Bangalore District Court
M/S. Convention Hotels India Pvt vs M/S. Indesine Space Solutions Llp on 15 February, 2020
IN THE COURT OF THE LXXXIII ADDITIONAL CITY CIVIL
AND SESSIONS JUDGE AT BENGALURU CITY[CCH-84]
PRESENT: Sri S.A. HIDAYATHULLA SHARIFF,
B.A., LL.M.,
LXXXIII Additional City Civil and
Sessions Judge
Dated this the 15st day of February 2020
COM.A.S.No.166/2018
Petitioner: M/s. Convention Hotels India Pvt.
Ltd, (A company registered
incorporated under the provisions of
the Indian Companies Act 1956)
With registered office at: Plot No. 7,
A1, Devasandra, 2nd Phase,
Singaiahanapalya, 3rd Cross,
Whitefield Road, Bengaluru 48,
By its Managing Director/
Authorized Representative
[By Sri. M.S.S, Advocate]
/v e r s u s/
Respondent: M/s. Indesine Space Solutions LLP,
A company incorporated under the
limited liability partnership Act,
1956. Having its registered office at
No. 701, Atlanta Centre, Sonawala
X Road, Goregaon (East) ,
Mumbai 400 063.
Represented by its companu
Secretary Sri. Vijay Biwalkar.
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[By Sri. S.U.B, Advocate,]
Date of institution of the : 04/08/2018
suit
Nature of the suit : Arbitration suit
Date of commencement of :
recording of the evidence
Date on which the : 15/02/2020
Judgment was
pronounced.
: Year/s Month/s Day/s
Total duration
01 06 11
(S.A. Hidayathulla Shariff)
LXXXIII ACC & SJ: Bengaluru
The petitioner M/s. Convention Hotels India private
limited has filed this petition u/s. 34 of Arbitration &
Conciliation Act 1996, to setaside the arbitral award
dated 21/04/2018 passed by the Hon'ble sole Arbitrator
in A.C No. 40/2017. The present petitioner was the
respondent before the Hon'ble sole Arbitrator and
respondent of the present petition was the claimant
before the sole Arbitrator.
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2. The case of the claimant/M/s. Indesine Space
Solutions LLP, before the arbitrator is that it is carrying
on the business of Interior designs and other allied
services. The Respondent company has called for letter of
intent/quotation for furnishing interiors to 136 rooms at
its proposed hotel Holiday Inn at Goa. Pursuant to the
above mentioned letter of intent, the claimant submitted
its quotation which was accepted by the respondent vide
communication dated 22/03/2011. The general terms
and conditions of the execution of the contract was also
communicated. The agreed tender value was Rs.
6,11,00,100/ including all taxes, labour cess etc.,.
Claimant was asked to furnish bank guarantee for 50%
of the 7.5% retention money of contract to be kept in
current for the entire period of the project. Claimant
company has communicated its consent for executing the
said project in terms of letter of intent. Based on the
letter of intent, claimant company was asked to start the
work in all blocks that is A1, A2, B, C, D, E, F, G & H.
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There was no access staircase to block A1. There were no
drawings for blocks F & G, civil work in block H was not
completed, plastering work was not done, door sizes
types of granites to be used for floor, its colour, size,
design etc.,were not finalized. Inspite of the same, the
respondent company has directed the claimant to
increase the man power. A meeting was held which was
recorded in the email dated 23052011 informing the
respondent company that unless a clear work area is
made available to the claimant, it cannot increase the
man power as the workers have to travel from Bombay to
Goa and they have to arrange for their stay
unnecessarily. Inspite of the same, all of a sudden on
23/05/2011, the claimant company was asked to stop
the work.
3. In the claim statement filed before the sole
Arbitrator, claimant has further contended that after
three months an agreement has been entered into on
20/06/2011 between the claimant and respondent.
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Under the agreement completion of the project has been
initially agreed to be on 30/09/2011. Pursuant to the
execution of the above mentioned agreement claimant
started executing the work in accordance with the
instructions, specifications & directions of the
respondent and also been submitting the running bills
periodically. Though under the agreement, the claimant
was required to commence and complete the works in
nine blocks simultaneously, it has been agreed that
physical possession of each block would be handed over
one after the other as and when the same was ready.
Though the claimant was asked to start the work on the
basis of letter of intent dated 22/2/2011, it was asked to
stop the work in the month of may 2011. Even as of third
week of July 2011, the respondent did not cleared all the
items for making the mock up room and there was also
delay in receiving the materials by the company in order
to enable to proceed with the work as per schedule. Even
by the end of September 2011, four days before the end
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of the schedule period the site and even mock up room
was not kept ready by the respondent company. Several
reminders were sent by the claimant in this regard. Even
during October and November 2011 i.e., after the
schedule date, timely clearance was not given and
claimant was asked to do the work in piece meal which
resulted in delay in completing the work even by the end
of November 2011 several of the permission and
clearances like gypsum, ceiling, cable pulling for voice
data, cable TV, CCTV and WiFi were not available
resulting in delay in execution of work. For the delay
caused by the respondent, claimant was also asked to do
additional work, for which, item wise rates were not
finalized. There was abnormal delay by the respondent
in handing over possession of most of the blocks for
commencement of the work. Despite the same suddenly
on 28/09/2011, respondent arbitrarily and unilaterally
reduced the scope of the work and handed over blocks F,
G & H to some other contractor causing huge financial
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loss to the claimant. Because of the said reduction in the
scope of work, materials mobilized by the claimant
became surplus and as per the discussion an direction of
the respondent an amount of Rs. 8,43,844/ was realized
from Ebony Interiors Private limited, Bengaluru.
