M/S V2 Retail Limited vs M/S S.S. Enterprises
2019 Latest Caselaw 1602 Del

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*      IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                       Date of Judgment: 20.03.2019

+      FAO(OS) (COMM) 290/2018

       M/S V2 RETAIL LIMITED                                ..... Appellant
                      Through:          Mr. Vishwendra Verma & Mr. Pranav
                                        Verma, Advocate

                               versus

       M/S S.S. ENTERPRISES                              ..... Respondent
                      Through:          Mr. Sudhir Nagar & Mr. Bhanu
                                        Sanoriya & Mr. Arun Nagpal,
                                        Advocates

       CORAM:
       HON'BLE MR. JUSTICE G.S. SISTANI
       HON'BLE MS. JUSTICE JYOTI SINGH

JYOTI SINGH, J. (ORAL)

FAO(OS) (COMM) 290/2018 and C.M. Appl. No. 51343/2018 (for stay)

1. The present appeal has been filed by the appellant assailing the order

dated 26.10.2018 passed by the learned Single Judge in O.M.P. (COMM)

64/2017 whereby the learned Single Judge has dismissed the petition under

Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred

to as „the Act‟) and has upheld the Award dated 27.12.2012 passed by the

learned Arbitrator except for the rate of interest which has been reduced to

8% instead of 12% per annum awarded by the learned Arbitrator

2. The brief and relevant facts are that the appellant, who was the

respondent in the arbitral proceedings had entered into a Memorandum of

Understand (hereinafter referred to as „MOU‟) dated 25.12.2007 with the

respondent, who was the claimant before the Arbitrator. By virtue of this

MOU the appellant had taken on lease the premises bearing no. 3/1/22, Site

IV, Sahibabad Industrial Area, Ghaziabad, U.P. (hereinafter referred to as

„the suit property‟) at a monthly lease amount of Rs.3,30,000/- for a period

of nine years with a lock-in period of 15 months. The lessee/appellant had

the liberty under the MOU to terminate the agreement prior to the expiry of

the lease period by giving a three months notice in writing. The lessor

however did not have the option of terminating the lease. One of the

important and relevant clauses in the MOU was that the lessor had to get the

user of the premises changed from "manufacturing corrugated boxes" to

"software development unit" within a period of three months from the date

of signing of the MOU.

3. The appellant paid rent till September, 2008 but thereafter the

payments were stopped. This resulted in issuing of a notice dated

22.10.2008 by the respondent, who called upon the appellant herein to

execute the lease deed and pay the rental amount. On 10.11.2008 the

respondent invoked the arbitration clause. The appellant immediately

thereafter on 14.11.2008 filed a suit in the Court of Civil Judge seeking a

declaration that the MOU be declared as null and void, and an order of

restraining the respondent, its agents from removing the articles of the

appellant from the premises and obstructing the appellant and its workers

from removing his articles. A direction was also sought to the respondent to

accept the vacant possession of the suit premises or in the alternative

permission was sought to deposit the keys of the premises in the Court. In

the said suit an application under Section 8 of the Act was moved and thus in

Arbitration Petition No. 33/2009, a Sole Arbitrator was appointed. The

Arbitrator having been appointed on 3.7.2009, entered reference. The

respondent filed his claims. Claim Nos. 1, 2, 3 and 6 were for rent for the

period 1.10.2008 to 31.5.2010 at the rate of Rs.3,30,000/- per month. Claim

no. 7 was for damages of Rs.40,00,000/-. Cost of Arbitration and interest @

12% p.a. was also claimed. The appellant filed his counter claims for cost of

goods lying in the premises and sought Rs.50,00,000/- under this head. He

also sought refund of the security deposit of Rs.9,90,000/- as well as

damages of Rs.20,00,000/-.

4. The learned Arbitrator vide his Award dated 27.12.2012 allowed the

claim for the rent @ Rs. 3,30,000/- p.m. from 1.10.2008 till 30.4.2009 (up to

the lock-in period) and @ Rs.1,65,000/- from 1.5.2009 to 31.5.2010 (up to

handing over possession), totalling to Rs.44,55,000/-.

