TaxTMI 
TaxTMI 
2023 (7) TMI 1555
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....and study material, and costs, alongwith interest @ 9% per annum with effect from the date of filing of the claim. 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 i....
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....bitral proceedings were thus commenced, O.M.P. 138/2010 and O.M.P. 213/2010 were withdrawn on 25.08.2010, with liberty to move the arbitral tribunal under Section 17 of the Act.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 d....
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....nsee the right to the use of the copyright of the Licensor in the name and styles of CAREER LAUNCHER INDIA LTD in any printed matter distinctive features decor and any other matter 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 L....
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....any business or activity which is similar to the conduct of the Professional Learning Center within or outside the City limits or anywhere in the country for a period of 2 years (two years from the date such termination takes effect). Similarly, also in the event of the Agreement lapsing 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....
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....0 and 25. to submit that the impugned award is devoid of reasons as to the validity of the termination and as to whether the non-compete clause would nevertheless apply. 15. The second ground of challenge urged on behalf of the petitioner is that the learned arbitrator has awarded damages contrary to Clause 14.6 of the Contract, which provides for liquidated damages of Rs.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 ....
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....ite its non-appearance in the arbitral proceedings and although they were not legally necessary, they have been accepted by the respondent also. 20. Mr. Mehta cited the judgments of the Supreme Court in Dwaraka Das vs. State of M.P. (1999) 3 SCC 500. and of this Court in Kishan Lal Kalra vs. N.D.M.C. AIR (2001) Delhi 402 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 impugn....
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....39; and its activities/business. It was urged by Ld. Cl. Sh. D.K. Sharma that agreement dt. 31.12.08 was rescinded by the respondent - unjustly and arbitrarily with the sole intention to start a competitive business - knowing fully that it was under a legal liability - not to start a competitive business during the term of the agreement ending 31st December, 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 N....
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....dents' intent to hide the truth which has to simply amount to mean an admission that respondent was actively breaching the terms of the agreement with full knowledge of the mischief being played on. Breach and violation of the terms of the agreement dt. 31.12.2008, thus, stand clearly established. 10. Now, coming to the petitioner's demand of damages/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 obv....
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....ation - there is always a good chance of enhancement of the income, but, it may also so happen that earnings could/may decline depending on a number of factors. To stay on lines in between and on a fair side - especially when the respondent is being proceeded exparte, I find it just and proper if a cut of 15% is allowed qua the amount of Rs.1,78,93,863/- which would now shift 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 ....
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....If the Court can deduce from the award and the materials before it, which may include extracts from evidence and the transcript of hearing, the thrust of the tribunal's reasoning then no irregularity will be found....Equally, the court should bear in mind that when considering awards produced by non-lawyer arbitrators, the court should look at the substance of such findings, rather than their form, and that one should 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 de....
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....'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. It is also significant that the petitioner did not appear before the learned arbitrator to plead or prove any breach of the Contract by the respondent so as to justify the petitioner's termination of the Contract under Section 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....
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....ding is naturally based upon the nature of the award in each case. As held in Dyna Technologies Ibid. , the particularity of reasoning required is context specific. In the context of the present case, for the reasons recorded above, I do not find such a lacuna in the impugned award as to invoke the limited jurisdiction of the Court under Section 34 of the Act. 32. For the aforesaid reasons, I am of the view that the impugned award in the present case contains, at the very 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 Rs.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 defau....
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....he judgment of this Court in Kishan Lal Kalra Supra (note 10). , which has been relied upon in the impugned award, specifically upholds an award of damages on the basis of past earnings under the contract:- "Loss of profit is claimed on the basis of one week's sale figures for which Ex. PW-2/136 is filed. On the basis of such calculation, the profit for the unexpired period of licence would have come to more than Rs. 5 lacs. The plaintiff has however confined his claim to Rs. 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 ha....