SPICEJET LIMITED vs KAL AIRWAYS PRIVATE LIMITED & ANR. & ORS.

* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 07 February 2024
Judgment pronounced on: 17 May 2024

+ FAO(OS) (COMM) 179/2023

AJAY SINGH ….. Appellant

Through: Mr. Amit Sibal, Sr. Adv. with Mr. K.R. Sasiprabhu, Mr. Goutham Shivshankar, Mr. Tushar Bhardwaj, Mr. Vinayak Maini, Mr. Kartikeya Asthana, Mr. Vishnu Sharma, Mr. Manan Sishodia and Md. Ilyas, Advs.
versus

KAL AIRWAYS PRIVATE LIMITED
& ANR. ….. Respondents
Through: Mr. Maninder Singh, Sr. Adv. with Ms. Nandini Gore, Ms. Sonia Nigam, Mr. Prabhas Bajaj, Mr. Ajay Sabharwal, Mr. Rajat Dasgupta & Mr. Akarsh Sharma, Advs.

+ FAO(OS) (COMM) 180/2023

SPICEJET LIMITED ….. Appellant
Through: Mr. Amit Sibal, Sr. Adv. with Mr. K.R. Sasiprabhu, Mr. Goutham Shivshankar, Mr. Tushar Bhardwaj, Mr. Vinayak Maini, Mr. Kartikeya Asthana, Mr. Vishnu Sharma, Mr. Manan Sishodia and Md. Ilyas, Advs.

versus

KAL AIRWAYS PRIVATE LIMITED & ANR.
& ORS. ….. Respondents

Through: Mr. Maninder Singh, Sr. Adv. with Ms. Nandini Gore, Ms. Sonia Nigam, Mr. Prabhas Bajaj, Mr. Ajay Sabharwal, Mr. Rajat Dasgupta & Mr. Akarsh Sharma, Advs.

CORAM:
HON’BLE MR. JUSTICE YASHWANT VARMA
HON’BLE MR. JUSTICE RAVINDER DUDEJA

J U D G M E N T

YASHWANT VARMA, J.

S. No.
Particulars
Paragraph Nos.
A.
INTRODUCTION
1 – 2
B.
BROAD FACTUAL MATRIX
3 – 9
C.
SUBMISSIONS OF THE APPELLANTS
10 – 48
D.
SUBMISSIONS ON BEHALF OF THE RESPONDENTS – KAL AND KM
49 – 78
E.
EVALUATION OF THE RIVAL SUBMISSIONS
79 – 124

A. INTRODUCTION

1. The appellants question the correctness of the judgment rendered by a learned Single Judge of the Court dated 31 July 2023 and in terms of which the challenge to the Arbitral Award under Section 34 of the Arbitration and Conciliation Act, 19961 as mounted has come to be dismissed. The petitions before the learned Single Judge had impugned the Arbitral Award dated 20 July 2018 as corrected vide order dated 20 September 2018 of the Arbitral Tribunal2.
2. The claim before the AT had been brought by KAL Airways Private Limited3 along with Mr. Kalanithi Maran4, and in which the appellants – SpiceJet Limited5 and Mr. Ajay Singh were named as the respondents. The AT had upon consideration of the claims as laid by KAL and KM as well as the counterclaims which had been filed by the appellants herein framed the following operative directions:-
“60. ….. In conclusion, we hold as follows:-
(1) The Claimants are entitled to refund of Rs.308,21,89,461 /- from the Respondents.
(2) The parties shall explore the possibility of giving effect to and exercise the option as described in detail. In case the efforts do not fortify, the Respondents shall within a period of one month thereafter refund the amount in question i.e. Rs. 270,86,99,209/- to the Claimant No. 2 (which is arrived at after adjusting the counter claim of Rs. 100 Crores which has been allowed)
(3) Since the amount covered by conclusion (1) was with the Respondents since November 2015, they would have become liable to pay interest on the same. Though, interest at the rate of 18% per annum has been claimed, we are of the view that since Respondent No.1 Company took over a huge liability and also paid interest on the tax amount payable by the Claimants, interest at the rate of 12% on Rs.308,21,89,461/- would be appropriate. The amount has to be accordingly calculated for about 30 months. Additionally, in view of the finding relating to the CRPS claim and the proved position that the Respondents have paid interest / servicing charges of around Rs.29 Crores, the counter claim to that extent is allowed.
(4) So far as costs are concerned, in view of the factual scenario involved, both parties are directed to bear their respective costs. The Cost of Arbitration (fee of Arbitrators, expenses including travel , hotel expenses etc. of the Arbitrators, venue and Secretarial assistance) shall be borne equally by the parties.
(5) In case the payments, as directed, to be made by the Respondents are not so made within two months from the relevant date, the Claimants shall be entitled to interest @ 18% from the last date of the due date in terms of this Award.
(6) Claims / counter claims other than those dealt with above and specifically granted stand rejected.
(7) The parties have furnished stamp papers of Rs.500/- each with undertaking to pay the deficit, if any, as and when called upon to do so.”

B. BROAD FACTUAL MATRIX
3. In order to appreciate the challenge which stands raised, we deem it apposite to notice the following essential facts. The case before the AT emanates from a transaction involving the takeover of SpiceJet by Ajay Singh from KAL and KM. The appellants contend that at the time when they took over SpiceJet, it was a company mired in debt to the extent of approximately INR 2200,00,00,000/- and the transaction essentially was aimed at taking over the debt-ridden company and absolving KM of the personal guarantees submitted as security for the repayment of loans taken with respect to SpiceJet.
4. It is submitted that in consideration of the aforesaid offer, the entire shareholding of KAL and KM in SpiceJet was to be transferred to the appellant – Ajay Singh for a consideration of INR 2/-. Additionally, KAL and KM were obligated to bring in “Committed Support” of INR 450 crores in SpiceJet. It is alleged by the appellants that KAL and KM failed to abide by their contractual obligations and ultimately infused only INR 350 crores. The takeover, which occurred in February 2015 was founded upon a Share Sale and Purchase Agreement6 dated 29 January 2015. The various steps liable to be undertaken in terms of the SSPA are explained by the appellants in the following terms:-
“The SSPA broadly envisaged the following:
a. Step 1: Transfer of entire shareholding held by KAL and KM in SJ to AS for a nominal consideration of Rs. 2.
i. See Clause 2 of SSPA
ii. Details of Sale Shares are at Schedule A of SSPA
b. Step 2: Issuance of Warrants to KAL and KM as stipulated in Schedule D of the SSPA, subject to necessary approvals being obtained. As per Clause 3.1 of the SSPA, these Warrants could be converted into equity shares at a conversion price of Rs. 16.30 per equity share. Consideration for the Warrants was broken up into the following parts:
i. The total consideration was Rs.308,21,89,461/- only. It is not in dispute that the entire sum was paid, but the warrants were not allotted. See [See Paragraph 6 of the Award (pgs 170) (PDF pgs 174)]
ii. Part of the consideration had already been paid by KM even prior to entry of the SSPA by way of SSPA by way of adjustments towards loans that had been advanced by KM to SJ.
iii. Thus, what was remaining to be paid was the “Balance Warrant Payments” as provided at Schedule D of the SSPA
c. Step 3: Issuance of Tranche 1 and Tranche 2 CRPS
i. The SSPA contemplated issuance of non-convertible redeemable preference shares (“CRPS”) of face value of Rs. 1000/- in two tranches.
ii. The terms and conditions of the CRPS that were to be issued are at Schedule B of the SSPA. The CRPS were essentially conceived as debt-like instruments having a coupon rate of 6 % and were redeemable only after 8 years. The terms also made it clear that dividend would become payable only subject to availability of profits in the company.
iii. The total consideration for CRPS of Rs. 370,86,99,209/- was broken up into:
1. Tranche 1 CRPS Amount Rs. 320,86,99,209/-
2. Tranche 2 CRPS Amount Rs. 50 crores
The said amounts are defined in Clause 1.1 of the SSPA”

