In a recent court decision, Hersheys India Pvt. Ltd. challenged a decision made by an arbitrator that required them to pay Rs. 75 lakhs to Kanti Beverages Pvt. Ltd. The court ultimately decided to cancel this payment order. Let's break down the details.
Hersheys India, once part of Godrej Industries, had a deal with Kanti Beverages to manufacture and package drinks under the brand 'Jumpin.' This agreement was supposed to last from December 2004 to December 2007. However, Kanti claimed that the contract had been extended until December 2011, which Hersheys disagreed with.
The original deal required Hersheys to buy at least 12 lakh liters of beverages annually. They paid Rs. 3.75 per liter for the first 12 lakh liters, with a sliding scale for more. Towards the end of the contract, Kanti faced financial losses and wanted to renegotiate, but talks fell through.
The arbitrator found no evidence that the contract had been extended beyond 2007. Despite this, the arbitrator decided Kanti should get Rs. 75 lakhs because of an "implied hope" for renewal based on Hersheys' silence to some emails.
"The absence of replies to certain emails of Kanti have been held... to have kept Kanti in the hope of a renewal."
Judge Somasekhar Sundaresan reviewed the case and found the Rs. 75 lakh compensation baseless. The arbitrator's decision to award this amount was inconsistent with its other findings that the contract had not been extended.
"The element of the Impugned Award directing payment of Rs. 75 lakhs... is incapable of being upheld."
The court decided to remove the Rs. 75 lakh compensation from the arbitrator's decision, keeping the rest of the findings intact. This decision underscores the importance of clear contract terms and communication.
