Madras High Court
M/S.Suryadev Alloys And Power Pvt. Ltd vs East Coast Constructions & Industries ... on 20 March, 2019
Author: R.Subramanian
Bench: R.Subramanian
O.S.A.No.200 of 2019
THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on Delivered on
20.03.2024 12.04.2024
CORAM:
THE HONOURABLE MR.JUSTICE R.SUBRAMANIAN
AND
THE HONOURABLE MR.JUSTICE R.SAKTHIVEL
O.S.A.No.200 of 2019
and
C.M.P.Nos.18116, 18117, 18119 of 2019
& 4131 of 2023
M/s.Suryadev Alloys and Power Pvt. Ltd.,
Represented by its Managing Director,
Mr.Mukesh Agarwal,
No.497 & 498 ISANA Building,
8th Floor, Poonamallee High Road,
Arumbakkam, Chennai - 600 106. ...Appellant
Vs.
East Coast Constructions & Industries Ltd.,
Represented by its Director,
Buhari Buildings, No.4, Moores Road,
Chennai - 600 006. ...Respondent
Prayer: Original Side Appeal filed under Clause 15 of the Letter Patent r/w.
Order 36 Rule 1 of O.S.Rules and Section 37 of the Arbitration and
Conciliation Act, 1996, against the order dated 20.03.2019 passed in
O.P.No.153 of 2019.
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https://www.mhc.tn.gov.in/judis
O.S.A.No.200 of 2019
For Appellants : Mr.V.Raghavachari, Senior Counsel
for Mr.P.Krishnan
For Respondent : Mr.Ravi Seshadri, Senior Counsel
for Mrs.Amit Kataria
JUDGMENT
(Judgment of the Court was made by R.SUBRAMANIAN, J.) This appeal under Section 37 of the Arbitration and Conciliation Act is at the instance of the owner. Challenge is to the order of the learned single Judge made in O.P.No.153 of 2019, dismissing an application under Section 34 seeking to set aside the award that was granted in favour of the respondent herein by the sole Arbitrator.
2.The claim arose in the following backdrop:-
The appellant had floated tenders for erection of a power plant at New Gummidipooondi. The respondent had made its bid to carry out civil works in the said project and the tender was awarded by the appellant on 26.02.2011. The agreement was entered into between the parties on 16.05.2011 and the time for completion of the work was fixed at one year.
The total value of the contract was fixed at Rs.20.16 crores. It is not in 2/32 https://www.mhc.tn.gov.in/judis O.S.A.No.200 of 2019 dispute that the total valuation of the work was reduced to Rs.12.24 crores by the appellant. The work was completed in March, 2013 and there were certain balance works which were done up to September, 2013. After completion of the work, certain disputes arose between the parties and an application under Section 11 of the Arbitration and Conciliation Act was moved by the respondent and a retired Judge of this Court was appointed as the sole Arbitrator.
3.The respondent filed a claim statement raising several claims which can be broadly classified as follows:-
i) Claim No.1 relates to unpaid bills which amounted to Rs.1,43,00,000/-.
ii) Claims No.2 relates to hire charges for the machinery and shuttering materials retained at the site by the respondent for the period from March, 2013 i.e., date of completion of the work till September, 2015. The same was quantified at Rs.4,07,62,096/-.
iii) Claim No.3 relates to price variation for the total work executed including extension, which is quantified to Rs.1,20,64,632/-.
iv) Claim No.4 was for the overhead expenses for the extended period 3/32 https://www.mhc.tn.gov.in/judis O.S.A.No.200 of 2019 of contract and the same was quantified at Rs.3,02,43,024/-.
v) Claims No.5 was for loss of profit due to reduction in scope of work which was valued at Rs.56,25,000/-.
vi) Claim No.6 was for the cost of plant and machinery and other materials which according to the respondent were left at the site by it and which were not allowed to be taken away even after the completion of the contract. The claim under these head was for Rs.5,74,33,787/-.
