Bangalore District Court
National Institute Of Fashion vs ) Mc. Gan'S Ooty School Of Architecture on 2 February, 2023
IN THE COURT OF THE LXXXIII ADDITIONAL CITY
CIVIL AND SESSIONS JUDGE AT BENGALURU CITY
[CCH-84]
:Present:
Ravindra Hegde,
M.A., LL.M.,
LXXXIII Addl. City Civil & Sessions Judge,
Bengaluru
Dated on this the 2nd day of February 2023
COM.A.P.No.83/2020
Petitioner National Institute of Fashion
Technology (NIFT)
Site No.21, NIFT Campus,
27th Main, Sector 1, HSR Layout,
Bengaluru-560102.
Represented by its Director.
(By Sri.G.S.B, Advocate)
// versus //
Respondents 1) Mc. GAN's Ooty School of Architecture
Represented by its Chairman and
Sri.Angala Parameshwari Education
Trust through its
Authorized Representative
Sri.N.Muralikumaran,
No.5/635, Perar Kotagiti,
Ooty-643002.
2) Shri H.M.Bharathesh,
Sole Arbitrator,
Arbitration & Conciliation Centre,
Bengaluru.
(Domestic and International)
'Khanija Bhavan,
#49, 3rd Floor, East Wing,
Race Course Road,
2
CT 1390_Com.A.P.83-2020_Judgment.doc
Bengaluru-560001.
(R.1 by Sri.S.S, Advocate,
R.2 - Learned Arbitrator)
Date of Institution of the : 08/12/2020
petition
Nature of petition : Arbitration Petition
Date of commencement of : --
recording of the evidence
Date on which the Judgment : 2/02/2023
was pronounced.
: Year/ Month/s Day/s
Total duration s
02 01 25
JUDGMENT
This petition under Section 34(2) of the Arbitration & Conciliation Act is filed by the petitioner praying to set aside the award passed by the learned Arbitrator in AC 174/2018 on 7/9/2020 and to allow the claim of the petitioner as prayed before the learned Arbitrator.
2. Present petitioner was the respondent before the learned Arbitrator. Respondent No.1 was the claimant before the learned Arbitrator and respondent No.2 is the learned Arbitrator.
3. Case of the petitioner in brief is as under:
The petitioner National Institute of Fashion Technology (NIFT) is the pioneering institute of fashion education in the country and has been in the vanguard of providing professional human resource to the textile and apparel industry and it is a statutory institute formed by an Act of the Indian Parliament 3 CT 1390_Com.A.P.83-2020_Judgment.doc and is also working as knowledge service provider to the Union and State Governments. Respondent No.1 McGan's Oooty School of Architecture was established in the year 2008 and it decided to establish fashion and design institute under the name and style as McGans' Ooty School of Fashion and Design (MSFD) and in order to further their establishment by providing courses related to fashion and design, respondent No.1 approached petitioner and sought for their services and support. Thereafter discussions were held between the parties and a draft MOU came to be circulated on 17/2/2015 and it was placed in meeting of Board of governors of NIFT on 23/2/2015 and in this there were several modifications suggested to the MOU and by incorporating suitable changes made to the draft MOU, final MOU dated 18/3/2015 came to be executed between the parties as per Ex.C.8. New MOU indicates that NIFT would not have any role in soliciting students to the respondent No.1's institution. In clause 1.4.1 and 1.4.2 it is clearly mentioned that the name and logo of NIFT shall not be used for anything other than the support and services provided by NIFT and in the event that the name of NIFT found to have been used in any other manner, then MOU shall be terminated with immediate effect without notice.
Therefore, respondent No.1 cannot use the name or logo for any purpose other than the support and services provided by the NIFT. MOU dated 18/3/2015 was entered for providing support and service of NIFT in training the faculty for developing the course curriculum for seven programs i.e. five 4 CT 1390_Com.A.P.83-2020_Judgment.doc full time post graduate diploma programs and two full time under graduate programs. NIFT and its faculty are also under no obligation to conduct courses or modules at MSFD under the terms of the present agreement. The MOU is for very limited purpose i.e. for training the faculty and developing the course curriculum of respondent No.1's institution and the petitioner is playing very limited role in training the teachers and assisting in developing the modules as decided by respondent No.1. For the services being rendered, petitioner was entitle to receive total compensation of Rs.25 lakhs, out of which Rs.20 lakhs was paid at the time of the signing of MOU and prevailing service tax was payble. After executing MOU, respondent No.1 in clear derogation of clause 1.4 of the MOU issued an advertisement on 15/5/2015 in Deccan Herald, wherein the respondent No.1 was soliciting students under the pretext that it had collaboration with the NIFT. On bare reading of the advertisement, it is evident that clause 1.4.1 of the MOU has been violated which would lead to automatic termination of the MOU. Therefore, petitioner got paper publication made in the Deccan Herald and Prajavani newspaper on 20/5/2015 stating that respondent No.1 has used the logo and name of NIFT without any form of prior consent and due to the said breach, MOU for the purpose of training the respondent's faculty for development of their course curriculum is withdrawn. After this publication a legal notice dated 23/5/2015 was sent to respondent No.1 informing them of the breach of clauses of the MOU and failing to pay service tax. Thereafter the respondent 5 CT 1390_Com.A.P.83-2020_Judgment.doc No.1 filed AA No.163/2015 and obtained temporary injunction restraining the present petitioner from unilaterally withdrawing the services of academic support as per the MOU. Subsequently, CMP was filed and respondent No.2 was appointed as learned Arbitrator by order of Hon'ble High Court. Before learned Arbitrator, present respondent No.1 filed statement of claim disputing validity of termination and seeking refund of Rs.20 lakhs along with interest of 24% per annum. The present petitioner - NIFT filed objection and also counter claim and claimed Rs.40 lakh for unauthorized use of the logo of the petitioner and also claimed Rs.10 lakhs as damages for using its name and logo without any authority and Rs.2,47,000/- along with interest @18% per annum on account of non failure in payment of service tax amount which NIFT deposited on 31/3/2015 and also claimed balance of Rs.5 lakhs of second installment as per MOU. Learned Arbitrator framed 12 issues and then passed the award on 7/9/2020 and rejected counter claim made by the petitioner and the claim made by the respondent No.1 for refund of Rs.20 lakhs plus interest is allowed by the learned Arbitrator by holding that termination is unlawful.
