by the respondents herein (Claimants). The learned arbitrator also recorded the assurance given by the learned counsel for the petitioner that the evidence of its witness shall be filed on or before 31st March 2011. The learned arbitrator accordingly recalled the witness of the respondents on the condition that petitioners paying to the respondent costs of the hearing held on 12th March 2011 and 17th March 2011 as condition precedent. The learned arbitrator clarified that the said order/directions had Asmita 23/40 ::: Downloaded on - 09/06/2013 19:33:01 ::: .. 24 .. ARBP-654/12 been made only keeping in mind that the petitioners should not have a grievance that full opportunity was not accorded to the petitioners and also keeping in mind the interests of justice.
33. Perusal of minutes of meeting held on 3rd May 2011 by the learned arbitrator shows that the counsel appearing for the petitioner had accepted while filing application for leading evidence on fresh issue that petitioner would file composite evidence in answer to the issue that delay has been caused by the respondents resulting in a loss being suffered by the petitioners and the quantification of the said loss as set in the counterclaim alongwith documentary evidence. The petitioner submitted that the witness who had deposed on behalf of the petitioner was not competent to lead evidence with regard to the quantum of damages and full opportunity shall be given to the petitioners to prove their case. The learned arbitrator has recorded statement of the petitioner's counsel that there was no person named in the application who would give further evidence on behalf of the petitioners as the second witness and also that no such evidence was ready and the petitioners would require some time to prepare some another witness. The respondents through their learned counsel, strongly opposed the application for permission to examine second witness on various grounds amongst the ground that the petitioner wanted to improve its evidence Asmita 24/40 ::: Downloaded on - 09/06/2013 19:33:01 ::: .. 25 .. ARBP-654/12 and fill up the lacuna in their evidence. In the evidence of the first witness examined by the petitioner, the petitioner could not prove any damages alleged to have been suffered nor could produce any material in support of counterclaim.
The learned arbitrator after considering documents on record and past conduct of the petitioner, took a view that though sufficient indulgence was shown by the learned arbitrator to the petitioner, however, application for examining second witness was made with a view to cause prejudice to the claimant and delay the proceedings. Dates for advancing arguments were fixed by consent of Advocates of the parties and thus, application was not only belated but on the facts of the case also not maintainable in law. The learned arbitrator recorded that full opportunity had been afforded to the petitioners as they desired. Even after 17th March 2011, the petitioner did not indicate that they want to lead evidence of any witness and to prove alleged delay caused by the respondent and to prove the counterclaim. The learned arbitrator rendered a finding that an application was clearly afterthought and therefore rejected the same.
34. Minutes of meeting held on 3rd May 2011 indicates that sufficient indulgence was shown by the learned arbitrator in past by granting extension of time for filing counterclaim, recalling of the witness examined by the respondent, counterclaim taken on record subject to conditions and accepting the statement Asmita 25/40 ::: Downloaded on - 09/06/2013 19:33:01 ::: .. 26 .. ARBP-654/12 of the petitioner that only one witness would be examined on composite issues and all documentary evidence in support of such issues would be filed by the petitioner. The learned arbitrator was also kind enough to recall the witness examined by the respondent at much belated stage. Record also indicates that in application seeking permission to examine second witness, neither the name of the person to be second witness was mentioned nor such evidence was ready.
The learned arbitrator in the facts of this case, in my view, was fully justified in rejecting the application of the petitioner to examine second witness on quantification. The conduct of the petitioner as indicated from the record clearly shows that the petitioner was all throughout interested in delaying the arbitration proceedings by one or other excuse. The learned arbitrator, in my view, was liberal in showing all indulgence to the petitioner. I am, therefore, not inclined to accept the submission made by the learned counsel for the petitioner that no sufficient opportunity was given by the learned arbitrator to the petitioner or that both parties were not treated equally by the learned arbitrator. In any event, since the learned arbitrator has already rejected the allegations of delay and/or latches made by the petitioner against the respondent even if the petitioner was not allowed to examine second witness on the issue of quantification of damages alleged to have been suffered, in my view, no prejudice is caused to the petitioner by rejecting its application for leading evidence of second witness.
