Delhi District Court
National Cooperative Consumer ... vs Prem Shankar Sole Prop Of Chetna ... on 9 June, 2025
IN THE COURT OF SH. SANDEEP YADAV,
DISTRICT JUDGE (COMMERCIAL)-03, SOUTH,
SAKET COURTS, NEW DELHI
OMP (Comm) 2/2025
CNR NO. : DLST01-000748-2025
National Cooperative Consumers Federation of India Ltd.
3, August Kranti Marg
NCUI Complex
New Delhi-110016
..... Petitioner
Versus
1. Prem Shankar
Sole Proprietor of M/s. Chetna Electricals
Office - 28/6, Pushta Road
West Karawal Nagar
Delhi-110094
..... Respondent no.1.
2. Roshan Lal Goel
Sole Arbitrator
DU-33, Pitampura
Delhi-110034 ..... Respondent no 2.
Date of institution of suit : 16.01.2025
Date of reserving judgment : 04.06.2025
Date of pronouncement : 09.06.2025
JUDGMENT
1. This petition under Section 34 of Arbitration & Conciliation Act, 1996 filed by National Cooperative Consumers Federation of India Limited is directed against the arbitral award dated 23.09.2024. Relevant OMP (Comm) 2/2025 1/23 facts necessary for disposal of this petition may be briefly noted down as under :-
2. Respondent, proprietor of M/s. Chetna Electricals, was awarded the work of redevelopment of Okhla office space vide letter dated 04.03.2021 by the petitioner. Offer of respondent was accepted by petitioner vide letter dated 13.04.2021 and thereafter, agreement dated 22.06.2021 (MOU) for execution of said work of redevelopment was executed between the parties. Total amount of work was Rs. 83,90,282.25 (civil & interior) & Rs. 23,12,168/- (electrical) i.e. total Rs. 1,07,02,448.25 for the entire work. The starting date of work was 13.04.2021 and original direction for the completion of said work was 6 months. The site was handed over by petitioner to respondent on 07.07.2021 i.e. almost 3 months after the commencement of maximum period of 6 months counted from LOA dated 13.04.2021. Subsequently, various communications were exchanged via e-mails between the parties regarding performance of terms & conditions of agreement dated 22.06.2021. It can be seen from these communications that both parties raised certain issues viz. Digging the foundation of column from a minimum dept of 1.5 to 2 feet or more, furnishing structural calculation for the drawing, etc. After various communications were exchanged between the parties, petitioner vide letter dated 14.03.2022 terminated the contract. It was the case of respondent before ld. Arbitrator that respondent has done everything to seek cooperation of petitioner and approval for design, drawing, calculation of structural drawing to ensure safety of the building but petitioner was never found interested in the OMP (Comm) 2/2025 2/23 execution of work. It was also the contention of respondent before ld. Arbitrator that contract had expired much earlier i.e. on 12.10.2021 without any extension. Respondent raised following claims before ld. Arbitrator :-
Claim No. 1 - A sum of Rs. 4,67,379/- being the measured work jointly conducted by the parties after the alleged termination on 14.03.2022 which has been claimed by the Claimant.
Claim no. 2 - The EMD of Rs. 1.00.000/- has been claimed by Claimant as the termination invoked on 14.03.2022 when the contract was not alive or in existence.
Claim no. 3 - A sum of Rs. 10,23,506/- being claimed on account of loss of profit on the balance work of Rs. 1,02,35,069/- (the calculations of the said claim of the claimant is in, claim no. 3 of the SOC) Claim no. 4 - A sum of Rs. 4,4 1,860/- being the miscellaneous expenditure incurred by the Claimant which includes for preparation of technical designs/ drawings & calculations, etc. has been claimed by the Claimant.
Claim No. 5 - Pre suit, pendent lite & future interest @12% p.a. from due to till date of actual payment has also been Claimed by the Claimant.
