Bangalore District Court
M/S Sharavathy Conductors Private ... vs The Superintending Engineer, Ele on 31 July, 2024
1
Com.A.P.No.119/2023
IN THE COURT OF LXXXII ADDL.CITY CIVIL &
SESSIONS JUDGE, AT BENGALURU (CCH.83)
THIS THE 31st DAY OF JULY 2024
PRESENT:
SUMANGALA S BASAVANNOUR., B.COM, LL.M.,
LXXXII ADDL.CITY CIVIL & SESSIONS JUDGE,
BENGALURU.
Com.A.P.No.119/2023
BETWEEN:
1. M/s Sharavathy
conductors Private
Limited, Had its
registered office at
No. 23, Bangalore
Co-operative
Industrial Estate, 6h
mile, Old Madras
Road, P.B. NO. 1609,
Bangalore - 560 016,
now having its
registered office at
No. 4A, KIADB
Industrial Area,
Chokkahalli, Hosakote
Taluk, Bengaluru
Rural District - 562
114, represented by
its Managing Director,
Mr. Kaardam Patel.
2
Com.A.P.No.119/2023
: PETITIONERS
(By M/s Tapas Law,
Advocate)
AND
The Superintending
Engineer, Ele.,
Tendering and
procurement, Hubli
Electricity Supply
Company Limited,
Hubli - 580 029..
: RESPONDENT
(Represented by Smt.
Sumana Naganand
Advocate)
Date of Institution of the suit 19.08.2023
Nature of the suit (suit on
pronote, suit for declaration & Petition for setting aside
Possession, Suit for injunction Arbitral Award
etc.)
Date on which judgment was 31.07.2024
pronounced
Total Duration Year/s Month/s Day/s
00 11 12
(SUMANGALA S BASAVANNOUR),
LXXXII Addl. City Civil & Sessions Judge,
Bengaluru.
3
Com.A.P.No.119/2023
JUDGMENT
This is a Petition filed by the petitioner under Section 34 of the Arbitration & Conciliation Act, 1996 and Petitioner prays that to set aside the award dated 24.02.2023 and direct the Respondents to pay the interest on delayed payment as claimed by the Petitioner and to which the petitioner lawfully is entitled to.
2. The Brief facts of the Plaint are as follows:-
The Petitioner is a small scale industrial unit, carrying on the manufacturing of ACSR, AAA, AAC, conductors, Earth Wire and GI stay wire. The Respondent issued a Purchase Order bearing No. 1702 dated 11.06.2009 and awarded the tender to Petitioner and the Petitioner accepted the purchase order issued by the Respondent. The Petitioner supplied the required materials within the stipulated period as per the purchase order placed by the Respondent and raised the 90% bills amounting to Rs.1,40,99,189/- on the Respondent. However, the Respondent made the payment of bills after the delay of upto 200 days and on calculating interest as per section 16 of the MSMED Act, the amount of interest works out as on 30/04/2010 sum of Rs.24,47,892/-. As on 31/07/2023, the total interest due is 4 Com.A.P.No.119/2023 Rs.2,11,69,129/-. The Respondent vide its letter dated 14/04/2010, to make the interest on delayed payment. However, the Respondent neither replied to the letter nor made any payment of interest till date. The Petitioner approached the MSMEFC vide Case No.07/2010 for seeking direction on outstanding interest on delayed payment. The MSMEFC rejected the claim without assigning any proper reason by observing that the Petitioner has failed to establish its case. Being aggrieved by the Award passed from MSMEFC, the Petitioner preferred an Arbitration Suit bearing A.S.No.38/2011 before the Hon'ble City Civil and Sessions Judge at Bangalore and for lack of territorial jurisdiction, to be presented before the competent court. The Petitioner preferred Arbitration Suit bearing No.1/2017 before the Principal District and Sessions Judge at Dharwad under section 34 of the Arbitration Act, for setting aside the award dated 19/02/2011. The Respondent being aggrieved by the order of the Trial Court in AS No.1/2017 preferred a Miscellaneous First Appeal bearing No.102014/2020 under section 37 of the Arbitration Act before the Hon'ble High Court of Karnataka at Dharwad Bench. The Hon'ble High Court allowed the Appeal on 18/08/2020, in part and modified the Order dated 17/02/2020 in A.S.No.1/2017 and 5 Com.A.P.No.119/2023 remitted back the matter to the MSMEFC council with direction to reconsider the matter after hearing the parties afresh on all such contentions which the parties may raise. Facts being so, the Petitioner re-approached the MSMEFC on 18/03/2020 and the MSMEFC passed an Order on 01/10/2020 to approach the Arbitration Centre for re- consideration under Section 18(3) of the MSMED Act along with the records. Based on the reference made by the MSME Facilitation council, the Arbitration Centre having appointed the Learned Sole Arbitrator. The learned arbitrator passed an award on 24.02.2023, by rejecting the claim of the claimant/petitioner on the ground that the petitioner has failed to prove that it has complied with all the conditions enumerated in clause No.4 of Schedule A, with regard to the supply of materials ordered. The aggrieved by the award, the petitioner preferred an application under Section 33 (1)
(a) and (b) for the interpretation of the award on 29.03.2023, with 2 days delay. The same has been disposed with the presence of the parties, on 24.05.2023, by rejecting the application under Section 5 of the limitation Act, and also that the learned arbitrator has no power to consider or entertain the application filed by the petitioner under Section 33 of the Arbitration Act.6
Com.A.P.No.119/2023
3. The petitioner has challenged the award on following;
GROUNDS
1. The award suffers from several defects including patent illegality and being contrary to the public policy. The award ought to be set aside under Section 34 of the Arbitration Act on the grounds.
2. The Petitioner with the enactment of the MSMED Act 2006, for the goods and services supplied by the MSME units, payments have to be made by the buyers as per Section 15 and 16 of the MSMED Act.
