Bangalore District Court
Gammon India Limited vs Sobha Projects & Trade Pvt. Ltd on 1 October, 2021
IN THE COURT OF THE LXXXIII ADDITIONAL CITY CIVIL
AND SESSIONS JUDGE AT BENGALURU CITY [CCH84]
:Present:
Ravindra Hegde,
M.A., LL.M.,
LXXXIII Addl. City Civil & Sessions Judge,
Bengaluru
Dated on this the 1st day of October 2021
COM.A.S.No.44/2019
Plaintiff Gammon India Limited,
having its registered office at:
Floor 3rd, Plot No.3/8, Hamilton House,
J.N.Heredia Marg, Ballard Estate,
Mumbai400038.
(By Sri.M.K.K.R, Advocate)
// versus //
Defendants 1. Sobha Projects & Trade Pvt. Ltd.,
having its registered office at
23/1, Sonnenahalli, Brook Field,
Mahadevapura Post,
Bengaluru560048.
Represented by its
Authorized Signatory
Aravinda Hegde,
Assistant Genreal Manager Accounts.
2. Sri. Jayant Patel,
Former Judge,
High Court of Karnataka
C/o Arbitration & Conciliation Centre,
(Domestic & International)
2
CT 1390_Com.A.S.442019_Judgment .doc
III Floor, East Wing, "Khanija Bhavan"
Race Course Road,
Bengaluru560001.
(By Sri.A.N, Advocate)
Date of Institution of the : 15/03/2019
suit
Nature of the suit : Arbitration Suit
Date of commencement of :
recording of the evidence
Date on which the : 01/10/2021
Judgment was pronounced.
: Year Month/ Day/s
Total duration /s s
02 06 16
JUDGMENT
This petition under Section 34 of the Arbitration & Conciliation Act is filed by the plaintiff praying to set aside the award dated 4/12/2018 passed by 2 nd defendant in the dispute between plaintiff and 1st defendant.
2. The brief facts of the case is as under:
The plaintiff entered into a work contract agreement with Godrej Buildwell Private Limited (GBPL) on 18/4/2012 for construction of Civil, Architecture, PHE, FPS, Electrical and external works for a residential building named as "Godrej Platinum". The plaintiff assigned sub contracts of some of the works to 1st defendant and four subcontracts are 3 CT 1390_Com.A.S.442019_Judgment .doc entered, among which the contract for Fire Detention and Alarm is dated 3/1/2014 and other three contracts are dated 27/9/2013. In terms and conditions of sub contracts, the 1 st defendant furnished five mobilization bank guarantees (MBG) and also four performance guarantees (PBG). The employer of the plaintiff i.e. GBPL and the plaintiff had some dispute in respect of main contract and GBPL has terminated the contract. Accordingly Plaintiff terminated sub contracts with 1st defendant. Thereafter, plaintiff invoked 3 MBGs given by 1st defendant, in terms and conditions stipulated in the sub contract agreement. Before remaining MBGs could be invoked by the plaintiff, 1st defendant approached City Civil Court by filing application under Section 9 of the Arbitration & Conciliation Act in A.A.No.58/2016 and the said application was allowed in part. Regarding dispute between plaintiff and defendant, on invoking of MBG and PBG, dispute was raised by the plaintiff and a petition was filed in CMP No.295/2016 for appointment of the Arbitrator. The Hon'ble High Court appointed 2nd defendant as learned Arbitrator for resolution of the dispute between the parties. Before the learned Arbitrator, claim petition and statement of objection were filed. Issues were framed and thereafter after hearing both the sides the learned Arbitrator has passed the award on 4/12/2018 and partly allowed the claim petition in favour of the 1st defendant and held that the 1 st defendant is entitle to recover a sum of Rs.83,62,027/ from the plaintiff and plaintiff can set off an amount of Rs.12,36,101/ being 4 CT 1390_Com.A.S.442019_Judgment .doc return of advance payment due by 1 st defendant and held that 1st defendant is entitle to recover remaining amount of Rs.71,25,926/ with interest @18% per annum from 30/8/2015 to 14/9/2018 and from 15/9/2018 @10%. Learned Arbitrator has also held that plaintiff has no right to invoke uninvoked MBG and also PBG. The learned Arbitrator has also held that 75% of the cost incurred by the claimant for administrative fees, Arbitrator fees etc. and 100% of the expenses spent towards transportation, conveyance, food, stay charge etc on actual basis to be paid by plaintiff apart from paying Rs.75,000/ towards advocate fees and incidental and legal expenses.
