Bangalore District Court
Vayam Technologies Ltd vs Ibm India Pvt. Ltd on 26 August, 2021
1 Com.A.S.No.122/2016
IN THE COURT OF THE LXXXVIII ADDL. CITY CIVIL &
SESSIONS JUDGE (EXCLUSIVE COMMERCIAL COURT):
BENGALURU CITY. (CCH-89)
Present: Sri. P.J. SOMASHEKARA, B.A.,LL.M,
LXXXVIII Addl. City Civil & Sessions Judge
Bengaluru City.
Dated this the 26th day of August 2021
Com.A.S.No.122/2016
Petitioner: Vayam Technologies Ltd.,
A company incorporated under
Companies Act, 1956, having its
registered Office at 'Thapar House',
124, Janpath, New Delhi - 110001,
represented through its Vice-President
(Telecom & MSP), Mr. Jeet Singh Chhabra
S/o late Piare Lal Chhabra,
Aged about 66 years,
(By Sri.V.H., Advocate)
-vs-
Respondents: 1. IBM India Pvt. Ltd., a company
Incorporated under Companies Act,
1956, having its registered office at
Subramaniya Arcade, No.12,
Bannerghatta Main Road,
Bangalore - 560 029, through its
Chief Financial Officer.
(By Sri. G.C.S., Advocate)
2. Hon'ble Mr. Justice S. Venkataraman,
No.161, 3rd F-Cross, 4th Main, 2nd Block,
3rd Stage, Basaveshwarnagar,
Bengaluru - 560 079.
2 Com.A.S.No.122/2016
3. Hon'ble Mr. Justice G. Patri Basavana
Goud, No.58, "Ganga", ISRO Road,
Judicial Officers' Layout, RMV-II Stage,
Sanjaynagar, Bengaluru - 94.
4. Hon'ble Dr. Justice K. Bhakthavatsala,
No.25, 2 nd Cross, 8th Main,
Vasanthnagar, Bengaluru - 520 052.
JUDGMENT
This is a suit filed by the plaintiff/petitioner against the defendants/respondents and sought for set aside the arbitral award dated 01.06.2016 passed in so far as it relates to rejection of claims No.(a) to (d) and (e) and for refusing to direct the respondent No.1 to restitute the amount of Rs.14,54,99,185/- of the bank guarantees and Rs.100 crores as damages on account of loss of business, reputation and litigation and to pass an award declaring that the invocation of the bank guarantees was per se illegal and in violation to the terms of the MFA and the supplement agreements No.18, 19 and 20 and refuse to declare that the termination notice dated 16.04.2015 issued by the respondent No.1 was bad in law, as well as on facts and set aside the termination and for refusal to pass an award directing the payment of costs of arbitration proceedings.
2. The nutshell of the plaintiff/petitioner case are as under: 3 Com.A.S.No.122/2016
The plaintiff/petitioner being the claimant and the respondent No.1 being the respondent in the arbitral proceedings. The plaintiff feeling aggrieved by the award which passed by the arbitrators has filed the instant suit, in which has alleged that the company has been incorporated under the Companies Act, 1956 and is an ISO 9001:2000, ISO 27001 and SEI-CMMi Level 5 Company and which is a leading company in the field of information and technology and has, in the past, successfully completed and has a large number of projects for developments, maintenance and supply of Hardware and Software with various Departments of the Government of India as well as State Governments. The respondent No.1 is the India's subsidiary of a multinational company, IBM Ltd., and deals in sale and purchase of computers, hardware and software. On 19.11.2009 the respondent No.1 entered into a Master Financial Agreement No.Vayam/DEL/MFA/200433 whereby the respondent No.1 agreed to finance goods/services and in all 20 supplement agreements were entered in between them. On 29.06.2013 a netting agreement was executed in between them pursuant to supplement agreements No.18, 19 and 20 amount to Rs.14,54,99,185/- was executed payable with interest in installments and last installment was payable on 30.06.2018. The 4 Com.A.S.No.122/2016 terms of clause 7 of the netting agreement, was required to secure the said amount being financed by the respondent No.1 by furnishing bank guarantee/s to the extent of amount financed and as such provided bank guarantee of an amount more than outstanding and the 13 bank guarantees has been executed in favour of the respondent No.1 and to secure the interest of respondent No.1, issued 60 post dated cheques for each installment payable plus interest in terms of supplement agreement No.18, 19 and 20 in favour of the respondent No.1.
3. The plaintiff/petitioner in its plaint has further alleged with regard to the supplement No.18, 19 and 20 which is the subject matter of consideration had made the payments as on 31.12.2014 and in this regard, the respondent No.1 admits to have also accepted late payment fee on one occasion for the delayed payment. Clause 28 of the MFA provides for late payment with interest at an exorbitant rate of 2% per month for the delayed payment as per clause 28 of the MFA. Due to certain financial constraint on account of financial year closing could not pay the quarterly installment for the period 01.01.2015 to 31.03.2015 which was due on 31.03.2015 for a period of behind 7 days and the respondent No.1 was informed accordingly. The respondent No.1 with an ulterior motive and to make wrongful 5 Com.A.S.No.122/2016 gain invoked all 13 bank guarantees against the due of first quarter for the year 2015 which amounted to only Rs.73,08,424/- including bank guarantees No.0844131GFIN0012 (Rs.1.18 Crores) dated 31.05.2013 of Dena Bank and bank guarantee No.1301271BG00268 (Rs.1.16 Crore) dated 31.05.2013 of IDBI bank against which payment already been made and the bank guarantees were required to be returned. Under utter surprise was informed vide notice dated 16.04.2015 by the respondent No.1 as illegally and contrary to the agreement has unilaterally terminated the master finance agreement as well as all the netting agreement including supplement agreement No.1 to 20 at once in light of clause 29 (A of the MFA). The termination letter is in teeth of MFA itself in as such as clause 30 specifically provides in case of default, the borrower shall be notified, however termination notice did not have any specific reference to any such previous intimation of default. The respondent No.1 unilaterally and most arbitrarily terminated even supplement agreement No.1
-17 the account with regard to which were already closed.
4. The plaintiff/petitioner in its plaint has further alleged that the invocation of bank guarantees was fraudulent and in violation and contrary to the express terms of MFA in as much as the respondent No.1 forfeited the amount which was spread over a 6 Com.A.S.No.122/2016 period payable at 30.06.2018 as provided for in the supplement agreement and violated the netting agreement as well as the clauses in the bank guarantees which specifically provided for recovery of only the value of MFA outstanding to the respondent No.1, but the respondent No.1 unilaterally and capriciously traveled behind the scope of its rights, from conjoint reading of clauses 28, 29 and 30 of the MFA its liability was only with regard to the amount due, if any and not the entire amount which had been illegally encashed and for any such amount having fallen due require to compensate the respondent No.1 by paying 2% of the unpaid amount for each month or barred to thereof from the due date until the date paid in terms of clause 28 of the MFA. Sec.35 of the MFA provides for settlement of disputes and differences amicably through arbitration but the respondent No.1 without jurisdiction terminated the agreement illegally by invoking the bank guarantees.
