the Temp DEs engaged through Greenfinch were crucial to Swiggy;
hence, it would make the payments due to them directly.
32. The Arbitral Tribunal also reproduced the letter dated
28.04.2020 (Exhibit P8), whereby Swiggy had called upon Greenfinch
to cure the breach within two days, failing which the agreement would
stand automatically terminated.
33. The Arbitral Tribunal found that, under the Agreement, Swiggy
was required to pay the invoices within the stipulated time, and it had
defaulted in making payments for invoices raised in November, which
were admittedly received by Swiggy. The Arbitral Tribunal found that
Swiggy Ltd.'s reliance on Clauses 6.3, 6.6, and 7.4 of the Agreement
for withholding the amounts was unsustainable.
34. Accordingly, the Arbitral Tribunal found that Swiggy had
defaulted in making payments for invoices raised for supplies that
were admittedly received by Swiggy Ltd. The Arbitral Tribunal
awarded an amount of `7,50,33,791/- in favour of Greenfinch. The
Arbitral Tribunal further held that, since Swiggy had unjustifiably
withheld this amount, it was also liable to pay interest. Although
Greenfinch claimed interest at the rate of 18% per annum, the Arbitral
Tribunal awarded interest at the rate of 12% per annum from
- 18 -
15.12.2019 till the date of the impugned award on the aforesaid
amount of `7,50,33,791/- which was withheld by Swiggy.
35. Insofar as the claim for compensation for manpower loss, claim
No.2 for a sum of `8,83,05,108/- is concerned, the Arbitral Tribunal
noted that the same was computed on the basis of an average
monthly profit of `73,58,759/-. The Arbitral Tribunal held that
Greenfinch would be entitled to the said service charges for a period
of five months from December to April, that is, till the termination of
the Agreement. However, the Arbitral Tribunal reduced the amount
by half (50%) on the ground that Greenfinch had defaulted in
depositing the GST for the month of October 2019 and part of
November 2019. However, the Arbitral Tribunal denied Greenfinch's
claim for interest on the said amount.
36. The Arbitral Tribunal held that termination of the Agreement by
Swiggy was wrongful and also awarded compensation, which was
quantified to `73,58,759/-. The Arbitrator noted that under the
Agreement, either party could terminate it by giving 30 days' notice.
Therefore, the claim for wrongful termination of the Agreement was
limited to one month's profit that Greenfinch would have earned. The
- 19 -
Arbitral Tribunal accepted the service charges claimed for November
2019 as the measure for loss of profits.
37. The Arbitral Tribunal also accepted Swiggy's counterclaim of
`3,70,48,450/- as supplied by it on account of reversal of ITC for the
month of October 2019 and accordingly, awarded the said amount.
Additionally, the Arbitral Tribunal also awarded an amount of
`1,65,80,527/- on account of the GST paid by Swiggy to Greenfinch,
which was received by Greenfinch in respect of twenty-one (21)
invoices raised for the month of November 2019 but not deposited
with the GST Authorities. Additionally, the Arbitral Tribunal also
awarded interest at the rate of 12% per annum on the said amount,
till the date of the impugned award.
38. As discussed above, an aggregate amount of `13,72,99,041/-
was awarded in favour of Greenfinch, and a sum of `6,16,96,653/-
was awarded in favour of Swiggy. Thus, the net amount of
`7,56,02,388/- was awarded in favour of Greenfinch after setting off
the amount awarded in favour of Swiggy. In terms of the impugned
award, Swiggy Ltd. is also obliged to pay interest at the rate of 12%
per annum from the date of the award till the date of payment.
- 20 -
The Impugned Order
39. Both parties preferred their respective applications to set aside
the impugned award under Section 34 of the A&C Act. Swiggy's
application (COM.A.P.No.62/2024) was confined to seeking the
setting aside of the impugned award to the extent of the amounts
awarded in favour of Greenfinch.
40. Swiggy raised several grounds to challenge the impugned
award. It claimed that the Arbitral Tribunal had failed to consider that
the sole witness (PW1) examined by Greenfinch was not properly
authorised and lacked personal knowledge. Second, it was contende
that the Arbitral Tribunal's finding that the termination of the
Agreement was wrongful and patently erroneous. Third, that the
impugned award was contradictory inasmuch as the Arbitral Tribunal
had awarded compensation to Greenfinch for breach of contract, but
it also awarded a counterclaim for reversal of ITC in favour of Swiggy,
which was founded on the basis that Greenfinch had breached the
terms of the Agreement. The Arbitral Tribunal held that Swiggy could
not allege that Greenfinch had breached its obligations to comply with
statutory laws on the basis of any default in the payment of GST, yet
it awarded Swiggy's counterclaim for the reversal of ITC.
- 21 -
41. Greenfinch also filed an application (COM.A.P.NO.72/2024) for
assailing the impugned award to the extent that the Arbitral Tribunal
had allowed Swiggy's counterclaims. Greenfinch claimed that the
Arbitral Tribunal had no jurisdiction to adjudicate the counterclaims,
which were founded on reversal of ITC. It claimed that GST matters
fall within the exclusive jurisdiction of the GST adjudicatory
authorities, and that the counterclaim was beyond the scope of the
arbitration agreement.
