Bangalore District Court
At Puttenahalli Was Required To … vs Themselves Have Admitted That The … on 23 November, 2018 1 IN THE COURT OF THE PRINCIPAL CITY CIVIL AND SESSIONS JUDGE, AT BENGALURU DATED THIS THE 23rd DAY OF NOVEMBER, 2018 PRESENT: SRI. SHIVASHANKAR B.AMARANNAVAR, B.Com., LL.M., Principal City Civil and Sessions Judge, Bengaluru. A.S.No. 01/2008 BETWEEN: M/s Krishil Capital Holdings
Private Limited
(Earlier M/s. Krishi Projects Pvt. Ltd.)
A Company incorporated under the
Provisions of Companies Act, 1956,
having its Registered Office at
No.21/83, 1st Floor
Ramachandra Arcade
South End Road
Basavanagudi,
Bangalore.
Rep. By its Director and
Authorized Signatory
Sri. K.R. Choudary. .. Plaintiff /Claimant (By Sri.S.S. Advocate , Advocate) AND 1. M/s. Telecommunications Consultants India Limited TCIL Bhavan Greater Kailash-1 2 New Delhi – 110 048 Rep. By its Chairman and Managing Director. 2. The Senior General Manager (SR) M/s. Telecommunications Consultants India Ltd., No.20, Potters Street Saidapet Chennai – 600 015. 3. Sri. P. Murali Mohan Arbitrator Deputy General Manager (MTCE) Bharat Sanchar Nigam Limited Southern Telecom Sub-Region Vijayawada – 520 010. .. Defendants / Respondents (By Sri.V.B., Advocate for R1 & R2)
(Arbitrator – Respondent No.3) JUDGMENT

The Plaintiff has filed this suit under Section 34 of
Arbitration and Conciliation Act, 1996 (hereinafter referred
to as ‘Act’ for short) challenging the Arbitral Award passed
by the 3rd Defendant in Case No.22/DGMM/ARB/05-
06/II/172 dated 29.8.2007.
2) For convenience, the parties would be referred
to as Claimant and Respondents as they were referred to in
the Arbitral Proceedings.
3 3) The Claimant has challenged the said Arbitral
Award dated 29.8.2007 on the following grounds:
a) It is the specific case of the respondents that the
pipes stored in the store yard are the pipes pertaining to
project bearing No. BGT 1/2k and BGT 16/2k apart from
the project bearing No. BGT 22/2k which the plaintiff has
completed after February, 2001. It is the case of the
respondents that the project bearing No. BGT 1/2k was
completed on 13-08-2002 and the project bearing No. BGT
16/2k was completed on 15-02-2003. The learned
arbitrator in his award has exceeded his jurisdiction in
taking into consideration all the twelve projects carried out
by the claimant in order to come to the conclusion that the
pipes were stored only for a period of four months instead
of 30 months as claimed by the claimant that too when the
respondents themselves have claimed that even according
to them only the pipes of BGT 1/2k and BGT 16/2k along
with the pipes of the project bearing No. BGT 22/2k, which
the claimant all along disputed and denied.
b) The learned arbitrator has erred in law in
exceeding his jurisdiction while coming to the conclusion
that the pipes were stored with respect to project bearing
No. BGT 22/2k only for a period of four months that too
after the admissions of the respondents that a rental of
Rs.36,000/- per month with respect to the store yard was
paid by the claimant continuously for a period of thirty
4 months only with respect to storing of pipes belonging to
project bearing No.BGT 22/2k and the space hired by the
claimant at Puttenahalli was required to store the pipes of
project bearing No.22/2k only and the respondents did not
object to the same as the said space was required for
storing the pipes for project bearing No. BGT 22/2k. The
learned arbitrator has failed to appreciate the fact that the
respondents themselves have admitted that the pipes of all
other projects except for the project bearing No. BGT 22/2k
were stored in the respective project sites.
c) The learned arbitrator has erred in law in
rejecting the interest after allowing the claim of the
claimant. The learned arbitrator ought to have allowed
interest as claimed by the claimant as the arbitrator had
specifically reached the conclusion in his award that the
plaintiff has made the payment as claimed and the
respondents are liable to pay the same.
d) The learned arbitrator has exceeded his
jurisdiction in holding that no business loss requires to be
compensated to the claimant as he has awarded the
storage and handling charges. In fact, the learned
arbitrator has not even applied his mind to the case of the
claimant as to the business loss and on that count alone the
award requires to be set aside.
5 e) The claimant submits that there is no rational
basis for the award and the Hon’ble Arbitrator has partially
rejected the claim of the claimant without even applying his
mind to the facts and circumstances of the case. On that
ground alone, the award requires to be set aside.
f) The award passed by the Hon’ble Arbitrator is
bad in law and the same requires to be set aside.
4) On service of notice, the respondents 1 and 2
appeared through Counsel. The Respondent No.3 is the
Arbitrator. This Court, after hearing the arguments of the
counsel for the parties has passed the Judgment on
5.4.2014 allowing the suit of the Claimant and directing the
Respondents to pay to the Claimant Rs.35,76,316/- with
interest at the rate of 12% p.a. from 27.3.2001 till payment
of the amount in full. The Respondents 1 and 2 have
challenged the said judgment dated 5.4.2014 before the
Hon’ble High Court of Karnataka in MFA No.5873/2014
(AA). The Hon’ble High Court of Karnataka has allowed the
said Appeal filed by Respondents 1 and 2 and remanded the
matter for re-hearing and disposal afresh and to take into
consideration the contentions of the Respondents 1 and 2
with regard to limitation, the power of this court to
interfere with the Award and estoppel of the fact of
Claimant Contractor having received the award amount
without protest. After remand, the Claimant and
6 Respondents 1 and 2 appeared through counsel and filed
their respective written arguments with citations.
