Bangalore District Court
M/S Samala Mareppa & Sons vs The Chief Engineer on 30 January, 2023
1 Com.A.P.No.27/2021
IN THE COURT OF THE LXXXVIII ADDL. CITY CIVIL &
SESSIONS JUDGE (EXCLUSIVE COMMERCIAL COURT):
BENGALURU CITY. (CCH-89)
Present: Sri. P.J. SOMASHEKARA, B.A.,LL.M,
LXXXVIII Addl. City Civil & Sessions Judge
Bengaluru City.
Dated this the 30th day of January 2023
Com.A.P.No.27/2021
Applicant: M/s Samala Mareppa & Sons,
202/5, Rayadurga Bus Stand,
Bangalore Road, Bellary,
Rep. by its Proprietor,
S. Ramachandra Reddy.
(By Sri. V.K., Advocate)
-vs-
Respondent: 1. The Chief Engineer, Electricity,
Transmission Zone, Prasarana
Bhavan, Karnataka Power Transmission
Corporation Ltd., Buddha Vihar Cross,
Sedam Road, Kalaburagi - 585 108.
2. Sri. Venkatesha C. Sharma,
Chairman, Arbitration Tribunal,
Sri. Vaishnavi Law Associates,
No.10, Cellar, Hotel Santosh Complex,
4th Cross, 3rd Main, Gandhi Nagar,
Bengaluru - 560 009 & Sri. Kukkaji
Ramakrishna Bhatt, Upstairs, Opp. New
2 Com.A.P.No.27/2021
Mangalore Stores, 11th Cross,
Malleshwaram, Bangalore,
Collectively called as Majority
Arbitrators,
3. Sri. G.A. Anthony Cruze, Advocate,
High Court, High Court of Karnataka,
Bangalore - 560 009, hereinafter
called as Minority.
(By Sri. S.S./K.T.V. Advocates)
JUDGMENT
This is a petition/ plaint filed by plaintiff/ petitioner under Sec.34 of the Arbitration and Conciliation Act and sought for to modify the judgment and award passed by the majority arbitrators to the of award passed by the minority member Sri. G.A. Anothony Cruze, War Veteran, Retired Asst. Registrar of Co- operative Societies and Advocate as awarded at page No.174-178 in the interest of justice and equity.
2. Nut shell of the plaint are as under:
The petitioner/plaintiff being the contractor in its petition has alleged that who has engaged in the construction of transmission lines and establishing sub-stations. The defendant No.1 called for a tender on 13.09.2004 for the purpose of establishing 1X10 MVA sub-station at Kudithini in Bellary Taluk and District and its associated 110 KV line and quoted the lowest rate, thereby his 3 Com.A.P.No.27/2021 bid has been accepted and contract was awarded, the 1 st respondent/ defendant after accepting the contract entered into agreement on 02.02.2005 and started executed the contract work entrusted, but could not complete the project due to the delays in giving approvals/ clearances by the 1st defendant. When the work was under progress, one Mr. C.S. Ganesh has been appointed as Chief Engineer related to the project, who was earlier given a complaint against his family members alleging that they have committed an offence of tampering the electrical energy and the said complaint has been registered in C.C.No.4195/1999 on the file of ACJ (Jr.) & JMFC, Ballary, after the trial, the matter came to be dismissed by its judgment dated 12.01.1998 and became final. Mr. C.S. Ganesh being aggrieved has started harassing by way of not giving the approvals which are narrated from Annexure A to M in the W.P. No.13130/2007 and insisting to do the impossible works such as constructing a tower on the HLC canal bund as narrated in Annexure T and also two towers adjacent to railway line for which the permission of the railway authorities were yet to get by the defendant No.1 and finally has terminated the contract on 04.08.2007, not being satisfied with the wicked act, the said C.S. Ganesh has instructed the GESCOM to stop all its payments vide letter No.5895-97 dated 27.08.2007 thereby 4 Com.A.P.No.27/2021 paralyzing the progress in all respects with the estoppel of the payment by Mr. C.S. Ganesh and failed to perform all the contracts including contracts awarded to him by GESCOM, thereby he was blacklisted everywhere. Being aggrieved by the impugned order dated 04.08.2007 has approached the Hon'ble High Court of Karnataka by filing W.P.No.13130/2007.
3. The plaintiff in its plaint has further alleged that the respondent having noticed that they have no merits to defend their case filed an FIR as an afterthought on 06.09.2007 i.e. after 30 days from the date of receipt of the W.P. and falsely alleging that the bank guarantees produced are not genuine and who relied on the Supreme Court judgment in C.A.No.1297/1997 dated 02.12.1977 which held that when a statutory functionary makes an order based on certain grounds, the validity must be judged by the reason mentioned and cannot be supplemented by fresh reason in the shape of affidavit or otherwise and the Hon'ble single judge having noticed the lapses on the part of the 1 st respondent quashed the blacklisting of the firm by holding as illegal and has not interfered in termination of the contract as it was falsely submitted by the 1st defendant that the work was completed through other contractor. In the said order the Hon'ble Single judge has suggested to approach the arbitrator/ civil court 5 Com.A.P.No.27/2021 for the receivables. The 1st defendant has not produced any materials in the W.P. to show that the lapses which are narrated in Annexure A to M and Annexure T are false, it is undisputed by the 1st defendant in the W.P. that Mr. C.S. Ganesh has blacklisted which is beyond his powers and which clearly establishes that the termination blacklisting and withholding the payments for the completed portion of the works are with an ulterior motive and not genuine as the delay in completion of the project is due to lapses and delays on the part of the 1 st defendant in giving the approvals and who is not responsible for the liquidated damages/ penalties and who has borrowed huge amount from the banks and local finances and the banks have initiated the recovery action under the SARFACIE Act and thereby sought for the relief against the 1st defendant to direct the defendant to make payments for the completed portion of works as per the assessment of Field Engineer without any liquidated damages/ penalties as an alternative, the completed portion can be arrived by deducting the cost of the balance work from the total cost of the work without any liquidated damages/ penalties, the variations in quantity if any has to be recorded separately by the Field Engineer and the cost of the same may be included in the payable amount and be compensated by giving 10% on the cost 6 Com.A.P.No.27/2021 of the balance work as profit that has lost due to lapses on the part of the defendant and lost an opportunity to complete the project due to false submission before the Hon'ble High Court of Karnataka made by the 1st defendant that they got the work completed through some other contractor and to pay interest @ 18% p.a. on the withheld payments pertaining to the contract under the dispute from the date of completion of the work till the date of payment and as per the order dated 04.08.2007 the defendant has withheld all the payments pertaining to other contracts entered with the defendant which are completed long back and to direct the defendant to release the payment which withheld by the defendant along with interest @ 18% p.a. from the date of completion of work till its payment and who has paid the compensation to the land owners at the instance of the defendant field engineer while executing the work therefore it is necessary to direct the defendant to release the said payment made to the land owners along with interest @ 18% p.a. from the date of the payment till its realization and because of the various reasons mentioned which cannot be attributed to the project could not be completed and cost of the extra watch and ward incurred by providing to the materials of the project from original date of completion till taking the possession on 20.08.2007 for a 7 Com.A.P.No.27/2021 period of 18 months 12 days at 3 watchman per shift consisting of 3 shifts per day as per the Karnataka Minimum Labour Wages Act Rs.5,000/- per month per shift per watchmen and the defendant has to compensate the said expenditure and because of various reasons cannot be attributed the project could be completed and the cost of the extra labour incurred by providing to the work of the project from original date of completion i.e. 06.02.2006 till taking possession on 02.08.2007 for a period of 18 months 12 months at 50 labours per shift consisting of one shift per day as per Karnataka Minimum Labour Wages Act i.e. Rs.5000/- per month per shift per labour and the defendant has to compensate the said expenditure and liable to pay loss of reputation, mental agony and book laws which occurred due to non participation in tenders for the past 5 years and the defendant is liable to pay a sum of Rs.31,70,21,192/-
