Bangalore District Court
Chamundeshwari Electricity Supply vs M/S.Rajashekar & Associates on 27 January, 2023
IN THE COURT OF LXXXIX ADDL.CITY CIVIL & SESSIONS
JUDGE, BENGALURU. (CCH-90)
Present: Sri.S.J.Krishna, B.Sc., LL.B.,
LXXXIX Addl.City Civil &
Sessions Judge, Bengaluru.
Dated: 27th JANUARY 2023
Com.A.P.No.41/2021
PETITIONER : Chamundeshwari Electricity Supply
Corporation Ltd.,
#CA29, Kauveri Grameena Bank Road,
Vijayanagar 2nd Stage,
Mysuru-570 017
represented herein by its
General Manager (Projects)
(By M/s.JUSTLAW, Advocates)
Vs.
RESPONDENTS: 1. M/s.Rajashekar & Associates,
having its registered office at
Unit No.201, Landmark Plaza,
#299, Langford Road,
Bengaluru-560 025
Represented by its
Authorised Signatory
2. Justice Ajit Gunjal
No.95, Lakshmi Kunj, 7th Main,
/2/
Com.A.P.No.41/2021
MCR Layout, Vijayanagar,
Bengaluru-560 040.
(By M/s.Kumar & Kumar Advocates)
Date of Institution of suit : 07.04.2021
Nature of suit : U/sec.34 of the Arbitration &
(suit on pronote, suit for Conciliation Act, 1996.
declaration and
possession suit for
injunction, etc.,)
Date of commencement : -
of recording of evidence
Date of judgment : 27.01.2023
Total duration : Year/s Month/s Day/s
01 09 20
(S.J.KRISHNA)
LXXXIX ADDL.CITY CIVIL &
SESSIONS JUDGE, BENGALURU.
(CCH-90)
JUDGMENT
The plaintiff M/S.Rajashekar Associates/Claimant has filed Com.A.P.No:02/2022 against the Arbitration Award dated 10.10.2020 passed by the Arbitral Tribunal in A.C.No.145/2016 declining to grant the prayers at (e), (f), (h) & (i) while also rejecting the claim for damages and overhead charges and in rejecting the application for amendment.
/3/ Com.A.P.No.41/2021
02. The Respondent/M/S.Chamundeshwari Electricity Supply Corporation Ltd., has filed Com.A.P.No:41/2022 being aggrieved by the Arbitration Award dated 10.10.2020 passed by the Arbitral Tribunal in A.C.No.145/2016 in its entirety.
03. For the sake of convenience the parties to the petition filed under Section 34 of Arbitration & Conciliation Act, 1996 are referred to as "Claimant" and "Respondent" as before the learned Arbitral Tribunal in A.C.No:145/2016.
04. In view of the order dated:27.09.2016 passed by the Hon'ble High Court of Karnataka in C.M.P.No:15 of 2016 the Arbitral Tribunal was constituted to resolve the dispute between the Claimant and the Respondent.
The summary of the Claim Statement filed by the claimant before the Learned Arbitral Tribunal is as under:
05. The claimant is a registered Partnership Firm. The Claimant is a member of the Karnataka Small Scale Industries Association, with Membership No.R0028. It is a Small Enterprise under the provisions of the Micro, Small and Medium Enterprises Development Act, 2006. The Claimant is engaged in the business of executing electrical projects to various central, states, private and public sector undertakings /4/ Com.A.P.No.41/2021 in South India. The Claimant has for over four decades, constructed various 110 KV, 66KV and 33KV sub-stations, 33 KV and 11KV HT distribution lines, 440V and 230 V LT distribution lines for townships and rural electrification for the power utility and industrial sectors of South India.
06. The respondent is a Government Company and Undertaking engaged inter-alia in distribution of electricity. The respondent floated a tender dated 23.10.2010 for strengthening of electrical distribution network under Part-B of th R-APDRP in Madikeri District on a turn-key basis. The claimant was the successful/lowest bidder. Accordingly, a Letter of Intent was issued on 07.10.2011. The parties thereafter entered into an agreement on 21.11.2011. The total contract price was then estimated at ₹.3,94,95,378/-. The project was to be completed within 12 months from the date of issuance of the detailed Work Award. The Detailed Work Award was issued on 05.01.2012 and therefore, the period of 12 months was to expire on 05.01.2013. The claimant furnished Performance Bank Guarantees of ₹.3,59,99,923/- towards supply portion of the work and ₹.34,95,450/- towards erection portion of the work and these PBGs were both dated 19.10.2011. Two agreements dated 21.11.2011 were executed, one for supply portion and the other for erection portion.
/5/ Com.A.P.No.41/2021
07. The Respondent issued a DWA dated:05.01.2012 to the Claimant for supply and erection portion for the works including Tender Conditions and General Conditions of Contract (GCC) and Special Conditions of Contract (SCC).
08. Under Clause 12 of the GCC the Claimant was required to submit a PROGRAMME REVIEW TECHNIQUE CHART(PERT) consisting of adequate number of activities covering various phases of the work within 15 days of awarding of the Contract. The claimant was required to discuss with the Respondent and it was only with the approval of the Respondent PERT chart was to be submitted as per Clause 12 of GCC. The respondent did not provide the site conditions and requirements and therefore further steps including furnishing of a PERT Chart could not be submitted. The respondent being aware of its failure to clarify the conditions and the scope of the works prepared a draft PERT Chart on 16.05.2012 and furnished a copy of the same to the claimant. This was close to 5 months after the DWA was issued. Over a period of time the claimant was constrained to revise the PERT Chart multiple times due to the delay by Respondent and due to weather conditions at Madikeri. The PERT Chart was submitted on 07.07.2012 and the same was approved by the Respondent.
/6/ Com.A.P.No.41/2021
09. There were huge variations and deviation from the DWA and the site conditions. As such, two surveys were undertaken. The first survey Report and since the variations were huge, the second survey was conducted at the request of the respondent. The surveys also revealed that lot of items of work were left out without which, the execution of the DWA was not possible such as concreting of spun polls, transformer structures, etc., subsequently, what was indicated as underground cabling in the tender at DWA was chanted to overhead cabling. Thus, the very scope and nature of the tender work underwent a huge change. The non-tendered work required approval without which, the work could not be completed. Joint surveys indicated the pre-estimate made by the respondent was not as per the site conditions and variations in relation to some of the aspects extended between 500% - 1000%. On account of the huge variation and since there was disparity in the quantity variation; the same was brought to the notice of the higher officials in a survey meeting that was conducted on 27.12.2011. The variations were viewed very seriously by none else than the Managing Director of the respondent who instructed and directed the concerned officials of the respondent to verify and submit a report in this regard. The claimant was unable to commence the work as stipulated under the contract on account of the fact that the material as per the sital condition was not /7/ Com.A.P.No.41/2021 finalized. The claimant in the meantime, informed the respondent regarding variation of quantities which were huge and sizable in nature. The Managing Director of the respondent directed the Executive Engineer to look into the detailed project report and examine the variations and the effect that it would have on the project. Such was the inaccuracy of the DWA that the respondent had completely failed to include LT Conversion Work within the scope of DWA and without inclusion of the same, the claimant cannot complete the erection portion of the contract. In view of the joint survey, the claimant had submitted Revised Work Detail for the work. The required schedule of material was found to be at great variance with the quantities stipulated in the original DWA and this came to the notice of the respondent only after the second joint survey was carried out. Unless these variations were taken note of and suitable changes made to the DWA and the scope of work remained an illusion and therefore, there was no occasion for the claimant to have proceeded with the work. The revised quantity of material was not approved and the claimant was unable to procure materials for the work and proceed further. This was communicated repeatedly to the respondent.
10. The Respondent issued a revised DWA dated 26.12.2012 just nine days before expiry of the contract period.
/8/ Com.A.P.No.41/2021 The revised DWA was received by the Claimant only after expiry of the contract period. In fact, though the revised DWA was issued which included some of the additional and some of the non-tendered work, there was no financial approval that was secured for non-tendered work. The Claimant procured all the materials as was tendered towards the supply portion of the contract to which financial approval had been given by the competent authority in the Respondent. In so far as erection works are concerned, to the extent possible, the Claimant could not execute the erection part of the contract to its entirety having regard to the fact that additional scope of work in terms of quantities were included, non-tendered items were included in the RDWA. Even then, financial approval having not being taken by the Respondent from the competent authority, the entire scope of work could not be executed for reasons attributable only to the Respondent. As things stood thus, when the Claimant was already suffering on account of the unprofessional manner the tender had been issued without taking into account the actual conditions that existed on site, the enhanced scope of work and non-tendering of essential works without which erection works could not be completed, the Respondent in a high- handed manner proceeded to issue notices falsely alleging that there was hardly any progress in the work that was awarded. The Respondent has issued appropriate relies. Thus, pursuant to the letter dated /9/ Com.A.P.No.41/2021 17.06.2015, the tender was short-closed and without any justification, the Respondent encashed the PBGs. As a consequence of the illegal and wrongful termination, the Claimant suffered immense losses and it led to a situation where the Claimant was forced to abandon all further execution of works with various other organizations/ companies, etc., and agencies on account of the Bank Guarantees being encashed illegally which led to the bank to proceed against the securities against which the Bank Guarantees were offered. No further financial facilities were offered by the Bank and Financial Institution on account of the short closure and encashment of PBGs.
