Bangalore District Court
Slk Software Services Pvt. Ltd vs Universal Test Solutions Llp on 30 October, 2021
IN THE COURT OF THE LXXXIII ADDITIONAL CITY CIVIL
AND SESSIONS JUDGE AT BENGALURU CITY [CCH84]
:Present:
Ravindra Hegde,
M.A., LL.M.,
LXXXIII Addl. City Civil & Sessions Judge,
Bengaluru
Dated on this the 30th day of October 2021
COM.A.P.No.01/2020
Petitioner SLK Software Services Pvt. Ltd.,
A company registered under the
Companies ct, 1956
having its registered office at:
SLK 1, 40/A, KHB Industrial Area,
Yelahanka
Bengaluru560064.
Represented by its Authorized
Signatory Mr. B.R.Jayakumar.
(By Sri.R.K, Advocate)
// versus //
Respondents 1. Universal Test Solutions LLP
A limited liability partnership firm
registered under the Limited
Liability Partnership Act, 2008
having its office at:
No.303, Anurag Business Centre,
V.T.Patil Marg, Chembur,
Mumbai400071.
Maharashtra.
2. Sri. Prakash Kumar,
2
CT 1390_Com.A.P.012020_Judgment .doc
District Judge (Retd)
Sole Arbitrator,
C/o Bengaluru Arbitration &
Conciliation Centre,
3rd Floor, East Wing,
Khanija Bhavan,
Race Course Road,
Bengaluru560001.
(R1By Sri.J.H.S.P, Advocate
R2 Learned Arbitrator)
Date of Institution of the : 02/01/2020
suit
Nature of the suit : Arbitration Suit
Date of commencement of :
recording of the evidence
Date on which the : 30/10/2021
Judgment was pronounced.
: Year Month/ Day/s
Total duration /s s
01 09 28
JUDGMENT
This petition U/S.34 of the Arbitration & Conciliation Act is filed by the petitioner praying to set aside the award in AC No.92/2018 dated 3/09/2019 passed by the learned Arbitrator - respondent No.2.
2. The petitioner was the respondent before the learned Arbitrator and 1st respondent was the claimant before the learned Arbitrator.
3CT 1390_Com.A.P.012020_Judgment .doc
3. The brief facts of the case are as under:
The petitioner is a private Liminted company engaged in the development of technical and business software consultancy and has garnered tremendous goodwill in the market. The respondent is a limited liability partnership and is engaged in the business of software development. In the usual course of business, the petitioner proposed to use a third party software to automate the testing of business and IT processes easily and swiftly. The respondent demonstrated a software by name "Test Magic" and indicated various advantages to the petitioner through the use of the software to conduct business. By relying on the express representations of the respondent and entered into a business alliance agreement (BAA) dated 10/10/2014 with the respondent as per which the respondent agreed to perpetually license the software exclusively to the petitioner for providing testing services to the petitioner's clients for a term of two years with renewal clause for further period of two years at once. The agreement also provides that the services to be rendered by the respondent were all inclusive and the petitioner was required to ensure consistent and constant services, including updates and upgrades to the software. The petitioner was to pay consideration of 300,000 USD to the respondent for the first year and 800,000 USD for the second year. The petitioner made payments to the respondent despite being unable to use the software and despite not receiving any support from the respondent for 4 CT 1390_Com.A.P.012020_Judgment .doc servicing the software against the of BAA. The parties amended the terms of the BAA on 12/10/2015 and respondent agreed to adhere to specific performance parameters of the software failing which penalties would be imposed by the petitioner. Internal restructuring by respondent in April 2016 resulted in the exit of key employees and further jeoparadised the large sums of monies invested in the software by the petitioner and therefore the petitioner was constrained to stop using the software. The failure of the respondent to adequately address defects in the software restricted the petitioner from making profitable use of the software and the software remained at the testing stage and was never used commercially by the petitioner. Therefore, the petitioner was not liable to pay further amounts to the respondent No.1 despite its demand. As the dispute has arisen, the respondent got issued legal notice on 30/12/2016 demanding amount towards alleged dues. The petitioner issued reply denying any liability to make further payments and thereafter the petitioner again got issued legal notice demanding refund of all sums paid and invoking arbitration clause which has been raised by the respondent. By reply dated 25/4/2017, petitioner proposed name of Arbitrator. Thereafter the respondent filed CMP before the Hon'ble High Court and 2nd respondent is appointed as learned Arbitrator. In the arbitration proceedings in AC No.92/2018 before the 2nd respondent, the respondent made a claim inter alia for Rs.6,12,74,995/ along with interest and the petitioner filed 5 CT 1390_Com.A.P.012020_Judgment .doc objection and also made a counter claim for Rs.1,97,75,669/. Before the learned Arbitrator issues were framed and after recording evidence the learned Arbitrator on 30/9/2019 passed award partly allowing the claims of the respondent and rejecting the counter claims made by the petitioner. Being aggrieved by this award the petitioner has filed this petition under Section 34 of the Arbitration & Conciliation Act and prayed to set aside the award on various grounds.
