Bangalore District Court
M/S Convention Hotels India Pvt vs Ltd on 17 January, 2022
1
Com.A.P 139/2018
IN THE COURT OF LXXXVII ADDL.CITY CIVIL &
SESSIONS JUDGE, (EXCLUSIVE DEDICATED
COMMERCIAL COURT)
AT BENGALURU (CCH.88)
THIS THE 17th DAY OF JANUARY 2022
PRESENT:
SRI.CHANDRASHEKHAR U., B.Sc., LL.M.,
LXXXVII ADDL.CITY CIVIL & SESSIONS JUDGE,
BENGALURU.
Com.A.S.No.139/2018
APPELLANT/ M/s Convention Hotels India Pvt.
RESPONDENT: Ltd.,
Flat No.7, A-1,
Devasandra, 2nd Phase,
Singaiahanapalya,
3rd Cross, Whitefield Road,
Bengaluru - 560 048
By its Managing Director/
Authorized Representative
(Reptd by AKS -Adv)
AND
RESPONDENT / M/s B.L. Kashyap & Sons Limited,
CLAIMANT: Rep. By its head admin
Sri.R.S Vidyashankar
4th floor, West Wing, South
Space, Paradigm Outer Ring
Road, Marathahalli
Bengaluru 560 037
Represented by its
Managing Director/Authorized Rep.
(Reptd by RBS- Adv)
2
Com.A.P 139/2018
Date of Institution of the 30.06.2018
suit
Nature of the suit (suit on
pronote, suit for declaration
& Possession, Suit for Arbitration Suit
injunction etc.)
Date of commencement of -
recording of evidence
Date on which judgment
was pronounced 17.01.2022
Total Duration Year/s Month/s Day/s
03 06 17
(CHANDRASHEKHAR U),
LXXXVII Addl.City Civil & Sessions Judge,
(Exclusive dedicated Commercial Court)
Bengaluru.
JUDGMENT
The appellant/respondent has filed the above petition under Section 34 of the Arbitration & Conciliation Act, 1996, (hereinafter called as 'the Act') for setting aside the Arbitral Award, dated 02.04.2018, passed by the Sole 3 Com.A.P 139/2018 Arbitrator in A.C. No.90/2016 and for dismissing the claim of the claimant and to allow the counter claim of the appellant throughout and for cost of the petition.
2. The brief facts of the case of the appellant/respondent are as hereunder:-
The claimant before the Arbitral Tribunal claims to be the registered company engaged in the construction activities of buildings. The respondent also claims to be a registered company and owner of the property bearing No.496, Mahadevapura, Whitefield, Bengaluru. Under an agreement dated 8.4.2010, the appellant entrusted the work of construction to the respondent for the construction of Hotel India Private Limited at a cost of Rs.33,44,03,184/-
with condition to deposit Rs.1,00,00,000/- as retention money and Rs.2,00,00,000/- as Bank Guarantee. The respondent proceeded with construction by complying the condition and since, the appellant withhold the retention money and Bank Guarantee, the respondent herein made a claim for appointment of Arbitrator to decide the claim, in 4 Com.A.P 139/2018 respect of retention money and other damages and after hearing the parties and adducing of evidence, learned Arbitrator partly allowed the claim and rejected the counter claim.
3. Being aggrieved by the said Award, the appellant has challenged the award on the ground that the award passed is highly perverse, opposed to the principles of law, opposed to the principles of natural justice, opposed to the settled legal positions, highly prejudicial, lacks application of mind, clearly one sided and suffers favoritism. It is based upon presumptions by overlooking the documentary and oral evidence and it diminishes the legal rights of the appellant. The award impugned also has posed an immediate threat of recovery by the respondents, in which case the appellant would be put to serious damage. The appellant had an extensive good case on merits and it intended to prosecute the matter unto the ends of justice and hence placed impeccable evidence on the board and the same has not been considered by learned Arbitrator. 5
Com.A.P 139/2018 Learned Arbitrator has not considered the documents produced by the appellant and it is against the scheme of law and lacks fairness. The technical behaviour of the Tribunal has caused serious miscarriage of justice to the appellant. More, even making a report of a Commissioner as an Annexure to the Award is unheard of and it clearly presupposes unfair appreciation of evidence and giving unwanted weight to a third party opinion. The Award under dispute is not only opposed to the law and it is clogged with the cloud of partisan considerations prima- facie and net result of unwarranted unfair considerations shown by the Arbitral Tribunal. The Arbitral Tribunal has traveled beyond its limitation by offering its own contradiction to the contents of the witness statements placed by the appellant and award is resulted of clear case of violation of principle of fair-play and natural justice by the Arbitral Tribunal. Accordingly, it has prayed for setting aside the Arbitral Award and allowing counter claim of the respondent in toto.
