Jubliant Foodworks Ltd. v. Indian Oil Corporation Ltd.

11. That after a lot of follow ups including verbal discussions and personal meetings, the representatives of the Respondent in a meeting held on 30.4.2010 with the Claimant, agreed to make a partial payment @ Rs.25,000/- per month w.e.f. February, 2009, as a part of settling the issues amicably.

12. That subsequently, the Respondent made part payments @Rs.25,000/- per month w.e.f. February, 2009 till May 2010 and continued to pay the same until October, 2010 and closed its operations at the Kalkaji Site RO of the Claimant on 9.10.2010 and vacant space was handed over to the Claimant.

13. That upon closure of the operations of the Domino's Store, the Claimant repeatedly requested the Respondent to reconcile the accounts and make the balance payment to the Claimant. In this regard, various emails were exchanged between the parties and various meetings were held, and the Claimant called upon the Respondent to make the outstanding payment of Rs. 22,62,867/, however, the Respondent failed to make any payments to the Claimant.

14. That the Respondent vide its letter dated 1.3.2011 stated that it was willing to make a payment of only Rs.9,66,750/- as against the total outstanding amount of Rs.22.62,867/-. However, upon recalculating the amounts due, it came to the notice of the Claimant that the total outstanding of Rs.22.62,867/- did not take into account the amounts of Rs.25,000/- paid per month from February 2009 to May, 2010 and on considering the same, the total outstanding amount came to Rs.17,55,608/-. After adding the "Service Tax w.e.f. 1.6.2007 and the outstanding payments for the months of January to April 2008, a sum of Rs. 22,93,863/- came about to be due and payable by the Respondent to the Claimant.”

9. In the above context of the averments, the following reliefs were sought before the Ld. Arbitrator:- “(a) pass an award In the sum of Rs. 22,93,863/- (Rupees Twenty Two Lakhs Ninety Three Thousand Eight Hundred and Sixty three only) in favor of the Claimant and against the Respondent; (b) pass an award in the sum of Rs. 20,37,078/- towards interest @18% per annum from the date(s) on which the amount of Rs. 22,93,863/- became due and payable by the Respondent to the Claimant;

(c) pass an award for grant of pendente lite and future interest @ 24%per annum on the awarded amounts.

(d) pass any such other order(s) as this Hon‘ble Arbitral Tribunal deems fit in the facts and circumstances of the case.”

10. In the statement of defence, filed on behalf of the petitioner, the nonpayment of the concerned amounts was sought to be attributed by the petitioner to the obstruction/s being faced by the petitioner in running the outlet.

11. In the above background, the arbitral award dated 14.03.2014 was rendered. The following issues were framed by the Ld. Sole Arbitrator:- “A) Whether the Claimant is entitled to a sum of Rs.22,93,863/- as prayed for? B) Whether the Claimant is entitled to a sum of Rs.20,37,078/- towards interest@ 18% per annum on the above mentioned amount of Rs.22,93,863/from the date(s), the same became due and payable, if the Claimant is found entitled to the above mentioned amount? C) Whether the Claimant is entitled to pendent lite and future interest, if so, at what rate? D) Whether the Respondent were entitled to amend/alter the payment terms of the original agreement by their letter dated 01/02/2009 to Claimant? E) Whether any action of Mr. Sachdeva as claimed by the Respondent resulted in any loss to the Respondent? F) If so, whether in terms of the Agreement between the parties, IOCL can be held liable for any purported and/or alleged action of Mr. Sachdeva. G) Whether the Respondent is entitled to Rs.50 lacs towards loss of profit as claimed in the Counter Claim? H) Whether the Respondent is entitled to the amounts claimed towards excess charges allegedly paid on account of water charges, electricity charges and parking charges? I) Whether the Respondent is entitled to interest, if so, for which period and at what rate?”

