Full Text
HIGH COURT OF DELHI
JUDGMENT
8265/2021, CM APPL. 33574/2022 SONY INDIA PRIVATE LIMITED ..... Appellant
Through: Mr. Nikhil Nayyar, Sr.
Advocate with Ms. Pritha Srikumar, Mr. Divyanshu Rai
& Mr. Shubhansh Thakur, Advocates.
Through: Ms. Malvika Trivedi, Sr.
Advocate with Mr. Pawan K.
Bansal, Ms. Sujal Gupta & Mr. Ahsan Ul haq, Advocates.
1. This judgment shall decide the present appeal filed under Section 37(1) (c) of the Arbitration and Conciliation Act, 1996[1] assailing the impugned judgment-cum-award dated 29.10.2020 passed by the learned Additional District Judge-07, South-East District, Saket 1 A&C Act Court, New Delhi[2] in the case bearing Arbt. No. 21138/2016,whereby the objections of the appellant company under Section 34 of the A&C Act were dismissed and the award passed by the learned Sole Arbitral Tribunal[3] dated 13.05.2016 in Case Ref. No. DAC/588/08-14 was upheld.
FACTUAL BACKGROUND:
2. Briefly stated, both the parties are Companies incorporated in India, and while the appellant company is incorporated in the business of mobile and electronic devices, the respondent/claimant company has been engaged in the business of providing services in the nature of advertising, strategic planning, retail, trade, activations and events etc. Evidently, the parties entered into an agreement dated 12.12.2011 Ex.CW-1/24 for providing certain services to be rendered by the respondent/ claimant for the period 01.10.2011 to 31.12.2012, which set out detailed terms and conditions for working of the contract inter alia providing for updation of the work as also the assignment of work outside the scope of the agreement, for which the appellant company was made liable to pay renumeration as per the agreed terms.
3. Admittedly, the First purchase order dated 17.07.2012 bearing No. 71192641 (hereinafter referred to as the ‗Big PO‘) came to be placed for a total value of Rs. 22,51,69,945/- by the appellant, that stipulated that the fee of the respondent/claimant or the „Iris fee‟, would be 8% of the cost of the work sourced under the purchase order. It is pertinent to mention here that along with the ‗Big PO‘, a 2 ADJ
3 Hon'ble Ms. Justice Manju Goel (Retired) calculation excel sheet was given to the respondent/claimant, for which invoice No. 165 (Ex.CW-1/4) for an amount of Rs. 51,11,479/was raised, which is the disputed invoice and hereinafter referred to as such, which, as per the respondent/claimant remained unpaid despite completing the entire work/services assigned.
4. It is also brought on the record that there was a change in the management of the appellant company, which necessitated a review of the entire branding and retail strategy and as a result of which, the scope of work/ services assigned to the respondent/claimant was also subject to a review. Admittedly, a meeting took place between the representatives of the two companies on 21.01.2013 and the value of the ‗Big PO‘ was proposed to be reduced to Rs.15,51,49,505/-, which was conveyed to the respondent/claimant vide an email and later on, meetings took place as between the representatives of the two companies on 01.02.2013, wherein the entire scope of the work was discussed consequent to which, the respondent/ claimant sent an email dated 08.02.2013 and another email dated 12.02.2013. Apparently, after discussions after back and forth talks and after rechecking the quantity etc. form the vendor party, the value of the ‗Big PO‘ was revised to Rs. 15,64,19,447/-.
5. It is pertinent to mention here that 80% of the work/services had already been completed by the respondent/ claimant when the ‗Big PO‘ was revised and it is an admitted fact that the work/services were completed by the end of April, 2013. Admittedly, a meeting took place on 19.04.2013 pursuant to which an email was forwarded by the
4 All exhibits during the course of arbitration proceedings respondent/claimant to the appellant company along with attached details of the invoices, wherein an amount to the tune of Rs. 3,19,49,030/- was shown to be outstanding vide disputed invoice NO. 165 dated 17.01.2013.
6. To cut a long story short, thereafter several reminders were given by the respondent/claimant, apparently, through telephonic calls as well as emails for payment towards the aforesaid pending bill and although some clarifications were sought by the appellant company, which were provided too, a reply was received from the appellant company on 19.06.2013 to the effect that they have reconciled the invoice as per the records. However, the respondent/claimant immediately replied that the TDS deducted for the claimant‘s payment was in excess and also reiterated that there was an outstanding payment towards the invoice No. 165. The appellant company on 20.06.2013 sent a letter to the respondent/ claimant in reference to the aforesaid disputed bill dated 17.07.2012 appending therewith one calculation excel sheet and conveying that an amount of Rs. 2,67,28,969/- was payable to them and they also declined to make any payment in respect of invoice No. 165. The respondent/claimant sent a letter dated 10.07.2013 seeking payment towards the said invoice, but it was in vain; hence, legal notice dated 21.10.2013 (Ex. CW1/15) was served demanding the outstanding dues towards the bill dated 17.01.2013 with interest @ 15% per annum apart from other legal expenses and also invoked the arbitration clause vide their notice dated 24.12.2013.