5) Heard the arguments of the learned counsel
appearing for the Claimant and Respondents 1 and 2.
6) Taking into consideration the arguments
advanced by both the parties, the following points arise for
my consideration:

POINTS 1) Whether the Suit filed under Section 34 of the Arbitration and Conciliation Act, 1996 is in time?
2) Whether the Claimant received the Award amount without demur and without
reserving right to challenge the award and therefore Claimant is precluded from challenging the Award passed by the Arbitrator?
3) Whether the Claimant has made out ground to set aside the Arbitration Award under Section 34 of Arbitration and Conciliation Act, 1996 and to allow his Claim made before the Arbitrator?
4) What Order?
7 7) My answer to the above points are as under:

Point No.1: In the Affirmative. Point No.2: In the Negative. Point No.3: In the Affirmative. Point No.4: As per the the following: REASONS 8) Point No.1: The present proceedings under
Section 34 of the Act, has been filed on 1.1.2008. The
Arbitration Award has been passed by the 3 rd Respondent
on 29.8.2007. It is the contention of the Claimant that they
received the copy of the Award sent by the Arbitrator on
29.9.2007. It is further contention of the Claimant that the
proceedings under Section 34 of the Act requires to be filed
within three months from the date of receipt of the award
and therefore the proceedings under Section 34 of the Act
has to be filed on or before 28.12.2007 and as the courts
were on vacation on 28.12.2007, thus Claimant filed the
suit on the re-opening day i.e., on 1.1.2008. The
Respondents 1 and 2 disputed that Claimant received the
copy of the award sent by the Arbitrator on 29.9.2007, but
they contended that the Claimant received the Award on
29.8.2007. As per Sub-Section (3) of Section 34 of the Act,
an application for setting aside may not be made after
three months having lapsed from the date on which the
party making that application had received the Arbitral
8 Award. As per Sub-Section (5) of Section 31 of the Act,
after the Arbitral Award is made and signed copy shall be
delivered to each party. There is nothing in arbitration
records to show that copy of the award sent by the
Arbitrator has been delivered to the Claimant on 29.8.2007.
The Director of Claimant Sri. K.R. Choudhary has been
examined as PW.1 and he has stated in his evidence
affidavit that Award was communicated to them on
29.9.2007. He has further stated that the date of signing of
the Award was on 29.8.2007 and it is impractical to assume
that the Award had reached them on the same day i.e., on
29.8.2007. PW-1 in his cross-examination has denied the
suggestion that he has received the copy of the Award
earlier to 29.9.2007. Therefore, from the evidence of PW-1,
it is clear that copy of the signed Award was communicated
to the Claimant on 29.9.2007. Ex.P1 is the copy of the
letter dated 29.8.2007 and copy of Award dated 29.8.2007
is annexed to it. The mode of service of the said copy of
the Award is not stated by the Respondents 1 and 2 or in
the arbitration records. Therefore, there is only statement
of PW.1 on oath that he has received the signed copy of the
Award on 29.9.2007. Therefore, the limitation for filing
proceedings under Section 34 of the Act has to be reckoned
from 29.9.2007 and the last date for filing the suit under
Section 34 of the Act is 28.12.2007 and the Civil Courts
were closed for vacation and the suit came to be filed on
the reopening day i.e., on 1.1.2008. Therefore, the suit
filed by the Claimant under Section 34 of the Act, on
9 1.1.2008, is within the period of limitation. Accordingly, I
answer Point No.1 in the Affirmative.
9) Point No.2: The Respondents 1 and 2 have
contended that the Plaintiff has received and encashed the
cheque for a sum of Rs.4,95,983/- sent by the Respondents
1 and 2 without demur and without reserving right to
challenge the award and therefore plaintiff is precluded
from challenging the award passed by the Arbitrator. The
Plaintiff has admitted that the 1st and 2nd Respondents have
sent cheque for a sum of Rs.4,95,993/- by their letter dated
28.9.2007 honoring the Award passed by the 3 rd
Respondent. The learned Advocate appearing for the
Respondents 1 and 2 has contended that the party, who has
taken benefit under the award cannot say award is invalid.
He placed reliance on the following decisions:
i) 1998 (1) Raj 529 (Delhi) Goel Associates vs. Din. Coop. Group Housing Society Ltd., wherein in paragraph 5, it is held as under:
“5. Sum and substance of the remaining four decisions referred to above is also that where a party to an award has taken benefit under it, it cannot turn round, and say that the award is invalid.”
ii) AIR 1982 BOM 76
10 M/s. Govindji Jevat and Co., vs. Shree Saraswati Mills,
Ltd., wherein in paragraph 8 it is held as under:
“8. The principle that emerges from the
two decisions is that it is possible in an appeal
against decree or order of Court to confirm the
same partly and set aside the same partly even
though two parts may not be severable.
