Bangalore District Court
Karnataka State Electronics ... vs Emerge Learning Services Limited on 25 March, 2024
1
Com.AP.No.71/2023
KABC170013852023
IN THE COURT OF LXXXII ADDL. CITY CIVIL & SESSIONS
JUDGE, AT BENGALURU (CCH.83)
THIS THE 25th DAY OF MARCH 2024
PRESENT:
SUMANGALA S. BASAVANNOUR., B.COM, LL.M.,
LXXXII ADDL.CITY CIVIL & SESSIONS JUDGE,
BENGALURU.
Com.A.P.No.71/2023
BETWEEN:
M/s Karnataka State
Electronics Development
Corporation Limited,
represented by its Managing
Director, No. 29/1, Race
Course Road, Bangalore -
560 001.
PLAINTIFF
2
Com.AP.No.71/2023
(Represented by Sri.
Ajay Kumar - Advocates)
AND
Emerge Learning
Services Limited,
represented by its
Director Mr. R. Kannan,
No. 4-A, 4th Floor,
Kasturi Apartments, Dr.
Radhakrishna Salai, 6th
Street (JP Avenue),
Mylapore, Chennai - 600
004.
DEFENDANT
(Represented by Ms.
Sheetal Srikanth
Advocate)
Date of Institution of the 09.06.2023
suit
Nature of the suit (suit on
pronote, suit for Petition for setting aside
declaration & Possession, Arbitral Award
Suit for injunction etc.)
3
Com.AP.No.71/2023
Date on which judgment 25.03.2024
was pronounced
Total Duration Year/s Month/s Day/s
00 09 16
(SUMANGALA S. BASAVANNOR),
LXXXII Addl. City Civil & Sessions Judge,
Bengaluru.
JUDGMENT
This Petition is filed under Section 34 of the Arbitration & Conciliation Act, 1996 for setting aside the Award dated 24.01.2023 passed by the sole arbitrator in arbitration case No.177/2021.
2. The Brief facts leading to the case are as follows:-
The Petitioner undertakes varies works ranging from providing hardware and technical support to establish IT Parks all over the state. The Respondent entered into a memorandum of understanding with the petitioner vide MOU dated 07.08.2009 where under parties agreed to mutually co-operate 4 Com.AP.No.71/2023 and expand their business. Subsequently, they entered into an agreement dated 22.06.2012where under the Respondent agreed to supply, install and provide repaid services to 1/5 Government Secondary and Higher Secondary Schools in Arunachal Pradesh under ICT Project. It was agreed that the petitioner would pay a sum of Rs. 4,60,57,920/- as advance tot the Respondent that the balance amount of Rs. 51,09,681/-
would be released after the same was received from Department of School Education, Government of Arunachal Pradesh (the Department) who is the beneficiary. The Respondent issued a notice dated 10.08.2018 demanding the aforementioned outstanding payment which was replied by the Petitioner denying the liability on two counts. Thereafter, the respondent invoked the arbitration clause under its legal notice dated 26.01.2019 for non-payment of the amount with interest. The respondent filed CMP No. 136/2019 before the Hon'ble High Court of Karnataka for appointment of Sole Arbitrator. The Hon'ble High court vide its order dated 05.10.2020 was pleased to appoint Sri, V.N. Ravindra, Retired District Judge as the sole arbitrator.
Upon constitution of the tribunal, the respondent filed its claim petition on 04.08.2021 and petitioner entered appearance and filed its detailed statement of defence denying the case of 5 Com.AP.No.71/2023 the respondent. The learned sole arbitrator after considering the pleadings and material placed on record by the parties, proceeded to pass the award dated 24.01.2023 allowing the claim raised by the respondent and directed the petitioner herein to pay a sum of Rs. 51,09,681/- with pendente-lite and future interest at 8% per annum.
Being Aggrieved by the Plaintiff has challenged the same on the following grounds:-
GROUNDS
1. The award passed by the learned sole arbitrator is arbitrary, capricious and opposed to settled principal law.
2. It is settled that though the arbitrator has wide discretion in passing award and allowing the claims, the same has to be exercised in the accordance with law. In the present case the award cannot be justified only on account of discretion of the arbitrator.
