Delhi District Court
Raunak International vs Oyo Apartments Investments Llp on 7 June, 2024
IN THE COURT OF SH. AJAY PANDEY
DISTRICT JUDGE (COMMERCIAL COURT-10)
CENTRAL, TIS HAZARI COURTS, DELHI
OMP (Comm.) 64/2023
Raunak International
Through Sole Proprietor
Mr. Jatinder Pal Singh
Having its Office at
27, Bunglow Road, Kamla Nagar,
Delhi-110007 .......Petitioner
Vs
Oyo Apartments Investments (LLP)
Having its Registered Office at
44, 2nd Floor, Regal Building,
Connaught Place, Delhi-110001 .......Respondent
Date of Institution : 02.05.2023
Date of Arguments : 31.05.2024
Date of Judgment : 07.06.2024
JUDGMENT:-
PETITON UNDER SECTION 34 OF THE ARBITRATION AND CONCILIATION ACT 1996 SEEKING STAY OF IMPUGNED AWARD DATED 25.01.2023 INTRODUCTION
1. The present petition under section 34 of The Arbitration and Conciliation Act 1996 (hereinafter referred to as 'The Act') has been filed for setting aside the award dated 25.01.2023 (impugned award) passed by OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 1 of 76 learned sole arbitrator appointed by Hon'ble High Court of Delhi. Along with the petition under section 34 of The Act, petitioner also filed an application for condonation of delay in refiling the petition. A separate application under section 36 (2) of The Act for stay of operation of impugned award is also filed.
APPLICATION FOR CONDONATION OF DELAY
2. The court shall firstly take the application for condonation of delay. It is inter-alia stated in the application for condonation of delay that the present petition was filed on e-portal well within the period of limitation under section 34(3) of The Act i.e. on 25.04.2023 but defects were notified by the Registry to the counsel for petitioner. The correction of defects took time and petitioner had to be re-filed.
3. The application is duly supported by the affidavit of learned counsel for petitioner. Copy of screenshots of filing the petition on e-portal of the court are also annexed along with the application.
4. The application is opposed by learned counsel for respondent.
5. As per section 34(3) of The Act, the petition for setting-aside the award may be made within three months from the date on which the party making the said petition had received arbitral award. Proviso to sub-
OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 2 of 76 section 3 of section 34 of The Act empowers the court to entertain the petition within a further period of 30 days if the court is satisfied that the petitioner was prevented by sufficient cause from making the petition within the period of three months.
6. It is seen that the petition has been filed/re-filed on 02.05.2023 i.e. within 08 days after expiry of three months since passing of the award.
7. Considering the averments made in the application duly supported by affidavit of learned counsel for petitioner, application for condonation of delay is allowed.
8. The court shall consider the application under section 36(2) of The Act, at the end of this order subject to the decision on the petition/objections under section 34 of The Act.
PETITIONER
9. Petitioner is stated to be engaged in the business of real estate activities including but not limited to owning, buying, selling, rendering and operating self owned or leased real estate.
RESPONDENT
10. Respondent is in the business of managing hospitality and residential spaces/establishments.
OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 3 of 76 Business model of respondent includes identifying hotels/residential accommodations and providing accommodation in various cities in India and abroad. For providing such services, respondent enters into agreements with such hotels and residential spaces.
MANAGEMENT SERVICE AGREEMENT BETWEEN THE PARTIES
11. Management Service Agreement (MSA) dated 22.07.2019 was entered into between the parties in respect of property owned by the petitioner in Malkaganj. In the said agreement respondent is described as service provided/party of the first part, whereas, petitioner is described as the owner/party of the second part and it is recorded in the preamble of the Agreement "The Owner is desirous of engaging a Service Provider for providing the services in the premises on an exclusive basis and on the terms and conditions as more specifically agreed hereunder". As per the agreement, respondent was supposed to pay 70% of the net revenue generated from the property to the petitioner for the first 03 months followed by the same share of revenue, with a minimum guarantee amount stipulated in the agreement. The terms of the agreement was agreed at 02 years with a lock-in period of 11 months. The relevant clauses of the agreement between the parties are recapitulated by learned Arbitrator in the OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 4 of 76 impugned award are read as under:-
SCOPE OF SERVICES AND
EXCLUSIVITY
2.1 The Owner hereby appoints the
Service Provider for providing services in the premises and on the terms and conditions contained herein.
2.3 The Owner shall execute an irrevocable Power of Attorney in favour of the Service Provider ... to ... collect rent / licence fee from guests.
2.4 Possession of the premises shall remain with the Owner.
TERMS 3.3. The parties shall not be entitled to terminate this Agreement during the Lock-in-Period. Post expiry of the Lock-in-Period, the parties shall have an option to terminate this Agreement by providing the other party a prior written notice of two months. However, if either party terminates the Agreement or causes this Agreement to be terminated during the Lock-in-Period, for any reason other than material breach of the terms of the Agreement, then the party terminating this OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 5 of 76 Agreement shall be liable to pay an amount equal to owner's fees plus management fees paid for the last three months before the date of claim, as Liquidated Damages.
5. INTEREST FREE REFUNDABLE SECURITY DEPOSIT The Service Provider shall pay to the Owner an Interest Free Refundable Security Deposit (IFRSD)... The IFRSD in full shall be refunded by the Owner to the Service Provider simultaneous to the early termination / expiry of this Agreement and terminating the services of the premises by the Service Provider ... In the event of termination of this Agreement due to any reason whatsoever the Owner shall refund the IFRSD to the provider simultaneously as the operations are being shifted to the Owner by the Service Provider failing which the Owner shall be liable to pay the Service Provider a delayed interest @ 18% per annum until the actual date of refund of the IFRSD... Also, at the time of termination of the Contract, Lessor will have 15 days from OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 6 of 76 the termination date to refund the security deposit to the Lessee....
6.1 SERVICE PROVIDER'S RIGHTS AND OBLIGATIONS The service provider shall
(h) Have right to operate and manage the premises in accordance with its own business / marketing plans / ideas and have exclusive control over the premises.
(p) In case the Lessee fails to provide rent for any subsequent month during the Lock-in-Period, the Lessor shall have the right to take the charge of operations going on the premises.
6.2 OWNER'S RIGHTS AND OBLIGATIONS The Owner shall;
(b) Ensure all the documents related to the property such as Sale Deed, Power of Attorney (if applicable), Certificate of Incorporation (if applicable), electricity and water connections bills (if applicable) are available and may require from a regulatory, legal and housing society standpoint before leasing the premises to the Service OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 7 of 76 Provider and shall ensure the validity of the same for the duration of this Agreement failing which the owner will hold harmless and indemnify the service provider against any consequence(s) or all losses whatsoever that have incurred from failure of the owner to perform the applications specified in this clause.
(j) Not interfere (except for partial inventory) in the day to day operations of the Service Provider ..
10. TERMINATION AND CONSEQUENCE OF TERMINATION 10.3 Notwithstanding Service Provider shall be entitled to terminate this Agreement any time (including within the Service Provider's Lock-in-Period) in the event (a) there is a material breach of this Agreement by Owner... and Owner fails to remedy the said breach within a period of 30 days from the date on which it is notified of the said breach. The Owner shall be entitled to terminate this Agreement (including within Lock-in-Period) in the OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 8 of 76 event the Service Provider fails to pay Owner's share for one consecutive month despite being in operations and the Service Provider fails to remedy the said breach within a period of 30 days from the date on which it is notified of the said breach in writing.
10.4 FORCE MAJEURE Notwithstanding anything contained in this Agreement, if the premises are rendered unfit, in whole or part or use and occupation or access thereof is hindered by any event such as tempest, flood, earthquake or any irresistible force or act of God not occasioned by negligence on the part of the Service Provider or his servant and agents, for a period exceeding three months then in such event, the Service Provider may terminate this Agreement by giving to the Owner a written notice of one month...
The Service Provider shall not be required to pay owner's fee and/or any other charges payable by the Service Provider to the Owner under this Agreement during the period of Force OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 9 of 76 Majeure event continues and/or for the unused and affected portion of the premises.
DISPUTES AND APPOINTMENT OF ARBITRATOR
12. Some payments of revenue sharing/minimum guarantee amount were made by the respondent to the petitioner. The respondent also deposited the interest free refundable security deposit of Rs.5,00,000/- with the petitioner. An email dated 28.11.2019 was sent by the respondent to the petitioner requestioning the documents specified therein by informing that the documents were mandatorily required to run the operations by the respondent. It was also stated in the said email that further payment to the petitioner would be put on hold till the said documents were provided. Petitioner however did not provide those documents to the respondent. Meanwhile there was Covid-19 outbreak in the country. The respondent sent an email dated 30.03.2020 to the petitioner, referring to the situation created by Covid outbreak and proposed the revised revenue sharing model w.e.f. 12.03.2020. Petitioner did not respond to the proposed revised revenue sharing model.
13. Vide its notice dated 02.05.2020, purporting to be sent under Clause 10.3(a) of the Agreement, the respondent, referring to its email dated 28.11.2019 OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 10 of 76 requested the petitioner to provide all the necessary documents within 30 days of the notice and informed that not providing the said documents would vitiate the Agreement which shall stand terminated forthwith, if the documents were not provided within 30 days. It was also stated in the said notice that the respondent had received complaints from the occupants informing that the petitioner was collecting room tariff directly from them. The petitioner was called upon to render accounts of all such collections with effect from December, 2019. The Arbitration Clause contained in the Agreement was also invoked and an Arbitrator named in the notice was proposed with a request to the petitioner to confirm his appointment as a Sole Arbitrator.
14. Petitioner replied this notice through its Advocate on 27.02.2021 stating therein that all the necessary documents had already been provided to the respondent, the subject premises was already in its possession and the business was going on smoothly. It was stated in para 6 of the Reply that "due to non-availability of inhouse stay supervisor from your Client's side, residents deposited fee to my Client's Warden whose salary was agreed to be borne by your Client." The petitioner suggested another Arbitrator to adjudicate the disputes between the parties.
