Bangalore District Court
M/S.Gowri Infra Engineers Pvt. Ltd vs M/S P.G.Setty Construction Technology on 20 May, 2020
1
Com.AS.37/2017
IN THE COURT OF LXXXII ADDL. CITY CIVIL & SESSIONS
JUDGE, BANGALORE CITY. (CCH.NO.83)
Dated: This the 20th day of May 2020.
PRESENT : Sri. Jagadeeswara.M., B.Com, LL.B.,
LXXXII Addl.City Civil & Sessions Judge, Bangalore.
Com.AS No.37/2017
Petitioner M/s.Gowri Infra Engineers Pvt. Ltd.,
A Company incorporated under the Companies
Act, having its office at No.85, 8th cross, Widia
Layout,Chandra Layout, Bangalore -560 040,
represented by its Manaing Director
Sri.C.P.Umesha.
(By Smt.Rashmi Patel - Advocate)
- Versus -
Respondents M/s P.G.Setty Construction Technology
Pvt.Ltd., A Company incorporated under the
Companies Act having its office at No.74,
Sandesh Arcade, 3rd floor, Saukar Chennaiah
Road, 17th main road, Kuvempunagar main,
Saraswathipuram, Mysore -570 009.
( by Sri. T.Seshagiri Rao- Advocate)
JUDGMENT
This is the petition filed under Sec.34 of the Arbitration & Conciliation Act, 1996 requesting to set aside the Arbitration Award dated 18.1.2017 passed by the Sole Arbitrator Hon'ble Justice Shri.V.Jagannathan (Retd.) in A.C.No.15/2015.
2Com.AS.37/2017
2. Petitioner herein by name M/s Gowri Infra Engineers Pvt.Ltd., was respondent and respondent herein by name M/S. P.G.Setty Construction Technology Pvt.Ltd., was claimant in the Arbitral proceedings.
3. Petitioner herein would be referred to as M/s Gowri and respondent herein would be referred as M/s P.G.Setty hereinafterwards in this judgment.
4. Brief facts of the case are as under:
Three Companies by name M/s Gowri Infra Engineer Pvt.Ltd., (Petitioner herein), M/s P.G.Setty Construction Technology Pvt.Ltd. (respondent herein) and SPML Infra Ltd., had entered into Memorandum of Understanding dated 16.12.2011 with the object of associating together to bid for the tender work of construction of affordable housing scheme to be constructed at Alur village in Dasanapura Hobli, Nelamangala Taluk, Bangalore North. M/s Gowri participated in the said tender and the work was allotted to the consortium. M/s Gowri also submitted its own tender for the work of construction of affordable housing scheme at Halagevaderahalli village, Kengeri Hobli, Bangalore. BDA awarded this work to M/s Gowri vide tender notification No.BDA/EM/T-48/2011-12 dated 21.5.2011. After these two construction works were allotted, the consortium decided to entrust the consultancy works of Alur project to M/s P.G.Setty. In the same way, M/s Gowri decided to appoint M/s P.G.Setty 3 Com.AS.37/2017 for consultancy of its Halagevaderahalli works. Accordingly, agreement dated 5.3.2013 was entered into between M/s Gowri and M/s P.G.Setty. As per this agreement, M/s P.G.Setty was required to provide consultancy services for both project works for which M/s Gowri had agreed to pay 2.5% of the contractual value of the works towards the technology and consultancy services to be provided by M/s P.G.Setty. After completion of those projects, as claimed by M/s P.G.Setty, it submitted final bill on 24.1.2014 for a sum of Rs.3,21,76,694/-. Since this amount was not paid by M/s Gowri, it issued notice dated 1.10.2014 demanding payment of the said amount. Since M/s Gowri did not pay said amount, M/s P.G.Setty issued notice dated 24.4.2015 invoking the Arbitration Clause of the Agreement and then it filed petition under Sec.11(5) of the Arbitration & Conciliation Act 1996 before Hon'ble High Court of Karnataka for appointment of Arbitrator in CMP No.97/2015 and accordingly Sole Arbitrator i.e., Hon'ble Justice Shri V.Jagannathan (Retd.) was appointed and Arbitral proceedings in A.C.No.108/2015 were commenced and subsequently Award was passed on 18.1.2017 directing M/s Gowri to pay Rs.3,10,81,847/- to M/s P.G.Setty with interest at 12% per annum from 24.1.2014 till realisation. Aggrieved by the same, M/s Gowri, who was respondent in the Arbitral proceedings, has filed this petition under Sec.34 (2) of the Act 1996 requesting to set aside the Arbitral Award passed in AC No.15/2015.4
Com.AS.37/2017
5. Now, grounds urged in this petition may be summarized as under:
a) The impugned Award is perse illegal, perverse, without jurisdiction and hence is liable to be set aside. The learned Arbitrator has exceeded the jurisdiction and traversed outside the scope of dispute, pleadings, evidence, both oral and documentary and has passed the Award which is wholly illegal and hence, is liable to be set aside.