3. It is also well settled that arbitrator cannot award or grant relief which has not been specifically raised in the claim petition.6
Com.AP.No.71/2023
4. The learned arbitrator grossly erred in holding that after constitution of the tribunal, the petitioner herein ought to have challenged the appointment of the arbitrator, by invoking section 13(2) of the Arbitration and Conciliation Act within 15days and that the tribunal having been constituted vide order dated 05/10/2020 but the statement of defence under which the jurisdiction was challenged was filed on 07/10/2021 and as such the challenge was not incompliance with section 13(2).
5. It is submitted that section 13 is applicable only in cases were the procedure adopted for appointment of arbitrator is challenged. The tribunal erred in applying section 13 whereas the challenge laid by the petitioner herein was squarely covered under section 16 of Arbitration and Conciliation Act.
6. Clause 15 of the agreement dated 22.06.2012 reads as follows:
"In the event of any dispute or difference arising out of the agreement the same shall be referred to the sole arbitration of the Managing Director, Karnataka State Electronic Develop Corporation Ltd., Bangalore, who shall conduct the arbitration in accordance with the 7 Com.AP.No.71/2023 provisions of the Arbitration and Conciliation Act, 1996 and whose decision shall be final and binding on the both the parties".
After the amendment of section 12 such clause which provides for arbitration at the hands of the named arbitrator who was a present or past employee of either of the parties was disqualified to conduct arbitration.
In the present case the learned arbitrator failed to consider that the clause-15 was a single sentence/clause and the same could not be divided by splitting the sentence to conclude the arbitration could be conducted by any Independent arbitrator.
7. The learned arbitrator erred in holding that the Tribunal having been constituted by the order of the High Court, it gains the jurisdiction to try the dispute de- hors Section16 of the arbitration act and the term of the agreement.
8. Since clause-15 did not have any independent clause proving for arbitration as the mode for settlement for disputes, the clause providing for arbitration at the hands of the Managing Director of the petitioner herein did not survive In its entirety.
8Com.AP.No.71/2023
9. The Tribunal failed to consider that the cause of action for seeking damages owing to alleged breach of agreement arose and lapsed much prior to filing of the claim petition and the respondent claim did not offer any explanation in its pleading to explain the delay.
10. The respondent who had claimed payment under its Invoice dated 30.03.2013 in its notices, while filing its claim petition had abandoned the said claim and sought only for damages. Hence the claim for the damages alone was before arbitrator and not for payment under invoice.
11. The Tribunal failed to take into consideration the settled proposition of law that, for any claim which was not part of the notice Invoking arbitration clause, the relevant date for limitation would be the date such claim was introduced. In the present case, though respondent claimed for payment under Invoice, in the notice. However, in the claim petition filed on 07.01.2021 the claim for damages was raised. Hence the period of limitation applicable to claim for payment under Invoice cannot be equated with that of a claim for damages.
9Com.AP.No.71/2023
12. The awarding claims which are clearly bought by time amounts to patent illegality on the face of the award.
13. The tribunal failed to consider that though a claim for payment under Invoice may have continuous cause of action more so, where the other party maintains it in its book of accounts, however cause of action for damages accrues once and that cannot be de-die-in- diem.
14. The tribunal failed to consider that the respondent was Itself guilty of inaction from 2014 till 2018, when it first sent notice. Yet by filing the claim petition the respondent was trying to take advantage of its own mistakes. The award has now resulted in the respondent being rewarded for its own Inaction, at the cost of the petitioner herein.
15. The tribunal has essentially applied different yardsticks to measure the inaction of the parties and hence the same is in violation of the public policy of India.
16. Even on the merits, the learned Tribunal failed to consider without proving breach of agreement on part of 10 Com.AP.No.71/2023 the petitioner, no relief could have be sought against it.
17. The tribunal failed to consider that even on assumption of breach of agreement, damages could not have been awarded without any evidence of loss or damages having suffered on part respondent/claimant.
