Full Judgment Text
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* IN THE HIGH COURT OF DELHI AT NEW DELHI5
th
Judgement Reserved on: 30 April, 2019
rd
Judgement pronounced on: 03 May,2019
+ FAO(OS) 244/2015
PCLIT SOLUTIONS PVT. LTD. ....Appellant
Through: Ms. Rishi Mittal, Advocate
versus
MTECH SOLUTIONS ....Respondent
Through: Mr. Avneesh Garg and Mr.M.P.Singh
Advocates
CORAM:
HON'BLE MR. JUSTICE G.S. SISTANI
HON'BLE MS. JUSTICE SANGITA DHINGRA SEHGAL
SANGITA DHINGRA SEHGAL, J
1. This is an appeal filed by the appellant under Section 37 of the
Arbitration and Conciliation Act, 1996 (hereinafter referred to
as ‘the Act’) read with Section 10 of the Delhi High Court
Rules against the order dated 31.10.2014 passed by the learned
Single Judge in OMP No. 647/2013 by which the objections
filed by the appellant to the award dated 22.08.2012 passed by
the Sole Arbitrator stand rejected.
2. Before the rival submissions of the learned Counsel appearing
for the parties can be considered, we deem it appropriate to set
out the basic facts which led to the dispute between the parties.
3. The brief facts leading to the filing of the present appeal are that
the appellant/ PCLIT SOLUTIONS PVT. LTD., who is in the
FAO(OS) 244/2015 Page 1 of 16
business of leasing out facilities and services to call centre
industry, entered into a Campaign Services Agreement
(hereinafter referred as ‘CSA) dated 01.11.2006 with the
respondent/MTECH SOLUTIONS, a proprietorship concern
operating as a BPO(Call Centre) and conducting IT enabled
services As per the agreement, the respondent took on lease the
entire floor of the premises of the appellant situated at Plot
No.21, Electronic City, Sector-18, Gurgaon with 166 calling
seats, offices and training room. As per the appellant, the
respondent was required to pay $31800 as security deposit
under CSA, i.e. $24000 for seats and $7800 for
PSTN(telephone calling minutes), but paid the respondent only
$25550 as security deposit and requested the appellant to adjust
the security deposit against the previous CSA dated 06.09.2006.
Appellant started providing the services as per CSA to the
respondent from 01.11.2006 but the agreement was terminated
on 21.11.2006 when the respondent approached the appellant
requesting to terminate the same as they desired to enter into a
similar agreement with another entity. Subsequently on
21.11.2006 after termination of the said agreement dated
01.11.2006 an arrangement in the form of “second
memorandum of understanding” was reached between the
parties as per which the respondent was to have a separate
agreement with the another entity (i.e.MS Technocall) in
reference to the transfer of security deposit. The respondent,
thereafter, approached the appellant to refund the security
FAO(OS) 244/2015 Page 2 of 16
deposit amounting to $31800, which the appellant denied and
disputes arose between the parties which were referred to a sole
Arbitrator, the Award dated 22.08.2012 was passed in favour of
the respondent whereby the appellant was directed to refund the
security amount along with the interest @ 12% including the
cost of litigation, to the respondent. The appellant approached
the learned Single Judge under Section 34 of the Act
challenging the said award but the same was dismissed. Hence
the present appeal.
