Bangalore District Court
M/S Beml Limited vs M/S Urc Construction Private on 9 June, 2021
1
Com.A.S.23/2017
IN THE Court OF LXXXVII ADDL.CITY CIVIL & SESSIONS
JUDGE, (EXCLUSIVE DEDICATED COMMERCIAL COURT)
AT BENGALURU (CCH.88)
THIS THE 9th DAY OF JUNE 2021
PRESENT:
SRI.CHANDRASHEKHAR U., B.Sc., LL.M.,
LXXXVII ADDL.CITY CIVIL & SESSIONS JUDGE,
BENGALURU.
Com.A.S.No.23/2017
APPLICANT/ M/s BEML LIMITED,
PLAINTIFF: "BEML Soudha",
No.23/1, 4th Main Road,
S.R. Nagar,
Bengaluru - 560 027,
Represented by its
Executive Director, (Defence)
(Reptd by learned counsel, CSJ)
AND
RESPONDENT/ M/s URC Construction Private
DEFENDANT: Limited,
No.119, Power House Road,
Erode -638 001,
Having its corporate office at
Plot No.810, 1st Cross, 7th Main,
HAL II Stage, Indiranagar,
Bengaluru - 560 008,
Represented by its Managing Director,
Mr. S. Palanisamy.
(Reptd by learned counsel, P.B.A)
Date of Institution of the 30.01.2017
suit
Nature of the suit (suit on
pronote, suit for
2
Com.A.S.23/2017
declaration & Possession, Arbitration Suit
Suit for injunction etc.)
Date of commencement of -
recording of evidence
Date on which judgment
was pronounced 09.06.2021
Total Duration Year/s Month/s Day/s
04 04 09
(CHANDRASHEKHAR U),
LXXXVII Addl.City Civil & Sessions Judge,
(Exclusive dedicated Commercial Court)
Bengaluru.
JUDGMENT
The applicant has filed the above suit under Section 34 of the Arbitration & Conciliation Act, 1996, r/w 151 of CPC to set aside the Arbitration Award, dated 20.08.2013 passed in AC 10/2013 (PEB).
2. The applicant has stated that it is a Government Company within the meaning of Section 617 of the Companies Act, 1956 under the administrative control of the Department of Defence Production, Ministry of Defence, Government of India, inter-alia engaged in the manufacture and marketing including after sale service and maintenance of equipment used for 3 Com.A.S.23/2017 earthmoving, Defence, Mining & Construction, Rail & Metro, Aerospace, Dredging, etc., and its spare parts and aggregates. It is further stated that in order to diversify its area of operation, decided to establish an Aerospace Division to manufacture and export of mechanical components used for Aerospace and had applied for land in Aerospace Special Economic Zone at Devanahalli. Accordingly, KIADB allotted 25 acres of land in Aerospace Special Economic Zone area by way of lease cum sale basis for a period of 30 years and has paid Rs.49,50,20,402/- as consideration and a perpetual lease-cum- sale deed was executed on 15.2.2012. The one of the conditions that grant of lease is for the factory shed shall be constructed immediately or else pay penalty of 10% of the land price besides forfeiture of lease amount. The project included construction of compound wall, Pre-engineered building, Civil works and other allied construction relating to civil work and it appointed a project consultant namely, M/s Potential Semac Consultants Pvt. Ltd. The pre-engineered building (PEB) was one of the major works of the said project, which consists of designing, fabricating and erecting two sheds, one for MRO/Main assembly and other is composite shed. The tender was quoted by the applicant on 9.7.2011 for PEB works and 4 Com.A.S.23/2017 after perusing the bid offered by the respondent was accepted for PEB works as well as civil works under different agreements. The Work order was issued on 1.3.2012 to carry out PEB contract and the total sum of the project was Rs.34,72,07,751/- and date of commencement was on 5.3.2012 and date of completion was 24.6.2012 as agreed in the contract. As per the contract, the respondent offered Bank Guarantee as per the terms of the contract and respondent had to prepare all shop drawings relating to design and to submit the same to consultant for their approval and once its approval by the consultant, it will be forwarded to the applicant for final approval. Further, the design furnished by the consultant has to be certified by the third party i.e., IIT Professor, who is qualified to certify the same and further there was an obligation on the part of the respondent to prepare combined PERT chart for the purpose of carrying out the design and the same were to be approved by the consultant. Further, it was the responsibility of the respondent to mobilise the men and material at the site and the PERT chart required to be submitted within 7 days from the date of work order i.e., 1.3.2012. Since, welding and cutting was not allowed at the site, the respondent had to erect the factory premises outside the SEZ area for manufacturing PEB 5 Com.A.S.23/2017 structures and bring the same to the area and install the same for the purpose of future manufacturing. However, the respondent has not commenced the work as