Bombay High Court
Ratnam Sudesh Iyer vs Jackie Kukubhai Shroff on 20 April, 2021
Equivalent citations: AIRONLINE 2021 BOM 949
Author: R. D. Dhanuka
Bench: R. D. Dhanuka, V. G.Bisht
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION APPEAL (L) NO. 4901 OF 2020
IN
ARBITRATION PETITION NO. 167 OF 2015
AND
INTERIM APPLICATION (L) NO. 4905 OF 2020
IN
ARBITRATION APPEAL LD VC NO. 99 OF 2020
IN
ARBITRATION PETITION NO. 167 OF 2015
Ratnam Sudesh Iyer )
Being an Individual and a Citizen )
and Resident of Singapore having )
his address at 16A, Dalvey Estate, )
Singapore 25955 ) ..... Appellant/
Org.Respondent
VERSUS
Jackie Kakubhai Shroff )
Being an individual and a Citizen )
And resident of India and having )
His address at Freeda 1, 83-A, )
Rajan House, Bandra (W), )
Mumbai 400 050 ) ..... Respondent/
Org.Petitioner
Ms. Ankita Singhania, a/w. Mr.Vishal Gandhi, Ms.Anvitaa Rastogi, i/b.
M/s.Gandhi & Associates for the Appellant.
Mr.Arif Bookwala, Senior Advocate, a/w. Mr.Rahul Chitnis, Mr.Shyam
Dewani, Mr.Chirag Chanani, i/b. M/s.Dewani Associates for the
Respondents and the Applicant in IAL/4905/2020.
CORAM: R. D. DHANUKA AND
V. G.BISHT, JJ.
RESERVED ON : 25th FEBRUARY, 2021
PRONOUNCED ON : 20th APRIL, 2021
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JUDGMENT (Per R. D. Dhanuka, J.) :-
By this appeal filed under section 37 of the Arbitration and Conciliation Act, 1996, the appellant (original respondent before the learned Single Judge and the original claimant before the Arbitral Tribunal) has impugned the judgment delivered by the learned Single Judge of this Court allowing the arbitration petition filed by the respondent herein (original petitioner) under section 34 of the Arbitration and Conciliation Act, 1996 (for short the Arbitration Act). Some of the relevant facts for the purpose of deciding this petition are as under :-
2. The parties in this order are described as per their original status in the arbitral proceedings. The appellant herein was the original claimant whereas the respondent herein was the original respondent.
The claimant is a citizen of Singapore and resides in Singapore. It was the case of the claimant that the claimant had identified and brought together (i) Mr.Raman Maroo, (ii) Mr.Jayesh Parekh and (iii) and the respondent and offered them an investment opportunity in the said joint venture company known as Ace TV Private Limited. The claimant and the respondent were friends at that time.
3. The claimant thereafter founded Sony Entertainment Television Private Limited (now known as Multi Screen Media Private Limited) along with the world renowned Sony Pictures Entertainment, USA a part of the Sony Group of Japan. The said Sony Entertainment Television Private Limited was created as joint venture company between companies owned by the claimant and the companies owned by the Sony Pictures.
4. It is the case of the claimant that the claimant together with Mr.Raman Maroo negotiated and procured favourable telecasting rights ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:06:59 ::: KVM 3/45 APPL4901 OF 2020.doc and built a 500 movies library which was then taken as part of the capital contribution to the said joint venture company. The claimant held shares of Multi Screen Media Private Limited through holding companies viz. Atlas Equifin Private Limited, India and Grandway Global Holdings Limited, Mauritius. The claimant was the first chief of television programming of the Sony TV Venture.
5. It was the case of the claimant that in the month of May 2012, the said shareholders whom the claimant brought together had sold their shares equivalent to 32% of Multi Screen Media Private Limited to the Sony Group companies at a valuation of approximately USD 840 million. The claimant had invested and was involved with several industries. According to the claimant, the value of his reputation was worth Rs.282.60 crores on the basis of his achievement relating to the Sony TC Venture alone and was worth Rs.314 crores if his other achievements were considered.
6. As per the claimant, the bare minimum value of the said reputation of the claimant was admitted by the respondent as USD 3.5 million or Indian Rupee 18 crores 78 lakhs. The claimant is a shareholder of Atlas Equifin Private Limited. The respondent was also a shareholder of the said company and holding 1,40,000 equity shares in the said company. The said company is an investment holding company and owns assets including shares of Multi Screen Media Private Limited which shares had recently been sold subject to the government approvals.
7. It was the case of the claimant that Mrs.Ayesha Shroff who is the wife and representative/agent of the respondent had acted as authorized representative of the respondent and had represented the respondent in various dealings with the claimant as well as in various dealings with the company. The respondent had been trying to sell his shares in the ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:06:59 ::: KVM 4/45 APPL4901 OF 2020.doc said company since the year 2002 by various modes. A placement instruction dated 15th November, 2005 was signed by the claimant and the respondent and other parties, authorizing the Standard Chartered Bank as their agent to identify a purchaser to purchase the shares of the said company.
8. It is the case of the claimant that the respondent thereafter disputed his signature on the Placement Instruction and lodged a false and baseless complaint with the Economic Offences Wing, Mumbai Police on 19th April, 2010 against the claimant and also against the bank, Mr.Rakesh Aggarwal, Mr.Umesh Parekh, Mr.Sanjay Chowdhury, in order to illegally and wrongfully extract monies from the claimant on false and baseless grounds. The parties entered into a Deed of Settlement on 10th January, 2011 whereby they agreed to settle the dispute raised by the respondent in the said complaint dated 19 th April, 2010 made with the Economic Offences Wing.
9. It is the case of the claimant that under the said Deed of Settlement, the respondent agreed to withdraw the said complaint. The respondent had represented and asked the claimant that he had not filed any other complaint or proceedings against the claimant or any other person regarding the Placement Instructions or shares of Atlas Equifin Private Limited, India before the police authorities and/or any other judicial, quasi judicial authority or intimated/addressed any letter to any other statutory authority, save and except the complaint mentioned in clause (2). The respondent also agreed that in future the respondent shall not write any letter or communication or complaint to any police authorities and/or any other judicial, quasi judicial authority or statutory authority or any person or entity complaining about the subject matter of the Settlement Deed.
10. In consideration of such settlement, the claimant agreed to pay ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:06:59 ::: KVM 5/45 APPL4901 OF 2020.doc the respondent a total sum of USD 3,50,000 (3 and ½ million United States Dollars) in the manner set out in the said clause 4 of the Settlement Deed. In clause (6) of the said Settlement Deed it was agreed that in the event the respondent commits any breach of any of the terms and conditions and/or his obligation under Deed of Settlement or any of the representation/assurances of the respondent under the Settlement Deed turned out to be false or incorrect, the Deed of Settlement shall stand terminated and the respondent shall forthwith return the amount of USD 1,500,000 to the claimant and agent shall not release further amount of USD 2,00,000 lacs to the respondent and shall be returned back to the claimant.
11. It was further provided in the said Settlement Deed that the claimant had agreed to pay a sum of USD 1,50,000 vide banker's cheque payable at Mumbai and drawn in favour of the respondent which shall be valid for a period of at least 180 days from the date of issuance of the cheque and be handed over to D.M.Harish & CO., advocate for the respondent to keep in escrow. The escrow agent shall handover the same to the respondent on confirmation from the Economic Offences Wing that the respondent had withdrawn his complaint dated 19th April, 2010, the said complaint was closed and there was no investigation of any nature whatsoever in respect of the said complaint.
12. It was provided that if Economic Offences Wing did not issue a letter confirming that the complaint had been withdrawn, the claimant shall file a quashing application within a period of 45 days from the day on which the respondent would submit his letter of withdrawal of complaint to Economic Offences Wing to have the complaint quashing. If the same is not received within a period of five months i.e. by 31 st May 2011, the banker's cheque for USD 1,500,000 shall be then ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:06:59 ::: KVM 6/45 APPL4901 OF 2020.doc exchanged on or before 10th June, 2011 by the claimant for fresh banker's cheque of the same amount and shall remain in escrow until such time as the Economic Offences Wing confirms that the complaint was withdrawn or the Court quashes the complaint.
13. It was further provided in clause 4.1 of the said Settlement Deed that if the claimant does not file a quashing application within a period of 45 days from the day on which the respondent submits his letter of withdrawal of complaint to the Economic Offences Wing or does not give a fresh banker's cheque by 15th June, 2011, time being of the essence, M/s.D.M.Harish & Co. shall handover the original banker's cheque to the respondent.