4. The plaintiff in the plaint has further alleged that the respondent has filed the objections to his claim stating that who has called the bid for the construction of 110 KV lilo line from existing Munirabad-Ballary S/C line to proposed 110KV substation at Kudithini in Bellary Taluk and District on 13.09.2004 and for establishing 1X10 MVA 110/11 KV substation and Kudithini in Bellary Taluk on 13.09.2004 on a turn key basis, the bid quoted by 8 Com.A.P.No.27/2021 him was accepted and the project for construction of station and line was awarded, the total value of the substation and lifeworks awarded amounting to Rs.2,52,54,963/- and Rs.96,88,961/- respectively, the work of construction of substation was divided in to 3 portion i.e. supply of materials, erection and civil works and issued 3 separate letters of intent all dated 19.01.2005 notifying the intention to award the contract, in so far as line works are concerned the works inter-alia involved supply of materials and erection for which two separate LOI both dated 19.01.2005 were issued two separate letters both dated 20.01.2005 confirming the acceptance of the terms of LOI. In relation to the work of construction of substation entered into 3 separate agreements for supply of materials erection and civil works all dated 29.01.2005 in so far as the work relating to construction of line is concerned, entered into two separate agreements for supply of materials and erection, the said agreements were entered into on 02.02.2005. The LOI requires him to furnish irrevocable and unconditional bank guarantees to the extent of 10% of the contract value for due performance of station and line works, accordingly had furnished the bank guarantees dated 29.01.2005 from Tungabhadra Krishi Sahakara Bank Niyamitha, Bellary District for the work relating to construction of substation and line works 9 Com.A.P.No.27/2021 totally amounting to Rs.25,25,496/- for the works relating to construction of station and Rs.9,86,897/- in respect of the line works, after the agreement was entered into between issued a detailed work award on 07.02.2005. As per the terms and condition of the contract agreement, he was obliged to undertake the construction of station and line strictly in terms of the contract documents. The time was an essence of contract and the period of completion of project was fixed as 12 months, from the date of acceptance of LOI, the period of completion of the supply of materials was 12 months including monsoon from the date of acceptance of LOI and target date was scheduled on 19.01.2006 however stipulated period for completion of erection portion was 9 months including monsoon period from the date of acceptance of the LOI and the target date was schedule on 20.10.2005.
5. The plaintiff in his plaint has further alleged that the 1 st defendant in its objection has further alleged that as per the invitation to tender and general conditions of contract he was required to furnish pert chart along with bar chart on the date of issuance of DWA and was require to achieve progress as per the pert and bar chart, and was expected to adhere strictly to the time schedule, however had failed to submit pert and bar chart, thereby issued several reminders to submit pert and bar chart, 10 Com.A.P.No.27/2021 but failed to honour its request, thereby constrained to issue bar chart prepared by its EE-MWD to him. On 01.07.2005 at the station site its engineers noticed that he had deviated from contract condition and commenced the work on his own without consulting the concerned engineers. So AEE EI MW KPTCL vide letter dated 05.07.2005 objected the work taken by him at station site without consulting its engineers, after the lapse of several months and after issuance of DWA noticed that he had not commenced the work as per bar chart and not carried out the project work according to the time schedule maintained in the chart and from time to time issued several reminders requesting him to adhere to the time schedule. From 08.07.2005 till 13.02.2007 various letters were addressed to him reminding about the dawdling progress of the work but he has on one pretext or the other kept on dodging, the said reminders which issued as an afterthought raised frivolous contention that he was unable to complete the project due to delays in giving clearance, during the execution of the contract and he used to issue fake calls towards the material inspection at factory and at the material site when its officials visited the site it was noticed that no materials as claimed by him were available at the site for inspection. On some occasions used to issue calls for inspection 11 Com.A.P.No.27/2021 of materials without issuing the purchase orders/ invoices for having purchased the materials.
6. The plaintiff in its plaint has further alleged that the respondent in its objection statement has stated that he could not go for inspection of materials since he had failed to furnish proper invoices to show that the materials were available at site and he was also indolent in procuring the required materials for construction of station and line, though it was the responsibility on him to procure the materials required for the construction of line and station, and he could not procure the required materials and in order to await delay in execution of project was constrained to supply several materials to him from its go downs, out of the materials supplied to him, materials worth of Rs.21,99,059/- were not accounted for at the time of joint inspection conducted on 20.08.2007 and he gave an undertaking dated 02.02.2007 to the Executive Engineer (Electrical) MWD, KPTCL, Bellary undertaking to complete the station in all respects before 01.03.2007 and also undertook to forego all his rights in the event of his failure to complete the station and line works by the said dates. In spite of the said assurance failed to complete the construction of station and line even after 31.03.2007, thereafter issued several reminders to him and gave details of the 12 Com.A.P.No.27/2021 materials to be procured and informed him to complete the procurement of the said materials on war footing and complete the works by mobilizing all men and material required for the same, however he has failed to respond its request as he was dodging the reminders issued and issued the final notice on 21.07.2007 to him to complete the construction of station and line on or before 31.07.2007, after the final notice dated 21.07.2007 was served to him and issued a reply on 03.08.2007 wherein has categorically admitted that substantial portion of work is pending to be completed and sought time to complete the commissioning of the substation and line and did not fulfill his part of obligation of completion of station and line on or before 31.07.2007 and constrain to terminate the contract by its letter dated 04.08.2007 in respect of works which awarded to him and was blacklisted apart from terminating the contract and blacklisting ordered encashment of bank guarantee immediately. The EMD that was paid by the contractor was ordered to be forfeited and the amount payable for the work rendered was also ordered to be withheld for adjustments against the price of the 1x10 MVA power transformers and issued a letter dated 04.08.2007 to the bank seeking to encash the bank guarantees furnished by him for sum of Rs.34,94,393/- in favour of Chief 13 Com.A.P.No.27/2021 Engineer (Electrical) Transmission Zone, KPTCL Kalaburgi. In response of the said letter the bank informed that it has not issued any bank guarantees in his favour and also informed that never issued any bank guarantee in favour of any persons or persons since its inception as there is no system in the bank to issue bank guarantee and informed that the bank guarantees issued by him are fake documents and signatures found on the bank guarantees are not of their forged.
