Delhi District Court
Arysta Life Sciences India Ltd vs Splendor Landbase Ltd on 24 May, 2024
IN THE COURT OF MS. NEELAM SINGH
DISTRICT JUDGE (COMMERCIAL)-02, SOUTH EAST
SAKET COURTS, NEW DELHI
OMP (COMM) No.- 43/2021
In the matter of
ARYSTA LIFE SCIENCES INDIA LTD.
Registered office at:
Uniphos House, Madhu Park Centre,
Opposite Madhu Park, Khar West
Mumbai-400052 (Maharashtra)
Through its Authorized Representative-Ms. Zalak Pandit
Law Officer to the petitioner/objector ......Petitioner
Vs.
SPLENDOR LANDBASE LTD
Having its registered office at:
Unit No. 501-511
5th Floor, Splendor Forum, Plot No. 3
Jasola District Centre, New Delhi
Also at:
Gurgaon Sales & Marketing Office
Gold Course Extension Road Splendor Trade Towers
Sector-65, Gurgaon, Haryana .... Respondent
Date of Institution : 20.11.2021
Date of Final Arguments : 16.05.2024
Date of Judgment : 24.05.2024
Final Decision : Dismissed
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Splendor Lanbase Ltd.
Section 34 Arbitration and Conciliation Act, 1996
1. The present petition has been filed under Section 34 of the
Arbitration and Conciliation Act, 1996 ("the Act"), seeks to set
aside the arbitral award dated 10.07.2021 passed by the Learned
Sole Arbitrator Justice Sh. V.K. Shali (Retired).
FACTUAL BACKGROUND
2. In brief the case of the petitioner is that the petitioner i.e. Arysta LifeScience India Limited (Formerly known as Devi Dayal Sales Limited) is engaged in the business of manufacturing and marketing of various chemicals products, fertilizers and agro products and provides crop solutions, offering products miticides, insecticides, herbicides, growth regulators etc which helps in improving the quality and increases the yield for broad range of crop products in India. The petitioner has approached the respondent for the lease space admeasuring 9,538 sq. ft. super build area with the total carpet area 6,200 sq. ft. approximately in the aggregate bearing unit no. 512 to 521, 5th Floor of the concerned Splendor Forum Complex, at Jasola District Center, New Delhi.
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3. The petitioner and the respondent have executed a lease deed dated 17.09.012 with respect to the said premises. Furthermore, maintenance agreement dated 17.09.2012 has also been entered and executed between the petitioner and the respondent, in terms of common area maintenance charges etc. The petitioner had paid the security deposit of rent to the respondent as per the Lease Deed and Maintenance Agreement dated 17.09.2012. On 01.02.2016, the petitioner herein intimated to the respondents through the notice regarding the termination of the abovesaid lease deed and maintenance agreement dated 17.09.2012 that the petitioner will be terminating the said deed and agreement that will be effective on 29.02.2016 prior in writing. The respondents accepted the termination letter (notice) and agreed the same accordingly. On 28.02.2016, the respondents and the petitioner decided and mutually agreed to terminate the abovestated agreements in good faith and the respondents assured to the petitioner that they will refund the security deposit of rent within a week after vacating the premises.
4. Accordingly, the petitioner vacated the premises on 29.02.2016. The respondent never objected to the notice dated 01.02.2016 and took over the possession of the subject premises. It is submitted by the petitioner that despite its own assurances and admission of liability vide e-mail dated on 31.03.2016 to the petitioner wherein respondents said that the respondents are in process of refund of security deposit that shall be done in April, OMP (COMM) 43/2021 Arysta Life Sciences India Ltd. Vs. Page 3 of 17 Splendor Lanbase Ltd.
2016. However, till date the petitioner has not received the security deposit despite rigorous follow ups and numerous reminder by the petitioner via e-mails and personal communication.
5. Being aggrieved, the petitioner approached to the Hon'ble High Court of Delhi and filed a petition bearing no. 306 of 2017 against the respondent and Splendor Space Management Services as respondent no. 2. During the proceedings of arbitration, the erstwhile respondent no. 2 i.e. Splendor Space Management Services admittedly settled the issue and refunded security deposit in Maintenance Agreement dated 17.09.2016 of Rs.12,53,293/-. It was clarified vide order dated 07.09.2017 of the Hon'ble High Court of Delhi that in the notice sent to the Splendor Space Management Services, the petitioner has wrongly sought payment of Rs.25,32,339/-. It was clarified that figure should be Rs.12,53,293/- and it was clarified that the balance amount i.e. Rs.12,79,046/- is actually based on the leased deed dues, which is recoverable from the respondent i.e. Splendor LandBase Ltd. It is submitted by Ld. Counsel for the petitioner that respondent is liable to refund the total amount of Rs.98,06,018/- alongwith interest thereupon at the rate of 18% per annum.