agreed and failed to furnish the drawings and designs, particularly, combined PERT chart, which was condition precedent for proceeding further. The project consultant had designed and generated detailed Bill of Quantity (BOQ) along with estimation for both the hangars, much before the contract was awarded. However, the respondent failed to submit the drawings and designs in accordance with the tender condition, till it invoked Arbitration clause on 12.9.2012 by way of issuing the mail. The respondent has also failed set up the factory to carryout fabrication as per the tender for manufacturing purposes. The respondent having entered into contract for construction of PEB work has failed to adhere to the condition, which lead to issue of Arbitration notice subsequently. Since, the works were not done and since the respondent moved the High Court of Karnataka and filed CMP Nos.19/2013 and 20/2013 for appointment of Arbitrator, the Arbitrator was appointed, who conducted the proceedings in AC Nos. 10/2013 and 11/2013, on the basis two different claims and counter claims. AC No.10/2013 relates to PEB works and infact, on account of the 6 Com.A.S.23/2017 failure on the part of the respondent, applicant has sustained loss to the tune of Rs.199.18 crores and claimed it as a counter claim. After application has been filed before the Arbitrator, Learned Arbitrator allowed claim Nos.1, 2, 4 and 5 partly and rejected the claim No.3 and also some of the counter claims. Being aggrieved by the allowing of Claim No.1, 2, 4 and 5, and the award dated 20.8.2016 also modified vide dated 7.11.2016 passed in AC 10/2013, the applicant has filed the above application on the ground that the award passed by the sole Arbitrator, so far as which are against the applicant are erroneous, unjustified and requires intervention by the Court. The Arbitrator has failed to appreciate the terms and conditions of the tender and work order and also the breaches committed by the respondent in its entirety. The Hon'ble Arbitrator has failed to appreciate that the respondent has never submitted the required designs, drawings, PERT chart, etc. in terms of the contract and the same were crucial to perform the contract. As far as claim No.1, i.e., grant of Rs.4,00,000/- towards damages is without any basis and the same is liable to be set aside. The respondent has never shown his readiness or willingness to complete the terms of the contract. Therefore, when there is no proof regarding actual loss sustained by it, the grant of 7 Com.A.S.23/2017 damages for preparation of designs and drawings at Rs.4,00,000/- is incorrect. As far as claim No.4 is concerned, the Arbitrator has awarded claim to the extent of Rs.2,40,000/- and when the respondent had no intention to perform the contract in full, the same should not have been allowed. Learned Arbitrator having stated that time was the essence of the contract, should not have allowed the claim of the respondent partly. Further, as far as claim No.5 is concerned, award of Rs.10,00,000/- towards the damages/loss suffered by the respondent is without any basis and same is liable to be set aside. Learned Arbitrator having observed that the respondent had failed to perform the contract, ought not to have allowed the claim with interest at 18% per annum as held in the various decisions of Apex Court and various High Courts. The Learned Arbitrator erred in allowing the claim of return of Bank Guarantee towards E.M.D without interest, despite having found that the respondent had breached the contract in all respects. Learned Arbitrator erred in allowing cost of Rs.10,00,000/- to the respondent, particularly when the points of dispute Nos.1,2, 3 and 5, etc. were decided against respondent and also held counter claim of the applicant was allowed in part. In AC No.11/2013, learned Arbitrator has indicated that the parties 8 Com.A.S.23/2017 have to bear their own costs, but the present case it was held claimant/respondent is entitled to costs of the proceedings. The basic principle while imposing costs that the Court or Tribunal would consider, is to ascertain that the dispute between the parties is a genuine dispute or not. While reading of the award, it discloses the disputes to be genuine and not any vexatious, frivolous or delayed tactics or misleading the court, normally the parties are directed to bear their own costs. So, award of costs is incorrect. Further, the impugned Award suffers from vice of arbitrariness, vagueness, contrary to law, against facts of the case and is contrary to material on record and liable to be set aside. Accordingly, it has prayed for setting aside the Award and also modification order, dated 7.11.2016 so far as the same is against the applicant.