4. In the claim statement filed before the sole
Arbitrator, the claimant has further contended that the
other reason for the delay in execution of the work was
that the project managers of the respondent company
have left the respondent company in quick succession
and there was no replacement at the site. The respondent
company has not appointed any architect for the project
from the beginning, as such, there was no coordinating
agency of the respondent company. Block nos. A1 & A2
was completed and kept ready for delivery in the month
of July 2012 itself, but the respondent has refused to
take delivery for no reasons. There was delay on the part
of the respondent company in making payments. Though
there were no snags, respondent company with a
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malafide intention of delaying and avoiding payment has
raised insignificant, minor and imaginary snags. The
claimant has informed the respondent that the snags and
bubbles and few other small works could be done when
air conditioner is made operational. At this stage,
claimant had to stop the work as the respondent
company refused to accept the bills and making
payments in the month of August 2012. The claimant
had submitted a final bill on 07/09/2012 and even
offered to take possession of remaining blocks
simultaneously. The respondent refused to acknowledge
the final bills and handover the remaining blocks.
Though the final bills were sent to the respondent
through courier, there was no response from the
respondent. When the claimant insisted for immediate
certification, the respondent has informed that it could
arrange for architect to access the work done and for
certification. But before doing so and before taking stock
and verification and certification by its email dated
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16/10/2012, respondent company started disputing the
claims made by the claimant regarding 5% escalation,
new extra item, balance payable with regard to C, D & E
blocks about quality of work with regard to blocks A1,
A2, F, G & H, withholding Rs. 17,97,923/ and Rs.
31,32,531/ to be paid after measurement and also
sought for certain details. Inspite of furnishing details to
the respondent company, it has failed to make payment.
Therefore, claimant had left the site by November 2012.
5. In the claim statement, the claimant has
further contended that out of the total value of the work
executed by the claimant of Rs. 4,30,60,528.64, the
respondent had paid only Rs. 2,13,15,467/ and
respondent is still due a sum of Rs. 2,17,04,061.64. A
demand notice was issued to the respondent on
17/12/2012. Inspite of it, respondent has not paid the
balance amount. Since there was an arbitration clause
included in the agreement, claimant has invoked the
same by issuing notice on 10/02/2013 suggesting an
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arbitrator to resolve the dispute. Only on 23/03/2013,
respondent replied to all the notices, where in, it has
admitted that Rs. 18,44,414/ is still due by the
respondent to the claimant. The respondent has also
contended that invoking the arbitration clause is
contrary to the terms of the agreement 20/06/2011. The
respondent has submitted statement to the income tax
department u/s. 203 AA, wherein, it has declared
payment of Rs. 2,74,07,012/ to the claimant and has
credited Rs. 5,48,142/ as TDS, though in its reply it has
denied the claim made by the claimant. As per the
payment declared with Income Tax Department a sum of
Rs. 77,15,150/ is to be credited to the account of
claimant and out of it Rs. 14,15,027/ was adjusted to
the bills leaving balance of Rs. 60,50,545/ to be credited
to the account of the claimant as per the TDS statement.
The claimant had also sent a rejoinder on 24/04/2013,
to its reply. The respondent has been unreasonably
denying its liability to pay the due amount. The delay in
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execution of the work was due to the conduct of the
respondent, but it is attributing it to the claimant.
6. In the claim statement, the claimant has
further contended that though 50% of redemption money
was to be released on submission of unconditional bank
guarantee equivalent to the amount which would be valid
till the end of defects validity period, the amounts have
not been released because of the refractory attitude on
the part of the respondent and unscheduled programs,
the claimant was made to suffer the balance work worth
Rs. 2,11,00,000/ arbitrarily, thus causing loss of
business, causing loss of profit there from.
7. Claimant has filed company petition in COP
152/2013 before the Hon'ble High court of Karnataka,
wherein, the respondent has admitted and paid Rs.
18,07,525/ to the claimant. In view of disposal of the
company petition and in view of the arbitration clause
contained the agreement, claimant filed CMP 125/2016,
seeking appointment of sole arbitrator. The said petition
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was allowed by order dated 25/11/2016 and sole
arbitrator was appointed. As on 07/09/2012 respondent
was due to a sum of Rs. 2,17,04,061.64 and as on
07/03/2017 respondent is due a sum of Rs.
3,31,34,118.14. The respondent is liable to pay the said
amount with interest @ 15% per annum from the date of
petition till realization of the amount.
8. A perusal of the materials on record discloses
that in response to the notice issued by the Hon'ble sole
Arbitrator, respondent has filed its written statement by
resisting the claim petition. In the written statement the
respondent has denied the claim made by the claimant
and further contended that it had already paid
substantial amount of Rs. 2,13,59,467/. The respondent
in its written statement has admitted the issuance of
letter of intent in favour of the claimant for execution of
136 guest rooms interior design works at its hotel at Goa,
the respondent also admitted execution of the agreement
dated 20/06/2011. The respondent further contended
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that it was unaware of the incompetence and
inexperience of the claimant in due execution of the work
entrusted to it. Though it has promptly disbursed the
mobilization advance to the claimant, the claimant did
not complete the work on or before 30092011 as
agreed. The claimant though was aware that it has to
make available necessary funds for completing the works
along with mobilization advance, it did not arrange for
such funds and thereby delay occurred in completion of
the work. The work done of claimant was substandard
and highly unsatisfactory and claimant did not had
qualified man power and labour for completion of the
work in time and to maintain the quality of work. There
were no Project Manager, Site Manager, Site Engineer or
any qualified professional for monitoring works in the site
and the labour personnel deployed by the claimant have
substantially damaged certain work which were already
completed and labour of the claimant have carried on
their work in a haphazard order and totally
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unprofessional manner, As a result of which quality of
work suffered a lot.