42. Swiggy also resisted Greenfinch's application to set aside the
impugned award, inter alia, contending that the claims were awarded
on admitted facts. It also pointed out that there was no challenge to
the award in respect of counter claim No.3 of `1,65,80,527/- and the
interest amounting to `83,67,875/- on the said amount.
43. The learned Commercial Court did not render any specific
findings on the issues raised by the parties. However, it accepted
Swiggy's contention that PW1 was not a competent witness. The
learned Commercial Court referred to the decision of the Supreme
Court in Janki Vashdeo Bhojwani v. Induslnd Bank Ltd. (2005) 2
SCC 217 and held that PW1 was not a competent person to depose
- 22 -
the matter and accordingly, set aside the impugned award in its
entirety.
Reasons and Conclusion
44. As noted above, the learned Commercial Court had set aside
the impugned award solely on the ground that PW1 was not a
competent person to give evidence before the Arbitral Tribunal, and
that reliance on her evidence vitiated the impugned award on the
ground of patent illegality. The learned Commercial Court also
observed that the impugned award was rendered wholly on the basis
of PW1's evidence.
45. The fundamental premise that the impugned award is rendered
wholly on the basis of PW1's evidence is ex facie erroneous. A plain
reading of the impugned award indicates that it is mainly based on
the admitted documents. There is no dispute that the parties had
entered into the Agreement, the terms of which were referred to by
the Arbitral Tribunal. The impugned award largely rests on the
interpretation of the terms of the Agreement and the admitted
communications exchanged between the parties.
- 23 -
46. The finding that PW1 was an incompetent witness is based on
the principle that the power of attorney holder cannot depose on
behalf of its principal in respect of matters of which the power of
attorney holder does not have any personal knowledge. There is no
cavil with this proposition. However, there is no impediment for an
authorised signatory or a person authorised on behalf of a company
to provide evidence as to the records of the company, even though
the authorised person may not have any personal knowledge of the
facts set out in the record. The knowledge that the records are
maintained in the normal course of business may be sufficient to
produce the same.
47. The learned counsel appearing for Swiggy also fairly stated
that Swiggy's contention that PW1 was incompetent to provide any
evidence on behalf of Greenfinch was based on the assertion that no
resolution had been passed by the Board of Directors of Greenfinch
authorising PW1 to prosecute the case or to give evidence. The
learned counsel submitted that the annual reports and returns filed by
Greenfinch clearly established that no meeting of the Board of
Directors was held on the date on which the resolution authorising
PW1 was passed. However, we note that the learned Commercial
Court has not based its decision on this conclusion. The Arbitral
- 24 -
Tribunal had also not permitted Swiggy to advance the said
contention on the ground that no question had been put to PW1 in
regard to the validity of the board meeting held on 17.10.2019. PW1
had produced a copy of the board resolution, and no question was
put to the witness regarding the said meeting. Further, no such
ground had been urged by Swiggy in its written statement, which
would warrant the parties to lead evidence on the said question.
Additionally, the Arbitral Tribunal noted that Ms Jyoti (PW1) had
represented Greenfinch before the High Court of Karnataka, and that
her authority to do so was not questioned even in those proceedings.
Clearly, there were no grounds to interfere with the decision of the
Arbitral Tribunal on the ground of the competence of PW1.
48. Secondly, it is trite law that the Indian Evidence Act, 1872 or
the Civil Procedure Code, 1908 does not apply to arbitral
proceedings. Section 19 of the A&C Act expressly stipulates that the
arbitral tribunal is not bound by the Code of Civil Procedure, 1908, or
the Indian Evidence Act, 1872. Sub-section (4) of Section 19 of the
A&C Act also expressly provides that the power of an arbitral tribunal
includes the power to determine the admissibility, relevance,
materiality and weight of any evidence. Section 19 of the A&C Act is
set out below:
- 25 -
19. Determination of rules of procedure.--(1) The
arbitral tribunal shall not be bound by the Code of Civil
Procedure, 1908 (5 of 1908) or the Indian Evidence Act,
1872 (1 of 1872).
(2) Subject to this Part, the parties are free to agree on the
procedure to be followed by the arbitral tribunal in
conducting its proceedings.
(3) Failing any agreement referred to in sub-section (2),
the arbitral tribunal may, subject to this Part, conduct the
proceedings in the manner it considers appropriate.
(4) The power of the arbitral tribunal under sub-section (3)
includes the power to determine the admissibility,
relevance, materiality and weight of any evidence."
49. PW1 had clearly stated that she was working as an HR
Manager at Green Finch from 01.02.2018 to 31.01.2019. However,
after 01.02.2019, she was not a regular employee; she was
appointed to work on a task-by-task basis. She had also stated that
she was not in charge of GST compliance and therefore did not have
any personal knowledge of Greenfinch's GST compliance. The
question as to what extent the evidence of PW1 could be relied upon,
and the weightage to be accorded to the said evidence, is a matter
solely within the jurisdiction of the Arbitral Tribunal. Whilst the learned
Commercial Court has faulted the Arbitral Tribunal for relying on
PW1's evidence, the learned Commercial Court had not specified the
link between any finding of the Arbitral Tribunal and the evidence led
by PW1. The learned Commercial Court has simply proceeded on the
- 26 -
basis that the entire impugned award is based on the evidence of
PW1. A premise that we find is erroneous and is not supported by the
plain language of the impugned award.