6
Com.A.P 139/2018
4. The respondent has filed objection statement stating that appeal is not maintainable and same has to be dismissed with costs. The respondent had filed the claim petition seeking for a sum of Rs.8,04,00,00/- with interest and costs. The appellant herein filed statement of objections and a counter claim for a sum of Rs.14,07,06,772/- and the Arbitral Tribunal has partly allowed the claim and rejected counter claim. The Arbitral Tribunal has considered the case of the appellant/ respondent in detail and allowing the claim partly regarding Bank Guarantee and retention money retained by the appellant herein and the amount paid towards renewal of insurance policy and ultimately passed the award to the tune of Rs.3,19,00,000/- and Rs.15,00,000/- towards Bank Guarantee renewal charges and Rs.4,00,000/- towards insurance renewal charges. The Arbitral Tribunal by giving sufficient opportunity to the parties by relying upon the terms of the contract, particularly, clause No. 3.1 of general conditions of the contract and referring to 7 Com.A.P 139/2018 various documents and particularly, referred to Exs.R2 and R3, passed impugned order and therefore, there is no merit in the case of the appellant. The Commissioner appointed by the Arbitral Tribunal in respect of the building and submitted a report inter-alia stating that the quality of construction cannot be determined as the construction has already been completed and for the purpose of testing quality of construction the materials used like sand, jelly, cement, water used for construction etc., are required to be examined. Since, no objection was raised till completion of 17th floor by the appellant, the contention that the poor quality of materials were used cannot be accepted. Though, appellant had sought for Rs.12,94,20,955/- towards de- snagging of the entire building and Rs.2,10,09,817/- towards excess amount paid to the respondent towards the bills and invoices raised by the respondent and a sum of Rs. 2,02,76,000/- towards liquidated damages cannot be considered by the Arbitral Tribunal based upon the report of the Commissioner at Ex.R5 and nothing can be 8 Com.A.P 139/2018 attributed to the award passed by learned Arbitrator. The appellant has illegally encashed the Bank Guarantee without knowledge and consent of the respondent and there was no justification whatsoever, for the appellant to encash the Bank Guarantee. The respondent has also filed complaint before the 43rd ACJM, Bengaluru regarding misuse of Rs.3,00,00,000/-. The respondent company being a 'A' class construction company, has executed the work, as per the terms and conditions of the contract and no objection was raised regarding quality till completion of 17th floor and in order to make counter claim, the said contention is raised and it was not accepted by learned Arbitrator, and denied other allegation made by the appellant in the petition and accordingly, it has prayed for dismissal of the application.
5. Heard learned counsel for the appellant and respondent.
6. Now, the points that arise for my consideration are:-
9
Com.A.P 139/2018
1. Whether the appellant proves that the award passed by the Sole Arbitrator is perverse, opposed to the principles of law, natural justice and settled legal position and thereby liable to be set aside?
2. What Order ?
7. My findings on the above Points are as under:
Point No.1 :- In the Negative.
Point No.2 :- As per the final Order for the following reasons.
REASONS
8. POINT NO.1: Learned counsel for the appellant would argue that the award passed by the Sole Arbitrator is perverse and against the principles of natural justice and law laid down by the Apex Court and as such, it is liable to be set aside. Learned Arbitrator has not taken into consideration, the period for completion of the construction as agreed by the parties as per the contract agreement and 10 Com.A.P 139/2018 failed to frame proper issues and wrongly cast burden on the appellant to prove that the construction was not completed and further the snags were not attended by the respondent. Learned Arbitrator, having come to the conclusion that there was delay in completion of the construction work, ought not to have allowed the claim of the respondent herein partly and rejected the counter claim of the appellant herein. Further, learned Arbitrator has solely relied upon the Commission report at Ex.CR1, who is not a competent person to speak about the quality of the construction and therefore, when the basis for passing award is the Commission report, then, the very Commissioner during the cross-examination, has admitted that he is not expert in the field of finding out the quality of constructed building as there is a separate institution to find out the same.