3. Being aggrieved by this award, plaintiff who was respondent before the learned Arbitrator has filed present petition on various grounds. The plaintiff has contended that the award is perverse and bad in law and is contrary to the settled principles of law and travels beyond the scope of Arbitration Agreement and is in conflict with public policy of India and is liable to be quashed and set aside. The plaintiff also contended that the award is exfacie, perverse and travels beyond the statement of claim as though the claim was only on the basis of wrongful invocation of the bank guarantee and there is no proceeding filed for recovery of money for work done under the contract, award proceeds on the basis that the defendant had completed work upto Rs.83,62,027/ and therefore there was an amount due and 5 CT 1390_Com.A.S.442019_Judgment .doc payable by the plaintiff to the defendant and consequently entire amount of MBG could not be appropriated. It is stated that the work done and amounts due and payable have no bearing or relationship with the encashment of the bank guarantee and as it was unconditional and only to secure the mobilization advance made by the plaintiff to the defendant subject to recovery. It is stated that as conditions for repayment of the mobilization advance had not been met, plaintiff was absolutely entitled to encash MBG. The plaintiff also contended that learned Arbitrator erred in distinguishing an acknowledgement of a bill raised by the subcontractor with that of certification of the same. It is stated that the learned Arbitrator has considered Ex.C.9 and Ex.C.11 as counter signed and are certified by the officer of the plaintiff and this finding is against the natural justice and the public policy and is against the trade custom. It is also stated that the learned Arbitrator has erred in interpreting the terms and conditions accepted between the parties. It is also contended by the plaintiff that the award is perverse and the learned Arbitrator has travelled beyond the scope of the agreement and erred in holding that the plaintiff has no right to invoke the uninvoked bank guarantees without any plea of fraud and special equities or irretrievable injury. It is stated that the award is against the public policy as, if the same is upheld it would give a wrong signal to the trade and there will be no meaning to furnishing of unconditional bank guarantees in the trade. The tribunal has also wrongly 6 CT 1390_Com.A.S.442019_Judgment .doc interpreted clause 34 and clause 9 and failed to notice a contract that the payment to be made for the work done by the defendant is based on the principle 'payment when paid' only, when the contract between the plaintiff and GBPL were to be alive but not when the same is terminated. It is stated that under clause 41 of the said contract, employer terminated the main contract as a result of which the plaintiff terminated the sub contract with the defendant and the same is totally in agreement with the terms and conditions contained in the said contract and as such the plaintiff was not required to give any reason to the defendant for the termination of the said contract. It is also contended by the plaintiff that the learned arbitrator has erred in holding that the plaintiff failed to prove that there is a collusion between GBPL and 1st defendant. It is also stated that the learned Arbitrator has failed to consider that the bills of the defendant were pending certification and no amounts were due and payable until the bills were certified by the principal employer. It is also contended by the plaintiff that the award is contrary to the bank guarantee itself. Though the bank guarantee is a separate contract and is regulated by its own terms and the bank guarantee is being unconditional, the correctness of the invocation of the bank guarantee has to be judged by the said standard and MBG was to act as security for compliance and repayment of the mobilization advance and admittedly the mobilization advance was not repaid and therefore encashing the same was justified. The plaintiff also 7 CT 1390_Com.A.S.442019_Judgment .doc stated that the amount payable to the defendant is not on the basis of invoices raised by the defendant, but on the basis of work done at the time of termination of the contract and only when the employer who terminated the main contract, makes the payment to the plaintiff and hence if no payment is received from the employer, then there is no payment to be made to the 1st defendant. It is stated that after adjusting all payments made by the defendant No.1, no amount was due and payable to the defendant No.1 and on the contrary amount of Rs.93,13,249/ was recoverable from the defendant No.1. It is also contended that MBG was given to secure the advance and as there was termination of the agreement, it could not be met and plaintiff was justified in encashing the bank guarantee and recover the said advance. It is stated by holding that MBG could only be encashed if there was no full compliance with work, the learned Arbitrator has applied standard of the performance bank guarantee to the mobilization bank guarantee. It is also stated that the award is perverse as it misplaces burden of proof on the plaintiff to show that it has not received payment from the employer and plaintiff cannot be asked to prove the negative. It is also stated that the learned Arbitrator has misapplied the principles of section 106 of the Indian Evidence Act. It is also contended that order in respect of costs is without there being any plea to that effect. It is stated that plaintiff has expressly made it clear that it will not pay expenses of the Arbitrator and cost of arbitration vide letter dated 10/8/2018 and same 8 CT 1390_Com.A.S.442019_Judgment .doc is noted on 16/8/2018 and it is on this condition the plaintiff has not preferred any appeal before the courts of law on the application filed under Section 16 of the Arbitration & Conciliation Act. It is stated that under such circumtances, learned arbitrator passing an order on costs is illegal and fit to be set aside. It is also stated that 1 st defendant has accepted and paid the entire fees of the arbitrator and not challenged the stand of the plaintiff in not accepting to pay the arbitrator's fees and inspite of such fact, the act of arbitrator imposing cost is illegal and susceptible. It is also contended that the learned Arbitrator has erred in imposing the cost of Rs.75,000/ towards the advocate fees of the defendant and incidental legal expenses is a matter beyond the scope of the arbitration. On all these grounds the award is prayed to be set aside.
