Bangalore District Court
Chief Engineer vs Samala Mareappa & Sons on 30 January, 2023
1 Com.A.P.No.88/2021
IN THE COURT OF THE LXXXVIII ADDL. CITY CIVIL &
SESSIONS JUDGE (EXCLUSIVE COMMERCIAL COURT):
BENGALURU CITY. (CCH-89)
Present: Sri. P.J. SOMASHEKARA, B.A.,LL.M,
LXXXVIII Addl. City Civil & Sessions Judge
Bengaluru City.
Dated this the 30th day of January 2023
Com.A.P.No.88/2021
Applicant: Chief Engineer, Electrical
Transmission Zone,
Karnataka Power Transmission
Corporation Limited,
Prasarana Nlaya, Sedam Road,
Kalaburagi - 585 108.
(By Sri. S.S., Advocate)
-vs-
Respondent: 1. Samala Mareappa & Sons
C/o Sri. Balaji Glass Ply & Woods
Having office at D.No.201, Opp.
Rayadurga Bus Stand, Bangalore Road,
Bellari - 583 101, Rep. by its Sole
Proprietor, Sri. Ramachandra Reddy,
2. Venkatesha C Sharma, Advocate,
No.10/1, Cellar Floor, Hotel Santosh
Complex, 4th Cross, 3rd Main Road,
Gandhinagar, Bengaluru - 560 009.
2 Com.A.P.No.88/2021
3. Kukkaje Ramakrishna Bhat,
District & Sessions Judge (Retd.)
No.116/5-1, 2nd Floor, 11th Cross,
Next to Union Bank, Malleshwaram,
Bengaluru - 560 003.
4. G.A. Anthony Cruze, Advocate,
No.62, 27th Cross, Cubbonpet
Main Road, Benglauru - 560 002.
(Exparte)
JUDGMENT
This is a suit filed by the plaintiff against the defendants under Sec.34 of the Arbitration and Conciliation Act r/w Rule 4 of the Hon'ble High Court of Karnataka Arbitration (Proceedings before the Courts) Rules 2001 and sought for to set aside the award dated 01.03.2020 as corrected/ modified on 24.03.2021 passed by the respondent No.2 to 4.
2. Nut shell of the plaint are as under:
The plaintiff being the respondent and the defendant No.1 being the claimant before the sole arbitrator feeling aggrieved by by the majority award has filed the instant suit, stating that who has invited the bids from interested bidders for construction of 110 KV Lilo (loop-in-loop-out) line from the existing Munirabad-
Bellary S/C Line to proposed 110 KV substation at Kudithini in Bellary Taluk and District on 13.09.2004 for establishing 1x10 3 Com.A.P.No.88/2021 MVA 110/11 KV substation at Kudithini in Bellary Taluk on a turnkey basis. The defendant No.1 claims to be a contractor engaged in the construction of transmission lines and establishing substation, participated in the tender floated for construction of 110 KV Lilo from existing Munirabad-Bellary S/C Line to proposed substation at Kudithini in Bellary Taluk and for establishing substation at Kudithini on a turnkey basis. The bid quoted by the defendant No.1 was accepted and the project for construction of station and line was awarded to the defendant No.1. The total value of the substation and line was awarded to the defendant No.1 amounted to Rs.2,52,54,963.35/- and Rs.96,88,961/- respectively. The work of construction of substation was divided into three portion viz., supply of materials, erection and civil works, for which issued three separate letters of intent all dated 19.01.2005, notifying the intention to award the contract to the 1st defendant. In so far as line works are concerned the works inter-alia involved supply of materials and erection for which two separate letters of intent both dated 19.01.2005 were issued. The defendant No.1 issued two separate letters both dated 20.01.2005 confirming the acceptance of terms of letter of intent. The relation to the work of construction of substation entered into three separate agreements for supply of materials, erection and 4 Com.A.P.No.88/2021 civil works all dated 29.01.2005, in so far as the work relating to construction of line entered into two separate agreements for supply of materials and erection. The agreements were entered into on 02.02.2005, the letter of intent required the defendant No.1 to furnish irrevocable and unconditional bank guarantee to the extent of 10% of the contract value for due performance of station and line works. The defendant No.1 has furnished bank guarantee dated 29.01.2005 from Tungabhadra Krushi Sahakara Bank Niyamitha, Sangankal, Bellary District for the work relating to construction of substation and line works totally amounting to Rs.25,25,496/- for the works relating to construction of station and Rs.9,86,897/- in respect of the line works.
3. The plaintiff in its plaint has further alleged that after the agreement which entered in between them issued a detailed work award on 07.02.2005, as per the terms and condition of the contract agreements, the defendant No.1 was obliged to undertake the construction of station and line strictly in terms of contract documents. The time was the essence of the contract and the period of completion of project was fixed as 12 months from the date of acceptance of letter of intent, the period of completion of the supply of materials was 12 months including monsoon from the date of acceptance of letter of intent and 5 Com.A.P.No.88/2021 target date was scheduled on 19.01.2006, the stipulated period for completion of erection portion was 9 months from the date of acceptance of the letter of intent and the target date was scheduled on 20.10.2005, though had commenced the works in right earnest, the work could not be completed on account of delays in securing approvals and clearances from various departments which contended by the defendant No.1, according to the defendant no.1 when the work was under progress one Sri. C.S. Ganesh was appointed as Chief Engineer for the project and had a grudge against the defendant No.1 and his family members, had started harassing the defendant No.1 by not giving approvals and insisted the defendant No.1 to do impossible works such as construction of tower of HLC canal bund and two towers adjacent to railway line. According to the defendant No.1 had not secured permissions from railway authorities for carrying out the works and C.S. Ganesh finally terminated the contract on 04.08.2007 and blacklisted the defendant No.1 and it was also alleged that not being satisfied instructed GESCOM to stop all the payments to the defendant No.1 vide letter No.5895/97 dated 27.08.2007, thereby paralyzing the progress and on account of stoppage of payment failed to perform all the contracts including the contracts awarded by GESCOM, thereby he was blacklisted 6 Com.A.P.No.88/2021 everywhere, for which the defendant No.1 challenged the order of termination and blacklisting before the Hon'ble High Court of Karnataka in W.P.No.13130/2007 and the Hon'ble High Court of Karnataka by its order dated 18.11.2011 quashed the order of blacklisting and did not interfere with the order of termination of contract and the defendant No.1 appointed the respondent No.4 as his nominee arbitrator and who has appointed respondent No.3 as its nominee arbitrator and both of them have jointly appointed the respondent No.2 as the presiding arbitrator since the defendant no.1 raised the dispute referred to KPTCL and the arbitral tribunal comprising the defendant No.2 to 4.
4. The plaintiff in its plaint has further alleged that the defendant No.1 sought for direction to make the payments for the completed portion of the works as per the assessment of the Field Officer without any liquidated damages/ penalties and suggested that the completed portions can be arrived at by deducting cost of the balance works mentioned from the total cost of the work without any liquidated damages and 10% of the cost balance work as loss of profit and to award interest @ 18% p.a. on the amounts withheld from the date of completion of the work til the date of payment and payments have been withheld for the completed works relating to other contract entered into with 7 Com.A.P.No.88/2021 interest @ 18% p.a. from the respective dates of completion and costs of the extra watch and ward provided to the materials at site at the rate of Rs.5,000/- per month per watchman for 3 watchmen for shift for 3 shifts per day from the original date of completion till the date of taking possession of the work site for a period of 18 months, 12 days and for sum of Rs.5,000/- per month for the additional expenditure which incurred in hiring 50 extra labour for a period of 18 months, 12 days and for compensation for loss of reputation, mental agony, book laws due to non-participation in the tenders anywhere since past 5 years and who has filed the objection stating that the defendant No.1 failed to execute the work with prompt as per the invitation to bidders and general conditions of contract and the defendant No.1 was require to furnish pert chart along with bar chart on the date of issuance of DWA and the defendant No.1 was require to achieve progress as per the pert and bar chart and the defendant No.1 was expected to strictly to the time schedule but failed to submit the pert chart and bar chart in spite of several reminders. On 01.07.2005 its engineers noticed that the defendant No.1 had deviated from the contract conditions and had commenced the work on its own without consulting the concerned engineers, for which objected the work taken by the defendant No.1 at the 8 Com.A.P.No.88/2021 station site without consulting its engineers, even after lapse of several months after the issuance of DWA notified that the defendant No.1 had not commenced the work as per the bar chart, even did not carried out project work according to the time schedule maintained in the charts and from time to time issued a several reminders instructing the defendant No.1 to adhere to the time schedule from 08.07.2005 till 13.02.2007 and various letters addressed to the defendant No.1 reminding about the dawdling progress of the work and the defendant No.1 contented that it was unable to complete the project due to delays in giving a clearance and during the execution of the contract the defendant used to issue false calls for inspection of the materials at factory and at site. When the officials of KPTCL visited the site, it was noticed that no materials as claimed by the defendant No.1 were available at the site for inspection, in some occasions the defendant No.1 used to address call letters for inspection of materials without issuing the purchase order/ invoices for having purchased the materials and could not go for inspection of materials since the defendant No.1 had failed to furnish proper invoices to show the materials were available at site and the defendant No.1 was also indolent in procuring the required materials for construction of station and line, though it was the 9 Com.A.P.No.88/2021 responsibility of the defendant No.1 to procure the materials required for the construction of line and station and the defendant No.1 could not procure the required materials, since the defendant No.1 gave an undertaking dated 02.02.2007 to the Executive Engineer (Electrical) MWD, KPTCL, Bellary undertaking to complete the station in all respects before 31.03.2007 and undertook to forego all his rights in the event of his failure to complete the station and line works by the said day, in spite of the said assurance failed to complete the construction of station and line even after 31.03.2007. Therefore, its subordinates issued a several reminders to the defendant No.1, gave details of the materials to be procured and informed to complete the procurement of the said materials on war footing basis and complete the works by mobilizing all men and materials required for the same and failed to respond its request dodging the reminders issued to the defendant No.1 and finally issued a notice on 21.07.2007 which was served on the defendant No.1 issued a reply on 03.08.2007 admitted substantial portion of the work is pending to be completed and sought time to complete the commissioning of the sub station and line.
5. The plaintiff in its plaint has further alleged the defendant No.1 did not fulfill its part of the obligation of completion of the 10 Com.A.P.No.88/2021 station and line on or before 31.07.2007 and constrained to terminate the contract by its letter dated 04.08.2007 in respect of the works awarded to the defendant No.1 and the defendant No.1 was blacklisted apart from terminating the contract and blacklisting ordered for encashing the bank guarantee immediately and EMD was paid by the contractor was ordered to forfeited and the amount payable for the work rendered was also ordered to be withheld for adjustments against the price of 1x10 MVA power transformer. So issued a letter dated 04.08.2007 seeking to encash the bank guarantee furnished by the defendant No.1 for sum of Rs.34,04,393/- in favour of the Chief Engineer (Electricity) Transmission Zone, KPTCL, Gulbarga, in response of the letter informed that he had not issued any bank guarantee in its favour. The defendant No.1 never issued any bank guarantee in favour of any person or persons since its inception there is no system in the bank to issue bank guarantees and the bank guarantees by the defendant No.1 are fake documents and signatures found on the bank guarantees are forged. FIR was lodged before the jurisdictional police at Bellary on 06.09.2007 against the proprietor of the defendant No.1 Ramachandra Reddy for furnishing fake and forged bank guarantees for sum of Rs.34,94,393/-, subsequent to lodging of the FIR the jurisdictional 11 Com.A.P.No.88/2021 police at Bellary prepared a charge sheet on 31.05.2009 and instituted criminal case bearing C.C.No.338/2010 before the II Addl. C.J. & JMFC 1st Class, Bellary on the ground of false and forged bank guarantees which is pending for adjudication and who has terminated the contract and blacklisted the defendant No.1 and the defendant No.1 took the possession of station site on 09.08.2007 and arranged security at the site. Thereafter issued a letter to the proprietor on 10.08.2007 requesting its representatives to be present at the station site on 20.08.2007 for taking joint survey of the work done/ materials at site and intimated vide fax letter must be given an advance notice of 15 days to enable him to come for joint inspection, thereafter issued a 2nd and 3rd reminders to the defendant No.1 on 24.08.2007 and 24.01.2008 requesting to be present at the site on 05.09.2007 and 11.02.2008 respectively for joint measurement and the defendant No.1 did not chose to appear for the joint inventory on 05.09.2007 and 11.02.2008 for joint inspection instead of address a letter dated 04.02.2008 contending that he was present for joint inspection on 24.08.2007 and there was no representative of the respondent at site and will not attend the joint inspection on 11.02.2008.
12 Com.A.P.No.88/2021
6. The plaintiff in its plaint has further alleged in spite of reminders for joint inspection its officials along with one M/s Vinay Security Services conducted the inspection of the materials at the station site on 11.02.2008 in the absence of defendant No.1 after the inspection the balance work for construction of station and line were estimated at Rs.1,38,62,636/- and Rs.29,45,590.31/- respectively amounting to Rs.1,68,08,226.31/- and supplied the materials to the defendant No.1 from its stores for a sum of Rs.21,59,000/- to carryout the work at the proposed station and line and at the time of inspection on 11.02.2008 its officials had noticed that the materials were neither utilized by the defendant No.1 nor they were available at site. After the termination of contract on 04.08.2007 preferred a writ petition before Hon'ble High Court of Karnataka, Bangalore in W.P.No.13130/2007 challenging the order of termination of contract and blacklisting of defendant No.1 and the said petition was transferred to Dharward Bench which came to be dismissed for non prosecution, subsequently restored the said W.P. and passed the order on 14.11.2011 was pleased to quash/ set aside the order of blacklisting of the defendant No.1 but did not interfere with the termination of contract and had not re-tendered the balance works due to the pendency of the writ petition re-tendered the 13 Com.A.P.No.88/2021 balance work to other contractors for completion of balance works and the pendency of the writ petition will not come in the way of getting the works completed through 3 rd party agencies and issued fresh DWA for completion of balance works for construction of station and line to the 3rd party contractor and who has raised the counter claim for sum of Rs.7,95,23,350/- and based on the pleadings the arbitral tribunal framed the issues and both have led their evidence and after conclusion of the evidence have filed the written submissions on 14.12.2015 and after hearing the arguments the arbitral tribunal vide its order dated 17.03.2017 pleased to appoint the Commissioner pursuant to the same the arbitral tribunal appointed K. Chandrashekar Reddy, Electrical Inspector to assess the value of the work completed by the defendant No.1 based on the materials placed before the arbitral tribunal filed his report and same was taken on record on 13.09.2017, after furnishing copy of the report filed by the Commissioner, arbitral tribunal directed to file their objection to the Commissioner report and the defendant No.1 filed his objection to the Commissioner report on 30.11.2017 and did not issue notice to the defendant No.1 or its counsel before executing the Commissioner warrant and the defendant No.1 has highlighted as to how the amounts arrived at by the 14 Com.A.P.No.88/2021 Commissioner or either erroneous or based on inadmissible documents and the defendant No.1 made a claim for recovery of sum of Rs.31,70,21,192/- and who has filed the fresh written submissions after the submission of Commissioner report and matter was reserved for passing of award with liberty to file a written submissions and who has also filed the detailed written submissions on 27.03.2018 along with application for permission to file the same and took the written submissions on record after more than two years from the date of reserving the matter for passing the award delivered two awards, one is the majority award which passed by the defendant No.2 and 3 and minority award which passed by the defendant No.4 and as per the letter dated 01.03.2020 presiding arbitrator communicated a back dated award dated 06.01.2020 and said award has been received on 16.03.2020 as per the majority award passed directed to pay sum of Rs.6,80,27,632/- along with interest @ 12% p.a. on the sums awarded from the dates mentioned in the award and cost of Rs.5,00,000/- under the heads and majority award directs to pay the amounts specified at Sl. No.1, 3, 4, 5, 6 and 7 at 12% p.a. from the date of termination i.e. 04.08.2007 till the date of payment and the award directs payment of the amount along with interest from 24.10.2004 till the date of payment. 15 Com.A.P.No.88/2021
7. The plaintiff in its plaint has further alleged the minority award passed by the defendant No.4 agreed with majority award on all aspects, except on the question of awarding interest to the defendant No.1 and regarding the jurisdiction of arbitral tribunal to pass award on claims which pertains to some other project which is not the subject matter of the arbitration between the parties. The minority award direct payment of the amount till the date of payment. The minority award directs the payment of interest @ 18% p.a. from 24.10.2004 till the date of payment. After passing of the award the defendant No.1 filed an application under Sec.33(3) and 33(4) of the Arbitration and Conciliation Act seeking rectification of certain typographical errors in both the arbitral awards and also seeking an additional award, due to the national lock down applicable was sent to the presiding arbitrator during the period April 2020 and the physical copy of the said application filed on 21.05.2020 and filed objections to the said application in June 2020 after the lifting of national lock down and the award has been corrected and sign copy of the award has not been furnished.
