Bombay High Court
Signpost India Private Limited vs Brihan Mumbai Electric Supply And ... on 4 December, 2025
2025:BHC-OS:23431
Neeta Sawant FC-ARB NO-282 OF 2024
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
ARBITRATION PETITION NO.282 OF 2024
WITH
INTERIM APPLICATION NO . 7232 OF 2025
SIGNPOST INDIA PRIVATE LIMITED ...Petitioner
V/s.
BRIHAN MUMBAI ELECTRIC SUPPLY
AND TRANSPORT UNDERTAKING ...Respondent
Mr. Harshvardhan Kotla with Mr. Dhanesh Dhotre & Ms. Shruti
Bedekar i/b Mr. Ajay Basutkar, for Petitioner.
Mr. Nirav Shah with Ms. Aprajita Mahto & Ms. Shraddha Nagaonkar
i/b Mr. Sagar Shetty, for Respondent.
CORAM : SANDEEP V. MARNE, J.
Reserved On : 25 NOVEMBER 2025.
Pronounced On : 04 DECEMBER 2025.
Judgment:
1) Petitioner has filed the present Petition under Section 34
of the Arbitration and Conciliation Act, 1996 (Arbitration Act)
challenging the Award dated 2 January 2024 passed by the learned
sole Arbitrator. By the impugned Award, the learned sole Arbitrator
has rejected all the claims made by the Petitioner. The counterclaim
filed by the Respondent is allowed to the extent of sum of Rs.
49,60,063/- towards interest on delayed payment charges, Rs.
46,78,000/- towards RTO fees and Rs. 37,29,000/- towards
defacement charges. The learned sole Arbitrator has also awarded
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costs of arbitral proceedings of Rs. 48,20,000/- in favour of the
Respondent. The Arbitral Tribunal has awarded interest @ 18% per
annum from 5 December 2022 i.e. date of filing of counterclaim till
the date of Award and post Award interest @10% p.a.
2) Brief facts leading to filing of the Petition as pleaded by
the Petitioner are stated thus :-
Petitioner is engaged in the business inter-alia of advertising. The
Respondent -Brihanmumbai Electric Supply and Transport
Undertaking (BEST) is a civic transport and electricity provider in
Mumbai. Respondent-BEST operates a large fleet of buses in Mumbai
city and neighbouring areas outside the city limits.
3) The Respondent floated a tender on 9 November 2018
for allotment of advertisement rights for 3121 buses in its fleet for a
period of three years. Petitioner participated in the tender process
and submitted bid/offer of Rs.95.5 crores. Petitioner was declared as
a successful bidder and contract was awarded vide allotment letter
dated 23 January 2019 granting advertisement rights for a period
of three years from 11 February 2019 to 10 February 2022.
Petitioner was directed to deposit Rs.4,78,00,000/- being 30% cash
security deposit and Rs.11,14,00,000/- in the form of Bank
Guarantee towards 70% security deposit and Rs.1 crore for
defacement/repainting of advertisements. The Petitioner
communicated its acceptance of allotment letter vide its letter dated
30 January 2019. Petitioner provided the requisite bank guarantee
towards security deposit and amount of defacement charges and
also paid 30% security deposit in cash. An Agreement dated
4 November 2020 was executed between the parties.
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4) After commencement of the contract, the Petitioner
came across several buses, which were unfit for display of
advertisements and upon its survey, it claimed that 966 buses were
found to be majorly damaged. The Petitioner accordingly requested
Respondent for grant of rebate in November-2019. A physical
inspection was completed by both the parties where 753 buses were
found to be majorly damaged. Relying on the report of the joint
survey, Petitioner requested Respondent to grant rebate in respect
of 753 damaged buses from the date of commencement of the
contract till the buses were repaired. By letter dated 23 December
2019, Respondent contended that 672 out of 753 buses were
damaged which needed to be attended to and 81 damaged buses
needed workshop attendance /major repairs.
5) After Covid-19 outbreak and imposition of nationwide
lockdown, the buses of the Respondent were not operational from 24
March 2020 onwards. The Petitioner claimed rebate in respect of
lockdown period. In July-2021 Second joint survey was conducted,
in which 175 buses were allegedly found to be damaged. Petitioner
sought rebate in respect of damaged 175 buses which was denied by
the Respondent. On 28 June 2021 Respondent granted partial
rebate in display charges by granting 100% rebate for 1 April 2020
to 30 September 2020 due to Covid-19 and 100% rebate for the
period from 1 October 2020 to 31 December 2020 due to display of
campaign of Municipal Corporation and 50% rebate from 1 January
2021 to 31 March 2021. The Petitioner requested for grant of
further rebate. By letter dated 15 March 2022 Respondent granted
further rebate in display charges in following terms:-
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(i) 75% rebate on display charges on 1 January 2021 to
28 February 2021.
(ii) Adjustment of payment of display charges amounting
to Rs.5,63,73,558/- for 672 buses from 11 February 2019
to 23 December 2019 and time for payment of
outstanding dues of Rs.25,06,78,641/- within 7 days.
6) According to the Petitioner, certain excess payments
were made by it to the Respondent in respect of buses not actually
plying and on account of wrongful application of calculation formula.
The contract between the Petitioner and the Respondent expired on
10 February 2022. However, the Petitioner kept on raising various
demands with the Respondent. Petitioner thereafter sought consent
of the Respondent for reference of the disputes to arbitration. With
the consent of the Petitioner letter dated 23 March 2022 was
addressed by the Petitioner to the learned sole Arbitrator and this is
how Arbitral Tribunal was constituted. Petitioner raised 8 claims in
its Statement of Claim. In support of its 8 claims, Petitioner raised
following prayers in its Statement of Claim :-
a. Directing the Respondent to provide the Claimant, rebate on damaged
buses amounting to a total of Rs. 4,67,42,372/- (the amount is inclusive
of interest charged as per the Request for Proposal) (Indian Rupees
Four Crores Sixty Seven Lakhs Forty Two Thousand Three Hundred
and Seventy Two Only) and consequently order and direct the
Respondent to pay the said amount to the Claimant.
b. Directing the Respondent to provide the Claimant, rebate on the said
Not-Out buses and on average available buses in the fleet during the
tenor of the subject Tender, the rebate on rental fees for the said Not-
Out buses comes to a total of Rs. 18,65,481/- (the said amount is
inclusive of the interest calculated as mentioned under the Request for
Proposal) (Indian Rupees Eighteen Lakhs Sixty Five Thousand Four
Hundred and Eighty One).
c. Directing the Respondent to provide the Claimant, rebate on the 08
day period from 24th March 2020 to 31st March 2020 in view of the
Covid-19 pandemic, the total rebate comes to total of Rs. 99,42,444/-
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(the said amount is inclusive of the interest calculated as mentioned
under the Request for Proposal)
d. Directing the Respondent to provide the Claimant, rebate calculated
on the basis of pay-per-use buses during the period 01st April 2021 to
10th February 2022, the total calculation comes to a total of Rs.
16,07,33,593/- (the said amount is inclusive of interest calculated as
per the Request for Proposal) (Indian Rupees Sixteen Crores Seven
Lakh Thirty Three Thousand Five Hundred and Ninety Three)
e. Direct the Respondent to refund the amount paid by the Claimant to
the Respondent, under protest and without prejudice to its rights and
contentions, amounting to a total of Rs. 14,45,33,204/- (Indian Rupees
Fourteen Crores Forty Five Lakhs Thirty Three Thousand Two Hundred
and Four Only)
f. For the purposes aforesaid necessary directions be given and enquires
be made and Award be passed.
7) The Respondent appeared before the learned Arbitrator
and filed statement of defence. Additionally, Respondent also filed
counterclaim with the following prayers:-
A. Directing the Claimant to pay to Respondent a sum of INR 4,13,
69,016 along with further interest thereon at the rate of 18% per
annum as agreed between the parties and as set out in Particulars of
Claims being Exhibit -A hereto from the date of the filing of the
Counter Claim till payment and/or realization;
B. Directing the Claimant to pay to Respondent a sum of INR
49,60,063 along with further interest thereon at the rate of 18% per
annum as agreed between the parties and as set out in Particulars of
Claims being Exhibit - C hereto from the date of the filing of the
Counter Claim till payment and/or realization;
C. Directing the Claimant to pay to Respondent a sum of INR 46, 78,
000 along with interest thereon at the rate of 18% per annum as
agreed between the parties and as set out in Particulars of Claims
being Exhibit- D hereto from the date of the filing of the Counter Claim
till payment and/or realization;
D. Directing the Claimant to pay to Respondent a sum of INR
37,29,000 along with interest thereon at the rate of 18% per annum
as agreed between the parties and as set out in Particulars of Claims
being Exhibit-F hereto from the date of the filing of the Counter Claim
till payment and/or realization;
8) Based on the pleadings, the Arbitral Tribunal framed
following 15 issues:-
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(1) Does the Claimant prove that its claims have arisen under the
2019 Tender and not under the Contract dated January 23, 2019,
entered into between the Claimant and Respondent?
(2) If the answer to Issue No. 1 is in negative, then does the
Claimant prove that all their claims, as sought for by them under the
Statement of Claim ought not to be rejected?
(3) Does the Claimant prove that it has not committed any breach(
es) of any of the provisions of the 2019 Tender?
