Bangalore District Court
Sankalpan Infrastructure Pvt Ltd vs Sumita Abhishek Sundaram on 19 June, 2024
KABC170016202023
IN THE COURT OF LXXXIII ADDL. CITY CIVIL & SESSIONS JUDGE,
COMMERCIAL COURT, BENGALURU (CCH-84)
Present: Sri S. Sudindranath, LL.M., M.B.L.,
LXXXIII ADDL. CITY CIVIL & SESSIONS JUDGE
BENGALURU.
COM.A.P.No.80/2023
Dated on this 19th day of June 2024
Petitioner Sankalpan Infrastructure Pvt. Ltd.,
A private limited company by shares
incorporated under the provisions of
the Companies Act, 1956,
At: 646, 1st 'D' Main Road, 1st Stage,
Domlur, Bengaluru,
Karnataka-560071
Also at:
Sentinel, Hiranandani, Business Park,
Powal, Mumbai, Maharashtra-400076
Represented herein by its
Authorized Representative &
Senior Manager Finance & Accounts
Mr.Suhas Vasudev Pawale.
(By Sri.S.Sushant Venkatesh Pai,
Advocate)
// versus //
Respondents 1. Sumita Abhishek Sundaram,
D/o Mr.Prem Kumar Bahl,
aged about 41 years,
R/at 34, ITI Colony, 8th Cross,
32nd Main, J.P.Nagar, 1st Phase,
2
CT 1390_Com.A.P 80-2023_Judgment.doc
KABC170016202023
Bengaluru,
Karnataka-560078.
2. Sri.C.K.Nandakumar,
The Learned Sole Arbitrator,
Arbitration and Conciliation Centre,
(Domestic and International)
3rd Floor, East Wing,
Khanija Bhavan, Race Course Road,
Bengaluru-560001.
(R1 by Sri.S.M, Advocate,
R2 - Arbitrator)
Date of Institution of suit : 07/07/2023
Nature of the suit : Management and
Consultancy Agreement
Date of commencement of :
recording of the evidence
Date on which the : 19/06/2024
Judgment was pronounced.
: Year Month/ Day/s
Total duration /s s
00 11 12
JUDGMENT
This is a petition under section 34 of Arbitration & Conciliation Act, filed by the Respondent before the Arbitral Tribunal, challenging the Arbitral Award dated 10-04-2023, passed by the Learned Sole Arbitrator- Respondent No. 2 herein, in AC No. 90 of 2022, allowing the claim of 3 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 Respondent No.1 herein [Claimant before the Learned Arbitrator].
2. On issue of notice of the present petition, the Respondent No. 1 / claimant has entered appearance through counsel and filed detailed objections to the present petition. The notice to Respondent No. 2 / Learned Arbitrator, is dispensed with.
3. Thereafter, I have heard the arguments of both sides and perused the records of the case.
4. The only point that arises for my consideration is :-
Whether the impugned Arbitral Award dated 10-04-2023, passed by Respondent No. 2, in AC No. 90 of 2022, calls for interference under section 34 of the Arbitration & Conciliation Act?
5. My answer to the above point is in the negative for the following :-
REASONS
6. The undisputed facts of the case are that, the Respondent No. 1 herein [hereinafter referred to as the 4 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 claimant], joined the services of the petitioner herein [hereinafter referred to as the company], as a consultant under the Consultancy Agreement dated 3-2-2017, which is marked as Ex. C-1. Under the said Consultancy Agreement, undisputedly, the claimant was entitled to fixed fee of Rs. 4.25 lakhs per month up to March 2017 and Rs. 4.80 lakhs per month from April 2017 onwards. In addition to the said fixed fee, the Consultancy Agreement provided for incentive of 1% of the work order exclusive of taxes for both design and build projects to be paid on realisation of the revenue.
7. The claimant resigned from the company and there is a dispute between the parties as to whether her last working day in the company was 15-04-2019, as contended by the claimant or 29-03-2019 as contended by the company.
8. It is the case of the petitioner that, she is entitled to the fixed fee for the months of March 2019 and half month of April 2019 and she has also not been paid incentive of 1% as per the Consultancy Agreement. For realizing these claims and since these claims arise out of the Consultancy 5 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 Agreement which contains arbitration clause, the petitioner initiated arbitration and filed CMP-194 of 2021 before Hon'ble High Court of Karnataka and in the said petition, the respondent No. 2 herein was appointed as the learned arbitrator.
9. Before the learned arbitrator, reiterating the above facts, the claimant filed claim petition and raised the following claims;
Sum of Rs. 59,79,087 towards variable fee of 1% of work order.
Further, relief of 1% of the amounts received by the respondent company for Kia Motors project to be quantified upon receipt of relevant information from the respondent.
Rs. 7,20,000 towards fixed fee from 1-03-2019 to 15-04- 2019.
Rs. 10,000 towards penalty levied on the claimant due to respondent's delay in filing TDS.
Costs and Interest.
10. Before the learned arbitrator, the company entered appearance and filed detailed Statement of Objections to the 6 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 claim petition. The Consultancy Agreement dated 03-02-2017 was admitted and it was admitted that the claimant rendered services for the company. However, as noted supra, dispute was raised regarding the last date of working of claimant in the company. Various allegations were made against the claimant alleging that she was not professionally competent during her tenure in the company which resulted in the clients terminating the contracts with the company, resulting in loss to the company. It was contended that, the Consultancy Agreement contained 3 months notice period which has been violated by the claimant by leaving the company on 29-03-2019 after giving termination notice only on 04-03-2019. It was alleged that, company laptop and various other documents and confidential information stored in the laptop are still in the custody of claimant and she has joined a competing company and using the confidential information of the company. In so far as the sum claimed as incentive of 1% of the work orders is concerned, it was contended that, said 1% of work order value is an incentive and is payable at the discretion of the company subject to 7 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 claimant's performance and therefore, claimant cannot claim the same as of right. It was further contended that the said incentive can be claimed subject to realization of revenue by the company and when the company itself has not realized the revenue due to the fault of the claimant, the claimant cannot claim said incentive. It was further contended that the incentive could not be claimed when claimant has failed to achieve targets. Ultimately, the company admitted its liability to pay fixed fee of Rs 4,80,000 for month of March 2019 and also Rs 10,000 which was paid as penalty by the claimant due to delay in the remitting of TDS by the company, but the company denied its liability to pay fixed fee for half month for April 2019 and also any liability to pay incentive of 1% of the work orders and sought for dismissal of the claim petition to that extent. The company raised a counterclaim seeking mandatory injunction to direct the claimant hand over laptop, data and other material and property of the company and to direct the claimant to strictly comply with confidentiality and non-disclosure covenants of 8 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 the agreement and to restrain claimant from using confidential and proprietary data of the company.
11. On the basis of the above rival pleadings of both sides, the Learned arbitrator framed the following issues;
1) Does the claimant prove that respondent is liable to pay 1% of the work order value for the Kia Motors project on which claimant worked during her engagement with the respondent?
2) Does the respondent prove that the scope of the variable fee of 1% under the consultancy agreement dated 3-02-2017 is linked to realization of total project revenue by the respondent?
3) Is the claimant entitled to a sum of Rs.
59,79,087 towards variable fee of 1% of the work order value towards various projects [as set out in Ex. C-25 being the letter dated 20-
12-2021 from the Learned Counsel for
Respondent to the Learned Counsel for
Claimant] that the claimant has worked on during her tenure with the respondent?
4) Is the claimant entitled to a sum of Rs.7,20,000 towards the fixed fee owed to the 9 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 claimant for the period beginning from 1-3- 2019 up to 15-4-2019?
5) Is the claimant entitled to a sum of Rs. 10,000 towards the penalty levied on the claimant due to the delay in filing of TDS by respondent for the financial year 2017-18?
6) In the event of the above claims [or any part thereof] being allowed, what interest is the claimant entitled to? Specifically, is the claimant entitled to pre and post award interest at 18% per annum on any claims that may be allowed?
7) Does the respondent prove that the claimant is liable to hand over laptop, data and other material and property belonging to the respondent company as stipulated in the consultancy agreement dated 3-2-2017?
8) Does the respondent prove that the claimant is liable to be directed, by way of mandatory injunction to strictly adhere to the confidentiality and non-disclosure covenants in the consultancy agreement dated 3-02- 2017?
9) What relief are the parties respectively entitled to?
10)What order on costs?
10
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11)Any other order, directions.
12. On behalf of the claimant, no oral evidence was adduced but instead the documents at Ex. C-1 to C-26 were marked by consent. In addition, in the cross-examination of RW-1, Ex. C-27, which was in fact a document produced by the respondent along with the statement of objections, was marked by confronting to RW-1. On behalf of the respondent, representative of respondent company was examined as RW-1 and Ex. R-1 to R-32 are marked and he has been cross- examined by counsel for the claimant.
13. To complete the narration of facts, it is to be noted that, as noted at paragraph 5 of the award, during the arbitral proceedings, the parties entered into partial settlement / compromise insofar as the counterclaims are concerned and respondent sought to withdraw the counterclaims, which is recorded in the Order Sheet of the Learned Arbitrator dated 26-12-2022 and therefore the Learned Arbitrator was only called upon to decide the claim of the claimant since the 11 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 counterclaim of the respondent company had been settled / compromised.
14. Thereafter, the Learned Arbitrator has heard the arguments of both sides and allowed the claim of the claimant by directing the company to pay Rs. 59,79,087 towards 1% of the work order value for the projects on which claimant worked during tenure of her engagement with the respondent as set out in Ex. C-25. In addition, the Learned Arbitrator directed the company to pay to the claimant a sum of Rs. 2,78,665 towards 1% of the work order value towards Kia Motors project. The Learned Arbitrator also allowed the claim for recovery of Rs. 7,20,000 fixed fee for the period from 1-3- 2019 to 15-4-2019. The Learned Arbitrator also allowed the claim for sum of Rs. 10,000 towards penalty levied on the claimant by the Income Tax Department.
15. On the sum of Rs. 59,79,087, the Learned Arbitrator granted interest at 12% per annum from 24-11-2018. On the sum of Rs. 2,78,665 towards Kia Motors project, the Learned Arbitrator granted interest at 12% per annum from 12 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 16-10-2018. On the fixed fee of Rs. 7,20,000, the Learned Arbitrator granted interest at 12% per annum from 1-4-2019 on Rs. 4,80,000 and from 16-4-2019 on sum of Rs. 2,40,000. On Rs. 10,000, interest was granted at 12% per annum from 11-10-2018.
16. In addition, Learned Arbitrator directed the company to pay the Arbitrator's fee and administrative expenses, legal fees and expenses of Claimant's Counsel and also sum of Rs. 3,000 towards the costs of memo for production / replacement of documents.
17. Aggrieved by the said arbitral award, the company is before this court in this petition under section 34 of the Arbitration and Conciliation Act.
18. Learned Senior Counsel for petitioner - Sri Dhyan Chinnappa in the course of his arguments mainly focused on the grant of relief of 1% of the work order value. In this regard, he vehemently argued that, the very terminology used in the consultancy agreement which is the undisputed document between the parties is that said 1% of the work 13 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 order value shall be an "incentive". He submitted that, the use of the word incentive discloses that, there is an element of discretion on the part of the company in either giving the said incentive or withholding the same and therefore, it is not that said incentive of 1% of the work order value can be claimed as of right or as a matter of course. He submitted that, on complete and logical reading of the consultancy agreement in general and annexure 1 of the same in particular, it becomes clear that, just above eligibility for incentives, the target for financial year 2017-18 has been fixed. Thereby, he submitted that the claimant will become eligible for incentive of 1% of the work order value only if she meets the targets and not otherwise. He highlighted that the claimant has not brought on record any material to show that she has achieved the targets set by the company. Such being the case, he argued that the Learned Arbitrator committed patent illegality in awarding 1% of the work order value, which can be interfered by this court under section 34 [2A] of the Act. Without prejudice to the above contention, he further argued that, from plain reading of the contract, it is clear that claimant 14 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 can claim 1% of the work order value only in respect of those work orders she has procured for the company. He submitted that the burden was on the claimant to step into the witness box and state on oath which are those work orders which have been procured for the company by the claimant and in the absence of claimant stepping into the witness box, the Learned Arbitrator has committed a patent illegality in awarding 1% of the work order value for all work orders stated in Ex. C-25. He submitted that Ex. C-25 is a letter written by the company's advocate to the claimant's advocate in compliance of directions issued by the court in Commercial AA No. 03/2021 and it cannot be construed as admission by the company that all the work orders stated in Ex. C-25 were procured by the claimant or that claimant was in any way involved in those work orders. Apart from this, Learned Senior Counsel for the petitioner has also attacked the other findings of the Learned Arbitrator as vitiated by patent illegality and in particular he argued that the Learned Arbitrator has committed a patent illegality in awarding the costs since in awarding the counsel's fee, the Learned 15 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 Arbitrator without specifying the value has awarded costs towards legal fees and expenses of claimant's counsel and as a result of same, given a blank cheque to the claimant to claim any astronomical amount under the said head. Thereby, he submitted that, viewed from any angle, the award calls for interference under Section 34 of the Arbitration and Conciliation Act.
19. Per contra, Learned Counsel for Respondent No. 1 has supported the impugned award.
20. Having considered the rival contentions, at the outset, it is to be noted that, the grounds raised in the present petition fall under Section 34 [2] [b] [ii] or Section 34 [2A] of the Act i.e. the grounds for challenging the impugned award are that, it is in conflict with public policy of India or that it is vitiated by patent illegality appearing on the face of the award.
21. Therefore, let me first analyze the findings of the Learned Arbitrator to ascertain whether it can be said that 16 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 award is in conflict with the public policy of India or it suffers from patent illegality appearing on the face of the records.
22. As already noted supra, one of the main grounds raised in the present petition is that the Learned Arbitrator committed patent illegality in allowing the claim for incentive of 1% of the work order value as stated in Ex. C-25 and also in respect of KIA project. The basis on which the claim is made in this regard by the claimant is in Annexure 1 of the consultancy agreement which is marked as Ex. C-1 and the same is extracted below for any reference.
"Eligibility for incentives Incentive of 1% of the work order value exclusive of the taxes for both design and design and build projects to be paid on realization of the revenue."
23. In this regard, there appears to be a slight but significant change in the stand of the company in the present petition from what it was before the Learned Arbitrator. In the statement of objections filed by the company before the Learned Arbitrator, with regard to this claim of the claimant, 17 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 the principal contention raised was that, it is an incentive which by its very nature is discretionary and apart from this, it is payable only on realization of the revenue and the services rendered by the claimant was not satisfactory as a result of which several clients cancelled the contracts with the company and therefore far from benefiting from the services of the claimant, the company in fact underwent loss due to the deficiencies in the services rendered by the claimant. As against this stand taken before the Learned Arbitrator, in the present petition, the entire thrust of the argument of the Learned Senior Counsel for Petitioner was that, the said incentive of 1% of the work order value is contingent upon claimant meeting the targets set in the earlier portion of annexure 1 of the contract. However, I hasten to add that, it is not that this contention regarding not meeting the targets is an argument in vacuum, but there is a whisper of the said contention in the statement of objections at paragraph 63 wherein it is contended that, by not fulfilling all the duties expected of her, she [claimant] has jeopardized her own 18 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 opportunity of receiving incentives owing to non-achievement of targets.
24. Anyhow, let me consider whether the Learned Arbitrator committed any patent illegality by allowing the claim of claimant for 1% of the work order value by rejecting the above contentions of the company. In so far as the first contention that the very word incentive implies an element of discretion on the part of the company in either allowing or rejecting the incentive is concerned, it is to be noted that, the company cannot withhold the incentive or deny the incentive on frivolous grounds, but can deny the incentive only on any of the conditions laid down in the contract. Therefore, merely because the said claim relates to incentive, it does not mean that it can be withheld by the company as per its whims and fancies and on the other hand, the company has to act strictly as per the terms of the contract. If the contract is looked into, it is seen that, it provides for claimant getting incentive of 1% of the work order value for both design and build projects to be paid on realization of the revenue. 19
CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 Therefore, on plain reading of the contract, it is clear that, the contract nowhere reads into the clause for incentive, the requirement of meeting the targets which was stipulated in earlier part of annexure 1 of the consultancy agreement. Therefore, the contention of the company that payment of incentive was subject to claimant meeting the targets is against the plain language of the agreement and cannot be accepted and the Learned arbitrator was correct in rejecting the said contention of the company.
25. No doubt, the plain reading of the agreement makes it clear that the incentive is payable only on realization of the revenue. However, the contention of the company that due to the deficiencies in the services rendered by the claimant, the company could not recover the revenue and on that ground to deny 1% incentive to the claimant cannot be accepted for two reasons. Firstly, as rightly held by the Learned arbitrator, no material has been produced by the company to show that, there was any deficiency of service on the part of the claimant or that as a result of any act or omission on the part of the 20 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 claimant, the company sustained loss or company lost contracts of its clients. In fact, from the emails produced by the claimant, it is clear that, till the claimant resigned from the company, the company had not put her on notice regarding any alleged deficiency in the services provided by her. The Learned arbitrator has analyzed the emails produced by the company in detail and reached the conclusion that, in none of the said emails is it forthcoming that the company has sustained any loss of income or loss of contract due to the acts or omissions of the claimant and in fact, the finding of the Learned arbitrator is that, in the emails produced by the company and relied upon by the company, there is in fact no reference to the name of the claimant. Therefore, the contention that the revenue was not realized due to fault of the claimant cannot be accepted. Even otherwise, the claimant herself was quite conscious that her entitlement to incentive of 1% of the work order value is subject to realization of the revenue by company. Therefore, during the pendency of the arbitral proceedings, the claimant filed application under section 26 of the Arbitration & Conciliation 21 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 Act read with order 26, rule 19 of the CPC. The Learned Arbitrator has referred to the said application at paragraph 50 of the award and under said application, claimant sought for appointment of qualified CA to review the accounts of the respondent company to ascertain revenue earned on each of the projects of the company and the date on which revenue was earned, total work order value, revenue earned and dates on which revenue was earned for the Kia Motors project. The Learned Arbitrator notes that, during the course of hearing, counsel for the company submitted that, while it is the case of the company that no incentive is payable, should the tribunal hold that incentive was indeed payable, incentive ought to be calculated at 1% of the work order value and consequently the details of realization including the amount and date of such payment are irrelevant. Thereby, by making the said concession before the Learned Arbitrator, so as to ensure that no CA was appointed to verify the records and ascertain what is the revenue earned on each project and when the revenue was earned, it follows that, it does not now lie in the mouth of the company to contend that no revenues 22 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 were earned from the relevant work orders and on this ground to deny 1% incentive to claimant. Therefore, from the above discussion, the conclusion to be drawn is that, on plain reading of the consultancy agreement, the claimant is entitled to incentive of 1% of the work order value subject to the only condition that it is payable as and when revenue is realized. There is no condition in the consultancy agreement that incentive is payable only on meeting of any targets by the claimant. Therefore, when the only condition for payment of incentive is realization of the revenue and when specifically claimant filed application to appoint CA to ascertain the quantum and realization of revenue on each of the work orders and said application was disposed off on the basis of submission of the company that, in case claimant is held to be entitled to incentive, incentive may be calculated on the work order value without going into question whether the said work order value was indeed realized by the company or not, it follows that, the Learned Arbitrator came to the correct conclusion in holding that the claimant is entitled to 1% of the work order value as incentive.
23
CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023
26. The next contention of the company is that, even assuming that the claimant is entitled to incentive of 1% of the work order value, the question which ought to have been considered by the Learned Arbitrator and the fact which ought to have been proved by the claimant by stepping into the witness box was, which are those work orders for which claimant is entitled to 1% of work order value as incentive. The answer to this question has to be again found on plain reading of the consultancy agreement which provides that claimant is entitled to 1% of the work order value for both design and build projects. The meaning to be assigned to this expression "design and design and build projects" is found in the statement of objections filed by the company at paragraph 5 wherein it is stated as follows;
"The projects handled by the respondent company can be broadly categorized into 2 categories, design and design and build, where in the case of the former, the respondent is merely a design consultant in charge of submitting a plan along with technical data drawings to the client. In the case of the latter, the respondent company is involved from the initial stages of planning the project through the building process and up until its completion."24
CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023
27. The argument of the Learned Senior Counsel for Petitioner is that the contract does not specify whether the claimant is entitled to 1% of work order value of those projects in which she was involved or which she procured for the company and therefore the Learned Arbitrator committed patent illegality by reading into the contract the words to the effect that claimant is entitled to 1% of work order value of those projects which she was involved in. No doubt the contract at Ex. C1 only says that claimant is entitled to 1% of the work order value for both design and design and build projects without specifying whether it is in reference to projects in which claimant was involved or projects which claimant procured and was also involved in. However, the manner in which the parties themselves understood the said contract is forthcoming from the email dated 24-11-2018 at Ex. C7 which was sent by the company to the claimant. In the said email, a list of 22 projects is enclosed and it is stated that the scope of involvement of claimant in respect of each project has been mentioned in the list and claimant has only 25 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 been involved with design responsibility for the design and build projects and therefore the company has considered a design fee for these projects at Rs.100 per square feet, since she has not taken responsibility for execution and procurement of the projects, company has not considered any incentive for this part. Therefore, from this email it is clear that the company has conceded that claimant was involved in the 22 projects stated in the list enclosed to the said email. The value of the said 22 projects comes to Rs.52,22,94,617. Of course, the list also mentions the billed value and amount to be billed. But as already noted Supra, the company has conceded before the Learned arbitrator that, in case it is ultimately held that claimant is entitled to incentive, the same may be calculated on the basis of work order value rather than amount actually billed and received. Therefore, the billed value and amount to be billed value stated in the list is not of much significance at this stage. In the said email, it is stated that claimant has only been involved with design responsibility for design and build projects and not taken responsibility for execution and procurement of the design 26 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 and build projects. However, as already noted Supra, at no earlier point of time, the company made any grievance about the quality of services rendered by the claimant. Therefore, when the contract does not specify that incentive shall be paid only on claimant being involved in execution of the project or for procurement of the project and only states that claimant is entitled to 1% of the work order value for both design as well as design and build projects and from the email at Ex. C7 which is sent by the company itself, it is evident that the claimant is involved in the 22 projects stated in the list enclosed to the said email, it follows that the company cannot now turn around and deny the incentive stated in the contract on the ground that claimant was not involved in execution of those projects or procurement of those projects, particularly when company had not raised grievance at any point of time regarding any deficiency in service on the part of the claimant.
28. However, it is to be noted that, in the present arbitration proceedings, the claimant has claimed 1% of 27 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 incentive for work order value of Rs 59.79 crores whereas in the list enclosed to said email at Ex. C7, the total project value is Rs 52.22 crores. The claimant relies upon Ex. C. 25 to claim 1% of work order value of Rs. 59.79 crores. In this regard, Learned Senior Counsel for the petitioner vehemently argued that, Ex. C25 is a letter addressed by company's advocate to the advocate for the claimant furnishing the information in compliance of the orders dated 23-11-2021 in Commercial AA No. 3 of 2021 and by furnishing the said information, the company did not make any admission that claimant was involved in those 26 projects in respect of which information was furnished at Ex. C25. Learned Senior Counsel for petitioner argued that, in the absence of claimant stepping into the witness box and stating on oath that, she was personally involved in these 26 projects, she was not entitled to claim 1% of the work order value of these 26 projects. However, if the statement of objection filed by the company before the Learned arbitrator is carefully analysed, it is noted that although in the claim petition, the claimant specifically sought for sum of Rs 59,79,087 being 1% of the 28 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 work order value stated in the said letter at Ex. C25, in the statement of objections, the company did not specifically deny her involvement in those 26 projects. As already noted Supra, in the objection statement filed before the Learned arbitrator by the company, only two contentions were taken to deny incentive to the claimant. Firstly, that incentive has an element of discretion and it is subject to realisation of the work order value by the company and secondly non-meeting of targets by the claimant. In the entire objection statement, no contention is taken specifying which among the 26 projects mentioned in Ex. C25 the claimant was involved in and which projects she was not involved in. This fact being within the knowledge of company, the company was expected to come clean on its stand as to which projects had personal involvement of claimant. In the absence of company denying the personal involvement of claimant in those 26 projects which are part of ExC 25, the Learned arbitrator was justified in granting relief to the claimant at 1% of work order value for all the projects mentioned in Ex. C25. In any event, the said finding of the Learned arbitrator cannot be 29 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 considered to be tainted with patent illegality appearing on the face of the records so as to justify interference in a Section 34 petition.
29. It is to be noted that, the total value of the work orders set out in Ex. C25 running to Rs 59.79 crores does not include Kia Motors project since in Ex. C25 the value of the said project is stated as nil on the ground that it was cancelled. It is for this reason that the claimant has separately claimed 1% of the work order value of Kia Motors project. Of course, the prayer in the claim petition is for 1% of the amount received by the company in respect of Kia Motors project. But as already noted, during the arbitral proceedings it was conceded by the company that, in case, it is held that, claimant is entitled to incentive such incentive will have to be calculated on 1% of the work order value rather than 1% of the revenue actually received by the company. The Learned arbitrator at paragraph 48 of the award has taken note of the fact that as per Ex. R26 the work order value of Kia Motors project is Rs 2.78 crores which corresponds to the value stated in the list enclosed with 30 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 email at Ex. C7 issued by the company and therefore, the Learned arbitrator has also awarded 1% of Rs 2.78 crores in respect of the Kia Motors project, on the ground that, there is no material on record to show that said project was cancelled due to the fault of the claimant. In my view this finding of the Learned Arbitrator also cannot be termed as patently illegal. This is because when the company did not allow its financial documents to be scrutinized by CA sought to be appointed in the arbitral proceedings, to ascertain the actual revenue generated to the company from the various projects in which the claimant was involved in and instead conceded that if ultimately incentive is allowed it may be calculated on work order value it follows that the company cannot now turn around and say that the project was cancelled and therefore the company did not receive any revenue and therefore incentive cannot be granted for the Kia Motors project. In view of my above discussion I hold that the findings of the Learned Arbitrator awarding incentive of 1% of the work order value as stated in Ex. C25 and in addition 31 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 awarding 1% of the work order value for the Kia Motors project does not call for interference.
30. The next relief granted by the Learned Arbitrator is awarding Rs. 7,20,000 towards fixed monthly fee from 1-3- 2019 to 15-4-2019. In this regard the fixed fee for March 2019 of Rs. 4,80,000 is not in dispute. What is disputed is only the sum of Rs. 2,40,000 for half a month of April 2019 on the ground that the last working day of the respondent is on 29-3-2019 and she never worked up to 15-4-2019 as claimed by her and in this regard the attendance register marked as Ex. R1 is relied upon. However, the Learned Arbitrator at paragraph 66 of the award has observed that, in the attendance register marked as Ex. R1, there is entry dated 9-4-2019 showing the claimant as present. Further, at paragraph 61 of the award, Learned Arbitrator observes that in email dated 17-9-2019 at Ex. C14 the company has acknowledged that 15-4-2019 was last working day of the claimant because it is reply to email of claimant in which she has specifically stated that 15-4-2019 is her last working day 32 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 in the company and in the contemporaneous reply to the same it is not denied. Therefore, the finding of the Learned Arbitrator that the claimant has worked till 15-4-2019 is based on evidence and even if a different view were to be possible, it is not open for this court in a section 34 petition to interfere with the said factual finding which is on the basis of appreciation of material on record. Once the conclusion is reached that Learned Arbitrator was correct in holding that claimant has worked till 15-4-2019, it follows that Learned Arbitrator was correct in granting half-month salary of Rs. 2,40,000 to the claimant. Accordingly, this relief of granting Rs. 7,20,000 towards fixed fee also does not call for interference.
31. In so far as Rs. 10,000 awarded for indemnifying the petitioner for penalty levied on her due to delay in remitting TDS by the company is concerned, the said claim is admitted by the company at Paragraph 65 of Statement of Objections wherein it is stated that, "The averments of this paragraph [Paragraph 42] are accepted to the extent that the respondent 33 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 company has been constant in confirming their liability to make payment towards remuneration of the claimant for the month of March 2019 and Rs. 10,000 towards penalty for non-remittance of TDS." Therefore, when the said liability is not disputed, the finding of the Learned Arbitrator awarding the said sum of Rs. 10,000 is perfectly in accordance with law and does not call for interference.
32. In so far as the interest component is concerned, the Learned Arbitrator has awarded interest at a reasonable rate of 12% per annum from the relevant dates and the same also does not call for interference.
33. In so far as the costs awarded by the Learned Arbitrator is concerned, there is no grievance made out in the petition except for one contention raised that the Learned Arbitrator has awarded legal fees and expenses of claimant's counsel without making a specific award in respect to the same and therefore, by virtue of the award, any astronomical claim as lawyer's fee would have to be paid. This ground is specifically raised at paragraph 47 of the present petition. However, if the 34 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 award is closely perused, it is noted that at paragraph 90 of the award, a reference is made by the Learned Arbitrator to details of costs filed along with written submissions. Along with the objections filed to the present petition, Learned Counsel for Respondent No. 1 has produced copy of the written submissions filed before the Learned Arbitrator as document No. 2. At paragraph 38 of the said written submissions, the total legal costs is quantified at Rs. 8,37,401. Therefore, it is clear that the award of legal fees and expenses of claimant's counsel is with reference to the legal costs quantified at paragraph 38 of written submissions, particularly since reference is made to the same at paragraph 90 of the award and therefore, it cannot be said that any vague or astronomical amount has been awarded by the Learned arbitrator in this regard. Therefore, I am of the view that the impugned award is neither vitiated by patent illegality nor against public policy of India so as to warrant interference under section 34 of the Arbitration and Conciliation Act.
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CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023
34. Before parting, it is necessary to refer to few other grounds raised in the Petition. One of the important grounds raised is that the Learned arbitrator in interpreting the contract has taken aid of external documents i.e. the previous drafts and thereby committed patent illegality. In this regard, reliance is placed upon the following rulings for the proposition that where interpretation of the contract is perverse and is based on external aids not connected with the terms of the contract then it is a sufficient ground to interfere under section 34 of the Arbitration and Conciliation Act;
i) Numaligarh Refinary Ltd. v. Daelim
Industrial Co. Ltd. - (2007) 8 SCC 466
ii) SEAMEC Ltd.v. Oil India Ltd. - (2020) 5
SCC 164
iii) BESCOM v. ES Solar Power Pvt. Ltd -
(2021) 6 SCC 718
iv) Food Corporation of India v. Abhijit
Paul - 2022 SCC Online SC 1605.
35. In this regard, if the impugned award is analyzed, it is noted that, the Learned Arbitrator was himself conscious in this regard and he has noted at paragraph 17 of the Award 36 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 that "While relying on previous drafts is not always a preferred mode of interpretation of contract, in the present case, a reading of the text of the clause makes it abundantly clear that incentive of 1% is payable for both design and design and build projects on the work value order exclusive of taxes. This does not really leave any room for interpretation or imagination as to discretion being available with the respondent on whether or not to make payment of such incentive. The only variable factor in this clause is the point of payment which is said to be upon realization of revenue by the company." This observation by the Learned Arbitrator makes it clear that the Learned Arbitrator himself opined that interpretation of contract with reference to previous drafts is not preferred mode of interpretation and Learned Arbitrator has interpreted the contract on the basis of the plain language of the contract. It is only in paragraph 18 that Learned Arbitrator observes that "The clarity of the contractual obligation is apparent from a reading of the clause itself. This is more so in the light of the contrast with the previous drafts at Ex. C2 and Ex. C3." Therefore, once 37 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 again the interpretation of the Learned Arbitrator is based upon the plain language of the contract and only because in passing Learned Arbitrator has referred that this plain language is in contrast with the earlier drafts does not mean that the entire interpretation of the contract by the Learned Arbitrator is based upon contrasting the language of contract with the previous drafts. Therefore, it cannot be said that the Learned Arbitrator has interpreted the contract in question in the light of previous drafts. On the other hand, the Learned Arbitrator has interpreted the contract on its plain language. Therefore, this contention of the petitioner cannot be accepted and the rulings relied upon in this regard have no application to the facts of the present case.
36. Reliance is also placed upon following rulings for the proposition that claimant has to plead and prove her relief on the strength of her case and award cannot be passed on the basis of weakness of the defence or lacuna in the defence;
i. Uttar Pradesh State Electricity Board vs Aziz Ahmed [2009] 2 SCC 606 38 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 ii. Rangammal vs Kuppaswami AIR 2011 SC 2344 iii. ONGC vs Western Geco International Ltd (2014) 9 SCC 263
37. These rulings are relied upon in support of the argument that in the absence of claimant entering into the witness box and stating on oath and proving which are the projects in which she was personally involved in, the Learned Arbitrator committed error in granting relief of 1% incentive of work order value. This has already been discussed by me supra in detail holding that the Learned Arbitrator has granted relief on the basis of the fact that, in the list enclosed with email at Ex. C-7, the company has itself admitted in respect of involvement of claimant in projects of work order value of Rs. 52.22 crores. In Ex. C-25, the company has furnished information in response to the directions of the court in the Orders in Commercial A.A. 3 of 2021 and the total work order value stated in Ex. C-25 comes to Rs. 59.79 crores. When specifically claim was made by claimant seeking 1% of work order value as stated in Ex. C-25 in the 39 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 objection statement filed by company before the Learned Arbitrator, there was no specific denial setting forth which among the said projects stated in Ex. C-25 the claimant was personally involved in and which projects she was not personally involved in. In the absence of there being specific denial in the statement of objections in this regard, there was no need for the claimant to step into the witness box and state on oath her personal involvement in these above projects. Therefore, Learned Arbitrator has not committed any error in this regard and the above rulings will not come to the rescue of the claimant in the present case.
38. Reliance is also placed upon the following rulings in support of the proposition that where Learned Arbitrator records any finding sans evidence, the same calls for interference;
i. State of Rajasthan Vs. Ferro Concrete Construction Pvt. Ltd. (2009) 12 SCC 1 ii. ONGC Vs. Western Geco International Ltd. [supra] iii. Associate Builders Vs. DDA (2015) 3 SCC 49 40 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 iv. Ssangyong Engineering and Construction Company Ltd. Vs. NHAI (2019) 15 SCC
131.
39. These rulings will not help the petitioner in this case because, in view of the detailed reasons noted supra, I have already recorded the finding that the conclusions reached by the Learned Arbitrator are based on material on record and sound appreciation of evidence.
40. Ultimately, Reliance is placed upon K. Narayana Vs. State of Karnataka ILR 1991 Karnataka 3283 for proposition that, by its very nature, incentive indicates that it cannot be claimed as of right or as a matter of course and it is within the discretion of the company. In fact, Reliance was placed upon this ruling before the Learned Arbitrator also, who has dealt with this aspect at paragraph 47 of the award. Anyhow, I have already noted supra that in the facts and circumstances of the case, the incentive could not have been denied by the company and therefore, the facts being different, this ruling has no application to the present case. Accordingly, in view of the detailed discussion supra and for 41 CT 1390_Com.A.P 80-2023_Judgment.doc KABC170016202023 all the above reasons, I conclude that the impugned award does not call for interference under section 34 of the Arbitration and Conciliation Act and accordingly, answering the point for consideration in the negative, I proceed to pass the following :-
ORDER The petition under section 34 of the Arbitration and Conciliation Act is hereby dismissed, with cost.
Office to issue soft copy of this judgment to both sides, by email, if furnished.
[Dictated using Dragon Professional Speech Recognition Software Version 15.3, transcript revised, corrected, signed and then pronounced by me in open court on this the 19th day of June, 2024] (Sri. S. Sudindranath) LXXXIII ADDL.CITY CIVIL AND SESSIONS JUDGE, COMMERCIAL COURT; BANGALORE.