Delhi District Court
Rahul Savara vs Shivraj Krishan Gupta on 18 December, 2024
IN THE COURT OF MS SAVITA RAO, DISTRICT JUDGE
COMMERCIAL COURT-01, SOUTH,
SAKET COURTS, DELHI
DLST010049792021
OMP (Comm) No. : 43/2021
In the matter of :-
Rahul Savara
Through Power of Attorney Mr. Rajiv Savara
11, Padmini Enclave, Aurobindo Marg
New Delhi - 110016
Also :
Mr. Rahul Savara
Flat no. 6,3/5, Ikoyi Criscent
Ikoyi, Lagos, Nigeria
............Petitioner
Vs.
1. Shivraj Krishan Gupta
6, Padmini Enclave
Aurobido Marg
Haus Khaz, New Delhi - 110016
2. Mr. Namit Gupta
6, Padmini Enclave
OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 1/46
Aurobindo Marg, Hauz Khas, New Delhi - 110016
..............Respondents
AND
DLST010079662021
OMP (Comm) No. : 64/2021
In the matter of :-
1. Shivraj Krishna Gupta
S/o Late Sh. B.K. Gupta
2. Mr. Namit Gupta
S/o Sh. Shivraj Krishna Gupta
R/o 36, Anand Lok,
South Delhi, New Delhi - 110049
............Petitioner
Vs.
Rahul Savara
B/o Rajiv Savara
R/o 11, Padmini Enclave, Aurobindo Marg
New Delhi - 110016
..............Respondent
Date of institution of the petition : 03.07.2021 & 12.10.2021
Date of final arguments : 25.09.2024, 12.11.2024,
26.11.2024, 03.12.2024
Date of Order : 18.12.2024
ORDER
1. This order shall dispose off two separate petitions u/s 34 of Arbitration and Conciliation Act, filed by the petitioner Rahul OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 2/46 Savara and by respondent Shivraj Kishan Gupta. Petitioner has sought setting aside of impugned award dated 19.02.2021 and Memorandum of Final Award dated 26.03.2021, passed by Ld. Arbitrator, whereas respondent seeks modification in the award. For the purpose of convenience, petitioner Rahul Savara shall be referred as ' Petitioner', respondent Shivraj Kishan Gupta and Anr. will be referred as ' Respondents' in both the cases.
2. Facts as narrated by petitioner are that Attorney of petitioner namely Sh. Rajiv Savara is a renowned Collector and Connoisseur of the Visual and the Decorative Arts. Respondents and Sh. Rajiv Savara were neighbours. Respondent no.1 during the course of their normal interaction as neighbours, had repeatedly urged Mr. Rajiv Savara to guide him in the making of investments in Works of Art and to further help him by and through the identification of Works of Art for potential acquisition by respondent no.1. Respondent no.1 expressed in no uncertain terms, his desire to acquire the Painting of late V.S. Gaitonde priced at Rs. 8,85,00,000/- (Rs. Eight Crore Eighty Five Lacs only) and over continued interaction with Mr. Rajiv Savara stretching over several weeks, expressed to him, his difficulty to fund the entire purchase, advising his intent to associate his younger son Mr. Namit Gupta (who is respondent no.2 herein), for the joint acquisition and ownership of the said painting with the petitioner, to which after confirming with the petitioner, Mr. Rajiv Savara expressed consent.
3. Thereafter as respondents were failing to keep their part of the agreed-to obligation of paying their share of the amount, Mr. Rajiv Savara on several occasions, requested the respondents to facilitate payment of the balance amount, for completion of the OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 3/46 transaction. Respondent requested Mr. Rajiv Savara to consider part funding for the purchase of said painting. With the sole intent to help respondents and to complete the transaction, Mr. Rajiv Savara requested petitioner who is a Non-Resident Indian, to consider co-investing with the respondents. Accordingly, a joint ownership agreement dated 20.04.2015 for the said Painting, was executed between the parties, wherein respondents had to contribute 60% of the purchase price towards the share of their part ownership and joint title to the said painting.
4. It was agreed between the parties that they would consider the exit or sale of the ownership and title of said painting within a period of 2 years. However, respondents who were contractually obliged to make total payment of Rs. 5,31,00,000/- being their contractual obligation, paid only a sum of Rs. 4,99,03,543/- and thereby did not contribute their contractually obligated 60% share towards the purchase of said painting and commenced multiple tactics in a concentrated attempt to shift the blame on the petitioner and Mr. Rajiv Savara and started making bald allegations against them. Respondents asked petitioner through Mr. Rajiv Savara for refund of the amount of Rs. 4,99,03,543/- contributed by them. Thereafter, they started presurrizing Mr. Rajiv Savara to consider the sale of said painting prior to completion of the mandated holding period of minimum two years, as originally envisaged in the agreement so as to procure maximum profit to both the parties from sale of said painting. However, petitioner upon repeated insistence of respondents and left with no other choice or option, executed the Addendum to Agreement dated 20/21 April 2016 and put the said painting for OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 4/46 sale through an international public auction to be conducted at London-England in May 2016.
5. Respondents in complete disregard to their contractual obligations, discussed the complete background of the acquisition and exit by them with their relatives, as a result of which the sale price of painting was impacted drastically. Petitioner then entered into an agreement with an England-based Auction House to sell the said painting through an International Public Auction wherein the painting was sold at hammer price of $700,000.00/- which was diligently conveyed to respondents vide e-mail dated 26.05.2016. Post auction, as a result of the breach of the confidendiality clause by Respondents, Auction House made inordinate delay in releasing the payment as they inturn received delayed payment from the successful bidder who had learnt of the potentional dispute between the parties, leading to the receipt of sales proceeds getting inordinately delayed.On 21.11.2016, an amount of Rs. 1,50,00,000/- was transferred by petitioner to respondents, followed by transfer of another sum of Rs. 2,00,00,000/- and full and final payment of Rs. 1,81,00,000/- on 18.04.2017.
6. After maintaining silence for over 18 months, respondents in order to further harass the petitioner, as an afterthought, disputed the fact that the amount of Rs. 1,81,00,000/- was remitted against full and final payment to them and invoked arbitration proceedings vide letter dated 15.10.2018, reply of which was sent by petitioner on 29.11.2018, followed by filing of Statement of Claim by respondents and its reply by petitioner.
7. Respondent's version, on the other hand is that in March 2013, one Mr. Rajiv Savara, brother and AR of petitioner herein OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 5/46 came in contact with respondent no.1 when he shifted in the same locality where the AR of petitioner was living. Mr. Rajiv Savara being neighbour regularly interacted and introduced himself as a Chartered Accountant and a collector of Art. Said Rajiv Savara contemporaneously advised/allured the repondent no. 1 to invest in Art/Paintings for better returns. On 22.02.2015, said Rajiv Savara sent an email to respondent no.1 stating therein that respondent no.1 is losing an opportunity of a good investment in painting and advised him to invest about Rs. 600 to 800 lacs in a good painting of Ravi Verma or alternatively a Gaitonde and advised him to set aside such money so that when an opportunity comes in the next 4-6 weeks, respondent is able to encash it. Conversations between the parties qua investment in the painting of Gaitonde continued over evening walks and the AR Sh. Rajiv Savara with malafide and dishonest intentions was successful in convincing and persuading respondent no.1 to invest in Gaitonde Painting. The AR informed respondent no.1 that the painting would be purchased from one person referred by him as ' Parsi Gentleman' in the joint name of respondent and his NRI brother Mr. Rahul Savara who lives in Nigeria, in the ratio of 50:50. The cost of the painting was quoted by AR at Rs. 8,50,00,000/-.
8. At the relevant time, respondents were liable to pay Rs. 4,25,00,000/- [Rupees Four Crore Twenty Five Lakhs] only against their share in the Painting. On 6.6.2015, the AR vide his email informed Respondent No. 1 that after discussions with the owner of the Painting i.e. the purported 'Parsi Gentleman' and the cost of the Painting had been unilaterally finalised and closed by AR at 8,85,00,000/- [Rupees Eight Eighty Five Crore Fifty OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 6/46 Lakhs) i.e. at an additional cost of 35,00,000/- [Rupees Thirty Five Lakhs). Respondents, without any document encompassing the aforesaid understanding about the Painting between the parties herein, and purely on the assurance of the AR, admittedly, by 4.6.2015, had already remitted 4,24,21,808/- [Rupees Four Crore Twenty Four Lakhs, Twenty One Thousand Eight Hundred and Eight] in the bank account of the petitioner. Respondents only had invested an amount of Rs. 4.24 Crores in the painting till June 2015 and no evidence of funds invested by the respondent till June 2015 was ever shared. It is further the case of respondents that AR till this email dated 6.6.2015, always represented and projected that cost of the painting was ₹8.50 Crores and it was on that basis only, that the respondents had remitted the abovementioned amount to the bank account of the petitioners. Despite petitioners not having invested a single penny in the Painting, vide email dated 6.6.2015, requested the respondents to remit the balance amount with regard to their share in the painting i.e. another Rs. 1,06,78,192/-, which demand was made on the premise that respondents were liable to pay 60% towards the cost of the painting, which had never been the case.