4. Ms. Risha Mittal, learned counsel for the appellant contends that
the learned single judge had erred in passing the impugned
order dated 31.10.2014 as the terms of the agreement agreed
between the parties are clear and unambiguous and the award
passed by the sole Arbitrator is against the public policy of
India; that there was no obligation on the appellant to refund the
security deposit to the respondent; that soon after termination of
the agreement after providing the services as per CSA for 20
days to the respondent, it was agreed between the parties that
the security deposit furnished by the respondent will be adjusted
towards the services provided; that the “Second Memorandum
of Understanding(MoU)/Tripartite Agreement” as alleged to be
entered into by the parties after the termination of the first
agreement was in reference to bring an end to the agreement
dated 01.11.2006 and the security deposit stood transferred to
M.S. Technocall; that the award passed by the learned arbitrator
is arbitrary and capricious; that considering certain contentions
of the appellant as admission was wrongly interpreted by the
arbitrator; that the onus of proving that no services were
FAO(OS) 244/2015 Page 3 of 16
provided by the appellant herein lies on the respondent; that the
finding of the learned arbitrator is based on conjectures and
surmises; that the said award dated 22.08.2012 as well as the
order dated 31.11.2014 being in contravention to law is liable to
be set aside. In order to substantiate the argument, learned
counsel relied on the case of Associate Builders v. Delhi
Development Authority reported in (2015) 3 SCC 49 , Oil &
Natural Gas Corporation Ltd. v. Saw Pipes Ltd reported in
(2005) 5 SCC 705 , Delhi Development Authority v. M/S R. S.
Sharma & Co. reported in 2008 (11) SCALE.
5. The learned counsel appearing for the respondent submits that
the learned Arbitrator has interpreted the agreement in its right
perspective, examined the evidence and rendered the award,
which has been rightly upheld by the learned Single Judge. He
contends that no grounds have been urged by the learned
Counsel for the appellant, which would call for interference in
the present proceedings. The scope of interference, while
hearing an appeal under section 37 of the Act is even narrower
and placed reliance in the case of P.C.L Suncon (JV) v
N.H.A.I.,2015 SCC Online Del 13192 , State Trading
Corporation of India Ltd. v. Toepfer International Asia Pte.
Ltd. reported at 2014(144) DRJ 220(DB), J.G. Engineers (P)
Ltd. v. Union of India , reported at (2011) 5 SCC 758.
6. We have heard the learned Counsels for the parties and
considered their rival submissions.
7. The main issue which arose between the parties was with
respect to the security amount which the respondent claimed to
FAO(OS) 244/2015 Page 4 of 16
have deposited with the appellant as per CSA and further
claimed its refund after the termination of the agreement.
8. The claim petition was filed by the claimant/MTECH
Solutions/respondent before the learned Arbitrator and the
learned arbitrator after examining the facts and the evidences on
record gave its findings, vide award dated 22.08.2012. The
learned Arbitrator disapproved the testimonies/evidence led by
the appellant on the ground that the same were not supported by
any documentary evidence and considered the oral evidence as
only hearsay with no evidentiary value. It was concluded by the
learned arbitrator that the security deposit of USD 31,800 was
paid by the respondent to the appellant by wire transfer as well
as by adjustment of security deposit under the earlier agreement
which was refundable and held as under:
“Thus the position that emerges from the pleadings
is as under:- the claimant says that the security
deposit of USD 31,800 was paid by wire remittance
of USD 25550 and by adjustment of USD 6250 which
remained unused in the previous agreement. The
respondent says that only some amount was paid
when the agreement was signed and there was a
request for adjustment of previous security deposit.
Thus, the difference between the two versions, as
per pleadings is very narrow or almost nil. The
respondent does not plead that no adjustment of
previous security deposit was made. Nor does the
respondent plead what amount was paid by the
claimant when the agreement of 1.11.2006(exhibit
CW1/3) was entered into. Such vague denial can be
interpreted as admission . ”
FAO(OS) 244/2015 Page 5 of 16
9. The Award dated 22.08.2017, was thereafter challenged before
the learned Single Judge, and the learned Single Judge while
acting within the scope of Section 34 of the Act found that none
of the ingredients under Section 34 which are necessary to set
aside the award of the Tribunal were fulfilled. Based on the
finding given by the learned arbitrator, the learned Single Judge
passed a detailed order and upheld the award in terms of CSA
agreement and observed that the refund of security amount is to
be initiated as per clause 4.5 of the said agreement. The learned
Single Judge also examined the evidence produced on record
and was convinced by the explanation adduced by the learned
Arbitrator while acting within its scope of Section 34 of the Act.