(4) Does the Respondent prove that it has not committed any
breach( es) of any of the provisions of the 2019 Tender?
(5) Does the Claimant prove that under the 2019 Tender,
Respondent is obliged to provide rebate to the Claimant of damaged
buses for an amount of Rs.4,67,42,372/-, as alleged or otherwise?
(6) Does the Claimant prove that under the 2019 Tender,
Respondent is obliged to provide rebate to the Claimant due to not out
I non - operational buses for an amount of Rs.18,65,481/-, as alleged
or otherwise?
(7) Does the Claimant prove that under the 2019 Tender,
Respondent is obliged to provide rebate for the 8 day period from
March 24, 2020 to March 31, 2020 in view of COVID - 19 pandemic
for an amount of Rs.99,42,444/-, as alleged or otherwise?
(8) Does the Claimant prove that under the 2019 Tender,
Respondent is obliged to provide rebate for the pay-per-use buses
during April 1, 2021 to February 10, 2022, for an amount of
Rs.16,07,33,593/-, as alleged or otherwise?
(9) Does the Claimant prove that under the 2019 Tender,
Respondent is obliged to provide refund of amount of
Rs.14,45,33,204/-,paid under protest by the Claimant, as alleged or
otherwise?
(10) Does Respondent prove that the Claimant is liable to pay
Respondent a sum of Rs.4,13,69,016/- along with further interest
at the rate of 18% p.a. for the delayed payment charges, as set
out in the Respondent's Counter Claim?
(11) Does the Respondent prove that the Claimant is liable to pay
the Respondent a sum of Rs.49,60,063/- along with further interest
at the rate of 18% p.a. for the interest on the delayed payment
charges, as set out in the Respondent's Counter Claim?
(12) Does the Respondent prove that the Claimant is liable to pay
the Respondent a sum of Rs.46,78,000/- along with further interest
at the rate of 18% p.a. for the RTO Fees, as set out in the Respondent's
Counter Claim?
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(13) Does the Respondent prove that the Claimant is liable to pay
the Respondent a sum of Rs.37,29,000/- along with further interest
at the rate of 18% p.a. for the defacement charges incurred by
Respondent, as set out in the Respondent's Counter Claim?
(14) What Order?
(15) What Costs?
9) Petitioner filed application under Section 17 of the
Arbitration Act for injunction against the Respondent from
invocation of Bank Guarantees and forfeiture of security deposit.
During the course of hearing Petitioner filed Application under
Section 17 of the Arbitration Act, Respondent filed Application
under Section 16 challenging jurisdiction of Arbitral Tribunal
contending that non-payment of requisite stamp duty on the
contract had a reflection on jurisdiction of Arbitral Tribunal. The
Arbitral Tribunal rejected Section 16 Application by order dated 28
July 2022. Thereafter Application filed by Petitioner under Section
17 of the Arbitration Act was withdrawn by the Petitioner.
10) Parties led evidence in support of their respective cases.
Arbitral Tribunal has made Award dated 2 January 2024 rejecting
all the claims of the Petitioner and allowing some of the claims
raised by the Respondent in counterclaim. Operative part of the
Award reads thus:-
A) All the Claims made by the Claimant are rejected.
B) The Claim of the Respondent is allowed to the extent given below:
i) In terms of prayer clause 'B' of Counter Claim of the
Respondent, the Respondent is entitled to an Award in the sum
of Rs. 49,60,063 (Rs. Forty Nine Lakh Sixty Thousand Sixty
Three Only) along with interest@ 18% p.a. from 5-12-2022 i.e
filing of the Counter Claim till the date of this Award
Accordingly, The Claimant is directed and ordered to pay to the
Respondent the total sum of Rs Rs. 49,60,063 (Rs. Forty Nine
Lakh Sixty Thousand Sixty Three) along with interest @18%
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p.a from 5-12-2022 i.e filing of the Counter Claim till the date of
this Award.
ii) In terms of prayer clause 'C' of Counter Claim of the
Respondent, the Respondent is entitled to an Award in the sum
of Rs. 46,78,000 (Rs. Forty Six Lakh Seventy Eight Thousand
Only ) along with interest @ 18% p.a. from 5-12-2022 i.e filing of
the Counter Claim till the date of this Award Accordingly, The
Claimant is directed and ordered to pay to the Respondent the
total sum ofRs. 46,78,000 (Rs. Forty Six Lakh Seventy Eight
Thousand Only) along with interest@ 18% p.a. from 5-12-2022
i.e filing of the Counter Claim till the date of this Award On
realization of this mount the Respondent shall pay the required
outstanding RTO fee as per the RTO rules applicable, to the
concerned RTO authorities .
iii) In terms of prayer clause 'D' of Counter Claim of the
Respondent, the Respondent is entitled to an Award in the sum
of Rs.37,29,000(Rs. Thirty Seven Lakh Twenty Nine Thousand
only) along with interest @ 18% p.a. from 5-12-2022 i.e. filing of
the Counter Claim till the date of this Award. Accordingly, the
Claimant is directed and ordered to pay to the Respondent the
total sum Rs.37,29,000 (Rs. Thirty Seven Lakh Twenty Nine
Thousand only) along with interest @ 18% p.a. from 5-12-2022
i.e. filing of the Counter Claim till the date of this Award.
iv) The Claimant is directed and ordered to pay to the Respondent
further interest@ 10% p.a. on the total sums as detailed in i), ii)
and iii) above, from the date of this Award till realization.
C) The Respondent is also entitled to costs as are held payable by the
Claimant as mentioned earlier and as such the Claimant is directed
and ordered to pay to the Respondent a sum of Rs. 48,20,000 (Rs.
Forty-Eight Lakh Twenty Thousand only) towards such costs
together with interest @ 10% p.a. from the date of this Award up to
the date of payment and/or realization.
D) The Arbitral proceedings are accordingly terminated by this final
Award.
11) Aggrieved by the Award dated 2 January 2024,
Petitioner has filed the present Petition under Section 34 of the
Arbitration Act.
SUBMISSIONS
12) Mr. Harshavardhan Kotla, the learned counsel appearing
for the Petitioner has canvassed following submissions in support of
the Arbitration Petition:-
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(a)That the Tribunal's finding that Petitioner is not entitled to
rebate for damaged buses is recorded in ignorance of vital
evidence and is contrary to the stipulations of the contract,
which expressly imposes an obligation on the Respondent
and further provides for rebate towards reduction of fleet.
That the finding is therefore contrary to public policy of
India and is also patently illegal.
(b)Finding of the Tribunal that Clause-4.1 is not applicable to
the present dispute is patently illegal since the finding is in
derogation of terms of that clause. That under Clause-4.1 it
was the contractual obligation of the Respondent to provide
required support for each bus to carry out advertisement
in good condition. That by making available damaged buses
for display of advertisement, the Respondent committed
breach of obligation under Clause 4.1 making the Petitioner
entitled to seek rebate in the fees.
(c) That the learned Arbitral Tribunal has erroneously
rejected Petitioner's argument of waiver raised on the basis
of Respondent's conduct of making available rebate in
respect of several buses on which advertisement could not
be displaced. That after granting rebate in respect of partial
number of damaged buses, Respondent was estopped from
questioning rebate entitlement of the Petitioner in respect
of all identified damaged buses in the joint inspection.
(d)That the Arbitral Tribunal has erroneously treated the
claim of Petitioner for rebate towards damaged buses as
claim for damages /compensation. On such erroneous
assumption the Tribunal committed further error in
expecting the Petitioner to adduce evidence to support
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cause of loss. Without prejudice he would submit that the
Tribunal failed to appreciate that liability to pay fees in
respect of the damaged buses is the loss caused to the
Petitioner.
(e)That the Arbitral Tribunal has failed to interpret and
construct various clauses of the contract without reading
them harmoniously.
(f) That the contract envisaged rebate in the fees payable by
the Petitioner if there was reduction in the number of buses
for any reason.
(g)That the Arbitral Tribunal erred in not appreciating the
position that Clause-1.3 of the contract is an overarching
provision dealing with rebate /concession and Clause-4.1 is
only one of the eventualities in which the rebate was
admissible and that therefore it was necessary to
separately deal with entitlement of rebate in Clause-4.1 of
the contract.
(h)That the Arbitral Tribunal has not even considered the
stipulations under Schedule-IX of the contract dealing with
'Terms of Payment' under which fleet of buses, which were
made available for display of advertisement on first day of
each previous month was an important factor in the
formula for determination of monthly rentals. That thus,
payment of monthly fees was not static and was in fact
dynamic depending on the number of buses made available
for display of advertisements. That therefore if certain
number of buses were not made available for any reason,
including damaged buses, the amount of monthly rentals
would automatically become liable for reduction.
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(i) That the Arbitral Tribunal has egregiously erred in not
sanctioning the claim for refund of excess amount paid by
the Petitioner by ignoring the formula under Schedule-IX of
the contract.
(j) That the Petitioner produced chart of buses actually
deployed by the Respondent every day before the Arbitral
Tribunal and that therefore the actual number of buses
deployed by the Respondent on first day of previous month
was required to be taken into consideration while
determining monthly rentals payable by the Petitioner.
