Delhi District Court
Veecon Music And Entertainment Pvt Ltd vs Mccann Erickson India Private Limited on 18 March, 2023
IN THE COURT OF SH. GAURAV RAO: ADJ-03 :NEW
DELHI DISTRICT: PATIALA HOUSE COURTS: NEW
DELHI
ARBTN No. 4980/17 (Old No. 965/17)
CNR No. DLND01-009292-2017
Veecon Music and Entertainment Pvt Ltd
(Formerly Veecon Music and Films
Production Pvt. Ltd.)
B-58, Shivalik, Malviya Nagar,
New Delhi-110017
........Petitioner
Versus
McCann Erickson India Private Limited
Having its Registered Office at,
202, Tolstoy House,
Tolstoy Marg,
New Delhi - 110001
..........Respondent
Date of institution : 22.07.2017
Date on which reserved for judgment : 18.03.2023
Date of decision : 18.03.2023
Decision : Petition dismissed
JUDGMENT
1. The present petition under Section 34 of Arbitration and Conciliation Act, 1996 has been filed against the award dated 21.03.2017.
ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 1/41 Petition/Petitioner's version
2. It is the case of the petitioner that the respondent was appointed as the advertising agent for carrying out various services, publicity for the CD 'Hanuman Chalisa' to be developed by it and in that connection, an agreement dated nil was executed between the parties which contained clauses regarding obligations & terms of the work.
2.1 It is its case that after execution of the agreement, disputes arose between the parties and the respondent filed a petition under Section 433 of the Companies Act, before Hon'ble High Court of Delhi, however, the Hon'ble High Court found it not to be a fit case for being adjudicated by the Company Court and therefore, in terms of the Arbitration Clause between the parties, the Hon'ble High Court appointed Mr. Virender Kumar Ganda, Senior Advocate as an Arbitrator and the arbitration was to be governed as per rules of Delhi High Court International Arbitration.
2.2 It is its case that the respondent (claimant before the Ld. Arbitrator) filed its statement of claim submitting therein that in or about May 2008, it approached the respondent for providing creative advertising services for the video CD which was to be developed by it & was titled as 'Dukh Harta Jai Jai Hanumanta' and which album was to be sung by leading artists including Mr. ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 2/41 Amitabh Bachchan. It is its case that the respondent claimed before the Ld. Arbitrator that the album was conceived sometime in the year 2007, however, due to non-availability of the lead singers, the preparation of the CD got severally delayed and it was eventually released in 2011.
2.3 It is its case that the respondent had further claimed that the petitioner (respondent before the Ld. Arbitrator) was liable to pay fixed retainership of Rs. 65,00,000/- for the period 16.05.2008 to August 2008 & from August 2008 to May 2009 and that it had further incurred an overall cost of Rs. 55,00,000/-, thus claimed an amount of Rs. 20,05,809.40/- and Rs. 7,00,000/- towards cost of the proceedings.
2.4 It is its case that in response to the claim, it filed its written statement cum counter claim and submitted that after execution of the agreement with the respondent there was a delay in finalizing the CD and the respondent was fully apprised of the work of advertising & publicity which actually commenced after the date of the CD was finalized. It is its case that it was further stated in the written statement/counter claim that the respondent was given lyrics for Shri Hanuman Chalisa Album, was requested to get it typed in Hindi and was further requested to fix a date so that it can look into the picture, album and posters etc. and the respondent was requested to make a design again but it failed to do the job despite repeated requests made to the respondent to complete the job. It is its case that it had further ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 3/41 stated therein that since the respondent had not carried out the obligations/completed the work by hiring another agency, in these circumstances, the counter claim for recovery was filed.
2.5 It is its case that the parties led their respective evidence and the respondent examined Mr. Vinay C. Karokar who had filed his affidavit of evidence and the perusal of the same would reveal that he had simply reiterated the contents of the statement of claim while exhibiting certain documents. It is its case that none of the documents were proved in accordance with law, none of the documents could have been exhibited and therefore, reliance placed by the Ld. Arbitrator on the said documents is against the settled principles of law as it is a settled law that if the documents are not proved, they cannot be read.
2.6 It is its case that it examined Mr. Rajnish Budhiraja as a witness, in support of its case, who filed his affidavit of evidence specifically stating that the respondent company did little preparation of CD and designs but did not do any of the launching in the press, TV, radio, outdoor, nor prepared the CD cassette covers, labels, designs nor any publicity was carried out on the internet and mobiles. It is its case that he had further stated that respondent (claimant therein) did not make any designs, advertisement for radio, media nor advertising agents or any posters were finalized or approved. It is its case that its witness was not cross examined on these specific averments which ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 4/41 clearly establishes that the respondent did not perform its obligations.
2.7 It is its case that the Ld. Arbitrator after hearing the claimant's counsel and without affording proper opportunity to it proceeded to pass the award and though the written synopsis were filed by it but the same were not considered by the Ld. Arbitrator. It is its case that the award is in violation of public policy and neither the terms of the contract have been appreciated nor evidence or the documents produced by the parties have been properly looked into and is thus liable to be set aside on the following grounds amongst others:-
A. The Ld. Arbitrator failed to look into the relevant provisions of Agreement between the parties, especially Clause 2 of Agreement dated 20.05.2008.
B. That the Ld. Arbitrator failed to appreciate that in paragraph 4 of the Statement of Claim itself, the respondent had admitted that though the album was conceived sometime in the year 2007 but due to non-availability of lead singers the preparation of the CD got severally delayed and it was finally released in October 2011.
C. That the Ld. Arbitrator failed to appreciate that the respondent did not carry out the obligations it was required to do, did not design one advertisement in the radio, media ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 5/41 or any other advertising agency nor posters, folders, leaflets were finally approved or distributed. The Ld. Arbitrator ignored the fact that the respondent had not worked at all for production of film, cinema slides, recording tapes, photographs nor had prepared any such posters, leaflets required for the said purpose and that since the respondent had not carried out the obligations laid down in the agreement, therefore, it is the respondent who had committed breach of the contract and the petitioner was compelled to hire M/s H-1, H-2 and G.S. Entertainment and in hiring them it had paid an amount of Rs. 43,69,809/- which amount it sought to recover by way of counter claim.
