Bangalore District Court
M/S Beml Limited vs M/S Urc Construction Private on 9 June, 2021
1
Com.A.S.22/2017
IN THE Court OF LXXXVII ADDL.CITY CIVIL & SESSIONS
JUDGE, (EXCLUSIVE DEDICATED COMMERCIAL Court)
AT BENGALURU (CCH.88)
THIS THE 9th DAY OF JUNE 2021
PRESENT:
SRI.CHANDRASHEKHAR U., B.Sc., LL.M.,
LXXXVII ADDL.CITY CIVIL & SESSIONS JUDGE,
BENGALURU.
Com.A.S.No.22/2017
APPLICANT: M/s BEML LIMITED,
"BEML Soudha",
No.23/1, 4th Main Road,
S.R. Nagar,
Bengaluru - 560 027,
Represented by its
Executive Director, (Defence)
(Reptd by learned counsel, C.S.J)
AND
RESPONDENT: M/s URC Construction Private
Limited,
No.119, Power House Road,
Erode -638 001,
Having its corporate office at
Plot No.810, 1st Cross,
7th Main, HAL II Stage,
Indiranagar,
Bengaluru - 560 008,
Represented by its Managing
Director, Mr. S. Palanisamy.
(Reptd by learned counsel, P.B.A)
2
Com.A.S.22/2017
Date of Institution of the 30.01.2017
suit
Nature of the suit (suit on
pronote, suit for
declaration & Possession, Arbitration Suit
Suit for injunction etc.)
Date of commencement of -
recording of evidence
Date on which judgment
was pronounced 09.06.2021
Total Duration Year/s Month/s Day/s
04 04 09
(CHANDRASHEKHAR U),
LXXXVII Addl.City Civil & Sessions Judge,
(Exclusive dedicated Commercial Court)
Bengaluru.
JUDGMENT
The applicant has filed the above suit under Section 34 of the Arbitration & Conciliation Act, 1996, (hereinafter called 'the Act') for setting aside the Arbitration Award, dated 20.08.2013 and modified order dated 7.11.2016 passed in AC No.11/2013, relating to civil works and for costs of the suit.
2. The brief facts of the case of the applicant are as under:-
3
Com.A.S.22/2017 The applicant is a Government Company within the meaning of Section 617 of the Companies Act, 1956, under the administrative control of the Department of Defence Production, Ministry of Defence, Government of India, inter-alia engaged in the manufacture and marketing including after sale service and maintenance of equipment used for earthmoving, Defence, Mining & Construction, Rail & Metro, Aerospace, Dredging, etc., and its spare parts and aggregates. It is further stated that in order to diversify its area of operation, decided to establish an Aerospace Division to manufacture and export of mechanical components used for Aerospace and had applied for land in Aerospace Special Economic Zone at Devanahalli. Accordingly, KIADB allotted 25 acres of land in Aerospace Special Economic Zone area by way of lease cum sale basis for a period of 30 years and has paid Rs.49,50,20,402/- as consideration and a perpetual lease-cum-sale deed was executed on 15.2.2012. The one of the conditions that grant of lease is for the factory shed shall be constructed immediately or else pay penalty of 10% of the land price besides forfeiture of lease amount. The project included construction of compound wall, Pre-engineered building, Civil works and other allied construction relating to civil work and it appointed a project 4 Com.A.S.22/2017 consultant namely, M/s Potential Semac Consultants Pvt. Ltd. The pre-engineered building (PEB) was one of the major works of the said project, which consists of designing, fabricating and erecting two sheds, one for MRO/Main assembly and other is composite shed. The tender was quoted by the applicant on 9.7.2011 for PEB works and after perusing the bid offered by the respondent was accepted for PEB works as well as civil works under different agreements. The Work order was issued on 1.3.2012 to carry out PEB contract and the total sum of the project was Rs.38,43,24,253/- and date of commencement was on 16.4.2012 and date of completion was 15.10.2012 as agreed in the contract. As per the contract, the respondent offered Bank Guarantee as per the terms of the contract