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2020 DIGILAW 537 (CAL)

Mitesh Mehta v. Saregama India Limited

2020-06-26

MOUSHUMI BHATTACHARYA

body2020
JUDGMENT Moushumi Bhattacharya, J. - The present challenge under Section 34 of the Arbitration and Conciliation Act, 1996 (the Act) is to an Award dated 15th March, 2015 passed by a learned Sole Arbitrator. By the said Award, the claims of the respondent (claimant in the arbitration proceedings) were substantially allowed. The petitioner was directed to pay the sums awarded to the respondent with interest at the rate of 12% from the date of submission of the statement of claim till realization and the respondent/claimant was directed to adjust a sum of Rs.5 lakhs which was with the respondent as security deposit at the rate of 6% per annum from the date of deposit till the date of the Award from the principal sum awarded in favour of the respondent. 2. The dispute between the parties arose out of an agreement dated 2nd May, 2008 by which the petitioner was appointed by the respondent to provide storing, handling, forwarding services and to act as clearing agent and logistic services provider in respect of the respondent's goods lying at the workshop maintained by the respondent at Byculla, Mumbai. The respondent's case before the learned Arbitrator was that the agreement was for a period of two years with effect from 1st June, 2008 till 31st May, 2010. The respondent terminated the agreement on 10th September, 2008 and called upon the petitioner to return the goods, documents, books of accounts, etc. which were lying with the petitioner at the Byculla Warehouse. The petitioner by its letter dated 13th September, 2008 offered to continue providing services and relied on a letter dated 22nd September, 2008 in support of its contentions. The respondent approached the Arbitrator claiming Rs. 37,00,992/- as on 15th March, 2010 under several heads including stock shortage from 15th October 2008 to 14th January 2009, operating and other expenses including rent and electricity charges etc. 3. Mr. Anirban Bose, learned counsel appearing for the petitioner (respondent before the learned Arbitrator) submits that the dispute between the parties relates to the termination of the agreement dated 2nd May, 2008 and contends that the Award should be set aside under Section 28(3) of the Act for ignoring the terms of the contract entered into between the parties. 3. Mr. Anirban Bose, learned counsel appearing for the petitioner (respondent before the learned Arbitrator) submits that the dispute between the parties relates to the termination of the agreement dated 2nd May, 2008 and contends that the Award should be set aside under Section 28(3) of the Act for ignoring the terms of the contract entered into between the parties. Counsel relies on Clause 30 of the agreement which provides that any party can terminate the agreement but must give to the other party 30 days' advance written notice of its intention to terminate and the agreement shall stand terminated only after expiry of the period of notice. Counsel submits that while deciding the question of validity of the termination, which was held in favour of the respondent herein, the Arbitrator only considered two letters dated 10th September, 2008 and 7th October, 2008 but did not consider the effect of Clause 30 of the agreement. Counsel submits that the agreement was terminated with effect from 14th September, 2008 while the letter of termination was of 10th September, 2008, which is in violation of Clause 30 and the subsequent letter of the respondent of 7th October, 2008 was only to guard the deficiency of the initial termination notice of 10th September, 2008. Counsel relies on ONGC Limited Vs. Saw Pipes Limited, (2003) 5 SCC 705 which held that the Arbitral Tribunal has to follow the procedure prescribed under the Act in the absence of which an Award would be patently illegal and liable to be set aside. Counsel also relies on State of Jharkhand Vs. HSS Integrated SDN, (2019) 9 SCC 798 which held that an Award can be interfered with if the findings are perverse or contrary to the evidence and against the public policy of India. 4. Mr. Anirban Ray, learned counsel appearing for the respondent (claimant before Arbitrator) submits that the Award primarily proceeds on the basis that the petitioner accepted the termination of the agreement dated 2nd May, 2008. The learned Arbitrator came to such finding on the basis of the correspondences exchanged between the parties which would be evident from paragraphs 15 and 16 of the Award which records that there was no denial of the termination of the agreement by the petitioner herein and that the petitioner had not only accepted the termination but had also acted thereon. Counsel submits that the Arbitrator had allowed the claims of the respondent primarily on the ground that the petitioner herein did not cross-examine the witness of the respondent and accordingly proceeded on the basis that no case had been made out contrary to the evidence of the respondent. Counsel urges that the Arbitrator did not allow