D. The Ld. Arbitrator completely ignored, nor discussed the submissions of the petitioner's counsel that no proof was led by the respondent, no documents stood proved before the Ld. Arbitrator and no certificate under Section 65B was given in respect of the email and therefore, the reliance placed by the Ld. Arbitrator on the documents is wholly in violation of principles of law and tantamount to violation of principles of Public Policy. That Ld. Arbitrator ignored the basic principles of law and failed to consider important documents & evidence as well as provisions of Section 74 of the Contract Act. The Ld. Arbitrator did not consider at all the principles of compensation and that the respondent had not proved that it had suffered any loss and or did the work for which it had not been paid.
ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 6/41 E. The Ld. Arbitrator totally ignored the fact that the respondent did not perform its obligations and merely mentioning of the word "retainership" does not mean that it is/was entitled to retainership amount, irrespective of whether work is carried out or not.
F. That on the bare perusal of the Award, it would reveal that the Ld. Arbitrator has violated the principles of law laid down by the Hon'ble Apex Court and there is a clear violation & conflict with the Public Policy of India and the same is against the well laid down & settled principles of law as well as against the principles of fairness, morality, equity and justice and hence the same is liable to be set aside.
G. That the procedure which was required to be followed by the Ld. Arbitrator should have also been in accordance with the agreement of the parties. The arbitrator in its decision must be also within the bounds of the jurisdiction conferred under the Act and it is clear from the conduct of the arbitrator that the award is in contravention of the provisions of the Act and the procedure prescribed has not been followed and therefore, the same is patently illegal.
2.8 It was pleaded that in view of the law laid down in Ardee Infrastructure Pvt. Ltd. Vs. Yashpal & Sons & Others, the ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 7/41 present objections would be governed under old Act i.e. The Arbitration and Conciliation Act 1996 because the arbitration proceedings commenced before October 2015.
2.9 Hence, the present petition.
Reply
3. It was pleaded that the objections do not fall within the category of the objections permitted & prescribed by Section 34 of the Arbitration and Conciliation Act, 1996 that can be be taken against the Arbitral Award and are framed like grounds of appeal which do not fall within the four categories of the objections that could be maintained against the arbitral award.
3.1 It was pleaded that the petitioner has not pleaded any issue/matter which has not been considered by the Ld. Arbitrator and the petitioner is merely attempting to seek the re-appreciation of the facts leading to the award on the same set of evidence and facts. It was pleaded that the findings of the Ld. Arbitrator are reasonable, based on facts on record and hence no case for review or even re-appreciation of the Arbitral Award has been made out.
3.2 It was pleaded that it is now well settled law that the award cannot be lightly interfered with unless the errors in the award are unconscionable and shake the conscience of the court.
ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 8/41 It was pleaded that the entire case of the objector revolves around the nature of the agreement & reading and interpretation of its various clauses and that the award is to be treated as final with regard to Ld. Arbitrator's reading & interpretation of the contract and even if such reading and interpretations are erroneous in law, the court would not interfere with an award only on the ground that another view is possible on the reading of the terms of the contract.
3.3 It was pleaded that the objections are beyond the scope and object of Section 34 of the Act, and do not fall within the four categories of Section 34 of the Act as interpreted, elucidated and explained by the Hon'ble Supreme court of India in Associate Builders Vs D.D.A AIR 2015 SC620: (2015) 3 SCC 49 and it is not even the case of the petitioner that the award is in contravention of the Fundamental Policy of the law or in conflict with the basic notion of morality of justice.
3.4 It was pleaded that it has been held in Associate Builders Vs D.D.A (2015) 3 SCC 49 that it is only when the Arbitral Award is in conflict with the Public Policy of India as per Section 34(2) (b) (ii) that the merits of an Arbitral Award can be looked into under certain specified circumstances and neither the objector has pleaded any such conflict of the award with the Public Policy of India in the objection nor is the Award under challenge in conflict with the Public policy of India, in any manner.
ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 9/41 3.5 It was denied that the award is liable to be set aside as being violative of the Public Policy or that the Ld. Arbitrator ignored the basic principles of law and failed to consider important documents, evidence and the provision of section 74 of the Contract Act and it was pleaded that the claim under Arbitration was not on account of any damages under Section 74 of the Indian Contract Act.
3.6 It was pleaded that the respondent is engaged in the business of organizing advertising and publicity in all forms of media, brand promotion, designing creative advertisements, devising creative strategies for marketing and advertising.
3.7 It was pleaded that that an Agreement dated 16.03.2009 was executed between it and the petitioner and it was agreed between the parties that it shall assist the petitioner in formulating the brand strategy, developing specific advertising campaigns for clients, preparing creative work and all material for all forms of media advertising, supervising film production for all brands and supervising and supplying printed materials as per clients needs.
3.8 It was pleaded that it was also agreed as per the said agreement that it will charge an all inclusive fixed Annual Retainer Fee of Rs. 65,00,000/- per annum, excluding service tax and will be billed and earned on monthly basis towards the cost ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 10/41 of creative services rendered by it. It was pleaded that to be billed monthly at pro-rata basis, the bill for retainer fee was to be raised by the respondent by the 7th of every month and the petitioner was to pay the same within 30 days of receipt of the invoice.
3.9 It was pleaded that it was also agreed as per Clause 3
(a) of the said Agreement that it would raise the invoice towards its creative and strategy fee by the 7th of every month and the invoices will be due for payment within 30 days from the date of receipt of the invoices by the petitioner.
3.10 It was pleaded that the scope of work was provided in Annexure A of the agreement and that the Retainership included only the fees for the creative services as specified in sub-clauses (i) and (ii) of Clause 2 of the Agreement.
3.11 It was pleaded that it raised invoices upon the petitioner from time to time and initially upto December 2008, the petitioner paid the invoices but from December 2008 to May 2009, the petitioner defaulted in the payment of the bills despite having availed the services. It was pleaded that the petitioner failed to pay the various invoices and for no justifiable reasons, neglected and failed to pay the outstanding amount of Rs. 20,05,809.44/- against the invoices from December 2008 to May 2009.
ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 11/41 3.12 It was pleaded that it, from time to time, provided the creative and strategy services, carried out all the art works, created all the media advertising campaigns and rendered advice on marketing strategies which have all been accepted by the petitioner without any demur and therefore the petitioner has no plausible reasons to not pay or claim to be not be liable to pay, the retainership fees to it during the period the Retainership Agreement remained in force. It was pleaded that as per its records the outstanding amount of Rs. 20,05,809.44/- has remained due in its books of accounts from the petitioner and upon failure of the petitioner to pay the admitted liability it was constrained to serve a legal notice dated 18.02.2012 upon the petitioner for the release of its outstanding dues.
