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2018 DIGILAW 2581 (MAD)

Srinvasa Ramiah v. Larsen & Toubro Limited

2018-08-21

ABDUL QUDDHOSE

body2018
ORDER : The instant petition has been filed by the petitioner under section 34 of the Arbitration and Conciliation Act, 1996 challenging the Arbitral Award dated 04.12.2010 passed against the petitioner. The brief facts leading to the filing of the instant petition are as follows : 2. The petitioner was an employee of the first respondent with effect from 18.02.2007 and he was placed at Dubai. The first respondent deputed the petitioner to United Kingdom to work in M/s.Foster Wheeler, United Kingdom, a client of the first respondent company for execution of a project awarded to the first respondent. According to the first respondent, the petitioner executed a letter of undertaking dated 24.06.2007 wherein he has allegedly undertaken to the first respondent that he will report back to duty at Dubai after the completion of project in the United Kingdom. Under the alleged letter of undertaking dated 24.06.2007, the petitioner has agreed to pay a sum of USD 10,000 to the first respondent, in case, he commits breach of the letter of undertaking dated 24.06.2007. 3. The petitioner on deputation worked in United Kingdom between 27.06.2007 and 28.07.2007 and returned back to UAE after completing the work assigned to him in the United Kingdom. According to the first respondent, the petitioner left for India on 09.08.2007 on one week leave. Since the petitioner did not return back to duty at Dubai, there arose disputes between the parties and the said dispute was referred to the Arbitration by the first respondent who appointed the second respondent as the Sole Arbitrator to decide the dispute on merits in accordance with clause “B” of the letter of undertaking dated 24.06.2007. 4. According to the first respondent, in view of the breach of letter of undertaking dated 24.06.2007 as per clause B, the petitioner is liable to pay the first respondent a sum of USD 10,000 together with interest at the rate of 15% p.a., calculated from the date when the petitioner left the first respondent company. 4. According to the first respondent, in view of the breach of letter of undertaking dated 24.06.2007 as per clause B, the petitioner is liable to pay the first respondent a sum of USD 10,000 together with interest at the rate of 15% p.a., calculated from the date when the petitioner left the first respondent company. The sole Arbitrator appointed by the first respondent acted upon the reference and after issuing notice to the parties to the dispute, has passed an Arbitral Award dated 04.12.2010 directing the petitioner to pay the first respondent a sum of USD 10,000 within 90 days from the date of Award and in the event of failure to pay the said sum within 90 days, the Arbitrator has directed the petitioner to pay simple interest at 8% p.a. on the sum of USD 10,000 from the date of Award till the date of payment. 5. Aggrieved by the Arbitral Award dated 04.12.2010, the instant petition has been filed. 6. Heard Mr. M.R. Uma Vijayan, learned counsel for the petitioner and Mr. K.K. Muralitharan, learned counsel for the first respondent. 7. According to the learned counsel for the petitioner, the primary ground for challenge in the instant petition is that the Arbitrator has passed an Award dated 04.12.2010, beyond the scope of the letter of undertaking dated 24.06.2007. According to the learned counsel for the petitioner, the dispute was referred to Arbitration based on the arbitration clause contained under the letter of undertaking dated 24.06.2007. According to the learned counsel for the petitioner, the petitioner has not committed any breach of letter of undertaking dated 24.06.2007. The learned counsel for the petitioner drew the attention of this Court to Clause A(2), (3) & (5) as well as Clause B of the letter of undertaking dated 24.06.2007 which is reproduced below : “(A) In consideration of the foregoing, I hereby agree and undertake as follows : 1..... 2. Throughout the period of my deputation and until I return to UAE, I will not accept any other employment, assignment or engage myself in any other business activity as this will hamper the quality and timely execution of the contract. 3... 4. 2. Throughout the period of my deputation and until I return to UAE, I will not accept any other employment, assignment or engage myself in any other business activity as this will hamper the quality and timely execution of the contract. 3... 