4. The petitioner has contended that the award is contrary to the letter and spirit of Arbitration and Conciliation Act, substantive law applicable to the dispute, the terms of the BAA and amendment agreement and also evidence on record. It is stated that the award is patently illegal and opposed to public policy and is ultra vires the terms of the reference. It is stated that the award failed to appreciate several key documents marked in evidence by the petitioner and wrongly interprets certain other documents. It is stated that the award is contrary to basic notions, morality and justice and is vitiated due to patent illegality. It is stated that award wrongly and without sufficient reason takes into consideration the overall annual revenues earned by SLK America Inc, an entity which was not a party to the arbitral proceedings and assumes it to be the revenues earned by the petitioner. It is stated that the revenue earned by SLK America Inc did not form a part of the dispute submitted to 6 CT 1390_Com.A.P.012020_Judgment .doc the tribunal and therefore finding given is beyond the scope of submission to arbitration. It is also stated that the award incorrectly proceeds on the untenable assumption that software was delivered as promised and that all revenues earned by SLK America Inc are attributable to the use of software and such finding is contrary to the documents on record. It is stated that the award failed to appreciate that the burden of proof lies on the respondent to prove that the petitioner earned profits from the software, but the respondent has sought the relief on over all revenue earned by the petitioner as well as SLK America Inc, a non party to the arbitral proceedings in order to unjustly gain at the hands of the petitioner and SLK America Inc. It is stated that the award fails to appreciate that the respondent accepted payments of the minimum guarantee amount for the first year of the BAA as well as for the first quarter of the second year of the BAA without demanding that the petitioner disclose revenues earned from the software. It is also stated that the contention of the petitioner that it has not generated income out of the software is not properly considered by the tribunal. It is also stated that the petitioner has relied on monthly updates issued by the respondent No.1 through email which clearly show the innumerable defects in the software, the date on which the defect was reported and the date on which the defect was rectified by the respondent. The facts and figures therein indicate that the respondent required several weeks to rectify defects in the software. As against the condition to 7 CT 1390_Com.A.P.012020_Judgment .doc rectify the defects between 24 hours and 96 hours, depending on the severity of the defect, learned arbitrator has held that the defect is rectified within the reasonable time though the delay is of 15 to 30 days. It is stated that the learned Arbitrator relied on Ex.R.2 to hold that software was commercially used by the petitioner and its clients, but the witness have elaborated on the nature of the use of the software with its clients and have stated on multiple occasions that the software was merely being tested by way of conducting proof of concepts before commercial use can begin. It is also stated that the observation that petitioner is not willing to share information about the revenue earned by it by use of software licensed to it by claimant is contrary to law and issues framed by the tribunal wherein the burden was caused on the respondent. It is stated that Ex.P.44 is the balance sheet of the petitioner and discloses the over all revenues earned by the petitioner and the finding that revenue earned is solely attributable to the software is erroneous. It is stated that very basis of calculation of the revenue of the petitioner is unfounded. It is stated that the learnd Arbitrator has wrongly observed that the petitioner failed to terminate the BAA is indicative of commercial exploitation of the software and it is against the settled principle of law that a party which is in breach of an agreement cannot take advantage of non termination of such agreement by the other party. It is stated that as per the agreement the respondent was required to secure presence of 8 CT 1390_Com.A.P.012020_Judgment .doc Brajesh Kumar and violation of this condition is not considered by the tribunal. It is also held that the learned Arbitrator has incorrectly held that the respondent No.1 is the rightful owner of the software. It is also stated that the learned Arbitrator without sufficient reasons awarded cost to the respondent, which is untenable. It is stated that the learned Arbitrator has unjustly rejected the counter claim of the petitioner. It is stated that the finding with regard to bank guarantee is also liable to be set aside. It is stated that the interest awarded by the learned Arbitrator is excessive and unreasonable and contrary to law. It is also stated that the award has disregarded the defence raised by the petitioner and the various documents produced. On all these grounds the petitioner has prayed to set aside the award passed by the learned Arbitrator.
5. The respondent who was the claimant before the learned Arbitrator has appeared and filed statement of objection and stating that the petition is misconceived, opposed to law and facts and against Section 34 of the Arbitration & Conciliation Act. It is stated that no grounds are made out for interference with the award passed by the learned Arbitrator. It is also stated that the petition under Section 34 of the Arbitration & Conciliation Act is not maintainable as petitioner has not complied with the order passed by the court within the time specified. It is stated that the learned Arbitrator has considered the pleadings, 9 CT 1390_Com.A.P.012020_Judgment .doc documents and the evidence on record and has justly arrived at the conclusion. It is stated that entire challenge is based on either reagitating the same contentions or calling upon the court to reappreciate the evidence which is not permissible. The respondent No.1 has stated that the gist of facts of the case looked to initiation of arbitration and has referred various clauses in the BAA entered between the parties. It is stated that the scope of interference by the court is very limited and grounds urged by the petitioner did not come under Section 34 of the Arbitration & Conciliation Act. It is stated that no relevant ground for interference is made out by the petitioner. The respondent has also given reply to the contention of the petitioner taken in different paragraphs of the petition. The respondent has stated that the software Test Magic developed by the respondent was a fully functional and ready to be commercially used and the petitioner had commenced testing of the product since March 2014 and various proof of concepts were carried out at various facilities and only thereafter the BAA was signed. It is stated that no where did the BAA state that the employees of the respondent will not change. Therefore, the assertion that the exit of key employees of the respondent jeoparadised money invested by the petitioner was not acceptable. It is stated that the award has been passed after affording the parties adequate opportunity to place on record their respective evidence and it is stated that the award has been passed within the frame work of the agreement between the 10 CT 1390_Com.A.P.012020_Judgment .doc parties and the findings of the arbitrator is not opposed to the public policy of India. It is also stated that the learned Arbitrator has considered each of the documents relied on by the parties and the contrary contention of the petitioner are illegal, false and baseless. It is stated that the evidence and the documents substantiate the facts that the petitioner has commercially exploited the software "Test Magic" in North America through affiliates and subsidiaries and the business was carried out by th petitioner's subsidiary SLK America Inc and the annual revenue from the use of the said software was collected by SLK America Inc in the territory of the North America. It is also stated that the learned Arbitrator ought to have taken the Annual Revenues generated, but has only taken the gross profit earned which puts the respondent in a disadvantageous position. It is stated that the petitioner is re agitating and seeking reappreciation of facts which is not permissible under Section 34 of the Arbitration & Conciliation Act. It is stated that the contention that the respondent ought to have secured presence of Brajesh Kumar is not acceptable. It is stated that the contract is between two entities and not dependent on Brajesh. It is stated that all the ground urged by the petitioner is already been considered and dealt with by the learned Arbitrator while passing the award. It is stated that the learned Arbitrator after appreciating documents, evidence has rightly arrived at the conclusion as stated in the award and there is no any error in the reasons given by the learned Arbitrator and therefore, 11 CT 1390_Com.A.P.012020_Judgment .doc award does not require any interference by this court. On all these grounds the respondent has prayed to dismiss the petition.
6. Heard both the counsels. Both the counseld have filed Written arguments also. Perused the records.
7. Now the points that arise for consideration of this court are:
1) Whether the claimant has made out any grounds to set aside award passed by the learned Arbitrator in AC No.92/2018 under Section 34 of the Arbitration & Conciliation Act?
2) What order?