5. As per the appellants, the issuance of Share Warrants7 and Non-Convertible Redeemable Preference Shares8 were to follow the adjustments made to loan amounts and unsecured advances amounting to INR 229 crores, a Committed Support of INR 450 crores being brought in by KAL and KM and the last part of the said Committed Support amounting to INR 100 crores being completed with the release of a fixed deposit of an equivalent amount standing in the personal name of KM into Designated Account 2. The appellants assert that disputes inter partes arose consequent to a failure on the part of KAL and KM to infuse INR 450 crores and as a result of a failure on the part of the Bombay Stock Exchange9 to approve the issuance of Warrants.
6. It is their case that the Warrants could not be issued since the approval of BSE could not be obtained despite all bona fide efforts being made by SpiceJet and Mr. Ajay Singh. They would contend that the non-issuance of Warrants thus cannot possibly be viewed as a breach of the SSPA either by SpiceJet or Mr. Ajay Singh.
7. They additionally argue that the CRPS transaction could not be completed since KAL and KM failed to pay the full consideration as per the terms of the SSPA. According to the appellants, there was an admitted failure on the part of KAL and KM to effect a deposit of INR 100 crores and thus they being liable to be held in breach of the contract terms. The aforesaid aspect has been duly noted by the learned Single Judge who has found that out of a total consideration of INR 220,02,93,039, KAL and KM had failed to place INR 100 crores in the Designated Account 2. Before us, the challenge stood confined to the direction framed by the AT for a refund of an amount of INR 270,86,99,209/- paid by KAL and KM for issuance of CRPS, the imposition of 12% interest pendent lite on Warrants as well as post-award interest at the rate of 18% from the last date of the due dates in terms of the Arbitral Award.
8. The primary ground of attack to the Award appears to have been directed against the direction for refund with it being apparently contended that the same is violative of the provisions contained in Section 65 of the Indian Contract Act, 187210. The appellants asserted that the aforesaid direction clearly amounted to a rewriting of the contract itself since the SSPA had not envisaged any refund of funds received in respect of CRPS. It was additionally urged that once the AT had found that it was KAL and KM who were guilty of breach, the refund was clearly unjustified. It was these submissions which appear to have been addressed before the learned Single Judge.
9. The learned Single Judge while dealing with the aforesaid issue, has essentially come to the following conclusions:-
“79. The learned Tribunal, while referring to the claims of the respondents herein, observed that the respondents were required to make the payment of Rs. 220,02,93,039/-, which stood paid. While coming to conclusion the Arbitral Tribunal also noted that out of the total consideration of Rs. 220,02,93,093/- to be paid by the respondents. towards the Tranche-I CRPS amount, the respondents had made a total payment of Rs. 120,02,83,038/-, leaving Rs. 100 Crores to be payable. The Arbitral Tribunal was of the view that since, the payment towards Tranche-1 was made by the respondents herein, but the supplementary obligation of issuance of the CRPS was not fulfilled by the petitioners, the petitioners were liable to pay back and refund the sum so deposited by the respondent after deducting the sum of the amount which remained uncredited, i.e., Rs. 100 Crores.
80. In accordance with the Agreement, the respondents herein were to make a fixed deposit of Rs. 100 Crores. However, it was observed that the said amount was never found to be deposited in the designated bank account in terms of the agreed mutual terms of the Agreement between the parties. The Counter-Claim pertaining to the said amount was, hence, decided in the favour of the petitioners herein and was deducted from their liability towards the respondents amounting to Rs. 370,86,99,209/- From a bare perusal of the aforesaid, it is evident that the learned Tribunal has provided adequate reasoning as to the issue of refund of Rs 270,86,99,209/-.
81. It has been further argued on behalf of the petitioners that all obligations were fulfilled by them in accordance with the Agreement, however, the Tribunal, upon appreciation of the entire circumstances as well as the material and record before it, found that the CRPS were not issued in terms of the Agreement.
82. The course of procedure taken by the Arbitral Tribunal as well as the findings as reproduced above are evidently not in contravention of any of the provisions under the Arbitration Act or even any substantive law. There is nothing in the observations in the impugned Award to suggest that the Tribunal contravened or went beyond the terms of Agreement executed between the parties. The Tribunal provided reasons for the findings delivered and there is no perversity which is either apparent on the face of the record or which goes to the root of the matter. Therefore, the impugned Award cannot said to be patently illegal.
83. To test the validity and legality of the impugned Award and the observations made therein the test of fundamental policy of law was also before this Court, however, upon a perusal of the Award, this Court does not find that the Award suffers from non-application of mind. Not only did the Tribunal go into elaborate details of the claims raised and submissions thereto made by the parties, it also appreciated the material on record and passed an Award which is supported by reasons. The inference drawn by the Tribunal based on the reasons provided by it do not constitute an interference which on the face of it is untenable or unreasonable. Under the scope of Section 34 of the Arbitration Act, this Court is to be concerned only about the aforementioned considerations to make an observation qua the impugned Award, without entering the merits of the case and the evidence in the matter, and in view of the findings of the Arbitral Tribunal with respect to the claims raised against refund of the amount, this Court is of the opinion that there is nothing perverse in the impugned Award to say that it is against the fundamental policy of law.”

