A reasonable interpretation to Section 34 would only lead to an irresistible conclusion that the Court can modify or vary the award of the arbitrator if it is contrary to the material evidence adduced by the parties.
| Case Name: | M/S. ISG Novasoft Technologies Limited Versus Ms. Gayatri Balasamy And Anr. |
| Case Number: | Original Side Appeal Nos. 59 And 181 Of 2015 |
| Court: | The High Court Of Judicature At Madras |
| Bench: | R. Subbiah, J Krishnan Ramasamy, J |
| Decided On: | 08.08.2019 |
| Relevant Act/Sections: | The Arbitration And Conciliation Act, 1996 |
- BRIEF FACTS AND PROCEDURAL HISTORY:
- Appeals arise out of the Judgment and Decree dated 02.09.2014 passed by the learned single Judge in O.P. No. 463 of 2012. By the said Judgment, the learned single Judge allowed the original Petition No. 463 of 2012 filed by the petitioner therein by modifying the award passed by the Arbitrator under claim No.12 to the effect that the petitioner therein is entitled for an additional amount of Rs.1,68,00,000/- (Rupees One Crore Sixty Eight Lakhs Only) payable by the first respondent therein.
- According to the appellant, she entered into an employment agreement with the first respondent company on 10.03.2006, as per which she was appointed as Vice President (M&A Integration Strategy) with effect from 27.04.2006. As per the said agreement, the first respondent company would impart training to the appellant in various subjects such as general management, finance, business strategy and project management during the first year of employment. The agreement also contemplates that during the first year of employment, the appellant has to work in Chennai and thereafter, she would be transferred to United States of America. The agreement also contains an arbitration clause, with the seat of Arbitration at Chennai.
- Clause 6 of the employment agreement deals with procedure for termination of employment, while Clause 6.2 stipulates that the employer is entitled to terminate the employment agreement by giving notice to the other party (120 days in advance) in writing and a severance compensation equivalent to one year’s gross salary inclusive of maximum bonus payouts at the time of severance from the company. However, clause 6.3 indicates that if either of the party to the agreement intends to terminate the agreement within three months of employment due to dissatisfaction or disagreement or discontentment, as the case may be, the employee shall receive four months gross salary as compensation.
- According to the appellant, within a few months of her joining the first respondent company, she noticed that there was a change in the behaviour pattern of Krishna Srinivasan, who was working as Chief Executive Officer in the company and he made sexist and derogatory remarks about her physique and dress sense. The appellant, unable to tolerate the behaviour of Krishna Srinivasan, tendered her resignation on 24.07.2006. Surprised by the letter of resignation of the appellant, the said Krishna Srinivasan apologised to the appellant and insisted the appellant to revoke her letter of resignation by stating that she was a valuable and irreplaceable asset to the first respondent company. Moved by such gesture, the appellant accepted the apology and continued her employment. However, shortly after re-joining the company, one Venkatesan was newly recruited as Vice- President – Global Human Resource. The aforesaid Krishna Srinivasan and Venkatesan have indirectly colluded together, exerted pressure on the appellant in discharging her duties and thereby attempted to bring disrepute to the appellant.
- The duo have issued contradictory instructions to the appellant and had humiliated her with unwarranted remarks. The appellant was also deprived of her upward revision in her salary purportedly by Krishna Srinivasan during March 2007. According to the appellant, she was made to confront numerous difficulties in discharge of her duties by the aforesaid Krishna Srinivasan and Venkatesan purportedly as a measure of punishing the appellant for not responding to their sexual overtures. The appellant also informed the Senior Executives in the company in United States about the sexual harassment to which she was subjected to by Krishna Srinivasan, which was aided and abetted by Venkatesan, however, no action was initiated. The appellant also received several e-mails containing derogatory and indecent remarks from the duo, which made her to inform the management that she was willing to leave the company provided her termination benefits were settled in terms of the Employment Agreement dated 10.03.2006.
- As there was no response, the appellant sent an e-mail dated 14.12.2017 to the Management along with the earlier e-mails she had sent to Krishna Srinivasan and Venkatesan. In the meantime, two letters of termination were issued by the first respondent company on 17.10.2007 and 12.12.2007. Subsequent to the e-mail dated 14.12.2017 of the appellant, one more letter of termination dated 20.12.2007 was also sent by the first respondent. According to the appellant, the Management, instead of responding to her e-mails, denied admission to her into the office on 21.12.2007 and escorted her out of the office in full view of her co- workers. In this context, the appellant has filed a complaint before the R-4, Pondy Bazaar Police Station, T. Nagar, Chennai against the Chairman and Director of the Company based on which a case in Crime No. 824 of 2007 was registered for the offences of sexual harassment, cheating, criminal breach of trust, misappropriation of company funds and criminal intimidation etc.,
- On the basis of such complaint, the appellant was enquired by the Police officials and she had narrated in her statement the manner in which she was subjected to sexual harassment during the course of her employment and the inaction on the part of the higher officials to deal with the offenders. Notwithstanding the filing of the complaint which culminated in Crime No. 824 of 2007, the appellant also sent a legal notice dated 05.02.2008 through her counsel to all the accused in the criminal case, but there was no response to the notice which would indicate that all the accused have entered into a conspiracy to ensure that no action is taken against Krishna Srinivasan and Venkatesan for their misdeeds.