4. On completion of deputation, I will duly report back for duty with the Company in U.A.E. My deputation shall be deemed to have commenced from the time of my departure from U.A.E and come to an end on my return to U.A.E. 5. I undertake that in the event of breach on my part of any of the above conditions under A) (1), (2), (3) and (4) above, I undertake to repay to the Company the expenses incurred by the Company towards to and fro air ticket, salary and other allowances paid to me during my stay abroad, along with interest at the rate of 15% per annum there on calculated from the date of my leaving the Company as compensation. (B) In addition to the above, I acknowledge the fact that due to my breach of the undertaking, there could be a claim on the company from the client and/or consultant, for non-completion /delayed completion of assignment besides being subjected to loss of business credibility and accordingly, I agree and undertake to pay to the company, a pre-estimated liquidated damages of USD 10,000 together with interest at the rate of 15% per annum thereon calculated from the date of my leaving the company.” 8. According to the learned counsel for the petitioner, the petitioner reported for duty at United Kingdom on 27.06.2007 and after completing the assignment for the client of the first respondent returned back to Dubai and reported for duty on 28.07.2007. Therefore, according to the learned counsel for the petitioner, no breach has been committed by the petitioner to the letter of undertaking dated 24.06.2007. Therefore, according to the learned counsel for the petitioner, Clause “B” stipulating liquidated damages at USD 10,000 together with interest at the rate of 15% p.a. will not get attracted. 9. The learned counsel for the petitioner also drew the attention of this Court to the Statement of objections filed by the petitioner to the claim petition filed by the first respondent before the Arbitrator/second respondent. The learned counsel for the petitioner referred to paragraph 12 of the Statement of objections which reads as follows : “12. 9. The learned counsel for the petitioner also drew the attention of this Court to the Statement of objections filed by the petitioner to the claim petition filed by the first respondent before the Arbitrator/second respondent. The learned counsel for the petitioner referred to paragraph 12 of the Statement of objections which reads as follows : “12. The respondent has not committed any breach of the conditions during the period of his deputation at M/s.Foster Wheeler UK. The respondent has discharged his duties to best satisfaction, ability of the up keeping the reputation of the company at all times of his deputation at Foster Wheeler UK. The respondent clarifies that there was no delay in completion of the assignment or the non completion of the project from the respondent's side, subjecting to loss of business credibility of the claimant.” 10. The learned counsel for the petitioner also drew the attention of this Court to the leave application submitted by the petitioner at Dubai requesting for one week leave which was also sanctioned by the first respondent. The learned counsel for the petitioner also submitted that work entrusted to the petitioner at United kingdom was completed to the satisfaction of the client of the first respondent. 11. The learned counsel for the petitioner further contended that the first respondent initiated arbitration only as per arbitration clause contained under the letter of undertaking dated 24.06.2007. Having fulfilled the terms of the letter of undertaking dated 24.06.2007, according to the learned counsel for the petitioner, there is no arbitrable dispute between the parties and the claim petition ought to have been rejected by the Arbitrator. According to the learned counsel for the petitioner, the first respondent cannot make a claim under the letter of undertaking dated 24.06.2007 for the breach of contract of employment which is beyond the scope of letter of undertaking dated 24.06.2007. 12. According to the learned counsel for the petitioner, the letter of undertaking dated 24.06.2007 which contains the arbitration clause is very specific in nature and the said letter of undertaking was issued only for the deputation assignment at United Kingdom given to the petitioner. 12. According to the learned counsel for the petitioner, the letter of undertaking dated 24.06.2007 which contains the arbitration clause is very specific in nature and the said letter of undertaking was issued only for the deputation assignment at United Kingdom given to the petitioner. Having completed the said assignment to the satisfaction of the client of the first respondent and having returned back to Dubai as per the letter of undertaking dated 24.06.2007, according to the learned counsel for the petitioner, no claim can be made by the first respondent to recover the liquidated damages stipulated under Clause “B” of the letter of undertaking dated 24.06.2007. 