Delhi District Court
All India Institute Of Medical vs All India Medicos on 28 April, 2022
IN THE COURT OF SH. PREM KUMAR BARTHWAL,
DISTRICT JUDGE (COMMERCIAL COURTS)-01, SOUTH
DISTRICT SAKET COURTS, NEW DELHI
IN THE MATTER OF:
OMP (Comm) 29/21
CNR No. DLST01-002414-2021
ALL INDIA INSTITUTE OF MEDICAL
SCIENCES, NEW DELHI
ANSARI NAGAR, NEW DELHI .......PETITIONER
Versus
ALL INDIA MEDICOS
THROUGH ITS PARTNER/PROPERIOTER
MS. MONIKA CHAWLA,
M.E.B., NDMC MARKET,
YUSUF SARAI,
NEW DELHI-110029 ........ RESPONDENT
Date of Institution : 02.03.2021
Date of arguments :19.04.2022
Date of Judgment : 28.04.2022
JUDGMENT
1. The present petition has been filed under section 34 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as "A&C Act") for setting aside the arbitral award dated 11.03.2020 passed by Ld. Arbitrator.
2. The brief facts, according to the petitioner, are that the petitioner prays for setting aside the impugned award dated 11.03.2020 passed by Ld. Sole Arbitrator whereby the Ld. Arbitrator has completely deviated away from the statutes/terms of the agreement dated 21.11.2011 between the parties and has OMP (Comm) 29/21 Page 1 of 21 erroneously directed for return of the performance guarantee amount Rs. 50,00,000/- (Rupees Fifty Lakhs only) forfeited by the petitioner alongwith interest of 8% since the date of appointment of arbitrator within 60 days from the passing of the order and another 10% interest in case of non-payment within aforementioned 60 days.
3. According to the petitioner, the applicant/petitioner AIIMS, New Delhi, is a leading center for health/medical services, education and research in country and is placed way ahead of other medical institutions. The quality of services and research being carried out at the AIIMS is incomparable to any other institute in the country and it is contributing widely to public health care, medicine, research and education as the number of patients and medical cases being disposed in the said institute are highest throughout the country. It is submitted that the petitioner had invited bid for licensing out medical shop located within the premises of AIIMS and after following the due process, bid of the respondent for the medical shop was accepted. Thereafter, the parties herein entered into license deed dated 21.11.2011 for the aforementioned pharmacy admeasuring about 350 sq.ft built structure @ Rs. 455/- per sq. ft. for a period of 2 years which was extendable for another one year based on satisfactory performance of the respondent.
4. According to the petitioner, as per the License Deed dated 21.11.2011, the respondent was obligated to deposit a Performance Guarantee of amount of Rs. 50,00,000/- with the petitioner and clause 3 of the License Deed also clarified regarding when the abovementioned Performance Guarantee was to be forfeited. The Ld counsel for the petitioner has vehemently OMP (Comm) 29/21 Page 2 of 21 argued that the core point of challenge to the award dated 11.03.2020 revolves around manifest error on part of the Ld. Arbitrator by completely ignoring conditions of Clause 3 of the License Deed whereby the Performance Guarantee was to be forfeited if the respondent violated any terms or conditions of the Deed or supplied substituted medicines, etc., which in this case is not disputed and is an established fact and that the said an error appears on the face of award. It is submitted that, during the tenure of the respondent as chemist at the said shop, the petitioner started receiving multiple complaints regarding non- availability of prescribed medicines, supplying of medicines of substituted brands, misbehaving with patients by shop clerks, tampering with complaint box, etc. Besides these, the petitioner also received letter dated 09.07.2013 from the Addl. Commissioner of Delhi Police (Crime Branch) against co-owners of the respondent that an FIR had been registered against the co- owners and arrests had been made in case of illegal transportation of consignment of banned drugs worth crores of rupees and accordingly, Addl. Dy. Comm. of Delhi Police had also requested to take actions against the respondent/said pharmacy shop running at the institute. Further, M/s. Unichem Laboratories Ltd., had informed vide letter dated 19.03.2014 that they had supplied various medicines having sales value more than Rs. 1.3 crores giving discount of approx. 