5. The plaintiff in its plaint has further alleged that the MFA contained a dispute resolution mechanism through arbitration under clause 35 and all the proceedings shall be conducted including all documents presented in such proceedings in the English language, as such the disputes between them with respect to illegal termination of the agreement and invocation of 7 Com.A.S.No.122/2016 bank guarantees arose and the MFA contained a dispute resolution mechanism through the arbitration under clause 35, thereby has invoked clause 35 and vide its notice dated 26.05.2015 appointed the respondent No.4 Hon'ble Justice K. Bhakta Vatsala as its nominee arbitrator, in furtherance thereto the respondent No.1 notified the appointment of respondent No.3 Justice Patri Basavanagowda as its nominee arbitrator, thereafter vide notice dated 23.06.2015 the respondent No.2 Justice S. Venkataraman has been appointed as the presiding arbitrator by the respondent No.3 and 4 and both parties were informed about the sitting of arbitral tribunal, accordingly on 11.07.2015 the arbitration proceedings commenced and in compliance to the said order of the tribunal has filed its detailed statement of claims and sought for directing the respondent No.1 to restitute the amount of Rs.14,54,99,185/- of the bank guarantees in addition to direct the respondent No.1 to pay an amount of Rs.1 crore as damages on account of loss of business reputation and litigation and to pass an award declaring that the invocation of the bank guarantee was per se illegal and in violation of the terms of MFA and the subsequent agreement No.18, 19, 20 on 21.04.2015 and to pass an award declaring that the termination notice dated 16.04.2015 issued by the respondent No.1 was bad in law as well 8 Com.A.S.No.122/2016 as on facts, thereby set aside the said termination and to pass an award directing for payment of costs of arbitration proceedings and other reliefs which deems fit in the interest of justice.
6. The respondent No.1 filed its defence statements taking various defence and filed the counter claim a sum of Rs.2,75,61,500/- from the plaintiff for which filed its rejoinder denying every plea which made by the respondent No.1. So on the basis of the pleadings of the parties, the arbitral tribunal framed the issues and examined one witness and marked numerous documents. The respondent No.1 examined a sole witness and marked various documents, after hearing the arguments on both side, the arbitral tribunal has passed the impugned award dated 01.06.2016 rejecting the claims (a) to (e) and directing the respondent No.1 to pay sum of Rs.2,24,91,666/- with interest @ 11.50 p.a. on Rs.2 crores from the date of award till its realization. Feeling aggrieved by the said award, the claimant being the plaintiff/ applicant filed the instant suit for the followings grounds:
a. The award which passed by the arbitral tribunal relating to rejection of award directing the respondent No.1 to restitute amount of Rs.14,54,99,185/- of the bank guarantee and refusal to direct the respondent No.1 to pay an amount of Rs.100 crores as 9 Com.A.S.No.122/2016 damages on account of its loss of business, reputation and ligation and for refusal to declare the invocation of the bank guarantees perse illegal and in violation to the terms of MFA and the settlement agreement No.18, 19 and 20 and refusal to declare the termination notice dated 16.04.2015 issued by the respondent No.1 as bad in law as well as on facts and refusal to set aside the said termination and direct the payment of costs is wholly erroneous contrary to the facts of the case. b. The tribunal failed to notice under clause 3 of the MFA, 30 days notice had to be given before terminating the MFA and the said 30 days notice having not been given the termination was illegal which is not taken into consideration. c. The arbitral tribunal failed to notice that though was not able to pay the installment due by 30.03.2015 as there is a provision in clause 28 of the MFA for the borrower to pay late payment in charge in case of non payment within due date and the respondent No.1 had collected such late payment charges in case of delay of previous action for the first 6 installments and the respondent No.1 could not have terminated the agreement only on the ground of non payment of installment which was not taken into consideration by the tribunal. 10 Com.A.S.No.122/2016 d. The tribunal committed patent error in holding Para 13 of the award that in case of defaulter in respect of the payments to be made in the supplement agreements No.1 to 17 the remedy is to receive penalty but which was not taken into consideration. e. The tribunal failed to notice the respondent No.1 had collected Rs.2.47 crores towards principal and Rs.1.21 crores towards interest for the period from September 2013 to December 2014 for the first six installments and claiming Rs.12.7 cores towards principal and 5.24 crores towards interest in respect of the future installments and the rate of interest for the first six installments which had been paid worked out to 32.6% p.a. and the rate of interest in respect of the future installment worked out to 43% p.a. which is highly unreasonable and hit by the provisions of Usurious Loans Act, 1923. f. The arbitral tribunal awarded the interest which unreasonable and usurious, since not agreed the rate of interest but the arbitral tribunal erred in ignoring the provisions of Usurious Loans Act 1923, thus the award is impeachable on this ground alone.
g. The arbitral tribunal failed to notice the bank guarantees were valid up to September 2018 for the principal amount of Rs.14.54 crores and odds financed under supplement No.18 to 20 11 Com.A.S.No.122/2016 were furnished in pursuance of clause 7 of the netting agreement and Rs.73,08,424/- had became over due in respect of the quarter ending 31.03.2015 and the respondent No.1 could not have invoked the BGs for the entire sum of Rs.14.54 crores which is not taken into consideration by the arbitral tribunal.
h. The arbitral tribunal failed to notice clause 7 of the netting agreement when the MFA has been terminated as the respondent No.1 had obtained BGs from the application for the period covering all the installments for which the respondent No.1 had no right to invoke of BGs which is not taken into consideration by the arbitral tribunal.
I. The arbitral tribunal failed to notice the BGs were furnished in terms of the netting agreement which is not taken into consideration by the arbitral tribunal since the respondent No.1, neither denied the said facts in the statement of defence nor challenged its evidence in the cross-examination.
j. The arbitral tribunal failed to notice about the BGs which furnished prior to the execution of netting agreement nor consider the request letter marked as Ext-C/6 dated 31.03.2015 k. The arbitral tribunal committed patent error for non consideration of the recitals which appeared in MFA under clause 12 Com.A.S.No.122/2016 30 of MFA as in terms of clause 7 of netting agreement though there was no default clause under Sec.30 of MFA.
l. The arbitral tribunal failed to notice the judgment of Hon'ble Supreme Court which relied and the respondent No.1 had no right to invoke BGs for any sum higher than the balance of principal and interest up to 31.03.2015.
m. The arbitral tribunal failed to notice about termination of the agreement and illegally invoke the bank guarantees by the respondent No.1.
n. The arbitral tribunal failed to notice about sudden encashment of bank guarantees and loss which caused and majorly depending upon the funding from the banks and its planning to utilize the funds available for its current projects which was not taken into consideration by the arbitral tribunal. o. The arbitral tribunal failed to notice the law laid down by the Hon'ble Supreme Court reported in (1999) 9 SCC 449 regarding illegal termination of MFA which is per se illegal. p. The arbitral tribunal while passing the impugned award has overlooked the judgment passed by the Hon'ble Supreme Court of India which are declarations of law under article 141 of the Constitution of India which are binding in nature on all the authorities and the courts and tribunal subordinate thereto which 13 Com.A.S.No.122/2016 is taken into consideration by the arbitral tribunal which is contrary to the fundamental laws of India and prays for allow the suit and set aside the arbitral award dated 01.06.2016 and to allow its claim (a) to (e) and to restitute the amount of Rs.14,54,99,185/- of the bank guarantees and to direct the respondent No.1 to pay Rs.1 crore as damages on account of its loss of business, reputation and litigation as per the illegal and in violation of terms of the MFA and the supplement agreement No.18, 19 and 20 and declare the termination notice dated 16.04.2015 issued by the respondent No.1 was bad in law as well as on facts and directing the respondent No.1 for payment of cost.