4. Being aggrieved by this award, petitioner - NIFT has filed present petition and challenged award on various grounds. It is stated that the award is in conflict with law of the land and in conflict with most basic notions of justice and vitiated by patent illegality. It is contended that the observation made in the award are in contravention of both law and documents. It 6 CT 1390_Com.A.P.83-2020_Judgment.doc is stated that clear violation of clause 1.4.1 and 1.4.2 by the respondent No.1 by publishing advertisement in the newspaper which resulted in lawful termination is not properly considered by the learned Arbitrator. It is also stated that draft MOU and subsequent meeting and then deleting several clauses of draft in the final MOU would show that the termination is lawful in terms of MOU and the learned Arbitrator construed the said agreement in a manner contrary to settled principles of law. The petitioner has also referred to the decision of Hon'ble Supreme Court in Khardah Company Limited v. Raymon & Company (India) Private Limited, Oil and Natural Gas Corporation Limited v. Saw Pipes Limited and contended that termination of the agreement are not properly interpreted by the learned Arbitrator. It is also contended by the petitioner that the learned Arbitrator has failed to note that the word 'technical collaboration with NIFT' was deliberately omitted in the final MOU and the respondent No.1, in clandestine manner used the line 'with academic support of NIFT' and tried to mislead and lure the public at large and the prospective students in particular, in joining their institution. It is stated that as per the clause in the MOU the name and logo of NIFT used for any purpose other than supporting service provided by NIFT and the interpretation of the contract is manifestly erroneous. It is also stated that the learned Arbitrator has observed that the termination is by misconstruing of the words put down in the advertisement by respondent No.1, but fails to consider the fact that on strict interpretation of the MOU, only service and 7 CT 1390_Com.A.P.83-2020_Judgment.doc support is with regard to the internal working of respondent No.1 which is to do with faculty training and development of curriculum. It is also stated that the learned Arbitrator has not appreciated evidence produced and passed an award which is perverse and in this connection referred to the decision in Ssangyong Engineering and Construction Company Limited. It is also contended that the learned Arbitrator has wrongly held that the petitioner was not entitle to receive service tax component of Rs.2,47,000/- with interest and the finding is based on the circular of the government. However, respondent No.1 has not intimated about this circular and exemption during the exchange of the draft of MOU. Therefore the finding is not correct. It is also stated that the dispute there being a valid termination on 20/5/2015 and same being communicated to the respondent No.1 on 23/5/2015, the respondent No.1 has continued using the plaintiff's name and logo upto July 2018 which is clear violation of clauses. It is stated that though the learned Arbitrator has rightly observed that respondent No.1 had no right to use the name and logo of the petitioner, sole Arbitrator failed to realize that this is in violation of Section 29(2)(c) of the Trade Marks Act and because of the said usage it has misled the general public. It is stated that despite answering issue No.7 in the affirmative, learned Arbitrator rejected the claim for damages in entirety which is illegal. It is also stated that though the plaintiff is self financed institute, without any form of government grant, learned Arbitrator has 8 CT 1390_Com.A.P.83-2020_Judgment.doc awarded interest on the higher side. On these grounds the award is prayed to be set aside.