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 : The claimant who is the respondent No.1 in the present petition has initiated arbitration. After giving notice claimant approached the Hon'ble High Court with CMP and as per the order of Hon'ble High Court, 2 nd respondent was appointed as Arbitrator to decide the dispute between the parties in relation to Business alliance agreement entered between them in respect of software developed by the claimant titled as "Test Magic". The business alliance agreement was entered into on 10/10/2014 as per Ex.P.3 between SLK Software Services Private Limited that is the 12 CT 1390_Com.A.P.012020_Judgment .doc respondent No.1 and Universal Test Solutions LLP that is claimant. The respondent is having a subsidiary in North America by name SLK America Inc. For use of the said software 'Test Magic' in North America, the claimant issued license to the respondent as per this Business alliance agreement and respondent was required to make payment of consideration amount as appearing in clause 4.1 of the agreement. Subsequently on 12/10/2015 an amendment agreement appears to have been entered between the parties as per Ex.P.4, in which several performance parameters are fixed and several clauses are added imposing penalty for the lapses on the part of claimant. The claimant contended that this amendment agreement was prepared by the respondent on its terms and it is one sided. Clause 4.1 of the agreement ment provides that the claimant is entitle for 10% of the annual revenue earned by the respondent by exclusive use of the software for testing as a service in the territory of North America with minimum guarantee amount of 300,000 USD for the first year and 800,000 USD for the second year. Since from second quarter of the second year, minimum guarantee amount is also not paid, claimant sent notice which was replied by the respondent and then respondent sent a notice highlighting several lapses in compliance with the performance parameters and not providing service, updates etc and also violating terms of the agreement by not keeping Brijesh Kumar available as per the agreement and expressed its intention to initiate arbitration. The respondent also 13 CT 1390_Com.A.P.012020_Judgment .doc claimed return of the amount which is paid by stating that the software is not working and it could not use it commercially and also claimed amount of more than 2 ½ corres as expenses incurred by the respondent. For this notice claimant has replied. Thereafter, claimant issued notice for initiating arbitration and approached the Hon'ble High Court and the 2nd respondent is appointed as Arbitrator to decide the dispute. The learned Arbitrator after considering the claim petition filed and the objection filed by the respondent along with the counter claim and considering the evidence lead by both the parties, has passed the impugned award and directed the respondent to pay 7,92,369 USD to the claimant with interest @18% per annum from 30/12/2016 till date of suit and then to pay future interest @9% per annum. Being aggrieved by this award, respondent has filed this petition challenging entire award. The claimant who is the respondent in this case has filed statement of objection. The respondent has challenged entire award and contended that the award is totally erroneous and is liable to be set aside.
10. The jurisdiction of the court to set aside an arbitral award is limited to the grounds set out in Section 34 of the Arbitration & Conciliation Act 1996. Even if a 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. Grounds on which award of learned Arbitrator can be set 14 CT 1390_Com.A.P.012020_Judgment .doc aside by court is clearly mentioned in Section 34(2) and 34(2A)of the Arbitration & Conciliation Act. Since any of the grounds mentioned in Section 34(2)(a) and 34(2)(b)(i) of the Act are not urged, challenge to the present award of the Arbitral Tribunal would be under Section 34(2)(b)(ii) and 34(2A)of the Act. Under these provissions, Award could be set aside if it is against public policy of India or is patently illegal. It is well established principle that the court sitting U/S.34 of the Act is not supposed to go for reappreciation of evidence or impose its view as against the view of learned 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. In the presence of these basic principles, grounds urged by the plaintiff and the award of the learned Arbitral Tribunal are to be looked into.
11. Before the learned Arbitrator evidence was led by the parties and documents were produced. The admitted facts show that Business alliance agreement between the claimant and the respondent is entered on 10/10/2014 for a period of two years with clause for automatic renewal. As per clause 4.1, respondent have to pay consideration amount. Admittedly for the first year, minimum guarantee amount of 300,000 USD is paid by the respondent. But according to the claimant 10% revenue calculation is not made and details are not given. In the second year 300,000 USD is paid by the respondent and in the minimum guarantee amount, 500,000 USD is still pending. Apart from this 10% revenue 15 CT 1390_Com.A.P.012020_Judgment .doc calculation is also not made and the claimant has claimed this amount in the claim petition filed before the learned Arbitrator. Respondent has contended about several lapses on the part of the claimant including not attending the services and not resolving critical issues that are raised and also not complying with the terms of the agreement. The agreement provides in clause 3 for training to be provided. As per clause 3.1 appropriate training is to be given by the claimant to the respondent in the office of the respondent at Bengaluru and Pune and the cost is to be borne by the respondent. If for rectifying any defect in the software, claimant have to travel to any of the office of the respondent, cost of such travel is to be borne by the claimant. Therefore at the expense of the respondent, training and EOC is to be conducted by the claimant and for rectifying the defect by visiting office of respondent, claimant have to bear expenses. According to the respondent there are several lapses and inspite of request to attend the problems and issues that are faced in using the software, they are not attended by the respondent. The respondent has relied on the clause in the amended agreement in Ex.P.4 wherein provision is made for reduction of certain percentage of the consideration amount payable to the claimant as penalty. The learned Arbitrator has negatived the contention of the respondent that claimant has not attended the issues, not attended problems and not given the service updates etc to the software and that respondent has suffered loss due to this. Byway of counter 16 CT 1390_Com.A.P.012020_Judgment .doc claim, respondent had claimed refund of entire amount that has been paid to the claimant amounting to Rs.1,97,75,669/ with interest and also claimed Rs.2,58,88,960/ as the loss incurred by the respondent due to the failure on the part of the claimant to comply with its obligation under Ex.P.3. These counter claims are rejected by the learned Arbitrator.
12. The learned counsel for the Respondent ( Petitioner in this petition) has vehemently argued that the award suffers from patent illegality and is liable to be set aside under Section 34(2A) of the Arbitration & Conciliation Act as it ignore several material terms of BAA and the amendment produced as Ex.P.3 and Ex.P.4. It is argued that the claimant has committed breach in complying with service obligation under the agreement and as such respondent was not liable to pay any amount to the claimant. It is argued that though clause 2.2 of the agreement obligate the claimant to adhere to the performance prameters, learned Arbitrator has not considered requirement of providing training and support to the respondent for the use of the software for conducting proof of concepts. It is argued that there are reciprocal obligations between the parties to be performed, but failure on the part of the claimant to perform such reciprocal obligation is not taken note of by the learned Arbitrator. The learned counsel has argued that as per the agreement, respondent is liable to pay 10% of the annual revenue generated from the commercial use of the software 17 CT 1390_Com.A.P.012020_Judgment .doc and not 10% of over all annual revenue. It is argued that learned Arbitrator has considered over all gross profit as the annual revenue and gave 10% of the same which is patent illegality. It is also argued that the amended agreement clearly stipulate 25% penalty if Brijesh Kumar was un available. However, the learned Arbitrator has held that the availability of Brijesh Kumar was not an agreed term between the parties. It is also argued that the learned Arbitrator has failed to appreciate key evidence, deposition and averments in the pleading, which are highlighted in the written arguments submitted. It is argued that, Ex.R.2 and Ex.R.9 Emails showing inordinate delay in servicing and upgrading the software are not considered by the learned Arbitrator and the award is also silent on the deposition of PW.1 who has admitted that the claimant has failed to achieve performance parameters set out in the root map in the agreement. It is also argued that the cross examination of PW.1 clearly show that the claimant has not sought details of any annual revenue generated from the commercial use of the software. It is also argued that it was the consistent contention of the respondent that it did not commercially exploit the software at any point of time and as such generating revenue from the same did not arise. However, the learned Arbitrator has not noted this contention taken in the objection. It is also argued that the impugned award is without basis and is full of contradictions and error apparent on the face of the award. It is argued that the learned Arbitrator has erroneously 18 CT 1390_Com.A.P.012020_Judgment .doc observed that delay in resolution of defects by the claimant is of 15 to 30 days and it cannot be considered as abnormal, whereas agreement expressly provides an outer limit of 96 hours for resolution of defects at the maximum. It is also argued that the learned Arbitrator has wrongly held that the respondent is not willing to share information about the revenues earned and has not considered the order passed by the learned Arbitrator on an interim application filed seeking records from the respondent. It is argued that the issue No.2 framed is casting the burden on the claimant to prove that the respondent is liable to furnish details of the revenue generated and without proof of such issue, learned Arbitrator has held that the respondent has not furnished details which is patently illegal. It is also argued that in the award it is mentioned that the respondent's customers in North America have used the software and the revenues earned by the respondent in North America are to be considered for the purposes of the dispute and this finding is perverse as it is not only based on the assumption that revenues generated by SLK America are revenues generated by the respondent and also on the assumption that all business conducted by SLK America during the years 2014, 2015 and 2016 are solely attributable to the software. It is argued that the answers given by the respondent's witness to the question are not properly considered. It is also argued that the learned Arbitrator has erroneously held that the software belongs to the claimant and certain trademark applications filed by the 19 CT 1390_Com.A.P.012020_Judgment .doc claimant though pending and there is no copyright registration. It is also argued that the award deals with the issue outside the scope of its reference and the findings are without jurisdiction. It is argued that SLK America Inc is a group company of the respondent, but it is a separate entity and is independent of the respondent and there is no privity of contract between the SLK America Inc and the claimant, still annual revenues generated by SLK America Inc is considered as the annual revenues of the respondent. It is also argued that the cost awarded to the claimant are unreasonable and in violation of Section 31A of the Act. It is argued that the claimant has claimed cost of Rs.16,83,451/ and has claimed even air ticket for more than Rs.5 lakhs, though his presence was not required on every date of arbitration proceedings and this award of exorbitant cost is also patently illegal and is contrary to law. The arguments is also addressed regarding non stamping of the arbitration award.
