Pragya Electronics Pvt. Ltd. v. Cosmo Ferrites Ltd.

(i) Claim in respect of payments due against supplies made under

(ii) Delivery of “C” forms failing which sum of Rs.1,27,24,521/- or such increased amounts as the Sales Tax Authorities may levy thereon. The interest of the sales tax liability claim was claimed at the rate of 18% per annum. 5.[7] PRAGYA appeared before the Arbitral Tribunal and contested the Arbitral proceedings. It was submitted by PRAGYA that the goods as supplied by CFL were not in accordance with the Agreement and that it received several complaints regarding breakage of the Manganese Zinc Soft Ferrites components as supplied by CFL. It further submitted that the cheques issued by PRAGYA were issued as a security and not in discharge of their outstanding liabilities and these were wrongly deposited by CFL. 5.[8] Detailed hearings were conducted by the Arbitral Tribunal. The Arbitral Tribunal framed 23 issues in the matter and reached the conclusion that PRAGYA had placed purchase orders for the goods in question and that CFL had supplied those goods and raised invoices against the supply. A special reference was made by the Arbitral Tribunal to an email dated 10.07.2009 sent by CFL to PRAGYA which stated that a total sum of Rs.54,14,934/- was outstanding against supply of goods till 30.06.2009. This email was placed on record by PRAGYA and the contents of this email had not been denied in contemporaneous correspondence by PRAGYA. 5.[9] The Arbitral Tribunal considered the evidence and material on record to conclude that a sum of Rs.54,14,934/- was due and recoverable by CFL against PRAGYA. The Arbitral Tribunal also held that PRAGYA was entitled to the following credit:

(i) Credit for commission payable for certain sales made to a third party entity called M/s COILS in the month of June, 2009 (after deducting TDS); Rs.1,14,279/-

(ii) Turnover Discount on Sales from April, 2009 to

(iii) Credit on account of commission on sales up to

5.10 After giving credit to PRAGYA in the sum of Rs. 17,22,511/-, the Arbitral Tribunal awarded the sum of Rs.36,92,423/- to CFL [Rs.54,14,934 – Rs. 17,22,511] along with future interest at the rate of 12.25% per annum.

5.11 As discussed in paragraph 4 (supra), the claim of award of prereference and pendente lite was initially rejected by the Arbitral Tribunal but awarded to CFL by the learned Single Judge in OMP (COMM.) No.350/2016 by its Judgment dated 25.05.2017.

5.12 During the course of arbitral proceedings, PRAGYA handed over the “C” forms as requested to CFL. Thus, there was no further dispute with respect to the “C” forms/other statutory forms, that remained for adjudication.

5.13 Against the Arbitral Award, PRAGYA filed a Petition under Section 34 of the Arbitration Act, which was dismissed by the learned Single Judge by the Impugned Judgment, which has led to the filing of the present Appeal.

6. During the proceedings before this Court, PRAGYA filed CM APPL. No. 39310/2021, wherein it stated that the amount due to CFL as on October, 2021 was calculated as follows: “i) Awarded amount by the Ld. Sole Arbitrator Rs.36,92,423/ii) Interest @ 12.25% p.a. from July, 2009 upto February, 2019 on Rs.36,92,423/- Rs.43,72,444/iii) Interest @ 12.25% p.a. from March, 2019 upto October, 2021 on Rs.16,92,423/- Rs.5,52,858/iv) Ld. Sole Arbitrator Fee Rs. 1,85,000/v) Interest @ 12.25% p.a. from Apr, 2016 upto October, 2021 on Rs.1,85,000/- Rs.1,24,643/- Total Rs.89,27,368/-” 6.[1] CFL filed a reply to this Application, submitting that the aforesaid calculations were incorrect and that an amount of Rs.1,15,03,798/was due to CFL as on October, 2021: “Amount payable by the Appellants till 28.09.2021, i.e., the first date of hearing of the instant appeal in terms of the arbitral award dated 13.04.2016 and the judgment of this Hon’ble Court dated 25.05.2017

I. In terms of award dated April 13, 2016, the Respondent is entitled to following:  Principal Amount Rs. 36,92,423/-  Towards Arbitration Fee plus actual expenses Rs. 1,85,000/-  Interest @12.25% p.a. on Rs. 36,92,423.00 from 13.05.2016 to 28.09.2021 Rs. 24,35,103/-  Interest @12.25% p.a. on Rs. 1,85,000.00 from above stated dates to 28.09.2021 Rs. 1,22,004/- Sub-Total (I) Rs. 64,34,530/-

II. In terms of judgment dated 25.05.2017, the Respondent is entitled to following:  Interest amount on Rs. 36,92,423.00 from the date of invoices till the date of award dated 13.04.2016 Rs. 30,54,721/-  Interest @12.25% p.a. on Rs. 30,54,721.00 from 13.05.2016 to 28.09.2021 Rs. 20,14,547/- Sub-Total (II) Rs. 50,69,268/- Grand Total (I + II) Rs. 1,15,03,798/-” 6.[2] Prior to filing of the present proceedings, PRAGYA had deposited an amount of Rs.20 Lakhs with the District Court [hereinafter called “Executing Court”] on 07.03.2019. Thereafter, in partial compliance with Order dated 28.09.2021 passed by a Coordinate Bench of this Court, a further sum of Rs.67 Lakhs was deposited by PRAGYA with the Registrar General of this Court. We are informed that subsequently, this amount was remitted to the Executing Court by the Registry of this Court.

