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2017 Supreme(Del) 718
IN THE HIGH COURT OF DELHI AT NEW DELHI
VIBHU BAKHRU, J.
M/S PAWAN HANS HELICOPTERS LTD - Petitioner
versus
M/S MARITIME ENERGY HELI AIR SERVICES PVT LTD - Respondent
O.M.P. (COMM) 281 of 2016 & IA No.6564 of 2016
Decided On : 01-03-2017
For the Petitioner: Mr Puneet Taneja.
For the Respondent: Mr Jayant K. Sud, Ms Priya Puri, Mr Umang Kumar Singh and Mr Swatantra Rai.
The main legal point established in the judgment is that the scope of judicial review under Section 34 of the Arbitration and Conciliation Act, 1996 is restricted, and errors of fact cannot be corrected. The court emphasized that the arbitrator's decision, if based on material and a plausible view, does not warrant interference.
Headnote:
Arbitration - Amphibian Aircraft Agreement - Arbitration and Conciliation Act, 1996 - Section 34 - [LIQUIDATED DAMAGES] - [Amphibian Aircraft Agreement] - [Section 34 of the Arbitration and Conciliation Act, 1996] - The court discussed the disputes between PHHL and Maritime regarding the Agreement for Wet lease of amphibian aircraft, the delay in delivery of the aircraft, and the premature termination of the Agreement. The court highlighted the arbitrator's acceptance of Maritime’s claim for refund of liquidated damages and damages for premature termination of the Agreement, while rejecting PHHL's counter claims. The court emphasized the arbitrator's reasoning for the refund of liquidated damages and the wrongful termination of the Agreement, and the subsequent award of damages and interest to Maritime.
Fact of the Case:
The case involved a dispute between PHHL and Maritime regarding an Agreement for Wet lease of amphibian aircraft, the delay in delivery of the aircraft, and the premature termination of the Agreement. Maritime claimed refund of liquidated damages and damages for premature termination, while PHHL made counter claims for revenue loss and damages incurred.
Finding of the Court:
The court found that the arbitrator's decision to refund liquidated damages and award damages for premature termination was based on a restricted scope of judicial review under Section 34 of the Act. The court emphasized that errors of fact cannot be corrected and that the arbitrator's decision, if based on material and a plausible view, does not warrant interference.
Issues: The issues involved the refund of liquidated damages, damages for premature termination, and the arbitrator's interpretation of the Agreement clauses regarding termination and payment obligations for the unexpired period of the Agreement.
Ratio Decidendi: The court held that the arbitrator's decision to refund liquidated damages and award damages for premature termination was based on a restricted scope of judicial review and that errors of fact cannot be corrected. The court also emphasized that the arbitrator's decision, if based on material and a plausible view, does not warrant interference. However, the court set aside the award of FMC charges as it was contrary to the express terms of the Agreement.
Final Decision: The court upheld the arbitrator's decision to refund liquidated damages and award damages for premature termination, but set aside the award of FMC charges as it was contrary to the express terms of the Agreement. The interest and costs awarded were also proportionately reduced.
VIBHU BAKHRU, J
1. M/s Pawan Hans Helicopters Limited (hereafter ‘PHHL’) has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter ‘the Act’) challenging the arbitral award dated 24.02.2016 (hereafter 'the impugned award') made by the sole arbitrator in connection with the disputes between PHHL and M/s Maritime Energy Heli Air Services Pvt. Ltd. (hereafter ‘Maritime').
2. The impugned award is rendered in the context of the disputes that had arisen between PHHL and Maritime in connection with an Agreement for Wet lease of amphibian aircraft which was to be deployed in Andaman & Nicobar Islands. There was a delay in delivery of the amphibian aircraft and consequently PHHL had levied liquidated damages. The Agreement between the parties was also prematurely terminated. The arbitrator accepted Maritime’s claim for refund of the liquidated damages collected by PHHL and also awarded damages for premature termination of the Agreement. The counter claims made by PHHL were rejected. The only challenge made by PHHL in these proceedings is in respect of refund of liquidated damages and the award of damages for premature termination of the Agreement.
3. Briefly stated, the factual context necessary to appreciate the controversy are as under:-
3.1 On 09.04.2010, PHHL entered into a Memorandum of Understanding (MOU) with the Andaman and Nicobar Administration for introduction of seaplane operations in Andaman & Nicobar Islands with a validity period of five years. The use of a seaplane was contemplated to connect popular tourist destinations in the Andaman & Nicobar Islands.
3.2 Subsequently, PHHL floated a global tender inviting bids for Wet lease of an amphibian seaplane (with passenger capacity of 5-10) for an initial period of six months with an option to extend for a further period of six months. The bidders were required to mobilize the seaplane at Port Blair within a period of 75 days from the issue of Letter of Intent (LOI).
3.3 Maritime submitted its bid pursuant to the aforesaid invitation, which was accepted and the LOI was issued by PHHL to Maritime on 13.09.2010.
3.4 In terms of the instructions issued by PHHL, the bids were to be split into fixed monthly charges (FMC) and flying hourly charges (FHC). In terms of the Agreement between the parties, Maritime was entitled to FMC of Rs.49,07,270/-and FHC of Rs.49,250/-per hour inclusive of service tax and other taxes.
3.5 Admittedly, Maritime was obliged to mobilize the seaplane by 25.11.2010; that is, within a period of 75 days from the issuance of the LOI.
3.6 It is not disputed that Maritime had failed to mobilize the aircraft within the period of 75 days as agreed. The aircraft arrived in Mumbai on 30.11.2010 and was cleared by the Customs on 03.12.2010. Maritime applied for the necessary permissions from Directorate General of Civil Aviation (DGCA), however, that took some time; the aircraft was finally delivered to PHHL on 24.12.2010. The Non Scheduled Operators Permit (NSOP) was received from DGCA on 07.01.2011 and the No Objection Certificate (NOC) for operation of the seaplane to and fro from Port Blair to Havelock water aerodrome was received on 19.01.2011. The flight could only be operated from 20.01.2011.
3.7 In view of the delays, PHHL issued a letter dated 10.12.2010 permitting Maritime to mobilize the seaplane at Port Blair, albeit, with levy of liquidated damages.
3.8 The parties entered into a formal contract on 14.02.2011 (hereafter ‘the Agreement’).
3.9 On 27.04.2011, PHHL issued a notice for discontinuation of services under clause 14 (14.2) of the Agreement, effective 15 days from 28.04.2011.
3.10 Maritime claimed that it raised invoices which were paid in part. On 28.07.2011, after the Agreement was terminated, PHHL informed Maritime about the levy of Rs.88,49,043/-as liquidated damages. At the material time, a sum of Rs. 76,62,429/-was admittedly payable by PHHL to Maritime. PHHL sought to adjust the aforesaid sum