9. Learned counsel for the appellant would argue that as per Ex.C9, respondent had given last bill within the agreed contract period on 31.3.2011 for a sum of 11 Com.A.P 139/2018 Rs.36,81,925/- as the contract period expired on 15.4.2011. Since, there was no extension of contract, the dispute is beyond the contract period and therefore, it is outside the scope of arbitration. Further, on 21.11.2012, as per Ex.C9 (28), the respondent submitted the last bill to the appellant for a sum of Rs.40,92,511/-, which is after the contract period, on 10.1.2014, as per Ex.C10, the respondent submitted pre-final bill without virtual completion certificate for a sum of Rs.1,77,59,608/- and same came to be rejected by the appellant herein, as there was no completion certificate and further, the respondent has not crystallized the claim before learned Arbitrator. Further, the demand made by the respondent herein as per Ex.C4 legal notice is inconsistent and contrary to the records produced before the Arbitrator.
10. As far as relying upon Commission report by the Sole Arbitrator, he would argue that the Commissioner on 30.9.2021, during the cross-examination, has admitted about his incapacity to find out the quality of building and 12 Com.A.P 139/2018 in view of the above fact, the observation of learned Arbitrator basing his award on the report of the Commissioner is incorrect and he would rely upon the decision in the case of M. Siddiq (Dead) through his LR's Vs. Mahant Suresh Das and Ors., reported in (2020) 1 SCC 1, wherein, it is held that the expert opinion has to be viewed and evaluated by the Court and cannot be conclusive in and all itself.
11. Regarding completion of the building as per the terms of the contract, he would argue that a sum of Rs. 26,76,34,231/- was approved as against Rs.30,38,49,560/-. Further, learned Arbitrator has ignored the admission of CW1 regarding non-completion of the building within time and further there is observation that claimant has not constructed the building on time as per Ex.C3 and learned Arbitrator having held that there is breach of contract by the respondent in completion of the building, then, the terms of the contract ought to have been 13 Com.A.P 139/2018 properly interpreted and non-application of mind by the Arbitrator has resulted in impugned Award.
12. As far as the claim against terms of the contract, he would argue that learned Arbitrator has placed the burden of proof erroneously on the plaintiff and whereas, it should have been on the claimant/respondent. There is no question of unilateral invocation of Bank Guarantee, but, as per the terms of the contract, when the respondent failed to complete the contraction and produced virtual completion certification, there was no other go, but, to avoid further loss, the appellant has invoked Bank Guarantee and the observation that it is unilateral, etc. is incorrect. Further, grant of maintenance charges regarding keeping Bank Guarantee and insurance coverage is also incorrect as there is no contract to pay the same by the appellant herein. Further, the grant of Rs.1,00,00,000/- towards retention money is also against the contract. 14
Com.A.P 139/2018
13. As far as rejection of counter claim is concerned, he would argue that though, the contract provides for recovery of liquidated damages and fact that the appellant had every rights to keep the retention money and encash the Bank Guarantee, allowing the claim for return of retention money and Bank Guarantee is against the terms of the contract that too, when there is no virtual completion certificate produced by the respondent herein. Learned Arbitrator has not considered the terms of the contract in its right to perspective and therefore, it leads to miscarriage of justice and non-application of various decision and also wrongly casting burden on the appellant herein to prove that building was not properly constructed etc., is against the public policy and as such it is liable to be set aside.
14. Regarding burden of proof when discharged, he has cited the decision in the case of Anil Rishi Vs. Gurbaksh Singh reported in (2006) 5 SCC 558, Rangammal Vs. Kuppuswami and Ors., reported in (2011) 12 SCC 220 to the effect that when a person is 15 Com.A.P 139/2018 bound to prove the existence of any fact, it is said that the burden of proof lies on that person and in earlier decision also deals with when the party asserts certain facts, then, he has to prove the same and by relying upon the above two decisions, he would argue that learned Arbitrator has wrongly cast burden on the respondent regarding fact that building was not constructed in accordance with terms of the contract and as such it is liable to retain the Bank Guarantee as well as retention money.
