Wrong Application Of Law Not Leading To Perversity; Arbitral Award Cannot Be Set Aside: Delhi High Court

The bench of Justice Chandra Dhari Singh ruled that the terminology used by the arbitrator in the award, that the party had failed to prove its claim “beyond doubt”, cannot be equated with the legal term ‘beyond reasonable doubt’, as is used in the criminal trial. Thus, the Court rejected the argument that the standard of proof imposed by the arbitrator violated the fundamental principles of Indian law.

The Respondent, Sproxil INC, a US based Company, sent a cease and desist notice to the Petitioner, Bright Simons, after the latter registered the Domain Name, ‘sproxil’. The respondent alleged that the petitioner was making unlawful use of the respondent’s trademarks and web domains.

The respondent filed a complaint before National Internet Exchange of India (NIXI), who appointed a Sole Arbitrator to adjudicate the disputes set out in the complaint.

The Sole Arbitrator passed an award holding that the petitioner had no rights in the Disputed Domain Name, and the same was registered by the petitioner in bad faith. While ruling that the Disputed Domain Name was identical or confusingly similar to the respondent’s trademark “sproxil”, the Arbitrator directed that the Domain Name be transferred from the petitioner to the respondent.

Challenging the Arbitral Award, the petitioner filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 (A&C Act) before the Delhi High Court, on the ground that the award was contrary to the fundamental principles of Indian Law and public policy, and suffered from patent illegality.

The petitioner, Bright Simons, submitted before the High Court that the Arbitrator’s finding that the respondent had trade mark rights in ‘SPROXIL’ and that the petitioner was using the Disputed Domain Name in bad faith, was not supported by any material on record.

The petitioner further argued that the Arbitrator had relied on a trademark application submitted by the respondent which was not provided to the petitioner. Thus, the petitioner averred that the Arbitrator had exceeded his jurisdiction. It added that in terms of the .IN Domain Name Dispute Resolution Policy (INDRP Policy), the Arbitrator was required to confine his findings to the submissions made and the documents provided by the parties.

Referring to the Apex Court’s decision in Associate Builders versus Delhi Development Authority, (2014), the Court reiterated the three principles which are a part and parcel of the fundamental policy of Indian law; firstly, the arbitrator must take a judicial approach; secondly, the principles of natural justice must be adhered and thirdly, the decision must not be perverse.

The Court added that the ground of ‘patent illegality’ in setting aside an arbitral award is not available in the case of international commercial arbitrations, in view of Section 34(2A) read with Section 2(1)(f) of the A&C Act.

“Accordingly, as the award in the present case arises out of International Commercial Arbitration seated in India, the Petitioner could not be said to have the benefit of the ‘ground of patent illegality’ to assail the impugned arbitral award under Section 34 of the Arbitration Act”, the Court said.

The bench ruled that merely because an application of Trademark Registration was given a passing reference by the Arbitrator, it cannot inevitably lead to the conclusion that the principles of natural justice were not complied with and the award was perverse.

“The Petitioner has failed to show that the arbitral award has been passed by not taking a judicial approach; or the award is based on no evidence”, the Court remarked.

“This court is conscious that it is not sitting in appeal over the arbitral award and hence, do not find any merit on the argument of the Petitioner that the conclusion reached by the learned arbitrator to the effect that the Disputed Domain Name registered by the Petitioner is identical is perverse or contrary to the fundamental policy of Indian Law. This Court is also satisfied that the arbitrator has reached a right conclusion to the effect that the mark ‘sproxil’ has been in use by the Respondent No.1 since 2011, on the basis of materials on record”, the Court said.

The petitioner, Bright Simons, further argued that the standard of proof imposed by the Arbitrator in evaluating the evidence adduced by the petitioner was "beyond doubt”, which is an incorrect standard of proof to apply in arbitral proceedings. It is submitted that as per the fundamental principle of Indian law, the standard of proof applicable in civil proceedings is 'preponderance of evidence' and not 'beyond reasonable doubt'.

Rejecting the petitioner’s argument, the Court held that the terminology used by the Arbitrator in the award, that the petitioner had failed to prove its claim “beyond doubt”, cannot be equated with the legal term ‘beyond reasonable doubt’, as is used in the criminal trial.

While dealing with the argument that the Arbitrator had wrongly applied Paragraph 6 of the INDRP Policy, which deems certain circumstances as evidence of bad faith in registration and use of domain name, the Court said: “ I am also unable to agree with the submission of the Petitioner that the arbitrator has wrongly applied paragraph 6(i) of the INDRP Policy as even if the submission of the Petitioner is accepted, then merely because there has been wrong application of law not leading to perversity cannot lead to the setting aside of the arbitral award.”

Holding that the petitioner had failed to prove that the Arbitrator’s finding regarding similarity of the disputed domain name was contrary to the public policy of India, the Court dismissed the petition.

Case Title: Bright Simons versus Sproxil Inc & Anr.

Citation: 2023 LiveLaw (Del) 43

Counsel for the Petitioner: Mr. Antony R. Julian, Advocate

Counsel for the Respondent: Mr. Rachit Batra and Mr. Nimish Chandra, Advocates for R-1 Mr. Ashok Kumar and Ms. Chhavi Arora, Advocates for R-2/NIXI

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