9. On 16.6.2015, while not in agreement of the amount demanded in the previous email, the respondent No. 1, transferred Rs 74,81,735/- thereby admittedly making a total payment of Rs 4,99,03,543/- [Four Crore Ninety Nine Lakhs Three Thousand Five Hundred and Forty Three] to the petitioners. On 23.6.2015, respondents disputed the balance payment demanded by the AR as stated in the email dated 6.6.2015, as the understanding was that the petitioner and OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 7/46 respondents would jointly pay the cost of the Painting in equal share. The AR vide his email dated 23.6.2015 accepted the aforesaid understanding, but however, requested the respondents to agree to pay balance due as demanded. It is only with this email dated 23.6.2015 that the AR informed the Appellant that he has sought time from the purported "Parsi Gentleman' to pay the cost of the painting only by mid July 2015. Respondents, at the request and continued insistence of the AR agreed, to invest 60% share in the cost of the Painting. Thus, the total consideration payable by the respondents against their share in the Painting came to Rs 5,31,00,000/- [Rupees Five Crores and Thirty One Lakhs) out of which, Rs 31,96,437/- [Rupees Thirty One Lakh Ninety Six Thousand Four Hundred and Fifty Seven] remained outstanding as on 23.6.2015.
10. On 8.7.2015, while the respondents were arranging funds for making the balance payment towards their share in the Painting, the AR of petitioner sought an urgent short term personal loan for an amount of Rs 1 Crore for 2-3 weeks only. Between 9.7.2015 to 17.7.2015, respondent's Company M/s Victor Cables Corporation Ltd remitted a sum of ₹70,00,000/- [Rupees Seventy Lakhs) to the account of the AR's Company M/s G&T Oil field & Services Pvt Ltd.The AR failed to return the said short term loan advanced to him/his Company by the Respondents, within three weeks of advancement of loan as assured. Later, after repeated requests, only 17 Lakhs were re- paid by AR by 31.8.2015 against the loan of Rs. 53 lacs.
11. On 12.11.2015, when the AR did not provide any evidence of the purchase of Painting and the utilization of funds remitted by Respondents to the petitioner's account, Respondent No. 1, OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 8/46 vide his email dated 12.11.2015 sought Status of the Painting, agreement regarding the painting and timeline to get Painting to be in possession of the Respondents as well as timeline for the repayment of outstanding towards the short term loan advanced to the AR/ his Company.
12. AR responded to the aforesaid email, vide email dated 13.11.2015, that it was duty bound to pay 53 lakhs with interest, against the Short Term Loan given by the Respondents Company and requested "Respondents to muster the balance amount payable for the painting and AR will muster the balance amount which petitioner has to pay such that the transaction is completed and the delivery of the Painting taken and the painting kept in safe custody with the Respondents till its sale by private treaty or by public auction". Thus, pertinently, even till 13.11.2015, the transaction was not complete with the purported 'Parsi Gentleman'. After exchange of further email communication between the parties, on 22.1.2016, the AR vide his email and contrary to the terms of the Agreement stated, that unless the Respondents were willing to bear the custom duties @ 17.5%, the Appellant will not be interested in bringing the painting back to India. In the said email, yet again, a hollow assurance was made by AR that he shall repay the short-term loan amount at the earliest. Said email was reverted by Respondent No. 1 vide his email and it was clarified that there was no such understanding between the parties as per the Agreement that the custom duty will be payable by the respondents to get the painting back to India.
13. AR vide his email dated 23.1.2016 responded to the query of the respondents, qua evidence of obligation of the payment of OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 9/46 the duty to bring painting in India, stating 'Etc means any other not specifically stated' and thus this clearly proves that payment of duty was never ever disclosed nor explicitly discussed. None of the contents of the said email were in consonance with the terms of the Agreement. The AR once again failed to share the details of payments made by them against purchase of the said Painting, thereby fortifying the belief of the respondents that there was no Parsi Gentleman ever involved in this transaction. It was the Petitioner/AR who had always been the owner of the Painting as stated in the Agreement and the entire bunkum of Parsi gentleman and negotiations with him was only a setup by AR to allure the respondents, with impression that both parties to the Agreement were making investment in the Painting, whereas the same was not the case.
14. On 5.2.2016, respondents considering all the above stated ill and malicious actions on the part of the petitioners acting through his AR, made up their mind to exit from the investment in the painting. On 16.3.2016, the AR vide his email proposed that either of the party may purchase the interest of the other party in the Painting on the following terms: -
"Payment to be made by the Other Party to the Party selling his interest in the Painting within 3 working days of receipt of the monies from Christie's (or any other Auction House) along with interest (discussed below) OR 31st July'16 whichever is earlier........
For this transaction to move forward to a logical conclusion, either of the Parties would need to be paid a fair rate of interest which in my opinion should not exceed 12% per annum."
OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 10/46
15. On 29.3.2016, respondents (having realised the cheating and fraud perpetuated by the AR / brother of the petitioner Mr Rajiv Savara) agreed for the petitioners to buy out their share in the Painting and refund their money alongwith interest @ 12% per annum by or before 31.7.2016. On 8.4.2016, AR upon deduction of Rs 31,96,457/- payable to the petitioners by the respondents against the Painting, returned the balance amount of Rs 21,03,543/- [Rupees Twenty One Lakh Three Thousand Five Hundred and Forty Three Only] out of Rs 53 lakhs short term loan given to the AR/his Company. Therefore, by 8.4.2016, Rs 5,31,00,000/- had been paid by the respondents to the petitioner against their 60% share in the said Painting.
Respondents opted for refund of their money by executing an Addendum Agreement dated 20/21.4.2016 wherein the petitioners agreed to refund the entire amount of 5,31,00,000/- to the Respondents together with interest @12% p.a. from the date each remittance was made by the Respondents to the petitioner and/or to petitioner and AR's undertaking M/s G&T Oilfield & Services Pvt. Said amount was not returned despite email communication by the respondent and it is only when respondents file a Criminal complaint with EOW against the petitioner that an amount of Rs. 150 lacs was remitted by the petitioner, followed by remittance of another amount of Rs. 2,00,00,000/- to the respondents on 10.1.2017. On 12.04.2017, respondents vide email specifically reiterated that balance principal amount alongwith all outstanding interest till date of payment , was payable by the petitioners to the respondents as per the Addendum Agreement, to close the transaction. However, on 18.04.2017, petitioners remitted amount of Rs. 1,81,00,000/-
OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 11/46 and baselessly treated the same as full and final settlement amount. Since the petitioners failed to honour their absolute and irrevocable undertaking under the Addendum Agreement to refund the principal amount alongwith updated interest to respondents, arbitration was invoked by respondents.
16. Ld. Arbitral Tribunal after completion of proceedings, vide impugned award, allowed the claim of respondents and directed the petitioner to pay an amount of Rs. 3726000/-. Parties were left to bear their own legal cost and the arbitration cost was to be borne equally by both the parties with further directions for payment of INR 9269.33 by claimants to respondents in respect of cost of the arbitration. Respondents preferred notice for correction of the award in terms of Article 27 of LCIA India Rules whereby the rectification was made in quantum of awarded amount at Rs. 10100000/-. Plea of respondents for award of pendentilite interest and litigation cost was negated, while the provision of section 31 (7) (b) was referred for payment of future interest. Both the parties made challenge to the award vide two separate petitions u/s 34 of Arbitration and Conciliation Act.
17. First challenge made by Ld. counsel for petitioner was pertaining to insufficiency of Stamp in Agreement. Ld. counsel for petitioner made following submissions:
(a) That, Hon'ble Arbitral Tribunal has arbitrarily and incorrectly by and through exceeding its jurisdiction, against and in conflict with the Public Policy of India, passed the Impugned Award in complete contravention of the fundamental policy of OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 12/46 Indian law. The Impugned Award has been passed on the basis of an alleged Agreement, which is not even stamped in compliance with the provisions of the Delhi Stamp (Prevention of Undervaluation of Instruments) Rules 2007. Agreement not having been duly stamped, could not have been acted upon, including adjudication by the Hon'ble Arbitral Tribunal. The Hon'ble Arbitral Tribunal in complete contravention of Section 33 and 35 of The Indian Stamp Act, 1899 adjudicated and proceeded with the arbitration proceedings.