7. The plaintiff in its plaint has further alleged that the respondent stated in its objection statement that its officers lodged FIR before the jurisdictional police at Bellary on 06.09.2007 against him towards furnishing the fake and forged bank/ performance guarantees for sum of Rs.34,94,393/- subsequent to lodging of FIR the jurisdictional police at Bellary have prepared a charge sheet on 31.05.2009 and instituted a criminal case No.338/2010 before the II Addl. C.J. & JMFC, 1 st Class, Bellary against him for submitting false and forged bank guarantees and the criminal case is pending, after terminated the contract and blacklisted, took the possession of the station site on 09.08.2007 and arranged security at site, thereafter issued a letter to him on 10.08.2007 requesting him or his representatives to be present at the station site on 20.08.2007 for taking joint 14 Com.A.P.No.27/2021 inventory of the work done at site, on 20.08.2007 has intimated vide fax letter that he must be given an advance notice of 15 days to enable him to come for joint inspection, thereafter issued 2nd and 3rd reminders to him on 24.08.2007 and 24.01.2008 requesting to be present at site on 05.09.2007 and 11.02.2008 respectively for joint measurement, however he did not chosen to appear for the joint inventory on 05.09.2007 and 11.02.2008 for joint inspection instead addressed a letter dated 04.02.2008 contending that he was present for joint inspection on 24.08.2007 and there was no representative at site and stated that he will not attend the joint inspection on 11.02.2008 as he has repeatedly ignored the reminders issued for joint inspection, its officials along with one M/s Vinay Security Services conducted the inspection of the materials at the station site on 11.02.2008 in his absence. After the inspection the balance work for instruction of station and line were estimated at Rs.1,38,62,636/- and Rs.29,45,590.31/- respectively, totally amounting to Rs.1,68,08,226/- and had supplied materials to him from its stores for a sum of Rs.21,59,000/- to carry out the work at the proposed station and line at the time of inspection on 11.02.2008 and its officials had noticed that the materials were neither utilized by him nor available at the site, though issued several reminders to 15 Com.A.P.No.27/2021 him to return the materials did not return the same, after termination of the contract on 04.08.2007 has preferred a writ petition before the Hon'ble High Court of Karnataka in W.P. No.13130/2007 challenging the order of termination of contract and blacklisting and the writ petition was transferred to Dharwad Bench and same was dismissed for non prosecution on 31.03.2009 and subsequently restored the said writ petition and order was passed on 18.11.2011 and set aside the order of blacklisting, however did not interfere the termination of the contract. Therefore, re-tendered the balance work to the contractors for completion dated 01.06.2010 after the High Court observation that the pendency of the writ petition will not come in the way of getting the works completed through 3rd agencies, therefore issued a fresh DWA for completion of the work for construction of station and line to their party contractor and also sought for counter claim of Rs.7,95,23,350/-. Based on the pleading, framed the issues, after full-fledged trial by the arbitral tribunal passed the majority award. Therefore it is necessary to modify the majority award for the following grounds:
GROUNDS A. The judgment and award which passed is illegal, arbitrary and no basis as much as the majority arbitrators have not applied their mind properly and independently without any basis have 16 Com.A.P.No.27/2021 given the findings and ultimately passed the award. There is no rationality in findings partially in respect of issue No.4, 9 and 11 in total in respect of issue No.10 by the majority arbitrators. Therefore, findings and award which passed on the basis of majority view are totally contrary to the decision of the Apex Court. Therefore, the judgment and award of the majority are liable to be modified to the extent of findings which adversed.
B. The majority of the arbitrators awarded only 12% instead of 18% in respect of issue No.11 as claimed which has no basis in as much as the minority arbitrator rightly given the finding by considering all the aspects including the loan which borrowed and interest paid thereon for the purpose of executing of the contract works. The minority arbitrator has rightly considered and awarded 18% interest at para No.1 of page 161 to 163 of the award and awarding of interest in respect of issue No.11 is liable to be modified as 18% and award interest in all the claims in respect of the work in other contractors and issue No.4 is also liable to be modified partially relating the rate of interest.
C. The findings of the majority arbitrators regarding the jurisdiction is absolute no basis and no rationality considering the dispute raised as much as the direction issued by the 1 st defendant to withhold all other amounts due in respect of other projects only on the basis of the pendency now the dispute has been resolved by all the three arbitrators holding that who is entitled for all the claims with respect to two projects and also with respect to other projects but the findings of the majority arbitrators has no water since the basis of giving such direction is resolved in the dispute and who is entitle for all the amounts of all other projects and clause 49 of the contract indicates tribunal has vast jurisdiction to deal all the disputes precipitated out of the dispute and majority arbitrators has rightly considered the jurisdiction in para 2.2 of page No.164 and hold that the tribunal has got jurisdiction to consider and to give direction to release the payments in respect of the other contractors which were withheld by the 1st defendant pursuant to termination of agreement dated 02.02.2005 on 04.08.2007 and termination of 17 Com.A.P.No.27/2021 the agreement is itself is bad in law and who is entitled for all the payments. Therefore judgment and award passed by the majority arbitrators is liable to be modified and grant relief of direction to release the entire payments in respect of all other contract.
D. The rate of interest which awarded by the majority of the arbitrators is 12% p.a. instead of 18% p.a. and other part of granting lesser amount are not granting any amount by the majority arbitrators cannot be sustained and the 1st defendant has not raised any objection in the cross-examination and who is entitled for the claim amount in respect of issue No.4 and the minority arbitrator has rightly discussed in accordance with law. Therefore, it is necessary to modify the majority award.
E. The majority arbitrators have not taken in to consideration that the 1st defendant without any reason terminated the contract. Therefore, who is entitle for amount for loss of expected profit and also compensation paid to the land owner in respect of issue No.6 and who is also entitle for the interest of 18% p.a. for which not taken into consideration by the majority arbitrators and who is also entitled the additional expenditures such as idle labour, extra watch and ward with interest @ 18% which not taken into consideration.
F. The majority of the arbitrators have not taken into consideration about the categorical suggestions and admission which appeared on record and who is also entitled the cost which was not taken into consideration and the interest part which awarded in issue No.18 from the date of termination till payments of amount withheld along with interest @ 12% p.a. is not reflected in the award. Therefore, the award of the majority arbitrators is liable to be modified and blacklisting is equal to civil death and prays for modify the majority award by allowing the instant suit.
G. The majority of the arbitrators have not taken into consideration about the illegal termination which terminated by the defendant No.1 nor taken into consideration about the 18 Com.A.P.No.27/2021 damages which payable by the defendant No.1 and the amount which withheld by the defendant No.1 and the majority of the members in the award at page No.179 para No.4 have not taken into consideration about the interest held that the interest part namely from the date of termination till the payment of amounts withheld along with interest @ 12% p.a. is not reflected in the award. Therefore, the award of the majority is liable for modified to the effect and also the rate of interest from 12.02.2018.
H. The majority of the arbitrators though have taken into consideration blacklisting is equal to civil death, though it was came to be set aside by the Hon'ble High Court of Karnataka but not taken into consideration of the interest @ 18% p.a. and when the termination held illegal, the defendant No.1 is liable to pay the cost of the arbitration proceedings along with interest @ 18% p.a. which was not taken into consideration by the majority of the arbitrators.
I. The majority of the arbitrators have awarded lesser rate of interest of 12% p.a. instead of 18%, though held there is no breach or negligence on his part and the minority arbitrator has rightly awarded 18% p.a. on all the dues and compensation which payable by the 1st defendant and therefore it is just and necessary to modify the majority award by granting the interest as held by the minority award and prays for allow the suit.
