Delhi High Court
Mohan Meakin Limited vs International Breweries (P) Ltd on 13 February, 2018
$~10
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 13th February, 2018
+ O.M.P. (COMM) 115/2017 & IA 14290/2017
MOHAN MEAKIN LIMITED ..... Petitioner
Through: Mr.Sandeep Sethi, Sr. Adv. and
Mr.Darpan Wadhwa, Sr. Adv. with Mr.P.K.Mittal,
Mr.Ashish, Advs.
versus
INTERNATIONAL BREWERIES (P) LTD ..... Respondent
Through: Ms.Suruchi Mittal, Mr.Abhishek
Gautam, Advs.
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
NAVIN CHAWLA, J. (Oral)
1. This petition under Section 34 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as the 'Act') has been
filed by the petitioner challenging the Arbitral Award dated 25th
February, 2017 passed by the Sole Arbitrator in the arbitration
proceedings titled Mohan Meakin Limited vs. International
Breweries (P) Ltd.
2. The disputes between the parties are in relation to the 'Contract
Brewing Agreement' dated 14th June, 2001. Some of the terms and
conditions of the contract that are relevant for the purpose of the
present petition are reproduced herein below:-
"2.7 MML shall sell the Beer under the BRANDS of IBPI to
IBPL or to the indenters holding necessary permits/license
(under the relevant excise laws and regulations) to
purchase/deal in BEER (hereinafter called INDENTORS) as
IBPL may from time to time advise.
xxxxx
3.4 IBPL shall be responsible for sending duty paid
import/bond permits to MML to enable MML to despatch BEER
of the BRANDS of IBPL to IBPL or to the INDENTORS as the
case may be IBPL shall ensure that all permits, excise
documents submitted by IBPL or its representatives shall be
genuine and not forged or mutilated IBPL shall keep
indemnified MML against all costs and damages which MML is
forced to incur as a result of such eventuality. IBPL shall be
responsible to obtain the verification certificate and/or other
evidence from the excise authorities with regard to the receipt
of BEER at the destination and furnish the same to MML within
time stipulated in Excise Rules. IBPL understands that failure
on part of IBPL to furnish verified passes will make it liable for
demands of Excise Duties or penalties which may be demanded
from MML and IBPL undertakes to indemnify and reimburse
MML all amounts paid by MML on this account.
3.5 IBPL shall be responsible to ensure payment of agreed
ex-factory prices. Statutory levies, Sales Tax and any other
liabilities including but not limited to taxes, duties, charges,
levies and other normal charges etc. on the due date in regard
to the BRANDS that may be sold by MML to IBPL or to the
INDENTORS, as the case may be.
3.6 IBPL shall otherwise be free to resell or direct the sale to
the INDENTORS the BEER of the BRANDS on such terms and
conditions as IBPL may decide.
xxxxxxx
ARTICLE 4: PRICES
4.1 The Ex-brewery prices of BEER case of 12 bottles of 650
mls. each shall be as under:-
AUSTRALIAN LAGER RS.150/- PER CASE
MAX. BEER RS. 157/- PER CASE.
xxxxxxxxxx
4.4 The parties agree that in respect of all sales of BEER of
BRANDS either to IBPL OR to the INDENTORS recommended
by IBPL it shall be a term and an essence of the agreement,
that MML shall receive from IBPL the price mentioned in
clause 4.1 above along with Sales Tax, Excise Duties, Export
Pass Fees, Octroi transport insurance and other statutory taxes
and levies charged in the sales invoices. MML shall remit all
statutory levies and indemnify IBPL against any liabilities
arising therefrom.
4.5 IBPL agrees to pay after 20 days from the date of
production by demand draft towards the price of Beer as per
article 4.1 of agrees to reimburse such taxes, duties and levies
arising out of the sales of Beer Brands of IBPL three days
before the due for payment by MML
4.6 The parties agree that the Sales of Beer of IBPL Brands
shall be made according to the despatch instructions issued by
IBPL. The invoices shall be raised by MML at the prices
communicated to them periodically.
4.7 MML shall give credit to IBPL for the difference between
the invoice price and Ex.-brewery price agreed to in 4.1 above
towards the royalty, marketing and technical service charges.
xxxxxxxx
4.9 As mentioned above, excise duties, sales taxes and levies
leviable or chargeable or levied or charged by any Government
or local authority from time to time and in force other than
those included in the basic price mentioned in Clause 4.2
above) shall be charged to IBPL or the lNDENTORS and IBPL
or the INDENTORS as the case may be, shall always pay all
such tax or duty."