15. Regarding the terms of the contract and its interpretation, he would cite the decision in the case of Bangalore Electricity Supply Company Limited Vs. E.S. Solar Power Pvt. Ltd., and Ors., reported in (2021) 6 SCC 718, wherein, it is held in para 16 that:
16. "The duty of the Court is not to delve deep into the intricies of human mind to explore the undisclosed intention, but only to take the meaning of words used i.e. to say expressed intentions (Smt. Kamala Devi V. Seth Takhatmal and Anr. MANU/SC/0016/1963: 1964 (2) SCR
152). In seeking to construe a clause in a Contract, there is no scope for adopting either a 16 Com.A.P 139/2018 liberal or a narrow approach, whatever that may mean. The exercise which has to be undertaken is to determine what the words used mean. It can happen that in doing so one is driven to the conclusion that clause is ambiguous, and that it has two possible meanings. In those circumstances, the Court has to prefer one above the other in accordance with the settled principles. If one meaning is more in accord with what the Court considers to the underlined purpose and intent of the contract, or part of it, than the other, then the court will choose former or rather than the later. Ashville Investment V. Elmer Contractors 1988 (2) ALL ER 577. The intention of the parties must be understood from the language they have used, considered in the light of the surrounding circumstances and object of the contract. Bank of India and Anr. V. K. MohanDas and Ors. MANU/SC/0491/2009 : 2009 5 SCC
313. Every contract is to be considered with reference to its object and the whole of its terms and accordingly the whole context must be considered in endeavoring to collect the intention of the parties, even though the immediate object of inquiry is the meaning of an isolated clause. Bihar State Electricity Board, Patna and Ors. V. M/s Green Rubber Industries and Ors.
MANU/SC/0075/1989 : 1990 (1) SCC 731."
16. Regarding adjudication of dispute in terms of contract is concerned, he would rely upon the two decisions, one in the case of Ssangyong Engineering and Construction Company Limited Vs. National Highways 17 Com.A.P 139/2018 Authority of India, reported in (2019) 15 SCC 131, wherein, it is held in para No.41 that:
41. "What is important to note is that a decision which is perverse, as understood in paragraphs 31 and 32 of Associate Builders, while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse."
58. "So far as this defence is concerned, standard textbooks on the subject have held that the expression "submission to arbitration" either refers to the arbitration agreement itself, or to disputes submitted to arbitration, and that so long as disputes raised are within the ken of the arbitration agreement or the disputes submitted to arbitration, they cannot be said to be disputes which are either not contemplated by or which fall outside the arbitration agreement. The expression "submission to arbitration" occurs in various provisions of the 1996 Act. Thus, under Section 28(1)(a), an arbitral tribunal "... shall decide the dispute submitted to arbitration ...". Section 43(3) of the 1996 Act refers to "... an arbitration agreement to submit future disputes to arbitration ....". Also, it 18 Com.A.P 139/2018 has been stated that where matters, though not strictly in issue, are connected with matters in issue, they would not readily be held to be matters that could be considered to be outside or beyond the scope of submission to arbitration."
68. "A conspectus of the above authorities would show that where an arbitral tribunal has rendered an award which decides matters either beyond the scope of the arbitration agreement or beyond the disputes referred to the arbitral tribunal, as understood in Praveen Enterprises (supra), the arbitral award could be said to have dealt with decisions on matters beyond the scope of submission to arbitration."
69. "We therefore hold, following the aforesaid authorities, that in the guise of misinterpretation of the contract, and consequent "errors of jurisdiction", it is not possible to state that the arbitral award would be beyond the scope of submission to arbitration if otherwise the aforesaid misinterpretation (which would include going beyond the terms of the contract), could be said to have been fairly comprehended as "disputes" within the arbitration agreement, or which were referred to the decision of the arbitrators as understood by the authorities above. If an arbitrator is alleged to have wandered outside the contract and dealt with matters not allotted to him, this would be a jurisdictional error which could be corrected on the ground of "patent illegality", which, as we have seen, would not apply to international commercial arbitrations that are decided under Part II of the 1996 Act. To bring in by the backdoor grounds relatable to Section 28(3) of the 1996 Act to be matters beyond the scope of submission to arbitration under Section 34(2)(a)(iv) would not be 19 Com.A.P 139/2018 permissible as this ground must be construed narrowly and so construed, must refer only to matters which are beyond the arbitration agreement or beyond the reference to the arbitral tribunal."
76. "However, when it comes to the public policy of India argument based upon "most basic notions of justice", it is clear that this ground can be attracted only in very exceptional circumstances when the conscience of the Court is shocked by infraction of fundamental notions or principles of justice. It can be seen that the formula that was applied by the agreement continued to be applied till February, 2013 - in short, it is not correct to say that the formula under the agreement could not be applied in view of the Ministry's change in the base indices from 1993-94 to 2004-05. Further, in order to apply a linking factor, a Circular, unilaterally issued by one party, cannot possibly bind the other party to the agreement without that other party's consent. Indeed, the Circular itself expressly stipulates that it cannot apply unless the contractors furnish an undertaking/affidavit that the price adjustment under the Circular is acceptable to them.
