Bangalore District Court
M/S.Oscar Infra Pvt. Ltd vs Hemavathy Power & Lights Pvt.Ltd on 27 January, 2018
IN THE COURT OF XXII ADDL. CITY CIVIL & SESSIONS JUDGE
BENGALURU
NGALURU (C.C.H.No.7).
(C.C.H.No.7).
Dated This the 27th Day of January, 2018.
Dated:
Present: Ms.VELA. D.K., B.A., LL.B.(Hons.)
XXII Addl. City Civil & Sessions Judge.
Bengaluru.
A. S. No. 4 9 / 2015
Petitioner M/s.Oscar Infra Pvt. Ltd.,
Aashirwad CHS, JN3-14/5, Sector-9,
Vashi Navi Mumbai-400074,
Represented by its Sandeep Doke,
Director, M/S.Oscar Infra Pvt. Ltd.
by Sri.K.Shrihari, Advocate.
Vs.
Respondents 1. Hemavathy Power & Lights Pvt.Ltd.,
A Company incorporated under the
Companies Act,1956, and having its
registered office at 905, Prestige
Meredian III, No.30, M.G.Road,
Bengaluru-560001.
2. Shri.B.Padmaraj,
Sole Arbitrator, Arbitration Centre,
Khanija Bhavan, Bengaluru-560001.
by Sri.P.H.Virupakshaiah, Advocate.
JUDGMENT
This Appeal is preferred under Section 34 of Arbitration and Conciliation Act, against the Award dated:4-3-2015 passed in A.C.No.58/2014.
2 A.S.No.49/20152. The defendant herein was the claimant and the plaintiff was the respondent before the Arbitral Tribunal. The case of the claimant was that, there was an agreement bearing No.HLPL/08-09/PPA dated:20-8-2008, whereby this plaintiff was appointed as a consultant. The defendant-company is said to generate electricity power and had entered into Power Purchase Agreement (PPA) with KPTCL Ltd. and Chamundeshwari Electricity Supply Company, to sell the power generated by it. According to the defendant, the tariff offered was said to be at lower side and in view of the same, there was said to be loss and in order to make the unit profitable and to get higher tariff, that agreement was said to have been executed.
The agreement is said to be an open agreement, without fixing any term, thereby, time to be not the essence of the contract. The MOU was to enhance the sale price per Kw/hr from existing Rs.3.074 per Kw/hr on 2x4 MW Riverbed project and Rs.3.132 per Kw/Hr on 4x4 MW HLBC Project. Quantum of increment was said to be not stated in MOU, as it is said to have used the word only 'hike' in the tariff. In terms of the agreement, the defendant is said to have made payment of Rs.72,23,146/- in two installments. The 1st payment of Rs.49,81,480/- was said to be paid one cheque on 20-8-2008 and the second payment of 3 A.S.No.49/2015 Rs.22,41,666/- was said to be paid vide cheque dated:18-2-2009. Thereby, in total, the payment made was said to be Rs.72,23,146/-.
The plaintiff is said to have worked on MOU and made the defendant to enter into an MOU with the Power Trading Company (PTC) for higher tariff and this was said to be suppressed by the defendant- Company. It was in the agreement, the witness, when was confronted with the MOU entered into with the PTC by the defendant-Company, the same was said to be admitted. There is said to be total suppression of facts by the defendant-Company. Immediately when the defendant is said to have entered into MOU with the PTC, the KPTCL/CESSO is said to have hiked the purchase tariff by themselves, as otherwise the MOU entered into by the defendant with the PTC if further was proceeded with, the KPTCL would sustain loss of the power by terminating the PPA with them. Therefore, the purpose of the MOU entered into with the plaintiff was said to be achieved. This fact was said to be not mentioned by the defendant either in the claim petition or in the Civil Miscellaneous Petition filed before the Hon'ble High Court of Karnataka. There was said to be no impediment to the defendant to state the present tariff that was given by the KPTCL/CESCO. Therefore, there is said to be serious lapse and suppression of material facts and the 4 A.S.No.49/2015 defendant is said to have been attempting to mislead the Court. As on today, the defendant is said to have stopped generating the power in the plants owned by it. Therefore, the plaintiff was said to be not interested to pursue the MOU with the defendant.