4. 1st defendant has appeared and filed statement of objection and contended that the impugned award is well reasoned, follows the judicial approach and indicates application of mind on issues at hand by the learned Arbitrator and the calculations drawn by the learned Arbitrator is supported by cogent reasons. The facts of the case like, contract entered into between the parties and dispute arisen between parties and initiating of arbitration are all stated by the 1st defendant. The details of PBG and MBG are also stated and details of PBG and MBG which are already encashed by the plaintiff are also stated. It is stated 9 CT 1390_Com.A.S.442019_Judgment .doc that apprehending further invocation of bank guarantee, 1 st defendant had filed arbitration application and obtained interim order and then approached the Hon'ble High Court with CMP and learned Arbitrator is appointed. The 1 st defendant has also stated that plaintiffs not discharged the burden that impugned award is liable to be set aside for any ground mentioned in Section 34 of the Arbitration & Conciliation Act and plaintiff has failed to make out a case for interference in the award and the contention taken by the plaintiff are not maintainable. It is stated that the plaintiff seek to reexamine and analyze the impugned award based on its merits. It is stated that the contention of the plaintiff rest on challenge to the appreciation of facts, evidence and application of law and plaintiff is invoking the jurisdiction of this court to sit as an appellate court, which is not permissible. It is also stated that the plaintiff has misconstrued the prayer made in the statement of claim and has wrongly stated that the claim is filed solely on the basis that there has been a wrongful invocation of the bank guarantee, whereas plaintiff has prayed for recovery of Rs.83,62,027/ and an issue is also framed to this effect. It is stated that arbitration proceedings was instituted for the breach of the sub contracts by the plaintiff and the prayers sought for by the 1st defendant were not singularly dependent on the wrongful invocation of the bank guarantees and the prayer seeking declaratory relief concerning bank guarantees was one aspect of many prayers and therefore the 10 CT 1390_Com.A.S.442019_Judgment .doc adjudication of entitlement of the plaintiff to the amount is very well covered by the claim petition and it cannot be held that the learned Arbitrator has proceeded beyond reference. It is also stated that the learned Arbitrator has provided cogent reason for arriving at the conclusion that 1 st defendant has completed work to the extent of Rs.83,62,027/. It is stated that the learned Arbitrator has not held that there has been wrongful invocation of the bank guarantee and in fact issue No.4 is answered in the negative. It is stated that the learned Arbitrator has prevented further invocation of the bank guarantees since it was not an equitable action, as plaintiff was liable to pay Rs.83,62,027/ to the 1st defendant. It is stated that after considering the total amount of advance received and by adjusting the same in the outstanding bills and by invocation of MBG, remaining amount of mobilization advance recoverable would be Rs.12,36,101/ and same is given set off in the amount payable to 1st defendant and balance of Rs.71,25,926/ is due and payable by the plaintiff to the 1st defendant which is correct and the learned Arbitrator has rightfully prevented the encashment of remaining MBG, as, such invocation would have unduly enriched the plaintiff beyond the amount that was due. It is also stated that Ex.C.9 and Ex.C.11 are final subcontractor progress payment certificate pertaining to water supply and sanitation system works and firefighting protection system works. These documents pertains to the bills raised by the 1 st defendant towards the work done by it to the extent of 11 CT 1390_Com.A.S.442019_Judgment .doc Rs.83,62,027/ including retention amount and these bills have been certified and countersigned by the representatives of the plaintiff. To prove the claim of the 1st defendant that the work done actually amounts to the claimed amount, learned Arbitrator has relied on these documents which clearly indicates that the plaintiff has certified these outstanding bills and the claim made by 1 st defendant regarding outstanding amount has been proved by documentary evidence. It is stated that the contention of trade custom is not maintainable because the bills have been clearly signed and certified by the plaintiff and plaintiff has not even provided any evidence to show that this has been the trade custom. It is also stated that the learned Arbitrator has properly interpreted the clause in the sub contracts to ascertain whether the amount claimed by 1 st defendant is due and payable. It is stated that the conclusions drawn by the learned Arbitrator is on the basis of evidence available before it. It is stated that the contention of the plaintiff that Rs.93,13,249/ was recoverable from defendant No.1 after adjusting all payments made by it, is factually incorrect and is against the evidence placed before the learned Arbitrator and the learned Arbitrator has considered and analyzed the facts and held that 1st defendant is entitle for amount. The plaintiff's contention about liability of the 1st defendant to pay certain amount is factually incorrect. It is also stated that the learned Arbitrator has considered the submissions of the parties and evaluated and analyzed the arguments and 12 CT 1390_Com.A.S.442019_Judgment .doc arrived at this conclusion and prayer of the plaintiff for reanalyzing the proceedings is not maintainable. The contention taken in the petition has been denied and disputed by referring to each para in the objection by the 1 st defendant. It is stated that the learned Arbitrator has imposed cost based on the provisions of the Arbitration and Conciliation Act and has provided reasons for doing so. It is stated that merely because a letter was prduced indicating inability to pay the costs, it cannot be said that the cost cannot be imposed. It is stated that as per the rules, plaintiff was required to bear the costs of the arbitration especially having agreed to arbitration as preferred mode for dispute resolution. It is stated that 1st defendant has paid for costs of the arbitration, since plaintiff did not do so as and when required. It is stated that the costs of the arbitration are borne by the parties equally and the plaintiff is liable to pay irrespective of any reservation made by it. On all these grounds the petition is prayed to be dismissed.