and respondent had to submit PERT chart relating to design and to submit the same to consultant for their approval and once its approval by the consultant, it will be forwarded to the applicant for final approval. Further, the design furnished by the consultant has to be certified by the third party i.e., IIT Professor, who is qualified to certify the same and further there was an obligation on the part of the respondent to prepare combined PERT chart for the purpose of carrying out the design and the same were to be approved by the consultant. Further, 5 Com.A.S.22/2017 it was the responsibility of the respondent to mobilise the men and material at the site and the PERT chart required to be submitted within 7 days from the date of work order. However, the respondent has not commenced the work as agreed and failed to furnish combined PERT chart, which was condition precedent for proceeding further. However, the respondent failed to submit the drawings and designs in accordance with the tender condition, till it invoked Arbitration clause on 12.9.2012 by way of issuing the mail. The respondent has also failed set up the factory to carryout fabrication as per the tender for manufacturing purposes. The respondent was aware that the PERT chart is a successful method adopted for timely and effective completion of any project and in the absence of the PERT chart, consultant shall neither be able to monitor the progress and synchronize the activities of the respondent nor to coordinate with other contract works, respondent did not take any action to comply with the same. Inspite of series of mails, the respondent has not furnished PERT chart with resources commitment. Further, the respondent submitted R A Bill No. 1 for civil works on 6th June 2012 to the consultant which was returned with a request to submit the PERT chart as per Ex.R13.
However, it did not yield any result. Applicant has further 6 Com.A.S.22/2017 stated that it has purchased the land from the KIADB under lease cum sale deed for Rs.49.50 crores and one of the conditions imposed by the KIADB is that works should be completed within 24 months from 26.4.2011 and on its failure to pay penalty of 10% of lease price may be imposed besides forfeiture of lease deed. The respondent completed only 0.27% works of the contract value as per the RA bills submitted by the respondent. Since, the respondent committed breach of contract, it is not entitled any claim as claimed in AC No.11/2013. However, by issuing a reply , it tried to justify the breach and shifting the burden on the applicant. Since, the works were not done and since the respondent moved the High Court of Karnataka and filed CMP Nos.19/2013 and 20/2013 for appointment of Arbitrator, the Arbitrator was appointed, who conducted the proceedings in AC Nos. 10/2013 and 11/2013, on the basis two different claims and counter claims. The applicant has filed counter claim in AC No.11/2013 claiming, cost of the land of Rs.51,23,20,402/- towards KIADB and registration charges, statutory fees of Rs.34,20,535/- for SEZ registration, licence fees, etc., tax consultant fee, basic infrastructure facilities expenses, value of the machinery, SEZ project Management costs, expenses towards Aerospace 7 Com.A.S.22/2017 division establishment, cost associated with SEZ project planning and monitoring, project management consultant charges, penalty of 10% of contract value, 10% of over head on the contract and amount towards loss of business opportunities. The learned Arbitrator after trial, allowed counter claim No.1 to 3 and counter claim No.4 regarding penalty and allowed the interest at 18% pa, and rejected other counter claims. Further, it allowed the claim of the respondent i.e. claim Nos.2, 6 in partly. The cost was made easy.
