Bangalore District Court
The Karnataka Slum Development Board vs M/S Tanisujan Infra Pvt Ltd on 8 August, 2024
KABC170019992022
IN THE COURT OF LXXXIV ADDL. CITY CIVIL AND
SESSIONS JUDGE (CCH-85) (COMMERCIAL COURT),
BENGALURU
DATED THIS THE 8th DAY OF AUGUST 2024
PRESENT
SRI.RAMAKANT CHAVAN,
B.Com., LL.B.(Spl)
LXXXIV ADDL. CITY CIVIL & SESSIONS JUDGE,
BENGALURU.
Com.A.P.No.73/2022
PETITIONER:
The Karnataka Slum
Development Board,
No.55, Abhaya Complex,
Risaldar Street,
Sheshadripuram,
Bengaluru - 560 020
Rep. by its Commissioner
(By Sri.V.B.Patil, Adv.)
AND
RESPONDENT:
M/s Tanisujan Infra Pvt. Ltd.,
No.1134, Karuna Marga,
Siddartha Nagar I stage,
Mysuru - 570 011
Rep. by its Director
Sri.S.Shivakumarswamy
(By Sri.S.Rupesh Kumar, Adv.)
2 Com.A.P.No.73/2022
Date of Institution 27.07.2022
Nature of the Petition For recovery of money
Date on which judgment 08.08.2024
pronounced
Total Duration Years Months Days
02 00 11
LXXXIV Addl. City Civil & Sessions Judge
(CCH-85) Commercial Court, Bengaluru
JUDGMENT
This petition is filed U/Sec.34 (2-A) of the Arbitration and Conciliation Act for the following reliefs:
(a) Allow this application by setting aside the Award dated 15.06.2022 passed by the learned Arbitrator Mr.Justice John Michael Cunha, Former Judge, High Court of Karnataka, Bengaluru in A.C.No.229/2021;
(b) Dismiss the claim of the respondent;
(c) Allow the counter claim of this applicant.
2. The brief facts leading to the case are as follows:-
(a) That the applicant is a statutory body under the Karnataka Slum Areas (Improvement and Clearance) Act, 1973 for the purpose of improvement and clearance of slums in Karnataka.
In pursuance of its objects, the applicant had floated a tender for 3 Com.A.P.No.73/2022 construction of 534 dwelling units at Seven selected slums in Krishanraja area of Mysuru city. The respondent was successful in bagging the tender. The Letter of Acceptance was issued on 16.03.2017 and work order on 10.07.2017 and the Tender Agreement was signed on the same day i.e. on 10.07.2017. The respondent has finished construction of 385 houses and refused to take up the construction of remaining 149 houses, unless higher prices were paid. There were several disputes between the parties.
(b) It is further pleaded that the differences could not be reconciled. The respondent invoked arbitration clause in the Tender Agreement and an Arbitrator was appointed. The respondent submitted its claim petition contending that Rs.2,60,91,159.66 was due regarding 8th RA bill and variation in 1 to 6 th RA bills, price adjustment variation of 7th bill as well as interest at the rate of 21% from 14.08.2019 to 14.09.2021.
(c) It is further stated that the applicant herein filed objections contending that the respondent is not entitled for the said amounts, it is guilty of several breaches of contract like - the respondent has not submitted the approved program of works and is not entitled for price adjustment claims and also not submitted 8th RA bill in the prescribed Form with all the required annexures, it has directly handed over the possession of the completed units to the beneficiaries, due to which the beneficiaries have refrained from paying their contribution towards the cost of construction and the Board has suffered a loss of Rs.81,75,910/-. The applicant is not liable to pay any amount to the respondent, 4 Com.A.P.No.73/2022 but, the respondent itself is liable to pay liquidated damages of Rs.3,06,40,000/- to the applicant.
(d) After perusing the evidence of the parties and the document, the learned Arbitrator has passed the award on 15.06.2022 directing the applicant to pay the amounts of Rs.5.00 lakhs within 30 days from the date of the award with interest at the rate of 12% as compensation, ordered to pay Rs.1,83,63,439/- with interest at the rate of 6% p.a. within 30 days and thereafter at the rate of 12% till payment, release of proportionate security deposit of Rs.42,75,862/- in respect of 149 dwelling units not constructed within 30 days from the date of award and thereafter interest at the rate of 12% and also ordered for remaining security deposit of Rs.1,10,48,368/- with conditions.
3. Being aggrieved by the same, the applicant has filed this petition on the following grounds:
(a) The award is not maintainable. The impugned award is not followed with proper reason. The main bone of contention between the parties is that it had handed over the possession of 385 completed units directly to the beneficiaries without any authority / permission from the applicant Board.
(b) The slum dwellers refrained from paying their part of contribution towards the cost of construction, it varies from 10% to 15% of the cost of construction. The payment of cost of construction by the beneficiaries is a condition precedent imposed by the applicant on the beneficiaries before taking possession of the completed units. The applicant Board could not recover the same as the respondent's contractor handed over the 5 Com.A.P.No.73/2022 possession of the dwelling units directly sans any authority to the beneficiaries. The beneficiaries have skipped the payment of contribution. The total cost of contribution not paid by 385 beneficiaries amounts to Rs.81,75,910/- as per Ex.R1.
(c) The applicant Board for finalization of the final bill has to issue Completion Certificate to the respondent - Contractor. It will be issued only after the expiry of Six months defect liability period from the date of handing over of possession of the completed units to the Board by the respondent. In this case, the applicant Board can neither issue defect liability certificate nor Completion Certificate as the possession was never handed over by the respondent. When the possession is directly handed over, it is not possible for the applicant Board to verify the works completed or left incomplete in each dwelling unit by the respondent contractor. Many beneficiaries started claiming that many items of work were not completed by the respondent contractor.
(d) It is the consistent of the applicant Board that RA bill No.8 has been submitted by the respondent sans the required enclosures. The Arbitrator has not considered the evidence properly and held that the applicant is liable for the same. Final bill is not paid for non submission of enclosures. But, also for the reason of direct handing over the possession of the completed dwelling units.
The learned Arbitrator has not consider the evidence of RW1 - Executive Engineer and Ex.R1 properly.
(e) One inference of the Arbitrator is that, out of 534 dwelling units, only 385 dwelling units were completed and the question of 6 Com.A.P.No.73/2022 respondent seeking completion certificate does not arise. It is pertinent to state that the respondent repeatedly in his letters at Ex.P23, P25 and P26 had unambiguously expressed his disinterest in taking up the construction of remaining 149 dwelling units. Nothing was prevented to the respondent from demanding a Completion Certificate for 385 dwelling units. The another inference by the learned Arbitrator is that the applicant Board had knowledge of handing over of completed houses, it did not object or act and therefore, there is tactic approval and it has not acted till 2020. There is a big difference between authority and knowledge and the Arbitrator has missed this crucial difference. Mere knowledge by this applicant Board will not wash away the willful breach of the contract by the respondent. It will not make an illegal act legal.
(f) The Arbitrator has confused himself with authority and knowledge. He infers that the applicant Board coming to know regarding handing over of possession did not act or raise objections from 2019 to 2020 and it raised objections only after 03.09.2020. The only option left was to proceed legally, but, the same was not done. There was plenty of time still left to raise objections. The Arbitrator infers that the applicant Board has not written any letter subsequent to November 2019 i.e. the date of stopping of work by the respondent contractor. The Arbitrator has not looked into Ex.P24. The findings and reasons given by the learned Arbitrator are incorrect and baseless.