b) The learned Arbitrator failed to appreciate the various terms and conditions agreed upon under the agreement between the parties.
c) Perusal of scope of work clearly shows that various scopes of work had to be carried out by M/s P.G.Setty which are integral part of execution of the project and if any one of the scope of work entrusted is also not carried out, then the project could not be completed. The learned Arbitrator has lost sight of said aspect of the matter.
d) The learned Arbitrator though disallowed certain payments, mus have appreciated that execution of all the scopes of work was an integral part of contract and even if one of the scope of work is not executed by the defendant, it would not be entitled to any payment.
e) M/s P.G.Setty has indirectly admitted that it has not deployed any engineers to supervise the project as undertaken in the scope of work. The learned Arbitrator having appreciated this fact, has awarded payment which is arbitrary and liable to be set aside.
f) The learned Arbitrator has failed to appreciate that the consultancy contract agreed upon between the parties obligated M/s P.G.Setty to carry out 5 Com.AS.37/2017 various duties. The obligation was not only to provide designs, but also to participate in the entire execution of the project till the completion. Learned Arbitrator has failed to appreciate that under Clause-3.15 of the agreement, M/s P.G.Setty had agreed to appoint one Surveyor for total station for marking and providing levels required for all construction activities of the project at all stages.
g) The learned Arbitrator failed to appreciate that payment of Rs.14,70,771.56 had to be released by the petitioner herein proportionate to the financial progress. M/s P.G.Setty has clearly admitted that the payment is related to financial progress in the cross-examination. If the learned Arbitrator had only appreciated this aspect of the matter, the award would not have been passed in the manner done by the learned Arbitrator.
h) The Award of the learned Arbitrator is one rendered on assumptions and presumptions and hence, it is liable to be set aside.
i) As the learned Arbitrator has totally erred in awarding interest at the rate of 12% per annum which is against the settled principle of law, the Award is liable to be set aside.
By raising the above grounds, petitioner has requested to set aside the impugned Award.
6. From the above, the following points have arisen for my consideration:
1) Whether petitioner has made out grounds to set aside Arbitral Award passed in AC. No.108/2015 directing to pay Rs.3,10,81,847/- to claimant/M/s P.G.Setty?6
Com.AS.37/2017
2) Whether interest awarded in the Award at 12 % p.a. from the date of final bill from 24.1.2014 till realisation is opposed to law ?
3) What order ?
7. I have heard argument of both sides and I have carefully gone through the materials on record and reasoning in the Arbitral Award and also written argument submitted by both sides.
8. My findings on the said points are as under :
Point Nos.1 & 2 : Negative Point No.3 : As per final order for the following :
REASONS
9. Point No.1 : It is submission of learned advocate for M/s Gowri, who is petitioner herein, that M/s P.G.Setty who is respondent herein had to provide the technology, design, constructural design, drawings, guidance, supervision, training and implementation of the design for both the projects as per the agreement dated 05.03.2013. But it has failed to provide such services as observed in para No.36 of the Award. It has failed to appoint qualified Engineers for supervision and no training has been given on site as observed in Para No. 30 of the Award. Due to this reason, technology was provided by another agency by name Moore Living Indian Building Solutions of New Zealand as noted in Para No. 29 of the Award and this fact is undisputed one. Even claimant before the Arbitral Tribunal 7 Com.AS.37/2017 in his cross-examination while answering question Nos.24 & 81, has admitted that M/s P.G.Setty did not complete structural drawings and also external electrification. These admitted facts, which are clearly noted in the Arbitral Award, clearly shows that M/S.P.G.Setty did not fulfill many of its obligations under the Agreement. The nature of contract is that the modules are interlinked and not severable. But, Arbitrator has severed the contract into pieces and wrongly allowed payment of certain modules though contract as a whole was not completed. Further it is also submission of learned advocate for petitioner herein that the contract was signed on 05.03.2013 and in less than a month bill was raised for 50% completion of work on 30.4.2013 and then final bill for completion of work was raised on 24.1.2014 which was less than ten months. In answer to question No.41, it was statement of the claimant in the Arbitral Tribunal that only 32 houses out of 1520 houses, were completed. Accordingly it is submission of learned advocate for petitioner herein that though materials on record clearly prove that M/s. P.G.Setty failed to comply with the terms and conditions of the Agreement dated 5.3.2013, but the learned Arbitrator has illegally awarded Rs.3,10,81,847/- and this Award is patently illegal and against to the public policy of India since the Award is perverse and against to the materials on record. Accordingly, learned advocate for petitioner herein has requested to set aside the impugned Award.