50. In the foresaid view, the impugned order is liable to be set
aside. Since the learned Commercial Court had not examined the
other contentions advanced by the parties, we were inclined to
remand the matter to the learned Commercial Court. However,
considering that the learned counsel had advanced submissions to
challenge to the impugned award, we consider it apposite to examine
the same in these proceedings.
51. The claims made by Greenfinch and the amounts awarded
against the said claims are set out below:
Claim Amount Amount
No. Description of Claim Claimed Awarded
1(a) Payments towards Temp DE 7,50,33,791 with
charges and service charges 8,91,84,239 interest at the
withheld up to 30.11.2019 rate of 12% from
15.12.2019
1(b) Payments towards service
charges (including interest) for 5,05,96,345 1,83,96,897
arbitrary and illegal retention of
Temp DEs for the period
01.12.2019 to 30.04.2020
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2 Compensation for service
charges due to manpower loss 73,58,759
arising out of illegal termination
for the period 01.05.2020 to
30.04.2021
3(a) Claim of GST amount due as on ----
30.11.2019 Rejected
3(b) Claim of GST amount payable on ----
service charges Rejected
4 Claim of penalty payable due to -----
non- payment of 100% GST due Rejected
as on 30.11.2020
52. The Arbitral Tribunal has awarded a sum of `7,50,33,791/-
(Rupees seven crores fifty lakhs thirty three thousand seven hundred
and ninety one only) in respect of the invoices raised by Greenfinch,
which admittedly remained unpaid. These invoices were issued
through November 2019. There is no serious dispute that Greenfinch
had rendered services in respect of which the said invoices were
raised. The Arbitral Tribunal noted that Swiggy had withheld
payments due to Greenfinch following inspections by GST Authorities
at its premises. Ex.P7, which is a letter written by Swiggy to
Greenfinch communicating its decision to withhold payments, which
was also set out by the Arbitral Tribunal in the impugned award, is
reproduced below:
"Sub: Notice
Ref:
i. Inspection dt. 28/29 November 2019 by DGGSTI
Officials at BTPL's office
- 28 -
ii. Memorandum of Understanding dated 14 November
2017 as replaced by Master Service Agreement dated 11
April 2019.
Dears Sirs,
We are writing on behalf of Bundl Technologies Pvt. Ltd.,
(BTPL) and in reference to the referenced matter and in
relation to the Memorandum of Understanding dated 14
November 2017 as replaced by Master Service Agreement
dated 11 April 2019 (collectively Agreement(s) executed
between BTPL and Greenfinch Team Management Private
Limited (Greenfinch) for availing certain services morefully
defined thereunder. In relation to the mentioned arragment. It is
further specified that we have been receiving services from
Greenginch and all invoices rightfully raised have been paid
without demur except those provided hereunder.
It is brought to your knowledge that the DGGSTI Officials have
conducted an inspection on 28/29th November, 2019 at BTPL
Premises and have raised certain queries to us regarding the
remittance of GST amounts by Greenfinch and accordingly the
eligibility of inputs tax credit in the hands of BTPL. In view of
this inspection, we submit that the payment in relation to the
Agreement is being suspended and any payment which may
be purported to be due to Greenfinch is withheld till resolution
of the above matter as abundant caution.
We recognize that the payment of service fees of the temp DEs
engaged through Greenfinch is critical to them. This service fee
is calculated based on the delivery service provided by them to
BTPL, which details are available with us. Therefore, in
pendency of resolution of on-going investigation, we shall
process the service fee of Temp DEs in good faith to them. We
further submit, that this is being done as the payment to the
Temp DEs is crucial to their earnings and any default in the
same will impact the continuation of operations adversely
alongside loss of goodwill to BTPL
Also note, the outstanding invoices as detailed hereunder are
under dispute and shall be reconciled after necessary
adjustments:
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Invoice City Total billing Week Month
No. No.
933 Delhi 4345584 47 November
934 Karnataka 25062488 47 November
936 Maharashtra 10433411 47 November
937 Tamil Nadu 3096830 47 November
940 A.P. 225390 48 November
941 Delhi 3816675 48 November
942 Karnataka 25007355 48 November
943 Karnataka 2 762847 48 November
944 Maharashtra 10556502 48 November
945 Tamil Nadu 3324120 48 November
946 UP 990827 48 November
We submit the above without prejudice to and with full
reservation of our rights and contentions to initiate necessary
proceedings in the eyes of law. please note, BTPL shall
reserve the right to suspend or terminate the Agreement and
thereby your service, as may be necessary under the
circumstances and reasons aforementioned.
Yours sincerely,
(AUTHORISED SIGNATORY)"
53. The parties thereafter carried out reconciliation of the invoices
that were outstanding, and there is no dispute that they had jointly
submitted that invoices amounting to `7,50,33,791/- were outstanding
and remained unpaid.
