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2014 Supreme(Bom) 113
High Court of Judicature at Bombay
N.M. JAMDAR, J.
Maxx Moblink Pvt. Ltd.
Versus
Pickle Advertisement Pvt. Ltd.
Arbitration Petition No. 679 of 2013
Decided On : 20-01-2014`
For the Petitioner:Mamta Sadh a/with Ravi Goenka, Amol Arote i/by Goenka Law Associates, Advocates.
For the Respondent: Vishal Kanade a/with Rajlaxmi Punjabi i/by
M.S. Bodhanwalla & Co., Advocates.
Headnote:Arbitration and Conciliation Act, 1996 - Section 34 - Setting aside of award. - Held, where contract between petitioner and respondent was continued upto 20.8.2010 and right of respondent to receive retainer fee also continued during said period, therefore award of arbitrator for payment of retainer fee to respondent being not without jurisdiction, cannot be set aside. Once this position was established the arbitrator had to proceed to consider the effect thereof. The first effect is obviously that till termination as per the terms contract, all rights and liabilities of the parties would continue. The learned arbitrator then next examined the factual dispute as to whether the respondent carried any work after 1 April 2010 till 20 August 2010.
Clause 4 of the agreement lays down retainer fee for the period from 10 August 2009 till 31 March 2010. There is no dispute that upto 31 March 2010, the retainer fee has been paid. To prove the work carried out by the respondent, the respondent examined their Managing Director. The Managing Director stated that he was involved in conceptualizing and execution of the advertising campaign. He deposed that substantial work was carried by the respondent after 01 April 2010 and he produced correspondence and e-mails. An e-mail in July 2010 the event of presentation of Hotel Taj Lands End, Bandra was recorded. In April 2010 an employee of the respondent Company made a presentation to the officer of the petitioner, which has reflected in e-mail dated 9 April, 2010. On 2 April 2010 an e-mail was sent by the petitioner regarding the details of the team proposal. The petitioner examined the Company Secretary, who joined the company on 5 April 2010. An e-mail from Ms. ‘N‘ to one of the employees of the respondent dated 9 April 2010 was noted by the arbitrator. The arbitrator also noticed the Maxx campaign and key minutes of the meeting held on 30 April 2010. An e-mail dated 30 July 2010 in respect of a meeting and an e-mail of 03 August 2010 enclosing a job sheet.
The witness of the petitioner i.e. Company Secretary had admitted the position that the e-mail was sent for the first time on 20 August 2010. Thus there was material before the learned Arbitrator to come to the conclusion that not only the contract continued till August 2010 when it was terminated by the petitioner by giving a notice but that the respondent carried on the work during this period. The learned Arbitrator considered the e-mail is exchanged between the parties and came to this conclusion. It cannot be said that this finding of the learned Arbitrator is without any material on record. Ms. ‘S‘ did not seriously dispute this factual finding. In any case she cannot.
Whether the respondent was entitled to retainer fee and whether the arbitrator could grant it. Firstly the concept of retainer fee needs to be emphasized. Retainer fee would be a fixed monthly fee payable by the party which is different than money for the work done. Claim for grant of retainer fee continues till the existence of the agreement. The retainer fee is a fixed amount which is to be paid. Ms. ‘S‘ laid a great emphasis on the fact that the retainer fee had to be renegotiated as per the Clause 4 of the contract after 31 March 2010. But what is being missed in the vehemently put submission is that what was to be negotiated was the quantum of retainer fee and not the liability to pay the retainer fee. When the contract continued the liability to pay retainer fee continued. There was no agreement between the parties that there will be no retainer fee at all after 1 April 2010. This fact is unique to the present case, which is distinct and different from all the judgments which are relied upon by Ms. ‘S‘.
It is settled law that if arbitrator commits an error in construction of the contract, that is an error within his jurisdiction. Even if two interpretations are possible this Court will not interfere. Ultimately, all that the learned arbitrator had done is that he has held that the contract continued and therefore, the obligation to pay retainer fee is continued. Since the arbitration clause was very widely worded, he considered the quantum of retainer fee. The clause regarding retainer fee has been construed by the learned arbitrator as right to receive the retainer fee continued. Thus the arbitrator had come to a point where the contract stood continued, the right of retainer fee stood established and then at that stage all that the arbitrator had to do was to decide the quantum. The widely worded arbitration clause permitted the learned arbitrator to do so.