(b) That, Honble Arbitral Tribunal committed grave illegality in award by holding that Sec. 2(24) of the Stamps Act does not cover within its ambit, the Settlement between the Parties. A bare perusal of Sec. 2(24) which defines "Settlement" in Clause B clearly states that the Settlement can also be for the purpose of distributing property of the settler amongst those for whom he desires to provide. Clearly, in this case, the Respondents by way of the 2016 Addendum were disposing of their 60% share in the said Painting in favour of the Objector/ Applicant.
(c) That, The Hon'ble arbitral tribunal has arbitrarily and incorrectly by and through exceeding its jurisdiction, against the Public Policy of India, passed the Impugned Award without addressing the issues raised by the Objector/Applicant inter alia allowing the claim of interest of the Respondents. The Objector/Applicant had diligently filed an Application w/s 16 of the Act challenging the very jurisdiction of the Hon'ble AT on various grounds including the Agreement having not been duly stamped in compliance with the provisions of the Stamp Act, OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 13/46 1899. However, the referenced Application was dismissed through an illegal and incorrect Order dated 20.01.2020.
(d) That, in any case and without prejudice to the above, the Hon'ble AT has itself in its Impugned Award held that by way of the 2016 Addendum, the Respondents transferred their 60% share in the said Painting in favour of the Objector/Applicant. Accordingly, the said Agreement is to be covered under Article 23 of Schedule 1 of The Indian Stamp Act, 1899 which provides for Conveyance and as such Stamp Duty ought to have been paid on an ad-valorem basis.
(e) That, on 13th December, 2023, a seven judge bench of the Supreme Court in Re: Interplay between Arbitration Agreements under the Arbitration & Conciliation Act 1996 AND THE INDIAN STAMP ACT 1899, In re, 2023 SCC OnLine SC 1666 (N.N. Global 7) has finally ruled on the enforceability of the unstamped arbitration agreements and has categorically held that the Stamp Act applies to an instrument as a whole and therefore, such instrument will eventually need to be stamped for giving effect to an arbitration agreement. In other words, even if, though not agreed with, the arbitration agreement is separable from the underlying contract, such contract as a whole will need to be stamped, should the arbitral tribunal so deem it fit, in order to adjudicate/ proceed with the arbitration proceedings. The interpretation accorded to the Stamp Act by the Apex Court in the above judgment does not allow law to be flouted.
(f) That, Arbitral Tribunal is bound by the provisions of the Stamp Act, including those relating to its impounding and admissibility. As expressed by the Apex Court in the above judgment, the Arbitral Tribunal too was bound to ensure that OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 14/46 while the provisions of the Arbitration Act were given effect to, it could not detract from the intent and mandate provided by the Stamp Act. The interests of revenue are not jeopardised in any manner as the duty chargeable must be paid prior to the Agreement in question being rendered admissible and the lis between the parties, adjudicated. The question is as to at which stage the Agreement would be impounded and not whether it would be impounded at all. It is pertinent to mention herein that the Hon'ble Arbitral Tribunal adjudicated and proceeded with the arbitration proceedings by placing reliance upon the two judge bench decision of the Court, in Re Garware Wall Ropes which has now been held by the Apex Court in Re: Interplay as decisions of this Court which have been wrongly decided and containing incorrect position of law. The relevant portion of the judgement is reproduced:
"179. The decision of the majority in N N Global 2 (supra) assumes that the inadmissibility of the document in evidence renders it unenforceable. However, the effect of the principle of competence is that the arbitral tribunal is vested with the power and authority to determine its enforceability. The question of enforceability survives, pending the curing of the defect which renders the instrument inadmissible. By appointing a tribunal or its members, this Court (or the High Courts, as the case may be) is merely giving effect to the principle enshrined in Section 16. The appointment of an arbitral tribunal does not necessarily mean that the agreement in which the arbitration clause is contained as well as the arbitration agreement itself are enforceable. The arbitral tribunal will answer precisely these questions........
187. Once the arbitral tribunal has been appointed, it will act in accordance with law and proceed to impound the agreement under Section 33 of the Stamp Act if it sees fit to do so. It has the authority to receive evidence by consent of the parties, in terms of Section 35. The procedure under Section 35 may be followed thereafter. In this manner, the competence-competence doctrine is given life and arbitration proceedings can continue to remain a faster alternative to suits before the trial courts or other, similar actions............
194. The interpretation accorded to the Stamp Act by this Court in the present judgment does not allow the law to be flouted. The arbitral OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 15/46 tribunal continues to be bound by the provisions of the Stamp Act, including those relating to its impounding and admissibility. The interpretation of the law in this judgment ensures that the provisions of the Arbitration Act are given effect to while not detracting from the purpose of the Stamp Act.
195. The interests of revenue are not jeopardised in any manner because the duty chargeable must be paid before the agreement in question is rendered admissible and the lis between the parties adjudicated. The question is at which stage the agreement would be impounded and not whether it would be impounded at all....
196. It is a well-known fact that courts are burdened with innumerable cases on their docket. This has the inevitable consequence of delaying the speed at which each case progresses. Arbitral tribunals, on the other hand, deal with a smaller volume of cases. They are able to dedicate extended periods of time to the adjudication of a single case before them. If an agreement is impounded by the arbitral tribunal in a particular case, it is far likelier that the process of payment of stamp-duty and a penalty (if any) and the other procedures under the Stamp Act are completed at a quicker pace than before courts."
Hence, the Impugned Award is liable to be set aside under section 34(2)(b)(ii) of the Act having being passed by the Arbitral Tribunal arbitrarily and incorrectly by and through exceeding its jurisdiction, against and in conflict with the Public Policy of India, in complete contravention of the Delhi Stamp (Prevention of Undervaluation of Instruments) Rules 2007 and Section 33 and 35 of The Indian Stamp Act, 1899.
18. Ld. counsel for respondents made following submissions:
(a) That, Ld. Arbitrator has given a detailed and legal finding on the issue as to whether the Agreements were defective or not as per Indian Stamp Act, 1899 on an application filed by the petitioner under section 16 of the said Act challenging the jurisdiction of the Arbitral Tribunal, inter-alia, on the following frivolous grounds:-
a) No dispute subsists;
b) Premature invocation of the Arbitration Clause;
c) LCIA Rules 2016 cannot be referred;
OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 16/46
d) Agreement void and not stamped/sufficiently
stamped.
(b) Said application was correctly dismissed by Ld. Arbitrator vide an order dated 20.01.2020. The petitioner could have challenged the said order dated 20.01.2020 at that stage itself as the same raised legal issues. Having not done so, the order dated 20.10.2020 has attained finality.
(c) That, stamp paper for the Addendum agreement was admittedly purchased by the petitioner himself as per his own email dated 21.04.2016 (9:56 A.M.). It seemed that it was a pre-
planned strategy by the petitioner to buy a under valued stamp paper, if so, and later make an issue of it to wriggle out of the Agreement. The petitioner is clearly playing fraud on the court.
19. Ld. Arbitrator vide proceedings dated 20.01.2020 addressed and disposed off the objection of the petitioner regarding insufficient stamp duty. Petitioner had contended that the agreement, not having executed on adequately stamped paper, was neither valid nor binding, as the Addendum constituted a settlement agreement, therefore, was subjected to stamp duty as per item no. 58 of Schedule 1 (a) of Indian Stamp Act which was subject to the same stamp duty as a bond i.e. at 2%. Ld. Arbitrator, nevertheless, examined whether the addendum could be classified as a settlement agreement and noted that addendum did not qualify as an insttrument of settlement as per terms of Stamp Act and it had to be stamped as per the agreement or memorandum of an agreement which entails stamp duty of INR
50. As the addendum was affixed with stamp duty of INR 100, it was taken to be duly stamped.
OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 17/46
20. Parties had entered into an agreement dated 20.4.2015 which was amended by addendum dated 21.4.2016. Observation of Ld. Arbitrator after consideration of the contents of both the documents, therefore, cannot be faulted with, that it was not the instrument of settlement but the agreement or memorandum of an agreement, merely amended lateron, vide addendum. Ld. Counsel for petitioner herself submitted in written submissions that 2016 Addendum was in continuation of the 2015 Agreement and that it did not override the 2015 Agreement, contrary to the earlier stand taken that it was the instrument of settlement. Though Ld. Arbitrator also noted the submission of respondent that stamp duty was payable by petitioner, therefore, petitioner could not have taken advantage of his own wrong.