3. The petitioner, claiming that in terms of the above agreement,
the respondent had not cleared its liability towards the 'Ex-Brewery
prices' for the supplies made by the petitioner to the respondent or to
the INDENTORS, invoked the arbitration agreement. The said
invocation led to an Award dated 23rd April, 2008, which was set
aside by this Court vide order dated 28th July, 2010, appointing the
arbitrator who has passed the impugned Arbitral Award.
4. The impugned Arbitral Award, while rejecting the claims made
by the petitioner, has allowed the counter claim of the respondent
based on the purported admission of the petitioner that an amount of
Rs.1,54,09,930/- on account of Beer supplied in the State of U.P. and
Rs.24,61,381/- on account of Beer supplied in the State of Rajasthan
was payable by the petitioner to the respondent.
5. The first claim of the petitioner was for an amount of
Rs.1,38,68,733.68 which it claimed was owed by the respondent to
the petitioner under the above mentioned agreement on settlement of
accounts. The said figure was arrived at by the claimant in the
following manner:-
"Amount recoverable/receivable by the Claimant Company from the
Respondent Company
(A) Amount recoverable from Respondent Company
(i) On account of sale of goods
by the Claimant to the
nominated parties of the
Respondent Company Rs.3,02,37,601.00
(ii) Cost of unused Packing materials Rs.32,23,747,71
(iii) Cost of unsold finished goods of
IBPL Brands Rs.2,78,696.00
TOTAL Rs.3,37,40,044,71
(B) Less : Entitlement of Respondent
Company
(i) Entitlement due on sale of Beer to
Nominated customers in the States of
Uttar Pradesh Rs.1,54,09,930.00
Rajasthan Rs. 24,61,381.00
Rs.1,78,71,311.00
(ii) Security Deposit received Rs.20,00,000.00
Total entitlement of Respondent Rs.1,98,71,311.00
As per Agreement*
(C) Net amount recoverable by Claimant
Company from the Respondent
Company (A)-(B)=(C) Rs.1,38,68,733.71
* Respondent Company is entitled to this amount only if the
Respondent Company makes payments to Claimant Company in
respect of supplies made by the Claimant Company to the nominated
parties of Respondent Company."
6. The Arbitrator in his impugned award has rejected the said
claim holding as under:-
"32) On behalf of the claimant-MML, two witnesses were
produced to establish its claim, namely, CW-1 Mr. S.C. Sahai
working as Sales Manager and CW-2 Mr. K.N. Kapoor
working as Chief Manager (Accounts), with M/s. Mohan
Meakin Ltd. During his cross examination, CW-1, Mr. S.C.
Sahai admitted that he filed his evidence by way of affidavit
which is Exh. CW-1/A and also exhibited the documents from
Exh. CW-1/1 to CW 1/18. It is further admitted by CW-1 Mr.
Sahai that the respondent-IBPL used to bring the orders along
with the indent from the third parties on the parties' letter head
along with covering letters of respondent company (IBPL) and
also payment towards the excise duty by way of cheque. It is
further admitted by the witness that the cheques were issued in
the name of claimant-company (MML) but it used· to be
brought by the officials/employees of the respondent-company
(IBPL) along with their covering letter. The witness further
says as Vol. as per excise laws, the claimant company (MML)
can only supply to a license holder and raise invoice in the
name of License Holder.
33) Thus, from the above situation it is clear that supply of the
goods used to be made directly to the indented parties after
receiving order from the indented party on their letter head
along with payments towards excise duty by way of cheques in
advance directly to Claimant and the bills used to be raised
directly to the indented third parties and the payments used to
be received only in the name of claimant-MML and thereafter,
claimant-MML used to pay/credit respondent-IBPL differential
of the cost of goods for MML and the invoice value.