C. SUBMISSIONS OF THE APPELLANTS
10. Assailing the view so taken, Mr. Sibal, learned senior counsel appearing in support of the appeals, addressed the following submissions. It was firstly contended that the grant of refund is clearly contrary to the terms of the SSPA and amounts to the AT undertaking an exercise to reinvent and rewrite the terms of the SSPA which is clearly impermissible in law.
11. It was submitted that the CRPS was conceived to be a debt instrument carrying a coupon rate of 6% and redeemable only after eight years. The dividend on the CRPS, Mr. Sibal explained, would have become payable subject to availability of surplus profits in the hands of SpiceJet. According to learned senior counsel, the underlying construct of the issuance of the CRPS was based upon the infusion of funds in SpiceJet and which would be available for utilization for a period of eight years and thus facilitate its revival. It was Mr. Sibal’s submission that no stipulation of the SSPA contemplated an expedited or premature refund of the amounts paid towards the CRPS.
12. The direction for refund, according to Mr. Sibal, is rendered even more untenable, when one bears in mind the fact that undisputedly KAL and KM had failed to comply with the requirement of ensuring the infusion of INR 450 crores into SpiceJet. It was further submitted that as per the SSPA, the interest burden relating to CRPS would not have exceeded INR 130.10 crores when computed at the rate of 6% spread over a period of eight years. However, it was submitted that the Award has led to the appellants being placed under a liability to pay more than INR 184.64 crores as interest for CRPS alone.
13. It was Mr. Sibal’s submission that the Award which stood impugned before the learned Single Judge and insofar as it unsettled the express stipulations of the contract between the parties falls foul of the well settled tenets as propounded by the Supreme Court in the decisions of PSA SICAL Terminals Private Ltd v. Board of Trustees of V.O Chidambranar Port Trust Tuticorin & Ors11 and Indian Oil Corporation Ltd v. Shree Ganesh Petroleum Rajgurunagar12.
14. In PSA SICAL, learned senior counsel submitted the Supreme Court had in unequivocal terms held that an AT is mandated to act within the terms of a contract and that it would tantamount to acting beyond its jurisdiction if it were to travel outside the contractually agreed stipulations. Relying on this principle, Mr. Sibal cited the following paragraphs of the said decision for our consideration:
“86. After referring to various international treaties on arbitration and judgments of other jurisdictions, this Court in Ssangyong Engineering and Construction Company Limited (supra), observed thus:

“76. However, when it comes to the public policy of India, argument based upon “most basic notions of justice”, it is clear that this ground can be attracted only in very exceptional circumstances when the conscience of the Court is shocked by infraction of fundamental notions or principles of justice. It can be seen that the formula that was applied by the agreement continued to be applied till February 2013 — in short, it is not correct to say that the formula under the agreement could not be applied in view of the Ministry’s change in the base indices from 1993-1994 to 2004-2005. Further, in order to apply a linking factor, a Circular, unilaterally issued by one party, cannot possibly bind the other party to the agreement without that other party’s consent. Indeed, the Circular itself expressly stipulates that it cannot apply unless the contractors furnish an undertaking/affidavit that the price adjustment under the Circular is acceptable to them. We have seen how the appellant gave such undertaking only conditionally and without prejudice to its argument that the Circular does not and cannot apply. This being the case, it is clear that the majority award has created a new contract for the parties by applying the said unilateral Circular and by substituting a workable formula under the agreement by another formula dehors the agreement. This being the case, a fundamental principle of justice has been breached, namely, that a unilateral addition or alteration of a contract can never be foisted upon an unwilling party, nor can a party to the agreement be liable to perform a bargain not entered into with the other party. Clearly, such a course of conduct would be contrary to fundamental principles of justice as followed in this country, and shocks the conscience of this Court. However, we repeat that this ground is available only in very exceptional circumstances, such as the fact situation in the present case. Under no circumstance can any court interfere with an arbitral award on the ground that justice has not been done in the opinion of the Court. That would be an entry into the merits of the dispute which, as we have seen, is contrary to the ethos of Section 34 of the 1996 Act, as has been noted earlier in this judgment.”
[emphasis supplied]

87. As such, as held by this Court in Ssangyong Engineering and Construction Company Limited (supra), the fundamental principle of justice has been breached, namely, that a unilateral addition or alteration of a contract has been foisted upon an unwilling party. This Court has further held that a party to the Agreement cannot be made liable to perform something for which it has not entered into a contract. In our view, re-writing a contract for the parties would be breach of fundamental principles of justice entitling a Court to interfere since such case would be one which shocks the conscience of the Court and as such, would fall in the exceptional category.

88. We may gainfully refer to the following observations of this Court in Bharat Coking Coal Ltd. v. Annapurna Construction.

“22. There lies a clear distinction between an error within the jurisdiction and error in excess of jurisdiction. Thus, the role of the arbitrator is to arbitrate within the terms of the contract. He has no power apart from what the parties have given him under the contract. If he has travelled beyond the contract, he would be acting without jurisdiction, whereas if he has remained inside the parameters of the contract, his award cannot be questioned on the ground that it contains an error apparent on the face of the record.”

89. It has been held that the role of the Arbitrator is to arbitrate within the terms of the contract. He has no power apart from what the parties have given him under the contract. If he has travelled beyond the contract, he would be acting without jurisdiction.

90. It will also be apposite to refer to the following observations of this Court in the case of Md. Army Welfare Housing Organization v. Sumangal Services (P) Ltd.

“43. An Arbitral Tribunal is not a court of law. Its orders are not judicial orders. Its functions are not judicial functions. It cannot exercise its power ex debito justitiae. The jurisdiction of the arbitrator being confined to the four corners of the agreement, he can only pass such an order which may be the subject-matter of reference.”

91. It has been held that an Arbitral Tribunal is not a Court of law. Its orders are not judicial orders. Its functions are not judicial functions. It cannot exercise its powers ex debito justitiae. It has been held that the jurisdiction of the arbitrator being confined to the four corners of the agreement, he can only pass such an order which may be the subject-matter of reference.

92. In that view of the matter, we are of the considered view, that the impugned Award would come under the realm of ‘patent illegality’ and therefore, has been rightly set aside by the High Court.”

15. In Indian Oil Corporation Ltd., the Supreme Court reiterated the said principle, namely that an AT is required to act within the terms of the contract and that an award would suffer from “patent illegality”, if it either travels beyond the contractual arrangement or ignores specific terms of a contract. The relevant paragraphs of the said decision are set out hereinbelow:
“43. An Arbitral Tribunal being a creature of contract, is bound to act in terms of the contract under which it is constituted. An award can be said to be patently illegal where the Arbitral Tribunal has failed to act in terms of the contract or has ignored the specific terms of a contract.

xxxx xxxx xxxx

46. In Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , this Court held that an award ignoring the terms of a contract would not be in public interest. In the instant case, the award in respect of the lease rent and the lease term is in patent disregard of the terms and conditions of the lease agreement and thus against public policy. Furthermore, in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] the jurisdiction of the Arbitral Tribunal to adjudicate a dispute itself was not in issue. The Court was dealing with the circumstances in which a court could look into the merits of an award.

xxxx xxxx xxxx

50. In PSA Sical Terminals (P) Ltd. v. V.O. Chidambranar Port Trust [PSA Sical Terminals (P) Ltd. v. V.O. Chidambranar Port Trust, 2021 SCC OnLine SC 508] this Court referred to and relied upon Ssangyong Engg. & Construction [Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 : (2020) 2 SCC (Civ) 213] and held : (PSA Sical Terminals case [PSA Sical Terminals (P) Ltd. v. V.O. Chidambranar Port Trust, 2021 SCC OnLine SC 508] , SCC para 85)

“85. As such, as held by this Court in Ssangyong Engg. & Construction [Ssangyong Engg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 : (2020) 2 SCC (Civ) 213] , the fundamental principle of justice has been breached, namely, that a unilateral addition or alteration of a contract has been foisted upon an unwilling party. This Court has further held that a party to the agreement cannot be made liable to perform something for which it has not entered into a contract. In our view, re-writing a contract for the parties would be breach of fundamental principles of justice entitling a court to interfere since such case would be one which shocks the conscience of the Court and as such, would fall in the exceptional category.”