OMP (Comm) 2/2025 3/23Claim No. 6 - Rs. 2,00,000/- being the cost of arbitration is also Claimed by the Claimant.
Claim No. 7 - GST of the amount of Rs. 4,40,000/- being 18% on Claim No. 1, Claim 3, Claim No. 4, has also been Claimed by the Claimant.
3. Petitioner, on the other hand, took the plea before ld. Arbitrator that respondent has failed to abide by time line given in the agreement dated 22.06.2021 and has also not performed various other obligations under the agreement. Hence, petitioner was justified in terminating the agreement dated 22.06.2021. Petitioner also filed counter claim with following claims before ld. Arbitrator :-
Counter Claim No. 1 - The Respondent/ Counter Claimant has claimed a sum of Rs.21,74,093.92/- on account of cost of repairing and retrofitting for redeveloping damaged infrastructure.
Counter Claim No.2 - The Respondent has also claimed a sum of Rs. 1,00,98,000/- on account of different heads i.e. for loss of Rent of alternative accommodation taken by the respondent.
Counter Claim No.3 - The Respondent has also claimed liquidated damages of Rs. 10,74,444/- (10% of the contract agreement).OMP (Comm) 2/2025 4/23
Counter Claim No.4 - The costs of Rs. 2,00,000 on account of litigation has been claimed by the respondent.
Counter Claim No.5 - Respondent has also claimed pendente lite interest of 18% per annum on Counter Claim no. 1, 2 and 3.
4. Following issues were framed by ld. Arbitrator in the claim petition:-
(i) Whether the claimant is entitled to Claim no.I to Claim no 7 ?
OPC
(ii) Whether the Claimant is entitled to any interest over the aforesaid claims lodged by the Claimant, if yes, at what rate of interest and from which period to which period? OPC.
(iii) Whether the Agreement in question has been rightly terminated by the Respondent regarding the Redevelopment work undertaken by the Claimant? OPR
5. Vide order dated 15.03.2024, ld. Arbitrator also framed following issues in the counter claim:-
(i) Whether the Respondent being the Counter Claimant is entitled to pass an Award to the tune of Rs. 1,41,07,53 7.92/- against the Claimant being Respondent in the Counter Claim? OPR.OMP (Comm) 2/2025 5/23
(ii) Whether the Respondent being the Counter Claimant is entitled to the interest @ 18% p.a. for the aforesaid amount against the Claimant?
OPR.
(iii) If. the Respondent being the Counter Claimant is entitled to the aforesaid rate of interest as specified in issue No. 2 then from when and to which rate the Respondent being Counter Claimant is entitled to against the Claimant? OPR.
(iv) Whether the Counter Claim is liable to be dismissed being false, frivolous, and vexatious? OPC.
6. Vide impugned award dated 23.09.2024, ld. Arbitrator held that a sum of Rs. 2,97,000/- is payable by petitioner to the respondent under claim no. 1, that respondent is entitled to get refund of earnest money deposit of Rs. 1 lacs from the petitioner under claim no. 2, claim no. 3 was partly allowed granting respondent profit to the extent of 6 % of balance work of Rs. 1,02,35,069/-. Ld. Arbitrator under claim no. 4 granted a sum of Rs. 2 lacs in lumpsum to the respondent, awarded interest @ 9 % under claim no. 5 and under claim no. 6 a sum of Rs. 1 lac was awarded as litigation expenses to the respondent. All the claims raised by petitioner in the counter claim were rejected by ld. Arbitrator.
OMP (Comm) 2/2025 6/237. I have heard Ms. Anju Bhattacharya, ld. Counsel for petitioner as well as Mr. Sanjoy Bhaumik, ld. Counsel for respondent, at length and considered the record.