7. In response of the notice, the respondent No.1 has been appeared through its counsel and filed the statement of objection in which has alleged that the jurisdiction of this court in view of Sec.34 of the Arbitration and Conciliation Act has only limited power to set aside an arbitral award under certain specific circumstances mentioned in Sec.34 of the Act and which is maintained inter alia only. If the arbitral award is against the public policy of India or is against to the fundamental policy of Indian law or when the award is deals with a dispute not contemplated or not falling within the terms of submission to 14 Com.A.S.No.122/2016 arbitrations, if there is a patent illegality and no such grounds has been made out under Sec.34 clause 2 of the Act in the instant suit which is liable for rejection summarily and he has alleged that the paragraphs No. 1, 2, 15 to 17 and 19 of the suit does not warrant for reply and he has alleged that the arbitral tribunal rightly rejected the claim of the plaintiff (a) to (e). So the suit which filed under Sec.34 of the Arbitration and Conciliation Act is not maintainable which is deserved for dismissal and with reference to the para 4 to 15 of the suit the same are narration of the facts which already dealt with the same in the statement of defence filed before the arbitrators and with reference to the para 18 has been denied that the defence which taken place is untenable and evasive and he has alleged the plaintiff has made a general allegation without giving any particulars as to why the award is erroneous and why the award is contrary to the facts of the case and how the award is contrary to the evidence on record and he has denied the averments which pleaded by the plaintiff and he has denied para 20(2) that the termination was illegal as 30 days notice was not given under clause 3 of the MFA and he has alleged that no such averment or plea was taken by the plaintiff in the statement of claim and he has issued emails dated 09.02.2015, 24.03.20215, 01.04.2015 and 06.04.2015 as per 15 Com.A.S.No.122/2016 Ex.R.6 demanding payment outstanding dues and also notified in case of failure to make payment outstanding dues would result in encashment of all BGs and the plaintiff has taken up the contention regarding the notice only at the time of arguments before the tribunal for which the tribunal rightly held the plaintiff has raised invalid grounds even if the arbitrator commits any error in the construction of the contract i.e. an error within its jurisdiction and same cannot be challenged under the application only under Sec.34 of the Arbitration and Conciliation Act and denied the para No.20(3) and 20(17) of the application under Sec.34 Arbitration and Conciliation Act that the tribunal failed to take note that the time was not the essence of contract in view of clause 24 providing for late payment charges and he has alleged that the said contention of the plaintiff is averred in para 19 of the statement of claim and dealt with the issue in para 15(17) of the statement of defence and the tribunal dealt with the said issue in para 11 to 13 of the award and denied the para 20(4) of the application under Sec.34 of the Arbitration and Conciliation Act that there is a patent error in para 13 of the award and he has alleged that the plaintiff had admitted in its email dated 25.04.2013 that as on the date of the outstanding dues Rs.14.54 crores and requested for conversion of the outstanding dues to 16 Com.A.S.No.122/2016 long term funding and the email exchanged dated 04.06.2013, 05.06.2013, 17.06.2013, 02.07.2013 and 03.07.2013 clearly evidence refinance of outstanding dues under supplement No.1 to
17.
8. The respondent No.1 in its objection statement has denied that as per the netting agreement and supplement No.18 to 20 were executed for the purpose of reduction of rate of interest and denied the para 20(5) of the petition that the arbitral tribunal failed to notice the contention regarding the rate of interest claimed was highly unreasonable and hit by the provisions of Usurious Loan Act, 1923 and alleged that no such plea or contention as regards to rate of interest being highly unreasonable had been taken by the claimant in the statement of claim or evidence and there is no finding in the award that the interest was unreasonable and usurious and denied the para 20(7 and 8) of the petition that tribunal failed to notice the contention of the plaintiff and he has alleged that the tribunal has taken note of the said contention in para 18 of the award and denied bank guarantee were given pursuant to clause 7 of the netting agreement and Rs.73,08,424/- had became overdue and could not have invoked the BGs for sum of Rs.14,54 crores and he has alleged the termination was under clause 30 of the MFA and 17 Com.A.S.No.122/2016 entitled to invoke bank guarantee to realize all the amounts due on the date of default and sum of Rs.17,31,96,450/- became due on the date of termination and the arbitral tribunal after considering the submissions rightly held in para 21 of the award and denied para 9 of the petition that the arbitral tribunal failed to notice the contention of the plaintiff and the learned tribunal has taken note of the contention in para 18 of the award and address the same in para 21 of the award and denied the BGs were furnished in terms of the netting agreement and he did not deny the said contention in the statement of defence and denied para 20(10) and 20(12) of the application that the arbitral tribunal failed to notice the contention of the plaintiff and alleged the learned tribunal has taken note of the contention in para 18 of the award and address the same in para 21 of the award and denied BGs being furnished prior to the execution of the netting agreement and it has been taken under clause 7 of the netting agreement and tribunal has rightly held in para 21 at page 14 and denied para 20(11) that the tribunal failed to note the contents of the applicant and alleged the tribunal has taken note of the said contention in para 18 of the award and address the same in para 21 of the award and denied that the applicant having paid Rs.2.47 crores out of Rs.14.54 crore and he had 18 Com.A.S.No.122/2016 returned BGs for that amount and could not have invoked the same and alleged that the claimant has taken the said contention in para 13 of the statement of the claim which dealt with at para 20(12) of the statement of defence and the tribunal has rightly held in para 21 at page 14 of the award and denied the para 20(12) of the application that the tribunal has committed patent error in the award holding that the clause 7 does not specifically mention that it applied to do termination under clause 30 of the MFA.
9. The respondent in its objection statement has denied the para 20(13) of the application that there is a patent error in para 21 of the award and the award holding that the BGs were not provided in pursuant to clause 7 of the netting agreement contrary to the answer given by R.W.1 to question No.8 of cross- examination and the tribunal has rightly held in para 21 of the award and denied para 20(14) of the application that sum of Rs.17,31,96,450/- became due on the date of termination and entitled to recover the entire amount including the future installment and denied the para 15 of the applicant and without the jurisdiction has been terminate the agreement and invoke the bank guarantees and he has alleged the applicant caused the breach of MFA and the netting agreement, when payment was not 19 Com.A.S.No.122/2016 done as per the agreement payment schedule entitle to terminate the MFA in case of the breach and right to invoke the BGs and he has alleged that the applicant committed breach of MFA and the netting agreement, the termination and invocation of BGs was legal. There is no question any damages caused to the applicant and denied the para 20(18) and 20(19) and prays for dismiss the suit.
10. Both counsels were filed written arguments. Heard the arguments on both sides.
11. The points that arise for consideration of this court are as under:
1) Whether the plaintiff/petitioner has made out any of the grounds as enumerated under Sec.34 of the Arbitration and Conciliation Act, 1996 to set aside the impugned award dated 16.04.2015 passed by the arbitral tribunal?
2) What order?
12. My answer to the above points are as under:
Point No.1: In the Negative;
Point No.2: As per final order, on the following; 20 Com.A.S.No.122/2016
REASONS
13. POINT NO.1: The plaintiff/petitioner has approached the court on the ground that he being the claimant before the arbitral proceedings has initiated against the very respondent No.1 and sought for the relief, but the tribunal has not passed the relief as sought for by rejecting its claim No.(a) to (e) and not directed the respondent No.1 to restitute the amount of Rs.14,54,99,185/- and also for damages of Rs.1 crore and other reliefs, so feeling aggrieved by the arbitral award the plaintiff has filed the instant suit.