51. In PSA Sical Terminals [PSA Sical Terminals (P) Ltd. v. V.O. Chidambranar Port Trust, 2021 SCC OnLine SC 508] this Court clearly held that the role of the arbitrator was to arbitrate within the terms of the contract. He had no power apart from what the parties had given him under the contract. If he has travelled beyond the contract, he would be acting without jurisdiction.

52. In PSA Sical Terminals [PSA Sical Terminals (P) Ltd. v. V.O. Chidambranar Port Trust, 2021 SCC OnLine SC 508] this Court referred to and relied upon the earlier judgment of this Court in Army Welfare Housing Organisation v. Sumangal Services (P) Ltd. [Army Welfare Housing Organisation v. Sumangal Services (P) Ltd., (2004) 9 SCC 619] and held that an Arbitral Tribunal is not a court of law. It cannot exercise its power ex debito justitiae.

53. In Satyanarayana Construction Co. v. Union of India [Satyanarayana Construction Co. v. Union of India, (2011) 15 SCC 101 : (2014) 2 SCC (Civ) 252] , a Bench of this Court of coordinate strength held that once a rate had been fixed in a contract, it was not open to the arbitrator to rewrite the terms of the contract and award a higher rate. Where an arbitrator had in effect rewritten the contract and awarded a rate, higher than that agreed in the contract, the High Court was held not to commit any error in setting aside the award.”

16. The direction for refund was vehemently assailed and questioned with Mr. Sibal drawing our attention to the principle of restitution as embodied in Section 65 of the 1872 Act. It was at the outset pointed out that a direction for refund could not have been framed de hors the principles underlying Section 65. It was contended that unless a case for restitution had been duly made out, the AT would be wholly unjustified in framing a direction for refund. Emphasis was laid on the fact that Section 65 rests on it being found that the agreement between the parties is discovered to be or becomes void. Our attention was drawn to the findings as returned by the AT and which had specifically observed that the SSPA could not stricto senso be held to be void. Mr. Sibal specifically referred us to Para 26 of the Arbitral Award which is extracted hereinbelow:-
“26. Nevertheless, the alternative plea of Claimants premised on Section 65 of the Contract Act is on terra firma (though contractual arrangements stricto senso cannot be termed as void). It would be relevant to note that in its proposal dated 20.11.2015, the Respondents had suggested that the consideration for warrants would be returned by the Company. Though by Annexure C-41 dated 20.11.2015, the Respondents had suggested that the consideration for warrants would be returned by the Company, the Claimants did not agree to the same. The amount involved is Rs.308,21,89,461 /-. This amount is to be refunded to the Claimants.”
17. It was then submitted that curiously even though the AT had found KAL and KM to be in breach of the SSPA as a consequence of a failure to ensure the infusion of INR 100 crores, the appellants have been held liable to effect refunds. Mr. Sibal in this regard drew our attention to the following observations as appearing in the Award:-
“51. The rival stands have been considered. As per amended structure of Schedule H of the SPA, second closing under Clause 7.1 was to be achieved by 15.02.2015 which was amended to 24.02.2015. Seller 2 was mandated to bring in Rs.100 Crores to Designated Account No. 2. The admitted position is that Rs.100 Crores did not come to Designated Account No. 2. Personal guarantees by way of mortgages given to CUB were to be released by 24.02.2015. The release of guarantees was to be back by fixed deposit of Rs.100 Crores with CUB. The same is claimed to have been done but Rs. 100 Crores as noted above did not come to Designated Account No. 2. If one looks at the requirements of Clause 6.3.2, they are as follows:
(1) Fixed Deposit of Rs. 100 Crores;
(2) Release of personal guarantees; and
(3) Seller No. 2 to CUB in the matter of released to the Company.
The first two steps appear to have been done, but not the third one. The Inflow of Rs.450 Crores included Rs.320 Crores for Tranche-1 shares. There was a requirement for deposit of Rs.220 Crores in to the Designated Account No 2. It is clear from a reading of Clause 6.3.2 (b) that two consents were required which depended on conditions relating to Clause 7.2.1 (b). As noted above, CUB had time from 15.04.2015 till 11.05.2015 when ED’s order was received. The evidence of Mr Dorai of UCB was that the bank had knowledge about the attachment from media reports. Much stress had been led by the Claimants on the certificate of the Bank issued to the Claimants vide Exhibit C-63 relating toirrevocable security. Neither the bank official nor the Claimants could explain as to why this certificate was necessary if instructions claimed to have been given were already there.
52. There are two options which are available to the parties (1) As noted supra, the Respondents have stated that they are still willing to issue the CRPS on the same terms subject to the Claimants fulfilling their part of obligations as detailed above. Let the Claimants take decision on the present offer made by the Respondents and such terms as may be mutually acceptable to them within two months. If no effective solution is found within a period of two months, thereafter, the Respondents shall return the amount of money received in the manner laid down in the SPA for issuance of CRPS. Since the Tranche-2 payment of Rs.100 Crores has not been made. the Respondent No.1 has raised a counter claim of Rs. 100 Crores. (2) In effect if the arrangement indicated above does not work out, the Respondents shall return the amount as may be worked out relating to the funds brought in by the Claimants within two months of the failure, if any, to work out the solution. To put it differently, the Claimants will be entitled to Rs 270,86.99,209/- after deduction of the counter claim amount of Rs.100Crores.”
18. According to Mr. Sibal, the fact that the appellants could not have possibly been viewed to be in breach is evident from their counterclaim for INR 29 crores having itself been allowed. It was submitted that the grant of the counterclaim was liable to be countenanced as an award for damages for breach of contract as opposed to one for compensation. This, since according to Mr. Sibal, the grant of the counterclaim cannot possibly be understood as being a measure of restitution, since it did not restore any advantage that the appellants may have obtained from either KAL or KM. Mr. Sibal submitted that the findings as rendered by the AT would in fact establish that the counterclaim came to be allowed, consequent to the AT acknowledging the loss suffered by SpiceJet while servicing interest on the loan of INR 100 crores extended by City Union Bank13, which could not be liquidated consequent to the failure of KM to bring in the last tranche of payments as per the terms pertaining to Committed Support.
19. According to Mr. Sibal, the grant of the counterclaim is in fact tacit acknowledgement of the SSPA subsisting and it neither having been breached by the appellants nor being void in the eyes of law. In light of the aforesaid, it was Mr. Sibal’s submission that the AT could have at best considered granting of relief of specific performance, subject of course to the requisite conditions underlying that relief having been met.
20. However, and Mr. Sibal laid emphasis on the fact, that KAL and KM had never sought specific performance, and had at no stage of the proceedings evinced any desire to provide the balance consideration of INR 100 crores in accordance with the Committed Support stipulations. Contrary to the above, Mr. Sibal highlighted the fact that the appellants had in all fairness offered to issue the CRPS subject of course to the outstanding amount of INR 100 crores being tendered by KAL and KM. Our attention in this respect was invited to the following recordal of submissions by the AT in the Award:-
“50. In the counter claim, the Respondents have claimed Rs. 100 Crores in addition to the interest paid by the Respondents to CUB for the loan of Rs. 100 Crores. So far as the plea of specific performance is concerned, the foundation therefore is the readiness and willingness to do what was required to be done by the person who seeks the relief of specific performance. Nothing has been pleaded by the Claimants in this regard. Additionally, it is a fundamental requirement that one who seeks the relief of specific performance must come with clean hands. The admitted position being that the interest was being credited to the personal account of Claimant No. 2, the conduct is not only suspicious but shows ulterior motives. Alternatively, it has been stated that the Respondents are still willing to issue the CRPS on the same terms subject to the Claimants fulfilling their part of the obligations. It is pointed out that there was a committed support undertaken by the Claimants to bring in Rs.450 Crores. That part of the arrangement has not been fulfilled by the Claimants. The question of any compensation, therefore, does not arise in the absence of the requisite conditions of specific performance of contract having been fulfilled.”