13. The learned counsel for the petitioner drew the attention of this Court to the findings of the Arbitrator on the defences raised by the petitioner in the Arbitration. The learned counsel for the petitioner referred to the following finding of the Arbitrator reads as follows : “Larsen & Turbo has accordingly invoked arbitration as the Respondent returned from his assignment in U.K. to Dubai and after spending a few days, he simply asked for leave and left with out being relieved to his own town in India. Thereafter, he never reported for duty. He has been issued several notices and emails and he has not responded by returning for work at Dubai. His letter of offer, acknowledged by him from the Larsen & Turbo clearly specifies that he will work for 2 years from the date of reporting before Larsen & Turbo at Dubai. This includes in-between period that he would be sent on an assignment to U.K. He has also clearly indicated in his letter of undertaking that he was in Larsen & Turbo employment for 5 months as on 24.06.2007 working as Manager (Planning) at Dubai.” Referring the above finding of the Arbitrator, the learned counsel for the petitioner submitted that the Arbitrator himself has observed that the petitioner returned to Dubai, after completing his assignment at United Kingdom. 14. According to the learned counsel for the petitioner, the Arbitrator has gone beyond the scope of the letter of undertaking dated 24.06.2007, by observing that the petitioner after spending a few days, he simply asked for leave and left without being relived to his own town in India and thereafter, he never returned for duty. 14. According to the learned counsel for the petitioner, the Arbitrator has gone beyond the scope of the letter of undertaking dated 24.06.2007, by observing that the petitioner after spending a few days, he simply asked for leave and left without being relived to his own town in India and thereafter, he never returned for duty. The Arbitrator has further observed that the offer of employment issued by the first respondent to the petitioner is for a period of two years from the date of reporting to work in Larsen & Turbo at Dubai. The Arbitrator has further observed that the petitioner was in employment with the first respondent as Manager planning for five months as on 24.06.2007 at Dubai. According to the learned counsel for the petitioner, the Arbitrator has gone beyond the scope of letter of undertaking dated 24.06.2007 by giving an adverse finding against the petitioner based on the offer letter of employment and the acceptance given by the petitioner accepting the employment. According to the learned counsel for the petitioner, neither the offer letter nor the acceptance which was issued five months before the date of letter of undertaking contains an Arbitration Clause. 15. Even though the said documents do not contain any Arbitration Clause, the second respondent/Arbitrator has passed an Arbitral Award against the petitioner and therefore, the Arbitrator has gone beyond the scope of letter of undertaking dated 24.06.2007 and has passed an Arbitral Award dated 04.12.2010 against the petitioner which is patently illegal. 16. Per contra, learned counsel for the first respondent submits that the offer of employment letter dated 01.12.2006 given by the first respondent which was accepted by the petitioner on 04.12.2006 must be read with the letter of undertaking dated 24.06.2007. According to the learned counsel for the first respondent, the petitioner having not reported for duty at Dubai after taking leave to go to India on 09.08.2007 has violated the terms and conditions of the Offer letter dated 01.12.2006, given to the petitioner. According to the learned counsel for the first respondent, the letter of undertaking dated 24.06.2007 cannot be read in isolation and must be read in conjunction with the offer letter dated 01.12.2006 given by the first respondent to the petitioner. According to the learned counsel for the first respondent, the letter of undertaking dated 24.06.2007 cannot be read in isolation and must be read in conjunction with the offer letter dated 01.12.2006 given by the first respondent to the petitioner. Therefore, according to the learned counsel for the first respondent, the Arbitration clause contained in the letter of undertaking dated 24.06.2007 is also applicable for the employment contract namely the offer letter dated 01.12.2006 giving employment to the petitioner which was also accepted by the petitioner. 