2023 (7) TMI 1555 - HC - Indian Laws

Validity of the termination of the contract by the petitioner - impugned award contained any or adequate findings with regard to the invalidity of the purported termination of the Contract by the petitioner - award of damages ought to have been limited to 5 lakhs in terms of Clause 14.6 of the Contract - quantification of damages in the impugned award is vitiated by lack of evidence or not. Does the award contain any or adequate finding regarding invalidity of termination? - HELD THAT - 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. The impugned award in the present case contains at the very least an implied finding that the termination by the petitioner was invalid. Interpretation of Clause 14.6. - HELD THAT - 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 - there are no infirmity in the impugned award to the extent that it holds Clause 14.6 to be inapplicable. Quantification of damages - HELD THAT - 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 - 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 there are no reason to interfere with the same. Conclusion - i) The arbitral award contained an implied finding that the termination by the petitioner was invalid and the arbitrator s reasoning was sufficient to support this conclusion. ii) The interpretation of Clause 14.6 by the arbitrator was deemed plausible and this interpretation is deferred holding that the damages were not limited to 5 lakhs. iii) The quantification of damages was upheld finding the arbitrator s method of using past earnings as a benchmark to be reasonable and supported by evidence. There are no 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.

Summary

The Court considered several key issues in this case, primarily revolving around the validity of the termination of the contract by the petitioner, the applicability of the liquidated damages clause, and the quantification of damages awarded by the arbitrator.

1. Issues Presented and Considered:

The core legal questions considered were:

• Whether the arbitral award contained adequate findings regarding the invalidity of the purported termination of the contract by the petitioner.
• Whether the award of damages should have been limited to 5 lakhs as per Clause 14.6 of the contract.
• Whether the quantification of damages in the arbitral award was supported by evidence or was speculative.

2. Issue-wise Detailed Analysis:

Validity of Contract Termination:

• Legal Framework and Precedents: The petitioner argued that the contract was validly terminated under Section 39 of the Indian Contract Act, 1872, due to breaches by the respondent. The respondent contended that the termination was unjustified, and the arbitrator found that the petitioner continued to operate a competing business, which constituted a breach of the non-compete clause.
• Court's Interpretation and Reasoning: The Court found that the arbitrator's award implied a finding that the termination was unjustified. The arbitrator's reasoning was based on documentary evidence showing the petitioner's involvement in a competing business prior to the termination.
• Key Evidence and Findings: The arbitrator relied on evidence such as emails and advertisements showing the petitioner's involvement with "Team Satyam," which indicated a breach of the non-compete clause.
• Application of Law to Facts: The arbitrator concluded that the petitioner's termination of the contract was wrongful, as the petitioner was found to be operating a competing business under a different name.
• Treatment of Competing Arguments: The Court acknowledged the petitioner's argument but found the arbitrator's reasoning sufficient to support the conclusion that the termination was invalid.
• Conclusions: The Court held that the arbitrator's findings were adequate and reflected a proper determination of the termination's invalidity.

Interpretation of Clause 14.6:

• Legal Framework and Precedents: The petitioner argued that damages should be limited to 5 lakhs as per Clause 14.6, which provided for liquidated damages upon termination.
• Court's Interpretation and Reasoning: The Court found that Clause 14.6 did not restrict the damages to 5 lakhs, as it was without prejudice to the respondent's general right to recover damages.
• Application of Law to Facts: The arbitrator's interpretation of the contract was deemed plausible, and the Court deferred to this interpretation.
• Conclusions: The Court upheld the arbitrator's interpretation, finding no infirmity in the award regarding Clause 14.6.

Quantification of Damages:

• Legal Framework and Precedents: The petitioner contended that the damages were speculative and unsupported by evidence. The respondent argued that the damages were based on the earnings during the contract's operation.
• Court's Interpretation and Reasoning: The Court found that the arbitrator's method of quantifying damages was reasonable, using the respondent's past earnings as a benchmark.
• Key Evidence and Findings: The arbitrator relied on the earnings from the contract period to estimate future damages, adjusting for uncertainties.
• Application of Law to Facts: The Court noted that future profits are inherently uncertain, and the arbitrator's approach was consistent with legal principles allowing for some estimation.
• Conclusions: The Court upheld the quantification of damages, finding no reason to interfere with the arbitrator's assessment.

3. Significant Holdings:

• The Court held that the arbitral award contained an implied finding that the termination by the petitioner was invalid, and the arbitrator's reasoning was sufficient to support this conclusion.
• The interpretation of Clause 14.6 by the arbitrator was deemed plausible, and the Court deferred to this interpretation, holding that the damages were not limited to 5 lakhs.
• The quantification of damages was upheld, with the Court finding the arbitrator's method of using past earnings as a benchmark to be reasonable and supported by evidence.
• The petition to set aside the arbitral award was dismissed, and the awarded amount was to be disbursed as per the orders in the enforcement proceedings.