However, no finding is recorded by the Arbitral Tribunal on
this vital aspect and the claim for refund of excess
payment is erroneously rejected by taking into
consideration reasons for rejection of claim towards
damaged buses.
(k) That the Tribunal's finding that the Petitioner is not
entitle to rebate for 8 days from 23 March 2020 to 31
March 2020 is in contravention of terms of contract and
hence contrary to public policy in India and is in conflict
with basic principles of natural justice. That the Tribunal
erred in rejecting claim for rebate for 8 days of Covid-19
period by ignoring a specific stipulation under Clause-19 of
the contract relieving the Petitioner from obligation to pay
monthly display charges due to occurrence of force
majeure event.
(l) That the Tribunal erroneously rejected waiver plea raised
by the Petitioner by invoking reasons for rejection of claim
for rebate for damaged buses.
(m) That the Arbitral Tribunal has erred in awarding interest
on interest in favour of the Respondent, which is clearly
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contrary to fundamental policy of Indian law. That the
Arbitral Tribunal failed to consider that delayed payment
charges are in themselves penal interest on delayed
charges of monthly display charges.
(n) That no computations were produced by the Respondent
and vague figure of Rs.49,60,063/- was presented before
the Arbitral Tribunal sans any particulars. That Petitioner
paid the entire outstanding dues towards display charges
by clearing all the arrears and by paying contractual
delayed payment charges on 9 December 2022, 24
December 2022, 8 January 2023 and 24 January 2023.
(o)That under the contract, the delayed payment charges
were in the form of interest @18% p.a. for first six months,
24% p.a. for next six months and 30% p.a. beyond one year.
That it is otherwise unjust to direct Petitioner to pay
further interest of 18% on such hefty amount of interest
already paid.
(p)That the Arbitral Tribunal has erroneously sanctioned
claim for RTO fees in the sum of Rs.46,78,000/- alongwith
interest which is contrary to the terms of the contract.
That the Arbitral Tribunal only considered terms of
stipulation in letter dated 23 January 2019 ignoring
Clause-14.2.1 of the Schedule- III (General conditions of
contract) which gave an option to the Petitioner to pay RTO
fees of Rs.62,42,000/- for first year or actual RTO fees for
every subsequent years. That during the period from
March-2020 to October 2020, buses of the Respondent
were admittedly not plying and that therefore RTO fees
were not payable in respect of that period. That Petitioner
had paid advance RTO fees for the period from February-
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2020 to January 2021 and therefore it was entitled to
adjust the said fees in the third year period.
(q)That there is nothing on record to indicate that the
Respondent actually paid fees to the RTO. That the words
'or at actual' occurring in sub-clause (b) of Clause-14.2.1
would mean payment by the Petitioner of only ' actual fees
paid by BEST to RTO'. That in absence of no proof being
produced by the BEST about payment of fees to RTO, it
would amount to unjust enrichment for BEST to claim fees
from the Petitioner.
(r) That Tribunal's conclusion that the Respondent is entitled
to defacement charges alongwith interest @ 18% is patently
illegal and contrary to fundamental policy of Indian Law.
(s) That while awarding claim towards defacement charges,
the Arbitral Tribunal ignored the ratio of the judgment in
Kailash Nath Associates V/s. Delhi Development Authority and
Anr.1 in which it is held that if penalty is stipulated in the
contract, the same represents the maximum cap upto
which damages can be awarded subject to proof of cause of
loss. That the Respondent did not lead any evidence to
prove cause of loss on account of alleged non-removal of
advertisement by the Petitioner after expiry of the
contract.
(t) That there is no evidence to indicate that the
advertisement were actually removed by the Respondent
or that it incurred any expenditure towards such removal.
(u) That in any case contract for the next term is also
awarded to the Petitioner and that therefore no eventuality
1 2015 (4) SCC 136
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occurred for removal of advertisements of previous
contract.
(v)That the Arbitral Tribunal has erred in awarding hefty cost
of arbitration at Rs.48,20,000/- with further interest
@10%. He would also rely on judgment of Division Bench of
this Court in Anila Gautam Jain. V/s. Hindustan Petroleum
Corporation Ltd. through the Chief Regional Manager2.
(w) That the interest awarded by the Arbitral Tribunal is
unreasonable. That pre-Award interest of 18% and post-
Award interest of 10% awarded by the Arbitral Tribunal is
unjust and contrary to the contractual term.
13) On above broad submissions, Mr. Kotla would pray for
setting aside the impugned Award.
14) The Petition is opposed by Mr. Shah, the learned counsel
appearing for the Respondent-BEST. He would raise following
submissions:
(a) That the Award made by the Arbitral Tribunal is strictly
in conformity with contractual terms agreed between the
parties. That the Arbitral Tribunal has acted strictly in
accordance with contract clauses and none of the
findings recorded by it contravenes any particular
contractual stipulations. That the findings recorded by
the Arbitral Tribunal are based on evidence on record
and that there is no element of perversity in those
findings. That the Arbitral Tribunal has taken plausible
2 2018 SCC Online Bom 917
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view, if not correct view. That therefore, none of the
grounds enumerated in Section 34 of the Arbitration Act
are made out by the Petitioner warranting dismissal of
the Arbitration Petition.
(b) That the claim of the Petitioner for rebate in respect of
damaged buses was contrary to the contractual
provisions. That there is no stipulation in the contract
under which Petitioner could be granted any rebate in
respect of buses which are damaged. That on the
contrary, Clause-1.1.1 of Schedule-VI specifically
reserves right for BEST to increase or decrease the
number of buses without affecting obligation of the
Petitioner to pay display charges. That Clause-1.1.1 of
Schedule-VI specifically provides that 100% buses need
not be on road and that no claims could be raised by the
Petitioner in respect of the buses which could not be
deployed on road.
(c) That Tender document contained specific provision for
disclaimer under which the Petitioner was required to
satisfy itself about the fleet of buses available with the
Respondent. That the Petitioner was supposed to
inspect and investigate the fleet of buses and thereafter
quote the Tender price. Though the Petitioner
conducted such inspection, it did not raise any queries
in respect of the alleged damaged buses. Even in pre-bid
meeting he did not raise any query about damaged
buses. Clause-4.1 of Schedule-III of the contract
contemplated provision of only support by BEST for the
purpose of display of advertisement in good condition,
which cannot be confused with a guarantee that
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undamaged buses would only be made available for
display of advertisement to the Petitioner. That the
words 'good condition' applies to advertisement and not
to buses.
(d) That Petitioner's claim for rebate of 8 days for Covid-19
period was ex-facie baseless and rightly rejected by the
Arbitral Tribunal by recording cogent evidence, which
do not suffer from vice of perversity.
(e) That Petitioner's claim for refund of excess payment
was made out of misreading of contractual provisions.
That number of buses actually deployed on the road had
no corelation to Petitioner's obligation to pay display
fees. That Schedule-IX contemplated 'fleet' of buses
'available for display' of advertisement on first day of
previous month. This would mean the number of buses
available in the fleet and not number of buses actually
deployed on the road. That Clause-1.1.1 of Schedule-VI
provides that BEST had necessary flexibility to increase
or decrease the buses and not to deploy 100% buses on
the road. The Petitioner agreed not to raise any claim in
respect of undeployed buses.
(f) That evidence led by the Respondent in respect of the
fleet size has remained uncontroverted and that
therefore claim raised by the Petitioner in respect of
refund of the alleged excess payment was totally
baseless and rightly rejected by the Arbitral Tribunal.
(g) That the Arbitral Tribunal has rightly allowed the claim
for interest on delayed payment charges as parties had
agreed on clear contractual stipulation of payment of
'additional interest' on delayed payment charges, if the
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contractor failed to pay delayed payment charges
within a period of three months. That therefore, award
of claim for interest on delayed payment charges was
perfectly as per the contractual stipulations.
(h) That the learned Arbitrator has rightly allowed claim of
the Respondent for RTO fees and indemnified
Respondent of obligation to pay the same to RTO. That it
is well settled law that contract of indemnity becomes
enforceable the moment RTO's claim qua the Petitioner
gets fructified and also proof of actual payment of fees
to RTO is not necessary for enforcing indemnity against
the Respondent. That the Tribunal has rightly relied on
four judgments cited by the Respondent in this regard.
(i) That the Arbitral Tribunal has rightly allowed the claim
towards defacement charges of Rs.37,29,000/- as the
said claim clearly flows out of contractual stipulations
under Clause-21of Schedule-III . That Petitioner did not
dispute the amount of defacement charges calculated
by the Respondent and is now estopped from
questioning the award of the said claim. The
Respondent had obligation to provide advertisement on
buses to the new contractor, which is a reason why
obligation was imposed on the Petitioner to remove all
its advertisements from buses or to bear expenses for
such removal in addition to payment of penalty of
Rs.1,000/- per bus per day. That Petitioner admittedly
breached the contractual stipulation in Clause-21 of
Schedule-III and failed to remove its advertisements
from the buses. That since the Petitioner agreed to pay
penalty of Rs.1,000/- per bus per day it cannot now
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expect the Respondent to lead evidence to prove loss
caused to the Respondent. That the Petitioner is
misreading the ratio of the judgment in Kailas Nath
Associates (supra) which recognises right to recover
the entire amount of stipulated penalty /damages upon
breach of contract.