3. The respondent has filed written statement denying the allegation made by the applicant in its petition, regarding conduct of Arbitral proceedings and award passed and on arbitrariness and other aspects, which is against learned arbitrator. Further, the application is not maintainable as the same has been filed beyond stipulated time as per Section 34(3) of the Act. The Award was passed on 20.8.2016 and the above petition came to be filed on 30.1.2017, which is beyond 90 days. 9
Com.A.S.23/2017 Further, by leave of the Court, the same can be filed within 120 days. The above application is filed on 30.1.2018 after expiry of limitation, on that count also the application is not maintainable. It has further stated that the award is not in accordance with Rule 4(c) of the High Court of Karnataka Arbitration (Proceedings before the Courts) Rules, 2001 which requires learned Sole Arbitrator to be impleaded as a respondent to an application under Section 34 of the Act. Since, the petition is filed with defect, the same is liable to be rejected for not conforming to the High Court Arbitration Rules. The respondent is a private limited company engaged in the business of civil and general construction of large scale industrial and other projects. Among the construction projects successfully completed by the respondent at Bengaluru, are packages I & II for the Indian Institute of Science, Bengaluru of the value of approximately Rs.90 crores and Byappanahalli Depot of the Bengaluru Metro Rail Corporation Ltd., of the value of approximately Rs.140 crores. The applicant had floated the PEB works contract for the work known as "Pre-engineered building system for industrial facility" and the respondent submitted its bid and same was accepted by the applicant and work order was issued as per the work order dated 1 st March 10 Com.A.S.23/2017 2012. The total costs of the project was Rs.34,72,07,751/-. As per the terms of the contract, the respondent had to execute a formal agreement on stamp paper in a standard format maintained by the applicant and there was delay in furnishing the format, which is attributed to the applicant. The letter of acceptance was issued on 27.2.2012 and since there was inordinate delay in furnishing format and signing the agreement and also appointment of Nodal Officer for the purpose of bringing materials to the SEZ site and also for want of appointment of Security personnel. As per the terms of the contract, initially it is the duty of the consultant to prepare the drawings and submit and it is the duty of the applicant to furnish the same to carry out the work, but the same was imposed on respondent. Initially, the PERT chart was required to be submitted relating to the civil work and in a later meeting, it was decided and insisted by the applicant that combined PERT chart should be submitted both for PEB and civil works. Initially, the respondent expressed its resolution to opt for option No. II, which was subsequently changed by the applicant to ask for option No. I design and due to which there is delay in submitting the same. Consultant of the applicant submitted its combined Chart on 27th March 2012 for the composite shed and 11 Com.A.S.23/2017 on 21.4.2012 for MRO/main Hanger. So, all the delay is on account of the applicant. In order to bring the material, there must be clearance by the SEZ authority and there was delay in obtaining such clearance by the applicant. Therefore, it cannot be attributed to the respondent. Further, 3 rd party design clarification certificate was must before starting up of the PEB work. Since the applicant has appointed Nodal Officer only on 12th July 2012, there was delay in bringing materials and proceeding with the designs etc. The applicant was reluctant to permit the respondent to carry out the work in the guise of non-submission of combined PERT chart. In fact, applicant was not interested to proceed with the work for the reason best known to it and its official. Since there was no progress in the work on account of the lethargic attitude of applicant and its officials, the respondent had to opt for invoking Arbitration clause. Accordingly, learned arbitrator was appointed pursuant to the order of Hon'ble High Court in CMP No. 19/2013 and the respondent made in total 5 claims in AC 10/2013 towards payment for preparation of design and soft drawings, return of Bank Guarantee, compensation for loss incurred due to the materials brought to the site for execution of the PEB works and taken back the same, compensation for expenditure since 12 Com.A.S.23/2017 contract could not be performed for the reasons not attributed to the respondent and also compensation for loss of profit sustained. Learned Arbitrator after detailed enquiry, allowed claim Nos.1, 4, 5 partly and claim No.2 was considered along with AC No.11/2013 and claim No.3 came to be rejected. The respondent has denied other allegation made in the application filed by the applicant under Section 34 of the Act. As far as award of costs is concerned, which is according to Rules of practice and there is no any mistake on the part of the Arbitrator in awarding mistake. Normally the cost could be awarded to indemnify the successful litigants and expenditure that they have incurred that too in the litigation is well known. Learned arbitrator was conscious of the fact that the applicant has made an extravagant and segregated counter claim of Rs.199.18 crores in a matter involving in the contract valued at Rs.34.32 crores. Accordingly, in the connected case, the cost was made easy and in the present case cost was awarded to the respondent. Accordingly, it has prayed for dismissal of the petition.