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35. Next submission of the learned counsel appearing for the petitioner is that various findings recorded by the learned arbitrator are perverse and are ignoring the evidence produced by the petitioners. It is submitted that learned arbitrator has not dealt with some of the submissions made by the petitioner in the impugned award. It is submitted that findings rendered by the learned arbitrator should have been arrived at on the basis of material on record. The learned counsel invited my attention to grounds (aa), (kk) and (qq) raised in the petition on this issue. The learned counsel for the petitioner submits that under agreement dated 19th February 2008, entered into between the division of the petitioner and the respondent, it was agreed that respondent shall provide consultancy services to the division of the petitioner. The petitioner has extended the contract for six months from October 2008 till March 2009 on the same terms and conditions. It is submitted that the division of respondent, however did not provide any services to the division of petitioner during extended period and issued two invoices without rendering services. It is submitted that the respondent did not deny in their written statement to counterclaim that respondent did not render any services to the petitioner. The respondent did not examine any witness to prove that any services were rendered by the division of the respondent to the division of the petitioner during extended period. The learned counsel submits that though in the evidence of Mr Sapte Asmita 27/40 ::: Downloaded on - 09/06/2013 19:33:01 ::: .. 28 .. ARBP-654/12 examined by the petitioner, it was deposed that respondent did not render any services after extension, there was no cross examination on the said deposition.
The learned arbitrator failed to consider this part of evidence while allowing claims made by the respondents. It is submitted that case of the respondent before the arbitration that it was a lumpsum contract and thus, respondent was not required to provide any services during extended period is contrary to the contract and was not proved by the respondent. It is submitted that if according to respondent, it was a lumpsum contract, respondent ought to have issued invoice for 16 lacs; whereas invoices were issued only for 8 lacs. The learned counsel submits that even letter seeking extension provides that respondent will have to provide services and extension was sought by the respondent on that ground. The learned counsel submits that the fact that the respondent issued only two invoices shows that it was not a lumpsum contract and hence unless services were provided by the respondent to the petitioner, no payment was due from the petitioner to the respondent. The learned arbitrator has considered the letter dated 24th September 2008 as admission of liability, whereas the petitioner did not admit any such liability as erroneously recorded in the award. The respondent, thus ought to have proved its claim. The award is based on no evidence. The learned counsel submits that conduct of the petitioner cannot be a ground to allow claims under invoices raised by the respondent when no Asmita 28/40 ::: Downloaded on - 09/06/2013 19:33:01 ::: .. 29 .. ARBP-654/12 services were rendered by the respondent. Interpretation of the learned arbitrator is contrary to Clauses 3 and 8 of the contract which are to be read together and demonstrate that services to be provided was must. The learned counsel submits that the claim awarded by the learned arbitrator is contrary to the terms of the contract arrived at between the parties and deserves to be set aside.
36. The learned counsel appearing for the petitioner submits that the learned arbitrator has allowed the claim for interest @ 18% per annum relying upon the invoices issued by the respondents. The learned arbitrator has also considered that the transaction being commercial in nature while allowing interest @ 18% per annum is reasonable. The learned counsel submits that though invoices issued by the respondent contained a provision for interest @ 18% per annum and were exhibited by consent of both the parties, it does not prove the contents of the invoices. It is submitted that respondent did not prove that interest @ 18% per annum was reasonable. The respondent also did not prove by leading evidence to show as to whether commercial rate of interest was 18% per annum as on 5th February 2009 and onwards. It is submitted that this part of the award is based on no evidence and is liable to be set aside.
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37. The learned counsel appearing for the petitioner submits that the rejection of counterclaim by the learned arbitrator is contrary to the evidence placed on record by the petitioners and is also contrary to the terms of contract.