5. Now the points that arise for consideration of this court are:
1) Whether the plaintiff proves that the award passed by the learned Arbitrator in AC No.62/ 2018 on 4/12/2018 is liable to be set aside under Section 34 of the Arbitration & Conciliation Act?
2) What order?13
CT 1390_Com.A.S.442019_Judgment .doc
6. Heard both counsels. Both the counsels have filed written arguments. Perused the records.
7. My answer to the above points are :
POINT No.1 : In the Negative.
POINT No.2 : As per final order for the following:
REASONS
8. POINT No.1 : This arbitration suit is filed by the plaintiff challenging portion of the award passed in AC No.62/2018. By this award the learned Arbitrator had directed the present plaintiff to pay Rs.71,25,926/ with interest @8% per annum from 30/8/2015 to 14/9/2018 and thereafter @10% per annum on the entire amount till realization of the amount and had also ordered for payment of 100% of the expenses already incurred by the claimant and also awarding Rs.75,000/ from the present plaintiff towards advocate's fee and incidental legal expenses and also held that the plaintiff is not entitle to invoke the left out MBGs or PBGs.
9. The jurisdiction of the court to set aside an arbitral award is limited to the grounds set out in Section 34 of the Arbitration & Conciliation Act 1996. Even if a contrary view based on the facts before the Arbitral Tribunal is possible, in the absence of any compelling reasons, court cannot interfere with the view taken by the learned Arbitral Tribunal, as if, it is sitting in appeal over the award of the Tribunal. Grounds on which the award of the Tribunal can be 14 CT 1390_Com.A.S.442019_Judgment .doc set aside by this court is clearly mentioned in Section 34(2) and 34(2A)of the Arbitration & Conciliation Act and these grounds are also elaborated by the Hon'ble Supreme Court in various decisions. Since any of the grounds mentioned in Section 34(2)(a) and 34(2)(b)(i) of the Act are not urged, challenge to the present award of the Arbitral Tribunal would be under Section 34(2)(b)(ii) and 34(2A)of the Act. Award could be set aside if it is against public policy of India or is patently illegal. Under the head of Public Policy of India, Fundamental Policy of Indian Law, Interest of India, justice or morality are included. It is also well established principle that the court sitting U/S.34 of the Act is not supposed to go for reappreciation of evidence or impose its view as against the view of learned Arbitral Tribunal and the power of the court is only to set aside the award, if it is coming under one of the grounds mentioned in the said section. In the presence of these basic principles, grounds urged by the plaintiff and the award of the learned Arbitral Tribunal are to be looked into.
10. The admitted facts of the case are that the plaintiff Gammon India Limited had entered into contract agreement with Godrej Buildwell Private Limited (GBPL) on 18/4/2012 for construction. The plaintiff had given subcontract by four subcontract agreements to the 1st defendant and during the pendency of this contract and the subcontract, GBPL has terminated the contract of the present plaintiff. Due to this 15 CT 1390_Com.A.S.442019_Judgment .doc termination of the contract by the employer of the plaintiff, in terms of clause 21 of the subcontract agreement entered into between the plaintiff and defendant No.1, the subcontracts of the 1st defendant are also terminated. As per clause 21 of the subcontract, main contractor shall be entitled to terminate the subcontract, if the main contract is terminated for any reason whatsoever by the employer. It is an admitted fact that as per the terms of the subcontract agreements, the 1 st defendant had given four PBG's totally for Rs.85,81,349/. It is also an admitted fact that 1st defendant had also given four MBG's by taking advance of Rs.1,42,47,000/ from the plaintiff. After termination of subcontracts, on termination of the main contract by GBPL and after about one year the plaintiff has invoked MBGs of Rs.50,00,000/, Rs.41,00,000/ and Rs.28,19,000/ which comes to Rs.1,19,09,000/ and has received amount of Rs.1,07,64,554/ by invoking MBG. By apprehending invocation of remaining two MBG's and four PBG's, 1 st defendant appears to have filed arbitration application and obtained interim order. Thereafter on the 1 st defendant filing CMP, the learned Arbitrator was appointed by the Hon'ble High Court. Though several claims were made by the 1 st defendant, Tribunal has upheld the invocation of MBG by holding that as the plaintiff had advanced Rs.1,42,47,000/ and only Rs.22,46,345/ was received and remaining Rs.1,20,00,655/ was to be recovered by the plaintiff and subcontract was also terminated, invocation is not illegal.