4. Heard, learned counsel for the plaintiff.
5. Now, the points that arise for my consideration are:- 13
Com.A.S.23/2017
1.
Whether the applicant has made out sufficient grounds to set aside the arbitration award, dated 20th August 2016 passed in AC No.10/2013?
2. Whether present application is barred by time?
3. What Order ?
6. My findings on the above Points are as under:
Point No.1 :- In the Negative.
Point No.2 :- In the Negative.
Point No.3 :- As per the final Order for the following reasons.
REASONS
7. POINT No.1 & 2: Learned counsel for the applicant would argue that it had floated tender for PEB work as well as civil work and the respondent was a successful bidder both for PEB work as well as civil work and agreement to that effect was entered into and work order was issued. Since, the applicant started the work with main object of manufacturing of components for defence vehicles and assemblies and also MRO activities relating to Aerospace application. With this very object, it took 25 Acres of land from KIADB as per the lease deed for 30 years by making payment of Rs.49,50,20,402/-. A lease 14 Com.A.S.23/2017 cum sale deed was executed on 15.02.2012. As per the terms of the contract, the respondent is required to complete the civil construction work, erect machineries and commence production within 24 months from 26.4.2011 or else to pay penalty of 10% of lease price, besides forfeiture of the lease and taking over the property. In view of the above fact, the company appointed a consultant M/s Potential Semac Consultants Pvt Ltd., for the purpose of achieving the object of the project spelled out in para No.8 to 10 of the SO and the work of preparing designs, fabricating, designs for the purpose of PEB building and Civil work was got prepared through the consultant and kept ready. He would further argue that in order to carry out the PEB work contract consists of several elements like design, drawings, drawing of the PERT chart for timely completion of the project with resource allocation so that the work can be monitored and speed up, so as to finish the same within the time stipulated. Since, time was essence of the contract, at the time of entering the contract with the respondent, it was specifically stated that work should be commenced from 5.3.2012 and it should be completed by 24.6.2012. Accordingly, work order was issued by explaining the need of completion of the work on time, keeping in mind the object of establishment of the 15 Com.A.S.23/2017 factories for the purpose of manufacturing of defence components. Since, there was a direction to submit shop drawings, design by the respondent through the consultant, inspite of granting sufficient time, the same was not submitted by the respondent though the contract stipulates to finish the work by 5.3.2012. The cost of the contract was Rs.34,72,07,751/-. So, he would argue that the respondent did not submit proper shop drawing and design through the consultant for its approval, which is a condition precedent of the terms of the contract. The tender contract is marked as Ex.R5, which discloses the necessity of drawing, preparing designs and submitting the same through consultant for its approval. Further, a combined PERT chart is required to be submitted within 7 days from the date of work order as per Ex.R8, which the respondent failed to submit. In this regard, he referred to Ex.R5, Ex.R8 at relevant page No. 149, 235 and to show that it is on account of delay caused by the respondent, the work was not completed. Therefore, allowing of claim partly is not sustainable. After referring to the said aspect, he took the Court to cross-examination of PW1, which goes to show that the PW1 admitted about requirement of drawings and its approval by the consultant and 3rd party certificate is also mandatory and 16 Com.A.S.23/2017 clearance by SEZ authority is also a condition precedent. PW1 was not in a position to state about submission of designs and drawings as on 4.9.2012. With this background, he would argue that the respondent failed to submit the design with the 3 rd party certification i.e., certification by the IIT Professor/certified Government Agency. Regarding PERT chart also he has submitted similarly as condition precedent as per Ex.R5 tender and he referred to various clauses, particularly, clause No.11 at page No.149 and work order at Ex.R8 and other document to show that the respondent was not keen to complete the work and failed to mobilize men and materials at the site for the purpose of completion of the work. Learned arbitrator having held that PERT chart has not been submitted, which is one of the condition precedents, the allowing of the claim in part is not sustainable. As far as the