9. In its written statement filed before the
Arbitrator, the respondent further contended that the
claimant sought new request for extra items that were
out of the scope of the work, but in the interest of
completion of work in a timely manner, the respondent
had approved the extra items sought by the claimant. In
Contravention of the agreement, the claimant had
proceed to bill for the extra work at rates higher than
agreed rate. The project was not completed by the
claimant in time and claimant arbitrarily stopped the
work half way and started demanding revision in the
extra item rates. In view of the substandard work carried
on by the claimant it had reduced the scope of certain
works with consent of the claimant with an intention that
claimant could concentrate to complete the works on
hand. Claimant had not completed all the works and did
not handover all the blocks to it as per the agreed
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specification and the same is incomplete even on the
date of filing of the written statement. There were many
snags in C, D & E blocks which were never rectified by
the claimant. That it has to bear heavy expenses to
remove the said snags. Blocks A1 & A2 were not
completed and handed over to it. With regard to payment
declared to the Income Tax Department, the alleged
payment is with regard to the mobilization advance
against the bank guarantee deposited by the claimant in
its favour. Mobilization advance against the bank
guarantee was returned to it on 18/01/2012. That it is
not due a sum of Rs. 2,17,04,061.64 as claimed by the
claimant. The respondent in its written statement has
denied all the other allegations made against it and
sought for dismissal of the claim petition.
10. Based on the pleadings of the parties, the sole
arbitrator has framed the following points for
determination:
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(1) Whether the claimant proves that there was
delay in handing over the blocks by the respondent?
(2) Whether the respondent asked the claimant to
do extra work as stated?
(3) Whether the respondent reduced the scope of the
work on 28/09/2011?
(4) Whether the claimant did substandard work as
stated?
(5) Whether the respondent is responsible for the
delay in execution of the project?
(6) Whether the claimant is entitled for Rs.
3,31,34,118.00 from the respondent?
(7) To what order parties are entitled to?
11. In proof of the case of the claimant, the
working site incharge of the claimant company got
himself examined as PW1 and tendered Ex. C1 to C54
documents in evidence. On behalf of the respondent
company, the directorprocurement and contracts of the
respondent company got himself examined as RW1 and
tendered Ex.R1 to R9 documents in evidence.
12. The learned sole Arbitrator after hearing the
learned counsel for the claimant and respondent, has
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answered points no. 1 to 3 & 5 in the affirmative, point
no. 4 in the negative, point no. 6 partly in the affirmative,
has partly allowed the claim petition holding that
claimant is entitle for a sum of Rs. 2,88,37,749/ from
the respondent together with interest @ 15% per annum
from the date of the claim petition till the date of
payment.
13. Aggrieved by the impugned award passed by
the sole Arbitrator, the petitioner/respondent has filed
the present claim petition u/s. 34 of the Arbitration &
Conciliation Act 1996, by challenging the impugned
award mainly on following grounds.
14. The tribunal relied too much on the emails to
hold points no. 1 to 5 in favour of the respondent, though
the said emails were not produced in a manner as
required under law. The Judgment of Apex Court of the
land in Anwar v. Basheer case was totally ignored before
the electronic evidence was considered resulting in deep
miscarriage of justice. It is further alleged that even the
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factual aspect and physical evidence has been ignored by
the tribunal. That the tribunal has accepted the evidence
of respondent witness as a gospel while the evidence of
appellant was largely ignored. It is further alleged that
the finding of the arbitral tribunal that the petitioner is
responsible for delay in completing the project is patently
wrong finding.
15. The petitioner further contended that the
tribunal has seriously erred by holding issue no. 2 in
favour of the respondent as there was a clear contention
that extra items were outside the scope or work and they
are crop up due to other defaults committed by the
respondent.
16. It is further contended that even while
considering point no. 3 the tribunal has given a total
gobye to the liberty bestowed upon the appellant under
the contract. The arbitral tribunal wrongly came to the
conclusion that descoping of the works was unilateral,
by wholly forgetting the aspect that the descoping is the
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discretion of the appellant. If further alleged that tribunal
also acceded to the term 'unilateral' without
understanding the fact that respondent never sought for
cancellation of descoping and it had accepted the de
scoping. It is alleged that the tribunal lost sight of the
fact that the descoping was done due to the inefficiency
of the respondent and not for any other whimsical
reason. It is further contended even while considering the
points no. 4 & 6 together the tribunal lost sight of the
fact that the petitioner has contended that they are not
due a sum of Rs. 2,17,04,061.64. The petitioner has
stated that it is disputing the bill. The petitioner has also
contended that respondent has done substandard work
and there are serious snags that are still persisting at the
sight. When such being the case it was apt for the
tribunal to get this rival contentions checked through an
expert, without drawing conclusion wholly upon the
evidence of the parties. It is further alleged that tribunal
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was wrong in holding that there were snags but work was
not substandard.
17. It is further contended that the respondent has
taken a contention that the petitioner is due a sum of Rs.
2,17,04,061.64 as on 07/09/2012 and also contended
that the partitioner is a due a sum of Rs. 3,31,34,118.14
as on 07/03/2017. The respondent in the final bill had
claimed money for extra items, new extra items, rework
items, escalation charges and interest in the bill, where
as, the petitioner has contended that they do not owe
anything to the respondent. The petitioner disputed the
final bill in its email dated 16/10/2012. The arbitral
tribunal without getting into the discreet details, the
tribunal un reasonably relied upon the oral testimonies
than the documentary evidence and falsely found that
the petitioner committed breach of contract and
unreasonably held that the respondent is entitled for Rs.
1,73,46,015/ from the petitioner as on 07/09/2012.
Interest on the said amount @ 15% per annum from
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01/10/2012 will be Rs. 1,14,91,734/. Therefore, the
respondent is entitled for Rs. 2,88,37,749/ from the
petitioner.
18. It is further contended the impugned award
passed by the sole arbitrator is perverse, opposed to the
principles of law, opposed to the principles of natural
justice, opposed to the settled legal positions, highly
prejudicial, lacks application of mind, clearly one sided
and suffered favoritism, based upon presumptions by
over looking the documentary and oral evidence resulting
in diminishing the legal rights of the petitioner. The
impugned award has also posed as immediate threat of
recovery by the respondent in which case the petitioner
would be put to serious damage.