8. The plaintiff in its plaint has further alleged the defendant No.1 had challenged the majority award passed by the respondent No.2 and 3 in Com.A.P.No.2/2020 before the court of 16 Com.A.P.No.88/2021 Prl. District & Sessions Judge, Kalaburgi without waiting for any orders on the application filed under Sec.33(3) and 33(4) of the Arbitration and Conciliation Act 1996 for rectification of typographical error and for additional award and who entered the appearance before the court and filed an application for return of the petition on the ground that the court of the Prl. District & Sessions Judge, Kalaburgi does not have the territorial jurisdiction to entertain the challenge under Sec.34 of the Arbitration and Conciliation Act and by virtue of the decision of the Supreme Court the defendant No.1 submitted no objection to the application and accordingly the petition filed by the defendant No.1 in Com.A.P.No.2/2020 came to be returned for want of territorial jurisdiction for presentation before the appropriate court having the jurisdiction. Both majority and minority award passed by the arbitral tribunal has been passed on a wholly misplaced, erroneous and false reasoning and the award is illegal, perverse and it is an outcome of collusion between the defendant No.1 and the arbitral tribunal and both awards vitiated by fraud and corruption, thereby liable to be set aside. Being aggrieved by the majority award on 06.01.2020 as corrected on 24.03.2021 prefers to challenge the award under Sec.34 of the Arbitration and Conciliation Act for the following grounds; 17 Com.A.P.No.88/2021
GROUNDS A. The award is induced by fraud and corruption which is evidence from the contents of the arbitral award itself and the arbitral tribunal passed two awards majority and minority camouflage the fraud perpetuated in passing of the arbitral award and the arbitration is a creation of an agreement between the parties, the only disputes can be referred to the arbitration as per clause 48.1 of the general conditions of the contract or any dispute or differences arising out of or in connection with the contract. If any amount allegedly due are withheld under the different contract either by GESCOM or by the defendant No.1, the same cannot be subject matter of the arbitration and the dispute arisen in between them in connection with the present contract fraud and corruption in obtaining the arbitral award is apart from the fact in the majority passed by the arbitral tribunal.
B. The arbitral tribunal is obliged to pass awards within a reasonable time after completion of hearing and at the duties of the arbitrator to devote proper time for arbitration as the hearings were concluded in January 2018 and matter was reserved for passing of award and the defendant No.1 filed the written submission on 27.03.2018 and arbitral tribunal for the reasons which are not forthcoming in the award did not passed the award for more than two years.
C. Though the award dated 06.01.2020 communicated the award passed under the cover of letter dated 01.03.2020 and the majority as well as minority award are with antedated, there is an inordinate and unexplained delay for more than two years in passing the award which is not taken into consideration by the arbitral tribunal and the award in some of the claims places on reliance on the Commissioner report which is an outcome of collusion between the defendant No.1 and the Commissioner appointed by the arbitral tribunal and the presiding arbitrator nor the Commissioner appointed issued a notice nor counsel before undertaking the Commissioner work and Commissioner examined the documents and records in the office and prepared the report 18 Com.A.P.No.88/2021 in the presence of the defendant No.1. While examining the documents Commissioner took note of documents which were not on record and due to inducement on personal gain permitted the documents to be taken on record for examination and no notice has been given for verification of documents or preparation of the report by the Commissioner and the report was prepared in their absence and deliberately executed the Commissioner warrant and turned a blind eye to the conclusive act which is oppose to the fundamental policy of the country.
D. The arbitral tribunal has to decide the dispute in accordance with the substantive law for the time being in force in India and Sec.28(3) of the Arbitration and Conciliation Act provides arbitral tribunal shall decide in accordance with terms of the contract and the tribunal has considered neither substantive law nor the provisions of the agreement while passing the impugned award and acted beyond its jurisdiction which shocks the consciousness of the court.
E. The arbitral tribunal discarded the provisions of Sec.73 and 74 of the Indian Contract Act and the award which passed against the fundamental Indian law, justice and morality and arbitral tribunal has misdirected itself in not taking into consideration several material documents and non consideration of documentary evidence has resulted in perversity which is not in conformity with the law and the arbitral tribunal colluded with defendant No.1 passed the award and collusion between the presiding arbitrator and the defendant No.1 in all the more apparent from the facts and the defendant No.1 was found in the office of the presiding arbitrator on the days when the arbitral tribunal was not sitting and Commissioner violated principles of natural justice by not notifying the execution of Commissioner warrant and which is an outcome of collusion between the defendant No.1 and the presiding arbitrator, though objection has been filed to the Commissioner due to the corruption chosen to deliberately ignore the same and upheld the Commissioner report on the ground the Commissioner was not cross-examined. The award which passed is erroneous and mere initiation of the 19 Com.A.P.No.88/2021 proceedings by the Engineer in his official capacity cannot be a ground to interfere animosity between the defendant No.1 and C.S. Ganesh and the arbitral tribunal has misdirected itself in accepting the contention and proceeded to erroneously hold that the termination of contract is illegal and the arbitral tribunal has erred in awarding sum of Rs.50,00,000/- towards the mental agony and a sum of Rs.50,00,000/- towards the loss of reputation. The defendant No.1 neither pleaded nor adduced evidence to show that he has suffered nervous shock and claim for mental agony and loss of reputation not maintainable, however on account of corruption passed the award and passed the award by observing the damages towards mental agony and loss of reputation was not awarded in the case relied by the defendant No.1 as the same was not proved. The award under the heads loss of reputation and mental agony is contrary to the decision of the Supreme Court and it is settled law that the judgment must not be construed as status and the observation made in the judgment must be read in the context in which they appear and not read the judgment and proceeded to copy paste the portions of the judgment from the written submissions.
F. The arbitral tribunal erred in awarding sum of Rs.2,09,66,354/- towards the book laws allegedly suffered and the defendant No.1 has not quantified the alleged book laws at the time of filing the claim statement and failed to appreciate the law laid down by the Hon'ble Supreme Court which reported in 2015(4) SCC 136 in a proper prospective manner. There is no basis for the claim and the assumption on which the claim is made is preposterous more so and the arbitral award copied and pasted the written submission and the defendant No.1 has miserably failed to prove that earned profit Rs.90,00,000/- per annum for the next 23 years as the blacklisting is only for 4 years and arbitral tribunal without any basis and the same has been devised only with a view to benefit the claimant on account of collusion between the arbitral tribunal and the defendant No.1. G. The arbitral tribunal has wholly misdirected itself in assuming the total value might execute would be 34,94,39,240/- 20 Com.A.P.No.88/2021 and the arbitral tribunal has committed an error in ascertaining the amount payable under the head at Rs.2,09,66,354/- and the incompetency of the tribunal in arriving at the figures is evident from the fact that the arbitral tribunal has not bothered to ascertain whether the project referred to in the award were being executed during the financial year. The arbitral tribunal has misdirected itself in issuing direction against the defendant No.1 to release the payment in relation to other project which were withheld and a reading of award would indicate that the arbitral tribunal has refer to payments that were withheld by GESCOM in connection with the project that was purposefully executed by the claimant and the arbitral tribunal in the guise of issuing direction to release the payments which are subject matter of entirely different arbitration proceedings before the different arbitral tribunal and the arbitral tribunal could not have issued any general directions to release the payments with 12% interest and erroneously opined that Sec.7 of the Arbitration and Conciliation Act does not fix the boundaries of the arbitrator. The arbitral tribunal lacks the competency to consider or look into the dispute which do not arise out of the agreement and the arbitral tribunal being the creature of an agreement between the parties cannot adjudicate any disputes arising in relation to a totally different project merely on the premise that the disputes are precipitated by the blacklisting of the defendant No.1 and the award which passed by the majority of the arbitrators is erroneous and liable to interfered and the arbitral tribunal ignored the fact that the rates of interest have been falling regularly since 2012 and failed to consider the law laid down by the Hon'ble Supreme Court.
H. The arbitral tribunal failed to consider that there is no agreement between the parties to pay interest @ 12% and the arbitral tribunal being a creation of agreement cannot be award interest contrary to the intention and agreement to the parties. The impugned award is unsustainable and is liable to be set aside.
21 Com.A.P.No.88/2021
I. The arbitral tribunal has misdirected itself in awarding cost of Rs.5,00,000/- and arbitral tribunal did not direct payment of any fee to the Commissioner appointed at the request of the defendant No.1 and the arbitral tribunal has misdirected itself in concluding that the photocopies of the bank guarantee instead of producing original bank guarantee while invoking the same and the tribunal has taken to make certain uncharitable remark which is liable for set aside.
J. The arbitrators have referred to a completely irrelevant document in reaching to the conclusion that the bank guarantees cannot be termed as fake, when a criminal case is pending. That Ex.C.83 referred to in para No.17.11 of the majority award dated 03.11.2004 long before issue of letter of intent in favour of the 1 st defendant and it does not pertain to genuineness of bank guarantee and the reasons assigned by the arbitral tribunal to refrain from deciding whether bank guarantees furnished by the claimant are fake or genuine is not supported by cogent reasons.
K. The arbitral tribunal erred in awarding a sum of Rs.4,97,346/- in favour of the defendant No.1 towards crop compensation on the premise that the same was given by the 1 st defendant to the land owners, the arbitral tribunal has arrived the figure solely on the basis of Commissioner report which is not permissible under law and the arbitral tribunal has not bothered to verify if any documents have been placed before it to corroborate the crop compensation allegedly paid by the 1st defendant and the observation of the arbitral tribunal that has not chosen to cross-examine C.W.1 is misconceived as there is no question of cross-examination of C.W.1 if the documents on record do no corroborate the claim.
L. The arbitral tribunal erred in observing that since has assessed the crop compensation paid by the 3rd party contractor at Rs.3,31,564/- and the Commissioner was justified in assessing the entitlement for crop compensation at 1 ½ times of the amount assessed for the 3rd party contract solely on the premise that the defendant No.1 has executed both concreting and erection works. The observation is without any basis and the 22 Com.A.P.No.88/2021 document on which the Commissioner has relied does not pertain to the works executed by the 1st defendant in the absence of any direct evidence to show that the defendant No.1 has paid the compensation to the farmers. Therefore, the reasons which assigned by the majority arbitrators is not in accordance with law.
M. The arbitral tribunal copied the written arguments of the 1 defendant while dealing with the issue relating to whether the st claimant is entitle to extra watch and ward and overheads and has merely rejected the contention and the defendant No.1 has neither pleaded nor claimed the amounts under the said head on the basis of Hudson formula and in the absence of the pleadings, reliance on Hudson formula by the arbitral tribunal is misplaced and erred in applying Hudson formula.
N. The arbitral tribunal erred in awarding additional expenditure purportedly incurred for providing watch and ward and additional expenditure purportedly incurred on providing labour at work site from 06.02.2006 till 04.08.2007 on the basis of Hudson formula and the arbitral tribunal has deliberately misread the contention which raised in para No.100C of written arguments and the award on this regard is a non speaking award because no reasons are assigned by the arbitral tribunal to justify the application of Hudson formula for the claim.
O. The arbitral tribunal has blindly accepted the contention of the defendant No.1 has not examined Asma Kathoon, Kum. Gayathri and Giridhar Singh who are the Field Officers during the contract period after realizing that these witnesses would go against with respect to extra watch ward, idle labour and crop compensation, when the defendant No.1 failed to discharge the burden cast on it to prove the claim the award which made by the arbitral tribunal is nothing but collusion with the defendant No.1. P. The observation which made by the arbitral tribunal in respect of Ex.C.167-A to S are proved is erroneous has made an unwarranted comment has attempted to mislead the tribunal. The defendant No.1 neither produced book of accounts nor the 23 Com.A.P.No.88/2021 income tax returns to show the expenses which claimed and the arbitral tribunal has deliberately ignored the admissions in the cross-examination of the C.W.1 and failed to appreciate its contention in a proper prospective manner.
Q. The arbitral tribunal ignored Clause 18.0 of erection conditions of contract which provide that the defendant No.1 shall have total responsibility for all equipments and materials on his custody/ stores loose semi assembled are erected by him at site. The rates which quoted by the defendant No.1 for erection will also include the expenses that may have to be incurred for the security of the materials and the obligation to secure the materials at site continuous still the works are taken over and the rates quoted by the 1st defendant includes cost of providing security at site. The arbitral tribunal was not justified in allowing the said claim.
R. The claim which awarded by the arbitral tribunal for watch and ward though not entitle by the defendant No.1 which is liable to be interfered by this court since the reasons which assigned by the arbitral tribunal on this aspect is not in accordance with law.
S. The arbitral tribunal erred in relying upon the award passed by other tribunal in the dispute between the same parties and the arbitral tribunal is not a court of record and decision of another arbitral tribunal cannot be relied upon to allow the claims in another disputes between the same parties before a different arbitral tribunal.
