Principles Of Equity And Fairness Not Applicable To Commercial Matters, Relief Is Governed By Contract: Delhi High Court

The Delhi High Court bench of Justice C Hari Shankar has held that commerce is devoid of equity. The bench held that commercial transactions are driven by a harsh reality, and the principle of universal brotherhood does not extend to commercial dealings. In these transactions, there is no obligation on the arbitrator for fairness, kindness, or equity, and no court can mandate such qualities. The bench noted that while there might be a limited expectation of fairness in transactions involving the Government, the contract's terms remain paramount. In commercial disputes, relief cannot be granted based on principles of equity and fairness; it must be sought within the framework of the Contract Act or relevant statutes. Further, the High Court held that regardless of how unfair the outcome might be for the petitioner due to the respondent's actions, relief is only available if the petitioner can demonstrate a contractual right entitling them to such relief. Brief Facts: Maruti Traders (Petitioner) was authorized by Itron India Pvt Ltd (Respondent) to act as a non-exclusive dealer for domestic and bulk water meters and accessories in Chhattisgarh. The Petitioner liaised with various organizations, including Public Sector and Government Undertakings, ensuring that the tenders issued included specifications for water meters manufactured by the Respondent. The Petitioner secured a market for the Respondent in Chhattisgarh and the Respondent quoted prices at which it would sell the water meters. The Petitioner claimed there was an understanding that it could charge a price to customers that included a profit margin over the Respondent's quoted prices. The Petitioner argued that it was entitled to this profit margin and claimed the Respondent wrongfully granted dealership rights to others for customers initially liaised with by the Petitioner. In the arbitral proceedings, the Petitioner sought compensation for the lost profit margin. The arbitrator rejected the claims of the Petitioner. Feeling aggrieved, the Petitioner approached the High Court under Section 34 of the Arbitration and Conciliation Act, 1996. Several emails were cited by the Petitioner to demonstrate ongoing communication and collaboration between the Petitioner and the Respondent, including instances where the Petitioner ensured the inclusion of the Respondent's water meters in various tenders. It argued that the Petitioner was instrumental in securing contracts for the Respondent by liaising with government departments and ensuring tender specifications matched the Respondent's products. It argued that the Respondent acknowledged the Petitioner's efforts and suggested prices for water meters. Subsequently, the Respondent entered into agreements with other entities and appointed them as authorized resellers in Chhattisgarh including parties initially liaised with by the Petitioner. The Petitioner objected to this and claimed that it constituted a breach of the dealership agreement. The Petitioner claimed a commission of ₹ 9.59 crores and submitted detailed calculations and supporting documents. The Petitioner reiterated these claims in a letter and accused the Respondent of breaching the contractual relationship by dealing directly with other dealers in Chhattisgarh. The Petitioner contended that the letters from 2009 to 2012 constituted a contractual relationship entitling them to compensation based on the difference in prices charged to customers. It argued that the direct sale of water meters by the respondent in Chhattisgarh and the appointment of other resellers constituted a breach of this agreement. Further, the {etitioner claimed that the Reseller Agreement's Clause 2.01, which described their role as non-exclusive, did not negate their rights under prior dealings. In response, the Respondent argued that no binding contract existed prior to the Reseller Agreement. It contended that the letters were mere authorizations without legal binding terms. The Respondent maintained that Clause 2.01 of the Reseller Agreement allowed them to sell directly and appoint other resellers which did not constitute a breach. Observations by the High Court: The High Court held that that the jurisdiction under Section 34 is distinctly different from an appellate jurisdiction. It referred to the decision of the Supreme Court in UHL Power Co. Ltd v. State of H.P. and Dyna Technologies (P) Ltd v. Crompton Greaves Ltd where it was held that Section 34 does not permit casual or cavalier interference with arbitral awards. Interference is impermissible merely on the grounds that a different possibly better view could be taken. The Supreme Court in Ssangyong Engineering & Construction Co. Ltd v. N.H.A.I. and Parsa Kente Collieries Ltd v. Rajasthan Rajya Vidyut Utpadan Nigam Ltdwhere it was held that it is necessary to respect the autonomy of the arbitral tribunal and limit...

Principles Of Equity And Fairness Not Applicable To Commercial Matters, Relief Is Governed By Contract: Delhi High Court

Rajesh Kumar

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