The plaintiff is said to have got expertise in the power generation and selling of the same at higher tariff is said to have offered a consultancy to the defendant, whereby MOU was said to be entered into between them. The plaintiff is said to own power generating unit at Punjab and other places successfully running various units. The defendant is said to be not satisfied with the service rendered by the plaintiff and therefore is said to have issued legal notice and filed CMP before the Hon'ble High Court of Karnataka and thereby, the arbitrator was appointed exparte. There were said to be some settlement talks between the plaintiff and the defendant. The plaintiff is said to have paid sum of Rs.10-lakhs in the fond hope that the matter could be settled out of the Arbitration center and Courts. However, the settlement is said to have not taken place. Award passed by the arbitrator is said to be without taking into consideration the pleadings and the evidence.
5 A.S.No.49/2015The grounds of the appeal has been as follows:
The award is said to be against the established principles of law and opposed to public policy of India.
a). In the cross-examination of D.W.1, there was said to be a specific question No.35, which is said to be clearly barred under Section 81 of the Arbitration and Conciliation Act. Further that the plaintiff is said to have paid a sum of Rs.10-lakhs in order to settle the matter amicably.
b). The question of limitation: The question of limitation pertaining to between the parties was not taken into consideration. Alleged agreement is dated:20-8-2008 and the first payment was made on 20-8-2008 and the second installment was dated:
18-2-2009. Thereby, the claim if any ought to have been prior to 18-2-2012. Civil Miscellaneous Petition was filed before the Hon'ble High Court only on 13-6-2013. Thereby, there is said to be delay of more one year four months in filing the Civil Miscellaneous Petition. This fact is said to be not considered by the Hon'ble Arbitrator.
c). Suppression of material facts and information: The claimant is said to have suppressed the material information that due to the efforts of the plaintiff, the Memorandum of Agreement was 6 A.S.No.49/2015 entered into between the PTC and the claimant and that was not later pursued by the claimant. Thereby, the burden was said to have been casted upon the plaintiff. During the cross-examination, the witness is said to have admitted the MOU.
The claimant is said to have not divulged the truth of ceasing of the power generation in the project. The claimant is said to have claimed money from the plaintiff, despite they were said to be ready and willing to perform their part of the contract.
d). The current rate of tariff from the KPTCL/CESCO was said to be not mentioned by the claimant. In case an agreement is frustrated, same cannot be performed. Claimant has suppressed the material information of not generating electricity, thereby there is said to be no necessity of enhanced tariff for the electricity not generated by the claimant.
e). KPTCL/CESCO is said to have come to know about the plan and the steps of the claimant, by entering into MOU with PTC and thereby is said to have increased the tariff by itself. Therefore, the claimant was said to have been satisfied and therefore, did not pursue the matter anymore with the plaintiff. The claimant is said to have accepted the higher tariff from KPTCL/CESCO and this was on 7 A.S.No.49/2015 account of MOU with the PTC in view of the efforts of the plaintiff. Thus, the performance of the contract was accepted by the third party, KPTCL/CESCO itself. Action of the claimant is said to fall under Section 41 of the Indian Contract Act.
Hemavathy Power and Lights Pvt. Ltd. is said to be a Company under the Companies Act. Thereby, it ought to have been represented by the biological person and the claim petition is said to be bad in law under Order XXIX Rule 1 of C.P.C.
The claimant is said to be only a nominee, as it is said to have already transferred the claim even in terms of the resolution filed and marked as Ex.C1. The recital of Ex.C1 is said to be that the claimant to have already transferred his claim in favour of Encoen and thereby, any amount recovered would go to Encoen. Section 41 of the Contract Act was said to be ignored. The sprit of the agreement between the parties is said to have achieved. The claimant who wanted higher tariff and that was said to be achieved due to the efforts of the plaintiff. Therefore, it is said to be not fair on the part of the claimant to seek repayment of the money from the plaintiff. Hence, has sought to set aside the Order passed by the Arbitral Tribunal, by allowing the above appeal.