5. Rs.5,00,000/- was awarded towards damages and Rs.2,00,000/-

towards cost of arbitration proceedings along with Rs. 82,500/- as share of

arbitration fees & expenses. The Arbitrator also awarded interest at the rate

of 12% per annum. The counter claims of the appellant were disallowed

except for refund of security deposit of Rs.9,90,000/-.

6. The appellant challenged the said Award by filing OMP No. 740/2013

before the learned Single Judge of this Court, which was dismissed on

25.09.2014 as there was a delay in re-filing the petition. In appeal, the

Division Bench on 14.03.2016, condoned the delay and the matter was

directed to be heard on merits. The said OMP was thereafter renumbered as

OMP (COMM) 64/2017.

7. The principal submission of the learned counsel for the appellant

before the learned Single Judge was that the respondent had failed to obtain

the change of user from Uttar Pradesh State Industrial Development

Corporation (UPSIDC) which was a pre-condition for the MOU and since he

was in breach of MOU, he could not have been compensated with the rental

amount for the entire period. His further contention was that the appellant

had clearly expressed his intention as in October, 2008 itself that he no

longer desired to continue in the suit premises and in fact he had filed a suit

before the learned Civil Judge for giving back the possession and/or handing

over the keys in the Court. He placed heavy reliance on the letter of

UPSIDC as well as the prayers made in the plaint before the Civil Judge to

support his stand. He further submitted that since the appellant had made all

efforts to hand over possession back to the respondent, he was not liable to

pay any rent at all.

8. Per contra, the counsel for the respondent had argued that though the

appellant repeatedly took the stand that he did not need the premises but the

actual possession was handed over only on 31.5.2010 and that too during the

arbitration proceedings and based on various orders passed by the Arbitrator.

He submitted that till 31.5.2010 the appellant continuously used the premises

and in fact did not even terminate the lease as per Section 106 of the Transfer

of Property Act, 1882 or in terms of the MOU. He contended that no notice

of termination was ever given by the respondent. Thus the appellant had

illegally used the premises and deliberately delayed handing over of

possession.

9. The learned Single Judge after having gone through the MOU and the

Award as well as the respective documents, came to a finding that in fact the

appellant had delayed the handing over of the possession and even despite

repeated orders of the Arbitrator from February, 2010 to May, 2010 the

possession was handed over only in May, 2010. This reflected that the

appellant wanted to enjoy the possession of the property and simultaneously

avoid payment of rent under the garb of the respondent not having applied in

time to the UPSIDC for change of the user. The learned Single Judge also

noticed that delay on the part of the respondent in applying for change of

user in fact did not prejudice the appellant, inasmuch as, no Government

authority came to stop or obstruct the business activities or user of the

premises of the appellant. Reliance was placed on the cross-examination of

the ex-Legal Head of the appellant in this regard. As regards the stand of the

appellant that he always wanted to hand over the possession and thus filed a

suit in the court of Civil Judge, the learned Single Judge found that in fact

the suit was filed on 14.11.2008 which was soon after the respondent had

issued a notice invoking arbitration. The learned Single Judge also referred

to repeated orders of the Arbitrator wherein the appellant was asked to hand

over the keys but the same were handed over after a considerate delay, only

on 31.5.2010. The learned Single Judge found that the findings of the

Arbitrator were justified inasmuch as the appellant never terminated the

tenancy after the lock-in period by giving three months notice, which he

could have done under the MOU. While on one hand he continued to enjoy

the possession, on the other hand he stopped paying the rent. The Court thus

found that the claims of the respondent for rent for the period the appellant

was in possession was justified, along with the damages and costs of the

proceedings and upheld the Award to that extent. The learned Single Judge

also did not find any infirmity in the Award in so far as it dismissed the

counter claims of the appellant except for the refund of the security deposit,

as in her view the appellant misused the premises and admittedly delayed the

handing over of the possession.

10. We have heard the learned counsel for the appellant and perused the

Award as well as the other documents and pleadings on record.

11. The principal contention of the learned counsel for the appellant

before us is also that the respondent had committed a breach by not applying

for the change of user of the premises within the time stipulated in the MOU.