THE IMPUGNED AWARD:
7. Suffice to state that on the respondent/ claimant moving an application under Section 11(6) of the A&C Act, the Sole Arbitrator was appointed vide order dated 10.09.2014 of this Court. On commencement of the arbitration proceedings, the claimant filed a statement of claim seeking an amount of Rs. 51,11,479/- along with interest @ 24% per annum from 17.01.2013 till the date of payment besides damages to the tune of Rs. One lac. Although the appellant company conceded the sequence of events as regards entering into a contract dated 12.12.2011, the ‗Big PO‘ dated 17.07.2012 besides the revised PO on 29.01.2013 and acknowledging all the email correspondence and letters mentioned in the statement of claim, however, they hotly contested the claims of the respondent/claimant stating that pursuant to the meeting between the parties on 21.01.2013, the scope of work in reference to the purchase order was amended and the value of the PO was revised to Rs. 15.50 crores with the understanding that the agency commission of the respondent/claimant was to be paid in proportion to the work executed by the claimant in accordance with the amended purchase order. It was refuted that the respondent/claimant was entitled to 8% of the total value of the original purchase order. The appellant company disputed any liability to make the payment in respect of the invoice No. 165 for an amount of Rs. 51,11,579/- since they claimed that it was revised in place of the original PO of Rs. 22.51 crores; and that on reduction in the value of the PO, the total agency fee payable stood reduced in total to only 8% of the value of the bills. It is pertinent to mention here that although the appellant company acknowledged that the amount claimed in the disputed invoice No. 165 was included in the detailed calculations in the excel sheet, but denied the fact that there was any admission on their part to pay such an agency fee. Further, although the TDS was deducted in respect of the amount claimed in the invoice No. 165 and the same was deposited with the authorities as required by law, it was vehemently denied that the same amounted to any admission of claim of the respondent/claimant on their part.
8. From the pleadings of the parties, the learned Arbitral Tribunal framed the following issues: ―1.Is the claimant entitled to the amount under invoice no 165, Annexure C[4] by way of fee for services rendered to the respondent?
2. Is the claim signed, verified and filed by a duly authorized person?
3. Is the claimant entitled to interest? If so, at what rate?
4. Relief‖
9. Suffice to state that the learned Arbitral Tribunal decided the issue No.1 in favour of the respondent/claimant holding that the contract between the parties as per the revised PO dated 29.01.2013 included the liability of the appellant company to pay the amount claimed in the invoice No. 165 (Ex.CW-1/4). Needless to state that issue No.2 was also decided in favour of the respondent/claimant and in so far as issue Nos. 3 and 4 are concerned, learned Arbitral Tribunal, keeping in view the rate of interest for commercial lending in the market, allowed interest @ 11% on Rs. 51,11,579/- w.e.f. 17.01.2013 till the date of payment besides providing that the costs of arbitration proceedings shall be borne by the two parties in equal shares except that the respondent/claimant would be entitled to recover from the respondent the costs that would be payable to the Delhi International Arbitration Centre.
THE IMPUGNED ORDER DISMISSING OBJECTIONS:
10. The impugned award dated 13.05.2016 was assailed by the appellant company by filing an application/objections under Section 34 of the A&C Act and suffice to state that the learned ADJ/First Appellate Court vide impugned order dated 29.10.2020, after discussing the relevant provisions of law and the case laws referred to by the parties, dismissed the objections, rejecting the plea of the learned counsel for the appellant company that the impugned award accepted a case not set up in the pleadings and/or that it went beyond the terms and conditions between the parties. It would be expedient to refer to the observations made by the learned ADJ, which read as under:-
64. Perusal of the documents annexed alongwith claim petition would clearly show that case of the respondent all through was that fees of the respondent was not dependent on the work executed rather it was a constant fees irrespective of any change in the purchase order. The reading of the claim petition as a whole would clearly show that all the correspondences between the parties (e-mail dated 29.01.2013, 08.02.2013, 12.02.2013) were made the part of the pleadings and, therefore, claim petition cannot be read in isolation. In the e-mail of petitioner dated 29.01.2013, petitioner itself mentioned that Iris fees need discussion, meaning thereby there was no consensus on fees being agreed @ 8% of work executed. This shows that respondent was demanding more. It cannot be said by any stretch of imagination that a different case was pleaded and during the course of the arguments, a case which was not set in pleadings was argued before Ld Arbitrator. These contentions of the Ld counsel for the petitioner are not at all tenable.
