Bangalore District Court
M/S Alupro Building Systems Pvt. Ltd vs M/S Skl Hotels Pvt. Ltd on 31 January, 2022
1 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
In the Court of LXXXIV Addl. City Civil & Sessions
Judge (CCH-85 Commercial Court), Bengaluru
Dated this the 31st day of January 2022
Present: Smt.H.R.Radha B.A.L., LL.M.
LXXXIV Addl. City Civil and Sessions Judge,
(CCH-85 Commercial Court)
Bengaluru
Com.A.S.No.131/2017
&
Com.A.S.No.143/2017
Plaintiff: M/s Alupro Building Systems Pvt. Ltd., a
company incorporated under the
Companies Act 1956 previously having its
registered office at No.28, Race Course
Road, Bengaluru - 560 001 and presently
having its registered and factory at No.89,
Dabaspet Industrial Area, Phase-II,
Nelamangala Taluk, Bengaluru - 562 123,
represented by its Director, Mrs.Gayatri
Kapur
(By Sri.P.B.Appiah, Adv.)
Vs
Defendant: 1. M/s SKL Hotels Pvt. Ltd., a Company
incorporated under the companies Act
1956, having its registered office at
No.270, 36th A Cross, 7th Block, Jayanagar,
Bengaluru - 560 082, represented by its
Director Mr.S.Kanhayalal
(Defendant by Sri.A.Sampath, Adv.)
Respondent: Justice L. Sreenivasa Reddy (Retd.), Former
Judge, High Court of Karnataka, C/o
Arbitration Centre - Karnataka, 3 rd Floor,
East Wing, Khanija Bhavan, No.49, Race
Course Road, Bengaluru - 560 001.
2 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
Date of Institution
Com.A.S.No.131/2017 06-10-2017
Com.A.S.No.143/2017 23-10-2017
Nature of the petition U/Sec.34 of the Arbitration and
Conciliation Act
Date on which judgment 31-01-2022
pronounced
Total Duration Years Months Days
Com.A.S.No.131/2017 04 03 26
Com.A.S.No.143/2017
04 03 09
LXXXIV Addl. City Civil & Sessions Judge
(CCH - 85 Commercial Court) Bengaluru
COMMON JUDGMENT
These petitions U/s 34 of the Arbitration and
Conciliation Act, 1996 ('the Act' in short) are filed
respectively by the respondent and the claimant in
A.C.No.121/2015 for setting aside the award dated
25-07-2017 passed by the sole arbitrator (hereinafter
referred as the 'Arbitral Tribunal').
3 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
2. A.S.No.131/2017 was transferred from CCH-5 to
CCH-39 by notification dated 23.03.2018 and then to
CCH-83 by notification dated 10.01.2019. A.S.No.143/2017
was transferred from CCH-5 to CCH-83 by notification dated
17.12.2019.
3. Subsequently both the cases were withdrawn from
CCH-83 and made over to this court by notification
No.ADM-I(A) 596/2021 dated 07.08.2021.
4. The parties are referred as per their original rank
before the Arbitral Tribunal for clarity.
5. Brief facts leading to filing of the petitions are that the
claimant was engaged by the respondent for fabrication and
installation of structural glazing for the facade in respect of
their hotel under construction. They entered into agreement
dated 03.01.2012 and the cost was estimated at
Rs.1,26,42,313/-. During execution of the work, the
respondent completely paid RA bill No.1 and 2 raised by the
claimant. However, towards RA bill No.3 for
Rs.41,69,385.94, the respondent paid only a sum of
Rs.40,00,000/-. By email dated 26.12.2012 the respondent
requested the claimant to remove itself from the site and
4 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
abruptly stopped all the works. In the meanwhile, the
claimant raised RA bill No.4 claiming certain amounts and
submitted on 26.12.2012. Letters were addressed and
notice was also issued to the respondent demanding the
balance under RA bill No.3 and the amount due under RA bill
No.4 together with interest. The respondent replied denying
the liability on the ground that the project management
consultant had not approved RA Bills 3 and 4, and claimed
return of the materials supplied by them or to pay the value.