60 lakhs on the same to the respondent's outlet during the period of April 2013 to December 2013 but there was manipulation done either at the respondent's outlet or at the stockist M/s. South Delhi Pharma since it appeared that invoices/challans submitted to M/s. Unichem Laboratories as proof of deliveries at the retail outlet OMP (Comm) 29/21 Page 3 of 21 appeared to be forged documents with different stamping used for receipts and computer generated invoices/challans in the name of the retail outlet. It is further submitted that Dr. Ashish Kumar, Deputy Director, Ministry of Environment and Forests had also forwarded complaint to AIIMS vide communication dated 06.09.2013 alleging that the medicines prescribed by the attending doctor for his father were not supplied by the respondent's shop and rather substituted medicine i.e. Elecephase 1000 tab were given which are harmful for the condition from which his father was suffering. He further alleged that certain chemist at the pharmacy generally behaves rudely with people. Further, on receiving such complaints by numerous people, the Monitoring Committee of Pharmacology Department of the petitioner Institute examined such complaints and found that indeed the respondent was supplying medicines of substituted brands, which was violation of Clause 10 of the License Deed and on account of violations of terms and conditions of the License Deed, penalties were also imposed on the respondent vide order dated 28.02.2013. Therefore, the License Deed of the respondent was not extended at the end of 2 year period and the same was communicated to the respondent vide communication dated 18.11.2013 and hence the license deed stood terminated w.e.f. 21.11.2013. It is submitted that the respondent challenged the above rejection of extension of License Deed before the Hon'ble High Court of Delhi by way of W.P. (C) No. 7237 of 2013 which was disposed off with directions to the petitioner to reconsider the request of the respondent for extension of the License Deed. Pursuant to the said directions, the petitioner reconsidered the request for extension and passed detailed order OMP (Comm) 29/21 Page 4 of 21 dated 25.11.2013 thereby again rejecting the request of the respondent for extension of the License Deed and directed the respondent to vacate the premises within 10 days from the date of receipt of the said decision. Again, the respondent in violation of Clause 36 of the License Deed did not vacate the premises within stipulated time as the respondent vacated the said premises on 07.12.2013.
5. It is submitted by the Ld. Counsel for the petitioner that respondent vide W.P. (C) No. 7520/2013 again challenged the decision of the petitioner dated 21.11.2013 which was dismissed by the Hon'ble High Court vide detailed order dated 29.11.2013 looking into the fact that multiple notices had been issued against the respondent for violation of terms and conditions of the License Deed and penalties had also been imposed on the respondent and the same were even paid by the respondent. It is submitted that after the dismissal of the said Writ Petition, the petitioner had issued letter dated 17.12.2013 that in view of violation of various terms and conditions during the tenure of respondent as chemist, the Performance Guarantee deposited was forfeited. Hon'ble High Court had appointed the Ld arbitrator who passed the impugned award dated 11.03.2020 which is being challenged in the present proceedings
6. According to the petitioner, the impugned award passed by the Ld. Arbitrator is in conflict with the settled principles of law and is vitiated on account of patent illegality appearing on the face of the award. The Ld. Arbitrator erred in disregarding the well settled proposition of law that once breach of contract is held to have been proved and admitted by the party against which it is proved then the said party ought not be entitled to relief.
