The court upheld the arbitrator's decision, affirming that the interpretation of contractual obligations did not warrant judicial interference under Section 34 of the Arbitration Act.

JUDGMENT :

AVNEESH JHINGAN, J.

1. M/s Zreyah Semiconductors Private Limited has filed the petition under Section 34 of the Arbitration and Conciliation Act, 1996 (for short 'the Act') aggrieved of the arbitral award dated 03.04.2023.

FACTS

2. The brief facts are that the petitioner is engaged in the business of manufacturing and supply of electronic components. The respondent is a Private Limited Company engaged in the business of managing hospitality establishments. The respondent placed a purchase order dated 26.09.2019 upon the petitioner (hereinafter 'the PO') for supply of 52360 switches valuing Rs.10,34,89,540/-, inclusive of taxes. Subsequent to the placement of the PO, the parties entered into a vendor agreement dated 23.12.2019 (hereinafter 'the VA'). The PO though prior in time was governed by the terms and conditions of the VA. After the placement of the PO the respondent paid an advance of fifty percent of the invoice value.

2.1 Prior to the placing of the PO, the parties had business transactions wherein the petitioner was assembling switches for the respondent and the entire material was being supplied by the respondent. The scenario changed and pursuant to the PO the petitioner had to procure the components for the switches and five major components were to be procured from vendors specified by the respondent in Schedule 'A' to the VA.

2.2 A dispute arose between the parties due to non-delivery of the switches and arbitration proceedings as provided under the VA were initiated at the instance of the respondent. The arbitrator framed the following issues:

(i) Whether the respondent has committed the breach of the Vender Agreement dated 23.12.2019? If so, its effect.

(ii) Whether the respondent has committed the breach of the P.O.s dated 26.09.2019 and 22.09.2020? If so, its effect.

(iii) Whether the claimant is entitled to the reliefs as claimed in the SOC?

2.3 The arbitrator after considering the pleadings and appreciating the evidence adduced directed the petitioner to deliver 11000 switches claimed to be ready and to pay Rs.2,84,00,000/- along with interest at the rate of nine percent per annum.

CONTENTIONS

3. Learned counsel for the petitioner relies upon clauses 2.1, 2.3 and 3.1 of the VA to contend that the petitioner was an assembler and not a manufacturer, the arbitrator erred in holding that the petitioner was a manufacturer. Reliance is placed upon the correspondence between the parties to show that the terms and conditions of the Chinese vendors (hereinafter 'the vendors') were provided by the respondent to the petitioner. It is submitted that clause 12.1 of the VA relied upon by the arbitrator deals with liability of petitioner towards employees and not with the nature of relationship between the parties and it was wrongly recorded that there was a principal to principal relationship between the parties.

3.1 It is argued that the arbitrator relying on clause 14.10 concluded that all prior discussions, negotiations and agreements were superseded by the VA, if this is taken to its logical end the PO no longer existed and consequently no liability could be casted upon the petitioner.

3.2 The averment is that some of the components were to be procured from the vendors identified by the respondent and the advance amount was to be paid by the respondent for these procurements. On failure of the respondent to make hundred percent advance payment the components could not be procured and the switch