M/S CREST EDUCATION (P) LTD v. M/S CAREER LAUNCHER (I) LTD

2. The Licensor also grants to the Licensee the right to the use of the copyright of the Licensor in the name and styles of CAREER LAUNCHER INDIA LTD in any printed matter distinctive features decor and any other matter pursuant to the Licensor’s direction as also the right to use the copyrighted material of the Licensor including Text, Transparencies, Video Tapes, CDs, Software, etc but only for the benefit of the Licensor and the Licensee.

3. The Licensor grants to the Licensee, for the purpose of marketing only and for no other purpose, the right to use its confidential Technical Know-how contained in various Product/Counseling/Marketing Manuals. The Licensee agrees, however, that any improvements and developments relating to such Know-how, in the course of the Agreement, by the Licensee, shall belong to the Licensor.

4. The Licensor grants to the Licensee the right to use the reputation and goodwill of CAREER LAUNCHER INDIA LTD and also of all the brands and Registered trademarks of CL as also the general goodwill of the Licensor relating to the business of Professional Learning only for the period this Agreement is operative. 3.[7] Similar Business (a) The Licensee hereby agrees that during the term of this Agreement, it shall not either directly or indirectly engage or have an interest in any Professional Learning business in any form, within or without/outside the Territory. 9.[1] Term This Agreement shall commence with effect from January 1, 2009 and unless terminated in accordance with the terms and condition hereof shall remain in force up to and inclusive of December 31, 2012.

12.0 DEFAULT The occurrence of any of the following events/acts shall constitute good cause for the Licensor at its option and without prejudice to any other rights or remedies provided for hereunder or by law or equity, to terminate without compensation, this Agreement by notice in writing to the Licensee; such notice to expire at such date as the Licensor in its absolute discretion may determine. 14.[6] Lien Damage In the event of termination of this Agreement upon default, the extent of all damage which the Licensor has suffered by virtue of such termination shall be and remain a lien in favour of the Licensor against any end all of the real and personal property of the Licensee and the Indemnifier including but not limited to the Professional Learning Center machinery, fixtures and Equipment owned by the licensee at any of the Professional Learning Centers at the time of such termination. Without prejudice to the Licensor’s general right to recover damages, the Licensee and the Indemnifier agree jointly and severally that in the event of termination of the Agreement they shall pay Rs.5,00,000 (Rupees five lakhs only) as liquidated damages to the Licensor. 14.[7] Continuing Obligation Termination of this Agreement for any reason shall not release either party hereto from any obligation, which at the date of termination has already accrued to the other part, (whether or not the amount of such liability has been computed) or which under the terms hereof or by its nature is a continuing obligation.

15.0 CONFIDENTIALY/FURTHER BUSINESS In the event of this Agreement being terminated during the period of the same, having particular regard to section 14.[1] of Article 14 and otherwise, the Licensee and the Indemnifier undertake not to either directly or indirectly do or be involved in any business or activity which is similar to the conduct of the Professional Learning Center within or outside the City limits or anywhere in the country for a period of 2 years (two years from the date such termination takes effect). Similarly, also in the event of the Agreement lapsing by efflux of time and not being renewed, the Licensee and the Indemnifier also undertake as above, but in which case, the 2 (two only) year period will commence from the date of expiry of the Agreement or extended time, if any. In both the above contingencies, the Licensee and the Indemnifier undertake to always and forever keep secret the confidential information imparted to or made available to it as well as the Trade Secrets and other information over which the Licensor has proprietary interest.

17.0

ARBITRATION AND JURISDICTION 17.[1] Arbitration All disputes and differences of whatsoever nature arising out of this Agreement, whether during its term or after expiry thereof or prior termination shall be referred to the sole arbitration of the Chairman of the Board of Directors of the Licensor, whose decision shall be final on every matter arising hereunder. It is further agreed that the fact that the chairman of the Board of Directors of the Licensor may have had occasion to deal with any matter related to this license either before or after its execution shall not be a disqualification from acting as Arbitrator. The venue of the Arbitration shall only be Delhi.”1