- In the meantime, the first respondent/Management has also filed criminal complaints against the appellant complaining defamation and extortion. The various criminal proceedings initiated by the appellant as well as the first respondent company need not be reiterated hereunder inasmuch as they were set aside by the Honourable Supreme Court, by order dated 18.03.2011 by observing that after the termination of the appellant, the only remedy available to her is to seek for payment of compensation, which she has to work out before an Arbitrator. Accordingly, by the said order dated 18.03.2011, the Honorable Supreme Court, while quashing all the criminal complaints or criminal proceedings initiated by both sides, directed the parties to approach an arbitrator for adjudication of the dispute.
- Pursuant to such direction issued by the Honourable Supreme Court on 18.03.2011, the second respondent herein was appointed as an arbitrator to resolve the dispute between the appellant and the first respondent and the second respondent/arbitrator entered into reference on 29.04.2011.
- Before the second respondent/arbitrator, the appellant filed the Claim Petition for recovery of a total sum of Rs.28,88,55,500/- under 12 heads. The first respondent company also made counter-claim, claiming a sum of Rs.4 crores as damages for defamation of four persons employed in the first respondent company and another sum of Rs.23 crores as damages for loss of reputation of the company and its senior executives.
- The second respondent/arbitrator, considering the rival claims, rejected the counter claim made by the first respondent/management, while accepting claim Nos. 1 to 4 made by the appellant and awarded a sum of Rs.2 Crore. In all other respects, the claim made by the appellant under Claim Nos. 5, 6, 7, 9, 11 and 12 were rejected.
- Aggrieved by the rejection of the counter-claim, the first respondent has not filed any Original Petition under Section 34 of The Arbitration and Conciliation Act, 1996. However, the appellant/claimant has filed O.P. No. 463 of 2012 under Section 34 of the said Act before the learned single Judge questioning the correctness of the award passed by the Arbitrator/second respondent herein in so far as it relates to disallowing the claim Nos. 5, 6, 7, 9, 10, 11 and 12 made by her. In so far as the claim Nos. 8 is concerned, the counsel for the appellant, who appeared before the learned single Judge, has not pressed the same and it was also recorded by the learned single Judge in para No.14. Therefore, what was questioned by the appellant in the Original Petition is with reference to rejection of claim Nos. 5, 6, 7, 9, 10, 11 and 12 by the arbitrator. In effect, the learned single Judge modified the award passed by the Arbitrator to the effect that apart from the compensation of Rs.2 crores awarded by the Arbitrator in respect of claim Nos. 1 to 4, the appellant will be entitled to an additional amount of Rs.1,68,00,000/- (Rupees one crore and sixty eight lakhs only) towards compensation for the 12th head of claim.
- ISSUE BEFORE THE COURT:
- Aggrieved by the order dated 02.09.2014 passed by the learned single Judge, the first respondent therein namely M/s. ISG Novasoft Technologies Limited has filed O.S.A. No. 59 of 2015 questioning the correctness of the order passed by the learned single Judge in enhancing the compensation amount in relation to claim No.12.
- Whether the learned single Judge is entitled to make such a modification of the award of the arbitrator in exercise of powers conferred under Section 34 of The Arbitration and Conciliation Act, 1996 has to be examined.
- RATIO OF THE COURT
- The court held that the compensation of Rs.2 crores awarded by the learned Arbitrator, which was affirmed by the learned single Judge, will be a just and fair compensation for the claim Nos. 1 to 5 made by the appellant.
- As against this finding of the learned Arbitrator, the learned single Judge concluded that the first respondent management had an obligation to constitute a committee as directed by the Honourable Supreme Court in Vishaka case and their failure to constitute such a committee had caused acute prejudice to the appellant and therefore, awarded a sum of Rs.1,68,00,000/- under this head. This is strenuously assailed by the learned counsel for the first respondent by contending that under Section 34 of The Arbitration and Conciliation Act, 1996, the learned single Judge has no jurisdiction to modify the award passed by the Arbitrator. By relying upon Section 34 of the Act, it was contended that the learned single Judge can either accept the award of the Arbitrator in entirety or set aside it and he has no jurisdiction to partially or fully modify a claim which was rejected by the Arbitrator.
- It is no doubt true that the legislators did not intend to use the word “modify” anywhere in Section 34 of the Act but what was contemplated is only to “set aside” an award passed by the Arbitrator if it falls within the realm of Section 34 of the Act. It is trite that an arbitrator being a Judge chosen by the parties, his decision would ordinarily be final unless one or the other conditions contained in Section 34 of the Act is satisfied for the purpose of setting aside his award. The Court’s jurisdiction in this behalf is to see whether the arbitrator has exceed his jurisdiction or not and therefore, the scope of judicial review of the arbitral award is a narrow one.
