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The Delhi High Court held that it is not allowed for a litigant to adopt opposing positions in the same litigation.

Title: ANR International Private Limited v. Mahavir Singhal & Ors.

Decided on: 03 November, 2023

+ FAO (COMM) 164/2023 & CM APPL. 40580/2023

CORAM: Hon’ble Justice V. Kameswar Rao and Justice Anoop Kumar Mendiratta

Introduction

A party cannot be allowed to approve and reprobate on the same facts at the same time, the Delhi High Court stated in dismissing a plea that contested a trial court ruling dated June 2, 2023.

Facts of the Case

The current appeal challenges an order dated June 02, 2023 issued by the District Judge of Commercial Court-01, Shahdara, Karkardooma, Delhi, dismissing an application filed by defendant No. 1 in the suit bearing CS(COMM.) No. 541/2022, pursuant to Section 8 of the Arbitration and Conciliation Act, 1996.

Courts analysis and decision

The court noted that the courts would be encouraging and abetting such litigants to break the law, especially fiscal laws, and would be allowing the litigants to periodically change their appearance to their benefit and the detriment of the public coffers and the general public if they were allowed to take a different stance during litigation than they have been taking while abiding by various laws. It went on to say that the same cannot be allowed and rejected the plea as not maintainable. The court went on to say that the respondent used Section 21 of the Act of 1996 to invoke the arbitration clause, despite the appellant’s initial denial due to incorrect counsel.

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Written by- Hargunn Kaur Makhija

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Delhi High Court dismissed the appeal filed under Section 37 of the Arbitration and Conciliation Act, 1996.

Title: UNION OF INDIA versus INDIAN AGRO MARKETING CO-OPERATIVE LTD

Judgment reserved on: 25th May, 2023.

Judgment delivered on: 11th July, 2023.

 + FAO (COMM) 123/2022 & CM APPLs. 36105-36107/2022, 36109/2022

CORAM: HON’BLE MR. JUSTICE SANJEEV SACHDEVA

      HON’BLE MR. JUSTICE MANOJ JAIN

Introduction

Delhi High Court dismissed the appeal filed under Section 37 of the Arbitration and Conciliation Act, 1996 impugns order dated 28.05.2022 passed by learned District Judge (Commercial Court) whereby, the objection petition filed by the appellant herein under Section 34 of said Act has been dismissed.

Facts of the Case

The appellant issued a tender for the purchase of 5450 metric tonnes (MT) of “Gramme whole.” In this tender procedure, the respondent M/s Indian Agro Marketing Co-operative Limited took part, and they were given the job of supplying 1125 MT of whole gramme at the price of Rs. 3553/- per quintal. On February 9, 2012, the appellant issued an acceptance letter. The work had a total cost of Rs. 3,99,71,250 and was due between February 1 and February 15, 2012.

The respondent made a request for an extension of the delivery time to March 31, 2012, citing the fact that a significant portion of the “delivery period” had already passed even before the receipt of the acceptance letter. The appellate granted this motion, and the delivery deadline was extended to March 31, 2012. According to the contract’s terms and conditions, the respondent provided a 39,97125/- rupee unconditional bank guarantee.

The respondent could not supply „Gram Whole‟ by 31.03.2012. In a “performance notice” dated 16.04.2012, the appellant instructed the respondent to carry out its contractual responsibility to provide supply on or before 17.05.2012, adding that the contract would be voided if such supply was not made.

Since no delivery was delivered, the contract was terminated on June 29, 2012, and the appellant forfeited the bank guarantee in accordance with clauses 7(4) of DGS&D-68 (Revised) and 18(d)(viii) of the appendix to the tender investigation.

 The respondent received the remaining funds after the appellant withheld Rs. 28,97,988 as “general damages.” Since the contract contained a “arbitration clause,” the respondent sought the court to request the appointment of an arbitrator by submitting ARB.P. No. 597/2014. This court was happy to appoint Shri A.K. Garg, Additional District Judge (retired), as Sole Arbitrator in an order dated February 26, 2015.

The Arbitral tribunal rejected the claims of the respondent and passed an Award accordingly. The appellant filed a petition under Section 34 of the aforementioned Act to contest the claimed award. The contested order dismissed the objection petition, OMP (COMM.) No. 37/19, which prompted the filing of the current appeal.

Analysis of the court

The appellant cited ONGC Vs. Saw Pipes Ltd. (2003) 5 SCC 705, and the arbitral tribunal noted that in that case, all of the contractor’s security was permitted to be forfeited because the parties “expressly agreed” that the amount was a true pre-estimate of damages and that liquidated damages were not a punishment. Thus, the Arbitral Tribunal determined that the factual matrix in the current instance was distinct. The forfeiture of a portion of the bank guarantee as “general damages” was not justified since the appellant was unable to demonstrate any financial loss, and no evidence was presented to support this conclusion. The Arbitral Tribunal further noted the cases of Kailash Nath v. DDA (2015) 4 SCC 136, Fateh Chand v. Balkishan Das (1964), and Maula Bax v. UOI (1969) 2 SCC 554.

The appellant cited the Supreme Court’s ruling in Construction and Design Services v. Delhi Development Authority: (2015) 14 SCC 263, arguing that because the purchase was for a public purpose, they were not obliged to prove any loss. The work on the “sewage plant” was delayed in the aforementioned instance, and as there was no way to calculate the losses brought on by the delay, it was determined that the damages were not calculable. In the current instance, the contract pertains to the purchase of goods, and any loss sustained by the appellant may clearly be measured in monetary terms.