14. The learned counsel for the plaintiff/petitioner apart from written arguments has submitted the plaintiff/petitioner and the respondent No.1/defendant were entered into master financial agreement, the respondent No.1 has been agreed to finance goods/services to the plaintiff. In all 20 supplement agreements were taken place in between them and on 29.06.2013 netting agreement was taken place in between them. In pursuance of the said supplement agreements No.18, 19 and 20 amounting to Rs.14,54,99,185/- was executed payable with interest by the plaintiff for the installments and the last installment payable on 30.06.2018. In terms of clause 7 of the netting agreement, the plaintiff was required to secure the said 21 Com.A.S.No.122/2016 amount being financed by the respondent No.1/defendant by furnishing bank guarantees to the extent of amount financed and provided bank guarantee of the amount more than outstanding and he has given the 13 bank guarantees in favour of the respondent No.1 and the supplement agreements No.18, 19 and 20 which are the subject matter of consideration and the plaintiff had made the payment as on 31.12.2014. As per clause 28 of MFA for late payments with interest at an exorbitant rate of 2% per month for the delayed period, due to certain financial constraint an account of financial year the plaintiff could not pay the quarterly installment for the period 01.01.2015 to 31.03.2015 which was due on 31.03.2015 for a period of 7 days. The respondent No.1 with ulterior motive and to make wrongful gain invoked all 13 bank guarantees against dues of first quarter for the year 2015 which amounted to only Rs.73,08,424/- On 16.04.2015 the respondent No.1 illegally and contrary to the agreement, terminated the master finance agreement as well as the netting agreement including supplement agreement No.1 to 20 and the said termination itself illegal which is contrary to the law and invocation of bank guarantees was fraudulent and in violation and contrary to the express terms of MFA as the respondent No.1 forfeited the amount which was spread over a 22 Com.A.S.No.122/2016 period payable up to 30.06.2018 which is the last installment payable by the plaintiff and who has also violated the netting agreement as well the clauses in the bank guarantees and the respondent No.1 unilaterally and capriciously travelled behind the scope of its rights and clause 28, 29, and 30 of the MFA are very much clear with regard to due amount if any and not the entire amount which had been illegally encashed by the respondent No.1, thereby the plaintiff has been nominated the respondent No.4 as its nominee arbitrator and the respondent No.1 has been nominated the respondent No.3 as its nominee arbitrator and both the arbitrators were appointed the respondent No.2 as the presiding arbitrator, though the plaintiff has placed the materials before the arbitral tribunal, but the arbitral tribunal has not considered the claim of the plaintiff and rejected the claim (a) to
(e) and also for restitution of Rs.14,54,99,185/- which drawn by the respondent No.1 under the bank guarantees and the tribunal has not directed the respondent No.1 to pay Rs.1 crore as damages, because of attitude of the respondent No.1, the plaintiff has sustained loss and the arbitrator has not taken into consideration either the amount of Rs.14,54,99,185/- nor the damages of Rs.1 crore are taken into consideration about the clause 18 to 20 of the MFA and supplementary agreements and 23 Com.A.S.No.122/2016 the tribunal has not taken into consideration that the 30 days notice had to be given before terminating of the MFA, but this fact was not taken into consideration by the tribunal and the tribunal has not taken into consideration about the last installment and come to the wrong conclusion that the termination which terminated by the respondent No.1 is legal and the tribunal has failed to notice the amount which collected by the respondent No.1 of Rs.2.47 crores towards principal and Rs.1.2 crores towards the interest for the period from September 2013 to December 2014 and the tribunal has not taken into consideration about the bank guarantees which furnished by the plaintiff nor the evidence which led by the parties and prays for set aside the award which passed by the arbitrator and to allow the claim No.
(a) to (e) and to direct the respondent No.1 to restitute amount of Rs.14,54,99,185/- and direct the respondent No.1 to pay the amount of Rs.1 crore as damages on account of loss of business and to declare that the termination notice which issued was bad in law.
15. Per contra, learned counsel for the respondent No.1 apart from the written arguments has admitted about MFA and other agreements which taken place in between the plaintiff and the respondent No.1/ defendant and he has submitted that the 24 Com.A.S.No.122/2016 arbitral tribunal has rightly rejected the claim of the plaintiff No.
(a) to (e). So reconsideration of that prayer as sought by the plaintiff does not arise and termination of the MFA which made by the respondent No.1 is legal, since MFA has been terminated by seeking termination notice as per clauses of MFA. So the question of issuing 30 days notice does not arise for which the tribunal has rightly held the termination has been effected on the ground of default by the plaintiff under clause 30 of MFA and the time was the essence of contract in view of clause 28 providing for late payment charges and the tribunal has rightly held in para 13 that in a mercantile contracts, time is presumed to be the essence of contract, in such contracts, if the promise as the discretion to extend time or condone some delay by accepting liquidated damages or late payment charges by relying the decision of Hon'ble Supreme Court. Therefore, the contention of the plaintiff on this regard holds no water and the respondent No.1 has made email transaction with the plaintiff regarding outstanding dues of the plaintiff for Rs.14.54 crores that itself is clear before terminating the MFA brought to the notice of the plaintiff about outstanding due and for non-payment of the installment and the respondent No.1 has rightly invoked bank guarantees and forfeited the amount due to default of the plaintiff for payment of 25 Com.A.S.No.122/2016 installment. The plaintiff was due an amount of Rs.17,31,96,410/- as the plaintiff agreed the terms of MFA. So, by virtue of clause No.18, 19 and 20 of the supplement invoked the bank guarantees to the tune of Rs.14,54,99,185/-. Still the plaintiff is due a sum of Rs.2,75,61,510/- thereby the respondent No.1 has sought for counter claim which was not taken into consideration by the tribunal. So the question of restitution of the amount as sought for nor payment of damages which sought by the plaintiff does not arise and he has also submitted the other arguments which stated in the written arguments and prays for dismiss the suit.
16. The learned counsel for the plaintiff while canvassing his arguments has submitted the tribunal has not taken into consideration of the claim which made by the claimant as claim No.(a) to (e) nor awarded the damages of Rs.1 crore or directed the respondent No.1 for restitution of Rs.14,54,99,185/- nor declared the termination notice dated 16.04.2015 issued by the respondent No.1 was bad in law. So, before consideration the materials on record and the arguments which advanced by both the counsels, it is just and necessary to consider the following legal aspects first, for the proper appreciation of the issue which involved in between the parties.
1. What is arbitration?
26 Com.A.S.No.122/2016
2. When court can interfere with arbitral award?
3. What is the scope of Court's power to interfere with the arbitral award?
4. What are the grounds are required to set aside the award?
5. Setting aside of arbitral award when permissible?
Let me decide one by one for proper appreciation of the materials on record. Thus this court drawn its attention on Sec.2(1)(a) of the Arbitration and Conciliation Act, 1996 which reads like this:
2(1)(a). The definition arbitration means any arbitration whether or not administered by permanent arbitral institution.
Arbitration is a private dispute resolution mechanism agreed upon by the parties.
Arbitration is a binding voluntary alternative dispute resolution process by a private forum chosen by the parties.
Arbitration is a process of settlement extra curses curiae and the parties are at liberty to choose their judge. "The esse visa nce of arbitration without assistance or intervention of the court is settlement of dispute by a tribunal of the own choosing of the parties." Law of arbitration aids in implementation of arbitration agreement contract between the parties which remains a private adjudication by a forum consequently chosen by the parties and made on consequential reference.
The above provision is very much clear the Arbitration is a binding voluntary alternative dispute resolution process by a private forum chosen by the parties. Now let me know when court 27 Com.A.S.No.122/2016 can interfere with the arbitral award. Thus this court drawn its attention on Sec.34(43) of the Arbitration and Conciliation Act, 1996 which reads like this:
43. Principles of interference with arbitral award:-
The principles of interference with an arbitral award under Sec.34(2) of the Act are as follows:
(1) An award, which is -
(i) contrary to substantive provisions of law; or
(ii) The provisions of Arbitration and Conciliation Act, 1996, or
(ii) against the terms of the respective contract; or
(iv) Patently illegal or
(v) Prejudicial to the rights of the parties; is open to interference by the court under Sec.34(2) of the Act.
(2) The award could be set aside if it is contrary to:
(a) fundamental policy of Indian Law; or
(b) the interest of India; or
(c) justice or morality.
(3) The award could also be set aside, if it is so unfair and unreasonable that it shocks the conscience of the court.