8. In response of the suit summons the defendant No.1 and 3 were appeared through their respective counsel, the defendant No.1 alone filed the statement of objection, the defendant No.3 did not chosen to file statement of objection. The respondent No.2 is the arbitrator. The defendant No.1 in the statement of objection has alleged the suit which filed by the plaintiff is not maintainable in law or on facts. As per the majority award passed 19 Com.A.P.No.27/2021 collectively by the defendant No.2, the defendant No.1 was directed to pay a sum of Rs.6,84,27,632/- along with interest @ 12% p.a. on the sums awarded from the date mentioned in the award and cost of Rs.5,00,000/- as mentioned in the award and the majority award directs the 1st defendant to pay the amounts specified at Sl.No.1, 3 to 6 and 7 @ 12% p.a. from the date of termination i.e. 04.08.2007 till the date of payment and in so far as the amount specified at Sl.No.2 the award directs payment of the amount along with interest from 24.10.2004 until the date of payment. The majority award passed by the defendant No.3 agrees with the majority award on all aspects except on the question of awarding interest and regarding the jurisdiction of the arbitral tribunal to pass award on claims which pertains to some other projects which is not the subject matter of the arbitration in between them and the minority award direct the payments as stated in the minority award and the minority award payments mentioned at Sl.No.1(a), 2, 2(a), 3, 4(3), 4(4), 4(5), 4(6), 5, 6, 7, 8(a), and 9 to 7 at 18% p.a. from 04.08.2007 till the date of payment in so far as the amounts mentioned at Sl.No.4(1) and 4(2) are concerned the minority award directs payment of interest @ 18% p.a. from 24.10.2004 till the date of payment. The minority award directs the payment of interest @ 18% p.a. from 20 Com.A.P.No.27/2021 the date of the award until the date of payment as invited the bids from interested bidders for construction of 110 KV lilo line from the existing Munirabad-Bellary S/C line to proposed 110 KV substation in Kudithini in Bellary taluk and district on 13.09.2004 for establishing 1X10 MVA 110/11 KV substation at Kudithini in Bellary taluk on a turn key basis. The plaintiff who claiming to be the contractor engaged in the construction of transmission lines and establishing substation participated in the tender floated by the plaintiff for construction of 110KV lilo from existing Munirabad-Bellary S/C line to proposed substation at Kudithini in Bellary taluk and for establishing substation at Kudithini on a turn key basis. The bid quoted by the plaintiff was accepted and the project for construction of station and line was awarded to the plaintiff and total value of the substation and line works awarded to the plaintiff amounted to Rs.2,52,54,963.35/- and Rs.96,88,961/- respectively. The work of construction of substation was divided into 3 portions viz., supply of materials, erection and civil works and issued 3 separate letters of intent all dated 19.01.2005 notifying their intention to award the contract to the plaintiff, in so far as line works are concerned the works inter-alia involved supply of materials and erection for which two separate letters of intent both dated 19.01.2005 were issued and 21 Com.A.P.No.27/2021 the plaintiff issued two separate letters both dated 20.01.2005 confirming the acceptance of the terms of the letter intent. The work of construction of substation the plaintiff entered into 3 separate agreements for supply of materials, erection and civil works all dated 29.01.2005. The works relating to construction of line is concerned entered into two separate agreement for supply of materials and erection.
9. The 1st defendant in its objection statement has alleged the agreements were entered into on 02.02.2005, the letter of intent required the plaintiff to furnish irrevocable and unconditional bank guarantees to the extent of 10% of the contract value for due performance of station and line works, accordingly furnished the bank guarantee dated 29.01.2005 from Tungabhadra Krushi Sahakara Bank Niyamitha, Sanganakal, Bellary District for the work relating to construction of substation and line works totally amounting to Rs.25,25,496/- for the works relating to construction of station and Rs.9,86,897/- in respect of the line works. After the agreement entered into between them issued the detailed work order on 07.02.2005, as per the terms and conditions of the contract agreement the plaintiff was obliged to undertake the construction of station and line strictly in terms of the contract documents. The time was the essence of the 22 Com.A.P.No.27/2021 contract and the period of completion of the project was fixed as 12 months from the date of acceptance of the letter of intent, the period of completion of supply of materials was 12 months from the date of acceptance of the letter of intent and the target date was scheduled on 19.01.2006. The stipulated period for completion of erection portion was 9 months from the date of acceptance of the letter of intent and target date was scheduled on 20.10.2005, but the work could not be completed on account of delay and C.S. Ganesh was appointed as chief engineer for the project though reminded the plaintiff to complete the work which was entrusted but the plaintiff did not do so, thereby terminated the contract and blacklisted the plaintiff and the arbitral proceedings has been initiated and passed the award after fulfledged trial as the arbitral tribunal based on the pleadings of the parties framed the issues and both have led the evidence, after conclusion of the evidence filed the written arguments and the certain amount which claimed by the plaintiff for the first time in relation to the claims that were not included in the claim statement and addressed the arguments, after addressing the reply arguments in part by the plaintiff moved an application on 22.02.2017 for appointment of Electrical Inspectorate, Government of Karnataka as Commissioner to assess the value of 23 Com.A.P.No.27/2021 the work completed by the plaintiff based on the materials placed before the tribunal though has filed the objection to the said application on 13.03.2017 opposing the application filed by the plaintiff, after hearing the arguments on both side, the tribunal vide its order dated 17.03.2017 was pleased to appoint the commissioner, pursuant to the same arbitral tribunal appointed K. Chandrashekar Reddy, Electrical Inspector to assess the value of the work which completed by the plaintiff based on the materials placed before the arbitral tribunal and filed the report same was taken on record on 13.09.2017 after furnishing copy of the report directed to file objection if any to the Commissioner report and filed the objection to the commissioner report on 30.11.2017 inter-alia contending that the Commissioner did not issue notice before executing of the Commissioner warrant and thereafter the matter was reserved for passing the award with liberty to file written submissions and who submitted the written submissions on 27.03.2018 along with an application for permission to file the same and arbitral tribunal took the written submissions on record after more than two years from the date of reserving the matter for passing the award the arbitral tribunal delivered two awards i.e. majority award passed by the defendant No.2 and 3 and minority award passed by the defendant No.4 and did not hold a 24 Com.A.P.No.27/2021 sitting to pronounce the award and letter dated 01.03.2020 communicated a back dated award dated 06.01.2020 and received the award on 16.03.2020, after passing of the award, the plaintiff filed an application under Sec.33(3) and 33 (4) of the Arbitration and Conciliation Act seeking for rectification for certain typographical errors in both the arbitral awards and also seeking an additional award and due to the national lock down the soft copies of the application was sent to the presiding arbitrator during April 2020 and the physical copy of the said applications were filed on 21.05.2020 and filed its objections to the said application in June 2020 after lifting of national lock down heard arguments on both applications in December 2020 and the written submissions was filed by the plaintiff on 28.12.2020 and nearly 100 days later corrected the award and handed over its counsel on 09.04.2020 under the cover of an undated letter addressed by the presiding arbitrator, though corrected the award indicates that the separate order dated 24.03.2021 has been passed on plaintiff application under Sec.33(3) of the Arbitration and Conciliation Act and a signed copy of the order has not been furnished the arbitral tribunal and the arbitral tribunal has not clarified if it has passed any order on the plaintiff application under Sec.33(4) of the Arbitration and Conciliation Act 25 Com.A.P.No.27/2021 and who filed separate petition challenging the majority award passed collectively by the defendant No.2, both the majority and minority award passed by the arbitral tribunal have been passed on wholly misplaced, erroneous and false reasoning, the award is illegal, perverse and is an outcome of collusive between the plaintiff and the arbitral tribunal has passed two award i.e. majority and minority only to camouflage the fraud perpetuated in passing of the arbitral tribunal, both awards vitiated by corruption liable to be set aside.