3. Being aggrieved by the Award of the learned Arbitrator dated 28.2.2016 and modified order dated 7.11.2016, the present application is filed on the ground that the Award of the Hon'ble Arbitrator to the extent that of decided against the applicant is against law, the evidences, and documents on record. The Hon'ble Arbitrator, having found that the respondent did not fulfill the preliminary requirement, including preparation and submission of PERT chart with resources commitment, should have dismissed claim No.1. The grant of claim No.1 is against the bills submitted and scheduled date of completion of works. Since, work completed was less than 0.27% of the works, the same should not have been allowed. The Hon'ble Arbitrator failed to appreciate the fact that the 8 Com.A.S.22/2017 invocation of bank Guarantee was legal and in accordance with the terms and conditions of the work order. The relief granted in respect of Bank guarantee is highly illegal. The applicant has exercised the encashment of Bank guarantee as per the work order and the parties borne by it. The allowing of interest at 18% p.a on the encashment of Bank guarantee and refund is perverted and highly irrational and against the law. The learned Arbitrator ought to have appreciated that as per Sec 34 of CPC, the interest shall not exceed 6% pa, if there is no contract to that effect. The Hon'ble Arbitrator failed to appreciate the fact that the respondent had taken WC policy as well as CAR policy for the proposed work without having any intention to complete the same. The Hon'ble Arbitrator ought to have allowed the counter claims, keeping in mind the object of the project, money spent by the applicant etc. The impugned award suffers from arbitrariness, vagueness and contrary to the law and facts of the case. It is opposed to public policy and law of the land. Accordingly, it has prayed for rejection of claims of respondent and allow the counter claim of the applicant in toto. AC No.10/2013 relates to PEB works and in fact, on account of the failure on the part of the respondent, applicant has sustained loss to the tune of Rs.199.18 crores and claimed it as a counter 9 Com.A.S.22/2017 claim. Accordingly, it has prayed for setting aside the Award and also modification order, dated 7.11.2016 so far as the same is against the applicant.
4. The respondent/defendant has filed detailed objection statement stating that the above application is barred by time, as the impugned Award was passed on 20 th August 2016 and the applicant should have challenged the same within three months i.e., on or before 19th November 2016 as per Section 34(3) of the Arbitration and Conciliation Act or on or before an outer limit of 19th December 2016 with the leave of this Court as per the proviso of Section 34(3) of the Act. It has further stated that the application is not in conformity with Rule 4(c) of the Karnataka High Court Arbitration (Proceedings before the Courts) Rules, 2001, which requires learned Sole Arbitrator to be impleaded as a respondent to an application under Section 34 of the Act. Rule 5 of the High Court Arbitration Rules prescribes that when an application under Section 34 of the Act is not made in accordance with the provisions of the Rules, the same is liable to be rejected. It has stated about procurement of the tender by the applicant, acceptance of bid, issue of work order, etc. It has also stated about issue of letter of acceptance, dated, 9th April 2012 and total cost of the project at 10 Com.A.S.22/2017 Rs.38,43,24,253/-. It has stated about the commencement of the work, providing of PERT chart as required by the applicant and strict observation of the terms of the contract, etc. It has stated that there was delay in execution of agreement for want of draft and there is delay in furnishing the same by the defendant. Further, it identified two acres of land, out of ten acres of land for the commencement of the work and for temporary shed for the labourers, etc. Though it has prepared PERT Chart and submitted to M/s Potential Seamac Consultants Pvt Ltd., and the same was not considered and claimed that PERT chart was not provided on time is incorrect. The consultant furnished the initial Good For Construction, PERT Chart, drawings for the Civil works up to the plinth level on 4 th May 2012 and the revised GFC drawings was given after forty days from the stipulated date and therefore, there was a delay. Further, since the execution of the work were to be conducted inside the SEZ area there was no free flow of men and materials to the said area for want of appointment of Nodal Officer by the applicant, which resulted in delay. Though, he has executed integrity Pact agreement, on 8.3.2012, that was given back that was approved after long time and communicated to him on 16.7.2012. It has stated that the delay was only on account of 11 Com.A.S.22/2017 the non-cooperation of the applicant company and same cannot be attributed to the respondent. It has denied all other allegations made in paragraphs No. 2 to 54. It has denied the contention raised in the grounds made in the petition, regarding para A to para U . Accordingly, it has prayed for rejection of petition filed under Section 34 of the Act by the applicant.
5. Heard, learned counsel for the plaintiff and defendant.
6. Now, the points that arise for my consideration are:-
1. Whether the plaintiff has made out sufficient grounds to set aside the Arbitration Award dated, 20th August 2016 in AC No.11/2013 allowing the claim against it and rejecting its counter claim?