11. The Respondent Company had failed and neglected to pay the Claimant towards 50% of the supply portion as well as 100% of the erection portion of the contract. Despite bringing all the aforesaid aspects to the notice of the Respondent, they acted in an arbitrary manner in short-closing the contract. Accordingly, the Claimant approached the Hon'ble High Court of Karnataka seeking appointment of an Arbitrator and consequently, an Arbitration Tribunal came to be constituted. The Claimant filed a Claim Petition seeking the following reliefs:
a) Direct the Respondent to pay the Claimant a sum of ₹.70,35,442/- (Rupees Seventy Lakh Thirty Five Thousand /10/ Com.A.P.No.41/2021 Four Hundred Forty Two Only) towards outstanding invoices towards materials supplied by the Claimant under the Original DWA;
b) Direct the Respondent to pay the Claimant a sum of ₹.17,63,920/- (Rupees Seventeen Lakh Sixty Three Thousand Nine Hundred Twenty Only) towards the outstanding invoices towards materials supplied by the Claimant under the Revised DWA;
c) Direct the Respondent to pay the Claimant to pay a sum of ₹.14,45,818.10/- (Rupees Fourteen Lakh Forty Five Thousand Eight Hundred Eighteen and Paise Ten Only) towards the Civil and Erection bills for the erection portion of the contract;
d) Direct the Respondent to pay Claimant a sum of ₹.1,12,301.16/- (Rupees One Lakh Twelve Thousand Three Hundred One and Paise Sixteen Only) towards the dismantling works;
e) Direct the Respondent to pay the Claimant a sum of ₹.25,18,134.80/- (Rupees Twenty Five Lakh Eighteen Thousand One Hundred Thirty Four and Paise Eighty Only) towards damages towards loss of profit;
f) Direct the Respondent to pay to the Claimant a ₹.57,55,631/- (Rupees Fifty Seven Lakh Fifty Five Thousand Six Hundred Thirty One Only) towards reimbursement of expenses incurred by the Claimant on account of Respondent's /11/ Com.A.P.No.41/2021 deliberate delay in progress of the work;
g) Direct the Respondent to reimburse a sum of ₹.39,49,538/- (Rupees Thirty Nine Lakh Forty Nine Thousand Five Hundred Thirty Eight Only) towards amounts towards Performance Bank Guarantee encashed by the Respondent;
h) Direct the Respondent to reimburse the Claimant a sum of ₹.3,04,832/- (Rupees Three Lakh Four Thousand Eight Hundred Thirty Two Only) towards expenses incurred towards renewal of Bank Guarantees;
i) Direct the Respondent to pay a sum of ₹.6,54,63,503/-
(Rupees Six Crore Fifty Four Lakh Sixty Three Thousand Five Hundred Three Only) towards damages caused to the Claimant towards wrongful short-closing of the Contract.
12. The Respondent entered appearance and filed its Statement of Objections.
The Summary of the statement of objections filed by the Respondent before the learned Arbitral Tribunal in A.C.no:145/2016 is as under:
13. The Respondent has denied the averments made by the Claimant. The Respondent has stated that the Claimant had not done any work within the timeline fixed under the contract.
/12/ Com.A.P.No.41/2021
14. The Respondent with an object of strengthening the electricity distribution network and to bring down the existing aggregate technical and commercial loss to less or equal to 15% under R-APDRP Project scheme, invited the Tenders for carrying out the said work in Madikeri/Kodagu district. The scope of the tender work involved execution of work on Total Turnkey basis including supply of equipment and erection of lines. The total contract price was ₹.3,94,95,378/- comprising of Supply Portion and Erection Portion.
15. The Respondent has issued Detailed Work Award(DWA) on 05.01.2012 for Supply and Erection Portion to the Claimant.
16. The Respondent had issued LOI for Supply and Erection Portion separately on 07.10.2011. As per the terms of LOI the Claimant was required to convey its acceptance within 15 days from the date of receipt of LOI and to execute Contract Agreement for Supply & Erection of all equipment as per Clause 32 of GCC and 36 of Instruction to Bidders and to furnish a Bank Guarantee.
17. The Respondent has failed to identify the Site Conditions. It was imperative on the part of prospective bidders to acquaint themselves with the Terms & Conditions of /13/ Com.A.P.No.41/2021 Bid documents and familiarize with their obligations as mentioned in the Instructions to Bidders. The Clause 4 of Instructions to Bidders deals with understanding of Bid Document and Clause 4.1 state that the prospective Bidder is expected to appraise themselves and understand the conditions which may affect the Scope of Work. The Claimant was required to furnish a PERT Chart at the time of execution of the work.
18. The Claimant has executed Contract for Supply & Erection Portion on 21.11.2011 and was required to furnish PERT Chart within 15 days of signing the LOI. The Claimant has failed to furnish the PERT Chart. The PERT Chart was to be prepared by Claimant after examining the site conditions and requirements. The Claimant has furnished first Bar Chart on 24.12.2011 after a partial survey carried out by the Claimant without coordinating with the representatives of the Respondent. The Claimant was to coordinate with the Respondent and prepare the PERT Chart. The Claimant was unable to prepare the PERT Chart. AS the Claimant did not furnish the PERT Chart the Respondent was constrained to prepare a PERT Chart on its own, as sufficient time had lapsed from signing of the Contract and there was no progress of work. The Respondent has denied that the claimant was constrained to revise the PERT Chart multiple times.
/14/ Com.A.P.No.41/2021
19. The Claimant failed to adhere to the contractual obligations since the inception of the Project and denied the liability attributed against it by the Claimant. The execution of the project was delayed due to the conduct of the Claimant, which has failed to submit PERT Chart within the stipulated period, the belated filing of PERT Chart has affected the successful completion of the entire project.
20. The poor progress in work resulted in delay in completion of the works in scheduled time. The Respondent had floated the Tender on Total Turn Key basis. The Respondent had entered in to an agreement with the Power Finance Corporation (PFC) for execution of the said Project. Under the said Agreement, PFC has extended substantial help to the Respondent under Part-B of the R-ADRP. The Respondent has made available the copy of the loans sanctioned by PFC to the Respondent under the said scheme. It was agreed between PFC and the Respondent that the Scheme would be executed and completed within the scheduled time. As the project was funded by the Central Government Agency and delay in execution of the work would cause loss to it. As per Clause 12 of GCC and the terms of LOI the time was the essence of the contract. A period of 12 months was fixed for completion of the project from the date of award of work as per DWA. The scope of the work included /15/ Com.A.P.No.41/2021 inspection of site, conducting joint survey supply of materials and erection of certain components.
21. The Claimant was required to complete a Joint Survey as it is essential for the execution of work under the contract since the same was required to frame and submit the PERT Chart and based on it the materials had to be procured to start execution of the work. The claimant did not carry out the Field survey even after lapse of a month since the award of the work. The respondent had issued multiple reminders to the Claimant to proceed with the Field Survey. Even after repeated reminders the Claimant failed to take the Work Award seriously and the slow start of the Project Work was noticed by the Respondent in a Joint Meeting held on 22.02.2012 wherein the Claimant was instructed to commence the work under contract as soon as possible without any delay. The Claimant assured the Respondent that the work would be commenced from 1st week of March 2012. Several opportunities were given to the Claimant for completion of work however the claimant failed to execute the works and submit Progress Report to the Respondent. The respondent has denied the allegation that there was a arbitrary revision of quantity of DWA and caused delay in the execution of the Work. After issuance of repeated reminders, a Joint survey was conducted by representatives of the Claimant and respondent before the execution of the /16/ Com.A.P.No.41/2021 works under contract. The changes were made as per the requirements pointed out by the Claimant. The respondent shall not be held liable for the fault of the Claimant.
22. The revision of the quantity in DWA did not have any effect on the schedule of the Project Work. Instead of fast tracking the execution of the work, the Claimant made baseless allegations that due to issuance of approvals and clearances, the said work could not be completed. There was nothing prevented the Claimant from completing the work. In a meeting held on 24.03.2015, the same was discussed. The claimant from day of inception was not committed to the project and did not perform its obligations under the contract even after getting timely assistance from the Respondent in all matters. The Respondent was constrained to issue notices at regular intervals indicating there is a huge backlog of work which the Claimant was obligated to contractually complete. The notices were issued on 27.04.2012, 02.07.2013, 27.03.2014, 29.03.2014, 30.04.2014 and the last of the notices was issued on 04.05.2015 reminding the Claimant of the poor progress of the works and obligations under the Contract. In spite of several opportunities and numerous extensions, the claimant was only able to complete 2.97% of the total worm. Thus, the claimant had been performing its obligations in a lackluster manner. The claimant has failed /17/ Com.A.P.No.41/2021 miserably to complete the work. Due to the inefficiency and serious breach of the Contract conditions, the project was suffering serious losses. The claimant even after extension of time for completion up to May 2015 could not complete the work. The claimant has completed only 3.15% of the total work as on May 2015. The respondent had no option but to issue on order for short-closure vide letter dated:17.06.2014. The Respondent in its Board meeting has decided that any additional Cost Factor for completion of the Work will be received from the Claimant.
23. The Claimant had to procure materials required for the project under DWA. The claimant requested the Respondent pursuant to a letter dated:11.04.2012 that he unused substation be utilized for the purpose of storing materials procured for the project. The Claimant had agreed to dismantle the sub-station and use the defunct substation as a storage unit. As per Clause 21 of the SCC Material & storage was the responsibility of the Contractor. The Respondent could use the substation for storage on a nominal monthly rent of ₹.5,000/-. The Claimant is liable to pay the said monthly rental charges.
24. As per the contract, the Claimant was paid 50% of the contracted amount. As per Clause 8.2.1 and 8.3.1 the /18/ Com.A.P.No.41/2021 payments were subject to the work going according to plan. The Claimant had to show progress and completion of work before raising any claim for the payment. The Claimant could complete only a very small amount of work in spite of availability of materials, labour, equipment and finance. The Claimant has not properly utilized the funds allocated. Even though the respondent has accepted all subsequent requests made by the claimant, the claimant has failed to perform its obligations under the Contract. The claimant has breached the terms of the Contract.
25. The Claimant had been asking for release of payments for items dispatched when in fact 50% of the payments had already made at the time of execution of the Contract. Under the GCC the Respondent had already made 50% payment to the Claimant as far as Supply Portion of the Contract was concerned. The balance 50% was liable to be paid only after the completion and Commission of the Works, as per Clause 8 of GCC.
26. The Respondent was constrained to short-close the contract as the Claimant has failed to complete the work. The Respondent was constrained to encash the Performance Bank Guarantee. The Respondent has denied that the Performance Bank Guarantee was fraudulently encashed by it and is liable /19/ Com.A.P.No.41/2021 to pay amounts towards settlement of outstanding bills for Supply and Erection Portions much less the amounts claimed in the claim petition.
27. The Respondent has denied that the Claimant was prevented from executing the work solely on account of the wrongful termination of the contract by the Respondent. The Claimant had been delaying the project from inception. The Claim of the Claimant that he would have earned a profit of 10% is not within the knowledge of the respondent and the same is a false claim. The Respondent has denied that the Claimant has suffered damages and loss of profit and incurred additional expenses on account of prolongation of the contract. The Claimant is not entitled for loss of profit, damages and refund of Bank Guarantee and the claim made towards the pending invoices. The claimant is not entitled for any of the reliefs sought for and the Claimant itself is responsible for the losses suffered by it.
28. The Claimant has filed Replication/Rejoinder to the Statement of Objections filed by the Respondent reiterating the averments made in the Claim Statement.