5. Respondent No.1 has filed detail objection and stated that there are no merits in the petition and it is liable to be dismissed with costs. It is stated that the petition is filed only to delay payment of sums that are legitimately due to the 1 st respondent and harass the 1st respondent. It is stated that the award cannot be lightly interfered and reasonableness of reasons given by the Arbitrator cannot be gone into. It is also stated that only because another view is possible on the same set of facts, the award cannot be challenged. It is stated that the petitioner sought to challenge the finding of the fact arrived by the Arbitrator and has attempted to substitute their own reasoning to substantiate their alleged case, it is impermissible as court under Section 34 do not sit in appeal. The respondent No.1 has referred to the decision in South East Marine Engineering and Construction Limited and also a decision in Project Director, National Highways Authority Authority of India and the decision in Ssangyong Engineering & Construction Company Limited and also Falma Laboratories private Limited and also relied on the decision in Prism Cement Limited, in support of the contention that the award cannot be lightly interfered. Respondent No.1 has stated facts of the case which led to initiating arbitration and stated that MOU was unilaterally and illegally terminated by giving paper publication. It is stated that respondent No.1 has complied with all the terms and conditions of MOU and without prior intimation and 9 CT 1390_Com.A.P.83-2020_Judgment.doc incomplete contravention of the clauses of MOU public notice was issued in Kannada and English daily newspaper stating that the services are withdrawn for using the logo and name of the NIFT. Respondent No.1 has stated that he has paid Rs.20 lakhs and has not provided any service as per the MOU. Respondent No.1 has also stated about Arbitration Application No.163/2015 seeking order of interim measure and obtaining the order of injunction and stated that inspite of such order, petitioner has not provided service and has violated the order and in violation has also issued legal notice on 23/5/2015. It is stated that though there is no violation of the MOU, only to please the competitors of respondent No.1, petitioner has deliberately terminated the MOU without any prior intimation to respondent No.1 and has caused serious damages to the reputation of respondent No.1 and has also caused monetary loss. It is also stated that in the objection filed in arbitration application for the first time the petitioner has contended that about non payment of service tax as the cause for termination of MOU. However, in the newspaper the said ground is not stated and this ground is taken for the first time in order to escape from the unilateral, arbitrary and illegal act of terminating the MOU. The respondent No.1 has justified the award of the learned Arbitrator in holding that the respondent No.1 is not liable to pay the service tax as the same is exempted. Respondent No.1 has also stated about petitioner helping another institution NIFT-TEA-KNITWEAR FASHION in which the member of Board of Governors of NIFT is interested 10 CT 1390_Com.A.P.83-2020_Judgment.doc and it is stated that it is a selective discrimination and the unilateral termination of MOU dated 18/3/2015. Petitioner entering into MOU with another institution Maharshi Karve Stree Shikshan Samstha by permitting usage of the word 'in technical collaboration with NIFT' and also refusing to permit the respondent No.1 to use in technical collaboration with NIFT itself show the biased and prejudicial act of the top officials of the NIFT against the respondent No.1 from the beginning. It is stated that services were not provided by the petitioner even after receipt of Rs.20 lakhs and the petitioner violated the terms and conditions of the contract and cannot justify its act of not rendering the services agreed. It is stated that the learned Arbitrator by considering the documents and the contention has passed the award. It is stated that clause 1.4.1 of the MOU do not prohibit the respondent No.1 from using the name and logo of the petitioner for the support and service agreed to be extended by the petitioner under the MOU and there is no requirement to take prior written consent from the petitioner to use the name and logo and accordingly, respondent No.1 had issued advertisement using the name and logo of the petitioner and petitioner without seeking for any clarification straight away proceeded to terminate the MOU unilaterally is bad in the eye of law. It is stated that the award reveals that the learned Arbitrator has adverted to the documents filed by the parties and all contemporaneous records to arrive at the conclusions and has rightly concluded that the termination of MOU was not justified and in the absence of any forfeiture clause the 11 CT 1390_Com.A.P.83-2020_Judgment.doc petitioner is not entitle to forfeit Rs.20 lakhs and the learned Arbitrator has assigned detailed reasons for arriving at his conclusions which cannot be interfered. On all these grounds the petition is prayed to be dismissed.
6. Now the points that arise for consideration of this court are:
1) Whether the petitioner has made out any ground under Section 34(2) and 34(2-A) of the Arbitration & Conciliation Act to set aside the award passed by the learned Arbitrator in AC No.174/2018 on 7/9/2020 as prayed?
2) What order?
7. Heard both the counsels. Counsel for petitioner filed written arguments also. Perused records.
8. My answer to the above points are :
POINT No.1 : In the negative.