The dispute could not be amicably settled. Therefore, the
claimant approached the Hon'ble High Court of Karnataka
for appointment of the arbitrator and CMP No.83/2015 came
to be allowed on 08.09.2015.
6. The claimant submitted the statement of claim
U/s 23(1) of the Act claiming a sum of Rs.9,73,09,774.38
from the respondent with interest at 43.5% compounded
monthly from the date of claim till the date of payment. The
respondent contested the same and raised counter claim for
return of the material supplied by them free of cost or to
pay Rs.1,34,48,087/- towards the value together with
interest at 18% p.a. from September 2012 till the date of
realization contending that the claimant had not executed
5 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
any work in terms of contract dated 03.01.2012 after
submitting RA bill No.3, as such RA bill No.4 could not have
been raised. The claimant was not entitled for idling charges
since it was instructed to stop work and to remove all its
men and material from the site. The counter claim was
opposed by the claimant by filing statement of defence
contending that the raw materials supplied by the
respondent was worth Rs.1,09,33,816.58 and had limited
shelf life. After receipt of respondent's email dated
26.12.2012, they addressed letter dated 25.02.2013
reserving the right to dispose of the materials to recover
Rs.1,12,15,018.69 and adjust sale proceeds towards the
dues. Since the respondent showed no interest to take back
the material or to pay the dues, they sold the materials by
auction for a sum of Rs.20,10,815.98 and issued credit
notes and the counter claim is baseless.
7. Based on the above pleadings, the Arbitral Tribunal
framed as many as nine issues. The claimant examined
Cw1 and Cw2 on its behalf and got marked Exs.P1 to P70.
The respondent examined Rw1 on their behalf and got
marked Ex.R1 to R28.
6 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
8. After hearing the arguments and considering the
material on record the Arbitral Tribunal, by the impugned
award dated 25-07-2017 partly allowed the claim; awarded
Rs.60,40,240/- in favour of the claimant with simple interest
at 15% p.a. from the date of award till realization and
dismissed the counter claim of the respondent.
9. Aggrieved by the same the respondent has filed
Com.A.S.No.131/2017 praying for setting aside the award on
the ground that awarding of interest applying Sec.16 of the
Micro, Small and Medium Enterprises Development Act,
2006 ('MSMED Act' for short) is outside the scope of
arbitration, as there was agreement to pay 18% interest on
delayed payments and the reference was U/s 11 of the Act,
not U/s 18 of MSMED Act. When RA bill No.3 and 4 were not
approved by the Project Management Consultant ('PMC' for
short), the Arbitral Tribunal ought not have held that there
was default in clearing the said bills; RA bill No.4 did not
contain honest disclosure of the claim and was in respect of
various items towards which no service was rendered and
therefore should have been rejected in toto. Without
evidence with regard to the rent payable per day for
godown in Dabaspet area, the Arbitral Tribunal has
7 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
arbitrarily awarded Rs.10,000/- per day towards idling
charges based on assumptions and presumptions. When the
claimant admitted receiving material worth
Rs.1,09,33,816.58 and utilizing of the same to an extent of
Rs.19,67,290/-, their counter claim could not have been
rejected, in the light of the observation that the procedure
for auction was not transparent. The invoices were very
much available for calculation of the value of the material
supplied by them to the claimant and without evidence, the
Arbitral Tribunal could not have believed that the materials
worth crores of rupees was sold just for Rs.20,00,000/-.
Thus the award contains decisions on materials not within
the scope of submission to arbitration and it is arbitrary.
