Delhi District Court
M/S S M Enterprises And Anr vs Modi Mundi Pharma Beauty Products Pvt. … on 6 August, 2025
IN THE COURT OF MS. ANU GROVER BALIGA,
DISTRICT JUDGE (COMMERCIAL COURT-04),
SOUTH-EAST DISTRICT, SAKET COURTS,
NEW DELHI.
OMP (COMM) No. 82/23
M/S S.M. ENTERPRISES & ANR. VS. MODI MUNDI PHARMA BEAUTY
PRODUCTS PVT. LTD.
In the matter of:
1. M/S S.M. ENTERPRISES
Through Its Proprietor
E 12/13, Shanti Niketan, CHS Khindipada
Rajaram Ohal Marg, Mulund Colony,
Bhandpur Complex, Mumbai,
Maharashtra - 400082
Email [email protected]
2. MS. SARITA MALHOTRA
Proprietor of S.M. Enterprises
R/o - E 12/13, Shanti Niketan, CHS Khindipada
Rajaram Ohal Marg, Mulund Colony,
Bhandpur Complex, Mumbai,
Maharashtra - 400082
Email - [email protected]. ....Petitioner
Versus
MODI MUNDI PHARMA BEAUTY PRODUCTS PVT. LTD.
Through Its Authorized Representative
Registered Office at :
Dayawati Modi Centenary Block,
Dayawati Modi Public School Campus,
Hapur Road, Modi Nagar-201204.
ALSO AT :
1400 Modi Tower, 98, Nehru Place,
New Delhi - 110019.
e-mail [email protected] ....Respondent
OMP (Comm) No. 82/23 M/S S.M. Enterprises & Anr. Vs. Modi Mundi Pharma Beauty Products Pvt. Ltd. Page 1 of 43
ANU Digitally signed
by ANU GROVER
GROVER BALIGA
Date: 2025.08.08
BALIGA 12:10:41 +0530
Date of institution : 11.09.2023
Date of reserving judgment : 16.07.2025
Date of pronouncement of Judgment : 06.08.2025
ORDER
1. The present petition has been filed under Section 34 of the
Arbitration and Conciliation Act, 1996 seeking to challenge and partly set-aside
the arbitral award dated 24.04.2023 passed by the Ld. Sole Arbitrator Sh. Balbir
Singh, District & Sessions Judge (Retired), who was appointed by the Hon’ble
Delhi High Court in a Petition filed by the Respondent under Section 11 of the
Arbitration and Conciliation Act. (it is relevant to mention that though the
Petition has been filed both in the name of M/s S.M. Enterprises and its
Proprietor Ms. Sarita Malhotra, it is well settled law that a Proprietorship Firm
has no identity separate from its Proprietor and therefore this Court will only be
referring to Sarita Malhotra, Proprietor of S.M. Enterprises as the Petitioner).
2. Briefly stated the factual matrix in which the aforementioned award
happened to be passed is as follows :-
a) The Petitioner and Respondent entered into a Memorandum of
Understanding (hereinafter referred to as MOU) dated 27.07.2017, whereby the
Petitioner was appointed as a franchisee of the Respondent for the purposes of
selling the products of the Respondent under the brand name and style of
“Revlon” and “Street-ware”.
b) In terms of the MOU, the Petitioner was to sell the aforementioned
products from a premises provided by the Respondent. To this end, the
Respondent took on lease a shop, being J-15, AB, Lajpat Nagar II (hereinafter
referred to as “Shop”) from third party landlords (hereinafter referred to as
“Landlords”) and entered into a lease agreement dated 25.08.2017 (hereinafterOMP (Comm) No. 82/23 M/S S.M. Enterprises & Anr. Vs. Modi Mundi Pharma Beauty Products Pvt. Ltd. Page 2 of 43
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ANU by ANU
GROVER
GROVER BALIGA
BALIGA Date: 2025.08.08
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referred to as “Lease Deed”).
c) The MOU recorded that the Agreement between the parties would
be valid w.e.f. 26.07.2017 to 26.07.2019 and would thereafter be automatically
renewed for each term of 12 months if parties remained in compliance of their
respective obligations. It was also stipulated in the MOU that the Franchise
Agreement could be terminated by either of the parties by giving 03 months
advance notice and that in the event of the expiry of the lease agreement in
respect of the shop, the MOU would automatically stand terminated and the
accounts of the franchisee would be settled.
d) In the year 2019, certain disputes arose between the parties and the
Respondent issued a notice to the Petitioner purportedly under Clause 5 of the
MOU calling upon the Petitioner to cure the breaches of the MOU committed by
her and also informed the Petitioner that in case she fails to do so, the MOU
would stand terminated. The Petitioner responded to the said notice and claimed
that no breaches have been committed by her and that infact it was the
Respondent who had been acting unfairly. Various communications were
exchanged between parties thereafter each sticking to his own stand.
e) On 21.10.2019, the Respondent sent a notice demanding the
Petitioner to vacate the shop and when the Petitioner failed to do so, the
Respondent then subsequently sent a legal notice dated 24.12.2019 invoking
arbitration and calling upon the Petitioner to either pay its due amounts or to get
the disputes settled before an Arbitrator.
f) The Respondent then also filed a petition under Section 9 of the
Arbitration and Conciliation Act before the Ld. Commercial Judge, Saket Courts,
seeking vacation of the suit premises by the Petitioner. The Petitioner appeared inOMP (Comm) No. 82/23 M/S S.M. Enterprises & Anr. Vs. Modi Mundi Pharma Beauty Products Pvt. Ltd. Page 3 of 43
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ANU by ANU
GROVER
GROVER BALIGA
BALIGA Date: 2025.08.08
12:10:54 +0530
the said proceedings and submitted that since arbitration already stands invoked
by the Respondent and an Arbitrator already stands nominated, all the reliefs
should be sought before the Ld. Arbitrator only.
g) Based on the said statement, Respondent then sent a letter dated
07.09.2020 to the then appointed Ld. Sole Arbitrator Sh. Rahul Khosla asking
him to initiate arbitration. A preliminary hearing was held by the Ld. Arbitrator
on 23.09.2020 and the Ld. Arbitrator directed the Respondent to file its statement
of claim. Pursuant thereto the petition under Section 9 of the Arbitration and
Conciliation Act, was withdrawn by the Respondent and a statement of claim
was then filed by it before the Ld. Arbitrator. The Petitioner however then chose
to file an application under Section 14 r/w 12 and 16 of the Arbitration and
Conciliation Act raising objection to the appointment of Ld. Sole Arbitrator
which was allowed by the Ld. Arbitrator vide its order dated 26.09.2020.
h) The Respondent then filed a petition under Section 11 of the
Arbitration and Conciliation Act before the Hon’ble Delhi High Court asserting
therein all the grievances it had against the Petitioner and requested the Hon’ble
Court to appoint an Arbitrator. Since in the meanwhile, on 04.08.2020, the
landlords of the shop had also filed a suit against the Respondent seeking
recovery of possession , arrears of rent and future mesne profits / damages in
relation to the shop, the Respondent included the said facts and disputes with
respect to the occupation charges of the shop also in its petition filed before the
Hon’ble Delhi High Court. The Petitioner appeared before the Hon’ble Delhi
High Court and agreed for the appointment of an Arbitrator and subsequently Sh.
Balbir Singh, District & Sessions Judge, (Retd.), was appointed as Ld. Sole
Arbitrator by the Hon’ble Delhi High Court to decide all the disputes that had
arisen between the parties.
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Digitally signed
ANU by ANU
GROVER
GROVER BALIGA
BALIGA Date: 2025.08.08
12:11:02 +0530
3. Pursuant to the aforementioned appointment , the Respondent filed
its claim before the Ld. Arbitrator Sh. Balbir Singh and the Petitioner also filed a
counter-claim.
4. Briefly stated that claim made by the Respondent before the Ld.
Arbitrator was that since the Petitioner was in breach of the terms of the MOU
executed between the parties, the Respondent had terminated the MOU w.e.f.
24.07.2019 and that since the Petitioner remained in unauthorized occupation of
the shop w.e.f. 24.07.2019 to 13.04.2021 (when the actual possession was handed
over by the Petitioner in the suit proceedings initiated by the landlords against the
Respondent) the Petitioner is liable to pay an amount of Rs. 64,73,055/- on
account of the payment of the lease rentals of the shop. The Respondent also
claimed that the Petitioner is also liable to pay to it Rs 26,47,680/-as damages for
having committed breach of the MOU, another Rs. 25 Lakhs on account of loss
of business income and mesne profits that it suffered for the period of July 2019
to September 2020 and an amount of Rs. 1,42,287/- on account of the electricity
expenses that it incurred for the shop for the period July 2019 to September 2020.
It also claimed that it will be required to reimburse electricity charges w.e.f.
September 2020 to 13.04.2021 and therefore on the said account also the
Petitioner should be held liable.
5. In its counter claim, the Petitioner claimed the refund of the security
deposit of Rs. 5 Lakhs paid by it to the Respondent and also claimed that it had
suffered losses to the tune of Rs. 36,40,000/- due to the alleged breaches of the
MOU committed by the Respondent. It also claimed that the Respondent should
be made to pay an amount of Rs. 3,04,596/- towards the stock of the Respondent
which remained unsold with the Petitioner as on 13.04.2021. It further claimed an
amount of Rs. 6,17,042/- towards certain unadjusted amount due from the
Respondent to it. It was also claimed by the Petitioner that the MOU was never
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ANU Digitally signed
by ANU GROVER
GROVER BALIGA
Date: 2025.08.08
BALIGA 12:11:08 +0530
terminated by the Respondent and that infact the MOU automatically stood
renewed, for the Petitioner was always complying with its terms.