21. Mr. Sibal submitted that restitution as a matter of principle and a direction for refund would have to be premised on the party having
“received an advantage” under an agreement. According to Mr. Sibal, one must acknowledge the distinction which the law recognizes to exist between the words “advantage” and “benefit”. Mr. Sibal in this regard drew our attention to the following passage as appearing in the treatise of Pollock & Mulla on the Indian Contract and Specific Relief Acts14:
“ ‘Advantage’ appears to suggest not the benefit derived by each party, but the relative benefit. The word ‘advantage’ is stated to be narrower in scope than benefit, since it suggests more strictly either a material benefit, or things won in competition against an opponent. The word ‘benefit’ means profit, gain, future good, whereas the advantage means a condition or circumstance that gives one superiority or success (especially when competing with others).”

22. It was then contended that the Arbitral Award also fails to quantify the value of the alleged “advantage” that may have been derived by the appellants. The imperatives of quantification were sought to be highlighted by relying upon the following observations as appearing in the decision of the Privy Council in Govindram Seksaria (A Firm) and Anr v. Edward Radbone15:-
“Apart from the terms of certain documents, which will be considered later, their Lordships feel no doubt that the decision of Blagden J. was correct. The result of section 65 of the Indian Contract Act was that, as from the September 3, 1939, each of the parties became bound to restore to the other any advantage which the restoring party had received under the contract of sale. In their Lordships’ view, the Custodian could not recover any sum in his action, as pleaded, unless he proved that the value of the “advantage” which the appellants had received under the contract, i.e., of the machinery which had been delivered to them, was greater than the sum of 83,875 Reichmarks, that sum being admittedly an “advantage” which the Custodian had received under the contract. Moreover, in their Lordships’ view, the value of the machinery which was delivered to the appellants, for the purposes of s. 65 of the Act, must be taken to be the value of that machinery in India immediately after the contract had become void by reason of section 65. In estimating that value, a Court would have to take into account the fact that the balance of the machinery contracted to be supplied could not be supplied from Germany, and the fact that the appellants could no longer have the services of a qualified erector sent from Germany and of the sellers’ Chief Chemist. Further, the Court would have to consider the question whether or not the appellants were able to procure from other sources the balance of the machinery contracted to be sent from Germany, and, if so, at what price and within what period of time, and what quantity and quality of products could be produced by the plant so assembled.
xxxx xxxx xxxx
The appellants also called one witness, who gave evidence to the effect that the appellants bought the missing parts of the machinery, and that their factory “was made to run continuously on July 27, 1941”. He offered to produce a statement showing how the machinery worked in 1941 and 1942, but the Advocate-Greneral, who appeared for the Custodian, objected to the production of this statement and it was never in fact produced. At the conclusion of his judgment Blagden J. said:—
“The fact is that I have no satisfactory evidence in the present case that the defendants-purchasers or either of them have received an advantage under the contract which became void by the start of this war. They might have or might not. For the price they paid they got a part of what they contracted for. Whether on the whole they put into their pockets more than they paid of I think it is impossible to say. But if it were necessary for me to do so on this evidence I should be inclined to think that they did not, but it is sufficient to say that on the evidence in this case it is not proved that they have.”
Their Lordships read this passage as meaning that in the view of the trial Judge the Custodian had failed to prove that the advantage which the appellants had received under the contract of sale was of a greater value than 83,875 Reichmarks. With this view they agree.”
23. It was then submitted that out of the total amount of INR 350 crores that was received by SpiceJet in terms of the SSPA, a substantial part thereof was utilized and deployed to the benefit of KM. Out of the aforesaid sum, Mr. Sibal pointed out INR 105 crores was utilized towards payment of taxes, overdue instalments owed to banks and creation of margins with financial institutions. It was submitted that it was the aforesaid utilisation of funds and for the purposes aforenoted which led to the release of personal guarantees and collaterals of KM.
24. In addition to the above, Mr. Sibal submitted that INR 245 crores was utilized towards meeting the operational expense requirements of SpiceJet. The aforesaid utilization of funds was explained in further detail as per Annexure 2 to the Written Submissions which were tendered on 29 November 2023 and which is reproduced hereinbelow:-
“Details of Amount paid by KM and KAL
Date
Amount (in Rs.)
Name of the Party who paid the Amount
How the amount was brought in
Utilization
Actual Utilization

CRPS
Warrants

December, 2013
64,59,16,170.00
Mr. Kalanithi Maran
Loan Agreement dated December 18, 2013 amended by Loan Amended Agreement dated November 7, 2014
64,59,16,170.00
–
Utilised by Spicejet Limited under the ownership, management and control of Mr. Kalanithi Maran and KAL Airways Private Limited.
August 2014 to November 2014
50,49,72,500.00
KAL Airways Private Limited
Advance towards subscription of warrants
–
50,49,72,500.00
Utilised by Spice jet Limited under the ownership, management and control of Mr. Kalanithi Maran and KAL Airways Private Limited.
November, 2014
1,14,00,00,000.00
Mr. Kalanithi Maran
Loan Agreement dated November 21, 2014
36,24,90,000.00
77,75,10,000.00
Utilised by Spice jet Limited under the ownership, management and control of Mr. Kalanithi Maran and KAL Airways Private Limited.
February 24, 2015
94,79,64,450.66
Mr. Kalanithi Maran
Advance towards subscription of CRPS
94,79,64,450.66
–
Utilised by Spice jet for ordinary operations of the Company as per Schedule H of SSPA
February 24, 2015
1,00,00,00,000.00
KAL Airways Private Limited
Advance towards subscription of warrants
–
1,00,00,00,000.00
Utilised by the Respondent No. 1 for ordinary operations of the Company as per SSPA
February 24, 2015
79,97,06,961.00
KAL Airways Private Limited
Advance towards subscription of warrants
–
79,97,06,961.00
(a)Rs.89,16,82,799 utilised towards payment of Income Tax liabilities (being the principal amount of Tax Deducted at source) as on January 31,2015 (b) Rs. 9,45,11,635.09 utilized towards overdue instalment of term loan facility availed from Yes Bank and (c) Rs. 6,58,41,115.25 utilized towards creation of margin with Yes Bank in form of fixed deposit to enable release of personal guarantee of Mr. Kalanithi Maran.
February 24, 2015
20,02,93,039.00
KAL Airways Private Limited
Advance towards subscription of CRPS
20,02,93,039.00
–