17. The learned counsel for the first respondent submitted that the petitioner violated the terms and conditions of the employment contract which was for a period of two years, by not completing the term without giving proper reason and notice to the first respondent. Further, the learned counsel for the first respondent submitted that the petitioner returned to Dubai after completing the project assignment for the client of the first respondent at United Kingdom on 28.07.2007 and within few days, left for India and never returned back to Dubai. 18. According to the learned counsel for the first respondent, having violated the terms and conditions of the employment contract as well as the letter of undertaking dated 24.06.2007, the petitioner is liable to pay USD 10,000 to the first respondent as stipulated under Clause B of the letter of undertaking dated 24.06.2007. 19. The learned counsel for the first respondent drew the attention of this Court to the Arbitral Award dated 04.12.2010 and submitted that the Arbitrator has rightly held that the petitioner is liable to pay USD 10,000 to the first respondent, in view of the breach of contract of employment i.e., letter of undertaking dated 24.06.2007 by the petitioner. 20. According to the learned counsel for the first respondent, the Arbitrator has given a well reasoned and well considered award. The reason given in the Arbitral Award for rejecting the defence of the petitioner is also only in accordance with the terms and conditions of the letter of undertaking dated 24.06.2007. According to the learned counsel for the first respondent, the Arbitrator has rightly awarded the liquidated damages amounting to USD 10000 as per clause B of the letter of undertaking dated 24.06.2007 in favour of the first respondent. Discussion 21. According to the learned counsel for the first respondent, the Arbitrator has rightly awarded the liquidated damages amounting to USD 10000 as per clause B of the letter of undertaking dated 24.06.2007 in favour of the first respondent. Discussion 21. As seen from the letter of undertaking dated 24.06.2007, the conditions imposed on the petitioner are as follows : (a) He should diligently and efficiently to complete the assignment and should not expose the first respondent to any kind of claim from the client or the consultant. (b) Throughout the period of deputation, he shall not accept any other employment, assignment or engage himself in any other business activity. (c) He shall report back to duty with the first respondent in UAE. The period of deputation shall be deemed to have commenced from the time of his departure from UAE and come to an end on his return to UAE. (d) He has undertaken that in the event of breach of any of the above mentioned conditions, to repay the expenses incurred by the first respondent towards to and fro air ticket, salary and other allowances paid to him during his stay abroad along with the interest at the rate of 15% per annum thereon calculated from the date of his leave from the company as compensation. In the event of breach of the letter of undertaking, he has agreed to pay USD 10,000 to the first respondent as liquidated damages. 22. In the instant case, the petitioner has reported back to duty at UAE on completing his assignment entrusted to him at United Kingdom by the first respondent. There is no complaint from the client of the first respondent in the United Kingdom against the petitioner and therefore, it can be inferred that the petitioner has completed the work to the satisfaction of the clients at United Kingdom. 23. The offer letter dated 01.12.2006 given to the petitioner by the first respondent at the time of his initial employment does not contain any arbitration clause which is also admitted by the first respondent. The offer letter was given by the first respondent on 01.12.2006 which was accepted by the petitioner on 04.12.2006 and with effective from 18.02.2007 the petitioner has been working with the first respondent. The offer letter was given by the first respondent on 01.12.2006 which was accepted by the petitioner on 04.12.2006 and with effective from 18.02.2007 the petitioner has been working with the first respondent. Only on 24.06.2007 the letter of undertaking was obtained from the first respondent after a lapse of more than five months from the date when the petitioner joined employment with the first respondent. 24. The letter of undertaking dated 24.06.2007 was given by the petitioner only for his deputation assignment at United Kingdom. The letter of undertaking does not refer to the contract of employment under which the petitioner initially joined duty in the first respondent organization. 25. From the materials available on record as well as after hearing the submission of respective counsels, this Court is unable to find any breach of terms of the letter of undertaking dated 24.06.2007 by the petitioner. The petitioner has complied with the conditions and he has also returned back and reported for duty at Dubai and only thereafter, the petitioner availed leave from the first respondent for proceeding to India. The offer letter dated 01.12.2006 given by the first respondent to the petitioner for employment admittedly does not contain an arbitration clause. The offer letter dated 01.12.2006 is the employment contract, since it was accepted by the petitioner. 