29. During the Course of proceedings the Claimant filed an application seeking amendment of the Claim Petition /20/ Com.A.P.No.41/2021 essentially invoking the provisions of the Micro Small and Medium Enterprises Development Act ("MSMED Act"), 2006. It is the contention of the Claimant that as per the provisions of the MSMED Act, the Claimant would be entitled as per Section 16 compounded interest at monthly rests at three times the bank rate as notified by the Reserve Bank of India.
30. The Learned Arbitral Tribunal has raised following Points in Dispute for its determination.
i. Whether the Claimant is entitled for the sums of money as sought for in respect of the pending invoices?
ii. Whether the Claimant is entitled for the sums of money as claimed towards the Civil Works and Dismantling Works?
iii. Whether the Claimant is entitled for the Loss of Profit, Damages and Overhead Charges for wrongful termination of the Contract as claimed?
iv. Whether the Claimant is entitled for the refund of the Bank Guarantees?
v. Whether Time is the Essence of the Contract and Respondent was justified in terminating the same? Bengaluru vi. Whether the Claimant is entitled for Amendment of the Claim Petition as sought for?
/21/ Com.A.P.No.41/2021
31. The Managing Partner of the Claimant Firm Sri.N.Sathyanarayan adduced his evidence as CW1 and exhibited Ex.P1 to Ex.P-240. The Respondent has examined Sri.P.S.Suresh, AEE as RW1 and RW1 exhibited Ex.R1 to Ex.R19; Sri.S.Lokesh, Asst.G.M.(Procurement) as RW2 and he has exhibited Ex.R29 to Ex.R42; Sri.V.M.Nagaraju as RW3 and he has exhibited Ex.R22 to R.28.
32. During the pendency of the Arbitration Proceedings, there was a change in the constitution of the Arbitration Tribunal at the instance of the Respondent. The proceedings culminated before the newly constituted Arbitration Tribunal.
33. The learned Arbitral Tribunal has passed the Award on 10.12.2020 as under:
a. The Claimant is entitled for the following reliefs:
i. The Respondent is directed to pay the Claimant a sum of ₹.70,35,442/- towards pending invoices towards supply of tendered items under the Original DWA.
ii. The Respondent is directed to pay the Claimant a sum of ₹.17,63,920/- towards pending invoices towards supply of materials as per revised quantities under the Revised DWA. iii. The Respondent is directed to pay the Claimant a /22/ Com.A.P.No.41/2021 sum of ₹.14,45,818/- is in respect of invoices raised towards civil and erection works. iv. The Respondent is directed to pay the Claimant a sum of ₹.1,12,301/- towards dismantling works of 33/11 KV UG MUSS at Madikeri.
v. The Respondent is directed to pay the Claimant a sum of ₹.2,50,000/- as relief towards Loss of Profit. vi. The Respondent is directed to refund/pay the Claimant a sum of ₹.39,49,538/-towards reimbursement of the Bank Guarantees and a sum of ₹.1,00,000/-to service the said Bank Guarantees. vii. The Claim for Damages and Overhead Charges is rejected.
viii. The Application for Amendment is rejected.
b. The Claimant is entitled for interest at 12% p.a. on the Award Amount from the date of filing of the Claim Petition until the date of realization. c. The Claimant is entitled for costs of the proceedings.
d. Stamp duty is payable as per the Karnataka Stamp Act, 1957.
e. The Award is signed and issued in three originals one for the record of the Centre and rest of the two to each of the parties.
/23/ Com.A.P.No.41/2021
34. Being aggrieved by the Award dated:10.12.2020 passed by the Learned Arbitral Tribunal the Respondent has filed the present suit for the following among other grounds.
35. The Respondent has furnished the facts of the case apart from grounds to assail the impugned Award.
36. It is the case of the respondent i.e. CESCO (Respondent in A.C.No:145/2016)that The plaintiff is a Government Company and its shares are fully held by the Government of Karnataka. The Respondent/plaintiff is a distribution licensee for electricity in the designated area and is in the business of distribution of electricity.
37. During the year 2010, the Respondent Company with an object of strengthening the Electricity Distribution Network and bringing down existing Aggregate Technical & Commercial (AT & C) loss to less than or equal to 15% under the R-APDRP project scheme invited tender on 23.12.2010 for carrying out strengthening of Electrical Distribution Network under Part-B of the R-APDRP project scheme in Madikeri district on total turn- key basis. The scope of work involved strengthening of the existing electricity distribution network and inter alia included the following:
11 KV line: New Feeder/ Feeder bifurcation;
/24/ Com.A.P.No.41/2021 Installation of Distribution Transformers; Enhancement of Distribution Transformers; LT Line: Augmentation Providing Mobile Service Station.
38. The Respondent issued Letters of Intent (LOI) separately for Supply and Erection Portion on 07.10.2011 (Ex. C-12). Upon acceptance of the LOI by the Respondent, the parties entered into contract agreement on 21.11.2011 for Supply and Erection portion (Ex. C-10 and C- 1). The total contract price was 3,94,95,378/-. Out of the same, the supply portion amounted to ₹ 3,59,99,923/- and erection portion amounted to 234,95,450/-. Thereafter, the Respondent isssued 2 Detailed Work Awards (DWA) dated05.01.2012 for Supply and Erection portions to the Claimant.
39. The completion of the said project work was 12 months from the date of issuance of DWA i.e., by 05.01.2013. However, the Respondent failed to complete works in the stipulated period and sought various extensions of time for such completion. The work was not completed by the Claimant even during the extended period of contract. In spite of granting various extensions of time, the Claimant had only completed 3.14% of the contract work.
/25/ Com.A.P.No.41/2021
40. The work was delayed by the Claimant on various counts like- delay in submitting PERT Chart, poor progress of works, failure of the Claimant to pay rent for utilizing 5MVA sub-station for storage, failure of the Claimant in effectively utilizing the funds allocated, etc.
41. Clause 4.0 of the LOI stipulated certain conditions which were mandatory for the Claimant to adhere to, as the execution of the contract was dependent upon such adherence to clauses by the Claimant. As per the terms of the LOI, the Respondent was required to submit a PERT Chart at the time of execution of the contract. Clause 4.1 of the LOI makes it clear that the requirements under clause 4.0 of LOI were to be complied by the Respondent within 15 days from the date of LOI.
42. Further, the General Conditions of Contract (GCC) also stipulated that the contractor/Claimant was required to submit a detailed PERT Chart within 15 days of notice of award of contract. In the case on hand, the contract was executed between the parties on 21.11.2011 and as per the terms of the contract. However, the Claimant submitted its PERT chart only on 24.12.2011 (Ex. R-1). It is to be noted that it was imperative for the Claimant to submit PERT chart within the stipulated time as the PERT Chart lists out details of activities and other /26/ Com.A.P.No.41/2021 associated details pertaining to the work to be undertaken by the contractor. PERT Chart was to be prepared by the contractor upon completion of survey of the site and other requirements. As the survey was conducted by the Claimant belatedly, the same led to delay in submission of PERT Chart. Reliance in this regard is placed on Minutes of Meeting dated 27.12.2011, wherein it was recorded that the Respondent had failed to contact the officials of the REspondent regarding survey and finalization of quantity (Ex. R-2).
43. In spite of various requests and reminders from the Respondent, the Claimant failed to submit the PERT Chart. Therefore, the PERT Chart was furnished by the Respondent itself on 16.05.2012 (Ex. R-3). In view of the delay caused by the Claimant in adhering to the very first condition of submission of PERT Chart, the commencement of the project work was delayed, which ultimately led to delay in completion of the project. Further, the Claimant also failed to review, update the PERT Chart in terms of clause 12.2 of GCC, which led to non-adherence of the timelines mentioned therein.
44. The Respondent had time and again reminded the Claimant about the slow start and progress of work and had also instructed it to commence the works under the contract without any delay. Further, as per contract conditions the /27/ Com.A.P.No.41/2021 Respondent had to conduct joint field survey and the same was essential before the execution of works. However, the Claimant delayed submission of the final joint survey report as it continued to conduct the joint survey and repeatedly submitted revised reports (Ex.Ex.P-66and Ex.P-95) and thus severely delayed the execution of works. In view of the revised joint survey reports submitted by Claimant, the Respondent had to revise the quantities stated in the DWA.
45. Despite given several opportunities, the Claimant for reasons best known to it, failed to execute the works and submit progress reports to the Respondent. The Respondent was deeply disappointed with the rate of the progress achieved by the Claimant in the execution of the project. The Respondent vide minutes of the meeting dated 14.12.2012(Ex.R-43) made it clear to the Claimant that the project work had to be completed within the time frame stipulated under the contract. However, the Claimant failed to complete the project work within the stipulated time and sought for extensions of time.
46. The Claimant even in the extended period of contract failed to show progress in completion of the work. The Respondent after reviewing the progress of the works directed the Claimant it to expedite the works as the project was /28/ Com.A.P.No.41/2021 funded by the Power Finance Corporation (PFC) (Ex. R- 22). The Claimant from the beginning was not committed to the project and did not perform its obligations under the contract despite getting timely assistance from the Respondent. The Respondent taking the same into account issued notices at regular intervals to bring to light that there is a huge backlog of work which the Claimant is contractually obligated to complete. Notices dated 27.04.2013 (Ex.R-29), 20.05.2013 (Ex.P-163), 02.07.2013(Ex.R-30), 27.03.2014 (Ex.R-31), 29.03.2014 (Ex.R-32), 30.04.2014 (Ex.R-33), 24.05.2014 (Ex.R-
4), 11.07.2014 (Ex.R-35), 07.11.2014 (Ex.R-36), 23.12.2014 (Ex.R-37) and 04.05.2015 (Ex.R-38) were issued by the Respondent reminding the Respondent of the poor progress of the works and its obligations under the contract to complete the work within the extended period of contract.
47. However even after repeated opportunities and numerous extensions given, Respondent was only able to complete 2.97% out of the total project works. Due to the inefficiency and breach of contract conditions by Claimant, the Respondent was suffering serious losses. The Claimant, even in the extended period completed only 3.14% of the project work. Therefore, seeing no improvement in the Claimant's attitude towards the project of such high importance and magnitude, the Respondent was constrained to issue an order /29/ Com.A.P.No.41/2021 for short closure vide official communication dated 17.06.2015 (Ex.R-41). Pursuant to short closure of contract, the project was awarded to another agency by recovering additional cost for completion of project the Respondent (Ex.R-42).