3. The buyer is to make payment on or before the date agreed on between him and the supplier in writing or, in case of no agreement, before the appointed day. The agreement between seller and buyer shall not exceed more than Forty Five (45) days. In the instant case the delay is for more than 200 days, hence the petitioner is entitled for interest.
7Com.A.P.No.119/2023
4. The Hon'ble Trial Court at Dharwad in AS No.1/17 has specifically pointed that the Arbitral tribunal/MSME Council in Case No. 7/2010 has failed to consider the Documents submitted by the Petitioner and that the Document and other Material would goes to show that the Petitioner is a Small Scale Industry within the meaning of Section 7(1)(a)(ii) of MSMED Act, therefore they are entitled for benefit of Section 16 of the said Act.
5. It is to be noted that the full payment of 90% as per the payment terms stipulated in Clause 4 of Schedule A has been made by the Respondent, after the Petitioner submitting all the documents as stipulated in Clause 4 of Schedule A, the payments were released.
6. Further, the very fact that the Respondent has made delayed payment for the Invoices raised by the Petitioner proves beyond doubt, that the Petitioner has submitted all the documents as per the Schedule. As per sec 2 (II) of the MSME Act, "the day of deemed acceptance" means, where no objection is made in writing by the buyer regarding 8 Com.A.P.No.119/2023 acceptance of goods or services within fifteen days from the day of the delivery of goods or the rendering of services, the day of the actual delivery of goods or the rendering of service. In the instant case there is no letter or objection from the Respondent till date, with respect to the required documents for payment, hence, it is deemed acceptance of the Respondent that they have received the documents as per Clause 4 of Schedule A.
7. The Clause No. 4 of the Schedule A, the relevant portion.
8. The petitioner has already submitted the invoice in duplicate, stamped and pre-receipted before the learned arbitrator and the same was not marked as the same was a copy only with petitioner and the original was with the respondent and continuous to be in the possession of the respondent.
9. The process of the delivery challan which is acknowledged and signed by the several of the 9 Com.A.P.No.119/2023 employees of the respondent would again be available in the original copy with the respondent alone. The Petitioner would only be given a duplicate challan.
10. The MAS is a very detailed process followed by the respondent wherein the following Nos. and dates of the purchase order, invoice, delivery challan, B.R. No. Receipt voucher, store inspection, the details of the conductors, quantity, Drum Nos. would all be first entered by the storekeeper and verified by the store officer who would then stamp and acknowledge the entries which would then be further verified by the executive engineer who would also put his stamp and seal.
11. The Ld. Arbitrator has failed to appreciate that balance 10% value does not require any documents as mentioned above which confirms patent illegality appearing on the face of the award. Further the terms of the payment is crystal clear that the aforesaid documents from point (i) to (vil) had to be furnished / submitted to the consignee division of the Respondent for releasing the 10 Com.A.P.No.119/2023 payments. Hence the documents enumerated above were with the possession of the Respondent and the Ld. Arbitrator has committed a grave mistake by not considering the very factum of the same and hence the award is vitiated by patent illegality.
12. The Ld. Arbitrator has grossly erred in not considering the fact that the burden lay on the Petitioner to put forth before the Ld. Arbitrator the case on hand, the onus of the producing the original lay on the Respondent. The Ld. Arbitrator failed to observe self-explanatory Clause 4A second para where in it was clear that the petitioner had to submit the documents to the Respondent for consideration of the 90% payment, therefore the Lil. Arbitrator could not have held that it was for the petitioner to have produced the documents which he failed to do. The Gross error in understanding the terms and requiring the petitioner to have to have produced the documents and weighing the entire case on non-production of documents was gross illegality and error. Therefore the observations vitiated by a Patent illegality.
11Com.A.P.No.119/2023
13. The Ex, P16 as contented by the Respondent is not a creation of the claimant, the same has been prepared and filed by the Respondent as Annexure - R5, and the Petitioner clarified the irregularities in Annexure-R5 with justification in the last two columns, which was confronted to PW1 during his cross and marked as Ex-P16. The same was neither opposed nor objected to by the Respondent and no Justification was made by the Respondent to the explanation given by the petitioner on the right hand side of the column of Ex-P16. The Ld. Arbitrator could not have suo moto ignored this vital document, by only relying on the left hand side of the document wherein the Respondent has made some unjust justifications which were controverted by the Petitioner on the right side Column. The column on the right side which dealt with the reasoning of the Petitioner were not at all gone into by the Ld. Arbitrator.
14. In Ex.P.13, Respondent's Letter dated 12.11.2009, containing the preamble, the relevant portion.
12Com.A.P.No.119/2023
15. The petitioner had submitted the firm has supplied the last consignment against subject DI to Bijapur Division on 14.10.2009. Hence there was a total delay of 14 days in supply of conductor. The firm had requested to condone the delay without levy of penalty since they had offered for inspection within the schedule, but the respondent without acknowledging the fact that there was a delay on their part proceeded to state that the 14 days delay has been condoned. Therefore, it was not act of gracious ness on the part of the respondent, it was the act of the respondent to have condoned their own delay which is forthcoming on the top portion of the very same document.
16. The learned arbitrator without understanding the basic fact that it is not the delay on the part of the petitioner, but delay on the part of the respondent. However, the learned arbitrator erred in understanding the same and in its order in para 24, shifts the burden.
17. The learned arbitrator could not have gone into this issue that the petitioner was not prompt in 13 Com.A.P.No.119/2023 supplying as that was not an issue at all raised by the Respondent. Therefore the learned arbitrator could not have used that as an excuse to deny the petitioner his interest.
18. The Petitioner has produced relevant documents to prove the delay of 200 days in making the payment to the Petitioner by the Respondent. However, the Ld. Arbitrator has failed to appreciate the evidence and the documents produced before him. The Ld. Arbitrator has categorically stated that the Respondent was compassionate toward the Petitioner by not imposing any penalty on the Petitioner. The Ld. Arbitrator misplaced sympathy for the Respondent and giving the Respondent credit for having not imposed any penalty on the delay of the petitioner was itself by itself an Incorrect and misinterpreted finding as the petitioner has already put forth before Hon'ble Tribunal the details of Ex-P9 to P13, which by the documents themselves reveal that the delay on the part of the Respondent and not the petitioner and therefore giving the Respondent clean chit was Incorrect.
