Bombay High Court
Ajay Singh (Sunny) Deol vs Suneel Darshan on 16 April, 2015
Author: R.D. Dhanuka
Bench: R.D. Dhanuka
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO.819 OF 2011
Ajay Singh (Sunny) Deol )
of Mumbai Indian Inhabitant, )
residing at Plot No.22, Road No.11, )
Juhu-Vile Parle Development Scheme, )
Mumbai - 400 049. ) .. Petitioner
Vs.
Suneel Darshan )
carrying on his sole proprietary )
business under the name and style of, )
"Shree Krishna International",
132, Park Street-2, S.V.P. Nagar,
)
)
Andheri (West), Mumbai- 400 053. ) .. Respondent
along with
ARBITRATION PETITION NO.908 OF 2011
Suneel Darshan )
carrying on his sole proprietary )
business under the name and style of, )
"Shree Krishna International", )
132, Park Street-2, S.V.P. Nagar, )
Andheri (West), Mumbai- 400 053. ) .. Petitioner
Vs.
Ajay Singh (Sunny) Deol )
residing at Plot No.22, Road No.11, )
Juhu-Vile Parle Development Scheme, )
Mumbai - 400 049. ) .. Respondent
---
Mr.G.R.Joshi, Senior Advocate a/w Ms.Neeta Jain a/w Mr.Sunil Gangal
a/w Mr.Jayesh Mistry i/by M/s.RMG Law Associates for the petitioner
in Arb. Petn. No.819 of 2011 & for the respondent in Arb. Petn.908 of
2011.
Mr.Ajit Kapadia a/w Mr.Shyam Kapadia i/by Mr.Aditya Chitale for the
petitioner in Arb. Petn.908 of 2011 & for the respondent in Arb. Petn.
No.819 of 2011.
---
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CORAM : R.D. DHANUKA, J.
RESERVED ON : 27th February 2015
PRONOUNCED ON : 16th April 2015
JUDGMENT :-
. By these two petitions filed under Section 34 of the Arbitration and Conciliation Act, 1996 (for short "the said Arbitration Act), both the petitioners have challenged part of the impugned award dated 6th June 2011 passed by the learned arbitrator rejecting the claim made by Mr.Suneel Darshan-petitioner in Arbitration Petition No.908 of 2011 however, awarding arbitration costs of Rs.12,00,000/- (Rs. Twelve Lacs only) against Mr.Ajay Singh (Sunny) Deol-the petitioner Arbitration Petition No.819 of 2011 who was the original respondent.
in The respondent in the said petition was the original claimant in the arbitral proceedings. Mr.Suneel Darshan is described as the claimant and Mr.Ajay Singh (Sunny) Deol is described as the respondent in this judgment. Some of the relevant facts for the purpose of deciding these two petitions are as under :
2. Mr.Ajay Singh (Sunny) Deol-the respondent is an actor by profession. The claimant is a film producer. The dispute arose between the parties relating to production of a film. The said dispute was referred to the former Chief Justice of the Supreme Court of India as the sole arbitrator. On 13 th March 2007, the parties arrived at consent terms duly signed by both the parties before the learned arbitrator. The parties also signed the Articles of Agreement dated 14 th March 2007 recorded in terms of settlement. On 15 th March 2007, the learned arbitrator made an award in terms of the consent terms arrived at between the parties.::: Downloaded on - 17/04/2015 00:00:37 :::
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3. Under the said consent terms, the respondent was suppose to work as a lead star in a proposed film to be produced by the claimant.
The parties agreed that the respondent shall give 40 shooting dates for completion of the said film excluding any date or dates on which the respondent was unable to report for such shooting due to health reasons and for dubbing. It was agreed that the subject of the proposed film will be agreed by and between the parties within three months from the date of publication of apology referred to in the consent terms. The claimant agreed to publish an apology against the respondent in the publications 'Midday', 'Hindustan Times' and the trade journal 'Film Information'.
The claimant accordingly published the said apology as agreed.
4. It is the case of the claimant that the claimant forwarded one script titled as "Kal Kisne Dekha" to the respondent. The respondent however sought narration of the script in order to understand his role in the film. In the month of November 2007, the respondent rejected the said script. It is the case of the claimant that he thereafter started working on another script called "Good Morning India" and forwarded the same to the respondent on 2nd April 2008 and also sought time for narration of the said script to the respondent.
5. On 29th April 2008, the writer of the script Mr. Robin Bhat along with Mr.Kartike Singh narrated the script "Good Morning India"
to the respondent. The respondent liked the subject of the said script but wanted to know the exact dialogues in order to understand his role as a lead star in the film. The respondent also wanted to know about music director in the film.::: Downloaded on - 17/04/2015 00:00:37 :::
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6. It is the case of the claimant that on 30 th April 2008, the Assistant Director Mr.Kartike Singh of the claimant addressed a letter to the respondent stating that he would work with the dialogues and would revert back to the respondent. However on 16th May 2008, the claimant addressed a letter to the respondent making various allegations alleging that the respondent was not co-operating with the venture and was delaying the project.
7. By letter dated 28th May 2008, the respondent denied all the allegations made by the claimant and informed that he had accepted the subject of the film "Good Morning India", however, without hearing the dialogues, he could not proceed with the venture. He also placed on record that Mr.Kartike Singh had informed him that he would revert back with the dialogues.
8. It is the case of the respondent that during the period between 21st May 2008 to 5th June 2008, the claimant forwarded Standard Actors Agreement duly signed by him and sought 40 consecutive dates from the respondent. By a letter dated 9 th June 2008, the respondent denied that he was delaying the project. By a letter dated 10th June 2008, the respondent informed the claimant that he was unnecessarily hasting his moves by asking 40 consecutive dates without there being any agreement and finalization of the script "Good Morning India." On 18th June 2008, the claimant threatened the respondent for legal action against the petitioner.
9. On 31st July 2008, the claimant forwarded various letters to the respondent. The respondent was informed for the first time that the ::: Downloaded on - 17/04/2015 00:00:37 ::: ppn 5 arbp-819.11 & 908.11(j).doc claimant had already executed an Agreement with M/s.Gemini Industries and had received an advance of Rs.3,00,00,000/- (Rs.Three Crores only) for the said film and that he would suffer damages, if that agreement was terminated. On 14th August 2008, the said M/s.Gemini terminated the said agreement with the claimant. The claimant claimed Rs.20,00,00,000/- (Rs.Twenty Crores Only) as damages from the respondent for the alleged breach committed by the respondent of the consent award.
10. The dispute arose between the parties. The said dispute was referred to a former Judge of the Supreme Court of India. The claimant filed a statement of claim demanding a sum of Rs.20,00,00,000/- (Rs.Twenty Crores only) with interest and costs. The respondent denied the said claim and lodged a counter claim. Both the parties examined witnesses. By an award dated 6 th June 2011, the learned arbitrator dismissed the claim of the claimant and the counter claim of the respondent. Learned arbitrator, however, awarded costs of Rs.12,00,000/- (Rs.Twelve Lacs only) in favour of the claimant and against the respondent. Both the parties have challenged part of the award rendered by the learned arbitrator in these two petitions.
11. By the said arbitral award dated 6th June 2011, the learned arbitrator though rendered various findings of facts in favour of Mr.Darshan-original claimant, the learned arbitrator has held that the claimant had not able to prove that he has suffered any damages much less damages in the sum of Rs.20 crores. The learned arbitrator held that the claimant was ready and willing to perform and that the respondent committed breaches of the agreement and the consent terms.::: Downloaded on - 17/04/2015 00:00:37 :::
ppn 6 arbp-819.11 & 908.11(j).doc The claimant had not able to prove that he had suffered any loss or damages as a result of the breaches. It is held that the claimant thus would be only entitled to costs of arbitration quantified at Rs.12 lacs from the respondent.
12. The claimant has impugned the certain findings rendered by the learned arbitrator against him and rejection of the claim for damages in the Arbitration Petition No.908 of 2011. The original respondent has also impugned some of the findings rendered by the learned arbitrator against him and has impugned the award in so far as the costs of arbitration directed to be paid to the claimant by the respondent in the sum of Rs.12 lacs is concerned.
13. The learned arbitrator in the impugned award framed nine issues. It is held by the learned arbitrator that the arbitral tribunal had jurisdiction to decide the dispute arising out of the consent terms and also had jurisdiction to decide whether the parties had orally agreed on the number of subjects that were to be put to the respondent and whether the 40 dates were to be allotted consecutively.
14. In the impugned award, the learned arbitrator held that the respondent had committed breach of consent terms by keeping on varying his demands on how the subject was to be agreed upon and answered the said issue in the affirmative accordingly. However, in so far as the claim for damages dealt with by the learned arbitrator while dealing with issue nos.(vi) and (vii) is concerned, he rendered a finding that there was no evidence on record to show that the agreement marked as exhibit 'C-31' was the agreement which had been entered into by ::: Downloaded on - 17/04/2015 00:00:37 ::: ppn 7 arbp-819.11 & 908.11(j).doc the claimant with M/s.Gemini Industries and Imaging Limited. The contents of the said agreement had not been proved by anybody. It is held that no person from Gemini Industries and Imaging Limited had been brought to prove the said agreement. The learned arbitrator has held that there was no explanation as to who was the Asian Capital Consolidated Fund and how it was connected with the claimant or M/s.
