1 Arbp360.06 & 457.06 kambli IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO.370 OF 2006 ... Victor G. Selvan ...Petitioner v/s. 1.Hathway Cable & Datacom Pvt. Ltd. 2.Vision India Network Pvt.Ltd. ...Respondents AND ARBITRATION PETITION NO.457 OF 2006 ... 1.Hathway Cable & Datacom Pvt. Ltd. 2.Vision India Network Pvt.Ltd. ...Petitioners v/s. Victor G. Selvan ...Respondent ... Mr.Shyam Mehta with Ms.Neeta Solanki i/b Kiran Jain & Co. for Petitioner in ARBP 370/06 & for Respondent in ARBP 457/06. Mr.S.U.Kamdar, Sr.Advocate with Ms.Pooja Patil & Ms.Jyoti Ghag i/b M/s.Thakore Jariwala & Associates for Respondents in ARBP 370/06 and for Petitioners in ARBP 457/06. ... 2 Arbp360.06 & 457.06 CORAM: D.K.DESHMUKH, J. DATED: 12th August, 2011 P.C.: 1. By these two petitions filed under Section 34 of the Arbitration & Conciliation Act the same award made by the learned Arbitrator dated 3rd May, 2006 is challenged. Therefore, both these petitions can be conveniently disposed of by a common order. 2. The claimant before the learned Arbitrator was M/s.Hathway Cable & Datacom Pvt.Ltd., which was the Petitioner in Arbitration Petition No.457 of 2006 and before the learned Arbitrator Mr.Victor G. Selvan was the Respondent, who is Petitioner in Arbitration Petition No.370 of 2006. In this judgment, I will refer to the parties as “Claimant” and “Respondent” for the sake of convenience. 3 Arbp360.06 & 457.06 3. Admittedly there is an agreement entered into between the parties. There is an arbitration clause contained in that agreement. As the dispute arose between the parties, arbitration clause was invoked by letter dated 18th May, 2004 and this court by order dated 17-6-2004 appointed an arbitrator and referred the disputes to him. The claimant filed his statement of claim. His case in the statement of claim is as follows: (i)The claimants are engaged in the business of receiving, exhibiting and transmitting Cable TV signals received from channel providers and distributors. The Respondent is an individual cable TV operator carrying on business on the name and style of Jai Sky Links. (ii)The Claimants transmit signals through their own head-ends to various franchisees. The Claimants have appointed franchisees all over Bangalore. The Respondent is one such franchisee. 4 Arbp360.06 & 457.06 (iii)The Respondent was in association with the Claimants much prior to 1995 on the basis of an oral arrangement. The Claimants and the Respondent entered into a Mamorandum of Understanding dated 6th June, 1995, pursuant to which, a Joint Venture Company, that is, Claimant No.2 was formed. The MOU was acted upon. In order to crystallise the intention of the said MOU, a Franchise-cum-Non- Competition Agreement dated 15th September 2000 (“the Agreement”) was entered into between the claimants and the Respondent. (iv)The claimants have installed and upgraded various equipment for enabling the Respondent to carry on the business effectively. For this purpose of installing, the Claimants spent a sum of Rs.1,75,950. The value of equipment runs into several lakhs of rupees and the cost of upgradation in or around the area of the Respondent runs into several crores of rupees. (v)The claimants have paid a sum of Rs.8,79,703 5 Arbp360.06 & 457.06 to the Respondent towards non-competition charges. (vi)The agreement is still subsisting and has not been terminated. (vii)On 1st October 2000, the Respondent was appointed as a consultant by the Claimants. (viii)In the year 2001, the Respondent started committing breaches of the Agreement. The following two breaches are specifically referred to. (ix)A sum of Rs.15,64,980.50 was due from the Respondent as of September 2004 and further monthly charges are due thereafter from the Respondent, in respect of provision of cable TV signals. (x)The Respondent has committed breach of negative covenant by associating with business rivals of the Claimants. The Respondent has admittedly committed breach of the Agreement by taking signals from Atria Convergence and Technologies Pvt.Ltd. (“Atria”). The Claimants have also stated 6 Arbp360.06 & 457.06 that the above has exposed the Claimants to grave loss whereby the equipments and co- axial cable wire installed by the Claimants were susceptible to cable cutting, distortion and/or loss of signals. (xi)Correspondence dated 31st July, 2001, 8th August 2001 and 9th August 2001 is referred to. The Claimants have disputed receipt of letter dated 11th June 2001 from the Respondent to the Claimant No.1. The Claimant has also alleged that the agreement with Atria is a `procured document’. (xii)By an order dated 24th August 2001 passed by bangalore City Civil Court, on a petition under Section 9 filed by the Claimants, the Respondent was