18. The Tribunal failed to consider that the petitioner herein would become liable for making payment of Rs. 51,09,681/- only after the balance amount was received from the client in Arunachal Pradesh. The Tribunal having concluded that the petitioner herein was yet to receive the balance amount, could not have directed the Petitioner to release the same in the form of damages.
19. It is submitted that the award of interest at the rate of Interest 8% per annum on the mount is exorbitant and unreasonable.
20. Viewed from any angle the award passed by sole arbitrator suffers from patent illegality which is apparent on the face of record which cannot be termed has a mere error in application of law and hence the award is liable is set-aside.
11Com.AP.No.71/2023 The award was published on 24.01.2023 which was informed by email dated 25.01.2023 by the Arbitration Centre. The Arbitration Centre then directed both parties to deposit Rs 3000/- towards additional sitting fees and the same was paid on 13.02.2023and the same on the same day, the award was served on the petitioner herein. It is submitted that after receiving of the award, the petitioner sought for opinion from the legal section, accounts department and administrative department. However, before decision could be taken, State Election Commission notified elections for the State Assembly. Hence no decision could be taken immediately. After completion of the elections, once again opinion was sought and after considering the opinion, it was decided to challenge the arbitration award 24.01.2023 and the same was handed over to the learned counsel to prepare and file the above petition as such petition could not be filed within 90 days from the date of receipt the award. However, the petition now filed is within the period of 120 days from the date of receipt of award, hence there is no delay in filing the suit.
12Com.AP.No.71/2023
3. The Respondent filed objection by stating that the learned arbitrator was appointed vide order dated 05.10.2020 in CMP NO. 136/2019, which was filed by the respondent for appointment of the arbitrator. A plea challenging the jurisdiction of the arbitrator should have been filed as a separate application by the Petitioner under Section 16 of the Act based on which suitable orders will be passed. However, the petitioner failed to file any such application. The petitioner also failed to avail remedy under Section 13 of the Act by challenging the procedure of appointment of the arbitrator. The averments in the grounds that there is no independent clause for arbitration as the original clause for unilateral appointment became void is untenable. The learned arbitrator has dealt with the said issue in detail and also accepted the view of this respondent. The Hon'ble Supreme Court in TRF Limited vs. Energo Engineering Project also affirmed the said view in a similar issue and the same was followed by the Hon'ble High Court of Karnataka in VKA Constructions vs. Chairman and Managing Director Hindustan Aeronautics Limited. Therefore, it is clear that the present stand of the petitioner is without any legs to stand and should consequently fail. The arbitrator has considered all these questions in great detail and has passed an award that is neither patently 13 Com.AP.No.71/2023 illegal nor contrary to the fundamental policy of India. It is pertinent to states that accounts book maintained by the Petitioner herein reflects the closing balance till the date of filing the claim petition. Therefore, taking into account all the above factual aspects it is clear that the claim is not barred by time. The ground 36 of the petition is incorrect. The petitioner failed to take any steps to recover the due amount from their client and the same has been confirmed by the learned arbitrator. The learned arbitrator passed an award in favour of the respondent and they are entitled to interest at the rate of 8% per annum after proper appreciation of the evidence. The averments with respect of patent illegality are vague. The learned arbitrator based on law and facts before him has arrived at a logical conclusion which any reasonable person would. Therefore, mere using of the word patent illegality in the averments by itself would not attract patent illegality and it is duty of the petitioner to explain how it is patently illegal. Hence, he prayed to dismiss the petition.
4. Heard arguments and perused the records. The Advocate for the Respondent has relied upon a following decision:
14Com.AP.No.71/2023 a. ( 2010) 12 SCC 210, State of Himachal Pradesh and another vs. Himachal Techno Engineers and Another.
b. (2019) 8 Kant LJ 865, VKA Constructions vs. Chairman and Managing Director, Hindustan Aeronautics Limited.
c. 2017 (8) SCC 377, TRF Limited vs. Energo Engineering Projects Limited.
d. (2021) 6 SCC 366, Asset Reconstruction Company vs. Bishal Jaiswal.
e. (1974) 1 SCC 242, Nagindas Ramdas vs. Dalpatram Ichharam @ Brijran and others.