12. The said issues were answered in the impugned award as under:- “A) Whether the Claimant is entitled to a sum of Rs. 22,93,863/- as prayed for ? Claimant is entitled to a sum of Rs. 22,93,863 as prayed for, considering upon following facts:

1. The case of Claimant is that Respondent has unilaterally reduced the monthly license fees of the store and the Claimant is claiming in its claim, the difference of monthly license fees for the period Feb. 2009 to Oct 2010. Claimant has heavily relied upon clause no. 16.[6] of the Collaboration Agreement Dtd. 31.12.2001 (based upon broad MOU Dtd. 19.12.2000 duly signed by both the parties) to say that in terms of the above clause, Respondent could not unilaterally amend the terms of the contract. As per this Clause ―No variation in the Agreement shall by binding on any party unless and to the extent that such variation is mutually agreed and recorded in a written document executed by all parties‖. During cross examination of Mr. Ravi S. Gupta, Respondent witness on 08.10.13, while replying to Question No. 4 & 5, it was replied that amendment of the Agreement needs to be mutually agreed in writing and Claimant has not signed any documents by which it had agreed to vary or amend the terms of Agreement Dtd. 31.12.2001.

2. As per Clause No. 12.[2] of Collaboration Agreement, this same can be terminated as follows: - By written consent of the parties, - By either party at any time by giving a notice of a 3 months to either party, - By either party (Non defaulting party) giving a notice of 3 months from the cure period, if the other party (Defaulting party) is in breach of its obligations under this Agreement, which breach is not cured within 12 weeks of notice of such breach by Non defaulting party to the Defaulting Party.

3. As per Clause no. 12.[4] (b) of Collaboration Agreement Dtd. 31.12.2001 – No termination of this Agreement or any agreement hereto shall release any party from any liability to any other party which at the time of such termination has already occurred nor affect in any way the survival of any right or obligation of any party which is expressly stated elsewhere into this Agreement or in any Agreement related hereto to survive the expiration or Termination hereof.

4. As per Clause No. 30 of MOU Dtd. 19.12.2000, any additions, deletions, amendments, alterations of any of the terms and conditions of this MOU as may be required by business exigencies and/or any change made by the regulatory authority and/or statutory changes shall by in writing.

5. As per Clause No. 32 of MOU Dtd. 19.12.2000, in the event breach is not reasonably cured by the other party within the cure period, the affected party shall have the option to terminate or otherwise withdraw from MOU on the failure of breach of the terms and conditions of the MOU by giving 3 months notice to other party.

6. In my view, this Letter Dtd. 01.02.2009 of the Respondent to Claimant at best can be construed only Proposal of Reduction of License Fees (in which certain problems of Water Bills, Electricity bills, Parking problems, renewal of Licenses and prevailing recessionary trends in the market has been highlighted) as no documents have been submitted by Respondent to exhibit that variation in payment terms have been accepted by the Claimant. Therefore, terms of the said letter Dtd. 01.02.2009 are not binding on Claimant and cannot be said to be a variation in the Agreement in terms of Clause no. 16.[6] of the Collaboration Agreement.

7. Besides, Respondent is not having any powers either in Collaboration Agreement Dtd. 31.12.2001 or MOU Dtd. 19.12.2000 of Unilateral Reduction in Payment/Variation in Payment Terms merely by giving intimation to Claimant through Letter Dtd. 01.02.09 that since no reply to its letter by Claimant, it will be assumed that Claimant has accepted Proposal of the Respondent.

8. During the proceeds. Respondent has not established that difficulties (resulting into Counter claim of Electricity charges, Water charges, Parking charges & Loss of Profit) to Respondent has been created by action/willful conduct of Claimant (IOCL).

9. Case Laws submitted by Counsel of Respondent are of those cases in which validity of the agreement has already expired and there is no clause of written consent of both the parties for affecting variation in payment terms. In the subject case. Validity period of Collaboration Agreement was still valid and contained clause of written consent of both the parties for effecting any change. Counsel of the Claimant has submitted case laws which support the contention that variation in payment terms cannot be made by unilateral action by one party and mere silence of one party cannot be used by another party for affecting variation in payment terms (If there is clause in the Agreement for written consent of both the parties).