8. Mr. Sanjoy Bhaumik, ld. Counsel for respondent, during the course of arguments raised the contention that present petition has been filed beyond the stipulated period of 3 months from the date of award and hence, same is barred by limitation. Present petition under Section 34 of Arbitration & Conciliation was filed electronically 14.01.2025. The arbitral award was passed on 23.09.2024. It is stated in para 16 of the petition that petition has been preferred within the limitation period as prescribed under Arbitration & Conciliation Act, 1996. It is further stated that petition was filed by petitioner on 18.12.2024 vide e-filing bearing no. ADL20230014838D20240009 and on 13.01.2025, scrutiny officer raised an objection regarding territory jurisdiction. Therefore, petitioner has not specified as to when petitioner came to know about the arbitral award. According to Section 34 (3) of Arbitration & Conciliation Act, 1996 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 the date on which that request had been disposed of by the arbitral tribunal. Proviso to clause 3 to Section 34 provides 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.
OMP (Comm) 2/2025 7/239. It is, therefore, obvious that the petition was filed beyond the stipulated period of 3 months. No ground has been putforth by the petitioner to satisfy the Court that petitioner was prevented by sufficient cause from making the application within such period of 3 months. The natural conclusion is that petition was not filed within the stipulated period of 3 months provided under Section 34 of Arbitration & Conciliation Act and same is accordingly dismissed on the ground of limitation.
10. The impugned award dated 23.09.2024 is challenged by petitioner mainly on the following grounds :-
(a) Findings of ld. Arbitrator that termination of contract was illegal suffers from patent illegality. Ld. Arbitrator has failed to take into consideration that work undertaken by respondent pertains to EPC (Engineering Procurement and Construction Contract) to redevelop office space of petitioner within specific time frame.
(b) Ld. Arbitrator committed patent illegality by awarding damages in complete disregard of clause 6 (b), 7, 9 and 21 of agreement dated 22.06.2021.
(c) Ld. Arbitrator failed to take into consideration correct facts, documents and evidence filed by petitioner and the fact that respondent before execution of agreement dated 22.06.2021 agreed with petitioner in OMP (Comm) 2/2025 8/23 letter dated 04.03.2021 to carry RCC construction instead of M.S. Steel structure yet he did not submit revised technical layout/design and calculation for construction as per RCC structure.
(d) Ld. Arbitrator did not take into consideration the contrary stand taken by respondent regarding extension of agreement beyond 12.10.2021.
(e) Ld. Arbitrator awarded an amount of Rs. 2,97,000/- to the respondent under claim no. 1 in complete disregard of the fact that the termination was not illegal as was evident from the evidence adduced in the matter.
(f) The arbitral award has been passed in complete disregard of terms of contract, pleadings and testimony of witnesses.
(g) Ld. Arbitrator granted Rs. 6,14,105/- (6 % of balance work of Rs. 1,02,35,069/-) to the respondent towards loss of profit without respondent having adduced any evidence that petitioner took all necessary steps to mitigate loss for which claim on account of loss of profit was made.
(h) Ld. Arbitrator committed patent illegality by allowing a sum of Rs. 2,00,000/- in lumpsum against the claim of Rs.4,41,860/- raised by respondent on account of consultation fee, guard salary, supervisor salary, OMP (Comm) 2/2025 9/23 etc. as same was in complete contravention of clause 6 (b) of the agreement.
(i) The impugned award is vitiated on the ground that work was not done in terms of terms of contract resulting in delay and consequent termination of contract. Petitioner was entitled to recover liquidated damages which was disallowed by ld. Arbitrator and therefore, the award is contrary to Section 28 (3) of Arbitration & Conciliation Act.
11. As can be seen from the grounds of challenge set out in the petition, petitioner is challenging the findings and conclusion of the ld. Arbitrator mainly on ground that same are not based on any evidence and that ld. Arbitrator has not discussed or taken into consideration any of the provisions of the agreement between the parties. In other words, the arbitral award is challenged mainly on the ground that the same suffers from patent illegality.