OMP (Comm) 29/21 Page 5 of 21According to the petitioner, the Ld. Arbitrator was prejudiced against the petitioner and biased towards respondent as is evident from the fact that, despite admitting the penalty imposed upon the respondent in violation of terms of the agreement, he has accepted the case of respondent that it is innocent. It is submitted that the Ld. Arbitrator misconducted itself and acted in conflict with the public policy of India in as much as it passed the impugned Award against law laid down by the Hon'ble Supreme Court. The impugned award is arbitrary and unreasonable and is in contravention of law and various judicial pronouncements of the Hon'ble Supreme Court and High Court of Delhi. The impugned award does not state the reasons on the basis of which the Ld. Arbitrator had come to the conclusion that the applicant was under liability to return the Performance Security. It is submitted that the Ld. Arbitrator has ignored the evidence put forth by the petitioner which remained unshaken. The plea and objections raised by the petitioner have not been considered by the Ld. Arbitrator and no proper reason and justification has been given by the arbitrator for not accepting the plea of the petitioner therefore the impugned award is in contravention and violation of principles of natural justice. An application for condonation of delay in filing the petition U/s 34 of Arbitration and Conciliation Act has also been filed alongwith the petition
7. Notice of this petition U/s 34 of Arbitration and Conciliation Act, 1996 was served upon the respondent and an application alongwith an affidavit of Ms. Monika Chawla was filed during the proceedings of 16.03.2022 claiming to the sole proprietor of the firm M/s. All India Medicos and it was informed that the respondent was earlier a partnership firm but after death OMP (Comm) 29/21 Page 6 of 21 of the other partner namely, Mr. Ashok Ahuja, the respondent is being run as a sole proprietorship firm of Ms. Monika Chawla. An affidavit dated 24.03.2022 of Ms. Monika Chawla W/o Sh. Raj Kumar Chawla was also filed on record wherein she claimed to be the sole proprietor of the respondent firm. It was reiterated by the Ld. Counsel for the respondent during the proceedings of 07.04.2022 that Ms. Monkia Chawla has taken over all the liabilities of the erstwhile partnership firm M/s. All India Medicos/respondent and that she will be responsible for the same. Even the documents/forms issued by the Licensing Authority, Department of Drug Control, Government of NCT, Delhi was also filed by the respondent.
8. According to the respondent, the present objection petition filed by the petitioner does not warrant interference by the Court as the award dated 11.03.2020 has been passed by the Ld. Arbitrator after duly considering the pleadings, submissions of the parties and the documents filed on record. The respondent also submits that the Award has been passed in conformity with the settled law and does not contravene the public policy of India and it does not suffer from any patent illegality. It is submitted that the present petition U/s 34 of the Arbitration and Conciliation Act is not maintainable being beyond the period of limitation as mentioned U/s 34(3) of Arbitration and Conciliation Act and is in violation of substantive and settled position of law and recorded facts and that the petition deserves to be dismissed. It is contended that an award can not be set aside by the Court merely on erroneous application of law or by re-appreciation of evidence. It is further contended that the impugned arbitral award does not suffer from any defect and that the petitioner has not OMP (Comm) 29/21 Page 7 of 21 made out any grounds as permissible U/s 34 of the Arbitration and Conciliation Act, 1996. It is further submitted that scope of interference U/s 34 of Arbitration and Conciliation Act is extremely limited and the Courts have been precluded from the re-appreciating evidence as the jurisdiction exercised is not that which is vested in the Appellate Court. It is contended that while dealing with a petition seeking the setting aside an arbitral award, the Court cannot venture into the evidence placed and its appreciation by the Arbitral Tribunal and the Tribunal being the final determiner of the quantity as well as the quality of evidence placed before it. It is submitted that the jurisdiction of the Court to interfere into an Award is confined to the parameters laid down in Section 34 of the Act and an Award can be set aside only on the grounds enumerated therein and in no other way. According to the respondent, it would not be open to the Court hearing petition U/s 34 of Arbitration and Conciliation Act to interfere with the same unless such interpretation is found to be perverse or unreasonable, which is not applied to the present case. The respondent has prayed for dismissal of the petition U/s 34 of the Arbitration and Conciliation Act.
9. I have heard the submissions adduced by the Ld. Counsels Mr. Atul Kumar and Mr. Rahul Pandey on behalf of the petitioner and Dr. Swati Jindal Garg, Ld. Counsel for the respondent. The written submissions filed by the Ld. Counsels have also been considered and documents perused. The original arbitral proceedings were also requisitioned and perused.
