SIGNPOST INDIA PRIVATE LIMITED v. BRIHAN MUMBAI ELECTRIC SUPPLY AND TRANSPORT UNDERTAKING
Analysis of Arbitral Award - Rebates, Delayed Payment Interest, RTO Fees, and Defacement Charges; Application of Section 34, Arbitration and Conciliation Act, and Principles of Contract Law.
Court: Bombay High Court
Citation: 2025:BHC-OS:23431
Decision Date: 04-12-2025
List of Laws
The Arbitration and Conciliation Act, 1996; The Indian Contract Act, 1872; Section 34 of the Arbitration and Conciliation Act, 1996
Case Brief
- Facts: Signpost India Private Limited (Petitioner) entered into a contract with Brihan Mumbai Electric Supply and Transport Undertaking (BEST, Respondent) for advertisement rights on BEST's buses. Disputes arose regarding rebates claimed by the Petitioner for damaged buses, non-operational buses during COVID-19 lockdown, and alleged excess payments. The Respondent also filed counterclaims for delayed payment charges, RTO fees, and defacement charges. The Arbitral Tribunal rejected all claims of the Petitioner and allowed some of the Respondent's counterclaims.
- Procedural Posture: The Petitioner filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging the arbitral award. The High Court of Bombay is hearing the arbitration petition.
- Issue: Did the Arbitral Tribunal err in rejecting the Petitioner's claims for rebates and in allowing the Respondent's counterclaims for interest on delayed payment charges, RTO fees, and defacement charges, considering the contractual terms and applicable legal principles? Specifically, whether the award of interest on interest and defacement charges without proof of actual loss is sustainable.
- Holding: The High Court modified the arbitral award. The award of counterclaim in favour of the Respondent towards interest on delayed payment charges of Rs. 49,60,063/- with interest @ 18% p.a. is set aside. The award of defacement charges of Rs. 37,29,000/- is also set aside. The award in respect of RTO fees of Rs. 46,78,000/- is confirmed, and the Petitioner is liable to pay 10% interest on this amount from the date of the award.
- Reasoning: The Court reasoned that the Arbitral Tribunal erred in awarding interest on interest, as the contractual clause was ambiguous and such an award conflicted with public policy. The Court also found that the award of defacement charges was unsustainable because the Respondent failed to prove any actual loss or legal injury, and the sum named in the contract was not a genuine pre-estimate of damages. The Court upheld the award of RTO fees based on the indemnity offered by the Petitioner and the contractual obligation to pay these fees. The Court relied on the principle that a sum named in a contract as liquidated damages can be claimed as reasonable compensation only if it is a genuine pre-estimate of damages fixed by both parties. The Court also invoked the principle of severability to modify the award, separating the valid part (RTO fees) from the invalid parts (interest on delayed payments and defacement charges).