Delhi High Court
Sony India Private Limited vs Iris Worldwide Integrated Private ... on 15 February, 2024
Author: Dharmesh Sharma
Bench: Dharmesh Sharma
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on : 13 December 2023
Judgment pronounced on : 15 February 2024
+ FAO 91/2021 and CM APPL. 8263/2021, CM APPL.
8265/2021, CM APPL. 33574/2022
SONY INDIA PRIVATE LIMITED ..... Appellant
Through: Mr. Nikhil Nayyar, Sr.
Advocate with Ms. Pritha
Srikumar, Mr. Divyanshu Rai
& Mr. Shubhansh Thakur,
Advocates.
versus
IRIS WORLDWIDE INTEGRATED PRIVATE LIMITED
..... Respondent
Through: Ms. Malvika Trivedi, Sr.
Advocate with Mr. Pawan K.
Bansal, Ms. Sujal Gupta & Mr.
Ahsan Ul haq, Advocates.
CORAM:
HON'BLE MR. JUSTICE DHARMESH SHARMA
JUDGMENT
1. This judgment shall decide the present appeal filed under
Section 37(1) (c) of the Arbitration and Conciliation Act, 19961
assailing the impugned judgment-cum-award dated 29.10.2020 passed
by the learned Additional District Judge-07, South-East District, Saket
1 A&C Act
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Court, New Delhi2 in the case bearing Arbt. No. 21138/2016,whereby
the objections of the appellant company under Section 34 of the A&C
Act were dismissed and the award passed by the learned Sole Arbitral
Tribunal3 dated 13.05.2016 in Case Ref. No. DAC/588/08-14 was
upheld.
FACTUAL BACKGROUND:
2. Briefly stated, both the parties are Companies incorporated in
India, and while the appellant company is incorporated in the business
of mobile and electronic devices, the respondent/claimant company
has been engaged in the business of providing services in the nature of
advertising, strategic planning, retail, trade, activations and events etc.
Evidently, the parties entered into an agreement dated 12.12.2011
Ex.CW-1/24 for providing certain services to be rendered by the
respondent/ claimant for the period 01.10.2011 to 31.12.2012, which
set out detailed terms and conditions for working of the contract inter
alia providing for updation of the work as also the assignment of work
outside the scope of the agreement, for which the appellant company
was made liable to pay renumeration as per the agreed terms.
3. Admittedly, the First purchase order dated 17.07.2012 bearing
No. 71192641 (hereinafter referred to as the ‗Big PO') came to be
placed for a total value of Rs. 22,51,69,945/- by the appellant, that
stipulated that the fee of the respondent/claimant or the „Iris fee‟,
would be 8% of the cost of the work sourced under the purchase order.
It is pertinent to mention here that along with the ‗Big PO', a
2 ADJ
3 Hon'ble Ms. Justice Manju Goel (Retired)
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calculation excel sheet was given to the respondent/claimant, for
which invoice No. 165 (Ex.CW-1/4) for an amount of Rs. 51,11,479/-
was raised, which is the disputed invoice and hereinafter referred to as
such, which, as per the respondent/claimant remained unpaid despite
completing the entire work/services assigned.
4. It is also brought on the record that there was a change in the
management of the appellant company, which necessitated a review of
the entire branding and retail strategy and as a result of which, the
scope of work/ services assigned to the respondent/claimant was also
subject to a review. Admittedly, a meeting took place between the
representatives of the two companies on 21.01.2013 and the value of
the ‗Big PO' was proposed to be reduced to Rs.15,51,49,505/-, which
was conveyed to the respondent/claimant vide an email and later on,
meetings took place as between the representatives of the two
companies on 01.02.2013, wherein the entire scope of the work was
discussed consequent to which, the respondent/ claimant sent an email
dated 08.02.2013 and another email dated 12.02.2013. Apparently,
after discussions after back and forth talks and after rechecking the
quantity etc. form the vendor party, the value of the ‗Big PO' was
revised to Rs. 15,64,19,447/-.
5. It is pertinent to mention here that 80% of the work/services
had already been completed by the respondent/ claimant when the
‗Big PO' was revised and it is an admitted fact that the work/services
were completed by the end of April, 2013. Admittedly, a meeting took
place on 19.04.2013 pursuant to which an email was forwarded by the
4 All exhibits during the course of arbitration proceedings
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respondent/claimant to the appellant company along with attached
details of the invoices, wherein an amount to the tune of Rs.
3,19,49,030/- was shown to be outstanding vide disputed invoice No.
165 dated 17.01.2013.
6. To cut a long story short, thereafter several reminders were
given by the respondent/claimant, apparently, through telephonic calls
as well as emails for payment towards the aforesaid pending bill and
although some clarifications were sought by the appellant company,
which were provided too, a reply was received from the appellant
company on 19.06.2013 to the effect that they have reconciled the
invoice as per the records. However, the respondent/claimant
immediately replied that the TDS deducted for the claimant's payment
was in excess and also reiterated that there was an outstanding
payment towards the invoice No. 165. The appellant company on
20.06.2013 sent a letter to the respondent/ claimant in reference to the
aforesaid disputed bill dated 17.07.2012 appending therewith one
calculation excel sheet and conveying that an amount of Rs.
2,67,28,969/- was payable to them and they also declined to make any
payment in respect of invoice No. 165. The respondent/claimant sent
a letter dated 10.07.2013 seeking payment towards the said invoice,
but it was in vain; hence, legal notice dated 21.10.2013 (Ex. CW1/15)
was served demanding the outstanding dues towards the bill dated
17.01.2013 with interest @ 15% per annum apart from other legal
expenses and also invoked the arbitration clause vide their notice
dated 24.12.2013.
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THE IMPUGNED AWARD:
7. Suffice to state that on the respondent/ claimant moving an
application under Section 11(6) of the A&C Act, the Sole Arbitrator
was appointed vide order dated 10.09.2014 of this Court. On
commencement of the arbitration proceedings, the claimant filed a
statement of claim seeking an amount of Rs. 51,11,479/- along with
interest @ 24% per annum from 17.01.2013 till the date of payment
besides damages to the tune of Rs. One lac. Although the appellant
company conceded the sequence of events as regards entering into a
contract dated 12.12.2011, the ‗Big PO' dated 17.07.2012 besides the
revised PO on 29.01.2013 and acknowledging all the email
correspondence and letters mentioned in the statement of claim,
however, they hotly contested the claims of the respondent/claimant
stating that pursuant to the meeting between the parties on 21.01.2013,
the scope of work in reference to the purchase order was amended and
the value of the PO was revised to Rs. 15.50 crores with the
understanding that the agency commission of the respondent/claimant
was to be paid in proportion to the work executed by the claimant in
accordance with the amended purchase order. It was refuted that the
respondent/claimant was entitled to 8% of the total value of the
original purchase order. The appellant company disputed any liability
to make the payment in respect of the invoice No. 165 for an amount
of Rs. 51,11,579/- since they claimed that it was revised in place of
the original PO of Rs. 22.51 crores; and that on reduction in the value
of the PO, the total agency fee payable stood reduced in total to only
8% of the value of the bills. It is pertinent to mention here that
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although the appellant company acknowledged that the amount
claimed in the disputed invoice No. 165 was included in the detailed
calculations in the excel sheet, but denied the fact that there was any
admission on their part to pay such an agency fee. Further, although
the TDS was deducted in respect of the amount claimed in the invoice
No. 165 and the same was deposited with the authorities as required
by law, it was vehemently denied that the same amounted to any
admission of claim of the respondent/claimant on their part.
8. From the pleadings of the parties, the learned Arbitral Tribunal
framed the following issues:
―1.Is the claimant entitled to the amount under invoice no 165,
Annexure C4 by way of fee for services rendered to the
respondent?
2. Is the claim signed, verified and filed by a duly authorized
person?
3. Is the claimant entitled to interest? If so, at what rate?
4. Relief‖
9. Suffice to state that the learned Arbitral Tribunal decided the
issue No.1 in favour of the respondent/claimant holding that the
contract between the parties as per the revised PO dated 29.01.2013
included the liability of the appellant company to pay the amount
claimed in the invoice No. 165 (Ex.CW-1/4). Needless to state that
issue No.2 was also decided in favour of the respondent/claimant and
in so far as issue Nos. 3 and 4 are concerned, learned Arbitral
Tribunal, keeping in view the rate of interest for commercial lending
in the market, allowed interest @ 11% on Rs. 51,11,579/- w.e.f.