65. The said contention has been raised by petitioner on one more ground that Ld Arbitrator had erroneously observed that respondent had incurred loss as a result of reduction in PO value which was never a case pleaded. In this regard it is stated that though Ld Tribunal had observed the same but the petitioner had never stated or demanded anything over and above the agency fees agreed to be paid at the first instance by the petitioner to the respondent. This observation cannot be read in isolation. It is in continuation of the findings of Ld Arbitrator which were based on thorough analysis of the case set up by both the parties, accompanying documents and evidence thereto. This argument does not hold any merit.
66. Objection no. 2 to 4 are taken up together being inter-related. (2) Where the award is contrary to, or ignores terms of the contract. (3) Where material evidence is ignored or findings are based on no evidence (4) Where the award fails to draw inferences on proven facts or draws inferences that are untenable on the fact of it.
67. The contention of the petitioner is that original contract provided Iris fee would be 8%. During the course of arguments, Ld counsel for petitioner has pointed out that in the purchase order 17.07.2012 itself, it was recorded that ―The total quantity is an approximation and would decrease or increase depending‖. Ld counsel for petitioner had argued that this clause included the understanding between the parties regarding the variation in the Iris fees. It was argued that Ld Tribunal did not consider this clause at all. Simultaneously, clause 1.[8] of the general terms and conditions of the contract was also relied upon and it was stated that absence of a reply to e-mail dated 12.02.2013 could not have been construed to be an agreement regarding the Iris fees changing from 8% to a fixed price. In order to understand this, the sequence of the events have to be brought on record. At the first instance, purchase order dated 17.07.2012 for an amount of approximately Rs. 22.[5] Crores was executed between the parties wherein the some costs were fixed whereas some costs were on percentage basis. As far as clause of variation of total quantity is concerned, to my mind that does not appear to be with regard to fee of the respondent. Quantity can be related to some material and not a service charge. The clear reading of the purchase order would show that this was with respect to material which was mentioned in the upper portion of the chart prepared alongwith purchase order dated 17.07.2012 whereas in the lower portion, Iris fees was stated to be 8%. Therefore, interpretation that as per the purchase order itself, Iris fees was also subject to change is unilateral interpretation and does not derive any strength from the purchase order dated 17.07.2012.
68. It is an admitted fact that in December 2012, there was a change in the management of the petitioner and, therefore, talks with respect to reduction of the contract value were initiated. On record, there is a reference of the meeting held on 21.01.2013 in the office of the petitioner, in the e-mail dated 29.01.2013. The e-mail of 29.01.2013 sent by petitioner to respondent is very important and has to be carefully understood. Apart from the contents of the covering letter, an excel sheet containing the simulation was also attached with it. By this e-mail, the petitioner intimated in writing about the reduction of the purchase order to be for an amount of Rs. 155 Millions, however, while calculating the figures, the Iris fees was put in the simulation and after adding the same, this amount of revised PO was arrived at. Ld counsel for petitioner had explained that in the excel sheet no ―Ok‖ was mentioned above the Iris fees which was there above the column wherein the parties were in agreement. Ld counsel for the petitioner has supported this argument by the fact that in the body of the e-mail dated 29.01.2013, it has been mentioned that ―Iris fees needs discussion‖. In order to have a clear picture of the said e-mail, the content of the said e-mail dated 29.01.2013 is reproduced herein for future reference:- ― Dear Haider As discussed in our office dated 21 Jan 2013 we've now made revised simulation of our scope of work or total PO. Attached is the copy of that simulation with cost mapped to each aspect/action covered (Incl 32K Orrisa). We're confirming total PO amt now revised at Rs. 155Mil. Details of the same attached for your ready reference. Pls confirm. Also we'd like to mention that only the amt and scope of work has been revised, rest terms & conditions for warranty after installation support will remain unchanged. Following issues are still need to be discussed and close:
┌──────────────────────────────────────────────────────────────────────────────────────────────────────────┐ │ Sl. No. Heads Action │ │ Signature Not Verified │ │ FAO 91/2021 │ │ Digitally Signed By:PRAMOD Page 9 of 38 │ │ KUMAR VATS │ │ Signing Date:16.02.2024 │ │ 21:00:30 │ ├──────────────────────────────────────────────────────────────────────────────────────────────────────────┤ │ 1. Supervision Need Proofs │ │ 2. Regional Managers Need Proofs │ │ 3. State Managers Need Proofs │ │ 4. Regional Managers Need Proofs │ │ Reporting & Communication │ │ 5. Iris Team Travel Need Proofs │ │ 6. Iris Fee Need discussion │ │ Initially we'll be clearing bills as per last details shared with │ │ you Earlier. │ │ Total Complete bills we'd received so far is of Rs. │ │ 37,168,619/-/ │ │ Partner Sum of Vendor Sum of Total Amt │ │ Name Amount Payable │ │ Meroform 5,549,069 5,987,871 │ │ P&I 13,499,851 14,395,593 │ │ Retailware 15,648,524 16,785,155 │ │ Grand Total 34,697,444 37,168,619 │ │ Regards │ │ Atul‖ │ └──────────────────────────────────────────────────────────────────────────────────────────────────────────┘
22. In view of the aforesaid proposition of law, reverting back to the instant matter, it would be relevant to reproduce the reasons that prevailed in the mind of the learned Arbitral Tribunal while deciding the issue No.1 in favour of the respondent/claimant, which are as under35: ―14. On 8th February the claimant wrote to the respondent referring to the revised PO. This letter refers to a meeting that was held on 01.02.2013. The scope of the work as revised has been given in detail in this email letter. So far as the question on Iris Fee is concerned the letter Ext CW 1/5 referring to the discussion says: "During our discussions with Sony Mobile Iris had emphasised that based on the team costs Iris will charge an amount of Rs. 192 lakhs as service fee for the entire project. (mail attached - Global procurement Sony Mobile). The issue was further discussed and in line with Sony's requirement Iris brought down their fee to Rs. 180 Lakhs. (mail attached - Global procurement Sony Mobile). Subsequent to these discussions Iris was advised that this project needs to be completed within four months from issuance of PO and since the time was reduced Iris would also reduce its fee since it was based on time costs. Based on this premise and following negotiations finally Sony agreed to pay Iris fee of Rs. 136 lakhs which is reflected on the official mass retail PO issued by Sony. For Ease of calculations and discussions this amount was being spoken of and mentioned as 8% of the value of PO'.
{Emphasized invited by this Court to the observation in bold in second appeal under section 37} Vide this email we would like to submit that the Iris team in the true team spirit of partnership has from the very beginning developed, managed and delivered this entire project. You will agree that in the past months we have seen several changes, in the designs, in the markets, retail outlets, timelines, the overall costs, the management of the project etc and Iris has steadfastly worked in tandem with your teams to deliver on Sony's every requirement including providing Sony with substantial savings. Despite this project having stretched for over nine months now the Iris team has neither shirked responsibility nor asked for any extra remuneration. Now at this very last leg' of our deliveries with more than 80% of the entire project complete it is only appropriate that Sony pay Iris their agreed fee of Rs. 136 lakhs as per the original PO".
15. On 12th February the claimant sent another excel sheet including the Iris Fee as claimed in invoice no 165 and calculating the new PO value at Rs. 156.[5] Mil. The single one line note forwarding the excel sheet written by Mr. Haider Rizvi is as under: "This refers to our discussion and subsequent to recheck of quantities from Vender Partner the Total PO value now stand revised to Rs. 156.[5] Mil, this resolves and closes all issues in this PO. The updated sheet is attached".
16. Now the excel sheet issued by the claimant as well as the one issued by the respondent included the Iris Fee figures Rs. 45,84,451/-. The respondent did say "Need Discussion" in its communication of 29.01.2013. It appears that there were discussions on various dates as reflected in the communications mentioned above and the statement of W[1]. The amount claimed by the claimant in invoice no 165 was included by the respondent itself while calculating revised value of the PO and despite the discussions that preceded and followed the revision of the PO, the claimant Included this figure in its communication when it sent its own excel sheet. There is no evidence that the respondent disputed this figure after the aforesaid mail of the claimant dated 12.02.2013 was received by it.
17. The next correspondence Ext CW 1/7(Collectively) in this matter comes on 15.04.2013 as email from the claimant to the respondent reminding the respondent of the amounts due. The respondent replied to the email on the same day asking for confirmation regarding:
1. Invoices received against "Big PO Rs. 15.33 crores"
2. Payment status of Iris other than the "Big PO".
18. The respondent did not raise any issue regarding its liability to pay the amount claimed in the invoice no. 165 on the claimant's simulation dated 12.02.2013 or by the claimant's earlier letter of 08 the February which said that the Iris fee was agreed upon as Rs. 1,36,10,726/-.
19. On 15th April the parties exchanged notes on various small issues. No questions regarding the invoice no. 165 or the dues thereunder were raised by the respondent although the parties corresponded only regarding the dues in respect of the PO in question.