10. First of all, as regards the objection of the respondent regarding delay in filing the present petition U/s 34 of Arbitration and Conciliation Act, it is noted that the arbitral award was OMP (Comm) 29/21 Page 8 of 21 passed on 11.03.2020. The Hon'ble Supreme Court of India in Suo Motu Writ (Civil) No. 3 of 2020 had extended the limitation periods w.e.f. 15.03.2020 and the present petition U/s 34 of Arbitration and Conciliation Act was filed by the petitioner on 02.03.2021 when the extension granted by the Hon'ble Apex Court regarding the limitation period was still in force. In view of the said directions passed by the Hon'ble Supreme Court of India in Suo Motu Writ (Civil) No. 3 of 2020, the contentions of the Ld. Counsel for respondent for dismissal of the petition U/s 34 of Arbitration and Conciliation Act assailing the impugned arbitral award dated 11.03.2020 on the ground of delay is found to be devoid of any merits and the said contention is hereby rejected.
11. An arbitral award can be set aside on the grounds set out in Section 34 (1) and (2) of The Arbitration and Conciliation Act, 1996 which read as under:
"34. Application for setting aside arbitral award- (1) Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub- section (3). (2) An arbitral award may be set aside by the court only if-
(a) the party making the application furnishes proof that-
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on OMP (Comm) 29/21 Page 9 of 21 matters beyond the scope of the submission to arbitration;
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the court finds that-
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation 1 - For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-- (i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.-- For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute."
12. Normally, the general principles are that Arbitrator is a Judge of the choice of the parties and his decision, unless there is an error apparent on the face of the award which makes it unsustainable, is not to be set aside even by the Court as a Court of law could come to a different conclusion on the same facts. The Court cannot reappraise the evidence and it is not open to the Court to sit in appeal over the conclusion of the Arbitrator. It is not open to the Court to set aside a finding of fact arrived at by OMP (Comm) 29/21 Page 10 of 21 the Arbitrator and only grounds on which the award can be canceled are those mentioned in the Arbitration Act. Where the Arbitrator assigns cogent grounds and sufficient reasons and no error of law or misconduct is cited, the award will not call for interference by the Court in exercise of the power vested in it. Where the Arbitrator is a qualified technical person and expert, who is competent to make assessment by taking into consideration the technical aspects of the matter, the Court would generally not interfere with the award passed by the Arbitrator.
13. Hon'ble Supreme Court in case of 'Ssangyong Engineering & Construction Co. Ltd. Vs. National Highways Authority of India', 2019 SCC OnLine SC 677 has held that under Section 34 (2A) of the Act, a decision which is perverse 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. A finding based on the 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. It is held that 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.
14. Hon'ble Supreme Court in case of 'Associate Builders vs. Delhi Development Authority', (2015) 3 SCC 49 has also held that the interference with an arbitral award is permissible only when the findings of the arbitrator are arbitrary, capricious or perverse OMP (Comm) 29/21 Page 11 of 21 or when conscience of the Court is shocked or when illegality is not trivial but goes to the root of the matter. It is held that once it is found that the arbitrator's approach is neither arbitrary nor capricious, no interference is called for on facts. The arbitrator is ultimately a master of the quantity and quality of evidence while drawing the arbitral award.
15. Hon'ble Supreme Court in the case of Parsa Kente Collieries Limited Vs. Rajasthan Rajya Vidyut Utpadan Nigam Limited, (2019) 7 SCC 236 has held that an Arbitral Tribunal must decide in accordance with the terms of the contract. If an arbitrator construes a term of the contract in a reasonable manner and if such interpretation is possible or plausible interpretation, award cannot be set aside. The construction of the terms of a contract is primarily for an arbitrator. The Court does not act as a court of appeal when a court is applying the "public policy" test to an arbitration award. It is held that if the arbitral award is contrary to the evidence on record, it can be set aside by the Court under Section 34 of the Act.
16. Hon'ble Delhi High Court in a recent pronouncement in case titled 'SMS Ltd vs Konkan Railway Corporation Ltd.' in O.M.P. (COMM) 279/2017 decided on 11.05.2020 has inter alia held in para 96 that it is a settled law that the finding of Ld. Arbitral Tribunal can be interfered with under Section 34 of the Act if such findings are arbitrary or perverse and the Learned Arbitral Tribunal has not adopted a judicial approach. It was further held that 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 OMP (Comm) 29/21 Page 12 of 21 illegality.
