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S. Deepika & Another v/s M/s. Arasan Vinayan Systems, Through its Managing Director, Tuticorin & Another

    C.M.A(MD) No. 1440 of 2013 & M.P.(MD) Nos. 1 & 2 of 2013

    Decided On, 13 August 2021

    At, Before the Madurai Bench of Madras High Court

    By, THE HONOURABLE MRS. JUSTICE R. THARANI

    For the Appellants: M. Saravanan, Advocate. For the Respondents: R1, T. Antony Arul Raj, D. Raj Kumar, Advocates, R2, No appearance.



Judgment Text

(Prayer: Civil Miscellaneous Appeal is filed under Section 37, 1 and 2 of Arbitration Act X of 1940, against the fair and decretal order, dated 30.10.2012, passed in Arbitration O.P.No.304 of 2010, on the file of the Principal District Judge, Thoothukudi, confirming the award, dated 30.04.2010, passed by the second respondent in Arbitration No.5 of 2009.)

1. This Civil Miscellaneous Appeal is filed against the fair and decretal order, dated 30.10.2012, passed in Arbitration O.P.No.304 of 2010, on the file of the Principal District Judge, Thoothukudi, confirming the award, dated 30.04.2010, passed by the second respondent in Arbitration No.5 of 2009.

2. The appellants herein are the respondents and the respondents herein are the petitioners in the original petition in Arbitration No.5 of 2009. Arbitration O.P. No.304 of 2010 was filed against the award, in Arbitration No.5 of 2009, dated 30.04.2010.

3. Brief substance of the petition, in Arbitration O.P.No.5 of 2009, is as follows:

3.1. The petitioner is a registered company registered with Registrar of Companies and it is dealing in computer design, development, manufacture of VLSI Chip sets, Device Drivers and related intellectual properties. The petitioner engaged Associators, who are Engineering Graduates by entering into an intellectual property agreement and instill them training on their intellectual properties, which is very rare in India. The agreement is a commercial one, under section 72 of the Indian Contract Act, 1872.

3.2. One Deepika joined the Company, as an Associator and she entered into an intellectual property agreement, dated 14.08.2008. Her father is one Sasidharan, who stood as surety in the agreement. Deepika joined duty in the petitioner company, situated at 10, Montieth Road, Egmore. She was given training by giving her access to their intellectual properties as part of their investment. She agreed to repay the same by way of technical contribution to the petitioner for a period of three years. As per clause (1) of the agreement, she has to associate with the Company for a minimum period of three years. But, she never reported to duty since, 21.05.2009 and she has committed a violation of Clause (1) of the agreement and she has to pay the penalty.

4. Brief substance of the objection filed by the respondents, Arbitration O.P.No.5 of 2009, is as follows:-

There was no valid Arbitration agreement. Arbitration agreement is one sided. The agreement is only an exploitation, which is against the public policy. There was no provision for proceedings against the Company. No transfer is made in imparting the alleged training as stated in the Arbitration. No chances to know the contents of the agreement was given. Name of the Arbitrator was not disclosed in the agreement. The agreement is silent over the particulars for arriving the claim Rs.10,00,000/- for the breach of the alleged agreement. The company has gained Data bases developed by the first respondent. The petitioner has not imparted or instilled any training. No salary was paid to the first respondent and she was compelled to work in the office, late in the nights hours. Therefore, she stopped from the work. There is no Arbitrable issue involved in the matter. The petitioner is holding all the Educational Certificates of the first respondent. The agreement was obtained by undue influence, fraud and misrepresentation and it was the harassment in the course of employment, which compelled the first respondent to leave office.

5. The Arbitrator passed an award under Section 34 of the Arbitration Act. Against the same, Deepika and her father/Sasidharan filed Arbitration O.P.No.304 of 2010 before the Principal District Judge, Thoothukudi.

