KISSANDHAN AGRI FINANCIAL SERVICES PVT LTD vs ASHOK KUMAR MITTAL
$~20
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of decision: 05th October, 2023
+ FAO (COMM) 173/2022 & CM APPL. 49674/2022
KISSANDHAN AGRI FINANCIAL SERVICES PVT. LTD
….. Appellant
Through: Mr. Rajat Joneja, Mr. Simrat Singh Pasay & Ms. Vani Gupta, Advocates.
versus
ASHOK KUMAR MITTAL ….. Respondent
Through: Mr. P.K. Mullick & Ms. Soma Mullick, Advocates.
CORAM:
HON’BLE MR. JUSTICE SURESH KUMAR KAIT
HON’BLE MS. JUSTICE NEENA BANSAL KRISHNA
J U D G M E N T (oral)
1. The Appeal under Section 37(1)(C) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act, 1996) read with Section 13(1A) of the Commercial Courts Act, 2015 has been filed against the Order dated 27.08.2022 vide which the petition under Section 34 of the Act, 1996 filed by the appellant assailing the Arbitral Award dated 02.02.2019 has been dismissed by the learned District Judge (Commercial Court).
2. The admitted facts are that the respondent had been appointed as Chief Executive Officer of the appellant Company vide Letter of Appointment dated 22.04.2014 upon terms and conditions as mentioned in the Appointment letter. In addition to the salary and other perks, the respondent was entitled to get bonus as per the terms stated, as under:
“(i) Fixed: Guaranteed bonus of Rs.10 lacs payable of the completion of one year and every subsequent year.
(ii) Joining Bonus: One time bonus of Rs. 10 lacs payable on the completion of one year.
(iii) Additional Bonus: An additional bonus shall be paid on the basis of achievement of the following target parameters:-
(a) Bonus of 6.5%, if PBT is achieved upto Rs. 5.65 Crores.
(b) Or Bonus of 7.25% if PBT is achieved between Rs.5.65 Crores to Rs. 6.25 Crores.
(c) Or Bonus of 8% if PBT is above Rs. 6.25 Crores.”
3. As noted above, during the tenure of employment of the respondent, he got a fixed guaranteed bonus of Rs.10 lacs payable on completion of one year and every subsequent year. However, the dispute arose between the parties in respect of the additional bonus as provided in appointment letter if PBT (Profit before Tax) was achieved upto and above specified sums. The matter was referred to learned Arbitrator who adjudicated the Claim of the respondent and granted additional bonus in the sum of Rs. 1,19,42,625.18/- for the Financial Years ending 31.03.2015 and 31.03.2016 and on pro-rata basis for the Financial Years ending 31.03.2017 from 01.04.2017 upto 11.01.2017. The respondent was held entitled to bonus @ 6.5 % of PBT for the year ending 31.03.2015.
4. The appellant aggrieved by the Arbitral Award dated 02.02.2019 filed the Objections under Sections 34 of the Act, 1996 before the learned District Judge (Commercial Court), wherein, the appellant asserted that the respondent was not entitled to any bonus since the PBT for the requisite financial years was less than 5.65 Crores. It was argued that the learned Arbitrator grossly erred in holding that the profit derived by the appellant company from its transaction with sister concerns including any NEFM should be included in computing PBT for the purpose of granting bonus to the respondent. It was claimed that the respondent had no role to play in the business transactions between the appellant Company and its sister Concerns and hence, the profit derived from the business transactions of the appellant with the third parties alone could be considered for computing the entitlement of the respondent to the bonus. The respondent was therefore not entitled to additional bonus.
5. The learned District Judge (Commercial Court) referred to the terms of LOA (Letter of Appointment) which contained the Clause for additional bonus and observed that the learned Arbitrator had rightly granted the additional bonus to the respondent and there was no merit in the Objections which were dismissed vide Order dated 27.08.2022.
6. Aggrieved, the present Appeal has been preferred.
7. The main ground of challenge essentially is the same as was raised before the learned Arbitrator. It was contended that the respondent was appointed as Chief Executive Officer-Collateral Finance (CEO-CF) by the appellant Company. It was asserted that the primary responsibility of the respondent was Business Development, a fact which remains undisputed. The Business Development as understood by the parties was to generate business from farmers, joint liability groups (JLGs), small & medium-sized enterprises (SMEs), commodity traders, processors, exporters, importers and the other agri-intermediaries which were the appellants target sector.
8. Immediately prior to joining the appellants employment, the respondent had furnished a business plan, setting out his disbursement targets for the coming Financial Years. Similarly, at various points during the currency of his employment, the respondent had furnished projections, plans and models, setting out the disbursement targets proposed to be achieved by him. It was asserted that the respondent was unable to achieve the disbursement targets that were promised by him. Resultantly, the loans availed by the appellant from financial institutions at the asking of the respondent, remained idle and resulted in generating negative margins for the appellant. The appellant thus incurred interest cost on loans availed without being able to generate income by making corresponding disbursements.