4.Claim No.1 which related to the unpaid bills was sought to be supported by providing a statement of claim which is titled as final statement of accounts and the details of the claim were set out therein. The claim under this head included VAT reimbursement, withheld amount of the service tax, work done for non-tendered items and the rent for scaffolding pipes etc.
5.The 2nd claim under the head of hire charges was sought to be supported by contending that the value of the entire contract was fixed at Rs.20.16 crores but, the same was unilaterally reduced by the respondent by nearly 34% to Rs.12.24 crores. Expecting to do a work of the value of 4/32 https://www.mhc.tn.gov.in/judis O.S.A.No.200 of 2019 Rs.20.16 crores, the respondent / claimant had mobilized machineries and other equipments worth nearly Rs.12,00,00,000/- at the site and because of the reduction of the scope of the work by the appellant, the respondent could not use those machineries and other materials in other contracts resulting in a financial loss in the form of hire charges as it was forced to hire machineries from others for its own work in other contracts.
6.Claim No.6 which related to the value of the plant and machinery was sought to be supported by contending that even after the completion of the work in March, 2013, the appellant did not allow the respondent to remove its material claiming that it had a right to retain the material till the payment due to it have been made by the respondent. Reliance was placed on Article 22 of the Contract, which confers a lien in favour of the owner on the equipments for the monies that may be due to the owner. The respondent sought to contend that nothing was due to the appellant from the respondent and therefore, the exercise of alleged lien under Clause 22 of the Contract is not in order. It was also contended that almost all the machineries and equipments that were left at the site by the respondent during March, 2013 when the contract was completed have become useless 5/32 https://www.mhc.tn.gov.in/judis O.S.A.No.200 of 2019 due to passage of time and have heavily depreciated in value. Therefore, according to the respondent, the appellant was liable to pay the cost of the machinery which was estimated at Rs.5,74,33,787/-.
7.Claim under two heads namely, hire charges and the value of the machinery was resisted by the appellant contending that there was no wrongful withholding of the machineries by the appellant. It was claimed that the respondent had abruptly left the work without even intimating the respondent. It was also contended that the claim for hire charges must be supported by some credible evidence to show that the respondent had in fact taken up other works during that period and it had incurred certain expenditure in hiring certain machineries for the other works.
8.On the claim for the payment of the value of the machineries namely, Claim No.6, the appellant had contended that the Clause 22 empowers the owner to retain the goods or machineries belonging to the Contractor for non-payment that will be due to it. Therefore, once the appellant had the right of lien over the goods belonging to the Director and the appellant had exercised such lien, the respondent cannot be heard to 6/32 https://www.mhc.tn.gov.in/judis O.S.A.No.200 of 2019 contend that it is entitled to value of the contrary.
9.Apart from resisting the claims above, the respondent also made a counter claim contending that it has suffered a monetry loss and the respondent which had purchased steel worth Rs.150.68 lakhs has not paid for the entire steel purchased and it had paid only Rs.60,00,000/- leaving the balance of Rs.90.68 lakhs which was admittedly due to the appellant and a request has been made by the respondent to adjust the said value of the steel from and out of the monies due to it. Therefore, according to the appellant, in view of the counter claim that has been made and in view of the admission that this sum of Rs.90.68 lakhs is due and payable to the appellant, the appellant was entitled to exercise the lien under Article 22 of the Contract Act. The claim for interest was also disputed by the respondent. Various documents were placed before the learned Arbitrator by both sides.
10.The learned Arbitrator after entering upon arbitration, framed the following issues for consideration.
1.Whether the Respondent honoured the bills raised by the Claimant for the works done ?
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2.Who is responsible for the delays in the Project ?
3.Whether the Claimant is entitled for the claims as prayed for ?
4.Whether the Respondent is entitled to any counter claim and what reliefs ?