APPOINTMENT OF ARBITRAL TRIBUNAL OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 11 of 76
15. Vide its order dated 02.08.2021 Hon'ble High Court of Delhi in a petition under section 11 of The Act, appointed Hon'ble Justice (Retd.) V.K. Jain as sole arbitrator to adjudicate disputes between the parties.
STATEMENT OF CLAIM BEFORE THE ARBITRAL TRIBUNAL
16. Respondent/claimant filed his statement of claim before learned Arbitral Tribunal stating inter-alia that he had to terminate the management service agreement between the parties on account of material breaches committed by the petitioner by not providing the documents requisitioned vide email dated 28.11.2019 and notice dated 02.05.2020, and by collecting tariff directly from the residents/occupants of the property. Respondent sought following reliefs :-
S. Particulars Amount (Rs.)
No.
A. Refund of balance security 6,35,000/-
fund with interest @ 18%
per annum with effect
from 01.06.2020
B. Refund of amount spent 2,23,574.61
by the respondent over
property with interest @
18% per annum with
effect from 01.06.2020
Total 8,58,574.61
17. In addition thereto direction to the petitioner to OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 12 of 76 render the account with respect to collection made directly by it from the residents w.e.f. December 2019 till the termination of the agreement was also sought.
STATEMENT OF DEFENCE AND COUNTER CLAIM
18. Petitioner resisted the claims of the respondent by filing its statement of defence stating inter-alia that respondent had checked all the documents i.e. chain of ownership deeds, electricity bills, sanctioned building plans and all related documents before entering into the agreement. It was also stated that security deposit was interest free and therefore no interest can be claimed on it. Petitioner also denied the alleged expenditure incurred by the claimant on the subject property. It was alleged that when the respondent took over the property, there was no stay supervisor, guards and house keeping staff to serve the inmates and respondent had agreed to reimburse the salary of the staff of petitioner. It was also alleged that the electricity bills etc. were not paid by the respondent.
19. Petitioner also filed its counter-claim thereby alleging material breach of contract by respondent/claimant and seeking to recover its share in the revenue on the basis of minimum guarantee amount stipulated in the agreement. Petitioner also claimed that respondent abandoned the property and it had refunded security to the residents/occupants, who had deposited OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 13 of 76 the said security with the respondent. It was stated that after adjusting part amount of the revenue share paid to it by the respondent, petitioner was entitled to the balance amount of the minimum guarantee and the security refunded by it to the occupants/residents along with interest @ 18% per annum. Petitioner also sought direction to the respondent to provide complete details of the occupants and the revenue collected by the respondent from the occupants till 02.05.2020, along with cost of arbitration.
ISSUES
20. Following issues/points for determination were framed by learned Arbitrator :-
1. Whether the Respondent committed breach of clause 6.1(h) and clauses 6.2(b) & (j) of the Agreement executed between the parties and if so, to what effect? OPC
2. Whether the Claimant was entitled to terminate the above referred Agreement in terms of Clause 10.3 thereof? OPC
3. Whether the Claimant is entitled to the expenditure incurred by it on the subject property, from the Respondent and if so to what amount? ОРС 3A Whether the Claimant was entitled to invoke Clause 10.4 of the Agreement, in view of Pandemic COVID-19? OPC
4. Whether the Claimant is entitled to the refund of the security deposit? OPC OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 14 of 76
5. To what amount, if any, the Claimant is entitled as the interest on the expenditure, if any, incurred by it on the subject Property? OPC
6. To what amount, if any, the Claimant is entitled as the interest on the security deposit? OPC 6A. Whether the Claimant is entitled to the rendition of accounts sought by it? OPC
7. Whether the Respondent is entitled to the amount claimed vide prayer (a) of the Counter Claim? OPR
8. Relief EVIDENCE BEFORE ARBITRAL TRIBUNAL
21. As many as 07 different claims were filed based on the different management service agreements entered in respect of 07 different properties. The terms and conditions of the management service agreements were similar with different amounts of minimum guarantee. On 01.09.2022 it was agreed that for the purpose of recording the cross-examination of the witnesses, all the seven matters may be consolidated so that the cross- examination pertaining to all the seven cases was recorded in one case and read and considered for the purpose of all the seven cases. One common witness namely Ms. Ankita Munja was examined by respondent/claimant as CW-1 in all cases. A common authorized representative namely Mr. Jitender Pal Singh was examined on behalf of petitioner/counter claimant. OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 15 of 76 AWARD:-
22. Learned Arbitral Tribunal passed the impugned award dated 25.01.2023 thereby deciding issue no.3, 3A, 5 and 6A against the respondent/claimant. Issue no.1, 2, 4 and 6 were decided in favour of the respondent/claimant. Issue no.7 was decided against the petitioner/counter-claimant and following order was passed:-
ORDER OF TRIBUNAL Arbitral Tribunal passed following final Award:-
47. For the reasons stated hereinabove the following Award is hereby made:
(a) The Counter Claims are dismissed with no order as to costs
(b) The Respondent shall pay a sum of Rs. 6,31,250/- to the Claimant
(c) The Respondent shall pay simple interest @ 10% per annum, to the Claimant, on principal amount of Rs.
5,00,000/-, with effect from the date of the institution of the claim till the date of the Award
(d) The Respondent shall pay simple interest @ 10% per annum to the Claimant on the awarded sum, with effect OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 16 of 76 from the date of the Award till the date of payment.
(e) The Respondent shall pay, to the Claimant, proportionate costs to be computed on the amount of Rs. 6,31,250/-, as per the Affidavit of Costs filed by the Claimant alongwith the proportionate fee paid by the Claimant to the Arbitrator on the amount of Rs.6,31,250/-.
(f) The payment in terms of this Award shall be made within two months.
PETITION UNDER SECTION 34 OF THE ACT
23. The petitioner/applicant filed the present petition stating inter-alia that impugned award is in total disregard and derogation of the specific terms of the contract between the parties and that same is patently illegal being contrary to the law of land and public interest. It is also stated that the award is also in conflict with public policy of India and thereby clearly liable to be set-aside under Section 34 (2) (a) (b) and 34 (2A) of The Act.
24. It is further stated that petitioner is challenging the findings and conclusions rendered in the impugned award except the findings and conclusion in the impugned award on issues no. 3, 3A, 5 and 6A.
25. It is further stated that the petitioner is aggrieved OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 17 of 76 by the findings as well as final amounts awarded by the Ld. Sole Arbitrator as the same are not only patently illegal but ex-facie erroneous and perverse and so irrational that it is opposed to fundamental policy of the Indian Law by going beyond the preview of the Agreement between the parties. The interpretation given by the Ld. Sole Arbitrator to the contractual clauses is wholly unjustified and unfounded. Besides, lacking factual findings on core issues, the finding in the Impugned Award is contrary to the documentary evidence. As a result, the findings of the Ld. Sole Arbitrator are against the settled law of the India and against the public policy and so patently bereft of logic that no reasonable prudent mind could arrive at such conclusion. The claims set up by the Respondent was not only meritless but also frivolous and an act of afterthought and therefore, should have been rejected by the Ld. Sole Arbitrator; with cost in favour of the petitioner.
26. It is further stated that the Impugned Award comprises of findings which are contrary to facts and law. The Ld. Sole Arbitrator despite noting the obligations of Respondent/ Claimant under the Management Service Agreement that the Respondent/ Claimant could not have terminated the Agreement expect on occurrence of material breach, failed to return any findings on whether there was any material breach OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 18 of 76 by Petitioner in terms of clauses 6.1 (h) and 6.2 (j). The Ld. Sole Arbitrator though retuned its findings on the clauses 6.2 (b) where upon Respondent/ Claimant had alleged material breach, however, he failed to consider that the same was an indemnity clause and in the absence of any claim, there could not have been any material breach by petitioner. Therefore, by holding that by not providing documents to respondent, petitioner committed material breach of the agreement, amounts to rewriting the terms of the agreement between the parties.
27. It is further stated that the learned Sole Arbitrator also failed to link the alleged breach under Clauses 6.1
(h), 6.2 (b) and (j) with the interpretation retuned by it on the expression "material breach", mentioned in Clause 10.3 of the Agreement. In any event, in the absence of any pleadings by Claimant on Clauses 6.1 (h) and 6.2
(b), the issues no. 1 could not have famed by the Ld. Sole Arbitrator. Thus, the Impugned Arbitral Award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration.
28. It is further stated that the Impugned Award is vitiated by patent illegality appearing on the face of the Impugned Award as the Ld. Sole Arbitrator while deciding on the issues no, 4, 6 and 7 did not even consider examining till what time the respondent collected rent from the occupants in the premises; till what time the respondent was in occupancy of the OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 19 of 76 premises owned by petitioner; till when the respondent/ claimant was liable to pay Owner's share to petitioner; what was the total amount of rent collected by Respondent during that occupancy, etc. Also the learned Sole Arbitrator failed to return any finding of the fact that Respondent/Claimant had discharged all its obligations under the Agreement to entitle for claim of its interest free security. It is worth mentioning that, despite there being bank accounts statements of Petitioner on record, there has been no findings retuned by learned Sole Arbitrator on the claims made by Petitioner against the admitted liability of respondents towards unpaid Owner's share, security by occupants collected by Respondent/Claimant. The learned Sole Arbitrator did not return any finding on abandonment of the premises by respondent in the month of June, 2020. Therefore, returning a finding that Respondent was entitled to refund of its security deposit without paying off dues of petitioner, goes beyond the preview of the contractual terms between the parties. Thus, apparently the Ld. Sole Arbitrator has not decided any of the issues in totality.