POINT No.2 : As per final order for the
following:
REASONS
9. Point No.1: This petition is filed challenging
the award by which, present petitioner-NIFT is directed to refund Rs.20 lakhs to the claimant with interest @12% per annum within 3 months and if same is not paid within 3 months, then with interest @24% per annum and rejected the claim put forwarded by NIFT. Admitted facts of the case are that the present petitioner 12 CT 1390_Com.A.P.83-2020_Judgment.doc NIFT and respondent-MSFD entered into MOU dated 18/3/2015 as per which the NIFT had agreed to provide necessary academic support and service to claimant- NIFT and MOU was entered for the purpose of NIFT imparting academic support on certain conditions. NIFT had agreed to provide training to MSFD for development of course curriculum for 7 programs offered by McGAN i.e MSFD. Clause 1.4 of MOU, which is crux of the matter states that McGAN i.e. shall not use the name and logo of NIFT for anything other than support and services provided by NIFT and for use of name of NIFT in any other manner prior written consent of NIFT will have to be taken. It is also provided in clause 1.4.2 that, if name of NIFT is found to have been used in any other manner and without prior consent of the NIFT, MOU shall be terminated with immediate effect without any notice and without assigning reason. For providing the service, out of fixed amount of Rs.25,00,000/-, first installment of Rs.20 lakhs was paid at the time of signing of the MOU. As per clause 2.1.2 prevailing service tax was also to be paid. After this agreement paper publication was given by the claimant in the news paper on 15/5/2015 and in this news paper advertisement the claimant had used name of NIFT and its logo by showing it as "with academic support of NIFT" for total 4 programs by showing (*) mark. According to the present petitioner this 13 CT 1390_Com.A.P.83-2020_Judgment.doc advertisement is in violation of clause 1.4.1 and by alleging NIFT gave paper publication on 20/5/2015 and 21/5/2015 stating that service of training MSFD faculty for development of their course curriculum is being withdrawn. Thereafter notices were exchanged and in the notice given by the present petitioner it is stated that not only this use of logo and name of NIFT is in violation of the MOU, but service tax is also not paid by the claimant and therefore, MOU is terminated. Thereafter, MSFD filed arbitration application under Section 9 and obtained interim order and in the meantime the NIFT has forfeited the amount of Rs.20 lakhs which was already given and the MSFD initiated arbitration and before the learned Arbitrator parties have pleaded their respective case and learned Arbitrator has passed the impugned award, which is challenged in the present petition.
10. The learned counsel for the petitioner-NIFT has relied on the decision of the Hon'ble Supreme Court reported in (2019) 15 SCC 131 (Ssangyong Engineering and Construction Company Limited v. NHAI) in which in para 41 it is held as under:
"...What is important to note is that a decision which is perverse, as understood in paras 31 and 31 of the Associate Builders, while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. Thus a finding based on no evidence at all or an award which ignores 14 CT 1390_Com.A.P.83-2020_Judgment.doc vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality..."
11. He has also relied on the decision of Hon'ble Supreme Court reported in (2014) 9 SCC 263 (ONGC Limited v. Western Geco International Limited) in which in para 38 it is held as under:
"Equally important and indeed fundamental to the policy of Indian law is the principle that a court and so also a quasi-
judicial authority must, while determining the rights and obligations of parties before it, do so in accordance with the principles of natural justice. Besides the celebrated audi alteram partem rule one of the facets of the principles of natural justice is that the court/authority deciding the matter must apply its mind to the attendant facts and circumstances while taking a view one way or the other. Non application of mind is a defect that is fatal to any adjudication. Application of mind is best demonstrated by disclosure of the mind and disclosure of mind is best done by recording reasons in support of the decision which the court or authority is taking. The requirement that an adjudicatory authority must apply its mind is, in that view, so deeply embedded in our jurisprudence that it can be described as a fundamental policy of Indian law."
12. The counsel for the petitioner has also relied on the decision of the Hon'ble Supreme Court reported in (1963) 3 SCR 183 (Khardah Company Limited v. Raymon & Company (India) Private Limited) in which 15 CT 1390_Com.A.P.83-2020_Judgment.doc it is held regarding interpretation of the contract as under:
"...We agree that when a contract has been reduced to writing we must look only to that writing for ascertaining the terms of the agreement between the parties but it does not follow from this that it is only what is set out expressly and in so many words in the document that can constitute a term of the contract between the parties. If on a reading of the document as a whole, it can fairly be deduced from the words actually used therein that the parties had agreed on a particular term, there is nothing in law which prevents them from setting up that term. The terms of a contract can be express or implied from what has been expressed. It is in the ultimate analysis a question of construction of the contract and again, it is well established that in construing a contract it would be legitimate to take into account surrounding circumstances...."
13. Further the learned counsel has also relied on the decision of the Hon'ble Supreme Court reported in (2003) 5 SCC 705 (Oil and Natural Gas Corporation Limited v. Saw Pipes Limited) which is also with regard to construction of contract and it is held as under:
"It cannot be disputed that for construction of the contract, it is settled law that the intention of the parties is to be gathered from the words used in the agreement. If words are unambiguous and are used after full understanding of their meaning by experts, it would be difficult to gather 16 CT 1390_Com.A.P.83-2020_Judgment.doc their intention different from the language used in the agreement. If upon a reading of the document as a whole, it can fairly be deduced from the words actually used therein that the parties had agreed on a particular term, there is nothing in law which prevents them from setting up that term. Further, in construing a contract, the court must look at the words used in the contract unless they are such that one may suspect that they do not convey the intention correctly. If the words are clear, there is very little the court can do about it."
14. On the other hand the learned counsel for the respondent No.1-MSFD, who was the claimant before the learned Arbitrator has relied on the decision of the Hon'ble Supreme Court reported in (2020) 5 SCC 164 (South East Marine Engineering & Construction Limited v. Oil India Limited) in which the Hon'ble Supreme Court has held in para 13 as under:
"It is also settled law that where two views are possible, the court cannot interfere in the plausible view taken by the arbitrator supported by reasoning. This court in Dyna Technologies (Dyna Technologies (P) Ltd v. Crompton Greaves Limited (2019) 20 SCC 1 :
2019 SCC Online SC 1656) observed as under:
Moreover, umpteen number of judgments of this court have categorically held that the courts should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The Courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in 17 CT 1390_Com.A.P.83-2020_Judgment.doc the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act."