6. Based on the claim and the counter-claim before him, the Ld.
Arbitrator framed the following 09 issues (in the Award, the Ld. Arbitrator has
referred to the Respondent herein as the ‘Claimant Company’ and the Petitioner
herein as the ‘Respondent’):-
ISSUE NO. 1 Whether the respondent no. 1 proprietorship
firm was appointed as a franchisee of the claimant company
for the purpose of selling its products under the brand name
and style of revion and street wear initially for a period of
02 years and the respondent firm remained in occupation of
the premises from 24.07.2019 upto 13.04.2021 illegally
after termination of the memorandum of understanding
dated 27.07.2017 as per terms and conditions mentioned
therein and the claimant is entitled to recover from the
respondents an amount of Rs. 64,73,055/- alongwith an
amount of Rs. 26,47,680/- as damages? OPP.
ISSUE NO. 2 Whether the claimant is entitled to recover
from the Respondents an amount of Rs. 25,00,000/- on
account of loss of business income and mesne profits
regarding the period from July 2019 upto month of
September 2020 ? OPP.
ISSUE NO. 3 Whether the claimant is entitled to recover
an amount of Rs. 1,42,287/- as electricity charges regarding
the period Respondents remained in unauthorized
possession of the premises ? OPP.
ISSUE NO. 4 Whether the claimant is entitled to receive
interest as claimed in the claim petition if so at what rate and
to what amount ? OPP.
ISSUE NO. 5 Whether the Respondents/counter-claimants
are entitled for an award amounting to Rs. 50,51,638/- as
prayed in the counter-claim petition? OPR.
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ANU Digitally signed
by ANU GROVER
GROVER BALIGA
Date: 2025.08.08
BALIGA 12:11:16 +0530
ISSUE NO. 6 Whether the counter-claimant is entitled to
receive interest if so at what rate and to what amount? OPR.
ISSUE NO. 7 Whether the claim petition is not
maintainable in the present form ? OPR.
ISSUE NO. 8 Whether the counter-claim is not
maintainable in the present form? OPP.
ISSUE NO. 9 Relief?
7. It will be relevant herein to briefly advert to the main findings of the
Ld. Arbitrator, on the basis of which the aforementioned issues have been
decided by him. The same are as follows :-
(i) The MOU executed between the parties did not stand terminated on the
basis of the notice dated 02.07.2019 issued by the Claimant Company. The MOU
could not have been terminated automatically only on the basis of the issuance of
the notice dated 02.07.2019. As per the terms of the MOU, in particular Clause 5
and 9, the Claimant Company was bound to have given 90 days notice to the
Respondent, if it was of the opinion that the Respondent had not rectified the
violations of the MOU mentioned in the notice dated 02.07.2019 and since the
Claimant did not give any such notice, the MOU remained in operation.
(ii) The MOU however automatically stood terminated with effect from
24.08.2020, in terms of Clause 9 of MOU, which clearly mentioned that in the
event of the expiry of the lease agreement of the shop, the MOU would stand
terminated. Since the three years lease period was not further extended beyond
24.08.2020, the MOU is to be held to have been automatically terminated with
effect from this date.
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ANU by ANU
GROVER
GROVER BALIGA
BALIGA Date: 2025.08.08
12:11:22 +0530
(iii) The occupation of the shop by the Respondent with effect from 24.08.2020
to 13.04.2021 was unauthorized and illegal and therefore the Claimant Company
cannot be burdened to make payment of the monthly rent, electricity charges and
other charges with respect to the leased shop. The Claimant Company is therefore
held entitled to recover, from the Respondent, the rent for the period 25.08.2020
to 13.04.2021 amounting to Rs. 25,46,768/- and electricity charges amounting to
Rs. 80,000/- for the said period.
(iv) Since the MOU stood terminated with effect from 24.08.2020 and
therefore the Claimant could not have supplied any material to the Respondents,
it is only the Respondents who are to be blamed and held responsible for the
monetary losses suffered by the Claimant Company during the period 25.08.2020
to 13.04.2021. In terms of Clause 5 of the MOU, the franchisee Respondents are
therefore liable to pay to the Claimant Company, equivalent to 03 times the
maximum monthly sale achieved from the shop during the last 12 months. The
monthly maximum sale of the shop between the period January 2018 to
December 2018 was Rs. 8,82,560/- in the month of December 2018 and taking
into consideration that the unauthorized possession of the shop by the
Respondents remained for a period of 08 months, they are held liable to pay an
amount of Rs. 15,65,120/- as damages to the Claimant Company.
(v) As per the terms of the MOU, the Claimant Company was bound to have
purchased the unsold stock of the value of Rs. 3,04,596/- from the Respondent
lying with it as on 13.04.2021 and was also bound to have returned the security
deposit of Rs. 5 Lakhs deposited by the Respondent with the Claimant Company.
Further, the Claimant Company was also guilty of not having given the requisite
margins to the Respondent and as per the terms of MOU, it is liable to pay Rs.
5,90,596/- towards the margins.
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ANU Digitally signed
by ANU GROVER
GROVER BALIGA
Date: 2025.08.08
BALIGA 12:11:29 +0530
Based on the aforementioned findings, the Ld. Arbitrator awarded an
amount of Rs. 43,26,768/- in favour of the Respondent and also awarded an
amount of Rs. 13,95,192/- in favour of the Petitioner / Respondent regarding their
counter-claim and in such view awarded an amount of Rs. 29,31,576/- in favour
of the Respondent alongwith interest at the rate of 9% p.a.
8. Now vide the present petition, the Petitioner seeks to challenge and
set-aside some of the findings of the Ld. Arbitrator, which have been set out in
the relief clause as follows:-
(a) set aside the finding of Ld. Arbitrator that the Lease
Agreement between the Respondent and the third party
lessors terminated on 24.08.2020 and consequently the MOU
terminated on 24.08.2020.
(b) set aside the finding of Ld. Arbitrator that the
Petitioner’s possession of the franchise premises from
25.08.2020 to 13.04.2021 was unauthorized.
(c) set aside the award of INR 25,46,768 to the Respondent
as rent of the franchise premises for the period 25.08.2020 to
13.04.2021.
(d) set aside the award of INR 80,000 to the Respondent as
Electricity Charges at the franchise premises for the period
25.08.2020 to 13.04.2021.
(e) set aside the award of INR 15,65,120 as damages to the
Respondent.
(f) grant the Petitioner INR 36,40,000 as damages on
account of breach of the MOU by the Respondent.
During the course of arguments Ld. Counsel for Petitioner has
however categorically stated before this Court that the Petitioner does not wish to
press relief (f) mentioned hereinabove. According to Ld. Counsel for Petitioner,
the Petitioner is entitled to challenge the award of the Ld. Arbitrator in the
aforementioned manner, for claims and counter claims are based on different set
of facts and are completely severable from each other.
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ANU Digitally signed
by ANU GROVER
GROVER BALIGA
Date: 2025.08.08
BALIGA 12:11:54 +0530
9. The aforementioned makes it clear that the Petitioner herein has no
grievance against the findings of the Ld. Arbitrator with respect to the amounts
awarded to it. It also has no objection to the finding of the Ld. Arbitrator that the
MOU could not have been terminated on the basis of the notice dated 02.07.2019
issued by the Respondent herein. The main objection is against the finding of the
Ld. Arbitrator that the MOU stood automatically terminated with effect from
24.08.2020 and that the possession of the shop by the Respondent with effect
from the said date till 13.04.2021 remained unauthorized and that therefore it was
liable to pay the rent of the said shop and the other damages suffered by the
Claimant Company. In as many as 26 grounds have been taken in the present
petition to challenge the said findings. Ld. Counsel for Petitioner has also filed
detailed written submissions to buttress the said grounds. During the course of
arguments it has also been vehemently contended that this Court is bound to take
note of each and every ground taken by the Petitioner to give a just decision.
10. The following are the main grounds and contentions taken by the
Ld. Counsel for the Petitioner, Sh. Paresh B. Lal to challenge findings at serial
no. (ii) and(iii) hereinabove :-
(i) The Respondent neither in its notice invoking arbitration clause nor
in its statement of claim filed before the Ld. Arbitrator had ever claimed or
prayed for monetary damages from the Petitioner, for occupying the shop w.e.f.
25.08.2020 to 13.04.2021. It is also not in dispute that neither the Lessors nor the
Respondent ever informed the Petitioner of the termination of the lease deed of
the shop.
(ii) That any claim for monies due to alleged unauthorized possession of
the Shop premises does not arise out of the MOU and could not have been
adjudicated upon by the Ld. Arbitrator. Thus, a claim related to the same could
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ANU Digitally signed
by ANU GROVER
GROVER BALIGA
Date: 2025.08.08
BALIGA 12:12:00 +0530
not and ought not to have been arbitrated.
(iii) That the Ld. Arbitrator failed to appreciate that the remedy for a
tenancy at Sufferance vests only with the Landlord and in any event, it could not
have been a claim for damages under the terms MOU. In law the remedy against
a tenancy at sufferance is a suit of ejection and claims for mesne profits. Thus,
the Ld. Arbitrator ought not to have awarded Damages under the MOU as
provided in the Impugned Award.
(iv) Further, without prejudice to the above, the claim for damages s an
action which necessarily includes adjudication of rights in rem, vis-a-vis the
Leased Shop Premises and necessarily affects the rights of third party landlord,
who are not parties to the Arbitration Agreement and who were not present before
the Ld. Arbitrator.
(v) The Ld. Arbitrator failed to appreciate that till the date of making the
said Claim the Respondent had suffered no loss. It is pertinent to note that the
Respondent had not paid any rent to the Landlords as per the Lease Deed and
have been contesting the Landlord’s claims in the Suit bearing CS (Comm.) No.
205 of 2020 before Ld. District Judge, Commercial Court, South District, Saket.
Thus, the Respondent has not suffered any loss towards rent even to this day. It is
trite law that in the absence of any loss, no Damages can be awarded, even where
there is a legal injury. In view of the same, the aforesaid finding is bad in law and
deserves to be set aside.
