Delhi High Court Dismisses Cross-Petitions In FHEL-GAPL Arbitration, Confirms Damages & Rental Awards

The Delhi High Court on 11 February upheld an arbitral award directing Fresh and Healthy Enterprises Ltd (FHEL) to pay over Rs. 80 lakh in damages to Global AgriSystem Pvt Ltd (GAPL) for failure to maintain agreed storage conditions, while also confirming FHEL's entitlement to over Rs. 87 lakh towards rental and handling charges.

A Single Bench of Justice Jasmeet Singh dismissed cross-petitions filed by both companies, while reiterated that courts exercising jurisdiction under Section 34 of the Arbitration and Conciliation Act, 1996 cannot reassess factual findings of an arbitral tribunal if they represent a reasonable and plausible view.

Justice Singh held:

"The findings of the Sole Arbitrator are a reasonable and plausible view and this Court under Section 34 petition is not to reassess the findings on facts if the same are reasonable"

The dispute arose from a 2011 arrangement between FHEL, a government-owned cold storage operator, and GAPL, a fruit and vegetable trader. GAPL stored approximately 85,000 bags of carrots, weighing over 3,500 metric tonnes, at FHEL's cold storage facility in Rai, Haryana.

Though no formal agreement was executed, the parties exchanged emails agreeing that the carrots would be stored at a temperature of 1°C (±1°C) and relative humidity of 90–95%.

Disputes arose when a substantial quantity of the carrots allegedly deteriorated. The matter was referred to arbitration, with GAPL claiming damages on the ground of improper storage and FHEL seeking unpaid rental and handling charges.

By an award dated 2 August 2013, the Sole Arbitrator granted Rs. 80,44,961 to GAPL as damages and Rs. 87,16,956 to FHEL towards rental and handling charges. Both parties challenged the award under Section 34.

FHEL contended that there was no concluded contract and that the Arbitrator erred in treating it as a “bailee.” It argued that since the Arbitrator found that GAPL used defective packing material and lacked pre-cooling, FHEL could not be held negligent.

GAPL, on the other hand, asserted that a binding agreement existed and that FHEL, as a “bailee,” failed to properly maintain 16 chambers and denied access between June and September 2011. It argued that the award of rental charges for that period was “patently illegal.”

Emphasising the limited scope of interference under Section 34, the Court observed that it does not sit in appeal over arbitral awards. It noted that the exchange of emails constituted a valid contract stipulating storage at 1°C (±1°C) with relative humidity between 90–95%.

The Court further recorded that the Arbitrator had examined chamber-wise data and identified deficiencies in 16 storage chambers, including missing temperature records and non-functional sensors. It upheld the finding that FHEL, as a bailee, was required to take care of the stored goods “as a prudent man would take of his own goods,” and that damages were awarded after adjusting sale proceeds based on detailed calculations.

On the issue of rental charges, the Court noted that the Arbitrator had found that GAPL could not withhold rental and handling charges merely due to dissatisfaction with storage conditions, as it was free to remove the stock. Accordingly, Rs. 87.16 lakh was awarded to FHEL.

Finding no perversity in the Arbitrator's factual assessment, the Court held that the award was neither “in contravention with the public policy of India” nor “patently illegal.”

On post-award interest, the Court held that grant of such interest is mandatory under Section 31(7)(b) where the arbitrator has not specified the rate. It therefore granted post-award interest at 2% above the prevailing rate to both GAPL and FHEL.

Accordingly, both petitions were dismissed and the arbitral award was upheld in its entirety.

For Petitioner (FHEL): Advocates Mr. M.M. Kalra and Ms. Savita Rustogi

For Respondent (GAPL): Advocates Mr. Anand Varma and Ms. Apoorva Pandey