15. He has also relied on the decision reported in 2021 SCC Online SC 473 (Project Director, National Highways Authority of India v. M.Hakeem and another) in which in para 21 it is held as under:
"As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the court under Section 34 and by the court in an appeal under Section 37, this court must be extremely cautious and slow to disturb such concurrent findings..."
16. Further he has also relied on the decision reported in 2015 SCC Online KAR 8950 (Prism Cement Limited v. D.C.S Limited) in which in para 32 the Hon'ble High Court has held as under:
"...Now coming to the question of scope of interference by the courts in the matters of Arbitral awards, section 34 of the Act is the controlling statutory provision. The principle formulated by the Apex Court in Delhi Development Authority's case holds the field. On a re-reading of the award also, we are 18 CT 1390_Com.A.P.83-2020_Judgment.doc unable to subscribe to the contention of the appellant that the award is contrary to the terms of contract or suffers from any patent illegality. The conclusion arrived by the learned Arbitrator flows from his reasoning's discussed in the body of the award. Clause 4.5 reads with clause 9.9 of the Agreement sustains the view taken by the Arbitrator that no liquidated damages was contemplated in the event of short supply of feed rock and award of unliquidated damage of Rs.1,30,41,000/- with interest @ 12% per annum with effect from 1/10/2005, was legal. Rightly the Court below has declined to interfere with the Arbitral award and dismissed the suit of the plaintiff. The judgment and decree of the Court below is proper and judicious not warranting interference..."
17. In the presence of these decisions stating the scope, objection and grounds for interference in the award, under Section 34 of the Arbitration & Conciliation Act, challenge to the award of the learned Arbitrator is to be considered. Therefore, Jurisdiction of the court to set aside an arbitral award is limited to the grounds set out in Section 34(2) and 34 (2A) of the Arbitration & Conciliation Act 1996. It is well established principle, that, even if contrary view based on the facts before the Arbitral Tribunal is possible, in the absence of any compelling reasons, court cannot interfere with the view taken by the learned Arbitrator. It is also well established principle that the court sitting U/S.34 of the Act is not supposed to go for re-
19CT 1390_Com.A.P.83-2020_Judgment.doc appreciation of evidence or impose its view as against the view of learned Arbitrator and the power of the court is only to set aside the award, if it is coming under one of the grounds mentioned in the said section. It is also well established principle that the court under section 34 cannot sit in Appeal over the Award. It is also established principle that interpretation of terms of contract is left to the arbitrator and unless, interpretation of terms of contract by arbitrator is perverse, court cannot interfere. In the presence of these basic principles, grounds urged by the plaintiff and the award of the learned Arbitrator are to be looked into.
18. On looking to the award and the dispute raised by the parties, legality of the termination by giving paper publication on 21/5/2015 by the present petitioner was the crux of the matter. Outcome on this issue is the basis for monitory reliefs prayed by either party in the claim petition and in the counter claim. It is not in dispute that the parties had entered into a draft Memorandum of Understanding dated 17/2/2015 which contains several clauses. It is also not in dispute that after this draft MOU, Board of governors have held the meeting and in that meeting several corrections to the earlier draft MOU and deletion of several clauses, have been made and these deletions and corrections have come into effect by entering into MOU as per 20 CT 1390_Com.A.P.83-2020_Judgment.doc Ex.C.8 on 18/3/2015. Learned counsel for the petitioner has argued that while interpreting the clause of MOU dated 18/3/2015 the Arbitrator is also required to consider the draft MOU and also the subsequent board meeting of NIFT in which several deletions are and corrections have been made. He has also argued that, there was specific understanding between the parties that claimant is not allowed to use the word 'Technical collaboration with NIFT' which was earlier appearing in the draft and several such terms which would show that the NIFT is also associated with the claimant school were all deleted and the claimant was only permitted to use the name and logo of NIFT for specific support and service provided by NIFT. These contentions of NIFT are considerd by the learned Arbitrator as could be seen from the Award.