10. Learned counsel for the appellant contended that it was agreed
between the parties that the security deposit will be adjusted
towards the services rendered by the appellant and there was no
admission on the part of the appellant to refund the security
deposit. In this context, we find from the record that after
framing of the issues, the Arbitrator took note of clause 4.5 of
Campaign Service Agreement dated 01.11.2006 entered into
between the parties wherein, the security deposit required to be
deposited by the respondent in pursuance of the service
provided by the appellant has been mentioned. Relevant portion
of the clause 4.5 of Campaign Service Agreement dated
01.11.2006 is reproduced as under:-
“4.5 Client shall deposit and keep deposited with call
centre the sum stated in Exhibit ‘B’ hereto as interest
FAO(OS) 244/2015 Page 6 of 16
free (refundable/adjustable against the last invoice)
security deposit (the security Deposit) for blocking
services as per Exhibit ‘A’ clause 1.1 (a) billable
seats with pro-rata increase, should the seats be
increased beyond such seats, for due performance
and fulfilment client of its obligations.
11. We also deem it appropriate to reproduce Clause 3 of the
Second Memorandum of Understanding dated 01.11.2006
which was disputed by the appellant being executed between by
the parties. Relevant portion of the same reads as under:-
“(3)Seat deposit amount of $6,250, as envisaged in
Agreement (1.a), was merged into the required
deposits in Agreement (1.b) Additional amount of
$25,550 was wired to complete the required deposit
amount of $ 31,800 of Agreement (1.b). Now this
amount of $ 31,800 becomes due from PCLIT
solutions to MTECH Solutions .”
12. From the perusal of the clause 4.5 of Campaign Service
Agreement dated 01.11.2006 we find that the security deposit
was interest free, refundable and could be adjusted against any
other transaction. Learned Arbitrator also took note of the
aforesaid clause alongwith the evidence adduced by him and
observed that the ‘ security deposit was refundable .’ Evidence
of CW-2 Mangilal, husband of the proprietor Parvati Devi is
vital in this regard. CW-2 deposed that USD 6,250 was
adjusted from the previous agreement and USD 25,550.00 was
paid by wire transfer on 09.11.2006 . Record reveals that no
documentary evidence has been placed on record by the
FAO(OS) 244/2015 Page 7 of 16
appellant to substantiate that security amount was not
refundable. Further the e-mail CW2/X-1 sent by the claimant to
the appellant alongwith the draft of second Memorandum of
Understanding, which was not signed by the parties, was
indicative of the fact that there was an outstanding amount of
USD 31,800. Further in reply to the claim petition, appellant
took a stand that ‘the claimant after signing the agreement
dated 01.11.2006 only paid some money in respect of security
deposit and requested the respondent to adjust the previous
security deposit in the present agreement. ” By way of reply to
the claim petition, the appellant had admitted that some amount
was paid by the claimant to the appellant towards security
deposit.
13. Learned counsel for the appellant further contended that as he
had provided 20 days service as per CSA to the respondent and
the agreement was entered only on 20.11.2006, therefore he is
entitled to the amount for the services rendered under CSA. In
this connection, from the record, we find the appellant did not
produce any documentary evidence to prove that services were
provided till 20.11.2016 under CSA to the respondent. It was
observed by the learned Arbitrator that “Sh. Sethi says that his
“account people” would know the exact amount payable for 20
days of service provided under the agreement dated 1.11.2006.
This suggests that the respondent maintained accounts and
there were regular employees for keeping such record or
accounts. The respondent therefore could produce its account to
FAO(OS) 244/2015 Page 8 of 16
prove what services were provided and how much was due from
the claimant on that account.”. It was further revealed from the
testimony of CW-2 Mangilal that due to internal problems no
services were provided by the appellant to the claimant and
deposed that due to internal problem, unknown to the claimant
the respondent could not provide any service to the claimant as
agreed to by the respondent under CSA dated 01.11.2016. The
view taken by the learned Arbitrator was avowed by the learned
Single Judge observing that the non-claimant failed to produce
on record any document to support his claim that the appellant
had provided 20 days service as per CSA to the respondent.