17.01.2013 till the date of payment besides providing that the costs of
arbitration proceedings shall be borne by the two parties in equal
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shares except that the respondent/claimant would be entitled to
recover from the respondent the costs that would be payable to the
Delhi International Arbitration Centre.
THE IMPUGNED ORDER DISMISSING OBJECTIONS:
10. The impugned award dated 13.05.2016 was assailed by the
appellant company by filing an application/objections under Section
34 of the A&C Act and suffice to state that the learned ADJ/First
Appellate Court vide impugned order dated 29.10.2020, after
discussing the relevant provisions of law and the case laws referred to
by the parties, dismissed the objections, rejecting the plea of the
learned counsel for the appellant company that the impugned award
accepted a case not set up in the pleadings and/or that it went beyond
the terms and conditions between the parties. It would be expedient to
refer to the observations made by the learned ADJ, which read as
under:-
64. Perusal of the documents annexed alongwith claim petition
would clearly show that case of the respondent all through was that
fees of the respondent was not dependent on the work
executed rather it was a constant fees irrespective of any
change in the purchase order. The reading of the claim petition as
a whole would clearly show that all the correspondences
between the parties (e-mail dated 29.01.2013, 08.02.2013,
12.02.2013) were made the part of the pleadings and,
therefore, claim petition cannot be read in isolation. In the
e-mail of petitioner dated 29.01.2013, petitioner itself
mentioned that Iris fees need discussion, meaning thereby
there was no consensus on fees being agreed @ 8% of work
executed. This shows that respondent was demanding more.
It cannot be said by any stretch of imagination that a
different case was pleaded and during the course of the arguments,
a case which was not set in pleadings was argued before Ld
Arbitrator. These contentions of the Ld counsel for the petitioner
are not at all tenable.
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65. The said contention has been raised by petitioner on one more
ground that Ld Arbitrator had erroneously observed that
respondent had incurred loss as a result of reduction in PO value
which was never a case pleaded. In this regard it is stated that
though Ld Tribunal had observed the same but the petitioner had
never stated or demanded anything over and above the
agency fees agreed to be paid at the first instance by the petitioner
to the respondent. This observation cannot be read in isolation. It
is in continuation of the findings of Ld Arbitrator which
were based on thorough analysis of the case set up by both
the parties, accompanying documents and evidence thereto. This
argument does not hold any merit.
66. Objection no. 2 to 4 are taken up together being inter-related.
(2) Where the award is contrary to, or ignores terms of
the contract.
(3) Where material evidence is ignored or findings
are based on no evidence
(4) Where the award fails to draw inferences on proven
facts or draws inferences that are untenable on the fact of
it.
67. The contention of the petitioner is that original
contract provided Iris fee would be 8%. During the
course of arguments, Ld counsel for petitioner has pointed
out that in the purchase order 17.07.2012 itself, it was recorded
that ―The total quantity is an approximation and would
decrease or increase depending‖. Ld counsel for petitioner had
argued that this clause included the understanding between the
parties regarding the variation in the Iris fees. It was argued that
Ld Tribunal did not consider this clause at all.
Simultaneously, clause 1.8 of the general terms and
conditions of the contract was also relied upon and it was stated
that absence of a reply to e-mail dated 12.02.2013 could
not have been construed to be an agreement regarding the
Iris fees changing from 8% to a fixed price. In order to understand
this, the sequence of the events have to be brought on record. At
the first instance, purchase order dated 17.07.2012 for
an amount of approximately Rs. 22.5 Crores was executed
between the parties wherein the some costs were fixed whereas
some costs were on percentage basis. As far as clause of
variation of total quantity is concerned, to my mind that does
not appear to be with regard to fee of the respondent.
Quantity can be related to some material and not a
service charge. The clear reading of the purchase order
would show that this was with respect to material which
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was mentioned in the upper portion of the chart prepared
alongwith purchase order dated 17.07.2012 whereas in the
lower portion, Iris fees was stated to be 8%. Therefore,
interpretation that as per the purchase order itself, Iris fees was also
subject to change is unilateral interpretation and does not derive
any strength from the purchase order dated 17.07.2012.
68. It is an admitted fact that in December 2012, there was a
change in the management of the petitioner and, therefore, talks
with respect to reduction of the contract value were initiated. On
record, there is a reference of the meeting held on 21.01.2013
in the office of the petitioner, in the e-mail dated 29.01.2013.
The e-mail of 29.01.2013 sent by petitioner to respondent
is very important and has to be carefully understood.
Apart from the contents of the covering letter, an excel sheet
containing the simulation was also attached with it. By this
e-mail, the petitioner intimated in writing about the reduction
of the purchase order to be for an amount of Rs. 155 Millions,
however, while calculating the figures, the Iris fees was put in
the simulation and after adding the same, this amount of
revised PO was arrived at. Ld counsel for petitioner had
explained that in the excel sheet no ―Ok‖ was mentioned above the
Iris fees which was there above the column wherein the parties
were in agreement. Ld counsel for the petitioner has supported this
argument by the fact that in the body of the e-mail dated
29.01.2013, it has been mentioned that ―Iris fees needs discussion‖.
In order to have a clear picture of the said e-mail, the content
of the said e-mail dated 29.01.2013 is reproduced herein for
future reference:-
― Dear Haider
As discussed in our office dated 21 Jan 2013 we've now
made revised simulation of our scope of work or
total PO. Attached is the copy of that simulation
with cost mapped to each aspect/action covered (Incl 32K
Orrisa). We're confirming total PO amt now revised at Rs.
155Mil. Details of the same attached for your ready
reference. Pls confirm.
Also we'd like to mention that only the amt and scope of
work has been revised, rest terms & conditions for
warranty after installation support will remain
unchanged. Following issues are still need to be discussed
and close:
Sl. No. Heads Action
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1. Supervision Need Proofs
2. Regional Managers Need Proofs
3. State Managers Need Proofs
4. Regional Managers Need Proofs
Reporting & Communication
5. Iris Team Travel Need Proofs
6. Iris Fee Need discussion
Initially we'll be clearing bills as per last details shared with
you Earlier.
Total Complete bills we'd received so far is of Rs.
37,168,619/-/
Partner Sum of Vendor Sum of Total Amt
Name Amount Payable
Meroform 5,549,069 5,987,871
P&I 13,499,851 14,395,593
Retailware 15,648,524 16,785,155
Grand Total 34,697,444 37,168,619
Regards
Atul‖
69. At this juncture, it was clear that no agreement was arrived
at regarding the Iris fees and it was left open to be discussed
between the parties. After this e-mail of 29.01.2013, there is an
e-mail dated 08.02.2013 written by respondent/Iris to the petitioner
which talks about the meeting held between the parties on
01.02.2013. In this e-mail, it is mentioned that mutually discussed
and agreed scope of work in the PO subsequently issued was
discussed comprehensively and thereafter it was
emphasized that how the respondent was entitled to be original
agency fee of Rs. 136 Lacs as per original PO and not to an
amount of 8% of the work executed as per the reduced value of
purchase order. This clearly shows that vide e-mail dated
08.02.2013 also, no consensus was arrived at between the parties
regarding the Iris fees but this e-mail made it clear that respondent
was claiming Iris fees to be paid at a fixed amount of Rs. 136 Lacs
whereas the petitioner was not agreeable to the same and that is
why the need to write this e-mail arose. Pursuant to this e-mail
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dated 08.02.2013, another email dated 12.02.2013 was sent by the
respondent to the petitioner wherein respondent affirmed that total
PO should be revised to Rs. 156.5 million and the body of the
e-mail 12.02.2013 read as follows:-
― Dear Atul
This refers to our discussion and subsequent to recheck of
quantities from Vendor Partner the Total PO value
now stand revised to Rs. 156 Mil, this resolves and closes
all issues in this PO.
The updated sheet is attached.
