Madras High Court
R.Ramasubbu vs M/S.Avm Productions
Author: Abdul Quddhose
Bench: Abdul Quddhose
IN THE HIGH COURT OF JUDICATURE AT MADRAS RESERVED ON : 23.07.2018 DELIVERED ON : 03.08.2018 CORAM: THE HON'BLE Mr.JUSTICE ABDUL QUDDHOSE O.P.No.102 of 2010 R.Ramasubbu Proprietor: M/s.Mercury Arts, No.42-A Mercury Apartments, First Floor, Pantheon Road, Egmore, Chennai 600 008 ... Petitioner/Claimant Vs. 1.M/s.AVM Productions, Represented by Sri.M.Saravanan, No.38, Arcot Road, Chennai 600 026. 2.Justice Mr.J.Kanagaraj (Retd.) Arbitrator, No.3, Justice Ramanujam Road, Malaviya Avenue, Shastri Nagar, Chennai 600 041. 3.Justice Mr.K.Govindarajan (Retd)., Arbitrator, No.5, Justice Ramanujam Road, Shastri Nagar, Chennai 600 041. 4.Advocate Mr.R.K.R.K.Chandramohen, Arbitrator, No.D-4, MIG Flats, Tamil Nadu Housing Board, Foreshore Estate, Chennai 600 028. ... Respondents Prayer: Original Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996, to set aside the Award dated 28.8.2009 passed by the learned Arbitrators 2 and 3/Respondents 2 and 3 and award costs of this Petition. For Petitioner ... Mr.A.Chidambaram For Respondents ... Mr.P.R.Raman Mr.C.Seethapathy for R2 R2 to R4 Arbitrators ORDER
The instant petition has been filed by the petitioner under Section 34 of the Arbitration and Conciliation Act, 1996, (in short the Arbitration Act) challenging the Arbitral Award dated 28.08.2009, rejecting the claim of the petitioner made before the Arbitrator.
2. The brief facts leading to the filing of the instant petition are as follows:
The petitioner and the respondent entered into a Distribution Agreement dated 03.06.2007. The first respondent was the producer of the movie by name "SIVAJI". The petitioner approached the first respondent to appoint him as the distributor for the said picture in 35mm format for theatrical exploitation for the areas of Trichy and Tanjore for a period of five years. As per the Distribution Agreement, the consideration payable by the petitioner to the first respondent was Rs.6 Crores, as well as 50% of the petitioner's share from all the theatres in excess of the aggregate of Rs.6 Crores after adjusting the print and publicity expenses.
3.In accordance with the agreement, the petitioner paid the entire consideration of Rs.6 Crores to the first respondent. After the payment of the entire consideration, the movie was distributed for Trichy and Tanjore areas by the petitioner.
4.The petitioner made an additional demand from the first respondent under the Distribution Agreement. The basis for the additional demand is that the term royalty used in the Distribution Agreement in Clause 4(1) is not the outright royalty consideration and it is only a distribution royalty/advance.
5.According to the petitioner, the agreement is a Distribution Agreement and based on that only an advance payment was made by the petitioner for appointing him as the Sole Distributor for the said Trichy and Tanjore Area for a period of five years. According to the petitioner, as per Clause 5(e) of the Distribution Agreement, prints and other formats of the contents will have to be returned on the expiry of the five years distribution period or otherwise, the distributor has to pay Rs.10,000/- per day towards damages.
6.Therefore, according to the petitioner, the agreement between the parties is nothing but a Distribution Agreement and as usual in the film trade, the petitioner has to recoup the remaining balance out of the advance sum of Rs.6 Crores paid by him as per the age old practice in the film trade. The first respondent denied the additional claim made by the petitioner since according to the first respondent, under the Distributor Agreement there is no obligation to be fulfilled by the first respondent once the petitioner becomes the sole distributor on payment of Rs.6 Crores to the first respondent.
7.Since there arose disputes between the parties, the said dispute was referred to Arbitration by the petitioner in accordance with the Arbitration clause and before the Arbitral Tribunal the petitioner made a claim of Rs.2,56,28,449/- against the first respondent. The Arbitral Tribunal comprising of two former Judges of this Court and an Advocate acted upon the Arbitration reference and after issuing notice to the parties to the dispute as well as after considering the materials available on record, the oral and documentary evidence let in by both parties, and after hearing the submissions of respective counsels, the Arbitral Tribunal passed an Award dated 28.08.2009, rejecting the claim of the petitioner.
8.Aggrieved by the Arbitral Award dated 28.08.2009, the instant application has been filed under Section 34 of the Arbitration and Conciliation Act, 1996, by the petitioner.
9.Heard Mr.A.Chidambaram, learned Counsel for the petitioner and Mr.Seethapathy, learned Counsel for the first respondent.
10.The first and foremost submission made by the learned Counsel for the petitioner is that the Award dated 28.08.2009, though it appears to be a majority Award signed by two Arbitrators out of three (Respondents 2 & 3 alone), it cannot be accepted as a valid Award since there is no reason whatsoever assigned for non-signing of the Award by the 3rdArbitrator (4th Respondent). The learned Counsel drew the attention of this Court to Sections 29 and 31 of the Arbitration Act, which reads as follows:
29.Decision making by panel of arbitrators.-(1) Unless otherwise agreed by the parties, in arbitral proceedings with more than one arbitrator, any decision of the arbitral tribunal shall be made by a majority of all its members.
