Bangalore District Court
M/S Avio Helitronics Infosystems Pvt ... vs M/S Savee Aerosystems Private Limited on 29 March, 2025
Com AP 24/2025
KABC170006612025
IN THE COURT OF LXXXV ADDL. CITY CIVIL &
SESSIONS JUDGE, AT BENGALURU (CCH-86)
(Commercial Court)
THIS THE 29th DAY OF MARCH 2025
PRESENT:
SRI.ARJUN. S. MALLUR. B.A.L.LL.B.,
LXXXV ADDL. CITY CIVIL & SESSIONS JUDGE,
BENGALURU.
Com.A.P.NO.24/2025 (Old A.S.No.191/2017)
BETWEEN:
M/S Avio Helitronics Infosystems Pvt Ltd
A Company registered under the provisions of the
Companies Act, 1956,
No.130, EPIP, 2nd Phase, KIADB Industrial Area,
Whitefield, Bangalore - 560066
Rep By Chief Operations Officer,
Deepika Arcot Ramesh
: PETITIONER/APPLICANT/claimant
(Represented by Sri. Shreyas Jayasimha, Advocate)
AND
1
Com AP 24/2025
M/S Savee Aerosystems Private Limited
Having its office at:
No.311, 3rd Floor, Plot No.371,
Hind Service Industrial Estate,
Jambhekar Maharaj Road,
Dadar West Mumbai - 400028
Rep By Its Authorised Signatory
Mr. Haren Chandrakanth Sanghavi
DEFENDANT/CLAIMANT
(Represented by Sri. Dhananjay Joshi Designated Senior
Counsel appearing for Sri. Mariappa M.S. & Associates ,
Advocate)
Date of Institution of 16-12-2017
the suit
Nature of the suit Arbitration Suit under Sec. 34
(suit on pronote, suit of Arbitration & Conciliation
for declaration & Act, 1996
Possession, Suit for
injunction etc.)
Date of
commencement of ---
recording of evidence
Date on which 29-02-2025
judgment was
pronounced
Total Duration · Year/s Month/s Day/s
· 07 03 13
(ARJUN. S. MALLUR)
LXXXV Addl.City Civil & Sessions Judge,
Bengaluru.
2
Com AP 24/2025
JUDGMENT
Application under Sec.34 of the Arbitration and Conciliation Act 1996 seeking setting aside of the arbitral award passed by the Learned Sole Arbitrator in A.C No.3/2015 dated 15.09.2017.
This petition was originally filed on 16.12.2017 and numbered as A.S.No.191/2017 which came to be disposed off vide judgment and decree dated 18.11.2019. Against the said judgment and decree appeal was preferred before the Hon'ble High Court and the Hon'ble High Court vide order dated 24.11.2022 stayed the operation and execution of the award under challenge. Thereafter an appeal was preferred before the Hon'ble Apex Court in Civil Appeal No.10967/2024 and the Hon'ble Apex Court vide order dated 30.09.2024 has set aside the judgment and decree passed by this Court and remanded the matter back to this Court for fresh disposal and directed this Court to dispose off the matter on or before 31.03.2025.
Consequently this petitioner which was pending on the file of CCH -32 came to be transferred this Court as 3 Com AP 24/2025 per notification number CCC(PIV)10/2025 dated 13.02.2025 and registered in the present number.
Parties are referred as per their rank before the Arbitral Tribunal.
2. Facts in brief is as under:-
The claimant is a private limited company is a MSME establishment engaged in manufacturing and providing engineering service and has been operation since 2007. The claimant holds a Defence Industrial License and CEMILAC(Ministry of Defence Laboratory for Military Aircraft Airworthiness Certification) approval and is also a 100% export oriented unit under Cochin special economic zone. The claimant is also a company registered under the companies Act and provides consultancy services with respect to recruitment, strategy, consultation and implementation, business plan, business development, marketing sales, placement, accounts training, IT- Infrastructure, IT maintenance and HR advisory service in India and abroad. The claimant was intending to expand its brand, image, projection to large international aerospace and defence clients and claimant approached 4 Com AP 24/2025 the claimant assuring that it had all the required all expertise in the industry to meet the goals and objectives of the claimant. The claimant submitted a business plan to the claimant on 28.07.2014 proposing the assist the claimant in carrying out periodic assessment, provide high level domain expertise to create a perception of higher delivery capability in niche technology areas of the claimant, provide business development experts to liaise with mid-level management of foreign equipment manufacturers in India and abroad and also employ aggressive HR recruiters to attract the best talent from the job market. Believing the assurances and representations of the claimant both the claimant and claimant entered into a Consultancy Agreement (hereinafter referred as agreement) dated 01.08.2014. As per clause 3 of the said agreement it was to be valid for a period of 18 months commencing from 01.08.2014 till 31.01.2016. Clause 4 of the agreement required the claimant to provide the following:
(i) High level domain experts retired from Defence Research and Development Organization (DRDO), Hindustan Aeronautics Limited(HAL). Council of 5 Com AP 24/2025 Industrial and Scientific Research (CISR') and military to lobby and provide public relations with the high level management of foreign Original Equipment Manufacturers (OEMs') and to provide perception of higher capability of delivery of niche technologies;
(ii) Provide business development experts to liaise with the mid level management of foreign OEMs in India and abroad to increase the chances to receive Request for Proposals (RFPs');
(iii) Provide large teams of engineering staff at the low, mid and high levels of experience to show-cause delivery capability;
(iv) To employ aggressive Human Resource (HR') recruiters to attract the best talent in the Indian job markets.
Clause 5 of the said agreement set out the exact manpower requirements needed to be provided by the claimant to the claimant in executing its work. Under Clause 6 of the agreement the claimant had assured certain Key performance Indicators(KPI). The claimant 6 Com AP 24/2025 had undertaken that it would recovery certain lost key accounts with (i) ELBIT Systems Limited, Israel and its subsidiary group of companies to build US $1 million order in take. (ii) SOGECLAIR AEROSPACE SAS France/Germany SII, France and AUSY, France to build US $1 million Order intake: (iii) AIRBUS and its subsidiaries like EUROCOPTER, AlRBUS MILITARY, AERILIA and MBDA to build US $10 million order intake, (iv) Chersta to build US $ 1 million order in-take, RAFAEL Systems, Israel to build US $ I million order in take, during the period of 18 months. Additionally, the claimant had inter alia undertaken to enhance chances of business with prime prospects like DASSAULT, BOEING, LOCKHEED MARTIN, BAE-SYSTEMS, SHINMAYA, SIKORSKY and BELL for a possible business opportunity worth US $20 million.
Clause 9 of the agreement required the claimant to conduct assessment of activities at a frequency of every three months submit a report with actions proposed to the respondent. Under clause 15 both parties have agreed that the agreement was based on Build-operate-Transfer model which required the claimant to recruit certain personal and place them as required by the respondent to 7 Com AP 24/2025 build a successful business model and also provide all infrastructure tools created or procured were to be transferred to the respondent at the end of the project. Under clause 19 the consideration payable to the claimant for all the services was not exceeding Rs.1,80,00,000/- per month for August and September 2014 and thereafter Rs.3,60,00,000/- per month for the remaining 16 months.
