Pioneer Publicity Corporation Pvt. Ltd. v. Delhi Transport Corporation

2. The respondent DTC had, vide agreement dated 24th November, 2005, awarded to the appellant rights for display of advertisement boards on the Bus Queue Shelters (BQSs) and Time Keeping Booths falling in the Najafgarh Zone for a period of three years from 28th November, 2005 to 27th November, 2008. Disputes and differences having arisen between the parties with respect to/arising out of the said agreement were in accordance with the arbitration clause in the agreement referred to arbitration. 2010:DHC:136-DB

3. Claim No.1 of the appellant, which has been dismissed by the arbitral tribunal and objections whereagainst have been dismissed by the learned single Judge, was for refund of Rs.54,06,324/- paid by the appellant to the respondent DTC with respect to 49 BQSs in terms of the said agreement. It was the plea of the appellant that after award of the contract, it was realized that the said 49 BQSs had no angles and were absolutely unfit for advertisement purposes. It was the case of the respondent DTC that the appellant was not entitled to any rebate in the licence fee with respect to the said 49 BQSs since the BQSs were allotted to the appellant on „as is where is‟ basis.

4. The arbitrator accepted the said reasoning of the respondent DTC and rejected the claim. It was further held that the agreement further provided that no relief whatsoever would be permissible to the appellant on account of any damaged BQS during the entire period of the contract; it was held that the appellant having signed the contract fully aware of the said term could not claim refund for the licence fee paid with respect to the damaged BQS. The arbitrator further held that the appellant, save for writing letters in this regard to the respondent DTC, did not take any steps to make the said BQSs usable. The arbitrator also negated the plea of the appellant of the agreement being between unequals. It was held that the contract was of a commercial nature, granted on the basis of an open tender floated by the respondent DTC and in which itself it was specified that the BQSs in the Najafgarh zone were being offered on „as is where is‟ basis; that the appellant did not object to the clauses aforesaid in the agreement during the tenure of the contract and raised the said point only while filing the statement of claim.

5. Claim No.2 of the appellant before the arbitral tribunal was for refund of the amount paid by the appellant to the respondent towards repair and maintenance of the BQSs. The arbitrator found that under the agreement, the appellant besides the licence fee for the BQSs was also to pay an amount towards repair and maintenance of the BQSs; that not a penny of the said amount received from the appellant was spent by the respondent DTC on the aforesaid 49 BQSs to make them fit for display of advertisement boards inspite of the repeated demands of the appellant; the stand taken by the respondent DTC of the appellant being responsible for providing angles and supporting structure was negated and accordingly the claim for refund of the amount paid towards repair and maintenance charges of the said 49 BQSs allowed.

6. Claim No.3 of the appellant before the arbitrator was on account of the loss of earnings due to non-display of advertisements on the aforesaid 49 BQSs. The arbitrator found the appellant to have not led any evidence of having orders in hand which could not be executed because the aforesaid 49 BQSs being not fit for display of boards; on the contrary, it was held that in the survey conducted by the respondent DTC on 29th November, 2006, 12 out of the 49 BQSs were found to be having advertisement boards. The arbitrator further held that the appellant had not taken any steps for mitigation of the losses and accordingly the claim was disallowed.

7. The learned single Judge dismissed the petition under Section 34 of the Act with respect to the aforesaid arbitration award for the reason of the same not disclosing any ground under Section 34 of the Arbitration Act. The counsel for the appellant had contended before the learned single Judge that the award disallowing the Claim No.1 and allowing the Claim No.2 was contradictory. The learned single Judge held the two claims to be entirely different. It was held that the reasoning given with respect to the two claims by the arbitrator was also different.

8. The contention of the counsel for the appellant before this Court also is of the award on the claims No.1 and 2 (supra) being contradictory. It is contended that the arbitrator having allowed refund of the amount paid towards maintenance and repair charges of the 49 BQSs ought to have also allowed refund of the licence fee with respect to the said BQSs.

9. We do not agree. There is no inconsistency in the two parts of the award, even if the same was to constitute a ground for interference under Section 34 of the Act, and on which we are not expressing any view in this order. The arbitrator has clearly held that while the licence fee for the BQSs was payable irrespective of the condition of the BQSs owing to the BQSs having been offered on „as is where is‟ basis and owing to it being a term of the agreement that no representation would be admitted for the reason of any damage to the BQSs. On the contrary, it has been held that the repair and maintenance charges were levied by the respondent DTC for repairing and maintaining the shelters and since the respondent DTC had failed to repair and maintain the aforesaid 49 BQSs, the appellant had become entitled to refund thereof. It cannot thus be said that merely because the repair and maintenance charges had been ordered to be refunded, the appellant became entitled to refund of the licence fee also. The terms and conditions for payment under the two heads were different. The view taken by the arbitrator is a reasonably plausible view and no perversity can be found in the award nor can it be said that the award is contrary to the public policy of India. The learned single Judge is right in holding that no ground for interference under Section 34 of the Act has been made out.

10. Arbitration is intended to be a faster and less expensive alternative to the courts. If this is one‟s motivation and expectation, then the finality of the arbitral award is very important. The remedy provided in Section 34 against an award is in no sense an appeal. The legislative intent in Section 34 was to make the result of the annulment procedure prescribed therein potentially different from that in an appeal. In appeal, the decision under review not only may be confirmed, but may also be modified. In annulment, on the other hand, the decision under review only may be invalidated in whole or in part or be left to stand if the plea for annulment is rejected. Annulment operates to negate a decision, in whole or in part, thereby depriving the portion negated of legal force and returning the parties, as to that portion, to their original litigating positions. Annulment can void, while appeal can modify. Section 34 is found to provide for annulment only on the grounds affecting legitimacy of the process of decision as distinct from substantive correctness of the contents of the decision. A remedy of appeal focuses upon both legitimacy of the process of decision and the substantive correctness of the decision. Annulment, in the case of arbitration, focuses not on the correctness of decision but rather more narrowly considers whether, regardless of errors in application of law or determination of facts, the decision resulted from a legitimate process.

11. In the case of arbitration, the parties through their agreement create an entirely different situation because regardless of how complex or simple a dispute resolution mechanism they create, they almost always agree that the resultant award will be final and binding upon them. In other words, regardless of whether there are errors of application of law or ascertainment of fact, the parties agree that the award will be regarded as substantively correct. Yet, although the content of the award is thus final, parties may still challenge the legitimacy of the decision-making process leading to the award. In essence, parties are always free to argue that they are not bound by a given “award” because what was labeled an award is the result of an illegitimate process of decision.

12. This is the core of the notion of annulment in arbitration. In a sense, annulment is all that doctrinally survives the parties‟ agreement to regard the award as final and binding. Given the agreement of the parties, annulment requires a challenge to the legitimacy of the process of decision, rather than the substantive correctness of the award.

13. There is accordingly no merit in the appeal. The same is dismissed.

CHIEF JUSTICE RAJIV SAHAI ENDLAW, J JANUARY 12, 2010 pk