20. On 16th April the claimant wrote to the respondent an email (part of Ext CW 1/7) asking to take the payment position seriously as the respondent had already confirmed having received all the invoices. On 22nd April, the claimant again wrote an email Ext CW 1/8 to the respondents asking for the payments. A list of all the pending invoices was included in the correspondence. Some of the invoices has been highlighted. The invoice no. 165 was one of the highlighted invoices. The letter explains that some of the invoices were being marked as per the requirement of the respondent. Despite the highlighting, the respondent did not come out with the refusal to accept the liability for the amount of the invoice no. 165. The demand for the dues was reiterated by the claimant in its email dated 24.04.2013 Ext. CW 1/22, 17.05.2013 Ext CW 1/9, 02.05.2011 Ext CW 1/25 and 10.06.2013 Ext CW 1/10. On 10.06.2013 itself the respondent again asked for certain invoices. However there was no mention of invoice no 165 in this email letter. The respondent sent reconciliation on 19th June CW 1/11 which was found to be fine by the claimant. The reconciliation includes the invoice no 165. The claimant while confirming the reconciliation said further that the invoice no 165 shall be resolved as soon as possible and asked for the release of the payment at an early date.
21. However on 20th June the respondent wrote a formal letter Ext CW 1/12 sent through, registered post in which the respondent referred to the various dues under various heads and included one cheque towards dues but denied the liability under invoice no 165. The two paragraphs of this letter that referred to invoice no 165 are as under: "Please note that as regard your invoice bearing no 165 dated 17th Jan, 2013 for an amount of Rs. 51,11,479/- (Rupees Fifty One Lakh Eleven Thousand Four Hundred Seventy Nine Only) which you have raised towards agency commission charges is not payable by us as the agency commission has already been charged by you in your other bills for the executed work & the same has been duly paid by us. The same has been communicated to you on numerous occasions in the past also. We reiterate that, the agency commission charges can be paid/is payable only on the work executed i.e. in your case the work executed by you is in accordance of the PO for an amount of Rs. 14,90,55,832/- (Rupees Fourteen Crore Ninety Lakh Fifty Five Thousand Eight Hundred Thirty Two Only) hereafter "New PO"; therefore, your claim of agency commission on the initial PO i.e. on Rs. 22,51,69,945/- (Rupees Twenty Two Crore Fifty One Lakh Sixty Nine Thousand Nine Hundred Forty Five only) is not tenable as the executed work by you is not in accordance of the original PO. It shall not be out of place to mention herein that the original PO in fact was superseded by the New PO 'when you agreed to undertake work in accordance of the New PO".
22. The claimant replied on 10.07.2013 Ext. CW 1/13 claiming the amount under invoice no. 165 and refusing to accept this settlement of bills, as offered in the letter dated 20.06.2013. Part of the letter relevant to the issue is extracted below. "As per several discussions with your team our invoice no 165 dated the 17th Jan 2013 for Rs. 51,11,479 is a valid invoice and it has never been communicated in the past that it is not payable. Your contention that you have informed us on numerous occasions in the past that this Invoice in not payable is therefore not correct. ……. As per our query on TDS deduction that an amount Rs. 2,34,491.78 has been excess deducted we note that the amount paid/ credited by you as reflected in the form 26 AS from the Income Tax Website includes the value of the invoice of Rs 51,11,479 i.e. this amount has already been shown as amount paid/credited by you for the Income Tax records and statutory records. Therefore as per the Income Tax records we have to show the above invoice of Rs 51,11,479 as part of our Income for the FY 2012-13".
23. The claimant reiterated its demand vide a letter dated 10.09.2013 Ext. CW 1/14 and thereafter issued formal legal notice dated 21.10.2013 Ext. CW 1/15.
24. Now we can analyze the above sequence of events. It is submitted by the respondent that the Iris fee was always decided to be a 8% and there was no confusion about it and that the claim raised in invoice no 165 is utterly false. This position is, however, not brought out at all in revised PO on 29.01.2013. There was a discussion on 21.01.2013 as stated in the communication of 29.01.2013. There were in fact discussions even before the disputed Invoice was raised as stated by CW 1. The excel sheet giving details of dues has the amount of the invoice no 165 incorporated in calculating the total payable to Iris i.e. claimant. On top of all the columns, there is mention of the word "Ok", except on top of the column with the name Iris. Absence of this term "Ok" on Iris doesn't indicate anything more than what is mentioned in the forwarding note namely "Need Discussion". If both parties understood the fee payable to be 8% of the value of work done there was no need to include the amount mentioned in invoice no 165 in the excel sheet and say "Need Discussion" in the note. The simplest thing to do was to add 8% in the column of Iris fee and straightway reject the Invoice no 165 as bad.
25. Secondly, even after discussion between the parties that followed the communication of 29th January, the respondent did not categorically say that the claim under invoice no 165 was entirely bad on the ground that the fee payable was only 3%. The claimant in the communication of 12th February stated in so many words after including invoice no 165. "This resolves and closes issues in PO”. Had the respondent's case as made out been true, the respondent would have immediately replied saying that the issue of Iris Fee was still open and could not be closed. Nor did the respondent reply by saying that this column had to be corrected with the figure calculated at 8% of the value of the work done.