restrained from taking cable TV signals from Atria. Despite the order, the Respondent continued to take signals from Atria. The said petition was subsequently returned to the Claimants on account of want of jurisdiction. (xiii)The petition was filed as Arbitration 7 Arbp360.06 & 457.06 Petition No.39 of 2003 at Bombay High Court. By orders dated 9th February, 2004 and 28th March, 2004, ad-interim order in terms of prayer (b) of the petition was granted to the Claimants. (xiv)A sum of Rs.15,64,980.50 with interest towards outstanding monthly amounts payable for cable TV signals received; (xv)Rs.9,00,000/- being damages on account of loss of profits; 4. The case of the Respondent before the learned Arbitrator was as follows: (i)The claim is bad for misjoinder and/or non- joinder of necessary parties. (ii)The Claimants did not provide different channels and pictures, did not provide proper cable facilities, machines and equipments and have not performed their part of the Agreement. (iii)The Claimants demanded unjustified and 8 Arbp360.06 & 457.06 unlawful feed charges. (iv)The signature of the Respondent was taken on the MOU on the basis of an assurance that he would get 10% share in shareholding in Claimant No.2. Respondent alongwith other cable operators were to have 49% shareholding in Claimant No.2. (v)Clause in the Agreement which are prejudicial to the Respondent are unlawful, void, unenforceable and forbidden by law. (vi)Out of the sum of Rs.8,79,703 only Rs. 2,50,000 was paid. The balance was to be paid in cash, but was never paid. No amount as mentioned in the Agreement was due or payable by the Respondent to the Claimants which could be adjusted as stated in the Agreement. (vii)The claimants have not invested more than Rs.600. (viii)The Respondent duly gave a first right of refusal to the Claimant No.1 by Respondent’s letters dated 11th June 2001 and 9th August 2001. At that time, the Respondent was 9 Arbp360.06 & 457.06 employed as a caretaker and developer by claimant No.2 and hence the Respondent did not address any letter to Claimant No.2, Claimant No.1 and 2 are the same. Since, unlawful charges were demanded and since 10% share was not given, the Respondent decided to leave the Claimants and joint with Atria after giving notice. (ix)As regards the claim for Rs.15,64,908.50, the claim is false. Unjustified and unlawful feed charges were demanded by the Claimants. The Respondent has denied having received any of the invoices of the Claimants. (x)The claim for Rs.10 lakhs is also denied as false and unjustified. No cutting or damage occurred to the equipments of the Claimants. (xi)An amount of Rs.25,000 per month on account of consultancy charges have also not been paid as per letter dated 25th September, 2000. (xii)By way of amendment, the Respondent has averred that the Agreement is void and uncertain as it contains several blanks. 10 Arbp360.06 & 457.06 (xiii)By way of amendment, it is also averred that the Agreement is void and invalid as it is one-sided and based on unreasonable and harsh terms. (xiv)It is also averred that the claim is barred by the law of limitation. (xv)The order of Bangalore court was passed in the absence of the Respondent. The Bangalore court had no jurisdiction and hence the petition was returned to the Claimants for presentation to the proper court. (xvi)The Respondent has made the following counter-claims: (xvi)(i) Rs.13,00,000 alongwith interest, being the value of 10% share of the Respondent in Claimant No.2; (xvi)(ii)Rs.6,00,000 alongwith interest, due as per letter dated 25th September, 2000; (xvi)(iii)Rs.3,30,000 on account of damages for unlawful restraint on Respondent from taking other assignment or work or business from 10/2/04 to 31/1/05. 11 Arbp360.06 & 457.06 (xvi)(iv)Rs.1,06,320 on account of purchase and maintenance of equipment as per letter dated 3/9/97; (xvi)(v)Rs.2,34,910 on account of dishonoured cheques; (xvi)(vi)Rs.30,00,000 as damages for loss of reputation; 5. On the basis of rival pleadings, the learned Arbitrator framed following issues: I S S U E S (i)Whether the claims made in the Statementof Claim are barred by the law of limitation as alleged in paragraph 12 of the Written Statement? (ii)Whether the counter-claim made by the Respondent is barred by the law of limitation as alleged in paragraphs 1`4 and 17 of the Reply to the Counter-claim? (iii)Whether the Statement of Claim suffers from non-joinder and/or misjoinder of parties 12 Arbp360.06 & 457.06 as alleged in paragraph 2 of the Written statement? (iv)Whether the Agreement dated 15/9/2000 is null, void, forbidden by law, unenforceable and invalid as alleged in paragraph 8 of the Written Statement? (v)Whether the Respondent has committed breach of the Agreement dated 15/9/00 by (i) receiving signals from Atria, and (ii) non- payment of feed charges, as alleged in paragraphs 20,22,30 and 31 of the Statement of Claim. (vi)Whether the Respondent is liable to pay to the Claimant No.1 a sum of Rs.15,64,980.50 towards feed charges as alleged in paragraph 31(d) and 32(a) of the Statement of Claim. (vii)Whether the Claimants are entitled to an order directing the Respondent to continue to receive the cable TV signal from the Claimants as per the Agreement dated 15/9/00 as alleged in paragraph 32(b) of the Statement of Claim? 