(2)Notwithstanding sub-section (1), if authorised by the parties or all the members of the arbitral tribunal, questions of procedure may be decided by the presiding arbitrator.
31.Form and contents of arbitral award.-(1) An arbitral award shall be made in writing and shall be signed by the members of the arbitral tribunal.
(2)For the purpose of sub-section (1), in arbitral proceedings with more than one arbitrator, the signatures of the majority of all the members of the arbitral tribunal shall be sufficient so long as the reason for any omitted signature is stated.
(3)The arbitral award shall state the reasons upon which it is based unless-
(a)the parties have agreed that no reasons are to be given, or
(b)the award is an arbitral award on agreed terms under section 30.
(4)The arbitral award shall state its date and the place of arbitration as determined in accordance with section 20 and the award shall be deemed to have been made at that place.
(5)After the arbitral award is made, a signed copy shall be delivered to each party.
(6)The arbitral tribunal may, at any time during the arbitral proceedings, make an interim arbitral award on any matter with respect to which it may make a final arbitral award.
(7)(a)Unless otherwise agreed by the parties, where and insofar 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.
[(b)A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of two per cent higher than the current rate of interest prevalent on the date of award, from the date of award to the date of payment.
Explanation.-The expression current rate of interest shall have the same meaning as assigned to it under clause (b) of section 2 of the Interest Act, 1978 (14 of 1978).] [(8)The costs of an arbitration shall be fixed by the arbitral tribunal in accordance with Section 31-A.]
11.According to the learned Counsel for the petitioner, no procedure was fixed by the Presiding Arbitrator as contemplated under Section 29(2) and no proper reasons as contemplated under Section 31(2) were given by the majority of the Arbitrators for not having obtained the signature of the third Arbitrator, Mr.R.K.Chandramohen while sending the majority Arbitral Award to the petitioner. He drew the attention of this Court to the letter dated 12.11.2009, sent by the Presiding Arbitrator to the petitioner enclosing the signed copy of the Arbitral Award passed by the majority Arbitrators (Justice J.Kanakaraj (Retd.) and Justice K.Govindarajan (Retd.)). In that letter, the Presiding Arbitrator has informed the petitioner that since the third Arbitrator Mr.R.K.Chandramohen has neither agreed or dissented from the majority Award for nearly two months, they are constrained to send the Award to the parties to the dispute. They have indicated that in the event of Mr.R.K.Chandramohen writing a separate Award, the said Award will be sent to the parties by Mr.R.K.Chandramohen the co-Arbitrator.
12.The learned Counsel for the petitioner drew the attention of this Court to another letter dated 12.11.2009 sent by Mr.Justice J.Kanakaraj enclosing the order dated 25.08.2009 dismissing the re-open petition filed by the petitioner. Even the order dated 25.08.2009, passed by the Arbitral Tribunal was signed only by two of the Arbitrators. In the letter dated 12.11.2009, the Presiding Arbitrator informed the petitioner that the 3rd Arbitrator, Mr.R.K.Chandramohen has not responded to the call of the majority Arbitrators. After referring to the two letters both dated 12.11.2009, the learned Counsel for the petitioner submitted that the Arbitral Award had been made ready only by two Arbitrators without reference to the co-Arbitrator and the reason given in the said two letters are totally contradictory and different from each other.
13.According to the learned Counsel for the petitioner, there was absolutely no deliberations whatsoever among the Arbitrators after the hearing was completed on 23.05.2009. According to the learned Counsel for the petitioner, the re-open petition was filed by the petitioner on 15.06.2009 and the counter was filed on 10.07.2009 and the order seems to have been passed on 25.08.2009 itself which was sent only on 02.11.2009 stating that final orders are passed, since the co-Arbitrator did not respond to the call of the majority of the Arbitrators.
14.According to the learned Counsel for the petitioner within three days from 25.08.2009 being the date of order passed in the re-open petition, the majority Arbitral Award came to be passed on 28.08.2009. Therefore, according to the learned Counsel for the petitioner, no deliberations could have taken place amongst all the Arbitrators before the Arbitral Award dated 28.08.2009 came to be passed against the petitioner.
15.The learned Counsel for the petitioner drew the attention of this Court to a judgment of the Delhi High Court in the case of Mahanagar Telephone Nigam Ltd. vs. Siemens Public Communication Network Ltd. reported in 2005 (1) ARBLR369 (Delhi) and submitted that the Delhi High Court held an Award will have to be set aside if it is passed in violation of Section 31(2) of the Arbitration Act. The learned Counsel for the petitioner also drew the attention of this Court to a Division Bench Judgment of the Karnataka High Court in the case of Rudramuni Devaru vs. Shrimad Maharaj Niranjan Jagadguru and Others reported in AIR 2005 Karnataka 313. Referring to the said judgment, the learned Counsel for the petitioner submitted that as held by the Karnataka High Court, joint deliberations amongst the members of the Arbitral Tribunal is mandatory before pronouncement of the Arbitral Award. According to the learned Counsel for the petitioner, in the case on hand there was no such joint deliberations amongst the members of the Arbitral Tribunal.