11.The learned Arbitrator decided issue No.1 regarding unpaid bills in favour of the respondent and held that the respondent is entitled to the entire amount claimed under the first head namely, a sum of Rs.1,43,33,509.60/-. On the 2nd issue, regarding to the delay, the Arbitrator had upon consideration of the evidence concluded that the appellant was not responsible for the delay. The Arbitrator also held that the payment delay cannot be linked with the delay in execution of the work. The Arbitrator also dealt with the counter claim for loss of profit due to the delay and rejected it on the conclusion that both the parties have been responsible for the delay. That is not the subject matter of challenge before us.
12.Issue No.3: The learned Arbitrator dealt with the claim Nos.2 & 6. 8/32 https://www.mhc.tn.gov.in/judis O.S.A.No.200 of 2019 On the claim of hire charges it was the contention of the respondent / claimant that it is entitled to hire charges, the learned Arbitrator found that the appellant is entitled to hire charges, since it was not allowed to take back the machineries on the de-scoping of the work.
13.Reliance was also placed on certain correspondence, particularly, Exs.C53, C55, C56 & C60 in support of the conclusion that the materials and machineries belonging to the respondent were unduly withheld by the appellant. However, the learned Arbitrator arrives at a conclusion that the details that are furnished by the claimant in the form of a statement about the type of machineries and materials and probable hire charges have not been supported by any proof as such and therefore, the amount claimed cannot be allowed in toto. After concluding so, the learned Arbitrator however, awarded 1/3rd of the claim on the premise that since the machineries and equipment were lying with the appellant, the respondent was prevented from using them in some other contract.
14.On the 5th claim which relates to cost of plant and machinery also, the learned Arbitrator took into account the conclusions arrived by him for Claim No.2 and faulted the appellant for not having directed the respondent 9/32 https://www.mhc.tn.gov.in/judis O.S.A.No.200 of 2019 to remove the machinery and equipments. Therefore, the learned Arbitrator on a premise that there would have been a depreciation of 15% per year, granted a sum of Rs.3,15,88,582/- as the value of the machineries that were left with the appellant by the respondent.
15.On Issue No.4, the learned Arbitrator found that the appellant is entitled to the counter claim of Rs.90,32,127/- which is the value of the steel that was purchased by the respondent from the appellant and not paid for however, the Arbitrator did not grant interest for the such amount. While he granted 18% interest for all the three claims which he had allowed as follows:-
i)Claim No.1 Interest at 18% per annum from April 2013 till date of payment.
ii)Claim No.2 & 6 Interest at 18% per annum from the date of award till date of payment.
16.The learned Arbitrator had allowed only three claims namely, the claim under the head of unpaid bills, hire charges and value of plant and machinery namely, Claim Nos.1,2 & 6. The other claims namely, Claims 3, 4 & 5 were rejected by the Arbitrator. The respondent had accepted the 10/32 https://www.mhc.tn.gov.in/judis O.S.A.No.200 of 2019 award and did not challenge the rejection. Therefore, it is only the award under claims 1,2 & 6 that was assailed before the learned single Judge. As regards Claim No:1we find that the learned single judge has recorded that the learned senior counsel who appeared for the appellant has made a statement that he is not seriously challenging the award under Claim No:1. Hence, we do not propose to delve into it, though Mr.V.Raghavachari, learned Senior Counsel appearing for the appellant would contend that the respondent had restricted its claim under Claim No.1 to Rs.1,07,29,045/-, placing heavy reliance on the statement of accounts that was produced along with rejoinder to the claim statement. We do not think, we could allow him to raise the said issue before us in as much as the learned single Judge had categorically recorded that the Senior Counsel appearing for the appellant had not assailed the award on Claim No.1. We should also point out at this juncture that Mr.Ravi Seshadri, learned Senior Counsel for the respondent would submit that the difference in the claim amount is because of the fact that the claimant had admitted only a portion of the counter claim made by the appellant. However, the learned Arbitrator has chosen to grant the same in full therefore, the claim of the learned Senior Counsel for the appellant that the respondent had restricted its claim under Claim No.1 to 11/32 https://www.mhc.tn.gov.in/judis O.S.A.No.200 of 2019 Rs.1,07,29,045/- cannot be countenanced. Be that as it may, we do not think, we can go into those questions, since the learned Senior Counsel who appeared for the appellant before the learned single Judge had categorically waived its objections to the award of Claim No.1. The learned single Judge had while dealing with the Claim No.1 observed as follows:-
"It may not be necessary to delve more into these aspects of the matter as learned senior counsel for petitioner submitted that arguments in instant OP and the grounds on which impugned award are assailed shall be limited to Claims (b) and (f) or in other words claims 2 and 6, which were partly allowed (details of which have been set out supra)."