2. What Order ?
7. My findings on the above Points are as under:
1. Point No.1 :- In the Negative.
2. Point No.2 :- As per the final Order for the following reasons.
REASONS
8. POINT No.1: Learned counsel for the plaintiff would argue that the civil work as well as PEB works has been taken 12 Com.A.S.22/2017 simultaneously and in order to commencement of work, preparation of PERT chart and its approval by the consultant was very material, which the defendant did not do it inspite of specific correspondence addressed to it by the plaintiff. According to him, the length and width of the shed , even if it is taken into consideration the total work done by the defendant is only 0.57% of the entire work and therefore, the claim of the defendant that it is entitled to cost of the work done by it towards civil work cannot be accepted and the observation of the learned arbitrator that the defendant is entitled to cost of the construction i.e, claim No.1 to the tune of Rs.21,38,625/- is incorrect for the reason that learned arbitrator has observed that the defendant has not furnished PERT chart, which is condition precedent to commence the work. Since, the defendant failed to fulfill the preliminary requirement including the preparation submission of PERT chart for resource commitment, then the respondent infact is not entitled to claim the cost of work done by it as it has completed only less than 0.27% of the work when compared to entire work. Under civil work, the defendant ought to have completed the composite hangers, utilities and water supply and sanitary work and should have commence the work within time stipulated as time was 13 Com.A.S.22/2017 essence of contract. Since, he has completed only 0.27% of the work which has resulted in damage to the reputation of the plaintiff company and also proceeding with the great project assigned by the department of Defence. The defendant company should have commenced the work after furnishing the PERT chart by 16.4.2012 and should have completed the same by 15.12.2012. Infact, the defendant company has conducted 0.53% of excavation 0.33% of bed concrete and 0.43% of flooring and 0.50% of field work, etc., and other works were not done. After addressing initial argument on this aspect, he took the Court to page No.4 of the Award, which deals with the initial claim made by the defendant regarding work executed by it and return of Bank Guarantee, etc. and what made it to encash the Bank Guarantee, since the defendant, at no point of time, intended to extend the Bank Guarantee in question and since the plaintiff suffered loss on account of the non-completion of the work as scheduled and its reputation has been tarnished. To make good to the same, it encashed the Bank guarantee which was valid up to 27.12.2013. Since, the defendant failed to extend the Bank Guarantee, as there was clear breach of terms of contract and therefore, plaintiff company encashed the Bank Guarantee. Learned Arbitrator, 14 Com.A.S.22/2017 having considered the letter addressed by the plaintiff, dated 23.12.2013, has committed error in ignoring the same and the reason for encashment of the Bank Guarantee. Further, the award of interest on the Bank Guarantee is highly incorrect and irrational and thereby making defendant unlawfully enriches itself. He would further argue that the observation of learned arbitrator regarding interest on Bank Guarantee is against Section 34 of CPC and Section 3(1) of interest Act. Therefore, it is illegal, against the law of the land. Further, he has failed to appreciate the WC policy and CAR policy taken by defendant for the purpose of indemnifying in case of loss, there is no question of interest or the cost towards completion of the work i.e., claim No.1, 2 and 6. Further, learned arbitrator having observed that defendant had committed breach should have allowed the claim. On the other hand, learned arbitrator has allowed the counter claim No.1 to 4 and rejected other counter claims, which according to the learned counsel is incorrect. Ofcourse, learned arbitrator has awarded, the amount towards tax consultancy, cost associated with SEZ project, project management consultancy and penalty. The penalty at 1.5% of the contract amount was allowed by learned arbitrator. He would further argue that learned Arbitrator should have allowed 15 Com.A.S.22/2017 the claim of the cost of the land and machinery purchased by it for carrying on the manufacturing of defence components and because of the failure on the part of the defendant to mobilise the resources which resulted in breach of contract and it has suffered at the hands of the defendants. After referring to the grounds of appeal, he took the Court to para No.21 of the award, which deals with counter claim and according to learned counsel for the plaintiff, the observation and reason given by learned arbitrator is not correct. Learned Arbitrator having observed in para No.38, that respondent has also suffered certain damages, it is further stated in the