19. It is further alleged that the petitioner had a
good case on merits and has produced impeccable
evidence before the arbitrator and the arbitrator has
flared with haste and proceeded to ignore the evidence of
the petitioner and without application of mind, without
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considering the just need of the petitioner has dismissed
the evidence and contention for the petitioner. It further
alleged that the sole arbitrator has passed an award
without affording a fair opportunity to the petitioner
which is clearly opposed to the principles of natural
justice.
20. It is further contended the arbitral tribunal
failed to act in terms of the scheme of law and with
fairness. It is further alleged that impugned award suffers
from preconceptions and lacks fair treatment to the
petitioner. It is further alleged that the impugned award
is clogged with cloud of partisan considerations and same
clearly falls under the exceptional categories u/s. 34 of
the Act.
21. It is further alleged that arbitral tribunal has
failed to appreciate the defences advanced by the
petitioner properly and the documents relied on by the
petitioner. It is further alleged that the arbitral tribunal
has erred in not properly appreciating the oral and
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documentary evidence produced by the parties. It is
further alleged that while appreciating the evidence, the
arbitral tribunal virtually stepped into the shoes of the
respondent, there by violated the principles of fair play
and natural justice.
22. After filing of the petition in response to the
court notice, the respondent entered its appearance
through its counsel and contested the petition by filing
objections statement to the main petition. In the
objections statement the respondent has contended that
the petitioner has not shown any valid grounds u/s. 34
of Arbitration & Conciliation Act 1996 to interfere with
the impugned award. It is further contended that the
impugned award is barred by limitation. The respondent
has also denied the allegations made in the petition
against the improper appreciation of the evidence by the
arbitral tribunal in not giving sufficient opportunity to
the petitioner to present its case and sought for dismissal
of the petition.
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23. Based on the contents of the petition and
objections filed to it, the points that arise for
consideration of this court are:
(1) Whether the petitioner proves that the sole
arbitrator committed jurisdictional error when assuming
jurisdiction and the sole arbitrator had no jurisdiction to
pass the impugned award, as such the impugned award
is liable to be setaside u/s. 34 (2)(a)(v) of Arbitration &
Conciliation Act 1996?
(2) Whether the petitioner proves that the sole
Arbitrator without affording fair opportunity to it has
violated the principles of natural justice, hence the
impugned award required to be setaside by the court
U/s. 34 (2)(a)(iii) of the Arbitration & Conciliation Act
1996?
(3) Whether the petitioner proves that the impugned
award passed by the arbitral tribunal is in conflict with
public policy of India and hence the same required to be
setaside U/s. 34 (2)(b)(ii) of the Arbitration &
Conciliation Act 1996?
(4) Whether the petitioner proves that the impugned
award passed by the arbitral tribunal is vitiated by patent
illegality appearing on the face of record, hence the award
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required to be setaside U/s. 34 (2)(A) of the Arbitration &
Conciliation Act?
(5) What order?
24. Written arguments filed by the learned counsel
for petitioner and learned counsel for respondent. Heard
oral arguments also. Perused the materials placed on
record.
25. My findings on the above points are as under:
Point No. 1 : In the negative.
Point No. 2 : In the negative.
Point No. 3 : In the negative.
Point No. 4 : In the negative.
Point No. 5 : As per final order for the following;
26. POINT NO.1: A perusal of the materials on
record discloses that there are certain undisputed facts
between the parties to this petition. The fact that the
respondent is the company carrying on the business of
interior designs and other allied business and petitioner
company has called for letter of intent/quotation for
furnishing interiors to 136 rooms at its proposed hotel at
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Goa is not in dispute. Further fact that, in pursuant to
the issuance of letter of intent, the respondent company
submitted its quotation which was accepted by the
petitioner vide communication dated 22/03/2011 and
the general terms and conditions under which the
contracts is to be executed is also communicated
between the parties is not in dispute. Further fact that,
the tender value agreed between the parties was Rs.
6,11,00,100/ and the respondent was asked to furnish
bank guarantee for 50% of the 7.5% retention money of
contract to be kept in current for the entire period of the
project is also not in dispute. Further fact that the
dispute arose between the parties subsequently resulting
into entering of another agreement dated 20/06/2011
between the parties agreeing for completion of the project
within 30/09/2011 is also not in dispute. Further fact
that, the dispute arose between the parties to the
agreement, as a result of which, the respondent has filed
company petition No. 152/2013 against the petitioner
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before the Hon'ble High court of Karnataka at Bengaluru
seeking recovery of a sum of Rs. 2,17,04,061/ with 80%
interest. Further fact that, the petitioner has paid
admitted liability of Rs. 18,44,413/ in the said company
petition and disputed the said petition on the ground
that the matter deserves to be referred to arbitration
under the arbitration clause in the agreement dated
20/06/2011 entered between the parties. The Hon'ble
High court of Karantaka by its order dated 10/07/2016
has given a finding that in view of the existence of
arbitration clause for settling dispute arising out of the
contract dated 20/06/2011, the remedy of winding up
petition sought in company petition no. 152/2013 was
not an appropriate remedy and rival claims of the parties
deserves to be adjudicated by the alternative dispute
resolution of arbitration has relegated the parties to
resort to the arbitration proceedings as aggrieved
between them. Thereafter, the respondent has filed CMP
no. 125/2016 before the Hon'ble High Court of
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Karnataka, seeking appointment of an arbitrator in terms
of the arbitration clause contained in contract dated
20/06/2011. In the said CMP no. 125/2016, the
petitioner though served with court notice has not
resisted the said petition, as a result of which the Hon'ble
High court of Karnataka by its order dated 25/11/2016
has allowed the petition by appointing a retired district
Judge as a sole Arbitrator to enter upon the arbitration,
arbitrate the dispute and conduct the arbitration
proceedings at the arbitration centre as per the
arbitration centre Karnataka Rules is also not in dispute.
