Mitsui Chemicals India Pvt. Ltd. vs Kt Holidays Private Ltd & Anr
2014 Latest Caselaw 5701 Del

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*     IN THE HIGH COURT OF DELHI AT NEW DELHI

+     FAO 332/2014
                                     Decided on 12th November, 2014

      MITSUI CHEMICALS INDIA PVT. LTD.                    ..... Appellant
                         Through:    Mr. Siddharth Silwal, Mr. Vikas
                                     Dutta and Mr. Nikhil Varshney,
                                     Advs.

                         versus

      KT HOLIDAYS PRIVATE LTD & ANR                       ..... Respondents

                         Through:    Mr. Nikhil Rohatgi, Adv.

CORAM:
HON'BLE MR. JUSTICE A.K. PATHAK

A.K.PATHAK, J.(ORAL)

Caveat 950/2014

Since caveator has appeared caveat is discharged.

FAO 332/2014

1. Appellant hired three cars from the respondents pursuant to separate

contracts. One of the hired cars was „Toyota Camry‟ bearing registration

no. DL-1ZZ 0164, which was hired by the appellant for a period of three

years vide agreement dated 15th November, 2006. Respondents claimed that

„Toyota Camry‟ car was purchased by the respondents at the request of

appellant and was lent on hire. The other two cars, that is, Honda Accord

bearing registration no. DL 3 CAK 7431 and „Toyota Innova‟ bearing

registration no. DL 3CF 9333 were also hired by the appellant vide separate

agreements, but in the present Award only „Toyota Camry‟ car is involved.

2. Contract was terminated by the appellant prematurely, on the ground

that respondents had committed breach of contract. Respondents invoked

arbitration clause and the disputes were referred to Late Justice N.N.

Goswami (Retd.). After his death reference was assigned to Justice Manju

Goel (Retd.), who entered upon the reference and proceeded further from the

stage proceedings were left by the earlier Arbitrator. Learned Arbitrator has

held that contract was illegally terminated by the appellant, inasmuch as, no

breach was committed by the respondents. Certain amounts have been

awarded under different heads. However, the challenge in this appeal is

only with regard to damages awarded by the Arbitrator in favour of the

respondents and against the appellant to the tune of `2,19,868/- and the

interest thereon.

3. Appellant filed an application under Section 34 of the Arbitration &

Conciliation Act, 1996 (for short, hereinafter referred to as the „Act‟)

thereby challenging the Award dated 21st January, 2013 passed by the

learned Arbitrator. This application has been dismissed by the trial court by

the judgment impugned in this appeal.

4. It is trite law that objections under Section 34 of the Act cannot

partake status of Appeal. While adjudicating application under Section 34 of

the Act, Court has not to sift and weigh the evidence adduced before the

Arbitrator and substitute its findings as if hearing an appeal. The Award can

be interfered with only if grounds, as envisaged under Section 34 of the Act,

are attracted. In Delhi Development Authority vs. R.S. Sharma and Co.,

New Delhi, 152(2008) DLT 678 (SC) Supreme Court held thus:-

"12. From the above decisions, the following principles emerge:

(a) An Award, which is

(i) contrary to substantive provisions of law ; or

(ii) the provisions of the Arbitration and Conciliation Act, 1996 ; or

(iii) against the terms of the respective contract ; or

(iv) patently illegal, or

(v) prejudicial to the rights of the parties, is open to interference by the Court under Section 34(2) of the Act.

(b) Award could be set aside if it is contrary to :

(a) fundamental policy of Indian Law; or

(b) the interest of India; or

(c) justice or morality;

(c) The Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the Court.

(d) It is open to the Court to consider whether the Award is against the specific terms of contract and if so, interfere with it on the ground that it is patently illegal and opposed to the public policy of India."

5. In Godrej Agrovet Limited vs. Surya Soaps and Chemicals

MANU/DE/3584/2009, this Court has held thus:-

"The scope of interference by a court hearing objections under Section 34 is well settled. An award can only be interfered with if the same is illegal against the law of the land or against the contractual provisions or is so perverse that it shocks the judicial conscience. Only in such

limited cases, can an Award be interfered with. A Court hearing objections under Section 34 does not sit as an appellate court to re-apprise the evidence and further, this Court will not interfere with the view taken by an Arbitrator merely because another view is possible than the view taken by the Arbitrator. Once the view taken by the Arbitrator is one of the plausible views then this Court would not set aside the Award merely because this Court is of another view.