10. The claimant has filed the written statement /
statement of objections contending that the petition is not
in conformity with Rule 4(c) of the Karnataka Arbitration
(Proceedings before the Courts), Rules, 2001. The grounds
urged are dehors the scope of Sec.34 of the Act and the
award cannot be interfered with merely because another
view is possible. The respondent has failed to demonstrate
that the impugned award is contrary to public policy. Mere
wrong finding of the fact or erroneous interpretation of
8 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
evidence cannot be interfered with U/s 34 of the Act. Being
a registered small scale industry, it is entitled to interest as
provided U/s 16 of MSMED Act, as the provisions of the said
Act override the provisions of the Arbitration and
Conciliation Act. Sec.18 of MSMED Act is merely procedural,
whereas Sec.16 confers substantive right on a small scale
industry. PMC had certified most of the items of RA bill No.4
by 20.02.2013, but the respondent failed to make payment.
The materials could not be delivered at the site as the
respondent had instructed to suspend the work in
December 2012 itself. There was delay on account of this
has also due to delay in supply of materials and timely
payment. The Arbitral Tribunal has rightly awarded
Rs.10,000/- per day towards idling charges. As per clause 27
of the agreement, it had lien on the materials supplied by
the respondent and installed by it; and could retain
ownership of all the products and services till full payment
was made. Its letters and emails expressing the intention to
dispose of the materials while neither refuted nor acted
upon by the respondent. Thus the materials were sold under
intimation and declared sale proceeds were adjusted
towards the dues. The respondent has not made out any
ground U/s 34 of the Act and therefore the petition should
9 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
be dismissed by upholding the arbitral award.
11. The claimant too has filed Com.A.S.No.143/2017
praying for setting aside the arbitral award on the ground
that out of the cumulative value of Rs.1,19,04,444.16 the
respondent had paid Rs.89,46,166/- leaving the balance at
Rs.29,58,278.10. Having relied on Ex.P16, the Arbitral
Tribunal wrongly excluded the retention money which was a
part of the running bills and also erroneously deducted the
amount towards the materials supplied by the respondent;
and the same needs to be corrected. There is no logic in
reducing the claim towards idling charges for storage of
assembled frames and glass from Rs.50,000/- to Rs.10,000/-
or disallowing the claim for idle charges for glass at the rate
of Rs.30,000/- per day. Similarly disallowing of claim No.3(c)
for idle charges for retention of JIB crane at the respondent
site at Rs.1,200/- per day is unsustainable and the Arbitral
Tribunal has completely overlooked Ex.P26 and Ex.P30. As
per clause 22 of Ex.P6, it was entitled to idle charges for
scaffolding and access equipment. JIB crane is nothing but
an access equipment to do the work. Claim 3(d) was
rejected on the ground that no permission was obtained to
lay-off the workmen due to wrong application of
10 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
Secs.25-M(1), 25-M(2) and 25-Q of the Industrial Disputes
Act. The said provisions are applicable only to factories
employing more than 100 workmen as per Sec.25-K of the
Industrial Disputes Act. Whereas it employed only 40
workmen. There is lack of application of mind to the facts
pleaded in relation to sale of the scrap and the Arbitral
Tribunal committed error in not awarding interest under
Sec.16 of MSMED Act, as such the impugned award is
contrary to law.
12. The respondent has not chosen to file the written
statement / statement of objections.
13. Heard arguments.
14. Sri.A.Sundar, the learned counsel for the respondent
argues that the adjudication of the dispute was not U/s 17
and 18 of the MSMED Act and the contract provided for fixed
rate of interest on delayed payments, as such the Arbitral
Tribunal fell in error in awarding interest by invoking Sec.16
of MSMED Act. In the presence of a clear finding with regard
to non delivery of materials by the claimant, the Arbitral
Tribunal could not have awarded Rs.10,69,386/- towards RA
bill No.4 that too when it was not approved by the PMC.
11 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
When there was no evidence to establish the actual sale
proceeds derived by the claimant by the sale of materials,
the Arbitral Tribunal patently erred in accepting that,
materials worth crores of rupees was sold as scrap for
Rs.20,16,815.98. If Ex.P57 were to be considered, then the
respondent would not be liable to pay any amount to the
claimant. The claim towards idling charges is nothing but
storage charges and the same could not have been awarded
as the respondent had offered 5000 sq.ft., area for storing
the material.
