Bombay High Court
Pepsico India Holding Pvt. Ltd vs Nishiland Park Limited on 17 April, 2012
Author: Anoop V. Mohta
Bench: Anoop V. Mohta
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ssm
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO. 768 OF 2010
PepsiCo India Holding Pvt. Ltd.
A Company duly incorporated under
the provisions of the Companies Act,
1956, and having its registered office
at 3-B, S Block, DLF Corporate Park,
Phase II, Gurgaon, Pin 122 002 and
having its Western Regional Office at
Off Sion Trombay Road, Chembur,
Mumbai, Through its authorized
signatory and General Manager
Finance Mr. Aditya Jain, having his
office at Off Sion-Trombay Road,
Chembur, Bombay 400 088 .... Petitioner
V/s.
Nishiland Park Limited, a Company
incorporated under the Companies Act,
1956, and having its registered
Office at 171, "Atlanta", 17th Floor,
Nariman Point, Mumbai 400 021 .... Respondent
Mr. Iqbal Chagla, Senior Advocate with Mr. R.I. Chagla i/by Mr. Rajeev
V. Talasikar for the Petitioner.
Mr. Nitin Thakkar, Senior Advocate with Mr. Ajay Panicker i/by Ajay
Law for the Respondent.
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CORAM: ANOOP V. MOHTA, J.
RESERVED ON : 5 MARCH 2012
PRONOUNCED ON : 17 APRIL 2012
JUDGMENT:
The Petitioner (original Respondent) has challenged Award dated 7 January 2010 passed by the sole Arbitrator, based upon the alleged agreement between the parties having arbitration clause. The operative part of the Award is as under :
"i) The Respondent do pay to the Claimant a sum of Rs.
15 lakh on account of outstanding license fee with interest at the rate of 12 per cent per annum calculated from 1st February, 2004 till the date of the award;
ii) The Respondent do pay to the Claimant a sum of Rs.2,00,00,000/- (Rupees two crore only) by way of damages for failure of the Respondent to insert labels on 3 lakh bottles of Pepsi per year for a period of four years with interest thereon at the rate of 12 per cent per annum from 1st February 2004 till the date of the award.
iii) The Respondent do pay to the Claimant the costs of the arbitration quantified at Rs.10,09,625/- as per the bill of cost submitted by the Claimant.
iv) The Respondent do pay to the Claimant interest on 1of 2 ::: Downloaded on - 09/06/2013 18:25:46 ::: 3 arbp768.10.sxw the sum directed to be paid by this award at the statutory rate of 18 per cent per annum as set out in section 31(7)(b) of the Act from the date of the award to the date of payment."
2 The Petitioner is a Private Limited Company incorporated under the Companies Act, 1956 and engaged in, inter alia, manufacturing, distribution and sale of soft drinks such as Pepsi, Mirinda; 7Up and Mountain Dew. The Petitioner also is engaged in manufacture and marketing of packaged drinking water under the brand name of Aquafina.
3 The Respondent is a Company incorporated under the Companies Act, 1956 and is engaged in the business of entertainment, having an entertainment park at Khalapur in Raigad District.
4 On 6 February 1998, the Petitioner and the Respondent entered into an agreement ("1998 agreement") under which the Petitioner agreed to sell its products to the Respondent and to publicise the inauguration of the Respondent's park on 150 truck backs, for at least 30 days for a period of 3 years effective from 18 th January, 1998. The Petitioner also agreed to provide Post Mix Machines (PMX) (soft drink 1of 3 ::: Downloaded on - 09/06/2013 18:25:47 ::: 4 arbp768.10.sxw dispenser) and Visi Cooler (refrigerator with glass door) on certain terms and conditions. The rates of products to be provided by the Petitioner were incorporated in Annexure "B" to the 1998 agreement.
The license fee of Rs. 2 lacs and Rs. 3 lacs was paid on 12 November 1999 and 9 March 2000 respectively, accordingly.
5 When the Respondent served a Statement of Claim on the Petitioner, they came to know for the first time, about the purported agreement allegedly entered into between them on 1 February, 1999, (for short, "1999 Agreement"). The same was executed by the Respondent only. The Petitioner was acting in pursuance to 1998 Agreement only.