29. It is further stated that the impugned award also suffers from basic notions of morality and justice as apparently the respondents had been collecting rent from the occupants till May, 2020 and besides acknowledging their liability during such period, had been paying OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 20 of 76 incomplete owner's share till March, 2020. Therefore, the petitioner was in any event entitled to its unpaid owner's share. The learned Sole Arbitrator since held that the ground of Covid- 19 was not a valid ground for suspension of owner's share, the counter claim by petitioner could not have been rejected, especially when the respondent was unable to bring on record the amounts collected by it during its occupancy of the premises. The agreement between the parties bars the respondent from claiming refund of security once found in violation of its fiduciary duty. The learned Arbitrator on mere vague averments, which were without the support of any pleadings, took notice of some rent entries in the bank account statement of the Petitioner and dismissed the entire counter claim without any justification. It is submitted that if respondent/claimant had sought for rendition of accounts and when entire bank statement of account was placed on record by the petitioner, it became a clear case of judgment on admission that respondent/claimant had failed to pay to the petitioner the owner's share and minimum guarantee during its occupancy in the premises, therefore, there was no question of either rendition of accounts and/or deciding breach by petitioner. The respondent/claimant also failed to prove it's bona fide by bringing on record the amount of funds collected by it. It is a settled law that an award which is in complete contravention of its OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 21 of 76 scope of submission to Ld. Arbitrator and beyond the scope of the agreement is without jurisdiction, thus, the impugned award is liable to be set-aside.
30. It is further stated that admittedly there has no claim raised by claimant/respondent for its own share of revenue, thus, evidently respondent had collected the entire revenue from the occupants. As a matter of fact respondent has also offered 30% revenue sharing from April, 2020 during Covid-19, therefore presence and collection of rent continues even post April, 2020 till its abandonment of the premises. The learned sole Arbitrator without examining the averments made by petitioner in counter claim rejected the petitioner's entitlement on the basis of alleged right to termination by respondent and ignored to decide anything related to the quantum of counter claim made by petitioner.
31. Award is then challenged on the grounds :-
a) That the impugned award is against the settled principle as mentioned under section 34 of The Act.
b) The impugned award is patently illegal in total disregard to substantive law of land and against public policy.
c) That learned sole Arbitrator passed the impugned award by merging facts of Juvello Homes Pvt Ltd in all cases and there is no mention of facts of the individual case.
OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 22 of 76
d) That learned Arbitrator ignored the facts that monthly rent/minimum guarantee and the difference of last payment for each property are different.
e) That learned Arbitrator passed impugned award ignoring the facts that the claimant was admittedly obliged to pay minimum guarantee amount of each property till March 2020 and after adjustment of the part payments received by the owners, the counter claims should have been allowed under order XII rule 6 CPC.
f) That learned Arbitrator passed the impugned award in contravention to Section 28(3) of The Act which provides as follows:-
"While deciding and making an award, the arbitral tribunal shall in all cases, take into account the terms of the contract and trade usages applicable to the transaction".
g) That the impugned award is based on no evidence, non application of mind and wrong appreciation of documents and learned Arbitrator failed to appreciate evidence on record.
h) That respondent did not even plead that petitioner had violated clause 6.1 (h) of the agreement and from perusal of statement of claim it is clear that the respondent attempted OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 23 of 76 to wriggle off its obligations under agreement citing Covid-19 pandemic as Force Majeure. The said plea having been rejected by learned Arbitrator, it was incumbent upon him to reject the claims of the respondent/claimant.
i) That findings of learned Arbitrator on issues 1 and 2 are perverse, arbitrary, patently illegal and contrary to the facts of claimant.
j) That while deciding issue no. 1 and 2 learned Arbitrator held that the petitioner had committed breach of clause 6.2 (j) without discussing as to how the said clause was breached and that it was not even the case of claimant/respondent that petitioner had breached clause 6.2 (j). The said finding is therefore perverse and illegal.
k) That the learned Arbitrator in para 24 of the award has mentioned that the petitioner herein had placed on record bank statement issued by HDFC bank in respect of the accounts held by it with the bank for the period 01.08.2019 to 31.07.2020 which have several credit entries which show transfer of rent/tariff directly to the account holders and as such held that the petitioner received rent from the occupants. The said finding is patently illegal for the reason that the amounts were not in OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 24 of 76 respect of the property in question but in respect of another property owned by the petitioner company. The said finding is contrary to evidence on record.
l) That the learned Arbitrator failed to appreciate that the claim of respondent was not signed by any authorized person.
m) That the claim made by respondent was against public policy of Indian and fundamental rule of law and not in accordance with the principles of authorization under order VI rule 14 of Code of Civil Procedure 1908 and that as per order III rule 1 and 2 the alleged power of attorney holder of the claimant could not have deposed on behalf of principle. Hence, claims of respondent were neither duly signed nor verified nor witness was authorized to depose.
n) That the learned Arbitrator failed to take into account that respondent acted in complete contravention to the terms of the agreement. The respondent, besides collecting the entire revenue from the occupants, withheld the monthly lease money/minimum guarantee and/or the owner's share of petitioner during the time when they were occupying the properties. Further, in terms of the agreement, the respondent was obligated to share the OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 25 of 76 details of the occupants in the properties for proper calculation of the owner's share, which was also not shared with petitioner on regular intervals, leading to non-payment of owner's share.
o) That learned Arbitrator failed to appreciate that Arbitral Tribunal, being a creature of arbitration agreement, has to adjudicate in terms of the agreement between the parties. When the respondent kept the petitioner in dark about revenue collected from the occupants, and did not give minimum guarantee amount or the owner share, petitioner was right in forfeiting the security of the respondent towards dues of the owners share.
p) That the Ld. Arbitrator failed to take into account the material evidence on record before deciding Issue no. I that whether Petitioner was in breach of Clause 6.1(h) of the Agreement. It is stated by Respondent/ Claimant that post December, 2019 Respondent/ Claimant is not aware of exact generation of revenue from properties and this impacted the pay out of Management Fee, however, he did not respond to either of the emails sent by Petitioner on 28.01.2020, 06.02.2020, 21.02.2020, etc. for sharing the details of the occupants in the OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 26 of 76 properties and requesting for payment of the minimum guarantee/ Owner's Share by it. Even the notice for termination was issued on 02.05.2020, which was after 7 months from December, 2019 seeking for rendition of accounts, therefore, admittedly Claimant was in possession/ occupation of the premises and had only issued notice dated 02.05.2020 once it had abandoned the properties of Petitioner.
q) That once the learned Arbitrator held that ground of Covid-19 was not valid for suspension of owners share, the claim made by the petitioner in the counter claim should have been allowed. Learned Arbitrator failed to decide that in terms of agreement, respondent was obliged to pay owners share till the expiration/termination of contract and if the petitioner had collected rent from the occupants, respondent ought to have claimed its share in the said revenue collection.
r) That the learned Arbitrator failed to appreciate that the Clause 6.2(b) is only an indemnity clause and there is no claim made by the respondent in terms of clause 6.2(b). Therefore, holding that not furnishing documents in terms of said clause was a breach of material term of the agreement is contrary to OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 27 of 76 the terms of the agreement.
s) That learned Arbitrator failed to appreciate that as per clause 6.2(b) of MSA all documents were available before entering into the agreement and the petitioner was required to ensure their validity during the term of agreement. The said clause nowhere mentions that it is mandated for the petitioner to provide such documents to respondent as and when required and that on failure thereof, respondent shall not be able to continue and provide services in the premises. That if not providing the documents was material breach, respondent could not have continued in the premises till 02.05.2020. That the said documents were required for running the premises for co-living purposes, while the premises in question was not for co-living and was exclusively for girls.
t) That it was not the case of the respondent that the premises of the petitioner were not verified before entering into the agreement. Therefore, learned Arbitrator should have taken note of the high handedness of the respondent when he threatened to put on hold all payments of the petitioner if documents were not supplied. That non-supply of documents could not have been material breach of agreement OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 28 of 76 after seven months of the demand of documents.
u) That learned Arbitrator failed to appreciate that in terms of agreement, respondent was never entitled to keep on hold the owners share.
v) That the Ld. Arbitrator failed to appreciate the reply to Para 6 of the legal notice dated 02.05.2020 issued by Respondent has no relevance in the present case as no warden, stay supervisor, guard housekeeping staff, was provided in the present case. Nor there is any pleadings to that effect. Therefore, the Ld. Arbitrator has not passed the Award considering the factual scenario but merely made replica of the Juvello Homes Pvt. Ltd. In any event, the same does not prove that that entire revenue was being collected by the Petitioner. It is also a settled principle of law that admissions have to be clear and unambiguous and Tribunal must pass an Award based on the pleaded facts. A simple case was pleaded by Petitioner during the course of argument that no rent was collected by it from the occupants during the currency of the Agreement. Moreover, the entire bank account statement of the Petitioner were on record and OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 29 of 76 there is not even single entry where the Respondent has been able to prove that its occupants had paid the said amount directly to Petitioner. Therefore, the findings of Ld. Arbitrator are fallacious and are contrary to the record.
w) That the Ld. Arbitrator has also relied on the Statement of Accounts of the Juvello Homes Pvt. Ltd. stating that there are several credit entries in the said statement which show transfer of rent/tariff directly to the Respondent described as 'rent'. It is relevant to note herein that no entries have been looked into in the facts of the present case. It was never the case of the Respondent that the entire amount of revenue collected from all the 7 properties was collected in Petitioner's account, the same was only made at the time of arguments, which was reverted by the stating that the rent amount mentioned is only Rs. 4 lakhs (Dec'19 onwards till March'20) and the Owner's Share of Juvello Homes property was 70% of the Total Revenue Share or minimum guarantee of Rs.