48. On perusal of the award, it is apparent that the Hon'ble Tribunal has failed to appreciate the contentions raised by the Respondent and also the evidence on record in the proceedings. It is submitted that the Tribunal has ignored the oral and documentary evidence adduced by the Respondent and the contractual provisions which are binding on all the parties. The Tribunal, while considering the said issues has wrongly comes to the conclusion that the Respondent committed breach of all the material clauses of the contract. The Arbitral Tribunal has also wrongly directed the Respondent to make payment towards pending invoices and refund bank guarantees and thus exceeded its jurisdiction.
49. The Arbitral Tribunal while dealing with Point No. 1 which is pertaining to payment of pending invoices towards supply of tenders materials as per Original and also revised DWA has completely ignored the settled law, that an Arbitrator is the creature of contract and has exceeded its jurisdiction and awarded the amounts to the Claimant. The Arbitral Tribunal has held that as there is no dispute regarding /30/ Com.A.P.No.41/2021 materials being supplied by Claimant and the same being acknowledged by Respondent, the Claimant is entitled for the balance 50% of the pending invoices. It is submitted that the said finding is contrary to the contractual clauses and thus Arbitral Tribunal has exceeded its jurisdiction.
50. As per Clause 8.2.1 of the Special Conditions of the Contract (SCC), the Petitioner had to pay 50% against supply of materials and the balance 50% of prices of materials supplied to be paid on erection and commissioning of the materials/equipment. Further, clause 8.3.1 of the Special Conditions of the Contract states that as far as payments for works pertaining to erection portion was concerned, the same were to be paid progressively after certification of the quantum of the works completed, and quality of works completed and the balance was to be paid after commissioning. From a conjoint reading of Clauses 8.2.1 and 8.3.1, it is clear, that the payments of the invoices were subject to the work being carried out in accordance with the contract.
51. The Respondent contended before the Arbitral Tribunal that it is not liable to pay the balance 50% of the total invoice amount pertaining to Original and Revised Quantity DWA as Claimant had failed to execute the erection and /31/ Com.A.P.No.41/2021 commissioning of the equipment/materials even in the extended period of contract and was able to complete only a meager amount of works despite the availability of materials, labor, equipment and finances. Further, as the contract was terminated by Respondent due to breaches committed by the Claimant, the Respondent is not liable to pay balance 50% of the total invoice amount towards original DWA and also the outstanding amount rose in the invoices towards revised quantity DWA. The Arbitral Tribunal has failed to consider the said contentions of the Respondent and has erroneously awarded the balance amount of the pending invoices. The Arbitral Tribunal has not considered clause 8.3.1 of the Special Conditions which specifically states that balance amount of the invoices will be paid only after erection and commissioning of works. Admittedly, the Claimant has not completed the erection and commissioning works.
52. The Arbitral Tribunal has also ignored the fact that admittedly the work of erection and commissioning was neither taken up nor completed by Claimant. Therefore, the Arbitral Tribunal which is bound by the contract ought to have considered the contention that the amounts had not become due as per the contract. The Arbitral Tribunal has therefore travelled beyond the contract in this regard and has exceeded its jurisdiction and awarded the amounts claimed. Further the /32/ Com.A.P.No.41/2021 Arbitral Tribunal has failed to consider all the evidence placed before it. The same is in violation of fundamental policy of India and therefore, the Arbitral Award is liable to be set aside.
53. The Arbitral Tribunal whilst considering Point No.2 (a) i.e., Whether the Claimant is entitled to sums of money for Civil and erection works has not assigned any reasons for awarding the said amounts claimed by the Claimant. The Arbitral Tribunal has awarded the amounts without taking any evidence into consideration. Further, the Petitioner had contended that Claimant had not produced any evidence to substantiate that it had completed the works for which bills were raised subsequently. The Arbitral Tribunal has failed to consider pleadings, oral and documentary evidence placed before it and the same is patently illegal. Therefore, the Arbitral Award is liable to be set aside.
54. While considering Point No. 2(b) i.c., whether the Claimant is entitled to sums of money towards dismantling works at 33/11 KV UG MUSS at Madikeri has erroneously awarded the said sums without assigning any reasons and without appreciating the contentions of pleadings, oral and documentary evidence on record. It is submitted that Claimant pursuant to the award of DWA, vide letter dated 11.04.2012 (Ex.P-68) requested Respondent to utilize the /33/ Com.A.P.No.41/2021 unused 5MVA sub-station for the purpose of storing the materials procured for the R-APDRP project. To that effect, the Claimant even agreed to dismantle the sub-station. The Respondent had specifically contended that the sub-station used by the Claimant for storage purpose will be on rent basis and that it was required to pay a nominal rent of ₹. 5,000/- rent to Petitioner utilizing the site. It was the responsibility of the Claimant to provide to Respondent a rent agreement which would crystallize the said arrangement. However, even after repeated reminders by the Respondent (Ex. R-15 and Ex.R-16) the Claimant failed to provide the rent agreement as agreed by the parties.
55. The issue pertaining to the payment of rent for usage of the 33/11 V MUSS substation was discussed in the meeting held on 24.03.2015 (Ex. R-13). A perusal of the minutes of meeting makes it clear that the even as on 24.03.2015, the Claimant had not paid any rent for using the sub-station for storing materials. The Arbitral Tribunal has failed to take the above mentioned contentions into consideration and has erroneously rejected the contention of Respondent by not assigning any reasons. The said act of the Arbitral Tribunal is in violation of Section 31 of the Arbitration and Conciliation Act, 1996. Therefore, the Arbitral Award is patently illegal and liable to be set aside.
/34/ Com.A.P.No.41/2021
56. The Arbitral Tribunal while dealing with Point No. 3 (a) which is with respect to award of damages/loss of profit to Claimant due to wrongful termination of contract has without assigning any reasons and considering any document has erroneously held that Respondent was responsible for the delay. The Arbitral Tribunal has failed to consider and appreciate the notices issued by the Respondent to Claimant at regular intervals stating the poor progress of works, which the Claimant is contractually obligated to complete. Further, the Respondent had relied upon various correspondences to contend that the Claimant not taken up the works and also to rectify the defective works. However, the Arbitral Tribunal has not appreciated the same and has without assigning any reasons held that Respondent was responsible for the delay in the project. The said finding of the Arbitral Tribunal is in violation of Section 31 of the Arbitration and Conciliation Act, 1996, fundamental policy of India and therefore liable to be set aside.
57. The Arbitral Award has held that the evidence let in by the Claimant would persuade the Arbitral Tribunal in granting the relief of loss of profit but not as claimed by it. Further, the Arbitral Tribunal has awarded ₹.2,50,000/- towards loss of profits as Claimant has been declared as Non- Performing Assets (NPA), it would have suffered certain losses.
/35/ Com.A.P.No.41/2021 It is submitted that the said finding of the Arbitral Tribunal is wholly erroneously and against the settled laws prevailing in India. The Arbitral Tribunal has awarded the said amount only because the Claimant has become an NPA and would have suffered losses. It is submitted that the same is not supported by any documents and therefore is perverse, as no reasonable person would have arrived at such a finding. The Tribunal has awarded loss of profit without appreciating the contentions raised by the Respondent in the proceedings and has ignored the provisions of law. Therefore, the Arbitral Award is liable to be set aside.
58. The Arbitral Tribunal while dealing with Point No.4 has erroneously held that the Claimant is entitled to refund of Bank Guarantees and also ₹.1,00,000/- towards Bank Commission charges. The Arbitral Tribunal has allowed the said claim by virtue of the finding that the survey was not completed within the stipulated time and delay in issuance of Revised DWA by Respondent. The Arbitral Tribunal has only considered the events that have transpired up to the issuance of revised quantity DWA and has discarded the events that took place pursuant the same. The Arbitral Tribunal has failed to consider the various notices issued by the Claimant stating the poor progress of work and that it had only completed 3.14% work despite lapse of 3 years from the date of issuance of revised /36/ Com.A.P.No.41/2021 quantity DWA. The Arbitral Tribunal has granted bank commission charges which is not arising from the contract and which is not based on any evidence. It is settled law that an Award based on no evidence is unsustainable. Therefore, the Arbitral Award is liable to be set aside as it shocks the conscience of this Hon'ble Court and is patently illegal.
59. The Arbitral Tribunal while considering Point No.5 has erroneously held that time was not the essence of the contract and there was no compelling reason for Petitioner to terminate the contract. The said finding of the Tribunal is wholly illegal, arbitrary and contrary to the contractual provisions. The Arbitral Tribunal has taken into consideration only the events up to issuance of revised quantity DWA and has completely discarded the events that occurred after the same. The Petitioner has written numerous notices requesting the Respondent to expedite and commence the work. Further, it has always provided all the required assistance to the Respondent. The Arbitral Tribunal has failed to take into consideration the agreement entered between the Petitioner and the PFC and the consequence of non-completion of the project within the time stipulated in the contract. The Arbitral Tribunal has not appreciated the same and has without assigning any reasons held that time was not the essence of the contract. The said finding could not have been arrived at /37/ Com.A.P.No.41/2021 by a reasonable person and the same shocks the conscience of this Court. Therefore, the Arbitral Award is violation of fundamental policy of India and is patently illegal and liable to be set-aside.
60. The award is erroneous, illegal, perverse and opposed to public policy. The award is wholly unsustainable and is liable to be set aside. The Respondent No.2 has not assigned any reasons and has awarded the claims to the Claimant. The amounts awarded by are against the terms of the contract, unjust, unfair and illegal. Therefore, the Impugned Award is required to be interfered with by this Hon'ble Court as it is opposed to law and public policy.
61. In the judgment of the Hon'ble Supreme Court in ONGC vs. SAW Pipes Limited reported in AIR 2003 SC 2629, it has been held that there is a mandate to the Arbitral Tribunal to decide the dispute before it in accordance with the substantive law for the time being in force in India. That apart, Sec 28 (3) of the Arbitration and Conciliation Act, 1996 provides that the Arbitral Tribunal shall decide in accordance with the terms of the contract. It is submitted that the Arbitrator has neither considered the substantive law nor the provisions of the agreement between the parties while passing the impugned award. The Tribunal has acted beyond its /38/ Com.A.P.No.41/2021 jurisdiction and therefore the impugned award is patently illegal and is liable to be set aside under section 34 of the Act.
62. The Arbitral Tribunal has misdirected itself in not taking into consideration several material documents and oral evidence. Non-consideration of the evidence on record has resulted in perversity and has resulted in an Award which is not in conformity with law or the provisions of the contract under which the Tribunal has been constituted. It is, therefore, contrary to public policy.