It is submitted that it was an accepted position that launch kit was to be completed by June 2008. The respondents were fully aware of the importance of adhering of time for launch of product. In the cross examination of petitioner's witness, it was deposed that the commercial production was started by the petitioner in June-July 2008 and the product was launched in October-November 2008. The witness examined by the respondent also admitted that product of the petitioner was launched in the market. The petitioner has pointed out and proved that petitioner was liable to a royalty to Disney which was part of the counterclaim. The learned arbitrator however, did not allow the petitioner to lead evidence on the quantification and to prove the payment and rejected the counterclaim. Finding of the learned arbitrator that there was no delay on the part of respondent in rendering services, contrary to evidence on record. The learned arbitrator has not dealt with the pleadings and evidence in the impugned award. Rejection of counterclaim by the learned arbitrator is thus in violation of principles of natural justice and without affording proper opportunity to the petitioner to prove counterclaim and thus, this part of the award deserved to be set aside.
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38. Perusal of the impugned award indicates that agreement entered into between the parties was admitted by both parties. The contents thereof was not in dispute. The learned arbitrator has rendered a finding that invoices had been raised by the claimants, (respondent herein) on the basis of the said agreement entered into between the parties. During the substance of the contract and while the claimant had rendered service thereunder, the respondent (present petitioner) did not raise any dispute as to the quality of service and quantity of service provided by the claimant. Mr Doijode, the learned counsel invited my attention to the correspondence exchanged between the parties forming part of the record before the learned arbitrator and filed in this proceedings which indicate that the petitioner had all through given assurances to consider the invoices issued by the respondent and to pay the dues of the respondent and had never raised any objection in respect of the quantity or quality of service rendered by the respondent. The witness examined by the petitioner had also admitted that the petitioner had directed the respondent's representative to initiate contact between the finance department of the petitioner and the finance department of the respondent. It was also admitted that the files of the invoices had already been sent to the finance department and that it should offer schedule of payment to the claimants. The learned arbitrator has considered all these correspondence on record and the oral evidence led by parties and rendered finding that there Asmita 31/40 ::: Downloaded on - 09/06/2013 19:33:01 ::: .. 32 .. ARBP-654/12 was no indication of any dispute existing between the parties. The learned arbitrator has also considered e-mail dated 21st August, 2009 by which the petitioner informed the respondent that petitioner were in a position to clear Rs.5 lacs per month, though it was added that accounts need to be reconciled. The witness examined by the claimants in examination in chief deposed that in the meeting held between the parties, the claimants were led to believe that the payments would be released by the respondents. There was no cross examination of claimant witness on this deposition. There was no denial that the invoices till February 2009 for retainer fees had been received by the petitioner. Only for the first time on 22nd January, 2010, the petitioner raised a dispute and denied the claims of the claimant and raised a dispute in regard to the quality of service provided. The learned arbitrator has rightly rendered a finding that the dispute regarding the quality of service and delay was an afterthought and was an attempt to delay amount due to the claimant. The learned arbitrator rendered a finding that the evidence on record shows an admission of liability on the part of the petitioner. Accordingly the learned arbitrator rejected the submission made by the petitioner that the claimant was required to prove that services were actually rendered by it to the petitioner. On interpretation of the contract, the learned arbitrator has also recorded a finding that it was not within a contemplation of either party that the retainer fees were payable only if services Asmita 32/40 ::: Downloaded on - 09/06/2013 19:33:01 ::: .. 33 .. ARBP-654/12 were rendered in a particular month and there was no nexus between clause 3 and clause 8 of the said agreement. The learned arbitrator rendered a finding that nothing was stated in the agreement to the effect that the monthly fees was to be paid only if some services was provided by the respondent to the petitioner.
