Arbitral Tribunal Is A 'Creature of Contract': Delhi High Court Upholds ₹25 Lakh Award To Carlsberg

The Delhi High Court has upheld an arbitral award directing Pali Hills Breweries Pvt. Ltd. to pay Rs 25 lakh to Carlsberg India Private Limited under a brewing contract, while partly allowing the company's challenge by setting aside the arbitrator's rejection of its storage-rent claim.

The court held that the amount was a genuine estimate of loss agreed to by the parties.

Justice Jasmeet Singh said the High Court could not step in to re-decide the dispute or re-examine the evidence. He said the court's role is limited and it cannot sit as an appeal court over an arbitral tribunal. The court noted that the arbitral tribunal gets its authority from the contract signed by the parties and must decide the dispute within the limits of that contract.

“The Tribunal is a creature of contract and is bound by the circumscribing limits of the terms of the Contract. It is upon the Tribunal to interpret the terms of the contract. The Tribunal, in the present case, has interpreted the amount of Rs. 25 lakhs as reasonable compensation,” the court said.

Carlsberg India Private Limited, the company behind Carlsberg beer in India, had entered into a brewing and packaging agreement with Pali Hills in December 2015. Under the deal, the Jharkhand-based brewery was to brew and bottle beer for Carlsberg.

The project failed to start on time and ran into repeated delays. The two sides blamed each other for problems relating to equipment, finances, and operations. The agreement was eventually terminated, pushing the dispute into arbitration.

In September 2020, the arbitral tribunal awarded Rs 25 lakh to Carlsberg under a clause that dealt with delays in achieving the agreed start date. Pali Hills challenged the award before the High Court, arguing that Carlsberg had not shown any real loss and that the amount was in the nature of a penalty. It also objected to the arbitrator rejecting its claim for rent for storing Carlsberg's equipment after the agreement ended.

The High Court rejected the challenge to the damages award. It said the contract itself recognised that any delay in achieving the start date would result in loss and that the parties had chosen to fix the consequence in advance.

“The parties' intention to quantify the consequence of such delay in advance binds the petitioner accordingly,” the court observed.

However, the court did interfere with the arbitrator's rejection of Pali Hills' claim for storage rent. It found that key documents showing that Carlsberg was asked to remove its equipment had been ignored.

On that issue, the finding could not be sustained. “No prudent person can arrive at the said findings in view of the documents available on record,” the court said.

For Petitioner/Palli Hills Breweries Pvt. Limited: Advocates Kirtiman Singh, Varun Rajawat, Arjun Chopra, and Maulik Khurana.

For Respondent/Carlsberg India Private Limited: Advocates Maurya Vijay Chandra and Manu Prabhakar.