14Com.A.P.No.119/2023
19. The Ld. Arbitrator has ousted his power to negate the Issue No.2 by mere statement of the Claimant/Petitioner witness and has actually failed to render an appropriate justification for rejecting the claim of the Petitioner. The Entire finding of the Ld. Arbitrator with respect to Issue No.2 "whether the claimant proves that it is entitled for interest as per sec. 16 of the MSME Act. 2006?", was entirely hinged on production of documents as enumerated in Clause 4 of Schedule A. However, as reiterated, the onus of furnishing those documents lay on the Respondent and not on the petitioner. Therefore having denied the petitioner their interest on delayed payments based on misreading and misunderstanding of the Ld. Arbitrator.
20. The petitioner requested the respondent vide letter dated 14.04.2010 (Ex.P.5) to make the MSEFC counsel.
21. The letters dated 15.07.2009 (Ex.P.15) and 29.07.2009 (Ann-R4), are extremely clear that, the petitioner have accepted the terms and conditions of the Tender & P.O and not waived their right for 15 Com.A.P.No.119/2023 the delayed payment, Section 16 of the Act is a non-obstante clause and as it is a special statue brought by the parliament to protect the interest of the petitioner industry.
22. The very fact that the respondent has made delayed payment for the invoices raised by the Petitioner proves beyond doubt, that the petitioner has submitted all the documents as per the schedule immediately after deliver of the goods.
23. In the instant case there is no letter or objection from the respondent till date, with respect to the required documents for payment, hence, it is deemed acceptance of the respondent that the have received the documents as per clause 4 of Schedule A.
24. The learned Arbitrator has further gone to the extent of ruling that the petitioner has not submitted documents as per clause 4 of schedule A. However, the learned arbitrator has failed to take note of the fact that the payment would be released by the respondent if and only if the documents 16 Com.A.P.No.119/2023 were submitted in consonance with clause 4 of schedule A.
25. On the other hand the learned arbitrator has drawn an adverse inference against the petitioner that the petitioner has not placed any acceptable material to discharge its initial responsibility of having submitted all the documents stipulated in clause 4 of Schedule A. This reasoning of the arbitrator lacks from application of mind in passing a judicious award, and is perverse when the petitioner has approached under MSMED Act, section 16 kicks in as soon as the respondent fails to make payment to the petitioner, as required under Section 15, regardless of any agreement between the respondent and the petitioner or any existing law which may be in force.
26. The petitioner has filed relevant documents and marked as Ex.P.9- Ex.P.13, in order to prove that there was a delay in payment and hence the petitioner is entitled to interest on delayed payment.
17Com.A.P.No.119/2023
27. The parties have not consensually agreed that only terms of the contract would apply and it is pertinent to note that the respondent has failed to follow the terms of payment as enumerated in the purchase order. The learned arbitrator has failed to take note of the same, inspite of the petitioner proving the same with relevant or requisite documents.
28. The letter dated 29.07.2009 (Annexure -R4) does not disclose anywhere about the petitioner has waived its right of interest on delayed payment. The same was not considered by the learned arbitrator. Further, in the letter dated 15.06.2009 (Ex.P.14) stated that if the payment is not released within 30 days, then the petitioner would be constrained to raise invoice for interest in line with MSMED Act, 2006.
29. The learned arbitrator has failed to consider the evidentiary value of the petitioner that the petitioner requested the respondent vide letter dated 14.04.2010 to make the interest on delayed payment (Ex.P.5). Hence this petition.
18Com.A.P.No.119/2023
4. The Respondent No.1 has filed objection stating that the petitioner has not raised any grounds in the present suit for this court to interfere and set aside the impugned award passed by the arbitral tribunal. It is well settled principle of law that an arbitral award cannot be lightly interfered with and that the court while applying the "public Policy" test to an arbitral award does not act as a court of appeal. The averment that the present petition is filed challenging the Impugned award is a matter of record. The Learned Arbitrator has dismissed the claim of the Petitioner without assigning any cogent reasons, is patently illegal and contrary to law are untenable, unsubstantiated and denied as false. The averment that the key findings in the Impugned award relating to non-production of materials, documents stipulated, failure to prove that there was delay in making payments, and not considering documents which are available in the file are bald, untenable and denied the averment that the Learned Arbitrator has completely misunderstood the fact that the documents as sought under Clause 4 of Schedule A are in the possession of the Respondent and the same could not be produced by the Petitioner for marking is misleading and denied as false. The Respondent has issued copies towards acknowledgment of 19 Com.A.P.No.119/2023 receiving of the said documents under Clause 4 of Schedule A to the Petitioner, therefore the Petitioner was in possession of the copies of the documents submitted to the Respondent, hence the said contention is liable to be rejected. The learned arbitrator has failed to consider critical issues necessary for the resolution of the dispute and relevant documents placed before the tribunal including the documents submitted before the MSME facilitation council which are part of the arbitration proceedings before the arbitral tribunal is untenable and denied as false . The petitioner did not produce the documents that were submitted before the MSME facilitation council in the arbitration proceedings, therefore the said contention is liable to be rejected. The averment that the petitioner supplied the required materials within the stipulated period is contrary to records and denied as false. The Respondent made payment of bills after delay of 200 days is untenable and denied as false. The Respondent had made timely payments to the petitioner after receiving all the documents mentioned in clause 4 of the Schedule and hence the said contention is liable to be rejected. As on 31.07.2023, the respondent is liable to be paid Rs. 2,11,69,129/- towards interest on delayed payments is untenable and denied. The 20 Com.A.P.No.119/2023 petitioner requested the respondent to pay interest on delayed payments and that the respondent has not replied to the said requests are denied. The petitioner did not object to framing of the said issue in the arbitration proceedings and hence the said contention is liable to be rejected.