Another thing to be noted in such a case is that
when an appellant challenges a decree against
him, the result of the appeal can only be
adverse to the appellant to the extent of his
challenge in case his challenge fails and if he
succeeds only that part is set aside while the
part of the decree which is not challenged
remains untouched; therefore, the appellant
when he receives the money or some other
benefit under the decree under challenge
always retains the benefit whether he wins or
loses the appeal. This is not the position in the
case of an award. Whenever an award is
challenged on whatever ground it may be, the
award has to be set aside in toto or if made in
parts, the entire part challenged and thereafter
there will not exist any basis for the person
challenging the award to retain the benefit
received by him under the award or the part of
the award which is challenged. In my view this
is an important distinction between an award
and a decree or order of the Court.”

iii) AIR 1979 CAL 20
J. Thomas and Co. (Jute and Gunnie) Pvt. Ltd., vs. The
Bengal Jute Baling Co. Ltd., wherein in paragraph 24,
it is held as under:
11 “24. J. Thomas, contends Mr. Tibrewal, having accepted the award and having made payments under the award cannot now challenge the award. It is nobody’s case that the appellant made payment without prejudice to its rights to challenge the award. The last point of Mr. Tibrewal may immediately be dealt with. A person who gains a benefit by obtaining an advantage of money under an award accepts such award and cannot thereafter challenge it. But a person who suffers or incurs a detriment by paying a sum of money or otherwise under an award does not thereby preclude himself from challenging the award if it is otherwise open to challenge.” 10) The learned Advocate appearing for the
Claimant/Plaintiff has contended that they have encashed
the cheque sent by the Respondents 1 and 2 without
prejudice to their case and the same has been pleaded in
Paragraph III, which reads as under:
“III. The plaintiff in the above suit has challenged the Arbitral Award passed by the third Respondent in Case No. 22/DGMM/ARB/05-06/II/172, dated 29.08.2007 at Document -1. The first and second respondent have sent a cheque for a sum of Rs.4,95,993/- vide their letter dated 28.09.2007 honouring the award passed by the third respondent and thereby the first and second respondent have acquiesced to the award. The claimant herein in this suit is questioning the
12 basis of the quantum arrived by the arbitrator. As the cheque was becoming stale and the claimant is questioning the basis for quantification, the claimant has deposited the cheque issued by the first respondent for honour without prejudice to their case, in the above suit.” 11) The aforesaid pleading of Claimant/Plaintiff
clearly goes to show that the Plaintiff has encashed the
cheque which was becoming stale and the Claimant is
questioning the basis for quantification, and therefore the
cheque has been encashed without prejudice to their case.
As per the law laid down in the aforesaid decisions, a party,
who is liable to make payment under the Award cannot
challenge the award if it had made payment without
prejudice to its rights. In the present case, there is no
liability on the Plaintiff/Claimant for making payment under
the award, but it is the plaintiff’s right to receive the
amount under the award. Even though the plaintiff has
received the amount under the award, he can still
challenge the award as his claim is more than the amount
awarded. Therefore, the decisions referred to by the
Counsel for Respondents 1 and 2 will not apply to the case
on hand. The plaintiff has encashed the said cheque sent
by the Respondents 1 and 2 without prejudice to the case
of the plaintiff and therefore the Plaintiff can challenge the
award and more so, the claimant is questioning the basis of
13 quantification arrived by the Arbitrator. Accordingly, I
answer point No.2 in the Negative.
12) Point No.3: The learned Counsel appearing
for Respondents 1 and 2 has argued that the parties by
incorporating Arbitration Clause in the Contract
consciously excluded the jurisdiction of the Civil Court.
Having submitted to the jurisdiction of the Arbitrator, the
parties are bound by the decision of the Arbitrator. The
parties cannot be allowed to make a back door entry to the
Civil Court under the guise of Section 34 of the Act, when
the Award goes wrong. Ultimately, the decision of the
Arbitrator is final and binding on both the parties.
However, the Award can be set aside by the Civil Court only
if the grounds mentioned in Section 34 of the Act are made
out. The scope of interference by Civil Court in Arbitration
Award is very limited. It is as good as supervisory
jurisdiction, since scope of interference is further reduced
under the Act. The Arbitration Award can be challenged
only if the grounds under Section 34 of the Act, i.e., Sub-
Section 2(a)(i) to (v) and (b) (i) and (ii). The learned
Advocate appearing for the Claimant has argued that he
has challenged the Arbitral Award on the ground that it is
in conflict with the public policy of India.
13) The Hon’ble Apex Court in the case reported in
2003 (5) SCC 705 in the case of ONGC Limited vs. Saw
Pipes Limited, wherein in para No.31, it is held as under:
14 “31. Therefore, in our view, the phrase ‘public policy of India’ used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award / judgment / decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term ‘public policy’ in Renusagar case, it is required to be held that the award could be set aside if it is patently illegal. The result would be – 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.

Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that 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 award is opposed to public policy and is required to be adjudged void.” 14) The Hon’ble Apex Court has considered what
would constitute “the fundamental policy of Indian law” in
ONGC Limited vs. Western GECO International Limited,
15 reported in 2014 (9) SCC 263 – in paragraphs Nos.40 and
41, which reads thus:
“40. It is neither necessary nor proper for us to attempt an exhaustive enumeration of what would constitute the fundamental policy of Indian law nor is it possible to place the expression in the straitjacket of a definition. What is important in the context of the case at hand is that if on facts proved before them the arbitrators fail to draw an inference which ought to have been drawn or if they have drawn an inference which is on the face of it, untenable resulting in miscarriage of justice, the adjudication even when made by an Arbitral Tribunal that enjoys considerable latitude and play at the joints in making awards will be open to challenge and may be cast away or modified depending upon whether the offending part is or is not severable from the rest.