8 A.S.No.49/20153. In the objections, the defendant has contended that the agreement-Ex.C2 dated:
20-8-2008 was entered into between the plaintiff and the defendant, whereby, the plaintiff-Company was said to be appointed to terminate the PPA with the KPTCL/CESCO with minimum cost an entering into new Power Purchase Agreement with PTC India Ltd., New Delhi. In furtherance of that agreement, the defendant is said to have paid a sum of Rs.72,23,146/- under two cheques dated:20-8-2008 and 18-2-2009 to the plaintiff. The plaintiff is said to have not performed its obligation in terms of the agreement-Ex.C2, therefore, legal notice was said to have been issued for the refund of Rs.72,23,146/-, along with interest and there was reply to that notice on 21-7-2012, admitting the receipt of the amount and the fact that it is said to have been not performed its part of the services. Therefore, the defendant is said to have filed CMP No.104/2013 for the appointment of the Arbitrator and that was said to be allowed, vide Order dated:16-7-2014. The defendant is said to have filed the claim petition before the Arbitrator in AC No.58/2014 praying an award of Rs.72,23,146/- along with interest, in favour of the defendant. After considering the pleadings, both oral and documentary evidence, the arbitrator is said to have allowed the claim petition filed by the defendant, holding that the plaintiff to 9 A.S.No.49/2015 have not achieved the specific objective as stipulated under the agreement, vide Ex.C2. The plaintiff is said to be bound by the terms of the contract to refund the entire advance amount received by the defendant.
The scope of the application filed by the plaintiff under Section 34 of the Arbitration and Conciliation Act, is said to be very limited and there are said to be no grounds made under Section 34(2) of the said Act. The objective of the agreement dated: 20-8-2008 was said to be to enable the defendant to terminate the present PPA with KPTCL with minimum cost and entering into PPA with the PTC India Pvt. Ltd. to get higher tariff for the power produced by the defendant herein. Further, the terms of the contract is said to clearly indicate that if the overall objective of the agreement vide Ex.C2 has not been achieved, the advance amount ought to be refunded. In fact, towards achieving the overall objective of the agreement, a Memorandum of agreement was said to be entered into between the defendant and the PTC India Ltd., wherein it was said to be stipulated that the MOA to remain valid for a period of two years and if the PPA cannot be finalized within a period of one year, then the MOA to automatically stand terminated. The main objective of the agreement vide Ex.C2 was said to have been finalized within the time stipulated under 10 A.S.No.49/2015 MOA vide Ex.R1. The plaintiff is said to have not taken any further steps pursuant to the execution of MOA-Ex.R1. The plaintiff is said to have not taken any further steps pursuant to the execution of the MOA-Ex.R1 on account of non-performance within the stipulated period, the main objective of Ex.C1 is said to have failed. Therefore, no materials were said to be placed on record to show that, because of the best efforts of the plaintiff, MOA was said to be entered into between the defendant and the PTC India Ltd. The plaintiff is said to be not entitled to take benefit of the fact of execution of MOA to contend that it was because of the efforts of the plaintiff MOA was executed. Clauses of the agreement in Ex.C2 is said to show that there was no obligation on the part of the defendant and that the duty to act so was said to be to achieve the objective of the agreement vide Ex.C2 was entirely upon the plaintiff. In view of the fact that the plaintiff is said to have failed to take steps to enter into PPA with the PTC India Ltd., the object of the agreement-Ex.C2 was said to be not fulfilled. The plaintiff, during the course of the proceedings, is said to have come up with the new case that the objective of the defendant-claimant to have been achieved by the hike in tariff by the KPTCL, but there were said to be no such pleadings and that it was said to be an after thought. The hike in the tariff by 11 A.S.No.49/2015 the KPTCL is said to have come into effect after MOA vide Ex.R1 had expired on 11-12-2009. Pursuant to the execution of the agreement, Ex.C2, MOA was executed on 12-12-2008, which was between the defendant and the PTC India ltd., wherein one year was said to be stipulated for termination of the PPA entered into between the defendant and KPTCL. The plaintiff was said to be required to perform his part of the contract n or before 11-12-2009 and to have failed to do so. Therefore, the notice dated:3-7-2012 was said to be issued for the refund of the amount. The plaintiff is said to have denied the claim, therefore, arbitral proceedings were said to be initiated. Issue of notice on 3-7-2012 is said to be within three years from the date of expiry of one year stipulated in Ex.R1, i.e., 11-12-2009. It was the plaintiff, who is said to have not rendered its services as stipulated under Ex.C2 to terminate the PPA with KPTCL and entered into PPA with PTC Ltd. within the period stipulated under MOA, vide Ex.R1. Therefore, on account of the lapse of the plaintiff, the object of the agreement-Ex.C2 is said to have been not achieved. Thus, there is said to be failure on the part of the plaintiff. The plaintiff is said to have tried to take the benefit of the fact of hike in the tariff by the KPTCL. The plaintiff was said to be required to act in terms of the agreement vide Ex.C2. Without complying with the said terms, the 12 A.S.No.49/2015 plaintiff is said to be not entitled to take the benefit of the fact of increase in tariff by the KPTCL and the claim was said to be because of the efforts plaintiff. The hike in the tariff by the KPTCL is said to have came in effect after term of the MOA-Ex.R1 had expired.