10. The defendant No.1 in its objection statement has alleged the defendant No.3 did not participated during hearing on interlocutory application and recording of evidence in the arbitration proceedings and relied unmarked documents while awarding interest @ 18% p.a. clearly shows he has merely signed on the award prepared by some one relying on the documents which are not marked and erred in holding that the arbitral tribunal had the jurisdiction to entertain and adjudicate the disputes relating to other contracts which were not referred to the arbitral tribunal and the arbitral tribunal constituted to adjudicate the dispute arising under an agreement and adjudicate the dispute arising out of the different agreement between the parties and the arbitral tribunal being the creature of an 26 Com.A.P.No.27/2021 agreement between the parties cannot adjudicate any dispute arising in relation to a totally different project merely on the premise that the disputes are precipitated by the blacklisting of the plaintiff. The defendant No.2 and 3 cannot assume the jurisdiction to adjudicate the disputes arising under an altogether different contract and the object of speedy disposal does not definitely empower the arbitral tribunal to do the acts as observed by the defendant No.3 in his award and he has not assigned any reasons as to why who is awarding simple interest @ 18% p.a. on the amounts adjudged by the defendant No.2 and the defendant No.3 ignored the facts that the rates of interest has been falling regularly since 2011 and also since the arbitration proceedings pending for a long time the interest awarded on certain claims allowed by the 3 rd defendant exceeded the claim amount awarded by the arbitrator and the 3rd defendant has awarded a sum of Rs.15,00,000/- as loss of expected profit in relation to the work of establishing 33 KV substation at Bemalkheda of Bidar District and from conjoined reading of Clause 48(1) and 48(2) and Sec.7(1) of the Arbitration and Conciliation Act only the disputes have arisen between the parties in connection with the contract can be referred for arbitration and the arbitral tribunal cannot adjudicate those claims and cannot be 27 Com.A.P.No.27/2021 made liable to pay the same in the guise of deciding the dispute arising out of the contract and the 3 rd defendant has erred in awarding a sum of Rs.2,09,94,017/- and restored to guess work and has erroneously awarded a sum of Rs.7,50,000/- on the premise no document has been produced despite of direction by the tribunal and no application has been filed before the tribunal summoning the documents and erred in awarding sum of Rs.16,38,477/- towards the loss of profit without any pleading nor the evidence on record and erred in awarding sum of Rs.1 crore towards the mental agony and sum of Rs.1 crore towards the loss of reputation in the absence of materials and evidence and erred in awarding sum of Rs.10,00,000/- towards the loss of book profits on account of blacklisting. Though plaintiff has not proved on the basis of any cogent material such as audited financial statement of the plaintiff and prays for reject the suit.
11. Both counsels were filed the written arguments.
12. Heard the arguments on both side.
13. The points that arise for court consideration are as under:
1. Whether the plaintiff has made out the grounds which are enumerated under Sec.34 of the Arbitration and Conciliation Act to modify the award passed by the majority arbitrators?28 Com.A.P.No.27/2021
2. What order?
14. My answer to the above points are as under:
Point No.1: In the Negative;
Point No.2: As per final order, for the following;
REASONS
15. POINT NO.1: The plaintiff being the claimant, the defendant No.1 being the respondent before the arbitral tribunal feeling aggrieved by the majority award approached the court on the ground that the defendant No.1 called the tender for which he has participated in the bid and his bid was accepted and contract agreements were taken place in between them, but due to breach of agreement by the defendant No.1 could not execute the work which was entrusted and later on terminated his contract and blacklisted him, thereby initiated the arbitral proceedings and the majority of the arbitrators were not passed the award as per the award which passed by the minority. Therefore, sought for modification of the majority award which passed by the arbitrators.
16. The plaintiff apart from his written arguments has submitted that the majority of the arbitrators were awarded only 12% instead of 18% as claimed by him. Therefore, it is necessary to modify the interest instead of 12% as 18%. Though majority of 29 Com.A.P.No.27/2021 the arbitrators were awarded the compensation but they have awarded the interest to an extent of 12% p.a. instead of 18%.
Therefore it is just and necessary not only modify sum compensation but also modify the award in respect of the interest from 12% to 18% and the majority of the award in page No.179 para No.4 reflects that the payments has been awarded from the date of termination till payment of amounts withheld along with interest @ 12% p.a. is not reflected in the award. Therefore, the majority award is liable to be modified to that effect and also the rate of interest from 12% to 18% p.a. and in view of blacklisting equal to civil death is necessary to award damages along with interest @ 18%. Therefore, it is just and necessary to modify the award which passed by majority of the arbitrators as awarded by the minority award and prays for allow the suit.
17. Per contra, the learned counsel for the defendant No.1 apart from written arguments has submitted the suit which filed by the plaintiff is not maintainable in law or on facts and the plaintiff has filed the instant suit for confirmation of the minority award and the arbitrator who nominated by the plaintiff has not been participated in the proceedings who signed the minority award which written by some one and no reasons has been assigned in the award for awarding the interest @ 18% which is 30 Com.A.P.No.27/2021 against to Sec.31 of the Arbitration and Conciliation Act and the arbitrator has not taken into consideration of the objection to the Commissioner report which filed by both the parties and Sec.31 of the Arbitration and Conciliation Act is very much clear the arbitrator shall assign the reasons while passing the award. If not assigned it is the ground to set aside the award. Therefore, question of modification of the award as sought by the plaintiff does not arise and prays for dismiss the suit. So before considering the arguments which advanced by both the counsels, it is just and necessary to consider the legal aspects first for appreciation of the arguments which advanced by both counsels and the materials on record which reads like this:
1. What is arbitration?
2. When court can interfere with arbitral award?
3. What is the scope of Court's power to interfere with the arbitral award?
4. What are the grounds are required to set aside the award?
5. Setting aside of arbitral award when permissible?
Let me decide one after another for the proper appreciation of the materials on record. Thus this court drawn its attention on Sec.2(1)(a) of the Arbitration and Conciliation Act, 1996 which reads like this:
2(1)(a). The definition arbitration means any arbitration whether or not administered by permanent arbitral institution.
Arbitration is a private dispute resolution mechanism agreed upon by the parties.31 Com.A.P.No.27/2021
Arbitration is a binding voluntary alternative dispute resolution process by a private forum chosen by the parties.
Arbitration is a process of settlement extra curses curiae and the parties are at liberty to choose their judge. "The essence of arbitration without assistance or intervention of the court is settlement of dispute by a tribunal of the own choosing of the parties." Law of arbitration aids in implementation of arbitration agreement contract between the parties which remains a private adjudication by a forum consequently chosen by the parties and made on consequential reference.
Now let me know when court can interfere with the arbitral award. Thus this court drawn its attention on Sec.34(43) of the Arbitration and Conciliation Act, 1996 which reads like this:
43. Principles of interference with arbitral award:-
The principles of interference with an arbitral award under Sec.34(2) of the Act are as follows:
(1) An award, which is -
(i) contrary to substantive provisions of law; or
(ii) The provisions of Arbitration and Conciliation Act, 1996, or
(iii) against the terms of the respective contract; or
(iv) Patently illegal or
(v) Prejudicial to the rights of the parties; is open to interference by the court under Sec.34(2) of the Act. (2) The award could be set aside if it is contrary to:
(a) fundamental policy of Indian Law; or
(b) the interest of India; or
(c) justice or morality.
(3) The award could also be set aside, if it is so unfair and unreasonable that it shocks the conscience of the court.
(4) It is open to the court to consider whether the award is against the specific terms of the contract and if so interfere with it on the ground that it is patently illegal and opposed to the public policy of India.32 Com.A.P.No.27/2021
So, by virtue of the provision which stated above, the court can interfere with the arbitral award in the grounds which mentioned above.
Now let me know what is the scope of Court's power to interfere with the arbitral award? Thus this court drawn its attention on Sec.34 of the Arbitration and Conciliation Act which reads like this;
Scope of Court's power to interfere with the arbitral award:
The scope of the interference by the court's in regard to arbitral award is limited. Courts do not sit in appeal over the findings and decision of the arbitrator, nor can it reassess or re-appreciate evidence or examine the sufficiency or otherwise of the evidence.