5. Based on the above contentions of both parties, and the arguments of both Advocates, following Points arise for my consideration:-
1. Whether there are grounds to set aside the Impugned Award under Section 34 of the Arbitration & Conciliation Act?
2. What Order?
6. My findings on the above points are as follows:-
Point No.1:- In the Negative.
Point No.2:- As per the final Order for the following reasons.15
Com.AP.No.71/2023 REASONS
7. Point No.1: - The settled position in law that in proceedings under Section 34 of the Act, the Court does not sit in appeal over the Award. Thus, an Arbitral Award passed by an Arbitrator shall not be interfered with lightly. The Court can neither sit in appeal nor reassess or re-appreciate the evidence and the Arbitral Award can only be interfered with grounds stipulated in Section 34(2) of the Act.
8. It is settled position in law that an Award could be set aside if it is contrary to:-
(a) fundamental policy of Indian law; or
(b) the interest of India ; or
(c) justice or morality ; or
(d) in addition, if it is patently illegal.
9. The illegality must go to the root of the matter and if the illegality is of trivial nature, it cannot be held that the award is against the public policy. Award could also be set aside, if it is so unfair and unreasonable that it shocks the conscience of the Court. Such an award is opposed to public policy and is required to be adjudged void.
16Com.AP.No.71/2023
10. The Hon'ble Supreme Court in the landmark judgment reported in 2015(3) - S.C.C. - 49 (Associate Builders vs. Delhi Development Authority), (which is relied on by the Advocate for the Defendant) while setting aside the judgment passed by the Division Bench of Hon'ble High Court of Delhi culled out the legal principles after traversing the judicial pronouncements passed by the various High Courts and the Hon'ble Apex Court. In the said case, it is held that it is important to note that the 1996 Act was enacted to replace the Arbitration Act, 1940 in order to provide for an Arbitral procedure which is fair, efficient and capable of meeting the needs of Arbitration and also to provide that the tribunal gives reasons for an Arbitral Award; to ensure that the Arbitral Tribunal remains within the limits of its jurisdiction and to minimize the supervisory role of Courts in the Arbitral process.
11. In the said decision, the Hon'ble Apex Court observed that it must be clearly understood that when a Court is applying the "Public Policy" test to an Arbitration Award, it does not act, as a Court of appeal and consequently errors of fact cannot be corrected. A possible view by the Arbitrator on facts has necessarily to pass muster, as the Arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon 17 Com.AP.No.71/2023 when he delivers his Arbitral Award. Thus, an Arbitral Award based on little evidence or no evidence which does not measure up in quality to a train legal mind would not be held to be invalid on this count.
12. Before going to the merits of this case it is proper to consider whether this petition is filed within limitation.
13. The Petitioner has stated that the award was published on 24.01.2023 which was informed by email dated 25.01.2023 by the Arbitration Centre. The arbitration Centre then directed both parties to deposit Rs. 3000/- towards additional sitting fees and the same was paid on 13.02.2023 and the same on the same day, the award was served on the petitioner herein. After receiving of the award, the petitioner sought for opinion from legal section accounts department and administrative department. However, before decision could be taken, state election commission notified elections for the state assembly. Hence no decision could be taken immediately. After completion of the elections, once again opinion was sought and after considering the opinion, it was decided to challenge the arbitration award24.01.2023 and the same was handed over to the learned counsel to prepare and file the above petition as such petition could not be filed within 90 days from the date of receipt the award. However, the petition now filed is within the 18 Com.AP.No.71/2023 period of 120 days from the date of receipt of award, hence there is no delay in filing the above petition.
14. Perused the records it reveals that this petition is filed on 09.06.2023.
15. Section 34 (3) of Arbitration and Conciliation Act, reads as under "an application for setting aside an award may be made within three months of the receipt of the arbitral award."
16. Admittedly, the arbitral award was received by the Petitioner on 13.02.2023, the date of award being 24.01.2023. The period of 3 months came to an end on 13.05.2023 and the additional period of 30 days lapsed on 12.06.2023, as such the above petition filed on 09.06.2023 is within the time limit prescribed under Section 34 of the Arbitration and Conciliation Act. The Petitioner had genuine reasons for being unable to file the petition within 90 days and is able to show sufficient cause for filing the petition within the additional time period provided under Section 34 (3) of the arbitration and conciliation Act. Hence, the petition needs to be disposed on its merits. Hence, the petition is filed within a limitation.
