A 2-judge bench of the Delhi High Court has reiterated the scope of review under Section 37 Arbitration and Conciliation Act, 1996 (“ACA”) and the principle that if a party terminates a determinable agreement, an injunction will not lie to revive or specifically enforce it. The remedy of the aggrieved party is to seek damages if the termination was wrong in law.

A. The background

The dispute in the case arose out of a joint venture agreement of 2011 (“JVA-II”). While setting off Busworld’s dues, Inter Ads defaulted on the last instalment and offered to compensate with interest. Arguably, earlier agreeing to the arrangement, Busworld terminated the agreement.

The dispute in the case arose out of a joint venture agreement of 2011 (“JVA-II”). While setting off Busworld’s dues, Inter Ads defaulted on the last instalment and offered to compensate with interest. Arguably, earlier agreeing to the arrangement, Busworld terminated the agreement.

Inter Ads applied to the court under Section 9 ACA for quashing of the termination notice. Jyoti Singh J, sitting singly, dismissed the petition (OMP (I) (COMM) 273 of 2019 decided on 13 January 2020). She examined the provisions of the agreement as well as the law on determinable contracts in detail. A reader interested in the issue of a determinable contract will find a reference to several relevant authorities in the judgment of Singh J. She concluded that the agreement was determinable and could not be specifically enforced.

B. The court’s decision

Firstly, the court noted that the “scope of an appeal under Section 37 of the Arbitration Act is fairly limited” and referred for this point to Ministry of Youth Affairs & Sports v. Swiss Timing Ltd, 2019 SCC OnLine Del 10934.^[1] [1] This was a judgment by Hima Kohli and Asha Menon JJ, where they had affirmed the dismissal by a single-judge of a set-aside application. Referring to several decisions, the court had concluded, among others, that when it comes to setting aside an award under public policy grounds, it should mean that the award should shock the conscience of the court and would not include what the court thinks is unjust based on the facts. Show More

The court then examined two clauses of the contract. It concluded that the agreement was terminable and “and therefore, the conclusion arrived at by the learned Single Judge that specific performance of the contract could not be granted and nor could any injunction be issued …”

It noted (before recording the finding on termination later in that same passage) that the validity of the termination and whether if the procedure set out in the agreement was followed before terminating were not matters for the court (the court used the expression “this court”, which appears to be a reference to the appellate court).

Jyoti Singh J had relied on MIC Electronics Ltd. and others. v. Municipal Corporation of Delhi and others, MANU/DE/0354/2011 “to hold that legality of the termination and the justification of the appellant of not paying the balance due to the respondent would have to be examined by the learned Arbitrator.” The court approved of it noting “reliance was rightly placed on the following observations made in the captioned case.”