(g) The applicant Board has learnt of the handing over of the possession, only after the same was done and there is nothing that the applicant could not do to prevent the same. The vacant 7 Com.A.P.No.73/2022 possession of the sites for construction have been handed over to the respondent contractor by the applicant Board, the cost of construction is paid by the Board, privity of contract is between the applicant Board and the respondent contractor. The beneficiaries are no where in the picture in the tender Agreement between the applicant Board and the respondent. The fact of direct delivery of possession of completed dwelling units to the beneficiaries is established by its own letter at Ex.P23 and P25. Another inference by the learned Arbitrator that Clause No.24 of the Tender Agreement is not invoked by the applicant Board. The tender Agreement was still in force, the Board was more interested in smooth completion of the project. The handing over of the possession of the completed dwelling units is patent illegal. Hence, prays for setting aside the impugned award passed by the learned Arbitrator.
4. The applicant Board has made counter claim against the respondents regarding non payment by the beneficiaries of their respective contributions amounting to Rs.81,78,910/- which was rejected by the learned Arbitrator on the grounds that :
(a) The possession has been delivered to the beneficiaries on behalf of the applicant Board by the respondent. No material is produced by the Board to show the actual amount paid or due. No material is produced to show the steps taken to recover the dues.
No material is produced to show that there is difficulty in recovering the dues. There is no pleading regarding particulars of loss.
8 Com.A.P.No.73/2022(b) No materials are produced to show the non payment of dues, there is no breach by the respondent, the respondent has nothing to do with the recovery, there is no provision in the tender Agreement to recover this loss from the respondent.
(c) All these inferences are perverse and illogical. No one has authorized the respondent to handover the possession of the completed dwelling units. The Ex.R1 is the list showing the non payment of the contribution by the beneficiaries to the applicant Board, but, the Arbitrator said that there is no material produced to show the actual amount due. He has also opined that no material is produced to show the steps taken to recover the dues. On the other hand, the applicant Board being an instrument of the state as a welfare measure may even waive the dues, but, this does not clothe the respondent to do an act which is not empowered to do so. The inference of the Arbitrator is, no pleading has to the particulars of loss is amazing as the pleading in Para No.38 of the Statement of objection and para No.25 of the affidavit and Ex.R1 make it clear.
(d) The Arbitrator has opined that no independent witness is examined, which is also perverse. The learned Arbitrator has said that there is no breach of the Agreement by the respondent contractor. The respondent contractor has nothing to do with the recovery, it is also not correct. There is no provision in the tender Agreement to recover the dues from the respondent.
(e) In regard to liquidated damages, the Arbitrator has held that applicant is not entitled for damages for the reason, there is delay in handing over the possession of vacant sites. It is deemed that there is delay till the respondent contractor obtains the 9 Com.A.P.No.73/2022 Completion Certificate and the expiry of defect liability period. The applicant Board is entitled for counter claim, which includes liquidated damages.
(f) In regard to price adjustment claims, the claimant had claimed that he is entitled for price adjustment in respect of RA bill Nos.1 to 7 and same has been opposed by the applicant Board. The Arbitrator has held that the respondent contractor is entitled for the same. He has not made a proper reading of Clause No.40 of the Tender Agreement, which shows the price adjustment formula will be as per the approved program of works. The Arbitrator has held that Tender Agreement does not stipulate withholding of the price adjustment claims for non submission of program works. The Ex.P14 and P15 clearly state that the respondent contractor has to submit a program of works and get it approved. In the absence of the same, the respondent is forgoing the benefit of the same. The Arbitrator has inferred that when the approved program of work is not a part of the Agreement, the question of giving price adjustment does not arise. The Arbitrator is not correct and the respondent contractor is not entitled for the same.
(g) In regard to compensation is concerned, the learned Arbitrator has granted compensation of Rs.5.00 lakhs for failure of the applicant Board in handing over the possession of 149 sites. There is no prayer by the respondent contractor in this regard. The Arbitrator has granted this amount voluntarily. The Arbitrator has overlooked the admission given by PW1 during his cross examination.
10 Com.A.P.No.73/2022(h) In regard to refund of security deposit, the Arbitrator has ordered for refund of security deposit. There is no prayer in this regard also. There are no prayers in respect of the Item Nos.3 to 5 of the award. The award is not correct and deserves to be set aside.
5. After issuance of the notice, the respondent has made its appearance through its counsel. It has filed its objections and denied most of the allegations made against it. The application to challenge an award U/Sec.34 of the Act could only be allowed, if a fundamental principle has been breached. The ground of patent illegality can only be invoked, if the Arbitral Tribunal fails to determine the terms of the Agreement in a reasonable manner and Agreement has been construed in such a way that no fair minded or reasonable person could do.
(a) The award passed by the Tribunal is judicious and being passed after thorough process and due applicability of law. The impugned award is not bereft of all reasoning, logic and the same is not perverse. The tender as is initiated by the applicant Board has been initiated under Pradhan Mantri Rajiv Awas Yojana - PMRAY. Under the scheme, the demand survey and identification of beneficiaries is made through identification and demand survey, and during such identification, the contractor shall not be in the picture. It is clear that the contractor / respondent has no role to play in identification of the beneficiaries. There is no direct relationship among the beneficiaries and the respondent contractor.
(b) The case of the respondent as well as the applicant Board is that, the respondent contractor had finished the construction of 11 Com.A.P.No.73/2022 385 dwelling units way back in the year 2019, why would have the applicant Board remained silent without taking any action against the respondent contractor. If at all, the respondent ought to have handed over the possession of 385 dwelling units directly to the beneficiaries without instructions of the applicant Board, the question of Board remaining silent would have been far from imagination. The non existent of question of handing over of sites directly to the beneficiaries arose only after Ex.P26 i.e. legal notice was issued by the respondent contractor. The applicant Board had issued a letter on 03.09.2020 as per Ex.P24 and it has said that the applicant Board has not raised any objection with regard to handing over the possession directly to the beneficiaries. The respondent contractor has produced several documents, photos, CD taken at the time of handing over of the constructed dwelling units to KSDB officials and the beneficiaries.
(c) The possession of completed 385 units were handed over with the knowledge and oral instructions of the applicant Board, but, also goes to show the extent of showing that even otherwise. The applicant Board was not prevented from taking legal action as per the contract only to defeat the legitimate claim of the respondent contractor, the applicant Board is now taking the shelter of non exist lis of the respondent contractor having handed over the possession directly to the beneficiaries. In regard to handing over of the possession of the dwelling units, sans authority. In regard to non payment of contribution by the beneficiaries is concerned, it is stated that the applicant Board said it has suffered loss. But, it is false. As a matter of fact, the funding arrangement for housing 12 Com.A.P.No.73/2022 under PMRAY Scheme is borne by Govt. of India to an extent of 50%, the extent of 40% of the funding is borne by the Govt. of Karnataka and the residual amount of 10% of the funding is borne by the beneficiaries.
(d) It is further stated that it would be paramount to consider the observation made by the Arbitrator in his award regarding completion, taking over are proper and correct, after considering the materials on record produced by the parties and the evidence of parties. The respondent contractor, after taking into account all the factors, had delivered the possession of the completed 385 dwelling units directly to the beneficiaries sans any authority is far from truth and the respondent cannot be saddled with the burden of non existent loss of Rs.81,75,910/- does not arise at all.
(e) It is further stated that in regard to issuance of Completion Certificate and final bill, the allegations made by the applicant Board are baseless and false. The defect liability clause ought to have come into force only after completion of all 534 dwelling units. The defect liability clause works on this cardinal principle. Both the parties have agreed to the factum of claimant having completed the construction of 385 dwelling units way back in November 2019. The only dispute made by the applicant Board is that, the dwelling units were not handed over to the applicant Board as provided under the contract.