T. The arbitral tribunal failed to appreciate the claim for idling of labour at station as well as line could not have been raised by the 1st defendant since the contemporaneous documents placed before the arbitral tribunal reveal that their officials have repeatedly advised the 1st defendant to undertake the works in the right earnest and complete the same without delay. The arbitral tribunal has committed manifest error in holding that the defendant No.1 is entitle to 15% of the total cost of the project. 24 Com.A.P.No.88/2021
U. The arbitral tribunal failed to appreciate the facts in a prospective manner and erred in allowing the claim of the defendant No.1. So the award which passed by the arbitral tribunal is not in accordance with law, without considering general condition of the contract, even though the defendant No.1 has not produced any materials to show his claim even then the arbitral tribunal awarded the claim.
V. The arbitral tribunal has applied Hudson formula for determining the claims under the head as the documents produced in support of the claims nor considered the admissions during the cross-examination and non production of book of accounts and income tax returns are not taken into consideration by the arbitral tribunal nor drawn an adverse inference against the defendant No.1 for withholding the material documents which would have bearing on the decision of the issue.
W. The arbitral tribunal erred in awarding a sum of Rs.10,92,380/- towards loss of profit to the defendant No.1 and the arbitral tribunal has dealt with the contention which is a non speaking award and merits to interference at the hands of this court and the claim for loss of profit must be established by adducing cogent evidence, but the tribunal has not taken into consideration of the said aspect and the award which passed by the arbitral tribunal is erroneous.
X. The arbitral tribunal has concluded the claim of the defendant No.1 for 10% of the balance work is not unreasonable and claim does not require further materials of evidence for proof of quantum of loss of expected profit and the tribunal has misdirected itself in concluding that the defendant No.1 is entitled a sum of Rs.10,92,318/- along with interest @ 12% p.a. from the date of termination till the date of payment is liable to be interfered by this court.
Y. The arbitral tribunal erred in directing to refund the earnest money deposit of Rs.2,65,000/- along with interest @ 12% p.a. from 04.08.2007 due to corruption and collusion with 25 Com.A.P.No.88/2021 the 1st defendant but the arbitral tribunal has ignored the overwhelming evidence on record which indicate that the 1st defendant was unable to complete the work despite granting numerous extensions and has only referred to the contentions raised by the defendant No.1 in the written submissions.
Z. The arbitral tribunal erred in not noticing the clause 45 of the general conditions of contract has no application in the facts and circumstances of the case and the contract has been terminated on account of contractors repeated defaults in completing the works. Therefore, clause 44 is attracted in facts of the present case which is not taken into consideration by the arbitral tribunal and the arbitral tribunal fails to advert to the documentary evidence placed on record and also fails to take note of its contentions.
Za. The arbitral tribunal has made unwarranted and uncharitable observations that he was attempting to mislead the arbitral tribunal by suppressing sentence in the judgment rendered by the appellate tribunal for electricity in the case of BESCOM vs Davanagere Sugar Co. Ltd., and KERC reported in 2010 ELR (APTEL) 0744 and the arbitral tribunal erred in accepting the contention of the 1 st defendant stating that he did not have the power to terminate the contract as the contractors were awarded to the 1st defendant pursuant to the approval of the board, but the arbitral tribunal rejected its contention without applying its mind and erred in accepting the contention of the defendant No.1 that the then Chief Engineer C.S. Ganesh had became inimical towards the defendant No.1 and the arbitral tribunal has not considered its contention in a prospective manner.
Zb. The arbitral tribunal erred in concluding that the then Chief Engineer does not have the territorial jurisdiction to blacklist the contractor beyond his jurisdiction and failed to appreciate the fact that issue relating to blacklisting cannot be linked with termination as the question as to whether the claimant was blacklisted or not has already been considered by the Hon'ble High Court of Karnataka in W.P. 13130/2007. 26 Com.A.P.No.88/2021
Zc. The arbitral tribunal has erred in accepting the contention of the defendant No.1 that the delay in approving the earthing materials was delayed the project but the arbitral tribunal has not taken in to consideration of the materials which placed on record and erred in accepting the contention of the defendant No.1 that there was a delay of 5 months and 6 days in approving the layout plan and the award is replica with several instances if the arbitral tribunal copying the written arguments of the 1st defendant presenting it as an award of the arbitral tribunal and the Commissioner has prepared the report for the convenience of the 1st defendant by placing the reliance on disputed documents and the documents which were not permitted to be marked in evidence and erred in accepting the conclusion of the Commissioner. When the Commissioner report is itself is inadmissible in evidence which cannot be taken into consideration, even then the arbitral tribunal relied the Commissioner report. Therefore the arbitral tribunal has committed an error blindly accepting the Commissioner report without considering its objection to the said Commissioner report.
Zd The arbitral tribunal erred in accepting the Commissioner report, without considering its objection filed on record and the arbitral tribunal accepted the Commissioner report only because of corruption and due to collusion with the 1st defendant. Therefore, the award is liable to be interfered by this court.
Ze. The arbitral tribunal has failed to appreciate the materials on record which produced and the award which passed by the arbitrators is contrary to the law laid down by the Hon'ble Supreme Court and the Commissioner was not justified in concluding the value of the materials supplied by the defendant No.1 without considering the value of the materials actually supplied and the arbitral tribunal on account of collusion accepted the report of the Commissioner and the attempt of the Commissioner to include certain items of works constitutes a serious misconduct on the part of the Commissioner, though there is no material on record to indicate that the 1 st defendant 27 Com.A.P.No.88/2021 has supplied the materials and erred in accepting the Commissioner report by ignoring his objections which raised.
Ze. The arbitral tribunal has not made any attempts to ascertain the delays caused by the 1st defendant in completion of the work. Therefore, the finding of the arbitral tribunal on this aspect is erroneous and ignored the materials on record and held that the 1st defendant unable to complete the work in time for want of permission from railways authorities based on the self serving letters of the 1st defendant and erred in concluding that had obtained the permission or clearance from the canal authorities and the arbitral tribunal has mechanically reproduced the written arguments of the 1st defendant in the award and the arbitral tribunal has not referred any of the provisions of the Indian Telegraphic Act nor any other statute which mandates that the permission from a canal authorities is required to be obtained under the Indian Telegraphic Act and the tribunal erred in directing to adjust the TDS to be deducted for the payments to be made in terms of the arbitral award, against the TDS that was deducted from the payments made against the bills which submitted by the 1st defendant solely on the ground that he had not issued TDS certificate to the 1 st defendant and erred in rejecting its counter claim without considering the materials on record and the award is mere reproduction of the written arguments of the 1st defendant without adverting to its contention and prays for allow the suit and set aside the award dated 01.03.2020 as corrected/ modified on 24.03.2021 passed by the respondent No.2 to 4.
9. In response of the summons the respondent No.1 has appeared in person and the respondent No.2 to 4 who are the presiding arbitrator and co-arbitrators. The defendant No.1 being the claimant before the arbitrators filed his objection to the petition under Sec.34 of the Arbitration and Conciliation Act which 28 Com.A.P.No.88/2021 filed by the plaintiff stating that the suit which filed by the plaintiff is not maintainable in law or on facts which is deserved for dismissal and the plaintiff has filed the instant suit with a malafide intention to protract the proceedings and to harass him and the plaintiff has exceeded the scope of Sec.34 of the Arbitration and Conciliation Act, as the plaintiff sought for re- appreciation of the evidence which is impermissible under law. On this ground alone the suit which filed by the plaintiff is deserved for dismissal and the plaintiff has not complied the mandatory provisions as required under Sec.34 of the Arbitration and Conciliation Act. The plaintiff is a guilty of breach of contract in as much as the recession of a contract held to be unjustified by all the arbitrators having no other efficacy now making grave allegations that the judgment is vitiated by corruption which is a bald, baseless, unwarranted and always condemnable statement made to cover up its lapses and all the allegations which made by the plaintiff are false and the plaintiff has to strict proof of the same and the present suit has been filed by the plaintiff is not maintainable and award has been passed by the majority of the arbitrators in his favour by awarding the compensation and the plaintiff has filed the instant suit to cover up its illegality which committed and to gain illegal excess estimated amount it has re- 29 Com.A.P.No.88/2021 tendered the contract ignoring the mandatory provisions of the transparency act and to cover up its illegality it has intentionally not produced the item wise details to the DWA's i.e. detail work award of the 2nd contractor in the arbitration proceedings and he has gone to the extent of misleading the Hon'ble High Court to gain illegal access estimated amount and cost of the balance work after termination of the contract awarded has been estimated as submitted and the plaintiff has stated that the estimated cost as per the schedule of rates 2011 is of Rs.3,80,46,523.65/- for which no supporting document has been produced before the tribunal and the plaintiff to cover up its corrupt practice, continuously alleging that the award is vitiated by corruption and the allegation of fraud and corruption which made by the plaintiff in all paras are totally false, according to the plaintiff the cost of the balance work as submitted to the tribunal for Rs.1,68,08,226/- and the alleged cost of completion of the balance work as claimed in the counter claim by the plaintiff is of Rs.3,37,77,000/- and the difference a sum of Rs.1,69,68,774/- is alleged extra burden incurred to the plaintiff in completing the balance work and the plaintiff should claim only alleged extra burden a sum of Rs.1,69,68,744/- instead Rs.3,37,77,000/- and the plaintiff has executed the balance work through 2 nd contractor 30 Com.A.P.No.88/2021 after 6 years from the date of termination of the contract awarded to him and after 3½ years from the date tender notification which it agreed to complete in 90 days. The plaintiff miserably failed to rebut his evidence placed before the tribunal and the tribunal carefully considered the rival contentions which raised and produced while passing the award and he has stated para No.1 to 6 of the plaint are not traversed separately.
10. The defendant No.1 in his objection statement has alleged the averments which pleaded by the plaintiff in para No.7 to 17 which are already raised before the tribunal same has been traversed by him and the averments which made in para No.18 and 19 are the issues framed by the tribunal with the consent of the parties and need not be traversed separately and para No.20 of the plaint in all the averments of the plaintiff and contended in its objection statement to the Commissioner report filed on 30.11.2017 and the Commissioner has not issued any notice to the plaintiff before executing of the Commissioner warrant and played fraud is unsustainable and the Commissioner has concluded the quantities and amounts based on the documents which filed by both the parties and submitted the report and none of them were chosen for cross-examination of the Commissioner and after hearing of the parties and perusal of the documents, 31 Com.A.P.No.88/2021 the arbitrators accepted the Commissioner report as proper and the averments which made in para No.21 to 26 of the plaint are materials on record and need not be traversed separately and the allegations made in para No.27 are illegal, perverse and the grounds which urged in the suit challenging the majority award which is not maintainable and para No.28.1 of the plaint that the averments of the plaintiff stating that the arbitrators have traveled excess of jurisdiction in spite of conjoined reading of clause 48.1 of the general conditions of the contract and Sec.7 of the Contract Act are totally false and absolutely no basis to allege the same and the dispute has been resolved by the majority award and the instant suit which filed is not maintainable and the plaintiff has not mentioned anywhere that the payments with respect to other projects were withheld for any other reason except to cover alleged losses in the present two contractors in completing the balance work and the termination of the agreement itself is bad in law. So who is entitled all the payments pertaining to the two projects in question and other projects, though the plaintiff has made the allegation about the fraud and corruption in obtaining the majority award which is totally false and the plaintiff has pleaded the said facts only with an intention to mislead the court and the allegations which made in para 32 Com.A.P.No.88/2021 No.28.2 of the plaint that the arbitrators have not passed the award in a prospective manner which is totally false as the award which passed in a proper not liable to be set aside and the allegations which made by the plaintiff in para No.28.3 stating that the Commissioner report and the proceedings conducted by the arbitrators are false, but the said facts which alleged is cover up its illegal things and the arbitrators have strictly followed the ingredients of Sec.26 of the Act in so far obtaining the expert opinion and the award is not opposed to the fundamental policy of India and not liable to be set aside and the facts which pleaded in para No.28.4 to 17 in the suit is only to cover up its illegal things and the arbitrators were passed the orders in accordance with law by following the procedures and the allegations which pleaded by the plaintiff are totally false and the plaintiff has to strict proof of the same and the tribunal has not disregarded the provisions of Sec.73 and 74 of the Indian Contract Act and the tribunal considered the Commissioner report in accordance with law and the plaintiff nowhere stated the Commissioner has to notify the parties before inspecting the documents and it is the duty of the counsel to follow up the Commissioner and the Commissioner executed the work in accordance with law and the report which filed by the Commissioner is proper and the tribunal 33 Com.A.P.No.88/2021 accepted the Commissioner report and the finding of the tribunal is based purely on evidence and the award which passed is proper and the contention which raised by the plaintiff are faraway from truth and he has proved the torture given by the plaintiff and the arbitrators have taken into consideration regarding the act which done by C.S. Ganesh and the plaintiff has pleaded the corruption in the suit only with an intention to cover up its lapses and the arbitral tribunal after considering the materials on record passed the award and the plaintiff has illegally directed the M.D. GESCOM to withheld the payment which is evident from the materials on record and the arbitrator after considering those aspects passed the award and the arbitrators have rightly decided that the plaintiff is liable to pay the claim which sought by him and the plaintiff has made false allegations and no illegality has been proved by the defendant and the arbitral tribunal consisting of one session judge (retd.) and two advocates and majority of the arbitral award is clear that the arbitrators after considering the materials on record passed the award and the plaintiff has made allegation that he has not issued any notice claiming the interest which is faraway from truth, since the plaintiff withheld the payments without any valid reasons, since he has borrowed the money from the banks and 34 Com.A.P.No.88/2021 other finance, thereby the respondent is liable to pay interest @ 18% p.a. compoundable quarterly.
11. The defendant No.1 in his objection statement has alleged that it is not exorbitant on the part of the majority arbitrators to award 12% rate of interest from the date of cause of action till the payment and the facts which pleaded by the plaintiff in para No.28.3 are totally false and cost of the arbitration means which includes fee and expenditure of arbitrators and other charges and denied the majority of the arbitrators have not assigned any reason to award compensation and fee of the co-arbitrator Ramakrishna Bhat chosen by the plaintiff is fixed at Rs.10,000/- per sitting payable by the plaintiff and same fee of Rs.10,000/- applies to the co-arbitrator chosen by him and the presiding arbitrator fixed Rs.2500/- payable by each party and the judgment writing charges at Rs.75,000/- payable by each party and he has been directed to pay charges of the Commissioner of Rs.5000/- and the said facts reduced into writing by the tribunal. Now the plaintiff has alleging that the tribunal has not directed any fees payable to the Commissioner and who has not provided any account fee paid by him to the Commissioner which is nothing but misleading the court and more than 50 sittings were taken place to pass the majority 35 Com.A.P.No.88/2021 award and majority arbitrators have awarded the considering sittings and the plaintiff failed to prove any of the issues and the bank guarantee has been provided in favour of the plaintiff is that in case of any loss is incurred to it due to breach of contract and extra cost if any in completing the balance work and the said loss will be made good by encashing the bank guarantees and the tribunal considered the materials on record while concluding the genuineness of the bank guarantee and the award which passed is proper not liable to be set aside and also denied the facts which pleaded by the plaintiff as pleaded in the statement of objection by denying the allegations and prays for dismiss the suit.