The Respondent further contended that As per section 15 and 16 of the MSMED Act, the buyer is to make payment on or before the date agreed on between him and the supplier in writing or in case of no agreement before the appointed day but shall not exceed 45 days is a matter of record. The averement that in the instant case the delay is for more than 200 days, hence the petitioner is entitled for interest is untenable and denied as false. The Hon'ble Trial court at Dharward is A.S. No. 1/17 has specifically pointed that the MSME Council in case No. 7/2010 had failed to consider the documents submitted by the petitioner which goes to show that the petitioner is a small-scale industry within the meaning of section 7 (1)(1)(ii) of MSMED Act and hence entitled for benefit under section 16 us wholly bereft of merits, untenable and are denied as false. The Respondent has paid 90% towards delivery of materials as per clause 4 of schedule a is a matter of record. The 21 Com.A.P.No.119/2023 respondent in the statement of objection filed by it before the arbitral tribunal had very specifically contended that it has made 90% payment in terms of clause 4 of Schedule A after the petitioner has complied with all the requirements under the said clause. Therefore, the averment that the respondent has not objected with respect to production of documents as stated in clause 4 of schedule A is liable to be rejected. The averment that the Petitioner has already submitted the invoice in duplicate, stamped and pre- receipted before the Learned Arbitrator and that the same was not marked as the Petitioner only had a copy of the same is misleading. The Petitioner did not submit the said document before the Learned Arbitrator. The Petitioner would only be given a copy of the acknowledged delivery challan is a matter of record but the same was never submitted before the Arbitral Tribunal. The averment that the entire detailed document i.e.,, Material Acknowledgment Statement, approved test certificate, guarantee certificate was not made available to the Petitioner and therefore the onus should have been on the Respondent to produce the same before the Learned Arbitrator is misleading, untenable and denied. The onus to prove that the whether the Petitioner submitted all documents stipulated in Clause 4 of 22 Com.A.P.No.119/2023 Schedule A to Purchase Order required for the Respondent to make payment was on the Petitioner and therefore, the said contention that the Learned Arbitrator without understanding the entire process or terms of Clause 4 proceeded to weigh the entire burden on the Petitioner alone is liable to be rejected. The said contention that the Petitioner all the documents as prescribed under Clause 4 was not in possession of the Petitioner was never raised before the Arbitral Tribunal, the Petitioner cannot raise new grounds before this Hon'ble Court as this Hon'ble Court cannot re-appreciated evidence or sit in appeal over the Impugned Award. Further, the Petitioner did not call upon the Respondent to produce the documents that are not in its possession before the Arbitral Tribunal. Therefore, the said contentions of the Petitioner that the Learned Arbitrator has failed to consider that the documents were not in possession of the Petitioner are liable to be rejected.
The Respondent further contended that the averment that the Learned Arbitrator has failed to appreciate that balance 10% value does not require production of any documents which confirms patent illegality is untenable and denied as false. The averment that the documents to be submitted under Clause 4 was in the possession of the 23 Com.A.P.No.119/2023 Respondent and that the same was not considered by the Learned Arbitrator is misleading and false It is submitted that the Petitioner never contended that the said documents were in the possession of the Respondent before the Learned Arbitrator. The onus to produce the original documents lay on the Respondent is wholly bereft of merits, contrary to the issues framed and hence denied as false. The Learned Arbitrator could not have held that it was for the Petitioner to produce the documents in Clause 4 as the same is self-explanatory is bereft of merits, untenable and denied The Learned Arbitrator could not have suo moto ignored Ex. P-16 by only relying on the left-hand side of the document wherein the Respondent has made some unjust justifications is wholly untenable, unsubstantiated and denied as false. The reasoning mentioned on the right-hand side of Ex.P-16 was not considered by the Learned Arbitrator is untenable and denied as false. The Learned Arbitrator has considered the entire document to hold that the Petitioner was levied with penalty beyond the promised date of delivery, therefore the said contention of the Petitioner is liable to be rejected.
The Respondent further contended that it was an undisputed fact that the Respondent had levied penalty on the Petitioner for not delivering the materials in time, 24 Com.A.P.No.119/2023 therefore, the Learned Arbitrator has appreciated the same and arrived at a finding that the Petitioner had delayed delivery of materials. Hence, the said contention of the Petitioner is liable to be rejected. The Learned Arbitrator could not have gone into this issued that the Petitioner was not prompt in supplying as that was not an issue at all raised by the Respondent is contrary to record, issues framed, untenable and denied as false. The Respondent had specifically contended in the statement of objections filed by it that the Petitioner had delayed supply of materials and hence penalty was also levied on it Therefore, the said contention of the Petitioner is liable to be rejected.
The Respondent further contended that the averment that the entire fact all along was only with respect to whether the Petitioner is a MSME or not and whether the Petitioner is entitled to interest on delayed payment or not is contrary to records, untenable and denied. The Learned Arbitrator had directed the Petitioner to rely on these issues and therefore the focus was on the same is untenable and denied as false. The Petitioner informed that the focus would be on Clause 4 Schedule A, the petitioner would have sought direction by the learned arbitrator to instruct the respondent to produce the aforesaid documents which is their 25 Com.A.P.No.119/2023 possession is misleading and false. It clear that the petitioner did not produce the said documents before the learned arbitrator and hence, the learned arbitrator has rejected the claims of the petitioner. The burden was on the petitioner to prove that it had submitted all the documents as per clause 4 and hence the learned arbitrator had also framed issue No.3 in this regard. Therefore, the petitioner cannot contend that it was misguided by the learned arbitrator. The averments that the petitioner had produced relevant documents to prove delay of 200 days in making payment and the learned arbitrator failed to appreciate the evidence is contrary to records. The learned arbitrator misplaced sympathy for the respondent and giving the respondent credit for having not imposed any penalty on the delay of the petitioner was by itself and incorrect and misinterpreted finding as the petitioner has already put forth before the Hon'ble Tribunal the details of Ex.P.9 to Ex.P.13, thereby giving the respondent a clean chit was incorrect is baseless. The petitioner has submitted all the invoices before MSMEFC and the same was a part and parcel of the file of the arbitral tribunal is contrary to records, untenable and denied as false. The petitioner never produced and marked the invoices before the arbitral tribunal, hence the 26 Com.A.P.No.119/2023 said contention is liable to be rejected.