(vi) The Ld. Arbitrator failed to consider that the issue of monies due to
the Landlord for the period of 25.08.2020 to 13.04.2021 is pending before this
Hon’ble Court in the Suit bearing CS (Comm.) No. 205 of 2020 filed by the
Landlords before Ld. District Judge, Commercial Court, South District, Saket. As
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ANU by ANU
GROVER
GROVER BALIGA
BALIGA Date: 2025.08.08
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such, till the said Suit has been adjudicated neither has any liability to pay arisen
nor quantified as regards the payment of rent for the Shop during 25.08.2020 to
13.04.2021. It is humbly submitted that in view of the fact that the said lis was
already being contested before this Hon’ble Court, it was not open to the Ld.
Arbitrator to adjudicate the aforementioned claim.
(vii) That the award of rent to the Respondent is completely contrary to
the terms of the MOU. In terms of the MOU, the liability to pay the rent of the
Shop was solely on the Respondent. Not only this, but also under the Lease Deed
for the Shop the responsibility to pay the rent to the Landlord was solely on the
Respondent. It is submitted that the Ld. Arbitrator was bound to decide in terms
of the contract between the parties and cannot decide contrary to the express
terms of the contract. Thus, contrary to the express terms of the MOU, the
Petitioner ought not to be liable to pay rent for the Shop.
(viii) Admittedly, the amount of INR 80,000 was arrived by the Ld.
Arbitrator by taking ‘some help of guess work’. No document had been produced
by the Claimant or Respondents regarding electricity, including electricity bills. It
is trite law that Damages need to be proved and that no amount can be awarded in
the absence of such proof.
(ix) That the award of 80,000 to the Respondent towards electricity
charges is completely contrary to the terms of the MOU. In terms of the MOU,
the liability to pay the electricity charges of the Shop was solely on the
Respondent. It is submitted that the Ld. Arbitrator was bound to decide in terms
of the contract, between the parties and cannot decide contrary to the express
terms of the contract. Thus, contrary to the express terms of the MOU, the
Petitioner ought not to be liable to pay electricity charges.
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ANU by ANU
GROVER
GROVER BALIGA
BALIGA Date: 2025.08.08
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(x) That while calculating the amount to be awarded, the Ld. Arbitrator
failed to even consider the prevailing COVID conditions during the period which
severely curtailed the use of the Shop and consequently the use of electricity in
the Shop. Therefore, the amount awarded by the Ld. Arbitrator is grossly
erroneous and the award must be set aside.
11. The following are the main grounds and contentions taken by the
Ld. Counsel for the Petitioner to challenge findings at serial no. (iv)
hereinabove :-
(i) Clause 5 of the MOU could not have been applied to award damages
in view of the accepted position that the MOU had already been terminated on
24.08.2020 by the termination of the Lease Deed. Clause 5 of the MOU deals
with breach of the contract and a cure period being offered to the Franchisee to
cure the defect. This clause does not survive the termination of the MOU and
could not have been applied to calculate damages after the termination of the
MOU.
(ii) Ld. Arbitrator completely misconstrued the scheme of Clause 5 of
the MOU. In terms of the said clause (i) there must be a breach, (ii) cure notice of
the breach is to be given by the Franchiser to the Franchisee; (iii) in case the
Franchisee does not cure the notified breaches then a right to terminate the MOU
vests with the Franchiser and (iv) upon there being a termination of the MOU in
accordance with Clause 9 of the MOU, are damages to be calculated. The Ld.
Arbitrator himself concluded that there had been no breach of the terms of the
MOU by the Petitioner. He could not have applied the said clause to calculate
damages.
(iii) The Ld. Arbitrator completely misapplied Clause 5 while calculating
damages owed by the Petitioner for the period of 25.08.2020 to 13.04.2021. It is
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ANU Digitally signed
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GROVER BALIGA
Date: 2025.08.08
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to be noted that the said provision make the franchisee liable to pay damages to
the company equivalent to three times of maximum monthly sale achieved from
the store in the last twelve months. Accordingly, the last twelve months for which
the sales ought to have been taken into consideration were from 25.08.2019 to
25.08.2020. However, the Ld. Arbitrator mistakenly took the maximum monthly
sales from the period of 2018 January to December 2018. Clearly the said period
is incorrect and much beyond the period prescribed by Clause 5 of the MOU.
(iv) That no proof of any damages had been placed before the Ld.
Arbitrator by the Respondent. It is trite law that Damages as a consequence of a
breach of contract can only be awarded where there is a breach and the breach
results in actual loss. Without there being either a breach of the MOU or any
actual loss resulting from a breach of the MOU, no damages ought to have been
awarded by the Ld. Arbitrator.
12. In support of this contentions, Ld. Counsel for Petitioner has relied
upon the following judgments :-
(i) Gateway Impex Pvt. Ltd. v. TATA AIG Life Insurance
Co. Ltd., (2019) SCC Online Del 10291;
(ii) Nand Ram v. Jagdish Prasad, (2020) 9 SCC 393;
(iii) Raptakos Brett & Co. Ltd. v. Ganesh Property (1998)
7 SCC 184;
(iv) MEC India Pvt. Ltd. vs. Lt. Col. Inder Maria, 1999
SCC Online Del 422;
(v) Vidya Drolia v. Durga Trading Corporation, (2021) 2
SCC 1;
(vi) M/s Unibros v. All India Radio, (2023) 9 SCC 393;
(vii) Indian Performing Right Society Ltd. v.
Entertainment Network (India) Ltd., (2016) SCC
Online Bom 5893;
(viii) Lion Engineering Consultants v. State of Madhya
Pradesh & Ors. (2018) 16 SCC 758;
(ix) Gayatri Balasamy v. ISG Novasoft Technologies Ltd.,
(2025) SCC Online SC 986.
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ANU Digitally signed
by ANU GROVER
GROVER BALIGA
Date: 2025.08.08
BALIGA 12:12:27 +0530
13. In rebuttal, Ld. Counsels for Respondent Sh. Piyush Sharma and Sh.
Armaan Verma have first and foremost contended that the petition is not
maintainable in the form that it has been filed. They have submitted that it is
evident that the Petitioner is not seeking setting aside of the entire impugned
award but is only seeking partial setting aside of certain findings which the Ld
Arbitrator has given against her. According to Ld. Counsels for Respondent, the
same is impermissible in view of the judicial dicta laid down by the Hon’ble
Delhi High Court in the case titled and reported as National Highways Authority
of India v. Trichy Thanjavur Express Way Ltd., (2023) SCC Online Delhi 5183.
In the alternative, they have submitted that even if it is taken that the petition is
maintainable, the objection of the Petitioner that the ld Arbitrator has gone
beyond the MOU and has decided disputes that were not arbitrable and were not
referred to him ,must fail on the following grounds :-
(a) The Respondent had claimed the Damages and Lease rent till
unauthorised possession of the said property i.e., 13.04.2021 by way of the
Statement of Claim. Therefore, the Petitioner was aware of the said claims but
she failed to raise such an objection before the Arbitrator qua the fact that such
disputes are beyond the scope of the Arbitration.
(b) Moreover, in the Petition under Section 11 of the Act filed before the
Hon’ble High Court, the Respondent had specifically mentioned the disputes
between the parties with respect to the lease rent and damages qua the
unauthorised possession of the shop to which the Petitioner had categorically
submitted before the court that “disputes are arbitrable in nature” after which the
matter was referred to Arbitration.
(c) It is trite in law that the pleas and objections with respect to law or
fact that were not raised before the Tribunal cannot be raised at the stage ofOMP (Comm) No. 82/23 M/S S.M. Enterprises & Anr. Vs. Modi Mundi Pharma Beauty Products Pvt. Ltd. Page 15 of 43
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Section 34 as had these objections been raised before the Ld. Arbitrator, he would
have been better equipped to deal with such contentions at the appropriate stage.
(d) It is an admitted position that the Petitioner was in unauthorised
possession of the said property. The Ld. Arbitrator has awarded damages in
favour of the Respondent after interalia, taking into account the future profit that
would be earned by the Respondent from the shop, had it not been in
unauthorised possession of the Petitioner.
14. In support of their contentions, Ld. Counsels for the Respondent
have relied upon the following judgments:-
(i) National Highways Authority of India v. Trichy Thanjavur
Express Way Ltd., (2023) SCC Online Delhi 5183;
(ii) Dakshin Haryana Bijli Vitran Nigam Ltd. v. Navigant
Technologies Pvt. Ltd. (2021) 7 SCC 657;
(iii) Bharti Airtel Ltd. v. Jamshed Khan & Anr.,
2023:DHC:8144-DB;
(iv) Rajasthan Breweries Ltd. v. The Stroh Brewery Company,
(2020) SCC Online Del 481;
(v) Kailash Nath Associates v. Delhi Development Authority,
(2015) 4 SCC 136;
(vi) Thangam & Anr. v. Navamani Ammal, (2024) SCC Online
SC 4580;
(vii) Delhi Airport Metro Express Pvt. Ltd. v. Delhi Metro Rail
Corporation Ltd., (2022) 1 SCC Online 131;
(viii) South East Asia Marine Engineering & Constructions Ltd.
v. Oil India Ltd. (2020) 5 SCC 164;
(ix) Parsoli Motors Works Pvt. Ltd. v. BMW India Pvt. Ltd.,
(2018) SCC Online Del 6556;
(x) Indian Railway Catering & Tourism Corp. Ltd. v. M/s Goel
& Goel, 2023:DHC:3959;
(xi) Union of India v. Susaka Pvt. Ltd. & Ors., (2018) 2 Supreme
Court Cases 182;
(xii) M/s Crest Education (P) Ltd. v. M/s Career Launcher (I)
Ltd., 2023:DHC:4342.
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15. Before dealing with the various contentions taken by the Petitioner
to challenge the impugned award, this Court will first examine the plea of the
maintainability of the present petition raised by the Respondent. As narrated
hereinabove, it is the contention of the Respondent that the Petitioner cannot be
allowed to seek partial setting aside of the impugned award. It is no longer res
integra that a Court in exercise of its jurisdiction under Section 34 of the
Arbitration and Conciliation Act, can partially set aside an arbitral award. Ld.