Gemini Industries and Imaging Limited. The learned arbitrator has rendered finding that the agreement, if any, with M/s. Gemini Industries and Imaging Limited appeared to have come to an end in November 2007 when the cheque was dishonoured. The letters at exhibit 'C-27' had been procured for the purpose of creating evidence. No reliance could be placed on those letters. The learned arbitrator accordingly held that the claimant had not been able to prove that he had any subsisting agreement under which he was to receive a sum of Rs.33 crores and accordingly rejected the claim of Rs.20 crores.
15. Mr. Kapadia, learned counsel for the claimant invited my attention to various findings rendered by the learned arbitrator in favour of the claimant and would submit that though the learned arbitrator has held that the respondent had committed breaches of the agreement, he has rejected the claim for damages.
16. It is submitted that the finding of the learned arbitrator that the agreement with M/s. Gemini Industries and Imagine Limited was an assignment and would attract stamp duty is totally perverse and illegal. He submits that the said writing was an agreement to assign in future. He submits that the said writing would clearly contemplate the ::: Downloaded on - 17/04/2015 00:00:37 ::: ppn 8 arbp-819.11 & 908.11(j).doc future assignment of right and more particularly in the 4 th recital thereof.
He submits that the agreement to assign would not amount to an assignment itself.
17. In so far as consideration under the said agreement is concerned, the learned counsel submits that first cheque of Rs.3 crores paid by the said M/s.Gemini Industries was encashed by the claimant. In so far as the second cheque issued to the claimant by the said M/s. Gemini is concerned, the said cheque was dishonoured in view of the instructions given by the said M/s.Gemini to stop the payment. The claimant did not deposit the 3rd and 4th cheques issued by the said M/s.Gemini. He submits that M/s.Gemini ultimately terminated the said agreement in the month of June 2008. The cheque no.599662 was already referred to in the said agreement with M/s.Gemini which cheque was issued by Asian Capital Consolidated Fund which was sole proprietary concern of the said M/s. Gemini. He submits that the claimant returned the said Rs.3 crores back to the said M/s. Gemini. He submits that the signature on the agreement on behalf of the said M/s.Gemini and the signature on the cheque issued on behalf of Asian Capital Consolidated Fund were of the same person. The finding of the learned arbitrator that the connection between the said M/s. Gemini Industries and the said Asian Capital Consolidated Fund could not be established by the claimant is totally perverse. Learned counsel submits that the learned arbitrator has committed fundamental errors of law by holding that the agreement between the claimant and the said M/s. Gemini was an assignment and it required stamping.
18. Learned counsel for the claimant then submits that though ::: Downloaded on - 17/04/2015 00:00:37 ::: ppn 9 arbp-819.11 & 908.11(j).doc the witness examined by the claimant, in his affidavit in lieu of examination-in-chief, has annexed a copy of the agreement between the claimant and the said M/s. Gemini and had deposed that the contents of the said agreement were true and correct and though the said witness had identified the signatures of the parties thereon, the learned arbitrator though marked the said agreement as exhibit 'C-31' however erroneously held that the contents of the said document were not proved. He submits that there was no cross-examination on the said deposition of the witness examined by the respondent. The learned arbitrator therefore ought to have considered the said document as proved. He submits that ignoring such proved documents would show a patent illegality on the face of the award and thus this part of the award deserves to be set aside on this ground alone.
19. Learned counsel invited my attention to the correspondence entered into between the claimant and the said M/s.Gemini. M/s. Gemini had terminated the said agreement and had called upon the claimant to pay Rs.11 crores by way of damages. The claimant had replied to the said notice of termination and denied the claim of Rs.11 crores. He submits that though initially the said witness could not identify the signature of the representative of M/s. Gemini, later on he had identified the same. The learned arbitrator has erroneously drawn an adverse inference merely on that ground. In support of this submission, the learned counsel invited my attention to various oral evidence led by the parties.
20. In so far as the finding of the learned arbitrator that the claimant could not prove the loss/damages is concerned, the learned ::: Downloaded on - 17/04/2015 00:00:37 ::: ppn 10 arbp-819.11 & 908.11(j).doc counsel for the claimant invited my attention to various parts of the oral evidence. He submits that the claimant had not assigned video and satellite rights in the said proposed film for future. He submits that the finding of the learned arbitrator that the document entered into between the claimant and the said M/s.Gemini was concocted is totally perverse and contrary to the proved facts on record.
21. Learned counsel for the claimant then submits that there was no market price of the said movie available. The claimant had claimed compensation for loss of profit on the premise that if the said movie would have been released, the claimant would have earned profit which the claimant was deprived of in view of the breach of the contract committed by the respondent. He submits that in this case, the consideration which the claimant was entitled to receive from the said M/s. Gemini for the said film was proved and was known to both the parties. The expenses required to be incurred on production of the film would not be ascertained as the same was not incurred upto the stage of production. Even if the revenue was uncertain in view of no market for the film available, certain expenses were required to be incurred which could not be disputed. The claimant was producing the film for commercial exploitation. The respondent was fully aware of the said fact. He submits that the respondent was fully aware that since he had committed breaches, the claimant was not able to produce a film and had suffered financial loss.
22. Learned counsel for the claimant then submits that the claimant had produced the accounts for three years. The claimant had produced three movies prior to the execution of the agreement with the ::: Downloaded on - 17/04/2015 00:00:37 ::: ppn 11 arbp-819.11 & 908.11(j).doc respondent. The claimant had produced and proved the expenses incurred by the claimant on three movies. Even if no profit was earned in respect of the said three movies, the respondent could not dispute that the expenses were incurred by claimant in producing those three films. The claimant had incurred expenses under the said agreement. Learned counsel invited my attention to the particulars of the claim and submits that after considering the amount which the claimant would have recovered from the said M/s.Gemini under the said agreement and after deducting the average expenditure in the sum of Rs.13 crores, the claimant would have suffered loss of profit in the sum of Rs.20 crores.
23. Learned counsel for the claimant submits that though there was adequate material produced by the claimant before the learned arbitrator to prove that the claimant had suffered loss of profit, the learned arbitrator has rejected the said claim without considering the evidence produced by the claimant. The claimant had also produced a letter from another producer exchanged with the respondent in respect of the movie "Goli" which indicated that the respondent would have charged a sum of Rs.5 crores for the said movie. He submits that as far as this case is concerned, the consideration amount was of Rs.50 lacs and thus the claimant would have at least made a profit of Rs.4.5 crores.
24. Learned counsel for the claimant then submits that even the counter claim of the respondent for Rs.5 crores would also suggest that there was loss of profit of Rs.5 crores suffered by the claimant. The learned arbitrator thus would have considered at least the said undisputed position and would have granted the claim for loss of profit in favour of the claimant.::: Downloaded on - 17/04/2015 00:00:37 :::
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25. Mr.Kapadia, learned counsel appearing for the claimant placed reliance on the following judgments in support of various submissions :-
i) Judgment of the Madras High Court in the case of G.Martirosi Vs. A.K.C.T. Subramaniam Chettiar, reported in AIR 1930 Mad 723;
ii) Judgment of this Court in the case of Mahanagar Gas Ltd. Vs. Babulal Uttamchand & Co., reported in 2013 (5) Bom.C.R.756;
iii) Judgment in the case of 786 Chaplin Vs. Hicks, reported in (1911) 2 K.B. 786;
iv) Judgment of 528 Victoria Laundry (Windsor) LD.Vs. Newman Industries LD. Vs. Coulson & Co. LD. (Third parties), reported in (1949) 2 K.B. 528;
v) Judgment of the Privy Council in the case of A.V.Joseph Vs. R. Shew Bux, delivered on 8th November 1918 in Privy Council Appeal No.112 of 1917;
vi) Judgment of the Calcutta High Court in the case of F.T. Kingsley Vs.The Secretary of State for India in Council, reported in AIR 1923 Cal. 49;
vii) Judgment of the Supreme Court in the case of A.T. Brij Paul Singh and Ors. Vs. State of Gujarat, reported in AIR 1984 SC 1703;
viii) Judgment of the Delhi High Court in the case of Delhi Development Authority Vs.S.S. Jetely, reported in 2011 (2) ARBLR 213 (Delhi);
ix) Judgment of the Madras High Court in the case of Chief Controlling Revenue Authority, Madras Vs. Sudarsanam Picture, Madras, reported in AIR 1968 Mad 319;
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x) Judgment of the Supreme Court in the case of Hindustan Steel
Ltd. Vs.Messrs Dilip Construction Company, reported in AIR 1969 SC 1238;
xi) Judgment of the Delhi High Court in the case of Time Warner Entertainment Company, L.P. & Ors. Vs. RPG Netcom & Ors. and Columbia Pictures Industries Inc. & Ors. Vs. Globe & Ors., reported in AIR 2007 Delhi 226;
xii) Judgment of this Court in the case of Shemaroo Entertainment Pvt. Ltd. Vs. Afzal Khan, proprietor of Shaboo Arts and Ors., reported in 2008 (110) BOMLR 3346;
xiii) Judgment of the Delhi High Court in the case of Suresh Kumar Vs. Satish Mehra & Anr. and Satish Mehra Vs. Suresh Kumar & Anr., reported in 2012 VIAD (Delhi) 321;
xiv) Judgment of the Delhi High Court in the case of Delhi State Civil Supplies Corporation Ltd. Vs. Union of India (UOI) (Army Purchase Organisation), decided on 4th September 2009 in OMP Nos.207 and 208 of 2000 and 159 of 2001;
xv) Judgment of the Supreme Court in the case of K.P. Poulose Vs. State of Kerala & Anr., reported in AIR 1975 SC 1259; xvi) Judgment of the Supreme Court in the case of Javer Chand and Ors. Vs. Pukhraj Surana, reported in AIR 1961 SC 1655; xvii) Judgment of the Full Bench of this Court in the case of Hemendra Rasiklal Ghia Vs.Subodh Mody, reported in 2008 (6) ALLMR 352.