He submitted that in the absence of the respondent having obtained proper

permission, he did not want to use the premises illegally and therefore in the

early stages itself he had indicated that he wanted to hand over the

possession. He contended that to show his bonafides, he even filed a suit in

the Court of Civil Judge, where his main prayer was to direct the respondent

to take over the vacant possession and in the alternative seeking permission

to deposit the keys in the Court. The argument is that a tenant/lessee who

wants to hand over possession can do no more and if the respondent was not

willing to take the possession, the appellant could not have been penalised

by paying rent for the said period. The Award and the judgment of the

learned Single Judge is thereby erroneous and the same be set aside.

12. At the outset we must point out that the scope of challenge under

Section 37 of the Act is extremely limited. The powers of the appellate court

in the realm of judicial review are far more restricted than even the powers

of the Single Judge under Section 34 of the Act. On the scope of judicial

review we refer to a paragraph of the judgment of the Hon‟ble Supreme

court in the case of McDermott International Inc. vs. Burn Standard Co.

Ltd. (2006) 11 SCC 181, which we quote as under:

"52. The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award leaving the

parties free to begin the arbitration again if it is desired. So, scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court‟s jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it."

13. In the case of MTNL vs. Fujitshu India Private Limited, reported at

2015 (2) ARBLR 332 (Delhi), also this Court had examined the scope of

judicial review under Sections 34 an 37 of the Act and held as under:

"The law is settled that where the Arbitrator has assessed the material and evidence placed before him in detail, the court while considering the objections under Section 34 of the said Act does not sit as a court of appeal and is not expected to re-appreciate the entire evidence and reassess the case of the parties. The jurisdiction under section 34 is not appellate in nature and an award passed by an Arbitrator cannot be set aside on the ground that it was erroneous it is not open to the court to interfere with the award merely because in the opinion of the court, another view is possible. The duty of the court in these circumstances is to see whether the view taken by the Arbitrator is a plausible view on the facts, pleadings and evidence before the Arbitrator. Even if on the assessment of material, the court while considering the objections under section 34 is of the view that there are two views possible and the Arbitral Tribunal has taken one of the possible views which could have been taken on the material before it, the court would be reluctant to interfere. The court is not to substitute its view with the view of the Arbitrator if the view taken by the Arbitrator is reasonable and plausible

Jhang Cooperative Group Housing Society v. P.T. Munshi Ram & Associates Private limited: 202 (2013) DLT 218. The extent of judicial scrutiny under section 34 of the Act is limited and scope of interference is narrow. Under section 37, the extent of judicial scrutiny and scope of interference is further narrower. An appeal under section 37 is like a second appeal, the first appeal being to the court by way of objections under section 34. Where there are concurrent findings of facts and law, first by the Arbitral Tribunal which are then confirmed by the court while dealing with objections under section 34, in an appeal under section 37, the Appellate Court would be very cautious and reluctant to interfere in the findings returned in the award by the Arbitral Tribunal and confirmed by the court under section 34 Court, or vitiated by an apparently untenable interpretation of the terms of the contract, requires to be eviscerated. In view thereof, the decision of the ld. Single Judge that reasoning of the arbitral award in this regard was based on no material and was contrary to the contract, cannot be said to be deserving of any interference at our hands under Section 37 of the Act. In a pronouncement reported at, MTNL v. Fujitshu India Pvt. Ltd. (FAO(OS) No. 63/2015), the Division Bench of this court has held that "an appeal under Section 37 is like a second appeal, the first appeal being to the court by way of objections under Section 34". Being in the nature of a second appeal, this court would be hesitant to interfere, with the decision of the learned Single Judge, unless it is shown to be palpably erroneous on facts or in law, or manifestly perverse."

14. We also place reliance on the judgment in the case titled as Associate

Builders vs. Delhi Development Authority reported as (2015) 3 SCC 49,

wherein the Supreme Court held that Arbitrator is a master of facts and

findings of fact cannot be interfered by a Court of appeal. The relevant para

reads as under:-

"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 In P.R. Shah, Shares and Stock Brokers (P) Ltd.. v. B.H.H. Securities (P) Ltd.: (2012) 1 SCC 594, this Court held: A court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or re-appreciating the evidence. An award can be challenged only under the grounds mentioned in Section 34(2) of the Act. The Arbitral Tribunal has examined the facts and held that both the second Respondent and the Appellant are liable. The case as put forward by the first Respondent has been accepted. Even the minority view was that the second Respondent was liable as claimed by the first Respondent, but the Appellant was not liable only on the ground that the arbitrators appointed by the Stock Exchange under Bye- law 248, in a claim against a non-member, had no jurisdiction to decide a claim against another member. The finding of the majority is that the Appellant did the transaction in the name of the second Respondent and is

therefore, liable along with the second Respondent. Therefore, in the absence of any ground Under Section 34(2) of the Act, it is not possible to re-examine the facts to find out whether a different decision can be arrived at."