For fixing the retainer fee, neither the learned arbitrator stepped outside the contract nor did he employed the principles of Section 70 of the Contract Act. The learned arbitrator gave the effect to the term of contract itself. He took note of the fact that there was no decision to reduce the retainer fee and therefore, proceeded to grant it. None of the decisions cited by the learned counsel for the petitioner are similar to the facts of the case at hand. The retainer fee is not the same as compensation for the work done. If the argument of the learned counsel for the petitioner is to be accepted, that having come to the conclusion that the contract continued and the right to receive retainer fee continued, the arbitrator ought to have sent the parties to the Civil Court, would make mockery of the arbitration proceedings. The policy of the Act is to promote arbitration and not to defeat it by raising hyper-technical objections. The award is being challenged by invoking abstract propositions of law with no regard to the factual situation. The entire attempt of the petitioner is to somehow deprive the respondents of their legitimate dues
Arbitration and Conciliation Act, 1996 - Section 34 - Validity of award. - Held, when agreement between parties, existed during disputed period and obligation of petitioner to pay retainer fee continued therefore award of arbitrator directing payment of retainer fee, not without jurisdiction.
Oral Judgment:
1. By this Arbitration Petition under section 34 of the Arbitration and Conciliation Act, 1996 the Petitioner challenges an Award of the sole Arbitrator dated 03 July 2012,
2. The Petitioner is a private limited company in the business of marketing and trading of mobile phones with related accessories, and customer services. The Respondent is also a private limited company engaged in the business of advertising and consulting for promoting and advertising products.
3. On 10 August 2009 an agreement came to be executed between the Petitioner and the Respondent. It was styled as Company / Agency Agreement. The Petitioner appointed the Respondent as an agency of its advertising consultant for its brand:
“Maxx Moblink Communication Ltd.”. The agreement was to come into effect on 10 August 2009. It was to remain operative unless and until terminated. The Respondent was to provide service as an advertising agency for promotion of Petitioner's brand, more particularly, making recommendations on the positioning and marketing of the Petitioner brands across TV, print, radio, billboard, hoardings/ point of sale and cinema etc. The Respondent was placed under an obligation not to accept fresh advertising account for directly competitive products. The agreement contained a clause for charging of retainer fees which later on became a bone of contention between the parties. This clause will be reproduced subsequently in this order.
4. The agreement provided that Respondent will raise its invoices in respect of retainer fee. Clause 9 dealt with the termination, inter-alia, stating that the agreement will be terminated by either of the parties by giving 60 days written notice. The rights, duties and responsibilities of both the parties were to continue in full force and effect during the period of notice. In the event of dispute, the matter was to be referred to Arbitrator. Jurisdiction was to be vested in the courts in Mumbai. There were certain other clauses which are not germane to the present controversy.
5. Disputes and differences arose between the parties and the Respondent invoked the arbitration clause by its notice dated 5 April, 2011. Thereafter, the Respondent filed a arbitration petition under section 11 of the Act in this court. This court by order dated 20 January 2012 appointed Justice F. I. Rebello, former Chief Justice of the Allahabad High Court as an Arbitrator to decide the dispute between the parties.
6. The Respondent filed its statement of claim before the learned Arbitrator. The case pleaded by the Respondent was that the Petitioners were to pay a sum of Rs. 6,25,000/- per month as retainer to the Respondent. The Respondent completed substantial work for the Petitioner, through several experts and executives. During the discussions about increase in the retainer fee, the Managing Director of the Petitioner agreed to increase the fee of Rs. 10,00,000/- per month for the month of July 2010 and Rs.16,00,000/- per month for the month of August 2010 onwards. According to the Respondent it had prepared revised draft agreement, however, in the meanwhile the Respondent had already raised invoices and debits for Rs. 6,25,000/-. The Respondent claimed that the Petitioner terminated the agreement on 20 August 2010, as per the terms of the agreement, notice period for termination which commenced on 20 August 2010, came to end on 20 October 2010. Accordingly, the Respondent prayed for an amount of Rs. 47,29,176/- including the principal amount of Rs. 45,81,000/- comprising of retainer fees at the rate of Rs.6,89,375/- per month (inclusive taxes) for the month of April, 2010 to September 2010 and proportionate amount of Rs. 4,44,758/- for the period between 01 October 2010 to 20 October, 2010.
7. The Petitioners filed their Say before the Arbitrator and contested the claim made by the Respondent. It was the case of the Petitioner that no amount or claim is due post 31 March 2010 and the Respondent faile