10. On the other hand, it is submission of learned advocate for M/s.
8Com.AS.37/2017 P.G.Setty, who is respondent herein that as per the Agreement dated 05.03.2013, M/s P.G.Setty provided its service as disclosed in the oral evidence of the parties and also proved this fact from the records produced. Except part of the services, relating to the Moore Living New Zealand provided drawings, rest of the drawings, technical and other services in the project were provided by M/s. P.G.Setty. Learned Arbitrator has properly considered the materials on record such as oral and documentary evidence placed by the parties and the contention of respective parties and has rightly awarded Rs.3,10,81,847/- by reducing the claim made in the claim statement. Since this Award was made on the basis of appreciation of facts and materials on record, there is no scope for this court under Sec.34(2) of the Arbitration & Conciliation Act, 1996 to set aside this part of the Award by re-appreciating the materials on record by sitting in the appeal against the Award. Accordingly, it is submission of learned advocate for respondent herein that impugned Award directing payment of Rs.3,10,81,847/- is not patently illegal and it is not opposed to public policy and it is not perverse.
11. At this stage itself, it is relevant to note that Section 34(2) of the Arbitration & Conciliation Act 1996, relating to grounds to set aside Arbitral Award, reads as under:
" (2) An arbitral award may be set aside by the Court only if -
(a) the party making the application furnishes proof that -
(i) a party was under some incapacity; or 9 Com.AS.37/2017
(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 the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
provided that, if the decision on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the Court finds that -
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
(Explanation 1 - For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-
(i) the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81; or
(ii) it is in contravention with the fundamental policy of Indian law; or
(iii) it is conflict with the most basic notions of morality or justice.
Explanation 2 - For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.) (2-A) An arbitral award arising out of arbitrations other than 10 Com.AS.37/2017 international commercial arbitrations, may also be set aside by the court, if the court finds that the award is vitiated by patent illegality appearing on the face of the award;
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciation of evidence."
12. It is held by Hon'ble Apex Court in (1989)1 SCC 411 (Puri Construction Private Limited Vs. Union of India) that the Court deciding objections against the award cannot examine correctness of the award on merits by re-appreciating evidence. When a court is called upon to decide the objections raised by a party against an Arbitration Award, the jurisdiction of the court is limited, as expressly indicated in the Arbitration Act, and it has no jurisdiction to sit in appeal and examine the correctness of the award on merits with reference to the materials produced before the Arbitrator. The court cannot sit in appeal over the views of the Arbitrator by re-examining and re-assessing the materials. Further, it is also held by Hon'ble Apex Court in (2015)5 SCC 698 (Navodaya Mass Entertainment Limited Vs. J.M Combines) that re-appraisal of material on record by the court and substituting its own view in place of arbitrator's view, not permissible in absence of perversity, merely because two views are possible. Once the Arbitrator has applied his mind to the matter before him, court cannot re-appraise said matter as if it were an appeal. Even if two views are possible, view taken by the Arbitrator would prevail.
13. Learned Counsel appearing for the respondent herein has placed 11 Com.AS.37/2017 citation reported in (2019) 9 SCC 798 ( State of Jharkhand & Ors. Vs. HSS Integrated SDN & Anr.), wherein it is held as under:
"6.1 In progressive-MVR after considering the catena of decisions of this Court on the scope and ambit of proceedings under Section 34 of the Arbitration Act, this Court has observed and held that even when the view taken by the Arbitrator is a plausible view, and/or when two views are possible, a particular view taken by the Arbitral Tribunal which is also reasonable should not be interfered with in a proceeding under Section 34 of the Arbitration Act.