6. Brief substance of the Arbitration O.P.No.304 of 2010, is as follows:-

The Tribunal failed to appreciate the case of the revision petitioners and failed to consider the averments made in the counter. The execution of the agreement was questioned by the revision petitioners, but, the same was not answered by the Tribunal. The Tribunal failed to consider the petition under Sections 12 and 13 of the Arbitration Act and Conciliation Act and failed to call for the documents requested by the petitioners. Service of the first petitioner was extracted as an employer and not as a trainee. The award is a biased one. No notice was issued towards intimating Arbitration award to the revision petitioners, the award is a nullity and it has to be set aside.

7. On the side of the petitioners, no witness was examined and 12 documents were marked. On the side of the respondents, no witness was examined and no document was marked.

8. After hearing both sides, the Principal District Judge, Thoothukudi, confirmed the award. Against the same, the petitioners in Ar.O.P.No.304 of 2010 filed this Civil Miscellaneous Appeal, on the following grounds:-

9. The lower Court dismissed the petition on the ground that the jurisdiction of the Court, under Section 34 is limited and there cannot be any re-appraisal of the evidence. But, the grievance of the appellants is that the Arbitrator failed to discharge his statutory duty, under Section 34 of the Act.

10. Only when there is a violations of Clauses 1,5, 6, Clause 14 is applicable. The word is used is “and” not “or”. The Procedure contemplated under Chapter 5 of the Arbitration Act is not followed by the Arbitrator.

11. The Arbitrator failed to consider Section 19 (3) of the Act as to the agreement of the parties to the procedures to be followed by the Tribunal. The Tribunal failed to consider the oral hearing, under Section 24 of the Act and failed to direct either of the parties to let in evidence. Counter claim was not considered by the Arbitrator.

12. The Arbitrator failed to note that the first respondent failed to produce documents, which was specifically mentioned in the agreement. The grounds for arriving at the compensation was not discussed by the Arbitrator. Failure to grant equal opportunity is fatal to the award. Arbitrator is not well equipped towards Intellectual Property Act and also not equated about the VLSI Chip sets to decide the agreement. The requirement under Section 31 of the Arbitration and Conciliation Act, has not been complied with.

13. Arbitrator has not served copies to the appellants. He acted in a biased manner. The award date was not intimated to the appellants. The date of award is 30.04.2010. Only when the notice was issued to the first respondent claiming award amount, the appellants came to know about the award. The notice was served on the appellants only on 09.08.2010.

14. On the side of the appellants, it is stated that the first appellant attended an interview held by the first respondent. She is a fresher, she was compelled to sign an agreement. Copy of the agreement was not furnished to her. The agreement was to work for a period of three years. Under Clause 14, Rs.10,00,000/- penalty can be imposed, if Clauses 1, 5 and 6 were violated. As per clause 1, the first appellant failed to work for three years.

15. After the agreement, she joined duty. The Company is situated in the outskirts of Chennai and the first appellant was compelled to work till late hours at night. She has to work up to 10.00 p.m., daily and she could not reach the hostel. After six months, she left the job. Only after informing the superiors, the first appellant left the office. Though she worked for a period of six months, agreed salary was never given to her. Only Rs.24,000/- was given to the first appellant for four months as salary. For the last two months, there was no salary paid to the first appellant.

16. The second appellant has not signed the agreement as a guarantor. The entire Arbitration agreement is one sided. No penal consequences was mentioned. Arbitrator failed to provide any opportunity to prove the case. No trial was ever conducted under Section 19, and on the date of filing the counter claim itself without any reason and without recording any evidence, the Arbitrator straightly posted the matter for respondent side evidence. Counter claim was rejected, without any reasons. Only two line discussion was made in the Arbitration award for the rejection of the counter claim. Counter was filed on the fourth hearing date, on the fifth hearing, the first respondent herein filed a re-joinder petition and on the seventh hearing, the first appellant filed a counter claim and on the same date, counter claim was rejected and the case was posted evidence, if any, on the side of the respondents. No opportunity for the appellants to produce evidence was given.