6. Petitioner has challenged the award on the grounds that Ld. Arbitrator had manifestly arrived at a wrong conclusion towards fixing penal interest at the rate of at 9% instead of 18 per cent as OMP (COMM) 43/2021 Arysta Life Sciences India Ltd. Vs. Page 4 of 17 Splendor Lanbase Ltd.
agreed between the parties to the contract vide lease deed dated 10.09.2012 and vide clause 10.01.2.2. The award has been challenged on the ground that the Ld. Arbitrator has failed to consider that the termination notice was sent on 01.02.2016 and premises was peacefully vacated on 29.02.2016 whereby the respondent was supposed to refund the security deposit on or around 29.02.2016. The respondent had sent the payment of Rs. 73,16,681/- and that too in five different installments which was not accepted by the petitioner. It is challenged that Ld. Arbitrator while fixing the penal at the rate of 9% instead of 18% have gone beyond statutory provision as enumerated under Section 31 (7) (a) of the Arbitration and Conciliation Act which is reproduced as under:
"(7) (a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made."
7. The award has been challenged on the ground that Ld. Arbitrator has wrongfully deducted the two month rents from the security deposit and has not appreciated the fact that it was the respondent who wanted the premises to be vacated and the not the petitioner. It is further argued that Ld. Arbitrator has failed to OMP (COMM) 43/2021 Arysta Life Sciences India Ltd. Vs. Page 5 of 17 Splendor Lanbase Ltd.
appreciate the fact that petitioner is entitled for refund of security of Rs.1,10,59,311/-. It is argued that Ld. Arbitrator failed to appreciate the legal provision enshrined in Section 58 of the Indian Evidence Act i.e. facts admitted need not to be proved i.e. the rate of interest duly mentioned at the rate of 18% in the lease deed. Vide this petition, it has been claimed that the award dated 09.06.2021 passed with an interst of 9% per annum be enhanced to 18% annum from the date of termination of lease i.e. 29.02.2016 till the realization of payment instead of awarded interest at the rate of 9% per annum vide order dated 09.06.2021 by Ld. Arbitrator.
8. Reply to the present petition has been filed on behalf of respondent and vehemently contested the petition and denied the allegations made by the petitioner. It is submitted by the respondent that Ld. Tribunal, in accordance with Section 31 (7) of the Arbitration and Conciliation Act, 1996 and also balancing the equities, i.e. the refusal of the petitioner to accept the IFRSD on multiple occasions, reduced the interest from 18% per annum as stipulated in the said deed, to 9% per annum from 01.02.2018 till realization. It is further submitted that Ld. Tribunal was well within its power to reduce the interest, as it may deem fit, after taking into account the facts and circumstances of the case. It is further submitted that the respondent had offered the refund of IFRSD to the petitioner on multiple occasions, which was rejected by the petitioner and thus, the petitioner at a belated stage cannot OMP (COMM) 43/2021 Arysta Life Sciences India Ltd. Vs. Page 6 of 17 Splendor Lanbase Ltd.
claim that the respondent is liable to refund IFRSD in accordance with lease deed dated 17.09.2012 and accordingly, the petition filed on behalf of petitioner is liable to be dismissed with cost.
Points of Consideration before the Court
9. I have heard arguments advanced on behalf of both the parties and have perused the case file as well as original arbitral record.
10. The petition has been challenged under Section 34 of the Arbitration and Conciliation Act, 1996 which is reproduced as under:
"Section 34. Application for setting aside arbitral awards.
(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 1[establishes on the basis of the record of the arbitral tribunal 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 OMP (COMM) 43/2021 Arysta Life Sciences India Ltd. Vs. Page 7 of 17 Splendor Lanbase Ltd.
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.
1[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
(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.] [(2A) 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 reappreciation of evidence.] (3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:OMP (COMM) 43/2021 Arysta Life Sciences India Ltd. Vs. Page 8 of 17
Splendor Lanbase Ltd.
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.
(4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.
[(5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement. (6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub-section (5) is served upon the other party.]"
11. It has been held in catena of judgments by Hon'ble Apex Court as well as by our own Hon'ble Delhi High Cort that while adjudicating upon a petition u/s 34 of the Act, the Court has limited ground as enshrined in Section 34 of the Act.