The Respondent further contended that the averment that Learned Arbitrator by oversight has not considered the documents submitted before him and the MSMEFC is contrary to records and denied as false. The Petitioner had not waived their right for delayed payment and that Section 16 of the Act is a non-obstante clause as it is special statue brought by the parliament to protect the interest of the Petitioner industry is misleading, untenable and denied. The averment that the Respondent has made delayed payment for invoices raised by the Petitioner proves beyond doubt that the Petitioner has submitted all the documents immediately after delivery of goods. The Respondent has made payments to the Petitioner only after it has received all the documents belatedly. In the instant case there is no letter or objection from the Respondent till date with respect to required documents for payment and hence it is deemed acceptance of the Respondent that they have received the documents as per Clause 4 Schedule A is misleading, untenable. The onus to prove that the Petitioner had submitted all the documents to the Respondent immediately after the delivery and that there was no delay in submitting the documents by the Petitioner, therefore the Petitioner 27 Com.A.P.No.119/2023 cannot contend that there was deemed acceptance by the Respondent that they have received the documents. The Learned Arbitrator has failed to take note of the fact that the payment would be released by the Respondent if and only if the documents were submitted is misleading. The Petitioner had failed to prove before the Learned Arbitrator that it had submitted the documents without any delay immediately after delivery of the materials and on the date of raising of invoice. As the Petitioner failed to prove the said issue with documentary proof, the Learned Arbitrator has held that the Petitioner has not proved the said issue.
The respondent further contended that the averment that the Learned Arbitrator has drawn adverse inference against the Petitioner that the Petitioner has not produced any document to discharge its initial responsibility of having submitted all the documents lacks application of mind and is perverse the MSMED Act is meritless, untenable and denied as false. It is submitted that the onus to prove Issue No.3 was on the Petitioner, despite the same, the Petitioner has failed to produce all the invoices, documents required under Clause 4 of Schedule A, hence the Learned Arbitrator has drawn adverse inference on the Petitioner. Therefore, the said contention of the Petitioner is liable to be rejected. The 28 Com.A.P.No.119/2023 Petitioner filed an application under Order 18 Rule 17 of the Code of Civil Procedure, 1908 to recall the Petitioner's witness and that the same was rejected by stating that normally documentary evidence will have to be considered in the light of the pleadings and not one or two stray sentences is a matter of record. The Learned Arbitrator's findings speak about the importance of documentary evidence, his reasoning of the award fails to recognize the same as he has neither considered the documents submitted before him nor before MSMEFC is baseless, untenable and denied as false. The Petitioner has failed to submit and mark the documents, hence there was no documents for the Learned Arbitrator to consider. Therefore, the said contention of the Petitioner is liable to be rejected. The Leaned Arbitrator without even considering the reasons assigned in the application under Section 33 and did not provide an opportunity to the Petitioner to present his case due to two days delay is misleading and denied. The Learned Arbitrator after considering its powers under the Arbitration Act had dismissed the application as being barred by limitation. Therefore, the said contentions are liable to be rejected.
The respondent further contended that the averment that the Petitioner has filed relevant documents and marked 29 Com.A.P.No.119/2023 as Ex.P-9 to P-13 is a matter of record. The provisions of MSMED Act were applicable to the arbitration proceedings are matter of record. The parties have not consensually agreed that only terms of the contract would apply and it is pertinent to note that the Respondent failed to follow the terms of payment as enumerated in the purchase order is baseless, untenable and denied as false The Learned Arbitrator has failed to take note of the same, in spite of the Petitioner proving the same with relevant or requisite documents is baseless.
The Respondent further contended that the averment that the Respondent did not make payment to the Petitioner despite repeated reminders and that the Petitioner has suffered great hardship, inconvenience, financial constraints is baseless, untenable and denied as false. The Learned Arbitrator has failed to consider the evidentiary value of the letter dated 14.04.2010 (Ex. P-5) wherein the Petitioner has requested the Respondent to make payment is denied as false It is submitted that as the Petitioner failed to prove that it had indeed submitted all the documents to the Respondent without any delay, the Learned Arbitrator has rejected the claim of the Petitioner The Learned Arbitrator has permitted the possibility of unjust enrichment of the 30 Com.A.P.No.119/2023 Respondent is baseless, unsubstantiated and denied as false. The Respondent has made the Petitioner knock the doors of various courts seeking justice with malafide intention is untenable and denied as false. The reliance placed on the judgment in Sahakari Udyog Mandal Ltd v Commissioner of Central Excise and Customs (2005) 3 SCC 738 to define unjust enrichment is not applicable to the facts of the present case, as the Respondent has not been unjustly enriched. The Respondent is intentionally raising new grounds in each proceeding to unjustly enrich itself is baseless, untenable and denied. The Respondent is burdening the exchequer and the Petitioner with unnecessary costs for multiplicity of proceedings is untenable.
5. I have heard the arguments of the learned counsels.
6. The Advocate for the Petitioner has relied upon a following decision reported in
1. Unibros vs. All India Radio, SLP (Civil) No. 8791/2020 dated 19.10.2023.
2. Associate Builders vs. Delhi Development Authority, (2015) 3 SCC 49.
31Com.A.P.No.119/2023
3. Damodar Valley Corporation vs. Reliance Infrastructure Limited, (2023) SCC Online Cal 3307.
4. PSA SICAL Terminals (P) Ltd vs. Board of Trustees of V.O. Chidambranar Port Trust Tuticorin, (2021) SCC Online SC 508.