54. Clause 6 of the Agreement, which sets out the terms of
payment, is set out below:
"6. - Payments and Terms of Payment under this
Agreement:
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6.1 For the Services by the Service Provider under this
Agreement, the fees, as stipulated under Annexure B
shall be payable by Swiggy to the Service Provider.
6.2 Swiggy shall pay the Service Provider on a monthly
basis within 15 days from the date on which Service
Provider raises a duly acceptable and agreed invoice on
Swiggy.
6.3 Along with the invoices raised by the Service
Provider, the Service Provider shall also provide sufficient
documentary evidence, as required by Swiggy, regarding
all applicable statutory compliances that have been
adhered to by the Service Provider. In the event of
Swiggy finds any statutory compliance have not been
followed or the Service Provider has defaulted in such
compliances. Swiggy shall have the right to require the
Service Provider to rectify such default as well as
indemnify Swiggy for any losses or damage suffered due
to such default by the Service Provider.
6.4 The fees specified in this Agreement shall be
exclusive of any applicable taxes. Any and all statutory
levies should be invoiced at percentages as may be
prevailing at the time of providing the Service. The
Service Provider shall clearly and separately state any
applicable taxes along with registration numbers with
appropriate authorities on the invoice for corresponding
fees.
6.5 All payments to be made under this agreement shall
be subject to the deduction of tax at source, wherever
applicable, as per the provisions of the Income Tax Act,
1961. Swiggy shall deduct tax at a lesser rate or shall not
deduct any tax at source based on specific certificate
obtained by the Service Provider from appropriate taxing
authorities and where a copy of the same is produced to
Swiggy. Swiggy shall reserve the right to recover the
taxes on behalf of the Service Provider from the
payments payable under this Agreement and in case of
default, same shall be recovered from the Service
Provider.
6.6 Swiggy may withhold payment of that portion of the
fees that Swiggy dispute in good faith; provided that
Swiggy will advice the Service Provider in writing of such
- 31 -
dispute, including the details of such dispute, by the time
such fees would otherwise be due. This clause only
applicable to Swiggy's responsibility to pay invoices
presented by the Service Provider, and does not limit
Swiggy's other remedies under this Agreement."
55. The invoices were to be paid within fifteen days of the date on
which Greenfinch raised them. Admittedly, the said payments were
not made.
56. It is apparent from the above, the lis related to the liability to
pay GST. Undisputedly, Greenfinch charged GST on invoices raised
on Swiggy, and Swiggy paid the earlier invoices along with GST.
Greenfinch had also filed its returns acknowledging the receipt of
GST from Swiggy. It also admitted its liability to pay the same.
However, it appears that Greenfinch had availed of Input Tax Credit
[ITC] in respect of the supplies received by it, on which it had paid
GST to the supplier. There is no dispute that if Greenfinch had
received the supplies/inputs and paid the invoices along with GST, it
would be entitled to claim ITC to discharge its GST liability. However,
the record indicates that the GST authorities had levelled an
allegation against Swiggy that it had not received any supplies from
Greenfinch and had fraudulently claimed ITC in respect of the GST
paid on the invoices raised by Greenfinch. Swiggy has stoutly
disputed the same and it is nobody's case before the Arbitral Tribunal
- 32 -
that Greenfinch had not rendered the services for which it had raised
the invoices or that Swiggy had (in the past) not paid the same along
with GST.
57. The Arbitral Tribunal found that, in the circumstances, Swiggy's
failure to pay the invoices within the agreed period amounted to a
breach of the Agreement. Further, there is no dispute that Swiggy had
received the services for which Greenfinch had raised the invoices
and was thus liable to pay them. In the aforesaid circumstances, the
decision of the Arbitral Tribunal allowing the Greenfinch's claim for
payment of invoices raised cannot be considered to be vitiated by
patent illegality or a decision that no reasonable person would take.
Clearly, the impugned award allowing the claim for unpaid invoices
cannot be assailed on the ground that has been vitiated by patent
illegality.
58. We also find no ground to interfere with the award of interest at
the rate of 12% per annum on the said amount of `7,50,33,791 from
15.12.2019.
59. The second issue to be considered relates to Greenfinch's
claim for compensation for service charges up to the date of
termination of the Agreement. Swiggy terminated the Agreement by a
letter dated 28.04.2020 [Ex.P8]. In that letter, Swiggy asserted that
- 33 -
Greenfinch had violated Clause 8.1 of the Agreement. According to
Clause 8.1, Greenfinch was obliged to comply with all relevant laws,
rules, regulations, government orders, and codes of practice
concerning its performance under the Agreement. Swiggy also
demanded that Greenfinch rectify the alleged breach in accordance
with Clause 9.4 within two days, failing which the Agreement would
automatically terminate without further notice.
60. According to Swiggy, the breach was not cured, and therefore,
the Agreement stood terminated on 30.04.2020. As noted above,
certain invoices raised in November 2019 remained unpaid, and
Swiggy did not pay any amount to Greenfinch for December 2019 to
April 2020. Ex.P7 indicates that Swiggy withheld the service charges
but directly paid the amounts to Temp DEs provided by Greenfinch.