9. The respondent was made aware that the appellant Company was generating negative margins and the actual disbursement was much lesser than what was planned initially. The respondent was repeatedly asked for reasons for incurring deficits under his management in all financial decisions. Moreover, numerous discussions between the appellants management and respondent regarding the latters non-performance and non-achievement of disbursement targets that had been committed by the respondent. As a consequence of the respondents delays and non-achievement of targets, the Business Development Team was realigned to other senior Management in May 2016. In this backdrop, the respondent resigned from the services of the appellant on 12.10.2016 with effect from 11.01.2017.
10. It is asserted by the appellant that as per terms of the Letter of Appointment, the additional bonus was not payable and the respondent never claimed it during his employment with the appellant Company and he made no communication with the appellant in respect of the same. The entitlement of respondent to additional bonus was not communicated till 2017, apart from two emails dated 24.06.2015 and 08.09.2015. The issue was discussed in the Board of Directors of the appellant who found that no additional bonus was due and payable to the respondent and accordingly, communicated to him. No further communication either by way of dissent or follow up was written by the respondent thereafter.
11. The appellants consistent stand has been that payment of additional bonus to the respondent was contingent on him having contributed to the PBT of the appellant Company. Since the respondent failed to make the requisite efforts, he was not entitled to additional bonus. It was asserted that the learned Arbitrator fell in error in granting additional bonus to the respondent and the learned District Judge (Commercial Court) also failed to appreciate the terms of Letter of Appointment and consider that the business generated on account of transactions with the sister Concerns could not have been added to calculate Profit before Tax. It was therefore, submitted that the impugned Order dated 27.08.2022 dismissing the Objections of the appellant filed under Section 34 of the Act, 1996 and also the Arbitral Award dated 02.02.2019 are liable to be set aside.
12. Submission heard of both the counsel for the parties and perused the record.
13. In the present case, the learned Arbitrator has considered the Letter of Appointment and terms of the Clause, Additional bonus which was payable at 6.5% in case the PBT was upto Rs.5.65 Crores. Nowhere in this clause was it mentioned that the said targets/achievements had to be with the concerted efforts of the respondent. It was not stipulated that the business generated through the sister Concerns shall not be included while making the assessment of Profit before Tax. It simply stated that where PBT was upto Rs.5.65 Crore, the respondent shall be entitled to 6.5% additional bonus.
14. The learned Arbitrator while interpreting the terms of Appointment held as under:
130. I find no merit in the contentions of the Respondent as to the manner in which it had sought to ascribe to adjudge the entitlement of the Claimant to Additional Bonus on “PBT” in the present proceedings, being the stand alone performance of the Respondent Company and not due to any linked performance derived from Group Companies Including NEFM and/or that in considering the entitlement of the Claimant towards Additional Bonus, the profits generated by the Respondent Company from transactions it may have derived from such other companies/entitles/sister concerns, including but not limited to NEFM.
xxx xxx xxx
132. Therefore, I am unable to agree with the contentions of the Respondent that while reading the said terms of the Letter of Appointment, which indisputably constitutes the written contract between the parties, word(s) ‘PBT’ (Profit before Tax) should be read or construed as ‘PBT’ minus transactions that were made with other companies of the Group and particularly, NEFM.
15. The learned District Judge (Commercial Court) while considering the findings in the Arbitral Award, also concluded that there was no illegality or perversity in the conclusion arrived at by the learned Arbitrator. Even in the present Appeal, the appellant has not been able to show that the conclusions arrived at by the learned Arbitrator and upheld by the learned District Judge (Commercial Court) are in any manner illegal, perverse or without any basis. In fact, considering the language of the terms of Letter of Appointment, there could not have been any possible interpretation except the one adopted by the learned Arbitrator.
16. The Apex Court in Ssangyong Engineering and Construction Co. Ltd. vs National Highway Authority of India, Civil Appeal No. 4779 of 2019 laid down the scope of interference under Section 34 of the Act, 1996 and held that the powers held by an appellate court cannot be exercised under Sections 34 or 37 of the Act, 1996 as it does not include reassessment or reappreciation of the evidence and consequently errors of fact cannot be corrected. Further, in MMTC Limited v. Vedanta Ltd, (2019) 4 SCC 163 it was found incontrovertible that an interference with an Order made under Section 37 of the Act, 1996 cannot go beyond the boundaries established by Section 34. In other words, the Court is not permitted to independently evaluate the merits of the award; instead, it must just confirm that the courts use of its authority under Section 34 of the Act, 1996 has not gone beyond what is allowed under the statute.
17. In view of the discussion above, we find no merit in the Appeal which is hereby dismissed.
18. The pending applications, if any, also stand disposed of.
(SURESH KUMAR KAIT)
JUDGE
(NEENA BANSAL KRISHNA)
JUDGE
OCTOBER 05, 2023/akb
FAO (COMM) 173/2022 Page 7 of 7