award that what is required to be set off is loss, damages suffered by respondent and having observed the same, has allowed the refund of Bank Guarantee, which is against the terms of the contract. Of course, under the tender document Ex.R5, the plaintiff is entitled to claim damages and also had right to encash the Bank Guarantee, in case of failure to complete the work or breach of terms of the contract. Learned Arbitrator has given importance to the clause No.21 of Ex.R5 and clause No.52 Ex.R5 also empowers the plaintiff to encash the Bank Guarantee by stating that it has full power to encash any Bank Guarantee executed under the contract at any time during the validity of 16 Com.A.S.22/2017 the guarantee and the contractor shall have no right or claim whatsoever in the matter of encashment of Bank Guarantee amount by BEML and any dispute/ claim whatsoever. In this regard, the dispute shall be considered by means of arbitration as provided under the contract. Based upon the said clause, learned Arbitrator allowed claim No.2 for refund of the Bank Guarantee on the ground that even if there is contract terms to refund of Bank Guarantee upon initiation of Arbitration Proceedings. The observation made by learned arbitrator that the plaintiff company hurried unnecessarily to encash the Bank Guarantee, which would be one of the subject matters for Arbitration Proceedings. Since, the Bank Guarantee was unconditional, the plaintiff encashed the same after coming to know that the defendant company is not in a position to complete the work within the stipulated time and the regulation permitted the plaintiff company to monitor the work and to see that work is completed within stipulated time. As far as claim No.3 is concerned, he would argue that learned Arbitrator has rightly rejected the claim No.3 and allowed claim No.4 partly thereby granting compensation of Rs.2,40,000/- on the basis of the premium paid for insurance policy. He would further argue about cost of the land when it obtained the same from KIADB on 17 Com.A.S.22/2017 lease with the condition to purchase the same after ten years and the rejection of other claims is improper and therefore, it needs to be interfered with, because of the failure on the part of defendant to complete the project, it has also suffered loss of business, same has not been considered by learned Arbitrator. Learned Arbitrator has observed that in the absence of any material or substantial proof the plaintiff cannot claim a sum of Rs.87,34,37,500/- towards loss of business. I do not find any mistake in the said order for the reason that the documents produced by the applicant herein do not disclose the loss sustained or because of the non-completion of the work, it has entrusted the contract to any third party and got it done etc. Till today the project has not been continued and therefore, the said contention is not accepted. After passing of the award, a review was filed seeking interest as well as Bank Guarantee of Rs.20 lakhs which was allowed and same is also under challenge. So, in all the Arbitrator has not considered certain counter claims and applicant's liability to pay interest on Bank Guarantee, which is not accepted and it is against the terms of the contract. So, according to learned counsel, it is a fit case to interfere with the findings of learned Arbitrator and in fact, it comes within the purview of Section 34 of the Act. The 18 Com.A.S.22/2017 very Award passed against the public policy or the provisions of law, non-application of law applicable to the case, amounts to patient illegality and therefore, this Court has got right to interfere. Learned counsel for applicant has submitted catena of decisions before learned Arbitrator. Among them, one is in the case of K S Vidyanandam and others Vs. Vairavan reported in (1997) 3 SCC 1 regarding time as essence of contract and infact, according to learned counsel when the tender document stipulates the time for completion of work and failure on the part of the defendant herein to furnish the PERT chart, after approval of the same by the consultant goes to show that Arbitrator has not given importance to terms of the contract, which ultimately made the plaintiff to suffer huge loss. The various correspondences exchanged between the plaintiff and defendant as observed by learned arbitrator goes to show that the time was essence of the contract. The learned counsel has cited another decision in the case of M/s Sharadamani Kandappan Vs. S Rajalakshmi and others reported in AIR 2014 SCC 3234 and also another decision of our High Court in RFA No. 150/2010 dated 10.9.2015, regarding time is essence of contract and there is no dispute about it. Further, learned Arbitrator has not followed the 19 Com.A.S.22/2017 provisions of Section 54 regarding terms and essence of the contract and failure on the part of the defendant to adhere to the terms of the contract, which amounts to patient illegality, which comes under provisions of Section 34(2) of the Act.