allegation that there was delay on the part of the respondent, in fact, the respondent officials were keen to get the work done and whenever there is any letter from the respondent, same has been suitably replied with reference to the terms of the contract and therefore, the respondent cannot harp upon the official of the applicant as contended in the written statement and also in their main suit. Further, the respondent had no any factory set up to manufacture PEB 17 Com.A.S.23/2017 structures for the purpose of shifting the same inside the SEZ area and fix the same for the purpose of manufacturing components. In fact, the respondent started a temporary structure and the very structure itself created doubt about the authenticity and also the quality of the work that was entrusted to it. So, when the applicant insisted to adhere to the terms of the contract, the respondent walked away from the contract and invoked arbitration clause or appointment of Arbitrator. Further, the contention of the respondent that, the delay was due to obtaining SEZ design is not correct. At no point of time, the respondent was ready to conduct the work and furnish the same within the time. Since, as per the work order Ex.R7, the duration was 15 weeks from the date of commencement, but, the claimant signed the agreement on 27.6.2012 and the main reason is that the respondent has not submitted required drawings and PERT chart. Further, since the time was essence of the contract, the respondent had to complete the contract as it is not an ordinary contract, but it relates to the manufacturing of components for the defence products, which comes within the SEZ area and entitled for tax exemption. Further, learned Arbitrator has not followed Section 51 and 54 of the Contract Act to decide the same and therefore it is opposed the public policy 18 Com.A.S.23/2017 and the above award made by learned Arbitrator again not sustainable and same can be challenged under the provisions of Section 34 of the Act. Further, he would argue that the cost awarded by learned Arbitrator is against the provisions of the Act. Having held that the respondent has not submitted PERT chart, which was a condition precedent, Learned Arbitrator ought not to have allowed the claim in part that too with costs. The applicant is a Central Government undertaking, has given its full cooperation to the respondent for execution of works and therefore, it is not expected from learned Arbitrator to grant cost to the respondent, who is reason for delay in execution of the work. In support of his contention, he has cited the decision in the case of Salem Advocate Bar Association .T.N Vs. Union of India reported in (2005) 6 SCC 344, Ashok Kumar Mittal Vs. Ram Kumar Gupta and another reported in (2009) 2 SCC 656, Vinod Seth Vs. Devinder Bajaj and another reported in (2010) 8 SCC 1 and Sanjeev Kumar Jain Vs. Raghubir Saran Charitable Trust reported in (2012) 1 SCC 455, to the effect that when cost can be allowed by the Court or Tribunal. After referring to the decision in the case of Salem Bar Association, he straight away took to the court to the decision in the case of Vinod Seth Vs. Devinder Bajaj 19 Com.A.S.23/2017 & another, particularly, para No.48 and 49. Para No.48, deals with provisions of cost is intended to achieve the following goals that: (a) It should act as a deterrent to vexatious, frivolous and speculative litigations or defenses. The specter of being made liable to pay actual costs should be such, as to make every litigant think twice before putting forth a vexatious, frivolous or speculative claim or defence. (b) Costs should ensure that the provisions of the Code, the Evidence complied with and that parties do not adopt delaying tactics or mislead the Court. (c) Costs should provide adequate indemnity to the successful litigant for the expenditure incurred by him for the litigation. This necessitates the award of actual costs of litigation as contrasted from nominal or fixed or unrealistic costs. (d) The provision for costs should be an incentive for each litigant to adopt alternative dispute resolution (ADR) processes and arrive at a settlement before the trial commences in most of the cases. In many other jurisdictions, in view of the existence of appropriate and adequate provisions for costs, the litigants are persuaded to settle nearly 90% of the civil suits before they come up to trial. (e) The provisions relating to costs should not however obstruct access to courts and justice. Under no circumstances the costs should be a deterrent, to a citizen with 20 Com.A.S.23/2017 a genuine or bonafide claim, or to any person belonging to the weaker sections whose rights have been affected, from approaching the courts.