15. Sri.P.B.Appaiah, the learned counsel for the claimant
argues that the respondent is trying to make out a new
case; the claim towards idling charges cannot be treated as
storage charges. The agreement provides for payment of
idle charges on account of delay in completion of the work.
Relying upon the judgment in SILPI Industries & Ors Vs
Kerala State Road Transport Corporation reported in
AIR 2021 SC 5487, it is argued that MSMED Act being a
special statute has overriding effect on the Arbitration and
Conciliation Act, the agreement between the parties with
regard to rate of interest has to be ignored. The claimant
being a small scale industry ought to have been awarded
12 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
interest as provided U/s 16 of MSMED Act from the date of
claim till the date of award. Further, the grounds urged in
A.S.No.131/2017 involve reappreciation of facts and
evidence and therefore the same should be rejected.
16. In the case of Union of India Vs M/s Warsaw
Engineers & Anr. (COMAP No.25/2021 dated
17.04.2021 KAR), while dealing with a petition U/s 34 of
the Act it is laid down that the court is required to advert to
the grounds, examine whether the same are available
U/Ss.34(2) and 34(2A) of the Act and if available, the court
should consider the grounds separately to see whether the
same is established.
17. In the light of the above, following are the points that
arise for the consideration of the court in these petitions:
1. Whether the respondent establishes
that, awarding of interest as provided
U/s 16 of MSMED Act is arbitrary and
beyond the scope of the dispute
submitted to arbitration?
2. Whether the respondent establishes
that awarding of idle charges of
Rs.10,000/- per day and partly allowing
the claim towards RA bill No.4 amounts
13 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
to error apparent on the face of the
record?
3. Whether the claimant establishes that
the award is contrary to Sec.16 of the
MSMED Act and also the terms of
agreement?
4. Whether the parties in
A.S.No.131/2017 and A.S.No.143/2017
have made out grounds U/s 34 of the Act
for setting aside the impugned award
dated 25.07.2017 passed by the Arbitral
Tribunal in A.C.No.121/2015?
5. What Order?
18. My findings on the above points are :
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 the final order for following
REASONS
19. Before dealing with the rival contention of the parties,
it is necessary to understand the scope of Section 34 of the
Act and powers of the court in deciding the same, in the
light of recent judgments of the Hon'ble Supreme Court.
14 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
20. In Ssangyong Engineering & Construction Co.
Ltd. Vs NHAI reported in (2019) 15 SCC 131, after
referring to several earlier judgments, it is made clear that:
(i) Post amendment of Section 34 of the
Act, interference with an award on the
ground of arbitrator not adopting a judicial
approach would amount to interference
with merits of the award and the same is
not permissible;
(ii) 'Interests of India' as a ground for
interference is no longer available, as the
same is deleted by way of amendment;
(iii) The ground for interference on the
basis that the award is in conflict with
justice and morality has to be understood
as conflict with 'the most basic notions of
morality or justice';
(iv) The expression 'public policy of India' is
restricted to mean that the domestic award
is contrary to fundamental policy of Indian
law; and interference on the ground that
the award is against basic notions of
justice or morality, has been done away
with;
(v) Re-appreciation of evidence, is not
permitted on the ground that the award is
patently illegal;
(vi) Mere contravention of substantive law
by itself is not a ground for setting aside
an arbitral award;
(vii) By virtue of Sec.28(3) of the Act the
court cannot interfere with an award on
the ground of mere erroneous
15 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
interpretation of the terms of contract,
unless the arbitrator construes the
contract in a manner that no fair minded or
reasonable person would;
(viii) If the arbitrator commits error of
jurisdiction by wandering outside the
contract and deals with matter not allotted
to him, then the ground for challenge is
covered U/s 34(2A) of the Act.