12. The learned counsel for the plaintiff and the defendant No.1 were filed the written arguments.
13. Heard arguments on both sides.
14. The points that arise for court consideration are as under:
1. Whether the plaintiff has made out any of the grounds which are enumerated under Sec.34 of the Arbitration and Conciliation Act to set aside the award?
2. What order?
15. My answer to the above points are as under:
Point No.1: In the Negative;36 Com.A.P.No.88/2021
Point No.2: As per final order, for the following;
REASONS
16. POINT NO.1: The plaintiff being the respondent and the defendant No.1 being the claimant before the arbitral tribunal, feeling aggrieved by the majority award approached the court on the ground that the plaintiff called the tender on 13.09.2004 for the purpose of construction of 1x10 MVA substation at Kudithini in Bellary Taluk & District and its associated 110 KV line among the tender quoted others, the defendant No.1 quoted the lowest rate and his bid was accepted and contract was awarded to the defendant No.1 and after accepting the contract entered into an agreement on 02.02.2005 and after release of detailed work award started executing the contract work entrusted but could not complete the project which was entrusted and the delay was caused on the part of the defendant No.1 and the dispute was arose in between them and one C.S. Ganesh has been appointed for the project and who filed the complaint against the defendant No.1 which was came to be registered, later on ended with acquittal and delayed for giving the approvals and the defendant No.1 did not execute the work which was entrusted within time, thereby notice has been issued and terminated the contract and blacklisted the defendant No.1, thereby arbitral proceedings has 37 Com.A.P.No.88/2021 been initiated and after hearing the arguments on both side, passed the award. Feeling aggrieved by the said award, the plaintiff being the respondent before the arbitral tribunal has filed the instant suit.
17. The learned counsel for the plaintiff in his arguments has submitted that the plaintiff has filed the instant suit challenging the award passed by the arbitral tribunal consisting of defendant No.2 to 4 and the instant suit has been filed challenging the award which passed by the majority award and the facts which pleaded in the plaint falls within the purview of Sec.34 of the Arbitration and Conciliation Act. The KPTCL is a company fully owned by the Government of Karnataka prior to 01.06.2002 KPTCL was engaged in transmission as well as distribution of electricity in the State of Karnataka reform measures coming into place the business of distribution has been taken over by 5 distribution companies. KPTCL is now vested with the responsibility of transmitting power all over the State of Karnataka and construction and maintenance of sub-stations and lines of 66 KV and above. The plaintiff invited the bids from interested bidders for construction of 110KV loop-in loop-out line from existing Munirabad-Bellary line to proposed 110KV sub-station at Kudithini in Bellary taluk and District on 13.09.2004 for establishing 1x10 38 Com.A.P.No.88/2021 MVA-110/11 KV sub-station at Kudithini in Bellary Taluk on a turnkey basis. The defendant No.1 claiming to be the contractor engaged in the construction of transmission lines and establishing sub-station participated in the tender floated by the plaintiff for construction of 110KV Lilo from existing Munirabad-Bellary S/C line to proposed sub-station at Kudithini in Bellary Taluk and for establishing sub-station at Kudithini on turnkey basis. The bid which quoted by the defendant No.1 was accepted and the project for construction of station and line was awarded to the defendant No.1, the total value of the substation and line works awarded to the defendant No.1 amounted to Rs.2,52,54,963.35/- and Rs.96,88,961/- respectively. The work of construction of substation was divided into three portions, i.e. supply of materials, erection and civil works and the plaintiff issued 3 separate letters of intent dated 19.01.2005 notifying the intention to award the contract to the defendant No.1 and in so far as line works, the works inter-alia involved supply of materials and erection for which two separate letters dated 19.01.2005 were issued and issued two separate letters dated 20.01.2005 confirming the acceptance of the terms of the letter and entered 3 separate agreements for supply of materials, erection and civil works dated 29.01.2005 and entered into two separate agreement for supply of materials and erection 39 Com.A.P.No.88/2021 and the agreements were entered into on 02.02.2005 and the defendant has to furnish irrevocable and unconditional bank guarantee to the extent of 10% of the contract value for due performance of station and line works. Accordingly the defendant No.1 furnished the bank guarantees dated 29.01.2005 from Tungabhadra Krushi Sahakara Bank Niyamitha, Sangankal, Bellary District amounting to Rs.25,25,496/- for the works relating to construction of station and Rs.9,86,897/- in respect of the line works. After the agreement was entered into between the defendant No.1 and the plaintiff issued a detailed work award. As per the terms and conditions of the contract agreement the defendant No.1 was oblige to undertake the construction of station and line strictly in terms of the contract and the period of completion of project was fixed as 12 months including the monsoon season. The period of completion of supply of materials was 12 months from the date of acceptance of the letter of intents and the target date was scheduled on 19.01.2006, however the stipulated period for completion of erection portion was 9 months from the date of acceptance of the letter and the defendant No.1 did not complete the work as per the agreement, in spite of repeated reminders and request, thereby contract was terminated and blacklisting the 1st defendant and the 1 st 40 Com.A.P.No.88/2021 defendant has been appeared before Hon'ble High Court of Karnataka in W.P.No.13130/2007 and the Hon'ble High Court of Karnataka quashed the order of blacklisting and did not interfere with the order of termination of the contract passed by the plaintiff and the defendant No.1 appointed defendant No.4 as his nominee arbitrator and the plaintiff appointed the defendant No.3 as its nominee arbitrator and both of them have jointly appointed the defendant No.2 as the presiding arbitrator and they have passed the award and the majority of the award which passed by the arbitrators is not in accordance with law, since the arbitrators have not taken into consideration not only admission of the parties but also materials which placed on record and they have reproduced the written arguments which produced by the defendant No.1 in the award, though the defendant No.1 has not produced any document to show that he has paid amount to the land owner, even then the tribunal awarded the compensation. When the defendant No.1 has not completed the work in terms of the contract thereby the agreement has been terminated by issuing a notice in terms of the contract and the claim No.8, 9 and 10 does not arise, even then the tribunal taken into consideration and Commissioner has been appointed who filed the Commissioner report without subjecting him for cross-examination 41 Com.A.P.No.88/2021 nor granted the opportunity considered the report of the Commissioner which is not in accordance with law and against to the principles of natural justice. Though the arbitrators were heard the arguments and they did not passed the award and delay in passing the award is also ground for interference of this court and the defendant No.1 had filed the written arguments before the arbitral tribunal, same has been copied by the arbitrators to pass the award and the arbitral tribunal has not passed the independent award as it is copied the written arguments which filed by the defendant No.1. Though Sec.27 empowers the arbitration to take the assistance of the Commissioner, but no opportunity has been granted for subjecting the Commissioner for cross-examination and there is no link between page No.36 and 37 of the award and the finding of the tribunal which on record is without any materials which amount to patent illegality and the work was not completed for 2 years 2 months which was not taken into consideration by the arbitral tribunal and the documents which placed on record are not taken into consideration by the arbitrators. The arbitrators instead of consider the oral and documentary evidence on record, they have copied the written arguments which filed by the defendant No.1 and the Ex.C.25, 27, 28 and 40 are not the letter of the 1 st 42 Com.A.P.No.88/2021 defendant which was not taken into consideration by the arbitrators and the conclusion of the arbitration is nothing but the para No.2 of the written arguments which filed by the defendant No.1 and only order has been placed but transformer never come to the spot which was not taken into consideration by the arbitrators, though arbitrators assumes which was not in existence nor on record in the absence of evidence and statement the arbitrators were come to the wrong conclusion and the para No.7.25.2 of the arbitral award replica of the written arguments which filed by the defendant No.1 and the arbitrators have not taken into consideration of Ex.R.28 while passing the award. Ex.R.32 is the letter which was sent by the defendant No.1 and railway line was erected, it is the obligation on the part of the defendant No.1 to obtain the permission from concerned authorities which was not taken into consideration by the arbitral tribunal and the entire findings which recorded by the tribunal is nothing but reproduction of the written arguments which produced by the 1st defendant and the reasons which recorded by the arbitral tribunal falls within the purview of Sec.34 of the Arbitration and Conciliation Act, though blacklisting period is only 4 years, but the tribunal has taken into consideration as 10 years which is apparently patent illegality which committed by the 43 Com.A.P.No.88/2021 tribunal. Though some facts which are not pleaded but the tribunal has taken into consideration non-pleaded facts, thereby the plaintiff has no opportunity to cross-examine those facts and the finding which recorded to the issue No.9 is contrary to the pleadings and the arbitral tribunal has not taken into consideration of the terms and conditions of the contract which taken place in between the parties and no notice has been issued to the Commissioner, nor examined to find out the truth in the report which filed by the Commissioner report and the interest which awarded is in the higher side and no reasons has been assigned to award the interest @ 18% p.a. and in respect of the finding on issue No.13 relating to the bank guarantee, the bank guarantee which alleged to have been produced by the 1 st defendant is a fake and no finding has been given by the arbitral tribunal and which has to be decided by the civil court, since the matter is pending before the civil court and the defendant No.1 failed to execute the work which was entrusted is not taken into consideration by the arbitral tribunal and no finding has been recorded in respect of the bank guarantee, therefore the said issue is liable to be set aside and the materials which supplied by the plaintiff to defendant No.1 has not been utilized which not taken into consideration by the arbitral tribunal. Though the 44 Com.A.P.No.88/2021 counter claim which filed by the plaintiff was came to be rejected, at the same time the award has been passed in favour of the defendant No.1. When the claim of the plaintiff was barred by limitation, at the same time the claim which made by the defendant No.1 is also barred by limitation which was not taken into consideration by the arbitral tribunal and the defendant No.1 has not examined any of the witnesses in his favour to claim the amount, but it was not taken into consideration by the arbitral tribunal for non examination of the material witness and the tribunal can draw the adverse inference against the defendant No.1, but the tribunal has not drawn any adverse inference against the defendant No.1 for non-examination of the material witness and there is no application of mind by the arbitrators without considering the materials on record. Though the plaintiff has placed the substantial materials for the counter claim but the tribunal has dismissed the counter claim on the ground of limitation. When the claim petition was came to be allowed, but at the same time the counter claim ought to be allowed instead rejected the counter claim only on the ground of limitation which is against to the law, the claim and the counter claim based on the written submission of the defendant No.1 was came to be dismissed by the arbitral tribunal in respect of the counter claim 45 Com.A.P.No.88/2021 and the Commissioner has been appointed and who submitted the report, for which both parties were also filed the objections, but it was not taken in to consideration by the arbitrators to allow for cross-examination of the court Commissioner to find out the truth in the report filed by the Court Commissioner and delay in completion of the work and delay in obtaining the permission from the concerned authorities is on the obligation of the defendant No.1, but it was not taken into consideration by the arbitral tribunal and written submission of the defendant No.1 in page No.26 word by word has been copied by the arbitrators and July month is the monsoon season, that is the reason why work was not done only after monsoon work has been started. Canal authorities permission has not been obtained by the defendant No.1, it is the obligation on the defendant No.1 to obtain the permission from the canal authorities to execute the work which is not taken into consideration by the arbitral tribunal and the railway authorities have not given any instruction to stop the work which was not taken into consideration by the arbitrators and the arbitral tribunal has ignored vital admissions of the parties during the cross-examination and not taken into consideration by the communication of the plaintiff dated 27.06.2006. As per Ex.R.42 and minutes of meeting dated 11.01.2007 as per Ex.R.43 and the 46 Com.A.P.No.88/2021 balance work has been entrusted to other contractors to complete the balance work, though this fact was brought to the notice of the arbitrators which was not taken into consideration by the arbitrators, though the plaintiff had filed the objection to the Commissioner report but the tribunal has not taken into consideration while passing the award and the tribunal has not given any finding on the Commissioner report and it is the duty of the Commissioner has to execute the work for the purpose which was appointed and to value of the work which executed by the defendant No.1, but the valuation of the work which alleged to have been executed by the defendant No.1 is for the intention to help the defendant No.1 and the Commissioner has to assess the value of the quoted amount of the claim amount not the subsequent allocation of work quotation amount to the 3 rd party, but the tribunal has not taken into consideration of the value of the quoted amount of the claim, but considered the subsequent allocation of work quantum amount which is against to the law and the running bill of the contractor is the base for assess the work which executed by the contractor which was not taken into consideration by the tribunal while passing the award and the Commissioner has not stated the amount which paid by the plaintiff to the defendant No.1, though the defendant No.1 has 47 Com.A.P.No.88/2021 requested the officials of the plaintiff for inspection of the materials whenever the officials were visited site for inspection and they were not found the materials on the site, though objection has been filed to the Commissioner report, the arbitrators have not summoned for cross-examination nor allowed to file application by the plaintiff and there is a variation of Rs.1 crore in the Commissioner report and no notice has been issued to the plaintiff by the court Commissioner at the time of execution of Commissioner work and the entire award is nothing but reproduction of the written arguments which filed by the defendant No.1 and the internal correspondences which placed on record are not taken into consideration by the arbitral tribunal and the written arguments at page No.52 has been reproduced in the award which clearly reflects the arbitral tribunal passed the award with an intention to help the 1st defendant without considering the materials on record and relied based on the exhibited documents. Whatever the delay which caused in execution of the contract work is on the part of the defendant No.1 not on the part of the plaintiff and income tax returns has not been produced by the defendant no.1 and in the absence of pleading any amount of evidence which led by the defendant No.1 cannot be taken into consideration, even then the tribunal though the defendant No.1 48 Com.A.P.No.88/2021 has not pleaded nor proved awarded the compensation and the plaintiff has tendered his evidence before arbitral tribunal in time and no delay on the part of the plaintiff and the contract of the defendant No.1 was came to be terminated on 04.08.2007 because of non execution of the contract work which was entrusted by the defendant No.1, though the defendant No.1 had not paid the compensation to the land lords, even then the tribunal has taken into consideration while passing the award which is based on the assumption and presumption of the court Commissioner also. Though the arbitral tribunal awarded the compensation for the watch and ward in the absence of the documents and the documents which placed before the court by the defendant No.1 are created documents, even then the tribunal without considering those documents in a proper manner awarded the compensation, though obligation on the defendant No.1 to place the materials but the defendant No.1 has not taken any pain to place the materials to substantiate his case, even then the tribunal has passed the award in favour of the defendant No.1 and the tribunal has not taken into consideration for extension of time at the request of the 1 st defendant, but the tribunal has not taken into consideration, though time has been extended at the request of the defendant No.1 even then the 49 Com.A.P.No.88/2021 defendant No.1 has not executed the work which was entrusted, thereby the plaintiff sustained the loss and the defendant No.1 is liable to pay the compensation, but it was not taken into consideration by the arbitral tribunal and one Ravi has not been examined by the defendant No.1 to prove his case and the award outcome of corruption and the delay has not been explained which is the ground for set aside the award which passed by the arbitrators and there is a delay in passing of the award which is also a ground to set aside the award which passed by the arbitrator and the delay in passing of the award is amount of patent illegality and violating of public policy and the arbitrators have not taken into consideration either Sec.26 nor Sec.31 of the Arbitration and Conciliation Act. Though the plaintiff has disputed the documents which placed on record but the reasons best known to the defendant no.1 has not produced the income tax returns to substantiate his case and the Commissioner report itself is inadmissible in evidence without examining the court Commissioner, even then the tribunal considered the report based on the assumption and presumption and it cannot be looked into and there is no pleading for quantification in respect of the claim which made by the 1st defendant and based on the letter of the GESCOM arbitrators cannot directed to pay the amount and the 50 Com.A.P.No.88/2021 arbitrators have not taken into consideration Sec.16 of the Arbitration and Conciliation Act and the arbitrators have not taken into consideration neither Sec.29-A and Sec.28(3) of Arbitration and Conciliation Act and no compensation can be granted as sought by the defendant no.1 in spite of the same the tribunal awarded the compensation in the absence of the documents to show loss and profit and even there is no pleading to that effect and the loss has to be established in the manner known to law. Even then the tribunal has not taken into consideration of the settled principles of law, though the blacklisting for a period of only 5 years, but the tribunal has taken into consideration for 10 years which is against to the law and the tribunal without considering the materials on record passed the award which is deserved for set aside and the facts which pleaded in the plaint falls within Sec.34 of the Arbitration and Conciliation Act and prays for allow the suit.