12. It has been held by our own Hon'ble High Court of Delhi that while dealing with the award passed by the Ld. Arbitrator the Court cannot dig deep on the point of appreciation of evidence and the discretionary power of Ld. Arbitrator to award cost and interest if the same is not prima-facie against the public policy or there is no error prima-facie on the face of the award.
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13. I have gone through the award in detail. Ld. Arbitrator has dealt with the issue of both the parties in detail and has awarded the amount of Rs.77,39,311/- to the respondent alongwith an interest @ 9% per annum w.e.f. 01.03.2016 till the realization of the amount with a sound reasoning. Para 53, 54 and 55 are reproduced as under:
"53. I have gone through both these judgments. In my opinion, both of these judgments are not applicable to the facts of the present case as the facts of the present case do not involve any concept of breach of agreement or repudiator contract. This is simple and straight case of lease, where the question is whether notice of 3 months was given in terms of Clause 17.1 of the lease deed before terminating the tenancy or the Claimant has to pay the rent in lieu of the same. This question has already been adjudicated here in above.
54. The Respondent is thus entitled o recover two months rent of Rs.32,68,672/- (Rupees Thirty Two Lakhs Sixty Eight Thousand Six Hundred and Seventy Two Only) apart from service tax of Rs 4,73,958/- (Rupees Four Lakhs Seventy Three Thousand Nine Hundred and Fifty Eight Only) from the IFRSD of Rs.98,06,018/- (Rupees Ninety Eight Lacs Six Thousand Eighteen) and thereafter refund the remaining security deposit amount which comes out to be Rs.60,63,388/- (Rupees Sixty Lakh Sixty Three OMP (COMM) 43/2021 Arysta Life Sciences India Ltd. Vs. Page 10 of 17 Splendor Lanbase Ltd.
Thousand Three Hundred and Eighteen)
55. Since the security deposit refund was to made in one transaction and the same was not being done by the Respondents, therefore the Respondent is liable to pay interest on the security deposit refund. However, the rate of interest cannot be @ 18% as the parties had agreed at the time of signing the lease deed. In my opinion, rate of interest @ 18% is an exorbitant interest and thus the same is reduced to 9% with effect from 1.3.2016 till the realization of the amount. This reduction of rate of interest is being done by the undersigned in terms of Section 31(7) of the Arbitration and Conciliation Act, 1996. Further, it will also balance the period for which the Claimant is not entitled to interest because of its refusal to accept the security amount."
14. Hon'ble Delhi High Court in M/S Space 4 Business Solution Pvt Ltd Vs The Divisional Commissioner Principal Secretary And Anr. ARB.P. 360/2024 has reaffirmed that the discretion to award interest rates lies with the arbitrator unless explicitly limited by the contract or statute. While the contractual obligation stipulated an 18% interest rate, the arbitrator's award of a 9% interest rate falls within the discretionary power granted under the Arbitration and Conciliation Act, 1996, unless there is a manifest error of law or principle, which is not evident in this OMP (COMM) 43/2021 Arysta Life Sciences India Ltd. Vs. Page 11 of 17 Splendor Lanbase Ltd.
case.
15. The Hon'ble High Court further highlighted that an arbitrator's award should be upheld unless there is a clear error of law or principle. The petitioner's challenge to increase the interest rate to 18% fails to provide sufficient justification for overriding the arbitrator's decision, as no statutory requirement mandates such a rate.
16. The principle of minimal judicial interference in arbitral awards is well-established. The petitioner's plea essentially seeks a re-evaluation of the merits, which is beyond the permissible scope of judicial intervention under Section 34 of the Act. Courts should refrain from interfering with the arbitral award unless there is a clear case of public policy violation or patent illegality.
17. The arbitrator evaluated the evidence presented by both parties meticulously. The respondent had made multiple offers to refund the IFRSD, which the petitioner refused. The arbitrator's conclusion to award 9% interest is based on a careful assessment of these facts, demonstrating a fair and judicious exercise of discretion.
18. The terms of the Lease Deed stipulated the conditions for termination and the refund of the IFRSD. The petitioner failed to OMP (COMM) 43/2021 Arysta Life Sciences India Ltd. Vs. Page 12 of 17 Splendor Lanbase Ltd.
comply with these terms by not serving the required three months' notice or paying the rent for the notice period. The arbitrator's deduction of two months' rent from the IFRSD was in accordance with the contractual provisions, making the award legally sound.