It is submitted by the respondent that as required under clause 19 the respondent had duly paid the claimant consultancy for the month of August and September 2014 to the extent of Rs.1,84,24,800/-. However it was noticed that since the first month itself the claimant was not capable of performing the services stipulated under the agreement and on account of poor performance on behalf the claimant the fees was reduced from Rs.3,60,00,000/- to Rs.3,00,00,000/- to which the claimant had agreed. Further for the months of October and November 2014 the respondent paid a sum of Rs.2,97,46,351/-and Rs.3,34,23,000/- and for the month of December 2014 a sum of Rs.1,79,16,000/- came to be paid along with repeated warnings for improvements. During August 2014 the claimant sent a letter to Prosol IT 8 Com AP 24/2025 placing an order of 210 laptops for a monthly rent of Rs.1,890/- per laptop. The claimant made the payment under the invoices raise by Prosol IT but the laptops were of very poor quality which came to be returned within 12 months. Thereafter there were repeated oral exchanges between the representatives of both claimant and respondent with respect to the obligations under the agreement and the claimant was repeatedly informed about poor quality of recruitment done by it. There was continued breach of faith and poor quality of services rendered by the claimant. On account of the claimant continued failure in fulfilling its obligations under KPI and as there was under performance of the engineers recruited by the respondent the respondent terminated the agreement on 28.02.2015 by addressing a mail to the Chief Operation Officer and Managing Director of the claimant. Another mail came to be sent on 26.03.2016 seeking response on behalf of the claimant. It is submitted that the claimant on 03.02.2017 sent a letter making the claim for a sum of Rs.2,16,83,649/-. The claimant has already paid a sum of Rs.1,79,16,000/-and deducting the said amount from Rs.3,00,00,000/- to be paid as consideration the amount payable by the 9 Com AP 24/2025 respondent would be only Rs.1,20,84,000/-. But the claimant falsely claimed a sum of Rs.2,16,83,649/-. On 05.02.2015 the respondent sent an email informing the claimant that out of the total probationary engineers employed service of 52 were to be absorbed and the balance probationary officers would be terminated. Further on 17.03.2015 the respondent received an email informing that about 30 to 40 employees deputed by the claimant were not at all paid salaries by the claimant and that they were intending to leave their employments. On 21.05.2015 claimant caused a legal notice to the claimant claiming the outstanding dues. Considering the disputes between the parties the respondent invoked the arbitration clause under 32(e) of the agreement and sent a letter to the claimant on 16.06.2015 to which the claimant issued a reply on 24.06.2015.
Subsequently the Learned Sole Arbitrator came to be appointed before whom the claimant raised a statement of claim for payment of a sum of Rs.12,03,07,649/-, Rs.25,12,378/- and Rs.1,09,17,991/- together with interest at 2% p.m. from the date of termination of the agreement till realization and also for a direction to the 10 Com AP 24/2025 claimant to stop using the software provided by the claimant. In response the respondent filed a statement of defense denying the averments of the claim and raised a counter claim for dismissal of the statement of claims and direct the claimant to refund all the payments made towards purchase of software, storage and UPS and also direction to the claimant to handover all the files relating to the licensed software.
The Learned Arbitrator after collecting the evidence on record vide award dated 15.09.2017 allowed the claim in part awarded the amounts claimed by the claimant with interest at 18% p.a. commencing from 28.02.20215 till realization and rejected the other claims and also the counter claims of the respondent.
3. Aggrieved by the impugned award the petitioner has filed this petition challenging the award on following grounds:
I. It is contended that the award passed by the Learned Arbitrator suffers from patent illegality and is in conflict with public policy of India as the Learned Arbitrator has failed to consider that the agreement was 11 Com AP 24/2025 entered into based on the false representation and promises of the claimant and that the Learned Arbitrator has failed to observe that the agreement dealt with issues involved in a sensitive defence sector involving National interest and National security and that the Learned Arbitrator has not considered the fact that the claimant not only failed to meet the obligations under the agreement but also has failed even to make an attempt to meet the obligations under the agreement.
II. It is further contended that the Learned Arbitrator has completely ignored the facts which disclosed that the claimant did not show any progress in the work as per terms of clause 4 and 5 of the agreement and did not provide proper services in relation to recruitment of the personnel and that the Learned Arbitrator erred in assuming that the progress review must be a joint effort and the periodical reports were not to be filed by the claimant alone but both had to file periodical reports.
III. It is submitted that the Learned Arbitrator grossly erred in holding that the termination of the 12 Com AP 24/2025 agreement was illegal and without any basis and valid reasons and the Learned Arbitrator has erred in concluding that the claimant was required to pay a sum of Rs.25,12,378/- for the laptops obtained on rental bases.
IV. It is contended that the Award of the Learned Arbitrator is in conflict with most basic notions of morality as the Learned Arbitrator has not appreciated the facts elicited in the cross-examination of the claimant witness who has admitted that the claimant had no clients from the aviation industry and that the claimant was never capable of providing consultancy service to the claimant.
V. It is contended that the Learned Arbitrator has not considered the admissions elicited in the cross examination of claimant witness Mr. Haren Sanghvi and that the Learned Arbitrator has failed to appreciate that when a contract is entered between the parties by misrepresentation the affected party is well within the rights to rescind from the contract.
VI. It is contended that the Learned Arbitrator has failed to appreciate that the respondent had absolute right to terminate the agreement in case of breach and in the 13 Com AP 24/2025 present case there were multiple breaches by the claimant in adhering to the terms of the agreement. It is further contended that the Learned Arbitrator has totally ignored failure on part of the claimant in providing the man power and services as per clauses 4 to 6 of the agreement and that the arbitrator has not considered the fact that the claimant has not shown any progress with regard to the obligations imposed upon him under the agreement. He also submitted that the Learned Arbitrator has failed to consider that the claimant has not duly complied in providing services as required under clause 5 of the agreement. It is contended that the Learned Arbitrator ought to have considered that the claimant had failed to fulfill its obligations under the agreement and that the arbitrator grossly erred in concluding that the evidence on record does not indicate any nonperformance of any of the KPIs and the Learned Arbitrator erred in not considering the email dated 17.03.2015 in which the employees deputed by the claimants have complained regarding non payments of their salaries.
VII. The Learned Arbitrator erred in concluding that it was not the case of the respondent that there was 14 Com AP 24/2025 nonperformance of KPI for the first two months and also there was also failure on part of the claimants in proper planning of bringing inflow to the claimant company. It is submitted that the Learned Arbitrator erred in assuming that to attract termination of contract there should be nonperformance of any of the KPIs for not less than 2 quarters i.e., 6months.
VIII. It is submitted that the Learned Arbitrator has failed to consider the doubts raised by the respondent and the expertise of the claimant as even after 6 months the claimant revive any of the lost accounts. It is further submitted that the Learned Arbitrator erred in not appreciating that there was failure on part of the claimant in providing any services or fulfilling any responsibilities under the contract. It is also submitted that the Learned Arbitrator has erred in not considering the fact that the claimant has not taken any steps to rectify the shortcomings.