12. The respondent under claim no. 1 has prayed for a sum of Rs. 4,67,379/- being the measured work jointly conducted by the parties after the termination of the contract on 14.03.2022. While deciding this claim, ld. Arbitrator referred to the deposition of the CW-1 Prem Shanker who supported the version of claimant. It transpires from the deposition of CW-1 that respondent raised certain bills against the work done by the respondent qua the total work granted by the petitioner and for verification and measurement for the said work done by the respondent, the work was jointly inspected. Ld. Arbitrator has referred to the OMP (Comm) 2/2025 10/23 deposition of RW-1 Chanchal Sharma during the course of examination wherein RW-1 has admitted that joint measurement of the work done by the respondent was conducted and on verification of work already done by the respondent, the bill for a sum of Rs.2,97,000/- was rightly found to have been done by the said respondent. The petitioner objects to the award of Rs.2,97,000/- to the respondent under Claim no. 1 on the ground that the same is not based on any evidence or document. However, the said amount has been admitted by RW-1 himself in deposition. According to Section 58 of Indian Evidence Act, the facts admitted need not to be proved. Once this vital admission was made by RW-1 nothing more was required by the respondent to prove the amount due from the petitioner. Reference is also made in the award to the fact that performance guarantee of 5% the total contract work was not deposited by the respondent. However, it is observed in the award that the moment the site in question was handed over to the claimant for the commencement of the work, then depositing of said 5% performance guarantee will be deemed to have been waived off/ condoned by the respondent. This is a finding of the fact and a just conclusion arrived at by the ld. Arbitrator and the same cannot be faulted with. The petitioner never insisted for depositing of performance guarantee before handing over the site to the respondent. Hence, the same is deemed to have been waived off. Further, CW-1 Prem Shankar has clarified that the amount of Rs.1,00,000/- of EMD was deemed to be converted in performance guarantee by the respondent and hence, the respondent cannot be blamed for non depositing of such performance guarantee. This again is a finding of facts OMP (Comm) 2/2025 11/23 based on the deposition of CW-1 which cannot be interfered with within the purview of Section 34 of the Arbitration & Conciliation Act, 1996.
13. The respondent also sought the refund of EMD of Rs.1,00,000/- and same is covered in Claim No.2. Claim no.2 is intrinsically connected with the findings of ld. Arbitrator on issue no.3 and hence, both are being taken up together. The third issue framed by the ld. Arbitrator was whether the contract in question has been rightly terminated by the petitioner regarding the redevelopment work undertaken by the respondent. In this regard, the facts are clear, admitted and undisputed. The agreement between the parties was executed on 22.06.2021 and the letter of offer was issued on 13.04.2021 i.e. almost three months after the commencement of maximum period of six months calculated from letter of allotment dated 13.04.2021. It is not the case of petitioner that the work was extended beyond 12.10.2021. Ms.Anju Bhattacharya, the ld. Counsel for the petitioner, submitted that according to the petitioner, the contract was extended beyond 12.10.2021. However, RW1 Chanchal Sharma has admitted the fact that there was no extension of period beyond 12.10.2021. Therefore, this submission of ld. Counsel for the petitioner goes against the deposition of RW1. The work was to be completed within six months from 13.04.2021. Thus, the duration of the agreement was till 12.10.2021. The petitioner terminated the contract on 14.04.2022 on which date the agreement did not exist. The petitioner could have terminated the agreement on or before 12.10.2021 and not thereafter. Ld. Counsel for the petitioner as well as ld. Arbitrator in this regard has rightly referred to judgment given in Hind Construction Vs,.