6,95,000/month which ever was higher. Further, the other 6 properties wherein the amount of Revenue Share or minimum guarantee per month was Rs. 28,00,000/- OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 30 of 76 approx, therefore, the finding of the Ld. Arbitrator is contrary to the record itself.
x) That the Ld. Arbitrator failed to appreciate that the onus to prove that Respondent had been collecting rent was upon Respondent which it did not prove by placing proof on record that the amount so credited in the account of Petitioner, was pertaining to the occupants of the property in question.
y) That the Ld. Arbitrator failed to appreciate that it is not denied by the Respondent either in the Statement of Claim or in the Defence to Counter Claim that the Refundable Security Deposit which was deposited by the Respondent was interest free. In terms of Clause 4 of Agreement, the Respondent took one month security from all the occupants of the premises, which was to be repaid by Respondent at the end of their respective lease Agreements in the month of June-July, 2020, however, during such time the Respondent/ Claimant abandoned the premises and consequently Petitioner was constrained to refund/ adjust the security amount deposited by occupants, which was retained by the Respondent. Therefore, the Petitioner's claim has been rejected without any reasons. Thus, OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 31 of 76 the Impugned Award is fallacious in law. z) That Ld. Sole Arbitrator has passed the Impugned Award without looking into the facts that the Respondent/ Claimant had collected PDCs (Cheque no. 294416 dated 23/7/20 ICICI bank for Rs.5,00,000/-) from the Petitioner for refund/adjustment of the security of such occupants who were residing in the properties at the time when the properties were handed over to the Respondent/ Claimant. The Petitioner was liable to pay to the Respondent such amount of securities with the Petitioner as and when such occupants were to vacate. The fact that Respondent/ Claimant abandoned the properties of the Petitioner and Petitioner was constrained to refund/ adjust the entire amount of securities of occupants that were with Respondent is evident from the fact that no PDCs were ever presented by the Respondent/ Claimant. Thus, the Impugned Award does not deal with any dispute contemplated by the reference or falling within the terms of the reference.
aa) That Ld. Sole Arbitrator has passed the Impugned Award without looking into the facts that the Agreement between the parties was not one of reciprocal promises. There is no OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 32 of 76 provision in the Agreement which provides of an interdependent performance. The Ld. Arbitrator manifestly erred in holding that Petitioner had been in violation of clause 6.1 (j) of the Agreement when there is neither any notice by Respondent/ Claimant nor any date determined by the Ld. Arbitrator from when the Petitioner had interfered in the day to day operations of the Respondent/ Claimant. bb) The Ld. Arbitrator also manifestly erred in holding that it is not possible for the Service Provider to determine the exact net revenue recovered from the occupants/residents if rent/tariff is collected by the Owner as well as by the Service Provider, It is relevant to mention here that the Respondent/ Claimant was in occupation of the premises till June, 2020, therefore, it is impossible for the Respondent/ Claimant to not know the exact number of the occupants and revenue from the premises.
cc) That in terms of the Agreement, the parties had to conduct a joint inspection of the premises at expiration/ termination, which was not even averred by Respondent, therefore, evidently Respondent abandoned the property of the Petitioner and consequently had to face OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 33 of 76 all the consequences. The Ld. Arbitrator did not decide the question till what time Respondent was providing services to the occupants in the premises of the Petitioner, therefore, in other words has rejected the claims of petitioner without considering documents on record. dd) That learned Arbitrator failed to appreciate that the entire claim of the respondent was an afterthought.
ee) That the Ld. Arbitrator was incorrect in relying on the alleged pamphlet which alleges to deposit the rent directly in the bank account of Petitioner. The said pamphlet was neither confronted by the Respondent/ Claimant, while they were in occupation of the premises of the Petitioner nor was filed with the Statement of Claim. It was only brought on record in the Rejoinder and never confronted with from the Petitioner's witness. It is also relevant to mention herein that the questions in the cross examination were dictated by the Ld. Arbitrator himself therefore, he could not have relied on the same to hold that the suggestion was an admission. Even otherwise, Respondent has failed to point out one occupant of the properties of the petitioner who had paid rent in accordance with the alleged pamphlet. OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 34 of 76 ff) That learned Arbitrator failed to consider that the respondent relied on the emails dated 06.03.2020 and 30.04.2020 shared by alleged occupants from their respective Oyo ID's in the name of Abhishant Gaur and Vaishnavi, whereas no payment was made in the name of said persons in the bank accounts mentioned in the pamphlet pertaining to Juvello Homes Pvt Ltd and that pamphlet produced by the claimant is forged and fabricated.
gg) That the learned Arbitrator's findings on the interpretation of the terms of agreement is violative of basic notion of understanding between the parties at the time of entering into agreement.
hh) That learned Arbitrator failed to appreciate that under the agreement and documents respondent was to reimburse for electricity not paid by them but learned Arbitrator ignored the admission of respondent and rejected the claim of petitioner against the principle of natural justice.
ii) That learned Arbitrator passed the impugned award without looking into the fact that respondent had paid security deposit to the petitioner to secure monthly guaranteed amount payable to petitioner and that as per clause 5 of OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 35 of 76 the agreement, on termination of contract, same was refundable subject to deduction of compensation or damages on the basis of joint inspection of premises not later than one week prior to handing over of the operations/services of the premises to the owner. As, in the present case, claimant abandoned the properties; not even single request was made by claimant to conduct the joint inspection as they had been defaulting the payment of minimum guarantee since the very inception. Thus, the claimant is not entitled to any refund of the security deposit.
jj) That impugned award comprises of findings which are contrary to facts and law. kk) That the Ld. Sole Arbitrator has wrongly placed reliance on the email dated 28.01.2020 by stating that the Petitioner admitted that it was collecting rent, however, the contents of the email are that it is wrongly presumed by the Respondent that rent is being collected by Petitioner, while the amount mentioned therein were security deposited by the occupants with the Petitioner before execution of the Agreement between the parties. The said amount was to be taken by Respondent by presenting the PDCs with it. Per contra, the OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 36 of 76 Respondent adjusted the said amount in the minimum guarantee, which was a violation of the terms of the Agreement. In any event, the same could by no means be construed as collections being made by Petitioner directly from the occupants.
ll) That the Ld. Sole Arbitrator also failed to link the alleged breach under Clauses 6.1(h), 6.2 (b) and (j) with the interpretation retuned by it on the expression "material breach", mentioned in Clause 10.3 of the Agreement. In any event, in the absence of any pleadings by Claimant on Clauses 6.1(h) and 6.2 (b), the issues no. 1 could not have been framed by the Ld. Sole Arbitrator. Thus, the Impugned Arbitral Award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration.
mm) That the Ld. Sole Arbitrator failed to return any finding of the fact that Respondent/ Claimant had discharged all its obligations under the Agreement for it to entitle for claim of its interest free security. It is worth mentioning that, despite there being bank account statements of Petitioner on record, there has been no finding returned by Ld. Sole Arbitrator on the claims made by Petitioner OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 37 of 76 against the admitted liability of Respondents towards unpaid Owner's share, security by occupants collected by Respondent/ Claimant.
nn) Because Section 31(3) of the Arbitration and Conciliation Act, 1996 mandatorily requires an arbitral Award to state reasons on which it is based. The impugned Award merely sets out the contentions of the parties and record the conclusions without consideration of evidence and is based on surmises and conjectures without giving reasons. oo) That learned sole Arbitrator did not return any finding on abandonment of the premises by respondent in the month of June, 2020.
pp) That as per clause 6.1(g), petitioner had all right to take charge of operation of on going premises in case respondent failed to provide his share. Therefore, breach of terms of clause 6.2(j) do not amount to interfering in operation of premises by respondent especially when respondent has neither paid minimum guarantee nor owner share.
qq) That the award is non speaking passed in a hurried manner.
OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 38 of 76
32. It is thus stated in the petition that the award passed by the learned Arbitrator is liable to be set-aside and a prayer to that effect is made.
REPLY TO PETITION
33. Respondent filed reply to the petition stating inter- alia that petitioner has sought to challenge the arbitration award under section 34 (2) (a) (iv), 32 (2) (b) (ii) and 34 (2A). It is stated that The Act is a complete Code in itself and scope of judicial interference under section 34 of The Act is very narrow, whereas, the petitioner has challenged the arbitral award on omnibus and generic grounds and none of the ingredients under section 34 (2)
(a) (iv), 32 (2) (b) (ii) and 34 (2A) are satisfied. In this context it is pertinent to note that petitioner has not challenged the specific finding of the learned Arbitral Tribunal that substratum and basis of arrangement between the parties was "revenue sharing". It is submitted that having accepted this finding challenging the consequential effect of the said finding does not holds good either in facts or law. It is submitted that the only challenge to this finding in ground (q) is that even if petitioner had collected the revenue from the residents/occupants, still it was obligation of the respondent to pay/refund the Minimum Guarantee and should have claimed its share from the revenue. OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 39 of 76
34. The contents of petition are stated to be vague and misconceived. The arbitration award is defended and it is alleged that the petitioner had committed material breach of the terms of the contract and the learned Arbitral Tribunal rightly held so. It is denied that the learned Arbitral Tribunal had re-written or went beyond the terms of the agreement. It is stated that all issues were framed in presence of both the parties and no application or objection were filed by the petitioner disputing any issue including issue no.1 and therefore the plea taken by the petitioner in the present proceedings about wrong framing of issues is meritless. It is stated that the petitioner has not disputed the findings that the arrangement between the parties was basically revenue sharing agreement. It is further stated that the petitioner had breached material terms of the agreement by collecting rent from the occupants directly and therefore the learned Arbitrator rightly held that the petitioner cannot claim to enforce the payment of minimum guarantee amount by the respondent. It is alleged that the petitioner frustrated the essence of the agreement by collecting rent but not providing the details of the same to the respondent because post signing the agreement, petitioner had no business to collect any rent from any occupant. It is stated that the petitioner in its email as well as in the statement of defence had admitted about collection of tariffs/rent from the occupants and the OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 40 of 76 learned Arbitrator had passed a well reasoned award, based on the pleadings, evidence and admissions. All grounds of challenge to the award are denied and the excerpts of the findings of the learned Arbitrator are quoted to submit that learned Arbitrator had dealt with all aspects of the matter and has passed a detailed reasoned award. It is stated that reasonableness of the reason given by the Arbitrator is not open to scrutiny by the courts nor re-appreciation of evidence or re- examination of the facts can be done. It is reiterated that none of the grounds contained in section 34 of The Act is satisfied to interfere in the decision rendered by Arbitral Tribunal. Dismissal of the petition is prayed.