We have seen how the appellant gave such undertaking only conditionally and without prejudice to its argument that the Circular does not and cannot apply. This being the case, it is clear that the majority award has created a new contract for the parties by applying the said unilateral Circular and by substituting a workable formula under the agreement by another formula dehors the agreement. This being the case, a fundamental principle of justice has been breached, namely, that a unilateral addition or alteration of a contract can never be foisted upon an unwilling party, nor can a party to the agreement be liable to perform a bargain not entered into with the other party. Clearly, such a 20 Com.A.P 139/2018 course of conduct would be contrary to fundamental principles of justice as followed in this country, and shocks the conscience of this Court. However, we repeat that this ground is available only in very exceptional circumstances, such as the fact situation in the present case. Under no circumstance can any Court interfere with an arbitral award on the ground that justice has not been done in the opinion of the Court. That would be an entry into the merits of the dispute which, as we have seen, is contrary to the ethos of Section 34 of the 1996 Act, as has been noted earlier in this judgment."
17. Similarly, he has cited the decision in the case of State of Rajasthan Vs. Nav Bharat Construction Co. Ltd., reported in (2006) 1 SCC 86, to the effect that the Arbitrator cannot go beyond the terms of the contract in the guise of doing justice.
18. Regarding the terms of the contract to be performed is concerned, he relies upon the decision in the case of New Bihar Biri Leaves Co., and others Vs. State of Bihar and others reported in (1981) 1 SCC 537, wherein, at para 48, it is held that:
48. "It is a fundamental principle of general application that if a person of his own accord, 21 Com.A.P 139/2018 accepts a contract on certain terms and works out the contract, he cannot be allowed to adhere to and abide by some of the terms of the contract which proved advantageous to him and repudiate the other terms of the same contract which might be disadvantageous to him. The maxim is qui a probat non reprobat, (one who approbates cannot reprobate). This principle, though originally borrowed from Scots Law, is now firmly embodied in English Common Law. According to it, a party to an instrument or transaction cannot take advantage of one part of a document or transaction and reject the rest. That is to say, no party can accept and reject the same instrument or transaction (Per Scrutton L.J. Verschures Creameries, Ltd. v. Hull & Netherlands Steamship Co.; See Douglas Menzies v.
Umphelby".
19. As far as waiver and pleadings to that effect is concerned, he relies upon the decision in the case of Jayesh H. Pandya & Anr. Vs. Subhtex India Ltd., & Ors., in Civil Appeal Nos. 6300 of 2009 and pleadings and its lack and consequences, he relies upon the two decisions in the case of Bachhaj Nahar Vs. Nilima Mandal and Ors., reported in (2008) 17 SCC 491 and in the case of Biraji and Ors., Vs. Surya Pratap and Ors., reported in (2020) 10 SCC 729 and submits that without there being any 22 Com.A.P 139/2018 pleadings, any amount of evidence is of any help to the parties.
20. Regarding interpretation of Bank Guarantee is concerned, he would rely upon the decision in the case of Andhra Pradesh Pollution Control Board Vs. CCL Products (India) Limited, reported in (2019) 20 SCC 669, wherein, at para Nos.18 and 19 it is held that :
18. "A bank guarantee constitutes an independent contract. In Hindustan Construction Co.
Ltd., V. State of Bihar, a two judge Bench of this Court formulated the condition upon which the invocation of the bank guarantee depends in the following terms :
"9. What is important, therefore, is that the bank guarantee should be in unequivocal terms, unconditional and recite that the amount would be paid without demur or objection and irrespective of any dispute that might have cropped up or might have been pending between the beneficiary under the bank guarantee or the person on whose behalf the guarantee was furnished. The terms of the bank guarantee are, therefore, extremely material. Since the bank guarantee represents an independent contract between the bank and the beneficiary, both the parties would be bound by the terms thereof. The invocation, therefore, will have to be in accordance with the terms of the bank guarantee, or else, the invocation itself would be bad."23
Com.A.P 139/2018
19. "The settled legal position which has emerged from the precedents of this Court is that absent a case of fraud, irretrievable injustice and special equities, the Court should not interfere with the invocation or encashment of a bank guarantee so long as the invocation was in terms of the bank guarantee."