14. The entire findings of the learned arbitrator was based on the
evidence(s) of the witnesses during the arbitral proceedings and
the arbitrator has given an elaborative reasoning to elucidate the
stand taken by the respondent in its claim. After perusal of the
previous findings of the court in the present case as well as the
appeal herein, it is apparent from clause 4.5 of CSA and the
evidence adduced that the amount of $25550 was paid via bank
transfer by the respondent to the appellant and only amount of
$5250 was to be adjusted from the previous CSA dated
06.09.2006. It is further apparent from record that security
deposit was interest free, refundable and can be adjusted against
any other transaction.
15. The position of law stands crystallized today, that findings, of
fact as well as of law, of the arbitrator/Arbitral Tribunal are
ordinarily not amenable to interference either under Sections 34
FAO(OS) 244/2015 Page 9 of 16
or Section 37 of the Act. The scope of interference is only
where the finding of the tribunal is either contrary to the terms
of the contract between the parties, or, ex facie, perverse, that
interference, by this Court, is absolutely necessary. The
Arbitrator/ Tribunal is the final arbitrator on facts as well as in
law, and even errors, factual or legal, which stop short of
perversity, do not merit interference under Sections 34 or 37 of
the Act. The Hon’ble Supreme Court in the case of P.C.L
Suncon (JV) v N.H.A.I.,2015 SCC Online Del 13192 , in para
24 stated that:
“24. As a postscript, this Court believes that it is
imperative to sound a word of caution.
Notwithstanding the considerable jurisprudence
advising the Courts to remain circumspect in denying
the enforcement of arbitral awards, interference with
the awards challenged in the petitions before them
has become a matter of routine, imperceptibly but
surely erasing the distinction between arbitral
tribunals and courts. Section 34 jurisdiction calls for
judicial restraint and an awareness that the process
is removed from appellate review. Arbitration as a
form of alternate dispute resolution, running parallel
to the judicial system, attempts to avoid the prolix
and lengthy process of the courts and presupposes
parties consciously agreeing to submit a potential
dispute to arbitration with the object of actively
avoiding a confrontation in the precincts of the
judicial system. If a court is allowed to review the
decision of the arbitral tribunal on the law or on the
merits, the speed and, above all, the efficacy of the
arbitral process is lost.”
FAO(OS) 244/2015 Page 10 of 16
16. The scope of judicial scrutiny and interference by an appellate
court under Section 37 of the Act is even more restricted. The
Hon’ble Supreme Court in the case of McDermott
International Inc. v. Burn Standard Co. Ltd. and Ors,
(2006)11SCC181 held as under:
"52. The 1996 Act makes provision for the
supervisory role of courts, for the review of the
arbitral award only to ensure fairness. Intervention of
the court is envisaged in few circumstances only, like,
in case of fraud or bias by the arbitrators, violation of
natural justice, etc. The court cannot correct errors
of the arbitrators. It can only quash the award
leaving the parties free to begin the arbitration
again if it is desired . So, scheme of the provision aims
at keeping the supervisory role of the court at
minimum level and this can be justified as parties to
the agreement make a conscious decision to exclude
the court's jurisdiction by opting for arbitration as
they prefer the expediency and finality offered by it."
17. It has been repeatedly held that while entertaining appeals under
Section 37 of the Act, the Court is not actually sitting as a Court
of appeal over the award of the Arbitral Tribunal and therefore,
the Court would not re-appreciate or re-assess the evidence. In
the case of State Trading Corporation of India Ltd. v. Toepfer
International Asia Pte. Ltd , reported at 2014(144) DRJ
220(DB), in para 16 it has been held as under:
“16. The senior counsel for the respondent has in this
regard rightly argued that the scope of appeal under
Section 37 is even more restricted. It has been so held by
the Division Benches of this Court in Thyssen Krupp
Werkstoffe Vs. Steel Authority of India and Shree
Vinayaka Cement Clearing Agency Vs. Cement
Corporation of India 147 (2007) DLT 385. It is also the
FAO(OS) 244/2015 Page 11 of 16
contention of the senior counsel for the respondent that
the argument made by the appellant before the learned
Single Judge and being made before this Court, that the
particular clause in the contract is a contract of
indemnification, was not even raised before the Arbitral
Tribunal and did not form the ground in the OMP filed
under Section 34 of the Act and was raised for the first
time in the arguments.”