5. Marsons Electrical Industries vs. Chairman, MP Electricity Board, (2023) SCC Online All 2675.
6. Bawana Infra Dev Pvt Ltd vs. Delhi State Industrial and Infrastructural Corp. Ltd, (2023) SCC Online Del 1569.
7. State Project Director vs. National Printeres, (2023) SCC Online Jhar 1351.
8. SAIL vs. F. Harley Co. (P) Ltd., (2023) SCC Online Cal 3481.
The Advocate for the Respondent has relied upon a following decision reported in
1. Delhi Airport Metro Express Private Limited vs. Delhi Metro Rail Corporation Limited, (2022) 1 SCC 13.
2. P.K. Palaniswmy vs. N. Arumugham, (2009) 9 SCC 173.
3. Union of India vs. M/s Warsaw Engineers and others, 2021 SCC Online Kar 15916.
32Com.A.P.No.119/2023
7. Based on the above contentions of both parties, following Points arise for my consideration:-
1. Whether there are grounds to set aside the Impugned Award under Section 34 of the Arbitration & Conciliation Act?
2. What Order?
8. My findings on the above points are as follows:-
Point No.1:- In the .
Point No.2:- As per the final Order for the following reasons.
REASONS
9. Point No.1:- The settled position in law that in proceedings under Section 34 of the Act, the Court does not sit in appeal over the Award. Thus, an Arbitral Award passed by an Arbitrator shall not be interfered with lightly. The Court can neither sit in appeal nor reassess or re-appreciate the evidence and the Arbitral Award can only be interfered with grounds stipulated in Section 34(2) of the Act.
33Com.A.P.No.119/2023
10. It is settled position in law that an Award could be set aside if it is contrary to:-
(a) fundamental policy of Indian law; or
(b) the interest of India ; or
(c) justice or morality ; or
(d) in addition, if it is patently illegal.
11. The illegality must go to the root of the matter and if the illegality is of trivial nature, it cannot be held that the award is against the public policy. Award could also be set aside, if it is so unfair and unreasonable that it shocks the conscience of the Court. Such an award is opposed to public policy and is required to be adjudged void.
12. It is pertaining to note that the learned counsel for petitioner argued that the petitioner is a Small Enterprises as enumerated under Section MSMED Act 2006 and also relied upon decision in this regard. On perusal of the award the learned arbitrator in Issue No.1 held that the claimant is a Small Enterprises as enumerated u/s 7(1) of MSMED Act 2006 and answered Issue No.1 in Affirmative. Under these circumstance, no discussion is required on this issue.
34Com.A.P.No.119/2023
13. The petitioner challenged the award on the ground of patent illegality. The petitioner stated that it is evident that for payment of 90%, the Petitioner should have furnished the documents mentioned below, it is apparent from the very clause itself, that while submitting the bills for supply, the petitioner had already submitted the documents Therefore, the questions of Learned. Arbitrator holding that the petitioner failed to provide this documents would not arise. The Learned Arbitrator has urged in holding that the Petitioner should have produced all the documents, if the petitioner was entitled to claim the 90% payment. The Learned Arbitrator failed to notice was that Clause 4 by itself was self-explanatory where in the onus was on the petitioner to furnish the said documents to the consignee division of the respondent while seeking 90% payment. This entire detailed document is not made available to the petitioner which the Respondent claims to be an internal document and therefore the onus should have been on the respondent to produce the same before learned arbitrator. Unfortunately the learned arbitrator without having understood the entire process or the terms as prescribed under clause 4 of schedule A (i) to (vii) proceeded to weight the entire burden on the petitioner alone by passing an 35 Com.A.P.No.119/2023 omnibus direction that since none of these documents were produced. " hence an adverse inference will have to be drawn against the claimant because of the non production of the materials to prove the compliance of the condition in clause 4 of the claimant has not placed any acceptable material to discharge its initial responsibility of having submitted all the documents stipulated in clause 4 of the Schedule A." The learned arbitrator could have summoned the respondent to file/produce the same as the learned arbitrator could not have relied upon the photocopies as evidence. The Learned Arbitrator failed to observe self- explanatory Clause 4A second para where in it was clear that the petitioner had to submit the documents to the Respondent for consideration of the 90% payment, therefore the learned Arbitrator could not have held that it was for the petitioner to have produced the documents which he failed to do. The Gross error in understanding the terms and requiring the petitioner to have to have produced the documents and weighing the entire case on non-production of documents was gross illegality and error. Therefore the observations vitiated by a Patent illegality.
36Com.A.P.No.119/2023
14. Clause 4 of Schedule A reads as under:
(a) HESCOM will arrange payment of 90% value of materials plus full taxes and duties against presentation of dispatch and other documents as specified below by means of cheque of the Executive Engineer E.I of the consignee division or Financial Advisor HESCOM as the case may be after satisfying the terms and conditions of the order, and after receipt of materials acknowledgment statement from the consignee stores.
For arranging 90% payment, the following documents will have to be furnished by the Supplier/Contractor to the consignee division.
(i). Invoice in duplicate, stamped and receipted. pre-receipted.
(ii). Delivery challan duly acknowledged by consignee. The payment will be arranged against clear acknowledgment duly signed by the Store Keeper and Store Officer of the relevant HESCOM Stores.
(iii). Material Acknowledgment statement along with advice transfer (to be furnished by consignee division).
(iv). Approved test certificate or reference to letter of superintending engineer El., (Tendering & procurement), HESCOM, Hubli approving the test certificate.
(v). Guarantee certificate.
37Com.A.P.No.119/2023
(vi). For payment of excise duty the original invoice, (buyer copy) duly authenticated by the proprietor/director or the company secretary shall be submitted.
(vii). The serial numbers of the invoices which were brought into use by the supplier is to be informed to the Asst. Collector of Central Excise of the jurisdiction and a Xerox copy to the effect shall be produced.
II) Balance 10% value of the material will be paid after completion of guarantee period."