Counsels for the Respondent do not question the said proposition however their
contention is that the part of the award which the Petitioner finds to be offending
to her cannot be severed without the same having an effect on the other findings
of the Ld. Arbitrator and that therefore the petition is not maintainable in the
manner that it has been filed. At this stage, it will be relevant to reproduce some
of the principles laid down by the Hon’ble Delhi High Court in NHAI case
(supra-a judgment relied upon by Ld. Counsels for Respondent), which a Court
must bear in mind while considering the plea for a partial setting aside of an
arbitral award. The same are as follows :-
A. While attempting to answer the issues flagged above, we
must at the outset, acknowledge the shift in legislative
policy which underlines the Act and which mandates
intervention by courts to be minimal. This flows from the
recognition of the theory that once parties have agreed to the
resolution of their disputes by an alternative adjudicatory
forum, courts must, as a matter of first principle, refrain
from interfering with the same except on the limited
grounds that the statute recognises. Courts are thus obliged
to bear in mind the principle of minimalist intervention
insofar as awards are concerned.
B. However, at the same time while courts are enjoined to
follow the minimalist intervention route, it would clearly be
a travesty of justice if courts were to fail to intervene where
circumstances warrant and demand corrective measures
being adopted. It is these compulsions which have led to
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courts evolving the serious irregularity or the patent
illegality grounds to intervene with an award. Section 34 is a
clear and unequivocal embodiment of the Legislature’s
intent to balance these competing facets of arbitration.
C……
D……
E……
F……
G. Undoubtedly, an award may comprise a decision
rendered on multiple claims. Each claim though arising out
of a composite contract or transaction may be founded on
distinct facts and flowing from separate identifiable
obligations. Just as claims may come to be preferred resting
on a particular contractual right and corresponding
obligation, the decision which an AT may render on a
particular claim could also be based on a construction of a
particular covenant and thus stand independently without
drawing sustenance on a decision rendered in the context of
another. If such claims be separate, complete and self-
contained in themselves, any decision rendered thereon
would hypothetically be able to stand and survive
irrespective of an invalidity which may taint a decision on
others. As long as a claim is not subordinate, in the sense of
being entwined or interdependant upon another, a decision
rendered on the same by the AT would constitute an award
in itself.
H. While awards as conventionally drawn, arranged and
prepared may represent an amalgam of decisions rendered
by the AT on each claim, every part thereof is, in fact, a
manifestation of the decision rendered by it on each claim
that may be laid before it . The award rendered on each such
claim rules on the entitlement of the claimant and the right
asserted in that regard. One could, therefore, validity,
subject of course to the facts of a particular case, be entitled
to view and acknowledge them as binding decisions
rendered by the AT on separate and distinct claims.
I. Once an award is understood as consisting of separate
components, each standing separately and independent of
the other, there appears to be no hurdle in the way of courts
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adopting the doctrine of severability and invoking a power
to set aside an award partly. The power so wielded would
continue to remain one confine to “setting aside” as the
provision bids one to do and would thus constitute a valid
exercise of jurisdiction under Section 34 of the Act.
K. The expression “modify” would clearly mean a variation
or modulation of the ultimate relief that may be accorded by
an AT. However, when a Section 34 Court were to consider
exercising a power to partially set aside, it would clearly not
amount to a modification or variation of the award. It would
be confined to an offending part of the award coming to be
annulled and set aside. It is this distinction between a
modification of an award and its partial setting aside that
must be borne in mind.
L. The power to partially sever an offending part of the
award would ultimately depend on whether the said decision
is independent and distinct and whether an annulment of
that part would not disturb or impact any other finding or
declaration that may have been returned by the AT. The
question of severability would have to be decided bearing in
mind whether the claims are interconnected or so
intertwined that one cannot be segregated from the other.
This for the obvious reason that if the part which is sought
to be set aside is not found to stand independently, it would
be legally impermissible to partially set aside the award. A
partial setting aside should not lead to a component of the
award being rendered vulnerable or unsustainable. It is only
when the award relates to a claim which is found to stand on
its own and its setting aside would not have a cascading
impact that the Court could consider adopting the aforesaid
mode.
M. The Court is thus of the firm opinion that the power to
set aside an award in part would have to abide by the
consideration aforenoted mindful of the imperatives of
walking a line which would not dislodge or disturb another
part of the award. However as long as the part which is
proposed to be annulled is independent and stands
unattached to any other part of the award and it could be
validly incised without affecting the other components of
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the award, the recourse to partial setting aside would be
valid and justified.
16. Now, in the present case, the Ld. Arbitrator after going through all
the evidence/material placed before him reached the conclusion that the MOU
could not have been terminated by the claimant/respondent herein by virtue of its
legal notice issued in July 2019. The Ld. Arbitrator has given a categorical
finding that the MOU stood automatically terminated only with effect from
24.08.2020. Thus, prior to this date the Ld. Arbitrator has declined to award any
amount claimed by the Respondent whether it be in the nature of damages, loss
of business income. Neither of the parties have chosen to challenge this part of
the findings/conclusion of the Ld. Arbitrator. It is the amounts awarded by the Ld.
Arbitrator for the period 24.08.2020 till 13.04.2021, with which the petitioner has
grievances with. In the considered opinion of this Court the award of the Ld.
Arbitrator is therefore, consisting of separate components, each standing
separately and independent of the other. One component prior to the date
24.08.2020 and the other after the said date. Thus this Court finds no hurdle in
the way of this court adopting the doctrine of severability and invoking its power
to set aside the impugned award partly.
17. Having held so, this Court will now examine the contentions being
taken by the Petitioner to challenge the findings of the Ld. Arbitrator. Before
adverting to the same, it will be relevant at this stage to reproduce the provisions
of Section 34 of the Arbitration and Conciliation Act. The same are as follows :-
34.Application for setting aside arbitral award – (1)……….
(2) An arbitral award may be set aside by the Court only if-
(a) the party making the application 1[established on the
basis of the record of the arbitral tribunal that]-
(i)…..
(ii)…..
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(iii).....
(iv) the arbitral award deals with a dispute not contemplated
by or not falling within the terms of the submission to
arbitration, or it contains decisions on matters beyond the
scope of the submission to arbitration :
Provided that, if the decisions on matters submitted to
arbitration can be separated from those not so submitted,
only that part of the arbitral award which contains decisions
on matters not submitted to arbitration may be set aside: or
(v) ……
(b) the Court finds that –
(i) the subject-matter of the dispute is not capable of
settlement by arbitration under the law for the time being in
force, or
(ii) the arbitral award is in conflict with the public policy of
India.
[Explanation 1. – For the avoidance of any doubt, it is
clarified that an award is in conflict with the public policy of
India, only if, –
(i) the making of the award was induced or affected by
fraud or corruption or was in violation of section 75 or
section 81; or
(ii) it is in contravention with the fundamental policy of
Indian law; or
(iii) it is in conflict with the most basic notions of morality
or justice.
Explanation 2. – For the avoidance of doubt, the test as to
whether there is a contravention with the fundamental policy
of Indian law shall not entail a review on the merits of the
dispute.]
[(2A). An arbitral award arising out of arbitrations other
than international commercial arbitrations, may also be set
aside by the Court, if the Court finds that the award is
vitiated by patent illegality appearing on the face of the
award:
Provided that an award shall not be set aside merely on
the ground of an erroneous application of the law or by
reappreciation of evidence.]OMP (Comm) No. 82/23 M/S S.M. Enterprises & Anr. Vs. Modi Mundi Pharma Beauty Products Pvt. Ltd. Page 21 of 43
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18. Now the contention of Ld. Counsel for Petitioner is that since the
Ld. Arbitrator dealt with the dispute that was not contemplated by the MOU to be
arbitrable, the Award is liable to be set aside by this Court as per Sec 34(2)(iv) of
the Act. It is his contention that the dispute regarding the unauthorized
occupation of the Petitioner in the shop w.e.f. 24.07.2019 to 13.04.2021 was not
arbitrable and that therefore the Ld. Arbitrator should not have given any finding
in this respect. As narrated hereinabove, admittedly the Ld. Arbitrator in the
present case was appointed by the Hon’ble Delhi High Court pursuant to a
petition filed by the Respondent under Section 11 of the Arbitration and
Conciliation Act. A copy of the said petition has been placed on record before this
Court and a perusal thereof clearly reflects that the Respondent in the said
petition had raised a dispute with respect to the occupation of the shop by the
Petitioner. It has been categorically averred in para 3 (xiii) of the said petition
that the Petitioner herein has been illegally occupying the shop w.e.f. 24.07.2019
to 13.04.2021 and that therefore the Respondent must pay the lease rentals of the
shop during the said period. For the sake of clarity the said assertions made in
para 3 (xiii) of the said Petition have been reproduced herein below:-
That it is further pertinent to mention that since the
Respondents were in illegal possession of the premise,
despite the termination of the MOU and even despite the
expiry of the Lease Deed, the Respondents are clearly liable
to pay Lease rental of the premises to the Petitioner which
the Respondents have been occupying illegally after
termination of the MOU since 24.07.2019 to 13.04.2021,
when the actual possession was handed over by the
Respondent which amounts to Rs. 64,73,055/-. The liability
of the lease rental of the premise has been accruing on the
Petitioner illegally since 24.07.2019 till 13.04.2021.
19. It is also a matter of record that pursuant to the aforementioned
petition, the Petitioner appeared before the Hon’ble Delhi High Court through herOMP (Comm) No. 82/23 M/S S.M. Enterprises & Anr. Vs. Modi Mundi Pharma Beauty Products Pvt. Ltd. Page 22 of 43
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counsel who categorically gave a statement that all the disputes raised are
arbitrable and that the Petitioner has no objection to the appointment of an
Arbitrator by the Hon’ble Supreme Court. The relevant part of the order dated
07.01.2022 in this respect is also reproduced herein below :-
Ld. Counsel for Respondents has objected to the averments
made in the present petition, however, has submitted that the
disputes are arbitrable and he has no objection if this Court
appoints a Sole Arbitrator
20. In the considered opinion of this Court, the aforementioned contents
of the petition filed under Section 11 of the Arbitration and Conciliation Act and
the no objection given by the Petitioner for the reference of the disputes to
arbitration makes it clear that the dispute regarding the occupation of the
Petitioner herein, of the shop for the period 24.08.2020 to 13.04.2021 was by
consent of the parties referred to arbitration. It is to be held that both the parties
including the Petitioner comprehended the dispute with respect to this period as
arbitrable.