18. In the case of Steel Authority of India v. Gupta Brothers Steel
Tubes Limited , reported in (2009) 10 SCC 63 , the Supreme
Court has laid down that an error relatable to interpretations of
the contract by an Arbitrator is an error within his jurisdiction
and such error is not amenable to correction by Courts as such
error is not an error on the face of the award. The Supreme
Court has further laid down that the Arbitrator having been
made the final arbitraror of resolution of disputes between the
parties, the award is not open to challenge on the ground that
the Arbitrator has reached a wrong conclusion. The courts do
not interfere with the conclusion of the Arbitrator even with
regard to the construction of contract, if it is a plausible view of
the matter.
19. The Apex Court in J.G. Engineers (P) Ltd. v. Union of India ,
reported at (2011) 5 SCC 758 , demarcated the boundary while
explaining the ambit of section 34(2) of the Act. The Court in
the aforesaid judgement relied upon the pronouncement of
ONGC Ltd. Vs. Saw Pipes , in paragraph 19 , held as under:-
“27. Interpreting the said provisions, this Court in
ONGC Ltd. v. Saw Pipes Ltd.(2003) 5 SCC 705] held
that a court can set aside an award Under Section
34(2)(b)(ii) of the Act, as being in conflict with the
FAO(OS) 244/2015 Page 12 of 16
public policy of India, if it is (a) contrary to the
fundamental policy of Indian law; or (b) contrary to
the interests of India; or (c) contrary to justice or
morality; or
(d) patently illegal. This Court explained that to hold
an award to be opposed to public policy, the patent
illegality should go to the very root of the matter and
not a trivial illegality. It is also observed that an
award could be set aside if it is so unfair and
unreasonable that it shocks the conscience of the
court, as then it would be opposed to public policy.”
20. In Associate Builders vs. Delhi Development Authority,
reported at (2015) 3 SCC 49 , the Supreme Court while further
explaining the scope of judicial intervention under the appeal in
the Act held as under:-
“It must clearly be understood that when a court
is applying the "public policy" test to an
arbitration award, it does not act as a court of
appeal and consequently errors of fact cannot be
corrected. A possible view by the arbitrator on
facts has necessarily to pass muster as the
arbitrator is the ultimate master of the quantity
and quality of evidence to be relied upon when he
delivers his arbitral award. Thus an award based
on little evidence or on evidence which does not
measure up in quality to a trained legal mind
would not be held to be invalid on this score1.
Once it is found that the arbitrators approach is
not arbitrary or capricious, then he is the last
word on facts. In P.R. Shah, Shares and Stock
Brokers (P) Ltd. v. B.H.H. Securities (P) Ltd.
(2012) 1 SCC 594, this Court held:
21. A court does not sit in appeal over the award
of an Arbitral Tribunal by reassessing or re-
appreciating the evidence. An award can be
challenged only under the grounds mentioned in
Section 34(2) of the Act. The Arbitral Tribunal
has examined the facts and held that both the
FAO(OS) 244/2015 Page 13 of 16
second Respondent and the Appellant are liable.
The case as put forward by the first Respondent
has been accepted. Even the minority view was
that the second Respondent was liable as claimed
by the first Respondent, but the Appellant was not
liable only on the ground that the arbitrators
appointed by the Stock Exchange under Bye-law
248, in a claim against a non-member, had no
jurisdiction to decide a claim against another
member. The finding of the majority is that the
Appellant did the transaction in the name of the
second Respondent and is therefore, liable along
with the second Respondent. Therefore, in the
absence of any ground Under Section 34(2) of the
Act, it is not possible to re-examine the facts to
find out whether a different decision can be
arrived at.”