18. Apart from the written arguments, the respondent No.1 in his arguments has submitted that the plaintiff called the tender on 13.09.2004 for the purpose of establishing 1x10 MVA sub- station at Kudithini in Bellary taluk and District and its associated 110 KV line among the tender quoted others he has quoted the lowest rate thereby his bid was accepted by the plaintiff and 51 Com.A.P.No.88/2021 awarded the contract and after accepting the contract entered into an agreement on 02.02.2005 and after release of detailed work award started executing the contract work which was entrusted. When the work was under progress one C.S. Ganesh has been appointed as a Chief Engineer related to the project, earlier he was filed the complaint against him and his family members alleging that they have committed an offence of tampering the electrical energy, though case has been registered which was ended with dismissal. Being aggrieved by the said case, the very C.S. Ganesh started harassing him by way of not giving the approvals for executing the work, insisting him to do the impossible works such as constructing a tower on the HLC canal bund and because of the delay on the part of the supply of furnishing of the permission and the drawings delay was caused but at the instance of C.S. Ganesh terminated the contract on 04.08.2007 and not being satisfied with the said act and C.S. Ganesh has instructed the GESCOM to stop all the payments vide letter dated 27.08.2007, thereby the progress of the work has been stopped and failed to perform the contract and he has been blacklisted, because of blacklisting he could not execute the work, thereby he has filed the writ petition before the Hon'ble High Court of Karnataka and which was came to be allowed, holding 52 Com.A.P.No.88/2021 that blacklisting is amount of illegal and because of non-payment and the dispute with the plaintiff arbitral proceedings has been initiated and after considering the materials on record passed the award, though the plaintiff in the objection filed before the arbitral tribunal has made the allegations against him, those allegations have not been proved by the plaintiff and in the instant case also the plaintiff has made the allegation against the arbitrators on the ground that the award is nothing but reproduction of the written arguments which filed by him before the arbitral tribunal and the award which passed by the arbitrators is very much clear that the arbitrators after considering the materials on record by both the parties passed the award which is not an reproduction of the arguments which filed by him before the arbitrator and the plaintiff has repeated its earlier allegations in the instant suit also without any basis and the Commissioner which was appointed by the arbitral tribunal was executed the Commissioner work in accordance with law and both parties were also filed the objection and he has paid the court fee which is on record and one Chandrashekar Reddy has been appointed as a court Commissioner who executed the Commissioner work in accordance with law. There is no corruption as alleged by the plaintiff and the report which filed by the Commissioner clearly 53 Com.A.P.No.88/2021 reflects that he has brought to the notice of the arbitrators about the actual facts, because of termination and stop payment and filing of criminal case sustained loss and reputation and blacklisting is nothing but amount of civil death and the plaintiff dragging him since 15 years, because of unnecessary allegations and dragging the court he has sustained not only loss but also his reputation in the society who is unable to execute the contract work and the plaintiff has not produced any documents to substantiate its case and there is no corruption as alleged by the plaintiff and the Commissioner has filed the Commissioner report based on the materials which available on record and on the site and even unexhibited documents court can look into before judgment and both parties have filed the objection to Commissioner report and the notice has not been issued in terms of the contract which taken place in between them before terminating which is illegal and time is not the essence of the contract and the Commissioner has issued work satisfactory report. Based on the report which filed by the Commissioner the tribunal awarded the compensation in accordance with law, though he has been blacklisted which was challenged before the high court and same has been set aside by the Hon'ble High Court of Karnataka and the arbitral tribunal passed the award based on 54 Com.A.P.No.88/2021 the materials on record. So question of interference of this court as sought by the plaintiff does not arise and prays for dismiss the suit.
19. The learned counsel for the plaintiff while canvassing his arguments has much argued that the majority arbitrators have not taken into consideration not only the admission of the parties but also materials on record even not taken into consideration about the violation of the conditions of the contract which taken place in between the plaintiff and the defendant No.1 and the arbitral tribunal awarded the compensation though not sought in the claim petition by the defendant No.1 nor pleaded anything. Therefore, it is just and necessary to interference of this court to set aside the award. So before considering the materials on record as well as the arguments which advanced by both counsels, it is just and necessary to know the legal aspects first for the proper appreciation which reads like this:
1. What is arbitration?
2. When court can interfere with arbitral award?
3. What is the scope of Court's power to interfere with the arbitral award?
4. What are the grounds are required to set aside the award?
5. Setting aside of arbitral award when permissible?
Let me decide one after another for the proper appreciation of the materials on record. Thus this court drawn its attention on 55 Com.A.P.No.88/2021 Sec.2(1)(a) of the Arbitration and Conciliation Act, 1996 which reads like this:
2(1)(a). The definition arbitration means any arbitration whether or not administered by permanent arbitral institution.
Arbitration is a private dispute resolution mechanism agreed upon by the parties.
Arbitration is a binding voluntary alternative dispute resolution process by a private forum chosen by the parties.
Arbitration is a process of settlement extra curses curiae and the parties are at liberty to choose their judge. "The essence of arbitration without assistance or intervention of the court is settlement of dispute by a tribunal of the own choosing of the parties." Law of arbitration aids in implementation of arbitration agreement contract between the parties which remains a private adjudication by a forum consequently chosen by the parties and made on consequential reference.
Now let me know when court can interfere with the arbitral award.
Thus this court drawn its attention on Sec.34(43) of the Arbitration and Conciliation Act, 1996 which reads like this:
43. Principles of interference with arbitral award:-
The principles of interference with an arbitral award under Sec.34(2) of the Act are as follows:
(1) An award, which is -
(i) contrary to substantive provisions of law; or
(ii) The provisions of Arbitration and Conciliation Act, 1996, or
(iii) against the terms of the respective contract; or
(iv) Patently illegal or
(v) Prejudicial to the rights of the parties; is open to interference by the court under Sec.34(2) of the Act. (2) The award could be set aside if it is contrary to:
(a) fundamental policy of Indian Law; or
(b) the interest of India; or
(c) justice or morality.56 Com.A.P.No.88/2021
(3) The award could also be set aside, if it is so unfair and unreasonable that it shocks the conscience of the court.
(4) It is open to the court to consider whether the award is against the specific terms of the contract and if so interfere with it on the ground that it is patently illegal and opposed to the public policy of India.
So, by virtue of the provision which stated above, the court can interfere with the arbitral award in the grounds which mentioned above.
Now let me know what is the scope of Court's power to interfere with the arbitral award? Thus this court drawn its attention on Sec.34 of the Arbitration and Conciliation Act which reads like this;
Scope of Court's power to interfere with the arbitral award:
The scope of the interference by the court's in regard to arbitral award is limited. Courts do not sit in appeal over the findings and decision of the arbitrator, nor can it reassess or re-appreciate evidence or examine the sufficiency or otherwise of the evidence.
So, by virtue of the provision which stated supra, the scope of interference by the court in regard to the arbitral award is limited scope. The scope of interference under Sec.34 of the Act is limited in view of the judgment of the Hon'ble Supreme Court of India which reported in AIR 2003 SC 2629 in between Oil and Natural Gas Corporation Ltd., V/s Shah Pipes Ltd., and in the said judgment, their Lordship held that;57 Com.A.P.No.88/2021
'an award can be set aside if it is contrary to fundamental policy of Indian Law, the interest of India, justice or morality, if it is patently illegal and unfair and unreasonable it shocks the conscience of the court'.
Now let me know what are the grounds are required to set aside the award which passed. Thus this court drawn its attention on Sec.34(18) of the Arbitration and Conciliation Act which reads like this:
18. Grounds to set aside award:- Under the new Act, 1996 misconduct of arbitrator is no ground to set aside an award but court may set aside an award in the following grounds:
(1) if the composition of the arbitral tribunal was not in accordance with the agreement of the parties.
(2) falling such agreement, the composition of arbitral tribunal was not in accordance with the part I of the Act.
(3) if the arbitral proceeding was not in accordance with -
(a) the agreement of the parties.
(b) failing such agreement - the arbitral procedure was not in accordance with part I of the Act. However exception for setting aside the award on the ground of composition of arbitral tribunal or illegality of arbitral procedure is that the agreement should not be in conflict with the provisions of part I of the Act from which parties cannot derogate;
(c) if the award passed by the arbitral tribunal is in contravention of the provisions of the Act or any other substantive law governing the parties or is against the terms of the contract.
An award can be set aside, if it is against the public policy of India that is to so it is contrary to:
(1) fundamental policy of Indian law, (2) the interest of India, or (3) justice or morality , or (4) if it is patently illegal.
It could be challenged -
(a) as provided under Sec.13(5); and
(b) Sec. 16(6) of the Arbitration and conciliation Act. So the court can set aside the award, if the grounds found which stated supra.58 Com.A.P.No.88/2021
So, if the petitioner is made out the grounds which stated supra, court can set aside the award. Now let me know about the setting aside of arbitral award when permissible. Thus this court drawn its attention on Sec.34(4) of the Arbitration and Conciliation Act, 1996 which reads like thus:
4. Setting aside of arbitral award when permissible:-
That the court can set aside the arbitral award under Sec.34(2) of the Arbitration and Conciliation Act if the party making the application furnishes the proof that:
(i) a party was under some incapacity
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for time being in force.
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or otherwise unable to present his case.
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitrator or it contains visa decisions on matters behind the scope of the submission to arbitration.
(2) The court may set aside the award:
(I) (a) if the composition of the arbitral tribunal was not in accordance with the agreement of the parties.
(b) falling such agreement, the composition of the arbitral tribunal was not in accordance with part-1 of the Act.
(ii) if the arbitral procedure was not in accordance with:
(a) the agreement of the parties, or 59 Com.A.P.No.88/2021
(b) failing such agreement, the arbitral procedure was not in accordance with part-1 of the Act.
However exception for setting aside the award on the ground of composition of arbitral tribunal or illegality of arbitral procedure is that the agreement should not be in conflict within the provisions of part-1 of the Act from which the parties cannot derogate.
(c) If the award passed by the arbitral tribunal is in contravention of provisions of the Act or any other substantive law governing the parties or is against the terms of the contract.
(3) The award could be set aside if it is against the public policy of India, that is to say, if it is contrary to:
(a) fundamental policy of Indian Law;
(b) the interest of India; or
(c) justice or morality; or
(d) if it is patently illegal.
(4) It could be challenged-
(a) as provided under Sec.13(5); and
(b) Section 16(6) of the Act."
"B. Further held as follows in this case: (1) The impugned award requires to be set aside mainly on the grounds:
(I) There is specific stipulation in the agreement that the time and date of delivery of the goods was the essence of the contract;
(ii) in case of failure to deliver the goods within the period fixed for such delivery in the schedule, ONGC was entitled to recover from the contractor liquidated damages as agreed;
(iii) it was also explicitly understood that the agreed liquidated damages were genuine pre-estimate of damages;
(iv) on the request of the respondent to extend the time limit for supply of goods, ONGC informed specifically that time was extended but stipulated liquidated damages as agreed would be recovered;
(v) liquidated damages for delay in supply of goods were to be recovered by paying authorities from the 60 Com.A.P.No.88/2021 bills for payment of cost of material supplied by the contractor;
(vii) there is nothing on record to suggest that stipulation for recovering liquidated damages was by way of penalty or that the said sum was in any way unreasonable.
(viii) in certain contracts, it is impossible to asses the damages or prove the same. Such situation is taken care by section 73 and 74 of the Contract Act and in the present case by specific terms of the contract" - Oil and Natural Gas Corporation V Shah Pipes Ltd. (2003)5 SCC 705 : AIR 2003 SC 2629; see also Moona Abousher V M/s. Cholamandalam DBS Finance Ltd. AIR 2019 Mad 233.
Apart from the legal aspects which referred above, it is just and necessary to know the claim of the defendant No.1 and the counter claim of the plaintiff sought before the arbitral tribunal are necessary for reproduction for the proper appreciation which reads like this:
CLAIM In this case, the applicant has sought this court and prays that this authority to do justice to him as per the conditions of the contract and in terms of natural justice. He requested the court to:
I. To direct the respondents to make payments for the completed portion of the work as per the assessment of the opponent's field engineer without any liquidated damages/ penalties.;
II. As an alternative, the completed portion can be arrived by deducting the cost of the balance work (as mentioned by the opponents in writ petition No.13130/2007) from the total cost of the work without any liquidated damages/ penalties. The variations in quantity if any, has to be recorded separately by the field engineer and the cost of the 61 Com.A.P.No.88/2021 same may to be included in the payable amount to the applicant.
III. The applicant should be compensated by giving 10% on the cost of the balance work as profit that the applicant has lost due to lapses of the opponents and also the applicant has lost an opportunity to complete the project due to wrong submission before the Hon'ble High court made by the opponents, that they got the work completed through some other contractor.
IV. The applicant should be paid interest @ 18% p.a. on the withheld payments pertaining to the contract under dispute from the date of completion of the work till the date of payment.
V. As per the order dated 04.08.2007 the opponent's have with held all the payments pertaining to other contracts of the applicant entered with the opponent,s which were completed long back. The applicant request this Hon'ble court to direct the opponents to release the payment held, along with 18% for the same from the date of completion of the work till the date of payment.
