The Single Bench of the Delhi High Court in the case of Millennium School vs Pawan Dawar consisting of Justice Vibhu Bakhru observed that Section 65-B of the Indian Evidence Act, 1872 (“Evidence Act”) is not applicable to arbitral proceedings.
Facts
The respondent is engaged in the business of providing transport services as M/s Genesis Enterprises (‘GE’). The parties entered into an Agreement, whereby the respondent agreed to provide transport services to the petitioner. The respondent agreed to operate and maintain twenty-two school buses of the petitioner and provide the required personnel. He also agreed to provide additional buses for the purpose. The Agreement was for eight years till 31.03.2020 with the first five years as a lock in period. Further, he agreed to strictly abide by all the obligations stipulated in the Agreement. The respondent requested the Principal of the petitioner school to release the outstanding payments in terms of the Agreement as he was making payments to him in petty instalments after a delay of a substantial period. The Principal alleged deficiencies in the services provided by the respondent and informed him that the petitioner would be compelled to take strict action if the same were not rectified within seven-ten days. Subsequently the petitioner terminated the Agreement.
Procedural History
The respondent invoked Clause 36 of the Agreement to refer the disputes to arbitration. This Court directed the Delhi International Arbitration Centre (DIAC) to appoint an arbitrator to adjudicate the disputes between the parties. The respondent filed its Statement of Claims before the Arbitral Tribunal. The petitioner filed its Statement of Defence before the Arbitral Tribunal and raised counterclaims. The Arbitral Tribunal partially accepted the respondent’s claims and awarded the outstanding Contractor’s fee along with interest at 18% per annum, extra cab hire charges and insurance premium returnable by the petitioner. It awarded pendente lite interest at 18% per annum on the awarded amounts from the date of presentation of claims till the date of the award and future interest at 18% per annum on the awarded amounts from the date of the award till the date of realization if the amount was not paid within a period of three months from the date of the award. It also awarded costs in favour of the respondent. Aggrieved, the petitioner filed the present petition.
Contentions Made
Petitioner: Arbitral Tribunal erred in holding that notwithstanding a material breach of the Agreement, the petitioner could not terminate the Agreement within the lock-in-period. Arbitral Tribunal wrongly rejected crucial evidence led by the petitioner including the complaints filed by parents of the students against the respondent on the ground that the Certificate u/s 65-B (4) of the Evidence Act did not conform to the statutory requirements. It failed to consider that the Evidence Act was not applicable to arbitration proceedings. The respondent had inflated the statement of accounts and the claim regarding outstanding Contractor’s fee was exaggerated. The evidence showing reconciliation of accounts was overlooked and the cab charges were awarded in excess.
Observations of the Court
The Tribunal’s decision that the termination of the Agreement was illegal rested on two findings- that the Agreement cannot be terminated under Clause 33 of the Agreement during the lock-in period and that the grounds on which the Agreement was terminated fall within Clause 33 of the Agreement and not under Clause 1. The grounds of Clause 33 and Clause 1 overlap, so, the findings were noted as erroneous. Regarding the decision of the Tribunal that the petitioner has failed to prove deficiency of service, it was noted that Section 65-B of the Evidence Act is not applicable to arbitral proceedings, yet the Tribunal has disregarded the entire evidence led by the petitioner regarding deficiency of service solely on the ground that the certificate under Section 65-B of the Evidence Act was defective. Regarding the outstanding Contract’s fee, extra cab charges and interest, it was noted that the arbitrator cannot allow damages more than the claim.
Judgment
The impugned award was set aside to the extent it allowed the respondent’s claim for loss of profits and cab charges to the extent of ₹12 lakhs.
Case: Millennium School vs Pawan Dawar
Citation: O.M.P. (COMM) 590/2020
Bench: Justice Vibhu Bakhru
Decided on: 10th May 2022
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