26. Learned counsel for the claimant submits that the learned arbitrator is required to make guess work while determining the loss of profit as claimed by the claimant. The learned arbitrator was not bound by the strict provisions of the Evidence Act. He submits that inspite of ::: Downloaded on - 17/04/2015 00:00:37 ::: ppn 14 arbp-819.11 & 908.11(j).doc the sufficient material produced before the learned arbitrator in support of his claim for loss of profit, the learned arbitrator disregarded the material produced by the claimant on frivolous grounds.
27. In so far as the finding of the learned arbitrator that the agreement entered into between the claimant and the said M/s.Gemini was an agreement to enter into an agreement for assignment is concerned, he submits that the said documents did not require any stamping. The respondent had objected to the said documents only on the ground of insufficient payment of stamp duty paid and on no other ground when the same was tendered. The learned arbitrator ultimately had marked the said documents as exhibits. No objection was raised by the respondent regarding mode of proof of the said documents. The learned arbitrator had initially upheld the objection of the respondent regarding insufficient payment of stamp duty. The respondent thus could not have challenged the mode of proof of the said documents once having marked as exhibits after considering the objection raised by the respondent by the learned arbitrator at a later stage. The learned arbitrator did not send the said documents for adjudication rightly as there was no short fall in payment of stamp duty on the said documents.
28. Learned counsel for the claimant submits that the finding of the learned arbitrator that two letters relied upon by the claimant were procured and fabricated is totally illegal. He submits that if, according to the learned arbitrator, the documents were not sufficiently stamped, the learned arbitrator was bound to refer to the said documents to the Collector for adjudication. In support of this submission, learned counsel placed reliance on the judgment of the Supreme Court in the case of ::: Downloaded on - 17/04/2015 00:00:37 ::: ppn 15 arbp-819.11 & 908.11(j).doc Hindustan Steel Ltd. (supra).
29. Per contra, Mr.Joshi, learned senior counsel appearing for the respondent submits that the agreement entered into between the claimant and the respondent was an agreement to enter into an agreement and thus was not capable of specific performance. He submits that the claimant was not ready and willing to perform his part of the obligation and thus was not entitled to any claim for damages. He submits that since the learned arbitrator has rendered findings of facts while rejecting the claim for damages made by the claimant which findings of facts are not perverse, such findings of facts cannot be interfered with by this Court under Section 34 of the Arbitration Act.
30. In so far as the issue no.(iv) answered by the learned arbitrator 'as to whether the agreement entered into between the claimant and the respondent was a concluded agreement or not' is concerned, he submits that the identity of the subject or identity of the core of the subject was not agreed and thus the said agreement was at the most an agreement to enter into an agreement. The said agreement was not a concluded agreement. He submits that the respondent being a lead actor was required to be satisfied with the subject of the film. There was thus no breach of the alleged agreement committed by the respondent. In his alternate submission, he submits that since the claimant was not willing to perform his part of the obligation, no damages could be claimed by him.
31. Learned senior counsel submits that for the purpose of making a claim for specific performance, the claimant is required to ::: Downloaded on - 17/04/2015 00:00:37 ::: ppn 16 arbp-819.11 & 908.11(j).doc prove his readiness and willingness to perform his part of the obligation all throughout which the claimant failed in this case. In support of this submission, learned counsel placed reliance on the judgment of the Privy Council in the case of Abdullah Bey Chedid and Ors. Vs. Tenenbaum, reported in AIR 1934 Privy Council 91.
32. It is submitted by the learned senior counsel that the onus was on the claimant to prove that he had complied with his part of the obligation for claiming specific performance and damages. In support of this submission, he relied upon the judgment of the Privy Council in the case of Tan Ah Boon Vs. State of Johore, reported in AIR 1936 Privy Council 236.
33. It is submitted by the learned senior counsel that the respondent was not agreeable to comply with the agreement as it stood on the ground that the payment terms had changed. The claimant had no finance to produce the film. In support of this submission, he invited my attention to the oral evidence of the claimant and in particular his reply to question nos.26, 27 and 28 to demonstrate that the claimant had no financiers available. In so far the consideration payable to the respondent under the said agreement of Rs.50 lacs is concerned, the learned senior counsel submits that the said consideration was payable by the claimant to the respondent during the shooting period excluding dubbing period. The claimant, however, did not pay any amount. The claimant, on the contrary, deposed in the oral evidence, according to which, the payment consideration was allegedly altered. The claimant did not show any readiness and willingness on his part. He submits that since the claimant had suggested the amendment to the consideration ::: Downloaded on - 17/04/2015 00:00:37 ::: ppn 17 arbp-819.11 & 908.11(j).doc amount in the agreement, it would clearly indicate that the claimant was not ready and willing to comply with his part of the obligation.
34. Learned senior counsel invited my attention to the cross- examination of the respondent in which the claimant had put suggestion to the witness that the activity of dubbing comes after shooting was over.
The claimant, thus, wanted to alter the terms of the payment and had suggested that the last instalment was due only after dubbing was over, which was contrary to the terms and conditions of the said agreement.
35. Learned senior counsel for the respondent submits that the claimant in his evidence had deposed that he was ready to make the film if finance was given to him by the respondent. He submits that even profit and loss account and balance sheet produced by the claimant would also indicate that there was huge loss suffered by the claimant in the years 2006, 2007 and 2008. Capital account of the claimant was in negative. In reply to question nos.318 to 321, the claimant had admitted that he had suffered loss.
36. In so far as the MOU between the claimant and M/s. Gemini alleged to have been executed on 2nd November 2007 is concerned, the learned senior counsel submits that on the date of execution of the said agreement, it was not the case of the claimant that the respondent had committed any breach of the said MOU. He submits that since one cheque, out of four cheques, was dishonoured and other two cheques alleged to have been issued in favour of the claimant were not deposited by the claimant, the said alleged agreement even otherwise would not have been survived. The learned arbitrator has rightly rendered finding of ::: Downloaded on - 17/04/2015 00:00:37 ::: ppn 18 arbp-819.11 & 908.11(j).doc fact that the claimant had failed to prove the said documents. He submits that in any event, the said document was terminated by the said M/s. Gemini with immediate effect.
37. In so far as the cheques alleged to have been issued by the said M/s. Gemini in favour of the claimant is concerned, the learned senior counsel invited my attention to the reply of the claimant in the cross-examination and in particular question nos.240 and 241 and 324 to 326 and would submit that though the said witness was called upon to produce the cheques relied upon by the claimant, the claimant did not produce the said cheques. The claimant had not received any bank guarantee from the said M/s.Gemini which was supposed to be given by it to the claimant under the said writing.
38. Learned senior counsel invited my attention to the income tax returns filed by the claimant including his accounts. Learned senior counsel invited my attention to the cross-examination of the claimant and in particular question nos.243 to 245 and would submit that even, according to the claimant, the said amount of Rs.3 crores received from the said M/s.Gemini was shown as advance refundable in the income tax returns filed by the claimant. He submits that it was not the case of the claimant before the learned arbitrator that Asian Capital Consolidated Fund was the sole proprietary concern of Mr.Manohar Prasad who was also the sole proprietor of the said M/s.Gemini.
39. In so far as the finding of the learned arbitrator on the alleged letters exchanged between the claimant and M/s.Gemini is ::: Downloaded on - 17/04/2015 00:00:37 ::: ppn 19 arbp-819.11 & 908.11(j).doc concerned, it is submitted by the learned senior counsel that when the entire chain of correspondence is disputed, the party who relies upon such document and correspondence has to prove all such letters. The claimant failed to prove the existence and the contents of those correspondence alleged to have been entered into between the claimant and the said M/s.Gemini. This Court cannot interfere with such finding of fact on that issue. The claimant had failed to prove the delivery of those letters and also that the said letters were posted by the claimant though the oral evidence led by the claimant.
40. Learned senior counsel invited my attention to the reply of the claimant to question nos.219 and 220 and would submit that the claimant even could not identify the alleged signature of Mr.Manohar Prasad who was alleged to be signatory of the said writing entered into between the claimant and the said M/s.Gemini. The learned arbitrator has rendered finding that execution of the said writing was not proved by the claimant. He submits that the learned arbitrator has rightly rendered finding that the said writing was procured by the claimant for the purpose of creating evidence. He submits that since the agreement was not proved by the claimant, the claim for damages did not survive.