21. So, with the help of above decisions, he would argue that the Arbitrator has given importance to the evidence without there being any plea and failed to consider the fact of the waiver by the respondent herein and misinterpreted the terms of the contract, awarded the claim, though the respondent is not entitled to the same. Further, the interpretation of the Bank Guarantee by Arbitral Tribunal is against the contract terms and therefore, viewing from any angle, if the award is read along with the documents produced, they are against the terms of the contract, evidence on record and solely relying upon the Commission report, which found to be incorrect for want of expertise by the so called witness. So, he has prayed for setting aside the award. I will discuss the each and every 24 Com.A.P 139/2018 decisions after referring to the argument canvassed by learned counsel for the respondent.
22. Learned counsel for the respondent would argue that the respondent made a claim before the Arbitral Tribunal to the tune of Rs.8,04,00,000/- and the Arbitral Tribunal awarded only Rs.3,19,00,000/- towards Bank Guarantee and retention money and the counter claim came to be rejected and in fact after completion of the building to the extent of 17 th floor in the presence of technical experts on the both the sides, whenever they found some mistakes in construction, deviation in the contract or any other snags, they were attended to by the respondent and same could be seen from the documents placed by the respondent itself. Further, as per the contract, the Bank Guarantee cannot be encashed unilaterally without there being any notice. It is an afterthought of the appellant herein, somehow to make gain wrongfully after completion of the building and counter claim to the tune of Rs.14,07,06,772/- without there being 25 Com.A.P 139/2018 any basis as and when the agency appointed to find out the quality of the work after completion of the each floor, they were attended to by the respondent herein and therefore, after completion of the 17th floors by taking time more than the contract period, the appellant herein kept quiet and when its term came to return the retention money and Bank Guarantee, the present counter claim has been made, therefore, the same cannot be entertained. Further, the Commissioner was cross-examined after direction by the Hon'ble High Court of Karnataka and though it is elicited that he is not competent to speak about the quality of material used and quality of construction and in earlier report, he has suggested that some of the institutions are competent to find out the quality of the constructed building. So, when there is a burden on the appellant herein to prove that the quality of construction was not up to the mark and as per the terms of the contract, then, it is its duty to produce the documents and documents produced by the appellant herein regarding the report of 26 Com.A.P 139/2018 one consultant, who inspected the building and found some of the mistakes is not sufficient. In the said regard, various e-mails and the quality inspection report was submitted from time to time by the consultant appointed by the appellant herein. In the presence of consultant of the contractor they were inspecting and noticing certain snags right from the first floor, till 17 th floor and all the snags have been rectified and some of the bills have been honoured. The consultant appointed by the appellant herein, the Civil Aid Technology Private Limited assisted by Principal Engineer of the said company and some more documents are produced to show the sample of the work, fitness of the work, quality of the material used, etc. and this is made basis for counter claim by the appellant herein and those documents were came to be marked as Ex.R3 by the appellant herein. After referring to the said document, he referred to the cross-examination of Commissioner and except the fact that he was not competent to find out the quality of the constructed building, nothing is forthcoming 27 Com.A.P 139/2018 from the evidence of the respondent that at the first and foremost time, they have raised dispute regarding quality of material used as it is admitted by the witnesses of the respondent that both have appointed technical persons to supervise the material supplied, the quality of the material and quality of construction, right from the basement till 17th floor. The evidence of RW2 goes to show that they have been supervising the construction and appellant has not raised its little finger regarding the quality of construction, etc. Moreover, it is admitted fact that it is the respondent, who supplied materials including sand, jelly, cement, steel and when it was supplied by the respondent/appellant how, it can blame the respondent herein for poor construction. Therefore, even if the Commissioner is cross-examined after the direction of the Hon'ble High Court, nothing is elected. Moreover, the burden of proving that construction is not up to the mark when it is shown that the materials were supplied by the appellant herein, then, the decisions cited by learned counsel for the 28 Com.A.P 139/2018 appellant regarding burden of proof are of no significance at all.
23. He would further argue that the scope of Section 34 is very limited and this Court cannot appreciate or re- appreciate the evidence, including documentary evidence as the Arbitrator is the chosen judge. As far as the jurisdiction of the Arbitrator to decide the case beyond contract period cannot be considered as the parties have submitted to the jurisdiction Arbitral Tribunal and without there being any grounds in the grounds urged in the petition, the same cannot be entertained. Further, there was a direction and first order was in favour of the respondent herein regarding alienation etc., and after direction by the Hon'ble High Court to the appellant herein, it deposited Rs.2,00,00,000/-. The argument about the quality was raised only at the fag-end, when they were about to pass final bill on the ground that the virtual completion certificate was not furnished. So, according to learned counsel for the respondent, the contention of the 29 Com.A.P 139/2018 respondent regarding the value of the Commission report, burden of proof or that the arbitrator has to pass award on the basis of the terms of the contract, waiver, etc., cannot be considered at this stage, without there being any challenge of the same in the grounds of appeal. (though, it is not an appeal).