February 24, 2015
5,20,35,549.34
Mr. Kalanithi Maran
Advance towards subscription of CRPS
5,20,35,549.34
–

June 3, 2015
50,00,00,000.00
Mr. Kalanithi Maran
Advance towards subscription of CRPS
50,00,00,000.00
–
Utilised by Spice jet for ordinary operations of the Company as per SSPA
Total
5,79,08,88,670.00

2,70,86,99,209.00
3,08,21,89,461.00

February 24, 2015
1,00,00,00,000.00
Mr. Kalanithi Maran
Not Paid
1,00,00,00,000.00
–
To be utilized towards repayment of the financing facility obtained by the Company from the City Union Bank”

25. The direction for refund, Mr. Sibal then submitted was further unmerited bearing in mind the AT itself having found the conduct of the appellants lacking in bona fide and alluding to the same as suspicious conduct. According to learned senior counsel, once the AT had come to such a conclusion, the same was sufficient to disentitle respondents to the relief of restitution. Mr. Sibal in this respect drew our attention to Paras 49 and 51 of the Arbitral Award which are reproduced hereinbelow:-
“49. Certain peculiar features need to be noted at this stage is that there was a request for closing of the loan but there was no response from CUB. Interestingly, CUB closed the account of Make my trip and select cargo. If the ED’s order was within its knowledge, no explanation is coming forthwith as to how the account was closed. Similarly, if there was no instruction in terms of Clause 6.3.2 as there is no reference as to who would get the interest. Another interesting feature is that the interest was being credited to the account of Claimant No. 2 and it was being automatically credited to the personal account Further, if the account was to be held as security and the interest was to be paid on maturity. It is quite suspicious that when instructions were already there as to the nature of the security of the deposit, what occasioned the certificate of the Bank, Exhibit C-63 to the Claimants.
xxxx xxxx xxxx
51. The rival stands have been considered. As per amended structure of Schedule H of the SPA, second closing under Clause 7.1 was to be achieved by 15.02.2015 which was amended to 24.02.2015. Seller 2 was mandated to bring in Rs.100 Crores to Designated Account No. 2. The admitted position is that Rs.100 Crores did not come to Designated Account No. 2. Personal guarantees by way of mortgages given to CUB were to be released by 24.02.2015. The release of guarantees was to be back by fixed deposit of Rs.100 Crores with CUB. The same is claimed to have been done but Rs. 100 Crores as noted above did not come to Designated Account No. 2. If one looks at the requirements of Clause 6.3.2, they are as follows:
(1) Fixed Deposit of Rs. 100 Crores;
(2) Release of personal guarantees; and
(3) Seller No. 2 to CUB in the matter of released to the Company.
The first two steps appear to have been done, but not the third one. The inflow of Rs.450 Crores included Rs.320 Crores for Tranche-1 shares. There was a requirement for deposit of Rs.220 Crores in to the Designated Account No 2. It is clear from a reading of Clause 6.3.2 (b) that two consents were required which depended on conditions relating to Clause 7.2.1 (b). As noted above, CUB had time from 15.04.2015 till 11.05.2015 when ED’s order was received. The evidence of Mr. Dorai of UCB was that the bank had knowledge about the attachment from media reports. Much stress had been led by the Claimants on the certificate of the Bank issued to the Claimants vide Exhibit C-63 relating to irrevocable security. Neither the bank official nor the Claimants could explain as to why this certificate was necessary if instructions claimed to have been given were already there.”
26. Mr. Sibal then proceeded to assail the grant of pendent lite interest at the rate of 12% on the refunded amount relating to Warrants and canvassed the following contentions. It was his submission that the award of interest at the rate of 12% was clearly unjustifiable bearing in mind the indubitable fact that neither SpiceJet nor Mr. Ajay Singh had breached the terms of the contract. It was submitted that the AT had itself found that the Warrants could not be issued in circumstances clearly beyond the control of the appellants.
27. Mr. Sibal submitted that the grant of pendent lite interest should have been guided by Clause 17.6 of the SSPA and which had while dealing with a contingency where a particular stipulation of the SSPA became impossible or incapable of performance, parties were obliged to negotiate in good faith and substitute it with a workable provision. It was submitted that although the appellants had proffered a solution and mooted a proposal for the cancellation of the prior issue of Warrants and substitution by fresh alternative instruments, the same was declined by KAL and KM.
28. Mr. Sibal submitted that the AT also woefully failed to consider the fact that the amounts pertaining to the Warrants during the pendency of proceedings before the AT stood either deposited in Court or secured by way of bank guarantees. The sums, therefore, according to learned senior counsel, were not even available for use by SpiceJet for a substantial period and during the pendency of the arbitral proceedings. This was sought to be explained with reference to the following salient events which are reproduced in a tabular form hereinbelow:-
“Date
Event
29.01.2015
SSPA entered into by Parties.
24.02.2015
Pursuant to SSPA, a total of Rs. 300 Crores were brought in by KAL and KM as advance as advance to Warrant and CRPS subscription.
03.06.2015
Further Rs. 50 crores was brought in as advance towards CRPS subscription by KM.
29.07.2016
Order of Delhi High Court in OMP (1) 71/2016 and 72/2016 directing deposit of Rs. 579 crore with Court.
December 2016
Arbitral Tribunal was constituted to adjudicate upon the disputes between the Parties.
03.07.2017
Order of Division Bench disposing of FAO (OS) (Comm) 61/2016 and 62/2016 modifying above direction. The modified requirement required SJ and AS to furnish Bank Guarantee for INR 329 crores and make a cash deposit of Rs. 250 crores.
31.07.2017
The Order of the Ld. Division Bench was upheld by Supreme Court. Direction was given to comply with deposit and bank guarantee in 2weeks.
11.08.2017
Bank Guarantee for Rs. 329,00,00,000/- taken with ICICI Bank Limited. This was subsequently replaced by another BG issued on 12.09.2017 by Yes Bank Limited with the permission of the Court.
13.09.2017
Towards the direction to deposit Rs. 250 Crores, and FD was taken in the name of Spice Jet Limited for the said amount with Yes Bank Limited with lien marked in favour of Registrar, Delhi High Court. This meant that interest earned on the FD was credited to Spice Jet’s account.
30.07.2018
Arbitral Award pronounced.”