41. Learned senior counsel for the respondent submits that the said writing entered into between the claimant and the said M/s. Gemini was required to be stamped in accordance with Article 5(iv)(a) of the Maharashtra Stamp Act whereas the said writing was alleged to have been executed on the stamp paper of Rs.100/- only. He submits that merely because the said agreement was marked as exhibit, the ::: Downloaded on - 17/04/2015 00:00:37 ::: ppn 20 arbp-819.11 & 908.11(j).doc contents thereof were not proved. Learned arbitrator rightly gave a ruling that the said document was marked subject to proof of contents. The claimant never urged that in view of the deposition in the affidavit of evidence, the contents of the said documents were also proved and shall be marked as exhibit fully and unconditionally. The claimant did not examine any other witness to prove the contents of the said document.
42. Learned senior counsel for the respondent placed reliance on the judgment of this Court in the case of Liladhar Ratanlal Vyas Vs. Holkarmal Sohanlal and Anr., reported in 1959 BCI 163 and in particular paragraph 8 and would submit that the claimant not having proved the said writing between the claimant and the said M/s.Gemini, the said document could not have been marked as exhibit by the learned arbitrator. No inspection of the said writing was given to the respondent by the claimant.
43. Learned senior counsel submits that the claimant has been cross-examined on the accounts relied upon by the claimant. The claimant failed to prove the entries in the accounts. The claimant did not examine any Chartered Accountant.
44. On the issue raised by the claimant that the learned arbitrator ought to have considered the reasonable sum for the purpose of awarding loss of profit is concerned, the learned senior counsel submits that no foundation was laid by the claimant for the purpose of claiming loss of profit. He submits that since the claimant made an attempt to prove the claim for loss of profit and had failed, the learned ::: Downloaded on - 17/04/2015 00:00:37 ::: ppn 21 arbp-819.11 & 908.11(j).doc arbitrator could not have awarded any sum on the basis of any guess work. The claimant failed to prove the revenue as well as expenditure. No claim for nominal damages was made by the claimant. The learned arbitrator did not decide that there was no mitigation of loss as the claimant did not raise such plea of alternate method of computation of damages. Learned senior counsel placed reliance on the commentary of Mulla on the Contract Act on the issue of proof of damages.
45. Learned senior counsel submits that even if the finding of the learned arbitrator that the respondent had committed breaches is considered as correct, that itself will not make the claimant entitled to claim loss of profit unless the same would have been proved by the claimant. In support of his submission, learned senior counsel relied upon paragraphs 15 and 16 of the judgment of the Division Bench of this Court in the case of Maharashtra State Electricity Board, Bombay Vs.Sterlite Industries (India) Ltd., reported in 2000 (3) Bom.C.R. 347.
Learned senior counsel also placed reliance on the judgment of the Division Bench of this Court delivered on 3rd January 2013 in the case of Edifice Developers and Project Engineers Ltd. Vs. M/s. Essar Projects (India) Ltd. passed in Appeal No.11 of 2012 in Arbitration Petition No.313 of 2007 and in particular paragraphs 7 to 12 thereof.
46. It is submitted by the learned senior counsel that the claimant in this case had not claimed reimbursement of expenses but had claimed loss of profit. In so far as reliance on the letter exchanged between another film producer and the respondent in support of his submission that even that letter would indicate that the loss of profit of Rs.4.5 crores is concerned, he submits that there was no such plea ::: Downloaded on - 17/04/2015 00:00:37 ::: ppn 22 arbp-819.11 & 908.11(j).doc raised by the claimant before the learned arbitrator. Each film may have a different quantum of profit or loss.
47. Learned senior counsel submits that since the findings rendered by the learned arbitrator while rejecting the claim for loss of profit are not perverse, thus no interference with such findings of facts is permissible under Section 34 of the Arbitration Act. The learned senior counsel placed reliance on the judgment of the Supreme Court in the case of Associate Builders Vs. Delhi Development Authority, reported in 2014 (4) ARBLR 307 (SC).
48. Learned senior counsel distinguished the judgments relied upon by the claimant on the ground that damages can be different in the facts of each case. He submits that thought the learned arbitrator had rendered finding of fact that the claimant had committed breaches of the obligations, the learned arbitrator has rightly rejected the claim for loss of profit and had rendered findings of facts which findings are pure findings of facts and no interference is warranted with such findings of facts.
49. In so far as the award of arbitration costs by the learned arbitrator against the respondent is concerned, the learned senior counsel for the respondent submits that the order for costs follows the success by a party. Since the learned arbitrator has rejected the claim for damages, the learned arbitrator could not have awarded the arbitration costs in favour of the claimant. It is submitted that in any event, the costs of Rs.12 lacs in favour of the claimant is disproportionate. This Court has power to interfere with such finding of facts and that part of the said award be set aside.
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50. In the rejoinder, Mr.Kapadia, learned counsel for the claimant submits that the parties had acted upon the agreement entered into between them as conclusive and binding. The claimant had given an apology in favour of the respondent under the said agreement. The respondent thus cannot be allowed to raise this plea at this stage. The said agreement was conclusive and binding. Learned counsel placed reliance on the judgment of Delhi High Court in the case of Delhi State Civil Supplies Corporation Ltd. (supra). He submits that the learned arbitrator has rendered finding of fact that the said contract entered into between the parties existed and thus no interference with such finding of fact is warranted.
51. In so far the submission of the learned senior counsel that the claimant had no financial capacity to produce a film is concerned, the learned counsel for the claimant submits that the respondent had not raised any such plea that the claimant had no financial capacity. The respondent ought to have led evidence on this issue. Learned counsel for the claimant distinguished the judgment of the Privy Council in the case of Tan Ah Boon Vs. State of Johore (supra) on the ground that the said matter was dealing with the land transaction. In so far as the issue of financial capacity of the claimant raised by the respondent is concerned, it is submitted that the same was never raised any time during the period prior to the date of invoking the arbitration agreement. The learned arbitrator has rejected this submission of the respondent in the impugned award.
52. In so far as the consideration payable by the said M/s.Gemini to the claimant is concerned, learned counsel submits that ::: Downloaded on - 17/04/2015 00:00:37 ::: ppn 24 arbp-819.11 & 908.11(j).doc the said M/s.Gemini had already paid Rs.3 crores to the claimant under the said agreement. Further amount at that stage was not required to be paid to the claimant. He submits that since the film was not complete in all respect, the amount received by the claimant from M/s.Gemini was rightly shown as refundable advance in the books of account of the claimant.
53. In so far as the three letters exchanged between the claimant and M/s.Gemini which were not marked as exhibits are concerned, the learned counsel for the claimant submits that the witness examined by the claimant had proved the signature of the claimant. The contents of letter dated 31st July 2008, 14th August 2008 and 22nd August 2008 were proved by the author himself who was a witness. The other two letters of M/s.Gemini were inseparable chain of events and thus ought to have been marked as exhibits by the learned arbitrator. Though the claimant could not have identified the signature of Mr.Manohar Prasad initially, he had subsequently identified the signature of Mr.Manohar Prasad as is recorded by the learned arbitrator himself in the notes of evidence. In support of the submission that the objection regarding admissibility of the documents has to be raised, when it arises while tendering such documents and the said objection cannot be postponed, learned counsel relied upon the judgment of this Court in the case of Hemendra Rasiklal Ghia Vs.Subodh Mody (supra) and in particular paragraphs 48 and 58 thereof.
54. In so far as the finding of the learned arbitrator that the agreement entered into between the claimant and M/s.Gemini is not proved is concerned, he submits that the said finding is contrary to ::: Downloaded on - 17/04/2015 00:00:37 ::: ppn 25 arbp-819.11 & 908.11(j).doc Section 47 read with Section 60 of the Evidence Act. The respondent only had raised an objection about insufficient stamp duty and not about the mode and manner of execution of the said documents. The contents of the said documents were deemed to have been proved or otherwise proved in view of deposition in paragraph 27 of the affidavit in lieu of examination-in-chief of the claimant. In support of this submission, learned counsel placed reliance on the judgment of the Supreme Court in the case of Javer Chand & Ors. Vs. Pukhraj Surana (supra) and in particular paragraph 8 thereof. Learned counsel also placed reliance on the judgment of the Supreme Court in the case of K.P. Poulose Vs. State of Kerala and Anr. (supra) and in particular paragraphs 3 to 5 thereof.
55. In so far as the award of arbitration costs by the learned arbitrator is concerned, it is submitted by the learned counsel that since all the findings on the plea of specific performance including the finding that the respondent had committed breach of contract are in favour of the claimant though the claimant could not succeed on the ground that the claimant had alleged to have failed to prove the alleged loss of profit, the learned arbitrator has rightly awarded the arbitration costs of Rs.12 lacs in favour of the claimant. The claimant had incurred arbitration cost much more than what has been awarded by the learned arbitrator. He submits that no interference is thus warranted with the award of arbitration costs of Rs.12 lacs by the learned arbitrator in favour of the claimant is concerned.