13 Arbp360.06 & 457.06 (viii)Whether the Claimants are entitled to an order restraining the Respondent from committing breach of the negative covenants contained in the Agreement dated 15/9/00. (ix)Whether the Claimants are entitled to receive from the Respondent a sum of Rs. 10,00,000 towards damages on account of loss of equipment/distortion/loss of signals as alleged in paragraph 33 of the Statement of Claim. (x)If answer to issue Nos. 7 to 9 is in the negative, whether in the alternative, the Claimants are entitled to a sum of Rs. 8,79,703 being the amount paid by the Claimants to the Respondent under non-compete covenants as alleged in paragraph 32(b)(i) of the Statement of Claim. (xi)If answer to issue Nos. 7 to 9 is in the negative, whether in the alternative, the Claimants are entitled to receive from the Respondent a sum of Rs.1,75,950 on account of expenses incurred as alleged in paragraph 14 Arbp360.06 & 457.06 32(b)(ii) of the Statement of Claim. (xii)If answer to issue Nos.7 to 9 is in the negative, whether in the alternative, the Claimants are entitled to receive from the Respondent a sum of Rs.10,80,000 as and by way of loss of profit as alleged in paragraph 32(b)(iii) of the Statement of Claim. (xiii)If answer to issue Nos. 7 to 9 is in the negative, whether in the alternative, the claimants are entitled to receive from the Respondent a sum of Rs.9,00,000 as and by way of loss of profit as alleged in paragraph 32(b)(iv) of the Statement of Claim. (xiv)Whether the claims made in paragraphs 4, 6 and 7 of the Counter-claim are beyond the jurisdiction of the Arbitral Tribunal as alleged in paragraphs 12 and 18 of the Reply to the Counter-claim. (xv)Whether the rights of the Respondent under the MOU dated 6/6/95 ceased as alleged in paragraph 37 of the Rejoinder of the Claimants. 15 Arbp360.06 & 457.06 (xvi)Whether the Claimants have committed breach of the Agreement dated 15/9/00 and the MOU dated 6/6/95 as alleged in paragraphs 6 and 8 of the Written Statement, namely, (i) by not providing different channels and pictures; (ii) by not providing proper cable facilities, machines and equipment; (iii) by demanding unjustified and unlawful feed charges; and (iv) by non-payment of Rs. 8,79,703 except a sum of Rs.2.50 lakhs. (xvii)Whether the letter dated 11/6/01 was duly and properly served on the Claimants in accordance with the requirements of the Agreement dated 15/9/00 as alleged in paragraph 8(e) of the Written Statement. (xviii)Whether the Respondent is entitled to recover from the Claimants a sum of Rs. 13,00,000 as alleged in paragraph 4 of the Counter-claim. (xix)Whether Respondent is entitled to recover from Claimants a sum of Rs.6,00,000 as alleged in paragraph 6 of the Counter-claim. 16 Arbp360.06 & 457.06 (xx)Whether the Respondent is entitled to recover from the Claimants a sum of Rs. 3,30,000 as and by way of damages as alleged in paragraph 6 of the Counter-claim. (xxi)Whether the Respondent is entitled to recover from the Claimants a sum of Rs. 1,06,320 on account of equipment purchase as alleged in paragraph 7 of the Counter-claim. (xxii)Whether the Respondent is entitled to recover from the Claimants a sum of Rs. 2,34,910 on account of dishonoured cheques issued by BITV as alleged in paragraph 8 of the Counter-claim. (xxiii)Whether the Respondent is entitled to recover from the Claimants a sum of Rs. 30,00,000 on account of damages for loss of reputation and image as alleged in paragraph 9 of the counter-claim. (xxiv)Whether either party is entitled to claim interest from the other on the aforesaid claims, and if so, at what rate and for what period. 17 Arbp360.06 & 457.06 (xxv)Whether either party is liable to pay cost to the other side, and if so, to what extent. 6. Issue No.4 framed by the learned Arbitrator was whether the agreement dated 15/9/2000 is null, void, forbidden by law, unenforceable and invalid? That issue has been considered by the learned Arbitrator on the basis of oral as also documentary evidence and the learned Arbitrator has held that the agreement is unenforceable and void because of the provisions of Section 29 of the Contract Act. The learned Arbitrator, therefore, has dismissed the claim made by the claimant, save and except that the learned Arbitrator has directed the Respondent to refund the amount which the Respondent has received under the contract as also the amount that was payable by the Respondents to the claimant because of the benefits received by him under the contract. 