21. This Court, time and again has emphasized on the narrow scope
of section 37. In the case of MTNL Vs. Fujitshu India Private
Limited , reported at 2015 (2) ARBLR 332 (Delhi), the division
bench held as under:
“The law is settled that where the Arbitrator has
assessed the material and evidence placed before
him in detail, the court while considering the
objections under Section 34 of the said Act does
not sit as a court of appeal and is not expected to
re- appreciate the entire evidence and reassess the
case of the parties. The jurisdiction under section
34 is not appellate in nature and an award passed
by an Arbitrator cannot be set aside on the ground
that it was erroneous. It is not open to the court to
interfere with the award merely because in the
opinion of the court, another view is possible. The
duty of the court in these circumstances is to see
whether the view taken by the Arbitrator is a
plausible view on the facts, pleadings and evidence
before the Arbitrator. Even if on the assessment of
material, the court while considering the
FAO(OS) 244/2015 Page 14 of 16
objections under section 34 is of the view that
there are two views possible and the Arbitral
Tribunal has taken one of the possible views which
could have been taken on the material before it,
the court would be reluctant to interfere. The court
is not to substitute its view with the view of the
Arbitrator if the view taken by the Arbitrator is
reasonable and plausible Jhang Cooperative
Group Housing Society v. P.T Munshi Ram &
Associates Private limited: 202(2013) DLT 218.
The extent of judicial scrutiny under section 34 of
the Act is limited and scope of interference is
narrow. Under section 37, the extent of judicial
scrutiny and scope of interference is further
narrower. An appeal under section 37 is like a
second appeal, the first appeal being to the court
by way of objections under section 34. Where there
are concurrent findings of facts and law, first by
the Arbitral Tribunal which are then confirmed by
the court while dealing with objections under
section 34, in an appeal under section 37, the
Appellate Court would be very cautious and
reluctant to interfere in the findings returned in the
award by the Arbitral Tribunal and confirmed by
the court under section 34.”
22. In the case of Mahanagar Telephone Nigam Ltd. vs Finolex
Cables Limited FAO(OS) 227/2017 reported at
2017(166)DRJ1 , it was held as follows:-
“ It is apparent, therefore, that, while interference
by court, with arbitral awards, is of it being
injudicious, contrary to the law settled by the
Supreme limited and circumscribed, an award
which is patently illegal, on account Court, or
vitiated by an apparently untenable interpretation
of the terms of the contract, requires to be
eviscerated. In view thereof, the decision of the
ld. Single Judge that reasoning of the arbitral
award in this regard was based on no material
and was contrary to the contract, cannot be said
FAO(OS) 244/2015 Page 15 of 16
to be deserving of any interference at our hands
under Section 37 of the Act. In a pronouncement
reported at MTNL v. Fujitshu India Pvt. Ltd.
(FAO(OS) No. 63/2015), the Division Bench of
this court has held that "an appeal under Section
37 is like a second appeal, the first appeal being
to the court by way of objections under Section
34". Being in the nature of a second appeal, this
court would be hesitant to interfere, with the
decision of the learned Single Judge, unless it is
shown to be palpably erroneous on facts or in
law, or manifestly perverse.”
23. Having regard to the law laid down by this Court as well as the
Apex Court in number of decisions rendered and applying the
law laid down to the facts of the present case, we do not find
any merit in the appeal. Hence, we find no reason to interfere in
the impugned order passed by learned Single Judge under
Section 34(2) of the Arbitration and Conciliation Act, 1996.
Resultantly, the appeal is dismissed.
SANGITA DHINGRA SEHGAL, J.
G.S.SISTANI, J.
MAY 3, 2019
//gr
FAO(OS) 244/2015 Page 16 of 16