ARGUMENTS OF PETITIONER:-
35. Both the parties filed their respective written submissions and also orally argued the case in detail.
36. Learned Sh. Pawanjit Singh Bindra, Sr. Advocate assisted by learned Sh. Taranjit Singh Sawhney on behalf of petitioner vehemently argued in the lines of the allegations and the grounds made in the petition. It was emphasized by him that the learned Arbitral Tribunal framed the issue regarding breach of clause 6.1 (h), 6.2
(b) and (j) though there was no specific plea to this effect in the statement of claim filed by respondent. He also argued that a bare reading of clause 6.2 (b) of MSA makes it clear that the said clause is an indemnity OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 41 of 76 provision. Under the said clause the documents such as power of attorney etc. are to be kept available by the owner before leasing the premises to the service provider. He argued that it is no where the case of the respondent that the said documents were not verified by them or that the documents were not provided by the owner prior to the entering into MSA. He argued that once the documents were provided by the owner before entering into the MSA. After leasing the premises, the only obligation of the owner during continuation of term of agreement was to ensure the validity of the documents for the duration of the agreement. He also argued that even if the said obligation is breached by the owner, the consequence thereof is provided in the said clause itself, according to which the owner has to indemnify the service provider for any loss incurred on account of failure of the owner to not to keep the documents valid during subsistence of the agreement term. Sh. Pawan Jeet therefore submitted that when a consequence of breach of a particular term of agreement is provided in the agreement itself, only that consequence can be enforced and without admitting, even if it is presumed that the said clause was breached, the learned Arbitrator could not have held that non-compliance of the terms of clause 6.2 (b) is material breach. He argued that at the most the respondent could have claimed an indemnity against the petitioner for any loss or harm suffered by it. OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 42 of 76 He therefore suggested that the findings of the learned Arbitrator are patently illegal on this aspect.
37. He also argued that the email dated 30.03.2020 has not been properly appreciated by the learned Arbitrator. He argued that even if it is presumed that the petitioner committed any breach of the term of agreement by not providing the documents, such breach was condoned by the respondent by writing email dated 30.03.2020, in which the respondent himself appreciated the relation with the petitioner and expressed its willingness to continue the agreement on revised revenue sharing basis. He thus submitted that the email dated 30.03.2020 amounts to condonation of any alleged breach for non-compliance of the email dated 28.11.2019.
38. Learned Sh. Pawan Jeet also argued that the findings of the learned Arbitrator are a case of non- appreciation of the facts and evidence. He admitted that the court cannot reappreciate the evidence and material considered by the learned Arbitrator but argued that there is no appreciation of evidence and material in the present case, hence there is no question of re-appreciation and that learned Arbitrator has not given any findings on the contentious issues in the impugned award, which itself is sufficient ground for setting aside the same.
39. It is further submitted that even if for the sake of arguments, it is presumed that the petitioner collected OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 43 of 76 some amount, all the documents in the form of the bank statement was filed before the Arbitrator and the Arbitrator could have adjusted the amount so received by the petitioner from the minimum guarantee amount under the agreement. He argued that the remaining amount of the minimum guarantee amount, as claimed by the petitioner in counter-claim should have been allowed by learned Arbitrator. He further argued that the learned Arbitrator wrongly placed reliance upon the pamphlet allegedly issued by the petitioner for direct collection of rent from the occupants of the property without appreciating that respondent failed to prove that any rent was actually deposited by any occupant in response to the said pamphlet.
40. He further argued that the case of the Claimant is that from the date of execution of Agreements till December, 2019, they were operating in the properties of the Petitioner and there was no disruption.
41. He further argued that under the Agreement, Clause 6.1 provided Respondent's first and foremost obligation of Claimant was to pay Petitioner's fee on the due date in timely manner. However, Respondent admittedly from the first day was neither sharing the total revenue collected by it nor was remitting amounts to the Petitioners.
42. He further argued that therefore, it is evident that the Respondent had been committing default from the OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 44 of 76 very inception of the Agreement.
43. He further argued that learned Sole Arbitrator does not render any finding on the fundamental issues till what time the Respondent collected rent from the occupants in the premises; till what time the Respondent was in occupancy of the premises owned by Petitioner; till when the Respondent/ Claimant was liable to pay Owner's share to Petitioner; what was the total amount of rent collected by Respondent during that occupancy, etc.
44. He further argued that as per Respondent's own showing, it was obligated to pay the minimum guaranteed amount of each property till March, 2020. He argued that the absence of any findings on contentious issues in the Arbitral Award, constitute valid grounds for setting aside the award.
ARGUMENTS OF RESPONDENT:-
45. Learned Sh. Rajnish Ranjan, Advocate for respondent on the other hand had submitted that the petitioner is raising the issues which were never pleaded or raised before the learned Arbitrator and this court cannot look into the grounds which were not taken before the learned Arbitrator. He argued that the petitioner never raised any plea that writing email dated 30.03.2020 by the respondent amounted to condonation of requisitioning the documents vide email dated 28.11.2019. He also argued that the submissions OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 45 of 76 regarding issue no.1 or any other issue being wrongly framed, was never raised before the learned Arbitrator. He referred to the statement of defence, counter claim and the evidence recorded before the learned Arbitrator to submit that the findings of learned Arbitrator that the petitioner collected rent from the occupants after execution of MSA are based on the admissions by the petitioner.
LAW AND PRECEDENCE
46. It is fairly admitted by both the learned counsels for the parties that an interference in the arbitration award is possible only when the application/petition under section 34 is covered within four corners of the grounds enumerated in the section. For the purpose of convenience the provision of law is reproduced herein below:-
34.Application for setting aside arbitral award (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).
(2) An arbitral award may be set aside by the Court only if--
2(a) the party making the application establishes on the basis of the record of the arbitral tribunal that
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 46 of 76 thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, wasnot in accordance with this Part; or
(b) the Court finds that--
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force,or
(ii) the arbitral award is in conflict with the public policy of India.
[Explanation 1.--For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,--
(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or
(ii) it is in contravention with the OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 47 of 76 fundamental policy of Indian law; or
(iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.--For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.] [(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:
PROVIDED that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.] ...........
47. A bare reading of sub-section 2 (a) of Section 34 of The Act is sufficient to show that the applicant/petitioner has to establish the grounds mentioned thereafter on the basis of the record of the Arbitral Tribunal. It is therefore clear that no ground or material which is not available in the record of Arbitral Tribunal, can be taken in the objections/application under section 34 of The Act.
48. It is rightly submitted by learned counsel for respondent that there is only limited scope of interference by the court in the petitions under section 34 of the Arbitration and Conciliation Act 1996. In the case of Associate Builders Vs Delhi Development Authority (2015) 3 SCC 49, wherein it was held by OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 48 of 76 Hon'ble Supreme Court "the interference with an arbitral award is permissible only when the findings of the arbitrator are arbitrary, capricious or perverse or when conscience of the Court is shocked or when illegality is not trivial but goes to the root of the matter. It is held that once it is found that the arbitrator's approach is neither arbitrary nor capricious, no interference is called for on facts. The arbitrator is ultimately a master of the quantity and quality of evidence while drawing the arbitral award. Patent illegality must go to the root of the matter and cannot be trivial nature."
49. In the case of Navodaya Mass Entertainment Ltd VS J.M. Combines MANU/SC/0735/2014, it was held :-
"scope of interference of the Court is very limited. Court would not be justified in reappraising the material on record and substituting its own view in place of the Arbitrator's view. Where there is an error apparent on the face of the record or the Arbitrator has not followed the statutory legal position, then and then only it would be justified in interfering with the award published by the Arbitrator. Once the Arbitrator has applied his mind to the matter before him, the Court cannot reappraise the matter as if it were an appeal and even if two views are possible, the view taken by the Arbitrator would OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 49 of 76 prevail. (See: Bharat Coking Coal Ltd. Vs. L.K. Ahuja, (2004) 5 SCC 109; Ravindra & Associates Vs. Union of India, (2010) 1 SCC 80; Madnani Construction Corporation Private Limited Vs. Union of India & Ors., (2010) 1 SCC 549; Associated Construction Vs. Pawanhans Helicopters Limited, (2008) 16 SCC 128;
and Satna Stone & Lime Company Ltd. Vs. Union of India & Anr., (2008) 14 SCC".
50. In the case of M/s Arosan Enterprises Ltd Vs Union of India & Anr MANU/SC/0595/1999, it was held:-
"that reappraisal of evidence by the court is not permissible and as a matter of fact exercise of power by the Court to reappraise the evidence is unknown to a proceeding under Section 30 of the Arbitration Act. In the event of there being no reasons in the award, question of interference of the court would not arise at all. In the event, however, there are reasons, the interference would still be not available within the jurisdiction of the Court unless of course, there exist a total perversity in the award or the judgment is based on a wrong proposition of law: In the event however two views are possible on a question of law as well, the Court would not be justified in interfering with the award. The common phraseology `error apparent on the face of the record' does not itself, however, mean and imply closer scrutiny of the merits of documents and materials on record: The court as a matter of fact, cannot substitute its evaluation and come to the OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 50 of 76 conclusion that the arbitrator had acted contrary to the bargain between the parties. If the view of the arbitrator is a possible view the award or the reasoning contained therein cannot be examined. In this context, reference may be made to one of the recent decision of this Court in the case of State of Rajasthan v. Puri Construction Co. Ltd. (1994 (6) SCC 485) wherein this court relying upon the decision of Sudarsan Trading Co.'s case case (Sudarsan Trading Co. v. Government of Kerala and Anr. (1989 (2) SCC 38) observed in paragraph 31 of the Report as below:- "A court of competent jurisdiction has both right and duty to decide the lis presented before it for adjudication according to the best understanding of law and facts involved in the lis by the judge presiding over the court. Such decision even if erroneous either in factual determination or application of law correctly, is a valid one and binding inter parts. It does not, therefore, stand to reason that the arbitrator's award will be per se invalid and inoperative for the simple reason that the arbitrator has failed to appreciate the facts and has committed error in appreciating correct legal principle in basing the award.