3.13 It was pleaded that the petitioner had engaged it for providing creative services on the basis of its worldwide reputation, expertise, effectiveness in rendering creative advertising, creative services, quality, novelty and effectiveness of the creative ideas, brand campaign, creating and mixing marketing strategies advised by it and the quality services, which it and its associate companies under the McCann World Group are known for.
3.14 It was pleaded that in arbitration proceedings it examined its witness Mr. Vinay C. Karekar, who successfully proved the various exhibits as also the fact that as the CD could not be released within the stipulated contractual time, it could not ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 12/41 release any advertisement in the newspaper. It was pleaded that the said witness denied that the designs created by it were not approved and on the contrary stated that the designs were appreciated by Mr. Amitabh Bachchan and he also denied that any fresh designs were sought from it. It was pleaded that the said witness also clarified that the work listed at item no. 2 Annexure A had been completed by it, whereas the work listed at Item 1 was only executable at the time of launch of the CD, which could not be done until October 2011. It was pleaded that the said witness clarified that the creative services involved providing the ideation and concept design of the brochure and securing printing of the brochure was not a part of the Agreement.
3.15 It was pleaded that petitioner examined Mr. Rajnish Budhiraja as its witness who had joined the petitioner only in August 2010 and had no personal knowledge of the pre-contract negotiations and the implementation of the Agreement dated 20.05.2008 and only the CD was released during his tenure.
3.16 It was pleaded that the petitioner's witness tried to belittle the quality and contents of the creative services rendered by it to the petitioner and even made false statements, which are contrary to its own e-mails. It was pleaded that the petitioner tried to contend that it refused to carry out certain work in the year 2011, when the CD was actually launched and, therefore, they had to engage other contractors for launch of the CD and in ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 13/41 his cross- examination, the petitioner's witness denied personal knowledge of the facts of the case. It was pleaded that the said witness had alleged that the payments were to be made for the posters, designs, booklet, press material, bunglers etc. and claimed that as these items were not prepared, nothing is payable. It was pleaded that although the Agreement for Retainership was only in respect of the creative services, but the witness has contended that the final product, to be delivered by it was the idea, as the CD of Hanuman Chalisa sung by Shri Amitabh Bachchan and 21 other leading singers. It was pleaded that the said witness had without any further proof denied that its erstwhile President had admitted that the CD cover and other publicity material have been designed by it for the petitioner. It was pleaded that the said witness also denied knowledge of the e- mails exchanged between it and the erstwhile President & Commercial Director of the petitioner. It was pleaded that the said witness alleged that the inner cover and jacket design of the album had not been prepared by it and also stated that the inlay would contain the names of singers, music directors, lyrics etc. which could not have been created during 2008-09 as the CD was ready only in October, 2011. It was pleaded that the said witness had given evasive answers to various questions put to him and he stated about the final CD that would be launched but none of these involved the creative inputs from it. It was pleaded that the said witness had admitted that the advertisement material would be required shortly before the date of launch.
ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 14/41 3.17 It was pleaded that thus it follows that during the term of the contract, it had delivered the ideation of the CD cover and the inlay and advertising material for the launch of the CD, but in October 2011 when the CD was launched, it could not have, in the absence of the contract for remuneration, provided any services to the petitioner. It was pleaded that the said witness negated the obligation of the petitioner of providing their marketing objectives or plans for advertisements, sale promotion etc. alleging that the petitioner had nothing to do with such plans. It was pleaded that the said witness had given evasive replies on the issue of fixed monthly Retainership payment alleging that the Retainership payments were subject to the approval of the designs by Mr. Amitabh Bachchan under an agreement between Mr. Amitabh Bachchan and the petitioner to which it was not a party and had alleged that Mr. Prasun Joshi was aware of the agreement but no such agreement has been placed on record. It was pleaded that the said witness admitted the e-mails exchanged between it and the petitioner and though he alleged that the CD was ready in 2007 but he could not place any proof on record except imputing the knowledge of Mr. Prasun Joshi, which it denies. It was pleaded that the said witness admitted that there was only a single CD for which the creative had to be designed by it, which was not ready until October 2011.
3.18 It was pleaded that while the petitioner is denying the payment of Retainership but they were not able to produce ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 15/41 any evidence that they had got the same work done by any such agency, if the respondent had not done it.
3.19 It was pleaded that the petitioner was unable to counter by any evidence that it had not provided creative services to the petitioner, for which it is claiming the fixed Retainership fee of Rs. 65 Lakhs. It was pleaded that the Petitioner also admitted that the Retainership fee was payable on a monthly basis and it had so paid the Retainership fee for the period from 16th May 2008 to November 2008 in full and partly for the month of December, 2008 and it appears that due to financial stringencies or some other cause, the petitioner was facing some financial crises or some other crises for which reason it could not pay the Retainership fee to it.
3.20 It was pleaded that the CD was released in October 2011 and at that stage it engaged third party contractors for the publicity material and the logistics required for the launch of the CD and none of the expenses, as claimed to have been incurred on the release of the CD related to creative services. It was pleaded that even if it had to provide these services, such services were separately chargeable. It was pleaded that the creative services rendered by it to the petitioner have been fully utilized and availed by the petitioner but for no justifiable reason, the petitioner is withholding the payment of the Retainership fee.
ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 16/41 3.21 It was pleaded that it had claimed the unpaid fixed Retainership fee agreed in the agreement dated 20.05.2008 and the same by its very nature, is payable at fixed intervals with or without the proof of any services having been rendered. It was pleaded that the Retainership fee is paid to retain a professional person or entity for seeking their advice, opinions or creative inputs from time to time against the payment of a fixed periodical consideration. It was pleaded that during the term of the Retainership Agreement, the retainee agrees to serve the retainer irrespective of the quantum of service rendered but the agreed fixed remuneration would be paid at the agreed periodical intervals. It was pleaded that therefore even if the petitioner's defence were taken into consideration, the said defence is not maintainable, as the fixed Retainership fee had to be paid every month as agreed in the agreement dated 20.05.2008.
3.22 It was pleaded that the evidence on record also, shows that the creative services rendered by it were appreciated by the petitioner and the petitioner had several times and even after the expiry of the Retainership Agreement, committed that the entire Retainership fee shall be paid to it, though in installment. It was pleaded that the petitioner had offered to renew the Retainership Agreement and had also offered to it to provide their services for two other CD launches and therefore the petitioner had no defence and its claim was rightly allowed by the Ld. Arbitrator.
ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 17/41 3.23 It was pleaded that as regards the arguments that the provisions of Section 65B of the Evidence Act, 1872 were not complied with, Section 19 (1) categorically provides that the arbitral proceedings will not be governed by the Indian Evidence Act, 1872.
3.24 It was pleaded that the claim in the Arbitration Petition/Statement of Claims was not for any liquidated damages or damages and hence this ground also fails miserably.
3.25 It was pleaded that though it is alleged that the Award is contrary to the principles of law and the Public Policy of India but there is no elucidation with regard to the precise ignorance of the principles of law or the Public Policy of India by the Ld. Arbitrator.
Findings
4. I have heard the Ld. counsels for the parties, given due consideration to the rival contentions raised at bar and have carefully gone through the record. I have also considered the case laws relied upon by the respective parties.
4.1 Ld. Counsel for the petitioner relied upon Arjun Panditrao Khotkar Vs. Kailash Kushanrao Gorantyal and ors Civil Appeal Nos. 20825-20826 of 2017 dated 14.07.2020, Board of Control for Cricket in India Vs. Deccan Chronicle ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 18/41 Holdings Ltd. Comm Arbitration Petition (L) No. 4466/2020 dated 16.06.2021, PSA Sical Terminals Pvt. Ltd. Vs. The Board of Trustees of VO Chidambranar Port Trust Tuticorin and ors Civil Appeal Nos. 3699-3700/2018 dated 28.07.2021, Govt. of NCT of Delhi Vs. M/s Hurryson Enterprises OMP 608/2008 IA 13043/2018, 13044/2018 & 13045/2018 dated 18.12.2018, The Braithwaite Burn and Jessop Construction Company Ltd. (BBJ) Vs. Rail Vikas Nigam Ltd. (RVNL) OMP (Comm) 127/2019 dated 15.04.2019, Bhuri Bai Vs. The State of Madhya Pradesh Criminal Appeal No 1972/2022 arising out of SLP (Cri) 9508/2022 dated 11.11.2022, Bharat Aluminium Co. Ltd. Vs. Lark Construction Pvt. Ltd ARBA No. 7/2017 dated 14.12.2018, Bharat Coking Coal Ltd. Vs. L.K. Ahuja Appeal (Civil) no. 5489-5490 of 1995 dated 12.03.2004 and Ashok Kapil Vs. Sana Ullah (dead) and ors dated 25.09.1996.
4.2 On the other hand, Ld. Counsel for the petitioner relied upon Patel Engineering Ltd. Vs. North Eastern Electric Power Corporation Ltd. (2020) 7 SCC 167, Delhi Airport Metro Express Pvt. Ltd. Vs. Delhi Metro Rail Corporation Ltd. (2022) 1 SCC 131, Associate Builders Vs. Delhi Development Authority (2015) 3 SCC 49, Dyna Technologies Pvt. Ltd Vs. Crompton Greaves Ltd. (2019) 20 SCC 1, MMTC Limited Vs. Vendanta Limited (2019) 4 SCC 163 and Millennium School Vs Pawan Dawar 2022 SCC OnLine Del 1390, ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 19/41 4.3 Section 34 of The Arbitration and Conciliation Act 1996 deals with setting aside of an arbitral award. The scope and ambit of court's jurisdiction under section 34 has been dealt with and explained in detail by the Hon'ble Apex Court in Delhi Airport Metro Express Pvt. Ltd (supra) wherein it has been held as under:-
"22. The 1996 Act was enacted to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards and also to define the law relating to conciliation and for matters connected therewith, by taking into account the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration and the UNCITRAL Conciliation Rules. One of the principal objectives of the 1996 Act is to minimize the supervisory role of courts in the arbitral process. With respect to Part I of the 1996 Act, Section 5 imposes a bar on intervention by a judicial authority except where provided for, notwithstanding anything contained in any other law for the time being in force. An application for setting aside an arbitral award can only be made in accordance with provisions of Section 34 of the 1996 Act.
23. Relevant provisions of Section 34 (as they were prior to the Arbitration and Conciliation (Amendment) Act, 2015) read as under:-
"34. Application for setting aside arbitral award. -- (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-
section (3).
(2) An arbitral award may be set aside by the Court only if--
(a) the party making the application furnishes proof that--
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 20/41 arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the Court finds that--
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation.--Without prejudice to the generality of sub- clause (ii), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81.
24. An amendment was made to Section 34 of the 1996 Act by the Arbitration and Conciliation (Amendment) Act, 2015 (hereinafter, 'the 2015 Amendment Act'). A perusal of the statement of objects and reasons of the 2015 Amendment Act would disclose that the amendment to the 1996 Act became necessary in view of the interpretation of the provisions of the 1996 Act by courts in certain cases which had resulted in delay of disposal of arbitration proceedings and increase in interference by courts in arbitration matters, which had the tendency to defeat the object of the 1996 Act. Initially, the matter was referred to the Law Commission of India to review the shortcomings in the 1996 Act in detail. The Law Commission of India submitted its 176th Report, recommending various amendments to the 1996 Act. However, the Justice Saraf Committee on Arbitration constituted by the Government, was of the view that the proposed amendments gave room for substantial intervention by the court and were also contentious. Thereafter, on reference, the Law Commission undertook a comprehensive study of the amendments proposed by the Government, keeping in mind the views of the Justice Saraf ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 21/41 Committee and other stakeholders. The 246th Report of the Law Commission was submitted on 05.08.2014. Acting on the recommendations made by the Law Commission in its 246th Report, amendments by way of the 2015 Amendment Act were made to several provisions of the 1996 Act, including Section
34.
25. The amended Section 34 reads as under: -
"34. Application for setting aside arbitral award. -- (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and subsection (3). (2) An arbitral award may be set aside by the Court only if--
(a) the party making the application furnishes proof that--
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the Court finds that--
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation 1. --For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,--
(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 22/41
(ii) it is in contravention with the fundamental policy of Indian law; or
(iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2. --For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute. (2-A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by re- appreciation of evidence."
26. A cumulative reading of the UNCITRAL Model Law and Rules, the legislative intent with which the 1996 Act is made, Section 5 and Section 34 of the 1996 Act would make it clear that judicial interference with the arbitral awards is limited to the grounds in Section 34. While deciding applications filed under Section 34 of the Act, courts are mandated to strictly act in accordance with and within the confines of Section 34, refraining from appreciation or re-appreciation of matters of fact as well as law. (See: Uttarakhand Purv Sainik Kalyan Nigam Limited. v. Northern Coal Field Limited. 2 , Bhaven Construction Through Authorised Signatory Premjibhai K. Shah v. Executive Engineer Sardar Sarovar Narmada Nigam Ltd. and Another 3 and Rashtriya Ispat Nigam Limited v. Dewan Chand Ram Saran 4 ).