16.The learned Counsel for the petitioner also referred to the judgment of the Hon'ble Supreme Court in the case of The Bharat Bank Ltd., Delhi vs. The Employees of the Bharat Bank Ltd., Delhi and the Bank Bharat Bank Employee's Union Delhi reported in AIR 1950 Supreme Court 188 involving Industrial Disputes Act (14 of 1949) and submitted that the Hon'ble Supreme Court held in that decision that the Award passed under the Industrial Disputes Act will have to be signed by all the members of the Tribunal. Applying the same analogy, the learned Counsel for the petitioner submitted that in the case on hand, the Arbitral Award which is the subject matter of challenge in the instant petition has not been signed by all the three Arbitrators and hence, the Arbitral Award is patently illegal.
17.The learned Counsel for the petitioner further submitted that no opportunity was given to the petitioner by the majority of the Arbitrators to let in further evidence since the order dated 25.08.2009, dismissing the re-open petition was received by the petitioner only on 02.11.2009, whereas the Arbitral Award which is the subject matter of challenge was passed on 28.08.2009, immediately after the dismissal of the re-open petition on 25.08.2009.
18.According to the learned Counsel for the petitioner, the petitioner had examined three witnesses on his side and also produced documents and further wanted to examine himself to strengthen his case, the Arbitral Tribunal ought to have granted permission for the same and rejection of the re-open petition amounts to misconduct of the proceedings by the Arbitrators.
19.According to the learned Counsel for the petitioner, the observation made by the majority Arbitrators under the majority Arbitral Award that consideration clause No.4 of the subject agreement dated 03.05.2007, is unambiguous and self contained is an incorrect finding and does not reflect the intention of the parties. He referred to the following finding of the majority of the Arbitrators which reads as follows:
In other words clause 4 mentions what should happen if the picture collects more than Rs.6 Crores but the agreement exhibit-C1 no where mentions what should happen if the picture fails to collect atleast Rs.6 Crores, and in the absence of the such clause the claim of the Distributor fails.
20.Referring to the above mentioned observations, the learned Counsel for the petitioner submitted that in the absence of what will happen if Rs.6 Crores is not collected will point to the ambiguity in the agreement. According to the learned Counsel for the petitioner, the petitioner had let in evidence both oral and documentary to establish that there was minimum sum assured under the agreement and Rs.6 Crores paid under clause 4 of the agreement is only the advance since further amount by way of 50% shall be payable in excess of the aggregate of Rs.6 Crores and as per clause 4(d) the said 50% out of the monthly distributor's share as set out in para 4(1) once in every month on or before 15th day of the immediately succeeding calender of the month. The first of such payment shall be not be due before 15th July 2007.
21.According to the learned Counsel for the petitioner, clause 4 consist of two payments namely viz. One Rs.6 Crores as per clause 4.1 as advance and another 50% of the distributor's share payable from 15.07.2007 onwards since the picture is being released from 15.06.2007, i.e., commencing from the next month onwards the first issue whether there is minimum sum assured had not been answered as per law in the Arbitral Award and contrary to the well established principles of law and in the peculiar facts and circumstances of the case.
22.According to the learned Counsel for the petitioner, the majority of the Arbitrators were misled by the contentions of the first respondent that the agreement is unambiguous by misinterpreting clause 4 of the agreement. Even though, model agreements were marked as exhibits on the side of the petitioner to establish the trade practice, the majority of the Arbitrators did not consider the same in the impugned Arbitral Award.
23.According to the learned Counsel for the petitioner, it is well established principle of law that in the cases of ambiguity in the language employed in the agreement, external evidence can be admitted. According to the learned Counsel for the petitioner, it is well established principle of law that if the Award has been passed contrary to the terms of the agreement, it is patently illegal. According to him, the basis for rejecting the claim of the petitioner is on perverse findings that consideration clause is unambiguous.
24.According to the learned Counsel for the petitioner, the majority Award had also totally ignored the evidence of CW-2 and CW-3 who are respected and independent witnesses being the Secretary, TV Sector (Film and Television Producers Guild of South India) and a reputed Film Producer and Distributor for about 25 years and the President of All Distributors Federation, by simply stating that they have not seen the subject agreement while there is absolutely no evidence let in either oral or documentary on the side of the first respondent.
25.According to the learned Counsel for the petitioner, regarding the trade practice in the cine trade, the majority Arbitrators ought to have considered the evidence of CW-2 and CW-3 coupled with model agreements produced on the side of the petitioner. The learned Counsel for the petitioner drew the attention of this Court to the judgments of the Calcutta High Court reported in AIR 1949 Calcutta 490 and AIR 1959 Calcutta 179 which according to him are directly on this point. He referred to the various clauses under the agreement and submitted that the role of the petitioner is similar to that of an agent. He referred to Section 28(3) of the Arbitration Act which reads as follows:
Section 28....
(3) While deciding and making an Award, the Arbitral Tribunal shall, in all cases, take into account the terms of the contract and trade usages applicable to the transaction.
26.The learned Counsel for the petitioner after referring to Section 28(3) of the Arbitration Act submitted that the majority of the Arbitrators did not consider the trade practice as contemplated under Section 28(3) of the Arbitration Act in the Arbitral Award. According to him, the trade practice will have to be treated as an implied term of the contract.