(ix) Though a perverse decision is no
longer a ground of challenge under public
policy of India, it would certainly amount to
a patent illegality appearing on the face of
the award.
(x) If a finding recorded by an arbitrator is
based on no evidence at all or an award
which overlooks vital evidence in arriving
at decision, would be perverse and is liable
to be set aside on the ground of patent
illegality.
21. The scope of interference with an arbitral award on the
ground of patent illegality U/s 34 (2A) of the Act is reiterated
as below in Delhi Airport Metro Express Pvt. Ltd. Vs.
Metro Rail Corporation Ltd. reported in (2021) SCC
Online SC 695:
(i) Every error of law committed by an
arbitral tribunal would not fall within the
expression of 'patent illegality'.
(ii) The patent illegality should be an
illegality which goes to the root of the
matter.
16 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
(iii) Erroneous application of law cannot be
categorized as patent illegality.
(iv) Contravention of law not linked to
public policy or public interest is beyond
the scope of expression 'patent illegality'.
(v) The courts cannot reappreciate the
evidence to conclude that the award
suffers from patent illegality appearing on
face of it, as they do not sit in appeal.
(vi) An award can be interfered with on the
ground of patent illegality when an
Arbitrator takes a view which is not even a
possible view and interprets a clause in the
contract in such a manner that no fair
minded or reasonable person would or if
the Arbitrator commits an error of
jurisdiction by wandering outside the
contract and deals with matters not
allotted to it.
(vii) An arbitral award stating no reasons
for its findings would make itself
susceptible to challenge on the ground of
patent illegality.
(viii) The conclusions of an Arbitrator which
are based on no evidence or the one
arrived at by ignoring vital evidence, are
perverse and can be set aside on the
ground of patent illegality.
(ix) Similarly, a finding recorded by the
Arbitrator by considering documents which
are not supplied to the other party would
be perverse and fall within the expression
'patent illegality' U/s 34(2A) of the Act.
(x) An award is said to be in conflict with
public policy of India only when it is
induced or affected by fraud or corruption
17 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
or is in violation of Ss.75 or 81 of the 1996
Act or if it is in contravention of
fundamental policy of India law or in
conflict with most basic notions of morality
or justice, by virtue of explanation (1) as
amended by 2015 Amendment Act .
(xi) Contravention of a statute only if is
linked to public policy or public interest is
ground for setting aside the award as
being at odds with the fundamental policy
of Indian law.
The above judgment is referred with approval in State
Of Chhattisgarh & Anr. Vs Sai Udyog Pvt. Ltd. reported
in (2021 SCC Online 1027).
22. Thus, it is clear that the basic approach of the court
should be to support the award rather than destroy it by
calling it illegal. The arbitrator is the sole judge of quantity
as well as quality of evidence and the court dealing with a
petition U/s 34 of the Act should not reappreciate the
evidence, as an appellate court. The award cannot be
challenged on the ground that the arbitrator arrived at his
own conclusions or failed to appreciate the facts. Where two
views are possible on interpretation of the contract, the
court shall not substitute its view for that of the arbitrator.
Mere error of application of law and appreciation of
evidence cannot amount to patent illegality and the scope
18 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
of interference in the arbitral award is limited.
23. Points 1 and 3: These points are inter related and
therefore are taken up together for discussion to avoid
repetition.
24. According to the learned counsel for the respondent,
the adjudication of the dispute was not by the Council
U/s 17 and 18 of the MSMED Act; Ex.P6 provided for a fixed
rate of interest i.e., at 18% p.a., on the delayed payments.
Therefore, the Arbitral Tribunal fell in error in awarding
interest as provided U/s 16 of MSMED Act.
25. The learned counsel for the claimant also argues that
MSMED Act being a special statute has overriding effect on
the Arbitration and Conciliation Act. Even when Ex.P6
provided for fixed rate of interest on delayed payments, the
Arbitral Tribunal ought to have awarded interest as provided
U/s 16 of MSMED Act. In support of this he relies upon the
judgment in SILPI Industries & Ors Vs Kerala State
Road Transport Corporation reported in AIR 2021 SC
5487.