The amounts payable to Greenfinch under the Agreement comprised
two components: first, payments due to Temp DEs, and second,
service charges. Swiggy made no payments to Greenfinch after
November 2019; however, it paid the amounts due to Temp DEs
directly, as stated in its letter dated 09.12.2019 [Ex.P7].
61. On the basis of the material available on record, the Arbitral
Tribunal found that the average monthly profit was `73,58,759/-. The
- 34 -
Arbitral Tribunal noted that in terms of the Agreement, Greenfinch
was entitled to 5.5% of the CTC [Cost to Company] of Temp DEs, that
is 5.5% of the amounts paid to Temp DEs. The Arbitral Tribunal thus
concluded that for the period of five months Greenfinch would be
entitled to a sum of `3,67,93,795/-. However, the Arbitral Tribunal
further reduced the said amount to 50%, that is `1,83,96,897.50 ps.
(Rupees one crore eighty three lakhs ninety six thousand eight
hundred ninety seven and fifty paise only) on the ground that
Greenfinch had admittedly not deposited the GST paid by Swiggy for
the month of October 2019. As a result, Swiggy was required to
reverse the ITC taken on the basis of the said payment. The Arbitral
Tribunal noted that although Greenfinch's default to pay GST for the
month of October 2019 was not a ground raised for withholding the
payments in the letter dated 09.12.2019 (Ex.P7), it was necessary to
bear the said fact in mind. On the basis of this reasoning the Arbitral
Tribunal reduced the damages as determined by half.
62. There is an apparent flaw in the reasoning of the Arbitral
Tribunal, considering that the Arbitral Tribunal has awarded Swiggy's
counterclaim on account of the reversal of ITC. Since the Arbitral
Tribunal found that Greenfinch is entitled to service charges for five
months, there is no reason to reduce the amount determined by 50%
- 35 -
on account of non-deposit of GST for October and part of November
2019. Swiggy had raised a separate counter claim for loss of
reversal ITC for the month of October 2019, amounting to
`3,70,48,450/-. This counterclaim was allowed along with interest.
Additionally, Swiggy had also claimed loss of credit on account of
failure on the part of Greenfinch to deposit the tax by filing necessary
returns for the month of November 2019, amounting to `1,65,80,527/,
which was also allowed. Additionally, the Arbitral Tribunal allowed
interest on the amount of ITC that Swiggy was compelled to reverse.
Thus, having fully compensated Swiggy for the reversal of ITC, the
same could not have been considered a factor in reducing any
amount found due to Greenfinch. The impugned award, insofar as it
quantifies the award against Greenfinch's claim for service
charges/compensation for the period December 2019 to April 2020, is
vitiated by patent illegality.
63. The last aspect to be examined is the award of compensation
for the illegal termination of the Agreement. Clause 9 of the
Agreement sets out the provisions for termination of the Agreement.
The said clause is set out below:
"9. Terms & Termination of this Agreement:
- 36 -
9.1 This Agreement is valid for ( ) months, on a non
exclusive basis, from its Effective Date unless otherwise
renewed in writing by Swiggy in its sole discretion.
Provided that any extension in the term of the Agreement
shall not automatically entitle the Service Provider to any
increase in the consideration payable by Swiggy to it
under this Agreement and unless otherwise agreed to in
writing by Swiggy.
9.2 This Agreement may be terminated by either
Party through a written notice of 30 (thirty) days to the
address of the other Party as in this Agreement or as
updated from time to time.
9.3 Swiggy shall reserve the right to terminate this
Agreement forthwith without prior notice to the Service
Provider, in the event the Service Provider has committed
a material breach of this Agreement.
9.4 Swiggy shall at its sole discretion have the
option of terminating this Agreement without notice or
payment in lieu thereof in the event the Service Provider
commits any breach of the terms and conditions or the
work is unsatisfactory or the Temp PDP of the Service
Provider are negligent or there is non-compliance under
the statutory legal requirements, provided Swiggy has
issued a notice to the Service Provider specifying the
breach and granted 2 (two) days' time to the Service
Provider for rectifying such breach or negligence and the
Service Provider fails to rectify the same within the notice
period.
9.5 Either Party may forthwith terminate this
Agreement following written notice to the other Party if the
other Party (i) ceases to do business in the normal course,
(ii) becomes or is declared insolvent or bankrupt, (iii) is the
subject of any proceeding related to its liquidation or
insolvency (whether voluntary) which is not dismissed
within 90 (ninety) calendar days or (iv) makes an
assignment of the benefit of creditors, (v) the other Party
undergoes or proposes or is likely to undergo a material or
significant change in its legal status.
9.6 Nothing in this Agreement shall obligate the
Swiggy to terminate this Agreement upon the occurrence
of any of the events referred to hereinabove, and Swiggy
- 37 -
shall be at liberty to pursue any and all other remedies
(including claims for damages) which it may have arising
out of any non-performance, breach or default by the
Service Provider in lieu of terminating this Agreement."