IX. It is further submitted that the Learned Arbitrator has misconstrued clauses 15 to 17 of the agreement and has come to the wrong conclusion. It is submitted that the 15 Com AP 24/2025 Learned Arbitrator grossly erred in assuming that progressive review has to be joint effort whereas the agreement required review to be done and reports to be submitted unilaterally by the claimant alone. It is submitted that the Learned Arbitrator has failed to consider that as the claimant failed to perform its part for the first 6 months under the agreement the respondent was forced to terminate the agreement at the end of six months. It is submitted that the Learned Arbitrator has failed to consider the terms of the agreement relating to the supply of laptops, grossly erred in holding that the consideration clause under 19 of the agreement did not include consideration for laptops supplied on rental basis, liability in holding the respondent responsible to pay the outstanding professional fees and that the Learned Arbitrator has failed to appreciate that all the partial payments and reduced payments made to the claimant has been accepted without any protest there by the claimant had waived its right to receive the outstanding amounts.
On these grounds the respondent seeks for setting aside the award.16
Com AP 24/2025
4. Upon notice the claimant has appeared and filed statement of objections wherein apart from admitting the facts narrated by the applicant in the petition, it is contended that under Sec.34(2) of the Arbitration and Conciliation Act an arbitral award can be set aside only if the Court finds that either the subject matter of the dispute is not capable of settlement by arbitration or the arbitral award in in conflict with public policy of India. It is contended that Sec.34 provides for limited grounds on which Court can set aside an arbitral award. It is contended that the grounds urged by the respondent is more in the nature of seeking review of the entire dispute which cannot be undertaken in application under Sec.34 of the Act. It is submitted that the application is based on frivolous and untenable grounds and that the present challenge to the award is not maintainable either on law or on facts. The claimant contends that the applicant/respondent has grossly misrepresented the facts and circumstances leading to the award in favour of the claimant and that the present application is only a misuse of due process of law and to avoid the liability of making payments under the award. It is submitted that the Learned Arbitrator after careful consideration of oral and 17 Com AP 24/2025 documentary evidence by both sides has passed the award which is not hit by any infirmities to set aside the same. It is submitted that the applicant has sought to challenge the award on findings of the facts which is not permissible under Sec.34 of the Act and that no ground as urged under Sec.34 has been made out to set aside the award. It is further submitted that the grounds urged in the application before the Court was never urged before the Learned Arbitrator and have been raised for the first time before the Court and therefore the award made by the Learned Arbitrator rejecting the counter claim of the applicant and allowing the claim in part is absolutely valid and is not capable of being challenged on any of the grounds under Sec.34 of the Act. In the statement of objections the claimant has reiterated some of the facts which are not in dispute. The claimant contends that it was discharging its functions and liabilities under the agreement as required for which the applicant has paid a professional fees for the months of August, September and November and partly for the months of October and December 2014 and with respect to the other months the applicant has without reason withhold the payments. It is submitted that under the terms of the agreement 18 Com AP 24/2025 nonperformance for a continued two quarters will attract termination of the agreement and the completion of the two quarters would be by end of March 2015 but even before that the applicant has unjustly terminated the agreement on false and baseless grounds. It is submitted that the termination of the agreement was without any valid reason and the applicant having master in all the trade secretes and having come in contact with different organizations was not in need of the services of the claimant and instead of paying the amounts due to the claimant the applicant has unauthorizedly terminated the agreement and has been using the software to unjustly enrich themselves. It is further submitted that for the purpose of recruitment the claimant used to search for suitable candidates and after conducting the test as per the requirements of the applicant and under the guidance of the applicant suitable candidates were to be short listed and sent for interview with the applicant and subsequently there were being recruited. The claimant has denied all other grounds urged in the application as false and baseless and has sought for rejection of the application. The claimant has also made a para wise denial of all the 19 Com AP 24/2025 grounds urged in the application and has sought for rejecting the application with costs.
5. Before the Learned Arbitrator the claimant herein examined himself as P.W.1 and got marked documents at Ex.P.1 to P.35. The witness for the respondent was examined as R.W.1 and Ex.R.1 to R.11 have been marked. The Learned Arbitrator after considering the oral and documentary evidence and after considering the arguments put forth by both sides, vide award dated 15.09.2017 allowed the claim in part directing the claimant to pay a sum of Rs.8,65,99,649/- with interest at 18% p.a. from 28.02.2015 till realization. Likewise the applicant was directed to pay a sum of Rs.1,09,17,991/- with respect to purchase of software, storage and UPS and also to pay a sum of Rs.25,12,378/- together with service tax towards the rentals paid for the laptops. All the amounts were to carry interest at 18% p.a. from 28.02.2015 till realization. All other claims have been rejected and so also the counter claim of the present applicant.
20Com AP 24/2025
6. Heard the Learned Counsel appearing for the applicant and Sri. Dhananjay Joshi, Learned Designated Senior Counsel appearing the Counsel for the claimant. Both sides have filed respective written arguments with memo and several citations. Perused the entire material on record.
7. The points that arise for my consideration are as under:
(1) Whether the applicant substantiates that the impugned award passed by the Learned Sole Arbitrator in A.C.No.3/2015 dated 15.09.2017 suffers from patent illegality appearing on the face of it and is in violation of fundamental Policy of Indian law liable to be set aside?
(2) What order?
8. My finding on the above Points are: -
Point No.1: In the Negative.
Point No.2: As per final order for the following:21
Com AP 24/2025 REASONS
9. POINT NO.1 :- Before adverting to the issues raised by the Learned Arbitrator and the conclusions arrived on those issues it would be just and proper to refer to the arguments and the citations filed by both sides in support of their respective arguments. The Learned Counsel for the applicant in the course of oral arguments vehemently contended that the claimant has not approached the tribunal with clean hands and the claimant is only a service provider whereas the main obligation is on the claimant and there were multiple successive breaches of the agreement by the claimant alone and the only breach committed by the respondent is terminating the agreement. The Learned Counsel for the applicant would submit that the award passed by the Learned Arbitrator is total non-application of mind and not considering vital evidence which amounts to patent illegality requiring the award to be set aside. He has referred to various clauses of the agreement under Ex.P.2 namely clause No.22, 27, 28 and also has referred to the emails exchanged between the respondent and the claimant and further contended that the present claimant had failed to meet the requirements of clauses 4 to 6 of the agreement and 22 Com AP 24/2025 that the Learned Arbitrator has not properly interpreted the terms of the agreement at Ex.P.2 and the Learned Arbitrator has traveled beyond the scope of the agreement and the interpretation of the agreement would show that the claim of the claimant is not at all made out and that the Learned Arbitrator has not considered clause 10 of the agreement. In addition to the oral arguments Learned Counsel for the applicant has also submitted written arguments wherein it is contended that in the claim statement there was no relief sought for either declaring or adjudicating that the termination by the claimant is illegal and in-spite of it the Learned Arbitrator has passed an award and recorded the findings under issue No.1 that the termination is illegal and without any basis. It is further argued in the written arguments that the award is in complete breach and direct conflict with the public policy of India oppose to basic notions of morality and justice, breach of fundamental policy of Indian law. In the written arguments the applicant would content that there is repeated breach of the terms of the agreement by the present claimant and therefore the applicant was justified in terminating the contract. It is further argued in the written arguments that there has 23 Com AP 24/2025 been wrong interpretation of the terms of the contract which amounts to patent illegality and the findings of the Learned Arbitrator that joint review was required to assess the progress made under the agreement is prima facie a perverse finding. The applicant also contends in the written arguments that the Learned Arbitrator has totally misread clause 5 of the consultancy agreement which has not at all been performed by the claimant and that the termination email at Ex.R.7 was on account of multiple breached and therefore no claim could have been maintained by the claimant. In the written arguments it is also contended that there is failure to comply clause 6 of the consultancy agreement by the claimant which has been conveniently ignored by the Learned Arbitrator and that the Learned Arbitrator has completely overlooked the evidence and has only considered the admissions of the applicant witness totally ignoring or not considering the admissions given by the claimant witness. It is further argued in the written arguments that the termination is no termination under law and that the amounts computed by the Learned Arbitrator is without any basis and no explanation is provide for arriving at the figures as mentioned in the award. The Learned Counsel for the 24 Com AP 24/2025 applicant would also contend in the written argument that the payment made to Prosol IT with respect to the laptops was in accordance with the terms of the agreement and there was no liability for the present applicant to pay any amount to the claimant towards rents for the laptops which was to be borne solely by the claimant himself. It is also contended that the Learned Arbitrator has not properly appreciated the appropriate law and sound legal principles laid down and has failed to observe that the consultancy agreement was entered into based on the false representations given by the claimant for which the claimant cannot be made to be compensated but on the other hand the claimant himself has to bear all the expenses for having misrepresented the respondent while entering into the agreement.