6 On 23 June 2005, the Respondent in the Statement of Claim stated that the Petitioner agreed to provide 3 lac bottles labels on 1.5 liters and 500 ml bearing the name of Nishiland Park; the Petitioner agreed to pay to the Respondent Rs. 5 lakhs in two installments as upfront consideration; the Petitioner failed and neglected to fulfill their commitments. It is alleged that the duration of 1999 agreement was for one year, but was extended by letter dated 25 January, 2000 1of 4 ::: Downloaded on - 09/06/2013 18:25:47 ::: 5 arbp768.10.sxw for three years. It is alleged that the Respondent refused to extend 1999 agreement for a further period from February, 2003 pending payment of consideration of Rs.15,00,000/- and affix 9 lakh labels on its bottles. The Respondent alleged service of a legal notice dated 16 January 2004 calling upon the Petitioner to pay a sum of Rs. 15 lacs towards the outstanding license fee and a sum of Rs.7.2 crores towards alleged loss suffered by the Respondent due to non-insertion of the labels on the 3 lac bottles each year; the Respondent invoked arbitration and demanded payment within 15 days. The Petitioner received notice on or about 27 January 2004, but failed to respond the same. The Respondent approached the High Court for appointment of Arbitrator under section 11 of the Arbitration Act. The Petitioner was absent. On 11 February 2005, the sole Arbitrator was appointed, ex-
parte.
7 On 12 June 2006, the Petitioner in its written statement raised the ground of limitation, as well as, non-existence of the arbitration agreements under which the alleged arbitration proceedings have been instituted. The Petitioner opposed the claims on all counts.
1of 5 ::: Downloaded on - 09/06/2013 18:25:47 ::: 6 arbp768.10.sxw 8 The parties lead evidence in support of their respective pleadings, the case and the defence. The impugned award is dated 7 January 2010. Hence, this Petition filed on 29 March 2010 for setting aside the same.
9 In view of the arbitration clause and by referring to clause 10.1 of Agreement in Arbitration Petition No.153 of 2004, the Court, to adjudicate the issue and as the Petitioner though served, never appeared, appointed the sole Arbitrator.
10 The learned Arbitrator also, after considering the rival contentions and the preliminary objection so raised, based upon the issues so framed held that the claimant/Respondent proved that fresh agreement dated 1 February 1999 executed between the parties before expiry of the earlier agreement dated 6 February 1998, in supersession of the said agreement and thereby the time was extended for a period of three years from 1 February 2000 to 31 January 2003. The learned Arbitrator while answering issue No. 1 and by referring to the various correspondences between the parties referring to both these agreements recorded as under :
1of 6 ::: Downloaded on - 09/06/2013 18:25:47 ::: 7 arbp768.10.sxw "39 My above conclusion gets full support from the ratio of the latest decisions of the Supreme Court in Unissi (India) (P) Ltd. v. Post Graduate Institute of Medicinal Education & Research (2009) 1 SCC 107 and Shakti Bhog Foods Ltd. V Kola Shiping Ltd. (2009) 2 SCC 134.
41 In the premises, I hold that the agreement dated st 1 February, 1999 does exist between the parties. As the said agreement contains the arbitration clause, the challenge of the Respondent to the jurisdiction of the Arbitral Tribunal is not tenable in law.
42 So far as the renewal of the 1999 Agreement is concerned, the Claimant produced its letter dated 25 th January, 2000 wherein the Claimant had recorded the renewal of the 1999 Agreement for a further period of three years upto 31st January, 2003 on the terms and conditions set out in the said letter. The Respondent have placed no correspondence on record to show that at any point of time they informed the Claimant that the statements contained therein were not correct. ......"
11 Admittedly, the original agreements signed by both the parties were missing. The documents on record shows only one signature.
But there is no denial to the fact of execution of agreement dated 6 February 1998 for a period of 3 years which expired in the year 2001, which was never terminated at earlier point of time. It is pointed out that in 1999 Agreement, there was no reference to the 1998 1of 7 ::: Downloaded on - 09/06/2013 18:25:47 ::: 8 arbp768.10.sxw Agreement. The purported renewal of 1999 agreement definitely not signed by both the parties. The mutual extension and/or renewal even if any, because it was not specifically replied, for further three years though so discussed and the Arbitrator has found that there exists the Arbitration Clause between the parties for Arbitration, in no way can be equated to accept the case and/or overlook the Petitioner's submission that the claim so filed and/or so raised is based upon no agreed signed documents and it is beyond limitation. The correspondences so exchanged, nowhere support the case that there was any action activities conducted by both the parties based upon the agreements.