REASONS AND CONCLUSIONS
56. I have heard the learned counsel for the parties and have given my anxious consideration to the rival submissions made by the ::: Downloaded on - 17/04/2015 00:00:37 ::: ppn 26 arbp-819.11 & 908.11(j).doc learned counsel. Both the parties have impugned part of the arbitral award dated 6th June 2011 made by the learned arbitrator. The learned arbitrator framed 9 issues for consideration. It is held by the learned arbitrator that he had jurisdiction to decide the disputes arising out of the consent terms and to decide whether the parties had orally agreed on the number of subjects to be put to the respondent and whether the forty dates were to be allotted consecutively. The respondent did not seriously dispute the finding of the learned arbitrator holding that he had jurisdiction to decide the disputes arising out of the consent terms.
57. Insofar as the issue raised by the respondent that the consent terms were a mere 'Agreement to agree' and was not a concluded contract is concerned, the learned arbitrator rejected the said submission of the respondent. It is held by the learned arbitrator that in the said agreement the parties had provided that a subject would be agreed upon within three months and the respondent should give forty shooting dates. The consent terms further provided that the film should be made within seven months from the date the parties agree upon the subject. It is held that there was thus a concluded contract on that aspect. The learned arbitrator held that merely because the subject was to be subsequently decided and/or an Actor Producer Agreement in the usual form was to be subsequently signed, and/or the fact that it was not set out how the forty shooting dates had to be alloted did not make it an 'Agreement to agree.'
58. It is held that merely because the name of the actress was to be decided later did not detract from the fact that there was a concluded contract. All these matters were the matters of working of the binding ::: Downloaded on - 17/04/2015 00:00:37 ::: ppn 27 arbp-819.11 & 908.11(j).doc contract. The learned arbitrator thus decided the said issue in favour of the petitioner. In my view the learned arbitrator has interpreted the terms of the contract and has rightly come to the conclusion that the consent terms and the articles of agreement were not 'Agreement to agree' as canvassed by the respondent. The interpretation of the learned arbitrator on this issue is a possible interpretation and thus cannot be substituted by another interpretation by this court under section 34 of the Arbitration Act.
59. Insofar as submission of the learned senior counsel for the respondent that there was alteration in the terms of the payment which would indicate that the claimant was not ready and willing to comply with his part of obligation is concerned, in my view there is no substance in this submissions. The learned arbitrator has dealt with this issue and has held that the even if there was any such understanding between the parties for modifying the consideration amount, the payment would have to be made as per the agreement. It is held that even though the respondent initially claimed that there was no understanding, finally the respondent was also relying on an understanding not spelt out in the terms. It is held that it was thus clear that there was an understanding between the parties. It is held that the parties must have orally agreed on the number of subjects that were to be put to the respondent. The learned arbitrator held that the question whether the forty days were to be alloted by the respondent were to be consecutive or not was to be orally agreed upon. Those two considerations were mere oral understanding on how the consent terms were to be carried forward and would not be reduced to writing. In my view the finding rendered by the learned arbitrator is not ::: Downloaded on - 17/04/2015 00:00:37 ::: ppn 28 arbp-819.11 & 908.11(j).doc perverse and does not warrant any interference. There is no merit in this submission of the learned senior counsel for the respondent on this issue.
60. Insofar as the submission of the learned senior counsel for the respondent that the obligation to prove that the claimant was althroughout ready and willing to perform his part of the obligation which the respondent had failed to prove is concerned, a perusal of the award indicates that the learned arbitrator has dealt with this issue while dealing with the issue as to whether claimant had committed any breach of the contract or not. The learned arbitrator has after referring to the oral and documentary evidence rendered by both the parties has rendered a finding that the case of the respondent that no subject was discussed at the meeting of 29th June 2009 between the parties was proved false by the respondent's own statement in paragraph 13 of his affidavit evidence dated 7th June 2010. It is held that the said statement in paragraph 13 belies the case of the respondent that the meeting had been fixed with Mr.Sunil Shah and that he was surprised to see the claimant at that meeting. By that date, the period of three months was already over. Both the parties were in agreement that time was not the essence.
61. The learned arbitrator noticed that it was not possible to believe that no subject would be discussed which took place after three months, when the meeting was held with a view to proceed further. When the respondent was confronted with the said statement made in the affidavit of evidence, he chose to say that the same was a mistake. The learned arbitrator held that initially the respondent did not admit that any meeting took place in November 2007 however he was then forced to ::: Downloaded on - 17/04/2015 00:00:37 ::: ppn 29 arbp-819.11 & 908.11(j).doc admit that the meeting had taken place but he then claimed that it was for the narration of the story.
62. The learned arbitrator held that on one hand the respondent had claimed that he could not agree upon a subject without the script being first narrated to him and on the other hand in his letter dated 22 nd April 2008, he claimed that he did not read scripts before approving the subject of the film. The learned arbitrator rendered a finding of fact that the respondent was reiterating that the script would only follow an approval of a subject and that the script would not be sent without the subject being discussed or approved. However his evidence in paragraph 14 of his affidavit was contrary to the said case and was belied by his own letters. The learned arbitrator has held that when the parties had provided that the subject of the film was to be mutually agreed upon within a period of three months, they did not intend that script with dialogues to be first narrated by the writer in the presence of the director and thereafter, the script to be read by the respondent before he would accept the subject.
63. Learned arbitrator has held that there was no reason to disbelieve the claimant when he claimed that the understanding was that two subjects would be narrated to the respondent and he would choose one. In the month of September 2007, the claimant had sent the script of 'Kal Kisne Dekha' to the respondent. The learned arbitrator has rendered a finding that the subject could be discussed between the parties without scripts. The respondent had admitted in his cross examination that there could be more than one lead star in the film. The learned arbitrator ::: Downloaded on - 17/04/2015 00:00:37 ::: ppn 30 arbp-819.11 & 908.11(j).doc rejected the submission of the respondent that the respondent had no dishonest intention from the start. It is held by the learned arbitrator that the evidence in this matter suggested that the respondent had no intention from the beginning of not honouring the consent terms. It is also held that it was clear that the respondent was trying his best to put spokes in the performance of the agreement and he was purposely not carrying forward the consent terms. The learned arbitrator rendered a finding of fact that the respondent has committed the breach of consent terms by keeping on varying his demands on how the subject was to be agreed upon.
64. Insofar as submission of the learned counsel for the respondent that the claimant was not ready and willing to perform his part of obligations under the consent terms and thus claimant was not entitled to claim specific performance of the agreement is concerned, the learned arbitrator has rendered a finding that the claimant had indicated his readiness and willingness by putting two subjects to the respondent and was spending time and money in getting two scripts ready. It is held that insisting on 40 consecutive dates by the claimant would not mean that the claimant was not ready and willing to abide by the consent terms. Insofar as issue of financial capacity of the claimant to produce the film is concerned, the learned arbitrator rejected the said contention on the ground that the respondent did not deny that the claimant was capable of raising finances. It is held that the claimant had not sold video and satellite rights for any of his films which had a value even post release.
65. The learned arbitrator has held that the respondent never allowed the consent terms to get past the first stage of agreeing upon the ::: Downloaded on - 17/04/2015 00:00:37 ::: ppn 31 arbp-819.11 & 908.11(j).doc subject of the film and thus a party in breach could not be heard to say that the other party was not willing to comply with the terms which were to be fulfilled later. It is held that even if the claimant was not ready and willing, at the highest he would not be entitled to damages and that would not preclude the learned arbitrator from holding that respondent was in breach. It is held that there was no substance in the contention that the claimant was not ready and willing.
66. In my view the learned arbitrator has considered the oral as well as documentary evidence led by both the parties in detail in the impugned award and has rightly rendered a finding of fact that the claimant was ready and willing to perform his part of the obligation under the agreement and that the respondent had committed breaches of his obligations under the agreement which findings are not perverse and thus no interference with such findings of fact is permissible under section 34 of the Arbitration Act. In my view the learned senior counsel for the respondent could not demonstrate as to how the findings of fact rendered by the learned arbitrator on the issue of readiness and willingness and breach are perverse.
67. Insofar as judgment of Privy Council in case of Abdullah Bey Chedid (supra) relied upon by the respondent is concerned, there is no dispute about the proposition of law that the readiness and willingness to carry out the obligation is always be a condition precedent for the plaintiffs to recover damages in respect of breach of two concurrent obligations. In this case, the learned arbitrator in my view has rightly rendered a finding of fact that the respondent had no intention from the ::: Downloaded on - 17/04/2015 00:00:37 ::: ppn 32 arbp-819.11 & 908.11(j).doc start to carry out his obligation under the agreement and was on one or the other ground refusing to comply with his part of the obligation. The judgment of the Privy Council in case of Abdullah Bey Chedid (supra) thus relied upon by the respondent does not assist him.
68. Insofar as judgment of Privy Council in case of Tan Ah Boon (supra) relied upon by the respondent is concerned, it is held that no plaintiff can maintain an action for specific performance and damages unless he avers and proves that he has performed or at all times been ready and willing to perform his part of the the contract. There is no dispute about the said proposition of law. In this case the claimant has proved that he was ready and willing to perform his part of the obligation under the agreement.
69. The learned arbitrator though rendered a finding of fact in favour of the claimant that he was ready and willing to perform his part of the obligations under the agreement and that the respondent had committed breaches of his obligation under the agreement, the learned arbitrator has refused to grant the claim for damages in favour of the claimant.