One Hukmi Chand Kankariya was said to be duly authorized by the defendant-Company by resolution dated:1-3-2013 vide Ex.C1 to initiate arbitration proceedings for recovery of dues and damages from the plaintiff. That resolution was marked without any objection from the other side. Therefore, when there is said to be an authorization by the defendant-Company for the evidence, the contention of the plaintiff company that CW1 to be not duly authorized, is said to be not acceptable. When there was submission to settle the matter, the Hon'ble Arbitrator is said to have directed to pay a sum of Rs.10-lakhs to the defendant and the plaintiff is said to have given a D.D. for the said amount to the defendant. In spite of settling the matter, the plaintiff is said to have back-out from the desire and contested the claim. It was therefore the defendant is said to have not encashed the D.D. Thus, there are said to be no grounds made out in terms of Section 34 of the Act of 1996 and therefore, has sought to dismiss the instant Application, by imposing exemplary costs.13 A.S.No.49/2015
4. On hearing the arguments, the Points that arise for consideration are as follows:
1. Whether the plaintiff has made out the ground that the award dated:4-3-2015 in A.C.No.58/14 is opposed to public policy of India?
2. What Order?
5. The above Points are answered as follows:
Point No.1 - in the negative, Point No.2 - as per Final Order, for the following:
Reasons
6. Point No. 1 : During the course of the arguments on the merits of the case, both the counsels had submitted that the copies of the documents and the oral evidence to have been already produced before the Court. Based on those documents only, the counsels have argued the matter.
The plaintiff was the respondent and the defendant was the claimant before the Arbitral Tribunal. The plaintiff and the defendant-Company registered under the Companies Act.
14 A.S.No.49/2015Section 34(2)(a)(b)(ii) of the Arbitration and Conciliation Act, 19o6 provides that the arbitral award could be set aside if it is in conflict with the public policy of India. The Explanation to the public policy of India is that the award to be induced or affected by fraud or corruption or was in violation of Section 75 or Section 81 of the Act. Section 75 pertains to keeping confidential matters by the conciliator and the parties which is to extend to the settlement agreement, except where its disclosure to be necessary and Section 81 reads as follows:
"81. Admissibility of evidence in other proceedings.- The Parties shall not rely on or introduce as evidence in arbitral or judicial proceedings, whether or not such proceedings relate to the dispute that is the subject of the conciliation proceedings,-
(a) views expressed or suggestions made by the other party in respect of a possible settlement of the dispute;
(b) admissions made by the other party in the course of the conciliation proceedings;
(c) proposals made by the conciliator;
(d) the fact that the other party had indicated his willingness to accept a proposal for settlement made by the conciliator."15 A.S.No.49/2015
The execution of the Purchase Agreement marked as Ex.C2, the issue of the cheques-Exs.C3, C4, Legal Notice, Reply Notice, Memorandum of Agreement-Ex.R1, are all undisputed facts.
Ex.C2 is the Purchase Agreement between the plaintiff and the defendant and it is dated:20-8- 2008. By virtue of this agreement, the plaintiff has been appointed as a Consultant for exiting the Power Purchase Agreement with KPTCL/CESCO and new PPA with PTC India Limited. This document contains in detail the following:
"Scope of services:
Broadly, the scope of service is to enable the company to terminate the present power purchase agreements with KPTCL/CESCO as per the provisions of PPA with minimum cost and entering into power purchase agreement(s) with PTC India Limited, New Delhi. The assignment involves among other things, the following (1) Coordinate with PTC India Limited to enter into a MOU, agreeing in principle to purchase the power, as per discussions with PTC, before our company makes necessary applications for terminating the present power purchase agreements. This is required to provide necessary comfort to our lending institution (2) Negotiate and coordinate with KPTCL/CESCO and other concerned agencies for terminating by mutual consent, the present power purchase agreements in 16 A.S.No.49/2015 respect of our 4 x 4 MW HLBC and 2 x 4 MW Riverbed Power Projects (3) Ensure that an agreement is entered into for Open Access of the Systems/ Transmission lines and other facilities of KPTCL/CESCO and other concerned agencies including with PTC India Limited to enable sale of power from our Hydel power projects to PTC India Limited (4) Obtaining necessary approvals, if any, of concerned state/central electricity regulation commissions (5) Ensure that our company enters into a Power Purchase Agreement(s) with PTC India Limited for purchase of power in line with our discussions (6) All other works in connection with the above to achieve the over all objective of sale of power to PTC India Limited at a higher tariff which would increase project viability and reduce the risk in case of failure of monsoon Consideration Your compensation for the entire services would be sharing of additional revenue over the present tariffs achieved on a 50:50 basis for a period of one year. The present Tariffs, as per current power purchase agreements, being paid by KPTCL/CESCO are:
2 x 4 MW Riverbed project: Rs.3.074 per Kwhr 4 x 4 MW HLBC Project : Rs.3.132 per Kwhr (to be revised to Rs.3.19 per Unit from 1st October 2008) 17 A.S.No.49/2015 The period of one year will commence from the date of first commercial sale under the PPAs with PTC India Limited Service tax, if any shall be to the account of the our company Payment terms
(a) You will be paid an initial advance of Rs.50.00 Lakh (Rupees fifty lakh only) Plus applicable service tax. The amount will be paid after deducting income tax at source as applicable under the Income Tax Act 1961
(b) The said advance will be refunded in case the overall objective is not achieved
(c) The balance consideration shall be paid based on number of units of power sold to PTC India Limited by our company multiplied by 50% of additional net revenue realized per unit, as explained in clause (d) below.