OMP (Comm) 2/2025 12/23State of Maharashra reported at AIR 1979 SC 720. In this case, it was held and observed as under:
"It appears that the appellant- plaintiff had an interview with the Superintending Engineer on August 24, 1956 when a written representation (Ex. 99) was handed over and the whole position was sought to be explained to the Superintending Engineer but within three days of the interview by the letter dated August 27, 1956 (Ex. 78) the contract was rescinded and the full security deposit was forfeited to Government. It will thus appear clear that though time was not of the essence of the contract, the respondent-defendant did not fix any further period making time the essence directing the appellant- plaintiff to complete the work within such period; instead it rescinded the contract straightaway by letter dated August 27, 1956. Such recision on the part of the respondent-defendant was clearly illegal and wrongful and thereby the respondent-defendant committed a breach of contract, with the result that there could be no forfeiture of the security deposit."
14. Thus, the ratio laid down in this case is squarely applicable to the facts of the present case and it is held that the termination of agreement vide letter dated 14.03.2022 was rightly declared as illegal by the ld. Arbitrator. Once, it is held that the petitioner terminated the agreement in an illegal manner, the petitioner had no right to forfeit the earned money deposit of Rs.1,00,000/- deposited by the respondent to the petitioner. The contention of petitioner that EMD of respondent has been forfeited as the petitioner has failed to complete the work within 6 months is liable to be rejected as the petitioner handed over the site to the respondent after 85 days from date of LOA i.e. 13.04.2021. In this context, it was rightly observed by ld. Arbitrator that question of completing the work by the respondent within the stipulated period of 6 months do not arise at all. No OMP (Comm) 2/2025 13/23 fault can be found with the finding in the arbitral award that forfeiture of EMD amount of Rs. 1,00,000/- is illegal.
15. Ms. Anju Bhattacharya, ld. Counsel for petitioner, submitted that the Sole Arbitrator should have adjudicated as to whether time was of the essence of contract. As discussed above, it was admitted by RW 1 Chanchal Sharma that no extension of time between 12.10.2021 was granted by petitioner to the respondent. In light of these admissions made by witness of petitioner, there was no need for ld. Arbitrator to decide the issue as to whether time was of the essence of contract.
16. Ms. Anju Bhattacharya, ld. Counsel for petitioner, further submitted that the Sole Arbitrator did not go into the issue as to whether respondent has fulfilled all the conditions of contract. It can be discerned from the impugned award that parties were at loggerheads with each other regarding various issues raised by them in different e-mails exchanged between them and when issue raised in those e-mails were not resolved, petitioner terminated the contract vide letter dated 14.03.2022. Termination of work has been held to be illegal by ld. Arbitrator and same has been upheld by this Court in subsequent part of this judgment.
17. The respondent in claim no. 3 claimed an amount of Rs. 10,23,506/- on account of loss of profit of balance work of Rs. 1,02,35,069/-. Respondent claimed the amount on account of loss of profit @ 10 % of the total work order which was to be completed by the respondent, had the petitioner not terminated the work contract and OMP (Comm) 2/2025 14/23 further if the petitioner would have extended the period of completion of entire work beyond 12.10.2021. In this regard ld. Arbitrator after referring to judgment given in Dwarka Dass Vs. State of M.P. & Anr., (1999) 3 SC 500 and M/s. MSK Projects (I) (JV) Ltd. Vs. State of Rajasthan & Anr. (2011) 10 SCC 523, and held that atleast 5 to 7.5 % of the entire work as the profit is permissible but there is no strict guidelines to the same effect and ultimately the Arbitrator awarded the profit @ 6 % on the unexecuted work of Rs.1,02,35,069/- in favour of respondent and against the petitioner.
