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Case Name: Maj. Pankaj Rai v. M/S NIIT LTD.

 Case Number: O.M.P. (COMM) 55/2024 & I.A. 2137/2024

 Dated on: 29th February, 2024

 Quorum: Hon’ble Mr. Justice Prateek Jalan

 FACTS OF THE CASE

An agreement titled “NIIT License Agreement (Urban)” was signed on December 30, 2015, between Maj. Pankaj Rai (petitioner) and M/S NIIT Ltd. (respondent). The agreement allowed Rai to use NIIT’s trade names, designs, copyrights, technical knowhow, and course materials to set up a computer education centre in A.S. Rao Nagar, Hyderabad. Following the agreement, Rai incorporated a limited company to establish the education centre. Disputes arose, leading Rai to invoke arbitration on July 26, 2017. The Arbitral Tribunal was constituted by an order of the Delhi High Court on March 4, 2022. Rai claimed Rs. 99.43 lakhs for losses, Rs. 35.42 lakhs as an assured amount by NIIT, interest, and costs. His claims included issues of unfair courseware pricing, improper GST rounding, territory restrictions, student poaching, and non-disclosure of adverse orders against NIIT. NIIT Ltd. contested the claims, arguing that Rai’s claims were not maintainable as the agreement was intended for Rai’s company. NIIT denied any breach of terms and disputed providing any assured returns. Rai was the sole witness for his case, while NIIT produced two witnesses who were cross-examined. Rai’s additional witnesses were not produced for cross-examination. An email from Rai on June 27, 2018, acknowledged the receipt of Rs. 297810.39 as a final settlement. The Arbitral Tribunal found no breach of contract or proof of losses as claimed by Rai.

ISSUES

• Whether the petitioner, in his capacity as ‘Indemnifier’ under the Licence Agreement, can maintain the present arbitration proceedings.
• Whether the arbitration agreement as well as the Licence Agreement stand discharged and extinguished.
• Whether the petitioner is entitled to the claims raised in the Statement of Claim.

LEGAL PROVISIONS

Arbitration and Conciliation Act, 1996 (the Act):

• Section 34: This section deals with the application for setting aside an arbitral award. The petitioner invoked this section to seek the setting aside of the Arbitral Award dated 19.10.2023.

Consumer Protection Act, 1986:

• Section 2(1)(r): This section defines “unfair trade practice.” The petitioner referenced this provision to argue that the agreement was one-sided and constituted an unfair trade practice.

CONTENTIONS OF THE APPELLANT

The appellant argued that the learned Arbitrator wrongly implemented a one-sided Agreement and erroneously applied the principle of caveat emptor. He contended that had he been aware of the full facts, including the respondent’s antecedents and price differences for metro and non-metro cities, he would not have entered into the Agreement. He relied on Supreme Court judgments, such as IREO Grace Realtech (P) Ltd. v. Abhishek Khanna & Others and Mrs. Manju Bhatia & Anr. v. New Delhi Municipal Council & Anr., to support his claim. The appellant contended that his consent to enter into the Agreement was vitiated by the respondent’s failure to disclose certain adverse orders from the Monopolies and Restrictive Trade Practices Commission (MRTPC) and the National Consumer Disputes Redressal Commission (NCDRC). He argued that this lack of disclosure constituted a material misrepresentation, which should render the Agreement void. The appellant claimed that he was unable to realise the assured profits indicated by the respondent, amounting to Rs. 35.42 lakhs over three years. He argued that the respondent had provided assurances of fixed returns prior to signing the Licence Agreement, which were not fulfilled. The appellant alleged that the respondent sold courseware to him at a higher rate than that sold to a licensee in a neighbouring area and engaged in “petty cheating” by rounding off amounts payable on account of GST. He claimed these actions resulted in significant financial losses. The appellant argued that the respondent did not permit him to approach institutes within his territory or offer discounts from his share of earnings. He also alleged that the respondent poached his students by operating a portal (NIIT.tv) that provided free pre-recorded videos to students, undermining his business.

CONTENTIONS OF THE RESPONDENT

The respondent took a preliminary objection against the maintainability of the claims at the instance of the petitioner. They argued that the Agreement contemplated the establishment of the education centre by the petitioner’s company, not the petitioner himself. Thus, the petitioner did not have the standing to bring these claims. The respondent disputed any breach of the terms and conditions of the Agreement. They denied allegations of overcharging for courseware, engaging in petty cheating by rounding off GST amounts, and preventing the petitioner from approaching institutes or offering discounts. They asserted that all actions taken were in compliance with the Agreement. The respondent denied providing any assurance of fixed returns or profits to the petitioner. They contended that the Agreement did not include any clause guaranteeing assured profits, and the claims of assured profits were unfounded.The respondent argued that the petitioner’s claims were fully and finally settled, as evidenced by an email dated 27.06.2018, where the petitioner acknowledged receipt of a sum towards final settlement. They asserted that this settlement discharged all claims under the Agreement. The respondent alleged that the petitioner had instituted numerous litigations against them before various forums and had started a campaign of defamation against the respondent. In response, the respondent had filed a suit before the High Court, which resulted in a consent decree dated 03.09.2019, restraining the petitioner from making defamatory statements.The respondent maintained that the claims brought by the petitioner were outside the scope of the Agreement and that the Arbitral Tribunal had no jurisdiction over matters not arising directly from the contractual terms. They also contended that the issues raised by the petitioner had already been settled through prior legal proceedings.

COURT’S ANALYSIS AND JUDGEMENT

The court first addressed the issue of full and final settlement, noting the petitioner’s acknowledgment of receipt of a sum as final settlement in an email dated 27.06.2018. This acknowledgment, coupled with the petitioner’s admission in the petition, led the court to agree with the Arbitrator’s conclusion that the petitioner’s claims were fully discharged. Regarding the petitioner’s contention of the Agreement being one-sided, the court explained that the context of the cited Supreme Court case, IREO Grace Realtech, under the Consumer Protection Act, did not apply here. The court upheld the Arbitrator’s decision to adjudicate the case within the contractual framework. The application of the caveat emptor principle was also examined, with the court finding no error in the Arbitrator’s application, given the petitioner’s obligation to conduct due diligence before entering the Agreement.

Moving on to the merits of the claims, the court reviewed the Arbitrator’s findings. The petitioner’s allegations regarding overcharging for courseware, GST rounding off, restrictions on territory, and student poaching were all rejected by the Arbitrator based on evidence and contractual analysis. The petitioner’s claim of assurance of minimum revenues was also dismissed, with the Arbitrator finding no supporting evidence. The court emphasized the limited scope of interference under Section 34 of the Arbitration and Conciliation Act, 1996, reaffirming the Supreme Court’s guidelines. Since the Arbitrator’s findings were based on a thorough analysis of evidence and contractual terms, the court found no grounds for interference and dismissed the petition, upholding the Arbitral Award.

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Judgement Reviewed by – Shruti Gattani

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