16CT 1390_Com.A.S.442019_Judgment .doc Therefore, the learned Arbitrator has upheld the invocation of MBG and rejected the prayer for compensation for alleged illegal invocation of MBG and other reliefs. The tribunal has held that after invocation of MBG for Rs.1,07,64,554/ still there is due of Rs.12,36,101/ which is payable by the 1 st defendant to the plaintiff.
11. Before the learned Arbitrator, claimant/1 st defendant had even made a claim for outstanding amount of Rs.83,62,027/ towards RA bills and towards retention money and this claim of the claimant was up held by the tribunal. The Tribunal has awarded Rs.83,62,027/ and as Rs.12,36,101/ was still payable by the 1 st defendant to the plaintiff, that amount was deducted and then awarded Rs.71,25,926/ to the claimant and this finding is mainly challenged by the present plaintiff. Before the learned arbitrator, contention of the claimant/1st defendant was that towards fire fighting works running bills Rs.27,35,015/ and towards plumbing works RA bills Rs.45,81,672/ and towards retention money Rs.10,45,340/ is due from the plaintiff and total of these amounts come to Rs.83,62,027/ and this is the amount payable by the plaintiff to the 1st defendant. The plaintiff had contended before the tribunal that it is not liable to pay the said amount and it contended that in terms of the MBGs and PBGs which are separate agreements the plaintiff is entitle to invoke all these bank guarantees MBGs and PBGs and as for as payment to the 1st defendant towards the 17 CT 1390_Com.A.S.442019_Judgment .doc running bills, plaintiff contended that only on payment of the amount for the work done by the main employer i.e. GBPL plaintiff could make payment even as per the terms of contract. It is contended by the plaintiff that for the amount due to the plaintiff and by contending about illegal termination of the contract, plaintiff has already invoked arbitration against GBPL and unless payments are made for the work done by GBPL, amount would not become payable to the 1st defendant/ claimant. The tribunal has considered the entire evidence lead before it and also terms of the contract. The Tribunal has noted that RW.1 in his cross examination has clearly admitted that out of this Rs.83,62,027/ stated by 1st defendant, RA bills for Rs.55,81,698/ is payable by the respondent i.e. the present plaintiff, but only when bills are certified. Even regarding remaining amount, there was no any categorical denial by the present plaintiff before the learned Arbitrator about the work done or the quality or quantity of the work. Learned arbitrator has also noted that plaintiff who was the respondent before him has not made any counter claim either regarding Bank guarantees or by disputing quality or quantity of the work done by the claimant. The learned arbitrator by considering this evidence lead before the Arbitral Tribunal and also by considering the contention of the claimant established through evidence has held that entire amount of fire fighting work RA bills Rs.27,35,015/ and plumbing work RA bills of Rs.45,81,672/ are certified or verified and are payable by the 18 CT 1390_Com.A.S.442019_Judgment .doc plaintiff. It also held that even retention money of Rs.10,45,340/ also proved to be payable by the plaintiff to 1st defendant. By considering the evidence that was placed before the tribunal and the admissions and the terms of the contract the tribunal has held that Rs.83,62,027/is payable to the sub contractor i.e. the 1st defendant.
12. The learned Arbitrator after holding that this amount is payable to 1st defendant has considered terms of the contract to determine as to whether this payment is to be made only after plaintiff receiving payment from the employer i.e. GBPL or the liability of the plaintiff to pay this amount is independent, in view of peculiar circumstances of the case wherein main contract is terminated and on the basis of the termination of the main contract, these sub contracts are terminated and they are not terminated for any fault of the 1 st defendant. Before the learned Arbitral Tribunal, general conditions and special conditions applicable to the contract are all referred and the tribunal has gone through all these clauses and has made elaborate discussion. Though in clause 34 of general conditions it is mentioned that eligible payment will be released to the sub contractors by the main contractor within 7 days after receiving corresponding payment from the employer, subject to any statutory and other deductions and monies owed by the sub contractor to the main contractor including recoveries against mobilization or plant advance and that no payment shall be made to the 19 CT 1390_Com.A.S.442019_Judgment .doc sub contractor unless corresponding payment has been received by the main contractor from the employer and also that main contractor reserves its right to withhold payments due to the sub contractor, the learned arbitrator has considered that in this case, termination of the contract of the 1st defendant was not for any fault, but only for the reason of main employer terminating the contract of the main contractor i.e. the plaintiff.