7. The principal question that arises for 18 Arbp360.06 & 457.06 consideration is whether the finding recorded by the learned Arbitrator that the contract is void because of the provisions of Section 29 is liable to be interfered with or not. 8. The blanks in the contract, which have been held to be fatal in so far as the validity of the contract is concerned, are in relation to Clause 2 of the contract which deals with consideration. It reads as under: “CONSIDERATION In consideration of receiving input signal/feed by the Franchisee and of the terms and conditions, covenants and stipulations contained herein, Franchisee shall continue to pay regularly to the Franchisor as per the number of Subscriber Points held by the Franchisee in the Area more particularly as laid down in Column C to the Schedule A before the _______th of the following month. Provided always that the consideration as contained herein shall be subject to revision in case of increase in the number of pay channels or subscription rates thereof or in number of Subscriber Points.” 9. Thus, as per this clause, consideration 19 Arbp360.06 & 457.06 to be paid by the Franchisee to the Franchisor was to be determined on the basis of particulars given in Schedule “A”. Schedule “A” reads as under: SCHEDULE “A” The Franchisor will pay the Franchisee Rs.( ______________) (Rupees___________________only) per month as Remuneration or ( ) % Commission of the net amount collected (actually realised i.e. Cash Collection or cheques deposited and realised/credited to the Franchiser’s account with the bank), which ever is higher. __________________________________________________ Sr. Territory No of Rate Amount No. Point (Rs.) __________________________________________________ A B C D E -------------------------------------------------- Dinnar Sulthanpadja Gansha Block Kawrar Nagar Ramth Nagar Chandi Nagar 20 Arbp360.06 & 457.06 10. The learned Arbitrator also found that there was a blank in Clause 1.2, in asmuch as, the area was left blank. But the learned Arbitrator has held that that is not material. The learned Arbitrator in his award has held that non- mentioning of the consideration and the rate in Schedule “A” is fatal. 11. It was the case of the Claimant that the Respondent was not entitled to any remuneration under the agreement and therefore those figures were kept blank in Schedule “A”. That case has been examined by the learned Arbitrator and the learned Arbitrator has disbelieved that case. The learned Arbitrator has held “ I further find that the case that no remuneration was payable under the Agreement is not acceptable because the Agreement contains an express clause on page 12 stating that the Franchisor shall pay to the Franchisee remuneration or commission, whichever is higher. The submission that no remuneration 21 Arbp360.06 & 457.06 was payable is contrary to the said clause.” The learned Arbitrator has held that oral evidence was led by the parties to indicate as to what was to be mentioned in the portion which was left blank. But that oral evidence is not admissible. But the learned Arbitrator has also considered that oral evidence and has recorded his finding that the term in relation to consideration is a material term of the contract and oral evidence that has been led by the parties does not indicate as to what was to be filled in the blank space in the contract. 12. The learned Counsel appearing for the Respondent also invited my attention to clause 9.6 of the agreement. It reads as under: “9.6 this Agreement constitute the entire agreement between the Parties and save as provided hereunder, there is no understanding, agreements, commitment or any onerous obligation whatsoever to be discharged or to be performed by the Franchisee, whether oral or written in relation to any provision of this Agreement.” 13. In my opinion, in view of this clause 22 Arbp360.06 & 457.06 clearly no oral evidence was admissible to fill in the blanks in the agreement. On a finding recorded by the learned Arbitrator that the consideration was vital term in the contract and as that term was left blank, in my opinion, the only conclusion possible was that in view of the provisions of Section 29 of the Contract Act, the contract is void. The learned Arbitrator has recorded similar finding in relation to the Column “D” in Schedule “A”. That finding is also based on appreciation of evidence on record. In my opinion, considering the extremely limited jurisdiction of the court I will not be justified in re-appreciating the evidence. It is not the complaint on behalf of the claimant that any piece of evidence has been left out of consideration by the learned Arbitrator. I find, on the contrary, the award is well considered and well reasoned award, where every piece of evidence has been considered in detail. In this view of the matter, therefore, in my opinion, no interference is called for with the findings recorded by the 23 Arbp360.06 & 457.06 learned Arbitrator at the instance of the Claimant. 