12 The Respondent, Original-Claimant did not raise the claim based upon 1998 agreement which expired by efflux of time in the year 2001. The claims are based upon 1999 agreement. The legal notice was issued on 16 January 2004. By the ex-parte order, the Court under Section 11, on 11 February 2005, appointed the Arbitrator.
Therefore, the Petitioner had no choice but to appear before the Tribunal, so constituted. The constitution of Tribunal itself looses the importance to decide the issue again by the Arbitrator with regard to 1of 8 ::: Downloaded on - 09/06/2013 18:25:47 ::: 9 arbp768.10.sxw the existence of the Arbitration agreement. The validity of the main agreement and the existence of the arbitration clauses are two different situations. Even if the contract is invalid or not binding, the tribunal can be constituted to decide the dispute based upon the arbitration clause. The Petitioner and the other side are always entitled to raise and resist the merits of the respective claims on all counts.
13It is necessary to consider whether merely because there exists an Arbitration Clause in writing for Arbitrator to decide the dispute arising out of the agreements/contract that itself is sufficient for the Arbitrator to grant claims so raised without the supporting material, and the evidence on record.
14 The Arbitrator has, after dealing with the licence fee clause, has observed as under:-
"44 .............. The Respondent paid a sum of Rs.2,00,000/- by cheque date 12th November, 1999 and a sum of Rs. 3,00,000/- by cheque dated 9.3.2000. A sum of Rs. 15 lakh is, therefore, payable by the Respondent to the Claimant on account of balance license fees for the period of four years. The Claimant is entitled to award of the above amount of Rs. 15 lakh with interest. The Claimant has claimed interest of the rate of 18 per cent per annum from 1of 9 ::: Downloaded on - 09/06/2013 18:25:47 ::: 10 arbp768.10.sxw the date of commencement of the arbitration viz., 16 th January, 2004 till the date of payment. I, however, allow interest at the rate of 12 per cent per annum on the amount of Rs. 15 lakh from 1st June, 2004 till the date of the award."
15 Admittedly, the petitioner never acted upon, the unilaterally signed 1999 agreement. The Respondent claimed Rs.15 lacs on a foundation that the Petitioner failed to make the balance consideration from 1 February 1999 to 31 January 2003 without any supporting documents except the alleged agreement. The balance license fee, as per the agreement dated 25 January 2000, upto 31 January 2001 amount of Rs.2 lacs was again on the same foundation.
The remaining Rs.10 lacs was towards the alleged upfront balance licence fee from 1 February 2001 to 31 January 2003. The Petitioner denied those claims. The Respondents led the evidence and so also the Petitioner. The Arbitrator hold that the Petitioner was liable to advertise the Respondent's park name label of 3 lacs PET bottles of 1.5 litters or 500 ml. per year as per the terms of 1999 agreement and renewal thereof while answering point No. 2. The reliance was on a series of correspondences from 16 February 2001 upto 14 October 2003 and letter dated 26 April 2000 and 16 April 2001. Most of them were addressed by the Respondent to the Petitioner. Merely because 1of 10 ::: Downloaded on - 09/06/2013 18:25:47 ::: 11 arbp768.10.sxw there was no reply as observed, that itself cannot bind the other party to treat the same as binding agreement, specially when there are denial and resistance, and the challenge was also even to the existence of binding effect of such one sided agreement. Section 7 of the Arbitration Act, cannot be extended to bind the parties even to the contents of disputed part of the agreement on merits. The party must prove its contents in all possible way to claim compensation or damages.
16 The Arbitrator hold that the Respondent-claimant is entitled for the damages on account of the failure of the Petitioner to advertise the claimant's park name by recording the following chart-
"50. The Claimant has quantified the business loss of Rs.180 lakh per year as under:-
a) Exposure of Claimant's park (new Park at the relevant time) name through suitable Label insertion on 3 Lakh Pepsi bottles would cover at least 30 lakh people-
an average of 10 people per bottle
label (thumb rule ratio 10-courtesy
Internet portel) ...30 lakh.
b) Conversion of 4% thereof (Thumb rule
says the average conversion rate 10) out
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of 100 viewers visitors. ...120000
(the Claimant has taken 4% only)
c) 120000 visitors @ Rs.300/- per person
fetches Rs.360 lacs.
d) Less:- 50% for expenses Rs.180 lacs.