6. In Walchandnagar Industries Ltd. vs. Cement Corporation of India,

2012 (2) ARBLR 219 (Delhi) this court has held thus:

"An appellate court will only interfere with the findings and conclusions of a court below only if the findings and conclusions are wholly illegal or perverse. Merely because two views are possible, an appellate court will not substitute its findings and conclusions for the findings and conclusions of the court below."

7. In this case, learned counsel for the appellant has contended that

arbitral award is in conflict with the public policy of India, thus, is liable to

be set aside under Section 34(2)(b)(ii) of the Act. It is contended that

damages to the tune of `2,15,706/- have been awarded by way of penalty

that too without any evidence having been led by the respondents to prove

the alleged loss, thus, violates Section 74 of the Indian Contract Act, 1872.

It is contended that even if liquidated damages have been specifically

stipulated in the agreement still same cannot be awarded if it is by way of

penalty, without the claimant proving actual loss suffered by it on account of

breach of contract. Reliance has been placed on Vishal Engineers &

Builders vs. Indian Oil Corpn. Ltd. AIR 2012 (NOC) 165 (DEL.).

8. I have perused the Award and am not in agreement with the appellant

that the amount as awarded by the Arbitrator could not have been awarded.

As per the contract, 93 % of the remaining monthly charges until the

termination date were stipulated in case of pre-mature termination of

contract, which was for a period of three years. The relevant clause reads as

under :-

(iii) Period of contract: The car shall be rented out for a period starting from 25th November, 2006 & ending three (3) years after the rental for Camry commences and after such years the same can be extended on mutual agreement. Provided, however, that Appellant may terminate this contract during such three years by paying 93% of the remaining monthly charges until the termination date. Further, either party hereto may immediately terminate this contract in the event that the other party should breach any of the provisions hereof and should not correct such breach within seven (7) days from the

date of delivery to the other party of written notice demanding the rectification thereof.

9. Learned Arbitrator has not awarded the amount as stipulated in the

above clause instead has awarded reasonable damages. In Vishal Engineers

(supra), it has been held thus: "Section 73 of the Contract Act, thus,

contemplates award of damages for losses suffered by breach of contract by

the opposite party. Section 74 of the Contract Act stipulates that in case of

such a broken contract if a sum is named in the contract as the amount to be

paid in case of such breach, whether or not actual damage or loss is proved

to have been caused thereby, the aggrieved party is entitled to receive from

the opposite party who has broken the contract, a reasonable compensation

not exceeding the amount so named". It is, thus, clear that even in absence

of evidence regarding quantum of actual loss suffered, a reasonable

compensation not exceeding the amount named in the contract can still be

awarded. Learned Arbitrator has considered Sections 73 and 74 of the

Contract Act and has declined to award 93% of the charges for the

remaining period of contract amounting to `10,43,546/- as claimed by the

respondent; instead has awarded only `2,15,706/-. Relevant paras of the

Award read as under :-

"26. The termination was caused in the last days of May, 2009. Hence for the period upto 20.5.2009, charges are payable as per contract. For the month of May, 2009, the claimants‟ bill is for `85,706/- (including taxes). If the claimants are paid for the next two months in addition to usual charges for May, 2009, the compensation would be reasonable and sufficient.

27. The bill for user of the vehicle in June, 2009 to July, 2009 was `65,000/- per month. The taxes were not recoverable as no service was provided. For June and July, the amount that the claimants would have earned thus would be `1,30,000/-. Thus, the amount of compensation to be awarded amounts to `1,30,000/- + `85,706/- = `2,15,706/-. Keeping in view of the bank rate for the period in question, it will be sufficient to award interest @ 12% p.a. Hence till the date of the award the total compensation payable is estimated at `3,00,000/-. Interest at the same rate is payable till recovery on the awarded amount viz. `2,15,706/-."

10. The approach adopted by the learned arbitrator cannot be said to be

contrary to law or against the public policy of India nor the same can be

termed as so absurd so as to shock the conscience of the court.

11. In view of above discussions, appeal is dismissed. Miscellaneous

applications are disposed of as infructuous.

A.K. PATHAK, J.

NOVEMBER 12, 2014/ga