27.The learned Counsel for the petitioner, finally concluded his submissions by submitting that the findings of the Arbitrators are arbitrary, perverse, illogical and therefore, the Arbitral Award is patently illegal and will have to be set aside.
28.Per Contra, the learned Counsel for the first respondent submits that there is no obligation on the part of the first respondent to pay any amount under the agreement to the petitioner. He drew the attention of this Court to clause No.4 in the Distribution Agreement which reads as follows:
"4.CONSIDERATION:
In consideration of the Producer granting the Distributor the rights of distribution and exhibition of the said picture as aforesaid, the Distributor shall pay to the producer the consideration amount consisting of: I. An amount of Rs.6,00,00,000/- (Rupees Six Crores Only) towards Royalty for the exploitation rights for the term and area specified herein which does not include cost of print and publicity materials, and II.50% (Fifty Percent) of the distributor's share from all the theatres in the area specified herein in excess of the aggregate of Rs.6,00,00,000/- (Rupees Six Crores Only) and print and publicity expenses. These sums shall be paid by the Distributor to the producer in the following manner:
a) A sum of Rs.2,00,00,000/- (Rupees Two Crores only) towards Royalty amount paid on this day vide cheque No.063893 drawn on Dhanalakshmi Bank Ltd., Trichy Branch, Trichy - 620 008, the receipt of which sum the producer hereby admits and acknowledges.
b)The balance sum of Rs.4,00,00,000/- (Rupees Four Crores only) towards Royalty amount to be paid on or before the 10th of June, 2007;
c)50% of the monthly distributor's share as set out in paragraph 4(II) above, once every month on or before the 15th day of the immediately succeeding calender month. The first of such payments shall be not be due before 15th July, 2007."
29.Referring to the above said clause, according to the learned Counsel for the first respondent, once the sum of Rs.6 Crores is received and exclusive distribution rights is granted by the first respondent to the petitioner for the movie for Trichy and Tanjore areas, there is no further obligation on the part of the first respondent to be fulfilled under the terms and conditions of the agreement. He also referred to the remaining clauses under the agreement and submitted that nowhere in the agreement, the first respondent is liable to pay any amount to the petitioner.
30.According to the learned Counsel for the first respondent, the agreement also does not provide for any payment to be made by the first respondent to the petitioner on account of any trade practice.
31.The learned Counsel for the first respondent also drew the attention of this Court to the findings on the issues framed by the Arbitrator Tribunal. He referred to the issues framed by the Arbitral Tribunal which reads as follows:
"1.Is there a minimum sum assured to the claimant under the agreement between the parties dated 03.06.2007?
2.Is the payment of Rs.6 Crores by the claimant to the respondent under the said agreement as 'advance' or out right payment?;
3.Is the claimant entitled to the amount claimed under the agreement dated 03.06.2007 as per the trade practice in the cine trades?;
4.Is the respondent liable to pay interest as claimed by the claimant?;
5.To what relief the parties are entitled to?"
32.He drew the attention of this Court to the findings in paragraph No.13 of the Arbitral Award for the issues No.1 to 3 which are as follows;
Issues 1 to 3 can be taken together because they are inter-related.Mr.Chidambaram, learned counsel for claimant says, that the entire arbitration case lies in a narrow compass. He starts by saying that there are three kinds of Distribution Agreements and a careful reading of the agreement Exhibit C-1, it can be seen that it falls under the second category vis., Distribution Agreement on advance/royalty basis. In support of his argument, the first contention of Mr.Chidambaram is that the word "appointed" has been used while naming the claimant as distributor for the picture "Sivaji" in one area called Trichy, Tanjore and the word "Royalty" is used in the consideration clause of the agreement. We do not think that the use of the word "appointed" makes any difference while interpreting the agreement Exhibit C-1. Similarly the word "Royalty" which only means a share in the proceeds paid by the producer for the right of exploiting his film production. The use of the word "Royalty" in the consideration clause makes no difference in understanding the agreement which is plain and unambiguous."
33.According to the learned Counsel for the first respondent, the Arbitral Tribunal has given a well considered finding that no money is payable by the first respondent to the petitioner under the Distribution Agreement.
34.According to the learned Counsel for the first respondent, there was no assurance given by the first respondent that the picture would collect more than the minimum of Rs.6 Crores. He referred to the following clauses under the agreement. Under clause 11 of the agreement, it has been inter alia agreed between the parties that neither is an agent of the other. It has further been agreed between the parties under clause 15 that no modification shall be binding unless set forth in writing and signed by both the parties. Further, clause 16 specifies that the agreement Exihibit C-1 constitutes the entire agreement between the parties. Under clause 20 of the agreement, the limitation of liability was agreed upon. It has been inter alia expressly agreed that there shall be no liability for any loss of profit etc and that this clause shall survive the expiry or termination of the agreement. After referring to the various clauses under the agreement, the learned Counsel for the first respondent submitted that the claim of the petitioner is untenable, baseless and lacks merit.
