Delhi High Court
Global Fragrances Pvt. Ltd. & Anr. vs Reebok India Company on 21 November, 2016
$~22
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P. (COMM) 501/2016
GLOBAL FRAGRANCES PVT. LTD. & ANR. ..... Petitioners
Through: Mr S. S. Ray and Mr Vaibhav Gulia,
Advocates.
versus
REEBOK INDIA COMPANY ..... Respondent
Through: Mr Abhinav Vashisht, Senior
Advocate with Mr NIraj Singh and
Mr Akshay, Advocates.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
ORDER
% 21.11.2016
VIBHU BAKHRU, J
IA No.14338/2016
1. Allowed, subject to all just exceptions.
2. The application stands disposed of.
O.M.P. (COMM) 501/2016
3. The petitioners have filed the present petition under Section 34 of the
Arbitration and Conciliation Act, 1996 (hereafter „the Act‟), inter alia,
impugning an Award dated 06.08.2016 passed by Justice M. L. Mehta
(Retired), a former Judge of this Court.
4. The main objection urged by the learned counsel for the petitioners is
that the disputes adjudicated by the Arbitrator are not arbitrable. He pointed
out that certain disputes had arisen between the parties in respect of a
Manufacturing Agreement dated 02.07.2011 (Ex.CW/1/3 before the
Arbitrator); and, these disputes were resolved in terms of Memorandum of
Understanding dated 03.12.2012 (Ex.CW/1/5 before the Arbitrator and
hereafter referred to as 'the MoU'). He submits that in terms of the MoU, the
parties had agreed that it superseded all prior discussions and agreements
between the parties with respect to the subject matter of the MoU.
5. It was further recorded in the MoU recorded that all disputes that arise
out of the MoU would be submitted to the jurisdiction of the Courts at Delhi
alone to the exclusion of the other Courts. He contends that in view of this,
the arbitration clause included in the Agreement dated 02.07.2011 also
perished and, therefore, the Arbitrator had no jurisdiction to adjudicate the
disputes.
6. In my view, the aforesaid contentions cannot be entertained
principally for the reason that the Sole Arbitrator was appointed by an order
dated 18.03.2014 passed by this Court in Arb. P. No.93/2014. The said
order clearly records that the petitioners have no objection for such
appointment. Plainly, no objection as to the existence or the validity of the
arbitration agreement was urged by the petitioners at the material time and
the petitioners had consented to the appointment of the Sole Arbitrator.
7. It is also important to note that no such objection was taken by the
petitioners even in their Statement of Defence; at any rate, none has been
pointed out by the learned counsel for the petitioners. The learned counsel
for the respondent on the other hand has pointed out that in the Statement of
Defence, the petitioners had specifically pleaded that the petitioners also
intended to refer disputes to the arbitration. It is also a matter of record that
the petitioners had also preferred counter-claims before the Arbitrator and
thus cannot be now heard to state that the parties had not agreed to
resolution of the disputes by arbitration.
8. Insofar as other disputes are concerned, the same relate to the merits
of rival claims, which have been adjudicated by the Arbitrator. The
Arbitrator has examined the terms of the MoU as well as other evidence and
had concluded that the sums of `89,20,379/- and `50 lacs had been given as
advances to the petitioners which were duly acknowledged by the
petitioners. However, the petitioners had not supplied the goods against the
aforesaid advances in terms of the MoU. It was the petitioners' case that
although they had received the aforesaid sums, the same were not given as
advances but against goods manufactured and the respondent had failed to
receive such goods on account of paucity of space. The petitioners further
claimed that in addition to the above, they had also manufactured goods
worth `82 lacs.
9. The Arbitrator noted that the Managing Director of the petitioner no.
1 (RW1) had, inter alia, deposed that the petitioners had called upon the
respondent to pay the outstanding and take the delivery of goods from the
petitioners' factory, but the respondent had not paid the outstanding and
therefore the goods could not be supplied. RW1 had further also admitted
that the entire goods had not even been manufactured; that in terms of the
MoU the goods had to be delivered by the petitioners at the respondent's
warehouse; and the respondent was to make the final payment by the
seventh day of such delivery. The Arbitrator also found several
inconsistencies in the evidence of RW1. After evaluating and appreciating
the entire evidence, the Arbitrator concluded that neither sufficient raw
material was procured by the petitioners nor any goods were taken to the
respondent‟s warehouse for delivery. He, thus, held that the petitioners had
failed to deliver the goods to the respondent as per the MoU.
10. The learned counsel for the petitioners states that the aforesaid finding
are erroneous as the Arbitrator had not taken into account the petitioners‟ e-
mail dated 14.12.2012 since it was not proved as per law under Section 65B
of the Evidence Act, 1872. He further submits that the audit report of M/s
Ernst & Young placed before the Arbitrator also indicated that the goods
were lying in the premises as on 09.10.2012 but had not been considered as
the witness had not produced the original e-mail. He submits that such
hyper-technical view is opposed to the ethos of arbitration as strict rules of
evidence do not apply to arbitral proceedings.
11. In my view, the aforesaid contention is also wholly bereft of any
merit. First of all, the Arbitrator had examined the contents of the e-mail
dated 14.12.2012 and further noted that the said e-mail was also not put to
the respondent‟s witnesses in their cross-examination. The said e-mail was
evaluated in the context of the testimony of witnesses. After examining the
evidentiary value of the said e-mail, the Arbitrator had concluded that the
same did not indicate that the goods had, in fact, been supplied to the
respondent.
12. Similarly, the Arbitrator had also examined the report of M/s Ernst &
Young. It was the petitioners' case that the said report was an inspection
audit report of the goods lying in the premises of the petitioners. The said
report was disputed by the respondent as being fabricated, the report also did
not bear the seal or the stamp of any official of Ernst & Young. The
petitioners, on the other hand, claimed to have received the same by e-mail,
however, the petitioners‟ witness did not place that e-mail on record. Thus
there was no evidence indicating the authenticity of the said report. Further,
the petitioner‟s witness (RW1) had in his cross-examination deposed that he
did not remember whether the goods highlighted in the said report were ever
supplied to the respondent. In view of the aforesaid, the Arbitrator had
rejected the said report as not proved but had also observed that the said
report did not advance the case of the petitioners.
13. In my view, none of the findings can be said to be perverse or
unsubstantiated. It is trite law that the scope of interference in an arbitral
award is only limited to the grounds as specified under Section 34(2) of the
Act. The petitioners have sought to place their case within the scope of
Section 34(2)(b)(ii) of the Act; that is, the arbitral award is in conflict with
the public policy of India. In my view, no such ground has been made out.
The Arbitrator's findings that the petitioners had received advances from the
respondent and had not supplied the goods against such advances are
findings of fact that are based on appreciation of evidence. No interference
with those findings are warranted in these proceedings.
14. In Associate Builders v. Delhi Development Authority: (2015) 3
SCC 49, the Supreme Court has explained the above principle in the
following manner:
"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
score. Once it is found that the arbitrators approach is not
arbitrary or capricious, then he is the last word on facts."
15. In the aforesaid view, the present petition is without any merit and is
accordingly, dismissed.
VIBHU BAKHRU, J
NOVEMBER 21, 2016/MK