70. In support of the claim for loss of profit of Rs.20 crores made by the claimant, he relied upon an agreement with Gemini Industries and Imaging Limited. The said document was initially marked for identification by the learned arbitrator on the ground that the same was not adequately stamped on the objection raised by the respondent. However, the said document was subsequently marked as Ex.C-31 during ::: Downloaded on - 17/04/2015 00:00:37 ::: ppn 33 arbp-819.11 & 908.11(j).doc the course of cross examination in view of the respondent having called upon the claimant to produce the letter dated 13 th September, 2010 which contained the reference to the said agreement dated 2 nd November 2007 entered into between the claimant and the Gemini Industries and Imaging Limited. The learned arbitrator after considering the objection raised by the respondent marked the said agreement as Ex.C-31 however clarified that the contents thereof had not been proved by the claimant.
71. A perusal of the award indicates that the learned arbitrator accepted the submission made by the respondent that there was no evidence on record to show that the agreement marked as Ex-C-31 was the agreement which had been entered into by the claimant with the said Gemini Industries and Imaging Limited. It is held that no person from Gemini Industries and Imaging Limited had been brought to prove the said agreement. The learned arbitrator noticed that four cheques had been issued under the said agreement not by Gemini Industries and Imaging Limited but by one M/s.Asian Capital Consolidated Fund in favour of the claimant. There was no explanation of who the said M/s.Asian Capital Consolidated Fund was and how it was connected with the claimant or Gemini Industries and Imaging Limited.
72. It is held that the only first cheque of Rs.3 crores was honoured. The second cheque dated 13 th November, 2007 was dishonoured for the reason 'payment countermanded by the Drawer'. The claimant did not give any explanation as to why the said payment had been countermanded. The other two cheques were admittedly not deposited by the claimant. The learned arbitrator held that the claimant did not give any explanation as to why payment of the second cheque was ::: Downloaded on - 17/04/2015 00:00:38 ::: ppn 34 arbp-819.11 & 908.11(j).doc countermanded within a period of less than 11 days after the agreement.
It is held that it could not be said that the cheque was dishonoured because the respondent was not agreeing to the subject or was committing default. A perusal of the record indicates that the claimant had failed to produce those cheques before the learned arbitrator though was called upon to produce in the cross examination.
73. A perusal of the oral evidence led by the claimant indicates that the claimant who had entered the witness box even could not identify the signature of the person who had alleged to have signed the said agreement on behalf of Gemini Industries and Imaging Limited on the letter. The said witness identified the signature much later after the matter was adjourned for recording further cross examination of the claimant. The claimant did not examine any witness from the said Gemini Industries and Imaging Limited to prove the said agreement and the contents thereof. In my view merely because the said agreement was marked as exhibit in view of the respondent calling upon the claimant to produce the notice issued to him by the Income Tax Department and while producing a letter dated 13 th September 2010 which contained a reference to the agreement dated 2nd November 2007, the contents of the said document were not proved by the claimant. Merely because a document is marked as exhibit, contents of such document are not proved automatically.
74. The learned arbitrator rightly took cognizance of the admitted fact that the claimant was not even able to identify the signature of the representative who had alleged to have signed the said agreement on behalf of Gemini Industries and Imaging Limited initially. The ::: Downloaded on - 17/04/2015 00:00:38 ::: ppn 35 arbp-819.11 & 908.11(j).doc claimant could not give any explanation about the alleged consideration mentioned in the said alleged agreement and could not produce the original cheques though called upon by the respondent. In my view the findings rendered by the learned arbitrator that the claimant could not produce any evidence on record to show that the said agreement was the agreement which had been entered into by the claimant with Gemini Industries and Imaging Limited is not perverse and the contents thereof had not been proved by anybody is not perverse but in my view is based on the oral as well as documentary evidence led by the parties and thus no interference with such finding of fact is warranted.
75. Insofar as submission of the learned counsel for the claimant that the witness examined by the claimant had proved the contents of the said agreement by leading oral evidence and by deposing that the contents of the said agreement were correct is concerned, the said witness of the claimant however could not even identify the signature of the person who had alleged to have signed the said agreement on behalf of Gemini Industries and Imaging Limited on the letter. The learned arbitrator in my view has thus rightly held that the contents of the said agreement were not proved.
76. Insofar as the submission of the learned senior counsel for the respondent that the learned arbitrator could not have marked the said agreement as Ex.C-31 at the first instance is concerned, in my view when the said document was produced pursuant to the notice to produce, the respondent did not raise any objection about the insufficiency of the stamp or the mode and manner of the execution of the said agreement.
::: Downloaded on - 17/04/2015 00:00:38 :::ppn 36 arbp-819.11 & 908.11(j).doc The full bench of this court case in of Hemendra Rasiklal Ghia (supra) has held that a question as to admissibility of document should be decided when it arises and should not be reserved till the judgment of the case is given. There is no provision enabling the court to postponing the objection regarding admissibility of the proof of the document. I am respectfully bound by the judgment of the Full Bench of this court which applies to the facts of this case. The respondent not having raised any objection about the mode and manner of execution of the document when the said document was tendered could not be allowed to raise that issue at the time of hearing of the matter.
77. Insofar as finding of the learned arbitrator that the alleged letter dated 14th August 2008 addressed by the said Gemini Industries and Imaging Limited was procured for the purpose of creating evidence is concerned, a perusal of the award indicates that the learned arbitrator noticed that the said document was taken on record as the claimant had claimed that he was familiar with the signature of the joint managing director of Gemini Industries and Imaging Limited. However in cross examination when he was shown the signature acknowledging the receipt of one of the letter of the claimant, he could not identify the signature which signature was the same as that on the letter of Gemini Industries and Imaging Limited. The learned arbitrator held that the offices of the said Gemini Industries and Imaging Limited was in Chennai. If the letter had been sent by the post as claimed by the claimant, there could not have been any acknowledgement of receipt of the said letter on the copy of the said letter. The learned arbitrator has thus rendered a finding of fact that the letters Ex.C-27 had been procured by the claimant for the purpose of ::: Downloaded on - 17/04/2015 00:00:38 ::: ppn 37 arbp-819.11 & 908.11(j).doc creating evidence and thus no reliance on those letters could be placed. It is is held that the agreement if any with Gemini Industries and Imaging Limited appeared to have come to an end in November 2007.
78. In my view there is no substance in the submission made by the learned counsel for the claimant that the said letter dated 2 nd November 2007 was in continuity and was one of the letter in chain of correspondence and thus existence and contents of all the three letters were proved by the claimant. In my view Mr.Joshi, learned senior counsel for the respondent is right in his submission that since the respondent had disputed all the three letters, the claimant was required to prove the existence and contents of all the three letters. In my view the finding of fact is rendered by the learned arbitrator after considering the oral as well as documentary that the said letters were procured for the purpose of creating evidence by the claimant which finding in my view is not perverse and no interference with such finding is thus warranted.
The claimant did not examine any witness to prove that the said letter was alleged to have been addressed.
79. Insofar as rejection of the claim for loss of profit made by the claimant is concerned, learned counsel appearing for both the parties have addressed this court at length and have cited several judgments for consideration of this court. It is not in dispute that the claimant had placed reliance on the alleged agreement dated 2 nd November 2007 entered into between the claimant and the said Gemini Industries and Imaging Limited in which there was mention of an alleged consideration of Rs.33 crores. The claimant had also alleged that for producing a film ::: Downloaded on - 17/04/2015 00:00:38 ::: ppn 38 arbp-819.11 & 908.11(j).doc which was subject matter of the agreement entered into between the parties, the claimant would have incurred expenditure of of Rs.13 crores and accordingly claimed loss of profit in the sum of Rs.20 crores. The respondent had disputed this claim for loss of profit on the ground that the respondent had not committed any breach and in the alternative that the claimant had not proved any such loss of profit. The respondent also placed reliance on various parts of the cross examination of the claimant and also the documentary evidence produced by the claimant himself in support of the submission of the respondent that the claimant had suffered losses even in past when produced other movies and never made any profit.
80. A perusal of the award clearly indicates that the learned arbitrator had rendered a finding of fact that there was no evidence on record to show that the agreement at Ex.C-31 was the agreement which was entered into by the claimant with Gemini Industries and Imaging Limited. It is also held that the contents of the said agreement had not been proved by anybody. The learned arbitrator has rendered a finding of fact that the claimant could not explain as to why the second cheque which was dishonoured for the reasons 'Payment countermanded by the drawer was why countermanded'. The claimant did not deposit admittedly the other two cheques. The cheque of Rs.3 crores which was encashed by the claimant was not shown as consideration by the claimant in his income tax return but was shown as refundable advance. The learned arbitrator has thus rightly considered that since the claimant had failed to prove that he had any subsisting agreement under which he was to receive a sum of R 33 crores, claimant had not been able to prove that he ::: Downloaded on - 17/04/2015 00:00:38 ::: ppn 39 arbp-819.11 & 908.11(j).doc had suffered any damages much less damages in a sum of Rs. 20 crores.
In my view the learned arbitrator has rightly rendered such finding of fact while rejecting the claim for loss of profit which finding is not perverse but is based on oral as well as documentary evidence led by the parties and thus no interference with such finding of fact is permissible.