14. In paragraph 4.2 of the said Settlement Deed, it was provided that the claimant would pay further USD 2,000,000 (United States Dollars two millions only) to be paid to the respondent within 7 days of the receipt of sale proceeds, by Grandway Global Holdings Limited, Mauritius and/or Atlas Equifin Private Limited, India from the sale of the shares held by Grandway Global Holdings Limited, Mauritius and/ or Atlas Equifin Private Limited, India in Multi Screen Media Private Limited and for that purpose, an undated cheque for USD 2,000,000 (United State Dollars two millions only) as and by way of security to be kept in escrow with Mr.Anil Harish of D.M.Harish & Co., advocates for the respondent. It was provided that in the event of the sale of the shares of Multi Screen Media Private Limited taking place, it shall be the duty of the claimant to immediately inform the respondent and Mr.Anil Harish of such sale of the shares of Multi Screen Media Private Limited so that the cheque for USD 2,000,000 (United States Dollars two millions only) kept in escrow may be handed over to the respondent.
15. It was further provided that if the claimant does not inform the ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:06:59 ::: KVM 7/45 APPL4901 OF 2020.doc respondent and if the respondent comes to know of the sale of the shares of Multi Screen Media Private Limited, the respondent by providing supporting documents about the sale may call upon Mr.Anil Harish to handover the cheque and Mr.Anil Harish shall thereupon after satisfying himself about the same call upon the claimant to confirm in writing within a period of seven business working days, failing which he shall be entitled to handover the cheque to the respondent.
16. In paragraph 4.3 of the said Settlement Deed, it was provided that Mr.Anil Harish for and on behalf of D.M.Harish & Co. advocates has confirmed the said escrow arrangement stated in paragraphs 4.1 and 4.2 of the Deed of Settlement. In paragraph 4.4 of the said Settlement Deed, it was provided that entire arrangement for payment of USD 3,500,000 to the respondent was in consideration of the settlement arrived at as recorded in the said Settlement Deed. The said amount was quite apart from the amount to which the respondent shall be entitled in his capacity as a shareholder of Atlas Equifin Private Limited, India.
17. In clause 5 of the said agreement, the respondent agreed to ratify the agreement in his capacity as the shareholder and director of Atlas Equifin Private Limited, India and agreed to do various acts for the purpose set out in the said clause. Clause (6) of the said agreement provided that if the respondent commits any breach of any of the terms and conditions and/or his obligation under this Deed of Settlement or any of the representation/assurances of respondent under Deed of Settlement turn out to be false or incorrect, the said Deed of Settlement shall stand terminated and the respondent shall forthwith return the amount of USD 1,500,000 to the claimant. Mr.Anil Harish of M/s.D.M.Harish, advocates shall not release the banker's cheque and ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:06:59 ::: KVM 8/45 APPL4901 OF 2020.doc the cheque lying in escrow to the respondent and same shall be returned back to the claimant.
18. In paragraph (7) it was provided that upon release of the cheque of USD 2,000,000 by D.M.Harish & Co. upon the happening of the events setout in clause 4.2, if the same cannot be encashed even though shares of Multi Screen Media Private Limited held by Grandway Global Holdings Limited, Mauritius and/or Atlas Equifin Private Limited, India had been sold and claimant gives instructions to stop payment then the respondent would be at liberty to take appropriate action for default and also make an appropriate claim by invoking arbitration.
19. In clause (8), it was provided that the Deed of Settlement was governed and/or shall be enforced by a parties thereto under the applicable laws of India. In clause (9) of the said Settlement Deed, it was provided that if any dispute arises between the parties in relation to any provision of the said Deed, the dispute shall be referred to arbitration by a single arbitrator to be appointed by mutual consent. The arbitration proceedings shall be governed by the Arbitration and Conciliation Act, 1996 of India or amendment thereto. The Courts in Mumbai shall have jurisdiction in relation to any legal action or proceeding arising out of or in connection with the said Deed of Settlement.
20. It is the case of the claimant that on 9 th June, 2011, wife of the respondent addressed an e-mail to the claimant informing the claimant that the deal term sheet had been signed between the Providence and Stanchart. In the said e-mail, the wife of the respondent expressed surprise and alleged that the claimant did not mention about the said term sheet when they spoke last. She alleged that the claimant had once again not been straight with them and she was concerned about ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:06:59 ::: KVM 9/45 APPL4901 OF 2020.doc that.
21. On 15th June, 2011, the claimant addressed an e-mail to the wife of the respondent with C.C. to three other parties and informed that the claimant had already told her that the claimant had signed the term sheet with Providence and that Sony wanted to exercise its pre- empitive rights. He was not aware of a term sheet signed between the Providence and Stanchart as stated by her in her e-mail. Even if any such term-sheet was signed, it did not matter. The respondent seem to be knowing more about the said deal and asked the respondent to inform the claimant. He informed that he did not bother about any updates nor should she bother. As and when the deal happens, she may take the money and run. He further stated that she was only waiting for it.
22. In response to the said email dated 15 th June, 2011, the wife of the respondent sent email on 15th June, 2011 at 11:59 p.m. to the claimant with CC to others stating that every one was waiting to take money and run and that she did not wish to continue to fraternize with a 'forger'. She denied that it was informed that a termsheet was signed and as per terms of Deed, the respondent was bound to give updates.
23. By letter dated 30th June, 2011, the respondent through his advocate to the claimant called upon the claimant to promptly complete the sale of share being the second pre-condition for second escrow cheque of US$ 2 million. On 7 th July, 2011, the claimant sent an email in response to the letter dated 30th June, 2011 addressed by respondent's advocate contending that till the share were sold, there was no obligation on the claimant to inform and that the claimant cannot call upon the respondent to sell. The claimant alleged that the respondent had breached the Deed of Settlement, particularly Clause 3, by sending false and defamatory email to respondent and others dated ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:06:59 ::: KVM 10/45 APPL4901 OF 2020.doc 15th June, 2011.
24. On 9th May, 2012, the Sony showed interest in purchasing shares of MSM from Atlas. Mr. Raman Maroo requested the claimant to sign the Share Purchase Agreement. On 24th May, 2012, the claimant executed a Share Purchase Agreement with Sony. The Share Purchase Agreement was executed. In the month of July 2012, the sale of shares of MSM came to be held by Atlas Equifin Pvt. Ltd. to Sony towards closure. Foreign Investment Promotion Board approval was awaited for remittance of proceed. On 23rd July, 2012, the claimant filed a Petition under Section 9 (Petition No. 853 of 2012) claiming interim reliefs against the respondent and respondent's wife and Escrow Agent alleging that the Deed of Settlement was breached by wife of the respondent who was acting as agent of the respondent and sent defamatory email dated 15th June, 2011. In the said petition, the claimant demanded that all the money paid and to be paid should be returned back to the claimant.
25. On 6th August, 2012, a learned Single Judge of this Court disposed of the said Petition bearing No. 853 of 2012 by consent of the parties. The name of the wife of the respondent who was impleaded as one of the respondent was agreed to be dropped as she was neither party to the Settlement Agreement nor Arbitration Agreement. It was directed that the Escrow Agent to handover cheque only after any direction in that regard in the arbitration proceedings. By consent of parties, the dispute was referred to a former Judge of the Supreme Court. The claimant filed statement of claim before the learned Arbitrator alleging breach of the Agreement by the respondent and prayed for compensation with interest and order and direction to refund of sum of US$ 1.5 million or Rs.8.49 crores with 18% interest p.a. w.e.f. from 7th July, 2011 till the date of payment. The respondent filed ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:06:59 ::: KVM 11/45 APPL4901 OF 2020.doc an application under Section 16 of the Arbitration Act in the said statement of claim before the learned Arbitrator.
26. By an order dated 17th January, 2013, the learned Arbitrator rejected the said application under Section 16 of the Arbitration filed by the respondent holding that in his prima-facie view, such claims could not be rejected at the threshold and kept all contentions open to be agitated at the stage of final hearing. The respondent thereafter filed a written statement to the said statement of claim on 8 th February, 2013. In the month of March 2013, total number of shares of MSM held by Grandway Global Holding Ltd. and Atlas Equifin Pvt. Ltd. being 31% equity shares were admittedly sold and the sale consideration was received by Atlas Equifin Pvt. Ltd. On 6 th April, 2013, Atlas Equifin Pvt. Ltd. declared and paid dividend payable to the shareholders from and out of part of the said consideration received by it from sale of share held in MSM.
27. On 12th March, 2013, the claimant filed application under Section 17 of the Arbitration Act before the learned Arbitrator alleging that the respondent would receive share of sale proceeds being shareholder and prayed for attachment of Rs.8.49 crores equal to US$ 1.5 millions. On 8th April, 2013, the learned Arbitrator rejected the said application filed by the claimant under Section 17 of the Arbitration Act. The claimant thereafter filed a Petition under Section 9 (being Petition No. 342 of 2013) inter-alia praying for the same reliefs before this Court. On 25th April, 2013, a learned Single Judge of this Court dismissed the said Arbitration Petition under Section 9 of the Arbitration Act and made various prima-facie observations against the claimant. On 1st October, 2013, Appeal No. 623 of 2013 filed by the claimant came to be dismissed. The respondent thereafter filed Petition No. 439 of 2013 under Section 9 to direct the Escrow agent to ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:06:59 ::: KVM 12/45 APPL4901 OF 2020.doc handover US$ 2 million on the ground that the respondent had already fulfilled his part of the part of obligation under the Agreement entered into between the parties.
