HARYANA TOURISM LTD. VS. MS. KANDHARI BEVERAGES LTD.

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CITATION	2022, SCC ONLINE SC 31
DATE OF JUDGMENT	11^th January, 2022
COURT	The Supreme Court of India
APPELLANT	Haryana Tourism Limited
RESPONDENT	M/S Kandhari Beverages Limited
BENCH	Justice M.S. Shah and Justice B.V. Nagarathna

INTRODUCTION

This case is an appeal from the judgment of the High Court of Punjab and Haryana, which set aside an arbitral award in favour of the appellant, Haryana Tourism Ltd. (HTL), on the ground that it was contrary to the public policy of India. The appellant is a public sector undertaking engaged in the promotion of tourism in the state of Haryana. The respondent, M/s. Kandhari Beverages Ltd. (KBL), is a manufacturer and distributor of aerated cold drinks. The dispute between the parties arose out of a tender contract for the supply of cold drinks at the tourist complexes of the appellant for a period of one year. The main issue in this case is whether the High Court was justified in interfering with the arbitral award, which directed the respondent to pay a sum of Rs. 9.5 lakhs to the appellant as sponsorship money for a Mango Mela event organized by the appellant.

FACTS OF THE CASE

The fact of the case of Haryana Tourism Ltd. vs. Ms Kandhari is as follows:

The appellant, Haryana Tourism Ltd., invited tenders for the supply of aerated cold drinks at its tourist complexes for a period of one year.
The respondent, Ms Kandhari, submitted the tender and it was accepted by the appellant.
As per the agreement, the respondent was supposed to pay Rs. 20 lakhs for brand promotion, which was to be spent as per mutual agreement between the parties.
The appellant organized a Mango Mela and spent Rs. 1 lakh. Both parties agreed to hold musical nights, for which the respondent claimed to have spent Rs. 13.92 lakhs.
The appellant asked the respondent to deposit Rs. 19 lakhs as sponsorship money, which the respondent refused to do.
The appellant terminated the contract and referred the dispute to arbitration.
The arbitrator passed an award in favor of the appellant, directing the respondent to pay Rs. 9.5 lakhs.
The respondent challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, but the challenge was dismissed by the Additional District Judge.
The respondent filed an appeal under Section 37 of the Act before the High Court, which allowed the appeal and set aside the award.
The appellant appealed to the Supreme Court, which reversed the High Court’s decision and upheld the award.

ISSUES RAISED

The main issues raised in the case were:

Whether the respondent was liable to pay Rs. 20 lakhs as per the agreement or only Rs. 6.08 lakhs as per the actual expenditure incurred by the appellant for brand promotion?
Whether the appellant was justified in terminating the contract on the ground of non-payment of sponsorship money by the respondent?
Whether the arbitrator’s award in favour of the appellant was valid and enforceable or liable to be set aside on the ground of being against the public policy of India?

CONTENTIONS OF APPEALENT

The appellant (Haryana Tourism Ltd) argued that the respondent (M/s Kandhari Ltd) had agreed to pay Rs. 20 lakhs as sponsorship money for the supply of aerated cold drinks at the tourist complexes of the appellant. The appellant claimed that this amount was fixed and not dependent on the actual expenditure incurred by the appellant for brand promotion. The appellant contended that the respondent had breached the contract by failing to pay the agreed amount and that the appellant had the right to terminate the contract on this ground. The appellant also supported the arbitrator’s award in its favour and challenged the High Court’s order setting aside the award on the ground of public policy.

CONTENTIONS OF REPONDENT

The respondent (M/s Kandhari Ltd) argued that the sponsorship money was to be paid as per the mutual agreement between the parties on the actual expenditure incurred by the appellant for brand promotion. The respondent claimed that it had already paid Rs. 13.92 lakhs for the musical nights organized by the appellant and that the appellant had not provided any proof of spending any more money for brand promotion. The respondent contended that the appellant had wrongfully terminated the contract and that the respondent was entitled to a counter claim for the damages suffered by it. The respondent also supported the High Court’s order setting aside the arbitrator’s award on the ground of public policy, alleging that the award was arbitrary, irrational, and contrary to the terms of the contract.