41. Inasmuch as the arbitrators clubbed the entire period between 16-10-2001 and 21-3- 2002 for the purposes of holding the appellant Corporation responsible for the delay, they committed an error resulting in miscarriage of justice apart from the fact that they failed to appreciate and draw inferences that logically flow from such proved facts. We have, therefore, no hesitation in rejecting the contention urged on behalf of the respondent that the arbitral award should not despite the infirmities pointed out by us be disturbed.” 15) As per the law laid down in the aforesaid
decisions, the Arbitration Award can be challenged, if on
facts proved the Arbitrator fails to draw an inference,
which ought to have been drawn or if they have drawn an
16 inference, which is on the face of it untenable resulting in
miscarriage of justice. The aforesaid decision of ONGC
case has been referred to in the case of Associated Builders
vs. Delhi Development Authority reported in 2015 (3) SCC
49, wherein in paragraph Nos.33 and 34, it is held as
under:
“33. It must clearly be understood that when a court is applying the ‘public policy’ test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts. In P.R. Shah, Shares & Stock Brokers (P) Ltd., v. B.H.H. Securities (P) Ltd., this Court held: (SCC pp. 601-02, para 21) “21. A court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or reappreciating the evidence. An award can be challenged only under the grounds mentioned in Section 34(2) of the Act. The Arbitral Tribunal has examined the facts and held that both the second respondent and the appellant are liable. The case as put forward by the first respondent has been accepted. Even the minority view
17 was that the second respondent was liable as claimed by the first respondent, but the appellant was not liable only on the ground that the arbitrators appointed by the Stock Exchange under Bye-law 248, in a claim against a non-member, had no jurisdiction to decide a claim against another member. The finding of the majority is that the appellant did the transaction in the name of the second respondent and is therefore, liable along with the second respondent. Therefore, in the absence of any ground under Section 34(2) of the Act, it is not possible to re-examine the facts to find out whether a different decision can be arrived at.”

34. It is with this very important caveat that the two fundamental principles which form part of the fundamental policy of Indian Law (that the arbitrator must have a judicial approach and that he must not act perversely) are to be understood.”

Therefore, in view of the law laid down in the aforesaid
decisions, it is to be ascertained whether the Arbitrator
failed to draw an inference which ought to have been
drawn, the inference, which is on the face of it untenable
resulting in miscarriage of justice.
16) In this case, it is admitted that the claimant was
awarded contract for construction of duct of about 925
Route Meter along Marathalli Road in Marathalli Exchange
18 Area in BGTD under TCIL Project No. BGT-22/2k. The work
was awarded on 27.10.2000 and was supposed to be
completed within three months. It is also not in dispute
that Pipes were issued to the claimant between 13.01.2001
and 27.03.2001 as per Ex.C.3 to C.8.
17) Further, it is admitted that the land wherein the
work has to be carried out by the claimant is a defence
land. Respondent was not able to get necessary
permissions from the Defence Authorities and hence on
22.07.2003 project was cancelled. Pipes were returned by
the claimant to the respondent in the second week of Jyly
2003. In fact return of pipes has taken place between
7.7.2003 and 11.7.2003. It is also not in dispute that the
claimant had stored these pipes by hiring store yard.
18) The claim made by the claimant is for
Rs.22,12,502/- towards storing charges, as the contract
was cancelled. Amount claimed by the claimant was
towards storing and guarding of 110 mm and 50 mm PVC
pipes for the project.
19) As against this, it is the contention of the
respondent that the claimant was issued required
quantities of PVC pipes in various lots during the course of
execution of 12 projects awarded to the claimant including
one in BGTD. 22/2k. Out of the 12 projects awarded, 11
projects were completed with varying delays. For these
19 completed projects there was no extra payment for pipes
storage nor any payment claimed by the claimant for each
project entrusted to the claimant against the above project.
Pipes were issued in lots as and when received from the
manufacturers / suppliers though BGTD and each lot
covered one or more projects. Claimant was expected to
stock the pipes meant for various projects which involve
transfer of pipes from one project to another regulated
through various store transfer notes approved by the
respondent during the course of execution of the project.
20) As regard the cancelled Project BGT 22/2k,
respondent submitted that at the time of issue of pipes
initially 33,270 meters of 110 mm and 23040 meters of 50
mm were supplied in lot. Claimant was simultaneously
having 9 projects of 1999 and 3 project of 2000 and for the
purpose of convenience entire quantity supplied as above
was shown as Project No. BGT. 22/2k. Through various
store transfer notes and store return notes the quantities
were regularized according to the actual utilization or
provision in the estimations as the case may be in each
projects.
21) While rejecting the claim of the claimant,
learned Arbitrator has held that the storage time for the
pipes were varying and they were ranging from 5 months
to 30 months in respect of completed projects. It was not
practicable to store the pipes for such long duration along
20 the road side in Bangalore. Store yard was used for storing
all the pipes meant for various projects. It is further held
by the Learned Arbitrator that as per Clause 54 of the
Proposal, Contractor was not entitled for any handling /
storage charges of materials, additional expenditure
incurred by the claimant need to be reimbursed by the
respondent.