19Com.AP.No.71/2023
17. The Petitioner has challenged this award on the ground that, in the present case the learned arbitrator failed to consider that the clause-15 was a single sentence/clause and the same could not be divided by splitting the sentence to conclude the arbitration could be conducted by any Independent arbitrator. The learned arbitrator erred in holding that the tribunal having been constituted by the order of the High court, it gains the jurisdiction to try the dispute de-hors section 16 of the arbitration act and the term of the agreement. Since clause-15 did not have any independent clause proving for arbitration as the mode for settlement for disputes, the clause providing for arbitration at the hands of the Managing Director of the Petitioner herein did not survive in its entirety.
18. The learned counsel argued that the arbitrator has committed serious error in relaying upon Section 12 of the Arbitration and Conciliation Act instead of Section-16. The petitioner all the while from its reply to arbitration notice has maintained that the dispute cannot be referred for arbitration, since the arbitration clause under agreement dated 22.06.2012 had lapsed an account of amendment to Section 12 of the Arbitration and Conciliation Act. The clause-15 of the Agreement dated 22.06.2013 reads as under:
20Com.AP.No.71/2023 "15- 'In the event of any dispute or difference arising out of the agreement the same shall be referred to the sole arbitration of the Managing Director, Karnataka State Electronic Develop Corporation Limited, Bengaluru who shall conduct the arbitration in accordance with the provisions of the arbitration and conciliation act, 1996 and whose decision shall be final and binding on the both the parties."
19. Section 12 (5) of Arbitration and Conciliation Act reads as under:
Section 12 (5) of the Act stipulates that "Notwithstanding any prior agreement to the contrary, any person whose relationship, with the parties or counsel or the subject-matter of the dispute, falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator;
20. In this regard the learned counsel of the Petitioner has relied upon a decision reported in TRF Limited vs. Energo Engineering Projects Limited - 2017 (8) SCC 377 full bench of the Hon'ble Supreme Court wherein held that "in view of the amendment to Section 12, in cases were the arbitration clause provides for one of the employees of one of the parties to the agreement, the arbitration clause alone might survive and the doctrine of severability could be applied where the arbitration clause is independent and the arbitration clause might survive. In the present case, the clause 15 is a single sentence which provided for adjudication of disputes at the hands of Managing Director of the petitioner. The 21 Com.AP.No.71/2023 procedure to be adopted by the Managing Director was to be in accordance with the arbitration and Conciliation Act. The clause cannot be severed to inform that the arbitration clause alone might survive.
21. In this sense, the judgment in Perkins was a logical extension of the approach taken by the Supreme Court in Voestalpine Schienen GMBH v. Delhi Metro Rail Corporation Ltd. ('Voestalpine'), wherein it stipulated the requirement for the existence of a broad-based panel of prospective arbitrators to obviate the possibility of bias, and of the approach in TRF Ltd. v. Energo Engineering Projects Ltd. ('TRF') wherein the Supreme Court held that a person who himself is ineligible under the provisions of the Amendment Act to be appointed as an arbitrator, cannot himself/herself nominate a sole arbitrator. The judgment in Perkins is, however, significant and breaks new ground because it is the most explicit recognition yet of a power imbalance in the methodology of appointment of an arbitrator being by itself an express indicator of a possibility of latent bias and the corresponding obligation of the Court to interfere in such a scenario, even if it means giving a go-by to the general principle of party autonomy.
22Com.AP.No.71/2023
22. Ex.P.18, the order Hon'ble High Court of Karnataka in CMP NO. 136/2019 it reveals that this petition was filed under Section 11 (5) of Arbitration and Conciliation Act, for appointment of sole arbitrator by the Respondent. IT also reveals that the Hon'ble High court in para NO. 7 and 8 held that "Both the learned counsel have fairly agreed to the appointment of Sri. V.N. Ravindra, retired District Judge to act as an arbitrator to resolve the dispute between the parties under the provisions of the arbitration and conciliation act 1996, as per the rules governing the arbitration centre at Bengaluru.