VI. The applicant has paid the compensation to the land lords at the instance of the opponent's Field Engineer while executing the work. The applicant request this Hon'ble court to direct the opponents to release the payment made to the land lords along with 18% for the same from the date of payment made to the land lords till the date of payment to the applicant from the opponents.
VII. That because of the various reasons mentioned above which cannot be attributed to the applicant, the project could not be completed and cost of the extra watch and ward incurred by providing to the materials of the project from original date of completion i.e. 06.02.2006 till taking possession
20.08.2007 for a period of 18 months 12 days at 3 watchmen per shift consisting of 3 shifts per day as per minimum Labour Wages Act of Government of 62 Com.A.P.No.88/2021 Karnataka i.e. Rs.5000/- per month per shift per watch man.
VIII. That because of the various reasons mentioned above which cannot be attributed to the applicant the project could not be completed and cost of the extra labour incurred by providing to the work of the project from original date of completion i.e. 06.02.2006 till taking possession 20.08.2007 for a period of 18 months 12 days at 50 labours per shift consisting of 1 shifts per day as per minimum labour wages act of government of Karnataka i.e. Rs.5000/- per month per shift per labour.
IX. The applicant should be compensated for the loss of reputation, mental agony, book loss which occurred due to non participation in tenders for the past 5 years and any other reliefs this Hon'ble court deems fit COUNTER CLAIM In the light of the foregoing, t is apparent that in spite of repeated reminders and requests the claimant has not bee able to perform its obligations under the contract which has resulted in breach of the contract. The bank guarantees issued to the respondent was fake which resulted in loss to the respondent. The materials supplied by the respondent from its stores to claimant were neither utilized by the claimant not they were found at the station site. Due to non-availability of the said materials, the respondent suffered a financial loss. Due to undue delay and non-execution of work, the respondent terminated the contract awarded in favour of the claimant and the respondent had to award the work in favour of other contractors for completion of the balance work. As the respondent has suffered a loss, the respondent is entitled to recover the damages suffered by it. The respondent is entitled to interest at 18% p.a. from the date of termination of contract i.e. 04.08.2007 till realization. 63 Com.A.P.No.88/2021
Accordingly the claimant is liable to be the respondent a sum of Rs.7,95,23,350/- as follows:
Sl.No Nature of loss suffered Amount
1. Loss suffered by respondent on account fake Rs.34,94,393/-
bank guarantees
2. Loss suffered by respondent for having supplied Rs.21,59,000/-
materials to the claimant from its stores which were neither utilized or found at the site at the time of inspection
3. Loss suffered by the respondent on account of Rs.3,37,77,000/-
re-tendering the balance work to other contractors on 22.07.2010 for completion of station and line
4. Interest at 18% p.a. from 04.08.2007 till Rs.4,01,22,950/-
realization
Grand Total Rs.7,95,23,350/-
20. Now keeping in mind the provisions and the relief of the defendant No.1 which stated supra, let me know the arguments which advanced by learned counsel for the plaintiff and the defendant No.1. It is an admitted fact neither the plaintiff nor the defendant No.1 have not disputed about the tender which called by the plaintiff for the purpose of establishing 1x10 MVA substation at Kudithini in Bellary Taluk and District and its associated 110 KV line and it is not in dispute that the defendant No.1 is the lowest bidder and his lower bid was came to be accepted and the total value of the substation and link works which awarded to the 1st defendant amounted to Rs.2,52,54,963.35/- and Rs.96,88,961/- and the plaintiff is also not disputed about issuance of 3 separate letters of intent on 64 Com.A.P.No.88/2021 19.01.2005 notifying the intention to award the contract to the 1 st defendant and it is not in dispute the plaintiff and the defendant No.1 were entered into 3 separate agreements for supply of materials, erection and civil works all dated 29.01.2005 and the plaintiff has not disputed about the bank guarantee which furnished by the defendant No.1 for the execution of the work as per the agreement which taken place in between them.
21. The learned counsel for the plaintiff while canvassing his arguments has much argued that there was a delay caused on the part of the defendant No.1 which is not on the part of the plaintiff, but whereas the defendant No.1 in his arguments has submitted that one C.S. Ganesh has been appointed as Chief Engineer related to the project who earlier had filed the complaint against him and his family members which was came to be registered and ended with dismissal, being aggrieved has started harassing him and insisting him to do the impossible works such as constructing a tower on the HLC canal bund and also two towers adjacent to railway line for which the permission of the railway authorities were yet to be obtained by the respondent since the obligation is on the respondent to obtain the permission from the concerned authorities and the very C.S. Ganesh had instructed the GESCOM to stop all the payments which caused irreparable loss and to 65 Com.A.P.No.88/2021 continue the work and thereafter terminated the contract on 04.08.2007 though completed the work which was entrusted and remaining only less work did not pay the amount in respect of the work which was completed by him, for which the arbitral tribunal in the award they have clearly stated the very defendant No.1 had informed the plaintiff that the canal authorities are objecting to undertake the work and pursuant to the defendant No.1 letter AEE has informed the same to the Executive Engineer (Electrical) MWD Bellary regarding the same and the Executive Engineer by its letter dated 03.07.2006 requested the Secretary, Tungabhadra Board to give permission to erect tower adjacent to the canal bund, but no permission was accorded to the defendant No.1 to erect the tower adjacent to the canal bund, unless the consent is received the canal authorities not allow the defendant No.1 to carryout further work such as the stringing of the conductor, thereby he could not complete the work because of hurdles which elaborately discussed by the arbitral tribunal in their award and they have also taken into consideration that unless the clearance are arranged by the plaintiff the canal authorities do not allow the defendant No.1 to carryout further work, though the defendant No.1 has made the representation but no permission has been accorded to the plaintiff in turn to inform the defendant No.1 to 66 Com.A.P.No.88/2021 carry out the work. So if this aspects are taken into consideration, the delay is not caused on the part of the 1 st defendant which is caused on the part of the plaintiff, since the letter dated 25.09.2005 which is on record marked as Ex.C.47 is very much clear the defendant No.1 has requested the Superintending Engineer, Electrical Munirabad to needful action but no action has been taken to allow the defendant No.1 to execute the work and the documents on record which reflects the plaintiff had obtained the permission from the concerned authorities in turn had informed to the defendant No.1 to execute the work. If that is so the matter would have been different, but nothing has been placed on record to show that it is the obligation is on the defendant No.1 to obtain permission from the concerned authorities nor placed any materials to show that though permission has been accorded to the defendant No.1 to execute the work but he did not do so. If that is so the matter would have different, but on record it is clear the plaintiff has not produced any document to show the permission has been accorded by the canal authorities for erection of tower, even then the defendant No.1 has not executed the work which was entrusted to him. If that is so the matter would have different.
67 Com.A.P.No.88/2021
22. The learned counsel for the plaintiff has much argued that the defendant No.1 has not executed the work as per the time which stipulated in the agreement and he has not obtained any permission from the railway authorities to execute the work. Admittedly the documents on record reflects the plaintiff has to fulfill the conditions as mentioned in the Ex.R.42 and to solve the problems with the railways to execute the work by the 1 st defendant in terms of the agreement, but the plaintiff has not obtained the permission for executing the work across the railway line within time, but has obtained the permission for executing the work cross the railway line only on 09.01.2013 as per the records after termination of the contract, since the plaintiff had terminated the contract of the 1 st defendant on 04.08.2007. So if the materials on record and the submission of the learned counsel for the plaintiff are taken into consideration, it is clear the plaintiff has not provided any permission from either canal authorities nor railway authorities to execute the work, before 04.08.2007. So it is the obligation on the part of the plaintiff to obtain the permission from the concerned authority. But the plaintiff did not do so. If these aspects are taken into consideration it is clear the delay in completion of the project due to failure to obtain the permission not only from the railways authorities, but also canal 68 Com.A.P.No.88/2021 authorities on the part of the plaintiff. Therefore, the arguments which advanced by learned counsel for the plaintiff holds no water.
23. The learned counsel for the plaintiff while canvassing his arguments has much argued that though the work was entrusted to the defendant No.1 in terms of the agreement but he did not completed the work, thereby the remaining work has been entrusted to other contractors to complete the balance work, thereby the defendant No.1 is liable to pay the liquidated damages. Thus this court drawn its attention on Clause 40.1 of the General Conditions of Contract which reads like this:
In case the contractors performance is delayed due to any act of omission on the part of the owner or his agent then the contractor shall be given due extension of time for the completion of the work to extent of such omission on the part of the owner has caused delay in the contractors performance of the contract.
So, by virtue of general conditions of the contract which referred above liquidated damages cannot be recovered unless established by the plaintiff that has sustained loss or legal injury, but on record nothing has been established to show that sustained any loss or legal injury, thereby the tribunal after considering the materials on record found the defendant No.1 has suffered a loss because of termination of the contract, not the 69 Com.A.P.No.88/2021 plaintiff. So the tribunal after considering the materials on record held that the plaintiff is not entitle any liquidated damages but whereas the defendant No.1 is entitled the compensation for the loss which sustained by the defendant No.1, because of the act of the plaintiff for termination of the contract and blacklisting the 1 st defendant. Therefore, the arguments which advanced by learned counsel for the plaintiff on this aspect holds no water.
24. The learned counsel for the plaintiff while canvassing his arguments has much argued that the defendant No.1 has breached the contract. That is the reason why the contract has been terminated on 04.08.2007 and the blacklisting the defendant, but where as the defendant No.1 in his arguments has submitted that because of blacklisting he could not get the work from the government. That is the reason why he has sustained loss. Not only loss but also mental agony, since the plaintiff has not provided required approvals because of C.S. Ganesh, even at the influence of C.S. Ganesh payment has been stopped and he has obtained the loan from the banks and finance for execution of the work. Because of the act of C.S. Ganesh payment has been stopped and who lost the reputation in the society and his name has been registered as defaulter in CIBIL. It is an admitted fact the plaintiff terminated the contract on 04.08.2007 and not only 70 Com.A.P.No.88/2021 termination of the contract, but also blacklisted the defendant, thereby the very defendant No.1 has filed W.P.No.13130/2007 before Hon'ble High Court of Karnataka challenging the order of termination of contract and blacklisting of the 1 st defendant and it was came to be allowed and held blacklisting is illegal and quashed the order of blacklisting and the plaintiff unnecessarily dragged him to the court and who has sustained the loss, though he has executed the work which entrusted and payment was not made by the plaintiff. So the arbitral tribunal after considering all these aspects passed the award. It is an admitted fact the plaintiff has not disputed about the termination of contract and blacklisting of the defendant No.1 and also not disputed about writ petition which filed by the very defendant No.1 before Hon'ble High Court of Karnataka and setting aside the order for blacklisting. So the tribunal after considering not only termination of the contract, but also blacklisting of the 1 st defendant awarded the compensation and the facts which pleaded in the plaint and the arguments which advanced by learned counsel for the plaintiff do not fall within the ambit of Sec.34 of the Arbitration and Conciliation Act.
71 Com.A.P.No.88/2021
25. The learned counsel for the plaintiff while canvassing his arguments has much argued that the award which passed by the arbitral tribunal is nothing but reproduction of the written arguments which produced by the defendant No.1, though the said counsel drawn the court attention not only on the written arguments which filed by the defendant No.1 before the arbitral tribunal and the award which passed by arbitral tribunal, but after considering the written arguments which filed by the defendant No.1 before the arbitral tribunal and the award which passed by the arbitral tribunal are taken into consideration, if the arbitral tribunal taken into consideration of the written arguments which submitted by the defendant No.1 before the arbitral tribunal it does not mean that the award which passed by the arbitral tribunal nothing but reproduction of written arguments which produced by the defendant merely on the ground that the arbitral tribunal accepting some extent of the written arguments which submitted by the defendant No.1 before the arbitral tribunal it does not mean that the award which passed by the arbitral tribunal is nothing but reproduction of the written arguments which produced by the defendant.
26. The defendant No.1 while canvassing his arguments has rightly submitted blacklisting is nothing but civil death for which 72 Com.A.P.No.88/2021 the arbitral tribunal elaborately discussed not only blacklisting of the defendant No.1 and the order which passed by the Hon'ble High Court of Karnataka held that the blacklisting is nothing but a civil death which already set aside by the Hon'ble High Court of Karnataka. Due to the act which committed by the plaintiff the plaintiff has sustained the loss, thereby awarded the compensation. Thus the arguments which advanced by learned counsel for the plaintiff on this aspect holds no water.
27. The learned counsel for the plaintiff while canvassing his arguments has much argued on the compensation which awarded by the arbitral tribunal towards watch and ward since the defendant No.1 has not examined any of the witnesses to substantiate the said relief and though the defendant No.1 has not pleaded nor proved but the arbitral tribunal awarded the compensation, but if the materials which are on record taken into consideration, it is clear the arbitral tribunal based on the oral and documentary evidence on record awarded the compensation and the plaintiff has not established that the facts which pleaded in the plaint falls within Sec.34 of the Arbitration and Conciliation Act. Therefore, the arguments which advanced by learned counsel for the plaintiff on this aspect holds no water.
73 Com.A.P.No.88/2021
28. The learned counsel for the plaintiff while canvassing his arguments has submitted the arbitral tribunal has not assigned any reasons for granting of compensation in the absence of pleading and evidence, though on record reflects the bank guarantees which alleged to have been furnished by the defendant No.1 is the fake but no finding has been recorded in respect of the bank guarantee. So, whatever the findings which given by the arbitral tribunal is liable for set aside and the materials which supplied by the plaintiff has not been utilized by the defendant No.1 which not taken into consideration by the arbitral tribunal, but if the materials on record taken into consideration, the arbitral tribunal not only consider the agreement which taken place in between them but also materials which supplied. So the arguments which advanced by learned counsel for the plaintiff on this aspect holds no water.
29. The learned counsel for the plaintiff has argued that the arbitral tribunal awarded the compensation towards the alleged payment to the land lords at the instance of field engineer but nothing has been produced by the plaintiff to substantiate the same, even then the tribunal awarded the compensation, but where as the arbitral tribunal while passing the award not only 74 Com.A.P.No.88/2021 taken into consideration of the oral evidence, but also the materials on record, though the very plaintiff has taken up the contention before the arbitral tribunal that the defendant No.1 has not examined Mr. Asma Khatoon, Kum. Gayathri and Giridhar Singh who were the Field Officers during the contract period of 30 months and who had the relevant information regarding the payment of crop compensation but no reasons has been recorded by the arbitral tribunal for non examination of the said persons, but whereas the arbitral tribunal while awarding the said crop compensation, considered not only the oral evidence but also the materials on record. So after considering the materials on record, as well as the report of the Commissioner passed the compensation which paid by the defendant No.1 to the land owners. So the arguments which advanced by learned counsel for the plaintiff on this aspect holds no water.