Net Business Loss Rs.180 lakhs
e) For 4 years at the rate of Rs.180 lakh
per year, it comes to Rs.720 lakh
(from 1.2.99 to 31.3.2003)"
17
The Petitioner, as recorded, resisted and denied the particulars of damages for the loss so claimed; and as the Respondent failed to produce the actual instances, who suffered losses due to the non affixation of labels. There was no supporting material and the evidence placed by the Respondent, except the self created chart as reproduced above, on the basis of so called experts opinion. The learned Arbitrator based upon English law in the decision of the House of Lords in England in Herbert Clayton and Jack Waller Ltd Vs. Oliver 1930 AC 209 (HL) and the decision of the Court of Appeal in England in Chaplin Vs. Hicks (1911) 2 KB 786 (CA) has observed as under:-
1of 12 ::: Downloaded on - 09/06/2013 18:25:47 ::: 13 arbp768.10.sxw "61. It is clear from the forgoing discussion that the claimant is entitled to damages for the breach of contractual obligation by the Respondent to insert labels of the Claimant's Park on three lakh bottles of Pepsi. The claim for damages is neither remote nor incapable of assessment. As a consideration for the undertaking of the Respondent to insert the labels of the Claimants park on the 3 lakh Pepsi bottles, the Claimant reduced the License fee from 15/16 lakh per year to 5 lakh per year and as a result, in effect, gave up a sum of around Rs.40 lakh for 4 years by way of consideration for the insertion of labels on 3 lakh bottles of the Respondent per year. In the premises, in my view, in the facts and circumstances of the case, the Claimant is entitled to damages for the failure of the Respondent to insert labels of the Claimant's Park on 3 lakh Pepsi bottles per year."
18 With regard to the quantum of damages, the observations are as under:-
"62. The next question that requires consideration is the quantum of damages. The Claimant claims a sum of Rs.180 lakh per year for four years. The expert examined by the Claimant has supported the above claim by elaborate reasoning. The Respondent's witness says that there is no set formula to determine the damages in such cases. The Respondent says that the Claimant must prove actual loss suffered to claim damages. I have carefully considered the rival submissions. I am of the view that the insertion of the labels on the 3 lakh bottles of Pepsi by the Respondent was definitely intended to boost the turnover of the Claimant, though how much it would 1of 13 ::: Downloaded on - 09/06/2013 18:25:47 ::: 14 arbp768.10.sxw have boosted, cannot be ascertained with exactitude. There is no set formula to determine such loss. However, such losses are determined on the basis of the facts of each case. In the instant case, the Claimant has determined the loss at Rs.180 per lakh per year. Mr. Gulrays, the expert witness examined by the Claimant, has given elaborate reasons in justification of the above figure of damages claimed by the Claimant. The Respondent did not agree with the above assessment but failed to give any figure which, according to it, might be regarded as the reasonable assessment. In such a situation, it is for me to assess the loss suffered by the Claimant which can be allowed by way of damages."
ig (emphasis added) 19 The learned Arbitrator, as emphasized, though noted the difficulty above, yet has put the burden on the Petitioner (Respondent) as he failed to bring contra material or theory for such assessment; and reasonable figure; and assessed the loss suffered by the Claimant. The learned Arbitrator, with regard to the assessment of damages, has observed that:-
"63. I have given serious consideration to the question of assessment of damages. Admittedly, the Claimant has lost a sum of around 10 lakh per year on account of reduction of the license fee in lieu of the insertion of labels of its park on three lakh bottles of Pepsi by the Respondent. According to Mr. Gulrays, the expert witness, the expected return from such expenditure by way of enhanced turnover is generally 1of 14 ::: Downloaded on - 09/06/2013 18:25:47 ::: 15 arbp768.10.sxw taken as 10 times of the expenditure. If that is taken, the damages can be estimated at Rs.100 lakh per year and 400 lakh for 4 years. If the multiplier is reduced to 5, the figure of loss will be about Rs.50 lakh per year and Rs.200 lakh for 4 years. If the assessment of the Claimant is taken, it would be 180 lakh per year for 4 years. If and average of all these figures, i.e. Rs.100 lakh, 50 lakh and 180 lakh is taken, it comes to Rs.110 lakh per year and Rs.440 lakh for 4 years. To be on the safer side, I take the lowest of the above four figures, i.e. Rs.50 lakh per year. At this rate, the quantum of loss suffered during the 4 years period will come to Rs.200 lakh.