17. How, the first respondent gave training to the first appellant was not stated. No training was ever given to the first appellant. The respondents has not proved any loss for giving training to the appellants. The first respondent has not produced any document or adduced any evidence. Even then, the Arbitrator award was passed in their favour.

18. On the eight hearing date, the appellants herein filed a petition for production of documents. All the Educational Certificates are with the first respondent. Though the documents are in the custody of the first respondent herein, the documents were not produced. On the ninth hearing date, the first respondent requested for time. On the tenth hearing date, the first respondent was absent. On the eleventh hearing date, a reply statement was filed stating the documents were not relevant to decide the petition. No order was passed on the petition to produce document. On the 13th hearing date, the petition seeking for document was returned and the case was closed for orders.

19. The Arbitrator pre-decided everything, respondent has not adduced any evidence. The award is against the principles of natural justice. The Principal District Judge, has dismissed the petition only on the ground that re-appreciation of evidence is not permissible, but, in the award, there was no appreciation of evidence at all. For issue No.2 to 4 just one line order was passed. As per clause 1, salary was not paid for two months. A 22 years girl was compelled to work late night in a Company, which is situated in the out skirts of the City. No reason was stated by the Arbitrator, regarding these points. Claiming damage of Rs.10,00,000/- is illegal.

20. On the side of the respondent, it is stated that the first respondent Company is dealing in computer design, development, manufacture of VLSI Chip sets, Device Drivers and there was an intellectual property agreement. The first appellant is only a fresher, she has no knowledge of the intellectual property. There is an agreement for three years, duties and responsibilities were fixed. The training will enhance the earning capacity of the first appellant. There is a commercial value in the training. There is an Arbitration Clause for penalty on violation.

21. The first appellant joined duty in the Company of the first respondent and then she was transferred to Chennai to a sister concern on 12.04.2009, but, the first appellant failed to report. Notice was sent on 15.06.2009, she failed to turn up. Hence, the first respondent approached the Arbitrator before the Arbitration Tribunal. The first appellant admitted that she left the office. Even in the counter, she has admitted that she has not attended the duty. By filing the counter claim, the appellants accepted the jurisdiction of the Arbitrator. The appellants cannot take a different view at this stage. The first appellant is only an Associate and she is not a worker. This fact was clearly discussed by the Principal District Judge. When no procedure is fixed in the agreement, the Arbitrator is at liberty to fix the procedures. No petition was filed by the appellants, before the Arbitrator, to produce any witness. Sufficient opportunity was given to the appellants and prayed the appeal to be dismissed.

22. A perusal of the agreement reveals that the agreement is named as a private business agreement. In Clause 5, 6 of the agreement, it is stated as follows:-

5. Restrictions During Association:

The Associator agrees and undertakes

(i) to devote her full time, energy and ability exclusively to the business interests of Arasan and desist from any other activity that would interfere with her obligations under this Agreement. She further represents that she has no other outstanding commitments inconsistent with this clause.

(ii) to promptly disclose to Arasan within a week any overtures/ inducements received by her from their clients, competitors and others for quitting her association with Arasan.

(iii) not to render to anyoneelse services of any kind for fee or otherwise.

(iv) not to publish books / articles on any subject directly or indirectly related to Intellectual Properties of Arasan.

(v) to disclose to Arasan all her correspondences by post, E-mail or otherwise on subjects directly or indirectly related to their Intellectual Properties.

(vi) to disclose to Arasan any change of her postal and E-mail addresses within two weeks of such changes.

6. Restrictions During Post Association

After expiry of the period as in Clause (i) or premature quitting / termination, the Associator agrees and undertakes

(i) not to take up jobs/assignments with clients / competitors of Arasan without their permission in writing for a period of 12 months from the date of expiry of the period as is Clause (1) and also to disclose to them periodically, her postings / jobs during this period to confirm that she abides this undertaking.