(f) It is further stated that the respondent contractor has never claimed that some amount would not be retained or withheld to attend to the repairs / defects that may crop up during the defect 13 Com.A.P.No.73/2022 liability period. Even the respondent has not disputed the rudimentary principles of defect liability clause as is wrongly put forth by the applicant Board. No where in the contact data it is stated or in other words, responsibility has been fastened on the contractor to obtain defect liability certificate or Completion Certificate upon handing over each dwelling unit. The applicant Board has not produced any material to show that the beneficiaries had raised the issue not being completed or otherwise of incomplete works. It is the case of the applicant Board that RA bill No.8 has been submitted by the respondent contractor sans the required enclosures is also denied as false. It has also pointed out towards the cross examination of RW1 and also materials produced by the parties also pointed out towards the findings given by the learned Arbitrator at page No.38 para No.52 of the award. The observation made by the Arbitrator is conclusive and legal on the aspect of RA Bill No.8, not being cleared by the applicant Board on account of difficulty in calculating the final account on false grounds of not handing over the possession directly to the beneficiaries does not call for any interference by this court.
(g) It is further stated that as urged by the applicant Board in its application that no prudent man would drive away anyone coming forward to pay monies due. No prudent man who has nothing to do with someone - beneficiaries go check who is listed where and how and handover possession of dwelling units. The entire contextual observation with regard to the contribution of the beneficiaries has been narrated while answering the grounds urged.
14 Com.A.P.No.73/2022(h) In regard to counter claim is concerned, the learned Arbitrator rejected the counter claim made by the applicant Board herein that the respondent contractor was liable for nonpayment by beneficiaries of respective contributions amounting to Rs.81,78,910/-. The grounds made out by the applicant Board are not maintainable and they are all on false grounds. It is the definite case of the respondent contractor that it had no business with the beneficiaries and there is no privity of contract between the respondent contractor and beneficiaries. The said fact is even admitted by the applicant Board of its application. The possession of 385 units were done in installments and such being the case if at all if the respondent ought to have handed over the possession of the completed dwelling units directly to the beneficiaries without the consent of the Board, then the question of Board remaining mute spectator is incredulous because when the sites were handed over in installments and if at all if the applicant Board had any grievance on the said fact it could have raised objections at the very first instance. The grounds made out by the applicant Board are false and baseless.
(i) It is further stated that the applicant Board in its counter claim has been more specifically answered while answering the heads "Direct handing over of possession of completed dwelling units to the beneficiaries". There are no grounds to consider the counter claim made by the applicant Board, it has to be rejected. The learned Arbitrator has come to the conclusion that the counter claim as is not maintainable for want of pleadings. There was no pleading by the applicant Board herein. The findings given by the 15 Com.A.P.No.73/2022 learned Arbitrator on the point of counter claim are proper and correct.
(j) It is further stated that in regard to liquidated damages is concerned, the grounds made out by the applicant Board are false and baseless. The time period as calculated from the date of handing over possession and not from the date of Agreement is ridiculous and a statement made in haste to create a ground to prefer this application. It has also pointed out towards the clause No.27 of the Contract Data. There is no dispute in regard to the fact that the respondent contractor was required to complete the works within 24 months from the date of issuance of work order. The applicant Board also ought to have provided the possession of the sites in condition at least with Three months gap to complete the construction from every milestone. The dates of handing over of the possession of sites show that there is difficult on the part of the applicant Board and in order to overcome this default, now the applicant Board is alleging that the respondent contractor has failed to provide possession of the completing dwelling units by obtaining Completion Certificate, till then it is deemed that possession has not been handed over. Issue No.11 is framed by the Arbitrator in regard to liquidated damages and he has given his findings to this issue which are proper and correct.
(k) It is further stated that in regard to price adjustment claims is concerned, the respondent / claimant had claimed that it is entitled for price adjustment in respect of RA bill Nos.1 to 7 totally Rs.51,25,134.83. The Arbitrator has given his findings on 16 Com.A.P.No.73/2022 issue Nos.2, 6 and 9. The respondent contractor restricted its claim only to a sum of Rs.1,83,63,493/- along with interest. The Arbitral Tribunal has held that the respondent contractor is entitled for price adjustment. The learned Arbitrator has given his findings. The applicant Board has issued a letter on 28.07.2016 as per Ex.P10 calling upon the respondent contractor to provide a commitment letter accepting the price adjustment clause w.e.f. issuance of work order and also requested to furnish the same within Three days. Once again it has issued a letter as per Ex.P12 on 09.03.2017 requesting for a commitment letter accepting the price escalation clause from the date of issuance of work order only. On the same day, the respondent contractor / claimant issued the commitment letter. There was a delay in fulfillment of tender formalities itself for a period of more than Three years, negotiations had taken place. The applicant Board could have sought for submission of program of events if at all if they had delivered the dwelling units on time in accordance with the milestone to be achieved by the respondent contractor. As per the GO No.FD 3 PCL 2008 dated 21.11.2008, the respondent contractor is entitled to claim price adjustment.
(l) It is further stated that the entire bills as per Ex.P44 to P51 had been placed before the Arbitral Tribunal, the officials have signed and accepted the quantities of works executed by the respondent contractor. The RA bill No.8 was withheld, since it was not in prescribed form as alleged by the applicant Board is an afterthought.
17 Com.A.P.No.73/2022(m) It is further stated, in regard to compensation is concerned, the grounds and allegations made by the applicant Board are also baseless and false. The applicant Board has miserably failed to deliver the possession of the sites in time. The time duration provided for execution of work was Two years including monsoon. After almost lapse of over Six months, since the date of issuance of letter of acceptance and over Three years since the awarding of tender the 38 sites were handed over on 23.09.2017 to 25.09.2017. Again on 22.11.2017 just 46 sites have been handed over to the respondent contractor. The sites have been handed over on Six different dates commencing from 20.11.2017 to 01.08.2019. As per the contents of Ex.P22, it is clear that the respondent contractor did not have possession of the remaining 149 sites as on the date of issuance of the said letter. The Ex.P24 clearly shows regarding possession of only 54 sites had been handed over to the respondent contractor. Hence, even on 03.09.2020 the applicant Board was never in possession of the remaining 149 sites as claimed. It has also pointed out towards Clause No.21 of the Tender contract. There has been complete failure on the part of the applicant Board to handover the possession of the sites within reasonable time. The Arbitrator has held that the respondent contractor is entitled for compensation.
(n) It is further stated that in respect of refund of security deposit, the learned Arbitrator has ordered the refund of security deposit without there being any prior misconception as urged by the applicant Board is also baseless. The grounds made out by the applicant Board in this regard are also irrelevant and baseless. In 18 Com.A.P.No.73/2022 regard to Item Nos.3 to 5 of the award is concerned, the grounds urged by the applicant Board referred above are also highly baseless and irrelevant. The issues were framed in the presence of both the counsel for the parties and opportunity was also given for finalization of the issues. But, the applicant Board is making false allegations. Hence, on these grounds and other grounds prays for dismissal of the application with cost and confirm the award passed by the learned Arbitrator in A.C.No.229/2021.
6. Heard arguments and perused the records.
7. Based on the pleadings of the parties, the following Points arise for my consideration:-
1. Whether there are grounds to set aside the award passed by the learned Arbitrator?
2. What Order?
8. My findings on the above points are :
Point No.1: In the negative Point No.2: As per the final Order for the following reasons.