9. Per contra, learned counsel for the defendant would argue that learned Arbitrator has rightly allowed the claim No.1, 2 and 6, but wrongly rejected other claims on the ground that there is no proof submitted by them regarding loss sustained and compensation etc. Regarding the PERT chart, he would argue that it is not a condition precedent for commencement of the work as per the work order, dated 11.4.2012. Ex.R7 requires the commencement of work on 16.4.2012 and submission of detailed PERT chart activities for the project within 7 days from the date of receipt of the letter and the defendant having submitted PERT chart and also other drawings, submitted to the consultant, but the same has been overlooked by the plaintiff and plaintiff hurried to close the contract for the reasons best known to it. Since, PERT chart is not a condition precedent, the plaintiff should have allowed the defendant to carry on the work in the SEZ area and allowed the defendant to bring the material and accumulate the resources. The Nodal Officer was not appointed for the purpose of bringing 20 Com.A.S.22/2017 the material and if any delay was caused on account of the lethargic attitude of the plaintiff herein in appointing and seeking necessary permission from SEZ authority. Initially, it was agreed to prepare PERT chart for civil work and PEB work separately and after submission of PERT chart or civil work, the plaintiff changed the mind and asked for combined PERT chart with the resources, which made the defendant to suffer at the hands of the plaintiff for known reason of its fault. Further, the defendant has completed 96% of excavation for composite work by 4.6.2012 and excavation for 4 executive buildings completed on 12.6.2012 and it was also completed PCC work for footing and RCC work for security block footing. The delay is due to non-production of SEZ documents for getting tax benefits, non-appointment of security personnel, non- appointment of Nodal Officer, non-production of drawing for execution. Further, there was delay in providing the format of agreement to be entered into and it was submitted a month after the acceptance of the bid and after obtaining the format and same was given to defendant, who prepared it on stamp paper and got it ready. Since there was delay on the part of the plaintiff herein and the defendant made to suffer, therefore it is entitled to compensation and damages and also other 21 Com.A.S.22/2017 reliefs. Learned Arbitrator has not allowed the claim Nos.3 to 5, which was subject matter of AS 176/2017. So, I have already discussed the things in the said case. As far as counter claims of the applicant are concerned, he would argue by relying upon the decision in the case of Karsandas H.Thacker Vs. Saran Engineering Company Ltd., reported in AIR 1965 SC 1981 to the effect that when the 1 st party has not to pay the compensation which second party had to pay to third parties as he had not been told at the time of contract that the 2 nd party was making purchase of article for delivery to such third parties. With the help of the above, he would argue that since the plaintiff has not got completed the work by calling for tender and therefore, there is no question of awarding compensation to it towards loss and learned Arbitrator has rightly rejected the claim. As far as granting of amount towards consultancy cost with the SEZ, project management consultancy and penalty of 1.5% of the contract amount, he would argue that is incorrect for the reason that the delay is due to the applicant. He would further argue that though there is a clause in the agreement to pay penalty, the observation of learned Arbitrator is not correct for the reason that the delay is due to the failure on the part of the plaintiff to furnish 22 Com.A.S.22/2017 necessary permission to enter SEZ area and appointment of Nodal officer, etc., or furnishing the drawings for commencement of the work. In the connected case AS No.176/2016, he has submitted some of the decisions i.e., one in the case of State of Kerala Vs. K.Bhaskaran rendered in A.S No.206 of 1978 by the Hon'ble High Court of Kerala, dated 31.8.1984, to the effect that when there is no document to show that plaintiff has extended any amount for execution of the contract work, the burden is on it to establish the same and with the help of the above citation, he would argue that the evidence adduced by the applicant is not sufficient to claim the counter claim made by it. Of course, the respondent has cited another decision in the case of Kuldeep Singh Vs. Commissioner of Police and others reported in (1999) 2 SCC 10, to the effect that the decision arrived at without no evidence which is thoroughly irrelevant and no reasonable person would have acknowledged, the order would be perverse. But, if there is some evidence on record, which is acceptable and it could be relied upon. Regarding review of award after disposing of IA, he would rely upon the decision in the case of Dwarka Das Vs. State of M.P and another reported in (1999) 3 SCC 500 and of course, there is no 23 Com.A.S.22/2017 dispute about it and learned Arbitrator has rightly reviewed the award thereby awarding