35.According to the learned Counsel for the first respondent, the petitioner was given ample opportunities during the entire arbitration proceedings. Final arguments were heard by the learned Arbitrators on 23.05.2009 and orders were reserved on that day. Subsequently by way of an affidavit dated 15.06.2009, the petitioner prayed for re-opening and permission to let in further oral evidence with additional documents. The first respondent filed its counter affidavit, inter-alia stating that three witnesses were examined on the petitioner's side and that not only were final arguments completed as aforesaid but also the Arbitral Tribunal had subsequently met and discussed the issues and evidence for finalizing the Award. The first respondent contended that such a petition of the petitioner was not only belated but also an abuse of process, vexatious and an afterthought. The petitioner had been participating and watching the arbitration proceedings from day one and had not attempted to depose during the course of Arbitration. Moreover no documents were filed along with the re-opening petition.
36.It is relevant to point out that the evidence had earlier been re-opened on a prayer by the petitioner and this was the second reopening petition. It is therefore clear that the majority members of the Arbitral Tribunal were correct in dismissing the reopening petition of the petitioner. This order dated 25.08.2009, was sent under a covering letter dated 12.11.2009, wherein it is mentioned that the learned Arbitrator nominated by the petitioner, viz. the fourth respondent, has not responded to the call of the second and third respondent Arbitrators. It is relevant to state here that no separate order was passed by the fourth respondent on the petitioner's reopening petition. It only forms part of the fourth respondent's minority Award dated 21.11.2009. Therefore orders on the reopening petition filed by the petitioner was passed by the fourth respondent only under his Award dated 21.11.2009, i.e. almost 5 months after hearing the arguments.
37.The learned Counsel for the first respondent further submitted that:
(i)The Arbitral Tribunal, by way of the majority impugned Award, has correctly interpreted the words found in the contract. The majority Award has been passed in accordance with the terms and conditions set out in the contract between the parties. The petitioner attempts to take advantage of the words... and shall take into account the usages of the trade applicable to the transaction. as found in Section 28(3) of the Arbitration and Conciliation Act, 1996. This does not come to the aid of the petitioner as all the terms and conditions of the contract are clear and unambiguous. The majority Award has been passed on a correct interpretation of the contract. Moreover, the very same section, viz. Section 28(3) first specifies that In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract... No trade practice as alleged by the petitioner has been established by the petitioner and moreover no trade practice contrary to /superseding the express terms of the contract can be arrived at. The various allegations of the petitioner importing alleged trade practices and customs in the said contract are denied as false. Where the terms of the contract are clear, it is not possible to rely on an alleged trade usage. The petitioner tried to mislead the learned Arbitrators by filing copies of two of its other contracts (Ex. C7 & C8 Pages 26 & 31). They are independent contracts and cannot be read into Ex. C-1. If such things are permitted, no sanctity can be attached to any written contract. Additionally, clause 16 of the agreement specifies that the agreement is the entire agreement between the parties. According to the learned Counsel for the first respondent, the petitioner cannot base its claim on something which does not form part of the contract.
(ii)In this context, the first respondent relies on the following judgments:
1.MANU/TN/2626/2007 = (2007) 6 MLJ 525. Para 14.
2.MANU/GH/0354/2008 = 2008 (4) ArbLR 443 (Gau). Para 15.
The learned Counsel for the first respondent submitted that there is no reason to come to the conclusion that Section 28(3) of the Arbitration and Conciliation Act, 1996, has been violated.
(iii)The learned Counsel for the petitioner, while making his submissions before this Court raised certain issues regarding the two covering letters dated 12.11.2009. According to the learned Counsel for the first respondent, these submissions do not find place in the grounds raised by the petitioner and hence deserve to be rejected.
(iv)Without prejudice to the same, the learned Counsel for the first respondent submitted that there is no infirmity in these two letters. The covering letter dated 12.11.2009, enclosed the order dated 25.08.2009 (preceding the Award dated 28.08.2009), rejecting the second reopen petition filed by the petitioner. In the said letter it has been made clear that the fourth respondent arbitrator did not respond to the call of the second and third respondent Arbitrators. The second and third respondent arbitrators have evidently awaited for the fourth respondent to respond till 12.11.2009 and only thereafter resorted to issuing the order dated 25.08.2009. From this order, it can be inter alia seen that arguments were completed before the second to fourth respondents on 23.05.2009 and time was taken for submitting citations. The petitioner also gave written arguments and citations. The Arbitrators also met and discussed the issues and evidence for finalizing the award. According to the learned Counsel for the first respondent, it is hence wrong on the part of the petitioner to submit that the Arbitrators failed to deliberate before passing the impugned Award. According to the learned Counsel, even in the minority Award, there is no mention of any lack of deliberation.
(v)The further covering letter dated encloses the impugned Award dated 28.08.2009. In the same letter, it has been expressly stated that the fourth respondent Arbitrator has neither agreed nor dissented from the impugned Award for about two months. The second and third respondents were hence constrained to issue the majority impugned Award. It was also added in the said covering letter that in the event of the fourth respondent writing a separate Award, it would be sent to the parties. It is hence clear that the majority impugned Award was read by the fourth respondent but he failed to either agree or dissent for a long time. Only in his separate Award dated 21.11.2009, has he showed his dissent. In his dissenting Award dated 21.11.2009, it has been stated by the fourth respondent that he has gone through the impugned Award.
(vi)The submission of the petitioner regarding alleged lack of deliberation among the learned Arbitrators before passing of the impugned Award also does not find place in the grounds raised in the above petition.