REASONS
9. Point No.1: The learned Senior counsel for the petitioner has submitted his arguments basing on the content of the application and also statement of objections by the other side. He has drawn my attention towards the award passed by the learned 19 Com.A.P.No.73/2022 Arbitrator. The petitioner / respondent sought counter claim also. The learned Arbitrator has rejected the counter claim made by the petitioner / respondent before him. But, he has granted excess prayer, which is not sought by the claimant / respondent herein. Hence, the learned Arbitrator has exceeded his limit and scope of the arbitration. The learned Arbitrator has misinterpreted the clauses mentioned in the Agreement. The claimant before the Arbitrator has not handed over the units after their completion, but, he has handed over the units to the beneficiaries. Hence, the petitioner herein has sustained loss.
10. The Ex.R1 i.e. the list showing the non payment of contribution by the beneficiaries due to direct handing over of the possession of the dwelling units by the claimant to the beneficiaries. But, this document is not challenged by the other side and even not challenged during the cross examination also. He has pointed out towards the prayer sought by the claimant in A.C.No.229/2021 before the learned Arbitrator that - "Direct the respondent to pay a sum of Rs.2,60,91,159.66 along with interest at 21% till date of delivery, treat failure to handover the sites within 24 months as compensation event, direct the respondent to pay 100% price adjustment for remaining 149 sites if the respondent intends to continue with the Tender and grant such other reliefs as are necessary in the circumstances of the case". But, the learned Arbitrator has clearly exceeded the scope of arbitration. There was no prayer regarding the prayers, but, the learned Arbitrator has granted the award at Sl.Nos.3 to 5. He has directed the petitioner 20 Com.A.P.No.73/2022 herein to pay a sum of Rs.5.00 lakhs to the claimant / respondent by way of compensation within 30 days from the date of award, thereafter it shall carry interest at the rate of 12% p.a. from the date of award till the date of payment and also directed the petitioner herein to release the proportionate Security Deposit of Rs.42,75,862/- within 30 days from the date of award, thereafter it shall carry interest at the rate of 12% p.a. from the date of award till the date of payment and also passed an award that the remaining Security Deposit of Rs.1,10,48,368/- shall be retained by the respondent / petitioner herein for a period of 30 days from the date of award and thereafter, it shall be released to the claimant / respondent herein upon issuance of the completion certificate and No Defects Liability certificate after deducting the cost and expenses if any, due and payable to the respondent / petitioner herein towards performance of the contract relating to 385 completed units, thereafter it shall carry interest at the rate of 12% p.a. from the date of the award, till the date of payment.
11. The learned Senior counsel has further submitted that he has pointed out towards the Ex.P23 i.e. the reply issued by the claimant / respondent herein dated 10.08.2020, the work was stopped in November 2020. The findings given by the learned Arbitrator on the Issues framed are not proper and correct. The claimant / respondent herein has not pleaded regarding waiver and even not proved by placing cogent evidence. Withholding amount is wrong, it is to be proved by placing evidence. He has pointed out towards the evidence of PW1 and also documents produced on 21 Com.A.P.No.73/2022 behalf of the claimant before the learned Arbitrator at Ex.P1 to P51. The Ex.P44 to P51 are the Eight RA bills. The 7 th and 8th RA bills are different, there is no measurements mentioned in 8 th RA bill. He has also pointed out towards the provisions of Sec.31(c) of the Arbitration and Conciliation Act and the provisions of Sec.34 of the Act. The award passed by the learned Arbitrator is to be set aside by allowing this petition and also allow the counter claim made by the petitioner herein.
12. During his arguments, he has relied upon the decision held in Prem Kumar Menon & Ors. Vs Lancor Holdings Ltd. [2019 SCC Online Mad 30433] and the following decisions -
[2021 SCC Online Kar 15933] Anheuser Busch Inbev India Ltd., Mumbai Vs Scarpe Marketing Pvt. Ltd., Hyderabad (XI) DAMAGES:
41. The respondent made a claim for damages of Rs.4,39,46,164/- along with interest at the rate of 18% towards outstanding invoices payable by the appellant on the date of Agreement. The tribunal by majority has awarded the said claim to the extent of Rs.3,98,81,995/- along with interest at the rate of 10% from the date when amount become due till it is actually paid. We now examine, whether the award made by Arbitral tribunal and the commercial Court suffer from patent illegality, in so far it pertains to aforesaid claim. The principles of law on compensation for breach of contract is succinctly stated by Supreme Court in 'Kailash Nath Associates Vs Delhi Development Authority' (2015) 4 SCC 136, which are extracted below for facility of reference -
43.2. Reasonable compensation will be fixed on well known principles that are applicable to the law of contract, which are to be found inter alia in Sec.73 of the contract Act.22 Com.A.P.No.73/2022
43.3. since Sec.74 awards reasonable compensation for damage or loss caused by a breach of contract, damage or loss caused is a sine qua non for the applicability of the section.
42. Thus in a case, it is possible to prove actual damages or loss such proof if not dispensed with and therefore, the evidence is required to be adduced by a claimant. It is settled in law that where loss in terms of money can be ascertained, the party claiming compensation has to prove the loss sustained by him. [See: 'MAULA BUX VS. UNION OF INDIA 1969 (2) SCC 554]. It is pertinent to note that the respondent has not adduced any oral evidence in support of its claim, however, in respect of claim for payment towards outstanding invoices, following documentary evidence has been produced, which reads as under:
(i) Doc No.4A - Attested copy of the Ledger of the respondent as maintained by the claimant.
(ii) Doc 12A and 12B - Statement of outstanding invoices along with the copies of the invoices raised in connection with the entries made in Doc 4A and 12A.
(iii) Doc No.20 collation of all email communication between the parties between Nov 2017 until March 2018 in connection with the services under the subject agreement.
45. The aforesaid finding is based on surmises and conjectures and is factually incorrect. Even though subsequently the respondent filed certified copy of the aforesaid documents 4A, 12A, 12B, however, the fact remains that the appellant had denied the contents of the document in the affidavit dated 06.12.2019, therefore, it was necessary for the respondent to adduce evidence. The tribunal however, the majority award of the tribunal held that outstanding invoices were raised towards services rendered by respondent in the State of Kerala on the basis of good faith and instructions of the appellant and therefore, the respondent is entitled to reimbursement of the expenses. It was further held that respondent was not entitled to claim amount towards trade investment scheme as no evidence was adduced. The majority award held the respondent entitled to a sum of Rs.3,98,81,995/- against outstanding invoices in addition to an interest of 10% from the date on 23 Com.A.P.No.73/2022 which the amount fell due till actual payment is made.
46. The aforesaid findings of the majority award of the tribunal and the finding of the commercial court in affirming the same on the ground that respondent did not file any objection to the documents viz., Document Nos.4, 12, 15 and 16 are factually incorrect, perverse, erroneous and are based on no evidence, and therefore, covered under the expression 'patent illegality' under Sec.34(2A) of the Act.
(XII) NOMINAL DAMAGES:
47. The respondent had claimed a sum of Rs.41,56,83,128/- as loss of revenue arising from the premature termination of the CISP agreement from March 2018 till August 2020. The majority award has held that in the absence of critical evidence, it is constrained to award nominal damages and has awarded nominal damages to the extent of Rs.16,04,41,281/- Crores along with interest at the rate of 10% from the date of the award till actual payment. Now we advert to the issue, whether award made by arbitral tribunal and the commercial court, insofar as it grants the claim of nominal damages to the extent mentioned above, suffer from patent illegality. In POLLOCK AND MULLA, THE Indian Contract, 1872 14TH Edition at page No.1171, the principles with regard to nominal damages have been summarized which read as under:
When the defendant is found liable for breach of contract, the plaintiff would be entitled to nominal damages even if no actual damage is proved. Nominal damages are awarded when there is an infraction of a legal right, and though it gives no right to any real damages yet gives the right to a verdict because of the infringement -
The plaintiff is awarded nominal damages when:
(i) the defendant's breach of contract has in fact caused no loss to the plaintiff.