In the premises, I hold that the Claimant is entitled to a sum Rs.200 lakh on account of damages for the failure of the Respondent to insert the labels on 3 lakh bottles of Pepsi per year as stipulated in the 1999 Agreement. The Claimant has claimed interest at the rate of 18 per cent per annum. I, however, allow interest on the above amount at the rate of 12 per cent per annum from 1st February 2004, i.e. the first day of the month preceding the date of the commencement of the arbitration, till the date of the award."
20 The Judgments cited by the Petitioners are also relevant. Those are as under:-
1) Oil and Natural Gas Corpn. Ltd. Vs. Saw Pipes, A.I.R. 2005 S.C. 2629;
2) Mcdermott International Inc. Vs. Burn Standard Company Ltd. (2006) 11 S.C.C. 181;
3) Senate Electrical Vs. STC- (1994) 2 Lloyds 1of 15 ::: Downloaded on - 09/06/2013 18:25:47 ::: 16 arbp768.10.sxw Reports 423.
The aspect and theory of Indian Law of Assessment of loss of business and/or profit as recognized and referred in the Judgments cited by the learned counsel appearing for the Petitioners, play important role in deciding such damages and/or award of compensation.
21 The Indian law recognizes the formulas for the loss of profit and damages. The unrecognized formula so adopted is quite foreign.
Such formula was admittedly not invoked or adopted. The business loss at 180 lacs per year due to non-insertion of 3 lakhs labels for four years, was totally different theory and based upon an unsupported and hypothecated material. The permissible relaxation in rule of requiring proof cannot be equated with no proof at all, merely because it is an Arbitration Proceedings. There is nothing on record that the parties have agreed for such relaxation or rules. The loss of licence fee, even if any, was also based upon 6 February 1999 agreement, and so also expected turnover of 1,20,000 people. The Respondent is not clear to support its claim and its basis. No expert witness or other witness stated authoritatively about the actual loss. Every statements 1of 16 ::: Downloaded on - 09/06/2013 18:25:47 ::: 17 arbp768.10.sxw were on estimation and hypothecation of additional income/profit or visitors turnover.
22 The relevant aspect of proofs of actual compensation and the mitigation are missing. The principles of Code of Civil Procedure (for short, "the CPC") and the Evidence Act also relevant for awarding such damages/compensation.
23The learned Arbitrator has relied upon the correspondences placed on record by the Respondent for the first time through the affidavit of Shri Paresh Shah, which was not pleaded and/or placed earlier. The strong reliance was also placed on handwriting expert and forensic expert by overlooking the evidence of author of the correspondences Shri Nutan Shetty, who challenged the genuineness of those signatures. The denial, not to grant opportunity to examine the forensic expert in variance with the opinion given by Shri Anil Kumar produced by the Respondent is also relevant factor. The forensic expert, ought to have been permitted to lead evidence specifically when it supported the case of the Petitioner. The evidence of Ms. Gaikwad, witness of the Respondent, who stated that there was 1of 17 ::: Downloaded on - 09/06/2013 18:25:47 ::: 18 arbp768.10.sxw no agreement dated 25 January 2000 entered into between the parties but still the findings were given that 1999 agreement was extended for a period of 3 years. The evidence of Petitioner's witness, giving explanation to the correspondences on record basically when the reliance was placed on those documents to pass the award, ought not to have been overlooked and so also the evidence of the witness of Shri Anjan Patole of the Petitioner. The Respondent failed to prove that the parties were ad idem and consented and accordingly executed documents/agreements based upon which the award was passed except 1998 agreement. The Respondent's own evidence of witnesses admitted that the aspect of targeted customers, if the Petitioner had affixed the labels on their bottles promoting the Respondent's Nishiland Park was only a commercial assumption, and there is no scientific study to establish the same. He also admitted that there is no universally accepted scientific formula for such conclusion. He admitted that the advertisement is only one of the components of marketing activity along with others like product and services, price, placement, promotion, reputation and the facilities. He also admitted that every advertisement has its different impact and in spite of huge amount of investments, it is not possible that every time it gives 1of 18 ::: Downloaded on - 09/06/2013 18:25:47 ::: 19 arbp768.10.sxw benefits and/or attract the public at large specifically when the Petitioners brought on record any defence and resisted the claim even of the experts, as well as, of the Petitioner in all respect. Therefore, heavy burden was upon the Respondent to prove the same which in my view, he failed to do so. There is a failure on the part of Respondent to ascertain the loss according to the settled, established and/or correct formula.