So, by virtue of the provision which stated supra, the scope of interference by the court in regard to the arbitral award is limited scope. The scope of interference under Sec.34 of the Act is limited in view of the judgment of the Hon'ble Supreme Court of India which reported in AIR 2003 SC 2629 in between Oil and Natural Gas Corporation Ltd., V/s Shah Pipes Ltd., and in the said judgment, their Lordship held that;
'an award can be set aside if it is contrary to fundamental policy of Indian Law, the interest of India, justice or morality, if it is patently illegal and unfair and unreasonable it shocks the conscience of the court'. Now let me know what are the grounds are required to set aside the award which passed. Thus this court drawn its attention on 33 Com.A.P.No.27/2021 Sec.34(18) of the Arbitration and Conciliation Act which reads like this:
18. Grounds to set aside award:- Under the new Act, 1996 misconduct of arbitrator is no ground to set aside an award but court may set aside an award in the following grounds:
(1) if the composition of the arbitral tribunal was not in accordance with the agreement of the parties.
(2) falling such agreement, the composition of arbitral tribunal was not in accordance with the part I of the Act.
(3) if the arbitral proceeding was not in accordance with -
(a) the agreement of the parties.
(b) failing such agreement - the arbitral procedure was not in accordance with part I of the Act. However exception for setting aside the award on the ground of composition of arbitral tribunal or illegality of arbitral procedure is that the agreement should not be in conflict with the provisions of part I of the Act from which parties cannot derogate;
(c) if the award passed by the arbitral tribunal is in contravention of the provisions of the Act or any other substantive law governing the parties or is against the terms of the contract.
An award can be set aside, if it is against the public policy of India that is to so it is contrary to:
(1) fundamental policy of Indian law, (2) the interest of India, or (3) justice or morality , or (4) if it is patently illegal.
It could be challenged -
(a) as provided under Sec.13(5); and
(b) Sec. 16(6) of the Arbitration and conciliation Act. So the court can set aside the award, if the grounds found which stated supra.
So, if the petitioner is made out the grounds which stated supra, court can set aside the award. Now let me know about the setting aside of arbitral award when permissible. Thus this court drawn its 34 Com.A.P.No.27/2021 attention on Sec.34(4) of the Arbitration and Conciliation Act, 1996 which reads like thus:
4. Setting aside of arbitral award when permissible:-
That the court can set aside the arbitral award under Sec.34(2) of the Arbitration and Conciliation Act if the party making the application furnishes the proof that:
(i) a party was under some incapacity
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for time being in force.
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or otherwise unable to present his case.
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitrator or it contains visa decisions on matters behind the scope of the submission to arbitration.
(2) The court may set aside the award: (I) (a) if the composition of the arbitral tribunal was not in accordance with the agreement of the parties.
(b) falling such agreement, the composition of the arbitral tribunal was not in accordance with part-1 of the Act.
(ii) if the arbitral procedure was not in accordance with:
(a) the agreement of the parties, or
(b) failing such agreement, the arbitral procedure was not in accordance with part-1 of the Act.
However exception for setting aside the award on the ground of composition of arbitral tribunal or illegality of arbitral procedure is that the agreement should not be in 35 Com.A.P.No.27/2021 conflict within the provisions of part-1 of the Act from which the parties cannot derogate.
(c) If the award passed by the arbitral tribunal is in contravention of provisions of the Act or any other substantive law governing the parties or is against the terms of the contract.
(3) The award could be set aside if it is against the public policy of India, that is to say, if it is contrary to:
(a) fundamental policy of Indian Law;
(b) the interest of India; or
(c) justice or morality; or
(d) if it is patently illegal.
(4) It could be challenged-
(a) as provided under Sec.13(5); and
(b) Section 16(6) of the Act."
"B. Further held as follows in this case: (1) The impugned award requires to be set aside mainly on the grounds:
(I) There is specific stipulation in the agreement that the time and date of delivery of the goods was the essence of the contract;
(ii) in case of failure to deliver the goods within the period fixed for such delivery in the schedule, ONGC was entitled to recover from the contractor liquidated damages as agreed;
(iii) it was also explicitly understood that the agreed liquidated damages were genuine pre-estimate of damages;
(iv) on the request of the respondent to extend the time limit for supply of goods, ONGC informed specifically that time was extended but stipulated liquidated damages as agreed would be recovered;
(v) liquidated damages for delay in supply of goods were to be recovered by paying authorities from the bills for payment of cost of material supplied by the contractor;
(vii) there is nothing on record to suggest that stipulation for recovering liquidated damages was by way of penalty or that the said sum was in any way unreasonable.36 Com.A.P.No.27/2021
(viii) in certain contracts, it is impossible to asses the damages or prove the same. Such situation is taken care by section 73 and 74 of the Contract Act and in the present case by specific terms of the contract" - Oil and Natural Gas Corporation V Shah Pipes Ltd. (2003)5 SCC 705 : AIR 2003 SC 2629; see also Moona Abousher V M/s. Cholamandalam DBS Finance Ltd. AIR 2019 Mad 233.
Apart from the legal aspects which referred above, it is just and necessary to reproduce the minority award for proper appreciation of the arguments which advanced by both counsels which reads like this:
MINORITY AWARD A. The Order No.CEE/TZ/GLB/EE (O)/AEE-2/2006-07/5763-84 dated 04.08.2007 (Ex.C62) is set aside in entirety by holding that termination of the contract of claimant are bad in law. Since black listing of claimant is held bad by Hon'ble High Court of Karnataka, Dharwad Bench. Dharwad in W.P. No.13130/2007 and quashed order of blacklisting as such no finding separately is required. Further,
1. The respondent is directed to pay the claimant balance sum of Rs.1,14,58,079/- which is the net balance payable for the work executed by claimant w.r.t station along with interest at 18% p.a. from 04.08.2007 till date of payment.
1a. The respondent is directed to pay to the claimant a sum of Rs.80,80,860/- payable for the work executed by claimant w.r.t station variation along with interest at 18% p.a. from 04.08.2007 till date of payment.
2. The respondent is directed to pay to the claimant balance sum of Rs.74,47,646/- which is the net balance payable for the work executed by claimant w.r.t line along with interest at 18% p.a. from 04.08.2007 till date of payment. 37 Com.A.P.No.27/2021 2a. The respondent is directed to pay to the claimant a sum of Rs.48,86,068/- payable for the work executed by claimant w.r.t line variation along with interest at 18% p.a. from 04.08.2007 till date of payment.
3. The respondent is directed to pay to the claimant a sum of Rs.32,33,461/- payable for the cost of the claimant's materials at site after taking possession along with interest at 18% p.a. from 04.08.2007 till date of payment. 4(1) The respondent is directed to pay to the cla9imant a sum of Rs.1,95,000/- payable towards refund of EMB which is deposited with the respondent for station on 24.10.2004 along with interest at 18% p.a. from 24.10.2004 till date of payment.
4(2) The respondent is directed to pay to the claimant a sum of Rs.70,000/- payable towards refund of EMD which is deposited with respondent for line on 24.10.2004 along with interest at 18% p.a. from 24.10.2004 till date of payment. 4(3) The respondent is directed to pay to the claimant the amounts towards the retention amount which are retained by the respondent from the claimant bills along with interest at 18% p.a. from dates of deduction from the claimant's bills of each item as mentioned in Ex.C.117 and 117A till date of payment.
4(4) The respondent is directed to pay to the claimant a sum of Rs.1,27,704/- towards refund of other deductions which are deducted by the respondent as mentioned in Ex.117 along with interest at 18% p.a. from the date of termination 04.08.2007 till date of payment.