(j) That mere award of contract to the Petitioner for
further period of three years does not absolve its
responsibility of paying defacement charges sans
penalty directed under Clause-21 of Schedule-III. The
Respondent could not have envisaged award of next
contract to the Petitioner and there was wide gap
between tenures of two contracts. That in any case
award of claim for defacement is directly in conformity
with Clause-21of Schedule-III of the contract.
15) On above broad submissions, Mr. Shah would pray for
dismissal of the Arbitration Petition.
REASONS AND ANALYSIS
16) Petitioner is an advertisement contractor engaged by
Respondent-BEST for display of advertisements on its municipal
buses. Respondent-BEST operates one of the largest fleets of
municipal buses in the city of Mumbai and surrounding areas. It
appears that initially the fleet of BEST was declared as 3121 buses
on which Petitioner was to exploit advertisement rights for a period
of 3 years from 11 February 2019 to 10 February 2022 after paying
display charges to the Respondent. Petitioner was selected by
Respondent-BEST through competitive bidding process and the
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Petitioner had bid for amount of Rs.95.50 crores for exploitation of
advertisement rights on buses of the Respondent for a period of 3
years. Under Clause-7 of the letter of allotment, Petitioner was under
obligation to pay monthly display charges in advance to the
Respondent in the prescribed formula which was, multiplication of
bid price by 36 months by fleet of buses of 3121 which was to be
further multiplied by the fleet as on the first day of previous month.
Clause-7 of the letter of allotment reads thus :-
7.Payment of monthly rentals: You shall pay to the Undertaking
the monthly display charges in advance as per the formula given
below on or before the first day of every month through
RTGS/NEFT/DD/PO under intimation to AGM(TE)'s office.
Amount of monthly rentals for the month= Rs. 95,50,00,000/ (36 X
3121) X Fleet as on first of previous month.
17) After commencement of the contract tenure, disputes
arose between the parties as Petitioner initially raised the issue of
large number of damaged buses and claimed significant rebate.
According to the Petitioner as many as 966 buses out of total fleet of
3121 buses were damaged which were incapable of being used for
display of advertisements. Initially, Respondent-BEST refused to
accede to the demand of the Petitioner for rebate in respect of 966
buses but subsequently acceded partially to the request in respect of
672 buses by letter dated 15 March 2022. Petitioner still remained
unsatisfied and continued claiming rebate in respect of the balance
damaged buses. Though Petitioner was granted rebate in respect of
the Covid-19 period, it continued demanding rebate in respect of 8
additional days. Petitioner claimed that the formula prescribed in
the agreement for computation of monthly display charges was
erroneously applied without taking into consideration the actual
buses plying on the road each month and contended that the
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Respondent had recovered excess monthly display charges from it.
The disputes raised by the Petitioner were referred to resolution by
arbitration. By filing of Statement of Claim, the Petitioner raised
following 8 claims.
Claim No. 1 Claim on Rebate of damaged buses.
Claim No.2 Claim on rebate due to Not Out buses. ( Non operational
buses as per the data provided by the Respondent.
Claim No.3 Rebate from 23rd March 2020 to 31st March 2020 in
the wake of COVID-19 pandemic.
Claim No.4 Loss of business sentiments and limited opportunities.
Claim No.5 Rebate on the RTO fees paid to the Respondent.
Claim No.6 Claim on payment of Rs. 2,31,204/- paid to the
Respondent under protest.
Claim No.7 Payment of Rs. 12,14,00,000/- paid to the Respondent
under protest.
Claim No.8. Rebate on incorrect interest levied on outstanding dues
since the inception of the subject Tender.
18) Respondent, in addition to resisting the statement of
claim, filed its own counterclaim and raised claims inter alia for
interest on delayed payment charges, RTO fees, defacement charges,
etc against the Petitioner. The Arbitral Tribunal has rejected all the
claims of the Petitioner and has sanctioned 3 Counterclaims of
Respondent-BEST in addition to award of costs and interests in its
favour.
19) Petitioner is aggrieved by rejection of all its claims and
by grant of three claims in favour of the Respondent, in addition to
direction for payment of costs and interests. Though several claims
were raised by parties against each other, the Petitioner has not
canvassed submissions before me with regard to the findings
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recorded by the Arbitral Tribunal in respect of each of its claims and
counterclaims of the Respondent. The scope of the present Petition is
thus restricted in respect of rejection of three claims of Petitioner
and grant of three counterclaims of the Respondent which are as
under:
REJECTION OF CLAIMS OF PETITIONER
1 Rebate for damages business amounting to Rejected
Rs.4,67,42,372/-
2 Rebated for 8 days' Covid-19 period amounting to Rejected
Rs.99,42,444/-
3 Refund of excess amount paid by the Petitioner to Rejected
Respondent of Rs.14,45,33,204/-
COUNTERCLAIMS AWARDED IN FAVOUR OF THE RESPONDENT
4 Interest on delayed payment charges of Allowed
Rs.49,60,063/- alongwith further interest at 18%
p.a.
5 RTO fees of Rs.46,78,000/- alongwith interest @ Allowed
18% p.a.
6 Defacement charges of Rs.37,92,000/- alongwith Allowed
18% interest
7 Costs of arbitration proceedings of Rs.48,20,000/- Allowed
with future interst @ 10% p.a.
8 Interest @ 18% p.a. on three counterclaims granted Allowed
in favour of the Respondent from the date of the
Award till realisation
20) Now I proceed to examine whether any ground is made
out by the Petitioner for interference in rejection of its claims and
sanctioning counterclaims of the Respondent.
REJECTION OF CLAIM FOR DAMAGED BUSES
21) Petitioner has raised claim of 4,67,42,372/- towards
rebate for damaged buses on which it allegedly could not display
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advertisements during the relevant period. The Arbitral Tribunal
framed Issue No.5 for deciding this claim of the Petitioner, which
was as under :-
Issue No.5. Does the Claimant prove that under the 2019 Tender,
Respondent is obliged to provide rebate to the Claimant on
damaged buses for an amount of Rs.4,67,42,372/-, as alleged or
otherwise?
22) Petitioner's claim for rebate in respect of damaged buses
was premised essentially on the alleged joint survey conducted by
the parties in November 2019 in which 753 buses were found to be
majorly damaged. A further joint survey was apparently conducted
in July 2021 in which it was found that 131 buses were consistently
damaged since 2019 and 175 buses were identified to be damaged
after 2019. Petitioner accordingly pressed for de-notification of 966
buses from fleet of 3121 buses for computing the monthly display
charges. Initially the request was rejected by BEST vide letter dated
13 May 2019. However, subsequently Respondent-BEST partially
accepted the request for rebate in respect of damaged buses by letter
dated 15 March 2022 by adjusting payment of display charges of
5,63,73,558/- for 672 buses for the period from 11 February 2019 to
23 December 2019 due to inability in displaying advertisements on
damaged/dented buses. The relevant portion of letter dated 15
March 2022 reads thus :-
ii) To adjust payment of display charges amounting to
Rs.5,63,73,558/-for 672 buses for the period from 11th February
2019 to 23rd December 2019 (316 days) due to inability to display
advertisement on damaged/dented Buses.
23) Based on letter dated 15 March 2022, Petitioner pressed
into service the theory of waiver for claiming that since the claim for
672 damages buses was accepted, the objection of absence of
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contractual obligation for rebate for damaged buses must be treated
as having waived by the Respondent. The Arbitral Tribunal has
however rejected the contention of waiver by recording following
findings:-
16.4 Both the above authorities relied on by the Claimant are also
taken shelter of by the Respondent in order to counter the
arguments advanced on behalf of the Claimant as to 'Waiver'. On
this issue defence of the Respondent is that said rebate/concession
given to the Claimant was subject to the fulfilment of other
conditions mentioned in the letters dated 28th June 2021 and 15th
March 2022. Moreover, the said rebate was not granted as a matter
of right vested in the Claimant but it was the gratuitous act of the
Respondent. Considering the rival submissions on this aspect of
Waiver in the considered view of this Tribunal said arguments on
behalf of the Claimant shall not sustain, in as much as grant of
rebate for Covid period as detailed in the letter dated 28 June 2021
was conditional and was on certain conditions as detailed therein
Moreover, such conditional rebate is required to be looked into
along with various terms and conditions of the Tender document
and specially 'Disclaimer' mentioned therein, so also is the case
with respect to letter dated 15th March 2022.
16.5 In the considered view of this Tribunal conditional grant of
rebate on damaged buses is clinching material in order to hold that
there is nothing expressed by the Respondent to abandon its rights
to challenge the claim of the Claimant on damaged buses. More over
conditions in iii) and v) in this letter are admittedly not complied
by the Claimant. Furthermore this 'Waiver' issue is put to rest by
the clinching provision in the Contract dated 4-11-2020 (Exhibit
UUU to SOC) entered into between the parties and filed on record of
this Tribunal on 4-7-2023. Clause 38. 'b' of this Contract reads thus,
which is self-explanatory.
24) I am in full agreement with the above findings recorded
by the learned Arbitrator. Mere extension of gratuitous act by
Respondent-BEST in granting rebate in respect of 672 damaged
buses cannot be used by Petitioner to advantage for claiming rebate
for balance alleged damaged buses contrary to the contractual
covenants. The advertising rights were granted in respect of 'fleet' of
buses available with BEST. While computing the monthly
advertisement charges, actual number of buses available in the fleet
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was taken into consideration for each month and Petitioner had
agreed for computation of charges in accordance with the formula. It
had inspected the buses before quoting the bid price. The contract
clauses specifically provided for payment of display charges even in
respect of buses rendered inoperational due to maintenance work.