26. In the earlier communication dated 8th February mentioned earlier a resume of discussion of the parties over the scope of work, the work process and the other issues were discussed. In the 8th February letter, the claimant sufficiently explained that after discussion the Iris fee had been agreed to be retained at Rs. 136 Lakhs. Both the letter of 8th February and the revised excel sheet of 12 February were subsequent to discussion held on 21st January to issue of the revised PO of 29th January. Till 20.06.2013 here was not a shred of paper or electronic communication denying the claim of invoice no 165 on the ground that the fee to be paid was only 8%.
27. It appears to me that both parties understood that the fee to be paid to the claimant continued to be the amount agreed originally which justified issue of invoice no. 165. So the letter of 20.06.2013 was merely an afterthought and did not indicate the real situation.
28. The respondent not only included the amount claimed in invoice no 165 while calculating the value of revised PO or the new PO, but also deducted the Income Tax to be deducted at source. The respondent says that the claim in invoice 165 was included in the excel sheet accompanying the revised PO only for the purpose of simulation. The Ld. counsel for the respondent has submitted that the inclusion of the figure in the simulation cannot be read as acceptance of inability. Similarly, he says, the deduction of Income Tax at source does not amount to acceptance of liability. The Ld. counsel for the respondent Mr. Nikhil Nayyar referred to two judgements to buttress his argument. They are M/s S.P. Brothers Vs Biren Ramesh Kadakia 2009 AIHC 650 in which the Bombay High Court held that issuance of the TDS certificate did not amount to an acknowledgement of the defendant within the meaning of Section 25 of the Indian Evidence Act and ACTAL Vs India Infoline Limited 2012 SCC Bom 1507 in which the first judgement is referred to with approval. Even if these arguments are taken as correct the two facts namely the deduction of Income Tax and inclusion of the claim made in the invoice no 165 in the simulation taken together indicate that the parties understood that invoice no 165 was valid and payable.
29. If the figure in question was included only for the purpose of simulation, there was no reason why 8% could not have been Included in the simulation. The original figure of Rs. 136 mil was equal to 8% of the total value of the original PO, With the PO value revised, 8% of the revised value again could be similarly calculated. Thus it is apparent that both parties understood that, with the revision of PO value, the fee to pay the claimant did not remain 8% of the value of the work actually delivered.
30. The whole case can be considered from another angle. The claimant had already taken steps on the orders placed by the original PO which was for a much bigger amount of Rs 22,51,69,945/-. The claimant had taken steps to fulfil that order and in the process had incurred 'expenditure and liability in the anticipation that the entire work produced would be delivered and the sum agreed upon as fee namely Rs. 136 mil would be earned by way of fee at the rate of 8% from every bill) Before the conclusion of the entire exercise, the respondent decided to take delivery of the work produced only till then and revised the total value of the PO. Admittedly the respondent did not offer to take upon itself the loss that was going to be caused to the claimant on account of respondent's decision not to take delivery of the remaining work directed under by the first original PO. It is very likely that the claimant would not have accepted the deduction in the value of the PO which was the first contract and forgo the profit expected by it by accepting only 8% of the revised value while shouldering all the costs that had already been incurred for satisfying the first original contract. It was only likely that the claimant would not have agreed to alteration in the contract without securing its own Interest.
31. Ms. Malvika trivedi, the Ld. counsel for the claimant made an argument that the claimant agreed to the respondent's proposal to reduce the value of the PO only on the condition that the "Iris fee" would not be altered. The Ld. counsel for the respondent opposed the argument on the ground that no such plea has been taken in the Statement of Claim, True, the claimant has not categorically pleaded such a case. But the Statement of Claim has to be read along with the documents filed by the claimant. The letter dated 08.02.2013 CW 1/5 is only indicative of such a plea. Hence this plea is a part of the claimant's case and cannot be ignored. The respondent cannot say that this plea takes the respondent by surprise. Therefore such a plea can be considered as a part of the claimant's pleadings and therefore is worth considering.
32. CW[1] Mr. Haider Rizvi in his cross-examination also maintained the same case by saying, as quoted earlier, that Iris agreed to lower the value of the Big PO and take the responsibility for the liability of vendor to whom it had issued purchase order based on the Big PO from Sony provided "Iris fee" of Rs. 1,36,10,724/-, is paid as per the original PO.
33. The learned counsel for the claimant has shown from the two simulation excel sheets which has several columns with heading available stock (not executed + modification). Three entities or vendor partners had stocks amounting to Rs. 31,59,294, Rs. 2,21,01,051 and 3,17,45,919. It was between the claimant and these vendor partners to deal with these available stocks. Whatever of these available stocks could not be supplied to the respondent remained with the claimant and its vendor partners. In this situation It is most likely that the claimant could not have agreed to only 8% of the supplies made to the respondent and suffer the consequence Investments/expenditure incurred to satisfy the original PO.