17.While challenging the award on Claim Nos:2 & 6 before the Section 34 Court, it was primarily contended that there was total absence of proof for the loss for the claim under the head of hire charges and in the absence of such proof, the Arbitral Tribunal was not right in awarding an assumed amount as the loss. It was appellant which filed an application under Section 34 seeking to set aside the award.
18.According to the learned single Judge, it was not the function of 12/32 https://www.mhc.tn.gov.in/judis O.S.A.No.200 of 2019 the Section 34 Court to delve into the sufficiency of the evidence and take a contrary view. The learned single Judge concluded that the Section 34 court which is neither a Court of appeal nor a Court of review cannot reappraise the evidence, get into the intricacies of sufficiency of evidence in order to pick holes in the award. In support of his conclusions, the learned sigle Judge relied upon the oft quoted judgments of the Hon'ble Supreme Court in Associate Builders Vs. Delhi Development Authority reported in (2015) 3 SCC 49 and Ssangyong Engineering and Construction Company Limited Vs. National Highways Authority of India reported in (2019) 15 SCC 131. On the said conclusions, the learned Judge dismissed the OP. Aggrieved, the appellants on appeal before us.
19.We have heard Mr.V.Raghavachari, learned Senior Counsel for the appellant and Mr.Ravi Seshadri, learned Senior Counsel for Mrs.Ami Kataria, learned counsel for the respondent.
20.Mr.V.Raghavachari, learned counsel for the appellant would vehemently contend that the Arbitrator having held that there is no evidence of loss ought not to have awarded an assumed amount.
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21.As regards the Claim No.6, relating to the value of the machinery, it was contended that there was no attempt on the part of the respondent to remove the machinery and therefore, the respondent will not be entitled to cost of the machinery. This was very seriously disputed by the respondent by drawing us to the proceedings taken under Section 9 of the Arbitration and Conciliation Act before this court where, the attempt of the respondent take back the machineries was very seriously objected to by the appellant, contending that the appellant had a right to retain the machineries under Article 22 of the Contract between the parties.
22.However, we find that an inventory of the machineries was taken by appointing a Commissioner in Application No.9493 of 2018 and a report was also filed into this Court by the Commissioner, pointing out the list of machineries that were available in December 2018. It is also seen that another application under Section 9 of the Arbitration Act filed some time in 2014 in Application No.4368 of 2014 seeking permission to remove the machineries and the shuttering material was closed giving liberty to apply to the Arbitrator under Section 17 of the Arbitration and Conciliation Act. We find that no such attempt was made before the Arbitrator by either of the 14/32 https://www.mhc.tn.gov.in/judis O.S.A.No.200 of 2019 parties.
23.The learned single Judge who heard the application while agreeing with the Arbitrator on his conclusions held that the appellant had not made out a ground within the four corners of Section 34 to enable the Section 34 Court to interfere with the award. On the contention that the awards on the two heads namely, hire charges and the value of the plant and machinery suffer a major lacunae namely, total lack of evidence, the learned Judge concluded that there was some evidence to show that the machineries were left with the appellant and at a certain point of time, the appellant had claimed a lien to retain the machineries for the amounts due to it.
