HARYANA TOURISM LIMITED versus M/S KANDHARI BEVERAGES LIMITED on 11 January 2022

1. Feeling aggrieved and dissatisfied with the impugned judgmentand order dated 17.07.2018 passed by the High Court of Punjab andHaryana at Chandigarh in F.A.O. No. 1399 of 2015 (O&M), by whichthe High Court has allowed the said appeal preferred under Section 37of the Arbitration and Conciliation Act, 1996 (for short, ‘the ArbitrationAct’) and has set aside the award dated 17.11.2005 passed by thearbitrator as well as the order dated 25.09.2014 passed by the firstappellate Court – Additional District Judge, Chandigarh, the originalclaimant – respondent before the High Court has preferred the presentappeal.

2. The facts leading to the present appeal in a nutshell are asunder:

That the appellant herein – Haryana Tourism Limited (for short,‘Corporation’) invited tenders/quotations for the supply of Aerated ColdDrinks at its Tourist Complexes for the period 15.05.2001 to 14.05.2002.The tender submitted by the respondent herein was accepted by theCorporation. As per the agreement, the respondent-company wassupposed to pay a sum of Rs. 20 lakhs on account of Brand Promotionwhich was required to be spent as per mutual agreement between theparties.

2.1 That the Corporation organised a Mango Mela on 07/08[th] July,2001. The Corporation spent a sum of Rs. 1 lakh. Both the parties agreedto hold musical nights. According to the respondent herein, it spent asum of Rs.13.92 lakhs. However, the appellant-Corporation asked therespondent vide letter dated 20.09.2001 to deposit a sum of Rs. 19 lakhsas sponsorship money. The appellant vide letter dated 17.01.2002terminated the contract. Dispute arose between the parties. The matterwas referred to the sole arbitrator.

2.2 Vide award dated17.11.2005, the arbitrator directed therespondent to pay a sum of Rs. 9.5 lakhs. The counter claim lodged bythe respondent claiming Rs. 13.92 lakhs was dismissed by the arbitrator.The respondent thereafter filed objection petition before Additional DistrictJudge, Chandigarh under Section 34 of the Arbitration Act against theaward passed by the arbitrator. Vide order dated 25.09.2014, theAdditional District Judge dismissed the appeal/objection petition.

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A2.3 Feeling aggrieved and dissatisfied with the order passed byAdditional District Judge, Chandigarh dismissing the appeal/objectionpetition under Section 34 of the Arbitration Act, the respondent hereinpreferred a further appeal before the High Court under Section 37 ofthe Arbitration Act. By the impugned judgment and order, the High Courthas allowed the said appeal by entering into the merits of the claim andBhas quashed and set aside the award passed by the arbitrator as well asthe order passed by Additional District Judge, Chandigarh.

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2.4 Feeling aggrieved and dissatisfied with the impugned judgmentand order passed by the High Court, the original claimant – Corporationhas preferred the present appeal.C

3. Shri B.K. Satija, learned Advocate has appeared on behalf ofthe appellant herein and Shri Kanwal Chaudhary, learned Advocate hasappeared on behalf of the respondent herein.

3.1 Shri B.K. Satija, learned Advocate appearing on behalf of theDappellant – Corporation has vehemently submitted that the High Courthas materially erred in quashing and setting aside the award in exerciseof its powers under Section 37 of the Arbitration Act. It is submitted thatwhile quashing and setting aside the award passed by the arbitrator, theHigh Court has exceeded its jurisdiction under Section 37 of theArbitration Act.E

3.2 It is submitted that the High Court had a very limited scopeand/or jurisdiction while deciding the appeal under Section 37 of theArbitration Act.

3.3 It is submitted that in an appeal under Section 37 of theFArbitration Act, the High Court has no jurisdiction to enter into the meritsof the claim awarded by the arbitrator, confirmed by the first appellateCourt under Section 34 of the Arbitration Act.

3.4 It is submitted that in the present case, the High Court hasdecided the appeal as if the High Court was deciding the first appealagainst the judgment and decree passed by the learned trial Court whichGas such is not permissible while exercising the power under Section 37of the Arbitration Act.

3.5 Making the above submissions, it is prayed to allow the presentappeal and quash and set aside the impugned judgment and order passedby the High Court.H

4. The present appeal is vehemently opposed by Shri KanwalChaudhary, learned Advocate appearing on behalf of the respondent.

4.1 It is submitted that as such the learned arbitrator had nojurisdiction at all to pass the award as no amount was due and payableas nothing was spent on marketing activities by the appellant –Corporation.

4.2 It is submitted that the composition of Arbitral Tribunal as wellas the appointment of the sole arbitrator was not in accordance withclause 13 of the Contract. It is submitted that the appointment of thesole arbitrator and his competence was challenged by the respondent,which was summarily rejected.

4.3 It is submitted that the question of jurisdiction can be raisedunder Section 16 of the Arbitration Act which can also be raised afterthe award is passed.

4.4 It is submitted that even otherwise as no amount was spent bythe appellant – Corporation, there was no question of any payment tothe appellant-Corporation. It is submitted that on the contrary, therespondent filed a counter claim claiming Rs. 13.92 lakhs whichunfortunately came to be rejected by the arbitrator.

4.5 Making the above submissions, it is prayed to dismiss thepresent appeal.

5. We have heard the learned counsel for the respective partiesat length. We have also gone through the impugned judgment and orderpassed by the High Court.

6. So far as the question of jurisdiction of the arbitrator raised bythe respondent is concerned, the same has been dealt with by the HighCourt also and the said objection has been overruled by the High Courtagainst which no appeal is preferred by the respondent. In that view ofthe matter, now it is not open for the respondent to challenge thejurisdiction of the arbitrator, that too in an appeal preferred by the originalclaimant – Corporation – appellant herein.

7. So far as the impugned judgment and order passed by the HighCourt quashing and setting aside the award and the order passed by theAdditional District Judge under Section 34 of the Arbitration Act areconcerned, it is required to be noted that in an appeal under Section 37of the Arbitration Act, the High Court has entered into the merits of the A

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Aclaim, which is not permissible in exercise of powers under Section 37of the Arbitration Act.

8. As per settled position of law laid down by this Court in acatena of decisions, an award can be set aside only if the award isagainst the public policy of India. The award can be set aside underBSections 34/37 of the Arbitration Act, if the award is found to be contraryto, (a) fundamental policy of Indian Law; or (b) the interest of India; or(c) justice or morality; or (d) if it is patently illegal. None of the aforesaidexceptions shall be applicable to the facts of the case on hand. The HighCourt has entered into the merits of the claim and has decided the appealunder Section 37 of the Arbitration Act as if the High Court was decidingCthe appeal against the judgment and decree passed by the learned trialCourt. Thus, the High Court has exercised the jurisdiction not vested init under Section 37 of the Arbitration Act. The impugned judgment andorder passed by the High Court is hence not sustainable.

9. In view of the above and for the reasons stated above, theDpresent appeal succeeds. The impugned judgment and order passed bythe High Court is hereby quashed and set aside. The award passed bythe arbitrator and the order passed by the Additional District Judge underSection 34 of the Arbitration Act overruling the objections are herebyrestored.

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10. The present appeal is accordingly allowed to the aforesaidextent. No costs.

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Divya Pandey

(Assisted by : Roopanshi Virang, LCRA)

Appeal allowed.

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