22) If the Award of the learned Arbitrator is
considered, it appears he was under the impression that in
view of Clause 54 of the Contract, Claimant was not
entitled for any handling / storage of charges of materials.
Arbitrator has opined that the business means not merely
profit and it means loss also. Because of the cancelled
project, whatever expenditure incurred by the claimant
towards the storage / handling charges will be sufficient to
be recouped and no business loss needs to be paid by the
respondent.
23) In my opinion, the observations made by the
learned Arbitrator are contrary to the clause of the
contract governing the parties.
24) Admittedly, Ex.C.2 is the Contract between the
parties in respect of the project in question. Terms of this
contract governs the contract between the parties. As can
be seen from the terms of this contract namely Sub-Clause
(d) of Clause 3, the PVC pipes will not be stored under
21 direct sunlight. At site they will be neatly stacked along
one trench in such a way that no damage occurs by the
work, traffic, etc. The PVC pipes, bends, along with solvent
cement will be issued at station of work. Other materials
(if any) will be issued. The Contractor will arrange proper
transportation and storage of material.
25) Clause 7 lays down that the Contractor shall
provide without any extra charges site office in near
vicinity for the whole duration of the work. It should have
a properly covered accommodation not less than 50 Square
Meters. In addition to the Contractor, the Employer’s
Engineer will also use this premises free of charges.
26) As can be seen from these clauses, once the PVC
pipes are handed over to the Contractor, it is his
responsibility to store the same in such a manner that pipes
will not be stored under direct sunlight and necessary
protection has to be provided. Apart from the same, the
Contractor is also required to provide a covered
accommodation as site office.
27) As per Clause 22 of the contract, the Contractor
shall in connection with works provide and maintain at his
cost all lights, guards, fencing and watching when and
where necessary or required by the Engineer or the
Engineer’s representative, or by any duty constituted
22 authority, for the protection of the works, or for the safety
and convenience of the public or others.
28) These are the some Clauses which indicate the
extent and manner the Contractor has to arrange for
storing and maintaining the pipes given to him for
executing the work.
29) The learned Arbitrator has referred to Clause 56
while restricting the claim of the claimant only to the
extent of the charges that are necessary for storing the
pipes.
30) According to Sub-clause (2) of Clause 56,
materials are to be supplied by Engineer. The materials
were required to be delivered at Contractor store or any
other godown / store / location, decided by the Engineer at
the station of work. It shall be the responsibility of the
Contractor to arrange for loading, unloading and
transportation for use at work at his cost.
31) It means, even the place where the pipes were
required to be stored has to be decided by the Engineer.
32) According to Sub-clause (3) of Clause 56, it will
be the duty of the Contractor to inspect the material
supplied to him prior to taking delivery thereof and to
satisfy himself that they are in good conditions. After the
23 materials are delivered by the Engineer, it shall be the
responsibility of the Contractor to keep them in good
condition and under proper storage wherever necessary. If
the materials are damaged or are lost at any time, they
shall be required to be replaced by the Contractor at his
own cost as per the directions of the Engineer.
33) This Clause indicates that even the safety of the
pipes being supplied or stored is the responsibility of the
Contractor. Any loss or damage to the pipes has to be
made good by the Contractor.
34) For the purpose of this case, I feel it necessary
to refer Sub-Clause (1) and (2) of Clause 43. These Clauses
refer to suspension of work and suspension lasting more
than 90 days. According to these clauses, the extra cost
incurred by the Contractor in giving effect to the
Engineer’s instructions shall be borne and paid by the
Engineer unless such suspension is otherwise provided for
in the Contract, or necessary by reasons of some default on
the part of the Contractor, or necessary by reason of
climatic conditions on the site, or delayed supply of
material by the Engineer, or necessary for the proper
execution of the works. Further, if the progress of the
works or any part thereof is suspended on the written
order of the Engineer and if permission to resume work is
not given by the Engineer within a period of ninety days
from the date of suspension then, unless such suspension is
24 within the paragraph (a) to (d) of Sub-Clause (1) of Clause
43, the Contractor may serve a written notice on the
Engineer requiring permission within twenty eight days
from the receipt thereof to proceed with the works, or that
part thereof in regard to which progress is suspended and,
if such permission is not granted within that time, the
Contractor by a further written notice so served may, but is
not bound to, elect or treat the suspension where it affects
part only of the works as an omission of such part under
Clause 54 thereof, or, where it affects the whole works, as
an abandonment of the Contractor by the Engineer.
35) If these clauses are taken into consideration, for
any reason, on account of commission or omission on the
part of the respondents, the work is not carried out then
the same is deemed to have been abandoned of the
Contract by the Engineer.
36) In the present case, admittedly, the Defence
Authorities did not give permission to carry out the work.
The responsibility of obtaining permission from the
Defence Authorities was on respondents. The said
responsibility was not discharged by the respondents. As a
result, the claimant was not permitted to carry out the
work. Ultimately, the contract was cancelled. It certainly
indicates that it is abandonment of contract by Engineer. In
fact, this position is not disputed by the respondents.
25 37) Lastly, I wish to refer to Sub-clause (3) of Clause
73 of the Contract. According to this sub-clause, in the
event of termination of the Contract, the Employer shall be
under the same obligations to the Contractor in regard to
payment as if the contract had been terminated under the
provisions of Clause 69(8) thereof, the Engineer shall pay
to the Contractor the amount of any loss or damage to the
Contractor arising out of or in connection with or by
consequence of such termination.