The learned arbitrator rightly rejected the submission made by the petitioner that the respondent was eligible to receive payment only if services were provided by the respondent to the petitioner. The learned arbitrator rendered a finding that it was clear from the evidence on record that consultancy fees were a fixed fee of Rs.16,00,000/- which was for convenience/agreement between the parties and that it would be paid in four installments of Rs. 4 lacs each. Admittedly the respondent had not made claim in respect of last two installments payable under the extended consultancy agreement dated 23rd October, 2010. The learned arbitrator has also rendered a finding that in so far as amount payable under consultancy agreement is concerned, there was no denial of liability of that. It was stated that since there was no way the said amounts were to be included in any particular account, the books of account of the petitioner did not show any balance outstanding. The learned arbitrator has also rendered a finding that all the estimates and invoices from Exhibit C-28 to Exhibit C-73 had been admitted by the petitioner as there was no such dispute to the said invoices and accordingly held that the claimants were entitled to the principal sum of Asmita 33/40 ::: Downloaded on - 09/06/2013 19:33:01 ::: .. 34 .. ARBP-654/12 Rs. 69,17,551/-.
39. Considering the correspondence as well as the oral evidence on record, in my view the learned arbitrator was right in rendering various findings referred to aforesaid which are not perverse. The learned arbitrator has in my view has considered each and every argument advanced by the parties and has considered the documentary as well as oral evidence on record and he rendered such findings of fact which cannot be re-appreciated under Section 34 of the Arbitration and Conciliation Act, 1996. I am, thus not inclined to accept the submission made by the learned counsel appearing for the petitioner that the award is based on no evidence or is contrary to the evidence on record. On the issue of whether contract provided for a lumpsum fee or not, in my view the interpretation of the learned arbitrator is a possible interpretation. In my view, thus this court cannot substitute the view of the learned arbitrator which is based on a possible interpretation by taking different view under Section 34 of the Arbitration and Conciliation Act, 1996. I am, therefore, not inclined to accept the submission of the petitioner made through its learned counsel that the contract did not provide for lumpsum fees or that the services required to be rendered by the respondent were not rendered, hence the petitioner was not liable to make any such payment under the disputed invoices. On the contrary the record Asmita 34/40 ::: Downloaded on - 09/06/2013 19:33:01 ::: .. 35 .. ARBP-654/12 shows that the petitioner never raised any dispute in respect of quality and quantity of the services rendered by the respondent.
40. As far as award of interest at the rate of 18% per annum by the learned arbitrator is concerned, it is not in dispute that interest at the rate of 18% was provided on the invoices issued by the respondent and admittedly received by the petitioner. The rate of interest was one of the terms and conditions on the invoices which was acted upon by the parties. Such invoices were taken on recored by the learned arbitrator. I am, therefore, not inclined to accept the submissions made by Mr Pooniwala the learned counsel for the petitioner that there was no agreement for payment of any interest or in any event at the rate of 18% per annum. In any event, in view of Section 31(7)(a) of the Arbitration and Conciliation Act, 1996, unless both parties would have agreed that no interest was payable, arbitrator is empowered to include the sum for which award is made interest, at such rate as it deems reasonable, an the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. The respondent was thus not under any obligation to prove that the contract was commercial contract and or what was the prevailing rate of interest during the period which was considered for payment of interest by the learned arbitrator. In any event Asmita 35/40 ::: Downloaded on - 09/06/2013 19:33:01 ::: .. 36 .. ARBP-654/12 such documents demonstrating the date of accrual approval of cause of action and the invoices containing the rate of interest at 18% per annum were on record before the learned arbitrator. In my view thus no fault can be found with the rate of 18% awarded by the learned arbitrator in the facts and circumstances of this case. Similarly no fault can be found for the period for which the learned arbitrator awarded the interest at the rate of 18% per annum. It was not the submission of either parties that there was any prohibition under any of the provision of the agreement entered into between the parties from the payment of interest. In my view, the learned arbitrator was thus right in awarding interest @ 18% per annum and for the period in question and no interference with that part of the award is warranted under section 34 of the Act.
41. Though the learned counsel appearing for the petitioner canvassed before me that the claim has been awarded by the learned arbitrator contrary to the terms of contract arrived at between parties, learned counsel could not demonstrate as to how the claim awarded was contrary to the terms of the contract. In my view, there is no merit in this submission made by the learned counsel for the petitioner.