13. The learned arbitrator while considering clause 34 has also noted clause 10 of General conditions. In this clause it is mentioned that as between the main contractor and the sub contractor, legal relationship is strictly on principal to principal basis and it will not constitute or imply any other legal relationship such as master servant, principal agent or otherwise. The learned arbitrator by considering that relationship between the main contractor and the sub contractor i.e. plaintiff and 1st defendant is a relationship strictly on principal to principal basis, has held that it would be an independent contract and not dependent on the employer. The tribunal has also considered that though there is clause 34 stating that only after receiving of the payment by main contractor from the employer, the payment is to be made to the sub contractor, clause 10 show that it is an independent contract and for whatever work done, plaintiff would be required to make payment to 1 st defendant, that too, in the circumstances of the case wherein, main contract 20 CT 1390_Com.A.S.442019_Judgment .doc between the employer and main contractor is already terminated and work done by sub contractor was already certified by the plaintiff and the amount is payable. The learned Arbitrator has also considered condition No.9 of the special conditions, stating that contract do not create privity of contract between the sub contractor and the employer and if the sub contractor commits any breach of the sub contract, sub contractor shall indemnify the main contractor against any damages for which the main contractor may become liable under the main contract as a result of such breach. Therefore, this special conditions clause No.9 also makes it clear that there is no privity of contract between the sub contractor and the employer, which means the sub contractor cannot ask for payment to the employer as there is no privity of contract.
14. Though there is clause 34 of the general conditions, stating that only on main contractor receiving the payment from the employer, payment would be made to the sub contractor i.e. the 1st defendant, clause 9 show that there is no privity of contract between the sub contractor and the employer and the sub contractor cannot ask employer. As per clause 10 of the General conditions, referred above, legal relationship between the sub contractor and the main contractor is on principal to principal basis and not that of a master servant, principal agent or likewise. Therefore, these clauses clearly show that it is independent contract. By 21 CT 1390_Com.A.S.442019_Judgment .doc considering these clauses and by interpreting clause 34, learned Arbitrator has held that though clause 34 is in the nature of 'payment if paid' in view of special condition No.9 it could be considered as 'payment when paid' and not 'payment if paid'. By considering so and by interpreting these clauses, learned Arbitrator has held that the plaintiff is liable to pay this outstanding amount of the RA bills and retention money totally Rs.83,62,027/ to the claimant/1st defendant.
15. The learned arbitrator has also considered the decision cited before it reported in (2015) 10 SCC page 642 (Essar Oil Limited v. Hindustan Shipyard Limited and others) in which it is held that the employer who had given contract to the main contractor and never entered into contract with the sub contractor, then there is no obligation on the employer to make payment to the sub contractor. The learned Arbitrator after considering all these clauses of General conditions of contract and Special conditions and also by considering the facts of the case, wherein sub contractor has done the work and the contract is terminated for the reason that GBPL has terminated contract of the main contractor and for the work done by the sub contractor the payment is not made and even he cannot recover the same from the employer as there is no privity of contract with the employer has held that this amount is payable by the plaintiff to 1st defendant.
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16. On looking to the entire award, learned arbitrator has considered evidence and also conditions of contract and has interpreted the same and on harmonious interpretation of condition No.10 and 34 of the general conditions and condition No.9 of the special condition, has held that amount which is due to 1st defendant is payable by the plaintiff and that cannot be dependent on the dispute that has been raised by the plaintiff with the GBPL and the payment due to the 1 st defendant cannot be made subject to the result of the arbitration initiated by the plaintiff against GBPL. It is held by the learned Arbitrator that though it is contended by the plaintiff that employer has terminated the contract by referring to lapses on the part of the sub contractor, the plaintiff has not made any claim or counter claim about any loss suffered due to the lapses on the part of the sub contractor i.e. the 1st defendant. The learned Arbitrator by considering this, has held that the contract is not terminated for any lapses on the part of 1st defendant and there is no complaint regarding quality of the work done by 1 st defendant and termination is only on the basis of the termination of main contract and as such, plaintiff is not justified in not making payment of Rs.83,62,027/. On going through the entire award the learned Arbitrator has held that the 1 st defendant is entitle for Rs.83,62,027 and as Rs.12,36,101/ payable by the 1st defendant to the plaintiff towards return of the advance amount after invoking of MBG of Rs.1,07,64,554/ and also recovery of Rs.22,46,345/ from 23 CT 1390_Com.A.S.442019_Judgment .doc the bills, the learned Arbitrator has held that after deducting this amount of Rs.12,36,101/, 1st defendant is entitle for Rs.71,25,926/.
17. The learned counsel for 1st defendant has relied on the decision of the Hon'ble Supreme Court reported in (2015) 3 SCC 49 (Associate Builders v. Delhi Development Authority) in which Hon'ble Supreme Court has held that the award could be set aside only if a finding is based on no evidence or an Arbitral Tribunal takes into account something irrelevant to the decision or ignores vital evidence. The Hon'ble Supreme Court in this decision has also stated that an Arbitral Tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, such an award cannot be set aside. It is held that construction of terms of a contract is primarily for an arbitrator to decide and unless the arbitrator construes the contract in such a way that it could be said to be something that no fair minded or reasonable person could do, then only such award would be perverse.