Petitioner agreed for a comprehensive contract not connected with
actual number of buses plying on the road or actual number of buses
fit for display of advertisements. It quoted the bid price accordingly.
After commencement of contract, it could not have turned around
and contended that the gratuitous act of BEST in granting rebate for
few buses would constitute as admission of liability or waiver of
objection about absence of contractual clause for rebate in respect of
damaged buses. In any event, Mr. Kotla has not raised a very
serious objection in respect of findings on waiver, and in my view,
rightly so.
25) After debunking the theory of waiver, the Arbitral
Tribunal has also considered contractual stipulations for rejecting
Petitioner's claim for rebate for damaged buses.
26) Turning to the contractual stipulations, the sheet anchor
of Petitioner is Clause-4.1 of Schedule-III of General Conditions of
Contract, which reads thus:-
4.1 The Contractor shall maintain the advertisements in good
condition and shall take responsibility of getting the work of
defacing/replacing/repairs or repainting done at their own cost.
The General Manager agrees to provide at its own cost such
support as may be required on each bus to carry out the
advertisements in good condition. Further, the painting or
repainting of advertisements directly on buses and pasting of vinyl
stickers will have to be done by the Contractor with proper care.
The Contractor shall ensure that the bus is repainted in the area
within three days as per the specification of BEST.
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27) Under clause-4.1, the General Manager of BEST agreed
to provide, at its own cost, such support as may be required by each
bus to carry out advertisements in good condition. The clause does
not stipulate that every bus must be provided in good condition for
display of advertisement. The words 'good condition' is attached to
the word 'advertisement' and not to the word 'bus'. Furthermore,
Clause-4.1 does not provide for any rebate in the event of any bus
being not made available for advertisement due to damage.
28) Faced with the difficulty of absence of provision in the
contract Clause-4.1 for rebate in respect of buses which were not in
condition to display advertisements in 'good condition', Mr. Kotla
has submitted that Clause-4.1 identifies one of the eventualities
where display charges became non-leviable and the overarching
provision for rebate is to be found in Clause-1.3 of Schedule-VI.
According to him, the moment there is reduction in number of buses
available for display of advertisements, pro-rata rebate was
automatic under Clause-1.3 of Schedule-VI.
29) Schedule-VI under heading 'Scope of Work' stipulated
that the display charges were to be paid in lumpsum in accordance
with the schedule of prices in Schedule-VII under which bidders
were expected to quote net display lumpsum charges in respect of
3121 buses. Schedule-VI under heading 'Scope of Work' stipulated
following conditions:
1. SCOPE OF CONTRACT
1.1 This contract is for the sole right for display of advertisement
on Undertaking's buses on payment of monthly installments based
on lumpsum display charges offered for a given period, as offered
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by the tenderer as per Schedule of Prices, Schedule-VII and
according to the conditions given below:
1.1.1 The Undertaking shall have the right to increase and / or
reduce the number of depots, number of buses in a depot, scheduled
turnout and fleet composition at different depots, subject to the
total number of buses as mentioned below being made available and
to change the route/s of the buses displaying advertisements at its
sole discretion. The 100% buses may not be on road considering
their repair and maintenance. No claims shall be raised by the
Contractor against upkeep and maintenance of buses.
1.1.2 The Undertaking reserves right to vary number of buses
allotted for display of advertisement out of its total fleet for
specific/entire period of contract.
1.2 Initially 3121 buses of different seating capacity, make, model
etc. of the BEST Undertaking would available to the contractor.
However buses already under Public Private Partnership (PPP),
Electric buses, Hybrid buses, donated buses and buses given to
BEST in lieu of advertising rights or similar such considerations
will not be covered in this contract. Further, buses which are
specified (new Tata buses) for non-display during part/entire
contract period, will also be excluded from the scope of this tender.
1.3 The rebate / concession shall be granted to the contractor for
reduction in the fleet by way of pro-rata relief in the payment of
monthly rentals. If the fleet increases over the fleet allocated, the
contractor shall be charged on pro-rata basis. The Undertaking
reserves the right to allocate spaces other than those specified in
the attached tender documents, to any other contractor by issuing
a separate contract. The Undertaking may offer these spaces to the
highest bidder of this tender on pro-rata basis.
1.4 The area available for advertising purpose on buses is as per
the drawing attached.
30) It is the contention of Mr. Kotla that Schedule-VI
stipulations are overarching agreed conditions for rebate without
specifying the exact eventualities and that Clause-4.1 Schedule-III of
dealt with one such eventuality under which rebate was required to
be granted if the bus was not in good condition. I am unable to agree.
Under Clause-1.1.1 of Schedule-VI , BEST not only had right to
increase or decrease the number of buses, but it was also specifically
agreed between the parties that '100% buses may not be on road
considering their repairs and maintenance ' and that 'No claim shall
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be raised by the contractor against upkeep and maintenance of
buses.'
31) Clause-1.3 of Schedule-VI provided for rebate/concession
in respect of 'reduction in the fleet'. Clause-1.3 is in consonance with
Schedule-IX 'Terms of Payment' which prescribed following formula
under Clause-1.1:-
Payment of Monthly Rentals:
1.1 The contractor shall pay to the Undertaking the display charges
quoted by it in the "Form of Offer" by way of monthly installment in
advance on or before the first day of every month, by demand draft
or pay order or through RTGS/NEFT to be submitted to the Asst.
General Manager (Transportation Engineering).
The amount of monthly rentals shall be calculated as under:
Amount of monthly rental for the month=A
Total display charges quoted for 3121 [excluding new Tata buses
(185), Hybrid buses (25) & Electric buses (6) from current fleet of
3337 Buses] buses =
No. of months in a contract=36
Total fleet of the Undertaking before commencement of contract =
3121 Buses
Fleet of the Undertaking available for display of advertisement as
on first of the previous month =
A= B XC
36 x 3121
On failure to do so, besides other remedies open to the Undertaking
under this contract and at law, the contractor shall be required to
pay to the Undertaking interest as specified in clause no 24 of
General Conditions of Contract for the period from the due date of
payment till the date the payment is actually received (both days
inclusive) by the Undertaking. In case the payment is withheld
beyond the period of 30 days from the due date of payment, the
Undertaking shall be at liberty to terminate the contract without
any claim or compensation / refund by contractor under the
provisions of clause no. 26 of General Conditions of Contract.
32) Thus, 'fleet' of the undertaking available for display of
advertisement as on the first day of previous month' was the only
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determinative factor for variance in monthly display charges since
other figures of overall fleet size of 3121, tenure of 36 months of
contract and price quoted by the Petitioner remained static
throughout the contract. The words ' fleet of the undertaking
available for display' did not mean number of buses actually plying
on the road. If in the event, BEST decided to reduce the fleet by 500
buses, the monthly display charges would automatically get reduced
under the formula. Because in such event the fleet size reduces and
those number of buses go out of purview of contract. Petitioner has
misconstrued the word 'fleet' with the word 'buses'. The eventuality
of reduction in the number of buses in a fleet on particular
day/month is taken care of under Clause-1.1.1 of Schedule-VI
wherein no claim was to be raised by the Petitioner if the buses were
not available for plying due to 'upkeep' and 'maintenance'.
33) The Arbitral Tribunal has rightly construed the interplay
between the terms and conditions under Schedule-VI and Clause-4.1
of Schedule-III for holding that there was no provision in the tender
document or the contract for seeking de-notification of 966 buses.
The interpretation made by the learned Arbitrator in respect of
various contractual clauses upon their holistic reading is sound.
Even otherwise, interpretation of terms of contract is in exclusive
domain of the Arbitral Tribunal. Even if the interpretation suffers
from any error, it is an error within the jurisdiction of the Arbitral
Tribunal not warranting any interference in exercise of power under
Section 34 of the Arbitration Act. In the present case, however no
error is traced in the interpretation of contractual clauses by the
Arbitral Tribunal even upon a detailed scrutiny undertaken by this
Court on account of contentions raised by the Petitioner. In my view,
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therefore the Arbitral Tribunal has rightly rejected the claim of
4,67,42,372/- for rebate on damaged buses.
REJECTION OF CLAIM FOR REBATE OF RS.99,42,444 FOR 8 DAYS COVID
PERIOD
34) The Arbitral Tribunal has discussed this claim by
framing Issue No.7 which reads thus :-
Issue no. 7: Does the Claimant prove that under the 2019 Tender,
Respondent is obliged to provide rebate for the 8 day period from
March 24, 2020 to March 31, 2020 in view of COVID 19 pandemic
for an amount of Rs.99,42,444/-, as alleged or otherwise?
35) Respondent granted rebate in favour of the Petitioner on
account of Covid-19 pandemic vide two letters dated 28 June 2021
and 15 March 2022. The rebate was 100% from 1 April 2020 to 30
September 2020. It was again 100% from 1 October 2020 to 31
December 2020 as health-related advertisements were displayed by
MCGM on buses during that period. From 1 January 2021 to 28
February 2021, the rebate was 75%, and from 1 January 2021 to 31
March 2021 onwards the rebate was 50%.