13. Mr. Dayan Krishnan, learned Senior Counsel for the petitioner, submitted that the impugned award suffers from patent illegality, inasmuch as damages have been awarded against the petitioner without any finding with regard to the invalidity of the rescission of the Contract by the petitioner. He submitted that the petitioner had validly terminated the Contract on 27.02.2010, in terms of Section 39 of the Indian Contract Act, 1872, due to breaches of the respondent’s obligations. Mr. Krishnan argued that, consistent with the principles laid down by the Supreme Court in Niranjan Shankar Golikari vs. Century Spinning and Manufacturing Co. Ltd.2, Gujarat Bottling Co. Ltd. vs. Coca Cola Co.[3] and Percept D'Mark (India) (P) Ltd. vs. Zaheer Khan[4], a non-compete clause can be enforced against the petitioner only during the currency of the Contract. The Contract having been terminated, against which the learned arbitrator has not ruled in the impugned award, damages could not have been awarded. He drew my attention to the fact that Clause 3.7(a) expressly operates “during the term of this agreement” and the “Term” defined in Clause 9.[1] [01.01.2009 to 31.12.2012] was expressly qualified by the phrase “unless terminated in accordance with terms and conditions hereof”. Emphasis supplied. (1967) 2 SCR 378.

14. Mr. Krishnan submitted that, in the impugned award, the fact that the Contract had been rescinded on 27.02.2010 was noted and the factual findings make it clear that the petitioner’s alleged competing business was commenced only thereafter. Although the termination was challenged by the respondent in the statement of claims[5], the learned arbitrator has not rendered a finding of wrongful termination, but proceeded to award damages as if the Contract continued to operate between the parties. Mr. Krishnan relied upon the judgment of the Supreme Court in Som Datt Builders Ltd. vs. State of Kerala[6] to submit that the impugned award is devoid of reasons as to the validity of the termination and as to whether the non-compete clause would nevertheless apply.

15. The second ground of challenge urged on behalf of the petitioner is that the learned arbitrator has awarded damages contrary to Clause 14.[6] of the Contract, which provides for liquidated damages of ₹5 lakhs only, payable by the petitioner to the respondent in the event of termination. It was further argued that the quantification of damages contained in the impugned award is not only contrary to Clause 14.6, but also based on speculative reasoning without any proof of damages having been furnished by the respondent.

16. Mr. Dhruv Mehta, learned Senior Counsel for the respondent, on the other hand, submitted that the impugned award is not liable to interference within the limited jurisdiction of the Court under Section Statement of claims; paragraph 37.

34 of the Act. He drew my attention to the findings in the impugned award to the effect that the petitioner had commenced a competing business within months after the Contract was entered into, and that statements to the contrary made on behalf of the petitioner in the course of Section 9 proceedings before this Court[7] were false and misleading. Mr. Mehta submitted that these findings are based on the documents on record, and the learned arbitrator’s evidentiary assessment does not call for interference by this Court.

17. Mr. Mehta disputed the contention of the petitioner that the award does not contain a finding against the petitioner on the validity of the termination. He submitted that the learned arbitrator has clearly found against the petitioner on the question of breach, despite noticing the petitioner’s assertion of rescission. According to Mr. Mehta, on a holistic reading of the award, it is clear that the learned arbitrator held that the Contract survived the purported termination, which had also been squarely challenged by the respondent. Mr. Mehta commended a reasonable, and not a literal, reading of the award, in consonance with the observations of the Supreme Court in Dyna Technologies (P) Ltd. vs. Crompton Greaves Ltd.8.

18. On the question of quantification, Mr. Mehta submitted that Clause 14.[6] would have applied only if the respondent had terminated the Contract on account of the petitioner’s default under Clause 12. Even in such a situation, he submitted that the provision for liquidated Order dated 24.05.2010 in O.M.P. 138/2010, as reproduced in order dated 25.08.2010.

damages of Rs. 5 lakhs under Clause 14.[6] is without prejudice to the respondent’s general right to recover damages. Learned Senior Counsel contented that interpretation of the Contract is within the domain of the learned arbitrator, and the interpretation being a plausible one, in the light of the contractual provisions, the award ought not to be interdicted by the Court.