Further fact that in pursuance of the appointment of
sole arbitrator, the petitioner and respondent appeared
before the sole Arbitrator and the respondent who was
the claimant before the arbitrator has filed a claim
petition which was resisted by the present petitioner, who
was the respondent before the arbitrator is also not in
dispute. Further fact that both the parties to the present
petition have lead their oral and documentary evidence
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before the sole arbitrator and sole arbitrator after
completing the arbitration proceedings has passed
impugned award dated 21/01/2018 by partly allowing
the claim petition holding that the claimant is entitled to
Rs. 2,88,37,749/ from the respondent together with
interest @ 15% per annum from the date of claim petition
till the date of payment. Aggrieved by the impugned
award passed by the learned sole arbitrator, the
petitioner who was the respondent before the arbitral
tribunal has filed the present petition.
27. It is pertinent to note that an arbitral award
may be set aside by the court only on the grounds
mentioned U/S.34 of the Arbitration & Conciliation Act
1996. U/S.34(2) of the Act an arbitral award may be set
aside by the court only if
a) the party making the application furnishes proof
that
i) a party was under some incapacity; or
ii) the arbitration agreement is not valid under the
law to which the parties have subjected it or, failing any
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indication thereon, under the law for the time being in
force; or
iii) the party making the application was not given
proper notice of the appointment of an arbitrator or of the
arbitral proceedings or was otherwise unable to present
his case; or
iv) the arbitral award deals with a dispute not
contemplated by or not falling within the terms of the
submission to arbitration, or it contains decisions on
matters beyond the scope of the submission to
arbitration;
Provided that, if the decisions on matters submitted
to arbitration can be separated from those not so
submitted, only that part of the arbitral award which
contains decisions on matters not submitted to
arbitration may be set aside; or
v) the composition of the arbitral tribunal or the
arbitral procedure was not in accordance with the
agreement of the parties, unless such agreement was in
conflict with a provision of this part from which the
parties cannot derogate, or, failing such agreement, was
not in accordance with this part; or
b) the Court finds that
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I) the subject matter of the dispute is not capable of
settlement by arbitration under the law for the time being
in force, or
ii) the arbitral award is in conflict with the public
policy of India.
iii) It is in conflict with the most basic notions of
morality or justice.
2A) An arbitral award arising out of arbitrations
other than international commercial arbitrations, may
also be set aside by the court, if the court finds that the
award is vitiated by patent illegality appearing on the face
of the award.
28. At this stage, it is relevant to go through the
decision of Apex Court of the land on the aspect of
considering the legality and validity of the arbitral award
U/S.34 of the Arbitration & Conciliation Act 1996. In the
decision reported between Puri Constructions Private
Limited v. Union of India reported in (1989) 1 Supreme
Court Cases 411, wherein, the Apex Court of the Land
has held that when a court is called upon to decide the
objection raised by a party against an arbitration award,
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the jurisdiction of the court is limited as expressly
indicated in the arbitration act and it has no jurisdiction
to sit in appeal and examine the correctness of the award
on merits with reference to the materials produced before
the arbitrator. The court cannot sit in appeal over the
view of the arbitrator by reexamining and reassessing
materials.
29. The main ground on which the impugned
award was challenged by the petitioner is that the
tribunal committed a serious jurisdictional error by
assuming jurisdiction when the arbitration clause was
clear that it operated only conditionally. The arbitration
clause clearly provided for prerequisite condition and
situation to occur before a party could proceed into
arbitration. Such conditions and prerequisite had not
been complied before invoking the arbitration clause.
Hence the entire proceedings was hit by sine qua non
been not followed. It is further alleged that the law laid
down by the Apex Court of the Land in United India
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Insurance company limited v. Hyundai Engineering was
totally ignored by the Arbitral Tribunal. The award under
dispute is clearly opposed to the laws of the country and
frustrates the settled law.
30. A perusal of the materials on record discloses
that the above mentioned ground in challenge of the
impugned award was not taken in the petition, but was
taken as a ground in the written arguments filed by the
learned counsel for the petitioner.
31. However, a perusal of the materials on record
discloses that the respondent M/s. Indesine Space
Solutions (LLP) has filed a petition U/s. 439 r/w. Sec.
433(e) of Companies Act 1956 seeking winding up of the
petitioner company and for recovery of a sum of Rs.
2,17,04,061/ with interest @18% per annum against the
present petitioner who was the respondent in the above
mentioned company petition. A perusal of the copy of the
order dated 01/07/2016 passed by Hon'ble High court of
Karnataka Bengaluru in company petition no. 152/2013
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discloses that in the said company petition the present
petitioner apart from paying the admitted liability of Rs.
18,44,413/ to the respondent has resisted the said
petition on the ground that there is an arbitration clause
no. 9.4 between the parties in the agreement dated
20/06/2011 and hence winding up petition cannot be
admitted and parties deserves to be referred to
arbitration under the said clause and stated its no
objection to refer the dispute between the parties to the
arbitration. By noting down the contention taken in the
said petition, the Hon'ble High court of Karnataka by its
order dated 01/07/2016 has relegated the parties to
resort to arbitration proceedings as agreed between them
in terms of clause 9.4 of the agreement dated
20/06/2011. Further, A perusal of the materials on
record discloses that in pursuance of the order passed in
company petition no. 152/2013, the present respondent
had filed CMP No. 125/2016 against the present
petitioner U/s. 11 (6) of the Arbitration & Conciliation Act
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1996 before the Hon'ble High Court of Karnataka at
Bengaluru, seeking for appointment of arbitrator in terms
of the clause 9.4 of the Arbitration Agreement dated
20/06/2011 entered between the parties. A perusal of
the copy of the orders dated 25/11/2016 passed by the
Hon'ble High court of Karnataka in CMP No. 125/2016
discloses that the present petitioner who was the
respondent in the said petition was served with the notice
of the said petition, but the present petitioner has not
resisted the petition by opposing the appointment of an
arbitrator in terms of the clause 9.4 of the Agreement
dated 20/06/2011 entered between the parties
32. A perusal of the orders passed by Hon'ble High
Court of Karnataka in CMP No. 125/2016 discloses that
noting down the fact that the dispute in question in the
said proceedings has arose from the agreement dated
20/06/2011 and both the parties had agreed. In
company petition no. 152/2013 for adjudication of the
dispute by the arbitrator, the Hon'ble High court of
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Karnataka has allowed CMP No. 125/2016 filed by the
respondent of the present petition by appointing sole
arbitrator, a retired District Judge to enter upon the
arbitration, arbitrate the dispute and to conduct the
arbitration proceedings at the arbitration centre as per
the Arbitration Centre Karnataka Rules. In pursuance of
the orders passed by the Hon'ble High court of Karnataka
dated 25/11/2016 in CMP no. 125/2016, the sole
arbitrator had entered upon the arbitration, arbitrated
the dispute, conducted the arbitration proceedings and
passed the impugned award.
