Percept D Pvt. Ltd. vs The Fashion Design Council Of ...
2009 Latest Caselaw 1513 Del

               * IN THE HIGH COURT OF DELHI AT NEW DELHI

                                                                        Date of Reserve: 13.4.2009
                                                                       Date of Order: April 20, 2009

OMP No. 280/2008
%                                                                                    20.4.2009

        Percept D' Pvt. Ltd.                           ... Petitioner
                         Through: Mr. Rishi Agarwala, Advocate
                         Mr. Ankit Shah & Ms. Rohna Hamid, Advocates

                   Versus


        The Fashion Design Council of India         ... Respondent
                       Through: Mr. Anurag Sharma, Advocate


JUSTICE SHIV NARAYAN DHINGRA

1. Whether reporters of local papers may be allowed to see the judgment?

2. To be referred to the reporter or not?

3. Whether judgment should be reported in Digest?

JUDGMENT

This application/petition has been made under Section 9 of the

Arbitration & Conciliation Act, 1996 by the petitioner submitting that the petitioner

was entitled to recover a sum of Rs.5,19,13,389/- from the respondent. The

respondent had no assets & valuables and therefore, in case, an award is passed in

favour of the petitioner by the Arbitral Tribunal there would be no means or method

to recover this amount from the respondent. The petitioner has prayed that the

Court should direct the respondent to deposit an amount of Rs.5,19,13,389/- with

this Court and restrain the respondent from withdrawing any amount from its bank

accounts. He also prayed that the respondent should be restrained from receiving

the above amount from its debtors and the debtors be directed to deposit the amount

with the Court.

2. A perusal of agreement relied upon by the petitioner shows that the

respondent is a registered society under the Societies Registration Act and

organizes fashion weeks/fashion events and works for promoting the interests of

fashion industry. By an agreement dated 5th December 2005 the petitioner was

appointed as sole and exclusive sales agent for "India Fashion Week" for two events

to be conducted annually in each of the calendar years 2006, 2007 & 2008. It

appears that the petitioner was to act as an agency to conduct "India Fashion Week"

as per the terms and conditions given in the agreement. A perusal of the covenants

would show that the petitioner was to secure sponsorship for the events and conduct

event on the basis of budget drawn up in consultation with the respondent. The

petitioner was to inform in writing to the respondent, four months prior to the date of

holding of the event, about the sponsorships and was to furnish two bank

guarantees to underwrite the payment of agreed sum to the respondent for each of

the two events to be held every year. The petitioner was to hold the event and

secure sponsorship within the proposed budget and in lieu of holding the event, the

petitioner was to pay certain sum to the respondent. The time schedule for holding

the event is also mentioned in the agreement.

3. It is contended by the petitioner that under the agreement petitioner

was to be paid the rights commission in terms of clause 1.9 being 10% of the rights'

income. The first event was to be organized from 5th April, 2006 to 9th April, 2006.

The petitioner contended that it worked for this event and secured sponsorships from

Zee TV, G4 Securities, ARY, Radio City, DHL Express, Sixt Rental Cars and

Securities Agencies apart from securing sponsorship from ITC and UB Group. The

petitioner was able to raise a total sponsorship of Rs.17 crores from ITC and Rs. 12

crore from Kingfisher. However, the deal of Kingfisher could not fructify since at the

time when the first event was to be held another event namely "Lakme Fashion

Week" was also proposed to be held and due to this second event, "India Fashion

Week" came under cloud. However, the petitioner in consultation with the

respondent, despite fierce competition undertook activities to make it successful.