24. So, with this background, we have to go through the award passed by learned Arbitrator. Learned Arbitrator has given anxious attention to each and every aspect and the contention raised by the parties and raised in all seven issues and out of them, issues No.1 and 2 were to be proved by the claimant and issues No.3 and 5 were to be proved by the respondent before the Arbitrator and issue No.4 relating to completion of the work, issue No.6 relating to interest, etc. Learned counsel for the appellant would refer to the issues first and then, the observation made by learned Arbitrator to the Commission report and according to him, when the Commissioner is not competent to decide about building, as his field is different, then, relying upon 30 Com.A.P 139/2018 the Commission report and passing of award is against the terms and decision cited by him. He refers to para Nos.8 to 11, 13, 16, 19 to contend otherwise. Learned Arbitrator after referring to the documents and evidence, has answered issue No.1 in favour of the claimant/respondent by referring to the evidence given by CW1 R.S. Vidyashankar and since, there was no cross-examination to that effect, regarding contributing factors by the respondent for delay and rock found in the area and it took sufficient time to clear of the rocks and there was inordinate delay in supply of materials and also payment of RA bills. There is no dispute about the Bank Guarantee and also retention money received by the appellant herein and learned Arbitrator refers to definition clause No.1.1a of Ex C3, which defines, the contract document to include the general conditions of contract. Clause No.9.1 of General Condition of Contract, obliges the contractor to provide a Bank Guarantee from a scheduled Commercial Bank of owner/Project Manager (Election) as per format approved 31 Com.A.P 139/2018 by the owner/Project Manager for 10% of the mobilisation advance. The contractor shall be paid 10% of the mobilisation amount and what is mobilisation advance has been stated in physical aspect of the GCC and the owner can recover the mobilisation amount paid by 6 Equated Monthly Installments out of RA bills. Further, at para No.26, learned Arbitrator observed by referring to the evidence of CW1 about Bank Guarantees and also unilateral encashment of Bank Guarantee, filing of criminal complaint, etc., and said aspect has not been contradicted by the appellant herein by way of cross-examination. The justification given by the appellant herein for invocation of Bank Guarantee is non-completion of work and loss sustained thereby that too without issue prior notice. Learned Arbitrator has considered the said aspect and also insurance renewal charges and retention money and negatived other aspects regarding escalation of price and claim made by the claimant and award is restricted to 32 Com.A.P 139/2018 retention money and return of Bank Guarantee only and all other claims were rejected.
25. Thereafter, learned Arbitrator refers to issue No.3 regarding whether construction has been completed in accordance with terms of the contract and that the quality of the construction is defective and has used defective materials. The main grievance of the appellant herein is that the burden is wrongly cast on the respondent. However, both are represented by competent counsels and they were not raised their little finger, even till conclusion of the argument that issue No.3 has not properly been framed. Normally, if construction is completed, it would be always contention of the contractor that he has constructed the building as per the terms and maintained the quality. When it is admitted that both the parties have appointed technical experts to monitor and find out the process of construction including quality of materials, then, can we expect that the contractors should have proved the quality of construction in order to get his retention money and 33 Com.A.P 139/2018 Bank Guarantee. If at all, the quality was not up to mark as per Ex.R3, why, the respondent allowed to complete 17 th floors. It cannot be done within a few months, it took more than 2 years to complete and can it be believed that the respondent kept quiet, even after noticing the defective construction. Therefore, the said contention appears to be raised only to overcome the claim made by the claimant as observed by learned Arbitrator, therefore, I am of the view that we cannot find fault with the award regarding issue No.3. Moreover, the clause No.7a, 7b of Ex.C3 also provides for appointment of experts to monitor the quality of construction and material and when it is right of the owner/appellant to supply required materials, then, it is obligation on the part of the appellant to supply quality materials and rectify, if any low quality construction. In this regard, clause Nos.30, 38 of GCC are very important. Learned Arbitrator refers to the evidence of RW2 Sanjay Uttam Rashk and also the service hired by the both the parties to monitor the work from 34 Com.A.P 139/2018 March 2010 till 2012 and from December 2010 to April 2013 to ensure day to day quality. Moreover, the Pour cards also produced, which are signed by the parties, responsible for monitoring the work, then, the contention that the quality was not up to mark and the appellant herein incurred huge amount for restoration of the same, which made him to claim counter claim cannot be accepted. The evidence of RW2 regarding appointment of technical experts is very important, which goes against the appellant herein to contend otherwise. Whatever the defects found were rectified and in this regard various e-mails have been exchanged. All the pour cards contained signatures of the representative of the respondent and therefore, pour cards are maintained for the purpose of maintaining quality of construction and quantum of materials used. When the materials are supplied by the respondent and when the representative has signed daily pore cards, then, it cannot be held that the building has been constructed with so many defects, which made the appellant herein to 35 Com.A.P 139/2018 spend more money and therefore, it is entitled to retain retention money and encash the Bank Guarantee.