27. For a better understanding of the role ascribed to courts in reviewing arbitral awards while considering applications filed under Section 34 of the 1996 Act, it would be relevant to refer to a judgment of this Court in Ssangyong Engineering and Construction Company Limited v. National Highways Authority of India (NHAI) 5 wherein R.F. Nariman, J. has in clear terms delineated the limited area for judicial interference, taking into account the amendments brought about by the 2015 Amendment Act. The relevant passages of the judgment in Ssangyong (supra) are noted as under: (SCC pp. 16971, paras 34-41) "34. What is clear, therefore, is that the expression "public policy of India", whether contained in Section 34 or in Section 48, would now mean the "fundamental policy of Indian law" as explained in paras 18 and 27 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49:
ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 23/41 (2015) 2 SCC (Civ) 204] i.e. the fundamental policy of Indian law would be relegated to "Renusagar"
understanding of this expression. This would necessarily mean that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] expansion has been done away with. In short, Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12], as explained in paras 28 and 29 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Court's intervention would be on the merits of the award, which cannot be permitted post amendment. However, insofar as principles of natural justice are concerned, as contained in Sections 18 and 34(2) (a)(iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in para 30 of Associate Builders Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204].
35. It is important to notice that the ground for interference insofar as it concerns "interest of India" has since been deleted, and therefore, no longer obtains. Equally, the ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the "most basic notions of morality or justice". This again would be in line with paras 36 to 39 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , as it is only such arbitral awards that shock the conscience of the court that can be set aside on this ground.
36. Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law, as understood in paras 18 and 27 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204], or secondly, that such award is against basic notions of justice or morality as understood in paras 36 to 39 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204]. Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii) was added by the Amendment Act only so that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] ,as understood in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 :
ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 24/41 (2015) 2 SCC (Civ) 204] , and paras 28 and 29 in particular, is now done away with.
37. Insofar as domestic awards made in India are concerned, an additional ground is now available under sub-section (2-A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within "the fundamental policy of Indian law", namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.
38. Secondly, it is also made clear that reappreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.
39. To elucidate, para 42.1 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Para 42.2 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award.
40. The change made in Section 28(3) by the Amendment Act really follows what is stated in paras 42.3 to 45 in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair-minded or reasonable person would; in short, that the arbitrator's view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2-A).
41. What is important to note is that a decision which is perverse, as understood in paras 31 and 32 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 :
(2015) 2 SCC (Civ) 204] , while no longer being a ground for challenge under "public policy of India", would ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 25/41 certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse."
28. This Court has in several other judgments interpreted Section 34 of the 1996 Act to stress on the restraint to be shown by courts while examining the validity of the arbitral awards. The limited grounds available to courts for annulment of arbitral awards are well known to legally trained minds. However, the difficulty arises in applying the well-established principles for interference to the facts of each case that come up before the courts. There is a disturbing tendency of courts setting aside arbitral awards, after dissecting and reassessing factual aspects of the cases to come to a conclusion that the award needs intervention and thereafter, dubbing the award to be vitiated by either perversity or patent illegality, apart from the other grounds available for annulment of the award. This approach would lead to corrosion of the object of the 1996 Act and the endeavours made to preserve this object, which is minimal judicial interference with arbitral awards. That apart, several judicial pronouncements of this Court would become a dead letter if arbitral awards are set aside by categorising them as perverse or patently illegal without appreciating the contours of the said expressions.
29. Patent illegality should be illegality which goes to the root of the matter. In other words, every error of law committed by the Arbitral Tribunal would not fall within the expression 'patent illegality'. Likewise, erroneous application of law cannot be categorised as patent illegality. In addition, contravention of law not linked to public policy or public interest is beyond the scope of the expression 'patent illegality'. What is prohibited is for courts to re-appreciate evidence to conclude that the award suffers from patent illegality appearing on the face of the award, as courts do not sit in appeal against the arbitral award. The permissible grounds for interference with a domestic award under Section 34(2-A) on the ground of patent illegality is when the arbitrator takes a view which is not even a possible one, or ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 26/41 interprets a clause in the contract in such a manner which no fair-minded or reasonable person would, or if the arbitrator commits an error of jurisdiction by wandering outside the contract and dealing with matters not allotted to them. An arbitral award stating no reasons for its findings would make itself susceptible to challenge on this account. The conclusions of the arbitrator which are based on no evidence or have been arrived at by ignoring vital evidence are perverse and can be set aside on the ground of patent illegality. Also, consideration of documents which are not supplied to the other party is a facet of perversity falling within the expression 'patent illegality'.
30. Section 34 (2) (b) refers to the other grounds on which a court can set aside an arbitral award. If a dispute which is not capable of settlement by arbitration is the subject-matter of the award or if the award is in conflict with public policy of India, the award is liable to be set aside. Explanation (1), amended by the 2015 Amendment Act, clarified the expression 'public policy of India' and its connotations for the purposes of reviewing arbitral awards. It has been made clear that an award would be in conflict with public policy of India only when it is induced or affected by fraud or corruption or is in violation of Section 75 or Section 81 of the 1996 Act, if it is in contravention with the fundamental policy of Indian law or if it is in conflict with the most basic notions of morality or justice.
31. In Ssangyong (supra), this Court held that the meaning of the expression 'fundamental policy of Indian law' would be in accordance with the understanding of this Court in Renusagar Power Co. Ltd. v. General Electric Co. 6 In Renusagar (supra), this Court observed that violation of the Foreign Exchange Regulation Act, 1973, a statute enacted for the 'national economic interest', and disregarding the superior courts in India would be antithetical to the fundamental policy of Indian law. Contravention of a statute not linked to public policy or public interest cannot be a ground to set at naught an arbitral award as being discordant with the fundamental policy of Indian law and neither can it be brought within the confines of 'patent illegality' as discussed above. In other words, contravention of a statute only if it is linked to public policy or public interest is cause for setting aside the award as being at odds with the fundamental policy of Indian law. If an arbitral award shocks the conscience of the court, it can be set aside as being in conflict with the most basic notions of justice. The ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 27/41 ground of morality in this context has been interpreted by this Court to encompass awards involving elements of sexual morality, such as prostitution, or awards 6 1994 Supp (1) SCC 644 seeking to validate agreements which are not illegal but would not be enforced given the prevailing mores of the day."
