MUMBAI: The Bombay High Court has set aside an arbitral award directing Hershey’s India Pvt. Ltd. to pay ₹75 lakh to Kanti Beverages Pvt. Ltd., observing that the sum was granted as a “consolation prize” without any basis in evidence or analysis.
Justice Somasekhar Sundaresan, on October 7, noted that while the arbitral tribunal had rightly found no liability on Hershey’s part under the contract, it “somehow found it fit to pick a number of ₹75 lakh virtually out of a hat,” merely because Kanti Beverages had “harboured hope” of a contract renewal.
“The award is entirely unacceptable and shocks the conscience of the court,” Justice Sundaresan said, terming it “perverse” and contrary to the tribunal’s own reasoning.
Hershey’s India, formerly a division of Godrej Industries Ltd., had engaged Kanti Beverages (earlier Tristar Beverages Pvt. Ltd.) under a 2004 agreement to manufacture and package beverages marketed under the ‘Jumpin’ brand. The contract was valid until December 2007.
Kanti, which claimed experience with major beverage brands such as Parle, Coca-Cola and Frooti, alleged losses of ₹45 lakh in 2005–06 and sought a revision of prices and an extension of the agreement. It later claimed that the contract had been extended by conduct until 2011.
However, Hershey declined to renew the agreement in 2007, citing uncompetitive rates. Kanti treated this as an illegal termination and invoked arbitration.
The arbitral tribunal dismissed Kanti’s claims in April 2014 but still directed Hershey to pay ₹75 lakh in compensation, reasoning that the company’s silence on Kanti’s renewal emails had “kept it in hope”.
Challenging this award before the High Court, Hershey argued that the tribunal had erred in law and awarded compensation without any foundation.
Agreeing with Hershey’s contention, the court said the ₹75 lakh figure was “plucked from thin air”, with no quantification or causal basis. It stressed that damages cannot be awarded on the basis of “hope or implied expectation” without evidence of contractual breach.
While setting aside the compensation, the court clarified that its decision would not affect the tribunal’s other findings on the merits of the dispute.