Our company will issue necessary irrevocable authorizations to PTC India Limited to deduct, out of the payment due each month to our company for power sold and pay directly to you. Alternatively, suitable provisions will be included in the Power Purchase agreement itself for direct payment to you for a period of one year
(d) For the purpose of arriving the net additional realization per unit, expenses on banking and wheeling and other incidental expenses relatable/attributable to such additional realization will be deducted and net additional realization will be shared in the ratio of 50:50"18 A.S.No.49/2015
7. It also contains a clause that, any dispute between the parties has to be resolved by mutual discussion and if it not resolved, the same has to be resolved through arbitration. Ex.C5 is the legal notice dated:3-7-2012 issued by the defendant to the plaintiff herein, seeking for return of the advance amount. In this notice, the details of the payment of the advance amount. In this notice, the details of the payment of advance amount has been stated as follows:
Date Cheque No. Bank Amount
1. 20.08.08 779568 ICICI Bank 49,81,480
2. 18.02.2009 827158 ICICI Bank 22,41,666
Total 72,23,146
This notice states that the plaintiff-Company to have only done negligible work, as a result of which, the objective sought to be achieved could not be achieved and thereby, the plaintiff-Company to have failed miserably to provide proper services and execute the work. What was the work expected from this Agreement? The Agreement has the recital specifically of the work to be completed by the plaintiff. That work is in the nature of the service, whereby the plaintiff was to terminate the present PPAs. with the KPTCL/CESCO with minimum cost and enter into PPA with PTC India Ltd. In this regard, the clause pertaining to consideration above noted, 19 A.S.No.49/2015 shows that additional revenue over the present tariffs was to be paid on a 50:50 basis for a period of one year as compensation for the entire services. The period of one year was to commence from the date of the first commercial sale under the PPAs with PTC India Limited. There is reply to this notice marked as Ex.C6 by the plaintiff, stating that the initial advance to have been paid through the cheques dated:20-8-2009 and 18-2-2009, which are already marked as Exs.C3 and C4 bearing Nos. 779568 and 827158. Thereby, the total sum paid is Rs.72,23,146/-. It specifically states as under:
"3. There has been no failure on the part of M/S Oscar Infra Pvt. Ltd. as because my client is quite aware of its obligations and duties so as to be rendered.
4. This is to point out here, that my client had asked you to furnish with some mandatory documents of significant importance for carrying out the aforementioned objective which however you have failed to submit anything so far. In fact the concerned person who was in charge of the entire project appointed by Hemavathy power and Light Pvt. Ltd. Mr.Murli couldn't be contacted so as to hand over the documents required. However later Murli informs that he has left Hemavathy which leaves my client Oscar Infra without giving any scope to attain the aforesaid objective since the documents and information required were not furnished.20 A.S.No.49/2015
5. This is pertinent to mention here that my client M/S Oscar Infra Pvt. Ltd. would always like to render their outmost service and with due precision and diligence thereby fulfilling the scope of service as per the aforementioned agreement dated 20th August 2008. This however can only be done when there is cooperation from your clients side, which till date have not been received by my client M/S Oscar Infra Pvt. Ltd.