19. Mr. Mehta further submitted that the quantification of damages contained in the impugned award is within the legitimate scope of discretion available to the learned arbitrator. The learned arbitrator has relied upon the amount which was in fact paid to the respondent during the operation of the Contract [from 01.04.2009 to 03.03.2010], and extrapolated it to the remaining period thereof. The learned arbitrator has thereafter adjusted the amount in favour of the petitioner by 15% [to compensate for the uncertainty in such a computation], and also for the post award period. According to Mr. Mehta, these two adjustments have been made in favour of the petitioner despite its nonappearance in the arbitral proceedings and although they were not legally necessary, they have been accepted by the respondent also.

20. Mr. Mehta cited the judgments of the Supreme Court in Dwaraka Das vs. State of M.P.[9] and of this Court in Kishan Lal Kalra vs. N.D.M.C.10 in support of the proposition that some guess work is permissible in quantification of damages in a case of this nature. He also relied upon the decision of a Division Bench of the Sikkim High

AIR (2001) Delhi 402. Court in KMC Brahmaputra Infrastructure Ltd. vs. Chief Engineer, Roads & Bridges Department, Government of Sikkim11.

21. Mr. Krishnan, in rejoinder, disputed Mr. Mehta’s reading of the award. He submitted that a finding as to the validity of the termination could not have been based upon alleged breaches by the petitioner after the date of termination. He submitted that, even upon the widest possible reading of the impugned award, it does not contain “proper, intelligible and adequate” reasons as required by Dyna Technologies12, to support a finding of wrongful termination. Mr. Krishnan lastly submitted that the impugned award lacks any finding that the alleged breaches attributed to the petitioner were sufficient to invalidate the petitioner’s termination of the Contract.

22. It may be noted at the outset that Mr. Krishnan did not advance any arguments on the correctness of the findings of the learned arbitrator with regard to breach of the Contract. The petitioner having failed to enter appearance in the arbitral proceedings, learned Senior Counsel confined his arguments to the question of whether the award of damages can be sustained in the absence of a finding with regard to invalidity of the termination, and quantification of damages. Mr. Mehta, on the other hand, also accepted that, if the petitioner’s termination of the Contract is held to be valid, the award of damages on the ground of breach of the non-compete clause would be unsustainable.

23. In view of the above, the questions which call for consideration in this petition are as follows:-

(i) Whether the impugned award contained any or adequate findings with regard to the invalidity of the purported termination of the Contract by the petitioner?

(ii) Whether the award of damages ought to have been limited to ₹5

(iii) Whether the quantification of damages in the impugned award is vitiated by lack of evidence?

24. The findings in the impugned award which deal with these questions are contained in the following paragraphs:-

(i) Does the award contain any or adequate finding regarding invalidity of termination?

25. In determining this question, I am guided by the principles laid down in Dyna Technologies14, cited by Mr. Mehta, wherein the Supreme Court held as follows with regard to construction of arbitral awards:-

34. The mandate under Section 31(3) of the Arbitration Act is to have reasoning which is intelligible and adequate and, which can in appropriate cases be even implied by the courts from a fair reading of the award and documents referred to thereunder, if the need be. The aforesaid provision does not require an elaborate judgment to be passed by the arbitrators having regard to the speedy resolution of dispute.

35. When we consider the requirement of a reasoned order, three characteristics of a reasoned order can be fathomed. They are: proper, intelligible and adequate. If the reasonings in the order are improper, they reveal a flaw in the decision-making process. If the challenge to an award is based on impropriety or perversity in the reasoning, then it can be challenged strictly on the grounds provided under Section 34 of the Arbitration Act. If the challenge to an award is based on the ground that the same is unintelligible, the same would be equivalent of providing no reasons at all. Coming to the last aspect concerning the challenge on adequacy of reasons, the Court while exercising jurisdiction under Section 34 has to adjudicate the validity of such an award based on the degree of particularity of reasoning required having regard to the nature of issues falling for consideration. The degree of particularity cannot be stated in a precise manner as the same would depend on the complexity of the issue. Even if the Court comes to a conclusion that there were gaps in the reasoning for the conclusions reached by the Tribunal, the Court needs to have regard to the documents submitted by the parties and the contentions raised before the Tribunal so that awards with inadequate reasons are not set aside in casual and cavalier manner. On the other hand, ordinarily unintelligible awards are to be set aside, subject to party autonomy to do away with the reasoned award. Therefore, the courts are required to be careful while distinguishing between inadequacy of reasons in an award and unintelligible awards.”15

26. It is evident from the contents of the award extracted above that, in the present case, the learned arbitrator has not returned an express finding with regard to termination of the Contract. To this extent, Mr. Krishnan’s submission is justified. However, in my view, a proper and holistic reading of the award makes it clear that the learned arbitrator found the purported termination by the petitioner to be unjustified.