Best regards,
Haider Rizvi.‖
70. Alongwith this e-mail the updated sheet/simulation was
attached wherein the fees mentioned was Rs. 136 Lacs. These
documents clearly shows that respondent had been pleading only
this case of claiming the fixed fee since the very beginning. It is
pertinent to mention here that no response to this e-mail was ever
given by the petitioner herein. Ld counsel for the
petitioner during the course of arguments has stated that
petitioner witness namely Mr Atul Sharma who has
examined as RW-1 before Ld Tribunal had categorically stated
about the meeting held between the parties on 05.03.2013 wherein
the respondent was allegedly informed that the petitioner would
be making payment only at the rate of 8% of the value of the
invoices raised for the work actually executed and not abandoned
by the parties. While addressing the arguments, Ld counsel for the
petitioner had laid great emphasis on the fact that no
cross-examination was done on this statement of RW-1 which was
mentioned in his affidavit and same amounts to an admission
by opposite party and, therefore, it cannot be said that
e-mail dated 12.02.2013 was never replied to. It is on this basis,
it was argued that material evidence was ignored. As far as this is
concerned, it is pertinent to mention here that statement of defence
was filed by the petitioner to the claim petition before Ld Arbitral
Tribunal, however, in the entire written statement, there is not even
a slightest whisper of any such meeting of 05.03.2013 held
between the parties. It is only in the affidavit of
evidence of RW-1 that this fact was mentioned. It is pertinent to
mention here that stating of these lines with respect to meeting
held on 05.03.2013 is a material improvement in the defence
by the petitioner. It is very apparent from the record that case
is based upon correspondences between the parties. None of the
e-mail filed by either of the parties show any reference
to alleged meeting held on 05.03.2013. Not even a single document
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referred to this alleged meeting held on 05.03.2013.
Though, in normal parlance, explaining any fact in the evidence
would not have matter much but here in this case the parties have
proved the case by relying on each and every correspondence
between them. Therefore, most significant e-mail dated
05.03.2013 could not have been ignored by the petitioner
herein while preparing their statement of defence. Though,
the rules of the pleadings and substantive law of CPC is not
applicable to arbitration proceedings, however, the basic
fundamentals cannot be ignored. This was a very important fact
and the opposite party had every right to rebut the same in the
rejoinder. Since, this fact was not incorporated in the statement of
defence, it could not have been read in evidence.
Therefore, absence of cross examination of RW-1 on this point by
respondent was not at all fatal to respondent.
71. Now as per record, after e-mail of 12.02.2013 the respondent
had written e-mail to the petitioner on 15.04.2013 regarding
releasing of payment of all the pending invoices, thereafter some
e-mails which have been sent by the official of the petitioner within
their department have also been filed on record to show that these
invoices were checked. Thereafter, e-mail dated 22.04.2013 was
sent by respondent to the petitioner which has been filed on
record, the contents of which are reproduced herein as under:-
―Dear Atul,
Kindly refer to our meeting on Friday 19 April 2013 in your
office regarding the payment of the invoices raised by us on
the Sony mobile Retail Branding Project. As discussed, we
have marked in the list some of the invoices as required by
you, Kindly process the payment of the invoices as per the
attached list and pay us the balance payment of Rs. 3.19
Crores ASAP. As discussed, it will be highly appreciated if
you can indicate the date of payment.
Kind regards
Haider Rizvi.‖
72. This e-mail talks about the mail sent on 19.04.2013 by the
respondent to the petitioner regarding the payment of
invoices. It is stated therein that some invoices have been
marked to process the payment. The list of invoices have been
given alongwith e-mail wherein some of invoices have
been marked which shows that marked invoices included
the invoice in dispute bearing number 165 dated 17.01.2013.
Even on receiving of this e-mail alongwith these marked invoices,
the petitioner never reverted back stating that this invoice
of 17.01.2013 is not at all payable. This was the second occasion
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after e-mail of 12.02.2013 wherein the respondent had clearly
stated that respondent was demanding this payment towards the
invoice no. 165, which was the difference of the original
agency fees minus the agency fee on account of work executed.
On 19.06.2013 the petitioner sent an e-mail to the
respondent stating that they have reconciled the invoices
and in reply to the same respondent had requested the
petitioner to resolve this issue of bill no 165 which has been put on
hold and immediately on 20.06.2013, a letter was received
by the respondent wherein petitioner has stated that this invoice
of 165 of 17.01.2013 is not payable. It was mentioned in
this letter that this fact had been communicated to
Iris/respondent on numerous occasions in the past. This letter was
replied to by the respondent on 10.07.2013 wherein it
categorically stated that no such communication was ever
made in the past that this invoice was not payable. Despite
replying to the letter of petitioner dated 20.06.2013, petitioner
chose to keep mum and did not clarify by sending a rejoinder to the
reply citing those meetings or the dates/e-mails by which
this fact was communicated to the respondent. From the record,
it is loud and clear that petitioner never informed the
respondent that this invoice no. 165 was not payable. It
was done for the first time on 20.06.2013.
73. There is yet another reason for inferring that there was no such
communication of denying this proposal of fixed fee by
respondent. In the e-mail dated 29.01.2013, the revised value of PO
was stated to be Rs. 155 million. In the e-mail dated 12.02.2013,
respondent stated it to be 156 million after discussion but in the
letter dated 20.06.2013, when the invoice no. 165 was stated to be
not due and payable, the value of purchase order was stated to be
Rs. 14,90,55,832/-. Meaning thereby the simulation of e-mail
dated 29.01.2013 included the fixed fee of Iris, which is
attempted to be explained by RW-1 by giving a theory of
'ok' and no 'ok' on the columns. But, there is no
explanation to the e-mail dated 12.02.2013 where the
revised PO was stated to be of 156 million. There is not even a
single revert to this email disputing this figure of purchase order by
saying that the revised PO stood at Rs. 14,90,55,832/- as they do
not accept the fee of Iris to be a fixed one and they shall pay it @
8% of work actually executed. This shows that they had impliedly
accepted the contents of the email of 12.02.2013.
74. It is an admitted fact on record that petitioner
deducted the tax on the entire invoices. Though it is a settled
principal of law that deduction of TDS does not amount to an
admission of liability, however, from the point of view of an
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ordinary prudent man, the respondent would have a
legitimate expectation that when the tax has been deducted on
this invoice, sooner or later the payment towards the same shall be
made to it. The deduction of TDS can be considered as
an attending circumstance, if not an admission, in order to see
the conduct of the petitioner, while appreciating the material
on record. The correspondences clearly shows that respondent
was made to wait and was never explicitly denied that
this invoice no. 165 was not payable. It was only with
the reconciliation of 19.06.2013, it was found that invoice
no. 165 was stated to be invalid and eventually in the
letter 20.06.2013 (on the very next day), it was
communicated by the petitioner for the first time that this invoice
was not payable. These sequence of events/correspondences
make it amply clear that the decision taken by petitioner
not to pay the unpaid invoice no. 165 to respondent
was arbitrary and capricious and had no basis.
75. In these circumstances, the averments of the petitioner
that award has ignored terms of contract or material evidence
has been ignored are not at all tenable. The Ld Arbitrator
had taken note of each and every fact, pleadings, documents,
judgments relied upon by the parties and have extensively
recorded the evidence. The findings of Ld. Arbitrator are based on
the documents filed by both the parties. There is not even a single
plea raised by petitioner which can be stated to be tenable and,
therefore, there is no question of re-appreciation of
evidence at all. There is no contrary finding on record
either beyond the terms of the contract or ignoring the
evidence which even otherwise was not permissible to be
looked into. The basic premises on which objection petition has
been filed are not at all convincing. There is no illegality in the
award, what to say about the patent illegality. No grounds has been
made out which warrants interference in the award passed
by the Ld Arbitrator. Hence, objection petition is dismissed.
11. It should also be clarified that there was a curative application
filed before the learned ADJ and the case number was corrected to be
read as 21138/2016 instead of 211318/2016 vide order dated
09.12.2020. The impugned judgment-cum-order dated 29.10.2020 and
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09.12.2020 have been assailed by way of a second appeal under
Section 37 of the A&C Act by the appellant before this Court.
LEGAL SUBMISSIONS ADVANCED AT THE BAR:
12. At the outset, learned counsel for the appellant confined his
objections to the rigors of Section 34(1) (b) (2) of the A&C Act and it
was urged that the Iris fee @ 8% was not fixed and it was stipulated
to be reduced based on the reviewed work/services to be performed by
the respondent/claimant but the agency fee was based on the total
value of the contract. It was urged that the work already undertaken
be mentioned in the statement of claims by the respondent/claimant
and only after a reply was filed before the learned Arbitral Tribunal
that in the rejoinder, the stand was changed by the
respondent/claimant to 8% of the total value of the ‗Big PO'. Learned
counsel took the Court through the relevant paragraphs in the
impugned award and it was urged that the fee claimed by the
respondent/claimant went beyond the terms of the contract entered
into by the parties. It was emphasized that the Iris fee was not a
frozen figure, but it was stipulated to fluctuate depending upon the
quantum of work to be performed and in every invoice, it was
submitted by the respondent/claimant that 8% of the work performed
had been claimed and all amount towards the bill had been paid except
for the disputed invoice No. 165 (Ex.CW-1/4), which was not tenable.