29. Since the amount stood deposited in Court, Mr. Sibal relied upon the principles laid down in H.P. Housing & Urban Development Authority vs. Ranjit Singh Rana16 that liability for post-award interest ceases once the amount is deposited in Court, and submitted that by applying the same yardstick, the grant of pendente lite interest by the AT was liable to be set aside by the learned Single Judge. Reliance in this regard was placed on the following paragraphs of the aforesaid decision:-
“11. Whether 24-5-2001 when the entire award amount was deposited by the appellants into the High Court is the date of payment?
12. “Payment” is not defined in the Act. Concise Oxford English Dictionary (10th Edn., Revised) defines “payment”:
“Payment.—(1) The action of paying or the process of being paid. (2) An amount paid or payable.”
13. Webster Comprehensive Dictionary (International Edn.) Vol. 2 defines “payment”:
“Payment.—(1) the act of paying.
(2) Pay; requital; recompense.”
14. The Law Lexicon by P. Ramanatha Aiyar, 2nd Edn. Reprint, inter alia, states:
“payment is defined to be the act of paying, or that which is paid; discharge of a debt, obligation or duty; satisfaction of claim; recompense; the fulfilment of a promise or the performance of an agreement; the discharge in money of a sum due”.
15. The word “payment” may have different meaning in different context but in the context of Section 37(1)(b); it means extinguishment of the liability arising under the award. It signifies satisfaction of the award. The deposit of the award amount into the court is nothing but a payment to the credit of the decree-holder. In this view, once the award amount was deposited by the appellants before the High Court on 24-5-2001, the liability of post-award interest from 24-5-2001 ceased. The High Court, thus, was not right in directing the appellants to pay the interest @ 18% p.a. beyond 24-5-2001.
16. The appeal is, accordingly, allowed in part. The impugned order of the High Court is modified and it is directed that the appellants shall be liable to pay interest @ 18% p.a. for the post-award period from the date of award until 24-5-2001. After 24-5-2001, the appellants are not liable to pay any interest on the award amount under Section 37(1)(b) of the Act.”
30. Mr. Sibal submitted that not only is the award of pendente lite interest at the rate of 12% excessive, the AT has also failed to assign any reasoning in support of the said relief. It was submitted that it was incumbent upon the AT to assign reasons in support of a rate of interest being found to be reasonable and justified as was explained by the Supreme Court in Executive Engineer (R and B) & Ors vs. Gokul Chandra Kanungo (Dead) Through his LRs17:-
“10. The provisions of Section 31(7)(a) of the 1996 Act fell for consideration before this Court in many cases including in the cases of Hyder Consulting (UK) Limited (supra) and Delhi Airport Metro Express Private Limited v. Delhi Metro Rail Corporation. A perusal of clause (a) of subsection (7) of Section 31 of the 1996 Act would reveal that, no doubt, a discretion is vested in the arbitral tribunal to include in the sum for which the award is made interest, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. However, it would reveal that the section itself requires interest to be at such rate as the arbitral tribunal deems reasonable. When a discretion is vested to an arbitral tribunal to award interest at a rate which it deems reasonable, then a duty would be cast upon the arbitral tribunal to give reasons as to how it deems the rate of interest to be reasonable. It could further be seen that the arbitral tribunal has also a discretion to award interest on the whole or any part of the money or for the whole or any part of the period between the date of cause of action and the date on which the award is made. When the arbitral tribunal is empowered with such a discretion, the arbitral tribunal would be required to apply its mind to the facts of the case and decide as to whether the interest is payable on whole or any part of the money and also as to whether it is to be awarded to the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.
11. A perusal of the award as also the judgment and order of the District Judge as well as the High Court would reveal that no such exercise has been done. The learned Arbitrator, without assigning any reasons, has awarded the interest at the rate of 18% per annum for the period during which the proceedings were pending and also at the same rate after the award was made till the actual payment.”

31. The Award was also assailed insofar as the grant of interest for the period post its pronouncement is concerned, with it being argued that interest at the rate of 18% was again granted without any reasons being assigned or recorded. Our attention in this respect was drawn to the significant statutory amendments introduced in Section 31 of the Act, and more particularly Section 31(7)(b) which came into effect from 23 October 2015 vide the Arbitration and Conciliation (Amendment) Act, 201518 and which reads as follows:-
“31. Form and contents of arbitral award.
xxxx xxxx xxxx
(7)(a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.
(b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of two per cent higher than the current rate of interest prevalent on the date of award, from the date of award to the date of payment.
Explanation.—The expression “current rate of interest” shall have the same meaning as assigned to it under clause (b) of Section 2 of the Interest Act, 1978 (14 of 1978).”
32. Mr. Sibal submitted that the aforesaid statutory provision obliged the AT to bear in mind the “current rate of interest” and which was prevalent on the date of the Award. Our attention was also drawn to the definition of the expression “current rate of interest” in the Interest Act, 197819 and which reads as follows:-
“2. Definitions. —In this Act, unless the context otherwise requires,—
xxxx xxxx xxxx
“(b) “current rate of interest” means the highest of the maximum rates at which interest may be paid on different classes of deposits (other than those maintained in savings account or those maintained by charitable or religious institutions) by different classes of scheduled banks in accordance with the directions given or issued to banking companies generally by the Reserve Bank of India under the Banking Regulation Act, 1949 (10 of 1949).”
33. It was vehemently argued that the Arbitral Award fails to assign any reason or refer to any cogent material in support of an interest rate of 18% being accepted as correctly representing the “current rate of interest”.
34. Mr. Sibal, in support of the aforesaid submission also placed for our consideration details gleaned from the official web portal of the State Bank of India and which stands encapsulated in the shape of the following chart:-

