Delhi District Court
Bhasin Infotech & Infrastruture Pvt Ltd vs Conquerent Control System Pvt Ltd on 31 August, 2021
In the Court of Shri Sanjiv Jain,
District Judge (Commercial Court-03), Patiala House Courts
New Delhi
OMP Number. 23/19
Bhasin Infotech & Infrastruture Pvt Ltd,
28 Raja Garden, New Delhi.
... Petitioner/objector
versus
Conquerent Control System Pvt Ltd
Plot No. 604-605, Sector 8 IMT Manesar,
Gurgaon, Haryana.
... Respondent/claimant
Date of institution : 01.02.2019 Date of reserving judgment : 25.08.2021 Date of decision : 31.08.2021 JUDGME NT
1. This petition under Section 34 of the Arbitration and Conciliation Act, 1996 (as amended upto date) hereinafter called the 'Act' challenges the award dated 30.10.2018 passed by the Ld. Arbitrator Sh. C. B. Jaglian, whereby, a sum of Rs. 45,88,689/- was awarded towards the balance price of goods and interest thereon at the rate provided under Section 16 of the MSME Act, 2006 from 07.11.2017 till the date of payment along with the cost of Rs. 20,000/- which was paid by the respondent towards the fee of the Arbitrator.
OMP Comm No. 23/2019 Page No.1 of 16Brief facts:
2. Briefly the facts are that the respondent, registered as a small manufacturing unit under MSME Act, 2006, carrying on the business of supplying electrical control panel and distribution board, supplied the electrical control panel and distribution boards to the petitioner for about four years. It raised the bills during the said period against which the petitioner released the part payments. The bills relating to the period from 07.05.2015 to 18.04.2016 amounting to Rs.
32,11,514/- remained unpaid. The respondent regularly followed up with the petitioner for release of the payments but the petitioner neither released the payments nor placed further orders. The respondent then made a reference for settlement of disputes to the Chairman, Micro & Small Enterprises Facilitation Council, Haryana. Since, no settlement could be reached between the parties before the council, the dispute was referred to the Arbitrator by the order of the Government of Haryana vide dated 08.08.2014. The parties put their appearance before the Arbitrator on 10.08.2018. The respondent filed its statement of claims, which the petitioner replied vide dated 21.09.2018 raising the objection about the venue of the arbitral proceedings. The objection was allowed by the Arbitrator and the venue was shifted from Gurgaon to Delhi. It was alleged by the petitioner before the Arbitrator that the OMP Comm No. 23/2019 Page No.2 of 16 invoices filed by the respondent are highly escalated, it has already paid for the invoices in full and now the respondent is claiming for the escalated invoice just to arm twist the petitioner. The respondent filed the documents Ex. C1 to C32 in support of its claims, whereas, the petitioner filed an affidavit of its AR namely Sh. P. N. Joshi Ex. RA and the copy of the board resolution. Ld. Arbitrator, after hearing the parties at length, passed the award.
3. The petitioner challenged the award on the following grounds:
A. That the award suffers from patent illegality and is perverse as the Arbitrator did not follow due process of law and conducted the proceedings in an unfair and bias manner without affording equal opportunities to the parties to present their case rendering the award against the public policy of India.
B. That the Arbitrator failed to appreciate that the respondent did not file its statement of claims in a proper format, which lacked in necessary details. It had only filed the claims in form 1 before Haryana Micro & Small Enterprises Facilitation Counter at Chandigarh under which at Point 16, the remedies sought to have been stated to be NIL / MSME. It is stated that if a decision is arrived at on no evidence or the evidence, which is thoroughly unreliable and no reasonable person would act on it, the order would be perverse. In the present case, both the parties were directed to file their evidence but the respondent neither filed any evidence by way of affidavit nor produced any witness except filing the documents, which were exhibited. It is stated that since, no affidavit was tendered in evidence, the documents being C1 to C22 could not have been exhibited and read in evidence. Further, the petitioner did not get any opportunity to cross examine the witness. On the contrary, the petitioner's witness was subjected to cross examination OMP Comm No. 23/2019 Page No.3 of 16 by the respondent. This objection was raised before the Arbitrator but he treated the documents of the respondent to be gospel truth and rejected the contentions holding that the documents Ex. C1 to Ex. C22 were admitted in evidence without any objection from the petitioner regarding their admissibility or the mode of proof. It was though pleaded by the petitioner that the respondent has only filed the invoices which are highly escalated and for materials, which were defective. It is stated that the petitioner was not given opportunity to admit or deny the documents filed by the respondent and the Arbitrator in a perverse manner, came to a conclusion that the petitioner did not object to the admissibility of the documents of the respondent.