38) Further, as can be seen from Sub-clause (8) of
Clause 69, if the contract is terminated, the Contractor
shall be paid by the Engineer, insofar as such amount or
items shall not have already been covered by payments on
account made to the contractor for all works executed prior
to the date of termination at the rates and prices provided
in the contract and in addition –
(a) The amounts payable in respect of any
preliminary items, so far as the work or service comprised
therein has been carried out or performed, and a proper
proportion as certified by the Engineer or any such items,
the work or service comprised which has been partially
carried out or performed.
(b) The cost of materials or goods reasonably
ordered for the works which shall have been delivered to
the contractor or of which the contractor is legally liable to
accept delivery such materials or goods becoming the
26 property of the Employer upon such payments being made
by him.
(c) A sum to be certified by the Engineer being the
amount of any expenditure reasonably incurred by the
contractor in the expectation of completing the whole of
the works insofar as such expenditure shall not have been
covered by the payments in this sub-clause before
mentioned.
(d) Any additional sum payment under the
provisions of Sub-Clause (1), (2) and (4) of Clause 69.
(e) The reasonable cost of removal of Constructional
plant under Sub-Clause (7) of Clause 69 and, if required by
the contractor, return thereof to the contractor’s main plant
yard in his country of registration or to other destination at
no greater cost.
(f) The reasonable cost of repatriation of all the
contractor’s staff and workmen employed on or in
connection with the works at the time of such termination.
Provided always that against any payments due from
the Engineer under this sub-clause, the Engineer shall be
entitled to be carried with any outstanding balances due
from the Contractor for advances in respect of
constructional plant and materials and any other sums
which at the date of termination were recoverable by the
Engineer from the Contractor under the terms of the
contract.
27 39) These clauses in the contract clearly indicate
that in case of termination or abandonment of contract on
account of commission or omission on the part of the
respondents, the claimant is not only entitled for actual
cost incurred by him, but he is also entitled for the
damages. But, according to the Arbitrator, the Contractor
is not entitled for any loss or damages. The above terms of
contract have been totally ignored by the Arbitrator. Hence,
the Award passed by the learned Arbitrator is in
contravention of the terms of the contract and, in view of
the law laid down by the Hon’ble Supreme Court of India in
the above mentioned rulings, it is liable to be set aside.
40) As already pointed out by me, both the parties
admit that the contract of project bearing No.BGT – 22/2k
was given to the claimant. As per the contract, the
claimant was required to complete the project within three
months from the date of issue of award letter. Exs.C.9 and
C.10 show that the work was not commenced. The
respondents were requested to take immediate action to
issue letter to KIADB for obtaining road cutting permission
and to issue letter to the claimant to start the work without
further delay. Ex.C.12 is a letter of the claimant to the
respondents. It was pointed out to the respondents that as
early as October 2000 the work order was issued, pipes for
the project were supplied between January 2001 and
March 2001, the work could not be commenced in spite of
constant follow up with the respondents. The letter further
28 shows that the respondents were intimated by the claimant
that the pipes were stored in a separate store yard at
Puttenahalli, J.P. Nagar by incurring huge expenditures. It
is further brought to the notice of the respondents that the
claimant is paying huge interest to the bankers on
overdraft and also incurring huge expenses. Hence, the
respondents were requested to expedite the matter. Similar
letters in Ex.C.15(a) and Ex.C.17 were written to the
respondents by Claimant. Ultimately, as per Ex.C.17 letter
dated 3.7.2003, the claimant was requested to return the
pipes. Admittedly, the pipes were returned. Ex.C.18 is a
letter dated 7.7.2003 along with enclosure claiming rent,
watchman and security charges, interest on rent deposit of
Rs.3.60 lakhs at 18% per annum, handling charges
(electricity, water, torches, battery, etc.), and interest,
totally amounting to Rs.22,12,502/-. The enclosure to the
said letter further shows that the rent was paid for the
storage yard at No.43/2, Puttenahalli, J.P. Nagar VII Phase,
Bangalore. Since the claimant was required to give
information to the landlord one month or thirty days prior
to vacating the same, the rent is paid upto 7.8.2003.
Payment for three Security Guards per day (24 hours) was
claimed at the rate of Rs.4500/- per month per Security
Guard.
41) There appears to be correspondence between
the parties in this regard. The claim of the claimant was
challenged by the respondents on the ground that the pipes
29 issued to the claimant are not only for the project bearing
No.BGT-22/2K, it also included the other two projects
bearing No.BGT-1/2K and 16/2K, which the claimant has
completed after February, 2001.
42) It is further contended that the storage and
handling of the pipes are the responsibility of the
Contractor. Such being the case, the claimant has an
obligation under the contract to store the pipes and the
respondents are not liable for any payment towards the
same. As per Clause 54(1) (b) of the general conditions of
the Contract, the respondents have a right to require the
Contractor to omit any work and the Contractor shall do
the same on such requirement. Such being the case, the
respondents are not liable to the claimant any expenses
incurred by the claimant and the claimant has an obligation
to return the pipes as and when required by the
respondents. The respondents have given a notional
calculation of a sum of Rs.1,97,684/-.