10. Against the arguments put forth by the Learned Counsel for the applicant the Learned Designated Senior Counsel appearing for the claimant would submit that a plain reading of the grounds urged in the petition is nothing but requiring this Court to conduct a review of the award on merit and indulge in re appreciation of evidence and re-interpretation of the terms of the agreement all of 25 Com AP 24/2025 which are not permissible under Sec.34 while deciding a challenge to the arbitral award. The claimant Counsel has also submitted his written arguments wherein it has been contended that the applicant is calling upon Court to reappreciate facts and evidence and interpret the terms of the contract for coming into a different conclusion than what has been concluded by the Arbitrator which is impermissible in law. The Learned Counsel for the claimant would submit that in a Sec.34 application the Court will not sit in appeal over the arbitral award and interference is permitted only under limited grounds namely breach of fundamental policy of Indian law and existence of a patent illegality in the arbitral award. It is submitted that the Court cannot interfere with an award merely because another possible view is permissible and that the Learned Arbitrator has taken one particular view. It is submitted in the written arguments that the Learned Arbitrator while recording finding in para 7 to 23 of the award has rightly answered issue No.1 holding that the termination done by the applicant of the agreement is bad in law. Similarly with respect to the findings arrived under Issue No.2 the Learned Arbitrator in paras 24 to 26 has recorded well reasoned findings based on evidence on 26 Com AP 24/2025 record and this Court cannot indulge in re-appreciation of the evidence. It is further submitted that with respect to issue No.5 to 7 the Learned Arbitrator at paras 28, 29 and 31 has elaborately considered the pleadings and the evidence led by the parties and none of the findings recorded by the Learned Arbitrator suffers from any perversity or patent illegality so as to vitiate the award. It is submitted that the award of the amounts by the Learned Arbitrator is on the basis of the terms of the contract and to contend there is no basis for arriving at the said amount is totally a misplaced contention. It is submitted that mere allegation of patent illegality would not be sufficient by itself to conclude that the findings recorded by the Learned Arbitrator is unjust, improper and oppose to the principles of law and natural justice. On these grounds the claimant would seek for rejecting the arguments put forth by the Learned Counsel for the applicant.
11. The Learned Counsel for the applicant in support of the arguments has relied upon the following decisions:
27Com AP 24/2025
1. 2020 SCC Online Bom 715, Slum Rehabilitation Authority vs. M.M. Project Consultants Private Limited, wherein at para 46 of the judgment it has been observed as under:
Repudiation will give the innocent party(B) the right to treat the contract as discharged and claim damages. It may be express or implied.
2. 2015 SCC Online Del 10220, Air India Ltd., vs Shankar and Gati Ltd. Wherein at para 56 of the judgment it has been observed as under:
The Court has already upheld the findings of the AT on the failures of the Air India to fulfill its obligations under the WLA. The AT has discussed Section 39 of the Indian Contract Act, 1872. It gives the right to the promisee to put an end to the contract if the promisor, in this case Air India, "has refused to perform, or disabled itself from performing, its promise in its entirety."
3. (2007) 13 Supreme Court Cases 434, ONGC Limited vs. Garware Shipping Corporation Limited, wherein at para 30 of the judgment it has been observed as under:28
Com AP 24/2025 There is no proposition that the courts could be slow to interfere with the arbitrators Award, even if the conclusions are perverse, and even when the very basis of the Arbitrators award is wrong.
4. (2004) 6 Supreme Court Cases 537, HPA International vs. Bhagwandas Fatehchand Daswani and others.
5. (2003) 12 Supreme Court Cases 91, Ganga Retreat and Towers Ltd and another vs. State of Rajasthan and others.
6. 1998 SCC Online Bom 320, Bharat Petroleum Corporation Limited and another vs. M/s Jethanand Thakordas Karachiwala and others.
7. (1994) 6 Supreme Court Cases 485, State of Rajasthan vs. Puri Construction Co. Ltd and another, wherein with respect to setting aside of the award it has been observed as under:
Since the arbitrator is a judge by choice of the parties, and more often than not, a person with little or no legal background, the adjudication of disputes by an arbitration by way of an award can 29 Com AP 24/2025 be challenged only within the limited scope of several provisions of the Arbitration Act and the legislature in its wisdom has limited the scope and ambit of challenge to an award in the Arbitration Act. Over the decades, judicial decisions have indicated the parameters of such challenge consistent with the provisions of the Arbitration Act. By and large the courts have disfavoured interference with arbitration award on account of error of law and fact on the score of misappreciation and misreading of the materials on record and have shown definite inclination to preserve the award as far as possible. As reference to arbitration of disputes in commercial and other transactions involving substantial amount has increased in recent times, the courts were impelled to have fresh look on the ambit of challenge to an award by the arbitrator so that the award does not get undesirable immunity. In recent times, error in law and fact in basing an award has not been given the wide immunity as enjoyed earlier, by expanding the import and implication of "legal misconduct" of an arbitrator so that award by the arbitrator does not perpetrate gross miscarriage of justice and the same is not reduced to mockery of a fair decision of the lis between the parties to arbitration. Precisely for the aforesaid reasons, the erroneous application of law constituting the very basis of the award and improper and incorrect findings of fact, which without closer and intrinsic scrutiny, are demonstrable on the face of the materials on record, have been held, very rightly, as legal misconduct rendering the award as invalid. It is 30 Com AP 24/2025 necessary, however, to put a note of caution that in the anxiety to render justice to the party to arbitration, the court should not reappraise the evidences intrinsically with a close scrutiny for finding out that the conclusion drawn from some facts, by the arbitrator is, according to the understanding of the court, erroneous. Such exercise of power which can be exercised by an appellate court with power to reverse the finding of fact, is alien to the scope and ambit of challenge of an award under the Arbitration Act. Where the error of finding of facts having a bearing on the award is patent and is easily demonstrable without the necessity of carefully weighing the various possible viewpoints, the interference with award based on erroneous finding of fact is permissible. Similarly, if an award is based by applying a principle of law which is patently erroneous, and but for such erroneous application of legal principle, the award could not have been made, such award is liable to be set aside by holding that there has been a legal misconduct on the part of the arbitrator. In ultimate analysis, it is a question of delicate balancing between the permissible limit of error of law and fact and patently erroneous finding easily demonstrable from the materials on record and application of principle of law forming the basis of the award which is patently erroneous. It may be indicated here that however objectively the problem may be viewed, the subjective element inherent in the judge deciding the problem, is bound to creep in and influence the decision. By long training in the art of dispassionate analysis, 31 Com AP 24/2025 such subjective element is, however, reduced to minimum. Keeping the aforesaid principle in mind, the challenge to the validity of the impugned award is to be considered with reference to judicial decisions on the subject. The contentions about factual errors and omissions apparent on the face of record as raised in the written argument are essentially errors and omissions in not properly considering the materials on record, in misreading and misconstruing such materials and consideration of some documents and statements out of their contexts. The arbitrators have given the award by referring to various documents and statements available on record and indicating the reasons for basing the findings. Even if it is assumed that on the materials on record, a different view could have been taken and the arbitrators have failed to consider the documents and materials on record in their proper perspective, the award is not liable to be struck down in view of judicial decisions referred to hereinbefore. Error apparent on the face of the record does not mean that on closer scrutiny of the import of documents and materials on record, the finding made by the arbitrator may be held to be erroneous. Judicial decisions over the decades have indicated that an error of law or fact committed by an arbitrator by itself does not constitute misconduct warranting interference with the award.