- In order to arrive at a conclusion as to whether the Court, in exercise of power under Section 34 of the Act is entitled to modify or vary the award passed by the Arbitrator, the learned single Judge relied on several decisions. In para No.30 of the order passed by the learned single Judge, reliance was placed on the decision of the Honourable Supreme court in Gautam Constructions and Fisheries Limited vs. National Bank for Agriculture and Rural Development reported in 2000 (6) Supreme Court Cases 519. In that case, a single Judge of this Court upheld the claim for award of Rs.400/- per square feet which was modified by the Division Bench of this Court and reduced it to Rs.150/-. When the matter reached the Honourable Supreme Court, the rate was modified further to Rs.250/- per square feet.
- By placing reliance on this decision, the learned single Judge held that the Court exercising jurisdiction under Section 34 of the Act has power to modify or vary the award passed by the Arbitrator. Similarly, reference was made in para No.32 of the order of the learned single Judge to the decision of the Honorable Supreme Court in Tata Hydero Electric Power Supply Co Ltd., vs. Union of India 2003 (4) SCC 172 in which also the Honourable Supreme Court, while reversing the judgment of the High Court, interfered with the award passed by the arbitrator in so far as it relates to payment of interest. For the very same proposition that the Court is empowered to modify or vary the award passed by the arbitrator, reliance was placed on the decision of the Honourable Supreme Court in Hindustan Zinc Limited vs. Friends Coal Carbonisation (2006) 4 SCC 445 to drive home the point that the Court has power under Section 34 to modify the award passed by the Arbitrator.
- The present court was also in entire agreement with the reasoning of the learned single Judge that merely because the word “modify” or “vary” is not indicated in Section 34 of the Act, it will not take away the jurisdiction of the Court exercising under jurisdiction Section 34 of the Act to interfere with the award passed by an arbitrator partially. If such a power is not vested with the Court, it will only lead to multiplicity of proceedings, which is not intended by the legislature while framing Section 34 of the Act.
- A reasonable interpretation to Section 34 would only lead to an irresistible conclusion that the Court can modify or vary the award of the arbitrator if it is contrary to the material evidence adduced by the parties. Even otherwise, as contemplated under Section 34 (2) (v) (b) (ii) of the Act, when the award passed by the Arbitrator is in conflict with the public policy in our Country, reversal or modification of such award passed by the arbitrator is well within the provisions contained under Section 34 of the Act itself. In the present case, as rightly observed by the learned single Judge, the non-constitution of a committee as per the direction of the Honourable Supreme Court in Vishaka case is to be regarded as a statutory violation and contravention of public policy prevailing in India and therefore, the appellant is entitled for a just and fair compensation.
- The learned single Judge, having held that the Court is empowered to modify or vary the award passed by the arbitrator, rightly, proceeded to conclude as to what would be the compensation payable to the appellant under claim No.12. In order to arrive at the quantum of compensation the learned single Judge proceeded to discuss the material evidence available to conclude that there is a breach on the part of the Management in not constituting a committee. In paragraph Nos. 134 to 137. In para No.137 of the order dated 02.09.2014, the learned single Judge concluded that “considering the status occupied and the position in which the petitioner was employed in the first respondent organization and considering the opportunities that she lost on account of the non constitution of the committee, I am of the view that the grant of an amount equivalent the severance benefit of Rs.1,68,00,000/-, as compensation towards the 12th head of claim, would be appropriate.”.
- Present court found that the learned single Judge has not made any arithmetical calculation while awarding compensation under Claim No.12. Even though the learned Arbitrator has awarded a sum of Rs.2 crores under Claim No.3 towards severance compensation, the learned single Judge proceeded to award a sum of Rs.1,68,00,000/- towards non-constitution of a committee as directed by the Honourable Supreme Court in Vishaka case. We wish to observe that the Court, in exercise of jurisdiction under Section 34 of the Arbitration and Conciliation Act, 1996 shall vary or modify the amount awarded without disturbing the factual finding and such a course is legally permissible under Section 34 of the said Act. We also reiterate that the appellant is entitled for compensation under Claim No.12, however, we feel that the quantum of compensation awarded by the learned single Judge is excessive and onerous. It is needless to mention that the appellant is entitled for a just and reasonable compensation for non-constitution of a committee as held by the Honourable Supreme Court in Vishaka case. However, such compensation cannot be a windfall or bounty and it should have reasonable nexus to the breach. Having regard to the above, we feel that the amount of compensation awarded by the learned single Judge towards claim No.12 shall be modified and the appellant is entitled to a sum of Rs.50,000/- (Rupees Fifty Thousand Only) as against Rs.1,68,00,000/- awarded by the learned single Judge.
- DECISION HELD BY COURT:
In the result, the court confirmed the Judgment and Decree dated 02.09.2014 passed by the learned single Judge, except modifying and/or reducing the amount of Rs.1,68,00,000/- awarded under Claim No.12 to Rs.50,000/- (Rupees Fifty Thousand Only). Consequently, O.S.A. No. 59 of 2015 filed by the first respondent/Management is partly allowed to the extent indicated above. O.S.A. No. 181 of 2015 filed by the appellant/claimant is dismissed. There shall be no
order as to costs.