35. The judgment of affirmance as rendered by the learned Single Judge was questioned with Mr. Sibal submitting that although it elaborately takes note of the various contentions which were urged by the appellants, it fails to either deal with the same or assign any reasons for negation of the challenge as it stood raised and thus causing irreparable prejudice to the appellants.
36. Mr. Sibal in this respect took us through the impugned judgment and highlighted the following aspects. In order to appreciate the breadth of the submissions which were addressed for the consideration of the learned Single Judge, Mr. Sibal firstly referred to Para 7 and which represents the recordal of the appellants’ contention with respect to CRPS amounts being repayable only at the end of eight years. Para 7 is extracted hereinbelow:-
“7. The learned senior counsel submitted that in terms of Schedule B of the Agreement, the CRPS is a debt instrument issued at a nominal coupon rate of 6%, repayable at the end of 8 years. The refund was awarded in favour of the respondents without considering that in accordance with the terms of the Agreement, CRPS is essentially a debt instrument, which could have been redeemed only after the expiry of a period of eight years from the date of subscription and is an amount which is not payable in praesenti. Moreover, in terms of the Schedule B, the dividend on the CRPS becomes payable only subject to the availability of profits of the Company. Therefore, on the face of the record, the Arbitral Tribunal failed to consider and appreciate that CRPS could have only been redeemed by the respondents after the expiry of a period of 8 years from the date of allotment of such CRPS in accordance with the terms of the SSPA.”
37. Mr. Sibal further argued that before the learned Single Judge, the appellants had also urged that the direction for refund came to be granted despite the AT finding that it was KAL and KM who were in breach of the SSPA. This, according to learned senior counsel, is manifest from a reading of Para 8 which is reproduced hereinbelow:-
“8. It is further submitted that the said refund was awarded in favour of the respondents despite the finding that they were in breach of the Agreement having failed to bring in Rs. 100 Crores, i.e., the Tranche-I of the total amount, in terms of Clause 6.3.1. and also, the petitioner Company’s claim to the extent of Rs. 129 Crores was allowed on account of such breach. Therefore, now the respondents cannot take undue advantage of their breach.”
38. The fact that the grant of reliefs as ultimately framed would amount to a rewriting of the contractual terms also was a contention which was specifically raised before the learned Single Judge, as would be evident from the reading of Paras 11 and 12 of the impugned judgment and which are reproduced below:-
“11. It is submitted that the entire amount of Rs. 370 Crores, which was to be brought into the petitioner Company as part of the committed support, was to stay with the airline for a period of 8 years as per the terms of the Agreement and therefore, the Arbitral Tribunal could not have rewritten the terms of the contract by awarding return of Rs. 270 Crores, modifying the nature of the transaction in the Agreement.
12. Relying upon the judgments passed in Indian Oil Corporation Limited vs. Shree Ganesh Petroleum Rajgurunagar, (2022) 4 SCC 463 and Union of India vs. Jindal Rail Infrastructure Ltd., 2022 SCC OnLine Del 1540, it is submitted on behalf of the petitioners that the Arbitral Tribunal rewrote the terms of the contract between the parties by converting the petitioner Company’s offer into an arbitral award. The Hon’ble Supreme Court in Shree Ganesh Petroleum Rajgurunagar (Supra) observed that:
“45. The Court does not sit in appeal over the award made by an Arbitral Tribunal. The Court does not ordinarily interfere with interpretation made by the Arbitral Tribunal of a contractual provision, unless such interpretation is patently unreasonable or perverse. Where a contractual provision is ambiguous or is capable of being interpreted in more ways than one, the Court cannot interfere with the arbitral award, only because the Court is of the opinion that another possible interpretation would have been a better one.
46. In Associate Builders [Associate Builders v. DDA. (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204], this Court held that an award ignoring the terms of a contract would not be in public interest. In the instant case, the award in respect of the lease rent and the lease term is in patent disregard of the terms and conditions of the lease agreement and thus against public policy. Furthermore, in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204] the jurisdiction of the Arbitral Tribunal to adjudicate a dispute itself was not in issue. The Court was dealing with the circumstances in which a court could look into the merits of an award.
*****
49. In Ssangyong Engg. & Construction Co Ltd. v. NHAI [Ssangyong Engg. & Construction Co. Ltd. v. NHAI. (2019) 15 SCC 131: (2020) 2 SCC (Civ) 213], this Court held: (SCC pp. 199-200, para 76)
“76. However, when it comes to the public policy of India, argument based upon “most basic notions of justice”, it is clear that this ground can be attracted only in very exceptional circumstances when the conscience of the Court is shocked by infraction of fundamental notions or principles of justice. It can beseen that the formula that was applied by the agreement continued to be applied till February 2013- in short, it is not correct to say that the formula under the agreement could not be applied in view of the Ministry’s change in the base indices from 1993- 1994 to 2004-2005. Further, in order to apply a linking factor, a circular, unilaterally issued by oneparty, cannot possibly bind the other party to the agreement without that other party’s consent. Indeed, the circular itself expressly stipulates that it cannot apply unless the contractors furnish an undertaking/affidavit that the price adjustment under the circular is acceptable to them. We have seen how the appellant gave such undertaking only conditionally and without prejudice to its argument that the Circular does not and cannot apply. This being the case, it is clear that the majority award has created a new contract for the parties by applying the said unilateral circular and by substituting a workable formula under the agreement by another formula dehors the agreement. This being the case, a fundamental principle of justice has been breached, namely, that a unilateral addition or alteration of a contract can never be foisted upon an unwilling party, nor can a party to the agreement be liable to perform a bargain not entered into with the other party. Clearly, such a course of conduct would be contrary to fundamental principles of justice as followed in this country, and shocks the conscience of this Court. However, we repeat that this ground is available only in very exceptional circumstances, such as the fact situation in the present case. Under no circumstance can any court interfere with an arbitral award on the ground that justice has not been done in the opinion of the Court. That would be an entry into the merits of the dispute which, as we have seen, is contrary to the ethos of Section 34 of the 1996 Act, as has been noted earlier in this judgment.”
50. In PSA Sical Terminals (P) Ltd. v. V.O. Chidambranar Port Trust [PSA Sical Terminals (P) Ltd. v. V.O. Chidambranar Port Trust, (2021) 18 SCC 716 2021 SCC OnLine SC 508) this Court referred to and relied upon Ssangyong Engg. & Construction [Ssangyong Engg& Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131: (2020) 2 SCC (Civ) 213] and held (PSA Sical Terminals case [PSASical Terminals (P) Ltd. v. V.O. Chidambranar Port Trust, (2021) 18 SCC 716: 2021 SCC OnLine SC 508], SCC para85)
“85. As such, as held by this Court in SsangyongEngg. & Construction [SsangyongEngg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131 (2020) 2 SCC (Civ) 213], the fundamental principle of justice has been breached, namely, that a unilateral addition or alteration of a contract has been foisted upon an unwilling party. This Court has further held that a party to the agreement cannot be made liable to perform something for which it has not entered into a contract. In our view, re-writing a contract for the parties would be breach of fundamental principles of justice entitling a court to interfere since such case would be one which shocks the conscience of the Court and as such, would fall in the exceptional category”
51. In PSA Sical Terminals (PSA Sical Terminals (P) Ltd. v. V.O. Chidambranar Port Trust, (2021) 18 SCC 716: 2021 SCC OnLine SC 508] this Court clearly held that the role of the arbitrator was to arbitrate within the terms of the contract. He had no power apart from what the parties had given him under the contract. If he has travelled beyond the contract, he would be acting without jurisdiction.
52. In PSA Sical Terminals (PSA Sical Terminals (P) Ltd. v. V.O. Chidambranar Port Trust, (2021) 18 SCC 716: 2021 SCC OnLine SC 508) this Court referred to and relied upon the earlier judgment of this Court in Army Welfare Housing Organisation v. Sumangal Services (P) Ltd. [Army Welfare Housing Organisation v Sumangal Services (P) Ltd. (2004) 9 SCC 619) and held that an Arbitral Tribunal is not a court of law. It cannot exercise its power ex debito justitiae
53. In Satyanarayana Construction Co v. Union of India (Satyanarayana Construction Co. v. Union of India, (2011) 15 SCC 101: (2014) 2