After Final Settlement Of Arbitration Award Is Acknowledged, Claims Of Under Influence And Coercion Can't Be Raised: Delhi High Court
The Delhi High Court single bench comprising Justice Prateek Jalan held that once an arbitration award has been acknowledged to be fully and finally settled by both the parties, it cannot be challenged on the basis of one-sided nature of the arbitration agreement. “The learned Arbitrator noted that the claimant had not reserved any other liberty and had not withdrawn the consent...
The Delhi High Court single bench comprising Justice Prateek Jalan held that once an arbitration award has been acknowledged to be fully and finally settled by both the parties, it cannot be challenged on the basis of one-sided nature of the arbitration agreement.
“The learned Arbitrator noted that the claimant had not reserved any other liberty and had not withdrawn the consent or contended that it was issued on account of undue influence, coercion or pressure. It was held that all claims under the Agreement stood discharged.”
Brief Facts:
The matter pertained an agreement, titled “NIIT License Agreement (Urban)” between the parties. The Respondent, engaged in providing computer education services, granted the Petitioner a limited and non-exclusive license to use their trade names, designs, copyrights, technical knowhow, and course materials to establish an education center in Hyderabad. The Petitioner, in compliance with the agreement, incorporated a limited company and set up the education center as per the agreement's terms.
Following disputes, the Petitioner initiated arbitration proceedings on July 26, 2017, resulting in the constitution of an Arbitral Tribunal. The Petitioner sought damages of Rs. 99.43 lakhs for direct losses, along with other claims. These claims included allegations of the Respondent selling courseware at higher rates, unfair GST practices, restrictions on approaching institutes and offering discounts, student poaching, and issues regarding the appointment of an arbitrator. Additionally, the Petitioner claimed that its consent to the agreement was vitiated due to the Respondent's failure to disclose certain past orders against them.
In response, the Respondent raised a preliminary objection to the maintainability of the petitioner's claims, arguing that the agreement required the petitioner's company to establish the education center. It denied breaching any agreement terms or providing assured returns. Moreover, the Respondent accused the Petitioner of initiating numerous litigations and engaging in a defamation campaign, leading to a previous lawsuit resulting in a consent decree.
During arbitration, the Petitioner acted as the sole witness, while the Respondent presented two witnesses for cross-examination. The arbitrator ruled in favor of the petitioner on issues of locus and procedural bar, but ultimately rejected the claims on the grounds of prior settlement and lack of merit. Feeling aggrieved, the Petitioner approached the Delhi High Court (“High Court”) and filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”).
The Petitioner contended that the Arbitrator incorrectly applied a one-sided agreement and the caveat emptor principle.
Observations by the High Court:
The High Court noted that the arbitrator examined the issue of full and final settlement, finding that the Petitioner's claims were resolved by the Respondent after the termination of the Agreement. This communication, expressing gratitude for the receipt of a specific sum towards final settlement, was interpreted by the arbitrator as signifying the resolution of the Petitioner's claims. Notably, the Petitioner didn't reserve any other liberty or withdrawn consent, coercion, or pressure. Consequently, the arbitrator concluded that all claims under the Agreement were discharged. The High Court found no grounds to interfere with this conclusion, given the Petitioner's express admission of full and final settlement.
Despite the Petitioner's argument that the entire Agreement was one-sided and should be disregarded, citing the Supreme Court judgment in IREO Grace Realtech (P) Ltd. v. Abhishek Khanna & Others (2021) 3 SCC 241, the High Court distinguished the case. It clarified that the SC judgment dealt with disputes under the Consumer Protection Act, which didn't apply to the present case. The Petitioner's claims didn't establish the nullity of the Agreement, and thus, the High Court upheld arbitrator's decision.
Therefore, the High Court dismissed the Section 34 application.
Case Title: Maj. Pankaj Rai vs M/s Niit Ltd.
Citation: 2024 LiveLaw (Del) 349
Case Number: O.M.P. (COMM) 55/2024 & I.A. 2137/2024.
Advocate for the Petitioner: Petitioner in person.
Advocate for the Respondent: None.
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