An erroneous decision of a court of law is open to judicial review by way of appeal or revision in accordance with the provisions of law. Similarly, an award rendered by an arbitrator is open to challenge within the parameters of several provisions of the Arbitration Act. Since the arbitrator is a judge by choice of the parties and more often than not a person with little or no legal background, the adjudication of disputes by an arbitration by way of an award can be challenged only within the limited scope of OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 51 of 76 several provisions of the Arbitration Act and the legislature in its wisdom has limited the scope and ambit of challenge to an award in the Arbitration Act. Over the decades, judicial decisions have indicated the parameters of such challenge consistent with the provisions of the Arbitration Act. By and large the courts have disfavoured interference with arbitration award on account of error of law and fact on the score of misappreciation and misreading of the materials on record and have shown definite inclination to preserve the award as far as possible. As reference to arbitration of disputes in commercial and other transactions involving substantial amount has increased in recent times, the courts were impelled to have fresh look on the ambit of challenge to an award by the arbitrator so that the award does not get undesirable immunity. In recent times, error in law and fact in basing an award has not been given the wide immunity as enjoyed earlier, by expanding the import and implication of "legal misconduct" of an arbitrator so that award by the arbitrator does not perpetrate gross miscarriage of justice and the same is not reduced to mockery of a fair decision of the lis between the parties to arbitration. Precisely for the aforesaid reasons, the erroneous application of law constituting the very basis of the award and improper and incorrect findings of fact, which without closer and intrinsic scrutiny, are demonstrable on the face of the materials on record, have been held, very rightly, as legal misconduct rendering the award as invalid. It is necessary, however, to put a note of caution that in the anxiety to render justice to the party to arbitration, the OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 52 of 76 court should not reappraise the evidences intrinsically with a close scrutiny for finding out that the conclusion drawn from some facts, by the arbitrator is, according to the understanding of the court, erroneous. Such exercise of power which can be exercised by an appellate court with power to reverse the finding of fact, is alien to the scope and ambit of challenge of an award under the Arbitration Act. Where the error of finding of facts having a bearing on the award is patent and is easily demonstrable without the necessity of carefully weighing the various possible viewpoints, the interference with award based on erroneous finding of fact is permissible. Similarly, if an award is based by applying a principle of law which is patently erroneous, and but for such erroneous application of legal principle, the award could not have been made, such award is liable to be set aise by holding that there has been a legal misconduct on the part of the arbitrator. In ultimate analysis it is a question of delicate balancing between the permissible limit of error of law and fact and patently erroneous finding easily demonstrable from the materials on record and application of principle of law forming the basis of the award which is patently erroneous. It may be indicated here that however objectively the problem may be viewed, the subjective element inherent in the judge deciding the problem, is bound to creep in and influence the decision. By long training in the art of dispassionate analysis, such subjective element is, however, reduced to minimum. Keeping the aforesaid principle in mind, the challenge to the validity of the impugned award is to be considered with reference to judicial decisions on the OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 53 of 76 subject."
51. It is thus clearly established by catena of judgments of Hon'ble Supreme Court and Hon'ble High Court that the interference with an arbitral award is permissible only when the findings of the Arbitrator are arbitrary, capricious or perverse or when conscience of the court is shocked or when illegality is not trivial but goes to the root of the matter. The Arbitrator is master of the quality and quantity of the evidence. The court would not be justified in re-appraising the material on arbitral record and substitute its own view in place of the view of learned Arbitrator. Once the Arbitrator has applied his mind to the matter before him, the court cannot re- appraise the matter as if it was an appeal and even if two views are possible, the view taken by Arbitrator would prevail. No interference in the award is required unless there is existence of total perversity in the award or the judgment is passed on wrong proposition of law. Even when the Arbitrator makes a mistake either in law or in fact but such mistake does not appear on the face of award, the award is good not withstanding the mistake and would not be remitted or set-aside.
52. It is further rightly submitted by learned counsel for respondent that court would not construe the nature of claim by adopting too technical an approach or by indulging into hair-splitting, otherwise the whole OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 54 of 76 purpose behind holding the arbitration proceedings as an alternative to Civil Courts forum would stand defeated as was held by Apex Court in the case of Sangamner Bhag Sahakari Karkhana Ltd Vs Krupp Industries Ltd, AIR 2002 SC 2221. Further in the case of P.R. Shah, Shares & Stock Brokers Pvt Ltd Vs B.H.H. Securities Pvt Ltd & Ors, (2012) 1 SCC 594, it was held by Hon'ble Supreme Court that in order to provide the balance and to avoid excessive intervention the arbitration award is not to be set-aside merely on the ground of erroneous application of law or by re- appreciating evidence.
53. In the case of NTPC Ltd Vs Maratho Electric Motors India Ltd, 2012 SCC Online Del 3995, it was held that appreciation of evidence by the Arbitrator is never a matter which the court considers in the proceedings under section 34 of the Act as the court is not sitting in appeal over the adjudication of the Arbitrator and the court do not act as court of appeal. An error relatable to interpretation of the contract by an Arbitrator is an error within his jurisdiction and such error is not amenable to the correction by courts as such error is not an error on the face of the award.
54. In the recent judgment of Delhi Airport Metro Express Pvt. Ltd Vs Delhi Metro Rail Corporation Ltd., Civil Appeal No. 5627 of 2021, AIR ONLINE 2021 SC 708, Hon'ble Apex Court, keeping in view the OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 55 of 76 amendment of the Arbitration and Conciliation laws by the Arbitration & Conciliation Act 1996 decided the Contours of the court's power to review arbitral awards. Relevant principles can be summarized amongst others, as follows:-
- One of the principal objectives of the 1996 Act is to minimize the supervisory role of courts in the arbitral process.
- An application for setting aside an arbitral award can only be made in accordance with provisions of Section 34 of the 1996 Act.
- While deciding applications filed under Section 34 of the Act, courts are mandated to strictly act in accordance with and within the confines of Section 34, refraining from appreciation or re-appreciation of matters of fact as well as law.
- As it is only such arbitral awards that shock the conscience of the court that can be set aside on grounds under section 34.
- There must be patent illegality appearing on the face 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.
- Reappreciation 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.
OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 56 of 76
- The construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair- minded or reasonable person would; in short, that the arbitrator's view is not even a possible view to take.
- A finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality.
- There is a disturbing tendency of courts setting aside arbitral awards, after dissecting and reassessing factual aspects of the cases. This approach would lead to corrosion of the object of the 1996 Act and the endeavours made to preserve this object, which is minimal judicial interference with arbitral awards. Several judicial pronouncements of the Court would become a dead letter if arbitral awards are set aside by categorising them as perverse or patently illegal without appreciating the contours of the said expressions.
- Every error of law committed by the Arbitral Tribunal would not fall within the expression 'patent illegality'. In addition, contravention of law not linked to public policy or public interest is beyond the scope of the expression 'patent illegality'.
- Courts do not sit in appeal against the arbitral award. The permissible grounds for interference with a domestic award under Section 34(2-A) on the OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 57 of 76 ground of patent illegality is when the arbitrator takes a view which is not even a possible one.
FINDINGS
55. With the assistance of learned counsels for the parties, the court has carefully gone through the statement of claim, statement of defence counter-claim and evidence led by the parties before the learned Arbitrator.
56. It is rightly submitted by learned Sh. Rajnish Ranjan that a reasoned award has been passed by the learned Arbitrator after dealing with all aspects of the matter and the contentions raised before him. The findings of the learned Arbitrator cannot be said to be contrary to the facts or law.
57. Submissions of learned counsel for the petitioner that the learned Arbitrator wrongly framed the issues is not tenable. Though it is not specifically stated in the statement of claim that the petitioner had committed breach of the clauses 6.1 (h), 6.2 (b) & (j), however the necessary particulars related to the breach of these clauses have been incorporated in the statement of claim. Entering into the Management Service Agreement is not disputed. It is not disputed that both the parties were supposed to be bound by the terms and conditions of the agreement. Both the parties alleged breach of the terms of the agreement by the other side. Respondent OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 58 of 76 specifically pleaded in the statement of claim that despite demand, the petitioner did not provide the ownership documents. The documents were supposed to be made available under clause 6.2 (b) of MSA. The respondent also specifically alleged that petitioner directly collected rent from the occupants. Under clause 6.1 (h) the operations and management of the premises had to be under exclusive control of the respondent. Clause 6.2 (j) prohibited the petitioner from interference in day to day operations of the premises. In view of the allegations in the statement of claim and the denial by the petitioner in statement of defence, in humble opinion of this court, the learned Arbitrator had duly crystallized the controversy between the parties by framing the issues. No objection was raised by the petitioner during the entire arbitration proceedings about framing of any issue. Such contention cannot now be raised and is liable to be rejected.