13. The learned counsel for the claimant who is the respondent in the present petition has argued that the respondent has challenged the award on the ground that it is patently illegal, however this contention cannot be accepted. The learned counsel has argued that issue No.1 and 2 framed by the learned Arbitrator covers the aspects of claimant's entitlement and respondent's obligation under the agreement to produce details of annual revenue earned in territory of 20 CT 1390_Com.A.P.012020_Judgment .doc North America. The learned counsel has referred to various clauses in the agreement and also relied on the cross examination of RW.1 and RW.2 wherein the witnesses have admitted that they are having number of customers in North America and that the financial details of their company can be produced. The learned counsel has argued that the respondent has not produced the relevant documents to decide the consideration which is payable to the claimant and in the absence of such documents, learned Arbitrator has considered the documents produced by the claimant as Ex.P.44 and then passed the award which is proper. The learned counsel has also argeud that the contention of the respondent that the claimant has failed to attend the issue and cleared its obligation and has failed to achieve the parameters fixed in the agreement etc are rightly not accepted by the learned Arbitrator by looking to the evidence placed by the parties. The learned counsel has also argued that the award is passed by considering the evidence and admission of the witnesses and different documents produced by the parties. It is also argued that the contention of respondent that it could generate any revenue from the software is totally wrong and the documents produced which are referred to by the learned Arbitrator show that several clients of the respondent in North America have utilized it. It is also argued that the respondent has made payment of the minimum guarantee amount for the first year and also portion of the amount for the second year which itself show that the 21 CT 1390_Com.A.P.012020_Judgment .doc respondent has used the said software. It is also argued that as agreement was entered into between the two entities, presence of a particular person could not have been insisted by the respondent and as such the learned Arbitrator has rightly considered that the availability of Brijesh Kumar was not express term of the contract. The learned counsel has also argued that the rejection of counter claim by the learned Arbitrator is also proper. Regarding cost, it is argued that Section 31A of the Arbitration & Conciliation Act gives disecrition to Arbitrator to award cost and the cost awarded by the learned Arbitrator is proper. It is also argued that scope of interference by the court under Section 34 is very limited and there are no grounds made out for interference. It is also argued that the award is based on pleading, document and evidence on record and there is no error or irregular in the award. It is also argued that there can be no re appreciation of evidence and it is argued that the respondent has not made out any ground under Section 34 to interfere with the award and hence prayed to dismiss the petition with costs.
14. On looking to the contention of both the parties and the impugned award, parties entering into business alliance agreement as per Ex.P.3 on 10/10/2014 is not in dispute. As per this agreement the claimant has given license for use of Test Magic Software to the respondent to conduct automated testing in North America. The period of the 22 CT 1390_Com.A.P.012020_Judgment .doc agreement is for two years and with renewal clause for further period of two years at once. It also contains clause with regard to payment of consideration and also provides for training to be given by the claimant to the employees of the respondent for use of the said software by the clients of the respondent. One of the contention of the respondent in the present petition is that the learned Arbitrator has considered the income and the financial status of SLK America Inc which is not party to the proceedings. On looking to the documents produced in Ex.P.44, financial statement of the respondent, it is clear that SLK America Inc. is the subsidiary of respondent. The respondent being holding company of the SLK America Inc has shown the financials of SLK America Inc for particular years as appearing in Ex.P.44. It s not the case of respondent that, apart from its subsidiary SLK America Inc, respondent has used software Test Magic in North America by itself. The contention of the respondent that it has incurred expenses of more than 2 ½ crores and has made payment to the claimant for the first year and portion of the second year for using the software in the territory of North America itself, along with the document at Ex.P.44 and even evidence of RW.1 and RW.2, show that the respondent has used the software developed by the claimant in the territory of North America through its subsidiary SLK America Inc.
15. Regarding order passed by considering the revenue of SLK America Inc which is not party to the 23 CT 1390_Com.A.P.012020_Judgment .doc proceedings, learned counsel for the respondent has relied on the decision reported in 2019 SCC Online Bombay 1853 (Bombay Slum Redevelopment Corporation Limited v. Samir Naraim Bhojwani) in which an award was set aside on the ground that Arbitral Tribunal had made finding against the non party to the proceedings. This decision cannot be applied to the present facts as admittedly SLK America Inc is the subsidiary of the respondent. It is not the case of respondent that it is using the software in North America by itself or through its some other agency. It is not the case of the respondent that SLK America Inc is not using the software which was licensed to the respondent by the claimant. Even the evidence of RW1 and RW.2 show that the software is being used by the respondent through SLK America Inc. Therefore, contention that the award is passed against third party or has decided the matter against third party, in the absence of such third party cannot be accepted. The respondent cannot contend that SLK America Inc is the third party as it is the subsidiary of the respondent. Therefore, contention of respondent that in the absence of SLK America Inc, which is a separate entity, Arbitrator should not have considered its income for fixing the amount of consideration to be paid to the claimant cannot be accepted.