64. Under clause 9.2 of the Agreement, either party may terminate
it by giving thirty days' written notice. Thus, Greenfinch's claim for
wrongful termination of the Agreement was rightly confined to the
compensation payable for thirty days, which was quantified at
`73,58,759/-. We find no fault with the Arbitral Tribunal's decision to
confine the claim for compensation to a period of one month. The
award of compensation is based on Arbitral Tribunal's finding that
Swiggy had breached the terms of the Agreement.
65. The question whether Swiggy had breached the terms of
Agreement was one of the principal disputes addressed by the
Arbitral Tribunal.
66. In terms of Clause 9.4 of the Agreement, Swiggy could at its
discretion terminate the Agreement if (i) Greenfinch had committed
any breach of the terms and conditions of the Agreement; (ii) its work
was unsatisfactory; (iii) Temp PDP provided by the Greenfinch was
negligent; and (iv) non-compliance with the statutory legal
requirements. However, in these cases, Swiggy was required to serve
a notice specifying the breach and granting Greenfinch two days' time
- 38 -
to rectify it or address the negligence. If Greenfinch failed to rectify
the issue within two days, Swiggy could terminate the Agreement.
67. Swiggy terminated the Agreement under Clause 9 on the
ground that Greenfinch failed to comply with statutory requirements.
The termination letter (Ex.P8) is set out below:
" April 28, 2020
Sir,
Sub - Notice under Clause 9.4 and Clause 23.1 of the
Agreement dated April 11, 2019 between Bundl
Technologies Private Limited and Green Finch Team
Management Private Limited ("Notice")
Ref: (i) Our letter dated December 9, 2019 to Green Finch
Team Management Private Limited and (ii) Your e-mail
dated March 30, 2020.
We refer to the Agreement dated April 11, 2019
("Agreement") between Bundl Technologies Private Limited
("Swiggy") and Green Finch Team Management Private
Limited ("Greenfinch"), pursuant to which Greenfinch was
engaged as a service provider for the provision of the
services described thereunder
2. We further refer to our letter dated December 9, 2019
("Suspension Letter") addressed to Greenfinch, by which
Swiggy raised its concerns regarding the search and
inspection conducted on Swiggy's premises at Bengaluru
and Gurgaon by the Director General of GST Intelligence,
Zonal Unit, Hyderabad ("GST Department"). The GST
Department raised concerns regarding Greenfinch's non-
compliance with applicable Goods and Service Tax ("GST")
laws, improper discharge and remittance of GST on service
rendered to Swiggy, remittance of Tax amounts paid by
Swiggy to Greenfinch in terms of tax invoices under the
Agreement and consequently Swiggy's eligibility to seek
input GST credit. The GST Department informed Swiggy of
the improper discharge of GST liability by Greenfinch and
- 39 -
non-cooperation with the investigation. This servrely
affected the business operations and reputation of Swiggy
and caused under harm and hardship to Swiggy. Swiggy
has at all times complied with its obligations under the
Agreement. Due to non-compliance by Greenfinch of the
terms of the Agreement, Swiggy suspended payments to
Greenfinch in accordance with Clause 6.6 of the Agreement
by the suspension letter.
3. Subsequently during the investigation, on November
28, 2019 to November 30, 2019 and December 26, 2019 on
account of improper remittance of GST on amounts paid by
Swiggy to Greenfinch under the Agreement, the GST
Department instructed reversing the input GST credit taken
by Swiggy amounting to Rs.27,51,45,529/- (Rupees twenty
seven crores fifty one lakhs forty five thousand five hundred
and twenty nine only) on the tax invoices issued by
Greenfinch. The details of invoices issued by Greenfinch in
respect of which in put GST credit was reversed in annexed
as an Annexure to this letter
4. As per Clause 8.1 of the Agreement, Greenfinch was
required comply with "all applicable laws, rules
regulations... relating to its performance under [the]
Agreement". Greenfinch's actions display an overt and to
deliberate non-compliance of GST laws and breach of
Clause 8.1 of the Agreement.
5. Therefore, in terms of Clause 9.4 of the Agreement,
Swiggy hereby calls upon Greenfinch to rectify the above
breach of the Agreement, within a period of 2 (two) days,
failing which the Agreement will stand automatically
terminated, without any further notice.
6. Further, Greenfinch's breach has caused a direct
loss of Rs.27,51,45,525/- (Rupees twenty seven crores fifty
one lakhs forty five thousand five hundred and twenty nine
only) to Swiggy, which Greenfinch is liable to indemnify
Swiggy in terms of Clauses 6.3, 8.2 and 13 of the
Agreement. Swiggy has also suffered irreparable loss, harm
and injury to its reputation, goodwill and business, as a
result of the breach of the Agreement by Greenfinch.
Greenfinch is therefore liable to compensate Swiggy for an
amount of Rs.1,70,00,000/- (Rupees One crore seventy
lakhs only) to make good such loss, harm and injury.
Greenfinch will also be liable for any consequential loss
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suffered by Swiggy on account of any interest and / or
penalty that may be levied on Swiggy by the Gst authorities
and Swiggy reserves its rights to claim and sue for
compensation against such loss.