6. Kindly admit the fact that M/S Oscar Infra Pvt. Ltd. has never tried to act inconsiderately or in an unprofessional manner but since my client couldnot hear from your client nor receive any intimation regarding the mandatory documents the aforementioned services couldnot be taken ahead as per to the decided project.
7. This is to reiterate here that My client would be more than happy to render the professional services as agreed upon, which however they can only do so as and when your client would cooperate by furnishing the required documents."
The above noted paragraphs of the reply notice has been to the effect that the professional services, as agreed upon, was not completed or rendered in terms of the agreement. They were still pending as on the date of issue of this reply notice. This is said to be on the ground that certain mandatory documents were to be required. The nature of the service in terms of this agreement-Ex.C2 was only to exit the agreement that was with the CESCO and to execute the PPAs. with the PTC India Limited. In 21 A.S.No.49/2015 order to show what was the outcome of the work in terms of the agreement, during the course of the evidence of the claimant therein before the Arbitral Tribunal, the Memorandum of Agreement-Ex.R1 has been got marked, which is dated:12-12-2008. it is executed between the PTC India Ltd. and the respondent. Clause (H) reads as follows:
"(H) This MOA shall be a part of the Power Purchase Agreement ("PPA") which shall be entered into at the earliest between the parties and pursuant to this MOA."
Other important clauses are 16 and 17, which are as under:
"16. MOA shall remain valid for a period of two (2) years commencing from the date of execution provided, however, if the PPA cannot be finalized to the satisfaction of both the Parties and on the most favourable terms and conditions within a period of 1 (one) year from the date of execution, then this MOA shall automatically stand terminated at that stage, not withstanding its term, unless otherwise revalidated and mutually agreed to be extended, by the parties in writing. In such an event, neither Party shall make any claim against any other Party for any loss/damage on account of such termination before any forum, whether judicial or otherwise. However, in the interest of Parties, the Parties shall strive to conclude or sign the PPA within 6 months from the date of signing of this MOA.22 A.S.No.49/2015
17. The MOA shall also stand terminated if the Producer confirms in writing to PTC that inspite of its best efforts, Producer is unable to exit the present PPAs due to non-receipt of permission from KPTCL/CESCO or any other authorities as applicable, to terminate the present PPAs or denial of permission to allow Open-access to its inter-connecting facilities on termination of present PPAs."
This Ex.R1 is only in nature of Memorandum of Agreement, which was valid only for a period of two years and in case the PPA was not finalized within one year from the date of execution, this Memorandum of Agreement was to stand automatically terminated. This is clearly expressly stated as per Clauses 16 and 17 above noted. When Ex.C2 read with Ex.R1, it only means that apart from this agreement-Ex.C2, one more agreement, styled as Memorandum of Agreement, has been executed. Of course, this Ex.R1 is between the PTC India Limited and the present defendant. Thereby, Clause-I of the scope of service in Ex.C2 was complied, as it pertains to entering into a MOU with PTC. But, the intention of the parties, on the perusal of the clauses provided in Ex.C2 was that the plaintiff-Company had to enter into PPAs. with the PTC India Limited for purchase of the power. This was for the reason for the sale of the power to the PTC India Limited at a higher tariff would increase project viability and reduce the risk in case of failure 23 A.S.No.49/2015 of monsoon. That was the objective behind executing this Ex.C2. Can mere executing a Memorandum of Agreement as per Ex.R1 by itself could show that this objective was achieved? The Clauses above noted in Ex.R1 shows that time was fixed for finalizing the PPA within one year and thereafter to conclude or sign the PPA within six months from the date of signing of the MOA. It was obligatory on the parties to strive in order to sign the PPA. In case, within the time as provided in the above noted Clauses, the PPA was not finalized or concluded, then it specifically provides that MOA to stand terminated. In this regard, the word used in Clause 17 above noted is that, the MOA shall also stand terminated. In Clause 16, the word used is, MOA shall remain valid for a period of two years from the date of its execution, provided, if the PPA is not finalized within the time fixed, then the MOA to stand automatically terminated. The recital pertaining to termination of the MOA within the time frame work fixed as per Clause 16 read with Clause 17, then mere executing a Memorandum of Agreement as per Ex.R1 by itself cannot amount to achieving the objective, namely to sell the power at a higher tariff in order to increase the viability of the project. Such being the case, how can there be violation of the public policy, as contended by the counsel for the plaintiff. In this regard, the learned counsel for the respondent has 24 A.S.No.49/2015 referred the citation reported in (2015) 3 SCC 49 {Associate Builders vs. Delhi Development Authority} wherein it is held as under:
"74. In the result, it is held that:
(A) (l) The Court can set aside the arbitral award under Section 34(2) of the Act if 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 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 failing within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration.25 A.S.No.49/2015
(2) The Court may set aside the award:
(i) (a) if the composition of the Arbitral Tribunal was not in accordance with the agreement of the parties,
(b) failing such agreement, the composition of the Arbitral Tribunal was not in accordance with Part I of the Act,
(ii) if the arbitral procedure was not in accordance with:
(a) the agreement of the parties, or
(b) failing such agreement, the arbitral procedure was not in accordance with Part I of the Act.