63. The impugned award has been passed in blatant violation of provisions of the Indian Contract Act, 1873, and the Arbitration and Conciliation Act, 1996. The Award is wholly opposed to public interest. The impugned order is liable to be set aside as being opposed to the public policy and requires to be adjudged as void and unenforceable.
64. The impugned award even otherwise suffers from serious infirmities, unsustainable and is liable to be set aside. The infirmities and perversity are writ large on the face of the Impugned Award without the need to examine the same in detail. The Impugned Award is erroneous, patently illegal and goes to the very root of the matter and hence, liable to be set aside.
/39/ Com.A.P.No.41/2021 After the service of notice the Respondent No:1 appeared before the Court and has filed Statement of Objections as under:
65. The present Arbitration Suit filed under Section 34 of the Arbitration and Conciliation Act, 1996 ("Act") seeking to set aside the Award dated 10.12.2020 passed by the learned Arbitrator, in A.C.No.145/2016 and other consequential relief/s is neither maintainable in law nor on facts and is liable to be dismissed in limine.
66. The Respondent has not made out any grounds, much less the grounds under Section 34 of the Act. To set aside the Award dated 10.12.2020passed by Justice. Ajit J Gunjal, former Judge, High Court of Karnataka as arbitrator as set out in the present petition and therefore the present arbitration petition is not maintainable and is liable to be rejected outright.
67. The scope under Section 34 of the Act to challenge an Award is very narrow and limited. It is settled position of law that the duty of the Court is limited to set aside the award if it does not withstand the legal scrutiny mandated under Section 34 of the Act. It is also well established that Section 34 of the Act is not an appeal and therefore, this Court cannot /40/ Com.A.P.No.41/2021 go into all the aspects like in an appellate Court, muchless reappreciate evidence.
68. The position of law is well settled that Hon'ble Court has to be cautious while considering the relief of setting aside an Arbitral Award. The Court may set aside the award only under exceptional circumstances which are mentioned under Section 34 of the Act. It is well settled that arbitrator is the master of the quality and quantity of evidence before him and that this court cannot reappreciate the evidence under Section 34 of the Act. It is further submitted that merely because another view is possible in the matter, the arbitrator's view cannot be held to be bad, unless the same is covered under grounds available in Section 34 of the Act. The Respondent has made out no grounds for this Hon'ble Court to interfere with the said Award.
69. The Claimant has furnished brief facts of the case. The same has been already culled out in the above paragraphs. Hence, it is not necessary to repeat the same.
70. The Respondent has failed to make out any case for setting aside the Award under Section 34 of the Act. It well settled law that an Award cannot be set aside merely because it is challenged. An arbitral Award can be set aside only in /41/ Com.A.P.No.41/2021 accordance with Section 34 of the Act. Petition under Section 34 of the Act is not an Appeal and hence the grounds to interfere with an arbitral Award are limited. The averments made in the Petition is nothing but requesting this Hon'ble Court to reassess the evidence which is not permissible. Therefore, the present Arbitration Petition is required to be dismissed.
71. The averments made in para 4 and 5 of the Arbitration Petition are a matter of record. The averments made in para 7 of the Petition to the effect that the Claimant failed to complete works in t stipulated period and sought for various extensions of time for such completion is denied as false, frivolous and vexatious. The further averment in the said para that work was not completed by the Claimant even during the extended period of contract and that in spite of granting various extensions of time, the Claimant had only completed 3.14% of the contract work as false, misleading and incorrect. It is submitted that on examining the evidence on record, the Arbitration Tribunal has rightly held that delay is on part of the Respondent.
72. The averments made in para 8 and 9 of the Petition are denied in its entirety as false, frivolous and baseless. In view of the extensive variations and revisions made by the /42/ Com.A.P.No.41/2021 Respondent to the scope of works, the Claimant was constrained to issue a revised PERT Chart and the Respondent failed to approve this PERT Chart, and had in the meanwhile, issued a revised DWA changing the entire scope of the works. The Claimant has submitted the PERT Chart as required. The Claimant had even submitted revised PERT Chart when required which the Respondent failed to approve and acknowledge. The Claimant has always been diligent in completing its work subject to the approvals and sital conditions. Delay in progress of work is attributable only to the Respondent as there was extreme discrepancies in the Work Award and the sital Condition. The scope of work was never crystallised by the Respondent and the Claimant was kept hanging in every step of work. There were variations between the tender quantities and the actual requirements on site to the tune of -100% ranging upto +1200%
73. The averments made in para 10 of the Petition is denied in its entirety as false, incorrect and vexatious. The fact that Joint survey/s was/were a necessity is not in dispute. The DWA was issued by the Petitioner even before the Joint Survey was conducted. The survey cannot be conducted by the Claimant alone but it's a Joint survey which is required to be conducted by both the parties. That huge variations were noticed upon first joint survey. The scope of work that was /43/ Com.A.P.No.41/2021 estimated upon joint survey completely deferred from the scope of work as envisaged in the tender document. The survey also indicated that DWA is completely inaccurate in so far as site conditions and site requirements were concerned and that the work as per the DWA was impossible to be taken up. Since the variations as per the tender requirements/schedule and the joint survey was extremely much and huge, the Petitioner requested a second survey to be done. Therefore, once again any delay in respect of survey or Pert Chart is attributable only to the Respondent.
74. The averments made in para 11 of the Petition is denied in its entirety as false, incorrect and misleading. The PERT Chart dated 16.05.2012 furnished by the Respondent was on account of its failure to clarify the site conditions and scope of works. Over the course of the works under the Contract, the Claimant was constrained to revise the PERT Chart multiple times as a result of the delay caused by the Respondent in providing clearances and approvals and its repeated revisions to the scope of works.
75. The averments made in para 12 and 13 of the Petition is denied in its entirety as false, baseless and misleading. The entire issue of Pert Chart and Joint Survey that the Petitioner is alleging in the said paras and para above, /44/ Com.A.P.No.41/2021 the same is nothing but at attempt to reappreciate the evidence on record. The Arbitral Tribunal after considering all the aspects has rightly held that the delay is on part of the Respondent.
76. The averments made in para 14 of the Petition to the effect that the Claimant even in the extended period of contract failed to show progress in completion of the work and that the Respondent after reviewing the progress of the works directed the Claimant to expedite the works as the project was funded by the Power Finance Corporation and that the Claimant from the beginning was not committed to the project and did not perform its obligations under the contract despite getting timely assistance from the Petitioner is denied as false, misleading and incorrect. The further averment that the Respondent taking the same into account issued notices at regular intervals to bring to light that there is a huge backlog of work which the Claimant is contractually obligated to complete and that notices dated 27.04.2013 (Ex.R-29), 20.05.2013 (Ex.P-163), 02.07.2013(Ex.R-30), 27.03.2014 (Ex.R-31), 29.03.2014 (Ex. R-32), 30.04.2014 (Ex.R-33), 24.05.2014 (Ex-R-34), 11.07.2014 (Ex.R-35), 07.11.2014 (Ex.R-
6), 23.12.2014 (Ex.R-37) and 04.05.2015 (Ex.R-38) were issued by the Respondent reminding the Claimant of the poor progress of the works and its obligations under the contract to /45/ Com.A.P.No.41/2021 complete the work within the extended period of contract is denied as false, frivolous and vexatious. The Respondent issued notices only to draw a veil over their mistakes.
77. The averments made in para 15 of the Petition to the effect that even after repeated opportunities and extensions given, Claimant was only able to complete 2.97% out of the total project works and that due to the inefficiency and breach of contract conditions by Claimant, the Respondent was suffering serious losses and that the Claimant, even in the extended period completed only 3.14% of the project work is denied as false, frivolous and baseless. The further averment in the said para that seeking no improvement in the Claimant's attitude towards the project of such high importance and magnitude, the Respondent was constrained to issue an order for short closure vide official communication dated 17.06.2015 (Ex.R-41) is denied as false, misleading and vexatious.
78. The averments made in para 16, 17 and 18 of the Petition are a matter of record and requires no interference.
79. The averments made in para 19 of the Petition is denied as false, frivolous and vexatious. The averments made in para 20 of the Petition to the effect that on perusal of the /46/ Com.A.P.No.41/2021 award, it is apparent that the Hon'ble Tribunal has failed to appreciate the contentions raised by the Respondent and also the evidence on record in the proceedings is denied as false, incorrect and baseless. The further averment in the said para that the Tribunal has ignored the oral and documentary evidence adduced by the Respondent and the contractual provisions which are binding on all the parties and that the Tribunal, while considering the said issues has wrongly come to the conclusion that the Respondent committed breach of all the material clauses of the contract as false, frivolous and incorrect. It is further denied that the Arbitral Tribunal has also wrongly directed the Petitioner to make payment towards pending invoices and refund bank guarantees and thus exceeded its jurisdiction as false, misleading and incorrect.
80. The averments made in para 21 and 22 of the Petition is denied in its entirety as false, frivolous and misleading. The averments made in para 23 to the effect that the Respondent contended before the Arbitral Tribunal that it is not liable to pay the balance 50% of the total invoice amount pertaining to Original and Revised Quantity DWA as Respondent had failed execute the erection and commissioning of the equipment/materials even in the extended period of contract and was able to complete only a meager amount of works despite the availability of materials, /47/ Com.A.P.No.41/2021 labor, equipment and finances is denied as false, frivolous and incorrect. The averment that as the contract was terminated by Petitioner due to breaches committed by the Claimant, the Respondent is not liable to pay balance 50% of the total invoice amount towards original DWA and also the outstanding amount raised in the invoices towards revised quantity DWA and that the Arbitral Tribunal has failed to consider the said contentions of the Respondent and has erroneously awarded the balance amount of the pending invoices is denied as false and incorrect. Further averment that the Arbitral Tribunal has considered clause 8.3.1 of the Special Conditions which specifically states that balance amount of the invoices will be paid only after erection and commissioning of work and that admittedly, the Claimant has not completed the erection and commissioning works is denied as false, frivolous and vexatious. The Claimant has performed its part of the contract and according to the approvals by the Respondent and sital conditions. The work could not be completed due to the non approvals and sanctions by the Respondent and non- crystallization of the work by the Respondent. The learned Arbitrator has observed the said aspect and fault on part of the Respondent and has rightly Awarded invoice amounts due to the Claimant.