34) That when Claimant MML was receiving payments
directly from the indented parties and only differential used to
be credited to Respondent IBPL, Claimant has not been able to
satisfy me as to how IBPL is liable for claims of supply of beer
to third parties and when only Claimant MML could have
received payments being a licensed manufacturer and licensed
retailer could also make payments only to Claimant MML. The
Respondent IBPL does not play any role in this process except
that it has to only secure orders from these licensed retailers or
indenters and take away the differential of the invoice value
and cost of beer as agreed in the agreement. Moreover, the
supply of beer of claimed amount is itself not established by the
Claimant for it to be claimed from Respondent IBPL. The CW-
2, Mr.K.N.Kapoor produced by the claimant to prove an
alleged account statement states in his cross examination that
neither he has certified the account statement nor prepared the
accounts for the Respondent. He seems to have no idea about
the dealings and transactions between the parties, and makes
contrary statements thereto.
35) The claim for unused packing materials has again
surprisingly found no place or mention in the claims of
Claimant MML in earlier award and even admitted by CW-1
that the claim and invoice for the same was raised as late as on
30.03.2010, when the matter was pending before the Hon'ble
Delhi High Court, however, no such invoice forms part of
record nor any proof of the packing material of the said value
under the name of IBPL with Claimant MML. Thus, the said
claim was raised for the first time in claim petition filed in
November 2010, when the alleged claim had become time
barred and could not be claimed. Similar is the case for unsold
stock. The above mentioned claims for the unused packing
material and unsold stock being barred by limitation, without
any document to substantiate the same and not claimed in the
earlier proceedings are beyond the scope of reference, hence
are rejected."
7. Learned senior counsel for the petitioner submits the Arbitrator
in his impugned award has acted in complete ignorance of the terms
of the agreement. In fact, barring reproducing some of the terms of
agreement in the initial part of the award, while dealing with the
claim made by the petitioner, there is no mention to any of the terms
of the agreement. He further submits that the Arbitrator has held that
the respondent does not play any role in the process of receiving
payments and its role is confined only to secure orders from the
licence dealers or industries, this is totally contrary to clause(s) 3.5
and 4.4 of the agreement reproduced herein above. He further
submits that the Arbitrator has not discussed the evidence that was led
by the petitioner in support of his claim and has merely brushed it
aside by holding that the supply of beer of claimed amount is not
established by the petitioner. He draws my reference to the affidavit
by way of evidence of Mr.S.C.Sahai, Sales Manager of the petitioner
to show that along with that the affidavit, the said witness had
referred to the Statement of Accounts, invoices, Indent, Dispatch
Challan, Gate passes, etc., of various dealers/distributors of the
respondent. He submits that this entire evidence has been completely
ignored by the Arbitrator and brushed aside by a single sentence
holding that the petitioner has been unable to prove sales made by it
under the contract.
8. Learned counsel for the respondent submits that as the invoice
to the Indentors were raised by the petitioner in its own name, it is the
petitioner who has to ensure receipt of payment against the same. In
her submission, clause 3.5 of the agreement is merely to suggest that
the respondent would render all assistance to the petitioner in
receiving payments from the Indentors, however, in case full
payments are not received against such invoices, the respondent
cannot be saddled with the liability thereof. She further submits that
it was for the petitioner to have proved from the evidence as against
which invoice the payment was not received by it and having failed to
do so, the claim of the petitioner has been rightly rejected by the
Arbitrator.
9. I have considered the submissions made by the learned senior
counsel for the petitioner and the counsel for the respondent.
10. A reading of the Award would show that the arbitrator has not
discussed the liabilities and obligations inter se owed by the parties in
terms of the agreement. Though both the parties have made
submissions on the true purport of Clauses 3.5 and 4.4 of the
agreement, I find that the Award is totally silent and, in fact, is
oblivious of the existence of these clauses and effect thereof on the
claims and counter claims of the parties. Mere reproduction of these
clauses in the initial part of Award, would not suffice as consideration
thereof by the Arbitrator. The arbitrator has, therefore, acted in
complete ignorance of the terms of the agreement. It was for the
arbitrator to have considered the effect of Clause 3.5, which expressly
states that the respondent shall ensure the payment of agreed ex-
factory prices to the petitioner. The respondent cannot brush aside
this responsibility by contending that as the invoices on the
INDENTORS were raised by the petitioner, the petitioner alone is
responsible if full payment there against is not received.
11. The arbitrator has also not considered the effect of clause 4.5 of
the Agreement, which expressly states that the respondent agrees to
pay after 20 days from the date of production, by demand draft, the
price of the beer as per clause 4.1.