30. The learned counsel for the plaintiff while canvassing his arguments has submitted that though the Commissioner has not been subjected for cross-examination, the arbitral tribunal accepted the report which is not in accordance with law, though Commissioner has been appointed who submitted the report in order to help the 1st defendant and the arbitral tribunal not accorded any opportunity to cross-examine the Commissioner nor 75 Com.A.P.No.88/2021 issued any notice to the Commissioner to appear before the arbitral tribunal and to give evidence and no document on record to show that the defendant No.1 has paid the Commissioner fee. So non examination of the court Commissioner the arbitrator ought to have drawn the adverse inference against the defendant No.1 instead consider the report which filed by the Commissioner in order to help the defendant No.1. It is an admitted fact nothing is prevented to the plaintiff to take steps to cross-examine the Commissioner, but the entire order sheet reveals the plaintiff has not taken any steps either to question the Commissioner report nor cross-examine the Commissioner, but without doing so now raising the objection that the Commissioner filed the report favouring the case of the defendant No.1 but the tribunal after considering the materials on record passed the award, not only the commissioner report but also the other materials which are on record. Therefore, the arguments which advanced by learned counsel for the plaintiff on this aspect holds no water.
31. The learned counsel for the plaintiff while canvassing his arguments has much argued that the tribunal has not given any findings of the Commissioner report and it is the duty of the commissioner to execute the work for the purpose which he was appointed value the work which executed by the defendant No.1 76 Com.A.P.No.88/2021 and to assess the value of the quoted amount of the claim amount not subsequent allocation of the work quotation amount to the 3rd parties but the Commissioner has not executed the work for which purpose he was appointed, but executed the work to favouring the defendant No.1 which was not taken into consideration by the arbitral tribunal and the running bill of the contractor is the base for assess the work which executed by the defendant No.1 which was not taken into consideration by the court Commissioner and the court Commissioner in his report has not stated the amount which paid by the 1 st defendant and no notice has been issued to the plaintiff before execution of the Commissioner report, though the lapses of the court Commissioner has brought to the notice of the tribunal which was not taken into consideration by the arbitral tribunal. The materials on record reflects the commissioner has been appointed and who submitted the report and both parties were filed the objection and have not taken any steps for cross-examination of the Commissioner. So, the tribunal after considering not only the report and the materials which are on record passed the award. Therefore, the arguments which advanced by learned counsel for the plaintiff holds no water on this aspect.
77 Com.A.P.No.88/2021
32. The learned counsel for the plaintiff has much argued on the findings of the tribunal without any materials on record to show that the findings which recorded by the arbitral tribunal falls within the purview of Sec.34 of the Arbitration and Conciliation Act. Admittedly this court power is very limited to interference of the award which passed by the arbitral tribunal. So in order to bring the case within the ambit of Sec.34 of the arbitration and conciliation Act, the plaintiff has to establish the facts which are enumerated under Sec.34 of the Arbitration and Conciliation Act, but the facts which pleaded in the plaint and the grounds which are urged by the plaintiff do not fall within the ambit of Sec.34 of the Arbitration and Conciliation Act.
33. The learned counsel for the plaintiff while canvassing his arguments has much argued on appointment of Commissioner and also report which submitted by the Commissioner. Admittedly the order sheet which on record reflects when the case was set down for reply arguments, the defendant No.1 has moved an application for appointment of Commissioner for assessing the value and other things which executed by the defendant No.1 in terms of the contract and the loss which sustained. Accordingly, the application which filed by the defendant No.1 was came to be 78 Com.A.P.No.88/2021 allowed and Commissioner was appointed who filed the Commissioner report and both parties were filed their objection to the Commissioner report which is on record. Admittedly after filing objection by the plaintiff has not taken any steps to cross-examine the Commissioner to elicit the objections which raised by this court. Instead of doing so has given up his right without taking steps for cross-examination of the court commissioner it amount to given up the right for cross-examination of the court Commissioner. Thus this court drawn its attention on Sec.26 of the Arbitration and Conciliation Act which reads like this:
26. Expert appointment by arbitral tribunal.--
(1) Unless otherwise agreed by the parties, the arbitral tribunal may--
(a) appoint one or more experts to report to it on specific issues to be determined by the arbitral tribunal, and
(b) require a party to give the expert any relevant information or to produce, or to provide access to, any relevant documents, goods or other property for his inspection.
(2) Unless otherwise agreed by the parties, if a party so requests or if the arbitral tribunal considers it necessary, the expert shall, after delivery of his written or oral report, participate in an oral hearing where the parties have the opportunity to put questions to him and to present expert witnesses in order to testify on the points at issue. (3) Unless otherwise agreed by the parties, the expert shall, on the request of a party, make available to that party for examination all documents, goods or other property in the possession of the expert with which he was provided in order to prepare his report.
The above provision is very much clear unless otherwise agreed by the parties, the arbitral tribunal may appoint one or more experts to report to it on a specific issues to be determined by the arbitral tribunal and if the party so requires or if the tribunal 79 Com.A.P.No.88/2021 considers necessary for the experts shall after delivery of his written or oral expert participate in an oral hearings where the parties have the opportunity to put questions to him and to present expert witness in order to testify on the points at issue, unless otherwise agreed by the parties the expert shall on the request of the party make available to that party for examination of all documents, goods or other party in the possession of the expert. So on close reading of the provision which referred above it is clear unless otherwise agreed by the parties the expert shall on the request of the party make available for examination. So the provision empowers the party can request the arbitral tribunal to issue summons to the Commissioner to examine all the issue for which purpose he was appointed, but the reasons best known to the plaintiff has not taken any steps to examine the court Commissioner. Now the learned counsel for the plaintiff while canvassing his arguments has much commented on the Commissioner report without availing the provision which referred above, as the provision empowers the party to request the arbitral tribunal to issue summons and to examine the Commissioner on the issue for which purpose he was appointed, but the reasons best known to the plaintiff has not at all opted the provision which referred above. Now the plaintiff cannot challenge the report 80 Com.A.P.No.88/2021 which filed by the court Commissioner, since the court Commissioner being the government servant has visited the premises where the defendant No.1 has executed the work and reported based on the instructions on the spot and filed the report. So based on the report which filed by the court Commissioner the tribunal awarded the compensation. Therefore, the arguments which advanced by learned counsel for the plaintiff on this aspect holds no water.
34. The learned counsel for the plaintiff has much argued the arbitral tribunal has not granted any opportunity or calling upon the court Commissioner to allow the party to examine the court Commissioner, but whereas Sec.26(3) of Arbitration and Conciliation Act is very much clear the party who aggrieved the report which filed by the court commissioner has to request the arbitral tribunal to issue summons and to calling upon the court Commissioner for his examination, it does not mean the tribunal suo-moto to calling upon the court Commissioner to allow the parties for examination as Sec.26(4) of the Arbitration and Conciliation Act is very much clear, cross-examination of the expert cannot be sought before the court dealing with application under Sec.34 of the Arbitration and Conciliation Act for setting aside the award, the right could be exercised during the 81 Com.A.P.No.88/2021 proceedings before the arbitrator. Once the arbitrator gave his decision the stage for doing that had passed. In the instant case, the reasons best known to the plaintiff has not make use of the opportunity to cross-examine the Commissioner in view of the provision which referred above, now the plaintiff cannot sought that the report which filed by the court Commissioner is not in accordance with law. Therefore, looking from angle, the arguments which advanced by learned counsel for the plaintiff on this aspect holds no water.
35. The learned counsel for the plaintiff while canvassing his arguments has much argued that there is a delay in passing of the award, thereby it is liable to be set aside and drawn the court attention on the judgment of Hon'ble High Court of Delhi passed in 2022 SCC Online Del. 1335 in between Director General, Central Reserve Police Force Vs Fibro Plast Marine Pvt. Ltd. , On careful perusal of the said judgment, in the said judgment their lordship held that whether the delay in pronouncement of an award after final arguments have concluded vitiate the award will depend on the facts and circumstances of each case and the petition was came to be allowed and there is an inordinate and unexplained delay in passing of the award which amount to patent illegality 82 Com.A.P.No.88/2021 and in conflict with the public policy of India. It is an admitted fact the order sheet which placed on record reflects though the defendant No.1 has submitted his written arguments and oral arguments, but whereas the plaintiff taken number of adjournments to conclude the arguments, because of lengthy arguments on the part of the plaintiff delay has been caused in disposal of the case. That is the reason why his lordship in the said decision held that the award depend on the facts and circumstances of each case. If the facts and circumstances of the said decision and the facts and circumstances on record are taken into consideration the delay was caused on the part of the plaintiff in disposal of the case and for passing of the award. Therefore, I do respect to the judgment which relied by learned counsel for the plaintiff but the facts and circumstances of the present case and the judgment which relied are different.
36. The learned counsel for the plaintiff has drawn the court attention on the judgment of Hon'ble High Court of Judicature at Madras passed in O.P.No.4/2015 and O.A.No.31/2015 in between K. Dhanashekar Vs Union of India and others. On careful perusal of the said judgment, in the said judgment their lordship held that the records which on record reflects the award has been passed after 3 years and 7 months. The letter issued by the arbitrators indicate 83 Com.A.P.No.88/2021 that the award dated 23.05.2014 was dispatched only on 11.11.2014. There is no reasons whatsoever stated for the huge delay in passing the award and the delay in passing of the award beyond 3 years and 7 months after completion of the hearing and the order sheet which is on record reflects on 25.01.2018 the counsel who appeared on behalf of the very plaintiff filed memo for extension of time to file written arguments, though the defendant No.1 opposes for grant time the arbitral tribunal grant time finally till 30.01.2018 for filing of the written arguments and directed the very plaintiff that shall file written arguments on or before 31.01.2018, if the written arguments filed thereafter will not be considered. So if the order sheet and the case papers are taken into consideration it is not the delay on the part of the arbitral tribunal, it is the delay on the part of the plaintiff. So the facts which involved in the present case and the facts which decided in the judgment which relied are different. Therefore, the judgment which relied by learned counsel for the plaintiff is not applicable to the case on hand.
37. The learned counsel for the plaintiff while canvassing his arguments has submits that the award which passed by the arbitral tribunal beyond the pleadings and the said counsel drawn the court attention on the following judgments: 84 Com.A.P.No.88/2021
1. M/s Trojan and Company Vs RM NV Nagappa Chettiar AIR 1953 SC 236.
2. Ram Sarup Gupta (dead) by LR's Vs Bishun Narain inter college and Ors AIR 1987 SC 1242
3. Fiza developers & Inter-Trade P. Ltd. Vs AMC (I) Pvt.
Ltd. And Anr. (2009) 17 SCC 796.
On careful perusal of the said judgments, in the said judgments their lordship held that if the parties are aware of the plea involved and proceeded in the trial on that basis question of absence of that plea cannot be raised by any of the parties and the pleadings need not contain the exact statutory language or expression in order to attract the statutory provisions and if the plea relates to terms and conditions of an oral agreement absence of written deed of the agreement not fatal to the plea as the terms can be gathered from the circumstances and conduct of the parties and the object is to focus upon questions on which evidence has to be lead and to indicate the party on which burden on proof lies and necessary in every contested regular civil suit not necessary in summary proceedings and whenever the issues are not necessary it does not mean that evidence is not necessary. Admittedly in the instant suit the arbitral tribunal decided the issues based on the terms and conditions of the agreement which was taken place in between the parties by considering not only the terms and conditions of the agreement but also gathered from the circumstances and the conduct of the 85 Com.A.P.No.88/2021 parties. Therefore, the judgments which relied by the learned counsel for the plaintiff will not help the plaintiff instead help the defendant's case.
38. The learned counsel for the plaintiff while canvassing his arguments has submitted though the defendant No.1 has not pleaded nor established the loss, however the arbitral tribunal awarded the compensation and the said counsel has drawn the court attention on the judgment of Hon'ble Supreme Court which reported in AIR 2000 SC 2003 in between Ghaziabad Development Authority Vs Union of India and Anr . On careful perusal of the said judgment, in the said judgment their lordship held that the party held liable to compensate for such losses as directly flow from its breach and the ordinary heads of damages allowable in contracts for sale of land are settled. So in the instant case, the court Commissioner has been appointed and the tribunal not only considered the Commissioner report which filed by the court Commissioner but also considered all the circumstances which are on fact and passed the award. Therefore, the judgment which relied by learned counsel for the plaintiff is not applicable to the case on hand, since the facts and circumstances of the present case and the judgment which relied are different. 86 Com.A.P.No.88/2021
39. The learned counsel for the plaintiff while canvassing his arguments has much argued not only the limitation on the counter claim but also rejection of the counter claim and also submits the arbitrators while passing the award have taken into consideration of the unmarked documents which cannot be relied and the said counsel has drawn the court attention on the following judgments;
a. 2012 (12) SCC 581, b. 2011 (3) SCC 57 c. RSA No.1344/2007, Hon'ble High Court of Karnataka. On careful perusal of the said judgments, in the said judgments their lordship held that where the arbitration agreement provides for referring all disputes between the parties, the arbitrator will have a jurisdiction to entertain any counter claim even though it was not raised at a stage earlier to the stage of pleadings before the arbitrators and court will not enter into disputed question whether the claim was barred by limitation or not. Such issues will be left to the decision of the arbitrator and exhaustive pleadings or production of documents are not required to justify claim or to prove said claim is within time and application must contain pleadings to show existence of dispute and arbitration agreement to decide such dispute. In the instant case, the arbitrators have not only decided the issue which on record but also decided the 87 Com.A.P.No.88/2021 limitation of the claim of the defendant No.1 and the counter claim of the plaintiff and held that the counter claim which filed by the plaintiff is not maintainable which came to be rejected after considering the oral and documentary evidence on record. Now this court cannot re-appreciate the oral and documentary evidence which on record and this court cannot sit as a appellate court while deciding the issue under Sec.34 of the Arbitration and Conciliation Act, since the powers under Sec.34 of the Arbitration and Conciliation Act is very limited, unless brings the case within ambit of Sec.34 of the Arbitration and Conciliation Act, but in the instant case the plaintiff has failed to bring the case within the ambit of Sec.34 of the Arbitration and Conciliation Act. Therefore, I do respect to the judgments which relied but the facts and circumstances of the present case and the judgments which relied are different.
40. The learned counsel for the plaintiff while canvassing his arguments has submitted there was no communication to the plaintiff before execution of the Commissioner work and drawn the court attention on the following judgments:
a. 1987 (3) SCC 34 b. 2010 (2) SCC 422.88 Com.A.P.No.88/2021
On careful perusal of the said judgments, in the said judgments their lordship held if an appointment is made illegally or irregularly the same cannot be the basis for further appointment and an erroneous decision cannot be permitted to perpetuate further error to the detriment of the general welfare of the public or a considerable section. But in the instant case the parties were well aware of the appointment of the Commissioner and execution of the work. Therefore, I do respect to the judgment which relied by the learned counsel for the plaintiff but the facts and circumstances of the present case and the judgments which relied are different.