24.On Claim No.6 namely, value of the plant and machinery that was claimed to have been left at the site by the respondent except a list of plant and machineries submitted by the respondent, there was no other evidence that was made available. The learned Arbitrator would however, relied upon the fact that the respondent had claimed that it had assembled machinery worth Rs.10,00,00,000/- at the site for doing a work of a contract value of Rs.20,00,00,000/- which was subsequently reduced to Rs.12,00,00,000/- 15/32 https://www.mhc.tn.gov.in/judis O.S.A.No.200 of 2019 and the said claim by way of E-mails has been accepted by the Arbitrator to conclude that the respondent had in fact, left those material and equipment at site.
25.The learned Arbitrator has completely overlooked the fact that this correspondence in Exs.C53 to C64 would show that the respondent had in fact put up a very inconsistent case and the question of mobilization of the plant and shuttering equipments of a particular value was never in issue between the parties. Having admitted that there was a reduction in the scope of the work from Rs.20.16 crores to Rs.13.25 crores, the respondent would claim that the balance amount that is payable to it after deducting all monies payable would be about Rs.1.21 crores. and the retention amount of about Rs.60,00,000/-.
26.The entire correspondence would show that the only claim of the respondent was for release of a portion of the monies which according to it were due to it. In fact, in Ex.C54 dated 04.04.2013, the respondent admits 16/32 https://www.mhc.tn.gov.in/judis O.S.A.No.200 of 2019 that a sum of Rs.22.84 lakhs is due and payable to the appellant and the same will be paid by 30.04.2013. However, within a week, on 12.04.2013, the money payable to the respondent by the appellant is inflated to Rs.1,07,73,235/- and after deducting the amount payable for the steel purchase that is a sum of Rs.60.68 lakhs, the balance of 17.05 lakhs is claimed by ECCI namely, the respondent.
27.It is not known as to how the amount payable swelled to Rs.1,07,73,235/- on 12.04.2013 from Rs.67,84,023 on 04.04.2014. No doubt, considering the limited scope of the petition under Section 34 and the appeal under Section 37, we must not do a microscopic re-examination of the evidence on record to pick holes in the award of the Arbitrator but, at the same time, this correspondence, in our opinion, cannot form the basis of an award for the hire charges and the value of the machinery.
28.Let us have a peep into the law relating to setting aside awards. Section 34 of the Arbitration and Conciliation Act which provided for setting aside the award reads as follows:-
Section 34: Application for setting aside arbitral awards.17/32
https://www.mhc.tn.gov.in/judis O.S.A.No.200 of 2019 (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).
(2) An arbitral award may be set aside by the Court only if--
(a) the party making the application[establishes on the basis of the record of the arbitral tribunal that]--
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the Court finds that--
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation1.--For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,--
(i) the making of the award was induced or affected by fraud or 18/32 https://www.mhc.tn.gov.in/judis O.S.A.No.200 of 2019 corruption or was in violation of section 75 or section 81; or
(ii) it is in contravention with the fundamental policy of Indian law; or
(iii) it is in conflict with the most basic notions of morality or justice.
Explanation: 2.--For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.] (2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.] (3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.
(4) On receipt of an application under sub-section(1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.
(5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement.
(6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date 19/32 https://www.mhc.tn.gov.in/judis O.S.A.No.200 of 2019 on which the notice referred to in sub-section(5)is served upon the other party.
29.Mr.V.Raghavachari, learned counsel for the appellant would also draw our attention to the judgment of a three Judge bench of the Bombay High Court in support of the contention that three heads of the award which had been granted by the Arbitrator are severable in nature and it is open to the Court to set aside the award partially and the same would not amount to modification of the award.