58. The court is further not in agreement with the submissions of learned counsel for the petitioner that because the respondent was entitled to seek indemnity against the breach of clause 6.2 (b), violation thereof cannot be termed as material breach. Reasonableness of the findings of the learned Arbitrator, has to be seen from the reasons given in the award. Findings of the learned Arbitrator in para no.18 and 29 are reproduced in herein below for ready reference :-
18..... The case of the Respondent is OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 59 of 76 that the Claimant having made its due diligence before executing Agreement with the Respondent, and having satisfied itself in all respects, it was not entitled to seek the documents specified in the said email dated 28.11.2019. In view of the specific obligation agreed by the Respondent in Clause 6.2 (b) of the Agreement, it would be difficult to say that it was not contractually bound to provide the copy of the Sale Deed of the subject Property, the electricity and water bills and the Power of Attorney / authorization for executing the Agreement with the Claimant. Clause 6.2(b) does not contain an exhaustive list of the documents required to be kept available and valid by the respondent. The use of the word 'such as' in the said Clause indicates that there could be other documents related to the property which would be necessary for the purpose of permitting the Claimant to rent the property for co-living purposes. the occupancy certificate would be one such document since a building cannot be legally occupied without issuance of an occupancy certificate by the concerned Local Authority. It has come in para 4 of the legal notice dated 2nd May, 2020 sent by the Claimant to the Respondent that the aforesaid documents were demanded by the Auditors of the Claimant during internal audit and known provisioning of the said documents amounted to material breach of the terms of the Agreement. Despite receiving the legal notice, the Respondent did not provide the documents demanded vide email dated 28.11.2019. It was also stated in the legal notice dated 2nd May, 2020 that the Claimant as a policy did not provide services in the premises which do not fulfill the legal OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 60 of 76 compliance and necessary requirements under the applicable laws. Vide para 7 of the legal notice the Respondent was informed that in case the said documents were not provided within 30 days from the date of the notice, the Agreement shall stand terminated. Clause 10.3 of the Agreement entitled the Claimant to terminate the Agreement at any time including within the Lock-in-Period, in case there was a material breach of the said Agreement by the Respondent.
29. As noted earlier, in terms of clause 6.2(b) of the Agreement, the respondent was required to keep available and valid, the documents relating to the property subject matter of the Agreement and the documents specifically mentioned therein cannot be said to be the only documents required to be kept available and valid by the respondent. The use of the words 'all the documents related to the property such as clearly indicates that all the documents which could be genuinely required by the claimant were required to be kept available and valid. Of course, the claimant could not have sought irrelevant documents from the respondent. But, it can be hardly disputed that the documents such as title deed, Sanctioned Building Plans and the Occupancy Certificate would be genuinely required by the person entrusted with the management of the property. This is more so, when the policy of the service provider is to manage only those properties which are legally compliant. The respondent did not offer the copies of even these core property documents to the claimant. The case of the claimant is that the documents were necessary for carrying out an audit of the subject property, which was also OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 61 of 76 envisaged in the Agreement. By failing to provide these core property documents to the claimant committed breach of yet another material term of the Agreement, thereby giving a right to the claimant to terminate the Agreement."
59. A bare perusal of the above findings is sufficient to show that the learned Arbitrator has reasonably dealt with the submissions of the parties. There is no error apparent on the face of the findings. The court is not permitted to re-appreciate the submissions and facts and/or to substitute its own view/findings above the reasons given by the learned Arbitrator. After dealing with the submissions of parties, learned Arbitrator held that not providing documents specified in the email dated 28.11.2019, amounts to material breach of the terms of the agreement. No interference is permitted from this court.
60. It is further rightly submitted on behalf of respondent that findings of the learned Arbitrator that the petitioner has collected rent directly from the occupants are duly supported by the pleadings and documents. In this respect learned Arbitrator, amongst other grounds, also relied upon pamphlets allegedly published by the petitioner. Findings of the learned Arbitral Tribunal in para no. 23 of the award are relevant and reproduced herein below for ready reference:-
"23. The case of the Claimant is that the OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 62 of 76 Respondent had circulated a pamphlet amongst the occupants/residents of seven properties including the subject Property, asking them to deposit the rent directly in its bank account. The said pamphlet purports to request the residents to make rent payment only to the Owner and his Authorised Representatives whose names and mobile numbers were given in the pamphlet. The Bank name, IFS Code and beneficiary name as well as the account number were also given in the pamphlet, in case payment was sought to be made through bank transfer. It was suggested to CW-1, in her cross- examination, that the pamphlet had been issued only to the occupants of the property subject matter of the Agreement with JHPL. It would be pertinent to note here that the property subject matter of this Agreement was being managed by the same person who was managing the property subject matter of the Agreement with JHPL. This very person has appeared as a common witness in all the seven matters."
61. On perusal of cross-examination of CW-1 it is clear that a categorical question no.75 was put to the witness by learned counsel for petitioner wherein PW1 was suggested that the pamphlets were circulated only on behalf of Juvello Homes Pvt Ltd. It is pertinent to mention here that all seven properties were managed by a common person Mr. J.P. Singh. There was categorical admission in the cross-examination that pamphlets seeking direct deposit of the rent to the petitioner were circulated. There is no unreasonableness if learned OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 63 of 76 Arbitrator acted upon such admission. It is immaterial to discuss as to how much amount was actually collected in response to those pamphlets as publishing of pamphlets amounted to interference in the management and collection of rents by the respondent service provider. There was no occasion by the learned Arbitrator to adjust the amounts collected by the petitioner by calculating the same from the banks statements filed by the petitioner. It is worth to mention here that in the pamphlets as available on record, occupants are suggested to make payment of rent not only by depositing the same in the bank account but the cash payments are also permitted to the persons specifically mentioned in the pamphlets. In such circumstances, there was no occasion with the learned Arbitrator to look into the details and calculate the bank transfers made by the occupants to adjust the amount of tariff from the minimum guarantee amount payable to the petitioners. Learned Arbitrator had further dealt with the issue of collection of rent by the petitioner and the claims made by the petitioner in counter claim. Para no. 24 and 32 of the arbitration award is as follows:-
24. In the matter of JHPL, the Respondent in that matter has placed on record a bank statement issued by HDFC Bank in respect of the account maintained by it with the said Bank. The statement of account pertains to the period from 1.8.2019 to 31.7.2020. There are several credit entries in the said OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 64 of 76 statement which show transfer of rent/tariff directly to the Account Holder. On 7.9.2019, there is a transfer of Rs. 16,000/- by one Rattan Kumar described as "Bipasha PG Fees". There is a credit entry on 6.9.2019 describing the transfer of Rs. 2,000/- as 'September rent'. There is a credit of Rs.
13,000/- on 29.8.2019 described as 'rent'. There is a credit entry of Rs. 9,000/- on 14.12.2019 described as 'Charu Mittal rent'. On 10.12.20219 there is a credit entry of Rs. 15,000/- described as 'Sankalp rent'. On 27.1.2020 there is a credit entry of Rs. 9,000/-described as 'Sudhanshu rent' and another entry of Rs. 4,500/- described as "rent'. On 13.1.2020 there is a credit entry of Rs. 9000/- as 'rent'. On 11.1.2020 there is a credit entry of Rs. 16,000/- described as 'rent' It is evident from the admission contained in the reply to the legal notice as well as the Statement of Defence, that the Respondent had been collecting rent/tariff from the residents / occupants of the subject Property.
Though it was submitted by the learned counsel for the respondent that the aforesaid entries in the bank account of JHPL pertained to other properties or that portion of the property which was retained by the respondent, the said submission is not backed either by the pleadings or by any documentary evidence and therefore cannot be accepted.
32. The case of the Respondent is that it had refunded / adjusted the amount of the security which the occupants/residents had made with the Claimant and it is entitled to adjust the said amount from IFSD deposited by the Claimant. It is stated in the OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 65 of 76 Counter Claim filed by the Respondent that it had refunded / adjusted a sum of Rs. 12,40,000//- to the occupants/residents of the subject Property. The Claimant has denied any such payment / adjustment by the Respondent. In the Counter Claim, the Respondent has not given breakup of the amount of Rs. 12,40,000/-alleged to have been refunded by it. The Counter Claim does not specify, who were the persons to whom the said amount was refunded / adjusted, what was the individual amount refunded / adjusted, when the security was deposited and when was the refund / adjustment granted by the Respondent. In order to succeed the Respondent was required not only to give such particulars but also to prove that the concerned occupants/residents had deposited the security with the Claimant and that amount was either adjusted by the Respondent out of the rent/tariff payable by that occupant / resident or was refunded by it to him / her. The occupants/residents could not have deposited the security with the Claimant in cash. Therefore, documentary evidence of the said deposit must be available in case such a deposit was made with the Claimant. The Respondent would not have refunded / adjusted the alleged deposit to the occupants/residents without obtaining documentary proof of the said deposit. No such proof of any deposit by any such resident / occupant has been produced by the Respondent. Moreover, if the Respondent had refunded / adjusted the security deposited by a resident / occupant with the Claimant, it must have prepared a document such as an invoice or voucher, evidencing the said refund / adjustment and got it signed from the occupant/resident in OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 66 of 76 whose favour the refund / adjustment was made. No such document however, has been produced by the Respondent. If the said deposit was refunded to the occupant/resident, the refund would be by way of a cheque / electronic transfer. No documentary proof of any such payment to any occupant has been produced by the Respondent. In the absence of any documentary proof, it would be difficult to accept that the Respondent refunded / adjusted a substantial amount of Rs.
12,40,000/- to the occupants/residents/students, though the said deposit was made by them with the Claimant and not with the Respondent. Ordinarily, if the security was deposited by an occupant / resident with the Claimant, he/she would demand it from the Claimant and the Respondent would not refund/adjust that amount to the occupant/resident/student.