19. The respondent repeatedly offered to refund the IFRSD, evidenced by multiple communications and cheques sent to the petitioner. The petitioner's refusal to accept these offers, despite acknowledging them, further undermines their claim for a higher interest rate. The Delhi High Court, in similar cases such as Delhi Airport Metro Express Pvt. Ltd. v. DMRC (OMP) (ENF.) (COMM) 145/2021, has upheld the arbitrator's discretion in determining interest rates. This principle is applicable here, where the arbitrator's decision to award 9% interest is reasonable and supported by judicial precedent.
20. The petitioner's request for an 18% interest rate lacks substantial legal or factual basis. Although the contract stipulated 18%, the arbitrator exercised their discretion to award 9%, considering the circumstances. There is no evidence or statutory mandate justifying an automatic award of the higher rate.
21. The finality of arbitral awards is a cornerstone of arbitration law. The petitioner's challenge undermines this finality by asking the court to alter the interest rate without compelling justification.
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Upholding the arbitrator's award preserves the integrity and finality of the arbitral process. The arbitrator's award reflects a proportional and fair approach, compensating the petitioner adequately without unduly penalizing the respondent. The 9% interest rate balances these considerations, aligning with legal standards and previous judicial pronouncements.
22. Although the contract stipulated an interest rate of 18% per annum, Section 31(7)(a) of the Arbitration and Conciliation Act, 1996 grants the arbitrator the discretion to award interest at a rate deemed reasonable unless the parties have expressly agreed otherwise. The arbitrator's role is to ensure that justice is served in a manner that is fair and equitable to both parties.
23. The arbitrator meticulously examined the contractual terms and the behavior of both parties. This thorough assessment revealed that the stipulated 18% interest rate was excessive and not reflective of a fair compensation for delayed payments. The arbitrator's decision to reduce this rate to 9% aligns with a reasonable and balanced interpretation of the contractual obligations.
24. Paragraphs 53, 54, and 55 of the arbitrator's decision elucidate the reasoning behind the 9% interest rate. The arbitrator noted that the case did not involve any breach of agreement or OMP (COMM) 43/2021 Arysta Life Sciences India Ltd. Vs. Page 14 of 17 Splendor Lanbase Ltd.
repudiatory contract but was a straightforward issue regarding the lease terms. The reduction of the interest rate was justified as 18% was deemed exorbitant.
25. The arbitrator's decision reflects a balanced approach, taking into account the principles of fairness and equity. By reducing the interest rate to 9%, the arbitrator ensured that the respondent is compensated for the delay without imposing an undue financial burden on the claimant.
26. The arbitrator's decision to set the interest rate at 9% per annum also considered the prevailing economic conditions and standard commercial practices. This rate is in line with the typical interest rates seen in commercial disputes, making it a reasonable and justified decision.
27. Imposing an interest rate of 18% would be punitive and potentially against public policy, which aims to avoid excessive penalization. The reduced rate of 9% ensures compliance with public policy objectives while still providing fair compensation. The reduced interest rate prevents the claimant from unjustly enriching themselves at the expense of the respondent. An 18% interest rate would have resulted in an unreasonably high penalty, which is not warranted in this case.
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28. The arbitrator's award strikes a balance between compensating the respondent for the delay and ensuring the claimant does not face an excessive financial burden. This balanced approach is crucial for maintaining the integrity of the arbitration process and ensuring fair outcomes. The decision to award 9% interest is proportional to the circumstances of the case. It ensures that the compensation is reasonable and commensurate with the delay in payment without being excessively punitive.
29. The courts have consistently held that they should not interfere with the arbitrator's award unless there is a manifest error in law or the award is against the public policy of India. In this case, the award does not exhibit any such error or contravene public policy, thus warranting minimal judicial intervention.
30. The arbitrator's reasoning, as detailed in paragraphs 53-55, specifically addressed the facts of this case. The decision to reduce the interest rate was based on a careful consideration of the lease terms and the conduct of the parties, ensuring that the outcome was fair and just.
Conclusion
31. Therefore, the petition challenging the arbitrator's award of 9% interest per annum is dismissed. The arbitrator acted within their discretion, the award is reasonable, and there are no OMP (COMM) 43/2021 Arysta Life Sciences India Ltd. Vs. Page 16 of 17 Splendor Lanbase Ltd.
compelling grounds for judicial intervention. The decision is in line with legal precedents and promotes the principles of fairness and equitable justice. File be consigned to record room after due compliance.
Announced & dictated
in the open Court on
24th day of May, 2024 (NEELAM SINGH)
District Judge
(Commercial Court-02)
South-East, Saket Courts, ND
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Splendor Lanbase Ltd.