26. Admittedly, Ex.P6 dated 03.01.2012 is an item rate
contract. Clause 7 provides that the claimant will not be
19 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
responsible for the delay due to delay in receipt of goods
under free supply; other contractors delays in works; delay
in releasing techno commercially ordered; changes in any
quantity/working area and delay in payment against the
running bills and final bill. Further, suitable extensions if any
required for any additional work order/quantity/changes, the
claimant was to be not held responsible for the same.
27. It is also not in dispute that the claimant is registered
as a small/manufacturer and Ex.P1, Entrepreneurs
Memorandum Acknowledgment dated 21.10.2008 issued
the Directorate of Industries and Commerce, Govt. of
Karnataka was produced before the Arbitral Tribunal in proof
of the same.
28. As provided U/s 15 of MSMED Act, the respondent
being the buyer ought to have paid the claimant for the
goods supplied or the services rendered, on or before the
date agreed upon in writing, or before appointed day, where
there is no agreement in writing. By virtue of the proviso to
Sec.15, the period agreed upon by the buyer and the
supplier in writing shall not exceed 45 days from the day of
acceptance [Explanation (I) (a) and (b) of Section 2 (b)] or
deemed acceptance [Explanation (ii) of Section 2 (b) of
20 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
MSMED Act].
29. As per clause 8 to 11 of Ex.P6, the claimant had to
raise the bills on a fortnightly basis and its certification
ought to be done within 10 days of submission and adhoc
payment of 75% of bill value to be made within the said
period and the remaining amount to be paid within 15 days
from the date of submission.
30. There is no dispute that the claimant submitted RA bill
No.3 and 4, but the same was not certified by the PMC as
provided under clause 9 of Ex.P6 within 10 days. Nor was
the factum of non approval of these bills by the PMC,
communicated to the claimant within the time fixed for
payment under clause 10 of the agreement dated
03.01.2012. However, the work was stopped from
26.12.2012 and thereafter no work was executed by the
claimant.
31. From the discussion, at para 79 to 85 of the impugned
award, it appears that the Arbitral Tribunal has come to the
conclusion that the provisions of MSMED Act have overriding
effect on any other law for the time being in force, by
placing reliance on a judgment of the Hon'ble Gujarat High
21 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
Court and the provisions contained U/Ss.15 to 24 of the
MSMED Act.
32. Clause 11 of the agreement Ex.P6 provides for interest
at 18% p.a., on delayed payment from the date when the
amount became due till the date of payment. The Arbitral
Tribunal has awarded interest as prescribed U/s 16 of the
Act on the delayed payments only and not other charges.
There is nothing in Ss.15 to 18 of MSMED Act to infer that
the rate of interest as prescribed U/s 16 can be awarded
only when the dispute is referred to Micro and Small
Enterprises Facilitation Council, as sought to be canvassed
by the respondent.
33. The Arbitral Tribunal has awarded Rs.1,37,905/- from
10.11.2012 to 27.03.2014 towards interest at 43.5% p.a.
compounded monthly, on the balance amount of
Rs.1,69,386/- payable under RA bill No.3 and Rs.6,27,926/-
towards interest on Rs.10,33,413/- being the amount due
under RA bill No.4 from 20.02.2013, the date of PMC
certificate to 27.03.2014. On appreciation of facts and
evidence, the Arbitral Tribunal has answered issue No.5
relating to the claim for Rs.4,63,25,125.10 by way of
interest under MSMED Act, in the negative. As discussed
22 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
earlier, the Arbitral Tribunal is the final authority with regard
to appreciation of facts and the evidence and findings
thereof cannot be interfered with lightly even if there is
erroneous interpretation of law. Therefore, points 1 and 3
are answered in the negative.