17. Now coming to the facts of the present matter, it has been vehemently argued by the Ld. Counsel for the petitioner that the impugned award dated 11.03.2020 is bad in law, suffers from patent illegality appearing on the face of it and is perverse be- sides being against the public policy as the same has been passed in contravention of the agreed terms of contract between the par- ties. It is submitted that the Ld. Arbitrator has wandered outside the terms of the contract and has committed the errors in rewrit- ing the terms of the agreement executed between the parties and that the same is against the fundamental notions of the justice of morality rendering the impugned award liable to be set aside. It is further submitted that the impugned award is against the specific terms of the contract and that the Ld. Arbitrator could not have traveled beyond the four corners of the contract between the party. It is submitted that the arbitrator has passed the impugned award on the basis of his personal notions of equity and fairness. It is submitted that the expressed term of Clause 3 of the License Deed did not envisage any show cause notice or prior hearing be- fore forfeiture of performance security and that the Ld. Arbitrator has tried to rewrite the terms of the License Deed by holding that the petitioner ought to have given show cause notice to the re- spondent before forfeiture of the performance security. It is sub- mitted that the report of Monitoring Committee of the petitioner categorically established violation of the Clause 10 of License Deed and the respondent was found to be indulging in brand sub- station of medicines in direct violation of the clause 3 of the Li- cense Deed.
OMP (Comm) 29/21 Page 13 of 2118. Per Contra, Ld. Counsel for the respondent has argued that the impugned award has been passed in conformity with the set- tled law and that the Ld. Arbitrator has adopted a judicial ap- proach while abiding the principle of natural justice and that the impugned award is neither against public policy of India nor has any illegality and rather the same is a well reasoned and speaking award. It is submitted that the award was passed after considering the pleadings, submissions of the parties and the documents filed on record and hence does not suffer from any infirmity. It is sub- mitted that the construction of the contract was within the juris- diction of Ld. Tribunal having regard to the wide nature, scope and ambit of arbitration agreement and there is no scope for re appreciation of the matter. It is submitted that the performance guarantee furnished by the respondent was forfeited in order to punish him for approaching the Hon'ble Courts for judicial inter- vention. It is submitted that the allegations against the respondent were false and fabricated and the respondent was forced to pay the penalty of Rs. 5331/-. It is submitted that the respondent had immediately vacated the premises on 07.12.2013 after dismissal of its writ petition Civil No. 75 of 203 on 29.11.2013. It is sub- mitted that the forfeiture of the performance security was con- veyed to the respondent vide letter dated 17.12.2013 taking the advantage of their superior position and to penalize the respon- dent for taking recourse to the law for extension of the license. It is submitted that the impugned award is a reasoned and detailed award and that the petitioner has failed to establish any ground for challenge of the said award U/s 34 of Arbitration and Concili- ation Act and hence the petition merits outright dismissal.
OMP (Comm) 29/21 Page 14 of 2119. The original records of the arbitral proceedings were requi- sitioned and carefully considered. Ld. Arbitrator had framed the following issues on the basis of the material available on record and after considering the pleadings and submissions of the Ld. Counsel for the parties:
(i) Whether the claimant is entitled to the amount claimed in the statement of claim?
(ii) Whether the claimant is also entitled to the interest. If so for what rate and for what period?