15. On perusal of the arbitral records it reveals that during cross-examination Pw.1 stated that they have supplied the entire quantity of material as per ExP.16 the dates on which the claimant received the payments are found in Ex.P.16. 14.11.2009 was dated on which the last supply was made. They have raised 22 invoice as per Ex.P.16 with regard to 90% of payment to be made by the Respondent. On 30.04.2010 the claimant had received the entire principle amount inclusive 10% retention money.
16. As per Ex.P.16 annexure-21 it is clearly shows that the 100% payment received and first penalty deducted for delay in supplies. After delay condonation penalty reimbursed. It 38 Com.A.P.No.119/2023 also discloses that from the date of supply 13.08.2009 to 14.11.2009.
17. Ex.P.5 letter dated 14.04.2010 discloses that the petitioner acknowledges the receipt of cheque bearing No. 853878 dated 31.03.2010 for Rs. 1,41,08,197/- towards the payment of their dues in pending bills. They received this payment after lapse of upto 200 days.
18. It is also evident on the record that the respondent has not given any reply to this letter at Ex.P.9. From Ex,P.16 it is clear that the last supply was made on 14.11.2009 and the payment was made as per Ex.P.5 on 31.03.2010 through cheque No. 853878 for Rs. 1,41,08,197/-.
19. The learned arbitrator has held that in para 20 that on a plain reading of the various sub clauses of clause No.4 make it clear that respondent was obliged to make payment of 90% of the value of materials plus full taxes and duties only upon compliance of other conditions. Mere physical delivery of the materials would not be sufficient to make payment. The delivery challan had to be duly acknowledged by the consignee and an acknowledgment duly signed by 39 Com.A.P.No.119/2023 the store keeper and store officer of the relevant HESCOM, stores was also mandatory. Apart from this approved test certificate issued by the Superintending Engineer, Electricals (Tendering and Procurement), HESCOM Hubbli, a guarantee certificate were also required to be produced after making the delivery. The claimant was expected to produce the original invoice for having paid the excise duty and it was expected to be authenticated by the Proprietor/Director of the company secretary of the claimant
20. The learned arbitrator further held that the respondent was expected to not only physically deliver the goods, but was also expected to comply with all the conditions as enumerated in clause 4 of the Schedule A appended to Ex. P4- the purchase order. It is in this regard claimant is expected not only to prove about the date on which the goods were supplied, but also the date on which other conditions as enumerated in clause 4 were complied with. If the claimant is able to prove that inspite of compliance of all the conditions enumerated in clause 4 coupled with physical delivery of the goods, the respondent did not pay within 45 days from the date of supply, then only Section 16 will be applicable.
40Com.A.P.No.119/2023
21. Ex.P.9 HESCOMs letter dated 10.08.2009 discloses that the delivery schedule for supply of above conductor is extended from a date of period of 10 days form the date of this dispatch instructions.
22. Ex.P.10 HESCOMs letter dated 05.09.2009 discloses that the delivery schedule for supply of above conductor is extended upto 12.09.2009 without levy of penalty.
23. Ex.P.11 HESCOMs letter dated 09.10.2009 discloses that the 152.573 Kms of Rabbit ACSR conductor has been inspected by TA and QC on staff on 30.09.2009 and it is reported that, Rabit ACSR conductor is conformity with specification and acceptable.
24. Ex.P.12 HESCOMs letter dated 13.10.2009 discloses that the 152.724 Kms of Rabbit ACSR conductor has been inspected by Executive Engineer, MT division, Hubballi C on staff on 10.10.2009 and it is reported that, Rabit ACSR conductor is conformity with specification and acceptable.
25. Ex.P.13 HESCOMs letter dated 12.11.2009 discloses that the 141.326 Kms of Rabbit ACSR conductor has been inspected by Executive Engineer, EI MT division, on staff on 41 Com.A.P.No.119/2023 24.10.2009 and it is reported that, Rabbit ACSR conductor is conformity with specification and acceptable. Further it also discloses that extended the delivery schedule upto 16.11.2009 without levy of penalty and official memorandum dated 12.11.2009 discloses that delay of 14 days in supply of Rabbit ACSR conductor by Ms. Sharavathi conductor private limited against the office DI No. HESCOM/ SEE(T&P)/E-7/AEE-1/PC-539/09-10 dated 09.10.2009 without levy of penalty.
26. In para 24 of the award the learned arbitrator has given a findings that, Of course the claimant speaks about the penalty being waived. On 12.11.2009 delay of 14 days was condoned by the Superintendent Engineer. This would go to show that claimant was not prompt enough in supplying the materials as per the time frame fixed in the various purchase orders issued by the respondent from time to time. This fact itself shows that the learned arbitrator has not considered the Ex.P.9 to Ex.P.13 and given contrary findings. So. These findings are perverse and illegal.
27. The learned arbitrator has held that in para 25 of the award that in paragraph 10 of statement of defence the respondent has specifically averred that the respondent 42 Com.A.P.No.119/2023 arranged for payment of money on submission of all the documents as enumerated in clause 4 and that there was no delay in payment as contended by the claimant. The entire clause No.4 in Schedule A is reproduced in paragraph 10 by the Respondent has drawn the attention of this tribunal to penalty imposed by the respondent in terms of clause 11 of the purchase order at Ex.P.4. Suffice to state that no acceptable material is placed on record by PW.1 with regard to the compliance of the mandatory conditions enumerated in clause 4 of schedule A appended to be drawn against the claimant because of the non-production of the material to prove the compliance of the conditions in clause No.4. The claimant has not placed any acceptable material to discharge its initial responsibility of having submitted all the documents stipulated in clause 4 of the schedule A. Hence, the question of respondent committing delay in making payment does not arise.
28. In work order clause 15 shows that the acknowledgment and acceptance Form: please return the enclosed acknowledgment and acceptance form of order duly signed over firm's seal within seven days from the date of receipt of this purchase order, failing which, will be deemed that the order is accepted by you with the terms 43 Com.A.P.No.119/2023 and conditions set forth. Please note that your acceptance communicated as above constitutes the contract.