It was pointed out that in none of the emails that were sent by the
appellant company, there was any admission to pay the amount under
the disputed bill.
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13. It was urged that the impugned award as well as the impugned
order passed by the learned ADJ are passed based on interpretation of
the ‗Big PO', which were neither routed in the expressed terms nor the
respondents pleaded the case, and thereby, amounted to the creation of
a new contract. It was further urged that the impugned award/orders
were patently illegal, passed in erroneous appreciation of evidence
placed on the record. Reliance has been placed on the decisions in
Ssangyong Engineering & Construction Co. Ltd. v. National
Highway Authorities of India (NHAI)5, PSA SICAL Terminals
Pvt. Ltd. v. Board of Trustees of V.O. Chidambranar Port Trust
Tuticorin & Ors.6, State of Chattisgarh & ANr. v. Sal Udyog
Private Limited7, Indian Oil Corporation Limited Through its
Senior Manager v. Shree Ganesh Petroleum Rajgurunagar
through its Proprietor Laxman Dagdu Thite8, Calcom Cement
India Ltd. v. Binod Kumar Bawri & Ors.9, Food Corporation of
India v. Adani Agri Logistics Ltd.10, Union of India, Ministry of
Railways, Railway Board & Anr. v. Jindal Rail Infrastructure
Limited11 Satheesh Venugopalan & Anr. v. Rishaj & Anr.12,
Hindustan Lever Ltd. v. Shiv Khullar & Anr.13
(2019) 15 SCC 131
2021 SCC OnLine SC 508
(2022) 2 SCC 275
(2022) 4 SCC 463
2022 SCC OnLine Del 3453
2022 SCC OnLine Del 1880
2022 SCC OnLine Del 1540
2022 SCC OnLine Ker 1961
2008 SCC OnLine Del 424
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14. Per contra, learned counsel for the respondent/claimant urged
that the appellant company is again disputing the merits of the case,
which are beyond the remit of jurisdiction of this Court under Section
37 of the A&C Act; and that the learned Arbitral Tribunal
meticulously considered all the documents/submissions and evidence
brought on the record by the parties and has passed a reasoned award.
It was urged that there is nothing to suggest that the impugned award
is rendering a decision on certain issues de hor the contract executed
by the parties. It was canvassed that in terms of Clause 5 and 5(1) of
―General Conditions of the Agreement‖ between the parties, the
agreement was always for a fixed agency fee irrespective of reduction
of the PO inasmuch as the entire work to the extent of 80% of the ‗Big
PO' had already been performed by the respondent/claimant. In his
submissions, learned counsel for the respondent/claimant relied on the
decisions in MMTC Limited v. Vedenta Limited14, State of
Jharkhand v. HSS Integrated SDN15, Mahanagar Telephone
Nigam Limited v. Fujitshu India Private Limited16, Jhan
Cooperative Group Housing Society Ltd. v. PT. Munshi Ram &
Associates Pvt. Ltd.17, Mahanagar Telephone Nigam Limited v.
Finolex Cables Limited18, L.G. Electronics India (P) Ltd v. Dinesh
Kalra19, Prestress Wire Industries v. Uppal Builders Pvt. Ltd.20,
14 (2019) 4 SCC 163
15 (2019) 9 SCC 798
16 2015 SCC OnLine Del 7437
17 ILR (2013) II Delhi 1632
18 2017 SCC OnLine Del 10497
19 2018 SCC OnLine Del 8367
20 2019 SCC OnLine Del 11104
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NHAI v. M/s. BSC-RBM-PATI Joint Venture21, ADTV
Communication Pvt. Ltd. v. Vibha Goel22, Union of India v.
Chenab Construction Company23, V2 Retail Limited v. SS
Enterprieses24, Steel Authority of India v. Gupta Brothers Steel
Tubes Limited25
ANALYSIS & DECISION:
15. I have given my thoughtful consideration to the submissions
advanced by the learned counsel for the rival parties at the Bar. I have
gone through the record of the case including the record of the
arbitration proceedings, which is Annexure-326 as well as the
impugned order dated 29.10.2020 and 09.12.2020. I have also gone
through the case laws (cited at the Bar).
16. First things first, before I advert to the case law on the subject,
it would be expedient to re-produce Section 34 as also the scope of
appeal under Section 37 of the Act, which read as under:
―34. Application for setting aside arbitral award. -(1) Recourse to a
Court against an arbitral award may be made only by an
application for setting aside such award in accordance with sub-
section (2) and sub-section (3).
(2) An arbitral award may be set aside by the Court only if-
(a) the party making the application establishes on the basis of the
record of the arbitral tribunal that-
(i) a party was under some incapacity; or
(ii) the arbitration agreement is not valid under the law to which
the parties have subjected it or, failing any indication thereon,
under the law for the time being in force; or
(iii) the party making the application was not given proper notice
21 2017 SCC OnLine Del 6430
22 2018 SCC OnLine Del 8843
23 2019 SCC OnLine Del 10515
24 2019 SCC OnLine Del 8230
25 (2009) 10 SC 63
26 Pleading Volume-I PDF Annexure-3 as well
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of the appointment of an arbitrator or of the arbitral proceedings or
was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated
by or not falling within the terms of the submission to
arbitration, or it contains decisions on matters beyond the
scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to
arbitration can be separated from those not so submitted, only
that part of the arbitral award which contains decisions on
matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure
was not in accordance with the agreement of the parties, unless
such agreement was in conflict with a provision of this Part from
which the parties cannot derogate, or, failing such agreement, was
not in accordance with this Part; or
(b) the Court finds that--
(i) the subject-matter of the dispute is not capable of settlement by
arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of
India.
Explanation 1.--For the avoidance of any doubt, it is clarified that
an award is in conflict with the public policy of India, only if,-
(i) the making of the award was induced or affected by fraud or
corruption or was in violation of Section 75 or Section 81; or
(ii) it is in contravention with the fundamental policy of Indian
law; or
(iii) it is in conflict with the most basic notions of morality or
justice.
Explanation 2.--For the avoidance of doubt, the test as to whether
there is a contravention with the fundamental policy of Indian law
shall not entail a review on the merits of the dispute.
(2-A) An arbitral award arising out of arbitrations other than
international commercial arbitrations, may also be set aside by the
court, if the court finds that the award is vitiated by patent illegality
appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground
of an erroneous application of the law or by reappreciation of
evidence.
(3) An application for setting aside may not be made after three
months have elapsed from the date on which the party making that
application had received the arbitral award or, if a request had been
made under Section 33, from the date on which that request had
been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was
prevented by sufficient cause from making the application within
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the said period of three months it may entertain the application
within a further period of thirty days, but not thereafter.
(4) On receipt of an application under sub-section (1), the Court
may, where it is appropriate and it is so requested by a party,
adjourn the proceedings for a period of time determined by it in
order to give the arbitral tribunal an opportunity to resume the
arbitral proceedings or to take such other action as in the opinion of
arbitral tribunal will eliminate the grounds for setting aside the
arbitral award.
17. Section 37 of the Act provides as follows:
"37. Appealable orders.
(1) [Notwithstanding anything contained in any other law for the time
being in force, an appeal] [Substituted 'An appeal' by Act No. 33 of 2019,
dated 9.8.2019.] shall lie from the following orders (and from no others) to
the Court authorised by law to hear appeals from original decrees of the
Court passing the order, namely:
(a) [refusing to refer the parties to arbitration under section
8; [Substituted by Act No. 3 of 2016 dated 31.12.2015.]
(b) granting or refusing to grant any measure under section 9;
(c) setting aside or refusing to set aside an arbitral award
under section 34.]
(2) An appeal shall also lie to a Court from an order of the arbitral tribunal
(a) accepting the plea referred to in sub-section (2) or sub-
section (3) of section 16;or
(b) granting or refusing to grant an interim measure under
section 17.