30.Reliance is placed by the learned counsel on the judgment of the Full Bench of the Bombay High Court in R.S.Jiwani Vs. Ircon International Ltd., reported in 2010 (1) Mh.L.J. 547 wherein, the Full Bench held that the Doctrine of Severability can be applied to awards which are severable by their very nature. Our attention is also drawn by the learned counsel to the judgment of the Hon'ble Supreme Court in JG Engineers Private Limited Vs. Union of India and another reported in (2011) 5 SCC 758 wherein, the Hon'lbe Supreme Court had gone into the question of severablity. Paragraph 25 of the said judgment, which reads as follows:-
20/32
https://www.mhc.tn.gov.in/judis O.S.A.No.200 of 2019 "25. It is now well settled that if an award deals with and decides several claims separately and distinctly, even if the court finds that the award in regard to some items is bad, the court will segregate the award on items which did not suffer from any infirmity and uphold the award to that extent.
As the award on Items 2, 4, 6, 7, 8 and 9 was upheld by the civil court and as the High Court in appeal did not find any infirmity in regard to the award on those claims, the judgment of the High Court setting aside the award in judgment to that extent is liable to be set aside and the award has to be upheld in regard to Claims 2, 4, 6, 7, 8 and 9."
31.Reliance is also placed on the judgment of this Court in M/s. Engineering Projects (India) Limited Vs. Tamil Nadu Generation & Distribution Corporation, which is rendered by a Division Bench, to which, one of us (Hon'ble Mr.Jusitce R.Subramanian) was party to justify the claim on the ground of severability of the award.
32.Contending contra, Mr.Ravi Seshadri, learned Senior Counsel appearing for the respondent would submit that it was open to the Arbitrator to adopt a certain amount of guesswork and if the Arbitrator reasons out the 21/32 https://www.mhc.tn.gov.in/judis O.S.A.No.200 of 2019 adoption of such guess work, the award cannot be held to be perverse. He would also draw our attention to the judgment of the Hon'ble Supreme Court in Mc Dermott Vs. Burn Standard reported in (2006) 11 SCC 181 to contend that it is only when the illegality goes to the root of the matter, the award could be set aside on the ground of patent illegality. Reliance is placed by the learned Senior Counsel on the judgment in Associate Builders Vs. Delhi Development Authority reported in (2015) 3 SCC 49 and Ssangyong Engineering and Construction Company Limited Vs. National Highways Authority of India reported in (2019) 15 SCC 131 as referred to supra and Konkan Railway Corporatin Limited Vs. Chenab Bridge Project Undertaking reported in (2023) 9 SCC 85.
33.In Konkan Railway Corporatin Limited Vs. Chejab Bridge Project Undertaking, the Hon'ble Supreme Court had held that while challenging the awards of the learned Arbitrators, the Court should not expect meticulous reasoning. The said judgment may not apply to the case on hand, since in the case on hand, the award is by the retired Judge of this Court.
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34.Adverting to the facts in the case on hand, two claims which have been awarded are under dispute. The first claim is for hire charges for the machinery that was mobilized and kept idle because of the reduction in the scope of the work. The 2nd claim that disputed is Claim No.6, which relates to value of the machinery and plant that was mobilized. While the first claim is based on an assumed loss, the 2nd claim is based on the contention that the appellant retained those machineries even after completion of the work.
35.As regards the 1st claim, it is the contention of Mr.V.Raghavachari is that there has to be some evidence of damages and it cannot be an assumed amount. The learned counsel would rely upon the judgment of the Hon'ble Supreme Court in Unibros Vs. All India Radio reported in 2023 SCC Online SC 1366 wherein, the Hon'ble Supreme Court had held that the claim for loss of profit arising from delayed contract or missed opportunities should be substantiated by the claimant through compelling evidence which should convincingly demonstrate that the Contractor could have secured supplementary profits utilizing the existing resources elsewhere. In doing so, the Hon'ble Supreme Court observed as follows:-
23/32
https://www.mhc.tn.gov.in/judis O.S.A.No.200 of 2019 "16. To support a claim for loss of profit arising from a delayed contract or missed opportunities from other available contracts that the appellant could have earned elsewhere by taking up any, it becomes imperative for the claimant to substantiate the presence of a viable opportunity through compelling evidence. This evidence should convincingly demonstrate that had the contract been executed promptly, the contractor could have secured supplementary profits utilizing its existing resources elsewhere.