JUDGEMENT

The case of Haryana Tourism Limited vs. M/S Kandhari Beverages Limited was a dispute over the payment of sponsorship money for the supply of aerated cold drinks at the tourist complexes of the appellant corporation. The arbitrator had awarded Rs. 9.5 lakhs to the appellant and dismissed the counterclaim of the respondent. The High Court had set aside the award and the order of the Additional District Judge, who had upheld the award. The Supreme Court, however, reversed the High Court’s decision and restored the award and the order of the Additional District Judge. The Supreme Court held that the High Court had exceeded its jurisdiction under Section 37 of the Arbitration and Conciliation Act, 1996 by quashing the award on the ground of public policy. The Supreme Court observed that an award can be set aside only if it is against the public policy of India, which means that it is contrary to the fundamental policy of Indian law, the interest of India, justice or morality, or if it is patently illegal. The Supreme Court found that none of these grounds were applicable in the present case and that the award was based on a fair interpretation of the contract between the parties.

ANALYSIS

The case of Haryana Tourism Limited vs. M/S Kandhari Beverages Limited is an example of how the courts should exercise their jurisdiction under Section 37 of the Arbitration and Conciliation Act, 1996. The Supreme Court held that the High Court had exceeded its jurisdiction by quashing the award on the ground of public policy, without finding any of the grounds specified in Section 34(2) (b) of the Act. The Supreme Court reiterated the principles laid down in Renusagar Power Co. Ltd. vs. General Electric Co. and ONGC Ltd. vs. Saw Pipes Ltd. that an award can be set aside only if it is against the public policy of India, which means that it is contrary to the fundamental policy of Indian law, the interest of India, justice or morality, or if it is patently illegal. The Supreme Court also observed that the High Court cannot enter into the merits of the case, while deciding an appeal under Section 37 of the Act, and that the award should be given due deference and respect, unless it is vitiated by any of the grounds mentioned in Section 34(2) of the Act.

The case highlights the importance of respecting the autonomy and finality of arbitration, and the limited scope of judicial intervention in arbitral awards. The case also demonstrates the need for a consistent and uniform interpretation of the public policy ground, which should not be used as a tool to interfere with the arbitrator’s decision, unless it is manifestly illegal or unjust. The case also shows the difference between the standard of review under Section 34 and Section 37 of the Act, and the role of the High Court as an appellate court, which should not re-appreciate the evidence or substitute its own view for that of the arbitrator. The case is a significant contribution to the jurisprudence of arbitration law in India, and a reminder of the pro-arbitration stance of the Supreme Court.

CONCLUSION

The conclusion of the above case is that the Supreme Court reversed the High Court’s decision and restored the award and the order of the Additional District Judge. The Supreme Court held that the High Court had exceeded its jurisdiction under Section 37 of the Arbitration and Conciliation Act, 1996 by quashing the award on the ground of public policy, without finding any of the grounds specified in Section 34(2)(b) of the Act. The Supreme Court also emphasized the importance of respecting the autonomy and finality of arbitration, and the limited scope of judicial intervention in arbitral awards. The Supreme Court observed that the award was based on a fair interpretation of the contract between the parties and was not against the public policy of India. The Supreme Court also noted the difference between the standard of review under Section 34 and Section 37 of the Act, and the role of the High Court as an appellate court, which should not re-appreciate the evidence or substitute its own view for that of the arbitrator. The case is a significant contribution to the jurisprudence of arbitration law in India, and a reminder of the pro-arbitration stance of the Supreme Court.

REFERENCES

This Article is written by Shamyana Parveen student of Bikash Bharati Law College, Kolkata, West Bengal; Intern at Legal Vidhiya.

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