Case Note & Summary
The dispute arose out of a dealership agreement dated 17 August 2004 between the appellant, a proprietorship firm acting as an LPG distributor, and the respondent, Hindustan Petroleum Corporation Limited. The appellant was appointed on a principal-to-principal basis to sell LPG cylinders in the Vashi, Navi Mumbai area. In 2006, the respondent issued a show cause notice alleging violations of clauses 12 and 24A of the agreement, citing cylinder stock variations and nonexistent customers. The appellant replied, disputing the allegations and claiming outstanding dues. Despite the reply, the respondent suspended the dealership on 3 June 2008 and subsequently terminated it on 13 September 2008, also raising a demand for Rs.19,94,174.68 under clause 32(c). The appellant challenged the termination before the High Court, and the dispute was referred to arbitration as per clause 38 of the agreement. In the arbitration, the appellant filed a statement of claim seeking to set aside the termination and, alternatively, monetary compensation of Rs.24,44,076.09 plus future losses. The respondent filed a reply and a counter claim for penalties, stock variation amounts, and debit balances totaling Rs.10,39,474.68 with interest. The appellant filed a rejoinder disputing the counter claim and putting the respondent to strict proof. During the proceedings, only the appellant filed an affidavit of evidence; the respondent neither filed any affidavit nor cross-examined the appellant. The sole arbitrator rendered an award on 11 September 2009, upholding the termination as legal and valid, partly allowing the appellant's monetary claim for Rs.4,01,244.88 upon proof, and allowing the respondent's counter claim. The appellant challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, but the learned Single Judge dismissed the petition on 16 January 2017. The appellant then filed this appeal under Section 37. The primary legal issue was whether the counter claim could be allowed in the absence of the respondent's evidence and cross-examination. The court examined the limits of interference under Section 37, observing that it cannot re-appreciate evidence. The court found that the arbitrator's acceptance of the counter claim was based on documentary evidence and the appellant's failure to specifically deny the claims, and that no perversity or patent illegality was made out. Consequently, the appeal was dismissed, affirming the Single Judge's order and the arbitral award.
Headnote
A) Arbitration - Counter Claim - Permissibility and Burden of Proof - Arbitration and Conciliation Act, 1996, Sections 34, 37 - The arbitrator allowed the respondent's counter claim despite the respondent not filing an affidavit of evidence and not cross-examining the appellant; the appellant challenged the award under Section 34 and in appeal under Section 37, contending that the award was perverse. The court upheld the award, finding that the counter claim was supported by documentary evidence and the appellant had not effectively challenged it in the arbitration. (Paras Not mentioned) B) Arbitration - Section 37 Appeal - Scope of Interference - Arbitration and Conciliation Act, 1996, Section 37 - The court reiterated that under Section 37, the appellate court does not re-appreciate evidence; interference is limited to cases of patent illegality or perversity. (Paras Not mentioned)
Issue of Consideration
Whether the counter claim as raised by the respondent could be allowed by the learned arbitrator, and whether the learned Single Judge was justified in affirming such arbitral award?
Law Points
- Appeal under S.37 is limited
- court does not re-appreciate evidence
- Arbitrator's award on counter claim based on unrebutted evidence is not perverse
- Counter claim can be allowed if raised in reply to statement of claim
- Non-cross-examination leads to acceptance of evidence.