(3) No second appeal shall lie from an order passed in appeal under this
section, but nothing in this section shall affect or take away any right to
appeal to the Supreme Court.‖
18. The above said provisions have come to be interpreted in
umpteen number of cases by the Supreme Court and various High
Courts including the Delhi High Court. It is well ordained that Section
34 is neither in the nature of an appellate nor it is in nature of a
revisional remedy. It only provides for setting aside the awards on
very limited grounds, as spelled out I sub-sections (2) and (3) of
Section 34. Secondly, as the marginal note of Section 34 indicates,
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―recourse‖ to a court against an arbitral award may be made only by
an application for setting-aside such award in accordance with sub-
sections (2) and (3). In other words, there is a limited right to
challenge an award. Thirdly, Section 34 proceedings do not entail a
challenge on the merits of the award. Fourthly, it is evident from a
reading of sub-section (4) that upon receipt of an application under
Section 34(4), the court may adjourn the Section 34 proceedings and
direct the Arbitral Tribunal to resume the arbitral proceedings or take
such action as would eliminate the grounds for setting aside the
arbitral award. Lastly, there is no gain saying that Section 34 is
modelled on the UNCITRAL Model Law on International
Commercial Arbitration, 1985, under which no power to modify an
award is given to a court hearing a challenge to an award27.
19. It would be relevant to refer to a few case law on the subject. In
the case of MMTC Ltd. v. Vedanta Ltd.28 the agreement between
the parties envisaged that the goods manufactured by the respondent
were to be stored and handled by the appellant as also to be marketed
by it raising invoices in the name of the customers after taking 100%
advance. It was further stipulated that the amount was then to be
remitted to the respondent after deducting service charges/commission
at an agreed rate. It appears that there were certain communications
Article 34. Application for setting aside as exclusive recourse against arbitral award.--
(1) Recourse to a court against an arbitral award may be made only by an application for setting
aside in accordance with paragraphs (2) and (3) of this article.
****
4) The court, when asked to set aside an award, may, where appropriate and so requested by a
party, suspend the setting aside proceedings for a period of time determined by it in order to give
the Arbitral Tribunal an opportunity to resume the arbitral proceedings or to take such other action
as in the Arbitral Tribunal's opinion will eliminate the grounds for setting aside.‖
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between the parties enabling the appellant to have the liberty to supply
the goods to the customers against letter of credit i.e. without advance
payment while maintaining that it was the total responsibility of the
appellant to ensure the bona fides of the letter of credit furnished as
also to ensure that the principal amount besides the interest was paid
on the due date against the letter of credit. A dispute arose with regard
to supplies made by the appellant to Hindustan Transmission Products
Limited ["HTPL"] since the payment was not made and the
respondent invoked the arbitration clause. The majority of the Arbitral
Tribunal found in favour of the respondent and on the award being
challenged, the Single Judge as well as the Division Bench of the
High Court of Bombay found in favour of the respondent. On further
challenge to the Supreme Court, a plea was advanced as to the
arbitrability of the dispute as also the plea that the courts should have
come to a different conclusion based on evaluation of evidence on the
record as regards the alteration affected by the parties envisaging a
distinct type of customers. Further, another plea was taken that the
supplies had not been made to HTPL independent of the contract
between the parties. Outrightly rejecting the aforesaid pleas, the
Supreme Court elucidated the contours of the power under Section 34
and 37 of the Act as under:-
―As far as interference with an order made under Section 34, as per
Section 37, is concerned, it cannot be disputed that such
interference under Section 37 cannot travel beyond the restrictions
laid down under Section 34. In other words, the court cannot
undertake an independent assessment of the merits of the
award, and must only ascertain that the exercise of power by
(2019) 4 SCC 163,
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the court under Section 34 has not exceeded the scope of the
provision. Thus, it is evident that in case an arbitral award has
been confirmed by the court under Section 34 and by the court in
an appeal under Section 37, this Court must be extremely cautious
and slow to disturb such concurrent findings.‖
20. In another case NHAI v. M. Hakeem29, the Supreme Court
delved into the issue as to: whether power of the Court under Section
34 of the A&C Act to set aside an award of an Arbitrator would
include the power to modify such an award. It was a case where the
Division Bench of the Madras High Court had disposed of large
number of appeals under Section 37 of the Act laying down as a
matter of law, that arbitral awards made under the National Highways
Act, 1956 read with Section 34 of the A&C Act should be so read so
as to permit the modification of an arbitral award and thereby, the
Division Bench enhanced the amount of compensation awarded by the
Arbitrator. Frowning upon such course of action, it was categorically
held as under:-
―It can therefore be said that this question has now been settled
finally by at least 3 decisions [McDermott International
Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181] , [Kinnari
Mullick v. Ghanshyam Das Damani, (2018) 11 SCC 328 : (2018) 5
SCC (Civ) 106] , [Dakshin Haryana Bijli Vitran Nigam
Ltd. v. Navigant Technologies (P) Ltd., (2021) 7 SCC 657] of this
Court. Even otherwise, to state that the judicial trend appears to
favour an interpretation that would read into Section 34 a power to
modify, revise or vary the award would be to ignore the
previous law contained in the 1940 Act; as also to ignore the
fact that the 1996 Act was enacted based on the Uncitral Model
Law on International Commercial Arbitration, 1985 which, as has
been pointed out in Redfern and Hunter on International
Arbitration, makes it clear that, given the limited judicial
interference on extremely limited grounds not dealing with the
merits of an award, the "limited remedy" under Section 34 is
29(2021) 9 SCC 1
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coterminous with the "limited right", namely, either to set
aside an award or remand the matter under the circumstances
mentioned in Section 34 of the Arbitration Act, 1996.
{paragraph 42}
Quite obviously if one were to include the power to modify an
award in Section 34, one would be crossing the Lakshman
Rekha and doing what, according to the justice of a case, ought
to be done. In interpreting a statutory provision, a Judge must put
himself in the shoes of Parliament and then ask whether Parliament
intended this result. Parliament very clearly intended that no
power of modification of an award exists in Section 34 of the
Arbitration Act, 1996. It is only for Parliament to amend the
aforesaid provision in the light of the experience of the courts in
the working of the Arbitration Act, 1996, and bring it in line with
other legislations the world over.‖ { paragraph 48}
{Bold Emphasized}
21. The aforesaid view has been reiterated in in a decision titled an
Hindustan Construction Company Limited v. National
Highways Authority of India30, that involved a dispute pertaining
to the interpretation of a condition in a contract. The Arbitral
Tribunal consisting of three members passed an award with one
member dissenting. Aggrieved by the majority view, the contractor
filed application/objections under Section 34 of the A&C Act. The
said application was rejected by the learned Single Judge on the
ground that Arbitral Tribunal's opinion on the issue of
measurement aspect reflected a „plausible and reasonable view
that did not call for interference'. On appeal by NHAI, the
Division Bench set aside the order and observed that the award
was based on an implausible interpretation of the contract. The
Supreme Court held that Courts under Section 34 are not
302023 SCC OnLine SC 1063
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granted the corrective lens and cannot "through
process......forbidden under Section 34" and that the DB's view
under Section 37 resulted in substitution of the Arbitral
Tribunal's view and that such substitution was impermissible.. It
was held31
―For a long time, it is the settled jurisprudence of the courts in the
country that awards which contain reasons, especially when they
interpret contractual terms, ought not to be interfered with, lightly.
The proposition was placed in State of UP v. Allied Constructions:
"[..] It was within his jurisdiction to interpret Clause 47 of the
Agreement having regard to the fact-situation obtaining therein. It
is submitted that an award made by an arbitrator may be wrong
either on law or on fact and error of law on the face of it could not
nullify an award. The award is a speaking one. The arbitrator has
assigned sufficient and cogent reasons in support thereof.
Interpretation of a contract, it is trite, is a matter for arbitrator to
determine (see Sudarsan Trading Co. v. The Government of
Kerala, (1989) 2 SCC 38 : AIR 1989 SC 890). Section 30 of
the Arbitration Act, 1940 providing for setting aside an award is
restrictive in its operation. Unless one or the other condition
contained in Section 30 is satisfied, an award cannot be set aside.
The arbitrator is a Judge chosen by the parties and his decision is
final. The Court is precluded from reappraising the evidence. Even
in a case where the award contains reasons, the interference
therewith would still be not available within the jurisdiction of
the Court unless, of course, the reasons are totally perverse or the
judgment is based on a wrong proposition of law". {paragraph
27}
This enunciation has been endorsed in several cases
(Ref. McDermott International Inc. v. Burn Standard Co. Ltd.32).