28. On 2nd April, 2014, a learned Single Judge dismissed the said Arbitration Petition No. 439 of 2013 holding that the direction could not be given as interim measures as claimant was not only resisting the payment but also asking for refund. The respondent preferred an appeal against the said order dated 2nd April, 2014, bearing No. 264 of 2014 which was disposed off as withdrawn on 5 th January, 2015. Learned Arbitrator thereafter framed issues on 17th June, 2013. The claimant filed his affidavit of evidence on 23rd July, 2013. On 25th July, 2013, the affidavit in lieu of examination-in-chief of the witness of the claimant Anmol Sekhri was filed before the learned Arbitrator. On 30 th September, 2013, the respondent and his wife filed their respective affidavit of evidence before the learned Arbitrator. All the witnesses were cross-examined. Both the parties filed their written submissions before the learned Arbitrator. The respondent filed supplemental written submission before the learned Arbitration on 11 th October, 2014.
29. On 10th November, 2014, the learned Arbitrator made an award and awarded the claim for liquidated damages in favour of the claimant as set out in the contract in the sum of US$ 1.5 millions. It was further directed that if the said sum is not returned by 15th November, 2014 by the respondent, the respondent would be liable to pay with interest @ 12% p.m. from 16th November, 2014 till payment or realization. The learned Arbitrator further declared that the respondent was not entitled to US$ 2 millions lying in Escrow. The learned Arbitrator directed the Escrow agent to forthwith return the amount/cheque to the claimant. Being aggrieved by the said Arbitration Award, the respondent herein ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:06:59 ::: KVM 13/45 APPL4901 OF 2020.doc filed Arbitration Petition No. 167 of 2015 under Section 34 of the Arbitration Act before this Court. The claimant in the meanwhile filed Commercial Execution Application No. 93 of 2017. The respondent filed Notice of Motion (Lodging) No. 1987 of 2017 under Section 36 of the Arbitration Act inter-alia praying for stay and enforcement of award.
30. On 6th April, 2018, a learned Single Judge of this Court granted unconditional stay in the said Notice of Motion (Lodging) No. 1987 of 2017 filed by the respondent and the said Arbitration Petition No. 167 of 2015. On 7th January, 2019, the Hon'ble Supreme Court did not interfere with the order dated 6th April, 2018 granting unconditional stay of the arbitration award and dismissed the Special Leave Petition filed by the claimant. On 19th May, 2020, a learned Single Judge of this Court allowed the said Arbitration Petition No. 167 of 2015 filed by the respondent herein and was pleased to set aside the impugned Arbitral Award made by the learned Arbitrator. The learned Single Judge directed the escrow agent to handover the cheque held by him to the respondent herein but not before six weeks from the date of the said judgment. The learned Single Judge also continued the interim attachment order passed on 16th April, 2018 of the shares held by the respondent herein for a period of six weeks.
31. Being aggrieved by the said judgment, the claimant filed this Appeal under Section 37 of the Arbitration Act. During the pendency of this appeal, the Division Bench of this Court passed various interim orders and continued the stay granted by the learned Single Judge. By an order 3rd September, 2020, the Division Bench of this Court directed the escrow agent to deposit the cheque with the Prothonotary and Senior Master of this Court with a direction to retain the said cheque in a sealed cover and to produce the same before this Court at the time of ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 14/45 APPL4901 OF 2020.doc hearing of the appeal.
32. On 27th October, 2020 the Division Bench of this Court passed an order in Interim Application (Lodging) No.4905 of 2020 taking on record the bank statement produced by the claimant showing that the appellant has deposited US$ 4,000,000 in the said bank account. The claimant undertook to produce a letter from the bank confirming that an amount of US$ 4,000,000 was lying in the account of the claimant and that the bank would ensure that the balance of US$ 4,000,000 was maintained and the claimant would not withdraw any amount without seeking prior written order of this Court. This Court accepted the said statement made by the learned counsel of the claimant.
33. On 5th November, 2020, this Court noticed that the letter issued by the bank on behalf of the claimant was not in compliance with the undertaking given to the Court by the learned counsel appearing for the claimant. The claimant undertook to produce a letter from the bank in compliance with the order dated 27th October, 2020. This Court however, clarified that the claimant was allowed to get the letter issued in regard to a sum of US$ 2 million instead of US$ 4 million. On 10 th December, 2020, the claimant through his counsel tendered a copy of the letter dated 3rd December, 2020 issued by the HDFC Bank. The said letter was taken on record. In the said letter, the HDFC Bank confirmed that the claimant had deposited a sum of US$ 2 million with the HDFC Bank Limited, Churchgate Branch, Industry House, Mumbai - 400 020 branch. The bank ensured that the said sum/balance shall be maintained by the claimant and the said sum would not be withdrawn by the claimant without taking prior written order of this Court.
34. Ms.Ankita Singhania, learned counsel appearing for the claimant invited our attention to various averments made by her client in the statement of claim, in the written statement filed by the respondent, ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 15/45 APPL4901 OF 2020.doc various correspondence exchanged between the parties, various paragraphs in the arbitral award, the judgment delivered by the learned single Judge and various interim orders passed by the Division Bench of this Court in this appeal. It is submitted that the learned single Judge has applied the test of "reasonablenes" and standard of wednesbury principles" in the impugned judgment contrary to the principles of law laid down by the Hon'ble Supreme Court in case of Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India (NHAI), 2019 SCC OnLine, 677. She relied upon paragraphs 22 to 28 and 70 to 76 of the said judgment and would submit that the learned single Judge has decided contrary to the principles of law laid down by the Hon'ble Supreme Court in the said judgment.
35. The Hon'ble Supreme Court in the said judgment has clearly held that the principles of reasonableness can no longer be applied in relation to the construction of term "public policy" as the same would be contrary to the object of the Arbitration Act which is to minimize the judicial intervention. She relied upon section 34 (2A) of the Arbitration Act in support of her submission that under the said provision, any award arising out of the International Commercial Arbitration cannot be challenged on the grounds of "patent illegality'. She submits that the claimant was admittedly a foreign resident and thus the arbitration between the claimant and the respondent fell within the purview of " International Commercial Arbitration" within the meaning of section 2(1)(f) of the Arbitration Act. She relied upon Explanation 2 to section 34(2A) of the Arbitration Act which provides that the test as to whether there is a contravention of "fundamental public policy of Indian law" shall not entail a review on the merits of the dispute. Learned single Judge has applied the principles applicable ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 16/45 APPL4901 OF 2020.doc to domestic arbitration in International Commercial Arbitration contrary to section 34 (2A) of the Arbitration Act.
36. Learned counsel placed reliance on the judgment of the Hon'ble Supreme Court in case of Associated Builders vs. Delhi Development Authority (2016) 3 SCC 49 and would submit that the Hon'ble Supreme Court in the said judgment while dealing with the expression "public policy" has held that merely being contrary to a statute would not contravene fundamental policy of India. She also relied upon paragraph 35 of the judgment of the Hon'ble Supreme Court in case of Ssangyong Engineering & Construction Co. Ltd. (supra) in support of this submission.
37. It is submitted by the learned counsel that the learned single Judge has reversed the findings of fact rendered by the learned arbitrator by recording fresh findings contrary to the findings recorded by the learned arbitrator which is ex-facie contrary to the principles of law laid down by the Hon'ble Supreme Court in case of Associated Builders (supra) and Ssangyong Engineering & Construction Co. Ltd. Supra). Learned single Judge could not have substituted the interpretation of the provisions of the agreement and could not have reappreciated the evidence led by the parties in the said judgment delivered under section 34 of the Arbitration Act which is not permissible in law.
38. It is submitted that the respondent had not satisfied the applicability of any of the grounds set out under section 34 of the Arbitration Act for setting aside the said reasonable and correct arbitral award rendered by the learned arbitrator before the learned single Judge. In support of this submission, learned counsel invited our attention to various findings recorded by the learned single Judge and the observations made about the alleged illegality in the impugned ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 17/45 APPL4901 OF 2020.doc award in the said judgment and would submit that no such fresh findings could be rendered by the learned single Judge while deciding a petition under section 34 of the Arbitration Act.
