Arbitral Tribunal Is Final Decision-Maker; Court Interference Only For Perverse Or Implausible Awards: Delhi High Court

Brief Facts:

Delhi Skills Mission Society (Appellant) challenged a judgment rendered by the Commercial Court. The Appellant was created by GNCTD to participate in the implementation of the Skill Development Initiative Scheme (SDIS) launched by the Ministry of Labour and Employment, Government of India, in May 2007.

Samuel Foundation Charitable India Trust (Respondent), a Vocational Training Partner (VTP) registered with GNCTD, was tasked with providing counseling, vocational guidance, quality training, and post-training support to help trainees secure employment. The dispute pertained to the Respondent's claim for training costs under an Agreement dated January 18, 2016. The Appellant refused payment and argued that the Respondent failed to maintain proper biometric attendance of trainers and trainees, which was mandatory under the Agreement. Consequently, the Appellant contended that the Respondent is not entitled to the claimed training costs. In response, the Respondent invoked the arbitration agreement stipulated in Clause 5 of the Agreement. As an arbitrator was not appointed, the Respondent filed a petition under Section 11 of the Arbitration Act to have an arbitrator appointed. This petition was granted and a sole arbitrator was appointed to resolve the dispute under the Delhi International Arbitration Centre (DIAC) Rules.

The Arbitral Tribunal issued an award granting the Respondent ₹15,50,200/- along with simple interest at 7.5% per annum from September 11, 2019 until realization and costs amounting to ₹2,98,005/-. The Appellant's subsequent application to set aside this award was dismissed by the Commercial Court. The Commercial Court found no grounds to interfere with the award, and held that the Arbitral Tribunal's decision was plausible and legally sound.

The Appellant dissatisfied with the Commercial Court's decision has filed an appeal in the High Court.

The Appellant argued that the Arbitral Tribunal's award was flawed and argued that the Tribunal effectively rewrote the contract by accepting irregular biometric attendance and challenging the fairness of the pro-rata settlement offer. The Appellant also disputed the Tribunal's reliance on external assessments for trainee certification. The Appellant argued that the Respondent's claim should be rejected due to alleged breaches of the Agreement, focusing on Clause 2.2.8, which required maintaining biometric attendance records for trainees and trainers.

Observations by the High Court:

The High Court noted that Clause 2.2.8 of the Agreement obligated the Respondent to maintain biometric attendance records. However, it held that it is important to examine the Agreement as a whole rather than isolating a single clause. The broader obligations under Clause 2.2 include conducting courses, publicising them, enrolling candidates into the SDIS web portal, and ensuring adequate infrastructure and quality training. The Agreement also mandated coordination with assessors and assessing bodies, and compliance with processes to maintain information in the SDIS portal.

The issue was whether the manner of recording attendance was essential to fulfilling the Agreement. While accurate recording of attendance is necessary, the High Court held that it is not the essence of the Agreement. The primary obligation of the Respondent was to provide high-quality training, and attendance records serve primarily to verify that training occurred.

Under Clause 2.2.8, the Respondent was initially required to maintain manual attendance records until the biometric system was set up. There were challenges with the biometric system, which the Respondent attributed to various factors including power supply issues. The Arbitral Tribunal found that while the biometric system was installed, problems persisted which justified the use of manual records temporarily. The High Court held that the Tribunal's conclusion that these issues did not negate the Respondent's entitlement to compensation for training was reasonable.

Further, the Tribunal noted that the biometric attendance system functioned properly during other periods and manual records were reconciled with biometric data.

The Appellant's claim that the Tribunal based its decision on equity rather than contractual terms was dismissed by the High Court. It held that the Tribunal found the Appellant's conditional offer of payment unfair and rejected it not as a basis for the claim but to ensure fair compensation for training provided.

Further, the High Court noted that the law limits the court's interference with arbitral awards to specific grounds under Section 34 of the Arbitration Act focusing on patent illegality or other statutory grounds. The High Court held that the court does not re-evaluate evidence or replace the Tribunal's judgment but ensures that the Tribunal's decisions are not irrational or perverse.

Therefore, the High Court dismissed the appeal.

Case Title: Delhi Skills Mission Society Vs Samuel Foundation Charitable India Trust

Citation: 2024 LiveLaw (Del) 964

Case Number: FAO (COMM) 73/2024, CMs Nos.23698/2024, 23699/2024,23700/2024 and 23701/2024

For the Appellant: Ms Avni Singh, Advocate with Mr Goutam Panda, Assistant Director (Skill Development), DTTE, GNCTD.

For the Respondent: Mr Arjun Garg, Advocate.

Date of Judgment: 30.07.2024

Click Here To Read/Download Order or Judgment