41. The learned counsel for the plaintiff while canvassing his arguments has submitted the defendant No.1 has breached the contract, thereby who is liable to pay the damages and this fact was brought to the notice of the arbitral tribunal but has not taken into consideration, instead awarded the compensation on the ground the plaintiff has breached the contract and the said counsel has drawn the court attention on the judgment of the Hon'ble Supreme Court which reported in 2015 (14) SCC 263 in between Construction and Design Services Vs Delhi Development Authority. On perusal of the said judgment, in the said judgment their lordship held that promisee can be assumed to have suffered 89 Com.A.P.No.88/2021 a loss on account of breach of contract is entitle to compensation to the extent of loss suffered as per stipulated damages clause and it is for a party in breach to show that the stipulated damages by way of penalty, but in the entire records nowhere reflects the plaintiff has established that the 1st defendant has breached the contract, thereby liable to pay the damages. Therefore, the facts and circumstances of the present case and the judgment which relied are different. Therefore, I do respect to the judgment which relied, same is not applicable to the case on hand.
42. The learned counsel for the plaintiff while canvassing his arguments has submitted if the award is contrary to the substantive provisions of law or the provisions of the Arbitration and Conciliation Act or against to the terms of contract would be patently illegal and the award which passed is contrary to the provisions of the law and against to the terms of the contract which was not taken into consideration by the arbitral tribunal, and the defendant No.1 has not executed the contract in spite of repeated request and demand and at the request of the defendant No.1, time has been extended but he did not do so. So it is clear on record the award which passed by the arbitral tribunal not only against to the provisions of law but also against to the terms of the contract and the said counsel has drawn the 90 Com.A.P.No.88/2021 court attention on the judgment of the Hon'ble Supreme Court which reported in 2003 (5) SCC 705 in between Oil and Natural Gas Corporation Ltd., Vs Saw Pipes Ltd. On careful perusal of the said judgment, in the said judgment their lordship held that if the award contrary to substantive provisions of law or the provisions of the Arbitration and Conciliation Act or against to the terms of contract would be patently illegal. Therefore, in order to bring the case within the ambit of judgment which relied, the plaintiff has to establish that the award which passed is contrary to the provisions of Arbitration and Conciliation Act and against to the terms of contract, but nothing has been established to substantiate the same. Therefore, the facts and circumstances of the present case and the judgment which relied are different and same is not applicable to the case on hand.
43. The learned counsel for the plaintiff while canvassing his arguments has much argued that the contractor cannot be sought for rendition of accounts and drawn the court attention on the judgment of Hon'ble Supreme Court which reported in 2006(2) SCC 285. On careful perusal of the said judgment, in the said judgment their lordship held that the right to seek rendition of accounts is recognized in law, in administration suit for accounts of any property and for its administration suits by a partner of a 91 Com.A.P.No.88/2021 firm for dissolution of the partnership firm and accounts suits by beneficiary against trustees and the suit for rendition of accounts is not maintainable by contractor against the employer for work done. In the instant case, the defendant No.1 has moved an application for appointment of the Commissioner to assess the work which was executed and other purpose, though the very plaintiff has raised the objection for appointment of the Commissioner but it was came to be allowed and Commissioner was appointed who executed the Commissioner work and submitted the Commissioner report and it was not challenged nor set aside, though objection has been filed by the very plaintiff did not cross-examine the Commissioner. Therefore, I do respect to the judgment which relied, but the facts and circumstances of the present case and the judgment which relied are different.
44. The learned counsel for the plaintiff in his arguments has submitted that though the defendant No.1 has not proved the loss awarded the compensation by the arbitral tribunal and the said counsel has drawn the court attention on the following judgments:
1. 2011 (10) SCC 573
2. 2015 (4) SCC 136
3. 2000 (2) Mh.L.J. 181 On careful perusal of the said judgments, in the said judgments, their lordship held that a damages can be claimed by a contractor 92 Com.A.P.No.88/2021 where the government is proved to have a committed breach by improperly resenting the contract and for estimating the amount of damages, the court should make a broad evaluation instead of going into minute details wherein the works contract the party entrusting the work committed breach of contract. The contractor is entitle to claim the damages for the loss of profit which he expected to earn by undertaking the works contract.
45. In the instant case, it is the specific case of the 1 st defendant that the plaintiff illegally terminated the contract under the same time blacklisted the defendant No.1. Because of that reason the defendant No.1 has sustained the loss and the plaintiff has breached the contract. So the arbitral tribunal after considering the materials and the report of the Commissioner found the plaintiff has breached the contract, thereby awarded the loss. So the judgments which relied instead of helping the plaintiff which help the defendant case.
46. The learned counsel for the plaintiff while canvassing his arguments has submitted that the application of Hudson formula without evidence not permissible, though there is an corrupt practice which brought to the notice of the arbitral tribunal, but the arbitral tribunal has not taken into consideration of the 93 Com.A.P.No.88/2021 materials on record and applied the Hudson formula without application of mind nor the evidence and the said counsel has drawn the court attention on the judgment of Hon'ble High Court of Judicature at Bombay passed in A.P. No.767/2009 in between Akbar Ismail Mansori Vs Concon Mercantile Co-operative Bank Ltd., & Ors., and the judgment of Hon'ble High Court of Delhi passed in OMP No.249/2013. In the instant case the arbitral tribunal while passing of the award granted the compensation based on the established Hudson formula on the available materials on record. Therefore, the facts which on record and the facts and circumstances of the judgments which relied by learned counsel for the plaintiff are different.
47. The learned counsel for the plaintiff while canvassing his arguments has submitted that the arbitral tribunal awarded the compensation, though the defendant No.1 has not pleaded nor placed any materials and the compensation which awarded beyond the contract which taken place in between the plaintiff and the defendant No.1 which is under the realm of patent illegality and the said counsel has drawn the court attention on the judgment of Hon'ble Supreme Court which reported in 2021 SCC Online SC 508 in between PSASICAL Terminals Pvt. Ltd., Vs Board of Trustees of Vo Chidambarnar Port Trust, Tuticorin and Others. On 94 Com.A.P.No.88/2021 careful perusal of the said judgment, in the said judgment their lordship held that party to the agreement cannot be liable to perform something for which it has not entered into a contract and the contract for the parties would be breach of fundamental principles of justice entitling a court interfere, if the impugned award would come under the realm of patent illegality, but in the instant case, the plaintiff has not established anything to show that there is patent illegality while passing the award. Therefore, I do respect to the judgment which relied, but the same is not applicable to the case on hand, since the facts and circumstances of the present case and the judgment which relied are different.
48. The learned counsel for the plaintiff while canvassing his arguments has submitted that the award which passed by the arbitral tribunal is patently illegal and interference of this court is necessary and the arbitral tribunal has not passed the reasoned award which is liable for set aside and the arbitral tribunal has not considered the prices of the materials while passing the award and the award which passed by the arbitral tribunal is contrary to the public policy and the arbitrators have not taken into consideration of the contract which taken place in between the parties and drawn the court attention on the following judgments: 95 Com.A.P.No.88/2021
1. National Highways Authority of India Vs Bumi Highways (M) SDN BHD (OMP 249 of 2013)
2. State of Rajasthan Vs Ferrow Concrete Pvt. Ltd. (2009) 12 SCC
3. Haryana Tourism Ltd. Vs. M/s Kandhari Beverages Ltd., Appeal No.266 of 2022.
4. Ministry of Youth affairs & sports Vs Agility Logisitic Pvt. Ltd. (OMP (COMM) 95 of 2013)
5. Haryana Urban Development Authority, Karnal Vs. M/s Mehta Construction Company Ltd. (C.A.No.2693 of 2022)
6. Delhi Airport Metro Express P. Ltd Vs Delhi Metro Rail Corporation Ltd. (C.A.No.5627 of 2121)
7. South East Asia Marine Engineering and Constructions Ltd., Vs Oil India Ltd. (C.A.No.673 of 2012)
8. Machine Tool India Ltd. Vs Splendor Buildwell Pvt. Ltd. & Ors. (OMP (Comm) 199-200 of 2018)
9. Atlanta Ltd. Vs Union of India (C.A.No.1533/2017)
10. Delhi Airport Metro Express P. Ltd. Vs Delhi Metro Rail Corporation Ltd., (C.A.No.3657 of 2022)
11. Oil & Natural Gas Corp. Ltd Vs Inter Ocean Shipping India Pvt. Ltd decided on 09.06.2017.
12. Steel Authority of India Vs Guptha Brothers Steel Tubes Ltd., (2009)(6) SCC 63
13. G. Ramachandra Reddy & Co. Vs Union of India & Anr. (2009) (6) SCC 414
14. Parsa Kenta Colliries Ltd. Vs Rajasthan Rajya Vidyut Uthpadan Nigam Ltd., (2019) (7) SCC 236.
15. ONGC Petro Additions Ltd. Vs Fernas Constructions Co. (OMP (MISC) (COMM) 256 of 2019.
16. Meenanath Fatarpekar Vs Microstraagy India Pvt.
Ltd. (Com. A.P. No.53 of 2021)
17. IOCL Vs Shree Ganesh Petroleum Ltd., (C.A.No.837- 838 of 2022)
18. Canara Nidhi Ltd. Vs M. Shashikala & Ors.
(C.A.No.7544-7545/2019 96 Com.A.P.No.88/2021
19. Bihar Rajya Bhumi Vikas bank Samiti Vs State of Bihar (Letter of patent appeal No.1841 of 2016
20. M/s Scholastic India Pvt. Ltd. & Anr. Vs. Kanta Batra (FAO (COMM) 112/2022 & CM No.7895/2021)
21. National Highways Authority Ltd. Vs KMC Constructions Ltd. (OMP (COMM) 461/2020
22. Raju Sebastian Vs Union of India (WA No.2112 of 2018)
23. Welspun Speciality Solutions Ltd. Vs ONGC Ltd. (C.A.No.2826-2827/2016 decided on 13.11.2021)
24. Relevant Extract of Section 152 of Chapter 11 of CPC. On careful perusal of the above judgments, in the said judgments their lordship held that in order to mitigate the harsh consequences of frustration and to uphold the sanctity of the contract, the parties with their commercial wisdom chose to mitigate the risk under the contract and the interpretation of the contract of the arbitral tribunal being perverse and not a possible interpretation, award passed is liable to be set aside and award should be in consonance of Sec.31 of the Arbitration and Conciliation Act, if not which is liable for set aside and if the award which passed by the arbitrators being against most basic notions of justice then it is the ground for setting aside the award and if the award which passed by the arbitrators falls within Sec.34 of the Arbitration and Conciliation Act, then the award which passed by the arbitrators is liable for set aside, but in the instant case the 97 Com.A.P.No.88/2021 plaintiff has not bring the case within the ambit of Sec.34 of the Arbitration and Conciliation Act either to interference of this court nor to set aside the award which passed by the arbitrators. Therefore I do respect to the judgments which relied but the same are not applicable to the case on hand.
49. The learned counsel for the defendant No.1 while canvassing his arguments has submitted the plaintiff has not bring the case within the ambit of Sec.34 of the Arbitration and Conciliation Act question of set aside the award as sought for does not arise and the arbitrators have passed the award based on the materials which produced by both the parties and the arbitrators were awarded the compensation within the purview of contract which taken place in between the plaintiff and the defendant No.1 and the delay was caused on the part of the plaintiff not on the defendant No.1 and the price fluctuation has been taken into consideration by the arbitrators and the grounds which averred in the plaint do not fall within Sec.34 of the Arbitration and Conciliation Act and the arbitrators have not traveled beyond the terms and condition of the contract which was taken place in between the plaintiff and the defendant No.1 and the plaintiff has failed to place the materials that the arbitrators were traveled beyond the contract and passed the award and failed to prove the 98 Com.A.P.No.88/2021 alleged misconduct of the arbitrators and the said counsel drawn the court attention on the following judgments:
1. PSA SICAL Terminal Pvt. Ltd., Vs Board of Trustees of VO Chidambranar Port Trust Tuticorn & Ors., reported in 2021 SCC Online SC 508.
2. Patel Engineering Ltd., Vs. North Eastern Electric Power Corp. Ltd., reported in (2020) 7 SCC 167.
3. South East Asia Marine Engineering & Constructions Ltd., Vs Oil India Ltd., reported in (2020) 5 SCC 164.
4. Dyna Technologies Pvt. Ltd. Vs Crompton Greaves Ltd. Reported in (2019) 20 SCC 1
5. Ssangyong Engineering and Construction Company Ltd., Vs National Highways Authority of India reported in (2019) 15SCC 131
6. Associate Builders Vs Delhi Development Authority reported in (2015) 3 SCC 49
7. Union of India Vs M/s Warsaw Engineers & Ors.
Decision dated 17.04.2021 passed by the Hon'ble High Court of Karnataka in COMAP No.25/2021.
8. BCCI Vs Deccan Chronicles Holdings Ltd., reported in 2021 SCC Online Bom. 834.
9. Director General, Central Reserve Police Force Vs Fibroplast Maine Pvt. Ltd., reported in 2022 SCC Online Del 1335
10. K. Dhanashekar Vs Union of India and Ors. Judgment of Madras High Court dated 19.09.2019 passed in O.P. No.4/2015.
On careful perusal of the above judgments, in the said judgments their lordship held that if the contract reflects no amount was due and payable then the arbitrator has no jurisdiction to grant the award and non payment of legitimate dues work done outside the 99 Com.A.P.No.88/2021 scope of the agreement then the award which passed by the arbitrator liable for set aside. If the delay is caused on the part of the contractor any amount is awarded which is also liable for set aside and if the arbitrator traveled beyond the terms of the contract which is also liable for set aside and if the arbitrator had misconducted himself while passing of the award then also the award which passed is liable for set aside, but in the instant case the plaintiff has failed to bring the case neither within the grounds as mentioned in Sec.34 of the Arbitration and Conciliation Act or established about the misconduct of the arbitrators nor established the arbitrators were traveled beyond the contract which taken place in between the plaintiff and the defendant No.1 or established as on the date of the award though there was no legitimate due by the plaintiff, the arbitrators were passed the award, if that is so the matter would have different. Therefore, the principles which are laid down in the judgments which relied by the defendant No.1 are applicable to the case on hand. So looking from any angle, the plaintiff has not bring the case within the ambit of Sec.34 of the Arbitration and Conciliation Act. Hence, I am of the opinion that the point No.1 is answered as Negative. 100 Com.A.P.No.88/2021
50. POINT NO.2: In view of my answer to point No.1 as stated above, I proceed to pass the following;
ORDER The petition under Sec.34 of the Arbitration and Conciliation Act r/w Rule 4 of the Hon'ble High Court of Karnataka Arbitration (Proceedings before the Courts) Rules 2001 filed by the plaintiff is hereby dismissed.
No order as to costs.
(Dictated to the Stenographer, transcript thereof corrected by me and then pronounced in the open court on this the 30thday of January, 2023) (P.J. Somashekara) LXXXVIII Addl. City Civil & Sessions Judge, (Exclusive Commercial Court), Bengaluru City.