24There is nothing on record to show that during the period between 1998 to renewal period 1999, the Respondent earned the fixed amount, or such reasonable amount to claim similar amount or average amount for the next years 1999 to 2003. All claims are on hypothetical basis and on doctrine of "damage is presumed" which is applicable when the parties are unable to prove the actual loss or loss of profit. The present case not fall "within the ambit of such exceptions". This is not a case of non-pecuniary harm. It was a business transaction, needs to be dealt with accordingly and not on presumption and assumption. The principle is for awarding real losses and not hypothecated one.
1of 19 ::: Downloaded on - 09/06/2013 18:25:47 ::: 20 arbp768.10.sxw 25 In the present case, everything was based upon the negotiations for the proposed contract. The contract initiated by the procedure of negotiation cannot be equated with other contracts as the discussion or correspondences even though entered into cannot be treated as final and binding unless all terms agreed by both the parties and/or the Companies as per the law. The exchange of letters for considering the respective terms and clauses cannot be the basis to hold that those correspondences and unilateral signed letter/document to be the binding contract specifically when both are the companies and/or the one is multi-national company. The contracts entered into and/or by the Companies has always foundation of authorization and resolutions. There is nothing placed on record to show that there was any resolution and/or authority granted to sign and consider the same to be binding contract between the parties. All these things are missing in the present case to declare authoritatively that there exists binding contracts on merit, except the arbitration clause, even if any, so discussed.
26 In State of Rajasthan and anr vs. Ferro Concrete Construction 1of 20 ::: Downloaded on - 09/06/2013 18:25:47 ::: 21 arbp768.10.sxw Private Limited,1 the Supreme Court while dealing with the Awarding the claim or measure of damages has observed as under :
"55 While the quantum of evidence required to accept a claim may be a matter within the exclusive jurisdiction of the arbitrator to decide, if there was no evidence at all and if the arbitration makes an award of the amount claimed in the claim statement, merely on the basis of the claim statement without anything more, it has to be held that the award on that account would be invalid. Suffice it to say that the entire award under this head is wholly illegal and beyond the jurisdiction of the arbitrator, and wholly unsustainable."
No evidence, no such compensation/damages can be awarded.
27 1999 Agreement, even if any, was never mutually extended. The Respondent never acted upon the alleged agreements. But there is nothing to justify their part and role upto 31 January 2003, though the contract was never mutually agreed. Mere raising of bills are not sufficient, it must be backed by the supporting material, which are missing in the matter. There is nothing to show that the Petitioner admitted and acknowledged the amount or bills or the claim. No material to show such losses. The damages, if any, need to be proved.
The loss of earning of profit without material, cannot be accepted.
1 (2009) 12 SCC 1 1of 21 ::: Downloaded on - 09/06/2013 18:25:47 ::: 22 arbp768.10.sxw Certain correspondences though not specifically denied or admitted, that itself cannot justify to accept the claims of the Respondents. The contents need to be admitted specially when it comes to awarding damages, compensation, loss of business/ profit without proof or the material. There was strong denial to the execution of 1 February 1999 agreement itself. The correspondences shows that it was only the preliminary negotiation/discussion. It was never authoritatively signed by the Petitioner. There is nothing to show that the part payment was towards 1999 agreement. There was no renewal letter signed. There is nothing to show that 1998 Agreement was terminated and the 1999 agreement was signed by both the parties.
The alleged loss of business or profit for the years attributed only to the Petitioner, is also unsupported by any material. There may be various factors which cause losses and not only the lack of labels promotion. There is no material to show that non-publication of labels on 3 lac bottles, itself sufficient to people not to visit the park;
and/or the Respondent could have earned the amount claimed and/or the targeted people would have visited the park.