interest at 18% per annum, which according to me is correct. Regarding grounds to challenge the award and when award can be set aside, learned counsel for the respondent relies upon the decision in the case of Oil & Natural Gas Corporation Ltd., Vs. Saw Pipes Ltd., reported in (2003) 5 SCC 705 and Associate Builders Vs. Delhi Development Authority reported in 2015(3) SCC 49 and with the help of these two decisions, he would argue that the award regarding counter claim can be set aside, if it is against the public policy and interest of India and it is patiently illegal. However, we have to see whether we can apply principles laid down in the above decisions in the present case to the award relating to counter claim made by the applicant in the above case. The some of the counter claims are allowed based upon the documents and the terms of the contract. The terms of the contract provides for imposition of penalty to the maximum extent of 10% of the contract value, but learned Arbitrator has allowed only 1.5%, which is as per the terms of the contract and there is no illegality. If learned arbitrator awarded such penalty or other claims which do not find support from the contract or other documents, then of course, it becomes patently illegal. 24
Com.A.S.22/2017 Therefore, the award of the counter claims in favour of the applicant cannot be found fault with and therefore, the above two decisions are of no help to the respondent to reject the award regarding counter claims in favour of the applicant. Learned counsel for the defendant would further argue that the counter claim should not have been allowed as it was filed belatedly by relying upon the decision in the case of State of Goa Vs. Praveen Enterprises, reported in AIR 2011 SC 3814. However, the above decision is not applicable for the reason that no such contention was taken before learned Arbitrator and though there is no necessity to act under Section 11 of the Act by the Hon'ble Chief justice or designate to refer the counter claim, when there is reference by the one of the parties for decision. The counter claim can also be made along with written statement and this aspect has been dealt by learned Arbitrator in its impugned award. Of course, the award does not speak about contention raised by the respondent herein, who was the claimant before the Arbitrator that the counter claim which was filed belatedly cannot be entertained. However, the said argument cannot be accepted for the reason that Section 23 r/w Section 29 of the Act, makes it clear that the respondent is entitled to raise counter claim, unless the parties 25 Com.A.S.22/2017 have otherwise agreed and also in addition to or amend the counter claim unless otherwise agreed. In short, unless the arbitration agreement requires the Arbitrator to decide only the specifically referred dispute, the respondent can file counter claim and amend or add to the same provided they are arbitrable and within in limitation. So, this is the sum and substance of the above decision and if we read above decision along with arbitration clause at Ex.P1, it provides for referring the dispute by both the parties as per clause (b). Now, the question regarding limitation whether such counter claim can be entertained along with written statement. When the written statement is accepted and parties proceeded with the trial and obtained an award, I think it cannot be agitated before this Court under Section 34 of the Act. It cannot be held that the award regarding counter claim is illegal and barred by time. When we peruse the claim statement and counter claim statement, there is nothing to show that counter claim is barred by time. Of course, clause 31(b) states that the parties to arbitration shall specify the dispute to be referred to arbitration under the clause together with amounts claimed in respect of each dispute and respondent had issued letter dated 12.9.2012 at Ex.P8 and 10.10.2012 i.e., Ex.P9 referring the dispute under 26 Com.A.S.22/2017 the contract for arbitration. Though the applicant has issued reply as per Ex.P10, 13 and 14, there is no specification of the dispute referable to arbitration by the applicant herein and respondent before learned arbitrator. So, according to learned counsel for the defendant, the counter claim cannot be appreciated. As I have already stated, learned arbitrator has not assigned any reason for entertaining claim made along with written statement. But, the fact remains is that it was not opposed to by the respondent herein, who was claimant before arbitrator that counter claims cannot be entertained. The written argument submitted before learned arbitrator by the plaintiff, which is dated 18.11.2015 is silent about above contention, which is raised for first time before this Court. Therefore, the defendant has waived off its right, which was not taken at the earliest point of time. There was no occasion for learned arbitrator to deal with this aspect, as it was not raised before him, as generally the counter claim can be made along with written statement. Therefore, the decision in the case of State of Goa Vs. Praveen Enterprises is not applicable to the case on hand.