However, exception for setting
aside the award on the ground of
composition of Arbitral Tribunal or
illegality of arbitral procedure is that the agreement should not be in conflict with the provisions of Part I of the Act from which parties cannot derogate.
(c) If the award passed by the Arbitral Tribunal is in contravention of the provisions of the Act or any other substantive law governing the parties or is against the terms of the contract.26 A.S.No.49/2015
(3) The award could be set aside if it is against the public policy of India, that is to say, if it is contrary to:
(a) fundamental policy of India law; or
(b) the interest of India; or
(c) justice or morality; or
(d) if it is patently illegal.
(4) It could be challenged:
(a) as provided under Section 13(5); and
(b) Section 16(6) of the Act."
8. The spirit of the agreement between the parties was that it was mandatory upon the plaintiff was to get higher tariff on the sale of the power to the PTC. No where does Ex.R1 falls within that frame work of the Agreement-Ex.C2.
In the ground stated for setting aside the award, the counsel has referred to the cross- examination of D.W.1 at question No.35. From the records, the question No.34 and the answer to that is as follows:
"Q.35. Would it be correct to say that you admitted of your inaction and hence agreed to pay Rs.10,00,000/- before the Hon'ble Arbitrator as a part of the settlement? A. I would agree to part of the statement of our inaction but would not agree having paid this as part settlement as it was suggested that this would made our position to the Hon'ble Arbitrator that our intent is to resolve the issue and nothing else."27 A.S.No.49/2015
This is said to be in violation of Section 81 of the Arbitration and Conciliation Act. But, the witness has answered to this question that, indeed there was inaction on their part. The fact that there was fixed duration even after finalizing the PPA as well as for entering into the PPA with the PTC and further that there was specific duration for the MOU, shows that within the time framed in terms of this Ex.R1, the further agreement was to be executed towards the objective of getting higher tariff from the PTC in viability of the project. In view of the admitted facts pertaining to execution of the agreements, namely, Ex.C2, MOU, the Cheques and the specific clauses as above noted, then the finding in the award therefore is within the purview of these clauses only. Irrespective of this question No.35, the fact remains that there are express terms and clauses pertaining to the time fixed and within that time frame work, admittedly there was no work which has been undertaken in any manner. Such being the case, it cannot be said that, that question No.35 to be in violation of the Section 81 of the Arbitration and Conciliation Act.
9. In the course of the arguments, learned counsel for the plaintiff has referred to the citations reported in AIR 1994 SC 853 {S,P.Chengalvlaraya Naidu (dead) by L.Rs. vs. Jagannath (dead) by LRs. and others}, AIR 2006 Kant. 231 {Bhimappa and Ors. Vs. 28 A.S.No.49/2015 Allisab and Ors.}, 2004 (57) ALR 730 {Smt.Swarnam Ramachandran and Anr. vs. Aravacode Chakungal Jayapalan}, AIR 1954 SC 44 {Satyabrata Ghose vs. Mugneeram Bangur and Company and Anr.}, AIR 1953 Mad. 300 {V.L.Narasu Carrying on Business vs P.S.V. Iyer and Ors.}, AIR 1967 Mad. 220 {S.P.Narayaaswami Pillai vs. Dhanakoti Ammal}, AIR 1971 SC 1756 {Smt.Sushila Devi and Anr. vs.Hari Singh and Ors.}, AIR 1971 Cal. 494 {The Gaya Muzaffurpur Roadways Co. vs. Fort Gloster Industries Ltd.}, AIR 1958 Punj 52 {Prem Singh Devi Ditta Mal and anr. vs. Sat Ram Das and ors.}, AIR 2000 HP 108 {Harnam Singh and ors. Vs. Smt.Purbi Devi and ors.} and AIR (Bom)-1945-0-11 {Santuram Hari vs. Trust of India Assurance Co.}. In view of the admitted facts stated above, the benefit of these citations cannot be availed by the plaintiff.