21. Nevertheless, also correctly noted that the provisions of Stamp Act being mandatory were to be adhered to. In the judgment Interplay between Arbitration Agreements under the Arbitration & Conciliation Act 1996 AND THE INDIAN STAMP ACT 1899, Hon'ble Apex court distinguished that SMS Tea Estates case, allowed the courts to impound the document u/s 33 of the Stamp Act at the section 11 stage and held that section 11 (6a) legislatively altered the basis of 'SMST Estates' to the extent that it dealt with judicial intervention at the section 11 stage. In 'Garware Wall Ropes', it was held that the referal court under section 11 (6a) would be bound by the mandatory provisions of the Stamp Act to examine and impound the unstamped instrument and also with regard to the existence and validity of arbitration agreement which was held to be not the correct position of law. Following was concluded by Hon'ble Apex Court:
OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 18/46 " 224. The conclusions reached in this judgment are summarised below:
a. Agreements which are not stamped or are inadequately stamped are inadmissible in evidence under Section 35 of the Stamp Act. Such agreements are not rendered void or void ab initio or unenforceable; b. Non-stamping or inadequate stamping is a curable defect; c. An objection as to stamping does not fall for determination under Sections 8 or 11 of the Arbitration Act. The concerned court must examine whether the arbitration agreement prima facie exists: d. Any objections in relation to the stamping of the agreement fall within the ambit of the arbitral tribunal; and e. The decision in NN Global 2 (supra) and SMS Tea Estates (supra) are overruled. Paragraphs 22 and 29 of Garware Wall Ropes (supra) are overruled to that extent ".
22. Ld. Arbitrator, in the instant matter, did not hold anything against the mandate of Hon'ble Apex Court in judgment (supra) which judgment though had been pronounced in the year 2023 subsequent to the objections having been decided by Ld. Arbitrator on 20.01.2020. Ld. Arbitrator duly considered the objection in relation to the stamping of agreement and discussed with regard to the objection pertaining to inadequate stamping and came to the conclusion that the document was properly stamped, which observation as already noted, cannot be faulted with and is not open for reappreciation.
Agreement and Liability of Petitioners to pay the amount:
23. Ld. counsel for petitioner made following submissions:-
(a) That, Ld. Arbitrator failed to take into consideration the fact that nothing was due and payable by the petitioner to respondents as petitioner's obligation under 2016 Addendum stood discharged on 17.04.2017 when the petitioner made full and final payment to the satisfaction of respondents which fact OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 19/46 was diligently recorded by Mr. Rajiv Savara FCA in his email dated 18.04.2017. Further there was complete silence of respondents for a period of close to 18 months commencing from 18.04.2017 till 15.10.2018 i.e. the date when the arbitration proceedings were sought to be invoked by the respondent.
(b) That, Hon'ble AT had completely ignored the material on record and further failed to appreciate the fact that the Respondents had already accepted the payment of Rs.5,31,00,000.00 (Rupees Five Crores Thirty One Lakhs only) towards full and final settlement and therefore, nothing was due and payable to the Respondents and that there was no cause of action for initiation of the Arbitral Proceedings.
(c) That, the Hon'ble AT failed to appreciate the dictum of the Hon'ble Apex Court in NTPC Lal. Vs. Reshmi Construction, Builders and Contractors (2004) 2 SCC 663 at 674, inter alia, to the effect that there can be no further claim upon the receipt of full and final payment of monies in settlement without any demur which is binding on it and as such, AT ought have dismissed the claim of the Respondents who received the entire settlement without any demur as is established from the fact that there was no response from the Respondents to the E-mail dated 18.04.2017 of the Objector/Applicant clearly providing that:
"with the effecting of the above referenced three (3) payments confirm that all amounts due and payable stand satisfied and the chapter closed with the entire amount of Rs. 5,31,00,000.00 (Rupees Five Crores Thirty One Lakhs only) having been paid".
(d) That, Hon'ble AT ought to have appreciated that the petitioner discharged its onus of proving the oral agreement OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 20/46 between the Parties on 14.04.2017. Also, the petitioner had univocally stated in its Response/Reply to the Statement of Claim that the last tranche of monies was in full and final payment as agreed to, by and between the Parties which fact was further detailed during the Evidence given by Mr. Rajiv Savara FCA. The AT ought to have appreciated that the strict rule of detailing each and every fact in pleading is not the requirement of the Arbitral Proceedings. The Hon'ble AT failed to appreciate that once the petitioner discharged its onus to prove the Oral Agreement, the onus shifted upon the Respondents to rebut the same which admittedly was never discharged by the Respondents.
(e) That, Hon'ble AT had erred in not appreciating the fact that the Respondents with malafide intent and ulterior motives, willingly chose not to enter the Witness Box to explain their conduct and in particular, the reason for their complete silence for over a period of over 18 months (commencing with the E- mail dated 18.04.2017 from the petitioner following the receipt of the balance amount by the Respondents on 17.04.2017 and till November 2018, when the Arbitration Proceedings were initiated by the Respondents) taking into consideration the penchant of the Respondents to instantly communicate even when not required on all matters, the Hon'ble AT had completely overlooked the marking of an adverse inference against the Respondents. The AT incorrectly held that the conduct of the Respondents suggested that they had no intent to waive the interest in as much the conduct of the Respondent SKG in having a dialogue with Mr. Rajiv Savara FCA and thereafter, there being no communication whatsoever from the Respondents (including important and OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 21/46 material relevance, to the E-mail dated 18.04.2017 of the petitioner), for over 18 months is evidence enough that the amount received by them was in full and final settlement. The AT ought not to have considered the illegal actions of the Respondents carried-out by them on the back of the petitioner as the sole criteria to determine their conduct.
(f) That, the Hon'ble AT in para 3.3.2(iii) of the Impugned Award on the basis of assumptions and contrary to the material on record came to the conclusion that there was no reason as to why the Respondent SKG despite having stringently demanded the return of his investment along with interest thus far, was now led to say "let bygones be bygones" especially considering the fact that the Respondents failed to enter the Witness Box.
(g) That, in para 3.3.2(iv) of the Impugned Award, the Hon'ble AT wrongly concluded that there is little to suggest that the Respondent SKG considered forgoing of interest merely on assumptions and without any iota of evidence. The Hon'ble AT while dealing with the petitioner's contention, has failed to appreciate the fact that the delay in transferring the amount was substantially due to the Respondent's own fault and unreasonable situations created by the Respondents which were beyond the control of the petitioner. However, regardless of all the adverse situations, petitioner fulfilled all of his obligations under the 2015 Agreement, read with the 2016 Addendum.
(h) That, Hon'ble AT further failed to appreciate that in fact respondents had breached the terms of the 2015 Agreement by not paying the entire amount of the purchase price towards the said Painting and that the petitioner had suffered financial and reputational loss on that account.
OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 22/46
(i) The Hon'ble AT also failed to appreciate that due to the Respondents having violated the confidentiality clause of the 2015 Agreement, petitioner failed to not only achieve the maximum possible price for the said Painting but resulted in the delayed receipt of payment from the Purchaser of the said Painting.
(j) That, clause 11.2 of 2015 Agreement, specifically provides that in case of any dispute, respondents should exhaust pre-arbitral conditions/remedies through friendly consultations by and through the holding of regular conference calls and meetings between the parties which the respondents did not, at any point of time, invoke and as such, the invocation of Arbitration was premature and contrary to the agreed terms of said 2015 Agreement.
(k) That, Hon'ble AT failed to appreciate that once the Parties had developed and defined a particular dispute resolution process which was to be adhered to prior to initiating arbitral proceedings, such process was required to be followed in letter and spirit and that the AT ought not to have substituted such process by its own assumptions. The Hon'ble AT miserably failed to appreciate that the 2016 Addendum was in continuation of the 2015 Agreement and that it did not override the 2015 Agreement.
(l) That, Hon'ble AT ignored the "Severability" Clause of the 2016 Addendum which clearly provides "that this Addendum shall in no way effect the validity or enforcement of any other provision of the Agreement dated 20th April 2015 and this Addendum". Again in the "Entire Agreement" Clause, it is clearly provided that "The Agreement dated 20th April 2015 and this Addendum constitute the entire agreement and understanding and OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 23/46 so proceeds any previous agreements between the parties whether oral or in writing regarding the subject matter thereof". The Hon'ble AT erred in holding that as the 2016 Addendum was the later document, it superseded the 2015 Agreement, without interpreting both the agreements harmoniously.