34. Point No.2: Drawing the attention of the court to para
61 and 92 of the award, it is argued that in the presence of
a clear finding with regard to non delivery of 6 mm Ceramic
Glass and Gypsm board worth Rs.1,07,726.88, Louvers
worth Rs.4,92,988.04 and Sand moeding material worth
Rs.4,90,838.83, the Arbitral Tribunal could not have
awarded Rs.10,69,386/- towards RA bill No.4, more so when
approval of PMC was not accorded for said payment.
Without there being any evidence, the case of the claimant
that materials worth crores was sold as scrap for a meager
sum of Rs.20,16,815.98 ought not to have been believed.
Had Ex.P57 been taken into consideration, then there was
no question of holding the respondent liable to pay any
amount. It is also argued that, ignoring of clause 21 of Ex.P6
has resulted in awarding storage charges under the head
idle charges. Therefore, the award is liable to be set aside
as perverse and patently illegal.
23 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
35. The learned counsel for the claimant on the other
hand argues that the respondent is trying to make out a
new case which was neither pleaded nor proved before the
Arbitral Tribunal; idle charges cannot be treated as storage
charges, as the machinery and equipment meant for the
scaffolding work was kept in the respondent's premises and
the agreement also provides for payment of idle charges on
account of delay in completion of the work.
36. RA bill No.4 Ex.P16 dated 26.12.2012 was for
Rs.21,24,967.06. Payment towards the same was opposed
on the ground that the bill was not certified by the PMC and
certain materials not delivered at the site were included
therein. On the other hand, the claimant contended that
there was no covenant in Ex.P6 to deliver the materials at
the site. But relying on clause 27 of the agreement the
Arbitral Tribunal has concluded that the claimant was
required to deliver the materials at the site and to install the
same but, could retain ownership on the products and
services so supplied till full payment was made.
37. That apart, relying on the evidence of Cw1 during
cross examination the Arbitral Tribunal has come to the
24 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
conclusion that materials worth Rs.10,91,554 was not
delivered at the site but the cost was included in Ex.P16.
After deducting the same, it is held that the respondent
would still be liable to pay Rs.10,33,413/- towards RA bill
No.4; the respondent suspended the project and therefore
was not interested in cooperating with the PMC in the
matter of certification of the said bill.
38. Thus, the discussion in paras 52 to 62 of the impugned
award demonstrates that the Arbitral Tribunal, on
appreciation of facts and evidence, has come to a clear
finding that RA bills 1 and 2 were fully paid; and
Rs.40,00,000/- was paid towards RA bill No.3 without waiting
for certification from the PMC and thereby the respondent
waived its right to make payment only on certification by
the PMC.
39. In so far as awarding of idle charges at Rs.10,000/- per
day from 01.01.2013 upto the date of disposal of the
material by sale dated 27.03.2014, from the discussion at
para 63 to 70 of the impugned award it is seen that the
same is based on Ex.P14, P16, P19, P23 and also clause 22
of Ex.P6.
25 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
40. In addition to the above, the Arbitral Tribunal has
taken into consideration the fact that scaffolding
material/equipment dumped in the claimant's godown could
not be moved, as the work was suspended from 26.12.2012.
But at the same time, the claimant too had not adduced
documentary evidence to establish to the rent of a similar
godown in Dabaspet industrial area. Therefore awarding of a
sum of Rs.10,000/- per day towards idle charges for storing
the items supplied by the respondent with interest is
reasonable and it cannot be found fault with by
reappreciating the facts of the case and evidence on record.
Moreover, the contention of the respondent that they had
made available 5000 Sq.ft., area at the work site for storing
the material was neither pleaded nor proved before the
Arbitral Tribunal. As such the same cannot be considered for
the first time in this application U/s 34 of the Act.