18. The learned counsel has also relied on another judgment of the Hon'ble Supreme Court reported in (2015) 5 SCC 698 (Navodaya Mass Entertainment Limited v. J.M.Combines) in which, it is held in para 8 that "the court would not be justified in reappreciating the material on record and substituting its own view in place of an 24 CT 1390_Com.A.S.442019_Judgment .doc arbitrator's view. Where there is an error apparent on the face of the record or the arbitrator has not followed the statutory legal position, then and then only it would be justified in interfering with the award published by the arbitrator. Once the arbitrator has applied his mind to the matter before him, the court cannot reappraise the matter as if it were an appeal and even if two views are possible, the view taken by the arbitrator would prevail." In another decision reported in (2009) 10 SCC 63 (Steel Authority of India Limited v. Gupta Brother Steel Tubes Limited) the Hon'ble Supreme Court in para 27 by considering the interpretation of the different clauses of the agreement has held whether this is or is not a totally correct view is really immaterial but such view is a possible view that flows from reasonable construction of clause 7.2. In para 28 it is held that once the arbitrator has construed clause 7.2 in a particular manner, and such construction is not absurd and appears to be plausible, it is not open to the courts to interfere with the award of the arbitrator. In another decision in (2010) 11 SCC 296 (Sumitomo Heavy Industries Limited v. ONGC Limited) in para 43, Hon'ble Supreme Court has held that "the umpire has considered the fact situation and placed a construction on the clauses of the agreement which according to him was the correct one. One may at the 25 CT 1390_Com.A.S.442019_Judgment .doc highest say that one would have preferred another construction of clause 17.3 but that cannot make the award in any way perverse. Nor can one substitute one's own view in such a situation, in place of the one taken by the umpire, which would amount to sitting in appeal."
19. On going through all these decisions, it is clear that interpretation of different clauses of the contract is the authority of the Arbitrator. Only because some other view is possible, court cannot interfere for such interpretation and though another interpretation is also possible, court cannot substitutes its own view under Section 34 of the Arbitration & Conciliation Act. In the present case the learned Arbitrator has interpreted the clauses of the contract entered into between the parties and held that receipt of payment from the employer by the main contractor is not condition precedent for making payment to the sub contractor, as it is the contract of principal to principal basis and in the present case there is no work to be proceeded and the contract work is terminated. This finding of the learned Arbitrator cannot be interfered with. Therefore, the finding of the learned Arbitrator that the plaintiff who is the respondent before the learned Arbitrator is liable to pay Rs.83,62,027/ and after adjustment of Rs.12,36,101/, plaintiff would be liable to pay Rs.71,25,926/ is by considering the evidence before it and on interpretation of different clauses of the contract and this finding of the tribunal cannot be interfered with under 26 CT 1390_Com.A.S.442019_Judgment .doc Section 34 of the Arbitration & Conciliation Act and this finding cannot be said to be against the public policy of India or is patently illegal as contended by the plaintiff.
20. With regard to MBG and PBG also,learned arbitrator has upheld the invocation of MBG to the extent of Rs.1,07,64,554/, by considering that total advance received was Rs.1,42,47,000/ and only Rs.22,46,345/ was recovered and still there was balance of Rs.12,36,101/. The arbitrator after upholding the invocation of MBG has restrained the plaintiff from invoking other remaining two MBGs and also four PBGs. For this finding learned arbitrator has given reasons and held that as the 1 st defendant is entitle for Rs.83,62,027/ and the payment due to the plaintiff towards return of the advance amount is only Rs.12,36,101/, same can be given set off in the amount due to the 1 st defendant and therefore the remaining MBG cannot be invoked by the plaintiff as it is already having liability of making payment to the 1st defendant towards RA bills and the retention money. This finding of the learned Arbitrator also cannot be said to be perverse or against the public policy of Indian law. Though as rightly argued by the plaintiff, MBG and PBG are independent contracts, as held by learned arbitrator they are connected to the sub contract agreement entered into between the parties. It is not that MBG and PBG can be invoked though plaintiff is not entitle, for any reason whatsoever and there must be 27 CT 1390_Com.A.S.442019_Judgment .doc some nexus between the invocation of bank guarantees and reason for such invocation.
21. In this case, PBG cannot be invoked as there is no question of any failure on the part of the 1 st defendant in performing its part of the contract, as contract is terminated due to termination of the main contract and not for any fault of the 1st defendant. As regards MBG, though there was Rs.12,36,101/ still due, as there is more due from the plaintiff towards defendant to the extent of Rs.83,62,027/, it is found proper to give set off and this finding of the learned arbitrator based on facts of the case cannot be said to be perverse. As held in the decision referred above only if there is an error apparent on the face of the record then only court will be justified in interfering with the award. Even if another view is also possible, award cannot be set aside and court cannot substitute its view to that of the Arbitrator. Therefore, finding of the learned arbitrator that there is certain amount due to the 1st defendant and also to the plaintiff and adjusting the same and giving set off in the amount due to the 1 st defendant cannot be termed as error apparent on the face of the record or is patently illegal. Therefore even regarding giving of set off to the amount due to the plaintiff and holding that the plaintiff cannot invoke the remaining MBG and PBG also is, on the facts of the case and with reasons, and such an award cannot be set aside.