24. Ld. counsel for respondents made following submissions:
(a) That, the disputes between the parties arose in regard to the Agreement dated 20.04.2015 read with the Addendum dated 20.04.2016 executed by and between the parties. The said agreement dated 20.04.2015 was with respect to the sale of 60% share in ' Gaitonde Painting" under the said agreement dated 20.04.2015 where, the respondents admittedly paid an amount of Rs. 5,31,00,000/- to the petitioner.
(b) That, respondents were induced by the petitioner and his AR to invest in the painting in question on their claim to purchase the same from a Parsi Gentleman, though in reality, it was always owned by the petitioner. Petitioner and his AR were in financial crises and to overcome it, they acted hands in gloves with each other, hatched this conspiracy and persuaded the respondents to part with their hard earned money under the guise of investing in Gaitonde Painting owned by a so called Parsi Gentleman and used the respondent's money for their benefit by playing fraud and cheating with the respondents.
(c) That, due to failure on the part of petitioner to remit the payment, respondents filed a criminal complaint with EOW against the petitioner and his brother/AR Sh. Rajiv Savara. On 18.04.2017, despite the respondents rejecting the proposal of petitioner (made in email dated 10.04.2017), AR of petitioner vide email dated 18.07.2017, remitted the amount of Rs.
OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 24/46 1,81,00,000/- and baselessly treated the same as full and final settlement amount payable to respondents, whereas there was no written confirmation from the respondents as was sought in AR's email dated 10.04.2017 for accepting Rs. 1,81,00,000/- only, as the full and final settlement.
(d) That, since petitioner and his AR failed to honour their absolute and irrevocable undertaking given under the Addendum Agreement to refund the principal amount alongwith up to date interest to respondents, respondents invoked arbitration clause14, under the Addendum Agreement .
25. Parties had entered into an agreement dated 20.04.2015 for joint purchase of Gaitonde Painting against 60:40 percent shareholding in ' Gaitonde Painting". Against the respondent's share of co-ownership, amount of Rs. 5,31,00,000/- was payable. Due to some dispute between the parties pertaining to the possession of the painting and the payments to the previous owner, addendum to the agreement was executed dated 20.4.2016 whereby respondent transferred his 60% shareholding in the painting against the refund of amount of Rs. 5,31,00,000/- payable to him within three working days of receipt of money from Auction House or 31.08.2016, whichever was earlier alongwith interest @ 12%, untill such date that money was returned by the petitioner to the respondents i.e. by or before 31.08.2016. The entire amount had not been refunded by petitioner before 31.08.2016. Respondent filed a complaint with Economic Offences Wing on 17.10.2016. Petitioner on 20.10.2016 refunded an amount of Rs. 1,50,00,000/- followed by further remittance of Rs. 2 crore in January 2017, leaving the balance outstanding at Rs. 1,81,00,000/-. Vide email dated OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 25/46 10.4.2017, AR of petitioner sought confirmation of the said payments for remittance of full and final settlement of balance amount of Rs. 1,81,00,000/-.
26. Respondent in response to email dated 12.4.2017 mentioned about the interest amount being due as per the terms of addendum. Petitioner thereafter relied upon a telephonic call received from respondent in the evening of 14.4.2017 whereby as stated, respondent agreed to accept sum of Rs. 1,81,00,000/- as full and final settlement. Vide email communication dated 18.4.2017, AR of petitioner referred to remittance of balance payment of INR 1,81,00,000/- inclusive of amount of INR 3196457/- paid by another entity which was adjusted in the said figure and thereby stated about the entire payment having been made. Respondent thereafter invoked arbitration proceedings. With regard to tele conference call dated 18.4.2017, Ld. Arbitrator noted that while the addendum was in writing, therefore, the averment of forbearance of the petitioner to not pursue the claim for interest to constitute a waiver would require an intentional and voluntary relinquishment of right or privilege. Since the respondent had categorically denied having made any such phone call or about any such oral understanding or agreement for waiver of the interest due as per the addendum, Ld. Arbitrator correctly reasoned that the said phone call was not mentioned in the Affidavit furnished by AR of the petitioner and this assertion was also not part of the pleadings. Petitioner had complained to the Economic Offence Wing stating about the itnerest being outstanding while the principal amount had been paid, thereby ruled that petitioner had not discharged the burden OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 26/46 of proof of an oral agreement of full and final settlement reached during phone call of 14.4.2017.
27. Similarly, with regard to the objection of sub silento, Ld. Arbitrator noted the contention of petitioner that respondent did not dispute or demur from the assertion made in the email of 18.4.2017 but rejected with the observation that the silence may be attributable to many facts including that the respondent had already initiated proceedings before Economic Offence Wing, further vide email dated 12.4.2017, respondent had already informed with regard to payment of outstanding amount of interest. Ld. Arbitrator further reasoned that waiver or abandonment of a right can be unilateral act, however, acceptance of a sum lesser than the contractual amount must require the confirmation of the party which makes the forebearance. Ld. Arbitrator reasoned that "Firstly, it cannot be said under any stretch of imagination that it was the duty of the Claimants to refute the Email of 18 April 2017. On the contrary, as mentioned above, it is up to the debtor to obtain a firm assent when making an averment that the payment was in full settlement, and not that of the creditor. Secondly, the Claimants by their actions in pursuing the claim for interest amply demonstrated that the averment of the Authorised Representative in the Email of 18 April 2017 that the payment of the principal sum was in full settlement of all dues was not accepted". No perversity or patent illegality is noted in the observation of Ld. Arbitrator.
Premature invokation of arbitration:
28. Ld. Arbitrator noted that at the time of execution of addendum which had been executed subsequent to arising of OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 27/46 dispute between the parties, parties could not have contemplated resolution of disputes through friendly consultations due to the serious differences. Ld. Arbitrator rather also observed with regard to inability of the parties to arrive at concensus even on procedural aspects of arbitration. The parties were also offered the chance to discuss and settle the issues between themselves but neither had shown any inclination, thereby had to observe that the consultation period was dispensed with in the addendum given the circumstances at that time and further despite the option given to the parties to settle their differences, they did not respond positively to the urging of the tribunal.
Interest:
29. Ld. Counsel for petitioner submitted that Ld. Arbitrator erred in granting interest beyond August 2016 in as much as Clauses 1 and 2, clearly provide that the interest ought to have been paid only till that point of time . Once the said agreement equivocally specified the date, Ld. Arbitrator ought not to have travelled beyond the terms of the agreement. Further, perusal of arbitration record shows that email dated 18.04.2017 was not placed on record by the respondents and Ld. Arbitrator chose to ignore this aspect and proceeded with the matter as if the said email was irrelevant or inconsequential, thereby, allowing the respondents to take advantage of their own wrong. Impugned award, therefore , is in complete violation of the principles of natural justice and Ld. Arbitrator, in a patent illegal manner, did not even consider and deal with the various judgments cited by the petitioner and proceeded to pass the impugned award.
30. Ld. counsel for respondents submitted that:
OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 28/46
(a) the petitioner never paid the full amounts due under the Addendum Agreement. The documentary and oral evidence clearly showed that all payments alongwith agreed interest had to be paid. The objections by the petitioner to challenge each and every part of the Addendum was a devise made by him to wriggle out of his contractual obligations. In fact, petitioner never had any intention ever to return the money as per the Addendum dated 20/21.04.2016. It was only when a complaint was made to EOW, Delhi Police that the petitioner realized that he will be arrested for the fraud and cheating played by him in connivance with his NRI Brother that he paid and that too only the principal amount.
(b) emails of 31.08.2016 and 08.09.2016 of the petitioner clearly mention that he will pay interest on the delayed period.
So the question of non payment of interest does not arise. The material facts and documents have been deliberately suppressed by the petitioner from this court in order to gain undue advantage and the present petition is meritless, bundled with incorrect facts, therefore, petitioner deserves no relief from this court.
31. Execution of Addendum was the admitted fact before Ld. Arbitrator which contained the specific stipulation for payment of interest @ 12% upon the amount of Rs. 5,31,00,000/- from the date of respective payments and till the date of refunds on or before 31.08.2016. Subsequent thereto, the email communication between the parties also referes to obligation of the petitioner with regard to payment of interest . It is also borne out from the record that the petitioner cleared the payment of principal amount beyond stipulated date of refund i.e. on or before 31.08.2016 and OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 29/46 stretched the payments even against the principal amount till 18.04.2017. Thereby, petitioner was under obligation to make the payment of interest till the date of final payment of principal amount . Assertion of the petitioner with regard to waiver of respondent through a telephonic call or vide subsequent oral agreement or the non response to the email of petitioner dated 18.4.2017, did not find favour with Ld. Arbitrator for the reasons as detailed in award. Well reasoned findings of Ld. Arbitrator based upon facts and evidence is not open for reappreciation before this court and the grounds taken by petitioner are more in form of appeal seeking reappreciation which is not permissible.