4.4 In Patel Engineering Ltd. (supra) it has been held as under:-
"15. In BCCI v. Kochi Cricket (P) Ltd., 2018 (6) SCC 287, the Supreme Court held that the Amendment Act, 2015 would apply to Section 34 petitions that are made after 23.10.2015 (the day on which the Amendment Act came into force). In the present case, admittedly, after the arbitral awards are dated 29.03.2016, the applications under Section 34 of the Act were filed before the Judicial Commissioner, Shillong as per the decision in BCCI, the provisions of the Amendment Act would apply.
16. Patent illegality as a ground for setting aside a domestic award was first expounded in the judgment of Saw Pipes Ltd.16 where this Court was dealing with a domestic award. This Court gave a wider interpretation to the 'public policy of India' in Section 14 Board of Control for Cricket in India v. Kochi Cricket Private Limited and Others (2018) 6 SCC 287 15 Board of Control for Cricket in India v. Kochi Cricket Private Limited and Others (2018) 6 SCC 287 16 Oil & Natural Gas Corporation Ltd. v. Saw Pipes Ltd. (2003) 5 SCC 705 34(2)(b)
(ii) in Part I of the 1996 Act. The Court held that an award would be "patently illegal", if it is contrary to the substantive provisions of law; or, provisions of the 1996 Act; or, terms of the contract.
20. In Ssangyong Engineering and Construction Company Limited19, this Court was considering a challenge to an award passed in an international commercial arbitration, between the Appellant - company a foreign entity registered under the laws of Korea, and the Respondent, a Government of India undertaking. In paragraph (19) of the judgment, this Court noted that the expansive interpretation given to "public policy of India" in the Saw Pipes (supra) and Western Geco International Limited 20 cases, which had been done away with, and a new ground of "patent illegality" was introduced which would apply to applications under Section 34 made on or after 23.10.2015. In paragraphs (36) and (37) of the judgment, this ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 28/41 Court held that insofar as domestic awards are concerned, the additional ground of patent illegality was now available under sub-section (2A) to Section 34. However, reappreciation of evidence was not permitted under the ground of "patent illegality" appearing on the face of the award.
21. In paragraphs (39) and (40) of Ssangyong Engineering (supra), the Court reiterated paragraphs (42.2) and (42.3) of Associate Builders (supra) wherein, it was held that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes a contract in a manner which no fair minded or reasonable person would take i.e. if the view taken by the arbitrator is not even a possible view to take. In paragraphs (39) and (40), the Supreme Court held as under:-
"39. To elucidate, para 42.1 of Associate Builders v. Delhi Development Authority (2015) 3 SCC 49, namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Para 42.2 of Associate Builders v. Delhi Development Authority (2015) 3 SCC 49, however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award.
40. The change made in Section 28(3) by the Amendment Act really follows what is stated in paras 42.3 to 45 in Associate Builders v. Delhi Development Authority (2015) 3 SCC 49, namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair-minded or reasonable person would; in short, that the arbitrator's view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2-A)." (emphasis supplied)"
4.5 In Associate Builders (supra) it has been held as under:-
"17. It will be seen that none of the grounds contained in sub- clause 2 (a) deal with the merits of the decision rendered by an ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 29/41 arbitral award. It is only when we come to the award being in conflict with the public policy of India that the merits of an arbitral award are to be looked into under certain specified circumstances.
.......33. It must clearly be understood that when a court is applying the "public policy" test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score[1]. Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts."
4.6 A bare reading of Section 34 and the law propounded by the Hon'ble Apex Court makes it crystal clear that the scope of inquiry, the grounds on which an award can be set aside is/are quite limited. This is because the Arbitrator is a Judge of the choice of the parties and his decision unless there is an error apparent on the face of the award which makes it unsustainable, is not to be set aside even if the court, as a court of law would come to a different conclusion on the same set of facts. The court cannot reappraise the evidence and it is not open to the court to sit in appeal over the conclusion of the arbitrator. It is not open to the court to set aside a finding of fact arrived at by the arbitrator and the only grounds on which the award can be set aside are those mentioned in the Arbitration Act.
4.7 Where the arbitrator has assigned cogent grounds and sufficient reasons and no error of law or misconduct is cited, the award will not call for interference by the court in exercise of ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 30/41 the power vested in it. Where the arbitrator is a qualified technical person and expert, who is competent to make assessment by taking into consideration the technical aspects of the matter, the court would generally not interfere with the award passed by the arbitrator.
4.8 The interference with an arbitral award is permissible only when the findings of the arbitrator are arbitrary, capricious or perverse or when conscience of the Court is shocked or when illegality is not trivial but goes to the root of the matter. Once it is found that the arbitrator's approach is neither arbitrary nor capricious, no interference is called for on facts. The arbitrator is ultimately a master of the quantity and quality of evidence while drawing the arbitral award. Patent illegality must go to the root of the matter and cannot be of trivial nature.
4.9 At the outset in view of law laid down in BCCI v. Kochi Cricket (P) Ltd., 2018 (6) SCC 287 as the award was passed on 21.03.2017 and the objections were filed on 22.07.2017, the Amendment Act 2015 would apply.
4.10 Though the petitioner is challenging the award claiming that the same is in conflict with the policy of India, however, the petitioner has failed to explain as to how the award is in conflict with the policy of India. It is also not the petitioner's case that the award was induced or affected by fraud or corruption or was in violation of section 75 or 81 of the Act. The ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 31/41 approach of the Ld. Arbitrator was a reasonable and judicious one. It was not even remotely arbitrary or whimsical. The Ld. Arbitrator had given reasonable opportunity to the parties to put in their best evidence and passed the award after fair appreciation of the evidence and the arguments advanced by the parties. There is no violation of statutory provisions or of the decisions of the Hon'ble Apex Court or the Hon'ble High Court. Neither is the award unfair or unreasonable to the extent that it shocks the conscience of the court. There is no illegality much least patent illegality which goes to the root of the matter. It is not the petitioner's case and otherwise also not borne out from the award that the same is against the justice or morality or the interest of India.
4.11 In fact by way of the present objections what the petitioner is seeking in essence is a review on the merits of the dispute which is not permissible. So is the re-appreciation or reassessing of the facts, evidence. If the court is to look into the quality and nature of evidence led by the parties before the Ld. Arbitrator and re-evaluate their respective evidence, same would tantamount to an appeal, review which is not permissible. Nonetheless the Ld. Arbitrator had duly and rightly appreciated the quality of evidence led by the respective parties and also observed that the petitioner's witness had joined the petitioner only in August 2010 i.e. after more than 1 year of the termination of the contract by efflux of time and had no personal knowledge ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 32/41 of the pre-contract negotiations or implementation of the agreement.
