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TMI Blog2023 (7) TMI 1555X X X X Extracts X X X X X X X X Extracts X X X X ..... ly 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A. Facts. 2. The respondent is a company engaged in the business of providing educational services through class room coaching as well as online training for various competitive examinations like Common Admission Test [CAT] and Common Law Admission Test [CLAT]. The arbitral proceedings concern license granted to the petitioner to conduct and deliver courses at three professional learning centres of the petitioner in Lucknow, Uttar Pradesh under the respondent's brand name. A Contract dated 31.12.2008, for one of the centres, has been placed on record. The Contract was for the period 01.01.2009 to 31.12.2012. 3. Prior to execution of the aforesaid Contract, the respondent had similar contracts with an individual by the name of Mr. Satyam Shankar Sahai. The first contract dated 14.11.2002 commenced on 01.01.2003 and was valid until 31.12.2005. It was extended by a second contract on 01.01.2006 until 31.12.2008, during the pendency of which Mr. Sahai established the petitioner-company and transferred all rights and liabilities with regard to the second contract in the name of the petitioner-company. The Contract dated 31.12.2008 was entered into between the petitioner-company and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he arbitral tribunal under Section 17 of the Act. The statement of the petitioner recorded on 24.05.2010 was continued until disposal of the Section 17 application by the learned arbitrator. 8. However, the Chairman of the respondent-company withdrew from the proceedings by a communication dated 03.03.2011, which led to the institution of ARB.P. 66/2011 [under Section 11 of the Act] by the respondent in this Court. A substitute arbitrator was appointed by this Court vide order dated 01.12.2011. The impugned award has been passed by the learned arbitrator so appointed. 9. The learned arbitrator issued a notice dated 18.01.2012 to the petitioner, but the petitioner responded on 31.01.2012 contending that the Chairman of the respondent-company remained in seisin of the proceedings, and that it was unaware of the proceedings under Section 11 of the Act before this Court. The learned arbitrator proceeded ex parte against the petitioner by order dated 15.02.2012. After examination of the witnesses of the respondent, the learned arbitrator passed an order dated 17.04.2012 in an application filed by the respondent under Section 17 of the Act, restraining the petitioner from carrying on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter 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. xxxx xxxx xxxx 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/outsi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing 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. xxxx xxxx xxxx 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 shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 Order dated 24.05.2010 in O.M.P. 138/2010, as reproduced in order dated 25.08.2010. 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Court in KMC Brahmaputra Infrastructure Ltd. vs. Chief Engineer, Roads & Bridges Department, Government of Sikkim 2022 SCC OnLine Sikk 130. 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 Technologies Supra (note 8); paragraph 35. , 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. D. Questions for consideration. 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 arb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ember, 2012. It is further submitted that the respondent started a competitive business - similar to that of the claimant - soon after rescinding the agreement - under a new brand name - 'Team Satyam'. Sh. Sharma asserted that the respondent's ill intentions were apparent when an E-mail dt. 22.1.2009 from respondent company was sent to one Mr. Chander Shekher Singh - mentioning that he (M.D. of the respondent) wanted to be independent from January 2011 and his goal was to be at No.1 in UP by 2015. The name of Team Satyam finds mention in several of the documents e-mailed by the respondent. It was further submitted that the respondent changed its name to Team Satyam and started operating from the same premises - using the same office and phone numbers. Respondent's 'letter head' carries the same phone No. and address as is of Team Satyam and also names and photographs of its Directors in the advertisement published in the name of 'Team Satyam'. Looking to various documents such as Ex. PW1/F, Ex. PW1/G, Ex. PW1/H, Ex. PW1/E, Ex. PW1/K-ST-U, we can very comfortably say that Team Satyam is none other than a new label and name given to the respondent comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /compensation projected under a number of heads - I would first take up the first point on liquidated damages. Here, I feel that liquidated damages could have been awarded in case of a simple termination of the agreement - where there was no friction or breach of legal obligation in the future period. The claimant has sought damages/compensation for the entire period right from the day the agreement came into operation till 31st March 2012. In between the dates - the agreement was terminated - till pendency of the proceedings - the respondent seems to be running its institute - purely in violation of the terms of the contract despite the fact that a statement to this effect had been made before the Hon'ble High Court though in a coloured form, and despite also that a restraint order was issued by this forum - so obviously, respondent has to be held liable to compensate the claimant as if the agreement still continues. Under this situation - no merit is available for awarding any liquidated damages as I find this to be a strong case to award damages/compensation on lines as if contract survives and continues till 31.3.2012. So, not accepting a demand for liquidated damages - I d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ift this figure of Rs.1,78,93,863/- minus 15% to Rs.1,52,09,784/- and adding the earlier mentioned previous arrear of Rs.3,68,292/- - we would get an amount of Rs.1,55,78,076/- that claimant needs to be compensated with. 12. One important aspect does need consideration that till date - there is no response from the respondent that it has acted in answer to the restraint order made by this Tribunal on 17.4.2012. Claimant's submission that the respondent is still continuing with the same business has to be accepted - but - then what after the current period i.e. after pronouncement of the arbitral order or after August end? We can't simply assume that the claimant would keep on carrying on the business, therefore, the amount of damages/compensation calculated till December 2012 needs to be adjusted by reducing it for the expected earnings of September, October, November and December, 2012 in a proportional and average basis. Taking Rs.59,64,621/- as being 11 months' earning - the proportional earnings for the aforesaid four months comes to Rs.21,68,953/- which needs to be reduced from the earlier indicated amount of Rs.1,55,78,076/-. Accordingly quantum of damages by n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld approach a reading of the award in a fair, and not in an unduly literal way." (emphasis supplied) 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 wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 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 Builders Supra (note 6). The Court laid down the following principles:- "25. The requirement of reasons in support of the award u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 implau ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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." Emphasis supplied. 40. Further, the Division Bench of the Sikkim High Court in KMC Brahmaput ..... X X X X Extracts X X X X X X X X Extracts X X X X
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