all the claims of the respondent and rejected the counter-claim of the petitioner since no evidence had been led by the petitioner. The manner in which the Arbitrator has directed adjustment of the security deposit which was lying with the respondent shows that the Arbitrator had considered the rival claims of the parties in detail. Counsel relies on Associate Builders Vs. Delhi Development Authority, (2015) 3 SCC 49 , for the proposition that the Arbitrator has the final word on evidence and unless the consideration of such evidence is found to be perverse, an Award should not be interfered with. Counsel relies on A.E.G Carapiet Vs. A.Y. Derderian, (1961) AIR Calcutta 359 for the proposition that wherever the opponent has declined to avail himself of the opportunity of putting his essential and material case in cross-examination, it would follow that the opponent believed that the testimony given could not be disputed at all. Counsel relies on Jahuri Sah Vs. Dwarika Prasad Jhunjhunwala, (1967) AIR SC 109 which refers to Order VIII Rule 5 of The Code of Civil Procedure which provides that every allegation of fact in the complaint if not denied specifically or by necessary implication in the pleading of the defendant shall be taken to be admitted. 5. Upon considering the impugned Award and the submissions of learned counsel, this Court is unable to accept the contention that the Award is liable to be set aside under section 28(3) of the Act, namely that the learned Arbitrator has veered away from the terms of the contract. The first point for consideration is that the Arbitrator records that although the petitioner (respondent in the arbitration) filed its affidavit of evidence, it chose not to appear after the first few sittings and remained unrepresented despite being put on notice by the respondent/claimant. The first point for consideration is that the Arbitrator records that although the petitioner (respondent in the arbitration) filed its affidavit of evidence, it chose not to appear after the first few sittings and remained unrepresented despite being put on notice by the respondent/claimant. The dispute centres around Clause 30 of the Agreement dated 2nd May, 2008 which provides that either party may terminate the agreement by giving 30 days' written notice of its intention to do so to the other party and the agreement will be terminated on the expiry of the period of notice. The letter of termination dated 10th September, 2008 sent by the respondent with reference to the agreement was intended to take effect from 15th September, 2008. This letter, sent in duplicate, was signed by the petitioner on 12th September, 2008 and returned with the handwritten endorsement "subject to further discussion". The petitioner's reply dated 13th September, 2008 against the termination letter, records the petitioner's displeasure at the abrupt termination but does not dispute the termination. The petitioner's second letter dated 30th September, 2008 refers to the two agreements in relation to the Byculla and Turbhe warehouses in Mumbai and the failure of the respondent to initiate a dialogue in this regard but again does not dispute the termination for the lack of a notice period or otherwise. The petitioner in fact requested for adjustment for 6 months for the two warehouses and enclosed bills to that effect. This was followed by a clarification dated 7th October, 2008 issued by the respondent referring to clause 30 of the agreement and stating that the 30 days' notice period would expire on 11th October, 2008. The petitioner was asked to deliver the goods in its custody under clause 31 of the agreement. This was replied to by the petitioner by its letter dated 10th October, 2008 referring to the notice period under clause 30 for the first time but reiterating the issue of the bills. The last stage of correspondence is the exchange of legal notices between the parties, by their respective lawyers. 6. The relevant point is that even if the initial letter of termination dated 10th September, 2008 gave a shorter time than the notice period prescribed under clause 30, this was cured by the subsequent letter of 7th October 2008. The last stage of correspondence is the exchange of legal notices between the parties, by their respective lawyers. 6. The relevant point is that even if the initial letter of termination dated 10th September, 2008 gave a shorter time than the notice period prescribed under clause 30, this was cured by the subsequent letter of 7th October 2008. Even otherwise, the respondent did not take any steps to give effect to the termination before the expiration of the period of 30 days which would be evident from the letter of 7th October, 2008. Moreover, the petitioner nowhere disputed the termination as being contrary to the requirements of clause 30 until 10th October, 2008 while responding to the clarification of the respondent. It is clear from the Award that the Arbitrator took these factors into account together with the fact that the petitioner had accepted and acted upon the termination and more significantly that the petitioner had not led any evidence on its affidavit for the purpose of cross examination of its witness or the witness of the respondent. The counter-claim of the petitioner was disallowed on this basis. The Learned Arbitrator dealt with each claim of the respondent with specific reasons for allowing/ disallowing such claim. 