19. Learned Arbitrator has considered the meaning of the words used in the advertisement given by the claimant which according to the present petitioner is in violation of the terms of MOU. Learned Arbitrator has considered the preamble of the MOU, wherein, it is mentioned that NIFT shall provide necessary Academic support and service to McGAN's from March 2015 till February 2018 and the parties for the purpose of NIFT imparting academic support entered into present understanding with various terms. By considering this, learned Arbitrator has found that 21 CT 1390_Com.A.P.83-2020_Judgment.doc very purpose of entering into the MOU as mentioned in the MOU itself is for the purpose of NIFT imparting academic support. The learned Arbitrator has also noted that in the paper publication given by the present petitioner on 15/5/2015 it is clearly mentioned as, "With academic support of NIFT". The learned Arbitrator has noted that even in the MOU dated 18/3/2015, words, 'academic support to be imparted by NIFT' is clearly appearing. The learned Arbitrator has also noted that NIFT has agreed to assist McGAN by training its faculty for developing the course curriculum for 7 programs and therefore, NIFT had agreed to provide training to the faculty of MSFD for developing course curriculum for 7 programs. Though in the newspaper there are totally 5 programs are shown, mark '*' is not shown before 'Textile design' as that was not part of 7 programs for which training was to be provided to the faculty for developing the course. Even in the present petition it is stated that Textile design was not part of 7 programs for which training to the faculty was agreed to be provided. However, as stated above, for the courses for which faculty is agreed to be trained by NIFT mark '*' is shown before and for Textile design, same is not shown, which indicates that for this course there is no such academic support by the NIFT. So this objection would not stand.
22CT 1390_Com.A.P.83-2020_Judgment.doc
20. Learned Arbitrator has considered as to whether necessary support to assist MSFD by training its faculty for developing the course curriculum can be understood to mean 'academic support' as mentioned in the advertisement and by considering the meaning of 'academic support', learned Arbitrator has found that it means so. He has also considered the preamble of MOU where the specific word of imparting academic support is clearly appearing and held that, for the purpose of NIFT imparting academic support it has entered into present MOU with the claimant and the NIFT has agreed to train MSFD faculty for course curriculum. Therefore, learned Arbitrator has found that usage of name and logo of NIFT, by stating 'with the academic support of NIFT', in the advertisement cannot be said to be unauthorized use, in terms of clause 1.4.1 of MOU. Learned Arbitrator has also noted that as per the MOU McGAN cannot use name and logo of NIFT for anything other than support and service agreed to be provided by NIFT. Therefore, learned Arbitrator by considering the advertisement has found that the claimant has not violated any terms of the MOU and there is no wrong in using the same. He has also noted that training faculty for the purpose of developing course curriculum is nothing but academic support.
21. By considering these facts and the terms of MOU, learned Arbitrator has held that no fault could be 23 CT 1390_Com.A.P.83-2020_Judgment.doc found with MSFD in giving advertisement by using logo and name of NIFT. The learned Arbitrator has found that there is no fault with the claimant in giving advertisement by showing as, 'with academic support of NIFT' and by using the logo, as, the words, 'Iin technical collaboration with NIFT' etc are not used. The learned Arbitrator by considering different terms and clauses of the MOU has interpreted the terms and such interpretation cannot be interfered by the court under Section 34 of the Arbitration & Conciliation Act. As held in the decision of South East Marine Engineering and Construction Limited, referred above, where two views are possible, the court cannot interfere in the plausible view taken by the arbitrator, supported by reasoning. In the present case while holding that the advertisement is not in violation of MOU dated 18/3/2015, learned Arbitrator has interpreted the words and the clauses of the MOU and then interpreted the same. As held in the decision in the Project Director, National Highways Authority Authority of India referred above, in which the decision in MMTC Limited has been referred the court cannot undertake independent assessment of the merits of the award.
22. Contention of the petitioner is mainly that in the previous draft MOU, words like, 'In technical collaboration with NIFT' were used and they are specifically deleted in the final MOU in view of minutes 24 CT 1390_Com.A.P.83-2020_Judgment.doc of meeting of the Board and this itself show that the service provided by the NIFT to MSFD is only for training the faculty in respect of 7 courses and not beyond that and advertisement given by the claimant in the newspaper would mislead the students and is against the MOU. These contentions are considered by the learned Arbitrator and he has found that in the preamble of the MOU itself it is mentioned as academic support of NIFT and there is no fault in giving the advertisement as stated.
23. In the decision Khardah Company Limited v. Raymon & Company (India) Private Limited, referred above, contract has been considered in which it is stated that in construing the contract it would be legitimate to take into account surrounding circumstances. Contention of the petitioner that the previous draft MOU and the minutes of the meeting etc which also is necessary to be taken into consideration are not considered by the learned Arbitrator is not acceptable. Admittedly in the advertisement given the word like in technical collaboration with NIFT etc are not used and the word used do not so mislead as contended. Therefore, decisions regarding interpretation of the terms of the contract as appearing in Khardah Company Limited case and ONGC v. Saw Pipes referred by the petitioner do not help the petitioner in this case.