8. Para No. 49 speaks about when cost is imposed. With the help of this decision and also in the decision of the Sanjeev Kumar Jain Vs. Raghubir Saran Charitable Trust, particularly Para No. 18 and 23, he would argue that there should be some clear approach for granting actual and varied cost and there is nothing to show that how the arbitrator allowed the cost when cost was made easy in connected AC No.11/2013. In AC No.11/2013 the claim and counter claim were allowed to some extent, but cost was made easy. But, in the present case still the claim was allowed in cost, the cost was allowed in favour of the respondent, which according to him is incorrect. So, the very award was passed by learned Arbitrator is against the provision of Section 35(a) of CPC and therefore, same is liable to be set aside. As far as other claim Nos.1, 2, 4 and 5, though it was allowed in part, there is no basis for granting the same, which according to him is liable to be set aside. I will opine about the arguments on awarding costs after discussing the arguments of learned counsel for Respondent. 21
Com.A.S.23/2017
9. Per contra, learned counsel for the respondent would argue that the award of claim Nos.1, 2, 4 and 5 in part is unjustified and it requires to be modified by awarding more. While, refuting the arguments canvassed by the learned counsel for the applicant, he would submit that the delay is attributable to the applicant, who failed to appoint the Nodal Officer on time, Security Personnel and also get SEZ clearance for the purpose of the transporting men and material to the site. Unless and until, the materials are brought, which are subject to exemption, there was inordinate delay for obtaining such clearance from the authority and when the contract came to an end and there was more delay in taking back the materials once again for the purpose of disposal. The respondent sustained huge loss and learned Arbitrator has not taken steps on these aspects. These aspects already dealt with in AS No.175/2016, which is connected case to the present case. He would argue that the SEZ Rules 2006 stipulate that the units developer may import or procure from domestic area without payment of duties, taxes or cess or procure from domestic area after availaing export or procure from other the same was or from export oriented unit or software technology park unit, or electronic hardware park unit, or or include components, consumer sale, goods etc. 22 Com.A.S.23/2017 are exempted from tax. However, there was delay in payment. He would also argue about preference of procurement from domestic area and what are the formalities should be followed. In order to bring the materials to the SEZ area, invoices must be signed by Nodal officer appointed by the applicant and there was huge delay in appointing of the him, the respondent is not liable for the delay. Further, the works cannot be started without signing contract agreement and submitting PERT chart and work cannot be started without approval of 3 rd party. There was delay in furnishing format of the agreement, which is ultimately resulted in delay in submitting a proper formant and subsequently it was approved by the applicant. As far as the argument regarding PERT chart is concerned, he would argue that it was not an essential components of the contract and at the initial time, as per the letter dated 13.8.2012, the applicant insisted for combined PERT chart with certification of 3 rd party, which was not agreed upon initially. However, in order to complete the work, respondent has agreed to submit the combined PERT chart and therefore, delay is attributed to the applicant. According to him, the submission of PERT chart is not a condition precedent and it is only the afterthought of the applicant to see that the work is not commenced and 23 Com.A.S.23/2017 completed. However, the respondent submitted combined PERT chart with design to the consultation on 29.6.2012 at Ex.R133 and it was approved by the consultant on 11.7.2012 at Ex.R.31 and forwarded same to the panel. So, the delay is attributed to the consultant also, which took sufficient time to approve the same. The contention of the applicant that respondent is not entitled to any claim as awarded by the Learned Arbitrator cannot be accepted for the reason that it has mobilized the men and materials, purchased the materials from M/s ESSAR Steels, brought it to the site and dumped there and they were subjected to speedy and natural decay and while disposing the same it sustained huge loss. Therefore, the contention of the applicant for rejection of claim cannot be accepted. Since, the applicant failed to perform its part of contract, it cannot insist to perform by other site, which is against the terms of the contract. The obligations of the parties have to be performed in a certain sequence, one of the of the parties to the cannot require compliance with the