21. In a case titled and reported as Ssangyong Engineering &
Construction Company Ltd v. National Highways Authority of India (2019) 15
SCC 131, the Hon’ble Supreme Court has discussed as to under which
circumstances can an arbitral award be stated to be beyond the scope of
submission to arbitration. In paragraph 69 the Hon’ble Supreme Court has made
the following observation :-
69. We therefore hold, following the aforesaid
authorities, that in the guise of misinterpretation of the
contract, and consequent “errors of jurisdiction”, it is not
possible to state that the arbitral award would be beyond the
scope of submission to arbitration if otherwise the aforesaid
misinterpretation (which would include going beyond the
terms of the contract), could be said to have been fairly
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comprehended as “disputes” within the arbitration
agreement, or which were referred to the decision of the
arbitrators.
In view of the aforementioned judicial dicta and the facts of the
present case discussed hereinabove, it is clear that the Petitioner was aware and
infact consented to the dispute relating to her unauthorized occupation of the
shop for the period 24.08.2020 to 13.04.2021, to arbitration. In such facts she
cannot now be allowed to contend before this Court that the Ld. Arbitrator went
beyond the scope of arbitration as contemplated in the MOU executed between
the parties, more so when this ground was never even taken before the Ld.
Arbitrator. Her submission that the Respondent had never raised any claim
regarding the monetary losses assertedly suffered by it due to the occupation of
the shop by the Petitioner during the said period is also absolutely contrary to
record. In paragraph 20 of its Statement of Claim filed before the Ld. Arbitrator,
the Respondent had asserted the following :-
20. That it is further pertinent to mention that since the
Respondents were in illegal possession of the Premises,
despite the termination of the MoU and even despite the
expiry of the Lease-Deed, the Respondents are clearly liable
to pay Lease rental of the Premises, which the Respondents
had been occupying illegally after termination of the MoU
since 24.07.2019 to 13.04.2021, when the actual possession
was handed over by Respondent pursuant to the court order
dated 08.04.2021, which amounts to Rs. 64,73,055/-
(Rupees Sixty Four Lac Seventy Three Thousand Fifty Five
Only). The liability of the Lease rent of the Premises has
been accruing on the Claimant as the Respondent had
occupied the Premises illegally since 24.07.2019 till
13.04.2021. Further, the Respondents are also liable to pay
Rs.25,00,000/- (Rupees Twenty Five Lakhs Only) for loss of
business income and mesne profits for the period July, 2019
to September, 2020 owing to non-purchase of stock and on
account of illegal and unauthorized use and occupation of
the Premises without any justifiable or cogent reasons post
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termination of the MoU along with interest @ 18%
calculated from the due date till the date of actual payments.
The Claimant further claims an amount of Rs. 1,42,287/-
(Rupees One Lakh Forty Two Thousand Two Hundred &
Eighty Seven Only) towards payment of electricity expenses
for the said Premises for the period July, 2019 to September,
2020 since Respondents are in illegal possession of the
Premises. Further Respondent will be required to reimburse
electricity charges which had not been paid, upto the date of
handing over of possession i.e. 13.04.2021.
22. In view of such categorical pleadings before the Ld. Arbitrator the
contention of the Petitioner that the Respondent had not claimed or prayed for
monetary damages from her for occupying the shop w.e.f 25.08.2020 to
13.04.2021 has no merit whatsoever.
23. Infact, on the other hand, it is clear from record that the Petitioner
herself was of the opinion that, for the occupation of the shop she is not
answerable to the landlords thereof and that it is a dispute between herself and the
Respondent . It is a matter of record that the landlords of the shop had in the
month of August 2020 filed a suit seeking possession / recovery of arrears of rent
and mesne profits against the Respondent herein and the said suit stands
registered as CS (Comm) No. 205/2020 and is pending before the Ld. District
Judge, (Commercial Courts-05), South East District, Saket, New Delhi. Taking
into consideration that it was the Petitioner herein who was in the possession of
the shop, she was impleaded as a party in the said suit. It is also a matter of
record that after being impleaded, the Petitioner took a stand before the said
Court that since the dispute regarding the lease rentals of the shop is already
before a Ld. Arbitrator and infact also stands decided by the Ld. Arbitrator, she
should be deleted from the said suit, more so when she had handed over the
vacant possession of the suit before the Court, to the landlords on 13.04.2021.
Vide order dated 12.01.2024 the Ld. District Judge (Commercial Court-05),
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South-East, Saket Courts, New Delhi, accepted the said plea of the Petitioner and
deleted the Petitioner from the said suit. By seeking to now contend before this
Court that it is only the landlords of the shop who could have filed the suit for
ejection and occupation charges against the Petitioner, for he had become ‘tenants
at sufferance’, the Petitioner is only trying to abuse the process of law. In the
considered opinion of this Court, the Petitioner cannot be allowed to approbate
and reprobate in this manner and cannot very conveniently expect this Court to
overlook her conduct in the proceedings of the aforementioned suit.
24. Further the submission of the Petitioner before this Court that she
was never informed that the lease deed stood terminated appears to be a blatant
lie.
25. I have perused the entire pleadings / record that were placed before
the Ld. Arbitrator by the Petitioner. There is not a whisper in the same that the
Petitioner was not aware that the lease of the shop stood expired on 24.08.2020.
In the considered opinion of this Court the conduct of the Petitioner before the
Ld. District Judge (Commercial Court-02), South-East, Saket Courts, New Delhi
also reveals that right from the month of September 2020 she was aware that the
lease of the shop stood expired and that the landlord had not extended the same.
It is a matter of record that both the petitions filed by the Respondent herein
under Section 9 of the Arbitration and Conciliation Act and the Commercial suit
filed by the landlord were allotted to Ld. District Judge (Commercial Court-02),
South-East, Saket Courts, New Delhi and that both the said cases were being
taken together by the Ld. Court (the said is apparent from the ordersheets placed
on record by the Ld. Counsel for Respondent). Though, it is being submitted by
Ld. Counsel for Respondent that on 25.08.2020 when both the suits and the
Petition under Section 9 of the Arbitration and Conciliation Act were taken up
together, Ld. Counsel for the Petitioner herein, one Sh. Ashwani was made aware
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about the civil suit filed, the ordersheet dated 25.08.2020 of the Ld. District
Judge (Commercial Court-02), South-East, Saket Courts, New Delhi is not clear
to the extent. However having said so, the ordersheet dated 02.09.2020 of the
Ld. District Judge (Commercial Court-02), South-East, Saket Courts, New Delhi
is categorical in recording that both the cases have been taken up together and the
parties have been referred for mediation. Thus on 02.09.2020, the Petitioner
herein was made aware that the lease of the shop stands expired and she is
required to vacate the same. In such view, to now assert before this Court that she
was never informed that the lease of the shop expired on 24.08.2020 and that
therefore the Ld. Arbitrator has erred in holding her responsible to pay the lease
rentals of the shop, is absolutely bereft of any merit. Infact a perusal of the
counter-claim filed by the Petitioner herein before the Ld. Arbitrator also makes
it apparent that the Petitioner was aware of the expiry of the lease deed. It will be
relevant to reproduce para 38 of the aforementioned counter-claim :-
38. It is most respectfully submitted that the Clause 2.1 of
the lease deed dated 25.08.2017 specifically stipulated that
the term of Lease Deed is for a period of 03 years from the
date of expiry of rent free period as per clause 3.5 And the
lease period will be further extended for a period of 3 years
at the first instance by registration of lease for renewal
period of 3 years on same terms. However, on account of the
omissions of the respondent the lease deed was terminated
by the Lessor.
26. The aforementioned makes it clear that the Petitioner was aware of
the expiry of the lease. The next contention of Ld. Counsel for Petitioner is that
the Ld. Arbitrator committed a patent illegality by awarding, in favour of the
Respondent herein, an amount of Rs. 25,46,768/- towards the lease rentals of the
shop for the period 24.08.2020 to 13.4.2021. His contention is that the Ld.
Arbitrator wrongly held that the MOU stood automatically terminated on
24.08.20 in terms of Clause 9 of the MOU. According to Ld. Counsel, the Ld.
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Arbitrator wrongly interpreted the terms of Clause 9 and he infact should have
held that MOU automatically stood renewed and that therefore as per the terms
thereof, the Respondent alone was liable to pay the lease rental of the shop. To
appreciate the said contention of the Ld. Counsel, it will be relevant herein to
reproduce Clause 9 of the MOU :-
Clause 9: This MOU shall come into force from 27 th July
2017 and would remain valid until 26th July 2019 and shall
thereafter automatically renew for each term of 12 months if
parties are in compliance to their respective terms and
conditions and or unless terminated by either party by
giving to the other three months advance notice in writing at
the address mentioned hereinabove. Further in the event of
expiry of the Lease Agreement in respect of the said
premises this MOU will automatically stand terminated and
accounts of the Franchisee will be settled.
27. Now, in view of the aforementioned Clause, in the considered
opinion of this Court the Ld. Arbitrator cannot be stated to have committed any
illegality in holding that the MOU stood automatically terminated in view of the
expiry of the lease agreement.
28. As to what amounts to patent illegality, is no longer res integra the
Hon’ble Supreme Court in its recent judgment pronounced in a case titled and
reported as Delhi Airport Metro Express Pvt. Ltd. v. Delhi Metro Rail
Corporation Ltd, (2022) 1 SCC 131, observed as to what amounts to patent
illegality. In para 29 of its judgment, the following dicta has been laid down by
the Hon’ble Supreme Court :-
29. Patent illegality should be illegality which goes to
the root of the matter. In other words, every error of law
committed by the Arbitral Tribunal would not fall within the
expression ‘patent illegality’. Likewise, erroneous
application of law cannot be categorised as patent illegality.