In MSK Projects (I) (JV) Ltd v. State of Rajasthan33 it was held that
an error in interpretation of a contract by an arbitrator is ―an error
in Reliance Infrastructure Ltd. v. State of Goa, 2023 SCC OnLine SC 604 referring to earlier
decision in Delhi Airport Metro Express Private Limited v. Delhi Metro Rail Corporation,
(2022) 1 SCC 131
32(2006) 11 SCC 181
33(2011) 10 SCC 573
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within his jurisdiction". The position was spelt out even more
clearly in Associate Builders34, where the court said that:
―[..] if an arbitrator construes a term of the contract in a reasonable
manner, it will not mean that the award can be set aside on this
ground. Construction of the terms of a contract is primarily for an
arbitrator to decide unless the arbitrator construes the contract in
such a way that it could be said to be something that no fair minded
or reasonable person could do.‖ {paragraph 42.3. Bold
emphasized}
22. In view of the aforesaid proposition of law, reverting back to
the instant matter, it would be relevant to reproduce the reasons that
prevailed in the mind of the learned Arbitral Tribunal while deciding
the issue No.1 in favour of the respondent/claimant, which are as
under35:
―14. On 8th February the claimant wrote to the respondent referring
to the revised PO. This letter refers to a meeting that was held on
01.02.2013. The scope of the work as revised has been given in
detail in this email letter. So far as the question on Iris Fee is
concerned the letter Ext CW 1/5 referring to the discussion says:
"During our discussions with Sony Mobile Iris had
emphasised that based on the team costs Iris will charge an
amount of Rs. 192 lakhs as service fee for the entire project.
(mail attached - Global procurement Sony Mobile). The issue
was further discussed and in line with Sony's requirement
Iris brought down their fee to Rs. 180 Lakhs. (mail
attached - Global procurement Sony Mobile).
Subsequent to these discussions Iris was advised that this
project needs to be completed within four months from
issuance of PO and since the time was reduced Iris would
also reduce its fee since it was based on time costs.
Based on this premise and following negotiations finally
Sony agreed to pay Iris fee of Rs. 136 lakhs which is
reflected on the official mass retail PO issued by Sony.
For Ease of calculations and discussions this amount was
being spoken of and mentioned as 8% of the value of PO'.
34(2015) 3 SCC 49
{Emphasized invited by this Court to the observation in bold in second appeal under section 37}
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Vide this email we would like to submit that the Iris team in
the true team spirit of partnership has from the very
beginning developed, managed and delivered this entire
project.
You will agree that in the past months we have seen several
changes, in the designs, in the markets, retail outlets,
timelines, the overall costs, the management of the project etc
and Iris has steadfastly worked in tandem with your teams to
deliver on Sony's every requirement including providing
Sony with substantial savings. Despite this project having
stretched for over nine months now the Iris team has
neither shirked responsibility nor asked for any extra
remuneration. Now at this very last leg' of our deliveries
with more than 80% of the entire project complete it is
only appropriate that Sony pay Iris their agreed fee of Rs.
136 lakhs as per the original PO".
15. On 12th February the claimant sent another excel sheet
including the Iris Fee as claimed in invoice no 165 and calculating
the new PO value at Rs. 156.5 Mil. The single one line note
forwarding the excel sheet written by Mr. Haider Rizvi is as under:
"This refers to our discussion and subsequent to recheck of
quantities from Vender Partner the Total PO value now stand
revised to Rs. 156.5 Mil, this resolves and closes all issues in
this PO. The updated sheet is attached".
16. Now the excel sheet issued by the claimant as well as the one
issued by the respondent included the Iris Fee figures Rs.
45,84,451/-. The respondent did say "Need Discussion" in its
communication of 29.01.2013. It appears that there were
discussions on various dates as reflected in the communications
mentioned above and the statement of W1. The amount claimed by
the claimant in invoice no 165 was included by the respondent
itself while calculating revised value of the PO and despite the
discussions that preceded and followed the revision of the PO, the
claimant Included this figure in its communication when it sent its
own excel sheet. There is no evidence that the respondent disputed
this figure after the aforesaid mail of the claimant dated 12.02.2013
was received by it.
17. The next correspondence Ext CW 1/7(Collectively) in this
matter comes on 15.04.2013 as email from the claimant to the
respondent reminding the respondent of the amounts due. The
respondent replied to the email on the same day asking for
confirmation regarding:
1. Invoices received against "Big PO Rs. 15.33 crores"
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2. Payment status of Iris other than the "Big PO".
18. The respondent did not raise any issue regarding its liability
to pay the amount claimed in the invoice no. 165 on the claimant's
simulation dated 12.02.2013 or by the claimant's earlier letter of 08
the February which said that the Iris fee was agreed upon as Rs.
1,36,10,726/- .
19. On 15th April the parties exchanged notes on various small
issues. No questions regarding the invoice no. 165 or the dues
thereunder were raised by the respondent although the parties
corresponded only regarding the dues in respect of the PO in
question.
20. On 16th April the claimant wrote to the respondent an email
(part of Ext CW 1/7) asking to take the payment position seriously
as the respondent had already confirmed having received all the
invoices. On 22nd April, the claimant again wrote an email Ext
CW 1/8 to the respondents asking for the payments. A list of all the
pending invoices was included in the correspondence. Some of the
invoices has been highlighted. The invoice no. 165 was one of the
highlighted invoices. The letter explains that some of the invoices
were being marked as per the requirement of the respondent.
Despite the highlighting, the respondent did not come out with
the refusal to accept the liability for the amount of the invoice
no. 165. The demand for the dues was reiterated by the claimant in
its email dated 24.04.2013 Ext. CW 1/22, 17.05.2013 Ext CW 1/9,
02.05.2011 Ext CW 1/25 and 10.06.2013 Ext CW 1/10. On
10.06.2013 itself the respondent again asked for certain invoices.
However there was no mention of invoice no 165 in this email
letter. The respondent sent reconciliation on 19th June CW 1/11
which was found to be fine by the claimant. The reconciliation
includes the invoice no 165. The claimant while confirming the
reconciliation said further that the invoice no 165 shall be resolved
as soon as possible and asked for the release of the payment at an
early date.
21. However on 20th June the respondent wrote a formal letter
Ext CW 1/12 sent through, registered post in which the respondent
referred to the various dues under various heads and included one
cheque towards dues but denied the liability under invoice no 165.
The two paragraphs of this letter that referred to invoice no 165 are
as under:
"Please note that as regard your invoice bearing no 165 dated
17th Jan, 2013 for an amount of Rs. 51,11,479/- (Rupees
Fifty One Lakh Eleven Thousand Four Hundred Seventy
Nine Only) which you have raised towards agency
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commission charges is not payable by us as the agency
commission has already been charged by you in your other
bills for the executed work & the same has been duly paid by
us. The same has been communicated to you on numerous
occasions in the past also.
We reiterate that, the agency commission charges can be
paid/is payable only on the work executed i.e. in your case
the work executed by you is in accordance of the PO for an
amount of Rs. 14,90,55,832/- (Rupees Fourteen Crore Ninety
Lakh Fifty Five Thousand Eight Hundred Thirty Two Only)
hereafter "New PO"; therefore, your claim of agency
commission on the initial PO i.e. on Rs. 22,51,69,945/-
(Rupees Twenty Two Crore Fifty One Lakh Sixty Nine
Thousand Nine Hundred Forty Five only) is not tenable as
the executed work by you is not in accordance of the original
PO. It shall not be out of place to mention herein that the
original PO in fact was superseded by the New PO 'when you
agreed to undertake work in accordance of the New PO".
22. The claimant replied on 10.07.2013 Ext. CW 1/13 claiming
the amount under invoice no. 165 and refusing to accept this
settlement of bills, as offered in the letter dated 20.06.2013. Part of
the letter relevant to the issue is extracted below.
"As per several discussions with your team our invoice no
165 dated the 17th Jan 2013 for Rs. 51,11,479 is a valid
invoice and it has never been communicated in the past that it
is not payable. Your contention that you have informed us on
numerous occasions in the past that this Invoice in not
payable is therefore not correct.
.......
As per our query on TDS deduction that an amount Rs.
2,34,491.78 has been excess deducted we note that the
amount paid/ credited by you as reflected in the form 26 AS
from the Income Tax Website includes the value of the
invoice of Rs 51,11,479 i.e. this amount has already been
shown as amount paid/credited by you for the Income Tax
records and statutory records. Therefore as per the Income
Tax records we have to show the above invoice of Rs
51,11,479 as part of our Income for the FY 2012-13".
23. The claimant reiterated its demand vide a letter dated
10.09.2013 Ext. CW 1/14 and thereafter issued formal legal notice
dated 21.10.2013 Ext. CW 1/15.