7. Subject to paragraph 9 below, Swiggy calls upon
Greenfinch to forthwith and in any event within a period of
30 (thirty) days from the date of receipt of this letter (i)
indemnify Swiggy for the amount of Rs.27,51,45,529/-
(Rupees twenty seven crores fifty one lakhs forty five
thousand five hundred and twenty nine only) on account of
non-compliance with GST laws and breach of the
Agreement; and (ii) pay an amount of Rs. 1,70,00,000/-
(Rupees One crore seventy lakhs only) as compensation to
make good the loss, harm and injury caused to Swiggy's
reputation, goodwill and business, failing which (a) interest
at the rate of 18% p.a. shall accrue on the abovementioned
amounts; and (b) Swiggy shall initiate appropriate criminal
and civil proceedings against Greenfinch, at its sole risk as
to the costs and consequences thereof.
8. In response to Greenfinch's email dated March 30,
2020 Swiggy deies the contents thereof in their entirety.
Swiggy is not liable to make any payments whatsoever to
Greenfinch due the Greenfinch's breach of the Agreement,
as also in terms of Clause 6.6 of the Agreement, as
communicated by the Suspension Letter. Greenfinch's
claims are frivolous, vexatious, unsubstantiated and
unlawful. Swiggy denies everything to the contrary.
9. Kindly note that the disputes above have been
sought to be remedied by Swiggy by good faith discussions
for more than 4 (four) months. Swiggy has attempted to
resolve the dispute amicably. However, Mr. Manikjeet Singh
Kals of Greenfinch has remained absconding and has not
come forward for any discussions, let alone extending due
co-operation during the investigation. Swiggy is also
informed that Greenfinch's directors and employees are not
co-operating with the GST Department and are absconding.
None of the Greenfinch's personnel are available at its
registered office for receipt of notices. Swiggy, its key
managerial personnel and executive officers suffered undue
hardship and were summoned to be present before the
GST authorities from time to time, while Greenfinch and its
officers and employees deliberately attempted to escape
summonses and failed to co-operate with the investigation,
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of their own non-compliances. However, without prejudice
to the above, in terms of Clause 23.1. Swiggy hereby is
formally initiating good faith negotiations for the resolution
of the above disputes. Swiggy invitees Greenfinch's
participation and seeks its co-operation in this regard. If
however, Swiggy remains unsatisfied with the outcome of
the negotiations after a period of 30 (thirty) days from the
date of receipt of this letter. Swiggy shall be entitled to
initiate appropriate criminal and civil proceedings against
Greenfinch, including arbitration proceedings in terms of the
agreement, at Greenfinch's sole risk as to the costs and
consequences thereof.
10. This letter is without prejudice to Swiggy's rights, all
of which are expressly resolved.
Yours sincerely.
For Bundl Technologies Private Limited"
68. It is apparent from the termination letter that Swiggy terminated
the agreement on account of alleged non-compliance and
Greenfinch's failure to comply with its obligations to pay GST. The
Arbitral Tribunal had faulted the said termination on principally three
grounds. First, the Arbitral Tribunal found that the issue of whether
the Greenfinch had wrongfully availed ITC in respect of payments
made to its suppliers was not a statutory obligation that was covered
under Clause 8.1 of the Agreement. The Arbitral Tribunal also found
that the question of whether Greenfinch had complied with the GST
was a contentious matter between Greenfinch and the GST
Authorities. The Arbitral Tribunal held that the same was not covered
under Clause 8.1 of the Agreement, which only referred to statutory
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compliance relating to the performance of the Agreement. Second,
the issue whether Greenfinch had failed to discharge its obligation
under the GST laws was a disputed matter between Greenfinch and
the GST Authorities. The said disputes had not been finally
adjudicated. The allegation that Greenfinch had wrongfully availed of
the ITC had not been finally determined. And third, that the two-day
period for curing any alleged default in payment of GST could not be
resolved within that period.
69. The Arbitral Tribunal had construed Clause 8.1 of the
Agreement to require compliance with applicable laws relating to
performance of the Agreement, and held that the same could not be
extended to Greenfinch's GST liability.
70. Clause 8.1 of the Agreement is set out below:
"8.1 The Service Provider agrees at all times and at its
own expenses to (i) strictly comply with all applicable laws,
rules, regulations, governmental orders and applicable
codes of practice, now or hereafter in effect, relating to its
performance of this Agreement, (ii) pay all fees and other
charges required by such laws, rules and regulations,
codes and orders and (iii) maintain in full force and effect
all licenses, permits, authorization, registration and
qualifications necessary to perform their obligations under
this Agreement."