(vii)The learned Counsel for the first respondent submitted that Arbitration is being sought as an alternate method of dispute resolution primarily to avoid delay. But, the fourth respondent Arbitrator had delayed the matter and had issued his dissenting Award much after the second and third respondent Arbitrators had made ready the majority Award. The minority Arbitrator cannot unreasonably prolong Arbitration proceedings. In fact, section 31(2) allows the Award to be made by a majority of the members of the tribunal without any requirement of signature of the minority, as long as the reasons for any omitted signature is stated.
(viii)In this context, the first respondent relies on the following judgment:
MANU/DE/1557/2008 = AIR 2009 Delhi 102. Para 9.
(ix)The learned Counsel for the first respondent further relies on the commentary found in Justice R.S.Bachawat's Law of Arbitration and Conciliation, 5th Edition, Reprint 2012 Volume 1 Page 1291 Note No.4.
(x)The learned Counsel for the first respondent respectfully places reliance on the following case law with regard to Section 34 of the Act:
MANU/SC/8177/2006 = (2006) 11 SCC 181 Paras 35 & 40 Discussion:
38.A pre-requisite for a valid Arbitral Award as per Section 29 and Section 31 of the Arbitration Act in Arbitral proceedings with more than one Arbitrator are as follows:
(a)Any decision of the Arbitral Tribunal shall be made by majority of all its Members.
(b)If authorized by the parties or all the Members of the Arbitral Tribunal, questions of procedure may be decided by the Presiding Arbitrator.
(c)An Arbitral Award shall be made in writing and shall be signed by the Members of the Arbitral Tribunal.
(d)In Arbitral proceedings with more than one Arbitrator, the signatures of the majority of all the Arbitrators shall be sufficient so long as the reason for omitting the signature of the minority Arbitrators is stated.
39.Two out of three Arbitrators comprising the majority have delivered to the petitioner as well as the first respondent, a copy of the order dated 25.08.2009, dismissing the petition filed by the petitioner/claimant on 15.06.2009, to reopen the case for further evidence.
40.The majority of the Arbitrators in their covering letter dated 12.11.2009, enclosing a signed copy of the Arbitral Award have informed the petitioner as well as the first respondent, the reasons as to why the third Arbitrator Mr.R.K.Chandramohen has not signed the Arbitral Award. In that letter, the majority of the Arbitrators have informed the parties to the dispute that Mr.R.K.Chandramohen, the third Arbitrator has neither agreed or dissented from the majority Arbitral Award for nearly two months and therefore, the majority Arbitrators were constrained to send the Arbitral Award without the signature of the third Arbitrator Mr.R.K.Chandramohen. It was also clearly indicated in that letter, in the event of Mr.R.K.Chandramohen, the third Arbitrator writing a separate Award, it will be sent to the parties to the dispute by the third Arbitrator.
41.As seen from the letter dated 12.11.2009, it is evident that the majority of the Arbitrators have given reasons for the omission of the signature of the third Arbitrator in the Arbitral Award. Therefore, the requirements of Section 31(2) of the Arbitration Act have been fully satisfied.
42.Similarly in the order dated 25.08.2009, dismissing the petition filed by the petitioner/claimant to re-open the case for further evidence, only two out of the three Arbitrators have signed the said order. By a letter dated 12.11.2009, to the respective counsels appearing for the parties to the dispute, one of the Arbitrators Justice K.Kanagaraj (retired) has informed the petitioner as well as the first respondent that the third Arbitrator Mr.R.K.Chandramohen who has not signed the order dated 25.08.2009, has not responded to the call made by the majority of the Arbitrators.
43.The order dated 25.08.2009, dismissing the petition to re-open the case has now become final since it was not challenged before any Appellate Forum by the petitioner/claimant. The third Arbitrator Mr.R.K.Chandramohen has passed a separate Arbitral Award dated 21.11.2009, allowing the claim as prayed for by the petitioner/claimant. As seen from the records, the said minority Arbitral Award was also received by the petitioner and the first respondent. In the minority Arbitral Award, passed by the third Arbitrator Mr.R.K.Chandramohen, there is no complaint against the majority Arbitrators that they did not follow the procedure prescribed under the Arbitration Act. There is also no mention of any lack of deliberation among all the three Arbitrators. Even though, the majority Arbitral Award was passed on 28.08.2009, the minority Arbitral Award was passed only on 21.11.2009. In the dissenting minority Award dated 21.11.2009, the Arbitrator has confirmed that he has perused the majority Arbitral Award.
44.It is undisputed by the parties to the dispute that all the hearings in the Arbitration were heard by all the three Arbitrators sitting together. Therefore, non-signing of the Arbitral Award dated 28.08.2009 as well as the order dated 25.08.2009, by minority Arbitrator will not lead to the inference that there was no deliberation between the Arbitrators. The Arbitration and Conciliation Act is a self contained and a special Code by itself. Being a special law and when provisions regarding form and contents of Arbitral Award are available under the Arbitration Act itself, the provisions of the Arbitration Act alone shall apply. The petitioner has not been able to prove that the majority Arbitrators who passed the majority Arbitral Award have violated any of the provisions of the Arbitration Act.