39. It is submitted by the learned counsel that though the claimant had specifically urged before the learned single Judge that the arbitration between the parties being "International Commercial Arbitration" within the meaning of section 2(1)(f) of the Arbitration Act and thus the principles applicable to domestic award while dealing with the application under section 34 could not be made applicable to an award under International Commercial Arbitration, learned single Judge did not deal with the said issue raised by the claimant in the impugned judgment.
40. Insofar as the issue of liquidated damages raised before the learned single Judge and dealt with by the learned single Judge in the impugned judgment is concerned, learned counsel invited our attention to paragraphs 110 to 124 of the impugned award and would submit that this issue was discussed in great detail by the learned arbitrator while allowing the claim for liquidated damages made by the claimant. Learned single Judge could not have interfered with the said claim awarded by the learned arbitrator on the ground that the learned arbitrator ought not to have granted liquidated damages for breach of Deed of Settlement by the respondent as the said breach was not so fundamental so as to invite an award of damages in full measure of consideration paid.
41. It is submitted by the learned counsel that learned single Judge totally over looked clause 6 of the Deed of Settlement which provided that any breach of any of the terms and conditions of the Deed of Settlement by the respondent would result in the respondent being liable to return the amount of US$ 1.5 million and will disentitle the ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 18/45 APPL4901 OF 2020.doc respondent from receiving further sum of US$ 2 million. Learned single Judge has read the condition in clause 6 which did not accept clause 3 of the Deed of Settlement, did not make any distinction between essential and in-essential term of contract. Learned single Judge has re-written the contract between the parties.
42. It is submitted by the learned counsel for the claimant that the learned single Judge could not have rendered the finding of fact in paragraphs 17 and 18 of the impugned judgment without distinguishing the reasonings given by the learned arbitrator at paragraph 112 of the award. Learned single Judge totally disregarded the reasonings given by the learned arbitrator in paragraph 113 of the award by re- interpretating clause 6 of the Deed of Settlement and holding that in order to claim damages for breach of contract, it was necessary to terminate the Deed of Settlement. Learned single Judge recorded various wrong findings of fact contrary to record.
43. It is submitted by the learned counsel for the claimant that the learned single Judge has set aside the said claim for liquidated damages holding that no judiciously minded person could have concluded as the arbitrator had done. The claim of US$ 3.5 million by the claimant was claim for liquidated damages for the reasons that it had not referred to the said sum as liquidated damages or genuine pre-estimate of loss in his statement of claim. She relied upon section 74 of the Contract Act and would submit that the said section itself would clearly show that there was no requirement for a party to describe a sum named in the contract as liquidated damages or a genuine pre-estimate of loss. Learned single Judge therefore, could not have set aside the said claim on the said ground contrary to section 74 of the Contract Act,1972.
44. It is submitted that the respondent had never alleged that the said amount claimed by the claimant was in the nature of penalty. Learned ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 19/45 APPL4901 OF 2020.doc arbitrator had thus rightly not framed any such issue for want of any such pleadings on the part of the respondent. It is submitted that the learned single Judge erroneously applied the principles in case of Punj Lloyd Ltd. vs. IOT Infrastructure & Energy Services Ltd., decided on 14th December, 2018 in Arbitration Petition No.1332 of 2012. Learned single Judge totally ignored the well settled principles of law laid down by the Hon'ble Supreme Court in case of Kailash Nath Associates vs. Delhi Development Authority & Anr. (2015) 4 SCC 136 and in particular paragraph 68 and also in case of ONGC vs. Saw Pipes Ltd. (2003) 5 SCC 704 and more particularly paragraphs 64 and 67 holding that in terms of section 74 of the Contract Act, in every case of breach of contract, a person aggrieved by breach is not required to prove actual loss or damage suffered by him before he can claim a decree.
45. It is submitted that the Court is competent to award reasonable compensation in case of breach, even if actual damage suffered is not proved. Learned single Judge has decided contrary to the principles of law laid down by the Hon'ble Supreme Court in case of Kailash Nath Associates (supra). Learned counsel for the claimant invited our attention to the observations made by the learned single Judge in paragraph 22 of the impugned judgment and would submit that the said observation is contrary to the principles of law laid down in case of Kailash Nath Associates (supra) and totally over looking the terms of the Deed of Settlement. Learned single Judge has misapplied the test of public policy to review the entire dispute on merits which is expressly prohibited by section 34 of the Arbitration Act.
46. It is submitted that it is rightly held by the learned arbitrator that no Court or Tribunal could apportion the amount of US$ 3.5 million to be paid between various things to be shown under the Deed of Settlement, when the parties themselves did not provide for such ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 20/45 APPL4901 OF 2020.doc apportionment. It was not the case of the respondent that the sum payable on breach, was by way of penalty and thus the claimant was entitled to recover the sum named in the contract. The said sum of US$ 3.5 million was genuine pre-estimate. It is submitted that balance of convenience was also in favour of the claimant and not the respondent. The claimant had already paid US$ 1.5 million to the respondent in the year 2011 itself which money was being enjoyed by the respondent including earning interest thereon.
47. Learned counsel for the claimant submits that the findings rendered by the learned arbitrator considering the pleadings and evidence on record that the wife of the respondent had acted as an agent of the respondent in the entire deal and thus acts of wife as an agent of the respondent were binding on the respondent, has been erroneously reversed by the learned single Judge. E-mail sent by the wife of the respondent to the claimant was also copied to several other persons which also gave cause of action to the claimant to claim liquidated damages against the respondent. The respondent had also filed frivolous complaints against the claimant with the Economic Offences Wing. The wife of the respondent was always leading him all through out. Even the said Deed of Settlement was also finalized by the wife of the respondent.
48. Learned counsel for the claimant also placed reliance on the judgment of the Hon'ble Supreme Court in case of Kuldip Singh vs. Commissioner of Police (1999) 2 SCC 10 and in particular paragraphs 26 to 28, 35 to 38, 42, 70, 72, 76 and 77. It is submitted that the learned single Judge has applied the principles laid down by the Hon'ble Supreme Court in case of ONGC vs. Western Geco International Limited, (2014) 9 SCC 263 which principles were already overruled by the Hon'ble Supreme Court in case of Ssangyong Engineering & ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 21/45 APPL4901 OF 2020.doc Constitution Co. Ltd. (supra). Learned counsel placed reliance on the judgment of the Hon'ble Supreme Court in case of Mcdermott International Inc vs Burn Standard Co. Ltd. & Ors.2006 (11) SCC
181.
49. Learned counsel for the claimant placed reliance on the judgment of this court in case of Mrs.Padmini Chandran Menon vs. Vijay Chandran Menon (2018) SCC OnLine Bom. 9 and in particular paragraphs 40,66 and 71 in support of the submission that in view of the agreement between the parties that the parties would be governed by the amendment to the Arbitration Act, 1996 or repealed thereto, the amendment to section 34 of the Arbitration Act would apply to the proceedings between the parties. She invited our attention to clause 9 which records the arbitration agreement forming part of the Deed of Settlement.
50. Mr.Bookwala, learned senior counsel for the respondent on the other hand invited our attention to the clauses 3, 4.1, 4.2, 6 and 7 of the Deed of Settlement entered into between the parties. He invited our attention to paragraph 125 of the impugned award and would submit that the learned arbitrator has given finding that the contract between the parties is kept alive. He invited our attention to various correspondences exchanged between the parties including the e-mails sent by the wife of the respondent to the claimant and between the advocates of the respective parties. He strongly placed reliance on the judgment of this Court in case of Patel Engineering Ltd. vs.North Eastern Electric Power Corporation Ltd. (2017) 15 SCC 32 and also in case of Ssangyong Engineering and Construction (supra) in support of the submission that in view of the amendment to section 34(2A) pertaining to the 'patent illegality', the said amendment would apply to the applications under section 34 made on or after 23 rd ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 22/45 APPL4901 OF 2020.doc October, 2015. He submits that the parties were thus not governed by the amendment of 2015 but were governed by the unamended provisions of the Arbitration Act as the proceedings were held prior to 23rd October, 2015. All the judgments dealing with the arbitration proceedings commenced prior to 23rd October, 2015 would not be applicable in the present matter.
51. Learned senior counsel placed reliance on paragraph 13 of the judgment of the Supreme Court in case of Ssangyong Engineering and Construction (supra) wherein it is observed that since the section 34 petition in the said case is dated 30 th July, 2016, parameters of review of arbitral award would be in accordance with the amendment, which came into force w.e.f. 23rd October, 2015, particularly in respect of the 'public policy of India ground'. Section 34(2-A) was also inserted by the same amendment. He submitted that there is no substance in the submission of the learned counsel for the claimant that the 'award is against basic notions of justice or morality' and the earlier 'test of reasonableness, perversity and impossible view' set out in ONGC vs. Western GECO International Ltd., (2014) 9 SCC 263, are overruled by the Supreme Court in case of Ssangyong Engineering and Construction (supra). He also relied upon paragraph 29 of the judgment of Supreme Court in case of Associated Builders (supra).