In Ministry of Defence, Govt. of India vs. CENREX SP Z.O.O. (supra), it was held, among other things, that the amount sought as liquidated damages could be claimed as per Section 74 of the Indian Contract Act, 1872, once the nature of the contract was such that losses were incalculable. This was done without proving or demonstrating how much loss was caused.

It was noted in MMTC Ltd. v. Vedanta Ltd. (2019) 4 SCC 163 that, in terms of challenging an order issued under Section 34, it cannot be contested that such challenges brought under Section 37 cannot go beyond the bounds of Section 34. In other words, the court cannot independently evaluate the merits of the award; instead, it must just confirm that the court’s use of its authority under Section 34 has not gone beyond the bounds of that provision. Regarding Section 34, it is well established that the Court does not hear appeals involving arbitral awards but may intervene on the merits in certain circumstances.

Thus, it is unnecessary to reiterate that interference under Section 37 of the aforementioned Act does not involve a review of the merits of the dispute and is only permitted in instances where the arbitrator’s findings are arbitrary, capricious, or perverse, when the court’s conscience is shocked, or when the illegality is not minor but instead affects the core of the issue. If the arbitrator’s position is one that might be supported by the evidence, then the arbitral decision cannot be challenged. Referring to Associate Builders v. DDA DDA, (2015) 3 SCC 49; Associate Builders v. See ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705.

Nothing that is shown to us suggests any obvious illegality, a completely illogical or irrational interpretation of a contract, or a result that was reached by disregarding significant facts or on the basis of “no evidence.” However, given the established legal position and the relevant facts, we do not believe there is a need for us to become involved. As a result, the appeal is denied.

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Written By – Shreyanshu Gupta

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The Power of the Arbitrator: Resolving Disputes in Partnerships through the Clauses of the Partnership Deed – Insights from the Karnataka High Court

Karnataka High Court

Jameela v. Sullia Afsa @ Hafsa.B & ors.

Bench- HON’BLE MR JUSTICE S.G.PANDIT 

CIVIL MISC. PETITION NO.500 OF 2021

Decided On 16-05-2023

Facts of the case-

The petitioner in this case claims to be the second wife of the late Hajee S. Ibrahim, whom she married on 14.05.2016. After the death of his first wife, Hajee S. Ibrahim married the petitioner. Hajee S. Ibrahim passed away on 23.09.2020 due to Covid-19, leaving behind the petitioner and two children, including the first respondent.

The petitioner alleges that Hajee S. Ibrahim, in order to establish a hospital and medical center in Aryapu village of Puttur Taluk, entered into a partnership with the respondents. The partnership deed was registered on 13.08.2020, and certain properties were contributed to the partnership firm by the respondents as their share of capital. The petitioner, as the second wife and legal representative of the deceased, requested the respondents to dissolve the partnership and divide the firm’s properties. However, the respondents refused to do so.

The petitioner, after the respondents’ refusal, approached the court seeking the appointment of a District Judge as a sole arbitrator under Section 11(5) and (6) of the Arbitration and Conciliation Act, 1996. The petitioner requested the arbitrator to arbitrate the dispute between the parties according to the terms of the partnership deed.

The respondents contested the petitioner’s claim of being the wife of the late Hajee Ibrahim. They argued that the petitioner was not married to Hajee Ibrahim but worked as a maid in his house. Therefore, unless the petitioner can establish her status as Hajee Ibrahim’s wife, she cannot seek the appointment of an arbitrator.

Relevant Provision

Arbitration and Conciliation Act, 1996 Related to
Sec. 11 Appointment of arbitrators.

Judgement

The court emphasized that the partners of a firm are bound by the clauses of the partnership deed, as long as they are not contrary to the law. In this case, since the partnership deed specifies the appointment of an arbitrator, the arbitrator has the authority to resolve any disputes based on the provisions of the partnership deed.

The court highlighted that the partnership deed clearly states that in the event of the death of the first partner (Late Hajee Ibrahim), the firm shall not be dissolved, but instead, it will continue with the remaining partners, and the deceased partner’s share of profit, capital account balance, and assets will be transferred equally to the remaining partners. Therefore, based on the terms of the partnership deed, the petitioner cannot seek the dissolution of the firm or claim a partition of its assets.

Regarding the status of the petitioner as a legal representative, the court pointed out that according to Section 40 of the Arbitration and Conciliation Act, 1996, a legal representative can enforce an arbitration clause. However, since the respondents have disputed the petitioner’s status as the second wife of Late Hajee S. Ibrahim, it needs to be determined whether the petitioner qualifies as a legal representative.

The court referred to a Supreme Court judgment (Vidya Drolia and others vs. Durga Trading Corporation, 2021) which identified the subject matters that are arbitrable and those that are not. In the present case, the status of the petitioner as a legal representative is in dispute, and it is yet to be established whether she is indeed one of the legal representatives of Late Hajee S. Ibrahim. 

The court noted that there is a pending partition suit filed by the petitioner, in which her status will be determined. Only after the petitioner’s status as a legal representative or the wife of Late Hajee Ibrahim is established, and if there is an arbitrable dispute, can the petitioner invoke the arbitration clause.

Given the provision in Clause-13 of the partnership agreement, which does not allow for the dissolution of the partnership firm upon the death of the first partner but instead mandates the transfer of the deceased partner’s share to the remaining partners, the court concluded that the petitioner, who claims to be the second wife of Late Hajee Ibrahim, the first partner of the firm, cannot seek the dissolution of the firm or the partition of its properties.

Therefore, the court held that the petitioner is not entitled to the appointment of an arbitrator based on the facts and legal provisions presented in the case.

JUDGEMENT REVIEWED BY ABHAY SHUKLA

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