/48/ Com.A.P.No.41/2021
81. The averments made in para 24 of the Petition is denied in its entirety as false, incorrect and baseless. The finding of the Arbitrator in respect of the beach by the Respondent cannot be said that the Arbitrator has travelled beyond the contract.
82. The averment in para 25 of the Petition to the effect that the Arbitral Tribunal whilst considering Point No.2 (a) i.e., Whether the Claimant is entitled to sums of money for Civil and erection works has not assigned any reasons for awarding the said amounts claimed by the Claimant and that the Arbitral Tribunal has awarded the amounts without taking any evidence into consideration is denied as false, incorrect and frivolous. Further averment that the Petitioner had contended that Claimant had not produced any evidence to substantiate that it had completed the works for which bills were raised subsequently and that the Arbitral Tribunal has failed to consider pleadings, oral and documentary evidence placed before it and the same is patently illegal is denied as false, incorrect and misleading.
83. The averment made in para 26 of the Petition to the effect that while considering Point No. 2(b) i.e., whether the Claimant is entitled to sums of money towards dismantling works at 33/11 KV UG MUSS at Madikeri has erroneously /49/ Com.A.P.No.41/2021 awarded the said sums without assigning any reasons and without appreciating the contentions of pleadings, oral and documentary evidence on record is denied as false, incorrect and baseless. Further averment that the Petitioner had specifically contended that the sub-station used by the Claimant for storage purpose will be on rent basis and that it was required to pay a nominal rent of ₹. 5,000/- rent to Petitioner utilizing the site and that it was the responsibility of the Claimant to provide to Petitioner a rent agreement which would crystallize the said arrangement and that even after repeated reminders by the Respondent the Claimant failed to provide the rent agreement as agreed by the parties is denied as false and baseless. The averment made in para 27 of the Petition to the effect that the issue pertaining to the payment of rent for usage of the 33/11 KV MUSS sub-station was discussed in the meeting held on 24.03.2015 is denied as false, frivolous and incorrect. It is further denied that a perusal of the minutes of meeting makes it clear that the even as on 24.03.2015, the Claimant had not paid any rent for using the sub-station for storing materials. The averment that the Arbitral Tribunal has failed to take the above mentioned contentions into consideration and has erroneously rejected the contention of Respondent by not assigning any reasons and that the said act of the Arbitral Tribunal is in violation of Section 31 of the Arbitration and Conciliation Act,1996 is /50/ Com.A.P.No.41/2021 denied as false, frivolous and vexatious. So long as the view taken by the Arbitrator, is a possible view based on facts, it is irrelevant whether this Court would or would not have taken the same view on the merits of the matter, hence Arbitral Award to this extent is required to be upheld.
84. The averment made in para 28 of the Petition is denied in its entirety as false, frivolous and vexatious. As stated supra, it is settle that this Hon'ble Court cannot reassess evidence on record.
85. The averment made in para 29 of the Petition is denied in entirety as false, incorrect and misleading. The averments made in par 30 of the Petition to the effect that the Arbitral Tribunal while dealing with Point No.4 has erroneously held that the Claimant is entitled to refund of Bank Guarantees and also ₹.1,00,000/- towards Bank Commission charges is denied as incorrect. All further averments in the said para are denied as frivolous and vexatious.
86. The averment made in para 31 of the Petition to the effect that the Arbitral Tribunal while considering Point No.5 has erroneously held that time was not the essence of the contract and there was no impelling reason for Respondent to terminate the contract and that the said finding of the Tribunal /51/ Com.A.P.No.41/2021 is wholly illegal, arbitrary and contrary to the contractual provisions is denied as false, incorrect and is leading. The further averment that the Arbitral Tribunal has taken into consideration only the events up to issuance of revised quantity DWA and has completely discarded the events that occurred after the same and that the Respondent has written numerous notices requesting the Claimant to expedite and commence the work are denied as frivolous and vexatious. Further averments in the said para are all denied as incorrect and baseless.
87. The averment made in para 32 of the Petition to the effect that the award is erroneous, illegal, perverse and opposed to public policy is specifically denied as false and incorrect. The Petition merely stating that the Award is opposed to public policy cannot be considered. The further averment in the said para are all denied as misleading and baseless. The averment made in para 33 of the Petition to the effect that the Arbitrator has neither considered the substantive law nor the provisions of the agreement between the parties while passing the impugned award and that the Tribunal has acted beyond its jurisdiction and therefore the impugned award is patently illegal and is liable to be set aside under section 34 of the Act is denied as false, frivolous and vexatious. This Hon'ble Court cannot interfere with the award merely because it is sought for or as a matter of course.
/52/ Com.A.P.No.41/2021
88. The averments made in para 34, 35 and 36 of the Petition is denied in its entirety as misleading, incorrect and baseless. Seen from any angle the Petitioner herein has not made out any ground for interference with the Award, much less, the grounds under Section 34 of the Act which are highly restrictive and cannot be invoked without strong and cogent grounds. As the Petitioner has not been able to make out any grounds to set aside the Award in its entirety, the present proceeding is required to be dismissed.
89. The Petition is not in the prescribed form. There is no proper and requisite verification. The grounds raised are more in the nature of requiring this Hon'ble Court to reappreciate the evidence on record before the Arbitral Tribunal or to reappreciate the interpretation of the learned Arbitrator as regards the clauses contained in the Agreement. Both of it is impermissible under Section 34 of the Act. The fact that the Petitioner was the person who was responsible for the fiasco and the breach has been conveniently suppressed. The learned Arbitrator has found that the termination of the contract by the Respondent is illegal, unjust and untenable in law and the same cannot be re-visited. There is no merit in the case of the Petitioner.
/53/ Com.A.P.No.41/2021
90. The Claimant submits that the present Statement of Objections is exclusive to the Commercial Arbitration Petition preferred by the Respondent. The Claimant reserves liberty to raise such other grounds and file additional Statement of Objections, if necessary, at the time of considering the present petition. The averments which are not specifically traversed and which are contrary to the stand taken by the Claimant are denied as false and incorrect.
91. I have heard arguments addressed by the learned advocates for the Claimant and respondent.
92. The Learned Counsel for the claimant has relied on the following Citations in support of his case:
Sl. Name of the Parties Citations No.
1. Central Warehousing Corporation (OMP No.353/1999, V. M/s.Power Maxx & Another High Court of Delhi) 2 Karnataka State Road Transport (2003) SCC Online Corporation & Another Kar 459 V.M.Keshava Raju 3 Extract-Overhead charges, 4 R.S.Jiwani (M/s.) Mumbai V.Ircon 2010 (1) Mh.L.J International Ltd., Mumbai 5 Navayuga Engineering Company 2021 Online Ker Ltd., V.Union Of India 5197 6 PSA SICAL Terminals Pvt., Ltd., 2021 SCC OnLine V.Board of Trustees of SC 508 /54/ Com.A.P.No.41/2021 V.O.Chidambaram Port Trust Tuticorin 7 Associate Builders V.Delhi (2015) 3 SCC 49 Development Authority 8 M/s.A.T.Brij Paul Singh and Others (1984) 4 SCC 59 V.State of Gujarat
93. The learned Counsel for the Respondent has relied on the following citation in support of his case:
Sl. Name of the Parties Citations No. 1. M/s.Christy Friedgram Industry Decision dated
V.Dept. Of Women & Child 22.03.2022 passed Development, Govt. of Karnataka by the Hon'ble High Court of Karnataka in Com.A.P.236/2021
94. I have gone through the materials available on record and the ratio of above citations are applied to the facts of the case.
95. The following Points arise for my determination:
(1) Whether the respondent/Plaintiff has made out any grounds set out under Section 34 of Arbitration & Conciliation Act, 1996 so as to Set aside the Award dated:10.12.2020 passed by the learned Sole Arbitrator in the arbitration proceedings in A.C.No:145/2016 ? (2) What Order?
/55/ Com.A.P.No.41/2021
96. My findings on the above Points are as under:
Point No:1 : IN THE NEGATIVE Point No:2 : As per final Order for the following REASONS
97. POINT No.1: The plaintiff M/S.Rajashekar Associates/ Claimant has filed Com.A.P.No:02/2022 against the Arbitration Award dated 10.10.2020 passed by the Arbitral Tribunal in A.C.No.145/2016 declining to grant the prayers at (e), (f), (h) &
(i) while also rejecting the claim for damages and overhead charges and in rejecting the application for amendment.
98. The Respondent/M/S.Chamundeshwari Electricity Supply Corporation Ltd., has filed Com.A.P.No:41/2022 being aggrieved by the Arbitration Award dated 10.10.2020 passed by the Arbitral Tribunal in A.C.No.145/2016 in its entirety.
99. The materials available on record show that the Claimant is seeking partial modification of the impugned Award. In such circumstances, the following questions arise for determination of the Court:
a) Whether this Court can modify/alter the impugned award by reassessing or re-appreciating the materials available before the Learned Arbitral Tribunal while acting under Section 34 of Arbitration and Conciliation Act, 1996?
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b) Whether the Respondent has established that the impugned Award suffers from patent illegality, and violated the fundamental public policy of Indian Law or against the most basic notions of morality and justice?
100. It is settled law that the Court while dealing with an application under Section 34 of Arbitration & Conciliation Act, 1996 is required to exercise its jurisdiction within the frame work of Section 34 and Section 34 (2A) of the Act. Where two views are possible in respect of a dispute, the view taken by the Arbitrator cannot be found fault with by the Court. The plaintiffs have to establish that the impugned order is against the fundamental policy of Indian law and must be patently illegal.
101. In order to determine the suit it is useful to refer to Section 34 of Arbitration and Conciliation Act, 1996 which reads as under:
ARBITRATION AND CONCILIATION ACT, 1996 [Section : 34] Application for setting aside arbitral award (1) Recourse to a Court against an arbitral award may be made only by an /57/ Com.A.P.No.41/2021 application for setting aside such award in accordance with sub-section (2) and sub-section (3).
(2) An arbitral award may be set aside by the Court only if- (a) the party making the application establishes on the basis of the record of the arbitral tribunal that-
(i) a party was under some incapacity; or
(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 the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral Tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, /58/ Com.A.P.No.41/2021 failing such agreement, was not in accordance with this Part; or
(b) the Court finds that-
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
[Explanation 1.-For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-
(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or
(ii) it is in contravention with the fundamental policy of Indian law; or
(iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.-For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
(2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33 , from /59/ Com.A.P.No.41/2021 the date on which that request had been disposed of by the arbitral Tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.