6.2. In Datar Switchgear Ltd., this Court has observed and held that the Arbitral Tribunal is the master of evidence and the findings of fact which are arrived at by the Arbitrators on the basis of the evidence on record are not to be scrutinised as if the Court was sitting in appeal. In Para 51 of the judgment, it is observed and held as under : (SCC pp.169-70) "51. Categorical findings are arrived at by the Arbitral Tribunal to the effect that insofar as Respondent 2 is concerned, it was always ready and willing to perform its contractual obligations, but was prevented by the appellant from such performance. Another specific finding which is returned by the Arbitral Tribunal is that the appellant had not given the list of locations and, therefore , its submission that Respondent 2 had adequate lists of locations available but still failed to install the contract objects was not acceptable. In fact, on this count, the Arbitral Tribunal has commented upon the working of the appellant itself and expressed its dismay about lack of control by the Head Office of the appellant over the field offices which led to the failure of the contract. These are findings of facts which are arrived at by the Arbitral Tribunal after appreciating the evidence and documents on record. From these findings it stands established that there is fundamental breach on the part of the appellant in carrying out its obligations, with no fault of Respondent 2 which had invested whopping amount of Rs.163 crores in the project. A perusal of the award reveals that the Tribunal investigated the conduct of the entire 12 Com.AS.37/2017 transaction between the parties pertaining to the work order, including withholding of DTC locations, allegations and counter-allegations by the parties concerning installed objects. The Arbitrators did not focus on a particular breach qua particular number of object/class of objects. Respondent 2 is right in its submission that the fundamental breach, by its very nature, pervades the entire contract and once committed, the contract as a whole stands the entire contract and once committed, the contract as a whole stands abrogated. It is on the aforesaid basis that the Arbitral Tribunal has come to the conclusion that the termination of contract by Respondent 2 was in order and valid. The proposition of law that the Arbitral Tribunal is the master of evidence and the findings of fact which are arrived at by the Arbitrators on the basis of evidence on record are not to be scrutinised as if the Court was sitting in appeal now stands settled by a catena of judgments pronounced by this Court without any exception thereto."
7. As held by this Court in a catena of decisions, the award passed by the Arbitral Tribunal can be interfered with in the proceedings under Sections 34 and 37 of the Arbitration Act only in a case where the finding is perverse and/or contrary to the evidence and/or the same is against the public policy. (See Associate Builders v. DDA, etc)"
14. By keeping in the mind the above proposition of law of Hon'ble Apex Court and also the nature of the provision of Section 34(2) of the Arbitration & Conciliation Act 1996, it is necessary to go through the materials on record to find out as to whether petitioner has made out grounds as contemplated under said Section 34(2) of the Act to set aside the Arbitral Award.
15. At this stage itself, it is important to note that three companies 13 Com.AS.37/2017 M/s Gowri Infra Engineering Pvt. Ltd., (petitioner herein) M/s. P.G.Setty Construction Technology pvt. Ltd.,(respondent herein), and SPML Infra Ltd., had entered into a Memorandum of Understanding (MOU) dated 16.12.2011 with the object of associating together to bid for the tender work of construction of affordable housing scheme to be constructed for the weaker sections of the Society at Alur Village in Dasanapura Hobli, Nelamangala Taluk, Bangalore North. M/s Gowri participated in the said tender and this work was allotted to the Consortium. M/s Gowri also submitted its own tender for the work of construction of such affordable houses for economically weaker sections at Halagevaderahalli village, Kengeri Hobli, Bangalore. BDA awarded this work to M/s Gowri vide tender notification No. BDA/EM/P-48/2011-12 dated 21.5.2011. It is also admitted fact between the parties that after the above noted two construction works allotted, the Consortium decided to entrust the consultancy work of Alur project to M/s P.G.Setty. In the same way, M/s Gowri decided to appoint M/s P.G.Setty for consultancy with regard to its Halagevaderahalli village work. Accordingly Agreement dated 5.3.2013 was entered into between M/s Gowri and M/s P.G.Setty. As per this Agreement M/s P.G.Setty was required to provide the consultancy services for both the project works and M/s Gowri had agreed to pay 2.5% of the contract value of the works towards the technology and consultancy services to be provided by M/s P.G.Setty.14
Com.AS.37/2017
16. M/s P.G.Setty was claimant in the Arbitral Tribunal and it filed its claim statement for recovery of Rs.4,18,29,698/- from M/s Gowri on the ground that M/s Gowri made use of its technology and consultancy services provided to both the project works which were completed, but M/s Gowri did not pay the consultancy charges of Rs.3,21,76,694/-. Accordingly M/s P.G.Setty claimed recovery of this amount with interest at 18% per annum from 24.1.2014 on which date it submitted a consolidated bill for Rs.3,21,76,694/-. M/s Gowri, who was respondent in the Arbitral Tribunal, has filed its counter/objection with the stand that M/s P.G.Setty did not provide the services as required by the Agreement dated 5.3.2013. M/s P.G.Setty prepared Master plan only and no other plans and it has not performed the obligations of the Agreement and thereby violated the terms and conditions of the Agreement. Services of Alur project was provided by M/s Moore Living New Zealand since M/s P.G.Setty had executed sub-contract to said M/s Moore Living. Thus, M/s P.G.Setty has failed to provide the consultancy, technology services to the projects. Further, it failed to deploy the qualified Engineers to the work sites. Further it failed to provide drawings in time to Halagevaderahalli village project. Its claims are barred by limitation.