34. The claimant's case that the parties agreed that despite the reduction in the total value of the PO the claimant would get the fee originally agreed upon, seems to be more likely than the case of the respondent that the fee payable to the claimant continued to be 8%. This tribunal has to accept one of the two cases made out by the two parties and cannot create a third case. The case of the claimant being more probable has to be accepted.
35. At the time of final arguments both the counsel raised the issue as to whether the documents of 17.01.2013, 29.01.2013, 08.02.2013 and 12.02.2013 constituted any contract. The Ld. Counsel for the claimant has referred to a few judgements showing that when a counter proposal is accepted it amounts to an offer. Let us examine the issue on the basis of the respective claims of the parties and the documents on record.
36. The original PO Ext. CW 1/3 was a contract which nobody disputes. In that contract the fee was agreed to be 8% and 8% was calculated at Rs. 1,36,10,726/-. The revised PO dated 29.01.2013, according to the respondent's counsel, is merely a conditional offer and not a contract. The respondent's counsel would further say that the reply of 08.02.2013 was also not an acceptance of the offer made by the letter dated 29.01.2013. So far as the reply of 12.02.2013 is concerned, the respondent's counsel says that the same was not an unqualified acceptance since the total value of the contract calculated by the claimant was 156.[5] million as against the offer of 155 million, the Ld. counsel for the claimant would argue that the respondent accepted the offer made vide letter dated 12.02.2013 and therefore the same amounted to a contract.
37. It is quite clear from the narration of facts in the foregoing paragraphs that the contract between the parties had actually taken place before the revised PO was issued when the parties met and discussed on dates including 21.01.2013. The claimant's witness has said that invoice no. 165 was raised as the discussions were already on for reducing the total value of the contract and as per the understanding between the parties that "Iris Fee' would not be altered, the invoice no. 165 was raised. The parties did not formally record the contract as is customary in the commercial world. What the contract was can only be inferred from the documents mentioned above. The foregoing paragraphs indicate the inference that can be drawn from the aforesaid documents, namely that the contract was not to reduce the total fee payable to the claimant.
38. Even if the contention of the Ld. Counsel, that the documents of 29.02.2013 were merely a conditional offer is accepted, it does not advance the case of the respondent. In the letter of 29.01.2013 there was no offer for "Iris Fee" to be paid at 8% of the bills. If this was to constitute a conditional offer and the respondent intended to pay only 8%, the respondent should have offered 8% in the offer/conditional offer and should have waited for the acceptance by the claimant. Instead, the respondent made a conditional offer for Rs 1.36 crores while including in the claim in the invoice no 165 as amount payable to the claimant and asked for discussion. There was no conditional offer for 8% to be accepted. Nor was any such offer accepted. There is no document/communication till June 2013 saying that the contract was only for 8%. In fact the respondent did not itself mention 8% in any of its communication ever since the original offer was revised.
39. As per respondent's affidavit at (pg. 7) there was no agreement regarding "Iris fee" till 12th of February and further that on 05th March in a meeting the respondent offered 8%. The claimant disputes the same in the Cross-examination. But more importantly the witness himself in cross-examination stated that the PO at pg. 47 & 48 of the Statement of Claims viz. the original PO CW 1/3 clearly indicated 8%. Thus the witness contradicts himself rendering his story weak for acceptance. The respondent in none of the subsequent documents, despite repeated demands from the claimant, referred to any fresh agreement of 8% on 5th March or any date subsequent to the revision in the PO. Therefore, it is difficult to infer that the parties contracted to "Iris Fee" being 8% only, even on the revised PO.
40. The "conditional offer" stood accepted on 12.02.2013 where the claimant reiterated the claim under invoice no 165 and recalculated some of the details. The respondent having not replied to this document till all the contractual work was concluded clearly accepted this position to justify a finding that the contract between parties included invoice no 165. It can be seen that the letter 12.02.2013 accepted the offer made in the letter 29.01.2013 and the same should not be treated as a counter offer because the difference in the total was not based on difference in regard to any terms of the contract but because of the way the parties calculated their dues. One may refer to judgement of Supreme Court in the case of Fair engineers (P) Ltd. Vs N.K. Modi, (1996) 6 SCC 385 in which an offer, a counter offer with some corrected technical details and its acceptance were held to be the parts of a concluded contract.
41. Even if the letter dated 12th February was treated as a counter offer that stands accepted by the silence of the respondents as acceptance can also be implied from conduct of the parties. The claimant in this regard cited the judgement in the case of Coffee Board Vs Commissioner Income Tax (1985) 3 SCC 263.