24. Now we can analyze the above sequence of events. It is
submitted by the respondent that the Iris fee was always
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decided to be a 8% and there was no confusion about it and
that the claim raised in invoice no 165 is utterly false. This
position is, however, not brought out at all in revised PO on
29.01.2013. There was a discussion on 21.01.2013 as stated in the
communication of 29.01.2013. There were in fact discussions even
before the disputed Invoice was raised as stated by CW 1. The
excel sheet giving details of dues has the amount of the invoice
no 165 incorporated in calculating the total payable to Iris i.e.
claimant. On top of all the columns, there is mention of the word
"Ok", except on top of the column with the name Iris. Absence of
this term "Ok" on Iris doesn't indicate anything more than what is
mentioned in the forwarding note namely "Need Discussion". If
both parties understood the fee payable to be 8% of the value
of work done there was no need to include the amount
mentioned in invoice no 165 in the excel sheet and say "Need
Discussion" in the note. The simplest thing to do was to add
8% in the column of Iris fee and straightway reject the Invoice
no 165 as bad.
25. Secondly, even after discussion between the parties that
followed the communication of 29th January, the respondent did
not categorically say that the claim under invoice no 165 was
entirely bad on the ground that the fee payable was only 3%. The
claimant in the communication of 12th February stated in so
many words after including invoice no 165. "This resolves and
closes issues in PO". Had the respondent's case as made out
been true, the respondent would have immediately replied
saying that the issue of Iris Fee was still open and could not be
closed. Nor did the respondent reply by saying that this column
had to be corrected with the figure calculated at 8% of the value of
the work done.
26. In the earlier communication dated 8th February mentioned
earlier a resume of discussion of the parties over the scope of work,
the work process and the other issues were discussed. In the 8th
February letter, the claimant sufficiently explained that after
discussion the Iris fee had been agreed to be retained at Rs. 136
Lakhs. Both the letter of 8th February and the revised excel
sheet of 12 February were subsequent to discussion held on 21 st
January to issue of the revised PO of 29th January. Till
20.06.2013 here was not a shred of paper or electronic
communication denying the claim of invoice no 165 on the
ground that the fee to be paid was only 8%.
27. It appears to me that both parties understood that the fee to
be paid to the claimant continued to be the amount agreed
originally which justified issue of invoice no. 165. So the letter of
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20.06.2013 was merely an afterthought and did not indicate the real
situation.
28. The respondent not only included the amount claimed in
invoice no 165 while calculating the value of revised PO or the
new PO, but also deducted the Income Tax to be deducted at
source. The respondent says that the claim in invoice 165 was
included in the excel sheet accompanying the revised PO only for
the purpose of simulation. The Ld. counsel for the respondent has
submitted that the inclusion of the figure in the simulation cannot
be read as acceptance of inability. Similarly, he says, the deduction
of Income Tax at source does not amount to acceptance of liability.
The Ld. counsel for the respondent Mr. Nikhil Nayyar referred to
two judgements to buttress his argument. They are M/s S.P.
Brothers Vs Biren Ramesh Kadakia 2009 AIHC 650 in which the
Bombay High Court held that issuance of the TDS certificate did
not amount to an acknowledgement of the defendant within the
meaning of Section 25 of the Indian Evidence Act and ACTAL Vs
India Infoline Limited 2012 SCC Bom 1507 in which the first
judgement is referred to with approval. Even if these arguments are
taken as correct the two facts namely the deduction of Income Tax
and inclusion of the claim made in the invoice no 165 in the
simulation taken together indicate that the parties understood that
invoice no 165 was valid and payable.
29. If the figure in question was included only for the purpose
of simulation, there was no reason why 8% could not have been
Included in the simulation. The original figure of Rs. 136 mil was
equal to 8% of the total value of the original PO, With the PO
value revised, 8% of the revised value again could be similarly
calculated. Thus it is apparent that both parties understood that,
with the revision of PO value, the fee to pay the claimant did not
remain 8% of the value of the work actually delivered.
30. The whole case can be considered from another angle. The
claimant had already taken steps on the orders placed by the
original PO which was for a much bigger amount of Rs
22,51,69,945/-. The claimant had taken steps to fulfil that order and
in the process had incurred 'expenditure and liability in the
anticipation that the entire work produced would be delivered and
the sum agreed upon as fee namely Rs. 136 mil would be earned by
way of fee at the rate of 8% from every bill) Before the conclusion
of the entire exercise, the respondent decided to take delivery of
the work produced only till then and revised the total value of the
PO. Admittedly the respondent did not offer to take upon itself
the loss that was going to be caused to the claimant on account
of respondent's decision not to take delivery of the remaining
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work directed under by the first original PO. It is very likely
that the claimant would not have accepted the deduction in the
value of the PO which was the first contract and forgo the
profit expected by it by accepting only 8% of the revised value
while shouldering all the costs that had already been incurred
for satisfying the first original contract. It was only likely that
the claimant would not have agreed to alteration in the
contract without securing its own Interest.
31. Ms. Malvika trivedi, the Ld. counsel for the claimant made
an argument that the claimant agreed to the respondent's proposal
to reduce the value of the PO only on the condition that the "Iris
fee" would not be altered. The Ld. counsel for the respondent
opposed the argument on the ground that no such plea has been
taken in the Statement of Claim, True, the claimant has not
categorically pleaded such a case. But the Statement of Claim has
to be read along with the documents filed by the claimant. The
letter dated 08.02.2013 CW 1/5 is only indicative of such a plea.
Hence this plea is a part of the claimant's case and cannot be
ignored. The respondent cannot say that this plea takes the
respondent by surprise. Therefore such a plea can be considered as
a part of the claimant's pleadings and therefore is worth
considering.
32. CW1 Mr. Haider Rizvi in his cross-examination also
maintained the same case by saying, as quoted earlier, that Iris
agreed to lower the value of the Big PO and take the responsibility
for the liability of vendor to whom it had issued purchase order
based on the Big PO from Sony provided "Iris fee" of Rs.
1,36,10,724/-, is paid as per the original PO.
33. The learned counsel for the claimant has shown from the
two simulation excel sheets which has several columns with
heading available stock (not executed + modification). Three
entities or vendor partners had stocks amounting to Rs. 31,59,294,
Rs. 2,21,01,051 and 3,17,45,919. It was between the claimant and
these vendor partners to deal with these available stocks. Whatever
of these available stocks could not be supplied to the respondent
remained with the claimant and its vendor partners. In this situation
It is most likely that the claimant could not have agreed to only 8%
of the supplies made to the respondent and suffer the consequence
Investments/expenditure incurred to satisfy the original PO.
34. The claimant's case that the parties agreed that despite the
reduction in the total value of the PO the claimant would get the
fee originally agreed upon, seems to be more likely than the case of
the respondent that the fee payable to the claimant continued to be
8%. This tribunal has to accept one of the two cases made out by
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the two parties and cannot create a third case. The case of the
claimant being more probable has to be accepted.
35. At the time of final arguments both the counsel raised the
issue as to whether the documents of 17.01.2013, 29.01.2013,
08.02.2013 and 12.02.2013 constituted any contract. The Ld.
Counsel for the claimant has referred to a few judgements showing
that when a counter proposal is accepted it amounts to an offer. Let
us examine the issue on the basis of the respective claims of the
parties and the documents on record.
36. The original PO Ext. CW 1/3 was a contract which nobody
disputes. In that contract the fee was agreed to be 8% and 8% was
calculated at Rs. 1,36,10,726/-. The revised PO dated 29.01.2013,
according to the respondent's counsel, is merely a conditional offer
and not a contract. The respondent's counsel would further say that
the reply of 08.02.2013 was also not an acceptance of the offer
made by the letter dated 29.01.2013. So far as the reply of
12.02.2013 is concerned, the respondent's counsel says that the
same was not an unqualified acceptance since the total value of the
contract calculated by the claimant was 156.5 million as against the
offer of 155 million, the Ld. counsel for the claimant would argue
that the respondent accepted the offer made vide letter dated
12.02.2013 and therefore the same amounted to a contract.
37. It is quite clear from the narration of facts in the foregoing
paragraphs that the contract between the parties had actually taken
place before the revised PO was issued when the parties met and
discussed on dates including 21.01.2013. The claimant's witness
has said that invoice no. 165 was raised as the discussions were
already on for reducing the total value of the contract and as per the
understanding between the parties that "Iris Fee' would not be
altered, the invoice no. 165 was raised. The parties did not formally
record the contract as is customary in the commercial world. What
the contract was can only be inferred from the documents
mentioned above. The foregoing paragraphs indicate the inference
that can be drawn from the aforesaid documents, namely that the
contract was not to reduce the total fee payable to the claimant.