36) Despite grant of substantial rebate, the Petitioner has
raised further claim for rebate for period of 8 days from 24 March
2020 to 31 March 2020 for Rs.99,42,444/-. The Arbitral Tribunal
has rejected this claim by referring to Clause-19(a) of the contract,
under which the obligation for Petitioner to pay monthly
advertisement charges remained continuous even on occurrence of
a force majeure event. The rejection of claim is thus in accordance
with contractual stipulations, and I do not find any reason to
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interfere in the findings recorded by the Arbitral Tribunal while
rejecting the claim for rebate in monthly display charges for 8 days.
Again, considering that the claim is only in respect of 8 days, the
rejection is not seriously challenged during the course of oral
submissions. It is therefore not necessary to delve deeper into this
aspect.
REJECTION OF CLAIM FOR REFUND OF EXCESS AMOUNT PAID BY PETITIONER
OF RS.14,45,33,204
37) This was a curious claim raised by the Petitioner by
misreading of contractual stipulations by mixing the concept of
'total fleet of undertaking' with 'buses made available for plying'.
According to the Petitioner, the Respondent made available the
details of operational buses on each day to the Petitioner during the
contract period, which reflected that the actual number of
operational buses were far lesser than the fleet size considered by
Respondent while computing monthly display charges under
formula envisaged in Schedule-IX. According to Petitioner, actual
number of buses which plied on first day of a month was
substantially lesser than the number of fleet size considered for
computation formula. Petitioner therefore believed that it was
charged excess monthly advertisement charges by BEST. According
to the Petitioner, the information supplied to it vide email by
Respondent showed substantial difference in the actual buses plying
on the road as compared to the fleet size considered for
determination of monthly display charges.
38) The above contention raised on behalf of the Petitioner
deserves rejection for the reasons which have been recorded for
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discussing the claim for rebate in respect of damaged buses. The
formula under Schedule-IX prescribed the method of computation of
monthly advertisement display charges, under which the contract
price of Rs.95.5 crores quoted by the Petitioner was required to be
divided by a number '36 x 3121' and the figure so arrived was
further required to be multiplied by the 'fleet of undertaking
available for display for advertisement' as on the first day of
previous month. Here the contract did not stipulate that the figure
'C' was to represent number of buses plying on the road. The number
'C' represented the size of the fleet made available for advertisement
by the Petitioner every month. This is because though Petitioner had
quoted contract price of Rs.95.5 crore for 3121 buses, the Petitioner
had right to reduce or increase the fleet size. The contract was to run
for 3 years. In the contract period, Respondent-BEST could have
reduced the fleet size on account of various reasons such as
discarding of buses and non-replacement thereof by new buses, non-
giving of business to the Petitioner for display of advertisements, etc
Therefore, the actual number of buses made available on the road on
a particular day has no significance for computing monthly display
charges. The Arbitral Tribunal has rightly rejected the claim for
alleged excess payment by adopting the reasonings in respect of
rejection of claim for rebate on damaged buses. Petitioner's criticism
of the Award by contending that separate reasons are not recorded
for rejecting claim for excess payment is clearly misplaced. The
reasons for discussing the claim for rebate for damaged buses and
claim for refund of excess payment in bound to be similar. Therefore,
no fault can be found in the Award of Arbitral Tribunal rejecting the
claim for excess payment.
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COUNTERCLAIM FOR INTEREST ON DELAYED PAYMENT CHARGES OF
RS.49,60,063
39) This claim has been discussed by the Arbitral Tribunal
while answering Issue No.11. However, answer to Issue No.11 also
depended on answer to Issue No.10, which related to counterclaim
raised by the Respondent in respect of delayed payment charges of
Rs.4,13,69,016/-. Issue Nos.10 and 11 were as under:-
Issue No.10: Does Respondent prove that the Claimant is liable to
pay Respondent a sum of Rs.4,13,69,016/- along with further
interest at the rate of 18% p.a. for the delayed payment charges, as
set out in the Respondent's Counter Claim?
Issue No.11: Does the Respondent prove that the Claimant is liable
to pay the Respondent a sum of Rs.49,60,063/- along with further
interest at the rate of 18% p.a. for the interest on the delayed
payment charges, as set out in the Respondent's Counter Claim?
40) While answering Issue No.10, the Tribunal noticed that
during pendency of arbitral proceedings, the outstanding amount
towards delayed payment charges were paid by the Petitioner. Para-
46 of the Affidavit of Evidence of RW1 reads thus :-
46. During the pendency of these proceedings, the three post dated
cheques of Rs. 1,00,00,000/- each have been provided by the
Claimant to the Respondent which have since been deposited on
December 9, 2022, December 24, 2022, and January 8, 2023,
respectively. A further cheque for INR 1,06,75,543 was also
provided on January 24,2023 which has also been encashed.
Accordingly, after giving credit for the amount of those cheques,
further delayed payment charges, as also a further rebate of INR
36 Lakh given for buses which had gone for bodybuilding, the total
amount due from the Claimant to the Respondent on this count is
nil.
41) Thus, the claim for recovery of delayed payment charges
was recorded as satisfied. However, the amounts were paid on
different dates as indicated in para-46 of affidavit of evidence of
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RW1. Therefore, the Respondent continued pressing its claim for
interest of Delayed Payment Charges (DPC).
42) The contract did not provide for any fixed sum to be paid
towards delayed payment charges. The delayed payment charges by
itself represented interest at stipulate rates. It would be apposite to
reproduce clause-24 of Schedule III, which reads thus :-
24. Non-payment of charges : The GST is payable on accrual basis
after raising invoices/bills to the parties to avoid non compliance of
statutory provisions. The delayed payment charges on any sum due
and payable by the contractor to the Undertaking, shall be payable
@ 18% p.a. for the first six months, 24% p.a. for the next six months
and 30% p.a. for delay beyond one year irrespective of the fact
whether the said condition is mentioned hereinabove or not.
Moreover, if the contractor fails to pay interest on delayed
payment within three months then the additional interest @ 18%
p.a. will be levied on such outstanding interest.
43) Thus, under Clause-24 of Schedule-III, delayed payment
charges in respect of any sum payable to BEST was fixed @ 18% p.a.
for first 6 months, 24% p.a. for the next 6 months and 30% p.a. for
delay beyond one year. There is no dispute to the position that
delayed payment charges as per agreed rate of interest is actually
paid by the Petitioner to the Respondent. However, Respondent
claimed interest on delayed payment charge which virtually
tantamounts to 'interest on interest'.
44) Clause-24 of Schedule-III of the contract provided that
'moreover if the contractor fails to pay interest on the delayed
payment within 3 months, then the additional interest @ 18% p.a.
will be levied on the outstanding interest'. Clause-24 itself makes it
clear that what is claimed by the Respondent is interest on interest.
This is because Clause-24 made the Petitioner liable to pay interest
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at the rate of 18% p.a. on ' outstanding interest', if Petitioner failed to
pay 'interest' on delayed payment charges.
45) Clause-24 of Schedule-III, so far as it relates to
stipulation for 'interest on interest' provision, appears to be a bit
confusing. The first part of Clause-24 of Schedule-III makes the
contractor liable to pay delayed payment charges at hefty rates i.e.
@ 18% p.a. for first 6 months, 24% for next 6 months and 30%
beyond one year. The second part of Clause-24 applies when
contractor fails to pay interest on delayed payment within 3 months,
in which eventuality additional interest of 18% was leviable.
46) Thus, under the first part of Clause-24, liability to pay
interest continues for delay in paying monthly display charges. To
illustrate, if monthly display charges of Rs.1 crore are due and
payable on 1 January 2020, the Contractor is liable to pay interest @
18% p.a. upto 30 June 2020 which increased to 24% from 1 July
2020 and thereafter 30% from 1 January 2021. However, second
part of Clause-24 makes it mandatory to pay further interest on
amount of interest which becomes leviable within a period of 3
months. This would mean that if Rs.1 crore payable on 1 January
2020 is not paid by 31 March 2020, interest of Rs.4,50,000/- for
months of January, February and March becomes due and payable.
If by 1 April 2020 also, due amount of Rs.1 crore is not paid, in
addition to liability to pay 18% interest on amount of Rs.1 crore,
additional interest on unpaid interest of Rs.4,50,000/- would become
payable under the second part of Clause-24. This dual method of
charging interest appears to be confusing and assumes character of
absurdity when due amount is not paid within the first three
months. There thus appears to be some ambiguity in Clause-24 of
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the contract and considering the facts and circumstances of the
case, it would be appropriate to relieve Petitioner of responsibility of
paying interest on interest under Clause-24.
47) The Learned Arbitrator has not entered into the realm of
interpretation or construction of Clause-24. Therefore, the award of
claim cannot be upheld by granting leeway to the learned Arbitrator
in the matter of interpretation of contractual clause. It is not that
Clause-24 is plain and unambiguous. There is an ambiguity in
Clause- 24, which the learned Arbitrator has failed to resolve. Not
undertaking the exercise of understanding the exact import of
Clause-24 by the learned Arbitrator would constitute a ground for
interference in the award. Awarding 18% interest on hefty delayed
payment charges of 18%, 24%, 30% is actually contrary to the first
part of Clause-24 and even otherwise in conflict with public policy of
India and in contravention with fundamental policy of Indian law. In
my view, therefore award of claim for interest on delayed payment
charges of Rs. 49,60,063/- in favour of Respondent is invalid and
liable to be set aside.