42. In so far as submission regarding rejection of the counter claim made Asmita 36/40 ::: Downloaded on - 09/06/2013 19:33:01 ::: .. 37 .. ARBP-654/12 by the petitioner before the learned arbitrator is concerned, in my view the learned arbitrator has considered the documentary evidence as well as oral evidence on record and has rendered a finding that there was no delay on the part of the claimants in rendering the services to the petitioner. It has been held that the date referred to in the Pert Chart was not the date agreed for launch of the product. The learned arbitrator has rendered a finding that the documentary evidence indicates that there was no date which was agreed upon for the launch of the product. Only after almost a year of providing service by the claimant to the respondent, the dispute was raised with regard to alleged quality of service as also timely performance of the service. The learned arbitrator has held that ground of delay was an afterthought. On the contrary record indicates that there were assurances of payment made by the petitioner to the respondent for the said services. The learned arbitrator has rightly rendered the finding that the present petitioner has failed to prove that there was any delay or default in providing the services by the respondent to the present petitioner. After rendering such finding, the learned arbitrator has rightly rejected the submissions made by the petitioner that there was proof on record that the petitioner has in fact made payments to Walt Disney under the licence agreement. Though the petitioner has examined the witness to prove the claim for damages including quantification, petitioner has failed to prove the quantification. In my view, Asmita 37/40 ::: Downloaded on - 09/06/2013 19:33:01 ::: .. 38 .. ARBP-654/12 since the petitioner had failed to prove any delay on the part of the respondent herein in rendering the services, even though application for examining second witness was rejected by the learned arbitrator in the facts of this case, no prejudice is caused to the petitioner. In my view, thus the said order rejecting the application of the petitioner to examine second witness is not in violation of principles of natural justice. The learned arbitrator has treated both the parties equally. The petitioner was not prevented from proving its case as sought to be canvassed by the petitioner.
43. In my view, there is no merit in any of the submission made by the petitioner and the petition is devoid of merits and does not warrant any interference under Section 34 of the Act.
44. During the course of arguments, the learned counsel appearing for the petitioner furnished a copy of the letter issued by BIFR showing that the reference under Section 15(2) is registered under the provisions of Sick Industrial Companies Act in respect of the petitioner and enquiry is initiated and is pending.
Mr Pooniwala, the learned counsel for the petitioner fairly stated that on the basis of such enquiry, under Section 22 of the Sick Industrial Companies Act, this court could still hear the arbitration petition under Section 34 and the present Asmita 38/40 ::: Downloaded on - 09/06/2013 19:33:01 ::: .. 39 .. ARBP-654/12 proceedings were not required to be stayed.
45. For the reasons aforesaid, I pass the following order :-
(a) Arbitration petition is rejected.
(b) There shall be no order as to costs.
[ R.D. DHANUKA, J.]
46.
Pursuant to an order dated 5th October 2010 passed in Company Petition No.146 of 2010, the petitioner had furnished a bank guarantee in the sum of Rs.50 lacs in favour of Prothonotary & Senior Master, which was to be kept alive until disposal of the Arbitration Petition. By an order dated 2nd February 2012, this Court recorded an undertaking on behalf of the petitioner herein that if it fails to file the proposed Arbitration Petition or upon filing of the same fails to obtain favourable orders therein, the respondent herein shall be entitled to invoke the said bank guarantee. This Court accepted the said undertaking.
47. At this stage, the learned counsel appearing for the petitioner seeks stay of operation of this order to enable the petitioner to challenge this order in appeal and seeks an injunction restraining the respondent from encashing the Asmita 39/40 ::: Downloaded on - 09/06/2013 19:33:01 ::: .. 40 .. ARBP-654/12 bank guarantee in the sum of Rs.50 lacs pursuant to the order referred to above.
Application is vehemently opposed by the learned counsel appearing for the respondent. In the facts of this case, stay is refused.
( R.D.DHANUKA, J.) Asmita 40/40 ::: Downloaded on - 09/06/2013 19:33:01 :::