52. Learned senior counsel placed reliance on sections 2(2), 2(7), 4, 28(1)(b), 28(3), 34(2)(a)(iv) and 34(2)(b)(ii) of the Arbitration Act. He also placed reliance on the judgment of Supreme Court in case of J.G.Engineers (P) Ltd. vs. Union of India, (2011) 5 SCC 758 and would submit that the award can be set aside if it is unfair and unreasonable, that it shocks the conscience of the Court, as then it would be opposed to public policy. He also placed reliance on the judgment of Delhi High Court in case of Mahanagar Telephone ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 23/45 APPL4901 OF 2020.doc Nigam Ltd. vs. Finolex Cables Limited, 2017(166) DRJ 1 in support of the submission that an award which is patently illegal, on account of it being injudicious, contrary to the law can be set aside under section 34 of the Arbitration Act. In support of this submission, he also placed reliance on the judgment of Supreme Court in case of Dyna Technologies Pvt. Ltd. vs. Crompton, 2019 SCC (Online) SC 1656.
53. Insofar as the claims awarded by the learned arbitrator in favour of the claimant is concerned, it is submitted by the learned senior counsel that the entire claim of the claimant was based on two e-mails dated 9th June, 2011 and 15th June, 2011 sent by wife of the respondent which were allegedly considered to be in breach of the terms of Deed of Settlement executed between the parties. The entire claim of the claimant was on the premise that even after withdrawing the complaint filed with the Economic Offences Wing, the wife of the respondent had written the said two e-mails allegedly in breach of the Deed of Settlement and thus the claimant became entitled to claim the damages as provided under the said Deed of Settlement. The entire claims made by the claimant was on hypothesis that the complaint lodged by the respondent with the Economic Offences Wing was false and it was done to extort money and was defamatory in nature.
54. It is submitted by the learned senior counsel that though there was no pleading, no issue, no evidence and no prayers for awarding the liquidated damages, the learned arbitrator awarded the liquidated damages in favour of the claimant. He submits that the respondent had admittedly entered the witness box and had deposed that he had not authorized his wife to act on his behalf and to take any decision in relation to the shareholdings or directorship in Atlas or to act in pursuance of the Deed of Settlement. The said part of the deposition of the respondent was not contradicted by the claimant in cross ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 24/45 APPL4901 OF 2020.doc examination of the respondent. The claimant also did not lead any evidence to prove that the wife of the respondent was authorized representative of the respondent.
55. It is submitted that sending of the e-mail by the wife of the respondent could not amount to breach of the Settlement Deed in any manner whatsoever. The said Deed of Settlement could have been breached only in case the respondent would not have been fulfilled his obligation under the said Deed of Settlement. It was not the case of the claimant that any of the obligations were left pending by the respondent under the said Deed of Settlement. All the obligations were fulfilled by the respondent even after sending those two e-mails by the wife of the respondent. The respondent had continued and fulfilled all his obligations which had been admitted and accepted by the claimant. The Deed of Settlement had not come to an end.
56. It is submitted that the said Deed of Settlement was not terminated and was kept alive and thus clause (6) of the Deed of Settlement providing for consequences of termination was never invoked. The damage could be claimed by the claimant and could be held payable only as per clause (5) in case of the termination of the deed. The allegation of the claimant that the e-mails were 'per se actionable' and 'per se defamatory' had not arisen out of or had any relationship with the Deed of Settlement and was outside the purview of the Deed of Settlement and accordingly out of purview of arbitration as per clause 9 of the Deed of Settlement.
57. It is submitted by the learned senior counsel that the learned arbitrator had not considered the issue of maintainability raised by the respondent and held that the respondent had not led any evidence to show that disputes were not arbitrable and thus deemed to have been dropped the said contention. The wife of the respondent also was ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 25/45 APPL4901 OF 2020.doc examined by the respondent as one of the witness. Even in her cross examination by the claimant's counsel, there was no cross examination or not even any suggestion put to the said witness that she was an authorized agent of the respondent.
58. It is submitted that the learned arbitrator did not deal with the vital part of the evidence of the wife of the respondent and more particularly that there was no cross examination of the deposition of the wife on the relevant part of the deposition. He also invited the prima facie observations made by the learned Single Judge in the order passed in petition filed by the claimant under section 9 of the Arbitration Act while dismissing the said petition. He submits that the appeal filed by the claimant against the said judgment of the learned Single Judge also came to be dismissed on 1st October, 2013.
59. Learned senior counsel invited our attention to the averments made in paragraphs 17, 43 and 47 of the statement of claim filed by the claimant on the issue of alleged breach of the Deed of Settlement by the respondent and the written statement filed by the respondent denying all those allegations. He also invited our attention to the particulars of claim in respect of the claim for damages at page 252 of the Volume I of the compilation. It was nowhere pleaded by the claimant that his claim was in the nature of the liquidated damages. He also invited our attention to the affidavit in lieu of examination in chief filed by the claimant at page 989 of the compilation and would submit that even in his deposition, the claimant did not state that his claim was for the 'liquidated damages'.
60. Learned Senior Counsel also invited out attention to the issues framed by the learned arbitrator which are set out in para 11 of the arbitral award. No issue was framed by the learned arbitrator 'whether the claimant was entitled to claim liquidated damages.' He also invited ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 26/45 APPL4901 OF 2020.doc our attention to the prayers in the statement of claim and would submit that there was no prayer for award for liquidated damages before the learned arbitrator. Learned senior counsel invited our attention to the findings rendered by the learned arbitrator in paragraphs 36, 37, 110, 118 to 120 and would submit that all these findings are ex-facie perverse and also show patent illegality and thus the learned Single Judge was right in setting aside the entire award.
61. Learned senior counsel submits that in paragraph 111 of the arbitral award, the learned arbitrator himself expressed that he was not in a position to understand the claim of damages in the sum of US$ 3.5 million and the learned counsel for the claimant was called upon to explain the said claim. The learned arbitrator had not even made any attempt to deal with the submission of the respondent that the liquidated damages were not provided under the Deed of Settlement. The said Deed of Settlement was not even terminated. The learned arbitrator thus in any event could not have considered the claim for liquidated damages made across the bar.
62. Learned senior counsel placed reliance on paragraph 15 of the judgment delivered by the learned Single Judge and would submit that the learned Single Judge has rightly observed that US$ 3.5 million was consideration of settlement and the damages could be paid only when there was breach of clause 5 and the termination of the Deed of Settlement. Since the respondent had performed all his obligations as provided in clause 5 of the Deed of Settlement including by withdrawing the complaint lodged with the Economic Offences Wing and not lodging any complaint with the said authority in that regard, the Appellate Court cannot find any fault with the findings recorded by the learned Single Judge. The power of the Appellate Court under section 37 of the Arbitration Act are very limited.
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63. Learned senior counsel invited our attention to the observations made by the learned arbitrator that both the sides had understood and claimed in their respective pleadings that the amount mentioned in clause (6) of the Deed of Settlement was a pre-estimate of the loss or damage which may be suffered by the claimant by reason of breach. Both the parties understood the amount in clause (6) of the Deed of settlement as liquidated damages. The entire observations/findings of the learned arbitrator were beyond the pleadings filed by the claimant and the evidence led. Learned senior counsel strongly placed reliance on the judgment of the Supreme Court in case of Kailash Nath Associates vs. Delhi Development Authority, (2015) 4 SCC 136 in support of the submission that the learned Single Judge had rightly set aside the impugned award awarding the liquidated damages in absence of any pleadings or any proof. The balance of convenience was not in favour of the claimant but was in favour of the respondent. He distinguished the judgment relied upon by the learned counsel for the claimant.
64. Ms. Ankita Singhania, learned counsel for the claimant in her rejoinder arguments once again relied on section 2(f) of the Arbitration Act in support of her submission that the arbitration proceedings between the claimant and the respondent were 'international commercial arbitration' within the meaning of section 2(f) of the Arbitration Act though the arbitral award rendered by the learned arbitrator was 'domestic award'. She invited our attention to the observations made by the learned Single Judge in paragraph 25 of the impugned judgment. She once again placed reliance on section 34(2)
(a)(iv) of the Arbitration Act and few paragraphs of the judgment of the Hon'ble Supreme Court in case of Ssangyong Engineering and Construction (supra) and would submit that the learned Single Judge ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 28/45 APPL4901 OF 2020.doc could not have applied the principles to be considered in case of a domestic award while dealing with the case of the international commercial arbitration.