4.12 The Ld. Arbitrator had considered the agreement entered between the parties particularly clause 2 which dealt with the services to be provided by the respondent and clause 3 which dealt with the remuneration to which the respondent was entitled to. Scope of the work and deliverables were provided in Annexure A which formed part of the agreement and the same was dealt in detail by the Ld. Arbitrator.
4.13 As per clause 3 of the agreement the respondent was entitled to the remuneration to the tune of Rs. 65 lacs for the period 16.05.2008 to August 2008 and August 2008 to May 2009. The Ld. Arbitrator while discussing the concept of retainership, retainer agreement held in para 31 as under:-
"As per, literal interpretation of the Agreement, it was clear and explicit that the said Agreement was a retainer contract. Simply stated, the word "Retainer" implies that one person engages another person for performing something which primarily involves some special or professional skills over a period of time by making available his/her time on priority basis at the call of the person engaging provided, such engaging person agreeing to pay to the person so engaged, a fixed sum of money, or a commitment charge say monthly, quarterly, half yearly or annually basis to ensure that such services are available interruptedly. The sum is normally agreed to be paid as commitment or retainer fee for such engagement so that the person engaged knows that for such commitment of professional time a certain sum in the form of remuneration or fees would be paid. In the context of the aforesaid Agreement, the understanding mutually entered and executed an Agreement that the respondent would pay an all-inclusive fixed sum of Rs. 65,00,000/- (Rupees Sixty-Five ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 33/41 Lakhs only) annually and that the same would be pro rata monthly."
4.14 Nonetheless the Ld. Arbitrator in all fairness, equity and reasonableness rejected the respondent's (claimant therein) argument that it was entitled to remuneration irrespective of whether it performed its obligation or not and when on to observe as under:-
"33. The contention by the Claimant that the payment has to be made irrespective of the performance in a month is not correct. Performance is a continuous process during the term of contract. The Claimant under a contract is entitled to payment, if and only, the Claimant has proved its performance and consistently showed and shows that it was willing and is willing to perform its obligations."
4.15 However at the same time, Ld. Arbitrator observed that the respondent had performed its parts of its obligations and it was not the petitioner's case and atleast not proved before the Ld. Arbitrator that the respondent had failed to perform its part of the contractual obligation. The Ld. Arbitrator observed as under
in this regard:
"34.In the present case, the Claimant had undoubtedly commenced its performance and it was not the case of the Respondent that the Claimant did not perform at all. The said Agreement was for a period of one year to begin with for performing various things as specified in Clause 3 (a) of the Agreement. Since, the work to be executed was a creative work, it could be accomplished only after several rounds of presentations and discussions with the Respondents for their inputs and feedback.
35.It is true that on a month to month basis, it may not be practicable to quantify the performance in a creative work. It is not the case of the Respondent that the Claimant was not in a position to fulfill its obligations, within the agreed deadline nor ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 34/41 were there reasons to believe that there was anticipatory breach of the terms of the Agreement. In which case, the Respondents should have pointed out the deficiencies, if any to the Claimant to take immediate remedial measures and effective steps and that failure to do the same, would result into termination of the Agreement. The Respondents have not done so."
4.16 There is no infirmity or illegality much least perversity in the above finding, of the Ld. Arbitrator, whatsoever. Even otherwise this court cannot substitute its own view/interpretation of the agreement with that of the Ld. Arbitrator nor re-appreciate or re-evaluate the evidence. The remuneration was to be paid for the creative services to be provided by the respondent and the Ld. Arbitrator has in detail discussed that there was no deficiency or shortcoming in the services provided by the respondent to the petitioner and in case if there was any, the same was never pointed out or proved.
4.17 As observed by Ld. Arbitrator the petitioner could not prove the rejection of the respondent's work or non performance of its contractual obligations and that if same would have been the case the petitioner would have terminated the contract at the first opportunity. Rather there was admission by the petitioner regarding delay in finalization of the CD which was admittedly finalized after the contract/agreement between the parties stood terminated due to efflux of time. The CD could not be finalized/recorded for want of lead singers which was not the responsibility of the respondent but it was of the petitioner. The agreement came to an end on 15.05.2009 whereas the CD ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 35/41 was finalized in 2011 and as the CD was not finalized the respondent could not develop the advertising contents as per the petitioner's marketing objectives and plans. As far as the work as per Annexure B appended to the agreement is concerned, not only the respondent was to be paid separately for it & it was in no way connected with the remuneration to be paid to the respondent as per clause 3 of the agreement but as the CD could not be ready before 2011 the work could be performed by the respondent in terms of Annexure B. 4.18 In fact Ld. Arbitrator also noted that the respondent continued to render its services to the petitioner even after the agreement had expired. In fact the Ld. Arbitrator took note of the emails exchanged between the parties particularly email dated 20.05.2009, 12.11.2009, 02.01.2010, 22.01.2010 etc. In these emails, especially ones exchanged in January 2010 the petitioner undertook to make the outstanding payment and sought time for releasing the payment. Had there been any deficiency in services by the respondent, any lapses on their part, any failure to fulfill their contractual obligation, the petitioner would have not written the above mails or released the amount/payment.