18. It is the contention of petitioner that no amount could have been awarded to the respondent under this head as the respondent failed to prove that any loss was caused to the respondent on account of termination of the contract by the petitioner. Ms. Anju Bhattacharya, ld. Counsel for the petitioner, in this regard relied upon Union of India Vs. Ahluwalia Contracts (India) Ltd. and Municipal Corporation of Delhi Vs. Satyapal Gupta decided by the Hon'ble High Court of Delhi. In Union of India (supra), the claim of the respondent for a sum of Rs.4,80,3560/- on account of loss of profits was rejected by the arbitral tribunal on the ground that (a) it was not supported by any provision under the contract;
(b) that the loss of profit is based on a conclusion that is hypothetical and unreal and (c) that the respondent's entitlement to the compensation is confined to the additional expenses incurred on account of prolongation of contract along with mark up 15% wherever is applicable and the aforesaid findings of the arbitrator were upheld by the Hon'ble High Court in this case. It was held in para 53 of these judgments as under:-
OMP (Comm) 2/2025 15/23"As noted above, the respondent has not led any evidence to establish that it had suffered any loss of profits on account of prolongation of works. As noted above, it merely imputed the monthly profits that it would have earned from the Contract in question and assumed that it would have earned similar monthly profits during the period for which the Contract was performed."
19. Reference in this judgment was also made to the decision of Hon'ble Supreme Court of India in Bharat Cooking Oil Ltd. Vs. L.K.Ahuja wherein, it was held that unless a plea of loss of profits is raised and established, the claim for loss of profit could not have been granted.
20. In Municipal Corporation of Delhi Vs. Satypal Gupta (supra), it was held that as under in para 27 :-
"27. A plain reading of the claims indicates that the Contractor had based its computation on the assumption that his profit margin was 10% of the value of the Contract. He, accordingly, worked out the quantum of profit that he would have earned per month by dividing the value of the work over the term of the Contract. He then multiplied the hypothetical figure of monthly profit with the period of delay in completion of the Contract. According to the Contractor, the delay was for a period of sixty months. Therefore, he claimed that he was entitled to the quantum of monthly profit as worked out above multiplied by the OMP (Comm) 2/2025 16/23 period of sixty months. It is at once clear that the computation of quantum of damages as calculated is flawed. First of all, there is no evidence or material to indicate that the Contractor would have earned 10% profit on the value of the work. Secondly, there is no material to indicate that if the Contract had not been prolonged, the Contractor would have been gainfully employed in another profitable contract. In Bharat Coking Coal Ltd. v. L.K. Ahuja: (2004) 5 SCC 109, the Supreme Court had held as under:
"23. Claim 8 has been rejected by the arbitrator. Now we proceed to consider Claim 9 for loss arising out of turnover due to prolongation of work. The claim made under this head is in a sum of Rs 10 lakhs. The arbitrator rightly held that on account of escalation in wage and prices of materials compensation was obtained and, therefore, there is not much justification in asking for compensation for loss of profits on account of prolongation of works. However, he came to the conclusion that a sum of Rs 6,00,000 would be appropriate compensation in a matter of this nature being 15% of the total profit over the amount that has been agreed to be paid. While a sum of Rs 12,00,000 would be the appropriate entitlement, he held that a sum of Rs 6,00,000 would be appropriate. He also awarded interest on the amounts payable at 15% per annum.
24. Here when claim for escalation of wage bills and price for materials compensation has been paid and compensation for delay in the payment of the amount payable under the contract or for other extra works is to be paid with interest thereon, it is rather difficult for us to accept the proposition that in addition 15% of the total profit should be computed under the heading "Loss or Profit". It is not unusual for the contractors to claim loss of profit arising out of diminution in turnover on account of delay in the matter of completion of the work. What he should establish in such a situation is that had he received the amount due under the contract, he could have utilised the same for some other business in which he could have earned profit. Unless such a plea is raised and established, claim for loss of profits could not have been granted. In this case, no such material is available on record. In the OMP (Comm) 2/2025 17/23 absence of any evidence, the arbitrator could not have awarded the same. This aspect was very well settled in Sunley (B) & Co. Ltd. v. Cunard White Star Ltd. [(1940) 1 KB 740 : (1940) 2 All ER 97 (CA)] by the Court of Appeal in England. Therefore, we have no hesitation in deleting a sum of Rs 6,00,000 awarded to the claimant."