17. Based on the nature of claims made in the claim statement and also nature of the defence taken in the objection statement, learned Arbitrator has framed the following issues for consideration:15
Com.AS.37/2017
1. Whether it is proved by the Claimant that as per the agreement dated 05.03.2013 the Claimant has provided the entire consultancy and technological services towards the construction of Haligevaderahalli and Alur projects respectively ?
2. Whether the Claimant is entitled to a sum of Rs.3,21,76,694/- with interest 18% per annum from 24.01.2014 and also future interest at 18% per annum ?
3. Whether it is proved by the Respondent that the claim is barred by time ?
4. Whether it is prove by the Respondent that except preparing the master plan he Claimant has not performed any other obligations agreed upon in terms of the agreement dated 05.03.2013 ?
5. Whether it is proved by the Respondent that the Claimant never provided the consultancy and technology services as required by the agreement dated 05.03.2013 ?
6. Whether it is proved by the Respondent that it has engaged the service of Moore Living of New Zealand for providing consultancy and technology services for the Alur project?
18. Before the Arbitral Tribunal, authorised representative of the Claimant therein gave his oral evidence as PW.1 and marked records at Exs.P.1 to P.15. Similarly, authorized representative of respondent before the Arbitral Tribunal gave his oral evidence as RW.1 and marked records at Exs.R.1 to R.144. After hearing both sides and after going through the materials on record, Award was made directing M/s Gowri, who was respondent in the Arbitral proceedings to pay Rs.3,10,81,847/- to M/s P.G.Setty who was Claimant in the Arbitral proceedings, with interest at 16 Com.AS.37/2017 12% per annum from the date of final bill i.e., from 24.1.2014 till realisation of the amount.
19. Admitted Agreement dated 5.3.2013 which was entered into between the parties was produced and marked at Ex.P.5 in the Arbitral proceedings. Details of almost all the Clauses of this Agreement including its Annexures are noted/re-produced in page Nos.8 to 16 of the Award.
There is no need to reproduce those Clauses in this Judgment for the reasons that entire Agreement at Ex.P.5 dated 5.3.2013 and its Clauses, which are noted in page Nos.8 to 16 of the Award, are undisputed facts.
20. Learned Arbitrator has answered above noted Issue No.1 in the 'Affirmative' with regard to the Halagevaderahalli project to the extent of services rendered by M/s P.G.Setty keeping in view the admission made by PW.1 during the cross examination with regard to BOQ and appointment of qualified Engineer and further learned Arbitrator has recorded negative findings to Issue Nos.4 & 5 to the extent of the findings recorded to Issue No.1 and further learned Arbitrator recorded affirmative finding to Issue No.6 with regard to the Moore Living Company providing the structural design and technical services in respect of Alur project. The discussion relating to the materials placed on record was made and reasonings for recording such findings to the issues is given in the Award. I have carefully gone through the materials on record i.e., oral and documentary evidence placed by the parties and also contentions raised in the claim statement and 17 Com.AS.37/2017 counter filed by the respective parties in the Arbitral proceedings.
21. In the chief examination affidavit of PW.1 it is stated that M/s P.G.Setty has provided consultancy and technological services to Halagevaderahalli and Alur projects as per the terms of Agreement dated 5.3.2013 at Ex.P.5 and among those two projects, Halagevaderahalli project was completed in December 2013 and Alur project was completed in January 2014. In the said chief examination affidavit of PW.1, the details of the services provided by M/s P.G.Setty are shown. As per these details, M/s P.G.Setty provided the drawing relating to the Halagevaderahalli project with respect to items (i) Master Plan,
(ii)Architectural Design & Working Drawings, (iii)Structural Design & Working Drawings, (iv) Internal Service Design & Working Drawings, (v) External Services Design & Working Drawings, (vi)Design of farm work & its requirement, (vii)Quantity and Cost Estimate for submission to BDA & (viii) Training to Workmen for use of Farm work system). Further in the said affidavit it is stated relating to the Alur Project that the drawings relating to (i) Master Plan, (ii) Architectural Design & Working Drawings,
(iii) Internal Service Design & Working Drawings, (iv) External Services Design & Working Drawings, and (v)Quantity and Cost Estimate for submission to BDA. As rightly observed in para No.26 of the Award, there is no effective cross examination done to PW.1 relating to the above noted details furnished in page Nos.12 to 14 of the chief examination affidavit.
18Com.AS.37/2017 Even there is no suggestion put to PW.1 stating that M/s. P.G.Setty did not provide the drawings relating to Halagevaderahalli works as shown in the table at Page Nos.12 & 13 of the Chief examination affidavit.