41. Claim 3(c) relates to idle charges for retention of JIB
crane at the rate of Rs.1,200/- per day. The Arbitral Tribunal
has noted that idle charges for JIB crane at the site for the
period from 24.08.2012 to 31.12.2012 was claimed Under
Annexure-A to Ex.P16, RA bill No.4; the project work was
suspended on 26.12.2012 and thereafter there was no work
26 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
at the site. In Ex.P25 and P26, the list of tools collected from
the site by the claimant with the help of Chikkajala Police,
JIB crane was not mentioned. As such the Arbitral Tribunal
has concluded that the claim towards JIB crane idle charges
to be false and unfounded, as the said equipment was not
kept at the respondent's work site.
42. In so far as rejection of the claim 3(d) towards idle
charges of factory workers and supervisors laid off from
01.01.2013 to 30.04.2014 is concerned, it is not the case of
the claimant that it had adduced evidence before the
Arbitral Tribunal to show that the work force employed was
only 40. Further, the discussion at paras 74 to 77 of the
impugned award makes it clear that neither the letter
allegedly addressed to the labour department intimating lay
off nor permission for the lay off, were produced before the
Arbitral Tribunal. Under such circumstances, the findings of
the Arbitral Tribunal cannot be held to be perverse.
43. Admittedly the respondent had agreed to supply
material to the claimant. Drawing the attention to Ex.R2 and
Ex.P57, it was argued that out of crores worth material
supplied, the claimant had utilized material worth
27 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
Rs.19,67,290/- and in the absence of evidence regarding
actual sale proceeds derived from the auction, the Arbitral
Tribunal erred in accepting that the materials were sold as
scrap for a meager sum of Rs.20,16,815.98, specially when
the auction was held to be not transparent.
44. The discussion at para 86 to 90 of the arbitral award
goes to show that on appreciation of Ex.P20, P23 and P36,
the Arbitral Tribunal concluded that the respondent is not
entitled for the counter claim even when the auction/sale of
scrap was not transparent, as they had failed to take back
the unused material lying in the claimant's factory despite
issuing requests at Ex.P20, P23 and P36 but, collected some
of the items during the pendency of arbitration proceedings
without even raising any objection. Therefore, the
arguments of the respondent that the Arbitral Tribunal has
recorded its findings with regard to sale proceeds derived by
the claimant, without any basis cannot be accepted.
Accordingly, point No.2 is answered in the negative.
45. Point No.4: From the above discussion, it is apparent
that the respondent has failed to establish that Arbitral
Tribunal travelled beyond the scope the dispute submitted
28 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
for adjudication in granting interest as provided U/s 16 of
the MSMED Act or in rejecting the counter claim. Similarly,
the respondent too has failed to demonstrate that the
Arbitral Tribunal construed the terms of contract in an
unreasonable manner.
46. Further, as observed in Swan Gold Mining Ltd., Vs
Hindustan Copper Ltd., reported in (2015) 5 SCC 739,
the arbitrator appointed by the parties is the final judge of
facts; finding of facts recorded by the Arbitral Tribunal
cannot be interfered with on the ground that the terms of
contract were not correctly interpreted. Even erroneous
application of law is no ground for interference U/s 34 of
the Act. A plain reading of the impugned award would show
that the findings are supported by reasons based on the
material on record and interpretation of provisions of law
and the contract. The grounds urged by the parties fall
within the realm of reappreciation of facts, evidence and
interpretation of the terms of contract and therefore the
award cannot be interfered with, as prayed. Accordingly, the
the point for consideration is answered in the negative.
47. Point No.5: In the result, I pass the following
29 Com.A.S.No.131/2017 &
Com.A.S.No.143/2017
ORDER
A.S.No.131/2017 and A.S.No.143/2017 filed U/s 34 of the Arbitration and Conciliation Act are hereby dismissed.
Keep a copy of the judgment in A.S.No.143/2017 and mail a copy to the parties through e-mail as provided U/o XX Rule 1 of CPC, if mail ID is furnished. (Dictated to the stenographer, transcribed and typed by her, corrected and then pronounced by me in the open court on this the 31st day of January 2022) (H.R.Radha) LXXXIV Addl. City Civil and Sessions Judge, (CCH-85 Commercial Court) Bengaluru