MODIFICATION TO AWARD
32. Final award was passed by Ld. Arbitrator dated 19.02.2021. Claimant/respondent thereafter filed an application seeking correction in the final award. It was submitted by Ld. Counsel for petitioner :
(a) That, Hon'ble Arbitral Tribunal without providing an opportunity to the Objector/Applicant to contest the Application filed by the Respondents for modification of the original award, passed the Memorandum to the Final Award dated 26.03.2021.
This is not only arbitrary but also in teeth of the very basic principle of natural justice "audi alterem partem". (b) That, the Arbitral Tribunal in complete violation of Article 27.1, 27.2 and 27.3 of the LCIA India Rules, without consulting with the parties, arbitrarily and incorrectly by and through exceeding its jurisdiction, against the Public Policy of India, modified the Original Award passed through the Memorandum to the Final Award dated 26.03.2021.
OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 30/46
(b) That, Article 27 of the LCIA India Rules, categorically mentions, emphasis on " 27.1......If, after consulting the parties, the Arbitral Tribunal considers the request to be justified, it shall make the correction...". The LCIA India Rules provide for consultation by and with both the parties by affording them the opportunity to be heard w.r.t to the Application of the Respondent's seeking essentially a fresh award in the garb of correction of the original Award wherein by way of such corrections the Arbitral Tribunal not only increased the claim amount to INR 1,01,00,000/- from INR 37,26,000/- as was previously passed under the original Final Award dated 19.02.2021 but a post award interest under section 31(7)(b) of the Act @ 14% was awarded in the garb of effecting a correction to the Award.
The relevant provisions of the LCIA India Rules was reproduced as under:
"Article 27 Correction of Award(s) and Additional Award(s) 27.1 Within 28 days of receipt of any award. party may by written notice to the Registrar (copied to all other parties) request the Arbitral Tribunal to correct in the award any error in computation, any clerical or typographical error, any ambiguity or any mistake of a similar nature. If. after consulting the parties, the Arbitral Tribunal considers the request to be justified, it shall make the correction by recording it in an addendum to the award within 28 days of receipt of the request. If, after consulting the parties, the Arbitral Tribunal does not consider the request to be justified it may nevertheless issue an addendum to the award dealing with the request, including any Arbitration Costs and Legal Costs related thereto.
27.2 The Arbitral Tribunal may also correct any error (including any error in computation, any clerical or typographical error, any ambiguity or any mistake of a similar nature) upon its own initiative in the form of an addendum to the award within 28 days of the date of the award, after consulting the parties.
27.3 Within 28 days of receipt of the final award, a party may by written notice to the Registrar (copied to all other parties), request the Arbitral Tribunal to make an additional award as to any claim, counterclaim or cross- claim presented in the arbitration but not decided in any award. If. after consulting the parties, the Arbitral Tribunal considers the request to be justified, it shall make the additional award within 56 days of receipt of the request. If, after consulting the parties, the Arbitral Tribunal does not OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 31/46 consider the request to be justified it may nevertheless issue an addendum to the award dealing with the request, including any Arbitration Costs and Legal Costs related thereto.
27.4 As to any claim, counterclaim cross-claim presented in the arbitration but not decided in any award, the Arbitral Tribunal may also make an additional award upon its own initiative within 28 days of the date of the award, after consulting the parties.
27.5 The provisions of Article 26.2 to 26.7 shall apply to any addendum to an award or additional award made hereunder. An addendum to an award shall be treated as part of the award."
33. It was submitted that the Impugned Award is liable to be set aside under section 34(2)(b)(ii) of the Act having been passed by the Arbitral Tribunal arbitrarily and incorrectly by and through exceeding its jurisdiction, against and in conflict with the Public Policy of India, in complete contravention of not only the basic principle of natural justice "Audi Alterem Partem" but in complete violation of Article 27.1, 27.2 and 27.3 of the LCIA India Rules.
34. Ld. Counsel for respondent made following submissions:
(a) That, Arbitral Tribunal after conclusion of proceedings, passed the Award dated 19.02.2021, holding the petitioner liable to pay intetest@ 12% on the amount of Rs. 4,99,03,533/- instead of principle amount of Rs. 5,31,00,000/-, subsequent to which, an application was moved by respondents seeking correction of the computation error in terms of LCIA Arbitration Rules.
Intimation/notice of said application was given to counsel for both the parties, however, petitioner despite being aware of the aforesaid communication purposefully chose not to participate or make any response to the respondent's representation, thereby agreeing with the representation / submissions of respondents . Accordingly, Ld. Arbitrator while considering the unopposed OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 32/46 representation of respondnets, verified the computation of interest in the arbitral award and admitted the computation error in the number of days which required correction and thereafter corrected the interest payable by the petitioner to respondents at Rs. 1,01,00,000/-, vide its order dated 26.03.2021. Apart from the aforesaid correction of computation error, no other relief was granted by Ld. Arbitrator.
(b) That, the impugned award suffers from no legal or factual anomaly except to the extent that Ld. Arbitrator had wrongly calculated the interest under the Original Award and further interest on the Addendum Award, as the amount of interest ought to have been calculated on the admitted amount of Rs. 5,31,00,000/-.
35. After the award had been passed, claimant/respondent moved before LCIA requesting the tribunal to make corrections to the final award dated 19.02.2021. Upon acknowledgment of receipt of claimant's letter and email by Registry, same was forwarded to tribunal with copy to both the parties. Ld. Arbitrator noted the provisions for rectifications whereby any error in computation, clerical or typographical error could be corrected. With regard to quantum of interest, same was awarded at Rs. 3726000/- based upon the number of days as 116. Ld. Arbitrator noted the error in computation of the said amount as the number of days were from 16 January 2015 to 20 October 2016, thereby made correction in accordance with Article 2.70.2 of LCIA India Rules. Any such correction was required to be made within 30 days of the receipt of the request. Therefore, any objection to the same was also required to be made by petitioner within the reasonable time. No such objection was raised by petitioner OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 33/46 within reasonable time despite having received the communication and also having knowledge that such correction, if any was required to be made within 30 days. Besides that, the correction was made pertaining to computation/calculation of the amount as previously number of days had been wrongly calculated for which the amount was payable, therefore, it cannot be said that no opportunity was made available to petitioner or any prejudice had been caused to the petitioner.
COUNTER PETITION BY RESPONDENT:
36. Respondent challenged the Final Award and Memorandum to Final Award on the following grounds:
PRINCIPAL AMOUNT:
(a) That, the Ld. Arbitrator while passing the impugned Final Award and Memorandum to the Final Award failed to consider the terms of the Addendum Agreement dated 20/21.4.2016 qua the understanding between the parties with respect to the Principal Amount of Rs 5.31 Crores. The determination of the Ld. Arbitrator in impugned Final Award and Memorandum to the Final Award that the PrincipalAmount repayable to the respondent by the petitioner was Rs 4,99,03,533/- and not Rs 5,31,00,000/- is itself contrary to the Addendum Agreement dated 20/21.4.2016.
(b) That, Ld. Arbitrator failed to consider that from the bare perusal of the aforesaid recitals of the Addendum Agreement, the parties understood that Principal Amount payable by the petitioner to the respondents was Rs 5,31,00,000/- and not Rs 4,99,03,533/-.
OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 34/46
(c) That, Ld. Arbitrator failed to consider the email dated 30.8.2016 from the respondents wherein it was specifically mentioned that under the Addendum Agreement, the Principal Amount is Rs 5,31,00,000/- and interest payable @ 12% per annum is Rs 92,07,893/-, totalling to Rs 6,23,07,893/-as on 31.8.2016.
(d) That, there was nothing on record for the Ld. Arbitrator to conclude that Principal Amount payable by the petitioner to the respondents under the Addendum Agreement was Rs 4,99,03,533/- instead of Rs 5,31,00,000/-. Ld. Arbitrator by determining the Principal Amount under the Addendum Agreement as Rs 4,99,03,533/- instead of Rs 5,31,00,000/-, has re-written the Addendum Agreement by reducing the obligation of the petitioner towards the respondents under the Addendum Agreement, contrary to the intention of the parties to the said Agreement. Intention of the parties is manifested in the terms of the language used in the Agreement and a contrary interpretation would be unsustainable. Reliance was placed on Oil & Natural Gas Corporation Ltd. v. SAW Pipes Ltd., (2003) 5 SCC 705 and Hindustan Zinc Ltd. v. Friends Coal Carbonisation, (2006) 4 SCC 445.