C. That the Arbitrator did not give any reasoning while allowing the claim of the respondent and passed the award, which is based on surmises and conjectures.
4. The respondent did not file any reply to the petition and made the oral submissions through its counsel Sh. Arvind Kumar Gupta.
5. I have heard the arguments advanced by Sh. Karan Grover, Ld. Counsel for the petitioner and Sh. Arvind Kumar Gupta, Ld. Counsel for the respondent.
6. Ld. Counsel for the petitioner reiterated what has been stated in the petition.
7. Ld. Counsel for the respondent per contra argued that on the objection raised by the petitioner, venue of the arbitration was shifted from Haryana to Delhi. As per the OMP Comm No. 23/2019 Page No.4 of 16 scheme of MSME Act, the matter was first referred to the Haryana Micro & Small Enterprises Facilitation Council (HMSEFC) at Chandigarh, Haryana and when the parties could not reach to an amicable settlement, the Chairman referred the dispute to the Sole Arbitrator. Ld. Counsel referred the statement of claims and stated that since the petitioner had admitted the documents, it was not incumbent upon the respondent to prove the documents by leading evidence and the same could be read in evidence. The petitioner did not produce any document what payment it had made to the respondent or how the goods were defective. Ld. Counsel stated that the award is a well reasoned one, which does not suffer from any infirmity. Ld. Counsel stated that the respondent had supplied the materials to the petitioner and raised the bills, which is evident from the purchase order, invoices and form C. The Arbitrator duly considered the invoices and then passed the award, which does not call for interference.
Findings / adjudication:
8. I have considered the submissions as above and gone through the impugned award and the relevant documents.
OMP Comm No. 23/2019 Page No.5 of 169. Section 34 of the Arbitration and Conciliation Act reads as under:
"34.Application for setting aside arbitral award- (1)Re- course to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub- section (3).
(2)An arbitral award may be set aside by the court only if-
(a) the party making the application furnishes proof that-
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbi-
tration, or it contains decisions on matters beyond the scope of the submission to arbitration;
Provided that, if the decisions on matters submitted to arbi- tration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral pro- cedure was not in accordance with the agreement of the par- ties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the court finds that-
(i) the subject-matter of the dispute is not capable of settle- ment by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation- I For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India only if the making of the award was induced or affected by OMP Comm No. 23/2019 Page No.6 of 16 fraud or corruption or was in violation of Section 75 or Sec- tion 81."
ii) It is in contravention with the fundamental policy of In- dian law;
iii) It is in conflict with the most basic notions of morality or justice.
Explanation-II- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
[2 (A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the court, if the court finds that the award is vitiated by patent illegality appearing on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
10. Normally, the general principles are that the decision of the Arbitrator unless there is an error apparent on the face of the award which makes it unsustainable, is not to be set aside even if the court as a court of law would come to a different conclu- sion on the same facts. The court cannot reappraise the evi- dence and it is not open to the court to sit in appeal over the conclusion of the arbitrator. It is not open to the court to set aside a finding of fact arrived at by the arbitrator and only grounds on which the award can be cancelled are those men- tioned in the Arbitration Act. Where the arbitrator assigns co- gent grounds and sufficient reasons and no error of law or mis- conduct is cited, the award will not call for interference by the court in exercise of the power vested in it.
OMP Comm No. 23/2019 Page No.7 of 1611. In the case of Associate Builders v/s Delhi Development Authority, (2015) 3 SCC 49, it was held that interference with an arbitral award is permissible only when the findings of the arbitrator are arbitrary, capricious or perverse or when con- science of the Court is shocked or when illegality is not trivial but goes to the root of the matter. The arbitrator is ultimately a master of the quantity and quality of evidence while drawing the arbitral award. Patent illegality must go to the root of the matter and cannot be of trivial nature.
12. In Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India Ltd. 2019 SCC On- Line SC 677, the Supreme Court has held that under Section 34 of the Act, a decision which is perverse while no longer being a ground for challenge under public policy of India would cer- tainly amount to a patent illegality appearing on the face of the award. A finding based on the documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties and therefore would also have to be characterized as perverse.
13. In the backdrop of the above, let me now examine the objections against the impugned award agitated by Ld. counsel OMP Comm No. 23/2019 Page No.8 of 16 for petitioner, vis-a-vis the contentions of Ld. counsel for respondent, in support of the award.