81. Be that as it may, a perusal of record even otherwise indicates that the claimant had admitted in his cross examination that he was ready to make the film if the finance was provided to him by the respondent. In the balance-sheet for the year 2006 to 2008 produced by the claimant, admittedly indicated a huge loss suffered by the claimant. The claimant also admitted in his cross examination that he had suffered huge loss. The capital account of the claimant was in negative. A perusal of the evidence led by the claimant would clearly indicate that he had not earned any profit for last several years in producing the film. The claimant thus could not prove that even if the respondent would have complied with his part of the obligation and if would not have committed breaches, claimant would have made any profit on producing the said film. In my view the claimant neither could prove the consideration if any on the said film by producing the said alleged agreement with the said Gemini Industries and Imaging Limited nor could produce the expenses which the claimant was required to incur for the purpose of producing the said film.
82. In my view the onus was on the claimant to prove by leading evidence that not only the respondent had committed breaches but also that due to such breaches on the part of the respondent the claimant had ::: Downloaded on - 17/04/2015 00:00:38 ::: ppn 40 arbp-819.11 & 908.11(j).doc suffered losses. Though the claimant proved that the respondent had committed breaches however could not prove that the claimant suffered any loss of profit.
83. Insofar as submission of the learned counsel for the claimant that the letter produced by the claimant which was exchanged between another film producer and the respondent which would indicate that the respondent was to get a sum of Rs. 5 crores from another film producer for producing a film and on that basis the claimant would have earned a profit of Rs.4.5 crores is concerned, in my view there is no substance in this submission of the learned counsel for the claimant. Neither the claimant had raised such plea before the learned arbitrator nor had proved the terms and conditions of the said agreement if any between the respondent and the said film producer. In any event production of each film may result in different quantum of profit or loss and thus reliance placed on the said letter was totally misplaced.
84. Insofar as submission of the claimant that once the learned arbitrator had rendered a finding of fact that the respondent had committed breaches of his obligation under the said agreement, the learned arbitrator ought to have allowed the compensation on the basis of guess work and ought to have allowed reasonable compensation to the claimant is concerned, a perusal of the record indicates that there was no such plea raised by the claimant. Be that as it may, the claimant had led oral evidence to prove the claim of loss of profit of Rs.20 crores by relying upon the documents which were not proved by the claimant. In my view once the claimant had entered the witness box and had led ::: Downloaded on - 17/04/2015 00:00:38 ::: ppn 41 arbp-819.11 & 908.11(j).doc evidence in support of his claim for loss of profit and had failed to prove such loss of profit, the learned arbitrator could not have awarded any compensation on the basis of guess work.
85. Insofar as the submission of the learned counsel for the claimant that he had incurred expenditure on taking various steps under the said agreement and thus the learned arbitrator should have allowed reasonable compensation by way of reimbursement of expenses is concerned, a perusal of the record indicates that the claimant had neither pleaded for reimbursement of the expenses nor has proved the quantum of any such expenses alleged to have been incurred by the claimant. There is thus no merit in this submission of the learned counsel for the claimant.
86. Supreme Court in case of M/s.Kailash Nath and Associates vs. Delhi Development Authority & Anr. delivered on 9th January 2015 in Civil Appeal No.193 of 2015 has considered the issue of award of compensation and after adverting to its several judgments has held that a compensation can only be given on damage or loss suffered and if damage or loss is not suffered, the law does not provide for a windfall. The statement of law declared by the Supreme Court on this issue in paragraphs 43 and 44 of the said judgment read thus :-
"43. On a conspectus of the above authorities, the law on compensation for breach of contract under Section 74 can be stated to be as follows:-
1. Where a sum is named in a contract as a liquidated amount payable by way of damages, the party complaining of a breach can receive as reasonable compensation such liquidated amount only if it is a genuine pre-estimate of ::: Downloaded on - 17/04/2015 00:00:38 ::: ppn 42 arbp-819.11 & 908.11(j).doc damages fixed by both parties and found to be such by the Court. In other cases, where a sum is named in a contract as a liquidated amount payable by way of damages, only reasonable compensation can be awarded not exceeding the amount so stated. Similarly, in cases where the amount fixed is in the nature of penalty, only reasonable compensation can be awarded not exceeding the penalty so stated. In both cases, the liquidated amount or penalty is the upper limit beyond which the Court cannot grant reasonable compensation.
2. Reasonable compensation will be fixed on well known principles that are applicable to the law of contract, which are to be found inter alia in Section 73 of the Contract Act.
3. Since Section 74 awards reasonable compensation for damage or loss caused by a breach of contract, damage or loss caused is a sine qua non for the applicability of the Section.
4. The Section applies whether a person is a plaintiff or a defendant in a suit.
5. The sum spoken of may already be paid or be payable in future.
6. The expression "whether or not actual damage or loss is proved to have been caused thereby" means that where it is possible to prove actual damage or loss, such proof is not dispensed with. It is only in cases where damage or loss is difficult or impossible to prove that the liquidated amount named in the contract, if a genuine pre-estimate of damage or loss, can be awarded.
7. Section 74 will apply to cases of forfeiture of earnest money under a contract. Where, however, forfeiture takes place under the terms and conditions of a public auction before agreement is reached, Section 74 would have no application.
44. The Division Bench has gone wrong in principle. As has been pointed out above, there has been no breach of contract by the appellant. Further, we cannot accept the view of the Division Bench that the fact that the DDA made a profit from re-::: Downloaded on - 17/04/2015 00:00:38 :::
ppn 43 arbp-819.11 & 908.11(j).doc auction is irrelevant, as that would fly in the face of the most basic principle on the award of damages - namely, that compensation can only be given for damage or loss suffered. If damage or loss is not suffered, the law does not provide for a windfall.
87. Division Bench of this court in case of Maharasthra State Electricity Board vs. Sterlite Industries (India) Ltd. 2000 (3) Bom.C.R. 347 has held that a party claiming compensation is under section 73 of the Contract Act is under an obligation to prove the loss suffered on account of breach of agreement by the respondent. It is held that when no loss or damages is ensued, there would be no question of awarding compensation. Paragraph 15 of the said judgment of the Division Bench in case of Maharashtra State Electricity Board (supra) read thus :-
"15. In the light of the above view taken by us, it is really not necessary to go into the second question as to whether appellants proved the alleged loss suffered by them. However, both the learned Counsel have advanced arguments on this aspect as such we are dealing with the same. It is a well settled law that where loss in terms of money is payed for, the party claiming compensation must prove such loss suffered by it. The concept of compensation is linked up with loss or damages that result from breach of contract and where no loss or damage is ensued, there would be no question of awarding compensation. Section 73 of the Contract Act does not give any cause of action unless and until damages are actually suffered, otherwise section 73 will become nugatory and party would be penalised though the other party suffered no loss. Thus, even under section 73 of the Contract Act, party claiming compensation is under an obligation to prove the loss suffered on account of breach of agreement by the respondents. In the present case, as found by the Arbitrators in the majority awards the appellants have failed to prove quantum of loss suffered by them. The appellants were, therefore, held not entitled to any damages claimed in the respective statement of claims. According to Mr. Bharucha, learned Counsel for the ::: Downloaded on - 17/04/2015 00:00:38 ::: ppn 44 arbp-819.11 & 908.11(j).doc respondents approach of the Arbitrators cannot be faulted in the proceeding under section 30 of the Arbitration Act as categorical findings have been recorded by the majority arbitrators in the respective awards. The appellants (claimants) have failed to prove that they suffered any loss. It is, therefore, not possible for this Court to examine findings of fact in the present appellate jurisdiction. Consequently, no fault can be found with the approach adopted by the learned Single Judge is the last contention of the appellants."
88. Division Bench of this Court in case of Edifice Developers and Projects Engineers Ltd. vs. M/s.Essar Projects (India) Limited delivered on 3rd January 2013 in Appeal No.11 of 20112 has after adverting to some of the judgments of the Supreme Court has held that the claim for loss of profit and under utilisation of plant and equipment is required to be proved and if not proved cannot be awarded by the learned arbitrator. Paragraphs 7 to 12 of the said judgment of Division Bench in case of Edifice Developers and Projects Engineers Ltd.(supra) read thus :-
"7. The arbitral award, ex facie, demonstrates that the Arbitrator proceeded on the basis that the Appellant had not produced either the basis of the account or any oral evidence to prove the overhead losses caused to or suffered by it.
Despite that finding the Arbitrator held that in the construction industry a contractor becomes entitled to overhead losses on the basis of Hudson's Formula, even in the absence of direct evidence to prove such losses when resources are mobilized and delay is caused in the execution of the work not attributable to the contractor. In holding this the Arbitrator relied upon the judgment of the Supreme Court in Brij Paul Singh's case (supra).