28 The marketing expert's evidence, is based upon hypothecation, 1of 22 ::: Downloaded on - 09/06/2013 18:25:47 ::: 23 arbp768.10.sxw assumption and presumption. There is no actual figure or material placed on record to support the same. Mere averments or expert evidence on marketing, cannot be the sole foundation to support the alleged loss or claim of the Respondent. In the competitive business or market, one such label itself cannot bring or attract the customer to visit the park as claimed. The visible and invisible market strategy, promotion of actual products, its quality and/or the services and facilities of the claiming party are always play dominant role in the marketing or such product/services. The name and fame is definitely one of the factor to attract the consumer but that itself cannot be the basis for earning such huge profit and loss so claimed. The Respondent, cannot on the basis of others figures or account, claim loss or profit without providing the material on record, to support the actual loss or profit. The damages or compensation cannot be awarded on the basis of other companies experience or the accounts.
Such hypothecated damages/claims cannot be awarded on the basis of others, unconnected though audited annual accounts. The expert witness evidence, based on assumption and presumption, without actual material on record, cannot be relied to award such claims of the Respondent.
1of 23 ::: Downloaded on - 09/06/2013 18:25:47 ::: 24 arbp768.10.sxw 29 Admittedly, there was no accepted formula made available or provided or agreed upon, following the same the Arbitrator could have award the damages/compensation. The expert witness himself admitted that there is no such recognized formula and so also the learned Arbitrator.
30 It is difficult to accept the estimate given by the expert witness that potential visitorsship would have been 3 lacs people per annum, specially when the binding effect of the agreements itself is the issue.
The situation with agreed and proved agreements could have made the situation quite near to the estimation but ultimately such basis of assessment of damages on estimation, without supporting material, is unacceptable. There is nothing on record to show that the labels catches the masses to visit the places where it were advertised. The concept of visitors, attracting to the park of the Respondent itself is indirect and so also based upon hypothecation, assumption and presumption. The expert witness, without referring to the disputed agreements, has expressed his views. It, in my view, is not binding except as the opinion, which the learned Arbitrator, or the Court will 1of 24 ::: Downloaded on - 09/06/2013 18:25:47 ::: 25 arbp768.10.sxw consider it, as an additional factor, but cannot be the basis for such award or grant of compensation/damages on such estimations of unsupported profit/loss. The Respondent's claims and the evidence of similar nature, also unacceptable on the above reasons itself. There is nothing on the record to show that the parties have agreed to the experts decision as final and binding.
31 The individual loss, or reputation based on personal acting cannot be equated with the estimation of visitors and/or turnover of the park business, specially when, there are various factors which attract or distract the estimated visitors, based upon the actual nature or service of products, or facilities, distance and the nature of business. The foreign cases have persuasive value only. The facts and circumstances are distinguishable. Those authorities no way sufficient to award such amount.
32 We have to consider the nature of business and the contract and also the effect of non-supply of such labels, if any. There is nothing pointed out that the Petitioner unable to do his business during this period for want of this labels and the business suffered loss or resulted 1of 25 ::: Downloaded on - 09/06/2013 18:25:47 ::: 26 arbp768.10.sxw into lost of income. The aspect of taking effective steps to avoid avoidable loss, was not considered at all. The law of mitigation under Section 34 of the Arbitration Act, cannot be overlooked by the Court, when such award is challenged on the merit itself. The loss of profit claims always have a foundation of net loss and not only the estimated gross profit, without supporting accounts and material. The award so granted is not nominal or reasonable amount, as there was no material to show actual loss. I am of the view that the amount so assessed and awarded, is without any settled foundation. The doctrine of mitigation was overlooked though the claim itself was denied by the Petitioner. In my view, it amounts to wrong estimation of the damages, as undue importance is given to the unsupported expert's opinion. The actual loss and the proof of the same, is totally missing. It is not the case of possible view or interpretation of the contract. Any assessment of damages on undisclosed or unknown formula or principle, is "falls within the ambit of error of law" and contrary to the contract and the law, therefore, unsustainable.
33 The foreign cases no way supports the cases of non-supply of labels and its cascading effect on such business. The alleged non-
1of 26 ::: Downloaded on - 09/06/2013 18:25:47 ::: 27 arbp768.10.sxw supply of labels itself cannot be the reason to grant the damages or compensation without proof of actual loss or supporting material to loss of profit, specially when no steps whatsoever taken and produced on record to show the steps to mitigate the losses were taken. "No Pepsi Labels, no business", and only loss, just cannot be the formula.