38. Even if the contention of the Ld. Counsel, that the
documents of 29.02.2013 were merely a conditional offer is
accepted, it does not advance the case of the respondent. In the
letter of 29.01.2013 there was no offer for "Iris Fee" to be paid at
8% of the bills. If this was to constitute a conditional offer and
the respondent intended to pay only 8%, the respondent should
have offered 8% in the offer/conditional offer and should have
waited for the acceptance by the claimant. Instead, the
respondent made a conditional offer for Rs 1.36 crores while
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including in the claim in the invoice no 165 as amount payable
to the claimant and asked for discussion. There was no
conditional offer for 8% to be accepted. Nor was any such offer
accepted. There is no document/communication till June 2013
saying that the contract was only for 8%. In fact the respondent did
not itself mention 8% in any of its communication ever since the
original offer was revised.
39. As per respondent's affidavit at (pg. 7) there was no
agreement regarding "Iris fee" till 12th of February and further that
on 05th March in a meeting the respondent offered 8%. The
claimant disputes the same in the Cross-examination. But more
importantly the witness himself in cross-examination stated that the
PO at pg. 47 & 48 of the Statement of Claims viz. the original PO
CW 1/3 clearly indicated 8%. Thus the witness contradicts himself
rendering his story weak for acceptance. The respondent in none of
the subsequent documents, despite repeated demands from the
claimant, referred to any fresh agreement of 8% on 5th March or
any date subsequent to the revision in the PO. Therefore, it is
difficult to infer that the parties contracted to "Iris Fee" being 8%
only, even on the revised PO.
40. The "conditional offer" stood accepted on 12.02.2013
where the claimant reiterated the claim under invoice no 165 and
recalculated some of the details. The respondent having not replied
to this document till all the contractual work was concluded clearly
accepted this position to justify a finding that the contract between
parties included invoice no 165. It can be seen that the letter
12.02.2013 accepted the offer made in the letter 29.01.2013 and the
same should not be treated as a counter offer because the difference
in the total was not based on difference in regard to any terms of
the contract but because of the way the parties calculated their
dues. One may refer to judgement of Supreme Court in the case of
Fair engineers (P) Ltd. Vs N.K. Modi, (1996) 6 SCC 385 in which
an offer, a counter offer with some corrected technical details and
its acceptance were held to be the parts of a concluded contract.
41. Even if the letter dated 12th February was treated as a
counter offer that stands accepted by the silence of the respondents
as acceptance can also be implied from conduct of the parties. The
claimant in this regard cited the judgement in the case of Coffee
Board Vs Commissioner Income Tax (1985) 3 SCC 263.
42. In Deokar Exports (P) Ltd Vs New India Assurance Co.
Ltd. (2008) 14 SCC 598 the Supreme Court had the following
observation to make in respect of offers and counter offers.
"A policy of insurance is a contract based on an offer
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(proposal) and an acceptance. The appellant made a proposal.
The respondent accepted the proposal with a modification.
Therefore, it was a counter-proposal. The appellant had three
choices. The first was to refuse to accept the counter-
proposal, in which event there would have been no contract.
The second was to accept either expressly or impliedly, the
counter-proposal of the respondent (that is, the respondent's
acceptance with modification) which would result in a
concluded contract in terms of the counter-proposal. The
third was to make a counter-proposal to the counter-proposal
of the respondent in which event there would have been no
concluded contract unless the respondent agreed to such
counter- counter-proposal. But the appellant definitely did
not have the fourth choice of propounding a concluded
contract with a modification neither proposed nor agreed to
by either party".
43. The situation mentioned in that case is very similar to ours
in which there are offers and counter offers but there is no offer of
any kind for payment of "Iris Fee" @ 8%. The original PO stood
revised and so far as the "Iris Fee" in the new PO was concerned,
the same was "conditionally" given to include the invoice no. 165.
Therefore, the claimant could accept only this offer. The offer was
not for 8% and no suggestion of that nature were at all made in that
offer or in offer made thereafter. RW1 himself says that it was only
on 05th of March that the parties agreed to 8%, a contention which
has been disbelieved.
44. In view of the entire analysis as above I have no option but
to hold that the contract between the parties as per the PO
29.01.2013 included the respondent's liability to pay the amount
claimed in invoice no 165 as claimed in Statement of Claim. Issue
no 1 is decided in favour of the claimant.‖
23. A careful perusal of the aforesaid line of reasoning would show
that the learned Arbitral Tribunal conducted a meticulous exercise of
appreciation of the entire evidence brought on the record resulting in
passing of the impugned award. Without further ado, there is no
question of the learned Arbitral Tribunal going beyond the terms and
conditions of the contract between the parties. There is no re-drafting
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of the contract so as to envisage that the decision went beyond what
was being claimed by the respondent/claimant.
24. The long and short of the entire story is that although the scope
of work had been revised in the meeting held on 01.02.2013, the e-
mail dated 08.02.2013 (Ex.CW1/5) clearly brought out that based on
the ‗Big PO', 80% of the work had already been performed and the
‗Iris fee' had been negotiated to be Rs. 136 lakhs assessed @ 8%.
Evidently, this was followed by another e-mail dated 12.02.2013
where the demand for the ‗Iris fee' @ 8% was reiterated and for that
matter, reiterated in subsequent discussions and accept for a lame
assertion on the part of the appellant consequent to the meeting dated
29.01.2013 that the said aspect ―need discussion‖, there was never any
refusal on the part of the appellant company to disown such
disposition till 20.06.2013.
25. Learned Arbitral Tribunal rightly relied on the decision in
Deokar Exports (P) Ltd Vs New India Assurance Co. Ltd.
(supra)36, to the effect that even if there was a counter offer by the
respondent claimant, the appellant firm chose to remain silent and the
parties acted upon the terms and conditions of the contract and the
respondent/claimant thereby performed their part of the contract to the
"42 A policy of insurance is a contract based on an offer (proposal) and an acceptance. The appellant made
a proposal. The respondent accepted the proposal with a modification. Therefore, it was a counter-proposal.
The appellant had three choices. The first was to refuse to accept the counter-proposal, in which event there
would have been no contract. The second was to accept either expressly or impliedly, the counter-proposal of
the respondent (that is, the respondent's acceptance with modification) which would result in a concluded
contract in terms of the counter-proposal. The third was to make a counter-proposal to the counter-proposal of
the respondent in which event there would have been no concluded contract unless the respondent agreed to
such counter- counter-proposal. But the appellant definitely did not have the fourth choice of propounding a
concluded contract with a modification neither proposed nor agreed to by either party".
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full satisfaction of the appellant completing the entire task by
30.04.2013.
26. The interpretation that has been accorded by the learned
Arbitral Tribunal to the whole sequence of events from the day the
contract in question was executed between the parties and ensuing
correspondence, which are by all account admitted, leave no scope for
doubt that the impugned award holding that the ‗Iris fee' was payable
@ 8% of the original ‗Big PO' cannot be said to be patently illegal or
outside the scope of the contract entered into between the parties.
27. In the face of the fact that the learned Arbitral Tribunal has
assigned sufficient and cogent reasons in support of its decision, no
interference is called from this Court in this second appeal. In other
words, there is no scope for any interference when it is palpable that
the learned Arbitral Tribunal committed no illegality or perversity in
appreciating the evidence led by the parties and there is nothing to
discern that the impugned award is based on wrongful application of
law on any aspect of the matter. There is no necessity for this Court to
delve into the plethora of case laws cited at the Bar and reflect upon
the respective pleas or counter pleas advanced by learned counsels for
the parties in view of the authoritative pronouncement by the Supreme
Court on the subject referred to hereinabove by this Court.
28. In view of the foregoing discussion, the present appeal is bereft
of any merits. The appellant company is fully responsible for this kind
of protracted litigation, and thereby, wasting time and precious
resources, putting unnecessary burden on the justice delivery system
for which they must be visited with the exemplary cost, which is
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quantified at Rs. 5,00,000/-, that is by all means a token amount given
the claim amount involved, which shall also be payable to the
respondent/claimant within one month from today, failing which they
shall be entitled to recover the same with interest @ 15% p.a. till
realisation.
29. The appeal, along with all the pending applications, is disposed
of accordingly.
30. A copy of this judgment be sent to the learned Trial Court for
information and records.
DHARMESH SHARMA, J.
FEBRUARY 15, 2024
Sadique
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