obligation by the other parties without in the first instance performing his own part of the contract which in the sequence of obligation is performable by him earlier. This aspect has also been held in the case of Nathulal Vs Phool Chand Vas reported in AIR 1970 SC 546. So, with the 24 Com.A.S.23/2017 help of above decision, he would argue that when the applicant failed to appoint Nodal Officer to get clearance from SEZ authority or appointment of Security personnel, then, it cannot insist for submission of combined PERT chart. According to learned counsel, the respondent has claimed that it has incurred a sum of Rs.1,73,60,387/- towards payment of design and Shop drawings and as far Bank guarantee is concerned, it has sought for an amount of Rs.4,40,660/- for the maintenance of Bank guarantee. However, learned Arbitrator has restricted its claim No.1 to an extent of Rs.4,00,000/-, which according to me is correct. Therefore, according to him, learned arbitrator has not acted as per the reference and evidence adduced before the Tribunal. As far as claim No.3 relating to compensation for loss at the rate of Rs.1,48,35,181/- is concerned the same can be rejected and according to learned counsel it is highly incorrect and requires to be interfered. The claim No. 4 i.e., relating to expenditure incurred and compensation regarding the same at the rate of Rs.5,38,07,741.54, which was restricted by learned arbitrator to an extent of Rs. 2,40,000/-. The amount paid towards vacant land obtained by the respondent for dumping materials, etc., the learned arbitrator has not considered the documents like balance sheet and accounts filed before the 25 Com.A.S.23/2017 Registrar of Companies to arrive at the compensation claimed under claim No.4. The claim No. 5 relates to compensation for loss of earning profit by the respondent to the tune of Rs.5,20,81,163/-. The lumpsum amount of Rs.10,00,000/- was awarded, which was strongly opposed by the applicant herein on the ground that the respondent is not entitled to the same. Regarding the decision on various claims, learned counsel would argue how the loss has to be assessed. In the said regard he relies upon the decision in the case of State of Kerala Vs. K Bhaskaran decided in AS No.206/1978, wherein, it is specifically stated that the defendant is liable only for "natural and proximate consequences of a breach or those consequences, which were in the parties' compensation at the time of contract". So, according to learned counsel for the respondent, the compensation awarded by learned Arbitrator is insufficient and learned Arbitrator has not followed the provisions of Sec. 17(c) of the Contract Act, which is one of the grounds to challenge the Award under Section 34 of the Act. Further, he relies upon the decision in the case of Dwaraka Das Vs. State of M.P and another para Nos.6 and 7 come to the conclusion that how the damages can be granted in case of breach of contract. When there is evidence to show that the 26 Com.A.S.23/2017 breach has been committed under the law and terms of the agreement. Though, the respondent walked away from the contract, on account of non-cooperation of the applicant herein and therefore, the award granted relating to damages is insufficient and requires to be modified. Now, coming to this aspect, when we peruse the award, learned Arbitrator has specifically traversed this aspect. In para No.67 to 72 and referred to various documents i.e., Ex.R93 and e-mail dated 19.6.2012 at Ex.R2 and other documents and specifically referred to Section 73 of the Contract Act to come to conclusion that when damages can be awarded. He has specifically discussed the argument canvassed by learned counsel for the respondent and rejected the claim No.3 stating that the respondent is not entitled to damages as it has been mitigated. Regarding claim Nos. 4 and 5, it has granted partly it has been attacked by the applicant herein on various grounds. Of course, the reason assigned by learned Arbitrator may not be too lengthy, but, learned Arbitrator has arrived at a fair conclusion based on the documents produced at Ex.P 80, 81, 84, 85 and 86 etc. Now, the question is whether this observation can be interfered under Section 34 of the Act. To support his arguments, learned counsel for the respondent would cite the 27 Com.A.S.23/2017 decision in the case of Oil and Natural Gas Construction Company Pvt. Ltd., Vs Saw Pipes Ltd., reported in 2003 (5) SCC 705, wherein their lordship have categorically held that when an award can be set aside. In para No.74 it is specifically stated when Arbitration award can be set aside.
74."The award could be set aside if it is against the public policy of India, that is to say if it is contrary a) fundamental policy of Indian law, or b) the interest of India; c) justice or morality; or d) if it is patently illegal"
and also other grounds available under Sec. 34.