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22. Learned arbitrator has rightly held that restraint order against invoking bank guarantee as an interim order in a case and an order after adjudication are entirely different. After adjudication of the matter, rights of the parties would be decided and after decision of such rights of the parties, it cannot be held that no restraint order could be passed against invoking bank guarantee. In this case the learned Arbitrator by considering the evidence has decided the claim of the parties and after final determination has found that Rs.12,36,101/ is due to the plaintiff and Rs.83,62,027/ is due to the 1st defendant. As such, permitted set off of Rs.12,36,101/ and directed the plaintiff to pay the balance Rs.71,25,926/ and after this determination, it found that remaining MBG and PBG cannot be invoked as there is no such liability to pay the amount covered by these PBG and MBG. Therefore this finding of the Arbitrator also cannot be said to be patently illegal or is against public policy.
23. The plaintiff has also challenged the award of the learned Arbitrator on the legality of the finding regarding payment of Rs.75,000/ as expenses of the arbitration proceedings to the 1st defendant and holding the plaintiff liable to pay 100% expenses that the defendant made towards the transportation, convenience, food, stay charges etc. It is also argued that this finding is grossly erroneous. It is stated by the plaintiff that place of arbitration agreed between the parties was Mumbai and for the sake of convenience of the 1 st 29 CT 1390_Com.A.S.442019_Judgment .doc defendant he approached the Hon'ble High Court of Karnataka and contended about jurisdiction of Hon'ble High Court and the plaintiff has cooperated, though has made it clear that plaintiff will not pay either for the expenses or for the fees of the Arbitrator as it also has to spend money for arbitral proceedings by way of appointing its advocates and traveling from Mumbai. It is stated that the awarding of this amount on the facts of the case by the Arbitrator is not proper and is erroneous. It is also argued for the plaintiff that the learned arbitrator has exceeded his power in presuming the fees of the advocate of the defendant and even the expenses of the defendant and has exceeded its power in ordering the plaintiff to bear the traveling expenses of the learned arbitrator. However, on looking to the award the learned arbitrator has considered the objection raised and has found that the general principle that awarding of cost to the successful party and general rule that the unsuccessful party has to pay the costs to the successful party is to be followed and by considering the same awarded Rs.75,000/ for advocate fee and incidental legal expenses of the claimant and also held that the claimant is entitled to recover 100% expenses already incurred by the plaintiff towards transportation, conveyance, food, stay charges etc on actual basis which is to be verified by the arbitration centre. Section 31A of the Arbitration & Conciliation Act it is clearly held that the Arbitral Tribunal is having a discussion to determine whether cost are payable by one party to another and what is 30 CT 1390_Com.A.S.442019_Judgment .doc the amount of cost and when it is to be paid. Section 31A(ii) also states that when the Arbitral Award decided to make an order as to payment of cost the general rule is that the unsuccessful party shall be ordered to pay the cost to the successful party. By following these provisions, learned arbitrator has awarded cost by considering that the claimant is partly successful before the learned Arbitrator. He has also considered that the plaintiff had not made any counter claim. By considering that claim petition was filed by 1 st defendant and 1st defendant was partly successful and award is passed directing payment of certain amount to the 1 st defendant/claimant and as per general rule, unsuccessful party is ordered to pay the cost. As per Section 31A, Arbitrator is having discretion to determine regarding the cost and when the Act clearly provides such discretion to the learned arbitrator and when the cost imposed cannot be said to be unreasonable, said finding cannot be set aside under Section 34 of the Arbitration & Conciliation Act.
24. The plaintiff has challenged the Arbitral Award with regard to legality of the finding of the Arbitrator that the plaintiff has to pay amount under the RA bills and retention money irrespective of whether the said bills are received by the respondent from GBPL and also challenging the finding of the Arbitrator that though plaintiff is entitled to invoke MBG and PBG, the plaintiff has no right to invoke the same and the amount due to the plaintiff is to be set off in the amount payable to the 1st defendant. The plaintiff also challenged the 31 CT 1390_Com.A.S.442019_Judgment .doc award on its finding regarding the cost. For the discussion made above none of these contention and the grounds for challenging the award of the learned Arbitrator are established by the plaintiff. The plaintiff has failed to show that the finding on different issues given by the learned Arbitrator as discussed above are against the public policy of India or/are patently illegal or/are for some other reason required to be set aside under Section 34 of the Arbitration & Conciliation Act. As such the present arbitration suit filed challenging the award of the learned Arbitrator is devoid of merits and accordingly the same is to be dismissed. Hence point No.1 is answered in the negative.
25. POINT No.2 : For the discussion made on above point, following order is passed:
ORDER This Petition filed U/S.34 of the Arbitration & Conciliation Act 1996, praying to set aside the impugned award of the learned Arbitrator dated 4/12/2018, is dismissed with costs.
[Dictated to the Judgment Writer; transcript thereof corrected, signed and then pronounced by me, in the Open Court on this the 1st day of October 2021] [Ravindra Hegde] LXXXIII Additional City Civil Judge.
BENGALURU.
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