27. The learned arbitrator has come to a clear and unequivocal conclusion against the petitioner’s contention that it was not the same as “Team Satyam”. Relying upon documentary evidence, he has found that “Team Satyam” is the business of the petitioner itself. In coming to this finding, the learned arbitrator has specifically relied inter alia upon Ex. PW-1/F which is a communication of the petitioner dated 22.01.2009, well before the termination on 27.02.2010. A report of the respondent’s representative regarding a visit to the petitioner’s centre on 24.02.2010, prior to the termination, was also exhibited by the respondent as Ex. PW-1/M. This report also supports the conclusion of the learned arbitrator with regard to breach of the non-compete clause by the petitioner. It is also significant that the petitioner did not appear before the learned arbitrator to plead or prove any breach of the Contract by the respondent so as to justify the petitioner’s termination of the Contract under Section 39 of the Indian Contract Act, 1872.

28. The learned arbitrator has noticed that such conduct of the petitioner “is certainly a breach of the terms of the agreement – even when the respondent may say that the agreement stood rescinded”. On this basis, the learned arbitrator has awarded damages “as if the agreement still continues”. Upon a practical and reasonable reading of the award, I find that the award reflects the arbitrator’s finding that the petitioner’s termination of the Contract was wrongful. The learned arbitrator has not awarded damages in ignorance of the termination or neglecting to take it into account, but was very much alive to the factum of termination. He has expressly held that the respondent is entitled to damages despite the petitioner’s purported termination. I am of the view that these observations are adequate to reflect the finding of the learned arbitrator on this point.

29. On the question of adequacy of reasons, Mr. Krishnan drew my attention to the provisions of Section 31(3) of the Act, as interpreted in Som Datt Builders16. The Court laid down the following principles:-

30. Even on the basis of the principles articulated above, I am of the view that the impugned award in the present case is sustainable. The Supreme Court has noticed that the award does not require elaborate or detailed reasons but the purpose is to reflect “the thought process leading to a particular conclusion”. As stated above, the learned arbitrator has clearly observed that he proposed to award damages for the post-termination period of the Contract, despite expressly noticing the purported termination. This gives sufficient insight into his determination that the termination was not legally tenable.

31. In the written submissions filed on behalf of the petitioner, reference has been made to the judgment in NHPC Ltd. vs. Jaiprakash Associates Ltd.18 delivered by a Coordinate Bench of this Court after the judgment in the present petition had been reserved. In the said judgment, this Court has set aside an arbitral award inter alia on the ground that reasons were not supplied, relying upon Dyna Technologies19. Such a finding is naturally based upon the nature of the award in each case. As held in Dyna Technologies20, the particularity of reasoning required is context specific. In the context of the present case, for the reasons recorded above, I do not find such a lacuna in the impugned award as to invoke the limited jurisdiction of the Court under Section 34 of the Act. Judgment dated 26.05.2023 in O.M.P.(COMM) 482/2020. Supra (note 8). Ibid.

32. For the aforesaid reasons, I am of the view that the impugned award in the present case contains, at the very least, an implied finding that the termination by the petitioner was invalid. Having come to this conclusion, it is not necessary to discuss Mr. Krishnan’s submissions on the question of whether the non-compete clause can be enforced for a period after the termination of the Contract, as the award is for the balance period of the Contract itself.

(ii) Interpretation of Clause 14.6.

33. On the interpretation of Clause 14.6, the learned arbitrator has found that the clause does not restrict the damages payable to the respondent at ₹5 lakhs. This finding is contained in paragraph 10 of the impugned award extracted above.

34. To the extent that Clause 14.[6] refers to termination of the Contract upon default, it is referable to Clause 12, which provides for termination by the licensor i.e. the respondent herein. It does not appear to deal with termination by the licensee i.e. the petitioner herein. Liquidated damages provided thereunder are, in any event, without prejudice to the licensor’s general right to recover damages.