21. However, in Dwarka Dass Vs. State of M.P (Supra), it was held as under: -
"Such a finding of the appellate court appears to be based on wrong assumptions. The appellant had never claimed Rs. 20,000 on account of alleged actual loss suffered by him. He had preferred his claim on the ground that had he carried out the contract he would have earned profit of 10% on Rs. 2 lacs which was the value of the contract. This Court in A.T. Brij Pal Singh and Ors. v. State or Gujarat, [1984] 4 SCC 59) while interpreting the provisions of Section 73 of the Contract Act, has held that damages can be claimed by a contractor where the government is proved to have committed breach by improperly rescinding the contract and for estimating the amount of damages court should make a broad evaluation instead of going into minute details. It was specifically held that where in the works con-tract, the party entrusting the work committed breach of contract, the contractor is entitled to claim the damages for loss of profit which he expected to earn by undertaking the works contract. Claim of expected profits is legally admissible on proof of the breach of contract by the erring party. It was observed :OMP (Comm) 2/2025 18/23
"What would be the measure of profit would depend upon facts and circumstances of each case. But that there shall be a reasonable expectation of profit is implicit in a works contract and its loss has to be compensated by way of damages if the other party to the contract is guilty of breach of contract cannot be gainsaid. In this case we have the additional reason for rejecting the con-tention that for the same type of work, the work site being in the vicinity of each other and for identical type of work between the same parties, a Division Bench of the same High Court has accepted 15 per cent of the value of the balance of the works contract would not be an unreasonable measure of damages for loss of profit.
Now if it is well-established that the respondent was guilty of breach of contract inasmuch as the rescission of contract by the respondent is held to be unjustified, and the plaintiff-contractor had executed a part of the works contract, the contractor would be entitled to damages by way of loss of profit. Adopting the measure accepted by the High Court in the facts and circumstances of the case between the same parties and for the same type of work at 15 per cent of the value of the remaining parts of the work contract, the damages for loss of profit can be measured."
To the same effect is the judgment in Mohd. Salamatullah and Ors. v. Government of Andhra Pradesh, AIR (1977) SC 1481. After approving the grant of damages in case of breach of contract, the court further held that the appellate court was not justified to interfere with finding of fact given by the trial court regarding quantification of the damages even if it was based upon guess work. In both the cases referred to hereinabove. 15% of the contract price was granted as damages to the contractor. In the instant case however the trial court had granted only 10% of the contract price which we feel was reasonable and permissible, particularly when the High Court had concurred with the finding of the trial court regarding breach of contract by specially holding that "we therefore see no reason to inter- fere with the finding recorded by the trial court that the defendants by rescinding the agreement committed breach of contract." It follows there- fore as and when the breach of contract is held to have been OMP (Comm) 2/2025 19/23 proved being contrary to law and terms of the agreement, the erring party is legally bound to compensate the other party to the agreement. The appellate court was, therefore, not justified in disallowing the claim of the appellant for Rs. 20,000 on account of damages as expected profit out of the contract which was found to have been illegally rescinded. "
22. It was further held that the grant of 10% of the contract price by the trial court was held to be reasonable and permissible. In another case reported as M/s M.S.K. Project (I) (JV) Ltd. Vs. State of Rajasthan & Anr., AIR 2011 (SC) 279, it was held in para 29 as under:-
"However, in Dwaraka Das v. State of Madhya Pradesh & Anr., AIR 1999 SC 1031, it was held that a claim by a contractor for recovery of amount as damages as expected profit out of contract cannot be disallowed on ground that there was no proof that he suffered actual loss to the extent of amount claimed on account of breach of contract."
23. The ratio laid down in aforesaid two cases is that some amount on account of loss of profit, can be granted in favour of the party aggrieved by the unlawful termination of the agreement and thus, the conclusion of the ld. Arbitrator to award the profit @ 6% on unexecuted work is just a reasonable.