(4) On receipt of an application under sub-
section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral Tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral Tribunal will eliminate the grounds for setting aside the arbitral award.
[(5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement.
(6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub-section (5) is served upon the other party.
102. It is useful to refer to the principles laid down by the Hon'ble Supreme Court of India in the following decision regarding the scope of Section 34 of Arbitration & Conciliation Act, 1996 and also the prayer of the plaintiff to receive the documents produced before this Court.
/60/ Com.A.P.No.41/2021 2021 SCC OnLine SC 1027 STATE OF CHHATTISGARH Vs. M/S. Sal Udyog Private Limited LAWS(SC) 2021 11 2 SUPREME COURT OF INDIA
14. In Ssangyong Engineering and Construction Company Limited v. National Highways Authority of India (NHAI) [2019] 15 SCC 131, speaking for the Bench, Justice R.F. Nariman has spelt out the contours of the limited scope of judicial interference in reviewing the Arbitral Awards under the 1996 Act and observed thus :
"34. What is clear, therefore, is that the expression "public policy of India ", whether contained in Section 34 or in Section 48, would now mean the "fundamental policy of Indian law " as explained in paras 18 and 27 of Associate Builders [Associate Builders v. DDA (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] i.e. the fundamental policy of In- dian law would be relegated to "Renusagar "
understanding of this ex- pression. This would necessarily mean that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 :
(2014) 5 SCC (Civ) 12] expansion has been done away with. In short, Western Geco [ONGC v. Western Geco International Ltd.,(2014) 9 SCC 263 :
(2014) 5 SCC (Civ) 12], as explained in paras 28 and 29 of Associate Builders [Associate Builders v.
DDA,(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Court's intervention would be on the merits of the award, which cannot be permitted post amendment. However, insofar as principles of natural justice are concerned, as contained in /61/ Com.A.P.No.41/2021 Sections 18 and 34(2) (a)(iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in para 30 of Asso - ciate Builders [Associate Builders v. DDA(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204].
35. It is important to notice that the ground for interference insofar as it concerns "interest of India " has since been deleted, and therefore, no longer obtains. Equally, the ground for interference on the basis that the award is in conflict with justice or morality is now to be under- stood as a conflict with the "most basic notions of morality or justice ". This again would be in line with paras 36 to 39 of Associate Builders [Associate Builders v. DDA (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], as it is only such Arbitral Awards that shock the conscience of the court that can be set aside on this ground.
36. Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law, as understood in paras 18 and 27 of Associate Builders [Associate Builders v. DDA (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], or secondly, that such award is against basic notions of justice or morality as understood in paras 36 to 39 of Associate Builders [Associate Builders v. DDA (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204].
Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii) was added by the Amendment Act only so that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12], as understood in Associate Builders [Associate Builders v. DDA (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], and paras 28 and 29 in particular, is now done away with.
37. Insofar as domestic awards made in India /62/ Com.A.P.No.41/2021 are concerned, an additional ground is now available under sub-section (2-A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within "the fundamental policy of Indian law ", namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.
38. Secondly, it is also made clear that reappreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.
39. To elucidate, para 42.1 of Associate Builders [Associate Builders v DDA(2015) 3 SCC 49 :
(2015) 2 SCC (Civ) 204], namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an Arbitral Award. Para 42.2 of Asso- ciate Builders [Associate Builders v DDA (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award.
23. We are afraid, the plea of waiver taken against the appellant-State on the ground that it did not raise such an objection in the grounds spelt out in the Section 34 petition and is, therefore, estopped from taking the same in the appeal preferred under Section 37 or before this Court, would also not be available to the respondent- Company having regard to the language used in /63/ Com.A.P.No.41/2021 Section 34(2A) of the 1996 Act that empowers the Court to set aside an award if it finds that the same is vitiated by patent illegality appearing on the face of the same. Once the appellant-State had taken such a ground in the Section 37 petition and it was duly noted in the impugned judgment, the High Court ought to have interfered by resorting to Section 34(2A) of the 1996 Act, a provision which would be equally available for application to an appealable order under Section 37 as it is to a petition filed under Section 34 of the 1996 Act. In other words, the respondent-Company cannot be heard to state that the grounds available for setting aside an award under sub-section (2A) of Section 34 of the 1996 Act could not have been invoked by the Court on its own, in exercise of the jurisdiction vested in it under Section 37 of the 1996 Act. Notably, the expression used in the sub-rule is "the Court finds that ". Therefore, it does not stand to reason that a provision that enables a Court acting on its own in deciding a petition under Section 34 for setting aside an Award, would not be available in an appeal preferred under Section 37 of the 1996 Act.
103. In view of the ratio of the above decision it is clear that this Court is precluded from re-appreciating the evidence under the ground of patent illegality. The Plaintiff has to make out its case on the materials available before the Arbitral Tribunal and establish its grounds to set aside the award.
104. The Court while exercising jurisdiction under Section 34 of Arbitration & Conciliation Act is precluded from finding fault with every finding of the Arbitral Tribunal without there being substantial materials.
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105. The Learned Tribunal has dealt Point No:1 Whether the claimant is entitled for the sums of the money as sought for in respect of the pending invoices in two fold i.e. a) a sum of ₹.70,35,442/- towards pending invoices towards supply of tendered items under Original DWA and b) claim of ₹.17,63,920/-towards pending invoices towards supply of materials as per revised quantities under Revised DWA.
106. The Learned Tribunal has taken in to consideration Ex.P15 to Ex.P22, P27 to P30, P32, P33, 282 to P-284, R-28, R- 12 and the oral evidence and relevant Clauses of SCC and GCC and particularly the evidence of RW3 and has observed that 'the said invoices are not in dispute. The Respondent admits the supply of material under the said bills. All the said bills and invoices are certified by the Respondent. The stand taken by the Respondent is that the balance of 50% would be payable only when the materials are received at the site and balance 50% would be paid when the materials are utilized. The evidence on record discloses that the materials were handed over to the Respondent and that they have acknowledged it'. The learned Tribunal has rightly awarded ₹.70,34,442/- relating to the pending invoices towards supply of tendered items under the Original DWA; and ₹.17,63,920/- relating to the pending invoices towards supply of materials as per revised DWA.
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107. The Learned Tribunal has not committed any error of law or facts while answering Point No.1. The findings of Arbitral Tribunal on Point No:1 cannot be considered as perverse or opposed to settled principles of Law. This Court cannot substitute its view to the view taken by the learned Arbitral Tribunal after appreciating the materials placed before it in a proper perspective.
108. The Learned Tribunal has dealt Point No:2 Whether the claimant is entitled for the sums of the money as claimed towards Civil Works and Dismantling Works in two folds i.e. a) the first claim of ₹.14,45,818/- is in respect of invoices raised towards civil and erection works, b) the second claim of ₹.1,12,301/- towards dismantling works of 33/11 KV UG MUSS at Madikeri.
109. The Learned Tribunal has taken in to consideration the correspondence made as per Ex.284 and handing over of materials to the Respondent by way of Joint Inventory and Ex.P15 letter dated:23.06.2012. The Respondent is not entitled to refuse the payment towards the materials handed over by the Claimant only on the ground that the bills were submitted after short-closure of the Contract.
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110. The Respondent has awarded additional work in relation to the dismantling to 33/11 KV UG MUSS at Madikeri. The Respondent has recommended awarding of work to the Claimant on labor contract basis as per Standard terms and conditions of the Corporation towards the dismantling of 33/11 MUSS at Madikeri as per the recitals of Ex.P79. As per Ex.P34 the Executive Engineer has recommended for payment regarding labour contract bill for dismantling of 33/11 KV MUSS at Madikeri carried out by the Claimant as per Work Order No:K-2211/date:21.04.2012. The RW3 has deposed that no agreement was entered in to between the Claimant and the Respondent regarding the monthly rent payable in respect of Substation which is used for storage and he does not know the basis for fixing the rate of rent at ₹.5,000/- Considering the oral and documentary evidence available on record the Learned Tribunal has rightly awarded ₹.1,12,301/- towards dismantling works. The findings on Point No:2 and award of ₹.14,45,818/- and ₹.1,12,301/-by the learned Tribunal calls for no interference by this Court.
111. The Learned Tribunal has dealt Point No:3 by examining the question of entitlement of the claimant to have damages/loss of profit due to wrongful termination of Contract; and the clam made by the Claimant towards Expenses/overhead charges incurred by the Claimant on /67/ Com.A.P.No.41/2021 account of delay caused by the Respondent in executing the contract work.
112. The Claimant is contending that on account of wrongful termination of contract it is entitled for damages/loss of profit at 10% of the Contract Value. The Total Contract Value for Supply and Erection Work and non-tendered items under DWA and revised DWA works out to ₹.4,33,87,542/- as per Ex.P-203. The Claimant has submitted bills up to the date of termination amounting to ₹.1,03,57,481/0 The Claimant is claiming 10% of ₹.3,30,30,060-70 as profit and ₹.25,18,134-80 towards Loss of Profit.
113. The Learned Tribunal after taking in to consideration the correspondence between the parties, Joint Survey Report, the period fixed for completion of the project and relevant clauses of GCC and the claim of the claimant that it has returned unused material has come to the right conclusion that the Respondent was responsible for the delay.
114. The Learned Tribunal by considering the materials available on record and by following the ratio of decision of Hon'ble Supreme Court of India in M/S.A.T.Brij Paul Singh and Others Vs. State of Gujarat (1984) 4 SCC 59 has held that the Claimant is entitled to have the Loss of Profit but declined to /68/ Com.A.P.No.41/2021 grant loss of profit at10% and quantified the loss at ₹.2,50,000/-. The Learned Tribunal has arrived at this conclusion based on the materials available before it. This Court has no jurisdiction to sit in appeal over the findings and conclusion of the Learned Tribunal.
115. The Claimant has made a claim for damages of ₹.6,54,63,503/- against the respondent towards wrongful termination of the Contract. The claimant is contending that the Respondent has wrongfully encashed Bank Guarantee which has resulted in declaring the bank account of the Claimant as NPA by the Canara Bank. The result of declaring bank account by the Canara Bank has pushed the Claimant to a situation where it could not generate funds to carry out any other projects. The Claimant is contending that on account of enforcement of Bank Guarantee and financial constraints the Claimant has lost two further projects with M/S.Welspun and Adani Group. The Learned Tribunal after considering the correspondence between the Claimant and M/S.Welspun and Adani Group has rightly concluded that there was no concrete evidence that the proposals made by them have crystallized in to a firm offer by either of them. The proposal were still in nascent stage and had not taken any concrete shape which would result in the awarding of the contract. The Learned Tribunal has referred to the principles enunciated in Hadley /69/ Com.A.P.No.41/2021 Vs.Baxendale and after observing lack of evidence regarding the claim of damages has come to the conclusion that the Claimant is not entitled for Damages as claimed.