43) The claimant has produced the lease deed
between the landlord and himself. The parties have
adduced evidence before the Arbitrator. RW.2 Project
Manager of the respondents at Bangalore was examined.
He has admitted about receipt of Ex.C.10. A suggestion
was made to RW.2 that there is no record to show that
Ex.C10 was replied. RW.2 admitted the same. He further
admits that by 6.10.2001 he was aware of increasing
30 financial burden on the claimant with respect to storage of
pipes relating to project bearing No.22/2K. He further
admits that by that time he was aware of the fact that the
claimant is incurring a rental of Rs.36,000/- per month with
respect to project bearing No.22/K. These admissions are
very very specific.
44) RW.2 further admitted that he was aware of the
fact that an extent of 10 guntas of land was hired by the
claimant in Sy. No.43/2 of Puttenahalli Village as per
Ex.C.29. There is no record to show that he has ever
required the claimant to return the pipes of the project
bearing No.22/K and surrender the lease during his tenure.
Then it was suggested to him that the space available in
Puttenahalli store yard was required for storing pipes of
project bearing No.22/2K and therefore he has not raised
any written objections. He replied saying that no written
objections were raised. There are no records even
minuiting his oral objections as to hiring of Puttenahalli
store yard for storing the pipes relating to the said project.
45) RW.1 was also cross-examined by the claimant in
this regard. He was asked whether he has ever enquired
with the claimant as to what are the arrangements he had
made for the storage of pipes. RW.1 replied saying that
there was no need for enquiry as he was making regular
inspection. He admits that during his inspection he was
satisfied with the storage of pipes vis-a-vis the project
31 bearing No.22/2K and he replied saying that he did not find
any irregularities. He has further admitted that during his
inspection, he has never objected for the claimant as to the
extent of area taken by him for storage of pipes. It is
admitted that he did not object because he knew that so
much area was required for storing the pipes supplied with
respect to the said project. It is not in dispute that in the
absence of project site being approved, the claimant should
store pipes at a private place. It appears, after storage of
pipes, there was regular inspection of the pipes by
respondent No.1. He admits that he has inspected the
project bearing No.BGT-22/2K.
46) These facts clearly show that the respondents
were aware of the fact that the claimant had taken the land
in question measuring to an extent of 10 guntas on monthly
rental of Rs.36,000/- for storing the pipes. He had also
paid deposit.
47) It is one of the contentions of the respondents
that since the project was to be completed within a period
of three months, there was no necessity for the claimant to
take the land in question on lease for a period of eleven
months. Hence, it is submitted that the document is a got
up document.
48) As can be seen from the documents produced
before the Arbitrator, the same indicates that the tenders
32 were called as if the project is going to commence
immediately. The project award letter dated 27.10.2000
was issued. In the said letter, the respondents asked the
claimant to commence the work immediately and should
complete the work in all respect within three months from
the date of issue of the said letter. The claimant was asked
to deploy adequate men and machinery and ensure uniform
and required progress every week.
49) Exs. C3 to C8 clearly show that the pipes were
issued between January 2001 and march 2001 only for the
project bearing No.BGT-22/2K.
50) RW.2 in his cross-examination has admitted that
he was aware by 6.10.2001 that the claimant was storing
the pipes by incurring huge expenditure. The work
entrusted to the claimant appears to be with respect to
Marathalli exchange area. Even when he was cross-
examined, as on that day, he admits that there is no
exchange in Marathalli area. A suggestion was made to
him that as per Ex.P.C.-36 he is aware of the non-
finalization of exchange at Marathalli exchange area as
early as 9.5.2000. He admitted the said suggestion. He
was asked whether at any point of time before awarding of
contract enquired with BSNL whether the requisite
permissions are obtained. He replied that he was informed
that approval of defence authorities is awaited. He further
admits that on 9.5.2000 itself he was aware of the fact that
33 exchange was not available at Marathalli. In spite of all
these facts, tender was called, work was awarded to the
claimant, pipes were delivered to him and he was made to
store the pipes by investing huge amount, that too for long
period of 30 months.
51) As per Dx.C.35 and R.13, RW.1 had informed the
claimant to lay cable duct from manhole No.1 to 6 in
Marathalli exchange area. Without obtaining the necessary
permission for carrying out the work from the competent
authorities including from the defence authorities, the
contract work was entrusted to the claimant. As per the
terms of the contract, the claimant was required to make
all arrangements for storing pipes and other arrangements
required for executing the contract work. IN the cross-
examination, RW.1 was asked that except Clause 54(1) (b)
in form of proposals, he does not have any objections for
settling the claim of the claimant. He replied that provided
the claim of claimant is justified as per CWC warehouse
charges.
52) Ex.C37(1) (i) is a letter of Project Director of the
respondent. In this letter, the Project Manager of
respondents states that the project No.BGT-22/2K has been
kept in abeyance for a period of thirty months by BGTD and
the same was cancelled. He further states that though the
claim appears to be justified, it is not practicable. So far in
the history of respondent, no such payment has been made
34 to Contractors as storage and transportation charges
whenever PVC pipes are handled by returning the same.
He further states that if BSNL reimburse the said amount,
the same can be paid to the Contractor. But, BSNL will
never or ever pay the above mentioned charges. This letter
reveals that in principle the Project Director had no
objection to pay the amount claimed by the claimant.