8. (2022) Supreme Court Cases 131, Delhi Airport Metro Express Private Limited vs. Delhi Metro Rail 32 Com AP 24/2025 Corporation Limited, wherein with respect to setting aside of an award on the ground of patent illegality it has been observed in para 29 of the judgment as under:
Para 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 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, 33 Com AP 24/2025 consideration of documents which are not supplied to the other party is a facet of perversity falling within the expression 'patent illegality'.
9. 2019 SCC Online SC 677, Ssangyong Engineering and Construction Co.Ltd.,vs National Highways Authority of India (NHAI), wherein at para 30 of the judgment it has been observed as under:
Para 30:What is important to note is that a decision which is perverse, as understood in paragraphs 31 and 32 of Associate Builders (supra), while no longer being a ground for challenge under "public policy of India", would 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 characterized as perverse.
12. Per contra the Learned Counsel for the claimant in support of his arguments has relied upon the following decisions:
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1.(2019) 4 Supreme Court Caes 163, MTMC Limited vs. Vedanta Limited, wherein it is observed as under:
Held, (i) in exercise of jurisdiction under Sec.34 of the Court does not sit in appeal over the arbitral award an may interfere on merits only on the well-settled limited grounds. (ii) interference under Sec.37 cannot travel beyond the restrictions laid down under Sec.34 and (iii) in case an arbitral award has been confirmed by the Court under S.34 and by the Court in an appeal under Sec.37 Supreme Court must be extremely cautions and slow to disturb such concurrent findings - Further, while interpreting the terms of the contract, the conduct of parties and correspondences exchanged would be relevant factors and it is within the arbitrator's jurisdiction to consider the same.
2. (2019) 20 Supreme Court Cases 1, Dyana Technologies Private Limited vs. Crompton Greaves Limited, wherein it is observed as under:
Held, the passing of a reasoned award is not an empty formulation under the Arbitration Act. Further, the requirements of a reasoned order are that the reasons/reasoning should be: proper, intelligible and adequate-Court while exercising jurisdiction under S.34 has to adjudicate the validity of an award based on the degree of particularly of reasoning required having regard to 35 Com AP 24/2025 the nature of issues falling for consideration- Further, the degree of particularity cannot be stated in a precise manner as the same would depend on the complexity of the issues in the facts and circumstances of each case -Further held, only when there is complete perversity in the reasoning can the award be challenged under the provisions of Sec.34. -Further, the power vested under Sec.34 (4) to cure defects can be utilized in cases where the arbitral award does not provide any reasoning or if the award has some gap in the reasoning or other' and that can be cured so as to avoid a challenge.
3. (2022) 4 Supreme Court Cases 116, UHL Power Company Limited vs. State of Himachal Pradesh, :
If there are two plausible interpretations of the terms and conditions of the contract, then no fault can be found, if the learned Arbitrator proceeds to accept one interpretation as against the other. In the instant case, held, that the interpretation of the relevant clauses of the Implementation Agreement, as arrived at by the learned Sole Arbitrator, are both, possible and plausible. Merely because another view could have been taken, can hardly be a ground for the learned Single Judge to have interfered with the arbitral award.
4. (2024) 6 Supreme Court Cases 809, National Highways Authority of India vs. Hindustan 36 Com AP 24/2025 Construction Company Limited, wherein it has been observed as under:
Held, there cannot be any dispute that as far as the construction of the terms of a contract is concerned, it is for the Arbitral Tribunal to adjudicate upon-Further, if after considering the material o n record, the Arbitral Tribunal takes a particular view on the interpretation of the contract, the Court under Sec.34 does not sit in appeal over the findings of the arbitrator.
5. The judgment of our Division Bench of our Hon'ble High Court in Commercial Appeal No.102/2024 dated 14.03.2025, M/s Strategic Infra Services Pvt. Ltd., vs. Mphasis Limited, wherein while referring to the judgment of the Apex Court in the decision reported in (2024) SCC Online 2600, OPG Power Generation Pvt Ltd., vs. Enexio Power Cooling Solutions India Pvt. Ltd., it has been observed as under:
The legal position which emerges from the aforesaid discussion is that after the '2015 amendments' in Section 34 (2)(b)(ii) and Section 48(2)(b) of the 1996 Act, the phrase "in conflict with the public policy of India" must be accorded a restricted meaning in terms of Explanation 1.37
Com AP 24/2025 The expression "in contravention with the fundamental policy of Indian law" by use of the word 'fundamental' before the phrase 'policy of Indian law' makes the expression narrower in its application than the phrase "in contravention with the policy of Indian law", which means mere contravention of law is not enough to make an award vulnerable. To bring the contravention within the fold of fundamental policy of Indian law, the award must contravene all or any of such fundamental principles that provide a basis for administration of justice and enforcement of law in this country. Without intending to exhaustively enumerate instances of such contravention, by way of illustration, it could be said that (a) violation of the principles of natural justice; (b) disregarding orders of superior courts in India or the binding effect of the judgment of a superior court; and (c) violating law of India linked to public good or public interest, are considered contravention of the fundamental policy of Indian law. However, while assessing whether there has been a contravention of the fundamental policy of Indian law, the extent of judicial scrutiny must not exceed the limit as set out in Explanation 2 to Section 34(2)(b)(ii).
13. With these contentions and arguments and the decisions that has been relied upon in support of the respective arguments in the hindsight it is now required to examine whether the Learned Arbitrator has committed patent illegality in passing the award or whether the 38 Com AP 24/2025 Learned Arbitrator has breached fundamental policy of India in passing the award.
14. In the decisions which has been cited above as relied upon by the Learned Counsels for both sides it is now a settled position of law that in an application under Sec.34 of Arbitration and Conciliation Act 1996 the Court is not sitting in appeal over the award. It is also made clear in catena of decisions and also in the decisions cited supra that while examining the award under Sec.34 the Court cannot undertake the exercise of review of the case on merits and also cannot embark upon re-appreciation of evidence. It has also been made clear in the above decisions that patent illegality is where the Learned Arbitrator has completely ignored the terms of contract ignored the vital evidence placed before him and has come to a conclusion which would shock the conscience of the Court and it is totally improbable to arrive at such a conclusion. The Court is required to examine whether the Learned Arbitrator while passing the award has ignored the basic notions of justice and has acted in an arbitrary manner.
