Bangalore District Court
M/S.Jurong Infrastructure vs ) M/S.Vishal Infrastructure Ltd on 7 November, 2018
IN THE COURT OF THE VI ADDL. CITY CIVIL & SESSIONS JUDGE
AT BENGALURU CITY : (CCCH.11)
Dated this the 7th day of November, 2018
PRESENT: Sri.Rama Naik, B.Com., LL.B.,
VI Addl.City Civil & Sessions Judge,
Bengaluru City.
A.S.NO: 104/2013
PLAINTIFF : M/s.JURONG INFRASTRUCTURE
(INDIA) PVT.LTD.,
A Company under the Companies Act 1956,
Regd.office : Jurong House,
1/5, Palace Road, Bengaluru-560 001.
Reptd.by its Senior Vice President-
Corporate Services - Mr.Umesh Mudnur.
[By Pleader Sri.Keetikumar D. Naik]
/Vs/
DEFENDANTS :1) M/S.VISHAL INFRASTRUCTURE LTD.,
A Company under the Companies Act 1956
Regd.Office : 1225/A,
Anugriha Apartments,
Rukminidevi Colony, West Marredpalli,
Secunderabad - 500 026.
Reptd.by its Managing Director.
[By Pleader Sri.BSK]
2) MR.K.G.HOSUR,
S/o.Sri.N.R.Jagadeeshwar,
Advocate, No.121/3, I Floor,
OM Complex, Avenue Road,
Cubbon Pet Main Road,Bengaluru-560 002.
[By Pleader Sri.Ashok.D.S]
AS.104/2013
2
JUDGMENT
This suit is filed by the Plaintiff under Section 34 of the Arbitration and Conciliation Act, 1996 praying for setting aside the award dated 30.08.2013 passed in Arbitration Case No.1/2011 by Defendant No.2 and for decreeing the suit in respect of counter claim made by the Plaintiff before the Arbitral Tribunal.
2) In brief, the Plaintiff's case is that, Plaintiff is a Company under the Companies Act 1956 and is engaged in the business of Civil Engineering Consultancy and undertakes civil construction projects. The Plaintiff had entered into a contract with M/s. Metrocorp Infrastructure (then a registered Partnership Firm), for the constructions of Residential Villas, in their proposed project called 'METROCORP NIRVANA' situate at Sadahalli Village, Bangalore North. The total contract value entered into with M/s. Metrocorp was Rs.1,15,30,20,000/- (Rupees One Hundred and Fifteen Crores Thirty Lakhs Twenty Thousand Only). An Agreement dated 05.10.2007 was executed between AS.104/2013 3 the Plaintiff and 1st Defendant for Civil Works for structure masonry and plastering of 27 Villas in the said Metrocorp Nirvana project. The said contract was item rate contract and as per the bill of quantities estimated, the total value of the works contracted to the Defendant was Rs.8,66,81,508/- (Rupees Eight Crores Sixty-six Lakhs Eighty-one Thousand Five Hundred and Eight Only). As per the terms of the contract, the rate for a specified work in the contract - bill of quantities was agreed upon and the 1 st Defendant was required to be paid the value of the total works done and certified to have been done by the Site Engineers. The terms of the contract stipulated that the Plaintiff would pay to the 1st Defendant mobilization advance which was to be secured by a bank guarantee, and that in every running bill the 1st Defendant would repay the mobilization advance in part and a total of 5% of the running bill. Time having been agreed to be the essence of contract, the 1st Defendant was to commence works by 12.10.2007. But, the 1st Defendant commenced work on 24.10.2007 with a very slack approach. The work AS.104/2013 4 progress was very slow and the 1 st Defendant could not keep up with the time lines scheduled for completion of the works within a period of six months. The 1 st Defendant issued its first RA bill on 02.01.2008 for a total value of Rs.21,55,018/-, which was very below the targeted works. The 1st Defendant was required to complete works of the value of about Rs.3,00,00,000/- within the said period to be able to keep up with the time lines and to complete the contract works within time.
The further contention of the Plaintiff is that, despite repeated reminders, the 1st Defendant failed to keep up the pace of progress of the work and tried to foist the reasons for delays on the Plaintiff. The Plaintiff has paid all the running bills of 1 st Defendant. The only running bill No.7 was not paid for the reason that the details of work alleged to have been done by the 1st Defendant in the said period did not match with the works actually done at site. Every RA bill has to go through the process of measurements and verifications AS.104/2013 5 of the works done and the quality of the works done and upon being found to be correct, the RA bills are required to be certified for payment. Without such certification, the RA bills could not be paid as claimed by the 1st Defendant. The Plaintiff also states that Defendant No.1 thereafter issued a letter dated 30.03.2009, wherein, the Defendant No.1 allegedly terminated the contract citing the reason of non- payment of RA Bill No.7. The Plaintiff issued a reply to the said letter vide its letter dated 09.03.2009. The Defendant No.1 sought reference to arbitration and the Arbitral Tribunal has passed the impugned award. The Plaintiff has challenged the impugned award on the following grounds.
(a) The composition of the Arbitral Tribunal and the arbitral procedure was not in accordance with Agreement of the parties.
(b) The arbitral procedure was in
accordance with law and the Arbitral
Agreement.
AS.104/2013
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(c) The Arbitral Tribunal failed to
appreciate the cogent documentary and oral evidence produced by the Plaintiff.
(d) The Arbitral Tribunal deals with the dispute, which was not contemplated by and was not falling within the terms of the submission to arbitration.
(e) The award is unsustainable and bad in law. Settled principles of law and precedents were not followed while passing the impugned award and the same led to miscarriage of justice.
(f) The Tribunal erred in relying upon the alleged documents produced by Defendant No.1 without there being approved as per law.
(g) The impugned award is bad in law, as the Tribunal has not even traversed the claims made by the Plaintiff by way of counter claim.
For all these reasons, the Plaintiff prays for setting aside the impugned award and allowing the counter claim.
AS.104/2013 7
3) After issuance of summons, the Defendant No.1 marked its appearance through its Advocate and filed statement of objections, wherein, the 1st Defendant has stated that the arbitration proceedings before the Arbitrator was carried out as per law and the Arbitrator has passed a reasoned award. Ex.C.6, Ex.C.7, Ex.C.13, Ex.C.14, Ex.C.20 and Ex.C.26 exhibited the undue interference and hindrances in the work by the Plaintiff. Exs.C.9, C.11, C.12, C.15, C.18 and C.19 revealed that cement, RMC, steel reinforcement etc., were not supplied in time which delayed the work. Exs.C.8, C.29 and C.31 disclosed the latches on the part of the Plaintiff in releasing the approved drawings. Exs.C.16, C.21, C.24, C.27, C.33, C.37, C.40 and C.44 brought out the delay in payment of bills. Exs.C.32, C.38, C.42, C.44 and C.45 are the correspondences exchanged between the Plaintiff and the 1st Defendant which revealed the respective contentions of the parties. The counter claims of the Plaintiff were without any evidence or proof. The grounds stated by the Plaintiff to set aside the award do not attract the provisions in sub-section AS.104/2013 8 (2) of Section 34 of the Arbitration and Conciliation Act and it is contended that after hearing both the parties, the Arbitral Tribunal has partly allowed the claim of the 1st Defendant, hence, prays for dismissal of the suit.
4) Heard. Perused the pleadings and records placed in this case.
5) The points that arise for my consideration are :-
(1) Whether the Plaintiff has made out any of the grounds enumerated in Section 34(2) of the Arbitration and Conciliation Act, 1996 to set aside the impugned award?
(2) What Order?
6) My answers to the above points are :-
Point No.1 - In the Negative;
Point No.2 - As per final order, for the following :
REASONS
7) Point No.1 The Plaintiff has filed this suit challenging the impugned award dated 30.08.2013, wherein, the learned Arbitrator/Defendant No.2 has AS.104/2013 9 allowed the claim petition of the 1st Defendant in part, while rejecting the counter claim of the Plaintiff.
Before adverting to the grounds urged by the Plaintiff in its pleading and arguments, it is relevant to mention Section 34(1) and (2) of the Arbitration and Conciliation Act, 1996, which reads as follows :
" 34. Application for setting aside arbitral award (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 furnish proof 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.
AS.104/2013 10 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.
Explanation : Without prejudice to the generality of sub-clause (ii) of clause (b), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81."
8) The first ground urged by the Plaintiff is that, the composition of the Arbitral Tribunal and the arbitral procedure was not in accordance with the agreement of the parties. The Plaintiff has stated that the arbitral agreement provides both the parties to appoint one arbitrator each and two arbitrators so appointed were AS.104/2013 11 to, in turn, appoint the third arbitrator. The Arbitral Tribunal was to comprise of three persons, whereas, the present Arbitral Tribunal was comprised of only sole Arbitrator. The 1st Defendant's contention is that, Defendant No.1 nominated Sri.T.V.Prabhakaran as Arbitrator and requested the Plaintiff to nominate its Arbitrator vide letter dated 10.06.2009 (Ex.C.49) and further reminded the Plaintiff vide letter dated 17.08.2009 at Ex.C.56 and letter dated 22.09.2009 at Ex.C.61. The Plaintiff failed to do so and tried to make delay in appointing the Arbitrator. The Defendant No.1, therefore, was forced to approach the Hon'ble High Court of Karnataka for appointment of Arbitrator. The 1st Defendant also contended that the Plaintiff did not protest for appointment of a sole arbitrator either before the learned arbitrator or before the Hon'ble High Court of Karnataka. Hence, the Plaintiff's contention is not tenable.
AS.104/2013 12
9) At this juncture, it is relevant to mention arbitration clause contained in para-5 of Ex.C.5-Articles of Agreement, which reads as follows :
" 5. Any dispute concerning any matter in respect of this contract agreement shall be referred to the arbitrators, one to be nominated by the Employer and others to be nominated by the contractor and these two arbitrators will nominate third arbitrator who shall act as Presiding arbitrator for this arbitration Tribunal. The Arbitrations proceedings shall be governed by the Arbitration and Conciliation Act 1996 as amended from time to time. The decision of Arbitration Tribunal shall be final and binding on the parties.
10) It is also relevant to mention Ex.C.49, C.56 and C.61, which reads as follows :
" Ex.C.49:
It is stated that vide our letter dated 20.04.09 referred to above we had rescinded the above contract with effect from 10th April 09 for your default and forwarded the claims arising in this contract vide our letter dated 06.05.09. There is no response from you at all to settle these claims amicably and as such certain disputes have arisen in this contract. In view of above there is no option but to refer the disputes in this contract to the reference of arbitration as provided for in serial No.5 of Articles of Agreement dated.05.10.2007.
According to this provision, one Arbitrator is to be nominated by the Employer and other to be nominated by the contractor and these two arbitrators will nominate third arbitrator who shall act as Presiding Arbitrator for this Arbitration Tribunal. We therefore nominate AS.104/2013 13 Shri.T.V.Prabhakaran as Arbitrator from our side. You are requested to nominate Arbitrator to be nominated by you within 30 days of the receipt of this notice. This notice is given to you under section 11 of Arbitration and Conciliation Act 1996."
" Ex.C.56:
............... In case our due payments are not finalized on before 22nd Aug 09, we have to Concluded that you are not interested to settle the matter through discussions, hence, we request you to refer the matter immediately to arbitration as requested vide our letter No.VIL/BLR/0568/2009-10 dated 10/06/2009."
"Ex.C.61:
We have already appointed our arbitrator Shri.T.V.Prabhakaran vide our letter No.VIL/BLR/0568/2009-10 dt.10.06.2009. Please nominate your arbitrator within 15 days from the receipt of this letter. This notice is in continuation of our earlier notice issued under section 11 of Arbitration and Conciliation Act 1996."
11) Having gone through the contentions of the parties and documents at Exs.C.5, C.49, C.56 and C.61, it make it clear that Defendant No.1 promptly invoked the arbitration clause in Ex.C.5 and nominated its arbitrator viz., Sri.T.V.Prabhakaran and brought it to the notice of the Plaintiff the appointment of its Arbitrator at Ex.C.49 and the same was reminded to the Plaintiff at Ex.C.56 and Ex.C.61. In spite of repeated requests of AS.104/2013 14 Defendant No.1, the Plaintiff did fail to appoint its Arbitrator. As a last resort, the Defendant No.1 was pleased to approach the Hon'ble High Court of Karnataka for appointment of sole Arbitrator. The Hon'ble High Court of Karnataka was pleased to appoint Defendant No.2 as sole Arbitrator in CMP.No.65/2010. The Plaintiff could have raised the said contention in the above CMP, but it allowed the matter to proceed further. When matter is being thus, the contention of the Plaintiff that the composition of the arbitral tribunal and the arbitral procedure was not in accordance with the agreement of the parties are not tenable. Moreover, Section 11(4)(a) of the Act specifically states that, if a party fails to appoint an arbitrator within 30 days from the receipt of notice from the other party, the appointment shall be made upon the request of a party by the Supreme Court or as the case may be by the High Court. Here in this case, the Defendant No.1 appointed its own arbitrator and requested the Plaintiff to appoint its arbitrator. The Plaintiff failed to do so. Then, the Defendant No.1 approached the Hon'ble High AS.104/2013 15 Court of Karnataka for appointment of sole Arbitrator under the provisions of Arbitration and Conciliation Act, 1996. Hence, I am of the opinion that the contention of the Plaintiff does not hold good.
12) The next contention of the Plaintiff is that, the arbitral procedure was not in accordance with law and the arbitration agreement. The Plaintiff has contended that the parties have not agreed that the award does not require reasons to be given in the award. In the absence of such agreement, the arbitral award ought to have been made following the mandate of law and as such, the award suffers from said infirmity and lacuna and cannot be sustained. The 1 st Defendant's contention is that, the award passed is well reasoned and the learned Arbitrator has passed the award after considering the documentary evidence and oral testimony of the parties. The findings of the learned Arbitrator are based on the documents and oral evidence placed by the parties.
AS.104/2013 16
13) On perusal of the impugned award dated 30.08.2013 passed by Defendant No.2 makes it clear that, the learned Arbitrator was pleased to frame 11 Points. The first and foremost point is Point No.1, which reads as follows :
" Whether there was delay in supply of cement, RMC, Steel reinforcement bar and concrete blocks free for incorporated works, in supply of drawings approved for construction and whether there were other delays in their day today working for non contractual Hindrances from M/s.Metro Corp.?"
The findings arrived at by the learned Arbitrator on Point No.1 was a basis for deciding all other points framed by the learned Arbitrator. The Defendant No.1 has ingrained the findings arrived at by the learned Arbitrator as follows :
"(a) Ex.C.6, C.7, C.13, C.14, C.20 and C.26 brought out the undue interference and hindrances in the work by the Plaintiff.
(b) Ex.C.9, C.11, C.12, C.15, C.18 and C.19 revealed that cement, RMC, steel reinforcement, etc. were not issued in time which led to delay in execution of work.
(c) Ex.C.8, C.29 and C.31 brought out the delay in release of approved drawings.
AS.104/2013 17
(d) Ex.C.16, C.21, .24, C.27, C.33, C.37, C.40 and C.44 brought out delay in payment of RA bills and
(e) Ex.C.32, C.38, C.42, C.44 and C.45 are correspondences exchanged between the parties which revealed the respective contentions of the parties.
The learned Arbitrator has considered all these exhibits and discussed elaborately and arrived at conclusion.
The Arbitrator after going through all these material evidence, was pleased to hold in para-42 of the award as follows :
"42. Though the respondent contended that there was no delay on its part in supply of materials, drawings but the documents produced by the claimant referred above makes it clear that there was a delay in supply of the said materials as contended by the claimant. The respondent failed to fulfill the basic fundamental obligations cast on them as per the conditions of the contract such as timely release of drawings, adequate supply of materials apart from that there was interference by the metro corp. in execution of work by the claimant. Hence I answer point No.1 in the affirmative."
14) In the same way, the learned Arbitrator was pleased to discuss Point No.2 to 10 in detail in the light of the materials placed before him. It is important to AS.104/2013 18 note that Clause (5) of Ex.C.5-Articles of Agreement categorically states that, arbitration proceeding shall be governed by Arbitration and Conciliation Act, 1996, as amended from time to time and that the decision of the Arbitral Tribunal shall be final and binding on the parties. Here, in this case, the Arbitrator was appointed by the Hon'ble High Court of Karnataka in CMP. No. 65/2010 under the provisions of Arbitration and Conciliation Act. The learned Arbitrator arbitrated the dispute as per the provisions of law and passed the award. The award is supported by material evidence placed by the parties and well reasoned. Moreover, the arbitration clause in Ex.C.5, which was consciously entered into between the parties, bars the parties from disputing the decision of the Arbitrator and the same shall be final and binding on the parties. Here, the award passed by Defendant No.2 is well reasoned and supported by material evidence. Moreover, the Plaintiff did not take contention that the learned Arbitrator had not followed the procedure in accordance with law and as per the arbitration agreement, nor he placed any AS.104/2013 19 materials before this court to show that the Plaintiff has taken such contention in the arbitral proceedings. Under such circumstances, it cannot be said that the arbitral procedure was not in accordance with law and the arbitration agreement. If it is held so, it would be overreaching on the well reasoned award and the same is not supported by established principles of law.
15) The Plaintiff has contended that, the Tribunal failed to consider the documentary evidence, which shows that the alleged RA bill No.7 was inflated and that the actual works done jointly admitted between the parties was only to the tune of Rs.19,00,000/-. It is also the contention of the Plaintiff that the parties had taken joint measurements and after due deliberation, the parties agreed for settling the final value of the works done for Rs.19,00,000/-. This was evidenced by e-mail dated 29.09.2009 and the draft of the joint memo sent by Defendant No.1. Defendant No.1 states that the RA Bill No.7 was submitted to the Plaintiff on 26.02.2009 and requested the Plaintiff to make outstanding RA Bills AS.104/2013 20 payments without delay and as the Plaintiff breached the contract, the Defendant No.1 issued letter dated 20.06.2009 at Ex.C.45 for termination of contract. Thereafter, joint measurement for the executed work certified and accepted by both the parties and revised final bill including extra for idle charges for delayed issue of materials and for idle labour and interest on delayed payments of RA bills etc., for Rs.46,20,656/- was submitted to the Plaintiff for payment vide 1 st Defendant's letter dated 18.08.2009 at Ex.C.57. The Plaintiff on the pretext of liquidated damages for the alleged delay for execution of work did not pay the final bill.
16) As observed herein above, the Hon'ble Tribunal before passing the impugned award has considered all the material evidence, the documentary as well as oral evidence placed before it. It is relevant to mention the findings of the Hon'ble Arbitral Tribunal regarding RA Bill No.7. The learned Arbitrator in Para-44 of the award was pleased to hold that :
AS.104/2013 21 " ...... Exhibit C 57 is the letter of the claimant dt:
18.8.2009, wherein the claimant has submitted extract of the final bill measurement certified and accepted by the respondent and accordingly claimant has requested to release the final bill of Rs.46,20,656/-. This document clearly shows that the final bill measurements were certified and accepted by the respondent. The respondent did not make payment of the final bill till today. RW1 in his cross examination has clearly admitted that after submission of the final bill joint measurement was conducted by the representatives of the both the parties to arrive the final cost. In view of the said admission and the contents of the above documents show that the respondent without any reason fail to make the payment of 7th RA Bill amounting to Rs.46,20,656/-. Because of non payment of the said RA bill the claimant rescinded the contract. ...."
17) The Plaintiff has much relied upon the alleged e- mail dated 29.09.2009 and the draft of the joint memo of settlement alleged to be sent by Defendant No.1. It is important to note that one Mr. Venkanagouda.M sent e-mail on 29.09.2009 at Ex.R.6 on behalf of the Defendant to the Vice President of the Plaintiff, wherein, it is stated that revised Agreement copy of the Jurong work was forwarded to the Plaintiff. It was marked as Ex.R.7. First of all, it is nowhere admitted by Defendant No.1 that Mr. Venkanagouda.M is the representative of Defendant No.1 and the instruction was given to him to send such e-mail to the Plaintiff. Moreover, the revised AS.104/2013 22 agreement is not at all executed by the Plaintiff and the Defendant No.1. It is just a draft copy of the revised agreement. More so, the Plaintiff has not confirmed and executed the same as stated in Ex.R.6. For all these reasons, the Tribunal might not have considered Ex.R.6 and Ex.R.7. The question of considering the unsigned and non-executed document do not arise in the absence of admissibility by the other side. Under such circumstances, the learned Arbitrator after relying on the materials, documentary, as well as oral evidence of R.W.1 was pleased to hold that the final measurements were certified and accepted by the Respondent. Hence, the contention of the Plaintiff that the RA bill was inflated and the tribunal failed to appreciate the cogent documentary and oral evidence produced by the Plaintiff are not tenable and the same is devoid of merits.
18) The further contention of the Plaintiff is that, the impugned award deals with a dispute, which was not contemplated by and was not falling within the terms of AS.104/2013 23 the submission to arbitration. The only dispute which was referred to arbitration was the dispute regarding the alleged non-payment of RA bill No.7. The alleged claims with respect to damages and claims, loss of profits, etc., were not referred to arbitration and hence, beyond the scope of arbitration.
The Defendant No.1 has stated that it has submitted all the claims arising out of the contract to the Plaintiff, vide letter dated 06.05.2009 at Ex.C.48 and this fact has also been mentioned by the Arbitrator in the impugned award.
On perusal of Ex.C.48 makes it clear that, Defendant No.1 has specifically mentioned all the claims which were decided by the learned Arbitrator. Moreover, the Plaintiff did not raise such contention while appointing Arbitrator in CMP.No.65/2009 by the Hon'ble High Court of Karnataka. Moreso, it has not raised such contention before the learned Arbitrator. The important document is Ex.C.5-Articles of Agreement, wherein, it has been specifically mentioned AS.104/2013 24 in Clause-5 that, "Any dispute concerning any matter in respect of this contract agreement shall be referred to the arbitrators...". When the parties are themselves binding to the terms entered into in the contract, they are estopped from agitating the correctness of the terms of the contract. It is important to note that on the date fixed for argument before the Arbitrator, the Plaintiff filed application seeking permission to file counter claim, which was not claimed by the Plaintiff at any point of time till the matter was posted for argument by the learned Arbitrator. In the said counter claim, the Plaintiff did claim seven claims to the tune of Rs.2,61,408,183/-. The learned Arbitrator as per the direction of the Hon'ble High Court of Karnataka has also decided the counter claim of the Plaintiff. Under such circumstances, it cannot be said that the arbitral award deals with the dispute not contemplated under specific terms of the contract. Under specific terms of the contract at Ex.C.5, the learned Arbitrator should bound to decide any dispute concerning any matter under the contract. Accordingly, the learned Arbitrator AS.104/2013 25 arbitrated the dispute referred to it and passed the award. Hence, this contention of the Plaintiff is not tenable.
19) The further contention of the Plaintiff is that, the award is unsustainable and bad in law. Settled principles of law and precedents were not followed while passing the impugned award and the Defendant was not entitled to the awarded amount of the alleged RA bill and hence the award of interest on such disputed and inadmissible amount further vitiates the award and needs to be set aside.
The Defendant No.1 has contended that he had claimed 18% interest. However, the Tribunal has awarded 12% interest. The Plaintiff had also claimed 18% interest on its counter claim. The Plaintiff knew that 18% interest is a reasonable one.
It is important to note that the learned Arbitrator in the award has come to the definite conclusion that the Respondent did not make payment of RA Bill No.7.
AS.104/2013 26 The cause of action arose to Defendant No.1 on 10.04.2009 on the date of terminating the contract by Defendant No.1. The Arbitrator after relying on Section 31(7)(a) of the Arbitration and Conciliation Act, 1996, awarded reasonable interest at the rate of 12% per annum from the date of rescinding the contract. When the law authorizes to grant interest unless barred by agreement, it cannot be contended that the Arbitrator should not have granted interest on the awarded amount. The Plaintiff has stated that the 1st Defendant is not entitled to awarded amount, hence interest cannot be granted. This argument of the Plaintiff does not hold good. Because, the learned Arbitrator, after coming to the conclusion having regard to the materials placed before it, held that the 1st Defendant is entitled to award amount and granted interest at a reasonable rate. Under such circumstances, without much discussion, I hold that the contention of the Plaintiff is not tenable.
AS.104/2013 27
20) The one more contention of the Plaintiff is that, the Arbitral Tribunal failed to appreciate the evidence adduced by the Plaintiff to demonstrate that there is no breach of contract by it and merely proceeded in allowing the claim of the 1st Defendant placing sole reliance upon the averments made in the claim statement and as such, committed error in passing the award.
Exs.C.6, C.7, C.13, C.14, C.20 and C.26 which indicated the undue interference and hindrances in work by the Plaintiff; Exs.C.9, C.11, C.12, C.15, C.18 and C.19 which disclosed that cement, RMC, Steel reinforcement, etc., were not supplied in time, which delayed the work; Exs.C.8, C.29 and C.31 revealed the delay in releasing the drawings and Exs.C.16, C.21, C.24, C.27, C.33, C.37, C.40 and C.44 indicated the delay in payment of RA bills. The learned Arbitrator, after considering all these material documents and oral evidence of R.W.1, held that the Plaintiff has breached AS.104/2013 28 the terms of contract. Moreover, para-2 of Ex.C.5- Articles of Agreement specifically states that :
" The Employer shall pay the contractor the said contract amount or such other sum as shall become payable at the time and in the manner hereinafter specified in the said Conditions. Default on the part of the Employer or Main contractor to pay RA bill to contractor beyond 42 days from the date of submission of RA Bill shall constitute breach of contract entitling the contractor to treat the contract agreement as Voidable at their discretion and claim damages."
The Arbitrator has specifically held that ' Due to prolongation of work the claimant had to incur the avoidable expenses on overheads supervision and other administrative expenses for a longer period then that included in the quoted rates for no fault of claimant but due to the defaults of the respondents. The prolongation of contract till rescission of contract is 11 1/2 months beyond the original period of 6 months. The claimant computed damages by taking 5% has over heads etc., by use of Hudson's formula. As per section 73 of the contracted, the claimant is entitled to compensation for loss or damages caused by breach of contract.' The learned Arbitrator has AS.104/2013 29 come to the specific conclusion that the breach of contract is on the part of the Plaintiff, which had led to the claimant to incur the avoidable expenses. Such finding of the learned Arbitrator is well reasoned and supported by documentary evidence. Under such circumstances, the contention of the Plaintiff that the Arbitral Tribunal failed to appreciate the evidence adduced by the Plaintiff to demonstrate that there is no breach of contract by it has no basis and the same is unacceptable.
21) One more contention of the Plaintiff is that the Arbitral Tribunal has relied upon the alleged documents without there being proved as per law. This contention of the Plaintiff does not hold water. The Plaintiff in one breath says that the Tribunal failed to appreciate the evidence placed before it and in another breath the Plaintiff says that the Tribunal relied upon the documents which were not proved. It is important to note that nowhere it is disputed by the Plaintiff in the arbitral proceedings, the documents which were AS.104/2013 30 produced and marked could not be produced and marked. These documents were produced in the arbitral proceedings within the knowledge of the respective parties. The respective parties have relied upon them. Admittedly, the said documents are correspondences, agreements, etc., which were taken between the Plaintiff and Defendant No.1 and the same came to be in existence at the undisputed point of time. Under such circumstances, strict proof of those documents as per provisions of law is not at all necessitated. Section 19(1) of the Arbitration and Conciliation Act, 1996 specifically states that the Arbitral Tribunal shall not be bound by the Code of Civil Procedure 1908 or the Indian Evidence Act, 1872. Hence, the contention of the Plaintiff that the document produced before the learned Arbitrator are not proved as per law does not have any force.
22) The other contention of the Plaintiff is that, the Tribunal has not even traversed the claims made by the Plaintiff by way of counter claim and has given a AS.104/2013 31 cryptic finding that the counter claim of the Plaintiff remained as a counter claim without any proof. The Plaintiff states that the affidavit filed as evidence of the Plaintiff before the tribunal, clearly refers to the documents produced by the Plaintiff and the claims made therein were directly arising out of the breaches committed by the Defendant. These breaches being apparent and available on the record, and having been evidenced by documentary and oral evidence, the tribunal erred in arriving at a finding that the counter claims remained without any proof. Clear calculations were provided in the counter claim itself and the tribunal ought to have given reasons for discrediting the claims, rather than proceed to hold that there was no proof. It is relevant to extract the findings of the learned Arbitrator on the counter claim, which reads as follows :
" 49. Point No.9: On the date fixed for arguments the claimant filed written arguments and there after respondent filed application seeking permission to file counter claim. The claimant filed objections to the said application. After hearing the arguments on the said application this tribunal rejected the same.
AS.104/2013 32 Being aggrieved by the said order respondent filed WP 21055/13. The Hon'ble High Court allowed said WP taking in to undertaking given by the respondent that it would not produce evidence. The claimant filed counter to the said counterclaim. The claimant has claimed more than 27 crores towads counter claim. The counter claim was filed after closer of evidence of respondent. There is nothing in the evidence of RW1 regarding said counterclaim. The counterclaim of the respondent, remained as counterclaim without any proof. Absolutely there is no evidence to substantiate the counterclaim. Hence, I answer Point No: 9 in the negative. "
23) The learned Arbitrator has clearly held that absolutely there is no evidence to substantiate the counter claim. The Plaintiff submitted that the learned Arbitrator has erred by misreading the order of the Hon'ble High Court of Karnataka in W.P.No.21055/2013 [GM-RES]. The learned counsel for the Plaintiff pointed out para-2 of the order which reads as follows :
" 2. ..............
But, it is submitted by the learned Advocate for the petitioner that no further evidence would be let in by the petitioner in support of the counter claim, but the evidence which is already on record would be taken assistance of by the petitioner in support of counter claim.
AS.104/2013 33 ..............."
24) The entire para should be read in entirety. If the Plaintiff had produced the evidence to prove the counter claim as stated in its affidavit filed before the Arbitral Tribunal, it should have convinced the Arbitrator what documentary evidence it relied upon to prove its counter claim. No such evidence was brought to the notice of the Arbitrator. Hence, the learned Arbitrator has held that absolutely no evidence has been placed to prove the counter claim. Be it as it may. The Plaintiff had every right to bring to the notice of this court the evidence which he led before the learned Arbitrator to say that the learned Arbitrator has not considered the evidence relied upon by the Plaintiff. But the Plaintiff did not do so, hence, the contention of the Plaintiff has no merits.
25) The Plaintiff has relied upon the following decisions:
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(i) AIR 1981 SC 2075 [M/s.Guru Nank Foundation V. M/s.Rattan Singh and Sons] " Interminable, time consuming, complex and expensive court procedures impelled jurists to search for an alternative forum, less formal, more effective and speedy for resolution of disputes avoiding procedural claptrap and this led them to Arbitration Act, 1940 ('Act' for short).
However, the way in which the proceedings under the Act are conducted and without an exception challenged in Courts, has made lawyers laugh and legal philosphers weep. Experience shows and law......"
Of course it is true, only when the award passed in a casual manner and without following the procedure laid down in law. Here the award is supported by material evidence and it is well reasoned award. More so, no grounds have been made out as enumerated under Section 34 of the Arbitration and Conciliation Act, to set aside the impugned award.
(ii) (2003)5 SCC 705 [Oil & Natural Gas Corporation Ltd., V. Saw Pipes Ltd.] " In certain contract, it is impossible to assess the damages or AS.104/2013 35 prove the same. Such situation is taken care of by Sections 73 and 74 of the Contract Act and in the present case by specific terms of the contract. When the terms of the contract are clear and unambiguous then its meaning is to be gathered only from the ..........."
Here in this case, para-2 of Ex.C.5-Articles of Agreement specifically states about the breach of contract and the Arbitrator arrived at the conclusion on the basis of materials placed in this case that the Plaintiff has committed breach of contract. Under such circumstances, the ratio laid down in the above decision is not applicable to the present facts of the case.
(iii) (2015)3 SCC 49 [Associate Buildings V. Delhi Development Authority] " No less important is the principle now recognised as a salutary juristic fundamental in administrative law that a decision which is perverse or so irrational that no reasonable person would have arrived at the same will not be sustained in a court of law. Perversity or irrationality of decisions is tested on the touchstone of Wednesbury principle of reasonableness. Decisions that falls short of the standards of reasonableness are open to challenge in a court of law often in writ jurisdiction of the superior courts but no less in statutory process wherever the same are available.
AS.104/2013 36 The juristic principle of Wednesbury reasonableness is that a decision which is perverse or so irrational that no reasonable person would have arrived at the same is important and requires some degree of explanation.
It is settled law that where :
(i) a finding is based on no evidence, or
(ii) an Arbitral Tribunal takes into account something irrelevant to the decision which it arrives at ; or
(iii) ignores vital evidence in arriving at its decision, such decision would necessarily be perverse."
26) The Plaintiff in this case urged numerous grounds as enumerated in Section 34 of the Arbitration and Conciliation Act, which led the court to look into the findings given by the learned Arbitrator in the award.
But, the award passed is based on material documents and evidence adduced by the parties and the award is supported by well reason. When matter stood thus, the circumstances enumerated in the above decision has not been made out by the Plaintiff.
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27) The Defendant has relied upon the following decisions :
(i) AIR 2011 SC 2477
[ M/s.J.G.Engineers Pvt.Ltd., v.
Union of India & Anr.]
" (A) Arbitration and Conciliation
Act, (26 of 1996), S.34 - Setting aside award - Ground of claims falling within 'excepted matters' - Delay in completion of works contract - Quantification of liquidated damages for delay/breach of contract was falling within 'excepted clause' - But question as to who was responsible for delay was arbitrable - Right to levy liquidated damages would arise only when contractor was responsible for delay - Arbitrator holding that contractor was not responsible for delay and quashing levy of liquidated damages, not improper - Award not liable to be set aside."
(ii) 2013(3) Arb.LR. 437 (Calcutta) [The Indian Iron & Steel Co. Ltd. Vs. J.G.Engineers Pvt.Ltd.] " Challenge to award - Escalation -
Damages/compensation - Public Policy of India - Scope of interference in award - Parties entered into construction contract - Disputes arose - ................... No cogent ground has been made out for challenging award - It must be borne in mind that though in extreme cases when there is perversity writ large in award court cites public policy to exercise authority under Section 34 it is generally a benevolent AS.104/2013 38 supervisory role that court has in a matter of present kind and court cannot be asked to go through award with a fine tooth-
comb as in a regular appeal - petition dismissed with costs."
(iii) 2015(1) AKR. 710 [ Bangalore Water Supply & Sewerage Board, Bangalore & Otehrs V. C.N.Krishnamurthy & others] " Arbitration and Conciliation Act (26 of 1996), S.34 - setting aside of award - Ground that award was opposed to public policy of India - Arbitrator explained reasons for arriving at decision - He has taken all claims separately and has made specific calculation with reference to delay in executing project and various losses sustained by Contractor - Awarding damages also substantiated by arbitrator - Fair assessment has been done by the arbitrator as to the damages caused to the claimant - contractor and those damages have been properly quantified - Even escalation of cost in regard to materials has also been properly considered -
Parties ably assisted by experienced advocates and several decisions cited before him have also been taken into consideration - No infirmity could be found in rate of interest awarded by Arbitrator - Award not be shown to be opposed to substantive law of land - Award could not be set aside."
For the foregoing discussions, I am of the opinion that, the learned Arbitrator after considering the AS.104/2013 39 materials placed before it and after due enquiry passed the award. No perverse or illegality shall be attributable to the reasoned award passed by the 2 nd Defendant. The decisions relied upon by the 1st Defendant have supported its case.
28) Under the facts and circumstances of the case, I am of the opinion that absolutely no grounds are made out by the Plaintiff to establish any of the grounds urged in the plaint or any of the grounds available in Section 34 of the Act. Herein is the case, the Tribunal has dealt the matter within the purview of matter allotted to it. No act is done by the Tribunal to term the award as perverse, unfair and unreasonable. The Plaintiff has utterly failed to establish that the Tribunal has gone contrary to law or beyond the expressed contract. Under these circumstances, I hold that the Plaintiff has utterly failed in establishing that the award passed by the Tribunal follows any of the clauses under Section 34(2) of the Act, much less, any of the grounds AS.104/2013 40 mentioned in the plaint is established. Accordingly, I answer Point No.1 in the negative.
29) Point No.2 : For the foregoing discussions, I proceed to pass the following :
ORDER (1) The suit filed by the Plaintiff under Section 34 of the Arbitration and Conciliation Act, 1996 to set aside the award dated 30.08.2013 passed in Arbitration Case No.1/2011 by Defendant No.2/Arbitrator is hereby dismissed.
(2) No order as to costs.
(Dictated to the Judgment Writer, transcribed and computerized by her, transcript thereof corrected and then pronounced by me in open court, dated this the 7th day of November, 2018.) (RAMA NAIK) VI Addl.City Civil & Sessions Judge, Bengaluru City.
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