17. One might ask, what would be the nature and quality of such evidence? In our opinion, it will be contingent upon the facts and circumstances of each case. However, it may generally include independent contemporaneous evidence such as other potential projects that the contractor had in the pipeline that could have been undertaken if not for the delays, the total number of tendering opportunities that the contractor received and declined owing to the prolongation of the contract, financial statements, or any clauses in the contract related to delays, extensions of time, and compensation for loss of profit. While this list is not exhaustive and may include any other piece of evidence that the court may find relevant, what is cut and dried is that in adjudging a claim towards loss of profits, the court may not make a guess in the dark; the credibility of the evidence, therefore, is the evidence of the credibility of such claim."24/32
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36.On the Claim No.2, the claim for hire charges on the ground that the respondent/claimant was deprived of the utilization of the machinery in other projects, the Arbitrator has found that there is no evidence of such loss. He had however, gone on to assess the loss by way of a guesswork and awarded 1/3rd of the amount claimed as the loss. This has been severely criticized by the Supreme Court where, it has said that the Court cannot make a guesswork in the dark.
37.No doubt, the learned Judge sitting under Section 34 held that the sufficiency of evidence cannot be looked into by the Court. Unfortunately, there is a change in the position of law relating to setting aside the awards, particularly, under the head of missed opportunities, after the judgment was rendered by the learned single Judge and hearing of the appeal before us. In Unibros refered to supra, the Hon'ble Supreme Court categorically laid down that the claim of missed opportunities must be substantiated by the compelling evidence which means the quality and quantity of evidence must demonstrate clearly that the claimant had an opportunity to employ these machineries elsewhere and earn income out of it. In the absence of such evidence, an admission of loss as has been made by the Arbitrator cannot be 25/32 https://www.mhc.tn.gov.in/judis O.S.A.No.200 of 2019 accepted. In such event, the award becomes an award passed without evidence. Therefore, we are unable to sustain the award on the ground of assumed loss or missed opportunities.
38.Let us now examine the award on the ground of loss of machinery. Here again, we must at once point out that there is no evidence for the loss of machinery except the statements made in the form of a tabular column by the claimant. There is nothing to show that these machineries were in fact, mobilized at the site. More than this under clause 22 of the contract, the appellant has a right to retain the machinery for the amounts due to it. Article 22 of the contract reads as follows:-
Article-22 Contractor's Equipment "(a) CONTRACTOR shall, at his own risk and expenses, provide all EQUIPMENT necessary to execute and complete work. If any equipment belonging to OWNER is available at SITE, CONTRACTOR may, with the written consent of OWNER, use the same on payment of any necessary charges as fixed by OWNER.
(b) All CONTRACTOR'S EQUIPMENT shall be used solely for the purpose of work and shall not be taken away by 26/32 https://www.mhc.tn.gov.in/judis O.S.A.No.200 of 2019 CONTRACTOR while it is required on SITE for the purpose of work, without permission in writting of OWNER / CONSULTANT and CONTRACTOR shall be liable for the loss or destruction thereof or damage thereto. If there are dues owing to or accruing to OWNER from CONTRACTOR, any money under or in respect of CONTRACT, OWNER shall be at liberty at the cost of CONTRACTOR, to sell and dispose of any such the cost of CONTRACTOR'S EQUIPMENT, as OWNER shall think fit, and to apply the proceeds in or towards the satisfaction of such dues as aforesaid."
39.It is sought to be contended that the action of the respondent in retaining the goods is illegal and therefore, the appellant is entitled to the value of the machinery. A reading of Article 22 of the contract shows that the owner had a lien over the equipments available at the site belonging to the contractor for the monies that are due to it. A perusal of the correspondence namely, Exs.C63 & C64 would demonstrate that money was due to the appellant and in fact, the Arbitrator has awarded a sum of Rs.90,00,000/- as money that is due to the appellant under the counter claim but, he has denied interest without assigning any reason.