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15. As mentioned above the Learned Arbitrator upon considering the pleadings i.e.,the statement of claim and the statement of defence and after considering the oral and documentary evidence has raised in all 8 issues. The foremost issue that has been raised by the Learned Arbitrator is regarding the validity of termination of the consultancy agreement dated 01.08.2014. It is vehemently contended by the Learned Counsel for the applicant in his oral arguments and also in the written arguments that considering the legality of the termination of the agreement was beyond the scope of the dispute referred for arbitration and it was beyond the scope of contract and therefore the Learned Arbitrator could not have gone into recording findings regarding validity of the termination. The said contention or argument put forth by the Learned Counsel for the applicant cannot be sustained. In the statement of claim the claimant has specifically contended that the period of the agreement was for 18 months and the present applicant resorting to termination of the agreement in February 2015 i.e., within six months is not valid in law and is not as per the established principles of law. In the light of the said contention put forth in the statement of claim, it cannot 40 Com AP 24/2025 be said that the Learned Arbitrator raising an issue with regard to validity of the termination of the agreement and considering the plea on the termination of the agreement is bad in law.
16. The agreement is produced at Ex.P.2 which is as a result of business plan and proposal submitted under a letter dated 28.07.2014 marked as Ex.P.1. The said letter is accompanied by a business plan and proposal consisting of detailed scope of services the reason which caused entering into such a service agreement, strength weakness and opportunities of the claimant and also the threat which they may have to face in the course of the agreement. The business plan and proposal also indicates the strategy plan augmentation of resources, areas of services to be provided to the present applicant the other terms and conditions including payment schedule and the conditions which would attract termination upon nonperformance of the obligations of the claimant. The claimant has not only endorsed the terms of the engagement but also has agreed confirming the acceptance of the terms and only on going through the terms of the proposal the agreement at Ex.P.2 has been 41 Com AP 24/2025 entered into. The business plan and proposal contains a note which required that the claimant must clearly define every previous month of the activity the requirements by the tenth of that calendar month and when it is done the claimant is required to provide and meet such requirements as per the monthly plan of activities submitted by the claimant. The respondent has taken his specific plea that the agreement at Ex.P.2 came to be entered into between the parties based upon false representation and promises made by the claimant to the respondent. It is vehemently argued by the Learned Counsel for the respondent that as the very agreement was based upon false representations the present applicant had all the rights to resign from the agreement and no fault can be found with it.
17. In Ex.P.1 the business plan the claimant had already stated their strength, weakness and opportunities which they could have anticipated during the course of their business. The witness for the present applicant R.W.1 in the cross-examination has deposed that they would do a background verification with the person or company with whom they would enter into contract and only after 42 Com AP 24/2025 finding it feasible they would enter into the contract. R.W.1 further has deposed in the evidence that in the present case before entering into the contract with the claimant they were satisfied about the capacity of the claimant and then they have entered into the agreement. Therefore under such circumstances no inference can be drawn to hold that at the time of entering into the contract the present claimant/claimant had made any kind of false representation and promises to the claimant/applicant.
18. Ex.P.1 is a comprehensive proposal given by the claimant to the claimant. In Ex.P.1 it is made clear that if any aspects of the proposal does not fit with the expectations of the present applicant the claimant would be happy to review those aspects with the claimant. No where in the statement of defence the present applicant has contended that they had communicated any of the proposals which appeared not fit and not within their expectations to the claimant. Therefore under such circumstances the contention of the present applicant that the agreement at Ex.P.2 was a result of false 43 Com AP 24/2025 representations made by the claimant does not hold any water.
19. To ascertain whether the conclusion of the Learned Arbitrator that termination of the agreement at Ex.P.2 was not lawful and it was not proper and correct it becomes necessary to examine the agreement and its clauses. Though it is observed in the above cited decisions that the Court cannot embark upon re-appreciation of evidence nevertheless it would be just and proper to examine whether Learned Arbitrator has taken into consideration all the relevant terms of the agreement before concluding that termination of the agreement was bad in law. Clause 3 of the agreement provides for the tenure which is to commence from 01.08.2014 for a period of 18 months to be valid till 31.01.2016. However the agreement could be extended for a further period upon mutually acceptable terms. Clause 4 of the agreement stipulates the responsibility or liability of t he service provider i.e., the claimant. Likewise clause 6 provides for the assurances given by the claimant i.e., the service provider. Clause 9 stipulates periodical assessment and filing of report which is required to be done by the service provider i.e., the 44 Com AP 24/2025 claimant once in every three months and a report should be filed to the present applicant. It is an admitted fact that the agreement was based on build, operate transfer model under which the claimant was required to recruit engineers place them with the claimant as and when required which is again governed under clauses 15 to 17 of the agreement. Under those clauses it is made clear that it is for the applicant at the first instance to convey to the claimant their requirement arising from time to time for providing engineers or any kind of employees and also the required infrastructure, processes, tools including the software and only thereafter it is responsibility of the service provider to carryout the same. Clause 22 of the agreement deals with respect to the manner in which removal of service provided by the claimant and replacement of the same by the claimant has to be undertaken. As per the said clause if the applicant finds any resources inefficient or incompetent and they are required to remove the said resources the applicant was required to call upon the service provider to replace them with suitable resources within a gap of two working weeks. The said clause makes it clear that the applicant was not entitled to remove the resources and remain 45 Com AP 24/2025 silent in order to deduct the payment in the fee of the next month. Progress review of the work has been stipulated under clause 28 of the agreement which is to be held jointly every month. It is pertinent to mention here that no where the present applicant contends that the terms of the agreement at Ex.P.2 were either suppressed or additionally inserted and they were not in accordance with the understanding and agreement of the applicant. Clause 28 makes it clear that the progress review must be a joint effort and therefore the present applicant requiring claimant to file periodical reports alone was not justified.
20. Clause 27 of the service agreement deals with respect to termination. The notice of termination which is produced at Ex.R.7 dated 28.02.2015 is a very brief email wherein it has been vaguely stated that as the service provider did not meet the requirements the agreement is being terminated. Upon reading of Ex.R.7 it is only mentioned therein some reasons but there is no effort made to make it clear to the claimant even thereafter what are all the reasons for which the agreement is being terminated. From the terms contained in Ex.R.7 the 46 Com AP 24/2025 termination letter it states that the applicant was constrained to terminate the contract with immediate effect it is abundantly clear that the applicant did not want the claimant any time for redressal of the grievances which is contrary to the terms of the contract. Therefore the only conclusion that can be arrived at is that the termination was abrupt. It is brought out from the evidence recorded before the Learned Arbitrator that there was no written complaint or suggestion for redressal of any grievance at any point of time prior to the issue of notice of termination under Ex.R.7. Though clause 27 of the agreement does not stipulates that the termination notice should be followed by any request for redressal or to state how many days after issuance of notice of termination it should it should take effect but at the same time it does not empower the applicant to terminate the contract in such a way with immediate effect without any warning or request for redressal. In this regard the evidence of R.W.1 i.e., the witness for the applicant becomes material who has deposed that they had orally communicated to the service provider about the discrepancies in performing the terms of the agreement and the lapses. However, the claimant witness in his 47 Com AP 24/2025 cross-examination has categorically denied those suggestions regarding orally being informed about the shortcomings. The contention of the applicant that claimant have orally informed about the lapses and shortcomings does not pass the test of acceptability as it is not supported by any kind of cogent and satisfactory evidence. On the other hand R.W.1 in her cross- examination admit that the applicant has not sent any notice or email prior to termination stating that the services of the claimant were not up to the mark. On the other hand R.W.1 deposed that as on 28.02.2015 they had absorbed all the employees however it was on humanitarian grounds even though there was no contract to absorb those employees. There is also admission in the evidence of R.W.1that they have not sent any letter or email to the claimant stating that the claimant has not provided proper services and that there was no proper planning in bringing inflow to the claimant company to achieve the requirements as per the terms of the agreement.