24. As regards interest, the respondent claimed pendente lite and future interest @ 12% per annum. However, ld. Arbitrator restricted the rate of interest payable by the petitioner to the respondent @ 9% per annum from OMP (Comm) 2/2025 20/23 the date of termination i.e. 14.03.2022 till realization. No grievance is raised by the petitioner to the award of interest @ 9% per annum and the same is upheld.
25. The petitioner also claimed a sum of Rs.4,41,860/- on account of different heads i.e. consultation fee, guard salary, supervisor salary, lab testing, etc. However, ld. Arbitrator granted a sum of Rs.2,00,000/- in lumpsum under all the aforesaid headings relying on the judgments given in Muddasani Venkata Narsaiah (D) Th. Lrs. Versus Muddasani Sarojana, (2016) 12 SCC 288. The judgment given in Muddasani Venkata Narsaiah (D) Tr. LRs vs Muddasani Sarojana (supra) (relied upon by ld. Counsel for petitioner) is not applicable to the fact of present case and reliance on same was misplaced. Ld. Arbitrator has not referred to any evidence oral or documentary while granting a sum of Rs. 2 lacs in lumpsum on account of different heads i.e. consultation fee, guard salary, supervisor salary, etc. Therefore, grant of Rs.2 lacs to the respondent under these heads cannot be sustained. Accordingly, conclusion of Ld. Arbitrator on claim no. 4 is set aside.
26. The respondent also claimed cost of litigation of Rs.3,74,000/-. However, ld. arbitrator granted a lumpsum amount of Rs.1,00,000/- under this head and no challenge is laid to the grant of Rs.1,00,000/- as litigation expenses to the respondent.
27. Sofar as claims of petitioner raised in the counter claim are concerned, only challenge laid by petitioner in the petition under Section OMP (Comm) 2/2025 21/23 34 of Arbitration & Conciliation Act is that the impugned award is vitiated on the ground that work was not done in terms of terms of contract resulting in delay and consequent termination of contract. Petitioner was entitled to recover liquidated damages which was disallowed by ld. Arbitrator and therefore, the award is contrary to Section 28 (3) of Arbitration & Conciliation Act. Respondent cannot be blamed for delay in execution of terms of contract as petitioner itself caused delay of 85 days in handing over the site to respondent. Thus, respondent was practically left with three months to complete the work under the agreement. It is, therefore, obvious that respondent cannot be blamed for delay in execution of work.
28. As regards, claim on account of rent, ld. Arbitrator has rightly held that no evidence was led by petitioner about payment of rent to landlord as claimed in the counter claim.
29. The Court, after going through claims of petitioner in the counter claim and findings of ld. Arbitrator thereon, comes to the conclusion that same cannot be challenged on any of the grounds enumerated under Section 34 of Arbitration & Conciliation Act.
30. Grant of Rs. 2 lacs by the Sole Arbitrator in respect of claim no. 4 is liable to be set aside. In Gayatri Balasamy Vs. M/s. ISG Novasoft Technologies Limited, Civil Appeal @ S.L.P.© Nos.15336-15337 of 2021, Hon'ble Supreme Court has held that Court has a limited power under Section 34 and 37 of 1996 Act to modify the arbitral award. It OMP (Comm) 2/2025 22/23 was further held that this limited power may be exercised when the award is severable by severing the 'invalid' portion from the 'valid' portion of the award, as held in para II of analysis.
31 However, since, it has already been held that petition is barred by limitation, the impugned award dated 23.09.2024 is upheld.
Arbitral record be sent back.
File be consigned to Record Room.
Digitally signed by SANDEEP YADAVSANDEEP Date:
YADAV 2025.06.09
Announced in the open court 17:32:31
+0530
on 09.06.2025 ( Sandeep Yadav )
District Judge (Commercial)-03
South, Saket Courts, New Delhi.
OMP (Comm) 2/2025 23/23