4(5) The respondent is directed to pay to the claimant towards the liquidated damages amounts which are deducted by the respondent from the claimant bills along with interest at 18% p.a. from dates of deduction from the claimant's bills of each item as mentioned in Ex.C.117 and 117A till date of payment.
4(6) The respondent is directed to pay to the claimant the amounts mentioned below towards loss incurred due to non issuance of TDS certificates which are recovered from the 38 Com.A.P.No.27/2021 claimant along with interest at 18% p.a. from dates of deduction from the claimant's bills of each item as mentioned in Ex.C.117 and 117A till date of payment.
5. The respondent is directed to pay to the claimant a sum of Rs.16,38,477/- payable towards loss of expected profit on the balance work in the contracts in question along with interest at 18% p.a. from 04.08.2007 till the date of payment.
6. The respondent is directed to a sum of Rs.4,97,346/- pay to the claimant payable towards refund of crop compensation paid by the claimant to landlords for line along with interest at 18% p.a. from 04.08.2007 till date of payment.
7. The respondent is directed to a sum of Rs.2,00,000/- pay to the claimant payable towards loss of advance given by claimant to its vendors along with interest at 18% p.a. from 04.08.2007 till date of payment.
8a. The respondent is directed to pay a sum of Rs.15,00,000/- to the claimant towards loss of expected profit in the project Establishing 33 kv substation at Bhemalkhed in Bidar Dist. Awarded by GESCOM along with interest at 18% p.a. from 04.08.2007 till date of payment. 8b. The claimant has claimed Rs.7,54,500/- towards loss of expected profit in the project 'Establishing 33 kv line at Kalmalla in Raichur Dist. Awarded by GESCOM. With respect to this claim there is no award as on today. It is not possible to obtain the quantify of work went out of the contract. Hence we are rejecting his claim for Rs.7,54,500/- with a liberty to adjudicate the same before any other competent court or authority.
9. The respondent is directed to pay to the claimant balance due of Rs.2,09,94,017/- towards the contract establishing of 2X10 MVA, power transformers sub-station at Donimalai, in Sandur Taluk, Bellary dist. Along with interest at 18% p.a. from 04.08.2007 till date of payment without prejudice to claim variation and his right in W.P. 30731/2018. 39 Com.A.P.No.27/2021
10 & 11. The respondent is directed to pay a sum of Rs.7,50,000/- to the claimant towards the contracts metering and protection works, shifting of transformers and other works on labour contract basis Ballary dt. And the crop compensation given by the claimant to land lords for the project construction of 66 kv line at Hampasagara along with interest at 18% p.a. from 04.08.2007 till date of payment. 12.13 & 14: The respondent is directed to pay to the claimant the sums, claimed under Sl.No.12, 13 & 14 as per the Hudson formulae by fixing overhead charges office expenditure at 15% of the cost of the project and profit percentage at 15% of the cost of the project to the claimant along with interest at 18% p.a. from 04.08.2007 till date of payment.
15. The respondent is directed to pay a sum of Rs.100,00,000/- to the claimant payable towards mental agony suffered by the claimant along with interest at 18% p.a. from 04.08.2007 till date of payment.
16. The respondent is directed to pay a sum of Rs.1,00,00,000/- to the claimant payable towards loss of reputation caused to the claimant along with interest at 18% p.a. from 04.08.2007 till date of payment.
17. The respondent is directed to pay a sum of Rs.10 crore to the claimant payable towards book loss suffered by the claimant due to illegal blacklisting along with interest at 18% p.a. from the date of blacklisting 04.08.2007 till the date of payment.
18. The respondent is directed to pay a sum of Rs.10,00,000/- to the claimant payable towards cost of arbitration to the claimant along with interest at 18% p.a. from the date of award till date of payment.
Keeping the provisions and the minority award which referred above in mind, now let me know the arguments advanced by both the parties, as the plaintiff while canvassing his arguments has much argued that modification of the award is necessary. Now the 40 Com.A.P.No.27/2021 question arises whether Sec.34 of the Arbitration and Conciliation Act empower this court for modification of the majority award as sought by the plaintiff. Thus this court drawn its attention on the following judgments:
1. 2015(3) SCC 49
2. Hon'ble High Court of Karnataka passed in MFA No.5915/2012 dated 08.12.2021 In the judgment of the Hon'ble Supreme Court reported in 2015(3) SCC 49 in between Associate Builders Vs Delhi Development Authority which referred above, in the said judgment their lordship held that a court does not sit in appeal over the award of an arbitral tribunal by reassessing or re-appreciating the evidence, an award can be challenged only under the grounds mentioned in Sec.34(2) of the Act. Therefore, in the absence of any ground under Sec.34(2) of the Arbitration and Conciliation Act, it is not possible to reexamine the facts to find out whether a different decision can be arrived at. So by virtue of the judgment of the Hon'ble Supreme Court which referred above, except the grounds mentioned in Sec.34(2) of the Arbitration and Conciliation Act, this court cannot sit in appeal over the award of an arbitral tribunal by reassessing or re-appreciating the evidence. 41 Com.A.P.No.27/2021
18. In the judgment of Hon'ble High Court of Karnataka passed in MFA No.5915/2012 dated 08.12.2021 in between Narasimhaha Murthy Vs The State, Indian National Highway authority, Which referred above, in the said judgment, the appellants feeling aggrieved by the order passed in A.C.No.3/2006 filed the MFA before the Hon'ble High Court of Karnataka on the ground no sufficient opportunity has been given to the appellant and also sought for appreciation of the materials on record, thereby the suit was came to be dismissed on the ground that there is no scope for appreciation and re-appreciation of the evidence which on record and under Sec.34 of the Arbitration and Conciliation Act the court can either only set aside the award or confirm that there is no scope for modification of the order.
19. Now keeping the provisions which referred above and the minority award in mind let me know the arguments which advanced by both the parties, as the plaintiff being aggrieved by the majority award has filed the instant suit on the ground that the majority arbitrators have not passed the order as passed by the minority award. Therefore, it is necessary for modification of the majority award and to consider the minority award in respect of issue No.4 to 11 as the plaintiff while canvassing his arguments has much argued that the majority award has not taken into 42 Com.A.P.No.27/2021 consideration of the materials which placed on record and the less compensation has been awarded instead of awarding the compensation as sought for and awarded the less interest instead of higher interest as 18%. It is an admitted fact the arbitral tribunal while passing the award in respect of issue No.4 have clearly stated that the plaintiff had claimed Rs.10,00,000/-
towards metering and protection works which were executed by him before termination dated 04.08.2007 and also sought for Rs.35,000/- towards the crop compensation which paid by him in Hampasagar project and both the amounts claimed are lump sum amounts, but did not accurate accounts based on the records and also taken into consideration that non-denial of said facts by the defendant No.1, since the defendant No.1 neither denied its liability to the plaintiff nor disputed the correctness of the amounts which claimed. Therefore, the majority of the arbitrators arrived the conclusion based on the materials on record and held that the defendant No.1 has not produced any document despite of application under the RTI and the directions of the tribunal, thereby observed that the claim is not pertaining to the project, the parties have been directed to work out their remedies before the appropriate forum and answered in favour of the plaintiff. Therefore, question of re-appreciation of neither the oral evidence 43 Com.A.P.No.27/2021 nor the documentary evidence and to give its own finding in the place of the majority award does not arise. If this court expressed any view against the findings which already given by the majority award it is nothing but modification of the award which is not permissible under law in view of the decisions which referred above. Therefore, the arguments which advanced by the plaintiff on this aspect holds no water.