No other company could have provided such similar labels, itself cannot be the reason to award the damages so granted, without considering the aspect of delayed claims; and on the basis of vague and unsigned agreement or renewal clause, without considering the basic contract of 1998, which was never superseded or overwritten in writing by both the parties. There was serious dispute about the address and service of the notice of Arbitration clauses invoked and so also the service of court notice under Section 11 of the Arbitration Act.
But, both resulted into ex-parte appointment of Arbitral Tribunal and invalid timely revocation of the Arbitration clause.
34 In view of above position on record the Respondent failed to prove that fresh agreement dated 1 February 1999 was executed between the parties before the expiry of the earlier agreement dated 6 February 1998, in supersession of the agreement and/or it was extended for a further period of three years from 1 February 2000 to 1of 27 ::: Downloaded on - 09/06/2013 18:25:47 ::: 28 arbp768.10.sxw 31 January 2003. The Respondent failed to prove that the Petitioner was liable to pay total license fees of Rs.20 lakh for four years from 1 February 1999 to 31 January 2003 under Agreement dated 1 February 1999 and renewal thereof and that there was outstanding of Rs.15,00,000/- payable by the Petitioner towards license fees for the said period. The Respondent failed to prove that the Petitioner was liable to advertise the Respondent's park name label on 3 lac PET bottles of 1.5 liters or 500 ml. as per the terms of the Agreement dated 1 February 1999 and renewal thereof. The Respondent failed to prove that the Respondent has suffered business loss of Rs.180 lakh per year, aggregating to Rs.720 lac for 4 years from 1 February 1999 to 31 January 2003 due to non-performance of the terms of agreement dated 1 February 1999 and renewal thereof by not inserting Respondent's park label on 3 lac Pepsi bottles.
35 The claims raised by the Petitioner on 23 June 2005. It was beyond the period of 3 years from the expiry of the first, as well as, 1999 agreement also. The renewals are not proved. This is the submission which needs to be considered while proceeding further with the matter, as the point of limitation was raised even before the 1of 28 ::: Downloaded on - 09/06/2013 18:25:47 ::: 29 arbp768.10.sxw Arbitrator.
36 I have already in Sealand Shipping and Export Pvt. Ltd. Vs. Kin Ship Services (India) Pvt. Ltd. 1 dealt with the aspect of limitation in the following words:-
"21 The plea of limitation though not specifically pressed/framed, but can be raised for the first time in a Petition under Section 34 of the Arbitration Act.24
Section 5 of the Arbitration Act, unless provided under the Act, the Court's intervention in such arbitration proceeding is also discouraged. The point still remains, whether the parties can waive the issue of limitation before the Arbitrator, as it goes to the root of the matter. The Arbitrator, in view of settled law itself, is not empowered to award claim which is barred by law of limitation, specifically when there is no contra agreement to show that the parties are entitled to raise claim or counter claim inspite of such provisions.
30 I may add that not pressing the point of limitation which goes to the root of the matter, at the first given opportunity, can cause serious prejudice to the proceedings and the litigant. The party and the counsel are under obligation to get such plea decided at the earliest stage of the case. A waiver of such plea is unjust, unfair and cause hardship to all and, therefore, must be avoided."
37 The claims so raised based upon the alleged 1999 agreement 1 2011(5) Bom.C.R.572 1of 29 ::: Downloaded on - 09/06/2013 18:25:47 ::: 30 arbp768.10.sxw and disputed renewal/extended agreements, are beyond limitation.
There was no valid service proved about the first notice dated 16 January 2004. The claim was raised on 23 June 2005, beyond the period of three years from the expiry of 1998 or 1999 agreements.
38 The interest on the damages can only be from the date of decision. The interest so awarded on the damages is impermissible as decided for the first time in this Arbitral proceeding, therefore, at the most it should have been from the date of award. But as I am inclined to set aside the main award itself, no further discussion on the issue of interest is necessary.
39 The award can be modified. So far as the costs is concerned as the same is reversed by this judgment. Therefore, the costs be shared by both the parties equally.
40 Resultantly, the following order:-
ORDER
a) Award is partially modified.
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b) Clause Nos. (i), (ii) and (iv) of the impugned award, are set aside.
c) The costs quantified as per Clause (iii) of the impugned award, is modified and be shared equally, by both the parties.
d) The Petition is disposed of accordingly.
e) There shall be no order as to costs.
ig (ANOOP V. MOHTA, J.)
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