Accordingly, this petition under section 11 of the Act, 1996 is disposed of by the appointing Sr. V.N. Ravindra, retired District Judge to enter into the said reference of arbitration and act an arbitrator in the present case in arbitration centre, Bengaluru, a per the rules governing in the said arbitration centre.
23. So, it is clear from the order of Hon'ble High court of Karnataka that the sole arbitrator is appointed with a consent of both counsel of the Petitioner and Respondent. Under these circumstances the contention raised by the Petitioner regarding the appointment of arbitrator is unilateral and in view of amendment to Section 12 to appointment of sole arbitrator is against the 7th schedule and is in eligible for appointment as 23 Com.AP.No.71/2023 arbitrator not accepted. As above discussed the sole arbitrator is appointed with a consent of both advocate in CMP proceedings. So, the Petitioner is estopped from challenging the appointment of arbitrator at this stage. On this ground the award cannot be set aside.
24. The Petitioner has challenged this award on the ground that the respondent who had claimed payment under its invoice dated 30.03.2023 in its notices, while filing its claim petition had abandoned the said claim and sought only for damages. Hence the claim for the damages alone was before arbitrator and not for payment under invoices.
25. The learned counsel for the petitioner argued that the tribunal failed to take into consideration the settled proposition of law that, for any claim which was not part of the notice invoking arbitration clause, the relevant date for limitation would be the date such claim was introduced. In the present case, though respondent claimed for payment under invoice, in the notice. However, in the claim petition filed on 07.01.2021 the claim for damages was raised. Hence the period of limitation applicable to claim for payment under invoice cannot be equated with that of a claim for damages.
24Com.AP.No.71/2023
26. The learned arbitrator in the award, para. 42, held that it can seen that as argued by Sri. Swaroop for claimant, the invoices with Ex.P.8 the letter along with signoff documents were sent to Respondent on 30.03.2013. The claimant waited till 30.03.2016, because during that time even if claimant had approached the Respondent it was of no use in view of the said clause 10 of the agreement. Claimants cause of action did not arise till expiry of the said 3 years period. Cause of Action for the claimant arose from 30.03.2016 till 30.03.2019. The claimant had invoked arbitration clause under Section 21 and issued legal notice to respondent on 26.01.2019 and thereafter filed CMP before Hon'ble High Court, for appointment of Arbitrator on 26.04.2019 and thereafter filed the claim petition on 04.08.2021 and hence the claim petition is in time.
27. The learned arbitrator relied upon a decision reported in (2021) 6 SCC PAge 366, relied by Sri. Swaroop for claimant, in the case of Asset Reconstruction Company Limited vs. Bishal Jaiswal and Another at page 386, Para 17, inter-alia it is observed thus:
" thus in Mahabir Cold Storae vs. CIT this court held (SCC p.409 para 12 (1991 Supp (1) SCC 402), the entries in the books of accounts of the appellant would amount to an acknowledgment of the liability to M/s Prayagchand Hanumannamal within the meaning of Section 18 of the limitation act 1963 and extend the 25 Com.AP.No.71/2023 period of limitation for the discharge of the liability as debt".
28. The learned arbitrator held that it is settled position of law that court or tribunal has to consider the substance of the claim petition and not the terminology of the relief/claim preferred by the claimant. In the body of the claim petition, in para 11 of the claim petition it is stated that balance outstanding as on 31.03.2013 stood at Rs. 51,09,681/-. In para 14 of the claim petition it is stated that the respondent confirmed the balance of Rs. 60,29,681/-. At para 16 it is stated that the claimant had sent notice demanding payment of outstanding amount. At para 17 also claimant averred that the respondent had agreed to release the balance payment of Rs. 51,09,681/- on receipt of the same from Department of School Education, Arunachala Pradesh. At para 19 it is stated that the claimant had requested the Respondent to authorize the employee of claimant company to approach directorate of School Education Arunachala Pradesh for recovery of balance amount. That being so, it is crystal clear that the claim made by the claimant is only to recover the balance outstanding amount and not for loss. Claimant being in the position of an unpaid seller can sue for balance amount of or loss. Mere fact that he sought for payment of Rs. 51,09,681/- for the loss on account of 26 Com.AP.No.71/2023 Respondent's failure and breach of contract is not a ground to hold that the claim for loss is only an attempt by claimant to save limitation because as stated above in the body of the claim petition the claimant has referred to the claim as balance amount. Therefore, i hold that the claim preferred by claimant is essentially a claim for balance amount.