(4) It is open to the court to consider whether the award is against the speci visa fic terms of the contract and if so interfere with it on the ground that it is patently illegal and opposed to the public policy of India.28 Com.A.S.No.122/2016
So, by virtue of the provision which stated above, the court can interfere with the arbitral award in the grounds which mentioned above.
Now let me know what is the scope of Court's power to interfere with the arbitral award? Thus this court drawn its attention on Sec.34(34) of the Arbitration and Conciliation Act which reads like this;
Scope of Court's power to interfere with the arbitral award:
The scope of the interference by the court's in regard to arbitral award is limited. Courts do not sit in appeal over the findings and decision of the arbitrator, nor can it reassess or re- appreciate evidence or examine the sufficiency or otherwise of the evidence.
So, by virtue of the provision which stated supra, the scope of interference by the court in regard to the arbitral award is limited scope. The scope of interference under Sec.34 of the Act is limited in view of the judgment of the Hon'ble Supreme Court of India which reported in AIR 2003 SC 2629 in between Oil and Natural Gas Corporation Ltd., V/s Shah Pipes Ltd. In the said judgment, their Lordship held that;
'an award can be set aside if it is contrary to fundamental policy of Indian Law, the interest of India, justice or morality, if it is patently illegal and unfair and unreasonable it shocks the conscience of the court'.29 Com.A.S.No.122/2016
Now let me know what are the grounds are required to set aside the award which passed. Thus this court drawn its attention on Sec.34(18) of the Arbitration and Conciliation Act which reads like this:
18. Grounds to set aside award:- Under the new Act, 1996 misconduct of arbitrator is no ground to set aside an award but court may set aside an award in the following grounds:
(1) if the composition of the arbitral tribunal was not in accordance with the agreement of the parties.
(2) falling such agreement, the composition of arbitral tribunal was not in accordance with the part I of the Act.
(3) if the arbitral proceeding was not in accordance with -
(a) the agreement of the parties.
(b) failing such agreement - the arbitral procedure was not in accordance with part I of the Act. However exception for setting aside the award on the ground of composition of arbitral tribunal or illegality of arbitral procedure is that the agreement should not be in conflict with the provisions of part I of the Act from which parties cannot derogate;
(c) if the award passed by the arbitral tribunal is in contravention of the provisions of the Act or any other substantive law governing the parties or is against the terms of the contract.30 Com.A.S.No.122/2016
An award can be set aside, if it is against the public policy of India that is to so it is contrary to:
(1) fundamental policy of Indian law, (2) the interest of India, or (3) justice or morality , or (4) if it is patently illegal.
It could be challenged -
(a) as provided under Sec.13(5); and
(b) Sec. 16(6) of the Arbitration and conciliation Act. So the court can set aside the award, if the grounds found which stated supra.
So, if the petitioner is made out the grounds which stated supra, court can set aside the award which passed by the arbitral tribunal. Now let me know about the setting aside of arbitral award when permissible. Thus this court drawn its attention on Sec.34(4) of the Arbitration and Conciliation Act, 1996
4. Setting aside of arbitral award when permissible:-
That the court can set aside the arbitral award under Sec.34(2) of the Arbitration and Conciliation Act if the party making the application furnishes the proof that:
(i) a party was under some incapacity
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for time being in force.31 Com.A.S.No.122/2016
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or otherwise unable to present his case.
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitrator or it contains visa decisions on matters behind the scope of the submission to arbitration.
(2) The court may set aside the award: (I) (a) if the composition of the arbitral tribunal was not in accordance with the agreement of the parties.
(b) falling such agreement, the composition of the arbitral tribunal was not in accordance with part-1 of the Act.
(ii) if the arbitral procedure was not in accordance with:
(a) the agreement of the parties, or
(b) failing such agreement, the arbitral procedure was not in accordance with part-1 of the Act.
However exception for setting aside the award on the ground of composition of arbitral tribunal or illegality of arbitral procedure is that the agreement should not be in conflict within the provisions of part-1 of the Act from which the parties cannot derogate.
(c) If the award passed by the arbitral tribunal is in contravention of provisions of the Act or any other substantive law governing the parties or is against the terms of the contract. 32 Com.A.S.No.122/2016 (3) The award could be set aside if it is against the public policy of India, that is to say, if it is contrary to:
(a) fundamental policy of Indian Law;
(b) the interest of India; or
(c) justice or morality; or
(d) if it is patently illegal.
(4) It could be challenged-
(a) as provided under Sec.13(5); and
(b) Section 16(6) of the Act."
"B. Further held as follows in this case: (1) The impugned award requires to be set aside mainly on the grounds:
(I) There is specific stipulation in the agreement that the time and date of delivery of the goods was the essence of the contract;
(ii) in case of failure to deliver the goods within the period fixed for such delivery in the schedule, ONGC was entitled to recover from the contractor liquidated damages as agreed;
(iii) it was also explicitly understood that the agreed liquidated damages were genuine pre- estimate of damages;
(iv) on the request of the respondent to extend the time limit for supply of goods, ONGC informed specifically that time was extended but stipulated liquidated damages as agreed would be recovered;
(v) liquidated damages for delay in supply of goods were to be recovered by paying authorities from the bills for payment of cost of material supplied by the contractor;
(vii) there is nothing on record to suggest that stipulation for recovering liquidated damages was by way of penalty or that the said sum was in any way unreasonable.33 Com.A.S.No.122/2016
(viii) in certain contracts, it is impossible to asses the damages or prove the same. Such situation is taken care by section 73 and 74 of the Contract Act and in the present case by specific terms of the contract" - Oil and Natural Gas Corporation V Shah Pipes Ltd. (2003)5 SCC 705 : AIR 2003 SC 2629; see also Moona Abousher V M/s. Cholamandalam DBS Finance Ltd. AIR 2019 Mad 233.
The above provisions which referred above are very much clear that if the petitioner made out the grounds which stated supra, court can interfere with the arbitral award.
17. The learned counsel for the plaintiff while canvassing his arguments has submitted that the tribunal has not taken into consideration of the claim No.(a) to (e) nor directed the respondent No.1 to restitute amount of Rs.14,54,99,185/- and not taken into consideration about the clauses No.28, 29 and 30 of MFA. So, let me know the relief which sought by the plaintiff and the respondent No.1 before the arbitral tribunal and the clauses which advanced by the learned counsel for the plaintiff by virtue of MFA are necessary for reproduction for the proper appreciation which reads like this:
RELIEFS (PLAINTIFFS/PETITIONER) In the facts and circumstances mentioned above, the claimant is entitled to the reliefs 34 Com.A.S.No.122/2016 mentioned below. According the claimant most respectfully requests this Hon'ble tribunal to:
a) Pass an award directing the respondent to restitute the amount of Rs.14,54,99,185/- of the bank guarantees which is detailed herein under.
b) in addition to the above, direct the respondent to pay to the claimant, an amount of Rs.100 crores as damages on account of loss of business, reputation and litigation; and
c) pass an award declaring that the invocation of the bank guarantees was per se illegal and in violation to the terms of the MFA and the supplement agreement nos. 18, 19, 20 on 21.04.2015; and
d) pass an award declaring that termination notice dated 16.04.2015 issued by the respondent was bad in law as well as on facts and thereby set aside the said termination;
and
e) pass an award directing payment of costs of present arbitration proceedings in favour of the claimant and against the respondent; and/ or
f) pass such further order in favour of the claimant as may be deemed fit in the interest of justice.