15. To the same effect is the judgment of this Court in the case of LG

Electronics vs. Dinesh Kalra in FAO(OS)(COMM) 86/2016 decided on

19.3.2018.

16. Having traversed through the judicial pronouncements, we now

examine the judgment of the learned Single Judge which is impugned before

us. The learned Single Judge in our view has rightly held that though the

respondent had applied for change of the user of the premises, after the time

stipulated in the MOU, but as per the evidence of the witness of the appellant

himself, no Government authority had ever obstructed the user of the

premises by the appellant. The appellant was well aware that if the premises

were being used, the rent was payable every month and there was no

justification for non-payment of the rent. The contention of the appellant

that he had resorted to filing a civil suit, is of no avail to the appellant, as

rightly held by the learned Single Judge. If the appellant was advised to

resort to the remedy of filing a civil suit, he could well had been advised to

send a termination notice and/or simply hand over the keys to the

respondent. It is obvious, as held by the learned Single Judge, the intent was

to continue using the premises on one hand and not pay the rent, on the

excuse that the respondent had not applied in time for change of user of the

premises.

17. We also find from the orders of the arbitration proceedings, as brought

out in the impugned judgment, that it took a lot of effort and time even for

the Arbitrator to get the appellant to hand over the keys to the respondent.

The learned Single Judge has referred to certain letters and ordersheets with

a view to bring out that the appellant in fact never intended to hand over the

possession. An order dated 12.12.2010 passed by the Arbitrator has been

extracted in which it is noted that it was the respondent who had submitted

that at least the possession of the property be handed over to him in

accordance with the MOU. The learned Single Judge observed that the order

indicates that it was the respondent who was seeking the possession of the

property. Another letter dated 16.02.2010 is relied upon which was a letter

written by the counsel for the appellant to the counsel for the respondent in

which he had categorically stated that the appellant would start operations to

withdraw all his material/equipment from the premises w.e.f. 19.02.2010. In

response to this letter, the respondent‟s counsel had sent a reply on

20.02.2010 asking the appellant to hand over vacant and peaceful possession

on 03.03.2010 at 12 noon. The appellant then moved an application seeking

police help for removal of goods. The learned Arbitrator on 25.03.2010

recorded the statements of the appellant and the respondent that the appellant

will remove the goods and the respondent will not create any hinderance and

that after vacating the premises, keys will be handed over by the counsel for

the appellant to the counsel for the respondent on 15.04.2010, before the

Arbitrator. The learned Single Judge notes that despite this order, and

repeated communications exchanged thereafter between the parties, the keys

were not handed over on 15.04.2010. On 24.04.2010, the Arbitrator again

recorded that the handing over of the keys did not materialize and the

proceedings were rescheduled for 08.05.2010 and thereafter again for

13.05.2010. It was only on 31.05.2010 that the goods were finally removed

and possession was handed over. The chronology narrated above clearly

reveals that the appellant had made every effort to delay the handing over of

the possession and thus in our view the Arbitrator has rightly allowed the

claims of the respondent herein.

18. We also endorse the view of the learned Single Judge that the

appellant never issued any notice of termination of the lease in terms of the

liberty that it had under a specific clause incorporated in the MOU to that

effect. The contentions thus raised by the learned counsel for the appellant

before us on his bonafides to hand over possession at the earliest opportunity

is not borne out from the conduct of the appellant.

19. The learned Single Judge has in her discretion reduced the rate of

interest awarded to the respondent from 12% p.a. to 8% p.a. keeping view

the prevailing interest rates. We find that this was in the domain and

discretion of the Court and no fault can be found with this direction as well.

20. We find no infirmity in the impugned judgment of the learned Single

Judge. There is no merit in the appeal and the same is hereby dismissed with

all pending applications. No orders as to costs.

JYOTI SINGH, J

G.S.SISTANI, J

MARCH 20, 2019 AK/rd