29. Hon'ble High court of Delhi in OMP (Comm.311/2021 MBL Infrastructure vs. Delhi Metro Rail Corporation, wherein the Hon'ble Supreme Court held that:
The learned Tribunal should have transgressed the boundary of Contract and granted the relief to the petitioner which it is rightly entitled to and have accordingly, have also placed material on record to support their claims.
30. The Arbitrator is absolutely reasonable and does not suggest any error apparent on the face of the record. Legitimate inferences and assumptions have to be drawn. No legal misconduct can be said to have been committed by the Arbitrator while granting this claim.
31. The petitioner also challenged this award on the ground that award of interest at the rate of interest 8% per annum on the mount is exorbitant and unreasonable.
27Com.AP.No.71/2023
32. The learned arbitrator in page 34 of the award stated that in view of the explanation provided to Section 31 (7) of the arbitration and Conciliation Act 1996, and having regard to the nature of the transaction and prevalent rate of interest in Nationalized Banks, on fixed deposits, i am of the considered opinion that the rate of interest claimed at 18% is too high and i am of the opinion that it is just and reasonable to award pendent-lite interest at 8% per annum from the date of filing the claim petition till the next date of award and future interest at 8% per annum from the date of award till the date of realization.
33. In Murugan Securities and Credits Private Limited vs. Video corn Industries Limited 202 Live Law SC 728, wherein the Hon'ble Supreme Court held that:
The Supreme Court held that an arbitrator has the discretion to award post-award interest on a part of the 'sum'- The arbitrator has the discretion to determine the rate of reasonable interest, the sum on which the interest is to be paid, that is whether on the whole or any part of the principal amount, and the period for which payment of interest is to be made - whether it should be for the whole or any part of the period between the date on which the cause of action arose and date of the award - The arbitrator must exercise to discretionary power to grant post award interest 28 Com.AP.No.71/2023 reasonably and good faith, taking into account all relevant circumstances- the purpose of granting post award is to ensure that the award debtor does not delay the payment of award.
34. The jurisdiction of the Arbitrator to award interest on the claim amount as well as the pendente lite interest is not disputed. It need hardly be said that the grant of interest at particular rate is the discretion of the Arbitrator and the Arbitrator has power to award interest at particular rate and also interest pendente lite. In the case of M/s. Krishan Kumar Madhok v. Union of India, it has been held that "an Arbitrator has power to award interest pendente lite. Though Section 34 does not in terms apply, the Arbitrator has the same power as the Court has." The grant of interest @ 8% as regards can not be said to be an error, apparent on the face of the record or a legal misconduct by the Arbitrator in view of the settled legal position in respect of interest pendente lite and rate of interest being the discretion with the Arbitrator.
35. As above discussed, in view of the citation it is clear that the learned arbitrator by considered the claim petition has granted the relief and arbitrator has a discretionary to grant the relief in view of the above judgment. Hence, i do not find any illegality in the award passed by the learned arbitrator and award cannot be set aside on this ground.