AWARD OF RESPONDENT'S COUNTERCLAIM FOR RTO FEES OF RS.46,78,000
48) This counterclaim is discussed in Issue No.12 by the
learned Arbitrator. The learned Arbitrator took into consideration
para-3 of letter dated 23 January 2019 which reads thus :-
You shall pay Rs. 1,87,26,000/- through RTGS/NEFT/DD towards
RTO advertisement fees for three years before commencement of
contract or pay Rs. 62,42,000/-through RTGS/NEFT/DD towards
RTO advertisement fees for first year before commencement of
contract. For each subsequent years you shall make the payment
atleast three months in advance from due date, subject to the
revision of advertisement fees by the RTA.
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49) Petitioner accuses the learned Arbitrator of ignoring
contractual Clause-14.2.1 of Schedule-III which reads thus :-
14.2.1 The RTO's present advertisements fees are ₹2000/- per bus
per year. For this purpose, the contractor shall:
a. deposit 1,87,26,000/- by Demand Draft or through RTGS / NEFT,
towards RTO advertisement fee for 3 years for 3121 buses or at
actual for entire fleet, before commencement of contract. OR
b. deposit 62,42,000/- or at actual by Demand Draft or through
RTGS / NEFT, towards RTO advertisement fee for 1st year before
commencement of contract and deposit RTO advertising fee of
62,42,000/-, or at actual for every subsequent years by way of DD,
NEFT/RTGS payment for each year atleast 3 months in advance
from due date of payment. The deposit towards RTO fees shall carry
no interest.
c. The contractor shall not be allowed to display advertisement on
buses unless and until deposit towards RTO fees is paid as
mentioned above.
50) The difference between para-3 of letter dated 23 January
2019 and Clause-14.2.1 of Schedule-III of general conditions of
contract is that the words 'or at actual for every subsequent years '
are missing in para-3 of letter dated 23 January 2019. In my view,
even if it is accepted that the Arbitral Tribunal has not taken into
consideration the above quoted words 'or at actual for every
subsequent years' appearing in Clause-14.2.1, the same would not
have any effect on the outcome of the award. So far as counterclaim
for recovery of RTO charges is concerned, the expression ' or at
actual for every subsequent years ' would mean the applicable RTO
charges for subsequent years. The Petitioner had an option of
depositing the entire RTO charges of Rs.1,87,26,000/- for 3 years
upfront computed at the rate of Rs.2000 /- per bus per year. If
Petitioner either did not have such amount or did not desire to
deposit the entire amount of Rs.1,87,26,000/- upfront, it could
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exercise the option of depositing amount of Rs.62,42,000/- for first
year and take the risk of paying the actual charges as determined by
RTO for subsequent years. The words 'at actual' would mean the
rates determined by RTO during subsequent years. If RTO was to
revise the charges and increase it beyond Rs.2000/- per bus per
year, the contractor would take the risk of paying the same to RTO.
This is the true purport of Clause-14.2.1 of the contract. The words
'or at actual' did not mean payment of RTO charges depending on
number of buses. RTO was not supposed to verify as to how many
buses were made operational each year for the purpose of
determination of charges. Petitioner undertook to pay RTO charges
of Rs.2,000/- per bus per year in respect of the entire fleet of 3121
buses under the contract. It cannot now turn around and contend
that the RTO charges in respect of actual number of buses plying
alone would be payable. It cannot contend that since buses did not
ply during COVID pandemic, no RTO fees were payable.
51) Similarly, Petitioner cannot demand proof of payment of
RTO charges by Respondent to RTO. The learned Arbitrator has
rightly considered the indemnity offered by the Petitioner for
holding that obligation to indemnify the Respondent in respect of
RTO fees comes into play immediately upon fructification of
obligation to pay RTO fess by the Petitioner by enforcing contract of
indemnity. It is not necessary to prove that the sum in respect of
which indemnity is offered is actually paid or not. For holding so,
the Arbitral Tribunal has relied upon judgments in the case of
Gajanan Moreshwar Parelkar Versus Moreshwar Mandan Manti 3 ,
Khetarpal Amarnath Versus. Madhukar Pictures 4, Jet Airways
3 ILR 1942 Bom 672
4 AIR 1956 Bom 106
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(India) Limited Versus. Sahara Airlines Limited and Others 5and
Reliance Industries Limited Versus. Balasore Alloys Limited 6.
52) Having expressly agreed to pay the RTO fees either at
Rs.62,42,000/- per year or as per actual rates charged by RTO,
Petitioner cannot now turn around and seek an escape from
contractual obligation by citing pretext of COVID pandemic or non-
production of proof of actual payment of fees by Respondent to RTO.
I therefore do not find any reason to interfere in the award of
counterclaim in respect of RTO fees in favour of the Respondent.
AWARD OF CLAIM FOR DEFACEMENT CHARGES OF RS.37,29,000
53) Under Clause-21 of Schedule-III of the contract,
Petitioner had agreed for withdrawal of all the advertisements from
buses upon expiry of the contract. Clause-21 of the contract reads
thus :-
21. Withdrawing of advertisements from buses on expiry of the
Contract:
The contractor shall deface / remove all the advertisements
displayed on the buses prior to the expiry or premature
termination of the contract. On default of the contractor, the said
advertisements shall be removed / defaced by the Undertaking and
the cost of such departmental work shall be borne by the contractor
in the manner as mor specifically explained in Clause No. 5 of
General Conditions of Contract. In addition, the contractor shall be
liable for a penalty of 1000/- per day, per bus till the day the
advertisements is actually defaced / removed.
54) Thus, under Clause-21, Petitioner was under obligation
for defacement/removal of advertisements displayed on the buses
prior to expiry or on premature termination of the contract. If
Respondent was to remove the advertisements, the same were to be
5 2011 SCC Online Bom 576
6 2014 14 SCC Online Bom 43
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defaced/removed at the costs of the Petitioner. In addition to bearing
the costs of removal of advertisements, the Petitioner was made
liable for penalty of Rs.1,000/- per day per bus till the
advertisements were actually defaced/removed.
55) There is no dispute to the factual position that the
advertisements on the buses were actually not removed by the
Petitioner. This was not done possibly because the Petitioner had
participated in the fresh tender. There is also no dispute to the
position that the Petitioner emerged as successful bidder even in the
fresh tender and has been awarded the very same contract once
again vide work order dated 12 May 2022. There appears to be a gap
of about 3 months between the two contracts. In anticipation of
award of new contract, possibly, Petitioner did not remove all the
advertisements from the buses. Respondent applied penalty clause
of Rs.1,000/- per day per bus and raised counterclaim of
Rs.37,29,000/-. The particulars of counterclaim filed by the
Respondent in support of its claim for defacement charges are
absolutely vague. Respondent filed following particulars in support
of its claim for defacement charges :-
PARTICULARS OF CLAIM FOR DEFACEMENT CHARGES
SR. NO. Particulars of Claim Amount (Rs.)
1. Penalty payable for Defacement Charges 37,29,000
as on November 25, 2022
The Claimant is liable to pay Rs. 37,29,000 (Rupees Thirty Seven Lakhs Twenty
Nine Thousand only) along with further interest at 18% from November 25, 2022
till payment and / or realization.
56) Thus, no particulars were given as to how the figure of
Rs.37,29,000/- was worked out.
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57) The learned Arbitrator has awarded entire claim of
Rs.37,29,000/- towards defacement charges. Petitioner argued
before the learned Arbitrator that penalty for defacement stipulated
in the contract could not be awarded without first proving legal
injury in the form of loss suffered by the Respondent. Reliance was
placed by the Petitioner on judgment of the Apex Court in Kailash
Nath Associate (supra).
58) In Kailash Nath Associate the Apex Court has held that
in para-43.1 as under :-
43.1. Where a sum is named in a contract as a liquidated amount
payable by way of damages, the party complaining of a breach can
receive as reasonable compensation such liquidated amount only if
it is a genuine pre-estimate of damages fixed by both parties and
found to be such by the court. In other cases, where a sum is named
in a contract as a liquidated amount payable by way of damages,
only reasonable compensation can be awarded not exceeding the
amount so stated. Similarly, in cases where the amount fixed is in
the nature of penalty, only reasonable compensation can be
awarded not exceeding the penalty so stated. In both cases, the
liquidated amount or penalty is the upper limit beyond which the
court cannot grant reasonable compensation.
59) In Anila Gautam, (supra) the Division Bench of this court
has held in paras-25 to 27 as under :-
25. The learned Arbitrator acted contrary to the basic requirement
of law when more particularly when one of the claims being of a
penalty for breach of the contract which was surely required to be
proved as per the requirement of Section 73 of the Contract Act.
Admittedly, on this claim of penalty the respondent did not lead
any evidence. On the other hand, the appellant not only disputed
the documents on the basis of which the respondent had made the
claim for penalty but also had filed her affidavit of evidence and was
ready and willing to be cross-examined. In this situation, it would
have been prudent as also a requirement of law for the learned
Arbitrator to consider whether the respondent either on oral
and/or documentary evidence, proved its claim for
penalty/damages as also the other claims. Further when there was
a dispute on reconcilliation of accounts, then, the learned arbitrator
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himself ought to have gone into the issue of reconcilliation and on
the basis of evidence, the monetary liability could have been
fastened on the appropriate party to the dispute.