62. In addition to noting the collection of rent and not providing the details for the alleged refund of security deposit by the petitioner to the occupants, learned Arbitrator held that petitioner himself committed breach of the agreement and therefore cannot compel the respondent to perform his obligations. Learned Arbitrator therefore rejected claim of sharing of revenue by the petitioner in para no.28 of the award, which reads as follows :-
28. The Agreement between the parties is based on and comprises reciprocal rights and obligations. The right of the respondent to receive the agreed share in the net revenue OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 67 of 76 carried with it, an obligation not to interfere in the management of the subject. property by the respondent, including inducting occupants/residents. therein and recovering rent/tariff from them. If a party to the Agreement commits breach of one or more of its material terms and thereby deprives the other party of its rights under the said Agreement, the party in breach can not compel the other party to perform the obligations of that party under the said Agreement. Logically also, such an Agreement cannot be performed, if both the parties collect rent/tariff from the tenants/occupants. The share of the respondent cannot be quantified in money terms, without first ascertaining the total revenue generated from the property. If the rent from the occupants is collected not only by the claimant but also by the respondent, the claimant cannot be sure of the total revenue generated from the property, even if the respondent were to offer to disclose the total rent collected by it. In any case, here no such offer has been made by the respondent.
The stand taken during the arguments was that no rent/tariff from the residents/occupants of the subject property was collected by the respondent. By collecting rent /tariff from the residents/occupants, the respondent forfeited its right to receive any share in the net revenue generated from the property, irrespective of the extent of such collection. A party who himself is in breach of an Agreement can not compel the other party to perform his obligations, ignoring the breach committed by him. I therefore hold that the respondent is not entitled to the any share in the revenue collected by the Claimant. OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 68 of 76
63. Whether the collection of rent, tariff by the claimant was fundamental breach of agreement or not was also dealt with by learned Arbitrator in detail in para no. 26 and 27 of the award, which is as follows :-
26. The next question which arises for consideration is as to whether the collection of rent/tariff by the Respondent directly from the occupants/residents amounts to a material breach of the terms of the Agreement or not. The Agreement between the parties was essentially a Revenue Sharing Agreement under which the net revenue collected by the Respondent by renting/licensing accommodations in the subject Property was to be shared between the Claimant and the Respondent. The Respondent was to receive 70% of the net revenue whereas the remaining 30% was to be retained by the Claimant. If 70% of the net revenue came to less than the amount of minimum Guarantee given by the Claimant to the Respondent and incorporated in Schedule I of the Agreement, the respondent was entitled to the said amount irrespective of the net revenue collected by the claimant.
After a period specified in the Agreement, if 70% of the net revenue was higher than the amount of the minimum Guarantee, the Respondent was entitled to the said higher amount. Such an arrangement necessarily required collection of the rent solely and exclusively by the Claimant. If both the parties were to collect rent/tariff from the residents / occupants, it would not have been possible to determine the total rent collected from the occupants. The Agreement between the parties did not envisage collection of OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 69 of 76 rent/tariff by both the parties. This is more than evident from the terms of the Agreement including Clause 2.3, which required the Respondent to execute an Irrevocable Power of Attorney in favour of the Claimant authorizing it to collect rent / licence fee from guests and take action in the event they did not pay the rent, Clause 6.2 (j) required the Respondent not to interfere in the day to day operations of the Claimant including with the occupation of any sub-licencee /sub- lessee except for partial inventory (the portion of the building which had not been given to the Claimant for management). In any case, the collection of rent/tariff solely by the Service Provider is inherent in such an Agreement. It is not possible for the Service Provider to determine the exact net revenue recovered from the occupants/residents if rent/tariff is collected by the Owner as well as by the Service Provider. In such a situation, the amount payable to the Owner in terms of the Agreement cannot be correctly determined. In any case, the Agreement between the parties did not permit both the sides to recover the rent/tariff from the occupants/residents. It would be pertinent to note here that neither in reply to the legal notice nor in its Statement of Defence, the Respondent has claimed that under the terms of the Agreement, both the parties were entitled to collect rent from the occupants/residents of the subject Property.
27. Though the term 'material breach' has not been defined in the Agreement executed between the parties, it would be difficult to dispute that breach of a fundamental term of the Agreement would certainly constitute its material breach. The collection of rent/tariff OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 70 of 76 by the Claimant alone, in my opinion was a fundamental term of an Agreement of this nature since the Agreement could not have been successfully implemented if the rent/tariff is collected by both the parties. As rightly contended by learned counsel for the Claimant, a breach which makes the commercial performance of an Agreement impossible and unviable would amount to a material breach. The whole concept of revenue sharing becomes meaningless, if the revenue is collected by both the parties.
64. The court do not see any unreasonableness in the findings of learned Arbitrator that if both the parties were to collect rent/tariff from the respondents/occupants it would be impossible to determine the total rent collected from the occupants and that agreement between the parties did not envisage collection of rent/tariff by both the parties and that agreement could not have been successfully implemented if rent/tariff is collected by both the parties. There is enough evidence that the petitioner had collected rent/tariff from the occupants directly. Respondent was having exclusive right of the same. The revenue sharing agreement between the parties could not have been implemented if both the parties were simultaneously collecting the rent/tariff or were refunding the security deposit without intimation/permission of each other. As noted by learned Arbitrator, petitioner did not share to whom he refunded the alleged security amount and the request for the said OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 71 of 76 refund, when such refund could have been sought only from the respondent. It can therefore be said that such breaches of the agreement impair functionality of the agreement. Learned Arbitrator therefore held that same amounted to material breaches. No fault can be found in the findings written by learned Arbitrator.
65. The issue as regards competency of CW-1 to sign and verify the claim and to depose on behalf of claimant was dealt in detail by learned Arbitrator in para no. 39 of the award, which reads as follows:-
39.It is stated in paras 1 to 6 of the Statement of Defence that "Para No. 1 to 6 of the Statement of Claim need no reply."
The Respondent having not specifically denied the averment made in para 2 of the Statement of Claim, the said averment is deemed to have been admitted and, therefore, was not required to be proved by leading evidence. In any case, the Claimant has not come forward to dispute the authority of Ms. Shreya Aggarwal to institute the Statement of Claim on its behalf. The documents executed between the parties have been annexed to the Statement of Claim. This precisely was the reason no specific issue / point for determination was framed by the Arbitral Tribunal on the authority of Ms. Shreya Aggarwal to file the Statement of Claim. It was also contended by the learned counsel for the Claimant that the Claimant has not produced the whole chain of documents to prove that CW-1 was competent to depose on its behalf. The contention, in my view is hyper-technical and untenable. The Claimant could have OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 72 of 76 examined any person conversant with the facts of the case, to depose on its behalf.
66. The court cannot re-appreciate the reasonings given by learned Arbitrator.
67. It cannot be said that learned Arbitrator has passed sweeping award just by considering the facts of Juvello Homes Pvt Ltd. It is a matter of fact that in the pamphlets seeking rent demands directly to the owner Mr. J.P. Singh and as authorized persons, particulars of bank account of Juvello Homes Pvt Ltd are given, but in the facts and circumstances, when said Mr. J.P. Singh was managing all the properties it cannot be said that cash or bank transactions made by the occupants, were related to the single property i.e. Juvello Homes Pvt Ltd. There was a common manager of all the properties on behalf of petitioner i.e. Mr. J.P. Singh. There was a common representative for all the properties i.e. Mr. J.P. Singh. His representatives were authorized to collect rent from the occupants. Hence, it cannot be said that rent collected by Mr. J.P. Singh consequent upon publication of pamphlets was limited to the properties of Juvello Homes Pvt Ltd only. Findings of learned Arbitrator cannot be faulted on this ground.
68. Submissions of learned counsel for petitioner that it was obligatory upon learned Arbitrator, before grant of refund of security, to hold that the respondent had OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 73 of 76 complied with all terms and conditions under agreement, is not tenable. Once the agreement was terminated for any reason whatsoever, it is specifically provided in clause 5 of agreement "In the event of termination of this agreement due to any reason whatsoever the owner shall refund IFRSD to the service provider". It is thus clear that once the agreement is terminated for any reason whatsoever, the owner/petitioner was liable to refund the security deposit to the respondent.
69. Plea raised by learned counsel for petitioner that clause 5 of the agreement provided for joint inspection of properties on termination of contract and for deduction of compensation or damages is of no use because no such demand was ever made by the petitioner nor any damages or compensation was claimed on account of any damage caused by the respondent service provider. Clause 5 of the agreement also provide that in case of failure of payment of interest free security deposit, on termination of contract, the owner shall be liable to pay interest @ 18% per annum for delayed refund of security. Learned Arbitrator has granted the interest upto the date of institution of claim on the stipulated rate of interest i.e. @ 18% per annum. Future interest @ 10% per annum has been awarded in para no.45 of the award which reads as follows :-
45. The Claimant has also sought interest @ 18% per OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 74 of 76 annum from the date of institution of the claim. Section 31(7)(a) of the Arbitration and Conciliation Act, 1996, to the extent it is relevant provides that unless otherwise agreed by the parties, in an Award for payment of money, the Arbitral Tribunal may include interest at such rate as it deems reasonable, for the whole or any part of the period between the date on which the cause of action arose and the date on which the Award is made. The claim for grant of interest upto the date of institution of the claim, at the agreed rate of 18% per annum has been allowed by me. Considering the nature of the transaction between the parties and the prevailing rates of interest, the Claimant is awarded simple interest @ 10% per annum, on the principal amount of Rs.
5,00,000/-, with effect from the date of institution of the claim, till the date of the Award.
70. In the facts and circumstances, there is no ground to interfere in the reasoned findings of learned Arbitrator.
71. The objections filed by the petitioner are accordingly dismissed. Award file along with copy of this order, be sent back to learned Arbitrator.
72. The consequent upon the dismissal of the objections, the application under Section 36(2) of the Act is also liable to be dismissed. Same is accordingly OMP (Comm.) 64/2023 Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 75 of 76 dismissed.
73. File be consigned to record room.
Announced in the open court Digitally signed
on the 07th day of June, 2024 AJAY by AJAY PANDEY
PANDEY Date: 2024.06.07
17:24:44 +0530
(Ajay Pandey)
District Judge
(Commercial Court-10)
Central, Tis Hazari Courts, Delhi.
OMP (Comm.) 64/2023
Raunak International Vs. Oyo Apartments Investments (LLP) Page no. 76 of 76