10. Claimant has submitted Letter Dtd. 14.03.2011 and Letter Dated 19.11.2009 (unsigned) and exchange of Mails with Respondent during Jan 11 & Feb. 11, clearly indicating that Variation in Payment Terms of Collaboration Agreement by Respondent and Proposal of Reduced Fees by Respondent was not agreed upon by Claimant. This reduced Fees Amount has been considered as Part Payment only by the Claimant (IOCL).

11. In Letter Dtd. 14.03.11, it was also advised by Respondent that as per Clause No. 5 of this supplementary MOU Dtd. 08.03.2007 (Jointly signed by IOCL and the Respondent) is not applicable in respect of Domino's Pizza store already commissioned against old MOU Dtd. 19.12.2000. The particular, Domino Pizza Outlet at Kalka Ji RO against Old MOU Dtd. 19.12.2000 and Collaboration Agreement Dtd. 31.12.2001.

12. Only Available option for Respondent as per collaboration agreement or MOU was to give notice for curing the defects (if any) in 12 weeks and if no action was taken by IOCL, then to terminate the agreement by giving 3 Months notice.

13. Admittedly, the Respondent never terminated the Agreement and in fact let it complete its full term till October 2010. Therefore, the Respondent cannot claim any defence for any alleged problems created by the Dealer. From the above, it is clear that the Claimant has proved that it is entitled to the claim amount of Rs. 22,93,863/-. Besides, the Respondent was not able to establish – Firstly powers of unilateral reduction of the License Fees and Secondly, Alleged harassment by the Dealer for which Claimant was to be blamed. The submission of the Respondent that the Claimant has accepted the terms of the letter Dtd. 01.02.2009 as it had accepted the payments made thereafter has also not been proved by the Respondent. The claimant has specifically in para 10 of the Affidavit filed by its witness, Shri Narpal Singh, pleaded that the Respondent had stopped making payments from Feb. 2009 and it was only after the claimant called upon the Respondent vide letter Dtd 19.11.2009 and the subsequent meeting held on 30.04.2010, that the Respondent started making part payment @ Rs.25000/- per month w.e.f. Feb. 2009 as part of settling the issue amicably. This contention of the Claimant's witness has neither been controverted by the Respondent nor has Respondent brought anything on record to suggest anything to the contrary. This further goes to show that the Claimant had never accepted the Respondent's offer made through its letter Dtd. 01.02.2009. In these facts, judgments relied upon by Respondent would not be applicable to the facts of the present case. Accordingly I decided issue no. (A) in favour of the Claimant. B) Whether the Claimant is entitled to a sum of Rs. 20,37,078/- towards interest @ 18% per annum on the above mentioned amount of Rs. 22,93,863/- from the date (s), the same became due and payable, if the Claimant is found entitled to the above mentioned amount? Yes, the claimant is entitled for interest on outstanding amount still pending to be settled by the Respondent, I allow 12% interest on this outstanding amount of Rs. 22,93,863/- to be paid by Respondent to the Claimant. C)Whether the Claimant is entitled to pendent lite and future interest, if so, at what rate? Yes, the claimant is entitled to pendent lite and future interest @ 12% P.A. D) Whether the Respondent were entitled to amend/alter the payment terms of the original agreement by their letter dated 01/02/2009 to Claimant? I have already decided Issue no. (A) in favour of Claimant, where I have observed that as per collaboration agreement or MOU Respondent was having no right to alter the payment terms by their letter dated 01/02/2009 unilaterally. This letter Dtd. 01.02.2009 can be construed only a proposal from the Respondent. Therefore I hold that Respondent was not entitled to alter/amend payment terms of the Original Agreement by their letter Dtd. 01.02.2009. E) Whether any action of Mr. Sachdeva as claimed by the Respondent resulted in any loss to the Respondent?

1. Although Respondent has submitted counter claim for the loss due to action of Mr. Sachdeva, RO Dealer but Counsel of the respondent during evidence has not established that Mr. Sachdeva was working as an agent of Indian Oil or his actions were based upon instructions from Claimant, hence the problems stated in its letter dated 01/02/2009 cannot be construed from IOCL (who is the party to the collaboration agreement and MOU).