16. The next point of objection to the arbitral award by the respondent is about consideration of 10% revenue of SLK America Inc for payment of consideration amount to the 24 CT 1390_Com.A.P.012020_Judgment .doc claimant. Clause 4.1 of Ex.P.3, provides for paymwnt of 10% of the revenue received by the respondent by exclusive use of software in the North America as consideration to the claimant. The minimum guarantee consideration is also provided in the agreement. For the first year minimum guarantee consideration amount is paid by claimant and in the second year only 300,000 USD are paid and 500,000 USD is still due as minimum guarantee consideration. Apart from this, 10% of revenue received is also to be considered as provided in clause 4.1. According to the claimant at the end of each quarter as per clause 4.2 there is to be reconciliation based on the revenue generated at the end of the quarter. Since 10% of the actual revenue earned by the respondent by exclusive use of the software is to be paid to the claimant as consideration amount, it is the respondent who have to show what is the revenue that has been earned by the respondent. However, respondent has not produced such document before the learned Arbitrator. Even to the claimant, documents are not made available for calculation of 10% of the actual revenue received by the respondent by use of the software Test Magic to arrive at a consideration amount that is to be paid in each quarter during the period of coperation of this Business alliance agreement.
17. In the absence of such document being placed or produced by the respondent, claimant produced Ex.P.44 which is the financial statement of the respondent submitted 25 CT 1390_Com.A.P.012020_Judgment .doc before Authorities by the respondent and same is relied for calculation of annual revenue. In Ex.P.44, income of SLK America Inc and its gross profit etc for the year 201415, 201516 and 201617 has been shown. The learned Arbitrator in the absence of any other documents showing the actual revenue earned by the respondent by use of the software in the territory of North America, has considered this financial statement of SLK America Inc to determine the consideration amount that is to be paid to the claimant. In this financial statement of SLK America Inc., income received by the said company which is a subsidiary of respondent and its gross profit and net profit is clearly appearing. This statement is not disputed by the respondent. The learned Arbitrator has considered the income, gross profit and the net profit that is provided and then decided as to what is to be considered as revenue. By holding that gross income cannot be considered as revenue, learned arbitrator held that gross profit is to be considered as revenue and held that total revenue earned by SLK America Inc during this period would be 1,39,23,695 USD and by taking 10% of the same arbitrator has held that 1,392,369 USD would be 10% revenue payable to the claimant. As six lakh USD are already paid by respondent to the claimant, it held that 7,92,369 USD is still due from the respondent to the claimant.
18. This calculation and determination are seriously disputed. It is vehemently contended by the respondent that 26 CT 1390_Com.A.P.012020_Judgment .doc the learned Arbitrator has proceeded on the assumption that entire income derived by SLK America Inc is by use of this software. No doubt the entire gross profit of SLK America Inc has been considered for arriving at the amount as 10% revenue payable as consideration to the claimant. However, the respondent has not produced any document to show that apart from the test Magic software which is being used by the clients of the respondent in North America, SLK America Inc which is subsidiary of the respondent has been marketing any other software or is doing any other business. What are the other business that are carried on by the SLK America Inc, apart from marketing Test Magic software for the use of its clients, is not stated in the evidence of the witnesses for Respondent. No documents are produced by the respondent to show that apart from the Test Magic software licenses which is obtained from the claimant, SLK America Inc also has some other business and also has some other license generating income.
19. When contract provides 10% of the revenue earned from the software to be paid as consideration to the claimant for giving license to use the software, it is the obligation on the respondent to furnish the details of the revenue earned by use of the said software. In the absence of such material being produced, finding of the learned Arbitrator by considering the gross profit of SLK America Inc as the revenue received from the use of the software of 27 CT 1390_Com.A.P.012020_Judgment .doc claimant cannot be found fault with. The respondent has contended that the learned Arbitrator on the assumption that entire income received by the SLK America Inc is by use of this software. But Respondent has not produced any document to show that SLK America Inc has some other business and is using some other software also and is deriving income from its business other than use of Test Magic software. Since the consideration is to be determined on the basis of the revenue earned and what is the revenue earned is known to the respondent, the respondent cannot keep quite and find fault with arbitrator's finding and contend that SLK America Inc has some other income also. In the absence of any material placed by the respondent, consideration of the entire gross profit earned by the SLK America Inc during the particular period as the revenue earned by use of the software provided by the claimant cannot be questioned. If respondent had produced some materials to substantiate its contentions now taken and arbitrator had not considerd those materials, then same would have become valid ground to interfere with the award. As there is no such material placed by the respondent, who is having exclusive possession of such document, the learned Arbitrator has rightly considered the documentary evidence which is available. An application was filed by the claimant seeking production of those documents, which was opposed by the respondent and the same is considered by the learned Arbitrator.
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20. It is argued for the respondent that the issue framed by the learned Arbitrator was as to whether the claimant proves that the respondent is liable to furnish complete details and, without giving finding on that issue and holding that respondent is liable to furnish complete details of the revenue generated, Arbitrator should not have determined 10% of the revenue to which Claimant is entitled. Only after holding that respondent is liable to furnish documents and then after giving opportunity to the Respondent to produce document, Learned arbitrator could have proceeded to determine 10% revenue. Though there is some strength in this argument in view of issue No.2 as framed, respondent itself was knowing that it have to furnish details, for re conciliation of accounts on the basis of revenue earned by use of the software as this was in terms of clause 4.1 of the agreement. Even for the first year when the respondent has made payment of minimum guarantee amount the respondent has not provided the details of the revenue earned for the particular period. Though respondent now contend that it has not earned any revenue from the use of software, as it remained in the testing stage and it could not be commercially exploited, this stand of the Respondent was not communicated to the claimant at appropriate stage while making payment or after completion of the first year. Since agreement itself provides for payment of 10% of the actual revenue received by use of the software and as the respondent 29 CT 1390_Com.A.P.012020_Judgment .doc is using the software, it have to furnish such details. On the basis of issue No.2, respondent cannot contend that only after finding given on Issue No.2, it would be obliged to furnish details or that there was no obligation on the respondent to produce documents for calculation of consideration to be paid to claimant. For calculation of the consideration amount, furnishing of those documents are very necessary, even without there being any arbitration proceedings. Even in the arbitration proceeding, for production of those documents, respondent has raised objection. Even voluntarily respondent has not produced the documents.
21. Under these circumstances the learned Arbitrator by considering Ex.P.44 has taken the gross profit of SLK America Inc as the revenue earned by the respondent by use of the software and has taken 10% of the same as the consideration amount payable to the respondent. This finding on the facts and circumstances of the case cannot be said to be patently illegal and this finding is not against any fundamental policy of Indian law or is not against public policy. In the various decisions of the Hon'ble Supreme Court it is held that interpretation of terms of contract is to be left to the Arbitrator and quantity and quality of evidence is left to the decision of the Arbitrator. When the learned Arbitrator has interpreted the terms of agreement and appreciated the evidence placed in a particular manner, Court u/s 34 cannot interfere with the same.