12. Section 28 (3) of the Act caste an obligation on the arbitrator to
decide the disputes in accordance with the terms and conditions of the
contract as agreed between the parties. However, as noted by me, the
Arbitral Award in this case, does not indicate that the arbitrator was
alive to the terms and conditions of the contract or considered the
effect thereof on the claims or counter claims of the parties. This
itself, in my view, is sufficient to set aside the arbitral award.
13. Learned Senior counsel for the petitioner is also correct in his
submission that the Arbitrator has not considered the evidence led
before him by the parties. It is not as if the arbitrator has considered
the evidence and found it to be unreliable or insufficient to prove the
claim of the petitioner. In fact, a reading of the Award would show
that there is absolutely no discussion in the entire Award on the
evidence led by the parties. It is true that if the arbitrator, after
consideration of the evidence, comes to a conclusion on facts, this
Court in exercise of its power under Section 34 of the Act would not
re-appreciate the same. However, the present is a case where there is
absolutely no appreciation of evidence at all by the Arbitrator. In my
opinion, therefore, the Award is liable to be set aside on this ground
as well.
14. As far as the allowance of the counter claim of the respondent
is concerned, the Arbitrator has relied upon the above quoted table
and the pleadings in the statement of claim to conclude that there was
an admission of liability on part of the petitioner in this regard. In
my opinion, this finding is also fallacious. An admission made by a
party is to be read as a whole and cannot be bifurcated in parts,
(Dudhnath Pandey vs. Suresh Chandra Bhattasalli (1986) 3 SCC
360).
15. The petitioner had claimed the amounts owed by the respondent
to the petitioner and as a settlement of account had also shown the
corresponding amounts that the respondent would be entitled to upon
payment of full amounts under the agreement. This was, therefore, a
conditional admission of liability. The arbitrator, apart from relying
on the alleged admission, does not go into the merit of the counter
claim of the respondent to award the said amount. In my opinion, the
counter claim could not have been granted merely on the above
alleged admission of the petitioner.
16. As far as the objection with respect to the disallowance of the
claim for the amount of packing material and unsold stock is
concerned, in my opinion, the arbitrator has rightly held that there is
no evidence on record to substantiate the said claims of the petitioner.
17. Learned senior counsel for the petitioner has drawn my
reference to para 14 of the affidavit of evidence filed by Mr.
S.C.Sahai, Sales Manager of the petitioner to contend that the same
would amount to an evidence in support of this claim. The said para
is quoted herein below:-
"14) I say that the following amounts have become due and
payable by the Respondent Company to the Claimant Company.
The gross amount recoverable by the Claimant Company from
the Respondent Company towards supply of goods to the
nominated parties of the Respondent Company works out to
Rs.3,02,37,601/- (Rupees Three Crores Two Lakhs Thirty Seven
Thousand and Six Hundred One only). At the same time, the
Claimant Company got the packing materials printed for
packing of finished goods but, however, the Respondent
Company had abruptly discontinued, without notice, placing
the indents upon the Claimant Company without any advance
notice and(or in violation of the terms of the Contract. The
claim towards Packing Materials is Rs.32,23,747.71 (Rupees
Thirty two lacs twenty three thousand and seven hundred forty
seven and paise seventy one only). Further, at the same time,
there were stocks of finished goods which the Claimant
Company manufactured at the instance of the Respondent
Company but later on, there were no instructions from the
Respondent Company about its dispatched and hence finished
goods under the brand name of Respondent Company worth
Rs.2,78,696/- (Rupees Two Lacs Seventy Eight Thousand Six
hundred Ninty Six Only) was lying with the Claimant Company.
This stock is due to abrupt and sudden discontinuance of
placing orders, in an illegal manner, by the Respondent
Company upon the Claimant Company."
18. In my opinion, this would be a bald statement of the witness
without any proof of the contents of the same. It was for the
petitioner to prove the extent of packing material and unsold finished
goods if any, lying with the petitioner at the time of termination of the
agreement. Mere statement in this regard cannot take the place of
proof of the same.
19. Be that as it may, for the reasons recorded above, the impugned
Award cannot be sustained and is liable to be set aside with no order
as to costs, leaving the parties open to initiate fresh proceedings in
accordance with law, wherein the parties would be entitled to claim
the benefit of Section 43(4) of the Act as far as the period of
limitation is concerned.
20. The petition is allowed in the above terms, with no orders as to
costs.
NAVIN CHAWLA, J.
FEBRUARY 13, 2018/RN