20. The Ld. Arbitrator in para 10 of the impugned award has held that:
"I have considered the rival contention and have gone through entire record. The undisputed fact in the matter is that the Bid of the claimant was accepted by the respondent. Consequent thereto the claimant furnished Performance Security in the form of Bank Guarantee for a sum of Rupees Fifty Lacs and besides that the earnest money of Rs. 2 lacs too was deposited. Thereafter, the License Deed Ex. CW1/1 was executed between the parties and then the respondent put the claimant in possession of the premises i.e. built structure of 350 sq. ft. @ Rs. 455/- per sq. meter for running the chemist shop from the said premises. The said license was for a period of 2 years w.e.f. 21.11.2011. However, the agreement also provided the stipulation that on the basis of satisfactory performance, the License could be extended for a further period of one year. But, here it is also an admitted case that the License in favour of the claimant was not extended for any further period. It is also not in dispute that since the license period of the claimant was not extended by the respondent, so, the claimant then vacated the premises on 07.12.2013, since he did not get any relief regarding the extension of the period even by filing petition in the Hon'ble High Court and then by letter dated 07.12.2013 (Ex. CW1/A) the claimant requested the respondent to return the earnest money deposit and release the Bank Guarantee. However, as a consequence thereto, the earnest money of Rs. 2 lacs was returned, but, the respondent decided to forfeit the Bank Guarantee of OMP (Comm) 29/21 Page 15 of 21 Rs. 50 lacs. The respondent while forfeiting the said Performance Guarantee of Rs. 50 lacs (Rupees Fifty Lacs only) has enumerated various reasons viz. a letter written against the claimant by one Shri Karan Singh Tanwar containing certain allegations, the misconduct on the part of the claimant with the customers, supplying medicines of different brands, the registration of a criminal case against relative of one of the co-owners, non-filing of monthly returns etc. etc.. However, after hearing the Ld. Counsel for the parties and perusing the record, it is apparent that only in one case on a complaint dated 06.10.2012 filed by one Sh. Praveen Kumar, a fine of Rs.
5,331/- was imposed upon the claimant which was duly paid. Otherwise, in all other cases there were mere unsubstantiated allegations & those too without any proof against the claimant. However, all these allegations had been denied by the claimant. Then, under such circumstances, the duty was cast upon the respondent to conclusive prove those allegations but he has utterly failed to do so. Under such circumstances, the act of the respondent in forfeiting the Performance Security of Rs. 50 lacs without firstly giving him show-cause notice or affording him adequate opportunity of being heard is totally illegal and against eh Principles of Natural Justice. Consequently, the said order is liable to set aside. Ordered accordingly.
FINDING In view of the aforesaid discussions, both the issues are decided in favour of the claimant.
Hence, the result is that the claimant is forthwith entitled to the amount of Rs. Fifty lacs i.e. the Performance Security which had been furnished by him to the respondent.
Interest The claimant is also entitled to interest @ 8% p.a. upon the said amount of Rupees Fifty Lacs w.e.f. 04.03.2015 i.e. the date of order of the Hon'ble High court appointing the undersigned as the Arbitrator to adjudicate the disputes between the parties till the date of recovery. However, 60 days time is granted to the respondent to make the payment. And in case, the amount is not paid within the said period of 60 days, then, the respondent shall be liable to pay interest @ 10% with effect from the date of the Award."
OMP (Comm) 29/21 Page 16 of 2121. Thus, the reasoning given by the L d. Arbitrator is that a fine of Rs. 5331/ was imposed upon the respondent in only one case on a complaint dated 06.10.2012 filed by one Praveen Kumar. The Ld. Arbitrator has opined that in all other cases there were mere unsubstantiated allegations and that too without any proof and under such circumstances duty was cast upon the petitioner to conclusively prove those allegations. In the considered opinion of this Court, such a reasoning and interpretation of the mutual terms of License Deed by the Ld. Arbitrator is going beyond the purview of the contract/agreement between the parties and tantamounts to rewriting the terms of the contract by the Ld. Arbitrator. Pertinently, the license deed dated 21.11.2011 provided for forfeiture of Performance Security as Clause 3 as under:
"3. Forfeiture of Performance Security- The amount of Performance Security shall be liable to be forfeited if the medicines/surgical consumable, etc supplied by the authorized Chemist against the request placed on them in pursuance of this contract are subsequently found as not conforming to quality as per prescribed norms/specifications.
Performance Security is liable to be forfeited if selected chemist:
i. Fails to adhere to the terms and conditions of the contract ii. Supplies any sub-standard, spurious medicines, substituted medicine etc. iii. Non-availability of common medicine/surgical consumables, etc. iv. Over-charging i.e. no offering the pre-determined discount v. Non-payment of rent/any other dues."
22. Additionally, clause 10 of the License Deed also provided as under:
"10. Non-substitution of medicine/drug- The chemist will OMP (Comm) 29/21 Page 17 of 21 not change Drug/Molecule mentioned by the treating doctor. In case of request for specific brand of medicines, the brand shall not be substituted irrationally. However, the chemist shop will be provided with a list of all the standard manufactures; duly recommended by the Monitoring Committee constituted by the Director, AIIMS."