4.19 Though Ld. Counsel for the petitioner argued that these emails could not have been looked into by the Ld. Arbitrator as they were not accompanied with any certificate u/s 65B of Indian Evidence Act 1872 and for which argument Ld. Counsel also relied upon Arjun Panditrao Khotkar (supra), ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 36/41 however suffice would be to say that the said argument is absolutely misconceived in view of section 19 of the Arbitration and Conciliation Act 1996 which provides that the Arbitral Tribunal shall not be bound by the Indian Evidence Act 1872. In fact as per section 19 (3) and (4) it is for the Arbitral Tribunal to determine the admissibility, relevance, materiality and weight of any evidence. Furthermore no objection was taken before the Ld. Arbitrator when the emails were tendered in evidence by the respondent. It has been held in Millennium School (Supra) as under:-
40. In R.V.E. Venkatachala Gounder v. Arulmigu Viswesaraswami & V.P. Temple And Anr.: (2003) 8 SCC 752, the Supreme Court held that an objection with regard to a certificate of Section 65-B of the Evidence Act is not available if it is not taken at the material time. The court had also explained the distinction regarding evidence that is inherently not admissible and a defect in the manner of proving the same. The requirement of Section 65-B of the Evidence Act relates to the mode and manner of leading evidence and if no objection as to the same is taken at the material time, it would not be open for a party to raise it at a later stage. The relevant extract of the said decision is set out below:
"20. ... Ordinarily, an objection to the admissibility of evidence should be taken when it is tendered and not subsequently. The objections as to admissibility of documents in evidence may be classified into two classes : (i) an objection that the document which is sought to be proved is itself inadmissible in evidence; and (ii) where the objection does not dispute the admissibility of the document in evidence but is directed towards the mode of proof alleging the same to be irregular or insufficient. In the first case, merely because a document has been marked as "an exhibit", an objection as to its admissibility is not excluded and is available to be raised even at a later stage or even in appeal or revision. In the latter case, the objection should be taken when the evidence is tendered and once the document has been admitted in evidence and marked as an exhibit, the objection that it should not have been admitted in evidence ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 37/41 or that the mode adopted for proving the document is irregular cannot be allowed to be raised at any stage subsequent to the marking of the document as an exhibit. The later proposition is a rule of fair play. The crucial test is whether an objection, if taken at the appropriate point of time, would have enabled the party tendering the evidence to cure the defect and resort to such mode of proof as would be regular. The omission to object becomes fatal because by his failure the party entitled to object allows the party tendering the evidence to act on an assumption that the opposite party is not serious about the mode of proof. On the other hand, a prompt objection does not prejudice the party tendering the evidence, for two reasons : firstly, it enables the court to apply its mind and pronounce its decision on the question of admissibility then and there; and secondly, in the event of finding of the court on the mode of proof sought to be adopted going against the party tendering the evidence, the opportunity of seeking indulgence of the court for permitting a regular mode or method of proof and thereby removing the objection raised by the opposite party, is available to the party leading the evidence. Such practice and procedure is fair to both the parties. Out of the two types of objections, referred to hereinabove, in the latter case, failure to raise a prompt and timely objection amounts to waiver of the necessity for insisting on formal proof of a document, the document itself which is sought to be proved being admissible in evidence. In the first case, acquiescence would be no bar to raising the objection in superior court."
(emphasis supplied)
41. In Sonu v. State of Haryana: (2017) 8 SCC 570, the Supreme Court referred to its earlier decisions and held as under:
"32. It is nobody's case that CDRs which are a form of electronic record are not inherently admissible in evidence. The objection is that they were marked before the trial court without a certificate as required by Section 65-B(4). It is clear from the judgments referred to supra that an objection relating to the mode or method of proof has to be raised at the time of marking of the document as an exhibit and not later. The crucial test, as affirmed by this Court, is whether the defect could have been cured at the stage of marking the document. Applying this test to the present case, if an objection was taken to the CDRs being marked without a certificate, the Court could have given the prosecution an opportunity to rectify the deficiency. It is also clear from the ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 38/41 above judgments that objections regarding admissibility of documents which are per se inadmissible can be taken even at the appellate stage. Admissibility of a document which is inherently inadmissible is an issue which can be taken up at the appellate stage because it is a fundamental issue. The mode or method of proof is procedural and objections, if not taken at the trial, cannot be permitted at the appellate stage. If the objections to the mode of proof are permitted to be taken at the appellate stage by a party, the other side does not have an opportunity of rectifying the deficiencies. The learned Senior Counsel for the State referred to statements under Section 161 CrPC, 1973 as an example of documents falling under the said category of inherently inadmissible evidence. CDRs do not fall in the said category of documents. We are satisfied that an objection that CDRs are unreliable due to violation of the procedure prescribed in Section 65-B(4) cannot be permitted to be raised at this stage as the objection relates to the mode or method of proof."
42. In Om Prakash v Central Bureau of Investigation: 2017 SCC Online Del 10249, a Coordinate Bench of this Court held as under: -
"25....Thus if a document is admissible in evidence and no objection to the mode of proof is taken thereof at the stage of tendering the same in trial, the party is estopped to challenge the same before the Appellate Court or thereafter, however if the document is per-se inadmissible then even if marked as an exhibit the same cannot be read in evidence."
43. It is also relevant to note that by virtue of Section 1 of the Evidence Act, it does not apply to arbitration. Although, the principles of the Evidence Act are usually applied in arbitral proceedings, sensu stricto, the said Act is not applicable. Section 65-B of the Evidence Act is not applicable to arbitral proceedings, yet the Arbitral Tribunal has disregarded the entire evidence led by the petitioner regarding deficiency of service solely on the ground that the certificate under Section 65-B of the Evidence Act was defective."
4.20 As far as the objections, arguments that the respondent/claimant was not entitled to any compensation as it did not prove any loss or damage before the Ld. Arbitrator and the reliance upon ONGC Vs. Saw Pipes 2003 Vol.5 SCC 705 and ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 39/41 Associated Traders Vs. Delhi Development Authority 2015 (4) SCC 136 is concerned, suffice would be to say that the claim before the Ld. Arbitration was not for any compensation or damages but towards the outstanding remuneration fees as per the agreement between the parties. There was thus no occasion for the respondent/claimant to prove any/actual loss/damages. The amount claimed was towards remuneration as per the contract and there was categoric admission by the petitioner to pay the same, in the emails as discussed above.
4.21 The impugned award is based upon due appreciation of facts, evidences & law. Not only the reasonings of Ld. Arbitrator are logical but all the material documents and evidences were taken note of by the Ld. Arbitrator at the time of the passing of the impugned award. Cogent grounds, sufficient reasons have been assigned by the Ld. Arbitrator in reaching the just conclusion and no error of law or misconduct is apparent on the face of the record. This Court cannot re-appraise the evidence and it is not open to this Court to sit in the appeal over the conclusion/findings of facts arrived at by Ld. Arbitrator. The impugned award does not suffer from vice of irrationality and perversity. No error is apparent on the fact of the impugned award. The award is not against any public policy nor against the terms of contract of the parties. No ground for interference is thus made out.
ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 40/41 4.22 For the foregoing reasons, the petition is hereby dismissed.
4.23 The parties are left to bear their own costs.
4.24 File be consigned to record room after necessary compliance.
Announced in the open court on 18th March 2023 (Gaurav Rao) ADJ-03/ New Delhi District Patiala House Courts, New Delhi.
ARBTN 4980/17 Veecon Music and Entertainment Pvt Ltd Vs. McCann Erickson India Pvt. Ltd. 41/41