42. In Deokar Exports (P) Ltd Vs New India Assurance Co. Ltd. (2008) 14 SCC 598 the Supreme Court had the following observation to make in respect of offers and counter offers. "A policy of insurance is a contract based on an offer (proposal) and an acceptance. The appellant made a proposal. The respondent accepted the proposal with a modification. Therefore, it was a counter-proposal. The appellant had three choices. The first was to refuse to accept the counterproposal, in which event there would have been no contract. The second was to accept either expressly or impliedly, the counter-proposal of the respondent (that is, the respondent's acceptance with modification) which would result in a concluded contract in terms of the counter-proposal. The third was to make a counter-proposal to the counter-proposal of the respondent in which event there would have been no concluded contract unless the respondent agreed to such counter- counter-proposal. But the appellant definitely did not have the fourth choice of propounding a concluded contract with a modification neither proposed nor agreed to by either party".
43. The situation mentioned in that case is very similar to ours in which there are offers and counter offers but there is no offer of any kind for payment of "Iris Fee" @ 8%. The original PO stood revised and so far as the "Iris Fee" in the new PO was concerned, the same was "conditionally" given to include the invoice no. 165. Therefore, the claimant could accept only this offer. The offer was not for 8% and no suggestion of that nature were at all made in that offer or in offer made thereafter. RW[1] himself says that it was only on 05th of March that the parties agreed to 8%, a contention which has been disbelieved.
44. In view of the entire analysis as above I have no option but to hold that the contract between the parties as per the PO 29.01.2013 included the respondent's liability to pay the amount claimed in invoice no 165 as claimed in Statement of Claim. Issue no 1 is decided in favour of the claimant.‖
23. A careful perusal of the aforesaid line of reasoning would show that the learned Arbitral Tribunal conducted a meticulous exercise of appreciation of the entire evidence brought on the record resulting in passing of the impugned award. Without further ado, there is no question of the learned Arbitral Tribunal going beyond the terms and conditions of the contract between the parties. There is no re-drafting of the contract so as to envisage that the decision went beyond what was being claimed by the respondent/claimant.
24. The long and short of the entire story is that although the scope of work had been revised in the meeting held on 01.02.2013, the email dated 08.02.2013 (Ex.CW1/5) clearly brought out that based on the ‗Big PO‘, 80% of the work had already been performed and the ‗Iris fee‘ had been negotiated to be Rs. 136 lakhs assessed @ 8%. Evidently, this was followed by another e-mail dated 12.02.2013 where the demand for the ‗Iris fee‘ @ 8% was reiterated and for that matter, reiterated in subsequent discussions and accept for a lame assertion on the part of the appellant consequent to the meeting dated 29.01.2013 that the said aspect ―need discussion‖, there was never any refusal on the part of the appellant company to disown such disposition till 20.06.2013.
25. Learned Arbitral Tribunal rightly relied on the decision in Deokar Exports (P) Ltd Vs New India Assurance Co. Ltd. (supra)36, to the effect that even if there was a counter offer by the respondent claimant, the appellant firm chose to remain silent and the parties acted upon the terms and conditions of the contract and the respondent/claimant thereby performed their part of the contract to the
full satisfaction of the appellant completing the entire task by 30.04.2013.
26. The interpretation that has been accorded by the learned Arbitral Tribunal to the whole sequence of events from the day the contract in question was executed between the parties and ensuing correspondence, which are by all account admitted, leave no scope for doubt that the impugned award holding that the ‗Iris fee‘ was payable @ 8% of the original ‗Big PO‘ cannot be said to be patently illegal or outside the scope of the contract entered into between the parties.
27. In the face of the fact that the learned Arbitral Tribunal has assigned sufficient and cogent reasons in support of its decision, no interference is called from this Court in this second appeal. In other words, there is no scope for any interference when it is palpable that the learned Arbitral Tribunal committed no illegality or perversity in appreciating the evidence led by the parties and there is nothing to discern that the impugned award is based on wrongful application of law on any aspect of the matter. There is no necessity for this Court to delve into the plethora of case laws cited at the Bar and reflect upon the respective pleas or counter pleas advanced by learned counsels for the parties in view of the authoritative pronouncement by the Supreme Court on the subject referred to hereinabove by this Court.
28. In view of the foregoing discussion, the present appeal is bereft of any merits. The appellant company is fully responsible for this kind of protracted litigation, and thereby, wasting time and precious resources, putting unnecessary burden on the justice delivery system for which they must be visited with the exemplary cost, which is quantified at Rs. 5,00,000/-, that is by all means a token amount given the claim amount involved, which shall also be payable to the respondent/claimant within one month from today, failing which they shall be entitled to recover the same with interest @ 15% p.a. till realisation.
29. The appeal, along with all the pending applications, is disposed of accordingly.
30. A copy of this judgment be sent to the learned Trial Court for information and records.
DHARMESH SHARMA, J. FEBRUARY 15, 2024