In regard to the question of limitation, this has been dealt in terms of reference No.21. The cheques-Ex.C3 and C4 are dated: 20-8-2008 and 18-2-2009. Legal notice-Ex.C5 was issued on 3-7-2012, MOA is dated:12-12-2008. Thereby the validity of this MOU is till 12-12-2010. Within three years therefrom Ex.C5-legal notice is issued and arbitration has been invoked as per notice-Ex.C7 dated:9-12-2012. Ex.R4 is the Power Purchase Agreement between the KPTCL and the respondent dated:8-1-2004. For the purpose of Ex.C2, the limitation as to be arrived at by reading the dates of 29 A.S.No.49/2015 Ex.C3, C4, Ex.R1 and Ex.C5. The matter before the Arbitral Tribunal is of the year 2014. Therefore, the question of limitation contended by the counsel for the plaintiff is not tenable. The perusal of MOU as above noted shows that there was no agreement executed in respect of the PPA at all. In fact, to complete the process of PPA, the term was fixed in the MOU. The gap between MOU, Ex.R1 and Ex.C2 is only about four months. The plaintiff was hired for the purpose of service which was specifically described in Ex.C2. Therefore, there cannot be any suppression of material fact. The contract was entered into between the plaintiff and the defendant for the purpose which is above noted and they are the contractual purpose. What was the obligation of each of the party is very specifically stated in Ex.C2. In furtherance of Ex.C2, the MOU-Ex.R1 was executed. The MOU is not completing the contract. It only specifies the time frame work, within which nature of service that was expected from the plaintiff was to be completed. That has not been completed or initiated at all. Thereby, the purpose for which Ex.C2 was executed has remained unfulfilled. Such being the case, the grounds stated for setting aside the award is not tenable.
The contract was entered into between the parties who are before the Court. The amount by way of refund has been awarded as per the award in 30 A.S.No.49/2015 terms of the amount that was paid towards rendering of the services. The refund of the said amount was fixed, the amount which is already paid has been deducted. As per the records, the amount paid by way of advance is Rs.72,23,146/-, for which the copies of the cheques have been noted above and the refund amount is deducting the amount that was already paid. This Ex.C7 dated:9-10-2012 is after the expiry of the time fixed in terms of the contents of Ex.R1.
Learned counsel for the defendant has also referred the citation (2012) 1 SCC 594 {P.R.Shah, Shares & Stock Brokers (P) Ltd. vs. B.H.H. Securities Pvt. Ltd. and others}, wherein Head Note (C) reads as under:
"C. Arbitration and Conciliation Act, 1996- Ss.34 and Appreciation of evidence by Court-When impermissible-Held, cannot site in appeal over award by reassessing or reappreciating evidence find out whether different decision could be arrived at against finding arbitral tribunal in absence of grounds under S.34."
10. The take over of the Company and assigning the claim to another Company cannot make any difference to make a claim as the parties to the agreement-Ex.C2 are the parties in the litigation. On account of expectation from the obligating party within the time fixed in terms of Ex.R1, the Doctrine of Frustration under Section 56 31 A.S.No.49/2015 of the Indian Contract Act is not applicable. In reply to the notice-Ex.C6 dated:21-7-2012 at para No.8, there is mention for cooperation of the defendant for carrying out the services stated in the MOA. This means that the services that was required was not rendered as on that date. Ex.C6 does not have any content of hike of the tariff by the KPTCL within the time fixed binding the contract between the parties. Therefore, in view of the above said reasons, no grounds of setting aside the award has been made out and the Point for consideration is answered in the negative.
11. Point No. 2 : Due to the findings as above, the following:
ORDER Arbitration Suit No.49/2015 instituted by the plaintiff, is hereby dismissed.
(Dictated to the Judgment Writer, transcribed and computerised print-out taken thereof is corrected, signed and then pronounced by me in Open Court on this the 27th day of January, 2018.) (VELA.D.K.) XXII Addl. City Civil & Sessions Judge, *sb Bengaluru.32 A.S.No.49/2015
27-01-2018 Judgment passed and pronounced in Open Court. (vide separate Judgment). Operative portion thereof reads as under:
Order Arbitration Suit No.49/2015 instituted by the plaintiff, is hereby dismissed.
XXII A.C.C. & S.J., Bengaluru.