22. Authorized representative of M/s Gowri gave his oral evidence as RW.1. It is evidence of RW.1 that drawings approved by the BDA were all submitted by M/s Gowri and those drawings are not the drawings supplied by M/s. P.G.Setty. But it is observed by the learned Arbitrator that this evidence of RW.1 cannot be accepted since evidence deposed by this RW.1 in his cross examination has disclosed that the drawings supplied by M/s. P.G.Setty were received by M/s Gowri and those drawings were approved by the BDA. It is also observed in para No.28 of the Award that it is answer of RW.1 to Qn.No.24 that drawings were received from the Claimant who was told to correct the drawings. Drawing at Exs.R.93 to R.143 were approved by the BDA. Drawings at Ex.R.97 and R.102 bear the code number 'PGS' which pertains to the claimant ( M/s. P.G.Setty). Further it is evidence of RW.1 that no document is produced in proof of payment made to outsourced agencies relating to preparation and supply of drawings. Based on this code in the drawings, it is observed by the learned Arbitrator that though drawings were approved by the BDA, those drawings contain the code of the Claimant ( M/s. P.G.Setty) and therefore, there is merit in the submission of learned counsel for the Claimant that the drawings supplied by the Claimant were used by the respondent (M/s 19 Com.AS.37/2017 Gowri). Further it is also observed in the Award that if all the drawings have been submitted by M/s Gowri to the BDA, there was no chance for the said drawings containing the code of M/s. P.G.Setty and therefore, the argument of learned advocate for claimant that respondent (M/s Gowri) had actually made use of the drawings of the Claimant ( M/s. P.G.Setty) which were sent in soft copy and then submitted the same to the BDA, has acceptable force.
23. Relating to the Alur project is concerned, it is relevant to note that as per the Annexure of the Agreement dated 5.3.2013 at Ex.P.5, M/s. P.G.Setty had to supply architectural design only for the building. Whereas relating to Halagevaderahalli project, M/s P.G.Setty was required to provide the architectural design and structural design drawings to M/s Gowri. The drawings supplied by the Moore Living Company, relates to the work that was given to the said Company. Accordingly, based on the proper appreciation of facts and materials on record, it has correctly observed in the Award that in respect of Halagevaderahalli project, M/s. P.G.Setty had supplied all the drawings including structural technology services, but in respect of Alur Project, Moore Living Company rendered services with regard to the structural and technolocy services.
24. In the cross examination of PW.1 it is his answer to Question No.99 that the amount of work done has to be ascertained from the physical progress on site. Further it is his anwer to Question No.83 that 20 Com.AS.37/2017 with regard to the BOQ he is not able to trace the documents before the Tribunal. Relating to the appointment of qualified Engineers, it is answer of PW.1 to question No.22 that he is not able to mention the name of qualified Engineer appointed and no documents are produced to show who are the qualified Engineers appointed by M/s. P.G.Setty with regard to the two projects. With regard to the drawings at Exs.P.13 & P.14 is concerned, it is answer of PW.1 to Question No.75 that soft copy of the drawings were delivered to M/s Gowri and last drawing was submitted on 3.3.2014. By appreciating the oral and documentary evidence of the parties, Learned Arbitrator has recorded the findings to these Issue Nos.1 and 4 to 6 as noted supra.
25. So far Issue No.3 is concerned, learned Arbitrator recorded finding that claim made by M/s. P.G.Setty is not barred by limitation since Agreement at Ex.P.5 is dated 5.3.2013 and M/s. P.G.Setty submitted its final bill on 24.1.2014 and order was passed on 21.7.2015 in CMP No.97/2015 by the Hon'ble High Court of Karnataka appointing the Arbitrator and therefore, the claim is not barred by limitation.
26. Relating to Issue No.2 is concerned, it is relevant to note that though M/s. P.G.Setty in its claim statement filed before the Arbitral Tribunal has claimed recovery of Rs.3,21,76,694/- with interest at 18% per annum. But, learned Arbitrator has considered the break-up of the cost of project and the corresponding payable for each of the services mentioned 21 Com.AS.37/2017 in Annexure at Ex.P.5, in the tabulation at Page Nos.24 & 25 of the Award as under:
HALAGEVADERAHALLI PROJECT - 23,53,23,450*2.5% = 58,83,086.175 % Amount Breakup (2.5% on Sl. No. Services of cost 23,53,23,450) of Halagevaderahalli project 1 Upon submission of Master plan 0.05 58,83,086.25*0.05%= 1,17,661.7 2 Upon submission of all architectural design of the 0.15 58,83,086.25*0.15%= buildings including release of all working 3,52,985.1 drawings.