25CT 1390_Com.A.P.83-2020_Judgment.doc
24. On looking to the award, finding of the learned Arbitrator that the advertisement given by the claimant in the newspaper is not against the clause 1.4.1 and 1.4.2 of the MOU is a clear possible view and the court under Section 34 cannot interfere with the same. It is also contended by the petitioner that the learned Arbitrator has not appreciated the evidence that has been produced as the claimant had included even Textile design in the advertisement which is not the course, which is covered by MOU. In this connection by relying on the decision in Ssangyong Engineering and Construction Company Limited, referred above, petitioner contends that the finding of the learned Arbitrator is based on no evidence or by ignoring vital evidence in arriving at decision. This contention also cannot be accepted as in the advertisement itself '*' mark appearing would show that only the course with '*' mark are 'with academic support of NIFT'. Therefore, it cannot be said that the learned Arbitrator has ignored the vital evidence which is appearing in the advertisement as contended. Contention that the learned Arbitrator without applying the mind has passed the award and thereby violated fundamental policy of Indian law as held in the decision in ONGC Limited v. Western Geco International Limited, is also not acceptable. The learned Arbitrator has considered the advertisement given by the claimant and 26 CT 1390_Com.A.P.83-2020_Judgment.doc then the terms of the MOU and then found that these advertisements are not against clauses of MOU. Therefore, finding of the learned Arbitrator that advertisement is not against the MOU cannot be interfered and is a reasonable and possible view and cannot be said to be perverse or is patently illegal or is against fundamental policy of Indian law or is not in terms of the agreement.
25. Learned Arbitrator has found that the advertisement given by the NIFT in a hurry by stating that advertisement given is in violation of the agreement and that the claimant has used the NIFT's logo and name of NIFT without permission and the agreement entered into for service of training of faculty is being withdrawn is illegal and not in terms of clause 1.4.2 of the MOU. When the finding of the learned Arbitrator is that the advertisement given by the claimant is not in violation of clause 1.4.1, it necessarily follows that the withdrawing of the service of providing training to faculty for development of the course curriculum by the NIFT is illegal. The NIFT has subsequently sent notice stating that it has terminated the agreement not only for this advertisement, but also for not paying service tax of Rs.2,47,000/- which is also not accepted by the learned Arbitrator. The learned Arbitrator has noted that in the newspaper publication given in public interest by the NIFT there is no reference to non payment of service tax 27 CT 1390_Com.A.P.83-2020_Judgment.doc as a cause for termination of the agreement. As such, learned Arbitrator has found that this contention taken is not acceptable and is afterthought. By considering this, the learned Arbitrator has found that the termination of MOU dated 18/3/2015 by the present petitioner is unlawful.
26. On looking to the entire award, contentions raised by the parties and also the terms of MOU and the subsequent event and even the allegation of selective discrimination followed by NIFT against the claimant, it is found that finding of the learned Arbitrator is just and proper and the termination of the MOU is not valid. Therefore, this finding also cannot be interfered under limited scope and power of this court under Section 34 of the Arbitration & Conciliation Act.
27. After holding that the termination is not valid, learned Arbitrator considered the contention of non payment of service tax amount of Rs.2,47,000/- and noted that as per Government circular payment of service tax is exempted and MSFD is not liable to pay the same and the claimant was justified in not making payment of the same. NIFT appear to be contending that when notice was given and even at the time of MOU claimant had not brought to the notice of NIFT about exemption for service tax and there is clear provision for payment of the agreed amount of Rs.25 lakhs with applicable service tax. Learned Arbitrator by 28 CT 1390_Com.A.P.83-2020_Judgment.doc considering the contention and also Government circular has come to the conclusion that the claimant is not in breach of essential terms of MOU dated 18/3/2015 by not paying Rs.2,47,000/- towards service tax. This finding also is a clear possible view and cannot be interfered under Section 34 of the Arbitration & Conciliation Act. When the rules and regulations, exempt certain tax liability, party cannot be a compelled to pay the same. Present petitioner who is also stated to have been constituted by the Act of Parliament is expected to be aware of such circular exempting the service tax in such transaction of providing service of education. As such, finding of the learned Arbitrator in rejecting counter claim regarding service tax of Rs.2,47,000/-, is based on facts and possible view and cannot be interfered.
28. Learned Arbitrator has noted in terms of reference No No.7, that, even after terminating the MOU, claimant has unauthorizedly used the name and logo of the respondent till 2018 on its website as contended by the present petitioner. However the claim for damages and compensation for unauthorized use of its name and logo on account of damage to its image and reputation as premiere institutes and design institutes in India are not allowed and the learned Arbitrator has found that no such loss of image or reputation or any damages suffered by NIFT are not 29 CT 1390_Com.A.P.83-2020_Judgment.doc established. Learned Arbitrator has noted that though MOU was entered on 18/3/2015, present petitioner- NIFT has not provided the services as agreed in the MOU at any time and though name and logo of the NIFT was used till February 2018 in the website of the claimant, the service as agreed in the MOU were not provided by the present petitioner. The learned Arbitrator has also noted that no such materials are placed to show that because of use of logo and name of NIFT, NIFT has suffered any loss of reputation or any loss which entitles it to compensation. Learned Arbitrator has also noted that no documents are produced to show that by showing name and logo of NIFT in their website till July 2018, claimant-MSFD has taken benefit by getting more admission to its course etc. By holding so, learned Arbitrator has rejected the claim for damages of Rs.40 lakhs and also another damage of Rs.10 lakhs as prayed by the present petitioner before the learned Arbitrator. When the loss suffered is not established and there is no any agreement between the parties providing for payment of compensation. finding of the learned Arbitrator in rejecting the counter claim for damages claimed by the present petitioner cannot be said to be perverse or patent illegality and not a possible view. On what basis the damages are calculated are also not stated before the learned Arbitrator. What is the loss suffered by NIFT 30 CT 1390_Com.A.P.83-2020_Judgment.doc is also not stated. Moreover, the termination of MOU itself is held unlawful. As such, party who is at fault would not be entitle for compensation for the damages even without proof of such damages or loss being suffered. Therefore the finding of the learned Arbitrator cannot be interfered.
