2020 (2) TMI 1525 - HC - Indian Laws

Validity of Arbitral Award - calling of entire records of arbitration proceedings before the Ld. Sole Arbitrator - impugned Award passed after more than three years - time limitation of counter claim filed by the respondent No.1 - whether the counter-claim could have been awarded contrary to the stipulation in the Supplementary MoU? - HELD THAT - The submission of the learned counsel for the petitioners is primarily that in terms of the said stipulation the amount was to be paid to M/s. Brawn Pharmaceuticals Ltd. Admittedly M/s. Brawn Pharmaceuticals Ltd. was not a party before the learned Arbitrator. In fact it is his submission that the respondent No.1 has resisted the petition filed under Section 11 of the Arbitration Conciliation Act 1996 by stating that there is no dispute between the petitioner and the said respondent. The grant of the counter claim in favour of the respondent No.1 is contrary to the stipulation in MoU - the submission made by the learned counsel for the petitioners is agreed upon inasmuch as the stipulation as reproduced above clearly states that predecessor-in-interest of the petitioners herein Late Pawan Kumar Gupta was personally liable to pay M/s. Brawn Pharmaceuticals Ltd. the unrealised portion of their share amounting to 49 lacs. Concedingly M/s. Brawn Pharmaceuticals Ltd. has not raised a claim before the learned Arbitrator. The benefit under the Supplementary MoU could only flow to the entity M/s. Brawn Pharmaceuticals Ltd. In the absence of any claim by M/s. Brawn Pharmaceuticals Ltd. the learned Arbitrator could not have allowed the counter claim of the respondent No.1 in his favour. The award to that extent is liable to be set aside. Supreme Court in the case of Bharat Coking Coal Ltd. v. Annapurna Construction 2003 (8) TMI 368 - SUPREME COURT wherein it was held that the Arbitrator cannot travel beyond the scope/parameters of the contract. Other issues need not be considered - petition allowed.

Summary

Issues Involved:
1. Whether the impugned Award is barred on the ground that it has been passed after more than three years.
2. Whether the counter claim filed by the respondent No.1 was barred by time.
3. Whether the counter-claim could have been awarded contrary to the stipulation in the Supplementary MoU.

Detailed Analysis:

Issue 1: Delay in Passing the Award
The petitioners argued that the impugned Award was rendered after a delay of three years and three months, violating principles of natural justice, fair play, and public policy. They cited judgments to support their claim that such a delay is sufficient to set aside the Award. The court noted the delay but did not find it necessary to rule on this issue due to the resolution of the third issue.

Issue 2: Barred by Limitation
The petitioners contended that the counter-claim was barred by limitation as it was filed more than three years after the cause of action arose. They argued that the counter-claim was filed on June 4, 2008, well beyond the three-year limitation period that expired on July 31, 2007. The court did not address this issue directly due to the resolution of the third issue.

Issue 3: Award Contrary to Supplementary MoU
The court focused on the stipulation in the Supplementary MoU, which stated that the late claimant was personally liable to pay M/s. Brawn Pharmaceuticals Ltd. the unrealized portion of their share amounting to ?49 lakhs. The court found that M/s. Brawn Pharmaceuticals Ltd., not being a party before the Arbitrator, had not raised a claim. The Arbitrator had awarded the counter-claim to respondent No.1 in his personal capacity, which was contrary to the stipulation in the MoU. The court held that M/s. Brawn Pharmaceuticals Ltd. is a separate legal entity, and the benefit under the Supplementary MoU could only flow to the company, not to respondent No.1 personally. Therefore, the counter-claim awarded by the Arbitrator in favor of respondent No.1 was set aside.

Conclusion:
The court allowed the petition, setting aside the counter-claim awarded to respondent No.1. The court emphasized that the Arbitrator acted beyond the scope of the contract by awarding the counter-claim to an individual rather than the company entitled under the MoU. The remaining issues were not addressed as the resolution of the third issue was sufficient to decide the case. The application for stay of execution proceedings was dismissed as infructuous.