14. A perusal of the arbitral record and the proceedings reveals that the respondent had placed Udhyog Aadhaar Acknowledgements Ex. C1 & Ex. C2 before the Arbitrator, as per which, the respondent company was registered under MSME Act, 2006 as a Small Industrical Unit for manufacturing purposes. It had made a reference to the Chairman, HMSEFC under the provisions of MSME Act, 2006 for settlement of disputes / recovery of amount against the petitioner. It had placed the copy of the purchase orders Ex. C4 to Ex. C7, invoices Ex. C8 to Ex. C15, Form C Ex. C16 to C19, which show that on the purchase orders issued by the petitioner, the respondent had supplied the goods against the bills as mentioned in Para 6 of the award / document Ex. C3. The details show that there was an outstanding balance of Rs. 32,11,514/- against the petitioner as on 06.11.2017. Section 16 of the MSME Act, 2006 provides interest at three times the bank rate compounded monthly, which at the relevant time was 6.50%. In the instant case, the respondent had claimed interest @ 18% as against 19.50% per annum compounded monthly i.e. low rate of interest, which on the amount of Rs. 32,11,514/- comes to Rs. 13,77,175/-. It was observed by the Arbitrator that the petitioner did not point out any irregularity or flaw in the OMP Comm No. 23/2019 Page No.9 of 16 outstanding amount towards the invoices and the interest thereon, which are also depicted in the ledger Ex. C20. Further the petitioner had issued the C Forms Ex. C16 to Ex. C19 against the invoices raised by the respondent, which substantiate the correctness of the invoices raised by the respondent against the price of the material.
15. In the impugned award, the Arbitrator has dealt with the contention of the petitioner that the respondent did not file any regular claim statement to show or justify the outstanding amount nor examined any witness to prove the documents Ex. C1 to Ex. C22 placed by the AR. He held that the respondent had submitted the claims in a duly prescribed format, in which details of the purchase orders and the invoices were given, copies of which were attached with the prescribed claim statement and all these documents were supplied to the petitioner. It was on the basis of the claim statement and the documents forming part of the claim statement, the petitioner had submitted its reply, so non examination of any witness by the respondent is not at all fatal, when the documents Ex. C1 to Ex. C22 were admitted in evidence without any objection from the petitioner regarding their admissibility or the mode of proof. The proceedings of dated 10.08.2018 reveal that the copies of all the claim documents were made available to the counsel for the petitioner by the Arbitrator, when he was asked to file the OMP Comm No. 23/2019 Page No.10 of 16 reply. The petitioner had filed its reply on 21.09.2018 and on that very day, the documents in support of the claim petition were tendered by the AR of the respondent. It cannot be said that no evidence was led by the respondent. The petitioner could very well conduct the cross examination of the AR, when the said documents were tendered by the AR as evident from the proceedings. The proceeding of the date 05.10.2018 shows that the respondent had tendered further documents in evidence and thereafter closed the evidence and even on that day, the counsel for the petitioner did not ask / demand for the cross examination of respondent's witness nor raised any objection that the documents, which the respondent had tendered cannot be exhibited in the manner, they were exhibited. After the respondent's evidence was closed, the petitioner tendered the affidavit of AR and then closed the evidence. In is true that the respondent had cross examined the petitioner's witness but similarly, the petitioner could have cross examined the respondent's witness but it was not done by the petitioner.
16. Although, in the cross examination, it was stated by the AR of the petitioner that they had made oral complaint to the official of the respondent about the faulty material but it did not make any written complaint. In the absence of any complaint, no much reliance can be placed on this aspect. The cross examination of the petitioner's witness shows that the petitioner OMP Comm No. 23/2019 Page No.11 of 16 had issued C Forms to the respondent. Although, he alleged that it were issued in good faith. Had it been so, what had stopped the petitioner from raising this objection during the transaction or by making a written complaint about the supply of faulty materials or wrongly issuing the C Forms. Ld. Arbitrator has rightly observed that MSME Act, 2006 has been enacted for the benefit of the Micro & Small Industries to save them from the exploitation of the big industrialists. The strict rule of CPC and Evidence Act are not applicable for conducting the arbitral proceedings. Section 19 of the Act also provides that the Arbitral Tribunal shall not be bound by the Code of Civil Procedure or the Indian Evidence Act. Parties are free to agree on the procedure to be followed by the Arbitral Tribunal in conducting its proceedings. The power of the Arbitral Tribunal includes the power to determine the admissibility, relevance, materiality and weight of any evidence. That being the position and the law, the Arbitrator has rightly held that the documents placed by the respondent can very well be read in evidence without formal examination of any witness especially when genuineness of those documents has not been challenged. It is also important to refer the reply filed by the petitioner before the Arbitrator. In Para 5, it had alleged that the respondent has only filed the invoices, which are highly escalated and for the material, which is faulty and defective. In Para 6, it had alleged that it has paid for all the invoices of the respondent in full and OMP Comm No. 23/2019 Page No.12 of 16 now the respondent is claiming escalated invoice amount just to arm twist the petitioner. The petitioner has failed to show / prove how the invoices raised by the respondent were highly escalated. It has not filed any statement of accounts as to the payments made by it against all the invoices as alleged nor submitted any detail how the materials which were supplied by the respondent were faulty or defective. A bald assertion was made by the petitioner without any substantive proof, which deserves to be rejected. The invoices placed by the respondent rather have the acknowledgement of the AR of the petitioner. Further, the petitioner had issued the C Forms, which clearly prove that the respondent had delivered the materials against the invoices and against the invoices, the petitioner had issued the C Forms.