After the second event from 5th to 9th September 2006, NOKIA, one of the sponsors,

decided to terminate the sponsorship with the respondent and started sponsoring

"Lakme Fashion Week". Due to this, the petitioner had to take some extra steps

which led to increase in the expenditure in respect of the events. The petitioner

described in detail what were the additional expenditure incurred by it and it is stated

that it incurred around Rs.244 lac of additional expenditure. The petitioner submitted

that this decision to incur additional expenditure was taken by both the parties to

improve the feasibility and status of the event of the respondent. However, the

petitioner in view of the conduct of the respondent was constrained to terminate the

agreement with the respondent and addressed letter dated 20.2.2007 to the

respondent. Since, the third event was around the corner, the petitioner of its own

withdrew its letter of 20th February, 2007 by writing a letter dated 1st March, 2007

and informed the respondent that the agreement between the parties shall remain

valid on certain terms and conditions. The respondent accepted the proposal given

by the petitioner. It is alleged that despite accepting the proposal of the petitioner

given in letter 1st March, 2007, the respondent abandoned the agreement by writing

letter dated 11th April, 2007 levying wrongful charges against the petitioner only to

avoid payment. The petitioner submitted that the petitioner was entitled to refund of

Rs. 2,40,86,064/- spent by the petitioner to bridge the gap between expenditure and

sponsorship amounts received while doing event in the year 2006 and the petitioner

was also entitled to receive a balance implementation fee of Rs.38,90,660/- and

commission to rights of Rs.1,15,92,996/- for the events to be held in the year 2007

and 2008. Thus, the petitioner claimed that it would be entitled to aggregate

damages for breach of contract to the tune of Rs.5,19,13,389/- and wanted this

Court to secure the petitioner by making the above prayers in the application under

Section 9.

4. The respondent's contention is that the petitioner failed to furnish the

bank guarantees within the specified time limits for the event in March, 2007. The

respondent had also sent letter dated 23rd October, 2006 reminding the petitioner

that it had failed to collect sufficient sponsorship to pay to the respondent the agreed

sum of Rs.75 lac for "India Fashion Week" event to be held between 5th April, 2006

and 9th April, 2006. The respondent clearly notified to the petitioner that respondent

might invoke the bank guarantee furnished by the petitioner in lieu of the first event.

Vide letter dated 29th August, 2006 the petitioner had sent bills of first event to the

respondent. The respondent had informed the petitioner it had exceeded the

amount mutually agreed upon between the parties while formulating the budget.

The additional costs, if any, allegedly incurred by the petitioner was incurred without

authority of the respondent and contrary to the contract between the parties. The

amount as claimed by the petitioner in the application under Section 9 was not at all

recoverable from the respondent. The application under Section 9 was liable to be

dismissed.

5. In order to claim relief under Section 9 of the Arbitration & Conciliation

Act, 1996 the petitioner has to show that the case of the petitioner was covered

within the scope of Section 9. There is no doubt that this Court could pass an

interim order to secure an amount in arbitration matter but such an order for securing

amount can be passed by the Court only where the amount payable can be worked

out with certainty and the petitioner has a good prima facie case. In the present

case, the petitioner during arbitration intends to seek damages from the respondent

for breach of contract and a claim that he had incurred extra expenditure on the

event and was entitled to reimbursement of extra expenditure. The contract

however, shows that the petitioner was to secure and generate sponsorship of its

own and was to pay to the respondent, a substantial amount after meeting the entire

expenses of the event and its own overheads and profits. The contract required

petitioner to give a bank guarantee to the respondent to ensure this payment.

Therefore, it cannot be said that prima facie petitioner had a case of recovery of

extra expenditure allegedly incurred by the petitioner. The agreement also shows

that if the expenditure on the event was to exceed the budget amount, then the

consent of both the parties was required where the amount exceeded more than

Rs.1 lac. No such consent letter has been placed on record by the petitioner despite

the fact that the budget, according to the petitioner, had increased by more than

Rs.2,40,00,000/.

6. Whether or not the petitioner was entitled to any amount is to be

decided by the Arbitrator. It is not appropriate for this Court to go beyond observing

that prima facie no ground was made out by the petitioner for securing this amount.

Suffice it to say that it is not a case where the Court should ask the respondent to

give security for the alleged damages which the petitioner is likely to claim before the

Arbitrator. I find no force in the application. The application is hereby dismissed.

April 20, 2009                                       SHIV NARAYAN DHINGRA, J.
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