(ii) the defendant has committed a technical breach of contract and the plaintiff himself and no intention of performing his terms.
(iii) the plaintiff fails to prove the loss, that he may have 24 Com.A.P.No.73/2022 suffered from the breach of contract;
(iv) he has suffered actual damage, which has arisen, not from the defendant's wrongful act, but from the conduct of the plaintiff himself, or an external event;
(v) the plaintiff merely seeks to establish the infringement of his legal right, without being concerned about actual loss. Where there is no basis for ascertainment of the amount. A small amount of GBP 5 may be awarded. The view that nominal damages do not connote a trifling amount is erroneous; nominal damages mean a small sum of money. Nominal damages have been defined as a sum of money that may be spoken of, but that has no existence in point of quantity, or 'a mere peg on which to hang costs'.
When the loss is small and quantifiable, the damages awarded, though small, are not nominal damages.
49. Thus, nominal damages are granted where a legal right of plaintiff is found to be infringed and there is no proof of actual loss. In such a case, a notional amount may be awarded as damages to plaintiff. The arbitral tribunal by majority while dealing with the aforesaid claim of the respondent in para 4.2.21 has held as under:
In the absence of critical evidence forthcoming from both the parties, we are constrained to award nominal damages in favour of the claimant for loss of business between March 2018 and August 2020."
Kalpraj Dharamshi & Anr. Vs Kotak Investment Advisors Ltd. & Anr.
[(2021) 10 SCC 401]
110. This Court has thus held, that the principle of waiver although is akin to the principle of estoppel; estoppel is not a cause of action and is a rule of evidence, whereas waiver is contractual and may constitute a cause of action. It 25 Com.A.P.No.73/2022 is an agreement between the parties and a party fully knowing of its rights has agreed not to assert a right for a consideration. It is further held, that whenever waiver is pleaded, it is for the party pleading the same to show that an agreement waiving the right in consideration of some compromise came into being.
13. Per contra, the learned counsel for the respondent submitted his arguments and pointed out towards grounds made out in the petition and also statement of objections. The learned Arbitrator has considered all the materials on record and also evidence of PW1 and RW1 as well as the documents marked at Ex.P1 to P51 and Ex.R1 to R3, he has passed the award. Since there were no grounds and evidence to consider the counter claim made by the petitioner herein. The learned Arbitrator has rightly rejected the counter claim sought by the respondent therein. He has also drawn my attention towards the provisions of Sec.34 of the Arbitration and Conciliation Act. The Ex.P16 is the Tender Agreement dated 10.07.2017, he has drawn my attention towards the clause No.21 of the Agreement / Notification regarding possession of the sites. All the sites were not handed over. The petitioner herein has handed over only 385 sites. Hence, the respondent herein is unable to complete the work within the stipulated time. He has also pointed out towards the clause 25 of Ex.P16. He has also drawn my attention towards the Ex.P22 i.e. the letter issued by the respondent / petitioner herein dated 24.07.2020. The contractor i.e. the respondent herein is entitled for the interest on the dues from the petitioner herein. The total claim 26 Com.A.P.No.73/2022 amount is not disputed. The findings given by the learned Arbitrator on all the 11 Issues are proper and correct.
14. During his arguments, he has relied upon the decisions held in Dyna Technologies Pvt. Ltd. Vs Crompton Graves Ltd. [AIR Online 2019 SC 1928], Konkan Railway Corporation Ltd. Vs Chenab Bridge Project Undertaking [AIR 2023 SCC 4049], S.V.Samudram Vs State of Karnataka & Anr. [2024 0 Supreme (SC) 18], Bachhaj Nahar Vs Nilima Mandal & Anr. [Civil Appeal Nos.5798-5799 of 2008] and the following decisions -
UHL Power Company Ltd. Vs State of Himachal Pradesh [Laws (SC) 2022-1-18]
15. As it is, the jurisdiction conferred on Courts under Section 34 of the Arbitration Act is fairly narrow, when it comes to the scope of an appeal under Section 37 of the Arbitration Act, the jurisdiction of an Appellate Court in examining an order, setting aside or refusing to set aside an award, is all the more circumscribed. In MMTC Limited Vs Vedanta Limited7, the reasons for vesting such a limited jurisdiction on the High Courtin exercise of powers under Section 34 of the Arbitration Act has been explained in the following words:
"11. As far as Section 34is concerned, the position is well- settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii) i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the "fundamental policy of Indian law" would cover 27 Com.A.P.No.73/2022 compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury [Associated Provincial Picture Houses v. Wednesbury Corpn., (1948) 1 KB 223 (CA)]reasonableness. Furthermore, "patent illegality" itself has been held tomean contravention of the substantive law of India, contravention of the1996 Act, and contravention of the terms of the contract."
16. A similar view, as stated above, has been taken by this Court in K. Sugumar v.Hindustan Petroleum Corporation Ltd.8, where it has been observed as follows:
"2. The contours of the power of the Court under Section 34 of the Act are too well established to require any reiteration. Even a bare reading of Section 34of the Act indicates the highly constricted power of the civil court to interfere with an arbitral award. The reason for this is obvious. When parties have chosen to avail an alternate mechanism for dispute resolution, they must be left to reconcile themselves to the wisdom of the decision of the arbitrator and the role of the court should be restricted to the bare minimum. Interference will be justified only in cases of commission of misconduct by the arbitrator which can find manifestation indifferent forms including exercise of legal perversity by the arbitrator."
17. It has also been held time and again by this Court that if there are two plausible interpretations of the terms and conditions of the contract, then no fault can be found, if the learned Arbitrator proceeds to accept one interpretation as against the other. In Dyna Technologies (P) Ltd. V. Crompton Greaves Ltd.9, the limitations on the Court while exercising powers under Section 34 of the Arbitration Act has been highlighted thus:
"24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various Courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the Court comes to a 28 Com.A.P.No.73/2022 conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate underS ection 34is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the Courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated."
NTPC Ltd. Vs M/s Deconar Services Pvt. Ltd.
[AIR 2021 SCC 2588]
11. Before proceeding further, it is necessary to make note of the scope of interference by Courts in arbitral awards passed under the Arbitration Act, 1940. This Court has consistently held that the Court does not sit in appeal over an award passed by an arbitrator. In Kwality Manufacturing Corporation v. Central Warehousing Corporation, (2009) 5 SCC 142 this Court held as follows:
"10. At the outset, it should be noted that the scope of interference by courts in regard to arbitral awards is limited. A court considering an application under Section 30 or 33 of the Act, does not sit in appeal over the findings and decision of the arbitrator. Nor can it reassess or reappreciate evidence or examine the sufficiency or otherwise of the evidence. The award of the arbitrator is final and the only grounds on which it can be challenged are those mentioned in Sections 30 and 33 of the Act. Therefore,on the contentions urged, the only question that arose for consideration before the High Court was, whether there was any error apparent on the face of the award and whether the arbitrator misconducted himself or the proceedings.