2. Remedy which was available to the Respondent as per Collaboration Agreement/MOU - Termination of Agreement was to terminate the Agreement by giving 12 weeks cure notice, which was admittedly not exercised despite stated problems being faced by Respondent since Jan. 2007 (Fact of Problems as mentioned in various Letter Dtd. 19.01.07, 18.10.07, 05.02.08 and its reply Dtd. 18.03.13 of Respondent against Statement of Claim of Claimant). Accordingly, I decide this issue in favour of the Claimant. F) If so, whether in terms of Agreement between the parties, IOCL can be held liable for any purported and/or alleged action of Mr. Sachdeva Since I have decided issue no. (E) in favour of the Claimant, I am deciding this issue also in favour of the Claimant, since Respondent has not established that:

1. Mr. Sachdeva has worked as an agent of Claimant.

2. Purported and/or alleged action was done by Mr. Sachdeva on instructions of Claimant (IOCL).

3. There is no clause in the MOU or Collaboration Agreement in this regard supporting the contention of the Respondent. G) Whether the Respondent is entitled to Rs. 50 lacs towards loss of profit as claimed in the Counter Claim? Respondent is not entitled to this claim submitted as Counter Claim, as:

1. Sales Data of Pizza Store at Satyam Place, Nehru Place (after closure of Pizza Store at Kalka IOC RO) submitted by Respondent is not of identical location to the subject store location at IOCL RO.

2. Besides sales figure of this Pizza Store indicated In the statement of Respondent (pertains to Nov. 2010-2011 & 2011-2012) is not of the similar period of the Pizza store at Indian Oil Retail Outlet (2007-08 to Sept. 2010).

3. Respondent has not submitted any evidence to show the alleged loss of profit.

4. Moreover, the Respondent's witness was put a specific question (Q. No. 23) by the Counsel for the Claimant that if the Respondent was having problems since 2007 on account of alleged acts of Shri Sachdeva, why did the Respondent not terminated the Agreement to which the Witness had replied that he is unable to answer the question. This only goes to show that even though the Respondent had an option (in terms of the Agreement) to terminate the Agreement, it had not terminated the Agreement but completed the full term of the Agreement. Therefore the Respondent cannot now try to claim any alleged loss that it claims that it had suffered due to the acts of the Sachdeva.

5. There is no clause in Collaboration Agreement Dtd. 31.12.2001 or MOU Dtd. 19.12.200 for this type of claim. Hence, the counter claim of Respondent of Loss of Profit is disallowed. H) Whether the Respondent is entitled to the amounts claimed towards excess charges allegedly paid on account of water charges, electricity charges and parking charges?

1. Respondent has not substantiated that these charges were collected by Mr. Sachdeva, RO Dealer as an Agent of the claimant (IOCL), hence this stated payment to Mr. Sachdeva cannot be linked to Payment made to IOCL (Claimant) for making refund.

2. Claim of Respondent for Reimbursement of parking charges on account of not providing proper parking space by Mr. Sachdeva, RO Dealer is not tenable as there is no clause in collaboration agreement or MOU for such reimbursement by the Claimant, hence the same is disallowed.

3. Photostat copies of Electricity bills of Main Meter of Multiplying factor 40 at the subject RO for the period March 2010 to Oct 2010 has been submitted by Respondent vide Application Dtd.03.02.14 in support of its counter claim but dispute of Electricity charges is between Mr. Sachdeva, RO Dealer and the Respondent and in absence of establishing the fact that these charges have been collected by Mr. Sachdeva on behalf of Claimant or on the directions of the Claimant, counter claim of the Respondent against Claimant (IOCL) in this regard is disallowed.

4. During Cross Examination of Sh. Ravi S Gupta on 06.11.2013 by Claimant also, no categorical assent was given by Respondent witness that claimant will be responsible or liable for RO Dealer‘s Act.