35 Com.A.S.No.122/2016
RELIEFS (RESPONDENT NO.1/DEFENDANT) Wherefore, the respondent respectfully prays this Hon'ble Tribunal to:
a) Pass an award directing the claimant to pay an amount of Rs.2,75,61,510/-
b) Pass an award directing the claimant to pay interest at the rate of 24% per annum on Rs.2,75,61,510/- from the date of termination till this day and such other future interests at the rate of 18% per annum till the date of recovery of the entire outstanding dues;
c) Pass an award directing the claimant to pay the cost of the proceedings, attorney fees, collection costs and other associated expenses incurred by the respondent in exercising all the rights under clause 30 of the MFA;
d) Pass such other award in favour of the respondent as this Hon'ble Tribunal may deem fit and proper I the facts and circumstances of the above case, in the interest of justice and equity.
So, the above reliefs which referred above are very much clear that the plaintiff/petitioner and the respondent/ defendant No.1 were put forth their claim before the arbitrators as stated above.
28. LATE PAYMENTS - If any due amount to be paid to Financier is not paid on or before its due date. Borrower shall pay Financier two percent (2%) of the unpaid amount for each 36 Com.A.S.No.122/2016 month or part thereof from the due date until the date paid or, if less, the maximum allowed by law. Borrower agrees that this represents reasonable compensation for the loss or damage incurred by Financier.
29. DEFAULT - Borrower shall be in default under this Agreement upon the occurrence of any of the following events:
(a) Borrower fails to pay any amount when due under this Agreement and such failure shall continue for a period of seven days after the due date:
(b) Clause Stands Deleted.
(c) Borrower fails to perform any other obligations or violate any of its covenants or representations under a financing transaction, or borrower fails to perform any of its obligations under any other agreement borrower may have with financier, and such failure or breach shall continue for a period of fifteen days after written notice is received by borrower from financier;
(d) Borrower's obligations under this agreement makes a misrepresentation in any application for credit or other financial data required to be provided by borrower in connection with a financing transaction;
(e) Borrower makes an assignment for the benefit of creditors, or consent to the appointment of a trustee or receiver, or if a trustee or receiver be appointed for borrower or for a substantial part of their property with or without borrower's consent;
(f) any petition or proceeding is filed by or against borrower under bankruptcy or insolvency or similar laws, or borrower admits 37 Com.A.S.No.122/2016 in writing of its insolvency or inability to poay its debts as they come due;
(g) Borrower ceases doing business as a going concern, or sell or dispose of substantially all its assets or make a bulk transfer of all its assets, or make an assignment for the benefit of creditors:
(h) Clause stands deleted.
30. REMEDIES - If Borrower is in default under this agreement, borrower shall be notified and all amounts due and to become due under each financing transaction shall be immediately due and payable., without further notice from financier subject to a discount rate, mutually agreed which would be stated in the applicable supplement and financier shall have the right, in financier's sole discretion, to exercise any one or more of the following remedies:
(a) declare any financing transaction entered into pursuant to this agreement to be in default and terminate the financing transaction.
(b) recover from borrower any and all amounts then overdue, due and all future installment payments for a terminated financing transaction not recovered as provided in sub- letter (f) below:
(c) Clause stands deleted. (d) Clause stands deleted.
(e) retain all installment payments made to financier as partial compensation for borrower's use
(f) require borrower to pay an amount equal to the current installment, prorated on the basis of a 30 day month, for each day a terminated 38 Com.A.S.No.122/2016 item is not returned, plus any associated late charges
(g) recover from borrower all attorney's fees, collection costs and associated expenses incurred in exercising any of financier's rights with respect to an event of default; or
(h) clause stands deleted (I) Financier may pursue any other remedy available at law or in equity.
So, the above provisions which appeared in the MFA are clear where the default in payment of installment and for late payments, there is a remedies and by virtue of the remedies recovered from borrower in and all amounts than over due and all future installments payment for a terminated financing transaction not recovered its provided in sub letter. Thus, the financier having a sole discretion to exercise any one or more of the remedies which stated supra, as the provision empowers the respondent to terminate the MFA and to recover not only the amounts due, but also to recover all future installments payments in case of default in payment of installments.
18. The learned counsel for the plaintiff while canvassing his arguments has much argued that before terminating of the MFA, the respondent No.1 had not issued a 30 days notice in view 39 Com.A.S.No.122/2016 of clause 3 of the MFA (Master Finance Agreement). Thus this court drawn its attention on clause 3 of MFA which reads like this:
Agreement Term: This agreement shall be effective when signed by both parties and may be terminated by either party upon one month prior written notice, each financing transaction than in effect. However shall remain subject to the terms and conditions of this agreement until it is expiration or termination.
Thus, the above clause 3 of MFA is very much clear the agreement shall be effective when signed both parties may be terminated by either party upon one month prior written notice. Either party without assigning any reason can put an end to the agreement by giving one month written notice. But where as the respondent No.1 has not terminated the MFA under clause 3 of master finance agreement. If that is so, the arguments which advanced by the learned counsel for the plaintiff would have accepted, but the respondent No.1 has invoked the clause 30 of the MFA which referred above.
19. It is an admitted fact the plaintiff in para 10 has categorically admitted that he was due to pay the quarterly installments for the period 01.01.2015 to 31.03.2015 which was due on 31.03.2015 for a period behind 7 days. So for the proper 40 Com.A.S.No.122/2016 appreciation of the admissions of the plaintiff is necessary for reproduction which reads like this:
That due is certain financial constraint on account of financial year closing the applicant could not pay the quarterly installment for the period 01.01.2015 to 31.03.2015 which was due on 31.03.2015 for period of behind 7 days. Thus, as per the admission of the plaintiff which referred above is very much clear that the plaintiff/ petitioner was in default in payment. So, as per clause 30 which referred above is very much clear recovery from the borrower any and all amounts than over due, and all future installment payments for a terminated financing transaction. So, by virtue of own admission of the plaintiff clearly reflects he was due for payment of installment thereby the respondent No.1 has invoked the clause 30 and terminated the master finance agreement on the ground of default. The materials which on record reflects the respondent has brought to the notice of the plaintiff regarding due amount and it is not in dispute 13 bank guarantees have been furnished by the plaintiff and the validity of BGs has been extended till 13.09.2018 and payment of installment has been fixed from September 2013 to 30.06.2018 and a sum of Rs.14,54,99,185/-
was outstanding from the plaintiff in respect of supplements No.1 to 17 and the respondent No.1 agreed to refinance the plaintiff 41 Com.A.S.No.122/2016 under supplements 18 to 20, under which the installments for the period of 18 to 20 was due. So, when the plaintiff did not pay the installment amount as agreed, the respondent No.1 has opted for termination of MFA and invoked the bank guarantees as per the agreements which taken place in between them which mentioned in the MFA. Therefore, the arguments which advanced by the learned counsel for the plaintiff on this aspect holds no water.
20. The learned counsel for the plaintiff has much argued that the finding which given by the arbitral tribunal is contrary to the facts and settled law, admittedly the MFA and netting agreement and other documents which taken place in between the plaintiff and the defendant No.1 are not in dispute. Even the plaintiff has not disputed about the outstanding amount of Rs.14,54,99,185/- but according to the plaintiff, if at all any delay in payment of installment, the remedy available to the respondent No.1 to recover the installment amount with penalty in view of clause 28 of MFA in which if any due amount to be paid to financier is not paid on or before its due date, the borrower shall pay financier 2% of the unpaid amount for which month or part thereof from the due date until the date paid or if less the maximum allowed by law, borrower agrees that represents 42 Com.A.S.No.122/2016 reasonable compensation for the loss or damage incurred by the financier. But where as the clause No.30 specifically provides that in case of default to recover either due amount or due future installments or to terminate the MFA. So, by virtue of the clause 30 of the MFA, the respondent No.1 has not only terminated the MFA, but also invoked the bank guarantee. Therefore, the arguments which advanced by the learned counsel for the plaintiff on this aspects holds no water.