7. Both parties filed their written submissions in support of their case and also addressed arguments in the matter.

8. It was submitted by Mr Kirti Uppal, learned Senior Counsel for PRAGYA that the Arbitral Award passed by the Arbitral Tribunal is not tenable in the eyes of law. It was argued that the Arbitral Award has been typed on three different types of sheets by the Arbitral Tribunal and each page of the Arbitral Award does not bear the signature of the Arbitral Tribunal. It was further argued that the Arbitral Tribunal decided Issues numbers 1, 2 and 14 without discussing the reasons for the same, thereby, showing that the Arbitral Tribunal had a pre-determined mind. 8.[1] Learned Senior Counsel for PRAGYA has raised various additional grounds in the Appeal. It was submitted that the learned Single Judge and the Arbitral Tribunal failed to consider that evidence was led by a witness who was neither the Director/Secretary nor the Principal of CFL and hence, was not competent to depose on behalf of CFL. It was submitted that Agreement was terminated by an officer of CFL who was not authorized to terminate such Agreement. 8.[2] It was further submitted that PRAGYA had filed a counter-claim claiming a sum of Rs.2.[5] crores inter-alia for non-payment of commission, quality defects, loss sustained to breakage and loss due to illegal termination of Agreement, which was dismissed by the Arbitral Tribunal by wrongly relying upon the Annual Agreement for the year 2009. 8.[3] Several additional objections were also raised against the Arbitral Award inter-alia stating that the evidence and documents were not considered by the Arbitral Tribunal and that certain clauses of the Agreement had been wrongly interpreted by the Arbitral Tribunal. It was argued that the claim as filed by CFL was barred by limitation and that the Arbitral Tribunal and the learned Single Judge did not consider this aspect either. Various other issues were raised by PRAGYA in respect of the deposition by witnesses during the Arbitral proceedings as well.

9. On the other hand, learned counsel for CFL, Mr Bharat Chugh, argued that the Courts, now, have a limited scope of judicial intervention into the findings of Arbitral Tribunal on facts, merits, quality and quantity of evidence and the scope for interference is even less in an Appeal under Section 37 of the Arbitration Act. Reliance was placed on the decision of the Supreme Court in Associate Builders v. DDA[1]. It was further submitted that the learned Single Judge went into some detail on the factual challenges raised by PRAGYA and no fault with the findings of the Arbitral Award was found by the learned Single Judge. 9.[1] Learned Counsel for CFL further argued that where there are concurrent findings in any award which have not been disturbed by the Court in the objections preferred under Section 34 of the Arbitration Act, the Appellate Court must be extremely cautious in disturbing such findings. Reliance was placed on MMTC v. Vedanta[2] and UBV Infrastructure Ltd. v. National Highways Authority of 1 [2015] 5 SCC 739

India[3] by the learned counsel for CFL. 9.[2] On merits, it was pointed out by learned Counsel for CFL, that PRAGYA‟s contentions were rejected by the Arbitral Tribunal and the learned Single Judge considered these objections and rejected the contentions as well. Additionally, each and every objection and ground of challenge which have been raised in the present Appeal were raised by PRAGYA in its Petition under Section 34 of the Arbitration Act and that these said objections have been adjudicated upon by the learned Single Judge. 9.[3] More specifically, it was submitted by CFL that the objections raised by PRAGYA in the present Appeal, are a reproduction of the grounds raised by PRAGYA in its Petition under Section 34 of the Arbitration Act all of which stood rejected by the learned Single Judge. 9.[4] In addition, learned counsel for CFL further submitted that unless there exists an error apparent on the face of the record, the Arbitral Tribunal‟s interpretation and findings cannot be interfered with. Reliance was placed on Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd.4.

10. We have perused the record as produced before us and the contentions of both the parties. Before we proceed further, we must remind ourselves of the scope and ambit of this Court‟s interference in proceedings under Section 37 of Arbitration Act.