5. As per Clause no. 13.[2] (b) of Collaboration Agreement Dtd. 31.12001 (The company shall indemnify Dominos against any and all losses or injuries suffered by Dominos or any person claiming through Dominos due to any damage caused to the premises and/or any equipment or property belonging to Dominos if such damage has been caused due to any negligence of misconduct by the Company Dominos or any of the employees working at the R.O.) is not applicable in the subject case as there is no damage to the premises and/or any equipment or property belonging to Dominos by IOCL in the dispute involved between both the parties. Claim of Respondent does not fall under this Clause. I) Whether the Respondent is entitled to interest, if so, for which period and at what rate? Basic counter claim of the Respondent has been disallowed hence question of entitlement of interest on this counter claim is not applicable. Besides Claim amount including interest, Respondent is also liable to make payment of Legal Charges (Stamp Duty & Advocate Fees incurred by Claimant) of the Arbitration case, to the Claimant.”

13. In the above background, the petitioner has sought to assail the aforesaid arbitral award. It is contended by learned counsel for the petitioner as under:-

(i) That there were doubts as to the independence and impartiality of the arbitrator. As such, the award deserves to be set aside on this ground alone.

(ii) That the petitioner‟s offer [as recorded in its letter dated

01.02.2009] was accepted by the respondent, and as such, the financial claims made by the respondent on account of deficiency in payment are untenable. It is contended that the arbitrator committed a patent illegality by holding that the letter dated 01.02.2009 of the petitioner can and best be construed only as a proposal of reduction of licence fee.

14. Per contra, learned counsel for the respondent has submitted that the award is well reasoned, based on the material and evidence on the record, in particular, taking into account the contractual stipulation contained in the agreement between the parties as regards payment of the licence fee. Attention has been drawn to a letter dated 19.11.2009 sent by the respondent to the petitioner wherein it was stated by respondent as under:- “Sr. Vice-President (Finance) Dominos Pizza India Limited Plot No.1-A, Sector-16A, Institutional Area, NOIDA 201 301 Sub: NOTICE ON NON-RECEIPT OF LICENSE FEE & ROYALTY FOR THE DOMINOS RESTAURANT AT OUR RETAIL OUTLET Dear Sir, You are running one Dominos Restaurant at our United Engineering Retail Outlet at Nehru Place. As per the agreement executed between us you are liable to pay License fee equivalent to fair rental value with 5% increase on first five years and thereafter upon revaluation. Besides this you are also liable to pay return on investment @ 13% on an annual basis payable in advance on every 15th of the month. In case ROI cannot be calculated then, Rs.500 per sq. ft. flat, is liable to be paid. Also a royalty of 2% on net sales is to be paid by you on quarterly basis computed at the end of every quarter and paid before the 15th of the fourth month. We have not received licence fee and royalty from your end since Feb‘09 despite many efforts made by our officers. In the light of the above, we have no option left but to put you on notice under clause 32 of MOU agreement for remedy of the breach of the condition for ‗timely payments‘. As per the said clause you are hereby given twelve weeks to resolve the issue of non-payment of the license fee, ROI and the royalty as applicable, failing which we shall have no option but to initiate termination of the agreement. Thanking you, Sincerely Yours, For Indian Oil Corporation Limited CHIEF DIVISIONAL RETAIL SALES MANAGER” Analysis and Conclusion

15. Having heard respective counsel for the parties, I find no infirmity whatsoever in the impugned arbitral award warranting any interference in exercise of the jurisdiction under Section 34 of the Arbitration and Conciliation Act, 1996.

16. The arbitral award takes into account the relevant contractual provisions, the correspondence exchanged between the parties and the attendant facts and circumstances to uphold the entitlement of respondent in claiming the differential amount of monthly licence fees over and above Rs.25,000/- paid by the petitioner w.e.f. February, 2009. It has been rightly held in the impugned award that the letter dated 01.02.2009 addressed by the petitioner did not result in any variation of the agreement between the parties, the provisions of which continued to operate till such time the petitioner vacated the premises in question. It has been rightly held that the agreement between the parties did not confer any powers on the petitioner to unilaterally reduce the amount payable to the respondent. It has also been found, as a matter of fact, that the respondent was not responsible for the alleged difficulties faced by the petitioner in running its outlet. In this regard, it has been noted that the petitioner never terminated the agreement and completed its full term till October, 2010, before vacating the premises in question.