40.When it is found that certain amount was due to the claimant, the 27/32 https://www.mhc.tn.gov.in/judis O.S.A.No.200 of 2019 retention of the goods over which the claimant has a lien becomes justified. Once when the retention is justified, the appellant cannot be asked to pay for the value of the goods so retained. We find that an application in A.No.9493 of 2018 has been made after the award for sale of the goods but, after taking an inventory the same has been dismissed. We do not find any evidence whatsoever to prove mobilization or to prove the value of the goods except the bald statement that appears in the claim statement that the goods are worth Rs.5,74,00,000/-. There is no other material to show entrustment.
41.Here again, while considering the claim for value of the machinery, the Arbitrator has gone by an assumption that the machinery was in fact kept at the site by the respondent. The learned Arbitrator has adverted to certain file noting in which there was an attempt to sell the goods and realise the proceeds. That by itself would not be proof of value of the goods that were available at site. No effort has been made by the claimant to establish that these were the goods that were available and this is the value of the goods. The claimant had filed a statement showing various goods that were kept there and certain amount as their value, no other evidence has been placed.
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42.We have not examined the sufficiency of the evidence for a moment, we find that evidence of mobilization itself is totally absent. As held in Unibros, when there is a claim for a loss, either on the basis of entrustment of the goods or on the basis of the missed opportunities, there must be concrete evidence to prove the loss. It cannot be a subject matter of assumption. Here again, the learned Arbitrator has without any basis proceeded to assess the loss on the basis of assumptions which cannot be done in the light of the judgment of the Supreme Court in Unibros Vs. All India Radio referred to supra.
43.The Section 34 Court has gone by the position of law prior to the decision of the Hon'ble Supreme Court in Unibros and therefore, the conclusions of Section 34 Court become unsustainable. We are therefore, convinced that the award in respect of claim Nos.2 & 6 is unsustainsble and is patently illegal. It is therefore, liable to be set aside.
44.Mr.V.Raghavachari, learned Senior Counsel appearing for the appellant would vehemently contend that the Arbitrator was not right in 29/32 https://www.mhc.tn.gov.in/judis O.S.A.No.200 of 2019 rejecting interest for the counter claim amount while he had granted 18% interest per annum from the date of the award till date of payment in respect of Claim No.2 and 18% interest per annum from April 2013 till date of payment in Claim Nos.1 & 6.
45.If we are to interfere with the grant of interest it would definitely amount to modification of the award which we are not entitled to do. Now, that we have decided to set aside the award on Claim Nos.2 & 6 it is only award of Claim No.1 that would stand. The non-grant of interest on the counter claim will not vitiate the award on claim No.1.
46.We therefore, do not propose to interfere with the award on the Claim No.1 and the counter claim. The awards under the claim Nos.2 & 6 alone which is severable from the other parts of the award will stand set aside. The appeal is therefore, allowed in part. The order of the learned single Judge in Section 34 application will stand set aside and Section 34 application will stand allowed in respect of Claim Nos.2 & 6 alone, while the other part of the award are sustained. However, in the circumstances, there shall be no order as to costs in this appeal.
30/32 https://www.mhc.tn.gov.in/judis O.S.A.No.200 of 2019 (R.S.M., J.) (R.S.V., J.) 12.04.2024 kkn Internet:Yes Index:Yes Speaking Nuetral Citation :Yes R.SUBRAMANIAN, J. and R.SAKTHIVEL, J. KKN 31/32 https://www.mhc.tn.gov.in/judis O.S.A.No.200 of 2019 O.S.A.No.200 of 2019 and C.M.P.Nos.18116, 18117, 18119 of 2019 & 4131 of 2023 12.04.2024 32/32 https://www.mhc.tn.gov.in/judis