3 Upon submission of all structural design of the 0.15 58,83,086.25*0.15%= building, foundation and plinth level including 3,52,985.1 release of all working drawing.
4 Upon submission of all services design for the 0.2 58,83,086.25*0.2% = building including release of all working 4,70,646.9 drawings. Electrical, water supply, plumbing, doors and windows, etc. 5 Upon submission of all external services design 0.2 58,83,086.25*0.2% = for the layout which includes UGD, External 4,70,646.9 electrification, storm water, drainage, Rain water harvesting, Roads and Sump.
6 Design of form work system including release of 0.2 58,83,086.25*0.2% =
system drawings by freezing the optimum are of 4,70,646.9
procurement for both foundation and
superstructure and upon successfully casting
minimum one block (foundation and super
structure)
7 Prepare Quantity and Cost Estimate for 0.15 58,83,086.25*0.15%=
submission 3,52,985.1
8 Impart training to workmen for appropriate use of 0.15 58,83,086.25*0.15%=
the system and completing minimum one block 3,52,985.1
foundation and super structure
22
Com.AS.37/2017
9 This payment shall be done every month for the 0.625 58,83,086.25*0.625%
project period from the start of foundation work = 14,70,771.56
proportionate to financial progress.
10 This payment shall be made progressively for 12 0.625 58,83,086.25*0.625%
months from the start of site work = 14,70,771.56
TOTAL 2.5 58,83,086.175
ALUR PROJECT - 1,10,23,28,976*2.5% = 2,75,58,224.4 % Amount Breakup (2.5% on Sl. No. Services of cost 23,53,23,450) of Halagevaderahalli project 1 Upon submission of Master plan 0.1 2,75,58,224.4*0.1% = 11,02,328.9 2 Upon submission of all architectural design of the 0.25 2,75,58,224.4*0.25% buildings including release of all working = 27,55,822.4 drawings.
3 Upon submission of all services design for the 0.25 2,75,58,224.4*0.25% building including release of all working = 27,55,822.4 drawings. Electrical, water supply, plumbing, doors and windows, etc. 4 Upon submission of all external services design 0.25 2,75,58,224.4*0.25% for the layout which includes - UGD, External = 27,55,822.4 electrification, storm water, drainage, Rain water harvesting, Roads and Sump and overhead tank 5 Prepare Quantity and Cost Estimate for 0.15 2,75,58,224.4*0.15% submission = 16,53,493.4 6 This payment shall be made every month for the 0.75 2,75,58,224.4*0.75% project period from the start of foundation work = 82,67,467.3 proportionate to financial progress.
7 This payment shall be made at the end of every 0.75 2,75,58,224.4*0.75%
month spread over 12 equal installments from the = 82,67,467.3
start of site work
TOTAL 2.5% 2,75,58,224.4
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Com.AS.37/2017
With the above calculation, it is held in the Award that M/s. P.G.Setty is entitled for Rs.51,77,115.97 relating to Halagevaderahalli project and Rs.2,59,04,731/- relating to Alur project, in all Rs.3,10,81,847/- (rounded off figure).
27. Learned Arbitrator has considered the facts and oral and documentary evidence of the parties properly and has recorded proper findings to the Issues framed as noted supra. Since the findings recorded to these issues is based on the appreciation of facts, after careful scrutiny of the materials on record, there is no perversity in recording findings to the issues in the Award. Therefore there is no scope for this court under Sec.34(2) of the Act to substitute its view to the view taken by the learned Arbitrator by re-appreciating the facts and evidence by sitting in the Appeal against the Award. Therefore, there are no grounds to set aside the Award made directing M/s Gowri to pay Rs.3,10,81,847/- to M/s. P.G.Setty. For these reasons, Point No.1 is answered in the 'Negative'.
28. Point No.2 : Learned Arbitrator awarded interest at 12% per annum on the awarded amount of Rs.3,10,81,847/-, from the date 24.1.2014, which was the date of final bill submitted, till realisation of entire amount. It is submission of learned advocate for petitioner herein that there was no contract between the parties for payment of interest. There is no statutory provision authorizing the Arbitrator to award 24 Com.AS.37/2017 pre-reference interest from the date of cause of action till the date of entrance by the Arbitrator in the Arbitral proceedings. Further it is also submission of learned advocate for petitioner herein that rate of interest awarded is excessive and exorbitant since as per Sec.31(7) of the Arbitration & Conciliation Act 1996, the current rate of interest can be awarded. The current rate of interest is defined in the Interest Act, 1978. Referring to the period from the date of Award to the date of payment, Sec.31(7) (b) of the Act 1996 specifically deal with the limits of the interest to the current rate of interest plus 2% and the current rate of interest as per State Bank of India is 6.5 % and the post lite interest awarded should be limited to 6.5 + 2 = 8.5%. In the notes of arguments learned advocate for petitioner herein has furnished details of current rate of interest on savings bank deposits w.e.f. 1.11.2019 and savings bank interest rate for balance above Rs.1 Lakh w.e.f. 1.5.2019.