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22. The next contention of the respondent is that the software was having several issues and those issues were not attended even after same being informed to the claimant. It is also contended that one of the condition in amendment agreement Ex.P.4, about availability of Brijesh Kumar to attend the issues is violated and not complied. For this, 25% of consideration can be imposed as penalty as per Ex.P.4. Respondent contended that these issues are either not considered or evidence regarding the same are not appreciated by the learned arbitrator. On this basis, respondent contended that award is based on no evidence and non appreciation of evidence and is perverse. It is also contended by respondent that though court cannot re appreciate evidence, when award is based on no evidence or non appreciation of evidence court can interfere to set aside the award.
23. On looking to the documents produced, issues and problems in the use of software is stated in many emails. In Ex.P.5 dated 14/10/2015 issues are raised in use of the software and Ex.P.6 dated 15/10/2015 is answer to the same. Similarly in emails found in Ex.P.7, Ex.P.8 and subsequent emails some critical issues faced have been stated and reply has been given. For the first time on 18/5/2016 in Ex.P.16 doubts are raised on continuing the contract with the claimant. Therefore, emails that are produced before the learned Arbitrator by the claimant and 31 CT 1390_Com.A.P.012020_Judgment .doc respondent show that the issues raised are after about one year of the agreement. During 1st year of of agreement, there was no provision for even payment of penalty as amended agreement was entered only on 12/10/2015. It is the case of the respondent that it has not used the software for commercial purpose and it remained in the testing stage and in that stage itself problems are faced. Respondent in its statement of objections has stated that it has incurred loss of Rs.2,58,88,960/ due to the failure on the part of the claimant to comply with the obligation. Admittedly the respondent has paid 600,000 USD to the claimant as minimum guarantee consideration for some part of the agreement period. It is hard to believe that the respondent has paid 600,000 USD to claimant and also incurred expenses of Rs.2,58,88,960/, without even putting the Software for commercial use. If, even after making such an exorbitant investment, respondent could not reap the fruits by putting the software in to commercial use, it would have definitely raised the issue at the earliest. In none of the communications the respondent has stated about non user of the software for commercial purpose.
24. Though respondent has contended that the software was not put into use for commercial purpose and it was only in the testing stage, evidence of RW.1 and RW.2 and also the emails show that several clients of the respondent were using the same and had some issues in use of the same. The 32 CT 1390_Com.A.P.012020_Judgment .doc respondent in none of its email has stated that it has not put the software into commercial use and is not getting any income. What is the amount derived by use of the software is known to the respondent and which information is not shared with the claimant. Under these circumstances, learned Arbitrator relying on Ex.P.44 cannot be questioned. As held in the decision reported in 2006(3) Arb.LR 380 (Delhi)(DB) (Airport Authority of India v. ICM Airport Technics) in para 6, "Some guess work has to be made in the matter of assessing damages". As such in the facts and circumstances of the case, assessment, guess work and assumption made by learned Arbitrator cannot be said to be patently illegal.
25. Learned counsel for the claimant has relied on the decision of the Hon'ble Supreme Court reported in (2006) 11 SCC 181 (Mcdermott International Inc v. Burn Standard Company Limited and others) in which in para 106 the Hon'ble Supreme Court has held that "We do not intend to devolve deep into the matter as it is an accepted position that different formula can be applied in different circumstances and the question as to whether damages should be computed by taking recourse to one or the other formula, having regard to the facts and circumstances of a particular case, would eminently fall within the domain of the arbitrator."
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26. This decision makes it very clear that the Arbitrator is not bound to follow the particular formula in calculating the damages that is to be paid to one of the party. These two decisions makes it clear that the Arbitrator is having power to interpret the contract and has power to apply particular formula for determining the demand and in such exercise he may have to make some guess work for assessing the damages and these things cannot be questioned by the respondent. In the present case the calculation made by the learned Arbitrator on the facts of the case are very reasonable and acceptable. Moreover, though Ex.P.44 show the gross income received by SLK America Inc, learned Arbitrator has considered gross profit as the revenue, by considering that out of income, expenditure may have to be deducted. Therefore, method adopted by learned Arbitrator to calculate 10% of the revenue as appearing in the agreement in the absence of information furnished by the respondent is very reasonable and cannot be said to be patently illegal and cannot be interfered.
27. Though lapses on the part of claimant on the issue of Brijesh Kumar is found in the email exchanged, how absence of Brijesh Kumar has affected the working of the software is not stated and established. In these circumstances, the learned Arbitrator has found that presence of Brijesh Kumar was not material. The emails that are exchanged show some issues in the use of the software in second year. However, even for the first year, 10% revenue 34 CT 1390_Com.A.P.012020_Judgment .doc earned by the respondent from use of the software is not paid to the claimant as consideration. Respondent has not even produced document showing that it has not used the software for commercial use and has not earned any amount through this software during the first year. In the cross examination of witness of the claimant there are some admission stating that they have not asked for revenue details etc. As it was the duty of the respondent to pay consideration amount, respondent was required to give details and give reconciliation statement by calculating the consideration amount payable on the basis of revenue earned by the respondent. Whether it has earned revenue or not is known to respondent itself. Under such circumstances, contention of the respondent that due to several issues and problems and the issues of Brijesh Kumar, respondent was not obliged to pay consideration amount or that it had right to deduct certain amount as penalty as provided in Ex.P.4, cannot be accepted. In none of the communications made by respondent with claimant as seen in emails produced before the court by either party, there is any claim made for deducting certain amount out of consideration amount payable to claimant as penalty in terms of Ex.P.4. Though amendment agreement provides for penalty it must be informed to the claimant about the penalty imposed and the deduction made. What is deducted, for what reason penalty imposed, what is payable is to be stated by the respondent, this information is also not furnished in any of the emails that are produced before the learned Arbitrator 35 CT 1390_Com.A.P.012020_Judgment .doc and even in the objection fled before the learned Arbitrator. In such circumstances the contention of entitlement of respondent to deduct penalty out of the consideration amount appears to be taken only as a defence.
28. One more contention of the Respondent is that the ownership of Software and disputes regarding copy right of Software and the finding of the learned arbitrator that claimant owns the software. The Respondent has entered into agreement with Claimant on 10.10.2014 as per Ex.P.3. In this agreement, respondent accepted ownership of this software with the claimant. Respondent has not produced any documents before learned arbitrator showing that Software licensed by claimant to the respondent do not belong to claimant or that some one else have made claim before respondent in respect of this software or have objected the respondent from using it or that respondent is dragged to some litigation regarding the same. Under these circumstances, finding of the learned arbitrator on issue No.8 holding that claimant has developed this software and is owner of it is based on facts and cannot be said to be patently illegal.