45.In view of the above findings, this Court does not find force in the submission of the learned Counsel for the petitioner that the Arbitral Award dated 28.08.2009, though it appears to be a majority Award signed by the two Arbitrators out of three Arbitrators, it cannot be accepted as a valid Award since there is no reason whatsoever assigned for non-signing of the Award by the third Arbitrator.
46.This Court is in agreement with the Division Bench Judgment of the Delhi High Court in the case of Government of India Bharat Sanchar Nigam Limited vs. Acome and Ors. reported in 2006 AIR 2011 102 cited by the learned Counsel for the first respondent that if the Award signed by majority Arbitrators and refusal of minority Arbitrator to sign will not affect its validity.
47.The judgment relied upon by the learned Counsel for the petitioner, reported in AIR 1950 SC 188 deals with Industrial Disputes Act and not with Arbitration and Conciliation Act. The Arbitration and Conciliation Act is a self contained and a Special Code by itself. Section 31(2) permits the majority of the Arbitrators passed an Arbitral Award without the signature of the minority Arbitrator, if reasons for omission of the signature of minority Arbitrator is given. In the case on hand, reasons were given by the majority Arbitrators for omission of signature of the third Arbitrator in the Arbitral Award dated 28.08.2009. There is no similar provision under the Industrial Disputes Act. Therefore, the Judgment cited by the learned Counsel for the petitioner is not applicable for the case on hand.
48.The other judgment on this issue cited by the learned Counsel for the petitioner, reported in AIR 2005 Karnataka 313 is also not applicable to the case on hand since in that case, an Arbitral Tribunal comprising of five Members out of which two Members have resigned and the remaining Arbitrators heard the matter and passed the Award. In the case on hand, it is an undisputed fact that all the three Arbitrators comprising the Arbitral Tribunal heard the disputes by sitting together in all the hearings. Therefore, the judgment of the Karnataka High Court reported in AIR 2005 Karnataka 313 is not applicable for the case on hand.
49.As evident from the letter dated 25.08.2009, passed by the majority Arbitrators, dismissing the petition filed by the petitioner/claimant to re-open the case for further evidence that final arguments in the Arbitration was completed on 23.05.2009 and the orders were reserved by the Arbitral Tribunal in the Arbitral dispute. It is also seen from the order dated 25.08.2009, that the petition was filed by the petitioner/claimant to re-open the evidence on 15.06.2009 and the notice was issued in the said petition for the hearing on 02.08.2009 and a counter statement on 10.07.2009 was filed by the first respondent opposing the re-open petition filed by the petitioner/claimant.
50.Further, as seen from these dates recorded in the order dated 25.08.2009, it is clear that re-open petition was filed belatedly after the Arbitral Tribunal comprising of three Arbitrators reserved the Arbitral dispute for orders on 23.05.2009. Therefore, the submission of the learned Counsel for the petitioner that no opportunity was given to the petitioner/claimant by the majority of the Arbitrators to let in further evidence since the order dated 25.08.2009, dismissing the re-open petition was received by the petitioner only on 02.11.2009, whereas the Arbitral Award which is the subject matter of challenge was passed on 28.08.2009, immediately after the dismissal of the re-open petition on 25.08.2009 cannot be countenanced by this Court and the said submission, has to be rejected.
51.Sufficient opportunity was given to the petitioner to defend the claim made by the first respondent. Even the minority Arbitral Award dated 21.11.2009, does not observe that sufficient opportunity was not given to the petitioner for oral and documentary evidence before the Arbitral Tribunal.
53.As seen from the terms and conditions of the contract dated 03.06.2007, there is no obligation on the part of the first respondent to pay any money to the petitioner.
54.The majority Arbitral Award after considering clause 4 of the agreement which is the consideration clause have given a clear finding that clause 4 is very clear and unambiguous and it comprises of two parts. One is payment of Rs.6 crores on or before 10th June 2007 and secondly if the collection exceeds Rs.6 crores, 50% of the distributor's share (petitioner) in excess of the sum of Rs.6 crores and print and publicity charges shall be paid by the distributor to the producer (first respondent). The findings under the majority Award on this issue are as follows:
The above clause is very clear and unambiguous that consideration comprises of two parts. One is payment of Rs.6 crores on or before 10th June 2007 and secondly if the collection exceeds Rs.6 crores, 50% of the distributor's share in excess of the paid 6 crores and print and publicity charges shall be paid by the distributor to the producer. So far as the payment of Rs.6 crores is concerned it is absolute and it shall be paid before 10th June 2007. While collection of above Rs.6 crores is talked of, the agreement is silent on what is to happen if it is less than Rs.6 crores. All that can be said in favour of the Claimants is that parties expected a box office hit which did not happen. This is so in every commercial transaction, more so, in the film trade. Nobody can say which film will succeed in the box office and which will fail. That is always the risk in film trade, which every producer and distributor knows and that is the charm of film production.
55.This Court does not find any infirmity or illegality in the findings of the Arbitrators under the majority Arbitral Award.