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In addition, contravention of law not linked to public policy
or public interest is beyond the scope of the expression
‘patent illegality’. What is prohibited is for courts to re-
appreciate evidence to conclude that the award suffers from
patent illegality appearing on the face of the award, as
courts do not sit in appeal against the arbitral award. The
permissible grounds for interference with a domestic award
under Section 34(2-A) on the ground of patent illegality is
when the arbitrator takes a view which is not even a possible
one, or interprets a clause in the contract in such a manner
which no fair-minded or reasonable person would, or if the
arbitrator commits an error of jurisdiction by wandering
outside the contract and dealing with matters not allotted to
them. An arbitral award stating no reasons for its findings
would make itself susceptible to challenge on this account.
The conclusions of the arbitrator which are based on no
evidence or have been arrived at by ignoring vital evidence
are perverse and can be set aside on the ground of patent
illegality.
29. It is therefore clear that the standard with respect to which the award
passed by a Ld. Arbitrator has to be tested is that of a reasonable person. In the
considered opinion of this Court the Ld. Arbitrator took a fair and reasonable
view by considering that since the lease of the shop stood expired on 24.08.2020,
the MOU, as per its own terms, also automatically stood terminated and therefore
the Petitioner herein had no right whatsoever to continue occupying the shop. As
narrated herein above the MOU itself recorded that once the lease of the shop
stands expired, the MOU in favour of the Petitioner / franchisee would
automatically stand terminated. The Ld. Arbitrator in this respect, therefore
clearly followed the terms of the MOU executed between the parties. Now once
the MOU stood terminated clearly the Petitioner had no right to occupy the shop
and therefore the Ld Arbitrator rightly held that during the period w.e.f.
24.08.2020 to 13.04.2021 it would be the Petitioner herein, who would be liable
to pay the occupation charges and the Respondent could not be made to make the
payment of the lease rentals. In the considered opinion of this Court, it is the
OMP (Comm) No. 82/23 M/S S.M. Enterprises & Anr. Vs. Modi Mundi Pharma Beauty Products Pvt. Ltd. Page 29 of 43
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GROVER BALIGA
Date: 2025.08.08
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Petitioner who is acting in a completely unreasonable manner by asserting that
the MOU should be deemed to have been extended, in terms of the MOU and
that therefore she was not liable to pay the lease rentals to the Respondent. It is
preposterous for her to insist that despite the fact that she was at loggerheads with
the Respondent regarding the compliance of the terms of the MOU, it should be
deemed that the MOU stood automatically renewed. The further submission that
the Ld. Arbitrator lost sight of the fact that from March 2020 till mid 2021, the
country was grappling with the corona pandemic and therefore the Petitioner
could not have vacated the premises makes the finding of the Ld. Arbitrator bad
in law overlooks the fact that the Petitioner never communicated this ground to
the Respondent for not vacating the shop in question. On the other hand, in all
the correspondences with the Respondent, she insisted that the MOU stands
automatically renewed for another period of 12 months and that therefore there
arises no question of her vacating the shop. This Court therefore finds on
illegality in the finding of the Ld Arbitrator that the MOU stood automatically
terminated on 24.08.2020.
30. Coming now to the finding of the Ld Arbitrator that the Petitioner
should pay Rs 25,46,768/- to the Respondent as damages for illegally occupying
the shop, the contention of Ld Counsel Sh Lal is that it is the Ld. Commercial
Court alone(before whom the landlords have claimed reliefs against the
Respondent with respect to the Shop) which can decide as to what amount is to
be paid by the Respondent to their landlords for the said period. In the considered
opinion of this court the said contention is overlooking the fact that the landlords
in the said suit before the Ld. Commercial Judge have not asked for lease rentals
for the period 24.08.2020 to 13.04.2021 but have infact demanded that the
Respondent herein must pay mesne profits to it for the said period. The Ld.
Arbitrator by taking a very reasonable view has only awarded the admitted lease
OMP (Comm) No. 82/23 M/S S.M. Enterprises & Anr. Vs. Modi Mundi Pharma Beauty Products Pvt. Ltd. Page 30 of 43
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Date: 2025.08.08
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rentals that were in operation during the aforementioned period and therefore in
the considered opinion of this Court, the finding of the Ld. Arbitrator in this
respect cannot be set aside on the ground that it is vitiated by patent illegality. Ld
Counsel Sh. Lal has then sought to contend that the Ld Arbitrator committed an
illegality by awarding the aforemtioned amount in favour of the Respondent
herein towards the occupation charges, because till the disputes were before the
Ld Arbitrator, the Respondent had not paid any amounts towards the lease rentals
to the landlords for the period 24.08.2020 to 13.04.2021. Though the said
contention of Ld. Counsel for Petitioner is correct to the extent that till the time
the Ld. Arbitrator was deciding the disputes between the parties, the Respondent
had not paid the lease rentals / occupation charges to the landlords of the shop for
the period 24.08.2020 to 13.04.2021, it has to be accepted that the liability to pay
the said charges had already accrued. The award given by the Ld. Arbitrator in
this respect can also be viewed from another perspective. The claim made by the
Respondent was infact with respect to future losses that it would have to suffer in
view of the unauthorized occupation of the shop by the Petitioner for the period
25.08.2020 to 13.04.2021. As reproduced hereinabove even in the Statement of
Claim the Respondent itself has submitted that it will bear losses in future due to
the unauthorized occupation of the shop by the Petitioner. In other words this is a
claim para materia to future profits and therefore if the Ld. Arbitrator has taken
the admitted rent which Respondent was liable to pay to the landlords as the
benchmark for estimating the future losses that will be suffered by the
Respondent, the finding of the Ld. Arbitrator cannot at all be stated to be illegal.
In the case titled OMP (Comm) No. 57/2017, M/s Crest Education (P) Ltd. v.
M/s Career Launcher (I) Ltd., the Hon’ble Delhi High Court has observed that
there is no illegallity committed by an Arbitrator in awarding prospective
damages. In para 39 of its order dated 03.07.2023, the Hon’ble Court has
observed as under:-
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Date: 2025.08.08
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39. The judgment of this Court in Kishan Lal Kalra, 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 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. ”
31. The aforementioned judicial dicta makes it clear that even if, on the
date that the disputes were referred to arbitration, the damages which the
Respondent would have to pay to its landlords for unauthorized occupation by
the Petitioner of the shop, had not been assessed, the same does not relieve the
Petitioner of paying the said damages, to the Respondent. It also makes it clear
that the Ld. Arbitrator has not committed any illegality by taking the admitted
rent as the indicator for calculating the said damages as Rs. 25,46,768/- in favour
of the Respondent. It is also a matter of record that during the pendency of the
present petition, the Respondent infact has been directed to pay the admitted rent
to the landlords by the Ld. Commercial Judge before whom the suit for eviction
filed by the landlords against the Respondents is pending. This Court therefore
finds that the awarding of damages of Rs. 25,46,768/- by the Ld. Arbitrator in
favour of the Respondent is based on a reasonable and fair view of the facts
before him and suffers from no illegality.
OMP (Comm) No. 82/23 M/S S.M. Enterprises & Anr. Vs. Modi Mundi Pharma Beauty Products Pvt. Ltd. Page 32 of 43
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by ANU GROVER
GROVER BALIGA
Date: 2025.08.08
BALIGA 12:14:34 +0530
32. Similarly, the finding of the Ld. Arbitrator that the Petitioner herein
was also liable to make payment of the electricity charges of the shop for the
period 25.08.2020 to 13.04.2021 is also based on a reasonable and fair view of
the facts before the Ld. Arbitrator. As narrated hereinabove, the Respondent in
its statement of claim had asserted that the Petitioner is bound to pay Rs.
1,42,287/- towards the electricity charges of the shop for the period July 2019 to
August 2020 and also reimburse to it the electricity charges which have not been
paid thereafter, upto the date of handing over of possession i.e. 13.04.2021. The
Ld. Arbitrator having held that the MOU was automatically terminated on
24.08.2020, rightly did not award any electricity charges of the shop prior to the
said date. For the period 25.08.2020 to 13.04.2021, he awarded an amount of Rs.
80,000/- in favour of the Respondent herein. The contention of Ld. Counsel for
Petitioner that there was no basis for the Ld. Arbitrator to have awarded the said
amount is negated by the electricity bill filed by the Petitioner herself before this
Court. On page 169 of the paperbook the Petitioner has filed the electricity bill
for Rs. 55,000/- issued by the concerned authority for the shop in question for the
period September 2019 to January 2020. During the course of arguments, Ld.
Counsel for Petitioner had fairly stated that the said bill was also placed before
the Ld. Arbitrator. The said bill makes it clear that on an average the monthly
electricity bill for the shop was Rs. 10,000/- approximately and therefore if the
Ld. Arbitrator has awarded Rs. 80,000/- towards electricity charges of the shop
for a period of 08 months, the said finding can hardly be stated to be patently
illegal. The submission that the Ld. Arbitrator despite being aware that the
Respondent herein had not filed any electricity bill, awarded this amount on the
basis of guess work hardly makes the finding perverse.
33. In view of the discussion hereinabove, this Court finds no reason
whatsoever to set-aside the finding of the Ld. Arbitrator that the Respondent
OMP (Comm) No. 82/23 M/S S.M. Enterprises & Anr. Vs. Modi Mundi Pharma Beauty Products Pvt. Ltd. Page 33 of 43
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Date: 2025.08.08
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herein is entitled to recover from the Petitioner herein, the rent for the period
25.08.2020 to 13.04.2021 amounting to Rs. 25,46,768/- and electricity charges
amounting to Rs. 80,000/- for the said period.