33. considering the fact that the present petitioner
in Company Petition no. 152/2013 filed against him by
the respondent has resisted the said petition taking
objection that any dispute is to be resolved by relegating
his parties to the remedy of arbitration proceedings as
agreed between them under agreement dated
20/06/2011 and further impliedly consented for
appointment of arbitrator in CMP No. 125/2016 by not
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contesting the said petition and has submitted himself to
the jurisdiction of the sole Arbitrator by taking part in the
arbitral proceeding without raising any objections with
regard to the constitution of the arbitral tribunal cannot
allowed to turn around and take objection after passing
of the award alleging that tribunal committed serious
jurisdictional error by assuming jurisdiction when the
arbitration clause was clear to be operated only on
conditionally.
34. By perusing the materials produced on record
this court is of the opinion that the petitioner has failed
to prove that the arbitral tribunal has committed serious
jurisdictional error by assuming the jurisdiction and the
constitution of arbitral tribunal is illegal and arbitral
tribunal had no jurisdiction to pass the impugned award
as alleged by him in his written arguments. With these
observations, I answer point no. 1 in the negative.
35. POINT NO.2: The second main ground on
which the impugned award is challenged by petitioner is
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that the sole arbitrator has flared up with haste and
without affording a fair opportunity to the petitioner has
passed the impugned award against the principles of
natural justice.
36. However, a perusal of the materials on record
discloses that after entering upon the arbitration, the
arbitrator has issued notice to both the parties as
required under law. After filing of the claim petition by
the respondent/claimant, the sole arbitrator has allowed
the present petitioner who was the respondent before the
arbitrator to file his statement of objections. Thereafter,
the arbitral tribunal has allowed both the parties to
produce their respective oral and documentary evidence
and after hearing both the parties to the proceedings has
passed the impugned award. A perusal of the materials
on record discloses that the learned sole arbitrator has
given sufficient fair opportunity to both the parties to the
petition and has followed all the principles of natural
justice and thereafter passed the impugned award. The
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materials on record do not supports that allegation of the
petitioner that the sole arbitrator had not offered it fair
opportunity to put forth its defence and not followed the
principals of natural justice.
37. By perusing the materials on record, this court
is of the opinion that the petitioner has failed to prove
that the arbitral tribunal has not given fair opportunity to
it to put forth its defence and has not followed the
principles of natural justice. With these observations, I
answer point no. 2 in the negative.
38. POINT NO.3 & 4: Since these two points are
interconnected with each other, to avoid repetition of
facts and findings, these two point are taken up together
for consideration.
39. A perusal of the grounds urged by the
petitioner in the present petition discloses that the
petitioner has challenged the impugned award on the
ground that the impugned award is in conflict with
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public policy of India and the impugned award is vitiated
by patent illegality appearing on the face of the award.
40. With regard to the above mentioned grounds,
are concerned, a perusal of the petition discloses that one
of the ground on which the impugned award was
challenged is that the tribunal has relied too much on the
emails to answer points no. 1 to 5 in favour of the
respondent/claimant, though the said emails were not
produced in the manner as required as under law. It is
further alleged that the judgment of Apex Court of the
Land in Anwar v. Basheer case was totally ignored by the
sole arbitrator before the electronic evidence was
considered which resulted in deep miscarriage of justice.
41. However, a perusal of the materials on record
discloses that on 27/09/2017 the further examination in
chief of PW1, the manager of the claimant firm was
recorded by the arbitrator. A perusal of which discloses
that along with the emails produced in his evidence, PW1
has produced certificate u/s. 65(B) of Indian Evidence
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Act. 1872, with respect to copies of emails produced as
documents in support of the case of the claimant.
42. A perusal of the further examination chief of
PW1 recorded on 27/09/2017 before the arbitral tribunal
discloses that the respondent has not resisted the
production and marking of any of the emails on the
ground that those emails were not produced in the
manner as required under law. Considering the fact that
the claimant has produced the electronic evidence in the
form of email communicated with certificate u/s. 65(B) of
Indian Evidence Act 1872 as required under law, the
contention of the petitioner the emails were not produced
in a manner as required under law and the learned
arbitrator has ignored the judgment of the Apex Court of
the Land in Anwar v. Basheer case before considering the
electronic evidence cannot be accepted.
43. Another ground on which the impugned award
is challenged by the petitioner is that the tribunal has
relied too much upon the emails produced by the
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claimant and has accepted the evidence produced on
behalf of the claimant as gospel truth and ignored the
evidence by the respondent and erred in coming to the
conclusion that the present petitioner who was the
respondent before the arbitrator was responsible for the
delay in completing the project.