17. As such, the arbitrator was fully justified in reaching the conclusion that the respondent was entitled to the amount of Rs.22,93,863/-. The details regarding the said amount have been set out by the respondent in CW1/7 filed along with the affidavit of evidence of the concerned witness of the respondent.

18. The impugned order renders a factual finding that the petitioner herein was not able to substantiate its alleged claims towards excessive charges having been paid on account of water, electricity and parking.

19. The pendent lite and future interest awarded by the Ld. Arbitrator to the respondent was also well within the jurisdiction of the Ld. Arbitrator.

20. The scope of the interference in exercise of Section 34 of Arbitration and Conciliation Act, 1996 has been the subject matter of numerous judicial pronouncements. Reference in this regard is apposite to the recent pronouncement of the Supreme Court in Hindustan Construction Co. Ltd. v. National Highways Authority of India, 2023 SCC OnLine SC 1063, wherein it has been held as under:- ―26. The prevailing view about the standard of scrutiny-not judicial review, of an award, by persons of the disputants‘ choice being that of their decisions to stand-and not interfered with, [save a small area where it is established that such a view is premised on patent illegality or their interpretation of the facts or terms, perverse, as to qualify for interference, courts have to necessarily chose the path of least interference, except when absolutely necessary]. By training, inclination and experience, judges tend to adopt a corrective lens; usually, commended for appellate review. However, that lens is unavailable when exercising jurisdiction under Section 34 of the Act. Courts cannot, through process of primary contract interpretation, thus, create pathways to the kind of review which is forbidden under Section 34. So viewed, the Division Bench's approach, of appellate review, twice removed, so to say [under Section 37], and conclusions drawn by it, resulted in displacing the majority view of the tribunal, and in many cases, the unanimous view, of other tribunals, and substitution of another view. As long as the view adopted by the majority was plausible-and this court finds no reason to hold otherwise (because concededly the work was completed and the finished embankment was made of composite, compacted matter, comprising both soil and fly ash), such a substitution was impermissible.

27. For a long time, it is the settled jurisprudence of the courts in the country that awards which contain reasons, especxially when they interpret contractual terms, ought not to be interfered with, lightly. The proposition was placed in State of UP v. Allied Constructions: ―[..] It was within his jurisdiction to interpret Clause 47 of the Agreement having regard to the fact-situation obtaining therein. It is submitted that an award made by an arbitrator may be wrong either on law or on fact and error of law on the face of it could not nullify an award. The award is a speaking one. The arbitrator has assigned sufficient and cogent reasons in support thereof. Interpretation of a contract, it is trite, is a matter for arbitrator to determine (see Sudarsan Trading Co. v. The Government of Kerala, (1989) 2 SCC 38: AIR 1989 SC 890). Section 30 of the Arbitration Act, 1940 providing for setting aside an award is restrictive in its operation. Unless one or the other condition contained in Section 30 is satisfied, an award cannot be set aside. The arbitrator is a Judge chosen by the parties and his decision is final. The Court is precluded from reappraising the evidence. Even in a case where the award contains reasons, the. interference therewith would still be not available within the jurisdiction of the Court unless, of course, the reasons are totally perverse or the judgment is based on a wrong proposition of law‖

28. This enunciation has been endorsed in several cases (Ref McDermott International Inc. v. Burn Standard Co. Ltd.). In MSK Projects (I) (JV) Ltd v. State of Rajasthanit was held that an error in interpretation of a contract by an arbitrator is ―an error within his jurisdiction‖. The position was spelt out even more clearly in Associate Builders (supra), where the court said that: ―[..] if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground. Construction of the terms of a contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said to be something that no fair minded or reasonable person could do.‖‖

21. In Konkan Railway Corpn. Ltd. v. Chenab BridgeProject, (2023) 9 SCC 85, it has been held as under:-