53) Ex.C37 (1) (i) is the details regarding the stock
of pipes made by the claimant. In Ex.C37(1c) the
respondents have admitted that the claimant may claim the
enhanced percentage over the approved percentage
because of delay in the project. By this, the respondents
have acknowledged that there was delay in the project,
which was ultimately cancelled.
54) Ex.C41 is the copy of FIR regarding theft of
pipes from Puttenahalli store yard of the claimant. This
document reveals that 845 pipes of 110 MM and 1217
pipes of 50 MM were stolen. Admittedly, the pipes were
stored for long time. Exs.C31 to C34 are the ledger
extracts of the Bank. The claimant has claimed interest as
paid by him to his bankers. These documents are not
denied by the respondents. Hence, there is evidence on
record to show that the claimant has incurred loan and
paid interest to take the land for storing pipes.
35 55) RW.2 was cross-examined and was asked that
whenever he visited the said place, he did not object saying
that there is no proper watch and ward to the store yard.
To the said question, he says that he used to instruct them
to keep all safety measures and stack according to
guidelines. He admits that he did not give any complaint at
any point of time about watch and ward of the store yard.
He says that watch and ward, according to him, may be
satisfactory. Evidence of this witness also shows that the
length of each pipe is about six meters. The pipe will not
be cut unless the same is required. He admits that the
pipes will be stored across each other to look like a square.
He says that three to four feet is required to move around
each pipes lot. RW.1 while answering the questions put to
him in the cross-examination has spelled out the various
modes of quantification of damages. His answers show
that while deciding the same CPWD guidelines are
followed. It is admitted that the establishment charges and
handling charges are taken into consideration while
preparing the estimated cost and he has taken into
consideration of the same while preparing the estimated
cost for the project bearing No.22/2K. He has also
admitted in his evidence that the time was essence of
contract and generally the time fixed for completion of
work is two or three months. Further, it is not in dispute
that the claimant had hired store yard at the rate of Rs.38.4
per square meter, whereas according to CPWD rates it is
36 Rs.48/- per square meter. It appears while making payment
the respondent pays according to CPWD rates.
56) No doubt, as pointed out by the Arbitrator,
according to Clause 54 the responsibility of storing and
handling the pipes is on the claimant. He has taken the
said responsibility by investing huge amount. If the
contract work was carried out, the claimant could have
made good of the said expenditure in his profits. According
to the contract, the claimant was required to complete the
work in three months. He was made to wait for thirty long
months and thereafter the contract is cancelled.
Meanwhile, the pipes were delivered to him. He had taken
store yard by investing huge amount and had stored the
pipes. Because of long delay, it appears some pipes were
also stolen regarding which a complaint was also filed.
Having made the claimant to store the pipes for thirty long
months, it is now not open to the respondents to say that it
was the responsibility of the claimant to store the pipes and
the respondents are not liable to pay anything to the
claimant, except storing charges, that too notionally
calculated. The contract was cancelled only due to inability
of the concerned authorities and respondents to get
necessary permission. There is no fault of claimant in
cancellation of contract. The claimant is entitled for
damages as per law. The Arbitrator has held that the
claimant is not entitled for any damages. Hence, the
37 claimant is entitled to the amount claimed by him in his
claim petition before the Arbitrator.
57) Clauses 69 and 73 of the Contract clearly
indicate that in case of termination or abandonment of
contract on account of commission or omission on the part
of the respondents, the Claimant is not only entitled for
actual cost incurred by him, but he is also entitled for the
damages. The above terms of the contract have been
totally ignored by the Arbitrator. On the facts proved, the
Arbitrator failed to draw an inference, which ought to have
been drawn and the inference drawn by the Arbitrator is on
the face of it untenable resulting in miscarriage of justice.
Therefore, the award passed by the Arbitrator requires to
be modified. The Claimant has claimed damages of Rs.
35,76,317/- with interest. There is no contention of the
respondents 1 and 2 that the amount of damages claimed
by the Claimant is in excess. Therefore, the Claimant is
entitled to damages of Rs.35,76,317/- with interest at the
rate of 12% p.a. from 27.3.2001 till payment of the entire
amount. Accordingly, I answer the point No.3 in the
Affirmative.
38 58) Point No.4: For the aforesaid reasons, I
proceed to pass the following:

ORDER The suit of the Claimant/Plaintiff filed under Section
34 of the Arbitration and Conciliation Act, 1996, is hereby
allowed .
The Award passed by the Arbitrator is modified
holding that the Respondents 1 and 2 are liable to pay to
the Claimant/Plaintiff a sum of Rs.35,76,317/- with interest
@ 12% p.a. from 27-3-2001 till payment of the entire
amount.
(Dictated to the Judgment Writer, transcribed and computerized by
him, then corrected, signed and pronounced by me in the open Court
on this the 23rd day of November, 2018).
(SHIVASHANKAR B. AMARANNAVAR) Principal City Civil & Sessions Judge, Bengaluru.
*sk/-
Digitally signed by SHIVASHANKAR BASAPPA AMARANNAVAR DN: cn=SHIVASHANKAR SHIVASHANKAR BASAPPA BASAPPA AMARANNAVAR,ou=HIG H COURT OF AMARANNAVAR KARNATAKA,o=GOVERN MENT OF KARNATAKA,st=Karnatak a,c=IN Date: 2018.11.28 14:46:28 IST

News Reporter

Leave a Reply

Your email address will not be published.

%d bloggers like this: