Bombay High Court
Slum Rehablitation Authority vs M. M. Project Consultants Pvt. Ltd on 16 June, 2020
Author: G. S. Kulkarni
Bench: G. S. Kulkarni
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL ARBITRATION PETITION NO. 557 OF 2018
Slum Rehabilitation Authority )
a corporate body constituted by )
the Government of Maharashtra )
through its Chief Executive Officer )
and Officer on Special Duty, )
Dharavi Redevelopment Project, )
having its address at Griha Nirman )
Bhavan, 5th Floor, Bandra (East), )
Mumbai 400 051. )... Petitioner.
Versus
M.M. Project Consultants Private )
Limited, )
A company incorporated under )
the Companies Act, 1956, having )
its registered office at 306, )
Pragati Industrial Estate, N.M. Joshi )
Marg, Lower Parel (East), )
Mumbai 400011 through its )
Chairman, Mukesh Mehta, adult )
Indian Inhabitant, having )
his address at 81, Urvashi, )
Nepean Sea Road, Mumbai-400006 )...... Respondents
..........
Mr.Darius Khambata, Senior Advocate a/w Mr.Mustafa Doctor, Senior
Advocate, a/w Mr. Jehangir Jejeebhoy, a/w Miss Anita Irani a/w Miss
Samridhi Lodha i/b Kanga & Company for the Petitioner.
Mr.Haresh Jagtiani, Senior Advocate a/w Apurva Manwani a/w Miss
Bhavi Vora a/w Sakrut Srivastava, Miss Priyanka Kapadia i/b
Mr.Shddhesh Suresh Bhole for the Respondent.
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CORAM : G. S. KULKARNI, J.
Reserved on : 5 December 2019
Pronounced on : 16 June 2020
(Through Video Conference)
........
1. This is a Petition under section 34 of the Arbitration and Conciliation Act, 1996 ( for short 'ACA') whereby the Petitioner challenges an arbitral Award dated 15 January 2018 passed by a three-Member Arbitral Tribunal. The impugned award partly allows the claims as made by the respondent/claimant in the arbitral proceedings, to the extent that a claim for damages for an amount of Rs.86.72 crores for wrongful termination of the contract, as entered between the parties stands awarded against the petitioner. The arbitral tribunal also has awarded interest at 9 % per annum on the award amount from the date of claim till payment or realization .
2. For convenience the contents of this judgment parawise would be as under:-
Paragraph Nos. Contents 3 to 33 Facts 34(i) to (xxxv) Submissions on behalf of the Petitioner
35(i) to (xxxii) Submissions on behalf of the Respondent 36 Reasons 41 Contractual provisions pvr 3 sonawane-rng-rane-SRA-final.doc 42 Questions involved 43 Discussion on (i) Whether the Respondent repudiated the PMC agreement.
66 Discussion on (ii) As to whether the termination of the PMC agreement by the petitioner was legal and valid ?
86 Discussion on (iii) Whether the arbitral tribunal is correct in law and facts in awarding damages?
122 Conclusion Facts The factual antecedents leading to the litigation can briefly be summarized:-
3. The Petitioner is a statutory body constituted by the Government of Maharashtra under the Maharashtra Slum Areas (Improvement, Clearance and Redevelopment) Act, 1971. The Respondent is a company incorporated under the provisions of the Companies Act, 1956 and for all purposes was represented, by its Chairman and Director Mr.Mukesh Mehta (for short 'Mr. Mehta')
4. The disputes between the parties concern an agreement between the parties entered in the year 2008 appointing the respondent as a Project Management Consultant (PMC), for a peculiar project concerning development of the 'Dharavi Slum Area' in Mumbai, one of the biggest slums in Asia, at the relevant time covering an area of 151 pvr 4 sonawane-rng-rane-SRA-final.doc hectares, about 46189 residents and approximately 12976 small and medium-sized business establishments. The details of this agreement are discussed in detail in the ensuing paragraphs.
5. In or about 1988-89, the Government of Maharashtra, is stated to have introduced the concept of Cluster Type Re-development through people's participation. In or about 1996, the Government started undertaking various schemes in the slum areas in Mumbai, for which the Petitioner was designated as the Project Authority.
6. In or about 2004, the Government of Maharashtra took a decision to replicate the concept of 'Sectoral Cluster Type Re-development in the "Dharavi Area'. Due to the complex nature of this re-development and the huge cost which would be incurred, it was decided to re-develop Dharavi through a process of "Public Private Participation" by dividing Dharavi into various sectors. For this purpose the zoning and sectors as proposed for the Dharavi Re-development plan, also came to be sanctioned by the Government of Maharashtra. It was decided that implementation of the Dharavi Re-development Project (for short "DRP") would be undertaken as per the existing norms and regulations of the Cluster Rehabilitation Scheme. It was further decided that DRP would be pvr 5 sonawane-rng-rane-SRA-final.doc implemented by inviting bids by a global tendering system.
7. Mr.Mehta had offered his services to the Government of Maharashtra for preparing the DRP, which is not in dispute. In this regard the petitioner has stated that the Government of Maharashtra at the relevant time, without any formal bidding or open tender process, decided to take his services and to appoint Mr.Mukesh Mehta as an Advisor/Consultant for the DRP.
8. On 4 February 2004 the Government through its Housing Department issued a Government Resolution (for short "GR") stating its intention to undertake DRP at a total sanctioned cost of Rs.5600 crores and to appoint Mr.Mukesh Mehta as an Advisor/Consultant for DRP. This Government Resolution recorded that the fees and terms of reference payable to Mr.Mehta would be decided by a Committees of Secretaries (CoS) and all expenses in that regard, would be borne by the Petitioners.
In pursuance of the said government resolution the petitioner started the work pertaining to the DRP with Mr.Mehta acting as an Advisor/Consultant.
9. On 1 November 2008, the petitioner and the respondent pvr 6 sonawane-rng-rane-SRA-final.doc entered into an agreement titled as "Agreement for Project Management Consultant (PMC) Services" (for short the "PMC Agreement"). Under the PMC Agreement, the respondent was to provide to the petitioner, its services which were listed in Appendix-A to the PMC agreement. The petitioner in turn was required to pay to the respondent the agreed fee restricted to 1% of Rs.5600 crores payable as per the Schedule of Payment (Appendix "E" to the PMC Agreement). Out of this 1% fee, 25% of the fee was payable to the respondent on completion of certain pre- tender activities as provided for in Appendix "E" to the PMC Agreement which was an amount of Rs.14 Crores. The balance 75% (Rs. 42 Crores) was payable for the post tender activities. All these payments were to be made by the petitioner to the respondent after retaining 5% of the amounts so payable as retention money towards satisfactory performance. The 5% retention amount was to be released to the respondent at the conclusion of the project that is partly upon obtaining the Completion Certificate and partly after three years from the date of Completion Certificate, as provided for in Clause 6.4 of the PMC Agreement. If the project was to progress and development activities to be undertaken in that event, the parties agreed that respondent would be paid 0.5% of the premium amount which would be received by the petitioner from the pvr 7 sonawane-rng-rane-SRA-final.doc prospective developers on sale of the area. This was to be received by the respondent only after the petitioner had received the same. Hence, this part of the respondent's remuneration was linked to the financial success of the project. The respondent has described his involvement in the DRP to be "his skin in the game" .
10. The petitioner has sated that even prior to the execution of the PMC Agreement, the petitioner had paid the respondent a sum of Rs.7,22,29,600/- in respect of pre - tender activities. The petitioner had originally invited bids for the project through a 'Global Advertisement' published in May 2007. About 101 potential bidders purchased the bid document, out of which only 26 submitted " Expression of Interest", from which 19 bids were shortlisted to make a presentation. Only 14 bidders made their presentations. However, there were only 6 bidders left in the fray for DRP bidding for five Sectors of DRP. Eventually, the bidding process was cancelled on 16th May 2011. The petitioner has stated that none of the claims which were made by the respondent in arbitral disputes pertained to the Global Advertisement of 2007. It is the petitioner's case that admittedly the project never reached the post tender stage and the respondent had not undertaken any post tender activities.
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11. In the above circumstances when everything was at a stand still the respondent being aggrieved, at such a stage of the DRP, on 26 th February 2010, invoked an arbitration interalia claiming idling charges. The disputes that had then arisen between the respondent and the petitioner were referred to an arbitration by a three member arbitral tribunal (for short "First Arbitration"). One of the grievances of the respondent in the First Arbitration was that the project, which was to be completed in 90 months (out of which 6 months had been allocated for pre - tender work) and as the project was still at a pre - tender stage for more than 6 years , the respondent had become entitled for idling/delay costs. In the said arbitration, the respondent raised number of claims, including a claim for idling charges in the sum of Rs.4,87,94,627/- ( for idling/delay cost from 1st April 2008 till 31st May 2020) and for further sum of Rs.11,68,359/- (for idling/delay cost for the month of June 2020) and similarly, Rs.6,36,944/- for the period July 2020 till 1 st September 2010.
12. It so transpired that as the contract was unlikely to proceed and the project had remained at a standstill, during the pendency of the first Arbitration that is on 28 th November 2011 and 15th June 2012 pvr 9 sonawane-rng-rane-SRA-final.doc respectively, the petitioner submitted an alternative proposal to the Housing Department of the Government of Maharashtra for redevelopment of four out of five Sectors of Dharavi. This according to the petitioner was nothing to do with the PMC agreement entered with the respondent.
13. The First Arbitration stood adjudicated by a majority award dated 21st June 2012. In paragraph 5 of the said award, the Arbitral Tribunal observed that 'the Project is at stand still'. The majority award directed the petitioner to pay to the respondent a sum of Rs.1,86,42,000/- with interest thereon as and by way of remuneration for the "pre-tender activities" as agreed between the parties under the PMC Agreement. The petitioner was also directed to pay entire amount retained by the petitioner under Clause 6 of the Agreement, which the petitioner was to retain as per the terms of Clause 6.4 (read with Serial No.5 of the ' Note' to the Appendix "E") of the PMC Agreement only to be paid, on the completion of the contract. All the other claims made by the respondent were rejected by the Arbitral Tribunal, including the respondent's claim in idling/delay costs. The respondent did not challenge this award.
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14. The respondent immediately after the Arbitral Tribunal delivered its award in the first arbitration, addressed a letter dated 25 th June 2012 to the petitioner, also forwarding on the same day an invoice, demanding payment of the retention amount as retained by the petitioner, in accordance with Clause 6.4 of PMC Agreement which was to be paid on completion of the contract.
15. It is the petitioner's case that under Clause 6.4 of the PMC Agreement , it was clear that 50% of the retention amount was required to be released upon obtaining the Completion Certificate of the rehabilitation- component, renewal component, amenities, infrastructure etc., and the balance 50% of the retention amount was to be released after three years from the date of Completion Certificate, including that of infrastructure work. The petitioner asserted that demand of the retention amount by the respondent, which was payable only after completion of entire project, was ex facie contrary to the terms of PMC Agreement and in fact amounted to act of repudiation of the PMC Agreement by the respondent.
16. Thereafter, the petitioner by its letter dated 4 th August 2012 is pvr 11 sonawane-rng-rane-SRA-final.doc stated to have accepted the respondent repudiation of the PMC Agreement and agreed to release to the respondent the amounts retained by the petitioner under Clause 6.4 of the PMC Agreement. By this letter, the petitioner also informed the respondent that the petitioner had taken a decision to cancel the bidding process and to allot the redevelopment of Sector 5 to the Maharashtra Housing and Area Development Authority (for short MHADA) and that in the aforesaid circumstances, the DRP as originally envisaged which included global tendering as per the government resolution dated 4th February 2004 had been presently stopped and was not being implemented in the original form. The petitioner accordingly, informed the respondent that without prejudice to its contention that the PMC Agreement stood repudiated and in the event the respondent was disputing its repudiation of the PMC Agreement the petitioner was terminating the PMC Agreement on account of occurrence of events which were specified in the termination clause namely Clause 2.8.1 (G) of the PMC Agreement. This clause provided that the petitioner could terminate the PMC agreement NB: "If the Dharavi Redevelopment Project for which the PMC is engaged is not implemented and /or stopped and abandoned by the State Government due to any change in law or litigation or for any reason whatsoever."
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17. It was the case of the Petitioner that the decision to terminate the PMC Agreement, was taken after considerable deliberation, which was undertaken for many months, at various levels of the Government and right up to the level of the Hon'ble Chief Minister's Office, which was on account of the fact that the project had stopped and the respondent was demanding idling cost from the Petitioners, to which the respondent was not entitled.
18. The petitioner's termination letter (dated 4 August 2012) was replied by the respondent by its letter dated 23 August 2012 inter alia contending that the termination of the PMC Agreement by the petitioner was malafide and based on extraneous reasons. According to the petitioner, the respondent also made several false and irresponsible allegations against various Officers of the Government of Maharashtra. The Petitioner has further stated that the respondent however did not withdraw its demand, for payment of the retention amount under clause 6.4 of the PMC Agreement.
19. On 17 September 2012 the Petitioners challenged the pvr 13 sonawane-rng-rane-SRA-final.doc Arbitral Award dated 21 June 2012 as passed by the arbitral tribunal in the first arbitration, by filing Arbitration Petition No. 1130 of 2012 before this Court. A learned Single Judge of this Court adjudicated the said Arbitration Petition. By an order dated 14 November 2012,the Arbitral Award dated 21 June 2012 in so far, as it pertained to the direction for payment of the retention amount referred to in clause 6.4 of the PMC Agreement, came to be set aside by the learned Single Judge. Thereafter, on 8 March 2013 the respondent again invoked arbitration to make a second reference to arbitration for adjudication of disputes interalia on a claim for damages under the PMC Agreement, being a reference leading to the impugned award. By an order dated 23 July 2013 passed in Arbitration Application No.139 of 2013 of this Court, a three-Member Arbitral Tribunal came to be constituted.
20. On 28 November 2013 the respondent filed its statement of claim before the arbitral tribunal inter alia contending that the respondent had not repudiated the PMC Agreement and that the Petitioner had wrongly terminated the contract. The respondent accordingly, claimed damages in the sum of Rs.118.72 crores towards loss of profit due to wrongful termination of the PMC Agreement; Rs.60 crores towards loss of pvr 14 sonawane-rng-rane-SRA-final.doc opportunity and good-will and Rs.25 crores compensation for stress and harassment to the claimant. The respondent made an alternative claim in the sum of Rs.30 crores towards the value of its plan, drawings, designs, concepts and other intellectual property. It was the respondent's contention that the termination was actuated by malafides as alleged against certain named Officers of the petitioners and other prominent individuals comprising the Committee of Experts appointed by the State Government. The allegations against these officers were reiterated in the affidavit of evidence of the respondent's first witness Mr.Mukesh Mehta. The petitioner has contended that all these Officers and other prominent individuals were not parties to the arbitral proceedings. In the statement of claim the respondent prayed for the following reliefs :
" The Claimant prays as follows :
i. that it be declared that the Respondent illegally terminated the services of the claimant vide its letter dated 4 th August 2012 by terminating the PMC Agreement dated 1 st November 2008 and/or illegally construed the act of raising invoices by the Claimant amounting to repudiation of the PMC Agreement dated 1 st November 2008;
ii. that it be declared that the Claimant is entitled to receive compensation from the Respondent for illegal termination and/or illegally construing that Claimant has repudiated the PMC Agreement dated 1st November 2008 along with interest as deem fit and proper by the Arbitral Tribunal;
iii. in the alternative to prayer clauses (i) and (ii) above it be declared that the Claimant is entitled to receive compensation pvr 15 sonawane-rng-rane-SRA-final.doc towards plans, drawings, designs, concept and other intellectual property developed/created by the Claimant for redevelopment of Dharavi along with interest as deem fit and proper by the Arbitral Tribunal;
iv. that the Respondent be directed to pay to the Claimant an amount of Rs.118.72 cores or any other amount as the Arbitral Tribunal deems fit and proper towards loss of profit of the Claimant due to illegal termination and/or illegally construing that Claimant has repudiated the PMC Agreement dated 1 st November 2008;
v. in the alternative to prayer clause (iv) and in the eventuality of tribunal granting prayer clause (iii) the Respondent be directed to pay to the claimant an amount of Rs.30 crores or any other amount as the Arbitral Tribunal deems fit and proper towards plans, drawings, designs, concept and other intellectual property developed/ created by the Claimant for redevelopment of Dharavi;
vi. that the Respondent be directed to pay to the Claimant an amount of Rs.60 crores or any other amount as the Arbitral Tribunal deems fit and proper towards loss of opportunity and goodwill of the Claimant due to illegal termination and/or illegally construing that Claimant has repudiated the PMC Agreement dated 1st November 2008;
vii. that the Respondent be directed to pay to the claimant an amount of Rs.25 crores or any other amount as the Arbitral Tribunal deems fit and proper towards stress and harassment to the claimant.
viii. that the Respondent be directed to pay to the Claimant interest as may be deemed fit and proper by this Arbitral Tribunal upon the claims of the Claimant from the date of termination vide letter dated 4th August 2012 till the filing of Statement of claim and further interest from filing of the Statement of claim till realisation.
ix. any other relief as the Arbitral Tribunal deems fit and
proper; and
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x. costs of this arbitration proceedings."
21. On behalf of the petitioner, a reply opposing the claims as made by the respondent, came to be filed on 24 March 2013 wherein the petitioner maintained that the respondent had repudiated the contract/PMC agreement, as also the termination of the PMC was legal and proper. It was contended that the respondent was thus not entitled for any damages as prayed for, also on merits of its claim.
22. The Arbitral Tribunal considering the rival contentions as contained in the pleadings, on 9 July 2014 framed the following points for determination:
(i) Whether the Claimant has repudiated the PMC Agreement dated 1st November 2008 ?
(ii) If the answer to issue no1. is in the negative, then whether the Respondent was entitled to terminate the PMC Agreement date 1st November 2008 ?
(iii) If the answer to issue no.2 is in the negative, whether the Claimant is entitled to receive any compensation for such alleged illegal termination from the Respondent ?
(iv) Whether the Claimant has proved that it has suffered a loss of profit of Rs.118.72 crores as claimed ?
(v) Whether in the alternative to the above, the Claimant has proved that it is entitled to Rs.3 crores and/or any part thereof towards preparation of plans, drawings, concepts and/or intellectual properties purportedly developed by the Claimant for the Dharavi Redevelopment Project ?
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(vi) Whether the Claimant has proved that it is entitled to Rs.60
crores and/or any part thereof, towards loss of opportunity and/or goodwill suffered by it ?
(vii) Whether the Claimant has proved that it is entitled to Rs.25 crores and/or any part thereof towards stress and harassment purportedly suffered by it ?
(viii) Whether the Claimant is entitled to interest as claimed ?
(ix) Whether the Claimant is entitled to costs of this arbitration?
(x) What award ?"
23. In the interim proceedings before the arbitral tribunal the petitioner had objected to the respondent making bald allegations against its officers and that too by their name when these officers were not even parties to the arbitration and as they could never be. In regard to these allegations as made against the Officers and other prominent persons, the Arbitral Tribunal upheld the petitioner's objections and directed the respondent to amend its statement of claim as well as Mr. Mehta's affidavit of evidence. Accordingly, the statement of claim came to be amended by inserting paragraph 99A. Also a fresh affidavit of evidence of Mr. Mehta dated 5th February 2015 came to be filed. However, according to the petitioner, paragraph 99A was far from withdrawing the allegations and in fact it reiterated the allegations of mala fides against certain officers. This was again re-objected by the petitioner. According to the petitioner, it was pvr 18 sonawane-rng-rane-SRA-final.doc wholly improper and unacceptable for the respondent to make such allegations as also the same could not be considered by the Arbitral Tribunal at any point of time.
24. The respondent/claimant led evidence of three witnesses viz.,
(i) Mr.Mukesh Mehta, Chairman of the respondent (ii) Mr. Girish Ranade of Ballal Engineering Pvt. Ltd. and (iii) Ms Gauri Shah of C.C. Chokshi & Co.. These witnesses were cross-examined by the petitioner.
25. The evidence of Mr. Girish Ranade of Ballal Engineering Pvt.
Ltd. and Ms. Gauri Shah of Chokshi & Co, was led to prove/support the respondent's claim for damages. According to the petitioner, Mr. Girish Ranade in fact admitted that the report made by him was incomplete inasmuch as several documents necessary to fully understand the report had not been produced being clear from his answer to question No.35 as posed to him in cross-examination. The petitioner has also stated that the report of M/s. C.C. Chokshi Advisors Pvt. Ltd. was partly based on Ballal Engineering's report, which was also incomplete inasmuch as the engagement letter was never produced. As also the first page of the report was deliberately suppressed at the relevant time and subsequently produced.
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26. It so transpired that when the arbitral proceedings were at the fag end, on 30th January 2016, the petitioner issued an advertisement inviting international bids for redevelopment of Sectors 1 to 4 of the Dharavi slum. This according to the petitioner was based on the fundamental change and modification of the DRP. The deadline as set out in the submission of bid was 7th April 2016. It was the petitioner's case that this advertisement was an alternative approach of the petitioner, which was fundamentally different from the DRP in its original form as envisaged in the GR of 2004 and the PMC Agreement entered with the respondent.
27. In the circumstances of this advertisement on DRP being issued on 30th January 2016, the respondent on 2 nd February 2016, midway when it was closing the oral submissions, tendered in evidence the said newspaper advertisement issued/published by the petitioner in the Times of India dated 30th January 2016 as also one of the bid document downloaded from the petitioner's website. The said advertisement and the documents in relation thereto were a matter of public record. The petitioner did not object these documents being pvr 20 sonawane-rng-rane-SRA-final.doc produced by the respondent, which were accordingly taken on record and marked in evidence. Respondent's contention based on the advertisement dated 30th January 2016 was that the DRP was alive and was being proceeded with, which proved that the case of the respondent that the petitioner has not stopped or abandoned the DRP and that such contention of the petitioner was false.
28. Under the said advertisement, the last date for submission of the bid was 7th April 2016. The petitioner has stated that in relation to the fresh advertisement between the period 30 th January 2016 to 30th July 2016, petitioner did not receive a single bid for even one of the four sectors, although the petitioner extended the deadline for submission of bids on five separate occasions, i.e., on 2 nd April 2016, 20th April 2016, 6th May 2016, 20th May 2016 and finally on 21 st June 2016. The petitioner placed on record before the arbitral tribunal, these subsequent facts in regard to the outcome of the said tendering process. According to the petitioner, the respondent's theory that the project would be highly profitable and result in the petitioner earning premium running into thousand of crores even otherwise stood falsified. Accordingly, on 19 th August 2016, the petitioner made an application before the Arbitral pvr 21 sonawane-rng-rane-SRA-final.doc Tribunal to file an additional reply to place on record the relevant additional facts which were in the public domain in regard to the outcome of the tendering process, which the respondent had sought to rely upon.
29. On 24th August 2016, the Arbitral Tribunal allowed the petitioner to file an additional reply to which the petitioner annexed documents to show that although the deadline for submission of bids were extended on five occasions, no bids at all were received from said project. The petitioner has contended that although the documents that were annexed to the reply inter-alia included public notices issued by the petitioner in various newspapers and which were issued pursuant to the notice inviting tenders dated 30th January 2016 as placed on record by the respondent itself, surprisingly, the respondent refused to admit even the existence of these documents. The arbitral tribunal accordingly, required the petitioner to prove the same.
30. The petitioner, therefore, led the evidence of three witnesses viz., Mr. Harish Varade, Mr. Mahesh Gadekar and Mr. Harshad Karade, who were examined for the limited purpose of proving three relevant facts. Firstly, that the deadline for submission of the bids were extended pvr 22 sonawane-rng-rane-SRA-final.doc from time to time and on five separate occasions; secondly, that the petitioner issued public notices in this regard in the newspapers and thirdly, that no bids were received for the said project even though the deadline for submission of bids were extended on five occasions.
31. It is the petitioner's case that by virtue of evidence of these witnesses, it had clearly come on record that when the last tender was closed, there were no bids and hence there could be no question of grant of any damages based on theoretical and hypothetical probabilities and conjectures by way of expert reports as asserted by the respondent ignoring the reality, borne out by the facts that were known to all and to the world at large, that the DRP was a commercial failure and that no bidders were willing to participate in the project and pay premium that the respondent had imagined would be received by the petitioner. The petitioner's contention being that there cannot be a claim for damages on hypothesis and overlooking the reality in regard to the project on record.
32. The Arbitral Tribunal concluded the submissions of the parties on 3rd April 2017 as also written submissions were filed by the respondent and the petitioner on 3rd May 2017 and 8th May 2017 respectively.
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33. The Arbitral Tribunal published the impugned award on 15 th February 2018, whereby the Arbitral Tribunal, inter alia, rejected the petitioner's contention that the respondent had repudiated the PMC Agreement by interalia seeking payment of retention money and held that the petitioner's termination of the PMC Agreement was wrongful and not valid in law. The Arbitral Tribunal, accordingly, awarded to the respondent a sum of Rs. 86.72 crores as damages for loss of profit. The Arbitral Tribunal rejected the respondent's claims for loss of goodwill and reputation, mental harassment and anguish and its alternative claim for damages for its drawings. The Arbitral Tribunal while awarding the respondent a sum of Rs.86.72 crores as damages for loss of profit, accepted the estimate set out in the report of C.C. Chokshi Advisors Pvt. Ltd. (for short Chokshi report), that is an expected receipt of the premium of Rs. 23,271 crores which could be potentially offered by developers to the petitioner. The Arbitral Tribunal, according to the petitioner, calculated the respondent's share of this estimated premium at 0.5% of Rs.23,271 crores, i.e., Rs.116 crores and added to this amount sum of Rs.42 crores as fees for post - tender work i.e., (Rs.116 crores + Rs.42 crores = Rs.158 crores). The petitioner has contended that although the petitioner had pvr 24 sonawane-rng-rane-SRA-final.doc disputed the respondent's entitlement to the post tender fees, the Arbitral Tribunal did not deal with this contention, but instead simply included this amount in its calculation of damages for loss of profit. The Arbitral Tribunal also deducted the respondent's potential expenses as estimated by Mr. Mehta to be Rs.71.28 crores, i.e., (Rs.158 crores - Rs.71.28 crores = Rs.86.72 crores). The relevant paragraphs of the impugned arbitral award inter alia rejecting certain claims as noted above, and granting claim of Rs.86.72 crores as damages for wrongful termination of the contract as follows:-
"74. The Claimant has claimed a further sum of Rs.25 crores for harassment and mental anguish. The Claimant has relied upon correspondence and notings exchanged between different concerned Departments of the State of Maharashtra including the Respondent in this connection. He has again and again referred to the alleged malice that some Officers of the State of Maharashtra bore against him although he had been told by the Tribunal right at the beginning that any claim for personal malice will not be gone into by the Tribunal in the absence of the persons against whom such an allegation is made. We cannot go into the allegations of harassment by certain Officers of the State of Maharashtra as herein before stated. We therefore reject the claim of the Claimant for Rs.25 crores under this subhead.
75. As we have awarded to the Claimant Rs.86.72 crores as damages for wrongful termination of the contract, we reject/ do not consider the alternative claim for damages of Rs.30 crores for drawings etc.
76. In the premises, the Claimant is entitled to receive from the Respondent a sum or Rs.86.72 crores as damages for wrongful termination of the said contract. The Respondent shall pay interest at the rate of 9% per annum on the said amount from the date of the claim made in these proceedings till payment or realisation. Looking to the facts and circumstances of the present case, interest on damages at 9 % per annum is the appropriate rate of interest.
pvr 25 sonawane-rng-rane-SRA-final.doc The issues are answered accordingly.
77. The Respondent shall pay to the Claimant costs of the arbitration. Looking to the number of meetings held, the fees paid to the three arbitrators and lawyers by the claimant in the course of the arbitration and other expenses for the conduct of arbitration, we award a sum of Rs.60 lakhs as costs payable by the Respondent to the claimant."
(emphasis applied) Submissions on behalf of the Petitioner
34. Mr.Khambata, learned Senior Counsel for the Petitioner in assailing the impugned award has made the following submissions:
(i) The Arbitral Tribunal's finding on the non-repudiation of the PMC Agreement by the respondent is perverse and contrary to the facts and record. In this context, it is submitted that all the circumstances and conduct of the respondent resulting into calling upon the petitioner to return the retention money forthwith which was well before obtaining completion certificate as mandated by PMC Agreement, respondent unequivocally expressed its intention to terminate the contract and did in fact do so. Respondent's demand for payment of retention amount was ex-facie contrary to the terms of PMC Agreement and constituted an act of repudiation of Contract. It is submitted that the respondent was in fact put to notice that the petitioner was treating the respondent's demand for return of retention money as repudiation of PMC Agreement.
Nevertheless the respondent persisted in its demand. Respondent pvr 26 sonawane-rng-rane-SRA-final.doc conscious of the fact that payment of retention amount was awarded without any such claim being made, ought to have withdrawn its demand for payment of this retention amount, as opposed to adamantly pursuing the same. It is submitted that in fact the respondent even defended its demand for retention amount even at the time of hearing of the petitioner's challenge to the award rendered in the first arbitration. Further notwithstanding the order passed by this court dated 14.11.2014 by which the majority award in so far as to pay retention amount to the respondent was set aside, this amount has been paid to the respondent who has willingly accepted the same. It is thus, submitted that the respondent has thereby demonstrated clear, consistent and unequivocally expressed intention to repudiate the express terms of the PMC Agreement. It is thus, contended that the impugned award be quashed and set aside.
(ii) The Arbitral Tribunal's finding that the termination of the P.M.C. Agreement was wrongful and invalid suffers from complete non- application of mind and ignores the contractual clauses and vital evidence. It is submitted that the Petitioner terminated the P.M.C. Agreement under Clause 2.8.1(g) by its notice dated 4 August .2012 which clearly recorded in paragraph 5 that the D.R.P. as originally envisaged in the P.M.C. pvr 27 sonawane-rng-rane-SRA-final.doc Agreement, through global tendering, as per G.R. dated 4 February 2004, for which the Respondent services were engaged for pre-tender and post- tender activities had stopped and were not being implemented. It is submitted that even before the Arbitral Tribunal, it was a categorical case of the petitioner and an accepted position that the D.R.P. for which the Respondent was engaged was not being implemented and/or was stopped and abandoned.
(iii) Moreover the Respondent's claim for idling charges as made in first arbitration was also premised on the Respondent's contention that the Respondent "was required to keep idle his staff engaged for the project as post-tender activities were not carried out even though the period of 2 years and more had lapsed." It is submitted that in the proceedings of the present arbitration the Petitioner had categorically relied upon the observations as contained in the Majority Award dated 21st June 2012 as made in the first Arbitration, to the effect that the project was at a 'stand still' since July 2009. The Majority Award also observed that the Respondent was carrying out pre-tender works for almost 4 ½ years from the date the PMC agreement was entered between the parties. The said Award had also recorded that the project was at 'stand still' ".
pvr 28 sonawane-rng-rane-SRA-final.doc (iv) It is submitted that the Petitioner also relied upon the
submissions as made by the learned Counsel on behalf of the Respondent in the proceedings of Arbitration Petition No.1130 of 2014 filed by the Petitioner challenging Arbitral Award as made in the first Arbitration.
v) It is submitted that the Arbitral Tribunal in passing the impugned Award has completely ignored the contentions of the respondent raised before this Court in the challenge to the first arbitral award when the arbitral tribunal in the impugned award holds 'that there was no material that has been put before the Arbitral Tribunal by the Petitioner to show that the project has been abandoned or is permanently stopped .' It is thus submitted that the impugned Award ignores vital evidence and suffers from non application of mind.
vi) It is submitted that the Respondent was not correct in contending that as in Arbitration Petition No.1130 of 2014 this Court had set aside the Award for grant of retention money payable to the Respondent on the basis that the project was still subsisting. Referring to paragraph 9 of this Order dated 14th November 2014 passed by this Court it is submitted that the Award of retention money in favour of the Respondent in the first Arbitration was set aside by this Court by making pvr 29 sonawane-rng-rane-SRA-final.doc the following observations "------- In the light of specific clause of the Contract and that there was not even a claim for refund of retention money the Arbitrators could not have awarded the payment of the retention money to the Respondent."
vii) It is submitted that the Arbitral Tribunal in recording findings in paragraph 28 to 30 of the impugned Award that the Petitioner's termination of P.M.C. Agreement is invalid has relied upon the Notice dated 30th January 2016 issued by the Petitioner inviting tenders for re- development of Dharavi. The Arbitral Tribunal having held NB: "In fact Notice inviting tenders goes to show that the project is alive and the State Government proposes to go ahead with the project. Clause 2.8.1 (g) is, therefore, not attracted. Termination of Contract is not valid in law."
viii) In regard to the above findings of the Arbitral Tribunal, it is submitted that the Arbitral Tribunal has ignored a series of documents including internal notings which would demonstrate that the decision to terminate P.M.C. Agreement by the Petitioner was a result of detailed deliberation and consideration by various Government Officers right upto the level of the Principal Secretary- Housing and the final decision in that regard was taken by the Hon'ble Chief Minister. It is submitted that these documents and notings bare out that the decision to terminate P.M.C. pvr 30 sonawane-rng-rane-SRA-final.doc Agreement was taken, in view of the fact that the project has come to a 'stand still' and that the Respondent had continued to make demands upon the Petitioner to pay delay/idling costs. It is submitted that the Petitioner in fact submitted chronological summary of these documents and notings at paragraph 82 to 84 of its written submissions filed before Arbitral Tribunal.
ix) It is submitted that the Petitioner's objection in regard to the impropriety and inadmissibility of the allegations made by the Respondent against various named Officers of the Petitioner was also upheld by the Arbitral Tribunal in the impugned Award. Submission of the petitioner is at that once this case of the Petitioner was accepted and these allegations of the Respondent were found to be false, the Arbitral Tribunal could not held the termination to be invalid. It is submitted that the Arbitral Tribunal has also recorded a finding that there was no material to show that termination was for ulterior motive or done with oblique or indirect object. However, having held so the Arbitral Tribunal in later part of the impugned Award while dealing with the Respondent's claim for damages contradicted itself by holding that the Petitioner created some evidence during the course of hearing by way of after though to dis-lodge the claim of the Respondent namely the Petitioner issuing an advertisement dated pvr 31 sonawane-rng-rane-SRA-final.doc 30.01.2016 inviting global bids for D.R.P. It is, thus, submitted that the impugned Award is vitiated by internal contradictions.
x) It is next submitted that the Arbitral Tribunal's failure to consider and take into account express terms of the Contract is contrary to the fundamental policy of Indian Law and public policy. This is being elaborated by the following submissions:
xi) By ignoring express terms of the Contract, the Arbitral Tribunal has unjustly enriched the Respondent at the cost of the Petitioner which is a Government body/State in relation to the respondent's claim as made in the context of Clause 6.1(B) of the P.M.C. Agreement, providing that "P.M.C. shall additionally receive 0.5% of the total premium received by S.R.A."
xii) It is submitted that when the said Clause specifically used the words "received by S.R.A". it is premised on the fact that the Respondent would be entitled to percentage of premium if and only if the Petitioner receives such premium. That by virtue of the said Clause Respondent had agreed to take part of the consideration, as percentage of total premium received conscious of a possibility that if the project was not being implemented and/or stopped or abandoned for any reason whatsoever, (Clause 2.8.1(g)). In any case if the Petitioner was not to receive any pvr 32 sonawane-rng-rane-SRA-final.doc premium consequently also the Respondent would not be entitled to any premium, due to such non receipt of premium by the Petitioner. It is submitted that the Respondent in fact in the course of Arbitral proceedings repeatedly referred to this risk on its part as having "skin in the game".
xiii) It is submitted that the Arbitral Tribunal failed to consider that as per the terms of the Contract, it was sufficient for the Petitioner to demonstrate that the project was not being implemented and which was as agreed by parties in Clause 2.8.1(g). It is submitted that the Respondent was not correct in contending that on reading of Clause 2.8.1(g) of the P.M.C. Agreement it was incumbent on the Petitioner to demonstrate not just that the project has been stopped "but it has also been abandoned." Such contention was complete misreading of Clause 2.8.1(g) which clearly afforded to the Petitioner a right of termination if the project "is not implemented" which was distinct from a situation of it being "stopped and abandoned". The Arbitral Tribunal has clearly failed to consider admitted fact that the project was not being implemented. It is thus, submitted that the Arbitral Tribunal grossly failed to take into account express terms of the Contract in granting Respondent's claim for 0.5% of the premium when the Petitioner itself had not received any premium, in a manner that no fair minded or reasonable body of persons pvr 33 sonawane-rng-rane-SRA-final.doc would do. The impugned Award is, therefore, in contravention of fundamental policy of the Indian Law.
xiv) It is submitted that the impugned Award is vitiated by fundamental internal contradictions. Hence, it is patently illegal and contrary to the public policy of India on the following contentions. The Arbitral Tribunal in recording a finding that the PMC agreement was not stopped and/or abandoned has referred to the advertisement published by the petitioner on 30 January 2016 inviting bids for the DRP. In this context, attention is drawn to para 30 of the arbitral award wherein the arbitral tribunal observes that "... In fact, the notice inviting tenders during the pendency of these proceedings goes to show that the project is alive and the State Government proposes to go ahead with the project.." . This when the Arbitral Tribunal has itself noted that it was the respondent who brought the advertisement/public notice dated 30 January 2016 on record of the Arbitral proceedings (paragraph 64 of the impugned Award) whereas the Arbitral Tribunal has shunned the very same evidence,as fabricated in context of the petitioner's defence to the respondent's claim for damages on account of its 0.5 % profit in the premium received by the Petitioner. It is submitted that also the very same evidence has been commented as a last minute attempt by the Petitioner to create some pvr 34 sonawane-rng-rane-SRA-final.doc evidence during the course of hearing, by way of an after-thought to dislodge the claim of the respondents. It is thus, submitted that this evidence could not have been rejected when considering the case of the Petitioner on termination,to hold that the Petitioner's termination was wrongful. It is submitted that on such findings, the Arbitral Tribunal could not have proceeded to estimate 'loss of profit' caused to the respondents on account of its share of the potential premium that the Petitioner could have possibly earned and on the basis of speculations and conjectures. It is submitted that in doing so, the Arbitral Tribunal has rendered the impugned award perverse and irrational, vitiated by its own contradictions, patently illegal and contrary to the Public Policy of India. To support this submission, reliance is placed on the decision of the Supreme Court in McDermott International INC vs.Burn Standard Co Ltd.1
xv) It is submitted that in any event the Arbitral Tribunal could not have ignored the fact that no bids were received by the Petitioner (despite five extensions) in determining the quantum of damages to be awarded to the respondents which was something which went to the root of the matter. For this reason, the impugned Award is rendered patently 1 ( 2006) 11 SCC 181.
pvr 35 sonawane-rng-rane-SRA-final.doc illegal and deserves to be set aside on this ground alone. xvi) The Arbitral Tribunal has also not dealt with the five decisions cited on behalf of the Petitioner in support of the proposition that damages cannot be granted on a notional and speculative basis when actual facts are known to the Tribunal.
xvii) It is submitted that the respondent has failed to provide any cogent answer to this fundamental and inherent flaw in the impugned Award. The respondent's explanation as contained in its three submissions purportedly attempting to explain these inherent contradictions is falsified by the record, namely the first contention of the respondent that there was no evidence that no bids have been received in response to the global advertisement issued in 2016. According to the Petitioner, this was plainly false as there were numerous documents on record and available in public domain, as also evidence as led on behalf of the petitioner of Mr.Harshad Karade by virtue of which, it was clearly established that no bids were received. Even in his cross-examination, Mr.Harshad Karde had stated that when last tender was closed, there were no bids received. Secondly, the respondent submitting before this Court, for the first time that the subsequent events of 2016 would have no bearing on the respondent's claim for damage on account of the fact that termination of the PMC pvr 36 sonawane-rng-rane-SRA-final.doc agreement took place in the year 2012. It is submitted that no such argument was canvassed by the respondents, before the arbitral Tribunal and therefore, it cannot be countenanced before this Court at this belated stage. The impugned Award also does not proceed, on this premise at all, and it is submitted and the respondents, cannot at this stage supplant the reasonings of the Arbitral Tribunal with its own. It is thus submitted that there is no basis whatsoever, for the findings as recorded, by the Arbitral Tribunal that the global advertisement and tender dated 30 January 2016 was issued/created as an after-thought to dislodge the claim of the respondents in the arbitral proceedings.
(xviii) It is submitted that the direct evidence on the viability of the project was that no bids were received despite five extensions. According to the petitioner, the respondent's submission ignores the vital fact that the respondent was entitled to be paid 0.5 % of the premium 'as received by the SRA" under clause 6.1 (B)" and in fact none was either received or forthcoming. Hence there could not have been any claim for damages. xix) It is submitted that the respondent's contention that there was no evidence before the Arbitral Tribunal of the bidding criteria and terms of the project advertised in 2016 and therefore, its viability could not have fairly ascertained, also was totally untenable. It is submitted, that it was pvr 37 sonawane-rng-rane-SRA-final.doc an admitted position that the terms of the bids documents and the bidding criteria was to be set-up and decided by the Petitioner itself. The respondents even if it remained in the contract would not have any say in the bidding criteria. The respondent's had repeatedly stated that it had "skin in the game" and hence, the respondent was not entitled to associate itself and its ability to earn profit with some aspect of the project and dis- associate itself with others. It is thus, submitted that the allegation of the respondent that the petitioner lay an onerous criteria with intent to dissuade the bidders from coming forward, defied logic and common sense.
xx) The Arbitral Tribunal has passed the impugned Award contrary to the settled-law that, when direct evidence was available as to ascertain the actual damages, it was forbidden to assert damages based on hypothesis or expert estimates. In this context, it is submitted that the respondents had made a claim for damages, on the basis of hypothetical premium that might have been received from the respondents from potential developers for DRP and more particularly considering clause 6.1 (B) of the PMC Agreement which provided that the respondents will be entitled to a part of the premium received from SRA. Thus, the respondent's remuneration was uncertain and dependent on the financial pvr 38 sonawane-rng-rane-SRA-final.doc success of the project and on the basis, the Petitioner receiving premium referred by the respondents as "skin in the game". It is submitted that the respondents led evidence purportedly of experts to project the likely premium that may be received by the petitioner for DRP which was totally imaginary.
xxi) The Respondents during the course of the arbitral proceedings, produced public advertisement dated 30 January 2016 issued by the petitioner inviting bids in respect of the DRP to contend that the project was an on-going project. The petitioner's submission is that this was responded on behalf of the petitioner without prejudice to their contention that the termination of the PMC agreement was valid firstly by producing evidence to show firstly that the dead-line for submission of the bids was extended on five separate occasions; secondly that the petitioner had issued notices in this regard and thirdly, no bids were received for the project despite five extensions which were facts in the public domain. The petitioner submits that based on these facts, the petitioner canvassed according to it, a well-settled position in law that the Arbitral Tribunal ought not to have ignored and shut its eyes to the "basic realities" of the case and ignored matters on record in considering award of damages on speculation, conjectures and hypothetical basis as asserted by the pvr 39 sonawane-rng-rane-SRA-final.doc respondents. The principle that damages are intended to a place a contractual party as far as in the same position he would have been had the contract was to operate, no better and no worse , if he had not suffered wrong complained of and the party, cannot be a wind-fall gain and/or an unjust enrichment. It is the petitioner's submission that this well-settled position has been completely ignored by the Arbitral tribunal in award of damages. In supporting this submission, the petitioner rely on the decision of The Bwllfa and Merphyr Dare Steam Collierres (1891 LTD vs The Pontyupvidd Water Works Co-2 and in Williamson vs John I Thornycoft & Co Ltd.3 and in Golden Strait Corporation vs Nippon Yusen Knbishika Kaisha4.
xxii) It is submitted that the respondent's response to the above arguments of the petitioner before the Arbitral tribunal was that the petitioner had led evidence of witnesses, who had no personal knowledge in the subsequent events that had transpired. Also that the judgments cited by the petitioner, were not applicable as the petitioner has not been able to prove any subsequent events. This submission of the respondent, according to the petitioner was completely contrary to the record as there was sufficient evidence on record that no bids were received in pursuance 2 1903 HL 426 3 (1940 CA 658 (Kings Bench) 4 2007 Bus LR 997 pvr 40 sonawane-rng-rane-SRA-final.doc of the advertisement dated 30 January 2016. The tribunal not only dis- regarded the evidence but has committed patently illegality in recording a finding and it was last minute attempt on the part of the petitioner to issue the advertisement which was by way of an after-thought to dislodge the claim of the respondents. It is submitted that the findings of the Arbitral Tribunal in this regard, are also based on no evidence and are ex- facie perverse, to the extent that no reasonable body of persons can arrive at such findings. It is submitted that it was absurd to suggest that the petitioner which is an instrumentality of the State, would float a global advertisement inviting bids in order to create evidence to defeat the respondent's claim for damages and that too, without having an idea with respect to the outcome of such bids.
xxiii) It is submitted that, in fact there would not have been a better evidence of the fact that the project was completely unviable had the PMC Agreement not being terminated, and secondly, the respondents would not have earned any premium. However, despite this, the Tribunal had held that there is no evidence oral or documentary to establish that the project was not viable or it was not abandoned for all times or no premium would have been received by the respondents in connection with the project.
xxiv) It is next submitted that the Arbitral Tribunal has inexplicably pvr 41 sonawane-rng-rane-SRA-final.doc rejected vital evidence available in public domain which best
demonstrated the reality of the situation viz. that in fact no bids were received and the project was unviable. Instead, the Arbitral Tribunal has relied upon irrelevant and incomplete evidence. This evidence being letter dated 9th March 2011 from OSD-DRP to the Secretary Housing department. This letter according to the petitioner in no manner amounted to an admission by the petitioner of huge premium that was expected to receive as ascertained by the respondent. It is submitted that in making such submissions, the Respondent overlooked that this letter only refers to a presentation made by third party consultation Darshaw & Company Private Limited and was not petitioner's own estimation. It, therefore, could not have been treated to be admission of the petitioner. The award hence, makes a fundamental error of treating the statements in this letter as admissions by the Petitioner.
xxv) It is submitted that in any event the said letter set out only estimate of gross profit which the Respondent was expected to earn. However, subsequent course of events had demonstrated that in fact DRP was unviable. No bids were received and the Petitioner received no premium whatsoever. Despite this, the Arbitral Tribunal contrary to well settled principles of law has brushed aside the stark reality as to the pvr 42 sonawane-rng-rane-SRA-final.doc profitability of DRP and instead proceeded to award damages based only on estimates and conjectures.
xxvi) It is submitted that in any event this letter dated 9 th March 2011 only referred to estimate of gross profit (not the premium) that may be earned. It is submitted that gross profit amount by its very definition and as expressly set out in 9 th March 2011 letter itself, need not provide for either interest or tax that would be payable by the Developer and would necessarily reduce any premium that the Developer may offer. The gross profit was, therefore, no indication of the amount that any developer would have bid and premium that S.R.A. would have received. The Arbitral Tribunal, however, erroneously treated the gross profit and the premium as synonymous.
xxvii) It is submitted that during the course of their argument before the arbitral tribunal , the Petitioner tendered a 'Note' titled "Brief Note on Dharavi Re-development Project" clarifying that only six bids were received in 2007-2008 bid process and given that one bidder could only get one of the 5 sectors, there would be no competition in the global bidding process. This Note was totally ignored by the Arbitral Tribunal. xxviii) It is submitted that the evidence on the cost estimate prepared by Ballal Engineering Private Limited (the Ballal Report) also pvr 43 sonawane-rng-rane-SRA-final.doc could not have been accepted by the arbitral tribunal. It is submitted that the report was based on the drawings, specifications, information and documents provided by the Respondent itself as also the supporting documentation did not form part of the arbitral record. It is thus, submitted that this Report was nothing more than summary of the detailed estimate and measurement sheet prepared, which the respondent chose not to place on record. It is submitted that the author of Ballal Report Mr.Girish Ranade (CW-2) confirmed that, "there is a detailed estimate and measurement sheet prepared section-wise and that these were only summaries which were attached there". He also admitted that without the supporting documents the Ballal Report was incomplete. It is submitted that the Arbitral Tribunal has also noted in the impugned award that the Ballal Report was, "merely tabulated summary of the conclusions arrived at and that consequently the petitioner could not cross examine the witness on these measurements and estimates ". The Petitioner submits that however, instead of rejecting Ballal Report as incomplete, the Arbitral Tribunal had concluded that it was incumbent upon the Petitioner to call upon the Respondent to produce complete documentation in this regard, and has proceeded to award damages on the basis of such incomplete report.
pvr 44 sonawane-rng-rane-SRA-final.doc xxix) It is submitted that it can never be conceived that it was
neither the duty or obligation of the Petitioner to ensure completeness of respondent's evidence. Such a principle would result in absurdity. Hence, reasoning of the Arbitral Tribunal in this regard, is patently illegal and perverse, so as to shock the conscience of the Court. xxx) In regard to the Chokshi report, estimating the expected premium that the petitioner might receive, it is submitted that, even this Report was based on assumptions and estimates provided by Mr.Mukesh Mehta (CW-1) including but not limited to the Ballal Report. The Chokshi Report had also clearly recorded that it was based on the information relating to the Company, furnished by the Management and information available in public domain regarding other players in the Industry. It is further submitted that the estimate provided in the Chokshi Report were based on the 'Working Papers' and 'Excel Workings' which formed part of the Report and yet were not placed on record by the Respondent. xxxi) It is submitted that the veracity and independence of Chokshi Report was also vitiated by the evidence of Mr.Mukesh Mehta- CW 1 who in his affidavit of evidence stated he requested the said advisor to estimate reasonable premium that could have been offered by the developers to the Government of Maharashtra ranging from Rs.23,270/- Crores to pvr 45 sonawane-rng-rane-SRA-final.doc Rs.29,600/- Crores. The Chokshi Report also estimated expected premium to be in the range i.e. 23,271/- to 29679 Crores. It is thus, submitted that the Arbitral Tribunal has shut its eyes to the facts and events in awarding damages to the Respondent on the basis of assumptions and conjectures, by ignoring vital evidence and taking into account irrelevant evidence. xxxii) It is next submitted that, before the Arbitral Tribunal the petitioner had categorically urged that the Respondent was not entitled to even a penny of post tender fees under PMC Agreement, since admittedly, post tender stage of project had not commenced on the date of termination of PMC Agreement and the Respondent has not carried out any post tender activities as outlined in PMC Agreement. Thus, the impugned award with respect to the claim for post tender fees of RS.42 Crores was contrary to the express terms of PMC Agreement and in particular Clause 6.1(A) read with Appendix E-Part(II). It is submitted that as to how the Arbitral Tribunal could have awarded payment of any sum, let alone entire claim of Rs.42 crores, for post tender activities under PMC Agreement by unexplicably including this amount in its calculation of damages without any discussion or deliberation on this aspect. According to the petitioner, the Arbitral Tribunal has failed to apply its mind to the petitioner's contention and by not affording any reasons for pvr 46 sonawane-rng-rane-SRA-final.doc awarding post-tender fees to the Respondent. The impugned award in this regard is patently contrary to the fundamental policy of Indian law. xxxiii) The Arbitral Tribunal has completely failed to consider and deal with the said several of the petitioner's arguments and submissions and provide reasons for rejecting or not accepting the same. To this extent the impugned award is unreasoned and in violation of principles of natural justice. This, according to the petitioner also demonstrates non application of mind on the part of Arbitral Tribunal and makes the impugned award an unreasoned award.
xxxiv) Lastly it is submitted that the Arbitral Tribunal has failed to consider several important submissions made by the petitioner on several documents on record and in ignoring these contentions it can be said that, the Arbitral Tribunal has rendered an award ignoring vital and uncontroverted evidence to arrive at findings which are ex-facie perverse. xxxv) In supporting the above contentions Mr.Khambata, learned Senior Counsel for the petitioner has relied on the decisions of the Supreme Court in Associate Builders Versus Delhi Development Authority5 and the decision of the learned Single Judge in Fermenta Biotech Ltd. Versus K.R.Patel.6 5 (2015) 3 SCC 49, 6 (Arbition Petition No. 545 of 2017, order dated 11 October 2018) Bombay High Court pvr 47 sonawane-rng-rane-SRA-final.doc Submissions on Behalf of the Respondent
35. On behalf of the respondents, Mr.Jagtiani learned senior counsel would make the following submissions :
(i) None of the grounds as urged on behalf of the petitioner warrant any interference under any of the limited grounds falling within Section 34 of the ACA. It is submitted that the Arbitral Tribunal has recorded findings on appreciating the documentary and oral evidence and has correctly come to a conclusion to award the damages as granted, in favour of the respondents.
(ii) It is submitted that the termination of the PMC Agreement by the petitioner was illegal. There was no fault of the respondents which could have made the petitioner to terminate the PMC agreement by invoking clause 2.8.1 (g) of the PMC Agreement. This much less alleging on the ground that the respondent's demand of retention fees in pursuance of the first award and by claiming such amounts, would have an effect of a deemed repudiation of the contract. It is submitted that the Arbitral Tribunal in para nos. 22 to 26 of the award, has appropriately held that the respondents by demanding the retention fees, would not constitute repudiation of the PMC Agreement.
(iii) In regard to clause 2.8.1 (g) it is submitted that the pre-
pvr 48 sonawane-rng-rane-SRA-final.doc condition to termination was that the project " not implemented and/or stopped and abandoned ". According to the respondent, the Tribunal has interpreted this clause to mean that a permanent stoppage or non-
implementation of the project and not a mere temporary break in the project. This is a reasonable and probable interpretation as made, by the Arbitral Tribunal to reach to conclusion that the termination is illegal. It is submitted that this is more so, for the reason that in the termination notice dated 4 August 2012 the petitioner itself stated that the project has only "presently been stopped and is not being implemented" .
(iv) The respondents had led ample evidence before the Arbitral Tribunal to demonstrate, that the project was alive and kicking. Also that the DRP Officers had continued the work full time and DRP had never been cancelled. This was also clearly recognized by the Principal Secretary to the Hon'ble Chief Minister, in internal note date 8 February, 2012. It is thus, submitted that after evidence was led by the respondent and when the Tribunal was ready to hear the submissions of the parties, the petitioner issued an advertisement dated 30 January 2016 followed by three or four successive extensions inviting bids in respect of same DRP as originally notified, in the G.R.dated 4 February 2004. These acts on the part of the petitioner falsified the contention that the project was pvr 49 sonawane-rng-rane-SRA-final.doc permanently stopped and/or abandoned making clause 2.8.1 (g) of the contract in-applicable to justify the termination of the PMC Agreement.
(v) It is submitted that once the termination was established to be illegal, the consequence had to follow namely that the respondent be compensated by way of damages for loss of profit that the respondents was reasonably expected to make, had the PMC Agreement was to be implemented in its course.
(vi) It is submitted that the petitioner's reading of clause 6.1 (b) which states that " PMC shall additionally receive 0.5 % of the total a premium received by the SRA " is mis-placed and cannot be invoked in a situation, when the termination of the contract by the petitioner was illegal. The petitioner's contention that unless the petitioner received the premium, the respondent was not entitled to be paid at the rate of 0.5 % of such premium, and that as no premium was received, the respondent was not entitled for such damages, is a fallacious argument. This, for the reason that non-receipt of the premium is a situation, that was brought about by the petitioner's own illegal conduct of wrongful termination of the PMC agreement. If such an argument is to be accepted, it would amount to adding a premium to an illegality and breach as perpetrated by the petitioner on the respondents. In this situation, damages to be pvr 50 sonawane-rng-rane-SRA-final.doc awarded by way of loss of profit were required to be calculated albeit hypothetically as if the contract was allowed to run its full course.
(vii) It is submitted that the respondent on evidence has established the loss of profit. In this context, it is submitted that the evidence of two expert witnesses was led by the respondents to determine loss of profit namely of Mr.Girish Ranade of Ballal Engineering, who calculated the cost of construction of the project, and secondly, of Ms.Gauri Shah of C.Chokshi who calculated a reasonable premium that would be earned by the petitioner. The Arbitral Tribunal on appreciation, of their testimony, accepted their evidence while observing that the petitioner had refrained from leading any evidence to either controvert or vary or substitute the conclusions of the respondent's witnesses. It is submitted that as regards, the respondent's witness Mr.Girish Ranade, his calculations were based on plans, specifications as contained in the tender document, which were prepared by the SRA itself and therefore, the material on the basis of which, Ballal Engineering had concluded the cost of project, were of the nature which emanated from the petitioner's documents and were fully within the petitioner's special knowledge and record. It is submitted that Mr.Girish Ranade's covering letter to the report in fact, specifically refers to the exact building within DRP and pvr 51 sonawane-rng-rane-SRA-final.doc therefore, his calculations were not done on any hypothetical basis but, on the very same compensation as projected.
(viii) It is submitted that the evidence of Ms.Gauri Shah gives an estimate of the reasonable premium that would be earned by the SRA which were also based on assumptions largely contained in the tender documents and based on recognized principles of valuation. Ms.Gauri Shah in her testimony has justified every assumption around which her calculations and projections were based. In this regard, it is submitted that she provided for a bandwidth ranging approximately Rs.23,000 crores to Rs.29,000 crores and the arbitral tribunal after adopting a conservative and a cautious approach, chose to accept a lowest figure of Rs.23,000/- crores as the basis for awarding damages.
(ix) It is next submitted that this is a case, where adverse inference was required to be drawn against the SRA and as rightly undertaken, in the impugned Arbitral Award. It is submitted that the disputes in arbitration revolved around as to whether the project had been permanently stopped and abandoned; what was the actual cost of the rehabilitation and saleable component of the project and what would be the reasonable expected premium had the PMC Agreement had been allowed to run its course. It is submitted that on each of these issues, the pvr 52 sonawane-rng-rane-SRA-final.doc petitioner had not only the domain knowledge but, also information and data in the form of drawings and specifications that would assist the Tribunal. in arriving at its decision. The facts pertaining to all these issues were within the special knowledge of the petitioner. It is submitted that notwithstanding this situation, the petitioner deliberately, chose not to lead any evidence and stop their witnesses to the testimony of cross- examination by the respondents so as to test the petitioner's defence and elicit the truth. It is submitted that it was petitioner's burden to prove the situation, the facts, which were within the special knowledge was on the petitioner, in accordance with sections 106 and 114 of the Evidence Act. The Arbitral Tribunal has in fact, severely commented on this aspect, has also considered the case laws on the subject, to the effect that adverse inference is required to be drawn against a party who could but, chose not to lead cogent evidence on the aspect within their knowledge and asserted the test of burden of proof.
(x) The statement of claim as filed by the respondents, was based on illegal termination of the contract in 2012 i.e. much prior to the said advertisement dated 30 January 2016 and hence, no reliance was placed upon such an advertisement and substantiate and establish the illegal termination. It is submitted that, when facts of the advertisement was pvr 53 sonawane-rng-rane-SRA-final.doc drawn to the attention of the Tribunal, an additional reason was provided to hold that the termination was illegal, as it demonstrated that the project was alive falsifying the assertion, that the project had been permanently stopped and abandoned. Being an additional piece of evidence, the Tribunal considered the same, concluded that the termination was illegal and did not satisfy the requirement of clause 2.8.1
(g).
(xi) The contention of the petitioner that as no bids were received, pursuant to the advertisement dated 30 January 2016 it was conclusively established that the project was un-viable and therefore, respondent's claim for loss of profit as awarded, was illegal and against the evidence brought on record is misconceived.
(xii) The petitioner's contention that the Arbitral Tribunal having admitted the advertisement in evidence and coming to a conclusion that the project was alive, cannot be a contradiction as the Tribunal has accepted that the advertisement proved that the project was alive, and as no bids were received, it necessarily had an impact on the question of loss of profit claimed by the respondent. This has been effectively dealt by the Arbitral Tribunal in paras 56 to 70 in as much as the Tribunal has found no casual connection, between non-receipt of bids and the advertisement pvr 54 sonawane-rng-rane-SRA-final.doc dated 30 January 2016 by holding that non-receipt of bids could still be contradicted to the tender documents, which have been dis-similar to the ones prevalent in 2012 when the respondent was in-charge and six bidders had actually continued to show interest. This was partly acknowledged in the letter dated 9 March 2011. It is submitted that the witnesses who were examined on behalf of the petitioner, were also ignorant of the whole project and the tender documents and therefore, could not assign any reasons as to why no bids were received from the prospective bidders, may be for the cause that the tender conditions were not attractive for a sector. The Arbitral Tribunal has also noticed that no Senior Officer of the petitioner, with knowledge of the tender documents, offered himself for cross-examination and to testify the reasons, why no bids were received. The Tribunal therefore, correctly found that it was not sufficient for the petitioner to contend, that as no bids were received the project had in any manner come to a standstill. The Tribunal also was correct in its observation that the event of 2016 could not be understood in self-contained term, for that would be taking a restricted myophic view of the case and non-receipt of the bids in 2016, might be contracted on a situation that prevailed in 2012 when six bidders were short-listed for the project. There is thus no contradiction at all, in the various observations as pvr 55 sonawane-rng-rane-SRA-final.doc made by the Tribunal.
(xiii) It is submitted that the petitioner had miserably failed to show that the project was non-viable and unprofitable while admitting that the project was still an on-going endeavour as originally conceptualized by the respondents. It is submitted that the Arbitral Tribunal has been conservative for all the losses while turning down all other claims. It is submitted that there were no contradictions whatsoever in the impugned Award and the same is not in any manner, patently illegal.
xiv) It is next submitted that only the petitioner was competent to appraise the Arbitral Tribunal of whether the project had been permanently stopped and abandoned. However, the petitioner desisted from doing so until the issue was conclusively established against the petitioner by reference to advertisement dated 30.1.2016 as placed on record by the respondent which proved that DRP was alive. It is submitted that inference to be drawn from such conduct of the petitioner clearly establish respondent's case of illegal termination of contract by the petitioner and beyond any doubt inciting the Respondent to recover damages for loss and profit.
pvr 56 sonawane-rng-rane-SRA-final.doc xv) In so far as to what was the actual cost of rehabilitation and
saleable components of the project, it is submitted that the Ballal's estimate of cost was based upon the material gathered from record of the petitioner and particularly tendered documents. Thus every valid notion as to what was the project cost was within the special knowledge of SRA which by withholding (by not offering any witness for cross examination) makes the cross examination of Mr. Girish Ranade, hollow and inadequate in trying to dis-approve his testimony. In fact, there was no attempt by the petitioner while cross examining Girish Ranade to suggest alternate estimate of cost by leading evidence to that effect. xvi) It is submitted that as to what would be reasonable expected premium had the PMC Agreement been allowed to run its course was appropriately considered by the Arbitral Tribunal in making the impugned award.
xvii) It is submitted that the petitioner could have reasonably undertaken an exercise of estimating the premium when the "would be developers", bidding in the project would pay on successful bid.
xviii) It is submitted that only on that basis that tendered document pvr 57 sonawane-rng-rane-SRA-final.doc would contain pre-requisites of eligibility in inviting bids. This was also
evident in the light of differing bidding requirements of different Sectors, in 2016 tenders. Reference in that regard is made to Clause 2.1.18(B) of the tender documents for Sector 1 to 4 as submitted by the respondent. It is further submitted that Ms. Gauri Shah had based her valuation on internationally accepted principles and assumptions which have been tested but unshaken in detail and ineffective cross examination. Also failure on the part of the petitioner to lead its own evidence, could be the only method by which Ms.Gauri Shah's valuation could be questioned. In the absence of the petitioner leading any evidence, Gauri Shah's testimony was required to be accepted in its totality.
xix) It is next submitted that an adverse inference in the context of petitioner's letter dated 9th March 2011 was necessary to be drawn. It is submitted that this letter of the petitioner destroyed all the defence that the SRA had, to the claim of respondent in the letter dated 9 th March 2011. This letter was obtained by the respondent under Right to Information Act. This letter demonstrated that this letter was internal communication from OSD-DRP to the Secretary Housing department to appoint MHADA as developer for Sector 5 of DRP by cancelling the then pvr 58 sonawane-rng-rane-SRA-final.doc existing process and to some how find an excuse to terminate the services of the respondent as Project Management Consultant. It is submitted that contents of the said letter stands completely established for following reasons;
a) Petitioner ought to have led evidence if it wanted to disassociate or water down effect of the said letter, it was only petitioner who was in position to explain the context in which admissions contained in said letter were made. If this was so, the question of project being profitable and that too to the extent of 31156 crores become a conclusive effect.
b) The purport of the said letter being to terminate respondent services and to appoint MHADA as developer in respect of Sector 5, both being achieved, the petitioner was constructively stopped from contending that the letter should be understood in any other manner except as what it actually stated.
c) The contents of this letter met the testimony of Ms.Gauri Shah and Mr.Ranade unassailable and in fact completely corroborated their statements and showed that same were not only extremely reasonable but conservative as well.
d) That a reference of this letter was seen in the appointment letter dated 21st May 2011 of MHADA for Sector 5, thereby ratifying pre-eminence accorded to this documentary pvr 59 sonawane-rng-rane-SRA-final.doc evidence.
e) The said letter also afforded an insight as to why SRA chose not to examine any witness of its own as if this was to happen. These witnesses could have confirmed the case of the respondent on all material aspects of the case namely illegal termination and estimated loss and profit which would follow on such termination.
(xx) It is submitted that it was not open for the petitioner to give any other meaning to the said letter dated 9 th March 2011 before this Court in the present proceedings for the reason that the SRA had chosen not to examine any witness in this regard and thus, before this Court now was precluded from giving a spin or interpretation of its own to the contents of said letter dated 9th March 2011.
(xxi) It is submitted that in any case, such letter dated 9 th March 2011, was written primarily to get rid of respondent and to appoint MHADA as a Project Management Consultant. As both objectives were achieved, all other contents of the letter must be read as understood by the respondent and in no other manner.
xxii) It is submitted that Rs.31,156 crore was in fact indicative of pvr 60 sonawane-rng-rane-SRA-final.doc
premium and the gross profits the figure of which was arrived by taking profit at 62,313 crores and by presuming that the developer would have share of 50% of 62, 313 crore as indicated in the said letter. (xxiii) It is further submitted that the petitioner's contention that those bidders who left each one of whom would have got one sector and thereby competition was avoided, was an erroneous interpretation which could not have been accepted in the absence of any evidence through such witnesses who authored the letter. It could well be that all bidders would bid for a single sector, which when awarded the remaining unsuccessful bidders would bid for the remaining available sectors. (xxiv) It is submitted that there was conundrum faced by the petitioner, it is submitted that at the virtual fag end of the arbitral proceedings that is before oral submissions, advertisement dated 30 th January 2016 was issued which unequivocally demonstrated that DRP was a subsisting and ongoing project under the same G.R. dated 4 th February 2004. This, according to the respondents nailed the petitioner's lie that the project had been permanent stopped and abandoned so as to attract termination of Clause 2.8.1(g).
xxv) It is submitted that the petitioner was allowed to file reply to pvr 61 sonawane-rng-rane-SRA-final.doc explain the said advertisement. Pursuant thereto on 24.8.2016, the
petitioner intended to show that though fresh global tenders were floated in respect of DRP, same failed to attract any bids and thereby demonstrating that the project was unviable and unprofitable. xxvi) It is submitted that in the additional affidavit-in-reply dated 19.8.2016, the petitioner stated that no bidders were attracted and showed interest in the project, no final bid materialized. To prove these aspects, SRA chose to lead the evidence of 3 lower ranked officers who in their cross examination pleaded total ignorance of any of the above facts as was evident from various answers to pointed questions put to them in cross-examination. To support these contentions, reference is made to cross examination of RW 1 (Mr.Harish Varade), question Nos.4 to 12, 14, 20 to 26 and of the cross examination of RW 2 (MrM.R.Gadekar) to question Nos.1 to 9, 16, 27 to 29 and to the cross examination of RW 3 (Mr.Harshad Karade) to question Nos. 6 to 20. It is thus, submitted that these 3 witnesses were offered for cross examination despite the fact that Mr. R.B.Sankhe, Mr. S.K. Joshi and Mr. S.B.Satam who were authors of advertisement dated 30th January 2016 and who were attending/participating in arbitral proceedings on regular basis, were deliberately not offered for cross-examination. It is submitted that pvr 62 sonawane-rng-rane-SRA-final.doc obviously said 3 persons possessed all requisite knowledge relating to the contents of additional affidavit-in-reply but were shielded, as it were, from being exposed to cross-examination by respondent/claimant. xxvii) It is submitted that in any event even assuming that no bids were proved to have been received pursuant to the advertisement dated 30th January 2016, the circumstance could have had no bearing on the facts and situation that had obtained in 2012, when the PMC agreement was illegally terminated. In this context, it is submitted that under respondent's appointment (pre-termination) admitted position was that there were six bidders whose interest in developing one of the sectors of DRP remained intact for almost 4 years, ever since the tenders were first floated in 2007.
(xxviii) It is submitted that even non-receipt of bid did not prove that the project was unviable as there can be numerous reasons why no bids can be received, which can be for the reasons of there being onerous tender conditions for e.g. one of the conditions may be demanding a hefty earnest money deposit as qualifying for the contract which the developer may not find reasonable or affordable or stipulating that SRA terminated development agreement in an arbitrary or one sided pvr 63 sonawane-rng-rane-SRA-final.doc manner. Such condition would certainly inhibit or deter an otherwise bidder from consummating the transaction with the petitioner/SRA. (xxix) It is submitted that if the petitioner wanted to prove that the project was unviable then the petitioner should have led cogent evidence to demonstrate that cost of the project exceeds sales receipts which they did not do.
(xxx) It is submitted that when asked directly by the Arbitral Tribunal, the petitioner desisted from saying that project was unviable. As clearly commented by the Tribunal in paragraph 56 to 70 of the award as also conclusion arrived at was that the petitioner/SRA miserably failed to establish unviability or lack of potential profitability of the project. Thus, the advertisement dated 30th January 2016, nailed the lie that the project was permanently stopped and abandoned and therefore, makes the termination wholly illegal vis-a-vis Clause 2.8.1(g). Also, failure to offer knowledgeable witness to substantiate contents of additional affidavit brought about a situation that contents of additional affidavit unproved and unacceptable.
xxxi) It is next submitted that contention of the petitioner that there is internal contradiction in the award is untenable. It is submitted that the said contention of the petitioner was fallacious for several pvr 64 sonawane-rng-rane-SRA-final.doc reasons. Firstly, it is submitted that the Tribunal independent of the advertisement dated 30th January 2016 has held that, on interpretation of termination Claus 2.8.1(g) of the PMC Agreement the termination does not meet with the requirement of the said Clause of PMC Agreement. Also, termination notice dated 4.8.2012 also stated that the project was "presently not implemented or stopped or abandoned". Whereas, on interpretation of Clause 2.8.1(g) the Arbitral Tribunal has held that only a permanent stoppage and abandonment would entitle SRA to terminate PMC Agreement. It is submitted that thus, the Arbitral Tribunal has held termination to be illegal on its own terms and observed in paragraphs 27, 28 and 30 of the impugned award. It is thus, submitted that interpretation of Clause 2.8.1 (g) as made by the Arbitral Tribunal was bot reasonable, correct and probable interpretation. (xxxii) In opposing the Petitioner's contention on repudiation, on behalf of the respondents, reliance is placed on : (1) Freeth and Anr v.Burr7; (2) Sweet v.Maxwell 8 and (3) Woodar V. Wimpey9) In regard to the proposition on loss of profit, reliance is placed on the decision in Union of India vs Vaman Prestresssing Co.Ltd and Anr 10, 7 (1874) L.R. 9C.P.208 8 (1964) 3 All E.R.30 9 (1980) 1 WLR 277.
10 2019 SCC Online Bom 192 pvr 65 sonawane-rng-rane-SRA-final.doc
K.K.Co-operative Group Housing Society Ltd vs Goel Assoc iaes 11, Nobel et al.v Tweedy12, Goel Associates v.Shama Cooperative Group Housing Society13; A.Brij Paul Singh and anr vs State of Gujrat 14 , MSK Projects India (JV) Ltd vs State of Rajasthan and anr15.
Reasons
36. To appreciate the contentions, at the outset it would be necessary to note some undisputed facts.
37. Dharavi being one of the biggest slum pockets in Asia and located in a central area in Mumbai being spread over in an area of about 174 Ha of land, the Government of Maharashtra in or about 2004 desired re-development of Dharavi for economic upliftment of persons who are occupying these slum areas. There cannot be two opinions of the public need felt by the State Government to undertake this herculean task to rehabilitate those suffering in these slums.
38. Accordingly, on 4 February 2004, the Government of Maharashtra in its Housing department issued a Government Resolution inter-alia notifying its decision for re-development of Dharavi. Some of 11 2012 (128) DRJ 310 (DB) 12 et al.203 P.2d 778 13 2009 (113) DRJ 523, 14 (1984) 4 SCC 59 15 (2011) 10 SCC 573 pvr 66 sonawane-rng-rane-SRA-final.doc the salient features for this re-development were that the re-development would be undertaken through public-private participation by dividing Dharavi into 9 Sectors, with expected expenditure of RS.5600 crores as sanctioned. Zoning and Sectors as proposed in the Dharavi re- development plan were sanctioned. A Committee of Secretaries was empowered to modify the extent of Sectors and number of Sectors to be proposed under Dharavi Redevelopment Project (DRP). The implementation of DRP was to be as per the existing norms and regulations of a Slum Rehabilitation Scheme, under Slum Rehabilitation Authority/Petitioner. The developers were to submit plans for development of individual sectors and the sectoral development was to be carried out in phases. The DRP was to be published through global tendering system. Bids received were to be scrutinized by the SRA/petitioner and submitted to the Committee of Secretaries (CoS) for a final decision. Scrutiny of bidders was to be done by the SRA/petitioner which would be put forth before the Committee as recorded in paragraph 3 of the said Government Resolution. After sanction from the COS to the proposal of developers for individual sectorial development, SRA/petitioner was to take further action. The Urban Development Department ( in short "UDD" ) of the Government of Maharashtra was to pvr 67 sonawane-rng-rane-SRA-final.doc complete the formalities of declaration of SRA/petitioner as a Special Planning Authority for Dharavi. Condition of obtaining consent from 70% slum dwellers by development was relaxed to 60% in order to expedite implementation of DRP. Consumption of FSI upto 4% was sanctioned only for Dharavi area. Sanction was granted to the utilization/availing of any FSI generated beyond 4.00 under Dharavi re-development as slum TDR. The Municipal Corporation of Greater Bombay was to plan in detail about basic infrastructure facilities. The Urban Development Department of the Government of Maharashtra, was to follow up with the Central Government for the funds required for infrastructure facilities. According to the plan, construction was to first commence on the Government of Maharashtra and Municipal Corporation for Greater Mumbai land. The Government of India was to be requested to give NOC on their land. Acquisition of private lands was to be initiated under MHADA Act 1971. Officer on special duty (I.A.S.) was to be appointed for the project. All expenses of this Officer were to be borne by the SRA. It is important to note Clause 16 of this Government Resolution which makes a reference to the Chairman of the Respondent Mr. Mukesh Mehta which reads as under:
CLAUSE 16:
In view of valuable services offered by Mr.Mukesh Mehta pvr 68 sonawane-rng-rane-SRA-final.doc apart from the proceeding, the concept of Dharavi redevelopment and also since he has attended various meetings at Delhi, Mr. Mukesh Mehta is hereby appointed as Advisor/Consultant for Dharavi re-development. As regards fees and terms of reference, same will be decided by the Committee of Secretaries and expenses will be borne by the SRA.
39. The aforesaid Government Resolution which is of the year 2004, is the first pointer to the role of Mr. Mukesh Mehta in the DRP so contemplated, who was appointed as an Advisor/Consultant. It is required to be noted that at the time of issuance of above Government Resolution, there is nothing to infer that, Respondent - M.M. Project Consultants Private Limited had any direct privity either with the Government of Maharashtra or with the petitioner.
40. In pursuance of the recognition of Mr.Mukesh Mehta as an Advisor/Consultant for the DRP to be undertaken by the Petitioner, a formal Agreement namely the "PMC Agreement" dated 1.11.2008 came to be entered between the petitioner through its 'Officer on Special Duty (OSD)' and the Respondent M/s M.M. Project Consultant Private Limited, through its Chairman Mr. Mukesh Mehta who was authorized by the Resolution of Board of Directors dated 10 th October 2008 to execute the said Agreement on behalf of the Respondent.
pvr 69 sonawane-rng-rane-SRA-final.doc Contractual Provisions
41. Both the sides have extensively referred to the various clauses of the PMC agreement in support of their respective contentions on the nature of the findings as recorded by the arbitral tribunal. Also Mr.Khambata, learned Senior Counsel for the Petitioner has raised categorical contentions that the impugned award ignores various clauses of the PMC agreement and/or there is non application of mind to the Clauses in the Agreement. It would be necessary to appreciate all these contentions by noting the relevant Clauses in the PMC Agreement which are as under:-
"1. GENERAL PROVISIONS:
1.1 Definitions:
Unless the context otherwise requires, the following terms whenever used in the Agreement shall have the following meanings.
a) .............
b) "Client" means Slum Rehabilitation
Authority (SRA).
c) "SRA" means Slum Rehabilitation Authority, constituted
in the year of 1996 under Maharashtra Slum Area
(Improvement & Clearance) Act 1971 and having its registered office at 5th floor, Griha Nirman Bhavan, Bandra (E), Mumbai 400 051, a body implementing the Dharavi Redevelopment Project (hereinafter called as the project) on behalf of GoM.
d).......
e) "Tender/Contract/Bid Document" or "Tender/Contract/ Bid Documents" mean the contract document or documents executed between the client and the developer/developers and/ or contractor/contractors for the project.
f) .............
g) "Developer/Developers" means the successful
bidder/bidders awarded the work of Dharavi Redevelopment pvr 70 sonawane-rng-rane-SRA-final.doc Project by SRA/Government of Maharashtra.
............
p) Dharavi Notified Area means the area of Dharavi as notified under Government Gazette, at present dated 9.03/2005 or to be notified in future, for which Slum Rehabilitation Authority is declareed as special planning authority for planning and development of this area. This notified area may be extended further by notifying such area in Government's Gazette by following due procedure.
q) "Dharavi Redevelopment Project " means Project within Dharavi notified area comprising necessarily of but not limited to construction of Rehabilitation Component (Rehabilitation units/tenements for Rehabilitation of existing eligible slum dwellers), Sale Component (Sale units/tenements as an incentive FSI in lieu of handing over Free of Cost built up Rehabilitation Component) redevelopment of certain municipal chawls, RGNP, MHADA properties work, infrastructure development works, development of D.P. reservation and additional amenities proposed as per special DCR provisions proposed for this project.
r) "Services" means the works to be performed by and as the PMC pursuant to this Agreement for the successful implementation of the Dharavi Redevelopment Project as assigned from time to time by Government of Maharashtra or SRA including what is specified in this agreement with particular reference to the duties of PMC described in Appendix A to this agreement.
..........
aa) "Premium" shall mean the amount payable to SRA, the Client by the Developer for obtaining development rights against per square feet built up rehab and renewal components alongwith amenities provided by the Developer.
2.2 Commencement of Services The PMC have already commenced carrying out of the Services on the effective date i.e. from 04/02/2004, the date of G.R. mentioned in 2.1 above.
2.3 Expiration of Agreement Unless terminated earlier pursuant to Clause 2.8 hereof, this Agreement shall terminate when, pursuant to the provisions hereof, pvr 71 sonawane-rng-rane-SRA-final.doc the Services have been rendered & completed and the payments of remuneration and rembursable expenditures have been made, unless extended or terminated on the terms as may be mutually decided between the parties t the Agreement hereto for a further period as may be agreed between the Parties.
2.6.2 No Breach of Agreement The failure of a Party to fulfill any of its obligations hereunder shall not be considered to be a breach of, or default under, this Agreement in so far as such inability arises from an event of Force Majeur, provided that the party effected by such an event has taken all reasonable precautions, due care and reasonable alternative measures, all with the objectives of carrying out the terms and conditions of this Agreement.
2.8 Termination 2.8.1. By the client The Client may, by not less tan sixty (60 days) written notice of termination to the Consultants may terminate this agreement provided that such notice is given after occurrence of any of the events specified in paragraph (a) through (f) of this clause 2.8.1.
a. If the PMC fails to remedy a failure in the performance of their obligations hereunder, as specified in notice of suspension pursuant to Clause 2.7 hereinabove, within thirty (30) days of receipt of such notice of suspension or within such further period as the Client may have subsequently approved in writing. b. If the PMC is in material breach of its obligations pursuant to this Agreement and has not remedied the same within forty five (45)days (or such longer period as the PMC may have subsequently approved in writing) following the receipt by the Client of the PMC's notice specifying such breach. c. If the PMC becomes insolvent or bankrupt or enter into any agreements with their creditors for relief of debt or take advantage of any law for the benefit of debtors or go into liquidation or receivership whether compulsory or voluntary. d. If the PMC fails to comply with any final decision reached as a result of Settlement of Dispute proceeding pursuant pvr 72 sonawane-rng-rane-SRA-final.doc to clause 8 hereof.
e. If the PMC submit to the Client a statement which has a material effect on the rights, obligations or interest of the Client and which the PMC knows to be false.
f. If, as a result of Force Majeure, the PMC is unable to perform a material portion of the Services for a period of not less than ninety (90) days.
g. If the Dharavi Redevelopment Project for which the PMC is engaged is not implemented and/or stopped and abandoned by the State Government due to any change in law or litigation or for any reason whatsoever.
h. If it is found that the PMC has accepted any arrangement, jobs, services, favour or engaged by the Developer, Contractor who has bid for the project.
5.5. Payment In consideration of the Services performed by the PMC under this Agreement, the Client shall make to the PMC such payment in such manner as is provided by Clause 6 of this Agreement. "6. "PAYMENTS TO THE PROJECT MANAGEMENT CONSULTANTS 6.1 Payment Terms (A) The PMC fees shall be restricted to 1% of Rs.5600 crores only as described hereunder.
i) 25% of 1% i.e. Rs.14,00,00000 (Rupees Fourteen Crores only) towards Pre-tender activities, the break of the percentage fee is given at APPENDIX-E.
ii) 75% of 1% i.e. Rs.42,00,00000 (Rupees Forty Two Crores only) towards Post tender activities the break up of the percentage fee is given at APPENDIX-E.
iii) PMC shall additionally receive 0.5 % of the total premium received by SRA. The same shall be released to PMC pvr 73 sonawane-rng-rane-SRA-final.doc within 30 days from the submission of the bill by the PMC. 6.2. The PMC shall be entitled to the cost of Services and ceiling contract value payable in Indian Rupees as set forth in Appendix E subject to sufficient compliance of any requirement by the Clients.
6.3. Mode of Payment / schedule of payment.
The Client will make payments to the PMC as per stage set in APPENDIX- 'E'.
6.4. From each of the bills payable to PMC, towards payment of fees 5% of the amount would be deducted and retained by the client as 'Retention Money' towards satisfactory performance. This 'Retention Money' will be released in two equal installments as follows:
a. 50% of the retention money shall be released upon obtaining Completion Certificate of the rehab component renewal component amenities, infrastructure etc on pro-rate basis.
b. Balance 50% of the retention money will be released after three years from the date of Completion Certificate as specified about including that of infrastructure work."
6.5 The Consultant shall submit the bills in the duplicate to the Client on Firm's printed bill forms indicating the work done by consultants in detail (if necessary with additional enclosure) such as test certificates, Completion certificate in respect of quality control etc) during the period for which payment is sought.
6.6 The Client shall cause the payment of the PMC periodically as given in Schedule of Payment Clause 6.3 above within thirty (30) days after the receipt by the Client of the bills with supporting documents and on satisfaction of the clients about the same.
6.7 The final payment under this clause shall be made only after the final Completion Certificate in respect of construction activities and a final statement, identified as such, shall have been submitted by the PMC and approved as satisfactory by the Client.
The Services shall be deemed completed and finally accepted by pvr 74 sonawane-rng-rane-SRA-final.doc the Client and the final report and final statement by the Client unless the Client, which such ninety (90)days period, gives written notice to the PMC specifying in details deficiencies in the Services and the final report or final statement. The PMC shall thereupon promptly make any necessary corrections, and upon completion of such corrections, the foregoing process shall be repeated. Any amount which the Client has paid or caused to be paid in accordance with this Agreement which was otherwise payable by the PMC shall be reimbursed by the PMC to the Client within (30) days after receipt by the PMC of notice thereof any such claims by the Client for the final report and final statement must make reimbursement with in six (6) calendar months after receipt approved by the Client in accordance with the above. 6.8 Defect Liability Period As agreed between the parties, the PMC shall monitor the performance of the Rehab and Renewal Components including the amenities and infrastructure created by the Developer, for three years with respect to defects if any of the respective components, which will be in effect from the date of completion for that component and the PMC will also handover the final report to the Client in this regard.
6.9 Printing and Stationary Expenses:
It is hereby agreed between the parties that, the PMC shall provide 5 (five) copies including 2 (two) draft copies and 3 (three) copies of various reports, maps, drawings etc. as required for the said project to the Client free of cost. However, any additional copies will be charged by the PMC to the Client@ actual cost.
APPENDIX 'E'
SCHEDULE OF PAYMENT FOR PMC
Sr.No. Item/Activities Amt (in
%)
1 Preparation of Dharavi Redevelopment Project Action Plan 10.59%
A.....
B.....
C....
D....
pvr 75 sonawane-rng-rane-SRA-final.doc
E......
F.....
G.....
2. Preparation and sanction of Draft Dharavi DCR 6.40%
3. Submission and proposal for Slum Declaration 1.80%
4. Land acquisition proposal 0.40%
A....
B......
5. Expression of Interest (EOI) 0.40%
A....
B.....
6. Sectoral tender documents 0.50%
A...
B...
B. From the total 25$% to be released for Pre-tender activities 5 % fees will be released to the PMC in 9 equal monthly instalments starting from the opening of the bid document until the release of the work order to successful Development/Developers. In case the work order is released earlier than 9 months from the date of opening of the bid documents the instalments will be adjusted to complete the payment towards the pre-tender activities.
II. Post tender (75%) A) From the total 75% to be released for Post Tender Activities, 30% (9.e. 40% of 75% payable PMC fees) will be released to the PMC on equal monthly instalments spread over the stipulated time period of 84 months plus 6 months grace period.
B) Balance 45% (i.e. 60% of 75% payable PMC fees) will be released to the PMC in proportion of the completion of the activities related to the Rehab /Renew Component, Amenity Component and infrastructure Component and is as under:
Item activities On total
Project/on work
completion
1 Scrutiny up to the stage of LoI & 0.25% pm or
Layout 1.25% if the stage
is completed
PMC fees:1.25
pvr 76 sonawane-rng-rane-SRA-final.doc
2. Scrutiny up to the stage of IOA 0.25% pm or
1.25% if the stage
is completed
PMC fees: 1.25
3. Scrutiny up to the stage of CC 0.25% pm or 1.25
if the stage is
completed.PMC
fees: 1.25
4. On completion of Plinth Monthly on
prorate basis on
work completed
PMC fees:5.00
NOTE
1. All the statutory taxes, levies such as service tax, FAT,TDS etc shall be payable by the concerned parties as per clause 1.10 of this agreement
2. Above PMC fees are calculated based on 1% of Rs.5600.00 Cr.only
3. The commencement of the services will be considered from the date of GR as indicated in clause 2.2 of this agreement
4. In the item activities in above table, whenever a stage of completion of construction item is specified, its meaning is on completion of such physical work on site as per plans, specification etc and only on submission of its completion certificate from quality control aspect by PMC
5. % Retention Money will be deducted from each bill payable,.
Retention Money is liable for refundable only after the completion of defect liability period and on faithful compliance of the terms of this agreement.
Questions involved.
42. Considering the submissions as advanced on behalf of the parties in the context of the legality of the impugned award as assailed by the Petitioner, the adjudication of this petition would involve examining pvr 77 sonawane-rng-rane-SRA-final.doc the impugned award and the findings as recorded therein on the following points:-
(i) As to whether the Respondent repudiated the PMC agreement ?
(ii) As to whether the termination of the contract/PMC agreement by the petitioner was legal and valid ?
(iii) Whether the arbitral tribunal is correct in law and facts in awarding damages ?
43. The discussion on the above points is as under :-
(i) Whether the Respondent repudiated the PMC agreement.
44. To appreciate the concept of repudiation of a contract, a useful reference can be made to the Halsbury's Laws of England, 5th Edition, Vol.22 which would explain 'repudiation' as under:-
560. Repudiation and anticipatory breach. Instead of merely failing to provide due performance at the stipulated time, one party may put himself in breach by evincing an intention, by words or conduct, of repudiating his obligations under the contract in some essential respect. It has been said that repudiation is a serious matter, not to be lightly found or inferred. Such repudiation may occur at the time fixed for performance or before that time, in the latter case it is known as 'anticipatory breach'.
Repudiation will give the innocent party (B) the right to treat the contract as discharged and claim damages. It may be express or implied.
561. Repudiation must go to the root of the contract. Not every refusal pvr 78 sonawane-rng-rane-SRA-final.doc by A to perform a part of the contract amounts to a repudiation which entitles the other party (B) to treat the contract as at an end; there must be a refusal to perform something which goes to the root or essence of the contract. Thus it is not just any delay in breach of contract which amounts to a repudiation, but only such delay as would frustrate the adventure. The question whether the refusal to perform part of the contract amounts to a repudiation of the whole contract depends on the construction of the contract and the circumstances of the case. The test is the same for both repudiation and anticipatory breach. If the agreement is an entire contract, the test is applied to repudiation of any part of it. If the agreement is construed as a series of separate contracts, prima facie no breach of one contract can be a repudiation of the others; whereas, if the contract is divisible, the question is whether repudiation of a divisible part shows an intention to repudiate the contract as a whole.
562. Express and implied repudiation. Repudiation may be an express renunciation of contractual obligations by one party (A). This will be so whether A absolutely refuses to perform his side of the bargain or unambiguously asserts that he will be unable to do so. However, it is more commonly implied from failure to render due performance or, in cases of anticipatory breach, by the party in default putting himself in such a position that he will apparently be unable to perform when the time comes. A party (B) seeking to rely on repudiation implied from conduct must show that the party in default has so conducted himself as to lead a reasonable person to believe that he will not perform or will be unable to perform at the stipulated time; as where A refuses to perform unless B complies with requirements not contained in the contract. The fact that a breach is deliberate is not of itself sufficient but it is a factor which may taken into account as evidence of an intention no longer to be bound by the contract; not will words and conduct which do not amount to a renunciation of the contract.
565. Rights of innocent party in case of repudiatory breach: in general. A distinction must be drawn according to whether or not performance of any promise was due before the repudiatory breach occurred; since in no case does the breach of contract terminate that contract ab initio. Rights which have already accrued before termination remain unaffected. Thus the innocent party (B) remains entitled to damages in respect of prior breaches by A3, and may recover in restitution any money he has paid A where there has been a total failure of consideration, or as regards any benefit conferred. At common law, A as the party in breach is entitled to damages in respect of any prior breach by B6, though he will not be able to recover any forfeitable deposit unless there has been a total failure of consideration, but equity may grant some relief against forfeiture.
pvr 79 sonawane-rng-rane-SRA-final.doc A repudiatory breach of contract by A will not of itself have the effect of discharging the contract de futuro. Rather, it has the effect of giving the innocent party (B) a prima facie right to elect whether he will treat the contract as at an end or as still on foot as regards future obligations in it. The contract does not come to an end and therefore, in assessing damages, the court will have to have regard to its terms, including those obligations due to be performed subsequently and any exemption clause or liquidated damages clause. Disputes arising from the contract continue to be governed by any arbitration clause.".. ... ..
566. Rights of innocent party in case of repudiatory breach: effect of termination. If the innocent party (B) can and does elect to terminate following a repudiatory breach by the other party (A), all the primary obligations of the parties under the contract which have not yet been performed are terminated. This termination does not prejudice the rights of the party so electing to claim damages (B) from the party in repudiatory breach (A) for any loss sustained in consequence of the non-performance by A of his primary obligations under the contract, future as well as past. Nor does the termination deprive the party in repudiatory breach (A) of the right to claim, or to set off, damages for any past non-performance by the other party (B) of that other party's own primary obligations, due to be performed before the contract was terminated. Thus the innocent party (B) is released from further liability to perform (subject perhaps to any express contrary provisions of the contract); and, for the 'primary' obligation of the defaulting party to perform, there is substituted by operation of law a 'secondary' obligation to pay damages for the loss resulting from failure to perform the primary obligation. However, prior liabilities remain: where a creditor accepts his debtor's default as terminating the contract, this does not release a guarantor who remains liable for moneys payable by the debtor after the date of discharge. Neither does the termination affect unpaid sums due before that time, but payments falling due before termination may be recoverable on some other ground, for example failure of consideration."
(emphasis supplied) A party to a contract thus either expressly or by implication can take a position that the other party to the contract would not be performing its obligation under the contract and that the contract accordingly would come to an end.
pvr 80 sonawane-rng-rane-SRA-final.doc
45. In this context, the contractual background as pointed out by Mr. Khambatta, is required to be noted to appreciate as to whether the arbitral award is oblivious to and/or unmindful of the contractual conditions. As seen from the PMC agreement the role of the respondent as a Project Management Consultant (PMC) was specified in Appendix-A to the PMC Agreement which was divided into 'pre-tender' activities and 'post-tender activities'. The work of the respondent was in regard to the preparation of certain plans, survey maps, plans for existing land used and preparation of complete proposal alongwith layout/building plan with details of land for proposed transit camp and preparation of detail draft with report for sector-wise layout plan which were contained in Items 1 to 7 under the head pre-tender activities in Appendix -A. The other items namely from item 8 to item 28, mostly provided for the respondent 'to assist' the petitioner in several activities. Similarly under the head post- tender activities, which contain items 1 to 39, again majority of activities were 'to assist' the SRA under DRP. In short as urged by Mr. Khambatta learned senior counsel for the petitioner, activities of the respondent under the PMC agreement were defined with quite certainty , relevant for the payment of the percentage of fees as fixed and specified in the last columns of the relevant appendix.
pvr 81 sonawane-rng-rane-SRA-final.doc
46. For all the pre-tender and post-tender activities it was agreed between the parties that the total (outer limit) of the remuneration/payment to be made to the respondent was as agreed in Clause 6. It is significant that the basis for respondent's fees was the project cost which was notified four years prior to PMC Agreement being entered namely as referred to in paragraph (1) of the Government Resolution dated 4th February 2004, declared to be Rs.5600 crores and the same was included in the PMC agreement. This is clearly seen from Clause 6.1 (A) when it says NB "PMC shall be restricted to 1% of Rs.5600 crores only, as described hereunder.". Accordingly, following was to be the respondent's remuneration as per Clause 6.1.
i) 25% of 1% of Rs.5600 crores i.e. 14 crores towards pre-tender activities as per break up of percentage fees as set out in Appendix-E of the PMC Agreement [ Clause 6.1(A)(i) ].
ii) Balance 75% of 1% of Rs.5600 crores i.e. an amount of Rs.42 crores toward post-tender activities as per break up of percentage fees as set out in Appendix -E [ Clause 6.1 (A)(ii) ].
iii) Additional entitlement to receive 0.5% of the total premium received by the petitioner/SRA to be released to the respondent within 30 days from submission of bill by the respondent [ Clause 6.1(B) ].
47. It is not in dispute that the entire 25% of the 1% i.e. amount of Rs.14 crores towards pre-tender activities has been received by the pvr 82 sonawane-rng-rane-SRA-final.doc respondent. As to what was the position taken by the Respondent qua the fees/amounts to be received/paid to the Respondent by the Petitioner under the contract interaila after the first award is very crucial, to consider the Petitioner's contention on repudiation.
48. After the award was pronounced in the first Arbitration on 21st June 2012, the respondent by its letter dated 25 th June 2012 raised an invoice of the same date, demanding from the petitioner, payment of retention amount which was being retained by the petitioner in accordance with Clause 6.4 of the PMC Agreement, which the petitioner was actually required to pay to the respondent only on completion of the project. The petitioner accordingly, urged before the Arbitral Tribunal that once the respondent demanded the retention amount which as per Clause 6.4 was payable on completion of the project, such act on the part of the respondent, was an act of repudiation of PMC Agreement. It was urged that once the respondent repudiated the Contract, the respondent could not have claimed damages to be put in a better position than the respondent stood at the time of repudiation. The Petitioner had urged that the act of repudiation of the contract by the Respondent stood compounded by the Respondent's further confirmation of the position taken by it. This by pointing out that the Petitioner had felt aggrieved by pvr 83 sonawane-rng-rane-SRA-final.doc the award of Arbitral Tribunal passed in first Arbitration before this Court, and succeeded in its challenge, in as much as the award partly came to be set aside. However in the Course of the said proceedings before this Court, the Respondent's justified its demand of the retention money as seen from what this Court recorded in its Order dated 14 th November 2014 in Arbitration No.1130 of 2012. Paragraph 8 of the said order is required to be noted which reads thus:
"8.Mr.Jagtiani, learned Senior Counsel appearing for the Respondent, however, referred to the following three documents, namely, Internal Note of Housing Department dated 19-9-2010, Housing Department Resolution dated 26 February 2010 and the Petitioner's letter dated 14th March 2012 addressed to the Respondent. Mr. Jagtiani also referred to the following circumstances namely,
i) there were no disputes between the parties that the Respondent was entitled to payment of Rs.14 crores for pre-tender activities.
ii) there was admittedly no deficiency of service on the part of the respondent.
iii)that the project has been suspended by the petitioner over which the Respondent had no control.
iv) the project was modified by the Government and the Respondent had no say over the modifications and
v) that the tender activities were abandoned by the Petitioner and MHADA was appointed as a Developer for the project."
(emphasis supplied)
49. It needs to be observed that issue before this Court in the earlier Arbitration Petition, which challenged the arbitral award as rendered in the first Arbitration, was not as to whether the PMC pvr 84 sonawane-rng-rane-SRA-final.doc agreement stood repudiated on the Respondent demanding retention amount and thus, necessarily the issue on repudiation of contract could have been validly urged by the petitioner in the present second Arbitration.
50. Form the above contentions of the Respondents as raised before this Court, two important facets were evident on record, firstly, that it was the respondent's own contention that project was suspended by the Petitioner and the tender activities were abandoned by the petitioner, and that MHADA was appointed as developer for the said project; Secondly, the respondent having acquiesced to this factual/contractual position, the Respondent still maintained that it was entitled to the retention amount as awarded by arbitral tribunal.
51. It is on the above backdrop and on sufficiently clear circumstances, as prevailing and understood between the parties that the contract had come to a stand still, the Respondent demanded the retention amount post the arbitral award. The Respondent also justified its demand.
52. On the above conspectus as contended by Mr.Khambata, it pvr 85 sonawane-rng-rane-SRA-final.doc was legitimate and natural for the petitioner to terminate the Contract which the petitioner did by its termination notice dated 4 th August 2012. In the termination notice the petitioner inter-alia recorded that Expression of Interest (EOI) which were called on 31 st May 2007 by issuing global advertisements, under which only six bidders were left in the fray for five sectors,hence no competition remained in the global bidding process. It was recorded that therefore a decision was taken on 16 th May 2011 to cancel bidding process. It was also recorded that on 21 st May 2011 a decision was taken to allot redevelopment of Sector 5 to MHADA and that further on 28th November 2011 and 15th June 2012 DRP-SRA submitted alternative proposals to the State Government for re-development of Sector 3 and Sectors 1 to 4 respectively, which were based on the concept of cluster development. In paragraph 6 of the termination letter, it was recorded that the respondent demanding retention amount was an act of respondent repudiating the Contract. Relevant paragraphs of termination letter are crucial and are required to be extracted and reads thus;
6. You had made various claims outside the provisions of the captioned agreement giving rise to dispute between the parties. Hence, it was decided to go in for arbitration as provided in the captioned agreement for resolution of various disputes. In the arbitration proceedings an award dated 21 st June 2012 has been made by which we have interalia been directed to pay you, certain amounts that had been retained by us, while making payments to you, in accordance with the terms of the Agreement. You have thereafter addressed to us a letter dated 25 th June 2012 enclosing pvr 86 sonawane-rng-rane-SRA-final.doc various invoices, interalia calling upon us to pay you the retained amounts. The demand by you for payment of amounts retained as per Clause 6.4 of the Agreement is contrary to the terms and conditions of the Agreement and makes it clear that you are treating the Agreement as having come to an end and/or are in any event, repudiating the same. (emphasis supplied)
53. In my opinion there is much substance in the contentions as raised by the petitioner that the Respondent had clearly repudiated the contract, which is clear from aforesaid material/evidence on record.
54. The Respondent's intention to repudiate the contract could also be clearly gathered from the respondent's reply to the termination letter being its Advocate's letter dated 23 August 2012. What is pertinent to be seen is that, in regard to the contention of the petitioner on repudiation, the Respondents justified its demand for release of the retention amount, despite the first arbitral award to that effect being set aside by this Court, in Arbitration Petition No. 1130 of 2012. The following Statement of the respondents, in the said letter dated 23 August 2012 addressed to the petitioner is required to be noted and which reads thus :
" As stated hereinabove there is no cause made out by you in your letter under reply and as such your invocation of Clause 2.8.1
(g) of the PMC Agreement is wholly untenable. Our client pvr 87 sonawane-rng-rane-SRA-final.doc confirms and reiterates the invoices sent to you with its letter dated 25 June 2012, and submits that submission of invoices pursuant to the arbitration Award by no stretch of imagination could mean that our client allegedly wants to terminate/repudiate the PMC Agreement. In fact his plea to convene a CoS meeting to resolve the issues has fallen on deaf ears. "
(emphasis supplied)
55. It is, on this background, the Petitioner interalia in para 5.10 and para 8 in its reply to the Statement of claim raised a specific contention that the PMC Agreement stood repudiated by the Respondents, and in case, if the Respondent was to dispute the repudiation, the Petitioner terminated the PMC agreement on the occurrence of the circumstances as specified in clause 2.8.1 (g) of the PMC Agreement, namely on the ground that the DRP was not being implemented and/or was stopped and abandoned. The respondent over and above this accepted the retention amount.
56. This being the evidentiary position on record of the arbitral tribunal, as what what has been held in the impugned award in this context is required to be noted. In paragraph 24 of the impugned Award the arbitral tribunal records as under :-
24: " It is the contention of the respondents that since the claimant has repudiated the contract by recovering the retention money in contravention of the terms of clause 6, of the said agreement, the respondent is entitled to terminate the said agreement. In our view, this contention cannot be accepted. The earlier arbitral tribunal passed an order for release of the retention money pvr 88 sonawane-rng-rane-SRA-final.doc although the claimant had not made any claim in that regard in the arbitration proceedings. For this reason the High Court has set aside this part of the award. If in the meantime ie; before the award in this respect was set aside, in view of the award, if the claimant has sought to realise the amount awarded, this cannot be treated as a repudiation of the contract. The demand has been made in view of the award and not because the claimant wants you reported the contract or go against the contract"
(emphasis supplied)
57. The above observation of the Arbitral Tribunal in my opinion, completely overlooks the clear evidence on record. This for two-fold reasons. Firstly, the Respondents not only by its letter dated 25 June 2012 which was addressed to the Petitioner, immediately after the Arbitral Tribunal rendered the first Award, demanded the retention amount which was admittedly payable after the completion of the contract but also maintained the said demand even in the Respondent's reply dated 23 August 2012 to the termination notice. The Respondent hence justified the said demand inter alia recording that the Respondents confirmed and reiterated the invoices sent to the Petitioner along with letter dated 25 June 2012 which in my opinion would certainly amount to repudiation. Only a person who foresees that the contract is not on foot and that nothing further would be required to be done by him, would like to jump the contractual conditions to seek a benefit what it would be entitled at the end of the contract. This is what has exactly happened with the pvr 89 sonawane-rng-rane-SRA-final.doc respondents by demanding the retention amount which would have been entitled only at the end of the contract.
58. Secondly this is not the only reason, the fact of repudiation as pointed out by Mr. Khambatta was also clear from the position the respondent took before this Court, which in no case could have been overlooked by the arbitral tribunal. Before this Court in the proceedings of the Arbitration Petition (Arbitration Petition No.1130 of 2012 ) the Respondent asserted that the contract is at a stand-still, that the tender activities were abandoned by the Petitioner and MHADA was appointed as a developer for the project. Such assertion of the Respondent was logical to the Respondent demanding the retention amount. This admitted factual position as emerged from the record was necessarily required to be considered by the Arbitral Tribunal in rendering a finding, on the issue of repudiation as forcefully urged by Mr. Khambatta learned senior counsel for the Petitioner. Thus the aforesaid finding as recorded by the arbitral tribunal is without application of mind to the clear evidence on record and/or a finding contrary to the record has been arrived at by the arbitral tribunal, in holding that there is no repudiation of the contract at the hands of the respondent. The petitioner in my opinion would be correct in pvr 90 sonawane-rng-rane-SRA-final.doc asserting a perversity on this count.
59. Further, the Respondent was aware of the contractual position in which the parties stood and more particularly, as to what was the agreed in clause 6.4 of the PMC agreement namely that the retention money was to be released in two installments which was firstly 50% of the completion certificate being received and 50% to be released after three years from the date of the completion certificate. When the Respondents demanded the payments which were surely due to it, only on the completion of the contract, this certainly brought about a legal consequence of the Respondents accepting that the contract is not required to be performed any further which would be nothing but a position of repudiation of the contract. There can be no other consequence one can prudently gather. In my opinion, when the arbitral award in the first arbitration, granted retention amount to the respondents (although not prayed for) and in pursuance thereto, a demand being raised by the respondent for the said amount, a legal consequence was brought about and which would flow from such demand qua the contract, namely the respondent accepting that the contract is not to be performed any further, that is repudiating the contract. Any other meaning to be pvr 91 sonawane-rng-rane-SRA-final.doc attributed to such a conduct of the respondent would amount to observing something contrary to clause 6.4 or putting the parties in a position contrary to the said contractual condition. The arbitral tribunal could not have discarded this overwhelming evidence on record to record by assigning an unacceptable and cryptic reasoning as set out in the impugned award namely that as Respondent had demanded the retention money, in pursuance of the Award it would not amount to repudiation. This reasoning for the above reasons on the face of the record amounts to a perversity.
60. In this context a useful reference can be made to the observations of Jackson, J. in P. Narasimha Mudali and others versus Potti Narayansami Chetty and others16 as to what is the consequence if a party to a contract repudiates the contract and the principle of waiver and estoppel, which is synonymous and akin to acquiescence . The following observations on the principle of law in my opinion are squarely applicable in the present facts:
"3. The point taken in this appeal is that the contract was never cancelled and the appellants rely for this position upon Frost v. Knight 26 L.T. 77 : 20 W.R. 471, where there it is laid down at page 122, that if one party to a contract repudiates it, the promisee may treat the repudiation as inoperative, and at the end of the 16 (AIR 1926 Mad 118) pvr 92 sonawane-rng-rane-SRA-final.doc period of the contract, treat the other party as responsible for all the consequences of non-performance, thereby, keeping the contract alive, or, on the other hand, he may treat the repudiation as a wrongful putting an end to the contract, and may at once bring his action as on a breach of it. The Chetty firm evidently adopted the latter alternative when it brought Original Suit No.27 of 1919. But relying upon a passage in the plaint of that suit, the appellants would have it that the Chettys availed themselves of both alternatives. They sued upon the breach of the contract, and in the same breath kept it open, because, in paragraph 11 of their plaint there is a statement that they were still entitled to deliver the rest of the bales. The short answer to this is that they had no right to make any such reservation. Frost v. Knight L.R.,7 Ex.3 is recognised authority prescribing the remedies open to a promisee and he cannot both sue upon the breach and also keep the contract open.
4. The appellants then proceed to argue that, if so much must be conceded, the Chetty firm closed the first portion of the contract, but re-opened a new contract by their 11 th paragraph. This plea can have no force unless the Mudaly firm can show its acceptance of this fresh tender, and so far from accepting it, that firm in its written statement utterly repudiated the 11 th paragraph, as false (Ex. III, paragraph II). Therefore, there was no fresh contract between the parties.
5. Apart from contesting this plea of the plaintiffs, the respondents have a good case as set forth in paragraph 8 of their written statement by way of waiver and estoppel. A party cannot repudiate a contract, wait a year, and then suddenly insist upon its performance. The question turns upon whether his conduct gives rise to an implication of abandonment of Pearl Mill Co. v. Ivry Tannery Co. (919), I.K.B. 78 at p.83. Delay coupled with repudiation does give rise to such an implication.
"Where one party by acts and conduct evinces an intention no longer to be bound by the contract, the other party will be justified in regarding himself to be emancipated: "Halsbury's Laws of England, Vol.VII para.865."
61. Mr.Jagtiani, learned Senior Counsel for the respondent has supported the findings of the arbitral tribunal as rendered in paragraphs 22 to 26 on repudiation to submit that there could not be any repudiation pvr 93 sonawane-rng-rane-SRA-final.doc in the respondents demanding retention fee as granted to the respondents in the first arbitration. It is his submission that this would never constitute repudiation as observed by the arbitral tribunal. Mr.Jagtiani in support of his submission that there is no repudiation in the facts of the present case, has relied on the decisions as noted above which are being discussed hereafter.
62. In Freeth and Anr Vs. Burr17 the court was dealing with a dispute concerning a contract between the parties to sell to the plaintiff 250 tonns pig-iron at 56s per ton, half to be delivered in two weeks, remainder in four weeks and payment was to be made in cash 14 days after delivery of each parcel. The delivery of first 125 tonns was not completed for merely six months. The plaintiff refused to pay for the first parcel, claiming right to set off the loss, they had sustained for being obliged to procure other iron consequent of the defendant's default, but they still urged the delivery of the second parcel. The defendants treating their refusal to pay as a breach and abandonment of the contract by the plaintiff, declined to deliver any more. There was no suggestion of inability on the part of the plaintiff to pay and the price of the first parcel was ultimately paid. It is in this context the court held that mere refusal to 17 (1874) L.R. 9 C.P. 208 pvr 94 sonawane-rng-rane-SRA-final.doc pay for the first parcel, need not under the circumstances, warrant the defendant in treating the contract as abandoned, and refusing to deliver the remainder the plaintiff was entitled to damages for the breach. The facts are in complete variance to the facts in hand. In the present case there was a complete intention on the part of the Respondent to hold out that further obligations under the contract need not be performed and on this assumption the Respondent hit the dead-end of the contractual path by demanding the retention money. The respondent was clear that the contract would not be performed when the respondent demanded payment of the retention money. Subsequent to this clear representation as made by the respondent, the petitioner terminated the contract also referring to the repudiation of the same by the respondent. Thus a clear position was taken by the respondents of the contract being not on foot.
63. In Sweet V. Maxwell18 there was a dispute between the landlord and tenant under an assignment of lease. The Court held that there was no repudiation. In my opinion, the decision is not surely applicable in the facts of the present case.
64. Woodar V. Wimpey19 was a case before the House of Lords 18 (1964)3 All E.R. 30 19 (1980)1WLR 277 pvr 95 sonawane-rng-rane-SRA-final.doc arising out of a contract to buy certain land. The Wanders were sent a notice purporting to rescind a contract invoking condition E(a)(iii) on the ground that the Secretary of State for Environment had commenced the procedure for compulsory acquisition of the part of land. The Wanders brought an action against the purchaser for declaration that the condition gave them no right to rescind the contract. In defence the purchaser contended that on a true construction of the contract condition, the notice of recission was valid. The trial court held that the purchaser was not entitled to invoke the condition and by doing so they have wrongfully repudiated the contract and they were accordingly liable for damages. The Court of appeal had affirmed this decision, however varying the amount of damages. While allowing the appeal the House of Lords held that in the facts of the case a party who took action relying on the terms of contract in question and not manifesting by his conduct an ulterior intention to abandon, it was not to be treated as repudiating it. The whole circumstances must be looked at. It is in this context the House of Lords discussed the decisions on repudiation of a contract, observing that the real matter for consideration was whether an act or conduct of one to do or do not amounts to an intention to abandon and altogether refuse performance of the contract. In referring to the decision in Heyman Vs. pvr 96 sonawane-rng-rane-SRA-final.doc Darwins Ltd. (1942) A.C. 56, Lord Write has been quoted to observe as under:-
"........ But perhaps the commonest application of the word "repudiation" is to what is often called the anticipatory breach of a contract where a party by word or conduct evinces an intention no longer to be bound and the other party accepts the repudiation and rescinds the contract. In such case if the repudiation is wrongful and the rescission is rightful, the contract is ended by the rescission but only as far as concerns future performance. It remains alive for the award of damages for the breach it constitutes the repudiation."
65. In the present case as noted above the respondent by its eminent conduct evinced a clear intention that it is no longer required to perform its obligation under the contract and accordingly demanded the retention money contrary to the terms of the contract. The petitioner also recognized this and paid the retention amount which was accepted by the respondent. Thus, the principle echoed by this decision, in fact would assist the petitioner.
(ii) As to whether the termination of the PMC agreement by the petitioner was legal and valid ?
66. At the outset it needs to be observed that the Arbitral Tribunal primarily on the advertisement dated 30 January 2016 issued by the petitioner, inviting tenders by way of international bidding, which was issued after about 4 years of the termination of the PMC Agreement, has pvr 97 sonawane-rng-rane-SRA-final.doc held that the project (DRP) was an ongoing project, hence the termination of the PMC agreement by the Petitioner invoking clause 2.8.1(g) of the PMC agreement was illegal. As noted above the termination of the PMC agreement by the Petitioner was by invoking clause 2.8.1(g) under which the parties agreed that the Petitioner could terminate the agreement for the reason that the DRP was not being implemented and/or stopped and abandoned by the State Government due to any change in law or litigation or for any reason whatsoever .
67. On this count the reasoning as set out by the Arbitral Tribunal in paragraphs 28, 29, 30 and 35 of the impugned award is required to be seen, which reads thus:-
28. According to the Respondent this means that the DRP for which PMC was engaged was stopped or abandoned. This contention must be rejected. Clause 2.8.1(g) deals with a situation where the DRP is not implemented, and/or 'stopped and abandoned'. The word "stopped" has to be read in conjunction with "abandoned". It refers to permanent stoppage and not a temporary halt. All the situations described in clause 2.8.1(g) are situations where the project comes to an end. It is also necessary to bear in mind the nature of the present project. It was a mega project to rehabilitate a population of 2-3 lakhs plus build additional housing which cuold be sold in the market to recover the cost of this massive rehabilitation and earn profit for the developer. The project was expected to span several years. The contract does not provide any time frame for completion of the project. It also allows for alterations in the DRP. A mere delay, and that too on the part of the Respondent, can not be considered as permanent stoppage or abandonment of the entire project.
29. The Respondent has nowhere stated that it does not pvr 98 sonawane-rng-rane-SRA-final.doc propose to redevelop Dharavi or that it does not propose to invite tenders for DRP. In fact during the pendency of the arbitration proceedings before this Tribunal, the Respondent issued a notice inviting tenders for DRP which notice is dated 30 th January 2016.
And this necessitated evidence being led by the Respondent in support of pleas which were raised by way of amendment. The Claimant has been appointed as management consultant for the project. No material has been put before us by the Respondent to show that the project has been abandoned or is permanently stopped.
30. The said sub-clause does not deal with a situation where the State for its own reasons has delayed the project or wants to vary the project. There is no prohibition in the agreement against changes being made in the project. In fact, the notice inviting tenders during the pendency of these proceedings goes to show that the project is alive and the State Government proposes to go ahead with the project. Clause 2.8.1(g) is therefore not attracted. The termination of the contract is not valid in law.
35. In the present case, the Respondent has taken a view that the long delay in commencing post-tender activities and/ or changes which the Respondent wished to make in the DRP amounted to abandonment of the project by the Respondent or its stoppage. The view was not justified in law. But it cannot be viewed as mala- fide termination or termination for an ulterior motive on the part of the Respondent. In fact the Claimant has throughout insisted on malafides against him on the part of named persons. It was only at the stage of submissions that the Claimant raised a plea of mala fides in law. In our view the material before us is not adequate to arrive at the conclusion of mala fides in law on the part of the Respondent in terminating the contract. The termination, however, by the Respondent's letter of 4 th August 2012 is wrongful as stated herein before.
(emphasis supplied)
68. Mr.Jagtiani, learned Senior Counsel for the respondents has supported the above reasons to submit that the tribunal has rightly interpreted the termination clause to mean a permanent stoppage or non implementation of the project and not a mere temporary break in the pvr 99 sonawane-rng-rane-SRA-final.doc project which is a reasonable and probable interpretation. It is his submission that even in the letter dated 4 August 2012 the petitioner itself has stated that the project has presently being stopped and is not being implemented. He submits that, also there was sufficient evidence before the tribunal to demonstrate that the project was alive and kicking. He submits that the project was alive, was also clear from the advertisement dated 30 January 2016 issued by the respondents which was at the fag end of the arbitral proceedings which clearly went to show that the project was not permanently stopped or not being implemented and/or abandoned.
69. Having perused the record, I am not persuaded to accept the submissions of Mr.Jagtiani. This more particularly considering the overwhelming evidence which, in my opinion, was completely discarded by the arbitral tribunal. The reasons in that regard are being discussed hereafter.
70. The petitioner terminated PMC Agreement vide termination letter dated 4th August 2012, invoking Clause 2.8.1(g) of the PMC agreement. It is clearly seen from the record that there were number of pvr 100 sonawane-rng-rane-SRA-final.doc reasons and sufficiently to the knowledge of the Respondent that the DRP in the nature it was conceived, relevant to the PMC Agreement, was not being implemented and/or stopped nay abandoned. Mr. Khambata has taken me through the the several clauses of the PMC agreement which are relevant to the issue of termination. Mr. Khambata has contended that it was an admitted position on record that the petitioner despite all efforts could not award the contract to any bidder. This was to the knowledge of the Respondent at all material times. He submitted that thus a clear situation was brought about that the contract could not be awarded to any of the bidders and hence there was no question of the DRP moving forward for any post-tender activities much less for construction to be undertaken. Mr.Khambata also has submitted that for the many intervening years the respondent had accepted this position as also invoked the first arbitration unsuccessfully demanding idling charges, further litigating as if the contract had fallen to the ground.
71. When no bidder could be awarded the contract in the year 2008 or even for that matter going by the Respondents own case no bids were received even in 2016, was something which was not in control of the Petitioner as rightly contended by Mr.Khambata.
pvr 101 sonawane-rng-rane-SRA-final.doc
72. The circumstances which were brought about not only in the year 2007 but also in the year 2016 that no bids being received were significant circumstances relevant to the clear wordings of the termination clause as agreed between the parties. It was necessary for the tribunal to attribute meaning to all the words of such a widely worded termination clause. Certainly, the circumstances which prevailed for about five years cannot be said to be of any temporary character which would keep the contract alive and capable of being performed at a future date. In fact, it can be observed that the circumstances were so sweeping and fundamental that even the respondent acknowledged the circumstances, to be as good as that the contract being dead. This is clearly established on the facts as explicitly staring from the evidence, which has been completely ignored and overlooked by the Arbitral Tribunal. These circumstances obviously led to a consequence of the petitioner rightly invoking termination clause as contained in Clause 2.8.1(g) inevitably terminating the contract. Surely, the circumstances were not such which can be classified to be an action on the part of the petitioner to have breached the contract. This apart, as noted above, the respondent itself undoubtedly had repudiated the contract by demanding the retention pvr 102 sonawane-rng-rane-SRA-final.doc amount. Thus, there was a clear situation of impossibility of performance of the contract and not a deliberate or intentional failure or refusal on the part of the petitioner to perform its obligations. The evidence on record clearly indicated that the contract had ceased to remain on foot.
73. Hence there is much substance in the contention as urged on behalf of the petitioner that the impugned award is totally oblivious of not only the contractual provisions but also the clear evidentiary position on record. Considering the peculiarity of contract and anticipating that there was no likelihood on the part of the petitioner and /or the parties to fulfill their receptive obligations under the PMC Agreement in the given situation that despite efforts no bids could be received and fianlised being a situation beyond the control of any of the parties it could not have been said that there was a breach of Agreement.
74. Moreover what was writ large was that the respondent being well aware of the fact that the DRP was not being implemented and/or was stopped, was also quite clear from its own assertion before this Court in the proceedings of Arbitration Petition No.1130 of 2012 as noted in the order passed by this Court on the said petition, as extracted above, when pvr 103 sonawane-rng-rane-SRA-final.doc the Respondent as a matter of record asserted firstly that the project has been suspended by the petitioner over which the Respondent had no control; secondly that the project was modified by the Government and the Respondent had no say over the modifications; and thirdly that the tender activities were abandoned by the Petitioner and MHADA was appointed as a Developer for the project.
75. This apart, also from the correspondence between the parties as entered prior to the termination of the PMC agreement it was a clear position on record that the DRP relevant to the PMC Agreement was not being implemented. The record was replete with evidence indicating that the Petitioner was intending to undertake development of Dharavi by adopting new methodology namely of having a development as per the provisions of Development Control Regulations No.33(9)(A) and 33(10) (A) and for which the State Government at the highest level had accorded approval. This was for some of the sectors. The respondent in no manner was involved in the pre-tender activities or had any role in such development as proposed. There was no material on record to relate the respondent to these steps being taken by the petitioner under the advertisement dated 30 January 2016. Thus as rightly urged on behalf of pvr 104 sonawane-rng-rane-SRA-final.doc the petitioner this evidentiary position was sufficient to indicate that the DRP for which the Respondent was appointed was stopped or abandoned as also urged by the petitioner before the arbitral tribunal.
76. It was hence a clear position on record as urged on behalf of the Petitioner, that what was envisaged under Government Resolution dated 4th February 2004 and the consequent exercise undertaken by the petitioner of inviting EOI on 31 st May 2007, having failed to materialize, despite serious efforts taken for almost four years, ultimately a decision was taken on 16th May 2011 to cancel the bidding process and a further decision was taken on 21st May 2011 to undertake re-development of some of the sectors as clear from the petitioner's communications dated 28th November 2011 and 15th June 2012 whereby the petitioner had submitted an alternative proposal to the State Government for redevelopment of some of the Sectors (Sector 3 and Sectors 1 to 4 respectively) on the model of cluster development. It is also quite clear that the Respondent was aware of all these developments. If this was to be the evidence on the record of the arbitral tribunal, it could not have been held by the arbitral tribunal that the action of the petitioner in invoking Clause 2.8.1 (g) to terminate the contract was illegal. It is a settled pvr 105 sonawane-rng-rane-SRA-final.doc principle of law that every clause in a contract would be required to be attributed its due meaning so as to gather the intention of the parties in providing such clause. A contractual clause cannot be rendered meaningless more particularly when there were overwhelming circumstances fitting into the termination clause, echoing that the contract had come to a standstill or was not being implemented or stopped.
77. In my opinion, the petitioner would thus be correct in its contention that the Respondent was sufficiently aware and had acquiesced to the position that DRP relevant to PMC Agreement was abandoned by the petitioner and that the parties would not be required to perform their obligations under the Contract. This was also clear from Respondent's reply to the termination notice viz. respondent's letter dated 23 rd August 2012. What the Respondent did was not only to make unsubstantiated allegations against the Officers of the Petitioner, which were subsequently not pressed and/or withdrawn by the respondent in the Arbitration proceedings. However following statements in regard to the conduct of the respondent showing its acquiescence to the DRP in its original form being not proceeded, are required to be noted as contained in the said letter which reads thus:
pvr 106 sonawane-rng-rane-SRA-final.doc "10. Our client and Mr.Mehta genuinely though that the loss of years (years taken for executing the PMC Agreement - 4.5 years ) would not continue and you would take your responsibilities seriously and you would perform the PMC Agreement effectively. However, the then OSD-DRP (Mr.Chatterjee) in order to wreak vengeance against Mr. Mehta decided to sabotage the DRP. Mr.Chatterjee was given the project on the platter which he has tried his utmost to destroy on the pretext of having better options. After 4 years he is unable to come up with any better alternative plan. The OSD-DRP (Mr.Chatterjee) who had assumed the office in or around July 2008 worked incessantly since to get the DRP scrapped. Initially the then OSD-DRP (Mr.Chatterjee) decided to relook the entire project even though the same was approved and re-approved by the GoM. On or around 23 rd June 2009, the CoS approved the Standardized Master Plan ("SMP") and advised to issue financial bids by 20th July 2009. ............."
12. ...................... "Now our client has been informed in the letter under reply that you purportedly on 28 th November 2011 and 15th June 2012 submitted the allegedly alternative proposals to the GoM for development of rest of the Sectors. Our client states that the strategy and design including the concept of development of Dharavi was of Mr.Mehta, and any so called alternate plans are nothing more than a mere camouflage of Mr.Mehta's original plans. Any such attempt on your part will not and can not take away the credit from our client and Mr.Mehta. You are estopped in light of your conduct from in anyway using the concept and design of our client (Mr.Mehta)for the development of Dharavi without proper authorization from our client and Mr. Mehta. Needless to say that if any attempt is made to use the plans created by our client (Mr.Mehta) for the DRP without adequate compensation to our client (Mr.Mehta) then you the former and present OSD-DRP (Mr.Gavai and Mr. Biswas) and the present Principal Secretary Housing will be personally liable for any loss that may be caused to our client (Mr.Mehta) and will also be guilty of plagiarizing Mr. Mehta's concept, design and plan for DRP."
78. The above facts would clearly show that, a situation sufficiently to be recognised in law was created, in regard to the respondent accepting that the PMC Agreement would not be performed.
pvr 107 sonawane-rng-rane-SRA-final.doc Moreover this conduct on the part of the respondent was admittedly, congruent and consistent to its earlier conduct namely the respondent claiming retention amount as granted to it, by the arbitral award passed in the first Arbitration.
79. From the findings of the Arbitral Tribunal as contained in the above quoted paragraphs of the impugned award, it is instantly seen that each one of them are on an erroneous assumption contrary to the evidence on record. They are also wholly against the plain meaning which can be attributed to the termination clause (clause 2.8.1(g)) as invoked by the petitioner to terminate the contract in the circumstances as borne out by the evidence on record. The termination clause in my opinion was quite plain, simple and of a nature very unlikely to create any confusion or ambiguity in its following words:-
"2.1.8(g) : If the Dharavi Redevelopment Project for which the PMC is engaged is not implemented and/or stopped and abandoned by the State Government due to any change in law or litigation or for any reason whatsoever."
80. It needs to be observed and as rightly asserted by the Petitioner before the arbitral tribunal that there was a clear change in the pvr 108 sonawane-rng-rane-SRA-final.doc circumstances, for the Petitioner to issue the advertisement on 30 January 2016. This was done by the petitioner in the public interest, almost four years after the termination of the PMC agreement. There was no bar for the Petitioner to do so. This would have also not affected in any manner the prior act of the petitioner, terminating the PMC agreement. It is extremely surprising, as to how the Arbitral Tribunal could record that there was no material placed before the arbitral tribunal to show that the project has been abandoned or permanently stopped. Such observation being made primarily on the basis of advertisement dated 30 th January 2016, would certainly amount to the arbitral tribunal turning a blind eye to the ample and overflowing evidence on record, of the project as relevant to the PMC agreement being stopped. It would also amount to the arbitral tribunal recording a finding contrary to the evidence on record.
81. In any event the arbitral tribunal could not have overlooked the material contents of the termination clause which also provided for 'any other reason' as one of the contents of clause 2.8.1(g) which should have been interpreted as a prudent body would interpret, namely on the first principles, as to how a contractual clause would be understood by the parties in a commercial sense. What is gravely missed by the arbitral pvr 109 sonawane-rng-rane-SRA-final.doc tribunal and in respect of which abundant material/evidence was placed on record of the arbitral proceeding was that the advertisement dated 30 th January 2016 was not issued in context of the development of Dharavi as envisaged and relevant to the Government Resolution dated 4 th February 2004 and consequent agreement entered with respondent namely PMC Agreement dated 1st November 2008. It was also not the case of the Respondent that the nature and the scope of the published advertisement issued in the year 2007 namely E.O.I. and fresh advertisement/tenders issued on 30th January 2016 were identical. There was no pre-tender activity undertaken from the Respondent qua this advertisement. These plentiful and material considerations which were over-pouring from the evidence on record are completely bypassed and /or not looked at by the arbitral tribunal. It was thus, ex-facie perverse for the Arbitral Tribunal to record a finding of the DRP of 2007 to be alive. The petitioner would be correct in its contention that the Arbitral Tribunal has completely discarded, over-looked and/or has failed to consider the material evidence on record in this regard. The contention of the respondent as accepted by the arbitral tribunal also leads to a patent absurdity in as much as it would bring about a consequence that the respondent would forever and/or in perpetuity, for any kind of DRP to be undertaken by the petitioner would pvr 110 sonawane-rng-rane-SRA-final.doc continue to be the PMC. Surely this was neither the intention of the parties as gathered from the PMC agreement. Hence, the findings of the Arbitral Tribunal to conclude that DRP was alive, is contrary to the evidence on record.
82. As noted above the arbitral tribunal has rendered a finding on termination to be invalid, contrary to multitude of evidence on record. The respondent had in fact acquiesced in the DRP as conceived for the PMC agreement, having stopped and or abandoned. The findings of the arbitral tribunal on this count are thus recorded wholly without application of mind to these glaring aspects as depicted by the evidence on record, amounting to an apparent perversity. Although it would be in the domain of the arbitral tribunal to interpret the contractual clauses and appreciate the evidence, it has to be a reasonable and prudent interpretation and appreciation of evidence and not something which is impossible to be conceived by any reasonable standards leading to an absurdity. What the arbitral tribunal has done is to have a selective and a non-holistic approach in consideration of the evidence on record in determining on the legality of the termination. The non-consideration of the substantive material has resulted in the arbitral tribunal trading on the path of conjectures, arbitrariness and absurdity.
pvr 111 sonawane-rng-rane-SRA-final.doc
83. I am not persuaded to accept Mr Jagtani's contention that the tribunal would be correct in its observation in interpreting clause 2.8.1 (g) to mean that it can only be a permanent stoppage or non-implementation of the project, and a mere temporary break in the project would not suffice and justify the petitioner invoking the said clause to terminate the contract. It is also his submission that this is a reasonable and possible interpretation of the contractual clause by the arbitral tribunal. I do not agree. As rightly contended by Mr.Khambatta the arbitral tribunal reading a temporary stoppage (when it is not), the arbitral tribunal has read something into the termination clause which is not provided for by the parties. In my opinion the arbitral tribunal has attributed an impossible meaning to the said termination clause, it is surely not a possible interpretation. Moreover such interpretation does violence to the plain reading of the termination clause leading to an absurdity. In my opinion the arbitral tribunal has made an interpretation which would wholly change the meaning of the termination clause as to what the parties had agreed and in fact supplants and/or has re-written the contractual clause. It is certainly a perverse interpretation of the termination clause by the arbitral tribunal.
pvr 112 sonawane-rng-rane-SRA-final.doc
84. It is well settled that if an interpretation of the contract by an arbitral tribunal is not a possible interpretation, the arbitral award on the foundation of such perverse interpretation would be held to be patently illegal. In a recent judgment of the Supreme Court in South East Asia and Marine Engineering and Constructions Limited (SEAMEC Limited) Civil Appeal No.673 of 2012 decided on 11 th May 2020.), Justice Ramanna speaking for the Bench observed thus:-
"28. In this context, the interpretation of clause 23 of the contract by the Arbitral Tribunal, to provide a wide interpretation cannot be accepted, as the thumb rule of interpretation is that the document forming a written contract should be read as a whole and so far as possible as mutually explanatory. In the case at hand, the basic rule was ignored by the tribunal while interpreting the clause.
31. The interpretation of the Arbitral Tribunal to expand the meaning of clause 23 to include change in the rate of HSD is not possible interpretation of this contract, as the appellant did not introduce any evidence which proves the same.
32. The other contractual terms also suggest that the interpretation of the clause, as suggested by the Arbitral Tribunal, is perverse. For instance, Item 1 of List II (Consumables) of Exhibit C (Consolidated Statement of Equipment and Services Furnished by Contractor or Operator for the Onshore Rig Operation), indicates that fuel would be supplied by the contractor, at his expense. The existence of such a clause shows that the interpretation of the contract by the Arbitral Tribunal is not a possible interpretation of the contract."
(emphasis supplied)
85. As a sequel to the above discussion it is quite clear that the Petitioner had lawfully terminated the PMC agreement, there was no scope on the record of the arbitral tribunal, for the Arbitral Tribunal to pvr 113 sonawane-rng-rane-SRA-final.doc hold that the termination of the PMC agreement by the petitioner was in any manner illegal.
(iii) Whether the arbitral tribunal is correct in law and facts in awarding the damages?
86. Notwithstanding the above discussion that the respondent repudiated the PMC agreement and further that the termination of the agreement at the hands of the petitioner was legal, for the sake of completeness the challenge to the decision of the arbitral tribunal to award damages, is also being considered. It was argued on behalf of the petitioner that the arbitral tribunal was ex-facie not justified considering the evidence on record and the legal principles to award damages. According to the petitioners the impugned award on this count also deserves to be set aside on the ground of patent illegality.
87. Mr.Jagtiani, learned Senior Counsel for the respondents has supported the findings of the arbitral tribunal in awarding damages. He submits that the obvious consequence of illegal termination would result into entitlement of the respondents for damages. He has submitted that originally under Clause 6 and sub-clauses thereunder as noted above, the pvr 114 sonawane-rng-rane-SRA-final.doc respondent was entitled to the fees for the post tender activities as also additionally received an amount of 0.5% of the total premium received by the SRA. It is his submission that as rightly held by the tribunal in the context of the damages, it was not necessary that the premium should have been actually received by the petitioner. This for the reason that there was an illegal termination of the contract and therefore, it was logical that a reasonable estimate is required to be arrived at. It is submitted that there was sufficient evidence of the expert witnesses which established loss of profit to the respondent. It is submitted that an adverse inference was required to be drawn against the petitioner in respect of the issue in regard to the stoppage of the work, the actual cost of rehabilitation and saleable components of the project and the reasonable expected premium to be received, if the PMC agreement was allowed to run its course, as the same was within the domain, knowledge and information of the petitioner. He has submitted that in this situation the petitioner had chosen not to lead any evidence as also the cross examination by the respondent of any such witnesses was prevented. It is thus submitted that the tribunal has rightly commented on this approach of the petitioner in paragraphs 56 to 70 of the impugned award. It is submitted that the estimates of the actual cost of rehabilitation and pvr 115 sonawane-rng-rane-SRA-final.doc saleable components of the project as placed on record of the arbitral tribunal by the expert witnesses was sufficient for the tribunal to award damages in the absence of any challenge to such evidence. It is further submitted that even the petitioner in the letter dated 9 March 2011 as obtained by the respondent under the Right to Information Act, being internal communication from OSD, DRP to the Secretary, Housing Department, proposing to appoint MHADA as a developer for Sector 5 of DRP, has clearly referred that the estimated premium to be received by the petitioner would be Rs.31156 crores which was about 8000 crores more than the amount estimated by the tribunal in awarding damages to the respondent. It is submitted that an adverse inference was required to be drawn even on this letter of SRA to the State Government. It is submitted that the evidence on behalf of the petitioner was no evidence to dislodge the respondent's case on damages.
88. In my opinion, the material on record however would not persuade me to accept the above submissions of Mr.Jagtiani as being discussed in the following paragraphs.
89. It is again required to be noted that the award of damages by the Arbitral Tribunal is, on the premise that the termination of the PMC pvr 116 sonawane-rng-rane-SRA-final.doc agreement by the petitioner was unlawful. This is clear from the observations of the tribunal in discussing the issue on damages, as recorded, in para nos. 66 to 70 of the impugned award. The arbitral tribunal has observed as under :
66. "If the Respondent had stopped or abandoned the DRP as alleged by it in its notice of termination to the Claimant, why was the said advertisement published in newspapers on 30th January 2016 inviting bids for the DRP ? The witnesses examined by the Respondent are not in a position to state whether the DRP proposed under the said advertisement was similar to the DRP originally advertised which had then attracted initially a large number of bidders. If the project advertised is different in material respects from the DRP originally proposed, non-receipt of bids for the project containing different conditions cannot be looked at to establish that the original DRP was unviable or would not have attracted any bids. If the project for which bids were invited in January 2016 was similar in substantial respects to the original DRP, notice of termination is clearly bad in law, since the project has not been stopped or abandoned."
"67. Assuming that the advertisement is in respect of the same DRP or substantially the same DRP, non-receipt of bids now may or may not be indicative of the viability of implementing construction of saleable portion of the said project which would finance/reimburse the developer for the cost incurred for the rehabilitation portion of the said project. Moreover, under the said contract the DRP could have been suitably modified, if, after so many years, the original DRP was sought to be implemented. To conclude that no premium would have been fetched for the saleable portion of the said project amounts to saying that the project cannot be implemented at all because the cost of rehabilitation of slum dwellers in rehabilitation buildings cannot be recovered and no profit can be earned at all by the developer by developing the saleable buildings by utilizing the FSI available to the developer for such redevelopment or the profit would not cover the cost of rehabilitation."
"68. The Respondent has desisted from saying that the entire project is unviable. The advertisement in question on the contrary suggests that the Respondent still considers that the project is viable. It is also somewhat surprising that at the concluding stage of the present arbitration proceedings, an advertisement was pvr 117 sonawane-rng-rane-SRA-final.doc suddenly issued by the Respondent inviting tenders for the said project."
"69. In our considered view, the last minute attempt was nothing but an attempt on the part of the Respondent to create some evidence during the course of hearing by way of an after-thought to dislodge the claim of the Claimant. No permission was sought from the Tribunal to float this global tender, when the matter was subjudice before the arbitral tribunal. No material is produced to justify the invitation for global tenders during the course of the arbitration. No material is produced to show as to when and why the decision to float global tenders was taken ; or who were parties to the said decision. Not a single responsible officer of the Respondent stepped into the witness box to throw light on the questions raised herein. Had a responsible officer of the Respondent stepped into the witness box, the Claimant would have got an opportunity to cross-examine the witness to challenge the evidence sought to be created during the course of the hearing by way of an after-thought."
"70. The witnesses, who were examined were junior officers having absolutely no personal knowledge in relation to the questions raised herein. In our considered view the Respondent has not succeeded in showing that the project was completely unviable and that SRA would not have earned any premium from the developers as contemplated."
(emphasis supplied)
90. In my opinion and as rightly contended on behalf of the Petitioner the arbitral tribunal in reaching to the above conclusion, has completely discarded the substantive evidence on record, namely that the respondent was not in a position to substantiate, as to what was being advertised, on 30 January 2016 was not under the scheme as envisaged in the year 2007 for which 'expression of interest' were invited and the bidding process was required to be aborted, as far back as in 2011, as pvr 118 sonawane-rng-rane-SRA-final.doc noted above. To my mind, one would be totally at a loss, to discern as to how the arbitral tribunal could accept the respondent's case of the 2007 DRP being continued by the Petitioner by issuing advertisement on 30 January 2016, so as to conclude that the DRP relevant to the PMC agreement was alive, when the evidence was otherwise. Even the Respondent had accepted the dead end of the road of the 2007- DRP as recorded by this Court in the previous litigation as arising from the first award.
91. Further, the observations of the arbitral tribunal in paragraph 69 of the impugned award to the effect "In our considered view, the last minute attempt was nothing but an attempt on the part of the Respondent to create some evidence during the course of hearing by way of an after- thought to dislodge the claim of the Claimant..." are beyond comprehension. It is an observation based on no evidence. It is difficult to accept a reasonable body of persons and that too an arbitral tribunal being well aware of the parameters of the adjudication before it, making such observations on a public body like the Petitioner, that issuing the advertisement dated 30 January 2016 was a last minute attempt on the part of the petitioner to create evidence to dislodge the claim of the pvr 119 sonawane-rng-rane-SRA-final.doc respondent. Observations as serious as these could not have been made so lightly against a public body, unless there was overwhelming material to support such observation, when in fact there was none. In fact there is an apparent contradiction in the arbitral tribunal making such observation in as much as in paragraph 35 of the impugned award the arbitral tribunal rejected the Respondent's case of malafides in law as also malafides of its officers. Further it is on the basis of this advertisement the arbitral tribunal comes to a conclusion that the DRP is still alive and has proceeded to award damages and on the other hand observes that the advertisement was an afterthought to create some evidence on the part of the petitioner to dislodge the respondent's claim. The paradox is apparent and fatal to the legality of the award.