65. It is submitted that the learned arbitrator has not re-written the contract as sought to be canvassed by the respondent. She submits that though the contract can be kept alive by the parties by providing such clause in the contract, the parties are not precluded from claiming damages. She relied upon the findings rendered by the learned arbitrator in paragraph 112 of the impugned award and would submit that after referring to a passage from the treatise of the well known author Pollock & Mulla on law of contract, the learned arbitrator in paragraph 113 had rightly rendered a finding of fact that there was no ambiguity in the contract. The interpretation of the contract by the learned arbitrator was even if possible interpretation, could not have been substituted by another interpretation by the learned Single Judge.
66. Learned counsel for the claimant relied upon the letter dated 9 th May, 2012 by Mr.Maroo and also at page 542 of the compilation and would submit that the contents of the said letter marked as Ex.R-7were not proved by the respondent when the learned arbitrator made an award. There was no dispute that the respondent had already received Rs.42 crores on sale of those shares. The claimant had not waived any breaches on the part of the respondent under the said Deed of Settlement. The transaction of sale of shares and defamatory statement made by the respondent were not at all connected in any manner whatsoever and were totally separate and distinct causes of action.
67. Insofar as the submission of the learned senior counsel for the respondent that there was no cross examination of the respondent or his wife on the aspect of the wife being an authorised representative/ agent of the respondent or not, it is submitted by the learned counsel ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 29/45 APPL4901 OF 2020.doc that it is always not necessary to prove the case of the parties only by leading oral evidence but could be proved by documentary evidence which was already led by the claimant. She invited our attention to the cross examination of the respondent in paragraphs 60 and 62 and the findings of the learned arbitrator in paragraphs 75 and 79 in this regard holding that the wife of the respondent was his agent in the entire transaction.
68. It is submitted by the learned counsel that there were sufficient pleadings in respect of three distinct heads of claim for damages in the statement of claim. She also invited our attention to the prayers (d) and
(e) of the statement of claim and the discussion of the learned arbitrator on these prayers in paragraphs 14, 30, 31, 115 and 116 of the impugned award. She submits that the learned Single Judge could not have interferred with the impugned arbitral award as if the said proceedings under section 34 were in the nature of the First Appeal. The impugned judgment of the learned Single Judge thus be set aside and the impugned award rendered by the learned arbitrator be restored.
REASONS AND CONCLUSION :-
69. The learned arbitrator allowed the claim made by the claimant in the impugned award directing the respondent to return on or before 15 th November, 2014, the sum of US$ 1.5 million received by him. The learned arbitrator made it clear that if the said sum is not returned by 15th November,2014, the respondent would then return it with interest at the rate of 12% per annum from 16th November, 2014 till payment or realization thereof. The learned arbitrator further held that the respondent was not entitled to the US$ 2 million lying in escrow and directed the escrow agent to forthwith return the said amount/cheque to ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 30/45 APPL4901 OF 2020.doc the claimant. The learned arbitrator held that the claimant is entitled to the liquidated damages as set out in the contract.
70. Both the parties through their respective counsel invited our attention to various findings rendered by the learned arbitrator in the impugned award. Learned senior counsel for the respondent laid emphasis on the finding rendered by the learned arbitrator in paragraphs 111 to 121. It is not in dispute that the claimant as well as the respondent led oral evidence. The respondent had also examined his wife Ms.Ayesha Shroff as one of the witness.
71. The respondent in his affidavit in lieu of examination of chief filed before the learned arbitrator in paragraph 27 had deposed that he had enquired with his wife. His wife told him that she had written the said email dated 15th June, 2011 in response to the email of the claimant dated 15th June, 2011. She had not mentioned to him about the exchange of emails. The said email dated 15th June, 2011 and 9th June, 2011 had been sent by her at her own. He had not authorized his wife in addressing on his behalf emails dated 9th June, 2011 and 15th June, 2011. The respondent had a separate email account and none of the said emails were marked to his email account. There was no cross- examination of the respondent by the claimant to the said crucial part of deposition.
72. The wife of the respondent also filed a separate affidavit in lieu of examination of chief dated 13th September, 2013. In paragraph 14 of the said affidavit in lieu of examination in chief, she deposed that she had sent those emails dated 9th June, 2011 and 15th June, 2011 to the claimant at her own and not at the instance of the respondent. The respondent had not instructed or directed her to send the said emails. She was not authorized by the respondent to send any emails to the Directors of the Shareholders of Atlas or or the claimant to act on his ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 31/45 APPL4901 OF 2020.doc behalf in relation to his affairs as shareholder or the director of Atlas or to sent any emails. She further deposed that the respondent was not even aware of the emails sent by her. The views expressed by her in the said emails were her own and were not the views of the respondent. She did not inform the respondent about the said emails and did not send any copy to him of the said emails or even forwarded to the respondent later. She had sent the said email dated 9th June, 2011 to the claimant in her own capacity to ascertain as to whether the sale of shares of MSM had been completed and she was aware that the escrow account under the Deed of Settlement was to be released to the respondent upon completion of the said sale.
73. In paragraph 15 of her affidavit in lieu of examination of chief, she deposed as to why she had sent those two emails to the claimant without any authority of the respondent and without his knowledge. There was no cross-examination of the wife of the respondent on that crucial part of deposition by the claimant. In the affidavit in lieu of examination of chief filed by the claimant also, he did not lead any evidence on this crucial aspect. The entire award rendered by the learned arbitrator holding that the wife of the respondent was his authorized representative or agent and had addressed those two emails to the claimant as his authorized representative / agent is over looking the crucial and vital evidence on record and thus the award was rightly set aside by the learned single Judge on the ground of perversity / patent illegality.
74. In our view, the entire finding of the learned arbitrator that the respondent had committed breach of the said Deed of Settlement based on those two e-mails sent by the wife of the respondent was over looking the vital and crucial evidence led by the respondent. We are thus not inclined to accept the submission of the learned counsel for the ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 32/45 APPL4901 OF 2020.doc claimant that the learned Single Judge could not have set aside the award by interferring with such finding of fact which according to this Court were totally perverse.
75. During the course of the arguments, learned counsel for the claimant vehemently urged that the claimant had proved his case that the wife of the respondent was his agent by cross examining the respondent. Learned counsel however could not point out any part of the evidence in support of this submission.
76. Learned single Judge has dealt with the issue as to whether the wife of the respondent was the authorized representative when she had addressed the said two emails in paragraphs 10 to 16 of the impugned order and has rightly recorded a finding that the materials produced by the parties on record did not at all indicate that when the wife of the respondent herein had addressed those two emails, she was doing so as an authorized representative of the respondent. Learned single Judge also dealt with sections 182, 187, 197 and 198 of the Contract Act dealing with the definition of agent and ratification of the acts done an agent of principal. In our view, the claimant could not prove before the Arbitral Tribunal that neither the respondent had authorized his wife to address those two emails nor that those two emails were addressed by the wife of the respondent to his knowledge.
77. Learned single Judge rightly held that the law requires a positive act of ratification on the part of principal so as to fasten him with consequences of that act. Once again, the learned arbitrator appears to have missed the plot, resulting into a complete miscarriage of justice by the learned arbitrator. In our view, since the learned arbitrator had overlooked the crucial and vital part of evidence and have rendered the findings which were ex-facie perverse, learned single Judge was right in setting aside such findings and the impugned award allowing the ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 33/45 APPL4901 OF 2020.doc claims made by claimant as a consequence of such perverse findings.
78. Hon'ble Supreme Court in case of Ssangyong Engineering & Construction Co. Ltd. (supra) has held that what is important to note is that a decision which is perverse, as understood in paragraphs 31 and 32 of Associated Builder's case, while no longer being a ground for challenge under "public policy of India" would certainly amount to patent illegality appearing on the face of award. The claimant had not even cross-examined the respondent and his wife and more particularly on their deposition that the wife of the respondent was not authorized representative or agent of the respondent. Learned arbitrator had ignored the vital evidence led by the respondent and had rendered a finding that the wife of the respondent was an authorized representative based on no evidence, the impugned award rendered by the learned arbitrator disclosed perversity and patent illegality on the face of award. The Hon'ble Supreme Court has held that the award which could be set aside on the ground of perversity is liable to be set aside on the ground of patent illegality under section 34 (2A) added by the Amendment Act, 2015 to section 34. The said illegality committed by the learned arbitrator goes to the root of the matter and was not mere erroneous application of law.
79. In paragraph 41 of the judgment of the Ssangyong Engineering & Construction Co. Ltd. (supra), it is held by the Hon'ble Supreme Court that the changes made in section 28(3) of the Amendment Act really follows what is stated in paragraphs 42.3 to 45 in Associated Builder's case (supra) namely construction of the terms of a contract is primary for an arbitrator to decide, unless he construes the contract in a manner that no fair minded or reasonable person would, in short, with arbitrator's view is not even a possible view to take. If an arbitrator wanders outside the contract and deals with matters not allotted to him, ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 34/45 APPL4901 OF 2020.doc he commits an error of jurisdiction. This ground of challenge will now fall within exclusive ground added under section 34(2A). In our view, the principles of law laid down in paragraphs 38, 41 and 42 of the judgment in case of Ssangyong Engineering & Construction Co. Ltd. (supra) would squarely apply to the facts of this case. We are respectfully bound by the said judgment.