10. The next decision cited by the defendant herein, is in the case of Sahyadri Earthmovers Vs. L&T Finance Ltd., & 27 Com.A.S.22/2017 others in Arbitration Petition No. 1283 of 2010 on the file of the Hon'ble High Court of Bombay, dated 28.3.2011 and the said decision speaks about the procedure to be followed by learned Arbitrator and what is the nature of arbitration, etc. The said decision elaborately speaks about method of evidence requires to be adduced, to decide about decision and following of decisions regarding ratio of decision, obiter dicta, Estoppel etc., and when arbitral award can be set aside. However, in the present case, there is no whisper about any irregularities conducted by learned Arbitrator while choosing the forum, following the procedure and application of laws. Learned Arbitrator has allowed the parties to file their written statement, frame the points for consideration, provided enough opportunity to adduce evidence and also cross-examination of the witnesses, heard them at length and allowed them to file written argument, and then the impugned award came to be passed. Therefore, I am of the view that learned arbitrator has followed all the procedure, which are required to be followed, as per the provisions of Section 12, 13 and 19 of the Act and therefore, I am of the view that the above decision is of no help to the respondent to speak otherwise.
28
Com.A.S.22/2017
11. As I have already stated in the connected case, the arbitral award can be set aside, if it is opposed to fundamental policy of Indian law, interest of India, justice and morality and patently illegal. The contravention of the law relating to the contract is also one of the causes, but when we peruse the entire award, procedure conducted by learned arbitrator, I am of the view that nothing is against the provisions of law. So, when that is the case, then scope for interference by the Court under Section 34 of the Act is limited. This Court cannot re- appreciate the evidence or appreciation of the evidence, as it is not permissible. When the plaintiff fails to show that the award is hit by the provision of Section 34(2) of the Act, on the basis of the law , I am of view that this Court cannot interfere with the decision of learned Arbitrator. Learned Arbitrator has rightly allowed the part of counter claims and allowed the claim partly which according to me cannot be found fault with and therefore, no grounds are made out to set aside the award. Hence, I answer point No.1 is in the Negative.
12. Point No.2 :- For the aforesaid reasons, I proceed to pass the following Order.
29
Com.A.S.22/2017 ORDER The suit/petition filed by the applicant U/S. 34 of Arbitration & Conciliation Act, 1996 is dismissed. No costs.
Return the L.C.R to Arbitration Centre.
(Dictated to the Stenographer, typed by him, corrected and then pronounced by me through V.C on this the 9th day of June, 2021).
(CHANDRASHEKHAR U), LXXXVII Addl.City Civil & Sessions Judge, (Exclusive dedicated commercial Court) Bengaluru.
sk 09.06.2021 P 1- R1- R2 -
For Judgment 30 Com.A.S.22/2017 The Judgment is pronounced through V.C vide separate Judgment. The operative portion of the said Judgment is as follows :-
ORDER The suit/petition filed by the applicant U/S. 34 of Arbitration & Conciliation Act, 1996 is dismissed. No costs.
Return the L.C.R to Arbitration Centre.
LXXXVII ACC&SJ, B'LURU.