116. The Claimant is contending that it had spent considerable amount as overhead charges on account of delay caused by the respondent in executing the Contract. The Contract was required to be completed within a period of 1 year from the date of DWA i.e. 05.01.012. The bid and quotes are made on the basis of calculation for a period of one year, which is the period of contract. The Respondent has short closed the contract on 17.06.2015 for no fault of the claimant. The Claimant has to suffer expenditure in terms of the overhead costs and expenses. The Claimant has estimated and claimed 15% of the Contract Value as expenses and overhead costs which works out to ₹.57,55,631/-.
117. The Respondent is contending that the scope of work involved strengthening of the existing distribution network. The Respondent has issued separate LOI for Supply and Erection Portion. The Claimant was required to submit PERT Chart at the time of execution of the Contract document.
118. The Learned Tribunal has examined Clauses 39, 43, 44 of GCC and the materials placed before it. The Learned /70/ Com.A.P.No.41/2021 Tribunal has observed that a Contractor in the normal course is entitled for overhead charges incurred by the Contractor on account of delay caused by the employer. The thumb rule of 15% of the Contract value cannot be applied mechanically in the absence of evidence to show that the Claimant had deployed men and machinery at the worksite. The correspondence of the Claimant with Respondent would indicate that the work could not be taken up by the Claimant as Madikeri area was besotted with monsoon and the work cannot be taken up until monsoon recedes. The Learned Tribunal has rightly declined to grant Overhead charges as claimed by the Claimant due to lack of evidence regarding deployment of men and equipment at work site. The findings of the Learned Tribunal call for no interference by this Court.
119. The Claimant has sought for refund of Bank Guarantee. The Claimant is contending that the Performance Bank Guarantee was given for the period of Contract i.e. 05.01.2013 and additional grace period of 3 months as per contract documents. The Bank Guarantee was continued beyond that period at the insistence of the Respondent. The Respondent has delayed the process of necessary sanction, approvals and clearances and arbitrarily short closed the contract and encashed the bank guarantee, which is unjust.
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120. The Respondent is contending that the claimant is not entitled for refund of the Bank Guarantee and refund of expenses and the interest thereon. As per the Contract, the claimant was required to furnish separate Bank Guarantees towards Supply and Erection portion which would be 10% of the Contract Value. The Claimant has completed the work to an extent of 3.14% only as on 17.05.2015. Hence, the Respondent had no option but to short close the contract.
121. The Learned Tribunal has observed that the Respondent had been always behind the schedule even though the DWA was issued on 05.01.2012. The Joint Surveys were conducted twice and during joint survey it was found that there was considerable variation in the nature of material to be supplied and erection works, which has resulted in issuance of revised DWA on 26.12.2012 i.e. one week before the completion of the Contract period. The respondent has also taken considerable time in finalizing the Contract Work. As per Joint Survey the work was to be done. This was finalized in the review meeting. The approval was given for supply of material in the nature of Spun Pole in place of Square Pole. However quantity variation was not finalized. Revised DWA was issued on 26.12.2012. The Claimant has brought to the notice of the respondent about non-cooperation of the respondent towards the progress of the work. The Claimant had to seek /72/ Com.A.P.No.41/2021 clarification at every stage regarding the work to be done. There was considerable delay in conducting the Joint Survey as the officials of the Respondent were not available. The Respondent could not adhere to the terms of the contract.
122. The Learned Tribunal has scrutinized the correspondence and also examined Clauses 39.0, 43.0 and 44.0 and the conduct of respondent and has held that the Respondent was not justified in encashing the Bank Guarantee. The Learned Tribunal has directed for refund of Bank Guarantees totaling to ₹.39,49,538/- and a sum of ₹.1,00,000/- to service the said bank Guarantees. In the facts and circumstances of the case, the finding of the Learned Tribunal calls for no interference by this Court.
123. Under Point No:5 the Learned Tribunal has dealt with the question whether the Time was the essence of the contract and the Respondent was justified in terminating the Contract.
124. In this case the parties had agreed that the work was to be executed within 12 months from 01.01.2012. The correspondence between the Claimant and the Respondent shows that they have not adhered to strict time line provided for completion of the Contract. The Respondent has revised DWA on 26.12.2012 just one week before the stipulated date /73/ Com.A.P.No.41/2021 for completion of the Contract. It is not fair on the part of the Respondent to contend that the Time was the essence of Contract, when the Respondent has revised DWA at the terminal stage of period fixed for completion of the works. The learned Tribunal has applied the ratio of the decisions of the Hon'ble Supreme Court reported in Janardhan Prasad Vs. Ramdas (2007) 15 SCC 174; Godhra Eccentricity Co., Vs State of Gujrat (1975) 1 SCC 199; Hind Construction Contractors Vs State of Maharashtra AIR 1979 SC 720 and has observed that the Time was the essence of the Contract at the inception, but however over a period of time by conduct, that was given a go-bye. Even the revised DWA dated:26.12.2012 issued by the Respondent does not indicate that the time is extended or that a time was fixed for the completion of the Project and come to the conclusion that Time is not the essence of the Contract and that there was no compelling reason for the Respondent to terminate the Contract. The findings of the Learned Tribunal is based on the materials available before it and supported by the ratio of the decisions of the Hon'ble Supreme Court of India. In such circumstances, the interference by this Court is not called for.
125. The Claimant is contending that the learned Tribunal has erred in declining the permission sought by the Claimant to amend the Claim petition to seek interest at 3 times the /74/ Com.A.P.No.41/2021 Bank rate notified by the RBI under the MSMED Act in respect of all the claims sought.
126. The Learned Tribunal has observed that the Application under Section 23 of Arbitration & Conciliation Act, 1996 was filed by the Claimant. The Claimant has stated that the Claimant Firm is registered under the provisions of the Micro Small Medium Enterprises Development Act 2006 (MSMED Act), a certificate is also furnished by the claimant. The Learned Tribunal has observed that the Claim petition was filed on 13.12.2016, the statement of objections was filed on 12.04.2017 and the Amendment application was filed on 25.04.2017. The application was made well within time. If the application for amendment is granted, the parties are not required to go before a different forum.
127. The Learned Tribunal has considered the objections filed by the Respondent to the application for amendment that the said application cannot be entertained in as much as the granting of the said application will change the forum. The Respondent would submit that the Amendment would have the effect of changing the nature of the proceedings and cannot be permitted.
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128. The Learned Tribunal has considered the scheme of MSMED Act particularly Section 16 and 19 and has opined that the if the application for amendment is granted the claimant will have to be before the Facilitation Council. Thus the question of granting the application and granting the interest at 3 times the Bank Rate notified by RBI does not arise and has declined to grant permission for amendment as prayed by the Claimant.
129. A careful analysis of the scheme of MSMED Act and the reasons assigned by the learned Arbitral Tribunal to decline the permission to amend the claim statement goes to show that the learned Tribunal has declined the permission to amend the claim statement on the assumption that if the proposed amendment if allowed would ouster the jurisdiction of the Tribunal and the Claimant will have to appear before Facilitation Council. This reasoning of the learned Arbitral Tribunal is not in consonance with Section 16 of MSMED Act. Section 16 of MSMED Act applies to all cases involving dispute between a Micro, Small and Medium Enterprises rendering service or supply goods notwithstanding anything contained in law or in an agreement entered in to between the Claimant and Respondent. In this case also the Claimant has rightly approached the Arbitral Tribunal and not the Facilitation Council.
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130. Now the Court has to consider the question whether, the erroneous application of law renders the entire award liable to be set aside. The Hon'ble Supreme Court of India in a decision reported in Ssangyong Engg. & Construction Co. Ltd., V NHAI (2019) 15 SCC 131 At para 37 observed that:
37. Insofar as domestic awards made in India are concerned an additional ground is now available under sub-section (2-A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within "the fundamental policy of Indian law", namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.
131. In this case the Learned Tribunal has not appreciated the provisions of MSMED Act in true sense and has failed to apply the relevant provisions. However, in view of the ratio of above proceeding applies to the case on hand. The /77/ Com.A.P.No.41/2021 Learned Tribunal has granted interest at 12% p.a. from the date of filing of the claim petition until the date of realization. Hence, the order dismissing the application filed by the Claimant does not have any bearing on the claim made by the Claimant.
132. As has been held by various judicial precedents, this Court acting under Section 34 of Arbitration and Conciliation Act, 1996 cannot modify/alter or set aside the impugned award partially. The Learned Tribunal has properly assessed and appreciated the materials available before it in a proper perspective. The Learned Tribunal has assigned proper and convincing reasons while answering Claims put forth by the Claimant. The materials available on record justify the reasoning adopted and findings given on Claims of the Claimant by the learned Arbitral Tribunal while coming to the conclusion to allow the claim of the claimant in part. The Respondent has not made out any grounds to interfere with the impugned award. In such circumstances, I answer Point No:1 in the NEGATIVE.
133. POINT No.2 : In view of the discussion made above and findings on Point No:1 I pass the following ORDER The Arbitral suit filed by the Plaintiff under section 34 of Arbitration & Conciliation Act, 1996 /78/ Com.A.P.No.41/2021 to set aside the impugned award dated 10.12.2020 passed by the Learned Arbitral Tribunal in A.C.No:145/2016 is hereby dismissed with costs.
The Award dated: 10.12.2020 passed by the Learned Arbitral Tribunal in A.C.No:145/2016 is hereby confirmed.
The Claimant is entitled for payment of ₹.36,65,000/- (Rupees Thirty Six Lakhs Sixty five thousand only) deposited by the Respondent as per the order dated:15.06.2021 passed by this Court now deposited at State Bank of India, Cauvery Bhavan Branch, Bengaluru with accrued interest after the expiry of appeal period subject to the orders that may be passed in a probable appeal by the Hon'ble Appellate Court.
(Dictated to the Stenographer, transcribed and typed by her, then corrected and pronounced by me in the Open Court on this 27th day of January, 2023) (S.J.KRISHNA) LXXXIX ADDL.CITY CIVIL & SESSIONS JUDGE, BENGALURU.
(CCH-90) ****