29. Learned counsel for the respondent i.e. petitioner in the present petition has relied on the decision of Hon'ble Supreme Court reported in (2015) 3 SCC 49 (Associate Builders v. Delhi Development Authority) in which learned 36 CT 1390_Com.A.P.012020_Judgment .doc counsel for the respondent has relied on para 29, 31 and 42.2(b). In para 29 it is held;
"It is clear that the juristic principle of a "judicial approach" demands that a decision be fair, reasonable and objective. On the other side, anything arbitrary and whimsical would obviously not be a determination which would either be fair, reasonable or objective."
In para 31 it is held;
"The third juristic principle is that a decision which is perverse or so irrational that no reasonable person would have arrived at the same is important and requires some degree of explanation. It is settled law that where (i) a finding is based on no evidence, or (ii) an Arbitral Tribunal takes into account something irrelevant to the decision which is arrived at; or (iii) ignores vital evidence in arriving at its decision and such award is against the fundamental policy of Indian law and is thereby against public policy of India."
By referring to this observation of Hon'ble Supreme Court, learned counsel has argued that the finding given by learned Arbitrator is beyond the evidence placed before it and by ignoring vital admission of PW.1 and evidence of RW.1 and RW.2. It is also argued that award of the learned Arbitrator, in taking entire gross profit of SLK America Inc as revenue received by respondent by use of the software is not fair, reasonable and objective and therefore the award is against the public policy of India.
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30. The learned counsel has also referred to para 42.2 of this decision, wherein Hon'ble Supreme Court has held that if arbitrator gives no reasons for an award it would be against Section 31(3) of the Arbitration & Conciliation Act and such award is liable to be set aside. On going through the decision and considering the facts of the present case and award passed by the learned Arbitrator, award is with reasons and by considering the evidence placed and decision arrived by the learned Arbitrator cannot be said to be irrational or perverse.
31. The learned counsel has also relied on the decision of Hon'ble Supreme Court reported in 2019 SCC Online SC 1656 ( Dyna Technologies Private Limited v. Crompton Greaves Limited) in which in para 41, 42 and 44 the Hon'ble Supreme Court has considered fate of an award which is unintelligible and held in para 44 that an award which is passed with inadequate reasoning and basing the award on the approval of the respondent cannot be stated to be appropriate and the award is unintelligible and cannot be sustained.
32. Learned counsel has also relied on the decision of Hon'ble High Court reported in 2008 SCC Online Delhi 424 (Hindustan Lever Limited v. Shiv Khullar and another) in which in para 20 the Hon'ble High Court has held that;
"Even in the realm of evidence, no doubt the provisions of the Evidence Act, 1872 are not 38 CT 1390_Com.A.P.012020_Judgment .doc strictly applicable before an arbitral forum, but underlying principles thereof would certainly apply. For example, Section 21 of the Evidence Act, 1872 mandates that an admission made by a party is a relevant fact. The said section underlines a fundamental policy of the law that the best evidence of a party is the admission of the opponent. Suppose an arbitrator ignores an admission made by a party which has not been explained. Such an award would suffers from mandates of the Arbitrator being violated as also on the ground that the conclusions are perverse."
33. By relying on this decision, it is argued that the admissions given by PW.1 in the evidence regarding claimant not seeking financial details of the respondent is not considered by the learned Arbitrator and therefore, learned arbitrator holding that respondent has not furnished documents regarding its financials to ascertain the revenue earned, is perverse. However as discussed above, agreement itself provides for payment of portion of the revenue earned by using the software to claimant as consideration. When that is specifically stated in the agreement, it is obligation of the respondent to furnish such information and make calculation even without being asked by the claimant. Therefore, finding cannot be said to be perverse and this decision cannot be applied.
34. Respondent also contended that as per the agreement, there are reciprocal obligations to be performed by each party and claimant cannot claim consideration amount without performing its part of the obligation. It is argued that 39 CT 1390_Com.A.P.012020_Judgment .doc when both the parties have to perform their part of the obligation. without performing such obligation, performance of obligation from the other party cannot be claimed. In this connection decision of Hon'ble Supreme Court reported in (2001) 1 SCC 534 (Raymond Limited and another v. M.P.Electricity Board and others) in which in para 21 Hon'ble Supreme Court has held that, "For the consumer to honour his/its commitment so undertaken to give a minimum consumption, there should essentially be corresponding supply by the Board at least to that extent, without which the consumption of the agreed minimum is rendered impossible by the very lapses of the Board". In another decision reported in 2012(4) Mh.LJ 614 (Shanti Builders v. CIBA Industrial Workers' Cooperative Housing Society Limited and another) the Hon'ble High Court in para 59 has held that, 'A party who has not carried out its reciprocal promises, could not call upon the other party to perform its part of the reciprocal promises'. It is held that, since society did not perform its reciprocal promises, it could not call upon the contractor to perform his obligations.
35. Regarding the reciprocal obligation to be performed, the learned Arbitrator in the award by considering several emails has clearly held that the claimant has cleared the issues which have arisen in putting the software in use and critical issues are attended by the claimant within few days. By referring to the conditions in the agreement as 40 CT 1390_Com.A.P.012020_Judgment .doc mentioned in the Annexure, it is argued for the Respondent that critical issues were required to be attended within 4 days at the maximum, however, 15 to 20 days time was taken. On the ground of not attending the critical issues, respondent has not taken any action against the claimant and has not even claimed its entitlement to any penalty and has not contended about the penalty in the email sent to the claimant. As such, finding of the learned Arbitrator based on documents stating that claimant has discharged its obligation and has attended the issue cannot be interfered with.
36. The learned counsel has also relied on a decision of Hon'ble Supreme Court reported in (2019) 15 SCC 131 (SsangYong Engineering and Construction Company Limited v. National Highways Authority of India) in which the Hon'ble Supreme Court has considered para 40 of the decision in Associate Builders referred above. Hon'ble Supreme Court in para 42 of Syang Yong Engineering has held that perversity of award is no longer a ground for challenge under public policy of India, but would amount to patent illegality appearing on the face of award. The Hon'ble Supreme Court has held that a finding based on no evidence or which ignores vital evidence in arriving at a decision would be perverse and liable to be set aside on the ground of patent illegality. For the discussion made above in the present case no such patent illegality is made out.
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37. In another decision reported in 2019 SCC Online Delhi 6562 (Delhi Metro Rail Corporation Limited v. Delhi Airport Metro Express Private Limited) Hon'ble High Court has held in para 105 that, if the findings is based on no evidence or the Arbitral Tribunal takes into account something irrelevant to the decision or ignores the vital evidence in arriving at the decision, then award is perverse.
38. Learned counsel for the claimant has relied on the decision in Mcdermott International Inc, referred above, in which in para 112, Hon'ble Supreme Court has held that "The construction of the contract agreement is within the jurisdiction of the arbitrators having regard to the wide nature, scope and ambit of the arbitration agreement and they cannot be said to have misdirected themselves in passing the award by taking into consideration the conduct of the parties. It is also trite that correspondences exchanged by the parties are required to be taken into consideration for the purpose of construction of a contract. Interpretation of a contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law."