23. Bare perusal of the mutual terms agreed between the par- ties vide their license deed dated 21.11.2011 clearly establish that neither the number of instances on which the respondent was re- quired to be penalized nor the requirement of any conclusive proof was agreed between the parties in the entire license deed dated 21.11.2011. The performance security was liable to be for- feited for supplies of any sub-standard, spurious medicines, sub- stituted medicine etc. by the respondent amongst other reasons narrated in Clause 3 of the License Deed. This Court is conscious of the fact that appreciation of the evidence and construction of the contract/agreement is the prerogative of the Ld. Arbitrator and accordingly, the reference to the evidence and material clauses of the License Deed is being made only for the limited purpose to note that the vital and material evidence/terms has been ignored by the Ld. Arbitrator while arriving at its decision. In the considered opinion of this Court, the Ld. Arbitrator, by holding that a duty was cast upon the petitioner to conclusively prove the allegations against the respondent, has tried to add/modify the terms of the parties agreement/License Deed and the same is not permissible in law. Additionally, the decision of the Ld. Arbitrator that the Performance Security could not have been forfeited without giving a show cause notice is also per- verse as no such procedure or requirement was agreed between the parties while executing the license deed dated 21.11. 2011 and, infact, the Ld. Arbitrator has tried to modify the terms OMP (Comm) 29/21 Page 18 of 21 agreed between the parties by suggesting/requiring/reading the procedure for forfeiture of Performance Security or imposition of penalty in the License Deed although no such requirement was agreed by the parties or forms part of any clause/term of the Li- cense Deed. Significantly, the petitioner, M/s. AIIMS had issued the show cause notice dated 09.01.2014 which was replied by the respondent vide its reply dated 20.01.2014 (Ex. CW1/5 in the records of the Arbitral proceedings) wherein the respondent M/s. All India Medicos themselves admit to have received show cause notices dated 16.08.2012, 16.10.2012, 12.03.2013, 13.06.2013 and 27.08.2013 on page of their reply and admit to have filed their replies and that a penalty of Rs. 5331/- was also paid by the respondent/ All India Medicos. Thus, the various show cause no- tices issued by the petitioner and even replied to by the respon- dent has not even been looked into by the Ld. Arbitrator although the said notices were admitted by the respondent itself in its reply (Ex. CW1/5 filed on record of the Arbitral proceedings). Even the evidence of petitioner's witness, Mr. Pallav Kumar Chittej, (Ex.RW1/A on record of arbitral proceedings) refers to said show cause notices in para 8 of his evidence and the Ld. Counsel for the respondent also suggested in question 2 of the cross-examina- tion of RW1 that said show cause notices were also replied and on one occasion the respondent had levied a penalty of Rs. 5331/- which was paid by the claimant. Thus, the Ld. Arbitrator by disregarding the evidence brought on record and instead re- quiring the petitioner to prove the allegations conclusively has rendered the impugned award perverse and has committed an er- ror which is stark and apparent on the face of it and reveals the arbitrary and capricious approach which is patently illegal and OMP (Comm) 29/21 Page 19 of 21 perverse. The imposition of penalty of Rs. 5331/- by the peti- tioner on the respondent and the factum of respondent even hav- ing paid the said penalty of Rs. 5331/- pursuant to report of the Monitoring Committee of Pharmacology Department of the peti- tioner/AIIMS is an admitted case of both the parties and the Ld. Arbitrator has also referred to the said penalty on page 20 of the impugned award and the said fact itself was sufficient to justify the forfeiture of Performance Security by the petitioner as per Clause 3 of the License Deed executed between the parties. Hon'ble Supreme Court of India in its recent pronouncement in case titled 'PSA SICAL Terminals Pvt. Ltd. Vs. Board of Trustees of V.O. Chidambranar Port Trust ' [2021 SCC Online SC 508] has held that a decision which is perverse, though