34. This Court will now consider the finding of the Ld. Arbitrator
namely that since the MOU stood terminated with effect from 24.08.2020, the
Respondent herein could not have supplied any material to the Petitioner herein
and therefore it is the Petitioner who is to be blamed and to be held responsible
for the monetary losses suffered by the Respondent herein during the period
25.08.2020 to 13.08.2021 and on the said account the Petitioner herein should
pay Rs. 15,65,120/- as damages to the Respondent herein. To appreciate the said
finding, it will be relevant herein to reproduce the claims made by the
Respondent herein in this respect. Para 34 of the Statement of claim filed before
the Ld. Arbitrator contains the details of the various claims made by the
Respondent herein before the Ld. Arbitrator and claim II and claim III therein is
as under :-
II. Claim for damages in terms of MOU which the Respondents are
liable to pay in accordance with the calculation under Clause 5 of the
MOU, the Respondents are thus, liable to pay an amount of Rs.
26,47,680/- (Rupees Twenty Six Lakhs Forty Seven Thousand, Six
Hundred and Eighty) as damages.
Claim III. Claim for loss of business income and mesne profits for
the period July, 2019 to September 2020 for an amount of Rs.
25,00,000/- (Rupees Twenty Five Lakhs Only) owing to non-
purchase of stock and on account of illegal and unauthorized use and
occupation of the premises without any justifiable or cogent reasons
post termination of the MOU alongwith interest @ 18% calculated
from the due date till the date of actual payments.
35. Now the basis for making the aforementioned Claim II and Claim III
has been provided by the Respondent in paragraphs 11 to 17 and thereafter in
paragraphs 20 and 21 of its Statement of Claim respectively. According to the
assertions made by the Respondent in its Statement of Claim filed before the Ld.OMP (Comm) No. 82/23 M/S S.M. Enterprises & Anr. Vs. Modi Mundi Pharma Beauty Products Pvt. Ltd. Page 34 of 43
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GROVER BALIGA
Date: 2025.08.08
BALIGA 12:14:50 +0530
Arbitrator, the Petitioner herein was in breach of the terms of the MOU for she
had not been placing orders for the supply of the products of the Respondent after
June 2019 and that though the Respondent herein, in terms of Clause 5 of the
MOU issued a notice dated 02.07.2019 upon her to rectify the defects / breaches
being committed by her, she failed to do so. Based on the terms of Clause 5 of
the MOU, the Respondent herein therefore claimed that the Ld. Arbitrator must
award damages to the extent of Rs. 26,47,680/- to the Respondent.
36. At this stage, it will be relevant to reproduce Clause 5 of the MOU :-
5. BREACH OF CONDITION
In case of breach of the terms of this MOU by Franchise the
Company will give notice of 15 days to rectify the breach
and if Franchisee fails within the stipulated period the
company may terminate this MOU with immediate effect.
In the event the Franchisee fails to rectify the breach and
MOU is terminated Franchisee will be liable to pay
damages to the company equivalent to three times of
maximum monthly sale achieved from the Kiosk/Store in
last twelve months.
37. Citing the aforementioned Clause, the Respondent herein in para 17
of its Statement of Claim has made the following assertions :-
17.That it is further stated that the maximum monthly sale
of the store during the period between January 2018 to
December 2018 was in the month of ‘December, 2018’
amounting to Rs. 8,82,560/-.Therefore, in accordance with
the calculation under Clause 5 of the MOU, the Respondents
are thus, liable to pay an amount of Rs. 26,47,680/- as
damages. The Claimant Company maintains a proper
ledger / record of the sale, purchase and the stock
maintained by the Respondents throughout. Copy of the
excel sheet reflecting the sale, purchase and closing stock
made by the Respondent during the term of the MOU before
terminated by the Claimant is annexed herewith and marked
as Annexure C/7.
OMP (Comm) No. 82/23 M/S S.M. Enterprises & Anr. Vs. Modi Mundi Pharma Beauty Products Pvt. Ltd. Page 35 of 43
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Date: 2025.08.08
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38. In other words, according to the Respondent since the Petitioner
had only the last stock of Rs. 6,85,008/- in the month of June 2019 and had not
been placing orders for supply of the products of the Respondent, and, which
amounted to a breach of the MOU, vide notice dated 02.07.2019, the Respondent
gave 15 days time to the Petitioner to rectify the breach and to therefore
purchase more stock from the Respondent and that when she failed to do so,
according to the Respondent, the MOU stood expired on 24.07.2019 and the
Petitioner became liable to pay damages of Rs. 26,47,680/- to the Respondent.
Now the Ld. Arbitrator has categorically held that the Petitioner herein had not
committed any breach of the MOU by purchasing less stock and that the MOU
did not stand expire on 24.07.2019. In such view it is to be held that the Ld.
Arbitrator refused the Claim III in favour of the Respondent herein. Now as
regards Claim IV (which has been reproduced herein above), it was the own case
of the Respondent that it had suffered loss of business income amounting to Rs.
25 Lakhs for the period July 2019 to September 2020 owing to non-purchase of
stock and on account of illegal and unauthorized use and occupation of the shop
by the Petitioner herein. Dealing with the said Claim the Ld. Arbitrator held that
the Petitioner herein was solely responsible for not purchasing stock from the
Respondent herein during the period 23.08.2020 to 13.04.2021 and therefore for
this period the Respondent had to suffer monetary loss. At this stage, it would be
relevant herein to reproduce the findings of the Ld. Arbitrator :-
32. ……..From the record on the file it also does not appear that
respondents violated the terms and conditions by not purchasing the
stock products as per terms and conditions in the MOU. It will be
pertinent to mention here that stock products amounting to
Rs.6,85,008/- were still in the stock of the respondents upto the end of
the month of June 2019. It is admitted fact that after the month of July
2019 till 13.04.2021 no product item was purchased by the
respondents despite that total stock amounting to Rs.3,04,596/- was
available with the respondents as on 13.04.2021. In my view the
respondents were supposed to purchase the stock items which can be
sold easily by the franchisee.
OMP (Comm) No. 82/23 M/S S.M. Enterprises & Anr. Vs. Modi Mundi Pharma Beauty Products Pvt. Ltd. Page 36 of 43
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Date: 2025.08.08
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33. Infact purchase of stock products in future depends upon sale of
the products already lying in the stock. Record shows that product
items remained available with the respondents in their stock till
13.04.2021 when respondents vacated the store premises. In these
circumstances findings cannot be given that company had to suffer
monetary losses only due to decrease in purchase of stock products
due to faults of the respondents. Infact it depends upon sale of the
stock products and as the stock remained available with the
respondents till 13.04.2021 findings cannot be given that claimant
company had to suffer monetary losses due to decrease in purchase of
stock products by the respondents. Similarly respondents have also
given the detail regarding less supply of the product items than
mentioned in the purchase orders during the period from 08.01.2019
upto 28.06.2019. Respondents also could not give detail of the
remaining period when supply of the product items was less than the
requisitions sent by the respondents. In my view in these
circumstances no adverse findings can be given either against the
respondents or against the claimant company regarding decline in sale
and purchase of the stock products during the relevant period.
Moreover in the MOU also it is nowhere provided that how much
product items should be weekly or monthly purchased by the
respondents. The claimant company if had to suffer some business
losses in this regard the respondents alone cannot be blamed for it.
34. I have given findings in foregoing paragraphs of this Award that
decline in sale and purchase of the stock items did not take place
merely due to faults of the respondents alone. The decrease in
purchase of the store products was mainly due to decrease in sale of
the products in the market which may be due to this reason also as
other franchisee was appointed by the claimant for sale of the same
products in the same area at a distance of 200 meters. Anyhow it is
nowhere mentioned in the MOU that Claimant Company cannot
engage another franchisee for the same type of business in the same
locality. The decline in the purchase of the store products was not
created by the respondents to cause financial losses to the claimant
company. Moreover as mentioned in detail in para no.11 of the written
statement Claimant company also did not supply the store products as
requested by the respondents in their requisitions during the period
from 08.01.2019 upto 28.06.2019. The claimant company could not
explain the reasons for short supply of products during this period. I
feel Claimant Company or the respondents are not entitled to receive
any amount on account of business losses or damages from each other
regarding the period prior to termination of the MOU. At the same
time this fact also cannot be overlooked that after the month of July
2019 till 13.04.2021 respondents did not purchase any store product
from the claimant company. Reason behind it was that claimant was
willing to obtain possession of the store premises after termination of
the MOU and respondents were insisting to continue their business
OMP (Comm) No. 82/23 M/S S.M. Enterprises & Anr. Vs. Modi Mundi Pharma Beauty Products Pvt. Ltd. Page 37 of 43
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Date: 2025.08.08
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activities. Ultimately as per my findings in earlier part of this Award
the MOU stood automatically terminated after expiry of the lease
period on 24.08.2020.
35. There is no controversy of any type that during the period from
25.08.2020 upto 13.04.2021 when possession of the respondents was
unauthorized no material could be supplied to the respondents by the
claimant company as possession of the respondents during this period
was unauthorized claimant company cannot be blamed of not
supplying store products to the respondents during this period. In
these circumstances regarding non-supply of the products only
respondents can be blamed and held responsible. The respondents
remained in unauthorized possession of the premises and due to this
reason claimant company had to suffer monetary losses unnecessarily.
As provided under clause 5 of the MOU the franchisee will be liable
to pay damages to the claimant company equivalent to 3 times of
maximum monthly sale achieved from the Kiosk store during the last
12 months. The monthly maximum sale of the store between the
period January 2018 to December 2018 was Rs.8,82,560/- in the
month of December 2018. In this way considering this fact that
unauthorized possession of the respondents remained only
approximately for a period of 8 months as provided under clause 5 of
MOU respondents are held liable to pay an amount of Rs.15,65,120/-
as damages. Keeping in mind the circumstances mentioned above I
found no merit in the prayer of the claimant company to recover an
amount of Rs.25,00,000/- on account of business income and Mesne
Profits regarding the period from July 2019 upto the month of
September 2020. The prayer of the claimant company for payment of
an amount of Rs. 25,00,000/- mentioned above is declined being not
justified.
39. Though this Court has tried its best to reconcile the findings of the
Ld. Arbitrator given in the aforementioned paragraphs, it has not been possible to
do so and this Court is constrained to observe that the findings given by the Ld.