12. Further, it is also a settled proposition that where the arbitrator has taken a possible view, although a different view 29 Com.A.P.No.73/2022 may be possible on the same evidence, the Court would not interfere with the award. This Court in Arosan Enterprises Ltd.v. Union of India, (1999) 9 SCC 449 held as follows:
"36. Be it noted that by reason of a long catena of cases, it is now a well settled principle of law that reappraisal of evidence by the court is not permissible and as a matter of fact exercise of power by the court to reappraise the evidence is unknown to proceedings under Section30 of the Arbitration Act. In the event of there being no reasons in the award,question of interference of the court would not arise at all. In the event,however, there are reasons, the interference would still be not available within the jurisdiction of the court unless of course, there exist a total perversity in the award or the judgment is based on a wrong proposition of law. In the event how ever two views are possible on a question of law as well, the court would not be justified in interfering with the award".
15. After hearing the learned counsel for the parties, I have also perused the contents of the application as well as objections filed by the other side. Some admitted facts are, the petitioner herein floated a Tender for construction of 534 dwelling units in Seven selected slums in Krishnaraja area of Mysuru. The respondent herein was the successful bidder. The letter of acceptance was issued on 16.03.2017 and work order on 10.07.2017, the Tender Agreement was signed by the parties on 10.07.2017.
16. The say of the petitioner herein is that, the respondent herein who was the highest bidder and constructor, has constructed 385 houses and refused to take construction of remaining 149 houses, unless higher prices were paid. Hence, the differences 30 Com.A.P.No.73/2022 arose between the parties, since the differences could not be reconciled, the respondent herein invoked the arbitration clause as mentioned in the Tender Agreement and an Arbitrator was appointed in the matter. The respondent herein who was the claimant before the Arbitrator, submitted that the 8 th RA bill of Rs.1,32,38,358/- was in due and also the price adjustment variation in 1 to 6 RA bills amounting to Rs.45,13,545/- and the price adjustment variation of 7th bill is Rs.6,11,589/-. The claimant before the Arbitrator has also sought interest at the rate of 21% from 14.08.2019 to 14.09.2021 amounting to Rs.77,12,666/- on an amount of Rs.1,83,63,492/-. The total amount claimed by the claimant / respondent herein is Rs.2,60,91,159/-.
17. I have also gone through the grounds made out by the petitioner herein and also statement of objections by the other side. I have also gone through the award passed by the learned Arbitrator. The Director of the respondent company has been examined as PW1 before the learned Arbitrator and produced number of documents at Ex.P1 to P51. The Ex.P44 to P51 are the Eight RA bills, the Ex.P16 is the Tender Agreement dated 10.07.2017. There are letter correspondences between the parties and produced the copies of the same at Ex.P22 to P25, the Ex.P26 is the legal notice dated 22.09.2020. The Ex.P29 and P30 are the reply and notice issued by the respondent / claimant before the learned Arbitrator dated 28.10.2020 and 05.12.2020. The Ex.P31 is the notice issued by the claimant therein dated 14.12.2020. The respondent / petitioner herein has issued reminders as per Ex.P35 to P37. The Ex.P42 is the printout of 265 photos.
31 Com.A.P.No.73/202218. An official of the respondent therein is examined as RW1 and he has produced the Ex.R1 to R3. The Ex.R2 is the notice issued by the Board to the claimant / respondent herein for payment of the liquidated damages along with calculation sheet. I have gone through the evidence of PW1 and RW1 as well as the documents referred above.
19. After considering the materials on record and pleadings, the learned Arbitrator has framed as many as 12 Issues. He has answered the Issues and come to the conclusion that the petition filed by the claimant is allowed in part and also granted the reliefs. He has rejected the counter claim sought by the petitioner herein.
20. I have gone through the findings given by the learned Arbitrator. The burden of proving Issue Nos.1 to 8 lies on the claimant before the Arbitrator and the burden of proving Issue Nos.9 to 11 lies on the respondent therein. After going through the findings, the clause No.46.1 and 47.1 of the Tender Agreement / Ex.P16, impose reciprocal promises, since the respondent therein failed to deliver the vacant possession of 149 sites as per the terms of the Agreement, the claimant / respondent herein was prevented from performing his part of the contract and therefore, the question of obtaining the completion certificate in respect of the entire contract did not arise at all. The learned Arbitrator has held that, in regard to delivery of the physical possession of the 385 completed units shown in Ex.P42 i.e. photographs and clause No.24 of the Tender Agreement, it was submitted that the project in question was executed under PMRAY Scheme. The beneficiaries identified by 32 Com.A.P.No.73/2022 the Board. The claimant / respondent herein had no say in the identification of the beneficiaries. The officers of the Board were also present at the time of handing over the possession to the beneficiaries. The respondent / petitioner herein has admitted that the claimant / respondent herein had stopped the work in the month of November 2019 and vacated the premises. If the possession was not delivered to the respondent / petitioner herein, it was open to the respondent to invoke clause No.24 of the Tender Agreement seeking intimation of the Principal Secretary. It is also argued before the learned Arbitrator by the claimant / respondent herein on the question of alleged loss sustained by the respondent / petitioner herein, no material has been produced by the other side to show that the beneficiaries in occupation of the units have failed to pay their respective contribution, even there is no pleading to that effect and no evidence has been produced by the other side to show that the Board has suffered a loss of Rs.81,75,915/-.
21. After hearing the arguments at length by both side, the learned Arbitrator has held that as per the terms of the Agreement in Ex.P16, the claimant / respondent herein could commence the construction of the dwelling units only after handing over the vacant possession of the sites. The Ex.P16 does not stipulate that the possession of all the 534 sites should be delivered to the claimant / respondent herein at a stretch, also does not stipulate the time for handing over the possession of these sites. The Ex.P16 provides that the construction of dwelling units should be completed within 24 months from the date of handing over possession of the vacant sites and also time limit for complete the 33 Com.A.P.No.73/2022 construction of these houses was 24 months from the issuance of work order. As stated supra, there were letter correspondences between the parties. The respondent / petitioner herein had issued Ex.P6 i.e. letter of acceptance accepting the Tender for a contract price of Rs.30,72,90,000/- and it was called upon to furnish the security deposit of Rs.1,53,65,000/-.
22. The Ex.P7 to P13 i.e. the letters issued by the respondent / petitioner herein on different dates from 19.02.2015 to 09.03.2017, the time for tender formalities was extended from time to time and finally after negotiations, as per Ex.P14 has been issued by the Board on 16.03.2017 more than Two years after the issuance of the first letter of acceptance on modified terms for the contract price of Rs.3,06,48,460/- i.e. 5% above the schedule rates for the year 2016-17, the claimant / respondent herein was asked to furnish security deposit. This is complied by executing Ex.P16.
23. I have gone through the clause No.46 and 47 of the Tender Agreement / Ex.P16. Clause No.46 - Completion, 46.1 reads
- "The Contractor shall request the Employer to issue a certificate of completion of the works and the Employer will do so upon deciding that the work is completed". Clause No.47 - Taking Over, 47.1 reads - "The Employer shall take over the site and the works within 7 days of issuing a Certificate of Completion".
24. The learned Arbitrator has held that, the construction of the dwelling units in 385 sites has been completed by the claimant / respondent herein. It is the contention of the other side 34 Com.A.P.No.73/2022 that the claimant / respondent herein has completed the construction of 385 units as agreed, but, the RW1 has asserted that the claimant sans any authority to handed over possession of the completed dwelling units to the beneficiaries. It is very clear that there is no dispute as to the completion of construction of 385 units. Hence, the learned Arbitrator has answered the Issue regarding completion of construction of 385 houses as per the conditions in favour of the respondent herein.
25. It is the case of the petitioner herein since beginning that, the respondent herein has not handed over the completed units to it and directly the claimant before the Arbitrator has delivered the possession of these units which have been completed directly to the beneficiaries. Because of this, the respondent therein had sustained loss, since the beneficiaries had not paid the remaining balance amount.