21. The learned counsel for the plaintiff while canvassing his arguments has much argued that the arbitral tribunal committed a patent illegality without considering the MFA and the netting agreement. Now let me know what is the patent illegality. Whether any of the grounds which urged in the plaint comes within the purview of Sec.34 of the Arbitration and Conciliation Act and thus this court drawn its attention on Sec.34(114) of the Arbitration and Conciliation Act which reads like this:
Public policy oppose to public policy and patent illegality. - The words public policy or oppose to public policy find reference in Sec.23 of Contract Act and also Sec.34(2)(b)(II) of the Arbitration and Conciliation Act. The interpretation of the contract is the matter of arbitrator who is a judge chosen by the parties to determine and decide the dispute, the court 43 Com.A.S.No.122/2016 is precluded from re-appreciation the evidence and to arrive at a different conclusion by holding that the arbitral award is against the public policy nor patent illegality.
So, the above provision is very much clear the arbitrator who is a judge who chosen by the parties to determine and decide the dispute and in view of the decision of Hon'ble Supreme Court which reported in 2006(1) SCC 181 in between M.C. Dermot International Vs Burn Standard Co. Ltd. their lordship held that the term patent illegality must go to the root of the matter. The public policy violation should be so unfair and unreasonable as to shock the concious of the court. If the arbitrator has gone contrary to or behind the express of law of the contract or granted relief in the matter not in dispute. That would come within the purview of Sec.34 of the Arbitration and Conciliation Act, but the plaintiff has not placed any materials nor made out any of the grounds to show that the arbitral tribunal committed patent illegality. Thus this court drawn its attention on Sec.23 of the Indian Contract Act with illustrations (a) and (h) to know what is lawful and what is unlawful:
Section 23 in The Indian Contract Act, 1872 44 Com.A.S.No.122/2016
23. What consideration and objects are lawful, and what not.--The consideration or object of an agreement is lawful, unless-- --The consideration or object of an agreement is lawful, unless--" it is forbidden by law; 14 or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy.
In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void. Illustrations
(a) A agrees to sell his house to B for 10,000 rupees. Here, B's promise to pay the sum of 10,000 rupees is the consideration for A's promise to sell the house and A's promise to sell the house is the consideration for B's promise to pay the 10,000 rupees. These are lawful considerations. (a) A agrees to sell his house to B for 10,000 rupees. Here, B's promise to pay the sum of 10,000 rupees is the consideration for A's promise to sell the house and A's promise to sell the house is the consideration for B's promise to pay the 10,000 rupees. These are lawful considerations."
(h) A promises B to drop a prosecution which he has instituted against B for robbery, and B promises to restore the value of the things taken. The agreement is void, as its object is unlawful. (h) A promises B to drop a prosecution which he has instituted against B for robbery, and B promises to restore the value of the things taken. The agreement is void, as its object is unlawful." On close reading of the above provision and the illustrations are very much clear the consideration or object of an agreement is lawful, unless it is forbidden by law is fraudulent or involves or implies injury to the person or property of another as immemorial 45 Com.A.S.No.122/2016 or oppose to public policy and the illustrations reflects which of the contract is lawful or unlawful, but the plaintiff has not bring the instant suit within the ambit of either Sec.23 of the Indian Contract Act or Sec.34 of the the Arbitration and Conciliation Act.
22.The learned counsel for the plaintiff while canvassing his arguments has drawn the court attention on the judgment of Hon'ble Supreme Court which reported in 2020 (7) SCC 167 in between Patel Engineering Ltd. Vs North-Eastern Electric Power Corporation Ltd. On perusal of the said judgment, in the said judgment their Lordship held that the ground of patent illegality is a ground available under the statute for setting aside a domestic award, if the decision of the arbitrator found to be perverse, irrational, no fair or reasonable person would take or that the view of the arbitrator is not even a possible view. But the plaintiff has not made out any of the grounds to show that the award of the arbitrator is perverse, irrational. Therefore, I do respect to the decision which relied, but the facts and the circumstances of the present case and the judgment which relied are different.
23. The learned counsel for the plaintiff has drawn the court attention on the judgment of the Hon'ble Supreme Court which 46 Com.A.S.No.122/2016 reported in 2020 (5) SCC 164 in between South-East Asia Marine Engineering & Constructions Ltd., Vs Oil India Ltd. On careful perusal of the said judgment, in the said judgment, their Lordship held interpretation of contract by arbitral tribunal being perverse and not a possible interpretation, award passed by its was liable to be set aside, but in the instant suit, the plaintiff has not made out any of the grounds to show the arbitrators were interpreted the contract which taken place in between the parties and passed the award. Therefore, I do respect to the judgment which relied, but the facts and circumstances of the present case and the judgment which relied are different.
24. The learned counsel for the plaintiff has drawn the court attention on the judgment of Hon'ble Supreme Court reported in 2006 (4) SCC 445 in between Hindustan Zinc Ltd. Vs Friends Coal Carbonisation, On careful perusal of the said judgment, in the said judgment their Lordship held that it is open to the court to consider whether the award is against to the specific terms of contract and if so, interference with it on the ground that it is a patently illegal and oppose to the public policy of India, but the plaintiff has not made out any of the grounds that the award which passed is against to the specific terms of contract. Therefore, I do respect to the judgment which relied but the facts 47 Com.A.S.No.122/2016 and circumstances of the present case and the judgment which relied are different.
25. The learned counsel for the plaintiff while canvassing his arguments has submitted the award which passed is the unreasoned and unintelligible award and interference of this court is necessary to set aside the award and the said counsel has drawn the court attention on the judgment of the Hon'ble Supreme Court which reported in 2019 (20) SCC 1 in between Dyna Technologies Pvt. Ltd. Vs Crompton Greaves Ltd . On careful perusal of the said judgment, in the said judgment their Lordship held that court while exercising jurisdiction under Sec.34 as to adjudicate the validity of an award based on the degree of particularity of reasoning required having regard to the nature of issues falling for consideration and the degree of particularity cannot be stated in a precise manner, as the same would depend on the complexity of the issues in the facts and circumstances of each case. So, the facts and circumstances of the present case and the judgment which relied are different. Therefore, I do respect to the judgment, but it is not applicable to the case on hand, since the plaintiff has not made out that the award which passed is not the reasoning award.
48 Com.A.S.No.122/2016
26. The learned counsel for the plaintiff has drawn the court attention on the judgments of Hon'ble High Court of Calcutta passed in clubbed matter in A.P. No.349/2017, G.A. No.21/2017, E.C.No.48/2017, APO No.398/2017, G.A. No.2806/2017, A.P.No.1087/2011, APO 419/2017, G.A. No.2988/2017 and A.P.No.1087/2011 in between State of West Bengal Vs Bharat Vanijya Eastern Pvt. Ltd., judgment of Hon'ble Supreme Court, reported in 2019 (15) SCC 131 in between Ssangyong Engineering and Construction Co. Ltd Vs National Highway Authority of India, Judgment of Hon'ble High Court of Delhi passed in C.S. (OS) 3299/2012 in between Nangia Construction Pvt Ltd. Vs National Buildings Construction Corporation Ltd. On careful perusal of the said judgments, in the said judgments their lordship held that an award could not be stand on the ground that it did not provide any reasons in support of any head of claim. Such ground also amounts to award being oppose to public policy and if the award ignores vital evidence in arriving its decision would be perverse and patent illegality and the arbitrator cannot extent to a conclusion which is based on no evidence. Therefore, I do respect to the decisions which relied but the facts and circumstances of the present case and the judgments which relied are different. 49 Com.A.S.No.122/2016
27. The learned counsel for the plaintiff while canvassing his arguments has submitted that the arbitrators while passing the award have to confine to the four corners of the agreement and to pass an award. The role of the arbitrator is to arbitrate within the terms of the contract and no power apart from what the parties have given him under the contract, where the arbitrator travels behind the contract, the award which passed without jurisdiction deserved for set aside. In the instant case, the plaintiff has failed to made out its case to show that the arbitrators were traveled behind the contract which taken place in between the plaintiff and the respondent No.1 and the said counsel has drawn the court attention on the judgments of Hon'ble Supreme Court of India passed in 2021 SCC Online SC 508 in between PSA SICAL Terminals Pvt. Ltd. Vs Board of Trustees of V.O. Chidambranar Port Trust Tuticorin and Others and 2009 (10) SCC 63 in between Steel Authority of India Ltd. Vs Gupta Brother Steel Tubes Ltd. On careful perusal of the said judgments, in the said judgments their lordship held that the jurisdiction of the arbitrator being confined to the four corners of the agreement which taken place in between the parties and the arbitrator should not travel behind the contract, but in the instant suit, the plaintiff has not made out any of the grounds to show that the arbitrators were traveled behind the contract nor made out that the award is contrary to the agreement which 50 Com.A.S.No.122/2016 taken place in between the plaintiff and the respondent No.1. Therefore, I do respect to the decision which relied, but the facts and circumstances of the present case and the judgments which relied are different.