(e) That, it is settled Principle of law that if the Arbitrator has chosen to act whimsically and passed an award without reference to the specific terms of the contract or contrary to the terms of contract, law does not permit the Arbitrator to do so neither gives him power to decide or adjudicate the claims in accordance with a new contract written by the Arbitrator himself between the parties.
OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 35/46
37. Ld. Counsel for petitioner referred to the observation of Ld. Arbitrator on the said aspect and submitted that objections under reply are liable to be outrightlty rejected as the respondent is claiming grant of interest on sum of Rs. 3196457/-, which transaction did not take place between the parties herein. It was submitted that issues raised in the objection were properly considered and dealt with by Ld. Arbitral Tribunal while passing the impugned award dated 9.2.2021 and the memorandum to final award dated 26.03.2021.
38. Ld. Arbitrator noted that " the amount of Rs. 5,31,00,000/- was payable by the respondent as his shareholding in the painting. As on 14.01.2016, payments by respondent for the painting amounted to INR 4,99,03,543/- leaving a shortfall of INR 31,96,457. Between 9 and 17 July 2015, Victor Cables Corporate Limited remitted a sum of INR 70,00,000 to G&T Oilfield and Offshore Services. Out of this amount of INR 70,00,000, a total of INR 38,03,543 was returned to Victor Cables Corporate Limited in tranches, leaving a balance of INR 31,96,457, which was retained and taken as adjusted against the shortfall due by the Claimants to the Respondent for their share in the co-venture. This balance amount was also refunded on 18 April 2017 by G&T Oilfield and Offshore Services to Victor Cables Corporate Limited".
39. Based upon above, Ld. Arbitrator observed that the two entities namely Victor Cables Corporate Limited and G&T Oilfield and Offshore Services were purportedly controlled by the respondents and the petitioner respectively. However, these entities were not parties to the agreement or the addendum nor to the arbitration. It was not known if any interest was payable or OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 36/46 paid on the sums advanced by one to the other and refund in two tranches since it was also not clear whether such transactions were authorized by the two entities. As noted, it could only be presumed that when the amount was adjusted, it was with due authorization, thereby noted that the tribunal had no jurisdiction to either direct interest to be paid in respect of such transaction between the two entities or for any balanace, if any to be refunded. Thereby considered the amount as Rs. 4,99,03,533/- for the purpose of respective payment and repayment by the parties to each other and did not award the interest by not considering the transactions with the two entities for payment of the principal sum nor its repayment. No patent illegality or perversity is found in such conclusion.
PENDENTILITE INTEREST
40. Ld. Counsel for respondent further submitted that:
(a) Ld. Arbitrator has erred by not awarding pendente lite interest despite the respondents being entitled to receive the same in the facts and circumstances of the case. Ld. Arbitrator also erred in considering settled legal proposition that in transactions where the Principal Amount is repaid with interest in various parts or installments, then any amount repaid is always first adjusted against the interest part and then the remaining amount is to be adjusted against the Principal Amount. Accordingly, as on 31.8.2016, a sum of Rs. 92,07,893/- was due as interest on the Principal amount of Rs 5.31 Crores then totalling to Rs 6,23,07,893/- [Rupees Six Crores Twenty Three Lakhs Seven Thousand Eight Hundred and Ninety Three]. In line with the aforesaid, though petitioner remitted Rs 5.31 Crores only by OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 37/46 18.4.2017, however, on the said date, interest on the amount of Rs 31,96,457/- was also to have been paid @12% p.a. as per the Addendum Agreement which the Ld. Arbitrator failed to consider.
(b) Ld. Arbitrator also failed to consider the email dated 31.8.2016 sent by the AR of petitioner wherein the AR unconditionally admitted to payment of interest in terms of Addendum Agreement on the admitted Principal Amount of Rs 5,31,00,000/-. Vide said email, petitioner did not object to the calculation of the interest on the Principal amount of Rs 5,31,00,000/- while answering the email of respondents.
(c) Ld. Arbitrator failed to consider the email dated 8.9.2016 issued by the AR of the petitioner, wherein he categorically stated that "First and foremost, we would like to assure you that we are well aware of provisions contained in Clause No. 1 titled "Principal Repayment" of our Agreement dated 20/21st April'16 that provide for the payments to be made by us within 3 working days of the receipt of monies from the Auction House "OR by 31st August'16, whichever is earlier, irrespective of the fact whether the painting is sold or not".
(d) Ld. Arbitrator failed to consider that the respondents in each of their communication claimed the interest @ 12% per annum on the Principal amount of Rs 5,31,00,000/- that was payable under the Addendum Agreement and not denied by the petitioner as is evident from the emails dated 13.12.2016 and 12.1.2016 sent by the respondents to the petitioner.
(e) Ld. Arbitrator erred in not considering the aforesaid facts and submissions while deciding the issue of interest on Rs 5,31,00,000/-, @ 12% per annum agreed as per Addendum OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 38/46 agreement dated 20/21.4.2016 and pendente lite interest and cost of litigation towards litigation which was forced upon the respondents and which gravely prejudiced the interest of the respondents, as the respondents suffered losses and incurred legal costs solely due to the acts of the petitioner and his AR.
(f) It is a settled principle of law that not only the parties to the contract but even the Arbitrator, who is given responsibility of deciding the disputes between the parties, is bound by the contract / Agreement and the Arbitrator has to decide the dispute only in accordance with the contract/ Agreement between the parties.
(g) Because the Arbitrator cannot rewrite the contract between the parties nor create a new contract between the parties. He has to apply the terms and conditions of the contract as were agreed between the parties. If the Arbitrator gives an award ignoring the terms and conditions of the contract and travels beyond the terms and conditions of the contract, the award is liable to be set aside and this finding of the Arbitrator is required to be modified by the Court.
(h) Ld. Arbitrator failed to consider that the petitioner was able to fraudulently and illegally extract Rs 5.31Crores from respondents between the period April 2015 to July 2015 on the pretext of purchasing a Gaitonde Painting worth Rs 8.85 Crores in terms of agreement dated 20.4.2015 from a claimed one Parsi Gentleman [though the Agreement dated 20.4.2015 claimed otherwise] for keeping it in his safe custody in India in terms of clause 3.2 of Agreement.
OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 39/46
(i) Petitioner by not honouring his unconditional and irrevocable obligations in Addendum Agreement dated 20.4.2016, pushed the respondent into unwarranted litigation.
(j) Ld. Arbitrator failed to consider that the it was the petitioner who did not pay the interest to the respondents despite his irrevocable and unconditional obligation in the Addendum agreement dated 20.4.2016 and therefore petitioner made himself liable for pendente lite interest.
41. Ld. Counsel for petitioner submitted that all the prayers of the respondents are not only violative of the Agreement and the Arbitral Award but bad in the eyes of the law considering there exists no unpaid principal amount, whatsoever. Thereby, seeking interest on the principal amount which stands paid before the initiation of the arbitral proceedings not only makes the entire arbitral proceedings bad in the eyes of the law but necessitates the frivolous and vexatious Section 34 Application in the matter of Shivraj Krishan Gupta vs. Rahul Savara [OMP(COMM 64 of 2021] to be dismissed with heavy costs on this ground alone.
42. It was also submitted that though the claim of pendentilite interest and litigation cost was disallowed, arbitral tribunal yet directed that the rate of interest Post Award be governed as per Section 31(7)(b) of the Act, while erring in granting interest beyond August 2016 in as much as Clauses 1 and 2 provided that interest ought to have been paid only till that point of time. It was also submitted that once, the said Agreement equivocally specified the date, the AT ought not to and for that matter, could not have travelled beyond the terms of the Agreement.
43. Ld. Arbitrator concluded that interest would continue to accrue after 31.08.2016 to the extent that the principal amount OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 40/46 had not been paid by that date and by the same token, it could accrue only untill the sum of money outstanding was paid and not thereafter. Since the Arbitration clause was silent on any agreement as to interest, Ld. Arbitrator relying upon Clause 2 of the Addendum, noted that it provided the interest as payable only till the date on which the principal sum was outstanding, therefore, did not find it necessary to exercise any discretion in the matter and also considering that the respondents instead of invoking arbitration pursued criminal proceedings, thereby declined to grant interest upon interest i.e. the compounded interest and also the pendentilite interest for the same reason. Litigation cost was directed to be borne equally by both the parties. Ld. Arbitrator, nevertheless, stipulated with respect to future interest with reference to section 31 (7) (b) of the act which provided for rate of 2% higher than the current rate of interest prevalent on the date of award from the date of award to the date of payment. There was no stipulation in the agreement mandating the payment of interest before the adjustment of the principal amount in the repaid sum. Further, no reason was provided to justify persuing a criminal remedy instead of the one prescribed in the agreement. In such circumstances, findings of Ld. Arbitrator are not subject to interference. Moreover objections raised by respondents in the counter petition are for seeking modifications in the findings of arbitral award which are neither perverse, patently illegal on face of it nor against the public policy of India.