7. The reliance on Associate Builders for reinforcing that the Arbitrator is the last word on facts becomes relevant when considering the findings of the Arbitrator on the correspondence exchanged between the parties with reference to the termination of the Agreement dated 2nd May 2008, particularly the finding that the petitioner had not only accepted but had acted upon the termination. A.E.G. Carapiet and Jahuri Sah are relevant on the point of the arbitrator's finding that the petitioner chose not to lead oral evidence corroborating the statements made in the affidavit of evidence or produce his witness for crossexamination and also did not cross-examine the witness of the respondent/claimant, in respect of the money claim of the petitioner. Both the decisions are an extension of the principle of Order VIII Rule 5 ('Specific Denial') of The Code of Civil Procedure and lay down the circumstances when an opponent will be taken to accept the evidence led by the other party; in other words, non-denial of an allegation of fact would presume admission of that fact. Both the decisions are an extension of the principle of Order VIII Rule 5 ('Specific Denial') of The Code of Civil Procedure and lay down the circumstances when an opponent will be taken to accept the evidence led by the other party; in other words, non-denial of an allegation of fact would presume admission of that fact. On the other hand, the reliance placed on ONGC vs Saw Pipes will have to be seen in the context of the later pronouncement of the law in Associate Builders with reference to section 28 of the Act and would have been relevant if the Arbitrator had made a conscious departure from the terms of the contract, which is not the case here. It is settled law that interpretation of the terms of the contract is within the domain of the Arbitrator. With reference to HSS Integrated SDN, the proposition of law that an Award can only be interfered with if found to be perverse or contrary to the evidence or against public policy, cannot be called to question. This decision would have been of assistance to the petitioner if the findings of the Arbitrator had been perverse or contrary to the evidence before him. 8. An issue in the impugned Award should however be clarified. In paragraph 16, the Arbitrator has referred to several letters exchanged between the petitioner and the respondent on the issue of termination. Although the arbitrator has mentioned the agreement dated 2nd May, 2008 as the disputed issue between the parties in the very first paragraph of the Award, the letters referred to elsewhere in the Award mention an agreement dated 16th May, 2007. It may be clarified that there were two agreements of 2nd May, 2008 and 16th May, 2007 executed between the respondent (claimant) and the petitioner in respect of two warehouses located at Byculla and Turbhe (both in Mumbai) respectively and incorporating identical terms including the termination clause. There are several letters exchanged between the parties including of 23rd September 2008, 30th September 2008, 10th October 2008 as well as Reimbursement and other Bills raised by the petitioner together with the reply of 15th October, 2008 by the respondent's lawyer and an order passed by a learned Single Judge of this Court on 10th November, 2008 which collectively show that the dispute between the parties arose out of both the agreements. Therefore, the letters referring to the agreement dated 16th May, 2007 relied upon by the Arbitrator may be interchangeably used for the agreement of 2nd May, 2008. 9. With regard to the issue of the respondent not complying with the requirement of 30 days' advance written notice as stipulated under Clause 30 of the agreement dated 2nd May, 2008, despite the persuasive argument of counsel for the petitioner, the finding of the Arbitrator that the termination was unequivocally accepted by the petitioner cannot be viewed as perverse. This is because the Arbitrator has referred to a letter dated 23rd September, 2008 and further that the initial letter of termination dated 10th September, 2008 was clarified by a subsequent letter dated 7th October, 2008 issued by the respondent. The conclusion of the Arbitrator that the petitioner accepted and acted upon the termination was based on evidence and cannot be said to be arbitrary or capricious or one that should be set aside as perverse. 10. In view of the reasons stated above, the impugned Award dated 15th March, 2015 cannot be said to be one which would call for interference under any of the grounds available under section 34 of the Act. A.P. No. 935 of 2013 is accordingly dismissed without any order as to costs. Urgent Photostat certified copy of this Judgment, if applied for, be supplied to the parties upon compliance of all requisite formalities.