26. This is a case where the respondent asserted breach of contract
(dealership agreement) on the part of the appellant and as a
consequence of a breach of contract, the respondent made a
counter-claim inter-alia seeking penalty and other claims which
pertain to variation of stock, debit balance of the account between
the parties. Once a claim for penalty is made, then necessarily the
provisions of Chapter VI of the Contract Act which deal with
consequence of breach of contract and the provisions of Sections 73
and 74 of the Contract Act which deal with award of compensation
when a party suffers on account of breach of contract and
compensation for breach of contract when penalty is stipulated in
the agreement itself respectively, are attracted. It cannot be
disputed that a liability to pay damages must arise under the
contract and not otherwise. The Arbitrator has power to decide the
question of liability for a particular amount as damages. In the
assumption of damages, the arbitrator was required to consider the
legal obligations the law would confer on the parties to prove such
claims. Once there was no evidence on record, oral or documentary,
which could prove the damages suffered by the respondent, then,
certainly it can be said that there was a patent illegality on the face
of the award. All these requirements have been completely
overlooked by the learned Arbitrator.
27. In our opinion, the learned arbitrator has gravely faltered in
overlooking the fundamental provisions under Section 73 of the
Contract Act, namely unless the party proves the damages suffered
by it on account of breach of contract, it is not entitled to any
damages on compensation. If the counter claims of the respondent
are to be seen in the context of clauses 5, 6, 10, 11, 12, 24(a),
28B(a) and B(k), B(g), B(h), these are claims which can be only
proved on evidence and in event any claim for damages/penalty on
these breaches has to be on the proof of damages suffered in the
absence of any liquidated damages agreed between the parties.
Even if the parties were to agree on a quantum of liquidated
damages, the party claiming such damages was required to prove
the actual damage suffered by it. (See "Kailash Nath Associates v.
DDA" 1).
60) Thus, under the contract, where an amount is fixed in
the nature of penalty, only reasonable compensation can be awarded
not exceeding the penalty so stipulated. However, though the
submission is noted, the learned Arbitrator has not decided the
same. Petitioner had specifically contended before the learned
Arbitrator that Rs.1,000/- per day per bus stipulated in Clause-21 of
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Schedule-III of the contract was not agreed genuine pre-estimate of
damages. In Kailash Nath Associates, the Apex Court has held that
a sum named in the contract as liquidated damages can be claimed
as a reasonable compensation only if it is genuine pre-estimate of
damages fixed by both the parties and found to be such by the Court.
Clause-21 of Schedule-III of the contract does not stipulate that
Rs.1,000/- per day per bus is a genuine pre-estimate of damages
agreed by both the parties. The learned Arbitrator has completely
glossed over this vital aspect and has erroneously awarded the
counterclaim for defacement charges by recording following findings
in para-22.3 and 22.4 :-
22.3 In the written arguments it is mentioned by the Claimant that
the Respondent cannot be permitted to make a case for the
imposition of defacement charges in the form of liquidated damage,
without first proving the legal injury in the form of loss suffered by
it. In support of these submissions Claimant placed reliance on the
following Judgments:
1) (2015) 4 SCC 136.
Kailash Nath Associates v Delhi Development Authority
2) 2023 SCC OnLine Del 6097.
Sudershan Kumar Bhayana (Deceased) v Vinod Seth
(Deceased),
Applying the the principles of the above authorities to the
present matter following submissions were made by the
aimant in its written arguments.
7.22. The Respondent has not placed anything on record to
demonstrate that there was a delay in defacing the buses.
7/23. The Respondent has neither pleaded nor proved that
the Respondent has suffered any damages or incurred any
loss on account of delay in defacing the buses. In this regard,
it is submitted that the Claimant was also awarded the
subsequent tender to display advertisements on the
Respondent's buses, and as such, no loss could have been
caused to the Respondent.
7.24. In the Tender, it does not state that the liquidated
damages of Rs 1000/- per bus per day as stipulated in Clause
21 of the Tender is a genuine pre-estimate of damages likely
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to be suffered by the Respondent in case of delay in
defacement of the buses upon expiry of the Contract. The
Respondent has neither pleaded nor proved that it is difficult
or impossible of to prove the loss.
7.25. Therefore, it is submitted that the Respondent is not
entitled to the defacement charges in the form of liquidated
damages.
22.4 The submissions on behalf of the Claimant are required to be
analyzed in juxtaposition of pleadings of the parties and specifically
pleadings of the Claimant on this Issue and overall effect of the
substantive evidence of RW-1 including his cross examination.
More over the factual position cannot be lost sight of as to terms
and conditions of Tender document, Contract document and other
correspondence between the parties. Further it must be understood
that imposing of 'penalty' which is quantified and agreed as per the
terms of the Tender document is factually a part of the contractual
arrangement between the parties. In the result the submissions
advance by learned counsel on this aspect shall not sustain.
Accordingly, it is held that Respondent has proved this Issue No.13
and the same is accordingly answered in the affirmative.
61) Admittedly, no evidence is led by the Respondent to
prove cause of any loss to it on account of non-removal of
advertisements. Since the sum named in Clause-21 of the contract
was not agreed as genuine pre-estimate of damages by the parties, it
was incumbent on Respondent to prove the cause of loss. In my
view, therefore award of counterclaim for defacement charges by
the Arbitral Tribunal is contrary to contractual Clause-21 and
provisions of Section 74 of the Contract Act,1872 (Contract Act).
62) Even otherwise, the Respondent has not actually faced
any loss on account of non-removal of advertisements by the
Petitioner since the Petitioner was awarded the contract for next
tenure. Therefore, merely because some advertisements remained
on the buses after expiry of earlier contract, it cannot be presumed
that any loss was caused to the Petitioner. There is nothing on
record to indicate that Respondent got the advertisements removed
by incurring of any expenditure. Therefore, in the peculiar facts and
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circumstances of the case, claim of defacement charges by the
Respondent from the Petitioner would actually constitute unjust
enrichment.
63) In my view, therefore the award of defacement charges
of Rs.37,29,000/- by the Arbitral Tribunal cannot be sustained and
the same is liable to be set aside.
AWARD OF COSTS
64) The Arbitral Tribunal has awarded costs of
Rs.48,20,000/- in favour of the Respondent under Section 31A of the
Arbitration Act. Thus, the Arbitral Tribunal has applied the
yardstick of Respondent being the successful party and has
accordingly awarded entire costs claimed by the Respondent.
However, two of the counterclaims awarded in favour of the
Respondent are found to be invalid. In my view therefore,
Respondent is not completely successful in the arbitration
proceedings. In that view of the matter, it would be appropriate to
restrict the amount of costs at Rs.25,00,000/-, which can be
awarded in favour of the Respondent.
POST AWARD INTEREST @ 10% P.A.
65) The Arbitral Tribunal has awarded interest @ 10% p.a. on
the sums awarded in favour of the Respondent from the date of the
award. This Court has already set aside the award relating to
interest on delayed payment charges and defacement charges. This
would mean that award in respect of RTO fees of Rs.46,78,000/-
alone is confirmed. Therefore Petitioner would be liable to pay 10%
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interest from the date of the award only on counterclaim relating to
RTO fees. I find no reason to interfere in the said direction.
SEVERANCE OF BAD PART FROM GOOD PART
66) The Constitution Bench in Gayatri Balasamy Versus ISG
Novasoft Technologies Ltd.7 has ruled that the court exercising
power under Section 34 of the Arbitration Act can modify the award
by severing the good part of the award from the bad part. In the
present case, award of only two claims relating to interest on delay
payment charges and defacement charges is being set aside. Rest of
the award is being confirmed. Bad part of the Award relating to
interest on delayed payment charges and defacement charges is not
inseparably intertwined with the good part of the award. Therefore,
bad part of the Award can be separated from good part by modifying
the Award.
ORDER :
67) I accordingly proceed to pass the following order :
The Award dated 2 January 2024 passed by the Arbitral Tribunal is modified to the following extent :
(i) The Award of counterclaim in favour of the Respondent towards interest on delayed payment charges of Rs.49,60,063/- with interest @ 18% p.a. is set aside.
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(ii) Award of counterclaim in favour of the Respondent towards defacement charges in the sum of Rs.37,29,000/- alongwith interest @ 18% p.a. is set aside.
(iii) Amount of costs awarded by the Arbitral Tribunal are reduced to Rs.25,00,000/- which shall be payable by the Petitioner to the Respondent along with interest @ 10% from the date of the Award.
(iv) Rest of the Award is confirmed.
68) Arbitration Petition is partly allowed to the above extent. Considering the facts and circumstances of the present case, I consider it appropriate not to award any further costs in the present Arbitration Petition.
69) With disposal of the Petition, nothing would survive in the Interim Application taken out for stay of the impugned order. The same also stands disposed of.
Digitally
signed by
NEETA [SANDEEP V. MARNE, J.]
NEETA SHAILESH
SHAILESH SAWANT
SAWANT Date:
2025.12.04
18:30:14
+0530
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