This decision makes it very clear that in interpretation of contract it is the Arbitrator who have to determine and construction of contract is within the jurisdiction of the Arbitrator and court would not lightly interfere in such interpretation.
39. Learned counsel for the Claimant has also relied on the finding given in Associate Builders' case referred above, 42 CT 1390_Com.A.P.012020_Judgment .doc in which in para 33 the Hon'ble Supreme Court has held that errors of fact cannot be corrected and in para 43 and 44 it is held that construction of contract is within the jurisdiction of the Arbitrator. It is also held in para 45 that if a clause in the agreement was capable of two interpretations and the view taken by the arbitrator is a possible view, it cannot be said that the arbitrator cannot be travel beyond its jurisdiction.
40. The learned counsel has also relied on a decision in 2019 SCC Online SC 1656 (Dyna Technologies Private Limited v. Crompton Greaves Limited) in which Hon'ble Supreme Court in para 26 and 27 has held as under:
"26. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the Court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equate with a normal appellate jurisdiction.
27. Moreover, umpteen number of judgments of this court have categorically held that the courts should not interfered 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 the award 43 CT 1390_Com.A.P.012020_Judgment .doc is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act."
41. On looking to the entire award, learned Arbitrator has considered all the points raised in this petition and has given finding based on facts and on appreciation of evidence before him. Since the decision of the learned Arbitrator is based on facts and on interpretation of the agreement entered into between the parties and on appreciation of evidence, court under Section 34 of the Arbitration & Conciliation Act cannot interfere with the said finding. Respondent has failed to establish that the learned Arbitrator has wrongly answered the relevant issues on the claim put forwarded by the claimant. The method adopted by the learned Arbitrator in calculating 10% revenue to be paid to the claimant as consideration and the calculation made to arrive at and holding that the claimant is entitle for this 10% amount and holding that the issue with regard to use of software were attended by the claimant and there were no such issue for which the penalty could be imposed on the claimant etc are not shown to be patently illegal and therefore on these points the award of the learned Arbitrator cannot be interfered with.
42. The respondent has also challenged the finding of the learned Arbitrator on counter claim. The learned Arbitrator has rejected the counter claim put forward by the respondent. Respondent on the grounds stated in the 44 CT 1390_Com.A.P.012020_Judgment .doc statement of objection had claimed return of the entire amount that was paid to the claimant amounting to Rs.1,97,75,669/ with interest @18% per annum. The respondent had also claimed Rs.2,58,88,960/ on the ground that due to the failure on the part of the claimant to comply with the obligation under the business alliance agreement, respondent has suffered loss. Since the contention of the respondent about non user of the software for commercial purpose and non entitlement of the claimant to the agreed consideration amount as per clause 4.1 of Ex.P.3 are not established and as claimant is entitle for consideration amount, respondent is naturally not entitle for the counter claim for return of the amount of Rs.1,97,75,669/ as prayed. Similarly since the respondent has failed to prove that it has incurred expenses of Rs.2,58,88,960/ due to failure on the part of the claimant, respondent is not entitle for the said counter claim also. The respondent has not substantiated its contention about incurring expenses of Rs.2,58,88,960/ on this software as contended. How such an amount is arrived is also not stated. On considering the entire contention that were taken by respondent before learned Arbitrator, finding of the learned Arbitrator in rejecting the counter claim cannot be said to be patently illegal or is against public policy.
43. Award is also challenged on the ground that the learned Arbitrator has directed the respondent to pay the cost. It is contended that the claimant has made exorbitant claim towards cost and such cost are not liable to be paid by 45 CT 1390_Com.A.P.012020_Judgment .doc respondent and as such, award with regard to cost is also not valid. However, as per Section 31A of Arbitration & Conciliation Act, learned Arbitrator is having discretion to determine, whether costs are payable by one party to another; amount of such costs and when such costs are to be paid etc. Since there is wide discretion given to learned arbitrator to decide on costs, such discretion exercised by the learned Arbitrator cannot be questioned. Finding of the learned Arbitrator holding that claimant is entitle for costs of the proceedings cannot be challenged under Section 34 of the Arbitration & Conciliation Act and this finding cannot be interfered with. Even as per Rule 2(a) of Section 31A, general rule is that unsuccessful party shall be ordered to pay the costs of successful party. Therefore, this finding of the learned Arbitrator on the cost also cannot be interfered with.
44. On looking to the decisions cited by both the counsels and considering facts and circumstances of the case and on looking to the Award, it is clear that the learned Arbitrator has considered terms of the agreement, properly interpreted the terms and then considered evidence placed before it and by considering the documents, has calculated the consideration amount payable to claimant and then passed award directing respondent to pay 7,92,369 USD with interest. Learned arbitrator has also considered the claim put forward by way of counter claim by the respondent. While passing the award, learned Arbitrator has negatived 46 CT 1390_Com.A.P.012020_Judgment .doc certain claims of the claimant for AMC and compensation and also negatived the counter claim of the respondent. Contention of the respondent that learned Arbitrator has traveled beyond jurisdiction and the contract and that, award is patently illegal and is against the public policy and is against the fundamental policy of Indian Law etc are not established.
45. The respondent has also raised objection for not stamping of the award. However the learned counsel for the claimant has drawn attention of this court to a decision of the Hon'ble Supreme Court reported in (2003) 8 SCC 565 (M.Anasuya Devi and another v. M.Nanik Reddy and others) in which the Hon'ble Supreme Court has held in para 4 that non stamping of the award is not a ground under Section 34 of the Arbitration & Conciliation Act. It is held in this decision that deficiency in stamping or registration are not within the purview of Section 34. Therefore this contention cannot be taken.
46. Looking from any angle, respondent before the learned Arbitrator who has filed the present petition challenging the award under Section 34 of the Arbitration & Conciliation Act has failed to make out any ground to set aside the award of learned Arbitrator. Accordingly point No.1 is answered in the negative.
47. POINT No.2 : For the discussion made on above point, petition is to be dismissed. In this case at the time of 47 CT 1390_Com.A.P.012020_Judgment .doc staying operation of award, Respondent (Petitioner in present Petition) has deposited Rs.4,80,02,855/ and had also given Bank guarantee. Since, petition challenging award is dismissed, it is necessary to order for payment of deposited amount to the Claimant. Accordingly, following order is passed:
ORDER Petition U/S.34 of the Arbitration & Conciliation Act filed by the petitioner is dismissed.
In the circumstances of the case, there is no order as to costs.
Rs.4,80,02,855/ deposited in this case by the respondent (Petitioner in this Petition), which is kept in FD, be released to the Claimant along with accrued interest, 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 30th day of October 2021] [Ravindra Hegde] LXXXIII Additional City Civil Judge.
BENGALURU.
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