44. Ld. Counsel for respondent submitted that power to modify an arbitral award has been recognized by the Hon'ble Delhi High Court in the case of the Surinder Mohan Talwar v. Cholamandalam OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 41/46 Investment & Finance Co. Ltd. reported in 2019 SCC OnLine Del 7792. In this case the Hon'ble High Court while entertaining an appeal under Section 34 of the Act found it appropriate to modify the award and thereby passed necessary orders in this regard. Following extract of the judgment was quoted : -
"1. The present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter, 'Act') has been filed challenging award dated 21 November, 2011.
8.... the Court is inclined to modify the award...
9. ..the impugned award is modified to the effect that the claims of Respondent finance company are allowed for a sum of Rs. 34,13,961/- to be paid along with simple interest @ 8% per annum from 1 October, 2013 till date. The impugned award is modified, accordingly."
45. In the judgment (supra), award was passed ex-parte. It was noted that the outstanding amount was much less whereas the award had been passed for a much higher amount. Based upon the document which was issued by the respondent itself who had not challenged the veracity or genuinity of the letter, court decided to modify the award in terms of the letter. Similar is not the position here. Ld. Arbitrator after hearing both the parties has arrived at the findings which are neither open for modifications nor for reappreciation of evidence.
46. Ld. Counsel for respondent submitted that " Petitioner raised objection pertaining to the maintainability of the appeal, heavily relying on judgment passed by the Hon'ble Supreme Court in NHAI vs. M Hakeem reported in (2021) 9 SCC 1. Petitioner had submitted that in view of the said judgment, this Court under Section 34 of the Act has no power to modify the OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 42/46 arbitral award and can either set aside the award or remand it back to the Arbitral Tribunal for reconsideration . However, the petitioner has not apprised this Court that the said judgment has not attained finality as a review petition under Dy No. 8803/2022 titled NHAI vs. M. Vijaylakshmi is still pending consideration before the Hon'ble Supreme Court. Therefore, till such time review petition against Hon'ble Supreme Court's judgment in NHAI vs. M Hakeem (supra) is decided, there lies no impediment to the pendency and adjudication of the present appeal".
47. Ld. Counsel for respondent seems to have either misunderstood or misinterpreted the dictum of law. No appeal is maintainable before this court against the arbitral award nor the award is open for judicial scrutiny in the form of appeal or reappreciation of evidence as in appeal. Judgment passed by Hon'ble Apex Court in NHAI (supra) holds good and remains binding and authoritative unless or untill, it is reviewed.
48. Ld. counsel for petitioner submitted that Ld. Arbitrator has arbitrarily and incorrectly by and through exceeding its jurisdiction, against the public policy of India, passed the impugned award without addressing the issues raised by petitioner.
49. Ld. counsel for respondents also submitted that in view of the settled principle of law, an arbitral award can be set aside under section 34 of Arbitration and Conciliation Act only, if the award is found to be contrary to (a) fundamental policy of Indian Law; or (b) the interest of India; or (c)justice or morality ; or (d) if it is patently illegal, which is not the case herein. Hence, the OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 43/46 court is not required to go beyond the evidence or the reasoning except for the exceptions carved out under section 34.
50. In Technofab Engineering Ltd. Vs. Tesla Transformers Ltd. 2021 LAWPACK (DEL) 84751, it was observed that :
" 14. .......
Construction and interpretation of the terms of the contract is primarily for the Arbitrator to decide and the legal position with respect to the exercise of jurisdiction under section 34 of the act, is now well established. This court cannot merely on an erroneous application of law, re-appreciate the evidence as it would be an encroachment upon the domain of the learned Arbitrator. The Supreme Court has also repeatedly observed that the scope of interference under section 34 of the Act is extremely narrow, and the court must be circumspect whilst dealing with cases".
51. It is correct that scope of jurisdiction under section 34 of the Arbitration Act is limited and is not open for appellate analysis. The court cannot sit in appeal while adjudicating a challenge to an Award. In terms of well settled law, the arbitral awards should not be interfered with, in a casual and cavalier manner, unless the court comes to a conclusion that the perversity of the award goes to the root of the matter.
52. In Ssangyong Engineering & Construction Co. Ltd. Vs. National Highways Authority of India, it was also noted that :
" it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law and secondly, that such award is against the basic notions of justice or morality. Explanation 2 to Section 34 (2) (b) (ii) and Explanation 2 to section 48 (2) (b)
(ii) was added by the Amendment Act only so that Western Geco (Supra), as understood in Associate Builders (supra), and paragrpahs 28 and 29 in particular, is now done away with. In so far as domestic awards made in India are concerned, an additional ground is now available under sub-section (2A), added by the Amendment Act, 2015, to section 34. Here, there must be patent illegality appearing on the fact of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within " the fundamental policy of India Law" ,namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.
OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 44/46 Secondly, it is also made clear that re-appreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.
To elucidate, para 42.1 of Associate Builders (supra), namely a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Paragraph 42.2 of Associate Builders (supra), however, would remain that if an arbitrator gives no reasons for an award and contravenes section 31 (3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award.
The change made in section 28 (3) by the Amendment Act really follows what is stated in paragraphs 42.3 in Associate Builders (supra), namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitratror construes the contract in a manner that no fair minded or reasonable person would; in short take or the arbitrator's view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted him, he commits an error of jurisidiction . This ground of challenge will now fall within the new ground added under section 34 (2A)" .
53. It has been observed by Honble apex court in P.R. Shah, Shares and Stock Brokers Pvt. Ltd. Vs. B.H.H. Securities Private Limited and Ors. (2012) 1 SCC 594, that :
" 21. It therefore is a settled proposition of law that section 34 of the Arbitration and Conciliation Act do not empowers the courts to re- appreciate and re-evaluate the evidences produced before the arbitral tribunal and thereafter to judge, if the findings of the arbitral tribunals are correct or wrong. It is so held by the apex court in the case of Steel Authority of India (supra) that " it is not permissible to a court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings". It means that the findings of fact by the Arbitral Tribunal, if based on evidence, even where a different opinion can be held on the basis of that evidences, the findings given by the Arbitrator has to be accepted and the courts cannot substitute its opinion. The power to interpret the contract also lies with the Arbitrator. Once the courts reach to the conclusion that the Arbitrator has acted within its jurisdiction, even if the courts are of the view that the opinion of the Arbitrator is wrong, it cannot be disturbed unless it is against the public policy. The Apex Court in Steel Authority of India, has categoricaly held that even where " the answer involves an erroneous decision on the point of law does not make the award bad on its face". An award can be said to be bad only when it is contrary to the substantive provision of law or against the terms of the contract. The Apex Court in Steel Authority has also clearly held that " if the conclusion of the arbitrator is based on a possible view of the matter, the court should not interfere with the award".
OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 45/46
54. Reliance was placed by Ld. counsel for respondent upon Haryana Tourism Corporation Ltd. Vs. M/s Kandhari Beverages Limited Civil Appeal No. 226 of 2022, wherein it was observed that :
" 8. As per settled position of law laid down by this court in a catena of decisions, an award can be set aside only if the award is against the public policy of India. The award can be set aside under section 34/37 of the Arbitration Act, if the award is found to be contrary to, (a) fundamental policy of Indian Law; or (b) the interest of India ; or (c) justice or morality ; or (d) if it is patently illegal".
55. In the instant matter, the award is well reasoned, is neither open for reappreciation of evidence or different interpretation, much less to be suffering from any patent illegality, perversity or against the public policy, calling for any interference from this court in objection petitions u/s 34 of Arbitration and Conciliation Act.
56. Having discussed as above, both the objection petitions filed by the petitioner and respondents stand dismissed. Files be consigned to record room after completion of necessary formalities.
Digitally signed by savita rao savita rao Date: 2024.12.18 16:23:37 +0530 Announced in the open (SAVITA RAO) court on this 18th day DISTRICT JUDGE of December 2024 (COMMERCIAL COURT)-01 (SOUTH) SAKET COURTS,DELHI OMP (Comm) No. : 43/2021 & OMP (Comm) No. : 64/2021 46/46