29Com.AP.No.71/2023
36. The petitioner challenged the award on the ground that the arbitrator has failed to apply the law pertaining to limitation. The claim for loss an account of alleged breach of contract by the petitioner herein. Hence, the claim had to be assessed under Article-55 of Limitation Act. Therefore, the arbitrator was excepted to asses the validity of the claim qua article-55 of the limitation Act. As per par 22 of the claim statement the right to suit accrued on 30.03.2016 when the time period for recovering the amounts from Directorate of School Education at Arunchal Pradesh by the petitioner lapsed. Hence, even on that count the notice invoking arbitration clause for a claim of loss or damages an account of alleged breach ought to have been raised by 30.03.2019. The notice invoking arbitration dated 26.01.2019 did not pertain any claim for loss or damages an account of any alleged breach. In this regard the petitioner has relied upon a decision in 2012 (12) SCC 581, State of Goa vs. Praveen Enterprises the Hon'ble Supreme Court wherein held that"
"19) There can be claims by a claimant even without a notice seeking reference. Let us take an example where a notice is issued by a claimant raising disputes regarding claims A and B and seeking reference thereof to arbitration. On appointment of the arbitrator, the claimant files a claim statement in regard to the said claims a and B. Subsequently if the claimant amends the claim statement by adding claim C [which is permitted under Section 23(3) of the Act] the additional 30 Com.AP.No.71/2023 claim C would not be preceded by a notice seeking arbitration. The date of amendment by which claim c was introduced, will become the relevant date for determining the limitation in regard to the said claim C, whereas the date on which the notice seeking arbitration was served on the other party, will be the relevant date for deciding the limitation in regard to claims A and B. BE that as it may".
37. The learned counsel for the respondent argued that the work order was completed and invoices was raised on 30.03.2013. The Government of Arunachal Pradesh also confirmed the same vide Ex.P.9. The petitioner had 3 years' time under the limitation Act, 1965 from 30.03.2013 to take any steps to recover the monies from the Government of Arunachal Pradesh. As correctly found by the arbitrator, the petitioner failed to take any steps to recover the sums from the Government of Arunachal Pradesh whatsoever within this three years period. Under clause 10 of the agreement, the respondent is not entitled to any monies from the Petitioner until the petitioner receives money from the Government of Arunachal Pradesh.
38. The learned arbitrator correctly concluded in the award that in para No 42 of the award that further it can be seen that as argued by Sri. Swaroop for claimant, the invoices with Ex.P.8 31 Com.AP.No.71/2023 the letter along with signoff documents were sent to Respondent on 30.03.2013. The claimant waited till 30.03.2016, because during that time even if claimant had approached the respondent it was of no use in view of the said clause 10 of the agreement. Claimant's cause of action did not arise till expiry of the said 3 years period. cause of action for the claimant arose from 30.03.2016 till 30.03.2019. The claimant had invoked arbitration clause under Section 21 and issued legal notice to Respondent on 26.01.2019 and thereafter filed CMP before the Hon'ble High Court, for appointment of arbitrator on 26.04.2019 and thereafter filed the claim petition on 04.08.2021 and hence the claim petition is in time. Hence, the above findings does not suffer from infirmity so as to hold the award suggesting any error apparent on the face of the record.
39. It is well established that under no circumstance can any court interfere with an arbitral award on the ground that justice has not been done, for that would be entering into the merits of the dispute, which is not permissible under Sec.34 of the Act. Having regard to the same and in view of the forgoing discussion, the the point for consideration is answered in the negative holding that the claimant has failed to make out grounds U/s 34 of the Act for setting aside the impugned award as prayed.
32Com.AP.No.71/2023
40. In the instant case, the award rendered by the Arbitrator, following the above principles laid down, can not be said to suffer from any infirmity so as to hold the award suggesting any error apparent on the face of the record. The Arbitrator, looking to the arbitration record and proceedings, can not be said to have commit- ted any legal misconduct in granting the claims, as suggested in the award, as afore-stated. In my opinion, the award rendered by the learned Arbitrator, does not call for any interference and the same deserves to be made rule of the Court and decree in favour of the petitioner. Therefore, I answer this Point in the "Negative".
41. Point No. 2 :- Therefore, I proceed to pass the following Order.
ORDER The Petitions filed under Section 34 of the Arbitration and Conciliation Act, 1996, is Dismissed.
33Com.AP.No.71/2023 The Office is directed to send copy of this judgment to both parties to their email ID as required under Order XX Rule 1 of the Civil Procedure Code as amended under Section 16 of the Commercial Courts Act.
( Dictated to the Stenographer, typed by her directly on computer, verified and then pronounced by me in open Court on this the 25th day of March, 2024).
(SUMANGALA S. BASAVANNOR), LXXXII Addl. City Civil & Sessions Judge, Bengaluru.