35. The learned arbitrator’s interpretation is, in these circumstances, a possible reading of the Contract. Unless an award can be characterized as implausible or perverse, in the sense that no reasonable person could have so interpreted the clause, the learned arbitrator’s interpretation of a contract is to be given deference.21

36. Consequently, I do not find any infirmity in the impugned award to the extent that it holds Clause 14.[6] to be inapplicable.

(iii) Quantification of damages.

37. The learned arbitrator has quantified the damages on the basis of the respondent’s earnings from the Contract during the period 01.04.2009 to 03.03.2010 i.e. during the period the contract was operative. In addition, the learned arbitrator awarded a sum of ₹1,50,000/- towards arrears of license fee and ₹2,21,864/- towards payment for the study material supplied by the respondent to the petitioner. However, he has rejected the respondent’s claim for further damages on account of infringement of intellectual property rights, expenses on granting of a third-party license, damages for mental pain and interest.

38. Mr. Krishnan’s argument was that the amount of damages is entirely speculative and unsupported by evidence. I am unable to accept this submission. Future profits can, by their very nature, not be a matter of strict proof. The amount earned by the respondent during the currency of the Contract has been used as the benchmark to estimate damages. The judgment of the Supreme Court in Dwaraka Das22, relying upon A.T. Brij Paul Singh vs. State of Gujarat23, holds Dyna Technologies (P) Ltd. vs. Crompton Greaves Ltd., (2019) 20 SCC 1 (paragraph 35) and Associate Builders vs. Delhi Development Authority, (2015) 3 SCC 49 (paragraphs 31 to 33). Supra (note 9); paragraph 9.

that a broad evaluation is required to estimate expected profits, rather than minute details, and disapproved of the decision of an Appellate Court reversing the findings of the Trial Court in this regard, “even if it was based upon guess work”.

39. The judgment of this Court in Kishan Lal Kalra24, which has been relied upon in the impugned award, specifically upholds an award of damages on the basis of past earnings under the contract:- “Loss of profit is claimed on the basis of one week's sale figures for which Ex. PW-2/136 is filed. On the basis of such calculation, the profit for the unexpired period of licence would have come to more than Rs. 5 lacs. The plaintiff has however confined his claim to Rs. 5 lacs under this head. There cannot be a direct and concrete evidence of such a loss. The damages on account of loss of profit are in the nature of prospective, and therefore, necessarily contingent. It is now well established principle of law that the mere fact damages cannot be assessed with certainty does not relieve the wrongdoer of the necessity of paying damages. (Chaplin v. Hicks, (1911) 2 L.B. 786). In Biggin v. Permanite, (1951) 1 KB. 422, Devlin, J observed “Where precise evidence is obtainable, the court naturally expects to have it, (but) where does not, the court must do the best it can”. Since it cannot be measured with precision as to what profits the plaintiff would have earned had he continued to run the restaurant for remaining term of the licence and the figure given by the plaintiff for the period he actually did business could be the best indicator. This is what the plaintiff has done and based on this formula the plaintiff has been able to prove the likely loss of Rs. 5 lacs. The plaintiff is accordingly held entitled to the amount of Rs. 5 lacs under this head.”25

40. Further, the Division Bench of the Sikkim High Court in KMC Brahmaputra26, cited by Mr. Mehta, held that an objection of this nature is not sustainable under Section 34 of the Act. Supra (note 10). Supra (note 11).

41. In the present case, the findings of the learned arbitrator are based upon a reasonable indicator, i.e. the earnings which actually accrued to the respondent during the time the very same contract was worked, and I find no reason to interfere with the same.

42. For the aforesaid reasons, I do not find any ground to interfere with the impugned award under Section 34 of the Act. The petition is therefore dismissed, but with no order as to costs.

43. The awarded amount, deposited by the petitioner in terms of the order of the Division Bench dated 08.12.2020 in FAO(OS)(COMM) 167/2020, will be disbursed in accordance with orders to be passed in O.M.P.(ENF.)(COMM) 47/2020. O.M.P.(ENF.)(COMM) 47/2020 In view of the dismissal of O.M.P.(COMM.) 57/2017, list the present enforcement proceedings before the Roster Bench on 25.09.2023.