26. It is contended by the respondent that it has used total Rs.17,07,06,772/- including liquidated damages and as per the clause relating to liquidated damages, it is entitled to forfeit the Bank Guarantee and retention money and the basis for claiming so much of amount is report and the documents produced by the respondent herein and for those documents, the respondent herein was not a signatory. There is nothing to show that the respondent was notifying before such report is obtained. When the commission report is partially accepted, regarding who is the competent authority to find out the quality of construction, after construction completed, then, there should have been inspection by such authority or technical experts and not one appointed by the appellant, that too without notice to the claimant. No doubt, learned arbitrator was handicapped at the time of passing of award as the cross-examination was done as per the direction, after 36 Com.A.P 139/2018 passing of the award, when the matter was pending before this Court. So, even, if we read the entire Commission report, one thing could be gathered that there are technical experts to decide such thing and appellant has not taken any report from such a competent person. Learned Arbitrator has rightly observed the same in his impugned award.
27. Now, regarding the liquidated damages of Rs.2,02,76,000/-, learned Arbitrator refers to clause No. 5.2 and find out the right to claim liquidated damages, if it is not completed within time and everything is stated in the award, but, till completion of 17 th floor, no such attempt is made by the appellant herein to claim liquidated damages or terminate the contract. Once, the period of the contract is expired, the respondent was allowed to continue the work, who completed the same till 17th floor and what is left is the fixing of doors and painting and all other minor snags have been attended in each and every floor, as could be seen from the arbitral records. 37
Com.A.P 139/2018 Learned Arbitrator though states that clause 5.2 fasten liability on the claimant to pay liquidated damages, the Court has to ascertain who is responsible for that. What action is taken by the respondent at every stage of delay and failure to complete the contract. It is the admitted fact that the respondent submitted pre-final bill as on 10.1.2014 and learned Arbitrator has considered all these aspects and rejected the claim with cogent reason and there is nothing to interfere under Section 34 of the Act.
28. When Award can be set aside, only if it is against the public policy, terms of the contract, or failure to apply substantive law or decision of the Apex Court. No such grounds are made out in the award. Whatever the grounds raised in the written submission do not find a place in grounds to set aside the award. Learned Arbitrator by taking into consideration, the evidence of the parties and documents placed before him, has elaborately discussed each and every aspects without giving any room to suspect. Ofcourse, there may be a chance of another 38 Com.A.P 139/2018 interpretation against one made by learned Arbitrator. But, this Court cannot interpret in a different way or re- appreciate the evidence or documents in a way different from one done by learned Arbitrator. Since, scope under Section 34 is very limited, this case cannot be tried as appeal to interpret each and every document and every line found in the document. Learned Arbitrator is not expected to pin point each and every aspects, in the voluminous documents produced before him and to the best of his ability, he has come to a right conclusion, which does not require any interference by this Court under Section 34 of the Act. In view of the above fact, the decisions quoted by learned counsel for the appellant regarding value of the Commission report, burden of proof, interpretation of the terms of the contract, adjudicating the dispute as per terms of the contract, waiver, evidence without pleadings, etc., are of no helpful to the appellant as this Court cannot interpret again and substitute its view. There are no merits 39 Com.A.P 139/2018 in the application. Hence, I answer point No.1 in the Negative.
29. Point No.2 :- For the aforesaid reasons, I proceed to pass the following Order.
ORDER
The suit/petition filed by the
appellant/claimant under Section 34 of
Arbitration & Conciliation Act, 1996 is hereby dismissed. No costs.
(Dictated to the Stenographer, typed by him, corrected and then pronounced by me in open Court on this the 17th day of January, 2022).
(CHANDRASHEKHAR U), LXXXVII Addl.City Civil & Sessions Judge, (Exclusive dedicated commercial Court) Bengaluru.