80. The Hon'ble Supreme Court in case of Patel Engineering Limited vs. North Eastern Electric Power Corporation Limitation, AIR 2020 SC 2488 has held that the ground of patent illegality is the ground available for setting aside the domestic award, if it is patently illegal or perverse. The Hon'ble Supreme Court in the said judgment adverted to several earlier judgments of the Hon'ble Supreme Court including in case of Oil and Natural Gas Corporation Ltd. vs. Western Geco International Limited ( 2014) 9 SCC 263, in case of Ssangyong Engineering Co. Ltd. (supra), in case of Associated Builder's case (supra). It is held by the Hon'ble Supreme Court that if the decision of the arbitrator is found to be perverse or so irrational that no reasonable person would have arrived at the same, or construction of contract is such that no fair or reasonable person would take, or that view of the arbitrator is not even possible view, such award can be set aside on the ground of patent illegality.
81. In our view, the findings rendered by the learned arbitrator are so irrational that no reasonable person would have arrived at such findings as rendered by the learned arbitrator. The construction of the Deed of Settlement by the learned arbitrator also discloses patent illegality which is of such a nature that no fair or reasonable person would have interpreted the terms of the contract in such a way. In our view, since the view of the learned arbitrator was not a possible view, learned single Judge was right in setting aside such interpretation of ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 35/45 APPL4901 OF 2020.doc contract which disclosed patent illegality and impossible view while exercising the powers under section 34 of the Arbitration Act. The principles of law laid down by the Hon'ble Supreme Court in case of Patel Engineering (supra) would apply to the facts of this case. We are respectfully bound by the said judgment.
82. In paragraphs 116 to 125, the learned arbitrator dealt with arguments of the parties on 'liquidated damages.' In paragraph 111 of the impugned award, the learned arbitrator himself observed that it must be admitted that initially even the tribunal did not understand the case for damage in a sum of US$ 3.5 million and had accordingly called upon the claimant to explain.
83. In paragraph 112 of the impugned award, the learned arbitrator recorded that the learned counsel for the claimant made it clear that the claim for US$ 3.5 million was always by way of liquidated damages under section 74 of the Contract Act. According to the learned arbitrator, the learned counsel for the claimant pointed out that in the pleadings, both the sides had understood that the claim made by the claimant was by way of liquidated damages. Even if, the Deed of Settlement was kept alive, the claimant was entitled to and had not given up his right to claim damages. This finding of the learned arbitrator is totally perverse and beyond the submission made by the parties.
84. In paragraph (115) of the impugned award, the learned arbitrator recorded the submission made by the learned senior counsel for the respondent that the case of the liquidated damages cannot be allowed to be made in the oral arguments and that if such a case would have pleaded, then it would have been shown by the respondent that such a provision was clearly in the nature of penalty. In paragraph 116 of the award, the learned arbitrator held that the claimant has not made out ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 36/45 APPL4901 OF 2020.doc any new case. In support of this view, the learned arbitrator placed reliance on the averments made by the claimant in paragraph (17) of the statement of claim and the averments made in the written statement made in paragraph 2(u).
85. In paragraph (118) of the award, the learned arbitrator held that it was established from the beginning that the claim for refund of US$ 3.5 million had been considered by all as a claim for liquidated damages as it was the sum named in the contract as payable on a breach. Learned arbitrator held that it has not been claimed that this was in the nature of penalty. The learned arbitrator did not allow the respondent to file written submissions on this aspect. The learned arbitrator totally overlooked the fact that it was urged by the learned counsel for the respondent that if the claimant would have pleaded liquidated damages, the respondent would have pleaded that the clause was in the nature of penalty. Though the learned arbitrator recorded this submission in paragraph 115 of the award, the learned arbitrator recorded a perverse finding that it was not claimed that it was in the the nature of penalty.
86. A perusal of the record before the learned arbitral arbitrator clearly indicates that though there was no pleading on the part of the claimant in the statement of claim that the claim made by the claimant was in the nature of the liquidated damages, the learned arbitrator however treated the said claim as the claim for liquidated damages. Since there was no averments in the statement of claim that the claim was in the nature of the liquidated damages, the respondent did not plead in the written statement that the said clause was in the nature of the penalty. Learned arbitrator totally overlooked this crucial part in the impugned award and rejected the objection raised by the respondent that there was no averments in the statement of claim that ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 37/45 APPL4901 OF 2020.doc the claim was in the nature of the liquidated damages and considered the said claim by recording a perverse finding that it was not the case of the respondent that the said clause was in the nature of penalty.
87. Though the claimant did not prove the said claim for damages, the learned arbitrator allowed the entire claim in paragraphs 123 to 125 of the impugned award. Issues nos. 1, 8 and 9 framed by the learned arbitrator are extracted as under :-
1. Whether the claims for damages as prayed for in prayer clauses (a) to (c) fall within the scope of the Arbitration Agreement contained in the Deed of Settlement dated 03-January-2011?
8. Whether the Claimant has suffered any damages as alleged in the Statement of Claim ?
9. Whether the Claimant is entitled to damages as prayed for ?
88. The learned arbitrator had not framed any issue in respect of the alleged claim for liquidated damages in view of there being no such pleadings. A perusal of issue no.8 would clearly indicate that the issue was whether the claimant had suffered any damages as alleged in the statement of claim. While dealing with this issue nos. 8 and 9, the learned arbitrator in paragraph 123 held that these issues dealt with claim for damages. These claims for damages would include the claim for damages for defamation and mental agony and also the claim for refund of US$ 3.5 million. It is held that the claim for damages for defamation and mental agony were not maintainable. What is to be considered is the claim for liquidated damages for breach of clause 5 of the Deed of Settlement.
89. Learned arbitrator held that the claimant was not required to prove actual loss or damage and it was nobody's case that the sum ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 38/45 APPL4901 OF 2020.doc named is by way of penalty or unreasonable. He further held that it is impossible for the tribunal to break up the figure of US$ 3.5 million and allocate any portion thereof to any particular act in the Deed of Settlement. The tribunal must award the same as it is a genuine pre- estimate. It is held that the amount which the respondent would have been entitled to, provide and only provided, he had abided by all the clauses of the Deed of Settlement. In paragraph 125 of the impugned award, the learned arbitrator held that the claimant was entitled to the liquidated damages set out in the contract and accordingly directed the respondent to return on or before 15th November, 2014, the sum of US$ 1.5 million received by him and further declared that the respondent was not entitled to US$ 2 million lying in escrow.
90. A perusal of the record clearly indicates that it was not even pleaded by the claimant that the said amount of US$ 3.5 million was a genuine pre-estimate of the losses. Since there was no such pleading, the respondent was not in a position to plead that the said clause was in the nature of penalty or denying that the said amount was not a genuine pre-estimate of the loss. Learned arbitrator himself was not able to understand the case for damages in the US$ 3.5 million as admitted in paragraph (111) of the impugned award.
91. In prayer clause (c) of the statement of claim, the claimant had prayed for order and direction against the respondent to compensate the damages as per the particulars of claim and as per Annexure 'S' in prayer clause (d) in the statement of claim praying for order and direction against the respondent to refund US$ 1.5 million or Indian Rs.8,59,00,000/- with interest at the rate of 18% per annum from July 2019 till the date of payment by the respondent.
92. The Hon'ble Supreme Court in case of South East Asia Marine Engineering and Constructions Limited (Seamec Limited) vs. Oil ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 39/45 APPL4901 OF 2020.doc India Limited (2020) 5 SCC 164 has held that the thumb rule of interpretation is that the document forming a written contract should be read as a whole and so far as possible as mutually explanatory. Since the Arbitral Tribunal had ignored the basic rule of interpretation of contract, such arbitral award is liable to be interfered with under section 34 of the Arbitration Act. In our view, learned arbitrator has re- written the contract while rendering the finding that the clauses of the Deed of Settlement provided for recovery of liquidated damages. Neither there was any such pleading in the statement of claim nor any clause of the said Deed of Settlement entered into between the parties provided for payment of liquidated damages at a particular rate or otherwise. Principles laid down by the Hon'ble Supreme Court in case of South East Asia Marine Engineering and Construction Ltd. (supra) applies to the facts of this case.
93. Insofar as the submission of the learned counsel for the claimant that the learned single Judge could not have set aside the impugned award on the ground of patent illegality since the said impugned award was arising out of the International Commercial Arbitration within the meaning of section 2(1)(f) of the Arbitration Act, the claimant being resident abroad is concerned, there is no merit in this submission of the learned counsel. It was not the case of the claimant that the award rendered by the learned arbitrator was a foreign award. It is an admitted position that the award rendered by the learned arbitrator was domestic award. It is not the case of the claimant that he had filed any application for enforcement of the said award under Section 48 of the Arbitration Act as if award rendered in the 'International Commercial Arbitration.'