20. The plaintiff while canvassing his arguments has much argued about entitlement of loss of profit at 10% of the cost of balance works for which the tribunal while passing the award not only considered the oral evidence, but also considered the materials on record and held that the payments to the claimant to protect its own interest is unsustainable for the reason that the bank guarantee submitted by the plaintiff to GESCOM were cross checked by it vide Ex.C.83 found acceptable and the respondent never chose to cross-examine the plaintiff on this aspect and the plaintiff was established his contention thereby answered in favour of the plaintiff. Therefore, if this court expressed anything in respect of the contention which taken by the plaintiff it is nothing but modification of the award. Therefore the arguments which advanced by the plaintiff on this aspect holds no water. 44 Com.A.P.No.27/2021
21. The plaintiff while canvassing his arguments has much argued that he has paid the compensation to the land lords at the instance of the field engineer of the 1st defendant, but the majority of the award is not taken into consideration which claimed in the claim petition, for which the arbitral tribunal in its award has clearly stated that the report of the court commissioner reflects though the plaintiff had sought Rs.6,63,128/- but based on the materials on record and the evidence of the court commissioner i.e. the report, the tribunal awarded sum of Rs.4,97,346/- with interest @ 12% p.a. till its payment by considering the oral and documentary evidence on record. So question of re-appreciation of the oral and documentary evidence as sought by the plaintiff on this aspect does not arise.
22. The plaintiff in his arguments has submitted that who is entitle additional expenditures incurred providing watch and ward for the period from 06.02.2006 till 20.08.2007 for three watchmen at the rate of Rs.5,000/- per watchmen per month and also entitle additional expenditure on providing labour at the work site for the period from 06.02.2006 till 20.08.2007 for 50 labours at the rate of Rs.5,000/- per labour per month for which the arbitral tribunal considered the materials on record and held that the respondent is liable to pay compensation for watch and ward, idle labours for 45 Com.A.P.No.27/2021 station and line and answered in favour of the plaintiff and also held that the plaintiff is entitled for the cost of extra watch and ward and idle labour cost for station line as per the Hudson formula but not as per the vouchers produced by the plaintiff along with interest @ 12% from 04.08.2007 till the date of payment, based on the materials on record for which the plaintiff has much argued to award as per the minority award and to grant the interest @ 18%. Admittedly, the majority of the arbitrators while passing the award have not only taken into consideration of the oral and documentary evidence but also considered the Hudson formula. Therefore, question of interference of this court as sought by the plaintiff does not arise. Hence, the arguments which advanced by the plaintiff on this aspect holds no water.
23. The plaintiff while canvassing his arguments has submitted that because of cancellation of the contract and blacklisting has sustained loss not only for loss of reputation but also mental agony and book laws for non participation of tenders for the past 5 years. For which also the arbitral tribunal while passing the award in page No.132 has held the plaintiff has sought for loss of business at Rs.20,70,00,000/- for the period to which he was prevented from participating due to blacklisting as well as for not achieving required turn over to participate after setting aside of 46 Com.A.P.No.27/2021 blacklisting. Admittedly the blacklisting was came to be set aside by the Hon'ble High Court of Karnataka, but the period was consumed for 5 years due to non achieving desired turn over he was prevented from participation for 5 years after setting aside of order of blacklisting. So, the arbitral tribunal by applying the formula awarded the compensation multiplying the value as stated in page No.133 of the award held the plaintiff is entitled for sum of Rs.2,09,66,354/- towards loss book, loss of profit. So question of variation nor modification of the award which passed by the arbitral tribunal does not arise, since the arbitral tribunal after considering the materials on record passed the award.
24. The plaintiff while canvassing his arguments has submitted though who is entitled for interest @ 18% p.a. from the date of completion of the work till payment, but 12% p.a. has been awarded by the majority arbitrators. Therefore, it is required for modification. It is an admitted fact the arbitral tribunal after considering the nature of the contract as well as the oral and documentary evidence on record and the circumstances of the case awarded the interest @ 12%. Now the plaintiff has come up with instant suit by challenging the partial award which awarded by the arbitral tribunal on the ground that the majority of the award granted the interest only at 12% instead of 18% and 47 Com.A.P.No.27/2021 requested for modification, but in view of the judgment which referred above question of modification of the majority award as sought by the plaintiff does not arise, since the plaintiff has failed to bring the case within the ambit of Sec.34 of the Arbitration and Conciliation Act.
25. The plaintiff while canvassing his arguments has drawn the court attention on the following judgments:
1. Civil Appeal. No.1762/2022 of the Hon'ble Supreme Court
2. Second Appeal No.234/2014 and M.P. No.1/2014 of High Court of Judicature at Madras.
3. Civil Appeal No.2440/2007 of Hon'ble Supreme Court
4. Arbitration Petition NO.549/2013 of High Court of Judicature at Bombay
5. Arbitration Petition No.132/2009 of High Court of Judicature at Bombay
6. Judgment of CCH-87 (Commercial Court, Bangalore) of A.P.No.19/2021 On careful perusal of the said judgments, their lordship held that where there is no exact relief that has been granted by the court, 48 Com.A.P.No.27/2021 so that it may not create further complication or difficulty in the execution if made out quashed and set aside the orders and where the arbitral tribunal has not been properly constituted or has no jurisdiction it must do so at the threshold before the arbitral tribunal so that remedial measures may be immediately taken and lacking in jurisdiction in proceedings for setting aside the award and where the arbitral tribunal considered the 3 rd party documents in support of the claims it is the grounds to set aside the award, but in the instant suit nothing has been established to apply the principles of the judgments which relied by the plaintiff.
Therefore, I do respect to the judgments which relied but the facts and circumstances of the present case and the judgments which relied are different.
26. The learned counsel for the defendant No.1 while canvassing his arguments has submitted the plaintiff is not entitle the relief as sought in the suit. So question of modification of the award as sought for does not arise and the said counsel has drawn the court attention on the judgment of the Hon'ble Supreme Court reported in 2021 (7) SCC 657 and the judgment of Hon'ble High Court of Kerala at Ernakulam passed in ARB.A.No.17/2013. On careful perusal of the said judgments, in the said judgments their lordship held that dissenting opinion of minority arbitrator can be relied 49 Com.A.P.No.27/2021 upon by the party seeking to set aside the award to buttress its submissions in the proceedings under Sec.34 of the Arbitration and Conciliation Act and the court is not procluded from considering the findings and conclusion of the dissenting opinion of the minority member of the tribunal and appreciation evidence is the realm of the tribunal and the court under Sec.34 of the Arbitration and Conciliation Act cannot re appreciate the evidence as is done in civil appeals and that it is only when the tribunal bases its conclusion on irrelevant and extraneous matter an interference would be called for. In the instant case, the plaintiff has not made out that the majority of the tribunal has considered irrelevant evidence or extraneous matters. Therefore, the principles which are laid down in the said judgments are applicable to the case, since the plaintiff has not made out any of the grounds which are enumerated under Sec.34 of the Arbitration and Conciliation Act for interference of this court. Hence, I am of the opinion that the point No.1 is answered as Negative.
27. POINT NO.2: In view of my answer to point No.1 as stated above, I proceed to pass the following;
50 Com.A.P.No.27/2021
ORDER The petition under Sec.34 of the Arbitration and Conciliation Act filed by the plaintiff is hereby dismissed.
No order as to costs.
(Dictated to the Stenographer, transcript thereof corrected by me and then pronounced in the open court on this the 30th day of January, 2023) (P.J. Somashekara) LXXXVIII Addl. City Civil & Sessions Judge, (Exclusive Commercial Court), Bengaluru City.