(ii) not to engage in any business or job that would directly or indirectly interfere with her obligations to Arasan.

(iii) not to disclose any information on any of the Intellectual Properties of Arasan to anyoneelse.

(iv) not to publish books/articles on any subject directly or indirectly connected to Intellectual Properties of Arasan.

23. Though the term private business agreement is mentioned, clause 5 and 6 clearly reveals that the appellant should not take any job directly or indirectly or render service of any fees or otherwise. An opportunity was given to the first respondent to terminate the Association with the first appellant that too without notice. But, no such opportunity was given to the first appellant in the agreement. This wording clearly reveals that this is not a private business contract.

24. In clause 2, it is stated that “the Associator shall be paid an allowance during the training period and consideration / fee in cash or kind in commensurate with her proficiency / contribution to Arasan's business, subject to clause (17).” Clause 2 did not disclose what was the allowance to be paid to the first appellant, at the time of training period and what was the fees to be paid to her, after the completion of the training. The agreement is silent as to any action, on failure on the part of the Company. When the obligation of one party to the agreement is vague, the agreement is malafide.

25. In any business agreement, equal opportunity should be given to both the parties. But, in this agreement, no such opportunity was ever given to the first appellant. No obligation was ever given to the first appellant and this agreement is not a private business agreement and this agreement is devoid of merits.

26. A perusal of the Arbitration award reveals that the first respondent has not deposited the Educational Certificate before the Arbitrator. Clause 17 of the agreement reads as follows:-

17. Academic Certificates:-

The Associator hereby volunteers to deposit her Original Academic Certificates with Arasan to affirm her irrevocable commitment to this agreement and they shall be returned to her on expiry of period of association as in clause (1).

In the event of any violation by Associator and consequent termination by Arasan, these shall be deposited with the Sole Arbitrator appointed in terms of Clause (15).

Before the Arbitrator, though the first appellant has requested the original certificates to be produced, the first respondent has failed to do the same. The first respondent failed to comply the condition No.17 in the agreement and he failed to deposit the Original Educational Certificate of the first appellant before the Arbitrator. When the first appellant has prayed for production of original Educational Certificates before the Arbitrator in the counter claim, the Arbitrator failed to consider the same and reject the counter claim filed by the first appellant.

27. The first respondent claimed that he instilled training which will enhance the commercial earning capacity of the first appellant and training itself is a part of the investment. But, before the Arbitrator, the first respondent has not filed any document to prove that any training was ev

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er given to the first appellant. Without any proof regarding the training, the first respondent is not entitled to claim damages. 28. The allegation of the first appellant is that the first respondent has not paid the agreed salary. The agreement is vague as to the salary agreed by the first respondent. The claim of the first appellant is that only a sum of Rs.24,000/- was paid as a salary for a total period of four months. It is further stated that the first appellant has worked for two months, without salary. This point was not disproved by the first respondent before the Arbitrator. 29. The second appellant has not signed the agreement as a Guarantor, he has signed the agreement only as a witness. But, the Arbitration Petition was filed against the witness also. The award was passed against the witness, which is illegal. Though the agreement was named as a private business agreement, the entire contention of the agreement is that of a “bonded labour agreement”. When the agreement itself is not a private business agreement, the Arbitration based on that agreement and the award passed by the Arbitrator are not maintainable. 30. For the above reasons, the order passed by the Principal District Judge, in Arbitration O.P.No.304 of 2010, on the file of the Principal District Judge, Thoothukudi, dated 30.10.2012, is hereby set aside and the award in Arbitration No.5 of 2009, passed by the second respondent, dated 30.04.2010, is also set aside. The first respondent is directed to produce all the Original Educational Certificates of the first appellant, before this Court, within a period of one month from the date of receipt of a copy of this order. 31. With the above direction, this Civil Miscellaneous Appeal is allowed. No costs. Consequently, connected Miscellaneous Petitions are closed. 32. Call on 20.09.2021 “for reporting compliance”.
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