29. NIFT had also prayed direction to pay Rs.5 lakhs which is the second installment of the amount out of total amount of Rs.25 lakhs agreed to be paid. This was also rejected by the learned Arbitrator by looking to the conduct of the present petitioner that after entering into the MOU the present petitioner has not provided the service to the claimant and the amount is paid for providing such service. When services are not provided the amount cannot be claimed and even termination itself is illegal. Hence, learned Arbitrator has held that the claimant is not entitle for this amount. On looking to the facts of the case as termination is rightly held to be unlawful, present petitioner-NIFT cannot claim balance amount, even without performing its part of contract. Therefore, finding of the learned Arbitrator in rejecting the claim for second installment amount of Rs.5 lakhs is also well founded.
30. Since present petitioner has illegally terminated the MOU dated 18/3/2015 and clause 1.4.2 is not violated by the claimant, termination of the MOU by giving public advertisement is found to be not legal.
31CT 1390_Com.A.P.83-2020_Judgment.doc Since claimant had paid Rs.20 lakhs as first installment amount, learned Arbitrator has held that the claimant is entitle for return of the said amount with interest. When the termination of the MOU is held to be unlawful and admittedly the present petitioner has not provided service of faculty training for the accepted course as mentioned in the MOU for the period of 3 years as agreed, claimant is entitle for return of the said amount which was illegally impounded even during the operation of interim order passed in arbitration application filed under Section 9 of the Arbitration & Conciliation Act. As termination of MOU is held to be illegal, claimant is rightly entitle for return of this amount of Rs.20 lakhs. Therefore, finding of the learned Arbitrator cannot be said to be against public policy or is patently illegal.
31. Learned Arbitrator has awarded interest of 12% per annum with direction to the present petitioner to pay the award amount within 3 months. The interest awarded is also seriously challenged by the present petitioner. However, interest of 12% per annum appeared is very reasonable as the claimant was not getting the service from the present petitioner and had paid the amount and the present petitioner has illegally terminated the MOU by giving paper publication and caused loss to the claimant. Therefore, interest of 12% awarded by the learned Arbitrator cannot be interfered 32 CT 1390_Com.A.P.83-2020_Judgment.doc and it is within the discretion of the learned Arbitrator. As per Section 31(7)(a) of the Arbitration & Conciliation Act, when the agreement do not bar awarding of interest, Arbitrator is having power to award reasonable interest on the awarded amount for the period specified in the award. Therefore, Arbitrator is well within the power to award interest and in this case, interest of 12% awarded is reasonable and cannot be interfered. The learned Arbitrator has held that, if the payment is not made within 3 months then the claimant is entitle for interest of 24% per annum as prayed. This finding is also cannot be said to be perverse. Since finding of the learned Arbitrator cannot be interfered even if the court has a different view other than the view of the learned Arbitrator, unless view taken by the learned Arbitrator is not even a possible view, this direction of the learned Arbitrator to pay interest of 24% per annum on the failure of the petitioner to pay the awarded amount within 3 months also cannot be interfered.
32. On considering all these aspects, award of the learned Arbitrator is well founded and the present petitioner has failed to establish that the award is against fundamental policy of Indian law or is patently illegal or is perverse as contended. Power of the court to interfere in the award under Section 34 of the Arbitration & Conciliation Act is very limited and no such valid grounds for interference are made out.
33CT 1390_Com.A.P.83-2020_Judgment.doc Hence, Award passed by the learned Arbitrator cannot be interfered by this court under Section 34 of the Act. Accordingly point No.1 is answered in the negative.
33. POINT No.2 : For the discussion made on above point, present Arbitration Petition is to be dismissed. In this case, as per the interim order passed by the court, present petitioner has deposited Rs.10,00,000/- in Court. Since claimant who is respondent No.1 in this case is entitle to receive the amount under the award, amount in deposit can be paid to the present respondent No.1 towards part satisfaction of the awarded amount, after appeal period is over. Accordingly, following order is passed:
ORDER This petition filed under Section 34 of the Arbitration & Conciliation Act by the petitioner praying to set aside the award passed by the learned Arbitrator in AC No.174/2018 dated 7/9/2020 is dismissed.
The amount in deposit in this case is ordered to be paid to the present respondent No.1 towards part satisfaction of the award amount, after appeal period is over.
[Dictated to the Judgment Writer; transcript thereof corrected, signed and then pronounced by me, in the Open Court on this the 2nd day of February 2023] [Ravindra Hegde] LXXXIII Additional City Civil Judge.
BENGALURU.34
CT 1390_Com.A.P.83-2020_Judgment.doc ***