26. The offer letter dated 01.12.2006 containing the terms of the employment covers a wide range of issues and does not deal with the terms and conditions applicable to an employee on deputation to a foreign country, whereas the letter of undertaking dated 24.06.2007 given by the petitioner to the first respondent is applicable only for the petitioner's deputation to United Kingdom from Dubai, to complete the assignment for the client of the first respondent at United Kingdom. 27. Section 7 of the Arbitration and Conciliation Act 1996 reads as follows : “7. Arbitration agreement.- (1) In this Part, “arbitration agreement” means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not. (2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (3) An arbitration agreement shall be in writing. (2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement. (3) An arbitration agreement shall be in writing. (4) An arbitration agreement is in writing if it is contained in - (a) a document signed by the parties; (b) an exchange of letters, telex, telegrams or other means of telecommunication including communication through electronic means which provide a record of the agreement; or (c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. (5) the reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract.” 28. There is no arbitration clause under the offer letter dated 01.12.2006 given by the first respondent to the petitioner. Subsequent to the offer letter also there are no exchange of correspondence in writing between the petitioner and the first respondent about the existence of arbitration clause. The arbitration clause is found only in the letter of undertaking dated 24.06.2007 and therefore, it is clear that the arbitration clause is binding only for the letter of undertaking dated 24.06.2007 and the intention of the parties was never to go for arbitration in respect of other matters relating to the employment of the petitioner by the first respondent. 29. In the instant case, the petitioner has fully satisfied the terms and conditions of the letter of undertaking dated 24.06.2007 by attending the assignment at United Kingdom and returned to duty at Dubai. Under the letter of undertaking dated 24.06.2007, the petitioner is liable to pay the first respondent a sum of USD 10,000 together with interest at 15% per annum only in the event of the petitioner committing breach of the letter of undertaking dated 24.06.2007. Since the petitioner has not committed any breach of letter of undertaking dated 24.06.2007, the petitioner cannot be made liable to pay the first respondent a sum of USD 10000 as stipulated under clause B of the letter of undertaking dated 24.06.2007. 30. Since the petitioner has not committed any breach of letter of undertaking dated 24.06.2007, the petitioner cannot be made liable to pay the first respondent a sum of USD 10000 as stipulated under clause B of the letter of undertaking dated 24.06.2007. 30. The Arbitrator has erroneously concluded that the petitioner has committed breach of the letter of undertaking dated 24.06.2007 and has held that the petitioner is liable to pay the first respondent a sum of USD 10000. The letter of undertaking dated 24.06.2007 is an independent contract and cannot be clubbed with the offer letter dated 01.12.2006 issued to the petitioner at the time of his initial employment with the first respondent. There is no reference to the letter of undertaking dated 24.06.2007 under the offer letter dated 01.12.2006 giving employment to the petitioner by the first respondent. 31. The offer letter dated 01.12.2006 containing the terms and conditions of the employment cannot be read in conjunction with the letter of undertaking dated 24.06.2007 which was given by the petitioner only for the purpose of returning back to Dubai after completing the assignment at United Kingdom. In the considered view of this Court, the Arbitrator has erroneously awarded a sum of USD 10,000 in favour of the first respondent by going beyond the scope of the letter of undertaking dated 24.06.2007. 32. Therefore, this Court is of the considered view that the findings of the Arbitrator are arbitrary, irrational and perverse and consequently, the Award dated 04.12.2010 passed against the petitioner is patently illegal. 33. In the result, the Award dated 04.12.2010 passed against the petitioner by the second respondent Arbitrator is hereby set aside and the petition is allowed.