71. Swiggy's contention that, in terms of Clause 8.1, Greenfinch
was required to comply with all laws and its failure to comply with
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GST laws would amount to a breach of Clause 8.1 of the Agreement,
is not insubstantial. However, the Arbitral Tribunal has interpreted the
said clause restrictively. The Arbitral Tribunal has, in effect, construed
the words "relating to its performance of this Agreement" as
controlling the width of the said clause. It is well settled that the
question of construction of the Agreement falls within the jurisdiction
of the Arbitral Tribunal. In Sumitomo Heavy Industries
Ltd. v. ONGC Ltd. [(2010) 11 SCC 296, the Supreme Court had
observed as under:
"43. ... The umpire has considered the fact situation and
placed a construction on the clauses of the agreement
which according to him was the correct one. One may at
the highest say that one would have preferred another
construction of Clause 17.3 but that cannot make the
award in any way perverse. Nor can one substitute one's
own view in such a situation, in place of the one taken by
the umpire, which would amount to sitting in appeal. As
held by this Court in Kwality Mfg. Corpn. v. Central
Warehousing Corpn. [(2009) 5 SCC 142 : (2009) 2 SCC
(Civ) 406] the Court while considering challenge to arbitral
award does not sit in appeal over the findings and decision
of the arbitrator, which is what the High Court has
practically done in this matter. The umpire is legitimately
entitled to take the view which he holds to be the correct
one after considering the material before him and after
interpreting the provisions of the agreement. If he does so,
the decision of the umpire has to be accepted as final and
binding."
72. We are unable to accept that the Arbitral Tribunal's
interpretation of the terms of the Agreement is manifestly perverse or
a view that was impossible for any reasonable person to accept. It is
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well established that the contentious issues must be adjudicated by
the Arbitral Tribunal, and a court does not have jurisdiction to re-
examine the disputes in proceedings under Section 34 of the A&C Act
and to replace the Arbitral Tribunal's judgment with its own. In this
regard, we cannot accept that the Arbitral Tribunal's interpretation of
Clause 8.1 of the Agreement vitiates the impugned award on the
ground of patent illegality or conflicts with the public policy of India.
73. As noted above, there is no dispute that the issue between
Greenfinch and the GST Authorities regarding its statutory
compliance has not been finally adjudicated by the competent
authorities. It is also material to note that the DGGI investigation,
which pertained to invoices from July 2017 to September 2019,
resulted in Swiggy being compelled to reverse ITC of approximately
`27.51 crores. However, Swiggy challenged this forced reversal
before this Court in WP No.4467/2021, contending that it had
received services from Greenfinch and was entitled to the ITC. This
Court allowed the writ petition and directed consideration of Swiggy's
refund application. Admittedly, Swiggy is pursuing its stand that it is
entitled to avail the ITC in respect of GST paid by it under invoices
raised by Greenfinch prior to October 2019. Thus, the Arbitral
Tribunal found that Swiggy's termination of the Agreement by
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providing two days' notice was not sustainable. We are unable to
accept that the Arbitral Tribunal's view is one that no reasonable
person could possibly accept and fails the Wednesbury test of
unreasonableness.
74. The Arbitral Tribunal found that Greenfinch had defaulted on
depositing GST for October and November 2019, thereby compelling
Swiggy to reverse the ITC to which it was entitled. The Arbitral
Tribunal also awarded counterclaims on this basis. However, this was
not the reason specified in the termination notice. The termination
with two days' notice was held to be illegal. In the given
circumstances, we are unable to accept that the award of
compensation or loss of service charges for a period of one month
warrants any interference in the proceedings under Section 37 of the
A&C Act.
75. There is no cavil that, if it is finally held that Greenfinch
wrongfully availed of ITC and fails to discharge its liability, thereby
compelling Swiggy to reverse the ITC, it would be entitled to raise a
claim in this regard.
76. The last question to consider concerns Greenfinch's challenge
to the counterclaim. As noted above, the Arbitral Tribunal has
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awarded counterclaims in respect of amounts paid by Swiggy on
account of GST to Greenfinch that Greenfinch did not deposit with the
GST Authorities. Consequently, Swiggy was compelled to reverse the
ITC claimed on those payments. It is contended on behalf of
Greenfinch that Swiggy could not raise any counterclaim on account
of the delay on the part of Greenfinch to comply with its obligation to
file the GST returns in the months of October and November 2019. It
is earnestly contended that Greenfinch is bound to comply with the
statutory obligations to file the returns and pay the GST either in cash
or by availing ITC. Admittedly, upon payment of GST by Greenfinch,
Swiggy would be entitled to claim a credit for that amount. Since
there is no dispute that Greenfinch had failed to file its returns,
Swiggy was compelled to reverse the ITC availed. Thus, the Arbitral
Tribunal's decision to award the counterclaim on this ground cannot
be faulted.
77. Having stated the above, we also consider it apposite to note
that in the event Greenfinch complies with the statutory requirement
of filing its returns and Swiggy can derive any benefit from the
delayed payment of GST, Greenfinch would be entitled to raise a
claim in respect of the same. It is also open to Swiggy to raise a claim
regarding GST if it is compelled to reverse its ITC for GST paid to
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Greenfinch upon finalisation of the disputes. These issues must
remain open given the tenor of the impugned award.
78. Greenfinch is also entitled to pursue its claim for compensation
for service charges for a period of five months, from December 2019
to April 2020. Since this court cannot modify the impugned award, in
these proceedings, the impugned award to the extent of the Arbitral
Tribunal has awarded claim of `1,83,96,897.50 in favour of
Greenfinch is set aside. The impugned order is set aside as well.
79. The appeals are disposed of in the aforesaid terms.
Sd/-
(VIBHU BAKHRU)
CHIEF JUSTICE
Sd/-
(C.M. POONACHA)
JUDGE
SD/KPS/AHB