44. However, a perusal of the impugned award
discloses that considering the contents of Ex.C7 email
dated 09/05/2011, Ex.C9 email dated 25/11/2011,
Ex.C16 email dated 18/11/2011, Ex.C18 email dated
01/12/2011, Ex.C20 email dated 24/12/2011 and
Ex.C27 email dated 17/07/2012 sent by the claimant to
the respondent, wherein, the claimant has stated that
there is delay on the part of the respondent in not
providing access to stair case to block A1 not providing
drawing of blocks F & G, not completing the civil work in
Block H, not giving clearance for DBlock, not delivering
of the required materials like leather for hardboard and
spring box for beds in time has complained that due to
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the delay caused by the respondent it is unable to
achieve the target inspite of increasing man power by 15
persons. Considering the fact that the above mentioned
emails issued by the claimant to the respondent were
neither replied nor denied in the evidence before the
arbitral tribunal and further considering the fact that the
allegation of the claimant that the project manager of the
respondent company left the company in quick
succession and there was no replacement at the site and
there was no architect appointed by the respondent
company for the project from the beginning was not
rebutted by the respondent, the tribunal has came to the
conclusion that the respondent is responsible for delay in
completing the project. This finding of the tribunal based
on its appreciation of the materials produced on record
cannot be considered as arbitrary and capricious.
45. One of the ground on which the impugned
award is challenged by the petitioner is that the tribunal
has erred in answering issue no. 2 in favour of the
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respondent as there was a clear contention that the extra
items were outside the scope or work and they were crop
up due to the other defaults committed by the
respondent.
46. However, a perusal of the impugned award
discloses that while answering issue no. 2 the arbitral
tribunal came to the conclusion that the respondent has
given extra additional work to the claimant as stated in
the claim petition and the evidence of PW1 which was not
been denied or disputed by the respondent either in its
objections statement or in its evidence has came to the
conclusion that the respondent has entrusted the
claimant to do extra work as alleged by the claimant.
This approach of the tribunal based on its appreciation of
evidence which it had answered issue no. 2 cannot be
considered as arbitrary or capricious in nature.
47. One of the ground on which the impugned
award was challenged by the petitioner is that while
considering the point no. 3 the arbitrary tribunal has
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given a total gobye to the liberty bestowed upon the
petitioner under the contract and tribunal wrongly came
to the conclusion that descoping of the works was
unilateral by wholly forgetting the aspect that descoping
is the discretion of the petitioner. It is further alleged that
the tribunal has also acceded to the term of unilateral
without under standing the fact that the respondent
never sought for cancellation of descoping and it had
accepted the descoping. It is alleged that the tribunal
has lost sight of the fact that the descoping was done
due to the inefficiency of the respondent and not for any
other whimsical reason.
48. However, a perusal of the impugned award
discloses that considering the fact that the evidence of
the claimant that the respondent has arbitrarily
unjustifiably and unilaterally took a decision to reduce
the scope of work and handed over blocks F, G & H to
some other contractor was not challenged in the cross
examination of claimant and further considering the fact
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that the respondent has not produced any evidence to
show that reduction in the scope of the work was by
mutual consent, the tribunal has came to the conclusion
that the respondent has reduced the scope of work
unilaterally on 28/09/2011 and the respondent has
failed to prove by mutual consent, scope of the work was
reduced. This finding of the arbitral tribunal based on its
appreciation of the oral and documentary evidence
produced before it cannot be considered as arbitrarily or
capricious in nature.
49. Another ground on which the impugned award
is challenged by the petitioner is that the respondent has
contended that the petitioner was due a sum of Rs.
2,17,04,061.64 as on 17/09/2012 and also have
contended that the petitioner is due a sum of Rs.
3,31,34,118.14/ as on 07/03/2017. The respondent in
the final had claimed money for extra items, new extra
items rework items escalation charges and interest in the
bill whereas the petitioner had contended that it do not
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owe any money to the respondent. The petitioner
disputed the final bill in its email dated 16/10/2012. The
tribunal without getting into the discreet details has
unreasonably relied upon the oral evidence then the
documentary evidence and falsely found that the
petitioner committed breach of contract and
unreasonably hold that respondent is entitle for Rs.
1,73,46,015/ from the petitioner as on 07/09/2012
together with interest on the above mentioned amount @
15% per annum from 01/10/2012 amounting to Rs.
1,14,91,734/. Thereby respondent is totally entitle to
Rs. 2,88,37,749/from the petitioner.
50. However, a perusal of the impugned award
discloses that while answering point no. 4 & 6 together,
the tribunal has assessed both oral and documentary
evidence produced on record and came to the conclusion
that the total amount of the work done by the claimant is
Rs. 4,10,10,027.22 which is the invoice value and held
that the claimant is not entitle for escalation charges and
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by deducting the amount of Rs. 1,69,03,204/ paid to the
claimant by the respondent till 05/09/2012 and the
amount of Rs. 44,53,263/ paid to the claimant vendor
has deducted to the above two payments from the total
sum of Rs. 4,10,10,027.22 and arrived at a conclusion
that as on 07/09/2012, the petitioner is due a sum of
Rs. 1,96,53,560/ to the respondent and by deducting a
sum of Rs. 18,07,545/ paid by the petitioner in the
company petition has come to the conclusion that as on
07/09/2012 the amount due by the petitioner to the
respondent was Rs. 1,78,46,015/. Further considering
the fact that there are snags in the work done by the
respondent and the same is not removed by the
respondent, the arbitral tribunal has deducted a sum of
Rs. 5,00,000/ from the above mentioned sum of Rs.
1,78,45,835/ and hold that the claimant is entitled for
Rs. 1,73,46,015/ from the respondent as on
07/09/2015. Further by considering the ratio of the
decision of apex court of the land reported in Hyder
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consulting limited vs. Governor, State of Orissa reported
in (2015) 2 SCC 169 has awarded interest @ 15% per
annum on the above mentioned sum of Rs.
1,73,46,015/ from 01/10/2012/ amounting to Rs.