10. Further, he cited another decision in the case of Associate Builders Vs. Delhi Development Authorities, reported in (2015) 3 SCC 49. In the said decision also, their lordships have held about need of judicial approach to determine the real controversy between the parties. In para No.29 of the said Judgment, their lordships have held that if the award is against the fundamental policy of Indian law and how that has to be appreciated as stated in Para No.29 and it is stated that:
"It is clear that the juristic principle of a "judicial approach" demands that a decision be fair, reasonable and objective. On the obverse side, anything arbitrary and whimsical would obviously not be a determination which would either be fair, reasonable or objective".28
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11. Even, in the above decision, it has been specifically stated that when an Arbitration Award can be set aside. So, with the help of these two decisions, he would argue that learned Arbitrator has not followed the procedure for determination of damages or compensation and no importance is given to Section 73 and 74 of Contract Act and other relevant provisions of the Act. So, when the Arbitrator has failed to followed the procedure as well as failure to consider the law laid down by the Apex Court and also the law of the land, then it amounts to patent illegality. When award suffers from patent illegality, it can be set aside under Section 34 of the Act. So, according to him, when there is claim for damages and compensation, which has been rejected without proper reason, then it can be interfered by the Court. No doubt, the Arbitrator has not given much reason, but he has given reasons for conclusion, why he has granted less compensation and damages and rejection of claim No.3 Therefore, this Court not being a Court of Appeal cannot set aside award passed by learned Arbitrator. The award can be set aside only if it is opposed to the public policy or suffers from any illegality or against the interest of India or that the applicant or respondent makes out the grounds available under Section 34(1) (2) of the 29 Com.A.S.23/2017 Act. Both are well versed in the litigation and conducting a regular business and therefore, he cannot attack the Award under Section 34(1)(2) of the Act. So, in view of the above fact, I am of the view that the above decisions are of no helpful to the respondent to show that learned Arbitrator has committed error in partly allowing claim No.1, 4 and 5 and rejection of claim No.3.
12. As far as costs is concerned, he would argue that he has mobilized men and materials, which has been accepted by learned Arbitrator and even for removal of the materials from the SEZ area, it took sufficient time and which has caused loss to the respondent. Therefore, by keeping in mind, all these aspects, Arbitrator has awarded the cost to be borne by the applicant relating to the cost of the Arbitration proceedings. Learned Counsel for applicant has failed to show that a false or frivol0us claim has been made. Nothing is elicited from the mouth of PW1 and 2 about falsity of claims. Therefore, decisions cited by the learned counsel for applicant regarding costs are not helpful to him. As far as grant of compensation at Rs.10,00,000/-, of course reason is insufficient, but, I do not find any mistake in the said order for the reason that we have to see each claim by its own perspective and when we peruse the 30 Com.A.S.23/2017 documents, series of e-mails and evidence adduced before the Tribunal, one thing is clear that the respondent has made an attempt to bring the materials and see that work is done on time but, for various reasons, he could not finish and therefore the award of Rs.10 lakhs is not exorbitant as contended by the applicant.
13. Now, coming to the maintainability of the above suit, according to the learned counsel for the respondent the suit A.S No.23/2013, came to be filed on 30.1.2017, award was passed on 20.8.2016, but if we take into consideration the date as 20.8.2016, then, it is barred by time. But, the above arguments cannot be accepted for the reasons that the award was modified on 7.11.2016 and application came to be filed within time, and said arguments cannot be accepted.
14. When we peruse the overall materials produced before learned Arbitrator and before the Court with reference to the various decision as stated above, I am of the view that there is no illegality committed by the Arbitrator either in following procedure or answering to the reference made to him. As far as the delay in counter claim is concerned, the same is not applicable to the present case and that counter claim was made in AC No.11/2013 only. The applicant has not made out any 31 Com.A.S.23/2017 grounds so as to set aside the award. Therefore, I am of the view that, the applicant has failed to make out grounds under Section 34 of the Act to set aside the Award . Accordingly, I answer point No.1 and 2 in the Negative.
15. Point No.2 :- For the aforesaid reasons, I proceed to pass the following Order.
ORDER The suit/petition filed by the applicant U/S. 34 of Arbitration & Conciliation Act, 1996 is dismissed. No costs.
Return the L.C.R to Arbitration Centre (Dictated to the Stenographer, typed by him, corrected and then pronounced by me through V.C on this the 9th day of June, 2021).
(CHANDRASHEKHAR U), LXXXVII Addl.City Civil & Sessions Judge, (Exclusive dedicated commercial Court) Bengaluru.
sk 09.06.2021 P 1- R1- R2 -
32 Com.A.S.23/2017 For Judgment The Judgment is pronounced through V.C vide separate Judgment. The operative portion of the said Judgment is as follows :- ORDER The suit/petition filed by the applicant U/S. 34 of Arbitration & Conciliation Act, 1996 is dismissed. No costs. Return the L.C.R to Arbitration Centre LXXXVII ACC&SJ, B'LURU.