21. Clause 22 of the agreement at Ex.P.2 stipulates that the claimant was entitled to get any resources not 48 Com AP 24/2025 meeting their expectations either in quality or competence in performance or efficiency to be removed immediately and the service provider i.e., the claimant was to replace them within two working days. Within a month of termination of the agreement the applicant had undertaken removal of lot of engineers but no request was made to the claimant to replace those engineers within two working weeks as required under clause 22. In the course of evidence of R.W.1 it has been suggested that there was no delay on part of the claimant in executing their work under contract. Had there been any delay or breach on part of the claimant the applicant could have issued a letter or email to the service provider asserting the same but no such document is placed before the Learned Arbitrator. Ex.P.23 is a letter in which the claimant has concluded to remove 124 probationary engineers as their performance parameters were not up to mark. However, prior to such removal the applicant has not communicated with the service provider regarding removing of 124 probationary engineers about their incompetence or shortcoming performance.
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22. Termination under clause 27 of the agreement would only arise when there is nonperformance of any of the KPIs for continued two quarters. There is no other ground which is provided in the agreement which entitles termination. The two quarters of period of nonperformance was to be completed by 28.02.2015. Clause 27 of the agreement does not state that termination of the contract would have been done by end of the two quarters commencing from the date of agreement i.e., 01.08.2014 on the other hand it is unambiguous that to attract termination under clause 27 there should be nonperformance in any of the KPIs for a continued two quarters. In other words there must be continuous nonperformance of any of the KPIs by the claimant for not less than 6 months. It can be gathered from the evidence before the Learned Arbitrator that the applicant had never complaint about any nonperformance in writing to the service provider. It is not even the case of the claimant that the claimant has failed to perform their obligations for the months of August and September 2014 for which the fees has been paid at Rs.1.8 crores per month by the present applicant without any protest. Therefore inference has to be drawn that there was no 50 Com AP 24/2025 nonperformance of any KPIs by the claimant for the first two months which resultantly infers that the termination notice which was issued on 28.02.2015 two quarters nonperformance did not occur at all.
23. It is not in dispute that for the months of August and September 2014. The applicant has paid the professional fee to the full extent of Rs.1,84,14,800/- each. For the month of October a sum of Rs.2,97,46,351/- has been paid and for November 2014 a sum of Rs.3,34,23,000/- has been paid. Clause 19 of the agreement stipulates that for the first two months the fee payable would be Rs.1,80,00,000/- and for the remaining months the fee payable was Rs.3,60,00,000/- which after mutual discussions has subsequently reduced to Rs.3,00,00,000/-. It is the contention of the applicant that even after making payments repeated warnings were given to the service provider to make improvements but no documents is placed before the tribunal for having issued those warnings and suggestions for improvements. On the other hand it is vaguely contended that there were oral exchanges between the applicant and the claimant which is not substantiated with any cogent and 51 Com AP 24/2025 satisfactory evidence before the tribunal. It is of common analogy that unless the services provided by the claimant i.e., the service provider were to the satisfaction of the applicant payment of huge sums of money amounting to more than Rs.1.5 crores to nearly 3 crores by the applicant to the claimant will not arise. Therefore the contention of the applicant that there was nonperformance any of KPIs by the claimant for a continued period of two quarters ending February 2015 cannot be accepted so as to terminate the contract. In fact termination of the contract was premature and beyond the terms of the agreement. The termination notice upon considering the prevailing facts and circumstances, is not only premature but it also beyond the terms and contrary to the terms of the agreement. It is vehemently contended by the applicant that the cause for termination of the contract much before the period of contract was mainly due to inadequate of the services as required under clause 4 of the agreement and no progress being shown towards proposed KPI as per clause 6 and reports not being filed as per clause 9. Clause 4 of the agreement required the service provider to provide high level domain experts provide consulting and 52 Com AP 24/2025 implementations in new area of Niche technology to provide BD experts, large team of engineering staff with low, medium and high levels of experience. During the course of evidence before the Learned Sole Arbitrator Ex.P.34 is filed by the service providers which has a list of several staffs recruited by the service provider and placed at the services of the claimant. During the evidence before the Learned Sole Arbitrator the claimant has also filed a table showing the types of the candidates recruited the total being 270 members and according to the applicant 196 have left the company. The Learned Sole Arbitrator in para 22 of the award has referred to various documents with regard to providing of the candidates by the claimant and has referred to the documents at Ex.P.4,P.3. The evidence i.e., lead before the tribunal clearly indicates that the claimant has participated in the entire recruitment process of the employees needed by them so that they can be assured of their competency and suitability to work for them in the endeavor to improve the business. Therefore the contention of the applicant that incapable and inexperienced persons came to be recruited by the claimant cannot be sustained as the entire recruitment was done jointly preparing the paper of 53 Com AP 24/2025 entrance test, holding examinations, evaluations of answer papers all under the guidance of the applicant. Therefore the said contention of the applicant that quality engineers were not recruited by the claimant also false to the ground.
24. With respect to the other aspects no where under the agreement at Ex.P.2 it was stipulated that KPI requirements have to be achieved within six months but on the other hand there was period of 18 months to meet all the requirements. From the evidence on record before the Learned Sole Arbitrator it is clear that at no time prior to February 2015 the claimant in writing had informed or complained about the shortcomings on part of the service provider. Therefore under such circumstances it cannot be assessed as to how suddenly in the month of February 2015 the applicant could have raised a issued that the claimant has not met the requirements more so when the applicant has not provided any statistics regarding the requirements communicated to the claimant and among them how many have been met and how many is still pending. Before the Learned Sole Arbitrator R.W.1 in her evidence has deposed that a mail was sent to 54 Com AP 24/2025 the service provider stating that the obligations under agreement being not met was extremely unprofessional. However as can seen from the records the said email I snot produced before the Learned Sole Arbitrator . On the other hand a bald contention is take up that there were several oral exchanges between the applicant and the claimant regarding nonperformance of KPI which has not been substantiated with cogent and satisfactory evidence. Therefore under these circumstances the contention of the claimant that the agreement at Ex.P.2 has been terminated for legal and valid and acceptable reasons cannot be sustained.