1,14,91,734/, totally amounting Rs.2,88,37,749/ and
directed the respondent who is the petitioner in the
present petition to pay the above mentioned amount to
the claimant with interest @15 per annum from the date
of claim petition till the date of payment. The approach of
the arbitral tribunal in concluding the above mentioned
claim amount is based on its appreciation of oral and
documentary evidence and this approach cannot be
considered as perverse or capricious in nature.
51. Another ground on which the impugned award
is challenged is that the petitioner who is the respondent
before tribunal has taken a defence that the claimant has
done substandard work and there are serious snags that
are still persisting at site and the tribunal instead of
getting the rival contentions check through experts has
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erred in drawing conclusion only upon the evidence of
the parties and erroneously held that there was snags
but work was not substandard.
52. However, a perusal of the materials on the
record discloses that the petitioner was the respondent
before the arbitral tribunal has not made any attempt to
get an expert appointed to prove the nature of the snags
and alleged substandard work done by the claimant.
That being the case, the contention of the petitioner
before this court that the arbitral tribunal has erred in
not getting the rival contention checked through an
expert and erred in drawing conclusion wholly upon the
evidence of the parties cannot be accepted.
53. Another ground on which the impugned award
is challenges by the petitioner is that the impugned
award passed by the arbitral tribunal is highly perverse,
opposed to the principles of law, oppose to principles of
natural justice, opposed to the settle legal position,
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highly prejudicial, lack application of mind, clearly one
sided and suffers from favoritism.
54. In the decision reported between Associate
Builders v. Delhi Development Authority reported in
(2015) 3 SCC 49, the Apex Court of the Land has held
that the merits of the arbitral award are assailable before
the court U/S.34 of the Arbitration & Conciliation Act
only when award is in conflict with public policy of India.
In the said decision the Apex Court of the Land has
explained in detail the heads under which public police of
India may be violated, enumerated and elucidated. In
the said decision the Apex Court of the Land has given
caution on and limits of power of court to interfere with
arbitral award under the various heads of public policy.
It was further held that none of the grounds mentioned
in Section 34 (2)(a) deal with the merits of the decision
rendered by the arbitral award. It is only when the
arbitral award is in conflict with public policy of India as
per Section 34(2)(b)(ii) the merits of the arbitral award or
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to be looked into under certain specified circumstances.
In the said decision, the Apex Court of the Land has
stated the heads of the public policy of India are :
"I Fundamental policy of Indian Law: (I) Compliance
with statutes and judicial precedents; (ii) Need for judicial
approach; (iii) Natural Justice compliance; (iv)
Wednesbury reasonableness;
II. Interest of India:
III. Justice or Morality; and
IV. Patent Illegality: (I) Contravention of substantive
law of India; (ii) Contravention of A & C Act, 1996; (iii)
contravention of the terms of the contract."
55. The Apex Court of the Land has further held
that when any of the heads/sub heads of test of public
policy is applied to an arbitral award, the court does not
act as court of appeal. Interference of the court is
permissible only when findings of the arbitrator are
arbitrary, capricious or perverse or when the conscience
of court is shocked, or when illegality is not trivial but
goes to the root of the matter. It was further held that
the interference of the court is not permissible when
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merely another view is possible. It was further held that
arbitrator being ultimate master of quantity and quality
of evidence while drawing arbitral award, award based on
little evidence or no evidence which does not measure up
in quality to a trained legal mind cannot be held invalid.
It was further held that once it is found that arbitrator's
approach is neither arbitrary nor capricious, no
interference is called for on facts.
56. In light of the ratio of the above cited decision,
a perusal of the impugned award discloses that none of
the findings given by the sole arbitrator in the impugned
award are in conflict with public policy of India with
regard to the circumstances mentioned in the above cited
decision, hence the contention of the petitioner that the
finding given in the impugned award by the learned
arbitrator is in conflict with public policy of India and
opposed to settle legal position cannot be accepted.
57. It is pertinent to note that the court dealing with
an application to set aside an arbitral award U/S.34 of
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Arbitration & Conciliation Act 1996 has not to consider
whether the view of the arbitrator on evidence is justified.
The Arbitrator adjudication is generally considered
binding between the parties as tribunal is selected by the
parties and the power of the court to set aside the award
is restricted to cases set out in Section 34 of the
Arbitration & Conciliation Act 1996. Statute has
restricted challenge to arbitral award only on certain
grounds mentioned in Section 34 of the Act. Any
grounds of challenge to an arbitral award could be
succeed only if its find support from any of grounds of
challenge mentioned in Section 34 and not otherwise.
The challenge of award on factual aspect is not
maintainable.
58. By going through the contents of the petition
filed by the petitioner U/S.34 of the Act challenging the
impugned award, this court is of the opinion that none of
the grounds mentioned in Section 34 of Arbitration &
Conciliation Act 1996 have been made out by the
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petitioner to set aside the impugned award. All the
grounds agitated by the petitioner are the grounds
warranting reappreciation of materials submitted before
and relied upon by the Hon'ble Arbitrator. This court is
not empower to reexamine the evidence or to interfere in
the findings of the fact arrived by the Hon'ble Arbitrator.
59. By perusing the materials produced on record,
this court is of the opinion that the petitioner has not
shown any grounds U/S.34 of the Arbitration &
Conciliation Act 1996 to interfere with the impugned
award passed by the Hon'ble Arbitrator. With these
observations, I answer points No.3 & 4 in the negative.
60. POINT No.5 : In view of my findings on points
No.1 to 4 and for the reasons assigned thereon, I proceed
to pass the following:
ORDER
The petition filed by the petitioner U/S.34 of the Arbitration & Conciliation Act is dismissed.
56CT 1390_Com.A.S.1662018_Judgment .doc Parties are directed to bear their costs.
[Dictated to the Judgment Writer; transcript thereof corrected, initialed and then pronounced by me, in the Open Court on this the 15th day of February, 2020] [S.A.Hidayathulla Shariff] LXXXIII Additional City Civil Judge.
BENGALURU.