29. As per the clause 4 the terms of the payment it is clear that the document mentioned point (I) to (vii) had to be furnished to the HESCOMS/Respondent for releasing the payment. In this case admittedly the Respondent had released the 100% payment to the Petitioner, it shows that he petitioner has complied the point no (i) to (vii) of clause
4. So, the Respondent has released the 100% payment to the petitioner. Under such being the case the findings of the learned arbitrator the onus of producing originals on the petitioner is grossly error. Accordingly clause 4 (a) the petitioner has to submit the document to the respondent for consideration of 90% payment, but the learned arbitrator has failed to considered the clause 4 (a) payment of terms. The learned arbitrator has given a findings that, requiring the petitioner to have to produced the documents and waiving the entire case and non production of document gross illegality and error. Therefor, the observation vitiated by a patent illegality.
30. The learned arbitrator has failed to take note of the fact that the payment would be released by the respondent 44 Com.A.P.No.119/2023 if and only if the documents where submitted in consonance with clause 4 of Schedule A. Associate builders vs. Delhi Development Authority (2015) 3 SCC 49 wherein Hon'ble supreme court held that The third juristic principle is that a decision which is perverse or so irrational that no reasonable person would have arrived at the same is important and requires some degree of explanation. It is settled law that where- a finding is based on no evidence, or an arbitral tribunal takes into account something irrelevant to the decision which it arrives at; or ignores vital evidence in arriving at its decision, such decision would necessarily be perverse.
Uni bro vs. All India Radio SLP (civil) 8791 /2021 wherein hon'ble Supreme court held that One might ask, what would be the nature and quality of such evidence? In our opinion, it will be contingent upon the facts and circumstances of each case. However, it may generally include independent contemporaneous evidence such as other potential projects that the contractor had in the pipeline that could have been undertaken if not for the delays, the total number of tendering opportunities that the contractor received and declined owing to the prolongation of the contract, 45 Com.A.P.No.119/2023 financial statements, or any clauses in the contract related to delays, extensions of Page 15 of 17 time, and compensation for loss of profit. While this list is not exhaustive and may include any other piece of evidence that the court may find relevant, what is cut and dried is that in adjudging a claim towards loss of profits, the court may not make a guess in the dark; the credibility of the evidence, therefore, is the evidence of the credibility of such claim.
the First Award was interfered with by the High Court for the reasons noted above. The Arbitrator, in view of such previous determination made by the High Court, could have granted damages to the appellant based on the evidence on record. There was, so to say, none which on proof could have translated into an award for damages towards loss of profit. A claim for damages, whether general or special, cannot as a matter of course result in an award without proof of the claimant having suffered injury. The arbitral award in question, in our opinion, is patently illegal in that it is based on no evidence and is, thus, outrightly perverse; therefore, again, it is in conflict with the "public policy of India" as contemplated by section 34(2)
(b) of the Act.
Damodar valley corporation vs. reliance infrastructure limited 2023 SCC Online Cal 3307 wherein Hon'ble Calcutta held that However, with respect to the arbitral tribunal's findings under Issues 17, 18, 21, and 27, this Court has come to a conclusion Page 253 of 255 AP 40 of 46 Com.A.P.No.119/2023 2020 REPORTABLE that the award suffers from patent illegality appearing on the face of the award with respect to these issues only. The said issues in no manner effect or are related to other issues in the arbitral award dated December 21, 2019, and need to be severed accordingly. As a result, by virtue of this Court's power under Section 34(2A) of the Act, this Court sets aside the findings of the arbitral tribunal only with respect to Issues No. 17, 18, 21, and 27.
It is well established law that were the damages are awarded there must be assessment there of and the order awarding damaged must contain an indication of basis upon which the amount award is arrived at. Further, the arbitrator shall determine whether compensation is payable any of them for what amount under various heads. The arbitrator cannot assess of damage an mere assumption. In the present case, the award does not contained any indication of basis upon which the learned arbitrator arrived the damage of Rs. 24 lakhs. Hence, the award suffers from illegality attracting the section 34 of Arbitration and Conciliation Act as the determination of the compensation by the Arbitrator is unintelligible without any basis and without any supporting oral or documentary evidence. The findings of the arbitral tribunal would come in the realm of perversity as explained in Associate Builders Vs. Delhi Development Authority (2015) 3 SCC 49.
As above discussed the learned arbitrator has failed to consider the Ex.P.5. Ex.P.9 to 13 and Ex.P.16 also not given 47 Com.A.P.No.119/2023 any findings on these documents. Hence, in view of the principle laid down in the above decisions, the entire findings of the learned arbitrator in respect to the issue No.2 is perverse and illegal.
31. In view of my above discussions, observations and findings, I am of the opinion that the Award of the Learned Arbitrator is liable to be set aside on the ground that the same is contrary to the Public Policy and also there is patent illegality in the findings of the learned Arbitrator. Further, I make it clear that I have discussed only about the findings given by the learned Arbitrator in the light of the contentions taken by the petitioner without re-appreciating the oral or documentary evidence placed before the Learned Arbitrator. All my findings are based on the legal aspects and the development of case law on the said subject. When such being the case, I have no other option except to set aside the entire Award passed by the learned Arbitrator. Therefore, I answer this Point in the "Affirmative".
32. Point No. 2:- For the discussion made on above point, following order is passed:
48Com.A.P.No.119/2023 ORDER The Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996, is allowed.
The Arbitral Award in A.C. No. 22/2021 dated 24.02.2023 is hereby set aside.
The Office is directed to send copy of this judgment to both parties to their email ID as required under Order XX Rule 1 of the Civil Procedure Code as amended under Section 16 of the Commercial Courts Act.
( Dictated to the Stenographer, typed by him directly on computer, verified and then pronounced by me in open Court on this the 31st day of July, 2024).
(SUMANGALA S. BASAVANNOR), LXXXII Addl. City Civil & Sessions Judge, Bengaluru.