14. The only submission made on behalf of the Respondent was that having recorded a finding that the agreement dated 15-9-2001 between the parties is void, the learned Arbitrator lost jurisdiction to make any award directing the Respondent to make payment to the claimant, because the arbitration clause is contained in the agreement dated 15-9-2001. The learned Counsel appearing for the Respondent, however, submitted that this contention that the learned Arbitrator has no jurisdiction to make any award against the Respondent after holding that the contract is void was never raised before the Arbitrator. The learned Counsel relied on the observations of the Supreme Court in its judgment in the case of Krishna Bhagya Jala Nigam Ltd. v/s. G.Harischandra Reddy and anr, (2007) 2 SCC 720, especially paragraphs 8 & 9 of that Judgement. Paragraphs 8 & 9 read as under: 24 Arbp360.06 & 457.06 8. Mr. C.S. Vaidyanathan, learned senior counsel for Jala Nigam, contended that the above-quoted Clause 29 of the Contract was not an arbitration clause and, therefore, the proceedings before the Arbitrator stood vitiated for lack of jurisdiction. He contended that the proceedings before the Arbitrator were without jurisdiction for want of arbitration agreement which cannot be cured by appearance of the parties, even if there was no protest or even if there was a consent of Jala Nigam, since consent cannot confer jurisdiction and, therefore, the impugned Award was null and void. Learned counsel submitted that though the plea of "no arbitration clause" was not raised in the counter statement before the Arbitrator, such a plea was taken by Jala Nigam in C.M.P. No.26/99 filed by the contractor and, therefore, Jala Nigam was entitled to raise the plea of "no arbitration clause". Learned counsel submitted that under the circumstances the courts below had erred in holding that Jala Nigam had waived its right to object to the Award on the aforementioned grounds. 9. We do not find any merit in the above arguments. The plea of "no arbitration clause" was not raised in the written statement filed by Jala Nigam before the Arbitrator. The said plea was not advanced before the civil court in Arbitration Case No.1 of 2001. On the contrary, both the courts below on facts have found that Jala Nigam had consented to the arbitration of the disputes by the Chief Engineer. Jala Nigam had 25 Arbp360.06 & 457.06 participated in the arbitration proceedings. It submitted itself to the authority of the Arbitrator. It gave consent to the appointment of the Chief Engineer as an Arbitrator. It filed its written statements to the additional claims made by the contractor. The executive engineer who appeared on behalf of Jala Nigam did not invoke Section 16 of the Arbitration Act. He did not challenge the competence of the arbitral tribunal. He did not call upon the arbitral tribunal to rule on its jurisdiction. On the contrary, it submitted to the jurisdiction of the arbitral tribunal. It also filed written arguments. It did not challenge the order of the High Court dated 10.9.99 passed in C.M.P. No.26/99. Suffice it to say that both the parties accepted that there was an arbitration agreement, they proceeded on that basis and, therefore, Jala Nigam cannot be now allowed to contend that Clause 29 of the Contract did not constitute an arbitration agreement. 15. It is common ground before me that before the learned Arbitrator such a contention was not raised. In my opinion, considering the provisions of sub-section 2 of Section 16 of the Arbitration Act the Respondent cannot be permitted to raise such a plea at this stage having not raised before the learned Arbitrator. Because in view of the provisions of sub-section 2 of Section 26 Arbp360.06 & 457.06 16, if an objection to the jurisdiction of the learned Arbitrator is not raised in the statement of defence, then that objection cannot be raised even before the learned Arbitrator at later stage and also precludes the party from raising it before the court after the award is made. 16. In this view of the matter, therefore, both petitions fail and are dismissed. No order as to costs. (D.K.Deshmukh, J.)