51 Com.A.S.No.122/2016
28. The learned counsel for the plaintiff while canvassing his arguments has submitted the arbitrators were ignored vital evidence in arriving their decision which amount to perverse and the award which passed liable to be set aside on the ground of patent illegality and the arbitrators were completely ignored vital part of the materials which placed on record and the award which passed is clearly discloses about the contravention of public policy within the meaning of Sec.34 of the Act and the said counsel has drawn the court attention on the judgment of Hon'ble Supreme Court of India reported in 2019 SCC Online Delhi 9142 in between Shiel Trade Venture Pvt,. Ltd Vs Samsung India Electronics Pvt. Ltd. And 2019 SCC Online Bombay 287 in between Toughalt India Vs Hindustan Petroleum Corporation Ltd. On careful perusal of the said decisions, in the said decisions their Lordship held that a finding based on no evidence at all are an award which ignores vital evidence in arriving at its decision would be perverse and where the arbitrator completely ignored vital part of the material placed amounts to patent illegality which requires interference of the court, but the plaintiff has not made out any of the grounds which stated in the above judgments to apply the principles in the instant case. Therefore, I do respect to the judgment which relied, 52 Com.A.S.No.122/2016 but the facts and circumstances of the present case and the judgment which relied are different.
53 Com.A.S.No.122/2016
29. The learned counsel for the respondent No.1 while canvassing his arguments has submitted that the award which passed by the arbitrators is in conflict with the public policy of India and the approach of the arbitrators is arbitrary and capricious and this court interference is required and the award passed by the arbitrators is patently illegal which ground available under the statute for setting aside the award which passed by the arbitrators and the arbitrators have not taken into consideration about the condition of the agreement which taken place in between the respondent No.1 and the plaintiff which appeared in the MFA and there is a perversity in the reasoning of the award and the said counsel has drawn the court attention on the judgment of the Hon'ble Supreme Court which reported in 2015 (3) SCC 49 in between Associate Builders Vs Delhi Development Authority . On careful perusal of the said judgment, in the said judgment their lordship held that the interference of the court arises only when the award is in conflict with the public policy of India, but in the instant case, the respondent No.1 has not placed any materials to accept its defence. Therefore, I do respect to the judgment which relied but the facts and circumstances of the present case and the judgment which relied are different, though the learned counsel for the respondent No.1 has relied other judgments which are 54 Com.A.S.No.122/2016 already relied by the learned counsel for the plaintiff and same judgments are already discussed which stated above. So question of reconsideration of those judgments, which relied does not arise.
30. The learned counsel for the plaintiff has much argued regarding the interest which awarded by the arbitral tribunal on the ground it is on higher side. Thus this court drawn its attention on Sec.31(7)(a) of the Arbitration and Conciliation Act which reads like this;
Unless otherwise agreed by the parties where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable on the whole or any part of the money for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.
So, by virtue of the clause which referred above, the arbitral empowers to award the interest. Thus this court drawn its attention on the judgment of Hon'ble Supreme Court which reported in 2005(6) SCC 462 in between Bagavati Oxygen Ltd. Vs Hindustan Copper Ltd. In the said judgment their Lordship held the arbitrator has power to grant interest for all 3 stages pre- reference, the pendent lite and post award provided rate of interest is reasonable and agreement does not provide for grant of 55 Com.A.S.No.122/2016 interest nor prohibit the such grant. Award of 18% p.a. interest for all the 3 stages and Sec.34 of CPC has no application to arbitration proceedings, since the arbitrator cannot said to be a court within the meaning of the court and this court drawn its attention on the judgment of Hon'ble Supreme Court reported in 2015(2) SCC 189 in between Hyder Consulting (U.K. Ltd) Vs Governor, State of Orissa. In the said judgment, their Lordship held that the arbitral tribunal is empowered to include pre-award interest in some for which award is made. Once so included, pre award interest losses its character of interest and becomes part and parcel of some awarded. Therefore, the judgments which referred above are applicable to the case on hand. Therefore, the arguments which canvassed by the learned counsel for the plaintiff holds no water.
31. The learned counsel for the plaintiff has much argued the tribunal failed to notice that the respondent No.1 without jurisdiction has been terminated the MFA and invoked the bank guarantee and failed to consider the loss which sustained by the plaintiff due to termination of MFA and the bank guarantees which invoked by the plaintiff, but by virtue of clause 30 which referred above, the respondent No.1 not only terminated the MFA but also invoked the bank guarantees, in view of the contract in between 56 Com.A.S.No.122/2016 the plaintiff and the respondent No.1 which is binding on them. Now the plaintiff cannot contend that the termination of the MFA nor invoking of the bank guarantees either against the public policy nor patent illegality. Therefore, the arguments which advanced by the learned counsel for the plaintiff holds no water.
32. The learned counsel for the plaintiff has much argued that the tribunal has not awarded the relief as sought (a) to (e), in spite of the materials placed on record. It is an admitted fact the plaintiff has utterly failed to prove that the terminating of MFA nor invoking of bank guarantees was illegal. So, in the absence of the materials from the plaintiff in view of Sec.34 of the Arbitration and Conciliation Act, question of directing the respondent No.1 for restitution of Rs.14,54,99,185/- does not arise, though the plaintiff has sought for damages for Rs.1 crore on account of loss of its business, reputation and litigation and to declare that the termination notice dated 16.04.2015 was bad in law, but the plaintiff has not placed any materials nor made out any of the grounds to establish that the termination notice dated 16.04.2015 issued by the respondent No.1 was illegal nor established about the damages on account of its loss of business, reputation and litigation nor placed that the invocation of the bank guarantees was per se illegal. Therefore, looking from any angle, the plaintiff 57 Com.A.S.No.122/2016 has not placed any materials to bring the case within the purview of Sec.34 of the Arbitration and Conciliation Act for interference of this court to set aside the award which passed by the arbitral tribunal. Hence, I am of the opinion that the point No.1 answered as Negative.
33. POINT NO.2: In view of my answer to point No.1 as stated above, I proceed to pass the following;
ORDER The petition under Sec.34 of Arbitration and Conciliation Act 1996 filed by the petitioner is hereby dismissed.
No order as to costs.
(Dictated to the Stenographer, transcript thereof corrected by me and then pronounced in the open court on this the 26th day of August, 2021) (P.J. Somashekara) LXXXVIII Addl. City Civil & Sessions Judge, (Exclusive Commercial Court), Bengaluru City