29. On the other hand it is submission of learned advocate for respondent herein that prime lending rate of the SBI after 24.1.2014 till now is much more than 12% per annum as per the attachment to the written arguments. There is no prohibition in the contract awarding pre-reference interest from the date of arising of cause of action till the date of entrance of Learned Arbitrator in the Arbitral proceedings and also pendente lite interest. There is no prohibition under law restraining the Arbitrator to award interest on the dues ascertained. Learned Arbitrator 25 Com.AS.37/2017 has considered the materials on record properly and though claimant had claimed interest at 18% per annum on the amount due, but learned Arbitrator has awarded interest at 12% per annum only from the date 24.1.2014, on which date final bill was submitted and amount became due and payable and therefore there are no reasons to set aside award of interest.
30. After having heard both sides on the point of interest awarded by the learned Arbitrator, I have carefully gone through the Clauses of Agreement at Ex.P.5. In fact there is no Clause in this agreement prohibiting to claim pre-reference interest on the amount becomes due and payable. In the claim petition filed before the Arbitral Tribunal, claimant therein claimed interest at 18% per annum on the amounts due. However, learned Arbitrator has awarded interest 12% per annum only on the due amount of Rs.3,10,81,847/- from the date 24.1.2014 when final bill was submitted, till realisation of entire amount. It is relevant to note that it is held by the Larger Bench of Hon'ble Apex Court in AIR 2001 SC 626 (Executive Engineer, Dhenkanal Minor Irrigation Division, Orissa etc., Vs. N.C. Budhraj(dead) by LRs etc.) at para No.47 as under:
"47.............. As long as there is nothing in the Arbitration Agreement to exclude the jurisdiction of the Arbitrator to entertain a claim for interest on the amounts due and become payable under the contract, the jurisdiction of the Arbitrator to consider and award interest in respect of all periods subject only to Sec.29 of the Arbitration Act 1940 26 Com.AS.37/2017 and that too the powers of the court thereunder, has to be upheld. The submission that the Arbitrator cannot have jurisdiction to award interest for the period prior to the date of his appointment or entering into reference which alone confers him power is too stale and technical to be countenanced in our hands, for the simple reason that in every case the appointment of an Arbitrator even resort to court to indicate rights could be only after disputes have cropped up between the parties and continued to subsist unresolved and that if the Arbitrator has the power to deal with and decide disputes which cropped up at a point of time and for the period prior to the appointment of an Arbitrator, it is beyond comprehension as to why and for what reason and with what justification the Arbitrator should be denied only the power to award interest for the pre-reference period when such interest becomes payable and has to be awarded as an accessory or incidental to the sum awarded as due and payable, taking into account the deprivation of the use of such sum to the person lawfully entitled to the same."
As noted above, there is nothing in the Arbitration Agreement at Ex.P.5 to exclude the jurisdiction of the Arbitrator to entertain the claim of M/s P.G.Setty for interest on the amounts due under the contract. There is no prohibition in the Agreement to claim interest on the amounts due. Admittedly it was commercial transaction between the parties. Therefore, in view of above proposition of law of Hon'ble Apex Court, and by considering the fact that learned Arbitrator awarded interest at 12% per annum only as against the claim of 18%, there are no grounds to set aside 27 Com.AS.37/2017 the interest awarded including the pre-reference period by the Arbitrator. For these reasons, this Point No.2 is answered in the 'Negative'.
31. Point No.3 : For the above discussed reasons, I proceed to pass the following :
ORDER Petition filed under Sec.34 of the Arbitration & Conciliation Act 1996 is dismissed.
Both parties shall bear their own costs.
(Dictated to the JW, typed by her, corrected and then pronounced by me in Open Court, on this the 20th May, 2020.) (JAGADEESHWARA.M.) LXXXII Addl. City Civil & Sessions Judge, Bangalore.28
Com.AS.37/2017 Judgment pronounced in Open Court vide separate orders:
Petition filed under Sec.34 of the Arbitration & Conciliation Act 1996 is dismissed. Both parties shall bear their own costs. (JAGADEESHWARA.M.) LXXXII Addl. City Civil & Sessions Judge, Bangalore.