Arbitrator in the aforementioned paragraphs are totally contrary to each other and
therefore do constitute a patent illegality on the face of the award. On the one
hand, Ld. Arbitrator has held that the Petitioner herein cannot be held guilty of
any of the breach of the MOU. He has also in detail explained the reasons as to
why he is of the opinion that the Petitioner cannot be held responsible for not
ordering fresh stock from the Respondent herein. The said reasoning is absolutely
correct and requires no interference on grounds of patent illegality. In particular
OMP (Comm) No. 82/23 M/S S.M. Enterprises & Anr. Vs. Modi Mundi Pharma Beauty Products Pvt. Ltd. Page 38 of 43
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ANU by ANU
GROVER
GROVER BALIGA
BALIGA Date: 2025.08.08
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the Ld. Arbitrator has held that the claimant company (Respondent herein) could
not have suffered monetary losses only due to decrease in purchase of stock
products by the Petitioner herein. He has reasoned that since as on 13.04.2021,
the date the Petitioner vacated the shop, it still had stock worth Rs. 3,04,596/-
available with it, which it was not able to sell, it would have not made any sense
for the Petitioner herein to purchase more stocks from the Respondent herein.
While considering the counter claim preferred by the Petitioner herein, the Ld.
Arbitrator has infact observed that the Respondent should have purchased the
stock worth Rs. 3,04,596/- from the Petitioner, in terms of Clause 9 of the MOU,
which laid down that the accounts of the franchisee have to be settled, in the
event of the MOU being automatically terminated. He therefore has allowed the
counter claim for this amount in favour of the Petitioner and the said finding is
absolutely correct and has not been challenged by any of the parties. Having once
proceeded on such reasoning, he however then goes on to hold that for the period
25.08.2020 to 13.04.2021 since the Petitioner herein did not purchase the stocks
from the claimant (Respondent herein), the claimant had to suffer monetary
losses unnecessarily. Once having held that the Petitioner could not have been
blamed for not having placed any orders of fresh products upon the Respondent
herein, the Ld. Arbitrator could not have held that for the period 24.08.2020 to
13.04.2021, the Petitioner is to be blamed for not placing any orders upon the
Respondent and causing monetary losses to the Respondent. When it is the own
finding of the Ld. Arbitrator that the lease of the shop stood expired on
24.08.2020, there arose no question of the Respondent earning any profit from its
business being conducted at the shop. It therefore could not have suffered
monetary losses in this respect. The only losses that the Respondent could have
and has infact suffered due to the unauthorized occupation of the shop by the
Petitioner for the period 24.08.2020 to 13.04.2021 is the occupation charges that
it became liable to pay with respect to the shop and the said had already been
OMP (Comm) No. 82/23 M/S S.M. Enterprises & Anr. Vs. Modi Mundi Pharma Beauty Products Pvt. Ltd. Page 39 of 43
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BALIGA Date: 2025.08.08
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granted by the Ld. Arbitrator in favour of the Respondent. It is to be noted that
the Respondent itself being aware that it could not have carried out any franchise
business from the said shop after the expiry of the lease ie. w.e.f 24.8.2020 in its
statement of claim restricted its claim of loss of business only till September
2020. It itself did not expect to be awarded any amount of business income
beyond this period. The damages of Rs 26 lacs claimed by it in accordance with
Clause 5 of the MOU, were for the alleged breaches committed by the Petitioner.
Now once the Ld. Arbitrator held that no breach was committed by the Petitioner
and that the MOU was not therefore validly terminated by the Respondent prior
to 24.08.2020 he then could not have awarded damages in favour of the
Respondent in terms of Clause 5 of the MOU, for the said Clause comes into
operation only when the franchisee commits breach of the MOU. It also cannot
be overlooked that even in terms of said clause the Petitioner would have been
liable to pay damages to the Respondent equivalent to three times of maximum
monthly sale achieved from the store in the last twelve months. Accordingly, the
last twelve months for which the sales ought to have been taken into
consideration, if at all, were from 25.08.2019 to 25.08.2020. However, the Ld.
Arbitrator has taken the maximum monthly sales from the period of 2018 January
to December 2018 to award the amount of Rs 15,65,120/- in favour of the
Respondent. In its recent judgment pronounced in the case titled and reported as
Patel Engineering Ltd v. North Eastern Electric Power Corporation Ltd., (2020) 7
SCC 167, the Hon’ble Supreme Court has reiterated that though the construction
of the terms of contract is primarily for an Arbitrator to decide, the said decision
of the arbitrator should at the bare minimum, be a possible view for a fair
minded or a reasonable person to take. In the considered opinion of this Court,
the view taken by the Ld. Arbitrator in respect of the damages awarded is not
even a possible view that can be taken by any fair minded or reasonable person
and therefore this Court is constrained to observe that the Ld. Arbitrator has acted
OMP (Comm) No. 82/23 M/S S.M. Enterprises & Anr. Vs. Modi Mundi Pharma Beauty Products Pvt. Ltd. Page 40 of 43
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Date: 2025.08.08
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patently illegally in awarding damages of Rs. 15,65,120/- by resorting to Clause
5 of the MOU.
40. Ld. Counsels for Respondent have however vehemently contended
that this Court must not interfere with the award of the damages granted by the
Ld. Arbitrator in favour of the Respondent. They have submitted that the Ld.
Arbitrator has awarded damages in favour of the Respondent after interalia,
taking into account the future profit that would been earned by the Respondent
had the shop not been in unauthorised possession of the Petitioner and in doing
so he has not committed any illegality whatsoever. They have, in this respect,
again relied upon the judgment of the Hon’ble Delhi High Court in M/s Crest
Education (P) Ltd.case(Supra) They have pointed out that in the said judgment
the Hon’ble Delhi High Court has reiterated the settled position of law namely
that there cannot be a direct and concrete evidence of loss of profit suffered by
the parties.
41. The aforementioned proposition of law being canvased by Ld.
Counsels for Respondent, cannot be questioned at all. However, at the cost of
repetition it is to be observed that what the Ld. Counsels for Respondent appear
to be completely missing is that as per the own case of the Respondent and the
finding of the Ld. Arbitrator, the lease of the shop in question stood expired on
24.08.2020 and therefore there is no question of the Respondents earning any
future profit from the said shop. In such view, the submission of Ld. Counsels
that had the shop been in unauthorized possession of the Petitioner herein, the
Respondent would have earned future profit is absolutely inconceivable in the
facts of the present case. As such by no stretch of imagination can it be held that
the Ld. Arbitrator was justified in allowing damages to the Respondent for loss of
income for the period 24.08.2020 to 13.04.2021.
OMP (Comm) No. 82/23 M/S S.M. Enterprises & Anr. Vs. Modi Mundi Pharma Beauty Products Pvt. Ltd. Page 41 of 43
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by ANU GROVER
GROVER BALIGA
Date: 2025.08.08
BALIGA 12:15:40 +0530
42. In view of the detailed discussion herein above, this Court hereby
sets aside the awarding of Rs. 15,65,120/- as damages by the Ld. Arbitrator in
favour of the Respondent herein. As discussed herein above, it is only the
awarding of Rs. 15,65,120/- as damages by the Ld. Arbitrator, which has been
found to be patently illegal by this Court. As such therefore this Court has only
set aside the said finding and in the considered opinion of this Court, the said
finding has no bearing on the other amounts awarded by the Ld. Arbitrator in
favour of both the parties. In the considered opinion of this Court when the Ld.
Arbitrator in the present case has given categorical findings that prior to
23.08.2020 no breach was committed by the Petitioner herein and the Respondent
has not challenged the said findings of the Ld. Arbitrator, it makes no sense
whatsoever for this Court to set aside the entire award, as contended by the Ld.
Counsels for Respondent. Accordingly award dated 24.04.2023 is therefore
partially set aside in this manner. The said partial setting aside of the impugned
award makes it necessary to record that now the Respondent Company will be
entitled to recover an amount of Rs. 13,66,456/- from the Petitioner herein
(which is calculated after deducting Rs. 15,65,120/-from the total awarded
amount of Rs. 29,31,576/-) with interest @ 9% per annum with effect from
14.04.2021 till date of recovery. As laid down by the Hon’ble Delhi High Court in
NHAI’s case (supra), the modification of the awarded amount by this Court in
exercise of its jurisdiction under Section 34 of the Arbitration and Conciliation
Act does not in effect amount to a modification of the award as such, but is only
confined to setting aside partially the award of damages of Rs. 15,65,120/- in
favour of Respondents herein. Even otherwise, in a recent judgment of the
Hon’ble Supreme Court pronounced in the case titled and reported as Gayatri
Baleswamy v. ISG Novasoft Technologies Ltd., (2025) INSC 605, it has been
held that a Court under Section 34 of the Arbitration and Conciliation Act does
have an authority to modify an award, particularly when such a denial would
OMP (Comm) No. 82/23 M/S S.M. Enterprises & Anr. Vs. Modi Mundi Pharma Beauty Products Pvt. Ltd. Page 42 of 43
ANU Digitally signed
by ANU GROVER
GROVER BALIGA
Date: 2025.08.08
BALIGA 12:15:45 +0530
impose significant hardships, escalate costs, and lead to unnecessary delays and
would defeat the raison d’etre of arbitration. It has also been categorically held by
the Hon’ble Supreme Court that judicial intervention is legitimate and necessary
when it furthers the ends of justice, including the resolution of disputes.
43. As such the present petition filed under Section 34 of the Arbitration
and Conciliation Act stands partly allowed in the aforementioned terms.
44. This file be consigned to Record Room.
Digitally signed by
ANU ANU GROVER
GROVER BALIGA
Date: 2025.08.08
Announced in the open court BALIGA 12:15:54 +0530
on 06th August, 2025. (Anu Grover Baliga)
District Judge (Commercial Court-04)
South-East District/Saket Courts
New Delhi
OMP (Comm) No. 82/23 M/S S.M. Enterprises & Anr. Vs. Modi Mundi Pharma Beauty Products Pvt. Ltd. Page 43 of 43