17. In the instant case, the Arbitrator has referred the document Ex. C3, which contains the details of the outstanding amount. It was prepared on the basis of the invoices raised by the respondent from the petitioner. He, after considering the statement, passed the impugned award for Rs. 45,88,689/- towards the balance payments and interest thereon as per Section 16 of MSME Act, 2006. The Arbitrator has held that the petitioner is liable to pay interest as per the Act w.e.f. 07.11.2017 till the date of payment along with the cost of Rs. 20,000/-, which the petitioner has paid to him (Arbitrator).
OMP Comm No. 23/2019 Page No.13 of 1618. In the present case, the arbitral proceedings and the attendance sheet confirm that the petitioner as well as the respondent had regularly appeared before the Arbitrator and were given due opportunities to plead and / or defend their case. Only thereafter, the impugned award was passed by the Arbitrator dealing with the contentions. It is not for this Court to sit in appraisal of the evidence led before the Arbitrator and this Court will not open itself to be task of being a judge of the material placed before the Arbitrator, which was the subject matter of dispute.
19. It was held in the case of State Trading Corporation of India Ltd Vs. Teopfer International Asia PTE Ltd FAO (OS) 242/2014 that Section 34 proceeding which in essence is the remedy of annulment, cannot be used by one party to convert the same into a remedy of appeal. Finality of the award is very important. An interpretation placed on a contract is a matter within the jurisdiction of the Arbitral Tribunal and even if an error exists, this is an error of fact within jurisdiction which cannot be re-appreciated by the Court under Section 34 of the Act. Legal position is no more res integra that the Arbitrator having been made the final Arbiter of resolution of dispute between the parties, the award is not open to challenge on the ground that Arbitrator has reached at a wrong conclusion. If we OMP Comm No. 23/2019 Page No.14 of 16 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.
20. Now to sum up, in the instant case, most of the grounds raised by the petitioner to challenge the award are factual in nature which have been already considered and adjudicated in the impugned award. It is outside the scope of Section 34 of the Act to reappreciate the entire evidence and come to conclusion because such an approach would defeat the purpose of arbitration proceedings. It has been consistently held that when a court is applying the public policy test to an arbitration award, it does not act as a court of appeal and consequently, errors of facts cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quality and quantity of evidence to be relied upon when he delivers his arbitral award. Once, it is found that the arbitrator's approach is not arbitrary or capricious, then he is the last word on facts. (P.R Shah, Shares & Stock Brokers (P) Ltd v. B.H.H Securities (P) Ltd. [(2012) 1 SCC 594).
21. Having examined the various contentions of the OMP Comm No. 23/2019 Page No.15 of 16 petitioner on the touchstone of the parameters of interference as explicitly laid down by the Supreme Court in several judgments referred to above, I am of the view that the impugned Award does not suffer from any infirmity or error apparent on the face of record. It is not for this Court to sit in appraisal of the evidence led before the learned Arbitrator and this Court will not open itself to the task of being a judge on the evidence placed before the Arbitrator which was subject matter of dispute. In the present case, the Arbitrator has deliberated on the issues under reference which were within his competence and as per the agreement entered into between the parties. The Arbitrator has duly explained the reasons for arriving at his decisions. There is nothing to indicate that award is in conflict with the basic notions of justice and the fair play and fundamental policy of Indian law or in contravention of the terms of the agreement or it lacks reasoning as pleaded in the petition.
22. For the aforesaid reasons the petition is dismissed with no order as to costs. File be consigned to record room.
Announced in open court
today i.e. 31th August 2021 (SANJIV JAIN)
District Judge (Commercial - 03)
Patiala House Courts, New Delhi
OMP Comm No. 23/2019 Page No.16 of 16