94. Learned arbitrator was appointed by this Court by consent of both the parties. Reliance placed by the learned counsel for the ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 40/45 APPL4901 OF 2020.doc claimant on paragraph 43 of the judgment of the Hon'ble Supreme Court in case of Ssangyong Engineering & Construction Co. Ltd. (supra) in support of this submission would not support the case of the claimant. No question fell for consideration of the Hon'ble Supreme Court in the said judgment whether the arbitral award in the International Commercial Arbitration can be set aside on the ground of patent illegality under section 34 (2)(a)(iii) and (iv) of the Arbitration Act amended in the year 2015 or not. Learned counsel for the claimant urged before this Court that in this case in the arbitration agreement both the parties had agreed that the parties would be governed by the provision of the Arbitration Act prevailing on the date of execution of the said agreement or even amendment thereto. In our view, even if the provision of 2015 Amendment applies to the arbitral proceedings between the parties, since the said arbitral award could be set aside on the ground of perversity on the grounds available prior to 2015 Amendment, such award could be set aside on the ground of patent illegality as is held by the Hon'ble Supreme Court in case of Ssangyong Engineering & Construction Co. Ltd. (supra) and more particularly in paragraph 38 to 42 of the judgment.
95. In paragraph 38 of the said judgment, the Hon'ble Supreme Court held that insofar as domestic award made in India, an additional ground is now available under section (2A) of the Amendment Act, 2015 to section 34. There must be patent illegality appearing on the fact of award, which refers to the said illegality as goes to the root of the matter but it does not amount to mere erroneous application of law. In our view, the arbitral award rendered by the learned arbitrator admittedly being a domestic award, such award can be set aside on the ground of patent illegality inserted under sub-section 2(A) to section 34 of the Amendment Act, 2015. There is thus no substance in this ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 41/45 APPL4901 OF 2020.doc submission of the learned counsel for the claimant.
96. The judgment of the Hon'ble Supreme Court in case of Associated Builders (supra) relied upon by the learned counsel for the claimant has been dealt with in great detail in the later judgment in case of Ssangyong Engineering & Construction Co. Ltd. (supra). In our view since the interpretation of the provisions of the Deed of Settlement by the learned arbitrator was impossible interpretation, such impossible interpretation can be interfered with by the Court under section 34 of the Arbitration Act.
97. Insofar as the claim for liquidated damages awarded by the learned arbitrator in favour of the claimant is concerned, learned counsel for the claimant could not dispute that in absence of any such pleading, learned arbitrator could not have framed any such issue in respect of the liquidated damages. Learned arbitrator in our view, thus could not have allowed the claim as and by way of liquidated damages by holding that there was no plea of the respondent that the said clause in the Deed of Settlement was in the nature of penalty.
98. The Hon'ble Supreme Court in case of Kailash Nath Associates (supra) has held that like sections 73 and 75, compensation is payable for breach of the contract under section 74 only where damage or loss is caused by such breach. It is held that where a sum is named in a contract as a liquidated amount payable by way of damages, the party complaining of a breach can receive as a reasonable compensation such liquidated amount only if it is a genuine pre-estimate of damages fixed by both parties found to be such by the Court. It is held that since section 74 awards reasonable compensation for damages or loss caused by a breach of contract, damage or loss caused is a sine qua non for the applicability of the section.
99. In paragraph 43.6 of the said judgment, Hon'ble Supreme Court ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 42/45 APPL4901 OF 2020.doc held that the expression "whether or not actual damage or loss is proved to have been caused" means that where it is possible to prove actual damage or loss, such proof is not dispensed with. It is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount named in the contract, a genuine pre-estimate of damage or loss can be awarded. In paragraph 44 of the said judgment, it is held by the Hon'ble Supreme Court that compensation can be only given for damage or loss suffered. If the damage or loss is not suffered, the law does not provide for a windfall. In our view, the principles of law laid down by the Hon'ble Supreme Court in the said judgment would squarely apply to the facts of this Court. The said judgment would not assist the case of the claimant but would assist the case of the respondent. Award of liquidated damages in favour of the claimant, in these circumstances, was nothing but a windfall in his favour.
100. In the facts of this case also neither there was any provision for payment of any liquidated damages nor it was fixed as a genuine pre- estimate damages by both the parties. It was required to be pleaded and proved by the claimant that the said amount claimed by him was in the nature of liquidated damages was a genuine pre-estimate of damage fixed by both the parties and such loss was suffered by him. Only if such pleading of the claimant was not disputed by the respondent in the written statement, the claim could be tried as 'liquidated damages.' Learned arbitrator in this case has converted the claim for damages under section 73 of the Contract Act into the claim for liquidated damages under section 74 of the Contract Act without any pleading on the part of the claimant or otherwise which is patently illegal. Learned arbitrator has travelled beyond the scope of submissions made by the parties before him. On this ground alone, the entire award was liable to be set aside and has been rightly set aside by the learned single Judge.
::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 :::KVM 43/45 APPL4901 OF 2020.doc We are not inclined to accept the submission made by the learned counsel for the claimant that balance of convenience was in favour of the claimant and not the respondent.
101. Insofar as the judgment of the Hon'ble Supreme Court in case of Kuldip Singh (supra) relied upon by the learned counsel for the claimant is concerned, the said judgment would not apply to the facts of this case even remotely. No case is made out by the claimant on the basis of the principles laid down by the Hon'ble Supreme Court in case of Mcdermott International Inc (supra) relied upon by the learned counsel for the claimant to interfere with the impugned judgment delivered by the learned single Judge. The judgment of the Hon'ble Supreme Court in case of Patel Engineering Limited vs. North Eastern Electric Power Corporation Limitation (supra) relied upon by Mr.Bookwala, learned senior counsel for the respondent would squarely apply to the facts of this case and would support the case of the respondent.
102. Hon'ble Supreme Court in case of J.G. Engineers (P) Ltd. (supra) has held that the arbitral award can be set aside if it is unfair and unreasonable, that it shocks the conscience of the Court, and it would be opposed to public policy. Similar view has been taken in by the Hon'ble Supreme Court in case of Dyna Technologies Pvt. Ltd. (supra) relied upon by the learned senior counsel for the respondent. A perusal of the award indicates that though the respondent had specifically urged before the learned arbitrator that it was not the case of the claimant in any of the pleadings that the claim was in the nature of liquidated damages and the same could not be treated as claim for liquidated damages across the bar, though the learned arbitrator referred to such objection raised by the respondent, has totally overlooked the said objection and has still converted the said claim for ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 44/45 APPL4901 OF 2020.doc damages under section 73 of the Contract Act as liquidated damages under section 74 of the Contract Act.
103. Learned senior counsel for the respondent rightly placed reliance on the affidavit in lieu of examination in chief filed by the claimant and more particularly at page 989 of the compilation in support of the submission that even in his deposition the claimant had not led any evidence on the aspect of liquidated damages. In our view, since in this case the claimant had failed to prove that the wife of the respondent was an authorized representative or agent of the respondent to address those two emails to the claimant and few others, there was no question of any breach committed by the respondent of any of the provisions of the said Deed of Settlement. Since there was no breach committed by the respondent, there was no question of awarding any claim for damages as claimed or otherwise. Learned single Judge thus rightly interfered with such perverse and patently illegal award under section 34 of the Arbitration Act, 1996. We do not find any infirmity in the recourse adopted by the learned single Judge in setting aside the said perverse and patently illegal award. No interference is thus warranted by this Court with the impugned judgment rendered by the learned single Judge. In our view, this appeal is devoid of merit.
104. We accordingly pass the following order :-
a) Arbitration Appeal (Lodging) No.4901 of 2020 is dismissed.
b) The claimant shall not be allowed to withdraw a sum of US$ 2 million deposited with the HDFC Bank Limited, Churchgate Branch, Industry House, Mumbai
- 400 020 branch for a period of eight weeks from today. The respondent would be at liberty to seek appropriate relief in respect of the said amount by ::: Uploaded on - 20/04/2021 ::: Downloaded on - 07/09/2021 19:07:00 ::: KVM 45/45 APPL4901 OF 2020.doc filing appropriate proceedings.
c) Interim order passed by this Court against the respondents on 1st February, 2021 stands vacated.
d) In view of disposal of the Arbitration Appeal, Interim Application (L) No. 4905 of 2020 does not survive and is accordingly disposed of. No order as to costs.
d) All other pending Interim Applications, if any also stand disposed of.
(V.G. BISHT, J.) (R.D. DHANUKA, J.)
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