26. The learned Arbitrator has held that since all the units were not constructed, since some of the sites have not been handed over, hence the question of claimant / respondent herein applying for issuance of Completion Certificate does not arise. The claimant / respondent herein delivered the possession of these completed units of 385 to the beneficiaries. There is no dispute. The Ex.P23 and P25 i.e. reply by the claimant / respondent.
27. The learned Arbitrator has also observed that the parties had stopped the work since November 2019 and had vacated the site along with the labourers. Till 03.09.2020, the 35 Com.A.P.No.73/2022 respondent / petitioner herein did not raise any objections regarding non delivery of the completed units. Though it paid and honoured the bills raised by the claimant / contractor from time to time during the progress of the work. The 7 th RA bill / Ex.P50 was presented t the Board by the respondent herein in August 2019. The amount claimed in 7 th RA bill was released on 20.11.2019 and the concerned officer i.e. Executive Engineer of the Board has given a direction to the concerned officials to recover the contributions due from the beneficiaries. It is held by the learned Arbitrator that in Ex.P50, it is specifically noted that out of 50 beneficiaries, 8 belonged to SC/ST category and among them Two had submitted the required information whereas the information regarding the other members of SC/ST was being collected and a sum of Rs.2.63 lakhs has been collected from the beneficiaries and the remaining amount of Rs.1.21 lakhs was yet to be recovered. It is also held by the learned Arbitrator that these facts go to show that the respondent / petitioner herein was not only aware of the fact that the completed units were in the possession of the beneficiaries chosen by the respondent itself, but, it has also tacitly acquiesced in the mode of performance of the contract by recovering the contribution from the beneficiaries who were put in possession of the completed units by the respondent herein.
28. He has also observed that the project was commissioned under PMRAY Scheme, the RW1 who is the Executive Engineer of the Board deposed that the identification of the beneficiaries and the funding was done as per the said scheme and he has admitted that the claimant / respondent herein had no role whatsoever in 36 Com.A.P.No.73/2022 identifying the beneficiaries. The claimant / respondent herein had no privity with anyone of the beneficiaries who were chosen under the scheme. It is not the case of the petitioner herein that the possession of the units was delivered to any strangers other than the beneficiaries, it implies that the possession of the units was handed over only to the beneficiaries. It does not lie in the month of the officials of the respondent / petitioner herein. Now to contend that the claimant / respondent herein has breached the contract by delivering the possession directly to the beneficiaries without the knowledge and consent of the respondent / petitioner herein - Board.
29. The RW1 has admitted the fact the joint measurement was done in the presence of the claimant / respondent herein when the beneficiaries were in possession of the respective units. All these factors clearly goes to establish that the respondent / petitioner herein was very much aware of the fact that the possession of the respective units was with the beneficiaries chosen by it.
30. In regard to counter claim sought by the respondent therein, according to the respondent therein, the alleged loss sustained by it to the tune of Rs.81,78,910/- is concerned, the learned Arbitrator has held that the completed units have been delivered to the beneficiaries for and on behalf of the respondent / Board, the counter claim does not survive for consideration. The counter claim sought on the supposition that on account of handing over the possession of the units directly to the beneficiaries, it has 37 Com.A.P.No.73/2022 become difficult for the Board to recover the contribution of 10 to 15% of the cost of construction payable by the beneficiaries under the Scheme. The Ex.P50, the Executive Engineer of the Board has accepted the position that it had already collected a sum of Rs.2.63 lakhs from 50 beneficiaries and had issued a direction to recover the balance contribution of Rs.1.25 lakhs from the beneficiaries. There is no pleading as to the particulars of the loss, no independent witnesses have been examined to show that the beneficiaries have refused to pay their contribution at any point of time. The respondent / petitioner herein has not substantiated the counter claim with any reliable evidence. There is no basis for the petitioner / respondent therein to sustain the counter claim. Hence, the learned Arbitrator has rejected the counter claim.
31. In regard to the price adjustment of the 8 th RA bill as well as Bill Nos.1 to 6 and also 7th bill is concerned, the respondent herein raised Six RA bills but, the respondent / petitioner herein paid an amount of Rs.17,02,38,177/- and failed to pay the price adjustment variation amounts to Rs.45,13,543.83. Later, the respondent herein raised 7th RA bill along with the price variation of Rs.6,11,589/- and on receipt of the bill, only an amount of Rs.2,43,83,634/- was cleared by the petitioner herein. Hence, the respondent / claimant therein raised 8th bill claiming the difference amount pertaining to bill Nos.1 to 7 amounting to Rs.1,32,38,358.19. The petitioner herein had not disputed the correctness of the amount claimed in bill Nos.1 to 7, but, it has raised a dispute that the liability to pay the amounts by raising some contents i.e. as per clause No.25 of Ex.P16, submission of 38 Com.A.P.No.73/2022 program of works was a condition precedent to avail the benefit of price adjustment. The claimant / respondent herein did not submit any program of works and did not obtain the approval of the Employer as required under Clause No.40 of Ex.P16, hence the claimant is not entitled to the benefit of price adjustment and also raised objections that certificate of completion as required under Clause Nos.46 and 48 of Ex.P16. One more allegation is there, the claimant / respondent herein stopped work in November 2019 and indicated his intention not to take up the construction of the remaining 149 sites. Therefore, he cannot be paid the amount. Another contention was the completion of 385 units were not in accordance with the terms of Ex.P16, no defect liability certificate has been obtained by the claimant / respondent herein, therefore, he is not entitled of these amounts.
32. The learned Arbitrator has come to the conclusion that, the claimant and the respondent since the stage of Tender Notification till execution of Ex.P16 and later on also, the performance of this condition has been waived by the respondent/petitioner herein and it has proceeded with the execution of Ex.P16 without insisting for the program of works. It is clear that the letter of acceptance as per Ex.P6 as well as Ex.P14 issued by the respondent / petitioner herein, the respondent herein was called upon to furnish an acceptable construction program. The program of works shall be a part of Ex.P16, but, without securing the program of works, the work order was issued as per Ex.P15 and also Ex.P16 was also executed, it shows that both the parties waived the compliance of this condition. The Agreement / Ex.P16 39 Com.A.P.No.73/2022 does not provide for withholding the amount for violation of the condition.
33. In regard to the price adjustment variation, as per Clause No.41 of the Conditions of the Contract reads -
"41.1 Contract price shall be adjusted for increase or decrease in rates and prices of labour, materials, fuels and lubricants in accordance with the following principles and procedures and as per formulae given in the Contract Data.
a. The price adjustment shall apply for the work done from the date of commencement upto the end of original period of completion of extensions granted by the Employer and shall not apply to work carried out beyond the stipulated period of completion for reasons attributable to the Contractor;
b. Price Adjustment shall be admissible from the date of opening of tenders (original or extended) c. The price adjustment shall be determined during each quarter from the formulae given in Contract Date.
d. Following expressions and meanings are assigned to the work done during the quarter:
R = Total value of work done during the quarter. It will exclude value for works executed under variations for which price adjustment (if any) will be worked out separately based on the terms mutually agreed."
