The Delhi High Court reprised the grounds for invalidating an award under Section 34 of the Arbitration and Conciliation Act, 1996. Hon'ble Ms. Justice Neena Bansal Krishna outlined that an award could be invalidated if it violated the fundamental policy of Indian law, the interest of India, justice or morality, or resulted in patent illegality.
Brief Facts:
The Petitioner, a Public Sector Undertaking working under the Ministry of Railways, was the Respondent before the Arbitrator. A Tender Notice was issued to allocate a licence for operating Food Plazas at the CST Station in Mumbai. The Respondent, who was the claimant before the Arbitrator, became the highest bidder and was awarded the licence for the Food Plazas.
Thereafter, the Respondent requested permission from the Petitioner to sub-license 75% of the designated premises to M/s Kishore H Caterers, which was granted. However the respondent informed the petitioner that an unauthorised third party named M/s B. Rajasaheb had taken possession of the remaining 25% of the Food Plaza and sought the petitioner's help in resolving the issue. The petitioner promptly took action by filing a complaint with the Railway Police Force (hereinafter referred to as “RPF”) and the Government Railway Police (hereinafter referred to as “GRP”).
The Tribunal concluded that the termination of the licence on 04.08.2014 was illegal and arbitrary. The petitioner objected to the award by filing a petition under Section 34 of the Arbitration and Conciliation Act (hereinafter referred to as “AC Act”).
Contentions of the Petitioners:
It was submitted that the Respondent had breached Clause 6.3 of the General Conditions of License by entering into an Agreement/MoU for sub-licensing the premises of the Food Plaza to M/s B Rajasaheb without prior permission.
It was contended that the sole arbitrator erred by granting damages despite the limited scope of reference, which only concerned the validity of the Termination Order. Since the Respondent had not challenged the terms of reference, their right to claim loss of profits or damages was waived under Section 4 of the AC Act. Moreover, the damages were awarded without any evidence and contrary to the specific terms of the Contract.
Further, it was argued that the Award dated contravened Sections 4, 8, 22, and 23 of the Indian Partnership Act, 1932.
Contentions of the Respondents:
It was contended that the grounds raised by the petitioner did not fall within the scope of Section 34 of the AC Act..
It was argued that the Petitioner failed to specify the provisions of the Contract Act that were allegedly ignored by the Sole Arbitrator in the Award, making their contention obscure and untenable. The Arbitrator used the Department formula for fixing the licence fee based on estimated turnover, which is in line with the catering policy and permitted under Section 28(3) of the AC Act. The Arbitrator granted reasonable damage of 15% despite the industry norm of around 40% profit in the food industry.
Observations of the Court:
The Court referred to the Hon’ble Supreme Court’s opinion in MMTC Limited v. Vedanta Ltd, (2019) 4 SCC 163, where it was determined that the scope of a challenge under Section 34 of the AC Act, had been limited to the specific grounds mentioned in the Section. In ONGC v. Saw Pipes, 2003 (5) SCC 705, the Supreme Court established the parameters of Public Policy. According to this judgement, an award could be invalidated if it violated the 'fundamental policy of Indian law,' 'the interest of India,' 'Justice or morality,' or resulted in a 'Patent Illegality.' To align with the 'fundamental policy of Indian law,' the Tribunal was required to approach the award in a fair, reasonable, and objective manner. This ground necessitated the Arbitral Tribunal to issue a reasoned and evidence-supported award.
Based on the well-settled law under Section 34, the High Court examined whether the Award dated 08.03.2019 contravened substantive law. The parties had agreed to decide the claims based on documents and not lead to any further evidence. The alleged agreement was denied by the Respondent and considered a forged document. The Arbitral Tribunal evaluated the supplemental circumstances and concluded that the termination of the agreement was illegal and arbitrary. The Petitioner's contradictory stand in different proceedings and their failure to prove the agreement led the Arbitral Tribunal to reject their claims.
The decision of the Court:
The Delhi High Court accordingly based on the aforementioned findings dismissed the petition and upheld the Arbitration Award.
Case Title: Indian Railway Catering & Tourism Corp. Ltd. v M/S Goel & Goel
Case No.: Original Commercial Miscellaneous Petition No. 229 of 2021
Coram: Hon'ble Ms. Justice Neena Bansal Krishna
Advocates for Petitioner: Advs.Mr. Saurav Agrawal, Ms. Divya Hirawatz, Mr. Anshuman Chowdhary
Advocates for Respondent: Advs. Mr. S. Ravi Shankar, Ms. Meghna Mukherjee, Ms. Yamunah Nachiar
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