11. The scope and ambit of a challenge under Sections 34 and 37 of the

2019 SCC Online SC 1656 Arbitration Act is no longer res integra. In a recent decision rendered by the Supreme Court in the matter of PSA SICAL Terminals Pvt. Ltd. v Board of Trustees of V.O. Chidambranar Port Trust Tuticorin[5], the Supreme Court has reiterated its view, in MMTC Limited case (supra), and held as follows:

12. The record of the Arbitral Tribunal shows that the following 23 issues were framed by the Arbitral Tribunal during the proceedings:

1) Whether the claimant supplied soft ferrites components worth Rs.54.14,934/- to the respondents and the said amount has become payable?

2) Whether the respondents issued 9 cheques totalling Rs.33,19,514/- in favour of the claimant in discharge of their part liability?

3) Whether the respondents withheld "C" forms in respect of invoices raised by the claimant in the financial years 2007-08, 2008-09 and 2009-10 thereby creating sales tax liabilities of Rs. 1,27,24,521/-?

4) Whether the claimant has withheld Form E-1 to the respondents? If so, its effect?

5) Whether the respondents have taken proper legal course regarding issuance of "C" forms? If so, its nature and effect?

6) Whether the respondents are liable to pay sales tax, penalty and interest on account of non-supply of "C" forms? If so how much?

7) Whether the claimant is entitled to recover interest at the rate of 12.25% on the sum of Rs. 54,14,934/-? If so, for what period and how much?

8) Whether the entire claim or any part thereof is within limitation?

9) Whether the claim petition is not maintainable?

10) Whether the claim petition has been filed, signed and verify by duly authorized persons? If not, its effect?

11) Whether the petition does not disclose any cause of action against the respondents and merits rejection under Order VII, Rule 11, CPC with costs?

12) Whether the arbitrator has no jurisdiction to try the present reference and the proceedings are against the principle of natural justice and void ab initio?

13) Whether the claim petition is liable to be dismissed with costs on account of objections raised by the respondents in para 8 of the preliminary objections taken in the Reply to the claim petition?

14) Whether the nine cheques were issued for security purpose in good faith, as alleged? If so, its effect?

15) Whether the distributorship agreement has been validly terminated?

16) What is the effect of the Hon'ble Delhi High Court Order dated 24.02.2011 on the present arbitration proceedings?

17) Whether the respondents are entitled to recover Rs.2,50,00,000/- or any other amount from the claimant on account of the reasons given in para 14 of the counter-claim including cross territory sales ?

18) Whether the respondents have not complied with the conditions of the annual agreement dated 13.04.2009 and, therefore, are not entitled to the recover any amount set up in their counterclaim?

19) Whether the respondents are entitled to the claim interest on Rs. 2,50,00,000/-. If so, how much?

20) Whether the respondents are entitled to reliefs (b) and (c) stated in their counter-claim?

21) Whether the counter-claim does not disclose any cause of action and is not maintainable?

22) Whether the counter- claim or any part thereof is within limitation?

23) Whether the pleas set up by the respondents are false, vexatious and frivolous to their knowledge and the claimant is entitled to recover special costs? lf so, how much?

24) Relief" 12.[1] The Arbitral Tribunal adjudicated upon each of these issues and gave an award in the sum of Rs. 38,77,423/- in favour of CFL after dealing with each issue in detail and appreciating the evidence produced by CFL and PRAGYA, during the course of Arbitral proceedings.

13. A review of both the Arbitral Award and the Impugned Judgment shows that the issues as set forth in paragraph 12 have been adjudicated upon. These are briefly discussed below: 13.[1] The issue of supply of goods by CFL in the sum of Rs.54,14,934/- and the nine cheques [details as set forth in paragraph 5.[2] (supra)] which are referred to as issue numbers 1, 2 and 14 have been clubbed together and decided by the Arbitral Tribunal. Paragraph 26 to 29 of the Arbitral Award discusses the findings of the Arbitrator on these issues. The learned Single Judge relied on these findings and the evidence before the Arbitral Tribunal to hold that the amounts awarded to CFL were correctly awarded by the Arbitral Tribunal. So far as it concerned the issue of nine cheques, it was held by the Learned Single Judge while noting the decision of the Arbitral Tribunal in paragraphs 26 to 29 as follows:

This finding of the Arbitral Tribunal has been affirmed by the learned Single Judge and we agree as well. 13.[5] Issue number 10 concerning the competence of the authorized representative, has been dealt by the Arbitral Tribunal in paragraph 36 to 38 of the Arbitral Award. The learned Single Judge in paragraph 36 & 37 of the Impugned Judgment found no infirmity with the same by taking into account the Power of Attorney dated 06.11.2007 executed on the authorized representative by the Executive Director of CFL. Therefore, even this objection does not hold water. 13.[6] Issue number 11, as to whether the Claim Petition did not disclose any cause of action, was decided against PRAGYA by the Arbitral Tribunal [reference is made to paragraph 39 of the Arbitral Award]. The same was correctly sustained by the learned Single Judge in the Impugned Judgment as being without merit. 13.[7] Issue numbers 12, 13 and 16 were also clubbed together by the Arbitral Tribunal and disposed of. The learned Single Judge of this Court in a Petition under Section 11 of the Arbitration Act [Arbitration Petition No. 201/2010] by an Order dated 24.02.2011 appointed an Arbitral Tribunal with the consent of CFL and PRAGYA to adjudicate the disputes amongst them. Reference in this regard is made in paragraph 40 of the Arbitral Award which held that this issue does not survive and hence, was not pressed by the parties and disposed of accordingly. 13.[8] The Arbitral Tribunal has discussed issue number 15 relating to the Distributorship Agreement and its termination, in great detail after referring to and relying upon the evidence placed before it by PRAGYA and CFL. The Arbitral Tribunal held that the Distributorship Agreement stood validly terminated on 28.08.2009. This finding of the Arbitral Tribunal has been affirmed by the learned Single Judge in paragraph 60 and 61 of the Impugned Judgment. We find no infirmity with the same. 13.[9] Issue numbers 17 to 22 relate to PRAGYA‟s contention that its counter claim in the sum of Rs.2.[5] crores has not been considered by the Arbitral Tribunal and the counter claims maintainability. The Arbitral Award and the learned Single Judge while relying on the evidence led by the parties found that the counter claim was inter-alia based on the handwritten annual agreement dated 13.04.2009. The Arbitral Tribunal found that PRAGYA failed to lead evidence with respect to its counter claim and hence, it was held that it was not entitled to any amounts. The learned Single Judge reproduced the findings of the Arbitral Tribunal being in agreement with his conclusions. We find no reason to disagree with the conclusions as reached by the Arbitral Tribunal and the Learned Single Judge.

14. Certain additional objections were raised by PRAGYA in its Petition under Section 34 of the Arbitration Act filed before the learned Single Judge which are dealt with below. 14.[1] The contention of PRAGYA that the Arbitral Award was typed on three different sheets with different fonts and furthermore, every page of the Arbitral Award was not signed by the Arbitral Tribunal is totally misconceived. There is no such requirement of an Arbitral Award being signed on every page by an Arbitrator nor is there any mention of typing on sheets and fonts etc. in the Arbitration Act. 14.1.[1] Section 31 of the Arbitration Act that sets out the „Form‟ and „Content‟ of an Arbitral Award, reads as follows:

14.1.[2] The learned Single Judge, in Paragraph 34 and 35 of the Impugned Judgment has in this regard, additionally held:

14.[2] The objections raised by PRAGYA in the present proceedings, that the authenticated statement of accounts were not produced and the statement of account being admitted despite PRAGYA‟s objection, is misconceived. The Arbitral Tribunal has relied upon the statement of accounts and the invoices as produced by CFL. These invoices were never contested by PRAGYA. The same has also been appreciated in the Impugned Judgment exhaustively.

15. The learned Counsel for CFL has vehemently argued that the objections and grounds were previously raised before the learned Single Judge and adjudicated upon. We find ourselves in agreement with the learned Counsel for CFL. The objections and grounds raised by PRAGYA before this Court are mostly a reproduction of the grounds/objections raised before the Arbitral Tribunal and the learned Single Judge. Thus, adjudication thereupon has already taken place by two forums.

16. In exercise of powers under Section 37 of the Arbitration Act, the scope of interference of the Courts is narrow. The law is no longer res integra. Where the Arbitrator has assessed the evidence and material placed before him while considering the objections to the Award, the Court does not sit as a Court of Appeal or re-appreciate and re-assess the evidence. Unless there is a patent illegality or perversity, interference by the Court is not warranted. Merely because another view is possible, the Court will not interdict the Award. The Courts should only interfere if such Award “portrays perversity unpardonable” under Section 34 of the Arbitration Act. Reference is made to the Supreme Court‟s decision in the Dyna Technologies case (supra) where it has been held as follows: “24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated.

25. Moreover, umpteen number of judgments of this Court have categorically held that the courts should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act.”

17. In view of the foregoing discussion, and being of the opinion that the view taken by the Arbitral Tribunal as upheld by the learned Single Judge, is certainly a possible view based on facts in relation to the merits of the disputes, we find no ground to interfere in the Arbitral Award and/or the Impugned Judgment as no infirmity or illegality exists in the Impugned Judgment that would merit our interference under Section 37 of the Arbitration Act.

18. The Appeal is accordingly dismissed. The pending Applications are also dismissed. Parties are left to bear their own costs.

19. The Registry is directed to send a copy of this Judgment to the Executing Court where the Execution Petition is pending.

TARA VITASTA GANJU, J RAJIV SHAKDHER, J MARCH 21, 2023/ha/r/SA