56.Insofar as, the contention of the petitioner that money is liable to be paid by the first respondent on account of trade practice, the agreement does not anywhere talk of any trade practice. Further, Section 28(3) of the Arbitration and Conciliation Act, which the learned Counsel for the petitioner relied upon does not apply to the instant dispute since Section 28(3) of the Arbitration Act which stipulates that while deciding and making an Award the Arbitral Tribunal shall, in all cases, take into account the terms of the contract and trade usages applicable to the transaction came into force only on 23.10.2015, after the Arbitration and Conciliation Act, 1996 was amended with effect from 23.10.2015. Further, the terms of contract being clear and unambiguous, there is no necessity for this Court to look for trade practice/usages.
57.As seen from the agreement there is no assurance given by the first respondent that the movie Sivaji would collect more than the minimum of Rs.6 crores. Under clause 11 of the agreement, the parties have agreed that neither is an agent to the other. Under clause 15, parties have agreed that no modification to the agreement shall be binding unless it is in writing signed by both the parties. Clause 16 specifies that the agreement Ex-C1 constitutes entire agreement between the parties. Under clause 20 of the agreement the limitation of liability was also agreed upon between the parties. As seen from the above mentioned clauses, in the agreement, it is evident that there shall be no liability on the first respondent for any loss of profit suffered by the petitioner. Since the movie did not make any profit, the petitioner as seen from the records and the evidence has also not paid any royalty to the first respondent as per the second consideration clause under the agreement. As seen from the agreement, there are no payment obligations for the first respondent and the liability to pay under the agreement is only with the petitioner.
58.For the foregoing reasons, this Court is of the considered view that the findings of the Arbitrator are valid findings based on the agreement dated 03.06.2007, entered into between the parties. There is no infirmity in the findings under the majority Arbitral Award and Award passed by the majority Arbitrators is in accordance with the procedure contemplated under the Arbitration and Conciliation Act. Therefore, this Court is of the considered view that there is no illegality in the majority Arbitral Award.
59.The Hon'ble Supreme Court in a Catena of decisions starting from Renusagar Power Company Ltd vs. General Electric Company 1994 Supp (1) SCC 644 to the recent Associated Builders Vs DDA (2015) 3 SCC 49 has held only under the following grounds the Arbitral Award can be challenged under Section 34 of the Arbitration and Conciliation Act:
(a)Procedure contemplated under Arbitration and Conciliation Act was not followed by the Arbitrator.
(b)The Arbitral Award is a non speaking Award.
(c)The Arbitrator has transgressed his jurisdiction.
(d)The Arbitral Award is in conflict with the public policy of India.
(iii)An award would be regarded as conflicting with the public policy of India if:-
(a) it is contrary to the fundamental policy of Indian law, or
(b) it is contrary to the interests of India,
(c) it is contrary to justice or morality,
(d) it is patently illegal, or
(e) it is so perverse, irrational, unfair or unreasonable that it shocks the conscience of the court.
(iv)An award would be liable to be regarded as contrary to the fundamental policy of Indian law, for example, if
(a) it disregards orders passed by superior courts, or the binding effect thereof, or
(b) it is patently violative of statutory provisions, or
(c) it is not in public interest, or
(d) the arbitrator has not adopted a judicial approach, i.e. has not acted in a fair, reasonable and objective approach, or has acted arbitrarily, capriciously or whimsically, or
(e) the arbitrator has failed to draw an inference which, on the face of the facts, ought to have been drawn, or
(f) the arbitrator has drawn an inference, from the facts, which, on the face of it, is unreasonable, or
(g) the principles of natural justice have been violated.
(v)Insofar the patent illegality has to go to the root of the matter. Trivial illegalities are inconsequential.
(vi) Additionally, an award could be set aside if
(a) either party was under some incapacity, or
(b) the arbitration agreement is invalid under the law, Or
(c) the applicant was not given proper notice of appointment of the arbitrator, or of the arbitral proceedings, or was otherwise unable to present his case, or
(d)the award deals with a dispute not submitted to arbitration, or decides issues outside the scope of the dispute submitted to arbitration, or
(e) the composition of the Arbitral Tribunal was not in accordance with the agreement of the parties, or in accordance with Part I of the Act, or
(f) the arbitral procedure was not in accordance with the agreement of the parties, or in accordance with Part I of the Act, or
(g) the award contravenes the Act, or
(h) the award is contrary to the contract between the parties.
(vii) Perversity, as a ground for setting aside an arbitral award,has to be examined on the touchstone of the Wednesbury principle of reasonableness. It would include a case in which
(a) the findings, in the award, are based on no evidence, or
(b) the Arbitral Tribunal takes into account something irrelevant to the decision arrived at, or
(c) the Arbitral Tribunal ignores vital evidence in arriving at its decision.
(viii) At the same time,
(a) a decision which is founded on some evidence, which could be relied upon, howsoever compendious, cannot be treated as perverse,
(b) if the view adopted by the arbitrator is a plausible view, it has to pass muster,
(c) neither quantity, nor quality, of evidence is open to re- assessment in judicial review over the award.
(ix)Morality would imply enforceability, of the agreement, given the prevailing mores of the day. Immorality, however, can constitute a ground for interfering with an arbitral award only if it shocks the judicial conscience.
60.In the result, there is no merit in the instant petition filed by the petitioner. Accordingly, the original petition shall stand dismissed. However, there shall be no order as to costs.
03.08.2018 pam Internet: Yes/No Index: Yes/No Speaking order/Non-speaking order ABDUL QUDDHOSE, J.
pam OP No.102 of 2010 03.08.2018