34. Hence, the Agreement disclose that in Ex.P10 i.e. letter issued by the respondent / petitioner herein dated 28.07.2016, it has insisted the claimant / respondent herein to a commitment 40 Com.A.P.No.73/2022 letter accepting the price adjustment clause with effect from issuance of work order and not from the date of opening of the Bid. This was also reiterated in Ex.P12 dated 09.03.2017 and same has been accepted by the claimant/respondent herein by his letter as per Ex.P13. The claimant before the arbitration has not obtained the Certificate of Completion as per Clause No.46 of Ex.P16 and also not obtained the NDLC. Explanation was offered by the claimant / respondent. The work has agreed ought to be completed within 24 months as per Clause No.27 of Ex.P16, but, the work order has been issued on 10.07.2017. Therefore, in order to adhere the milestones prescribed in clause No.27, the respondent Board was bound to deliver the possession of all 534 sites to the claimant/ respondent herein atleast Six months before the said date. But, until the end of November 2019, the respondent Board / petitioner herein has delivered only 385 sites and the possession of remaining sites i.e. 149 was not delivered to the claimant / contractor.
35. It is held by the learned Arbitrator that the respondent / Board has not terminated the contract, treating the stoppage of work by the claimant / respondent herein as fundamental breach as contemplated under Clause No.50 of the Condition of the Contract, in which the liquidated damages could have been claimed from the claimant / respondent herein. The learned Arbitrator has also held that the only remedy available to the claimant / respondent was to seek reasonable remuneration for the part of contract performed by him. The claimant / respondent has raised bills as per the progress of the work for quantity of works carried out by him. There is no dispute regarding the 41 Com.A.P.No.73/2022 correctness of the amount claimed in Bill Nos.1 to 7. Even the respondent / petitioner herein has contended that RA bill No.8 is not in the form of a bill and it is only a covering letter. But, Ex.P51 it is in the same form as bill Nos.1 to 7. Hence, the Arbitrator held that the claimant / respondent herein is entitled for recovery of the amounts as claimed at Sl.Nos.1 to 3 referred above in the table amounting to Rs.1,83,63,439/- with interest at 6% from 01.12.2019.
36. The learned Arbitrator has also discussed regarding compensation event i.e. in regard to Issue Nos.3, 7 and 8. The clause No.21.1 of the Condition of the Contract reads that - "the Employer shall give possession of all parts of the site to the contractor. If possession of a part is not given by the date stated in the contract data the Employer is deemed to have delayed the start of relevant activity and this will be compensation event." The learned Arbitrator has also relied upon the provisions of Sec.54 of the Contract Act. He come to the conclusion that the claimant / respondent herein is entitled to treat the event as compensation event. No material is available to quantify the loss. The claimant / respondent herein having invested money for carrying out the entire project consisting of 534 units and having employed Personnel and labourers on account of the frustration of part of the contract loss could be assumed even without proof and the burden shifts on the person who committed breach to show that no loss was caused. Hence, awarded Rs.5.00 lakhs as compensation for the breach committed by the respondent / petitioner herein in delivering the vacant possession of the remaining 149 sites . Hence, 42 Com.A.P.No.73/2022 the learned Arbitrator answered the Issue Nos.3 and 8 in favour of the claimant / respondent herein.
37. In regard to security deposit the learned Arbitrator has held that the claimant / respondent has furnished a security deposit of Rs.1,53,24,230/-. As per the Clause No.44 of the Contract, the said security deposit shall be valid until 30 days from the date of expiry of defects liability period and the additional security for unbalanced Tender shall be valid until a date of 30 days from the date of issue of Certificate of Completion. The claimant / respondent herein has sought to receive the security deposit on the ground of no defect liability period as provided in the letter of acceptance dated 16.03.2017 has expired on 15.04.2020 and therefore, entitled for return of the security deposit. The say of the respondent / petitioner herein is, the security deposit will be refunded only after settlement of all claims and not before it. It is also held that the Clause No.46.1 of the Contract, any such request by the contractor has to be decided by the Employer that the work is completed. It is one of the essential condition of the contract which cannot be brushed it aside. Also held that, the respondent is entitled to retain the proportionate deposit relating to 385 units and the rest of the deposit amount relating to 149 sites is liable to released in favour of the Contractor / claimant.
38. In regard to Issue No.11 - "whether the respondent is entitled to recover the liquidated damages of Rs.3,06,40,000/-, and the loss caused to the Board amounting to Rs.81,79,910/-, in total Rs.3,88,18,910/- by way of counter claim" is concerned, it is held 43 Com.A.P.No.73/2022 at the respondent / petitioner herein has made counter claim and it is sought on the basis of the legal notice issued by the contractor / claimant, wherein the respondent / petitioner herein has claimed liquidated damages from the Contractor at the rate of Rs.20,000/- per day in terms of the contract - clause No.41 for the delay in handing over the possession of 385 units. But it is an admitted fact that the contractor has completed the construction of 385 units within Two year i.e. 24 months from the date of delivery of the vacant sites. There is no evidence / material to show the exact date of completion, but, it can be gathered that by the end of November 2019 all the 385 units of which the vacant possession was given to the claimant were completed. The respondent / petitioner herein caused delay in delivering the vacant possession of the sites. Hence, it is held by the learned Arbitrator that the respondent / Board is not entitled for damages.
39. I have also gone through the evidence of PW1 and RW1 and also documents referred above. I have also gone through the decisions relied upon by the learned counsel for the petitioner. The principles laid down in these decisions are well founded. These decisions are not helpful to the case of the respondent / Board. I have also gone through the decision relied upon by the learned counsel for the claimant / respondent herein. The principle laid down in these decisions are well founded. These come to the aid of the respondent / claimant. It is an admitted fact that the respondent Board has not handed over the entire sites for construction of residential houses for the beneficiaries at Krishnaraja Area of Mysuru. But, only some sites have been 44 Com.A.P.No.73/2022 delivered and the claimant before the learned Arbitrator has completed the construction and handed over the constructed houses to the beneficiaries to the extent of 385 sites. The main grievance of the respondent / Board is that the Contractor / claimant has to handed over the constructed houses to the Board, but, directly the contractor has handed over to the beneficiaries. So, the Board has sustained loss and sought for damages by way of counter claim.
40. It is admitted fact also that the Board has not handed over the entire site for construction and there was a delay. If the Board has handed over all the sites in time as agreed, then if the respondent herein has failed to complete the construct of all the dwelling units of 534 sites then, the matter would have been different. But, it is not so. The contractor has deposited security deposit with the petitioner / Board herein. The learned Arbitrator by considering all the materials on record and evidence of PW1 and RW1 has rightly come to the conclusion that the petition filed by the petitioner before him is partly allowed. The learned counsel for the petitioner herein submitted that the learned Arbitrator has exceeded his jurisdiction and granted the reliefs sought at Sl.Nos.3 to 5 and also rejected the counter claim. It is also not proper. But, looking into the facts and circumstances of the case, the reliefs sought by the claimant before the Arbitrator referred above. The learned Arbitrator has granted the relief under "Grant such other reliefs as are necessary in the circumstances of the case". By looking into the facts and circumstances of the case, I am of the opinion that the learned Arbitrator has not exceeded his 45 Com.A.P.No.73/2022 jurisdiction. I have also gone through the provisions of Sec.34 of the Arbitration and Conciliation Act. Very limited scope is available to this court. Since, there are no reasons to interfere in the award passed by the learned Arbitrator. The petitioner has not made out grounds to set aside award. Therefore, in the light of discussions made supra, I answer the Point No.1 in the negative.
41. Point No.2: In the result, I pass the following:
ORDER The petition U/Sec.34 (2-A) of the Arbitration and Conciliation Act is hereby dismissed.
Issue copy of the judgment to the parties through e-mail as provided U/Or XX Rule 1 of CPC, if email ID is furnished.
(Dictated to the stenographer, typed by her directly on the computer system, corrected and then pronounced by me in the open court on this the 8th day of August 2024) \ (RAMAKANT CHAVAN) LXXXIV Addl. City Civil & Sessions Judge, (CCH-85) Commercial Court, Bengaluru.