8. The Learned Single Judge, in our view, was justified in coming to the conclusion that the Arbitrator was manifestly in error in awarding the claim for overhead losses in spite of the fact that no oral evidence was adduced on behalf of the ::: Downloaded on - 17/04/2015 00:00:38 ::: ppn 45 arbp-819.11 & 908.11(j).doc Appellant. In Brij Paul Singh's case the Supreme Court noted that it was not disputed that where in a works contract a party entrusted with the work commits a breach of the contract, the contractor would be entitled to claim damages for loss of profit which he expected to earn by undertaking the contract. The Supreme Court, however, noted that what must be the measure of the profit and what evidence should be tendered to sustain the claim are different matters. The judgment of the Supreme Court adverts to the fact that in that case the High Court had referred to Hudson's treatise on Building and Engineering Contracts. Hudson states there that in major contracts subject to competitive tender on a national basis, the evidence given in litigation on many occasions suggests that head office overheads and profits are between 3 to 7% of the total price of cost which is added to the tender. The High Court in that case had rejected the claim of the contractor. The Supreme Court noted that in an identical contract with regard to another portion of the same road and for the same type of work the High Court had accepted loss of profit at 15% of the price of the balance of work as a reasonable measure of damages if the State is guilty of a breach of contract. It was on this basis that the Supreme Court came to the conclusion that since for the same type of work, between the same parties involving a nearby portion of the same road a certain measure of damages had been adopted by the High Court, the same measure ought to have been adopted in that case as well.
9. Brij Paul Singh's case therefore does not stipulate as a doctrine of law that the formula which has been prescribed in Hudson's treatise must invariably be accepted in all cases as a measure of damages sustained on account of loss of overheads. On the other hand in the subsequent decision of the Supreme Court in McDermott International (supra), the Supreme Court has relied upon the following observations contained in the earlier decision in M.N.Gangappa v Atmakur Nagabhushanam Setty & Co. - (1973) 3 SCC 406.
"In the assessment of damages, the court must consider only strict legal obligations, and not the expectations, however reasonable, of one contractor that the other ::: Downloaded on - 17/04/2015 00:00:38 ::: ppn 46 arbp-819.11 & 908.11(j).doc will do something that he has assumed no legal obligation to do."
10. The judgment in McDermott International (supra) considers various formulae including Hudson's Formula, Emden Formula and Eichleay Formula. As regards Hudson's Formula the Supreme Court has noted, in the following extract, that although it has received judicial support in many cases, it has been the subject matter of criticism :
"(a) Hudson Formula : In Hudson's Building and Engineering Contracts, Hudson formula is stated in the following terms :
"Contract head office overhead & contract sum period of delay"
profit percentage ig x -------------- x
contract period
In the Hudson formula, the head office overhead
percentage is taken from the contract. Although the Hudson formula has received judicial support in many cases, it has been criticized principally because it adopts the head office overhead percentage from the contract as the factor for calculating the costs, and this may bear little or no relation to the actual head office costs of the contractor." (emphasis supplied)
11. In McDermott International (supra) the Supreme Court has held that it is an accepted position that different formulae can be applied in different circumstances and the question as to whether damages should be computed by taking recourse to one or other formula, having regard to the facts and circumstances of a particular case, would fall within the domain of the Arbitrator. In the present case no other formula other than Hudson's formula has been considered in the arbitral award. In the present case the Arbitrator proceeded on the basis that it was only Hudson's Formula which was to be applied and that even though no direct evidence had been adduced on behalf of the Appellant, nonetheless the Appellant would be entitled to damages measured with reference to the aforesaid formula. This approach of the Arbitrator is manifestly in the teeth of the law laid down by the Supreme Court in McDermott International. Section 28(1)(a) requires ::: Downloaded on - 17/04/2015 00:00:38 ::: ppn 47 arbp-819.11 & 908.11(j).doc that the Arbitral Tribunal shall decide a dispute submitted to arbitration in accordance with the substantive law for the time being in force in India. Section 28(3) requires the Arbitral Tribunal to decide in accordance with the terms of the contract and take into account the usages of the trade applicable to the transaction. The Arbitral Tribunal under Section 28(2) can act as amiable compositeur and can decide ex aequo et bono only if parties have expressly authorized it to do so. In the present case, the Learned Single Judge was correct in coming to the conclusion that the award of the Arbitrator proceeds on the manifestly misconceived notion that a contractor is entitled to claim overhead losses even in the absence of evidence on the basis of Hudson's Formula. Similarly, the Arbitral Tribunal proceeded on a misconceived premise that this formula is invariably adopted for quantification of claims for overhead losses in India. In the present case the Appellant produced no evidence in support of its claim; this has been so stated in the Award. The award of the claim is on the misconceived basis that the Hudson's Formula must be applied despite the absence of evidence. Since the fundamental basis that has permeated the award is contrary to law, the judgment of the Single Judge cannot be faulted in setting aside the arbitral award on that aspect.
12. The Arbitrator, as noted earlier, also awarded claims in respect of loss of profit, for under utilized plant and equipment and for reimbursement of infrastructure expenses. In respect of loss of profits, the Arbitrator merely held that a measure of 10% on the value of the remaining part of the works contract cannot be said to be unreasonable. The Arbitrator observed that a percentage representing 10% of the rate of profit is invariably accepted in the construction industry. Evidently save and except for an priori assumption, no evidence whatsoever was led before the Arbitrator in that regard. In P.R. Shah, Shares and Stock Brokers Private Limited v. B.H.H. Securities Private Limited - (2012) 1 SCC 594 the Supreme Court has held that while an Arbitral Tribunal cannot make use of its personal knowledge of the facts of the dispute, which is not a part of the record, the Tribunal can certainly use its expert or technical knowledge or the general knowledge about ::: Downloaded on - 17/04/2015 00:00:38 ::: ppn 48 arbp-819.11 & 908.11(j).doc the particular trade in deciding a matter. That is why in many arbitrations, persons with technical knowledge are appointed since they may be well-versed with the practices and customs in the respective fields. The Arbitrator in the present case was not an arbitrator drawn from the trade. No basis whatsoever has been indicated in the award for accepting 10% as a measure representing loss of profits. No material was produced before the Arbitrator on the nature of the practice in the trade. During the course of the hearing no basis has been indicated to the Court from the record to suggest that any practice of that nature in the construction industry was brought to the notice of the Arbitral Tribunal. In the circumstances, the arbitral award to the extent that it allows the claim for loss of profits is based on pure conjecture and in the absence of any evidence whatsoever was correctly set aside. Similarly, in regard to the claim for underutilized plant and equipment and for reimbursement of expenses of infrastructure, it is evident that the Arbitrator has merely awarded a sum which he considered to be reasonable. No evidence whatsoever was led before the Arbitral Tribunal.
In the circumstances, we do not find any reason to interfere with the judgment of the Learned Single Judge. The Appeal shall accordingly stand dismissed.
There shall be no order as to costs."
89. In my view if a party has not suffered any losses, even if the respondent has committed breaches, such party cannot be awarded any compensation under Section 73. When loss in terms of money is prayed, the party claiming compensation has to prove such loss or damages suffered by him. The division bench of this court in case of Maharashtra State Electricity Board (supra) has held that section 73 of Contract Act does not give any cause of action unless and until any damages or loss was actually suffered otherwise section 73 would become nugatory and party would be penalised though the other party suffered no loss. In my view, if the party who has not suffered any loss is awarded any ::: Downloaded on - 17/04/2015 00:00:38 ::: ppn 49 arbp-819.11 & 908.11(j).doc compensation under section 73 it would amount to unjust enrichment to such party.
90. I am respectfully bound by the judgment of the Supreme Court in case of M/s.Kailash Nath and Associates (supra) and the judgment of division bench of this court referred to aforesaid. Each of the judgment referred to aforesaid on the claim for loss of profit and compensation are squarely applicable to the facts of this case. I am respectfully bound by the law laid down by the Supreme Court and this court.
91. Insofar as judgments of English courts relied upon by the learned counsel for the claimant in support of his submission that the learned arbitrator ought to have awarded reasonable compensation on guess work basis is concerned, in my view the law on this issue laid down by the supreme court and the division bench of this court as summarized aforesaid would be binding on this court which squally applies to the facts of this case. The judgments relied upon by the learned counsel for the respondent which are referred aforesaid in paragraph 25 of this judgment are clearly distinguishable in the facts of this case and do not assist the claimant.
92. Insofar as claim of arbitration cost of Rs.12 lacs awarded by the learned arbitrator in favour of the claimant is concerned, the said claim is opposed by the respondent on the ground that the learned arbitrator having rejected the claims made by the claimant could not have allowed the said claim for cost. A perusal of the award clearly indicates ::: Downloaded on - 17/04/2015 00:00:38 ::: ppn 50 arbp-819.11 & 908.11(j).doc that the learned arbitrator has rendered most of the findings in favour of the claimant while holding that the respondent had committed breaches of the agreement and had since inception had no intention to comply with his part of the obligation under the agreement. The learned arbitrator however has rejected the claim for loss of profit on the ground that the claimant had failed to prove such loss of profit. In my view though the claimant had incurred arbitration cost much more, the learned arbitrator has only awarded the cost at Rs.12 lacs. In the facts and circumstances of this case the learned arbitrator was thus justified in awarding cost of Rs.12 lacs in favour of the claimant. In my view there is thus no merit in this submission of the learned senior counsel for the respondent and thus that part of the award is upheld. In my view both the arbitration petitions are devoid of merits.
93. I, therefore, pass the following order :-
a) Arbitration Petition No. 819 of 2011 and Arbitration Petition No.908 of 2011 are dismissed.
b) There shall be no order as to cost.
R.D. DHANUKA, J.
Mr.Joshi, learned senior counsel appearing for the respondent prays for stay of the execution of the award granting the arbitration cost by the learned arbitrator. Prayer for stay is refused.
R.D. DHANUKA, J.
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