25. The Learned Sole Arbitrator has meticulously considered all these documentary evidence and also the answers elicited in the cross-examination of P.W.1 as well as R.W.1 and has rightly concluded that the applicant/respondent was not justified in terminating the agreement prematurely. Upon considering the above mentioned facts and circumstances it cannot be said that the conclusion reached by the Learned Sole Arbitrator is in any manner perverse or baseless. The observations made by the Apex Court in the decisions in Slum 55 Com AP 24/2025 Rehabilitation Authority, Air India Limited and HPA International cited supra are not applicable to the facts and circumstances of the case on hand. So also the observations made in the decisions of Ganga Retreat and Bharath Petroleum Corporation cited supra by the Learned Counsel for the applicant are also not applicable to the prevailing facts and circumstances. There are no circumstances brought out which would indicate that the service provider had refused to perform the terms of the contract and that affirmation on part of the service provider indicating not rescinding the contract and also that the claimant has made to suffer loss under the contract to entitle it terminate the same abruptly.
26. One another ground that has been urged in the oral arguments as well as written arguments by the applicant is that there is no basis what so ever with respect to award of the amounts under issue Nos.2 to 4. The Learned Arbitrator has framed issue Nos.2 to 4 wherein the burden is casted upon the service provider i.e., the claimant to prove that they are entitled for the outstanding professional fee, the amount that was paid by them to Prosol IT towards rents for the laptops and the 56 Com AP 24/2025 amount spent towards purchase of software, storage and UPS together with interest thereon. It is pertinent to mention here that the Learned Arbitrator has not awarded any damages regarding termination of the agreement in an unlawful manner. What has been raised under issue Nos.2 to 4 is the entitlement for the professional fees til the termination of the contract, payment for securing on rent from Prosol IT and also payment towards purchase of software, storage and UPS. It is a fact that the service provider after being served with the notice of termination of the contract has not chosen to agitate the same but on the other hand by conduct he has accepted and has raised payment of the professional fees till the date of termination of the contract and other expenses. It is a fact that the applicant has paid a sum of Rs.1,84,24,800/- each in the months of August and September 2014, a sum of Rs.3,34,23,000/- for November 2014 and a sum of Rs.2,97,46,351/- for October 2014 in part and Rs.1,79,16,000/- for the month of December 2014. It is a fact that agreement came to be terminated in February 2015 as per Ex.R.7 no professional fee has been paid for the months of January and February 2015. Clause 19 of the agreement provides that for the months of August and 57 Com AP 24/2025 September 2014 the professional fee payable was Rs.1.8 crores to the service provider and the consultancy fee for the remaining 16 months was Rs.3.6 crores per month a request was made by the applicant for reducing the consideration amount from Rs.3.6 crores to Rs.3 Crores commencing from October 2014 and onward which has been conceded by the service provider. Therefore the applicant was required to pay the consideration fee at Rs.3 Crores per month commencing from October 2014. Upon perusal of the arbitral records this reduction is also not given effect by the applicant. This is clear from the version of R.W.1 wherein it is stated that for the month of November 2014 Rs.3,34,23,000/- is paid and for October 2014 only a sum of Rs.2,97,46,351/- has been paid against the invoice of Rs.4.01 crores. The claimant in his statement of defence has admitted payments of certain amounts to the claimant which is infact not disputed. The arbitral records contains Ex.P.29 which is an email dated 26.12.2014 under which the claimant has stated t hat the balance amount shall be arranged to be paid as soon as possible. Upon considering the statement of defence and the evidence i.e., adduced before the Learned Arbitrator there has been no justification for not paying the 58 Com AP 24/2025 professional fees for the months of January and February 2015. In the statement of claim the claimant has sought for payment of professional fee to the extent of Rs.36,76,649/- for October 2014, Rs.1,55,07,000/-for December 2014 and a sum of Rs.3,37,08,000/- each for the months of January to March 2015. The amounts claimed by the claimant in the statement of claim is only the differential professional fee that was required to be paid as per the agreed rate which the Learned Arbitrator has held the applicant responsible to pay. Conclusion arrived by the Learned Arbitrator is absolutely in accordance with the terms of the agreement and the evidence produced before the tribunal and there is no patent illegality what so ever. At the same time no perversity is made out as the Learned Arbitrator has considered in detail all evidence that is produced and has rightly concluded that the service provider is entitled for the amounts under issue Nos. 2 to 4.
27. With regard to the payment of interest the Learned Counsel for the applicant in the course of his oral arguments as well as written arguments has contended that the interest award is exorbitant, unjust and not 59 Com AP 24/2025 provided for. Clause 21 of Ex.P.2 the agreement provides for award of interest and it provides that the interest would be at the prevailing bank rates. Clause 19 requires that invoices must be raised in advance at the beginning of each month and sent to the claimant who shall remit the consideration in 10 days failure to which the service provider is entitled for interest at the rate fixed by the bank. In the statement of claim the claimant has sought for awarding interest at 24% p.a.. However the Learned Arbitrator upon considering the evidence of R.W.1 the documents at Ex.R.2, R.3, R.7 and R.8 and also taking into consideration the provisions of clause 21 of the agreement has held that awarding interest at 2% per month would be excessive and has found it just and proper to award interest at 18% p.a. which was the then prevailing bank rate of interest. Therefore upon re- examining the arbitral records, the evidence of parties and the conclusions arrived by the Learned Arbitrator in the award it clearly justifies awarding of interest at 18% p.a. on the amounts due to be paid as claimed under issue Nos. 2 to 4.
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28. Clause 19 of the agreement only provides for consultancy fee and it cannot include payments made towards rent for laptops and expenses incurred towards purchase software, storage and UPS. This fact is also admitted by R.W.1 in her cross-examination. Admittedly there is no stipulation in the contract that for payments of rents towards hiring the laptops, the service provider has to bare it on its own and that the service provider will not be entitled to claim the amounts spent towards purchase of software, storage and UPS. Under such circumstances the applicant cannot seek to absolve from its liabilities to make payments with respect to those claims. Therefore the conclusion arrived by the Learned Arbitrator holding the present applicant responsible to pay the amounts under issue Nos.2 to 4 with interest at 18% p.a. from 28.02.2015 cannot be said to be a finding without evidence or without considering the materials placed before him so as to held as perverse and patently illegal or in breach of fundamental policy of India.
29. Though as held by the Apex Court in decisions referred supra and also by our Hon'ble High Court in the recent decision supra this Court under Sec.34 has no 61 Com AP 24/2025 powers to undertake re-appreciation of evidence or review of the decision on merits. Nevertheless upon careful examination of the award and the documents tendered in evidence before the Learned Arbitrator it has to be inferred that the award passed by the Learned Arbitrator is upon meticulous consideration of evidence on record and there is no scope for any perversity or patent illegality which would vitiate the entire award. In the result for the aforesaid reasons, I answer Point No.1 in the Negative.
30. POINT NO.2:- For the aforesaid reasons, I proceed to pass the following.
ORDER Application filed by the applicant under Sec.34 of Arbitration and Conciliation Act 1996 challenging the award passed by the Learned Sole Arbitrator in A.C.No.3/2015 dated 15.09.2017 is dismissed with costs.
62Com AP 24/2025 Office to send soft copy of the judgment to both parties over email of furnished.
(Dictated to the Stenographer Grade-III, transcribed by her, corrected and then pronounced by me in open court on this the 29th day of March, 2025) Digitally signed by ARJUN ARJUN SRINATH SRINATH MALLUR Date: 2025.03.29 MALLUR 17:53:36 +0530 (ARJUN. S. MALLUR) LXXXV Addl.City Civil & Sessions Judge, Bengaluru.
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