92. This apart, the arbitral tribunal completely lost sight and ignored its jurisdiction when the observations were made in the in the same paragraph to the effect "..... No permission was sought from the Tribunal to float this global tender, when the matter was subjudice before the arbitral tribunal." I am so astonished as to how such observation could be made by the arbitral tribunal when the role of the arbitral tribunal was merely of an adjudicatory authority qua the contractual rights of the pvr 120 sonawane-rng-rane-SRA-final.doc parties, and when surely it did not wield any other jurisdiction much less a substantive jurisdiction vested in the Court of law. This is another facet of the perversity of the findings of the arbitral tribunal, on which is based the super structure, leading to the award of damages.
93. Now coming to the actual claim as made by the Respondent. Respondent claimed damages firstly for loss of profit or in the alternative compensation for plans and drawings; secondly for loss of opportunity and goodwill; and thirdly for harassment and mental anguish. The later two claims were rejected hence no discussion is called for on these two claims. As noted above the claim for loss of profit has been granted by the arbitral tribunal.
94. The claim for damages for loss of profit was made based on Clause 6 of the Contract as under:-
(i) Claim for post tender activities being 75% of 1% of Rs.5600 crores being an amount of Rs.42 crores as per clause 6.1(A)(ii) of the PMC Agreement. and;
(ii) Claim for for an amount of 0.5% being the additional entitlement in the total premium 'to be received' by the petitioner as per Clause 6.1(B) pvr 121 sonawane-rng-rane-SRA-final.doc of the PMC Agreement if the DRP was to proceed , quantified by the respondent at Rs.148 crores.
95. Thus these claims for an amount of Rs.42 crores and Rs.148 crores were made by the respondents on a presumption/estimate that these were the amounts which would have been received by the respondent if the contract was to progress. The respondent, however, deducted the projected cost for manpower and administrative expenses, which according to it was to be incurred amounting to Rs.71.28 crores and deducting this amount, made a claim for a sum of Rs.118.72 crores that is Rs.42 crores plus Rs.148 crores minus Rs.78.28 crores.
96. In support of these claims, the respondents examined two witnesses namely Mr.Girish Ranade (C.W.2), founder and Director of M/s.Ballal Engineering Pvt. Ltd. and Ms Gauri Shah (C.W.3), Chartered Accountant and Director of C.C. Chokshi Advisors Pvt. Ltd., a company engaged in providing financial advisory services.
97. Both M/s.Ballal Engineering Pvt.Ltd. And M/s.C.C.Chokshi Advisors Pvt.Ltd. had prepared their estimates of loss of profit to the respondents on the basis of the material provided by the respondents/ pvr 122 sonawane-rng-rane-SRA-final.doc claimants. This is an admitted position. It is also an admitted position on record that the complete report of M/s.Ballal Engineering Pvt.Ltd was not on record of the arbitral tribunal, as the measurement sheets and estimates which accompanied this report was not produced by the respondent. Thus, concededly the petitioner could not cross examine the witnesses on these measurements and estimates. However, despite this basic lack of material, the tribunal has proceeded to accept this report on the following reasoning in paragraph 49:-
"49. These reports have been challenged by the Respondent on the ground that these reports are incomplete because the measurement sheets and estimates have not been produced. The Respondent had taken inspection of these reports. They, however, did not ask for the measurement sheets and estimates. As far as the witness is concerned, he has clearly set out in his reports that these measurement sheets and estimates accompanied his report and the final conclusions which he has set out are based on these measurements and estimates. In our view, the reports cannot be discarded as hypothetical simply because these measurement sheets and estimates which accompanied that report have not been produced by the Claimant. It is true that the respondent could not cross examine the witness on these measurements and estimates. At the same time, these measurements and estimates have also not been called for by the respondent. The witness has answered questions put to him in cross-examination in a forthright manner. He is not in any way connected with the claimant. These reports cannot be discarded. The figures set out by him have not been questioned on merit. No material evidences is led by the respondent to dislodge or to rebut the expert evidence tendered by the Claimant."
(emphasis supplied)
98. Similarly in respect of the report submitted of C.C. Chokshi Advisors Pvt. Ltd. Ms.Gauri Shah (C.W.3) director led evidence. It is clear pvr 123 sonawane-rng-rane-SRA-final.doc that the entire analysis in respect of the report was on the basis of the information furnished by the respondent and gathered by the said concern from Public domain on the basis of which the respondent made a claim of Rs.148 crores. The relevant observations of the tribunal, in this regard can be found in paragraphs 50 and 51 of the impugned award which reads thus:
50. The claimant also relies upon a report from financial consultant Messrs. C.C. Chokshi Advisors Private Ltd. The claimant has led the evidence of a Director of C.C. Chokshi Advisors Private Ltd. Ms. Gauri Shah, (RW-3) who is a Chartered Accountant. She has deposed to a report issued by the said firm relating to estimation of reasonable premium that could have been offered by the developers who would have participated in the DRP, to that Government of Maharashtra based on the profitability in implementing the DRP as per the tender documents. She has prepared the report and has been authorized by her firm of financial advisors to give evidence in this matter. The report is at Exhibit 93 at page 578 to 594 of Claimant's Compilation volume 2. The report states that the claimant company had requested the said firm to estimate a reasonable premium that could have been offered by the developers to the government based on their profitability vide volume 6 of the commercial part of the tender documents. The report states that the analysis was undertaken on the basis of information relating to the company furnished to the firm by the management of the company and information available in public domain regarding other players in the industry. The following particulars are given in the report relating to the information given by the claimant company:
1. A presentation on the Dharavi project made by the claimant.
2. Tender documents for the project
3. Feasibility study conducted by Ballal Engineering Private Limited of the said project
4. Financial viability study done by the company of the said project
5. Financials (top-level view)
6. Assumptions
7. Estimated project cost and proposed means of finance
8. Revenue
9. Final, and set of deviations (CSD) pvr 124 sonawane-rng-rane-SRA-final.doc
51. The report states that the firm estimates that the developer may potentially offer premium in the range of 35%-40% of the profits of the project. This is based on the sale price of the free sale portion of the project. The total cost in crores for the rehab portion, residential free sale, commercial free sale, infrastructure development, Greenway, and various other heads including premium and administrative overheads has been estimated at Rs.82,513 crores. The total cost without premium is estimated at Rs.59,243 crores. The premium (35%) per square foot based on total built-up area of 4,31,40,584 sq.ft. Based on the sale price of Rs.17,500 per square foot has been estimated at Rs.23,271 crores while premium at 40% based on the estimated sale price of Rs.17,500 is estimated at Rs.26,596 crores. At the sale price of Rs.19.500 per square foot the premium as 35% of profit before taxes comes to Rs.25,969 crores and the premium as 40% of the profit comes to Rs.29,679 crores (cf. Page 15 of the report). Based on this estimate the claimant has calculated expected premium to the government/SRA as Rs.29,600 crores (40% of the profits on the basis of sale price of Rs.19,500). The share of the claimant as 0.5% comes to Rs.148 crores. The claimant has adopted this figure which is the highest figure estimated in the said report.
99. The petitioner urged before the arbitral tribunal that the report of C.C.Chokshi Advisors Pvt. Ltd. is also required to be totally discarded as it contains hypothetical estimates of the premium to be received. This was being urged firstly contending that there was no post tender work undertaken by the respondents. The work itself would have taken several years and the contract itself provided for a period of seven years, hence, it was not possible to have a reasonable estimate as to what would be the market price of the saleable portion after a time lapse of seven years. It was further urged that C.C. Chokshi Advisors Pvt. Ltd. had taken into consideration the calculation as per the report of M/s.Ballal Engineering Pvt. Ltd., which could not have been relied, in the absence of pvr 125 sonawane-rng-rane-SRA-final.doc supporting material namely calculation and measurement sheets which were not before the arbitral tribunal. In short, the contention of the petitioner in assailing this report was that damages could not have been awarded on the basis of hypothesis. It was also contended that the respondents could not have been put in a better position than what if the contract was carried. The petitioner accordingly contended that the respondent had totally failed to prove any case on damages. The arbitral tribunal however accepted Chokshi's report which was in turn based on Ballal's report on a very peculiar reasoning namely that the respondents ought to have produced material to displace these reports. This reasoning can be found in paragraphs 55, 56, 60 and 61 of the Award which read thus:-
55. In our view, the Chokshi report cannot be rejected on the ground that it has relied upon the Ballal report for calculating the area available in respect of saleable portion and rehabilitation portion. As set out hereinabove, the calculations in the Ballal report cannot be rejected simply because detailed documentation which supported the calculations has not been produced. The respondent did not ask for it. Nor did the respondent produced any alternative figures which according to it were valid.
56. Another important circumstance is not entering into the witness box by any officer of the respondent conversant with the project. No responsible officer appeared on behalf of the respondent to depose in relation to the stopping of the project, or the viability of the project or any relevant aspect of it including the expected premium, if any, from the saleable portion of the project.
... ... ... ....
60. A claim of this nature for loss of profit is bound to be in a pvr 126 sonawane-rng-rane-SRA-final.doc sense hypothetical because there cannot be any material about the future profit which is lost. This has to be estimated on the basis of the available relevant material. In the present case the estimate is based on the terms of payment under the contract in question. The area which was covered by the DRP is known. The area available for rehabilitation of existing slum dwellers and the corresponding saleable area available to the developer on the basis of the rehabilitation area is also governed by the Development Control Rules framed by the respondent and is known. On the basis, if the saleable area is ascertained, and the market price anticipated for such saleable area is determined on the basis of prevailing market rates with an increase in percentage which the experts in the area anticipate, it cannot be considered unreasonable looking to the very nature of the project and the number of years over which it was to be executed.
61. The respondent has, however, pointed out that the sale price would be affected by the fact that a very large area for residential and commercial purposes would suddenly become available in the market. This would result in a decrease in prices. This is accepted by Gauri Shah (see question and answer 148 in cross-examination). The increase, however, in the residential and commercial premises would be spread over the years. Nevertheless there may be some impact on price on a large number of such premises coming into the market. We would therefore prefer to accept the lowest estimate given in the Chokshi report in respect of the premium for the saleable portion. If we take the sale price at Rs.17,500 per square foot, the premium earned per square foot at the rate of 35% comes to Rs.23,271 crores. The claimant's share of 0.5% of this premium comes to Rs.116 crores. Therefore the amount payable to the claimant for his share of premium can be taken as Rs.116 crores instead of Rs.148 crores as claimed."
(emphais supplied)
100. On a reading of the above findings of the arbitral tribunal, to my mind the petitioner is correct in contending that the arbitral tribunal has wholly proceeded on a hypothesis, that the figures/amounts of loss of profit which are reflected in these reports were sacrosanct when the measurement sheets leading to these estimates were not on record. The pvr 127 sonawane-rng-rane-SRA-final.doc observations of the arbitral tribunal in paragraph 61 would clearly indicate that the lowest estimate of the premium which would be received for the saleable portion set out in the Chokshi's report is accepted, which is the sale price of Rs.17,500/- per square foot which according to the tribunal is at the rate of 35% which would be Rs.23,271 crores. The respondents' share is considered by the tribunal at 0.5% of this premium, which would be about Rs.116 crores. Thus according to the arbitral tribunal the amount payable to the respondent towards its share of premium as per Clause 6.1(B) be taken at Rs.116 crores instead of Rs.148 crores as claimed by the respondents. The arbitral tribunal has supported this conclusion also referring to a letter dated 9 March 2011 which was a letter of CEO DRP to the Secretary Housing, who had estimated the premium for the development to be undertaken by MHADA at Rs.31156 crores. Admittedly, neither the author of this letter was examined by the respondent on the basis of which such an estimate was made by the said officer of the respondent or anyone from M/s.Darashaw & Co. Pvt.Ltd who had made estimates, and on what basis, was not before the arbitral tribunal. Thus the letter dated 9 March 2011 could in no manner amount to any admission in regard to the profits to be earned by the petitioner. When one speaks of profits there are so many other intricacies of pvr 128 sonawane-rng-rane-SRA-final.doc deductions etc. to arrive at the actual figure of gross profit. These basic requirements in considering the respondent's plea on this letter are completely discarded by the arbitral tribunal. Further an estimate cannot have any sanctity. Thus, there was no cogent material as to whether the estimate was the correct estimate as contained in the said letter and whether it was at all accepted by the State Government.
101. On the above foundation, the arbitral tribunal decided to award damages in favour of the respondent by the following observations as made in paragraph 63:-
63. The total fees which the claimant would have recovered had the DRP been executed therefore comes to Rs.116+42 (fees for post-
tender work) = 158 crores. The claimant has deducted his expenses, which, according to him, come to Rs.71.28 crores. He has deposed that this amount consists of manpower cost of Rs.59.46 crores and corporate office employee costs etc. of Rs.11.82 crores. There is no effective cross examination of Mukesh Mehta in this regard. So we have to accept this figure of Rs.71.28 crores. Deducting this amount from the total fee of Rs.158 crores, loss of profit comes to Rs.86.72 crores.
102. In regard to the evidence of the petitioner, it was the petitioner's contention that, it was sufficient for them to examine the Officers who were concerned with the issuance of the advertisement dated 30 January 2016, namely, Shri Harish Warde Assistant Public Relations pvr 129 sonawane-rng-rane-SRA-final.doc Officer, Shri Mahesh R.Gadekar Public Relations Officer both working at the relevant period and Shri Harshad Karade Information Technology Officer of the Petitioners, since 8 August 2010.
103. These witnesses of the Petitioners, were fully cross-examined by the Respondents. It is important to note that even under the advertisement dated 30 January 2016 there were no bids received. This has clearly come in the respondent's cross-examination of the Petitioner's witness Shri Harish Warde (RW-1). Thus, it was a clear position, even qua the new advertisement that even as far back in July 2016, no bids were received. The fact remained that not only under the 2007 'expression of interest' but also under the DRP relevant to the 30 January 2016 advertisement, no bids could be received.
104. From these circumstances, two basic facets in regard to the respondent's case on damages would emerge. Firstly, that the the entitlement of the respondent to receive any fees under clause 6.1A (ii) of Rs.42 crores for the post-tender activities was totally illusory. I wonder as to how the post tender fees could be included by any standard in grant of damages and as to how it can be an item under the head 'loss of profit.
pvr 130 sonawane-rng-rane-SRA-final.doc This objection although is raised by the petitioner, the same has not been dealt by the arbitral tribunal. Secondly as a logical corollary, the tender having failed, there was no question of any development activity to be undertaken, so that any premium could be received by the Petitioner in regard to which, claims for damages were made by the Respondents in the arbitral proceedings. This more particularly when in Clause 6.1(B) the parties agreed that "PMC shall additionally receive 0.5% of the "total premium received" by SRA." In this regard the petitioner would also be correct in its contention, as also urged before the arbitral tribunal that the respondent cannot seek damages, of a measure to be put in a better position, than what it could have been, if the contract was to be performed.
105. I am in agreement with Mr. Khambatta, learned senior counsel for the petitioner when he would urge that the arbitral tribunal, has completely overlooked the nature of the project, a relevant factor in considering a claim for damages. According to him, the Dharavi Redevelopment Project, was not a ordinary construction project, it was a project as pointed out by Mr. Khambata involving number of complexities which even included land acquisition. The success of the project depended pvr 131 sonawane-rng-rane-SRA-final.doc on several contingent factors, on which depended the fees to be payable to the project management consultant-the respondent. In the absence of a project in its real sense there was no question of any services being rendered by the respondent. It would be correct for the petitioner to contend that neither a strait-jacket formula or ordinary norms of valuation could be applied for the different knotty areas of Dharavi. Mr. Khambatta, would thus be correct in his contention when he argues that the Choksy report read with the Ballal report could never have formed the basis for arriving at any figure of the damages which completely omitted several complexities of the project in making illusary estimates.
106. Be that as it may, the expert evidence firstly Mr. Girish Ranade (CW-2) , Director of Ballal Engineering Private Limited and of Ms.Gauri Shah(CW- 3) Director of M/s C. C.Choksi Private Ltd. (a Company providing financial advisory services) as accepted by the arbitral tribunal is also seriously criticised on behalf of the petitioner. In so far as, evidence of Mr. Girish Ranade -CW 2 is concerned, admittedly it was the Respondent who had provided him with drawings and specifications for the project on which basis a report came to be prepared by Mr.Girish Ranade's Company, interalia in regard to the cost of typical rehabilitation pvr 132 sonawane-rng-rane-SRA-final.doc building, cost of estimation of sell building, infrastructure development, amenities building and greenway etc. This report contained cost of construction for the concerned work at the rate of per square foot. The foundation for these figures namely the measurement sheets and estimates. In regard to the evidence of this witness, the arbitral tribunal has come to a conclusion that the figures set out by this witness had not been questioned on merits and that no material was led by the Respondent or dislodged or rebut this expert evidence of this witness.
107. Mr.Khambatta, the learned Senior Counsel for the petitioner has fervently criticized the findings of Arbitral Tribunal to submit that the evidence of Mr. Girish Ranade was required to be discarded in totality. Mr. Khambata has drawn my attention to the Ballal Report to submit that the report was based on drawings/specifications, information and documents provided by the respondent which is not in dispute and while doing so all the supporting documents did not form part of arbitral record. Mr.Khambata's contention is that, the Ballal Report is nothing more than summary of detail estimate and measurement sheet, which were not placed on record of the Arbitral Tribunal. In this regard Mr. Khambata has referred to question No.13 in the cross examination of Girish Ranade pvr 133 sonawane-rng-rane-SRA-final.doc (CW-2) whereby Mr.Girish Ranade has confirmed that detail estimated measurement sheets were prepared section-wise. However, only summaries were attached to the report. Mr. Khambata also refers to question no.35 in the cross examination of Girish Ranade (CW 2) wherein he admits that without supporting documents Ballal Report was produced by the Respondent and hence it was a incomplete report. Mr. Khambata would thus submit that the Ballal Report ought to have been rejected by the Arbitral Tribunal being incomplete. On the other hand Mr. Jagtiani has supported the report to contend that it provided all material which was sufficient for the tribunal to consider the damages as suffered by the Respondent. He would submit that there was no challenge to this report and/or there was no contrary material so that this report would be disbelieved. Hence according to Mr Jagtiani the petitioner's submission that as the measurement sheets were not available the report should be discarded, cannot be accepted.
108. In my opinion, there is much substance in the contentions as urged by Mr.Khambata. Even the Tribunal in paragraph 48 of the impugned award has noted that the Ballal Report was merely a tabulated summary of conclusions arrived at and further in paragraph 49, it was pvr 134 sonawane-rng-rane-SRA-final.doc observed that the petitioner could not cross examine this witness on this measurement and estimate. If this was the evidentiary position on record, the Arbitral Tribunal could not have attributed any weightage to the Ballal Report. Moreover the contents of the Report ought to have been held to be hypothetical by the arbitral tribunal, in absence of any foundation of these estimates.
109. Similarly, in regard to the evidence of RW 3 Gauri Shah, the Director of M/C C.C. Choksi Private Limited who deposed to the Choksi Report, the plight is not different. The Choksi Report estimated the expected premium that could be fetched by the petitioner, if the project was to progress. This Report was based on assumptions and estimate provided by Mr.Mukesh Mehta, Chairman of the Respondent. The Report itself states that, the analysis was undertaken on the basis of information furnished by the Management of the Respondent and information available in public domain regarding other players in the Industry. The following contents of the Choksi Report itself made acceptance of the report doubtful much less by the Arbitral Tribunal adjudicating damages. The relevant portion reads thus;
"In the course of the valuation, we were provided with both written and verbal information, including financial and operating data. We have evaluated the information provided to us by the pvr 135 sonawane-rng-rane-SRA-final.doc Company through broad inquiry and analysis (but have not carried out a due diligence or audit or review of the Company for the purpose of this engagement, nor have we independently investigated or otherwise verified the data provided). We have been given to understand by the Company that they have not omitted any relevant and material factors. Accordingly, as regards information provided by the Company we do not express any opinion or offer any form of assurance regarding it accuracy and completeness. We assume no responsibility for any errors in the above information furnished by the Company and their impact on the present exercise.
(emphasis supplied)
110. In my opinion the above statement in the Choksi report was ex-facie sufficient to render the same worthless, in the context of assessing damages. This apart, the Petitioner would be correct in its contention that the Arbitral Tribunal could not have blindly accepted the Choksi Report for any purposes when Respondent's witness Mr.Mukesh Mehta, himself in his evidence in paragraph no.108 of the affidavit in lieu of examination-in- chief stated that he requested the said Advisors to estimate reasonable premium that could have been offered by developers to the Government of Maharashtra ranging from Rs.23,270/- crores to Rs.29,600/- crores and accordingly, Choksi Report estimates premium in the range of Rs.23,271/- crores to Rs.29,679/- crores. The petitioner would thus be correct that a tailor made report could never be a foundation to award damages. It was incumbent on the arbitral tribunal to consider these vital aspects of the respondent's evidence. However, the arbitral tribunal has totally ignored and/or turned a blind eye to even refer to this evidence. In my opinion, pvr 136 sonawane-rng-rane-SRA-final.doc evidence of Miss Gauri Shah and Choksi Report ought to have been held to be totally inadmissible. The arbitral tribunal ought to have applied a prudent rationale of a holistic appreciation and assessment of evidence. I would fail to understand that in this situation as to how the Arbitral Tribunal could have proceeded to award damages either on the basis of Ballal Report or Choksi Report, when the Report lacked basic foundation to arrive at conclusions as contained in these reports. Petitioner's submission assailing the findings as made in award on these reports are required to be accepted in totality. An award as rendered by the arbitral tribunal ignoring vital facets of the evidence would amount to a perversity, a ground sufficient to set aside the award.
111. Mr.Jagtiani's contention that this is a case where an adverse inference was required to be drawn against the petitioner as the petitioner did not examine any witness on the reason set out for termination and the information on the project cost which was completely in the domain of the petitioner. I do not agree. The fundamental fallacy in this argument is that the petitioner could not be expected to discharge the burden of proof of the respondent. It was for the respondent to prove whatever the respondent asserted. It was also open to the respondent to pvr 137 sonawane-rng-rane-SRA-final.doc summon/examine whichever witnesses it desired. The respondent examined only three witnesses, the first being Mr.Mehta, and Mr.Girish Ranade and Ms.Gauri Shah. The respondent thus was required to be content with the evidence of these three witnesses. The respondent cannot expect that the lacunae in the evidence of their witnesses should be filled up by the petitioner. It is not a situation that the respondent was precluded from examining any of the officers of the petitioner to give evidence. Thus there was no question of any adverse inference being drawn against the petitioner. This contention of Mr.Jagtiani hence requires to be rejected.
112. There is another significant aspect as urged on behalf of the petitioner and which in my opinion would go to the root of the matter in the arbitral tribunal considering the claim for award of damages viz. whether it was permissible to place the respondent in a better position, then what the Respondent could have found itself, had the contract subsisted. Even assuming if it was to be presumed that advertisement dated 30th January 2016 was issued under DRP as conceived in the year 2004. However even under this new advertisement admittedly the petitioner did not receive any bid. Thus, there was not a remotest pvr 138 sonawane-rng-rane-SRA-final.doc possibility of the contract moving any further, so that, the respondent would be in position to undertake post-tender activities much less the contract still moving further so as to assume that the petitioner would receive any sale premium, from which the respondents could claim 0.5% of the amounts which would be received.
113. A claim for damages cannot be made by a party to have any unjust enrichment or it should not confer a windfall on the claimant. It cannot exceed the loss actually suffered or likely to suffer. In awarding damages, it can never be that an unreasonable and disproportinoate deal is being foisted on a contracting party. It is a settled principle of law that damages for breach of contract are awarded to place the injured party in the same position in which it would have been had the contract was not broken. This would postulate that the damages have to be compensatory and not punitive or retributory.