would not be aground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. It was further held that 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. Hon'ble Apex Court in Associate Builders Case (supra) has held that where the arbitral tribunal takes into account something irrelevant to the decision which is arrived at or where it ignores vital evidence in arriving at its deci- sion then such decisions are necessarily perverse. In terms of law laid in the aforementioned by the Hon'ble Superior Courts and particularly in PSA SICAL Terminals Pvt. Ltd. vs Board of Trustees of V.O. Chidambranar Port Trust Tuticorin and Ors., (2021) SCC OnLine SC 508, Ld. Sole Arbitrator cannot rewrite the contract between the parties nor can create a new contract be- tween the parties nor can give the award ignoring the terms and OMP (Comm) 29/21 Page 20 of 21 conditions of the contract nor can travel beyond the terms and conditions of the contract. Per se the adjudication of Ld. Sole Ar- bitrator in the impugned arbitral award suffers from the vice of patent illegality in terms of law laid in the case of Patel Engineer- ing Ltd. vs North Eastern Electric Power Corporation Ltd. (supra). Accordingly,the impugned award is liable to be set aside under Section 34(2)(b)(ii); Section 34 (2A) of the Act as it is (a) in contravention with the fundamental policy of Indian law; (b) vitiated by patent illegality appearing on the face of award and
(c) contrary to clause nos. 3 of the License deed dated 21.11. 2011 agreed between the parties and thus in violation of Section 28 (3) of the Act.
24. Relying upon the law laid in the cases of (i) Associate Builders vs. Delhi Development Authority (supra); (ii) Ssangy- ong Engineering and Construction Company Limited vs National Highways Authority of India (NHAI) (supra); (iii) Patel Engi- neering Ltd. vs North Eastern Electric Power Corporation Ltd. (supra) and in view of foregoing discussions the impugned award dated 21.11.2011 is hereby set aside.
25. The parties are left to bear their own costs.
26. File be consigned to record room after necessary compliance.
Announced in the open Court on
on 28th Day of April 2022
(Prem Kumar Barthwal)
Digitally signed
PREM by PREM District Judge (Commercial Courts)-01,
KUMAR
KUMAR BARTHWAL (South) Saket Courts,
BARTHWAL Date: 2022.04.28
17:37:24 +0530 New Delhi
OMP (Comm) 29/21 Page 21 of 21
OMP (COMM.) 29/21
ALL INDIA INSTITUTE OF MEDICAL SCIENCES Vs. ALL INDIA MEDICOS 28.04.2022 Present : Sh. Atul Kumar, Ms. Sweety Singh, Sh. Rahul Pandey and Sh. Rajiv Ranjan, ld. Counsels for the petitioner.
Dr. Swati Jindal Garg and Ms. Saumya Jain, ld.
Counsels for the respondent.
Vide separate order dictated, typed and announced in the open court today, the petition U/s 34 of Arbitration and Conciliation Act is hereby allowed and the arbitral award dated 21.11.2011 has been set aside. The respondent had received a sum of Rs. 74,76,689/- under the said award through the Execution Court and the said order of the Execution Court dated 11.02.2021 was set aside by the Hon'ble Delhi High Court in CM (M) 420 of 21 vide order dated 17.12.2021. The Hon'ble High Court had also restrained the respondent from withdrawing the said amount vide its order dated 12.07.2021. The respondent had also filed the details of the assets i.e. P-9, basement Malviya Nagar, New Delhi-110017 before the Hon'ble Delhi High Court and a copy of the Sale Deed dated 23.06.2011 in respect of the basement floor of the property bearing no. P-9, Malviya Nagar, New Delhi-110017 was also filed in the proceedings dated 24.03.2022 in this Court. As the impugned award dated 21.11.2011 has been set aside, the respondent is directed to return the money/amount received by it to the petitioner within 90 days and the basement floor of the property bearing no. P-9, Malviya Nagar, New Delhi-110017 is hereby attached and shall remain attached till such repayment. In case of failure of the respondent to return the amount as aforesaid, the petitioner will be entitled to recover the same by executing this order as per law. No order as to costs. The file be consigned to record room after necessary compliance.
(Prem Kumar Barthwal) District Judge (Commercial Court)-01 (South)/Saket Courts, New Delhi/28.04.2022 OMP (Comm) 29/21 Page 22 of 21