Case Note & Summary
The petitioner, Diversey India Private Limited, filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging an arbitral award dated 4th May 2012. The petitioner was the original claimant in the arbitration, and the respondent, Waverley Private Limited, was the original respondent. The dispute arose out of a distributorship agreement between the parties for the sale of products manufactured by the petitioner in Sri Lanka. Prior to June 2005, the respondent acted as a distributor without a written agreement. On 14th June 2005, the parties entered into a written agreement for distribution, which ended on 13th June 2006. From 14th June 2006 to 31st March 2007, the products continued to be distributed, but no written agreement was signed. On 1st April 2007, a new agreement was signed for a period of two years ending 31st March 2009. The petitioner claimed loss of profits for the period when no written agreement existed, which the arbitrator rejected. The petitioner challenged this part of the award under Section 34, arguing that the arbitrator's decision was contrary to the terms of the contract and public policy. The court, after considering the submissions, held that the arbitrator's finding that the claim was not maintainable in the absence of a written agreement was not perverse or against public policy. The court noted that the arbitrator had considered the evidence and concluded that no implied contract existed for that period. The court found no ground to interfere with the award under Section 34 and dismissed the petition.
Headnote
A) Arbitration Law - Section 34 Petition - Challenge to Arbitral Award - Public Policy - The court considered whether the arbitral award rejecting a claim for loss of profits for a period when no written agreement existed between the parties was contrary to public policy under Section 34 of the Arbitration and Conciliation Act, 1996. The court held that the arbitrator's finding that the claim was not maintainable in the absence of a written agreement was not perverse or against public policy. (Paras 2-4)
B) Contract Law - Distributorship Agreement - Implied Contract - Loss of Profits - The court examined whether the parties had an implied contract during the period 14th June 2006 to 31st March 2007 when no written agreement was signed. The court held that the arbitrator's conclusion that no implied contract existed and that the claim for loss of profits was not sustainable was a plausible view and not open to interference under Section 34. (Paras 2-4)
Issue of Consideration
Whether the arbitral award rejecting the petitioner's claim for loss of profits for the period 14th June 2006 to 31st March 2007 (when no written agreement existed) is contrary to the terms of the contract and public policy under Section 34 of the Arbitration and Conciliation Act, 1996.
Final Decision
The court dismissed the petition, holding that the arbitrator's finding that no implied contract existed for the period 14th June 2006 to 31st March 2007 was not perverse or against public policy. The petition under Section 34 was rejected.
Law Points
- Arbitration Act
- 1996
- Section 34
- Public Policy
- Distributorship Agreement
- Loss of Profits
- Mitigation of Damages
Case Details
Arbitration Petition No.958 of 2012
Mr.M.P.S. Rao, Senior Advocate a/w Mr. Nilesh Khandray a/w Ms. Shivangi Vengurlekar i/by M/s.Mallar Law Consulting for the petitioner. Mr.Vishal Talsania a/w Mr.Dhawal Mohan i/by M/s.Thakore Jariwala & Associates for the respondent.
Diversey India Private Limited
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Nature of Litigation
Petition under Section 34 of the Arbitration and Conciliation Act, 1996 challenging an arbitral award.
Remedy Sought
The petitioner sought to set aside the part of the arbitral award that rejected its claim for loss of profits for the period 14th June 2006 to 31st March 2007.
Filing Reason
The petitioner was aggrieved by the arbitrator's rejection of its claim for loss of profits for the period when no written agreement existed between the parties.
Previous Decisions
The arbitral award dated 4th May 2012 rejected the petitioner's claim for loss of profits for the period 14th June 2006 to 31st March 2007.
Issues
Whether the arbitral award rejecting the claim for loss of profits for the period without a written agreement is contrary to public policy under Section 34 of the Arbitration and Conciliation Act, 1996.
Submissions/Arguments
The petitioner argued that the arbitrator's decision was contrary to the terms of the contract and public policy.
The respondent supported the award, contending that the arbitrator's finding was plausible and not open to interference.
Ratio Decidendi
The court held that under Section 34 of the Arbitration and Conciliation Act, 1996, an arbitral award can be set aside only if it is contrary to public policy or perverse. The arbitrator's conclusion that no implied contract existed for the period without a written agreement was a plausible view based on the evidence, and thus not open to interference.
Judgment Excerpts
By this petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (for short 'the said Arbitration Act'), the petitioner has impugned the arbitral award dated 4th May 2012 made by the learned arbitrator in so far as the learned arbitrator has rejected a part of the claims made by the petitioner.
Prior to June 2005, the respondent was acting as a distributor for the petitioner in certain areas earmarked in Sri Lanka. There was no written agreement between the parties prior to June 2005.
On 14th June 2005, the parties entered into an agreement for sale of products manufactured by the petitioner which were to be distributed by the respondent in the earmarked territory in Sri Lanka. On 13th June 2006, the first agreement came to an end.
During the period from 14th June 2006 to 31st March 2007, the products of the petitioner continued to be distributed in the territory of Sri Lanka. No agreement was signed for the said period of 14th June 2006 to 31st March 2007 between the parties.
On 1st April 2007, the petitioner and the respondent entered into an agreement. The said agreement was to be operated for a period of two years ending 31st March 2009.
Procedural History
The petitioner filed a claim before the arbitrator for loss of profits for the period 14th June 2006 to 31st March 2007. The arbitrator rejected that part of the claim. The petitioner then filed Arbitration Petition No.958 of 2012 under Section 34 of the Arbitration and Conciliation Act, 1996, challenging the award to that extent. The petition was heard and reserved on 16th April 2015, and judgment was pronounced on 9th June 2015.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 34