114. Now applying these norms to the facts of the present case, it is quite clear that the post tender activities which were defined along with the quantum of the fees for each of the activities were surely not to be performed as no bids were received. In this situation there was also no pvr 139 sonawane-rng-rane-SRA-final.doc question of the petitioner undertaking any further development in regard to the DRP. Thus on both the counts there was no likelihood of any work to be done and consequently any loss being suffered by the respondent. Thus the claim of the respondent was presuming a contingency that the contract was to be performed. In this situation a stricter test was applicable of not only a breach of the contract fundamental to the contract or going to the root of the contract at the hands of the petitioner but also of having overwhelming material to quantify such damages.
115. As noted above, the contract in question was not a construction contract as awarded to the respondent, it is a contract of an advisory nature. Although the respondent terms the project as its "Skin in the same" the same is not borne out by the PMC agreement. Thus surely norms which are required to be applied in case of breach of a construction contract where one of the contracting party possibly could procure material by incurring expenditure and would seek damages for such losses and for loss of business are inapplicable to the fact situation.
116. The petitioner is correct in its contention that it was impossible to estimate how the Dharavi Redevelopment Project (DRP) pvr 140 sonawane-rng-rane-SRA-final.doc could at all have proceeded in the absence of successive attempts to receive bids having failed. This was also the apprehension and expectation of the parties when they agreed to the specific termination clause, which provided an unequivocal right to the petitioner to terminate the PMC agreement in the event things coming to a standstill or the contract being abandoned or for any other reason. A prudent body like the arbitral tribunal was required to take these vital aspects into consideration rather than ignoring them.
117. In my opinion the respondent by invoking the present arbitration and by making such ambitious claim for damages has traded on a path of futility, when tested not only in law but on the clear facts on record. If this be the position, then clearly the Arbitral Tribunal could not have placed the respondent in better position, then the respondent could have found itself in case contract was to be on foot, subsisting as surely the petitioner itself was not required to undertake any post tender activities or receive any premium so as to grant its share as per Clause No.6.1(B) of the PMC Agreement to the respondent.
118. On behalf of the petitioner it is contended that this is a case wherein, on the record of the arbitral tribunal complete evidence qua the pvr 141 sonawane-rng-rane-SRA-final.doc factual conspectus of the events was available and if this was to be so the arbitral tribunal was bound to look at these events in regard to the contract in question in considering award of damages. In this context on the principle which should be followed in awarding damages, reliance is placed on behalf of the petitioner on a celebrated decision of the House of Lords, Golden Strait Corpn vs.Nippon Yusen Kubishika Kaisha (2007) UKHI . The majority view is reflected in the opinions of their Lordships Lord Scott, Lord Carswell and Lord Brown. It was held that the principle that damages should be assessed as at the date of the breach, was not inflexible and the desirability of achieving certainty in commercial contracts was subject to the overriding compensatory principle that the damages awarded should represent no more than the value of the contractual benefits, of which the claimant has been deprived. If at the date of breach there had been a real possibility that an event would happen terminating the contract or otherwise reducing those contractual benefits, the quantum of damages might need to be reduced proportionately to reflect the estimated likelihood of that possibility materializing, but where such an event had already happened by the time damages were assessed, the Court should have regard to what had actually occurred, so that estimation was no longer necessary. In so pvr 142 sonawane-rng-rane-SRA-final.doc observing, Their Lordships have referred to the exposition of law in "The Bwllfa and Merthyr Dare Stem Collieries (1891) vs The Pontypridd Waterworks Company"20 and "Maredelanto Compania Naviera S.A. vs.Bergbau -Hamdel G.m.b.H. The Mihalis Angelo 21. It would be apt to note the exposition in the opinion of Lord Scott which reads as under :
"29. My Lords, the answer to the question at issue must depend on principles of the law of contract. It is true that the context in this case is a charter party, a commercial contract. But the contractual principles of the common law relating to the assessment of damages are no different for charter parties, or for commercial contracts in general, than for contracts which do not bear that description. The fundamental principle governing the quantum of damages for breach of contract is long established and not in dispute. The damages should compensate the victim of the breach for the loss of his contractual bargain. The principle was succinctly stated by Parke B in Robinson v Harman (1848) 1 Ex 850, and remains as valid now as it was then:
"The rule of the common law is, that where a party sustains a loss by reason of a breach of contract, he is, so far as money can do it, to be placed in the same situation, with respect to damages, as if the contract had been performed."
If the contract is a contract for performance over a period, whether for the performance of personal services, or for supply of goods, or, as here, a time charter the assessment of damages for breach must proceed on the same principle namely, the victim of the breach should be placed, so far as damages can do it, in the position he would have been in had the contract been performed.
"32. That contention, in my opinion, attributes to the assessment of damages at the date of breach rule an inflexibility which is inconsistent both with principle and with the authorities. The underlying principle is that the victim of breach of contract is entitled to damages representing the value or the contractual benefit to which he was entitled but of which he has deprived. He is entitled to be put in the same position, so far as money can do it, as if the contract had been performed. The assessment at the date of breach rule can usually achieve that result. But not always . In Milangosv George Frank (Textiles) Ltd (1976) AC 443, 468-469 Lord Wilberforce referred to "the general rule" that damages for breach of contract are assessed as at the date 20 1903 AC 426 21 1970 3 WLR 601.
pvr 143 sonawane-rng-rane-SRA-final.doc of breach but went on to observe that:
"It is for the Courts, or for arbitrators to work out a solution in each case best adapted to giving the injured plaintiff that amount in damages which will most fairly compensate him for the wrong which he has suffered"
and, when considering the date at which a foreign money obligation should be converted into sterling, chose the date that "gets nearest to securing to the creditor exactly what he bargained for". If a money award of damages for breach of contract provides to the creditor a lesser or a greater benefit than the creditor bargained for, the award fails, in either case, to provide a just result.
36. The same would, in my opinion be true of any anticipatory breach the acceptance of which had terminated an executory contract. The contractual benefit for the loss of which the victim of the breach can seek compensation cannot escape the uncertainties of the future. If, at the time the assessment of damages takes place, there were nothing to suggest that the expected benefit of the executory contract would not if the contract had remained on foot, have duly accrued, then the quantum of damages would be unaffected by uncertainties that would be no more than conceptual. If there were a real possibility that an event would happen terminating the contract, or in some way reducing the contractual benefit to which the damages claimant would, if the contract had remained on foot, have become entitled, then the quantum of damages might need, in order to reflect the extent of the chance that that possibility might materialize, to be reduced proportionately. The lodestar is that the damages should represent the value of the contractual benefits of which the claimant had been deprived by the breach of contract, no less but also no more. But if a terminating event had happened, speculation would not be needed,an estimate of the extent of the chance of such a happening would no longer be necessary and, in relation to the period during which the contract would have remained executory had it not been for the terminating event, it would be apparent that the earlier anticipatory breach of contract had deprived the victim of the breach of nothing. In Bwlfa and Merthr Dare Steam Collieries (1891) Ltd vs Pontypridd Waterworks Co(1903) AC 426, 428, the Earl of Halsbury LC rejected the proposition that "because you could not arrive at the true sum when the notice was given, you should shut your eyes, to the true sum now you do know it, because you could not have guessed it then"and Lords Robertson said, at p 432, that "estimate and conjecture are superceded facts as the proper media concludendi" at, p.433,that "as in this instance facts are available, they are not to be shut out." Their Lordships were not dealing with a contractual or tortious,damages issue but with the quantum of compensation to be paid under the Waterworks Clauses Act 1847 (10 & 11 Vict c 17). Their approach however, is to my mind as apt for our purposes on this appeal as to theirs on that appeal."
pvr 144 sonawane-rng-rane-SRA-final.doc
38. The arguments of the owners offend the compensatory principle. They are seeking compensation exceeding the value of the contractual benefit as of which they were deprived. Their case requires the assessor to speculate about what might happen over the period 17 December 2001 to 6 December 2005 regarding the occurrence of a clause 33 event and to shut his eyes to the actual happening of a clause 33 event in March 2003. The argued justification for thus offending the compensatory principle is that priority should be given to the so-called principle of certainty. My Lords, there is, in my opinion, no such principle. Certainty is a desideratum and a very important one, particularly in commercial contracts. But it is not a principle and must give way to principle. Otherwise incoherence of principle is the likely result. The achievement of certainty in relation to commercial contracts depends, I would suggest, on firm and settled principles of the law of contract rather than on the tailoring of principle in order to frustrate tactics of delay to which many litigants in many areas of litigation are wont to resort. Be that as it may, the compensatory principle that must underlie awards of contractual damages, is, in my opinion, clear and requires the appeal in the case to be dismissed. I wish also to express my agreement with the reasons given by my noble and learned friends, Lord Carwswell and Lord Brown of Eaton-under Heywood, for coming to the same conclusion."
In my opinion the above observations are clearly applicable to the facts of the present case firstly for the reason that the clear events on record which depicted the real factual scenerio in arriving at the quantum of damages could not have been overlooked by the arbitral tribunal, and secondly the tribunal as a prudent body could not have overlooked as to whether in such a situation as the contract found itself to be in any damages could at all be awarded to be termed as loss of business.
119. Mr.Jagtiani, learned Senior Counsel for the respondents has relied on some decisions on damages by way of loss of profit which are being pvr 145 sonawane-rng-rane-SRA-final.doc discussed hereunder:-
(i) Union of India Vs. Vaman Prestressing Co. Ltd. & Anr 22. This decision of the learned Single Judge, concerns a challenge to an arbitral award adjudicating a dispute under a works contract namely for 'manufacture and supply of PSC mono-block concrete. The original contract was amended and the respondent was required to manufacture additional quantity of 72000 sleepers than the original contractual quantity of 2,40,000 sleepers. The quantity was further added by the second amendment. The dispute between the parties pertained to whether the price of the sleepers shall be paid as per the original delivery period under the contract or should it admit a variation claimed by the respondent. The dispute was referred to arbitration. There were number of claims made. One of the claims being loss of overheads and profit. The arbitral tribunal granted price variation on 1,45,220 sleepers in accordance with the contract, as also granted freight reimbursement, compensation for delayed payment being interest on price variation as also loss of overheads and profits. It is in this context the Court considered the law of damages. However, what is relevant is, what the Court has observed in paragraphs 7 and 8 referring to the decision of the 22 2019 SCC OnLine Bom 192 pvr 146 sonawane-rng-rane-SRA-final.doc Supreme Court in A.T. Brij Paul Singh And Ors. vs State Of Gujarat23 and the decision of the Division Bench of this Court in Mahanagar Gas Ltd. Vs. Babulal Uttamchand & Co.24. The learned single Judge observed that the basic principle in awarding damages would only when the other contracting party commits a breach of the contract by improper recession and/or there is a breach of fundamental terms of the contract by one of the contracting party. In any case the learned Single Judge in this case was dealing with a works contract where the parameters are completely different. This decision in the present facts will not assist the Respondent.
(ii) In K.K. Cooperative Group Housing Society Ltd. v. Goel Associates 25 a Division Bench of Delhi High Court was dealing with a contract entered by the appellant on 7 May 1988 with the respondent, whereby the services of the respondent were engaged to carry out the work of development of land allotted to the society and construction of different types of houses including providing electrical and sanitary installations and other services. The appellant society had raised certain deficiencies after three years of the contract entered between the parties and finally the appellant terminated the agreement vide letter dated 30 September 1991. The 23 (1984) 4 SCC 59 24 2013 (5) Bom.C.R.756 25 2012 (128) DRJ 310 DB pvr 147 sonawane-rng-rane-SRA-final.doc dispute between the parties was referred to arbitration. The arbitrator had framed two issues to be decided, firstly whether the agreement was valid and binding on both the parties; and secondly whether the appellant society terminated the contract awarded as per the agreement dated 7 May 1988 unilaterally without reasonable cause, if so, to what amount was the claimant entitled as compensation and interest. Answering the first issue, it was held that it was a valid and binding contract. On the second issue, the arbitrator found that the agreement has been unilaterally revoked by the society without consideration of the respondent's reply, and therefore, he proceeded to grant an amount towards fee which would been payable to the respondent at 2.75% of the total cost of construction. Being an arbitration under the Arbitration Act,1940, the award was filed in the Court. The appellant had filed an application under Sections 30 and 33 of the Arbitration Act 1940 raising objections. Learned Single Judge found no merit in the objections,however taking into consideration the fact that the respondent had actually not rendered any services, called upon the sole proprietor of the respondent to indicate whether he was ready to accept the lesser compensation instead of awarded amount. The respondent accepted to vary the impugned award and he has awarded only 40% of the fee alongwith 6% simple interest. Accordingly, learned pvr 148 sonawane-rng-rane-SRA-final.doc Single Judge modified the award. The Award was accordingly made rule of the Court as modified. This decision was challenged before the Division Bench and it is in this context , the Division Bench referred to G.T. Gajria's Law Relating to Building and Engineering Contracts in India, came to a conclusion that an appropriate method was followed by the arbitrator and the learned Single Judge while coming to the conclusion that the respondent was entitled to the compensation of fee, which would have been paid had he performed his functions and more particularly the respondent had accepted the cut that is 40% of the fee payable. The facts are completely in variance to the facts in hand.
(iii) "Goel Associates Vs. Shama Cooperative Group Housing Society "26 is also a case under the 1940 Act where the learned Single Judge was dealing with an application under Sections 30 and 33 of the Arbitration Act,1940. A claim was made by the petitioner for a compensation for his right being violated by the respondent under the contract. The Court referring to the general principles of award of damages when the breach of contract is proved, thought it appropriate to confirm the award. The principles as discussed in the judgment are well settled that in actions for breach of contract, the object is to put the plaintiff in the position he 26 2009 (113) DRJ 523.
pvr 149 sonawane-rng-rane-SRA-final.doc would have been in if the contract had been satisfactorily performed. However, in the facts of the present case, the judgment is squarely not applicable.
(iv) The Supreme Court in "A.T. Brij Paul Singh And Ors. vs State Of Gujarat"27 has observed that when a contractor submits his tender for a works contract, a reasonable expectation of profit, is implicit in it and its loss has to be compensated by way of damages if the other party to the contract is guilty of breach of contract. It was observed that when a party entrusted with the work commits breach of the contract, the contractor would be entitled to the damages for loss of profit which he expected to earn by undertaking works contract. It was observed that what would be the measure of profit however would be depend upon the facts and circumstances of each case. In the said case the respondent was guilty of breach of contract as it was held that the recission of contract by the respondent was unjustified, and the contractor had executed a part of the works contract, and hence the contractor would be entitled to damages by way of loss of profit. Surely the desion would not forward the case of the Respondent.
27 (1984) 4 SCC 59 pvr 150 sonawane-rng-rane-SRA-final.doc (v) The decision of the Supreme Court in M/s.MSK Projects India (JV) Ltd. vs.State of Rajasthan & Anr.28 also discusses and recognizes the
principles of damages when a claim is made by a contractor. The dispute between the parties pertained in the context of a contract awarded by the PWD, State of Rajasthan to the appellant to construct the Bharatpur bye- pass for the road from Bharatpur to Mathura. Concession agreement was entered into between the parties authorising collection of toll fee by the appellant-MSK. The period of concession was 111 months including the period of construction. The appellant had completed the contract work and also started collection of toll fee. However, there was some issue in collection of toll because of local agitation and consequently the respondent issued an order prohibiting entry of commercial vehicles into Bharatpur town and diverting traffic through the bye-pass and collection of toll from vehicles using Bharatpur-Deeg patch of the road. The disputes were referred to arbitration. The arbitral award was made in favour of the appellant in which a finding was recorded that there was a delay on the part of the respondent in issuing a notification that the State has failed to implement the same and the contractor was entitled to collect toll fee even from the vehicles using Bharatpur-Deeg part of the road. The respondent was directed to pay a sum of Rs.990.52 lacs to MSK-appellant as loss for 28 (2011)10 SCC 573 pvr 151 sonawane-rng-rane-SRA-final.doc the period in question. A challenge to the award by the respondent-State of Rajasthan before the learned District Judge succeeded and the arbitral award was set aside. In an appeal before the High Court, the dcision and findings of the learned District Judge stood confirmed. It is in this context the Supreme Court was discussing the law on damages and also referring the decision in A.T. Brij Paul Singh And Ors. vs State Of Gujarat (supra) redirected adjudication on the point as framed in paragraph 50 of the judgment. However, in reaching to the conclusion some important observations as made by the Supreme Court are relevant in the context of the present proceedings which are required to be noted, which in fact support the case of the Petitioner which is also a public authority. The Supreme Court in paragraph 47 observed that, it is strange that a person who has not complied with terms of contract and has acted in contravention of the terms of agreement claims that he was entitled to earn more profit. It was observed that the respondent was not permitted to claim damages on compensation as he has not spent the said amount. It was also observed that the reliefs which are claimed by the appellant would prove to be a "windfall profit" without carrying out the obligation to execute the work just on technicalities. In paragraphs 47 and 49, the Court observed thus:-
pvr 152 sonawane-rng-rane-SRA-final.doc "47. It is strange that a person who has not complied with terms of contract and has acted in contravention of the terms of agreement claims that he was entitled to earn more profit. The private appellant cannot be permitted to claim damages/compensation in respect of the amount of Rs.13.25 crores, as he did not spend the said amount stipulated in the terms of agreement. The private appellant cannot claim the amount of Rs. 7.13 crores for a period of three years for a small patch of 1.25 kilometers out of the total length of the road to the extent of 10.85 kilometers. ... ... ...
49. The State authority had decided to establish a toll road as it was not having sufficient funds. In case the claim of the private appellant is allowed and as the State is not in a position to grant further facility to collect the toll fee at such a belated stage, the purpose of establishing the toll road itself stands frustrated. More so, the toll fee cannot be collected to recover the amount never spent by the contractor. It is evident from the discourse in pre-bid meetings of the parties that it had been decided that compensation would be worked out on the basis of investment made by contractor concerned. More so, the statutory notification dated 10.2.1997 provided to recover the cost of construction and maintenance including interest thereon. Therefore, the question of non-execution of work of second phase of the contract becomes very material and relevant to determine the real controversy. The State authorities for the reasons best known to them, did not make reference to the arbitration proceedings for non-execution of the work of the second phase of the contract. However, the relief claimed by the private appellant would prove to be a "windfall profit" without carrying out the obligation to execute the work just on technicalities. We have held in this very case, that the arbitrator cannot proceed beyond the terms of reference and, therefore, the question of considering the non-execution of work of the second phase of the work was neither permissible nor possible as it had arisen subsequent to the date of award in the arbitration proceedings."
120. As a sequel to the above discussion in my opinion looked from any angle the arbitral tribunal could not have awarded in favour of the respondent damages of Rs. 86.72 crores for the alleged wrongful termination of the contract and the consequential award of interest in the said amount.
pvr 153 sonawane-rng-rane-SRA-final.doc
121. Before concluding, I may observe that I have thought it appropriate to refer and discuss only the relevant decisions as cited on behalf of the parties. In regard to the other decisions, the principles of law as contained therein as arising in the facts of those cases are well settled. I have thought it appropriate not to burden the judgment by discussing those decisions as it would be wholly academic.
CONCLUSION
122. The above deliberation on each of the issues touching the legality of the award leaves no room for any doubt that the arbitral award does not take into consideration the evidence on record and/or the findings are based on no evidence. This apart there is a perverse interpretation of the contractual terms, leading to a patent absurdity on the face of the record. There are also internal contradictions in the arbitral award coupled with findings being arrived on no evidence. When so many assailing factors are apparent on the face of the record, they would point out to only one conclusion that the arbitral award is wholly vitiated and unsustainable on the ground of perversity and patent illegality as available under Section 34 of the ACA. Consequently, the impugned award would also be required to be held as contrary to public policy. The pvr 154 sonawane-rng-rane-SRA-final.doc principles of law to set aside an arbitral award on these grounds are also required to be noted.
123. In McDermott International Inc. versus Burn Standard Co. Ltd.29 the Supreme Court in paragraph 65 of the report has emphasized as to what is the supervisory jurisdiction in regard to judicial review of an arbitral award. The reasons being vitiated by perversity in evidence in contract and existence of internal contradictions are held to be grounds which would appreciate the award. The Supreme Court observed thus:-
"65. We may consider the submissions of the learned counsel for the parties on the basis of the broad principles which may be attracted in the instant case i.e. (i) whether the award is contrary to the terms of the contract and, therefore, no arbitrable dispute arose between the parties; (ii) whether the award is in any way violative of the public policy; (iii) whether the award is contrary to the substantive law in India viz. Sections 55 and 73 of the Indian Contract Ac; (iv) whether the reasons are vitiated by perversity in evidence in contract; (v) whether adjudication of a claim has been made in respect whereof there was no dispute or difference; or (vi) whether the award is vitiated by internal contradictions."
124. In Associates Builders Vs. Delhi Development Authority30 the Supreme Court has explained the principles interalia on the fundamental policy of Indian law and patent illegality being the grounds available for setting aside the arbiral award which includes the juristic principle that a 29 (2006) 11 SCC 181 30 (2015)3 SCC 49 pvr 155 sonawane-rng-rane-SRA-final.doc a decision which is perverse or so irrational that no reasonable person would arrive at would include within its ambit a finding based on no evidence or an arbitral tribunal taking into account something irrelevant to the decision which it arrives at; or ignores vital evidence in arriving at its decision. It is held that if the arbitral award contains any of these elements then the arbitral award would be required to be held being contrary to the fundamental principles which form part of the fundamental policy of Indian Law. In regard to the test of patent illegality of an arbitral award, the arbitral tribunal adjudicating a dispute in contravention of Section 28(3) of ACA, would amount to award being vitiated by patent illegality, apart from other grounds under this head namely the award in contravention of substantive law in India and illegality going to the root of the matter.
125. In a recent decision in Ssangyong Engineering & Construction Co.Ltd. Vs. National Highways Authority of India (NHAI) 31 the Supreme Court has now held that a decision which is perverse, as understood in paragraphs 31 and 32 of Associate Builders (supra), while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. It is held 31 2019 SSC OnLine SC 677 pvr 156 sonawane-rng-rane-SRA-final.doc that a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Also a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse. The Court held thus:-
"37. Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law, as understood in paragraphs 18 and 27 of Associate Builders (supra), or secondly, that such award is against basic notions of justice or morality as understood in paragraphs 36 to 39 of Associate Builders (supra). Explanation 2 to Section 34(2)
(b)(ii) and Explanation 2 to Section 48(2)(b)(ii) was added by the Amendment Act only so that Western Geco (supra), as understood in Associate Builders (supra), and paragraphs 28 and 29 in particular, is now done away with.
38. Insofar as domestic awards made in India are concerned, an additional ground is now available under sub-section (2A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within "the fundamental policy of Indian law", namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.
...... ... .... ...
41. The change made in Section 28(3) by the Amendment Act really follows what is stated in paragraphs 42.3 to 45 in Associate Builders (supra), namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair-minded or reasonable person pvr 157 sonawane-rng-rane-SRA-final.doc would; in short, that the arbitrator's view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2A).
42. What is important to note is that a decision which is perverse, as understood in paragraphs 31 and 32 of Associate Builders (supra), while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse."
126. For the above reasons the petition needs to succeed. It is accordingly allowed by setting aside the impugned arbitral award dated 15 February 2018. No cost.
Digitally signed by Prashant (G.S.Kulkarni.J) Prashant V. Rane V. Rane Date:
2020.06.16 20:17:07 +0530