Allowed

Indian Oil Corporation Ltd. v. M/S. Kadbrotec Engineering Industries

Bombay HC14 Jan 2011ARBP/212/2007

Case brief

AI extract

What is this about?

Petitioner challenged an arbitral award under Section 34 due to lack of evidence supporting the awarded damages. The High Court held that an award without material evidence is illegal and set aside the award, emphasizing that arbitrators must consider basic proof requirements even if not strictly bound by evidence codes.

What did the court decide?

The impugned award dated 31st January, 2007 was set aside and quashed. The arbitration petition was allowed.

Indian Oil Corporation Ltd. Vs M/S. Kadbrotec Engineering… — Arbitration | Bombay HC (2011)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY

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ORDINARY ORIGINAL CIVIL JURISDICTION

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ARBITRATION PETITION NO. 212 OF 2007

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Indian Oil Corporation Ltd. (A Govt. of India undertaking), having its registered office at Indian Oil Bhavan, G-9, Ali Yawar Jung Marg, Bandra (East), Mumbai-400 051 and having its Maharashtra State office at 254-C, Dr. Annie Besant Road, Prabhadevi, Mumbai-400 030

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....Petitioners.

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Vs.

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M/s. Kadbrotee Engineering Industries A partnership firm registered under Indian Partnership Act, having its Principal Place of business at R-224, TTC, M.I.D.C., Rabale Thane-Belapur Road, Navi Mumbai-400 701.

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....Respondents.

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Mr. N. Engineer a/w Mr. Sunil Gangan i/by M/s. RMG Law Associates for the Petitioners.

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Mr. S.A. Oak i/by M/s. Mahesh Menon & Co. for the Respondents.

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CORAM : ANOOP V. MOHTA, J.

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DATE : 14^th JANUARY, 2011

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ORAL JUDGMENT:-

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This Petition is filed under Section 34 of the Arbitration and

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Conciliation Act, 1996 (for short, the Act), whereby award dated 31^st January, 2007 has been challenged. The Arbitrator has granted the award as under:-

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“I hereby direct the Respondents to pay to the Claimants the sum of Rs.9,12,157/- within 30 days from the date of the Award. If the Respondents fails to pay the awarded sum within 30 days from the date of the Award then the Claimants shall be entitled to receive interest at the rate of 9% p.a. On the awarded sum of Rs.9,12,157/-.”

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2 The facts of the case are - the Petitioners are intera-lia engaged

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in the business of refineries and marketing, selling and distributing of Petroleum Products. The Respondents is a partnership firm engaged in engineering works.

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3 On 26^th July, 2002, the Petitioners had floated limited tender No.MSO/ENG/LT-16/-01-02/BHADLI for construction of sand pad foundation, fabrication of new cone roof tank for water and installation of fire fighting pumps at Petitioner’s Bhadli depot. Pursuant to the quotation received from the Respondents, the Petitioners by letter dated 26^th July, 2002 placed the work order upon the Respondents. Thereafter, the contract was executed between the

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parties on 23^rd August, 2002.

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4 The Respondents did not take any steps for taking over of the site and therefore, the Petitioners by their letter dated 18^th September, 2002 informed the Respondents that, 28^th September, 2002 should be treated as the commencement date of the work order and that the Respondents should report at site and commence the work immediately. Since, the contract was for a period of 6 months, the completion date of the contract was 27^th March, 2003. The time was the essence of the contract. The Respondents did commence work on 7^th October, 2002.

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5 The Respondents’ progress of work was very slow and tardy at site. The Respondents had grossly delayed the execution of the work, and was able to complete only the foundation work for the tank, which constituted only 10% of the total job by 3^rd March, 2003.

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6 The Respondents did not commence the construction of fire fighting pump housework, which was an independent activity and not related to tank fabrication. The Petitioners had by their aforesaid letter dated 24^th February, 2003 advised the Respondents that if they

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did not commence the pump house construction work on or before 3^rd March, 2003 they would delete this portion of the work from the Respondent’s scope and get it done through other agency.

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7 The Respondents was advised by letter dated 21^st January, 2003 to submit action plan for completion of work by end of February, 2003. However, the Respondents did not submit any action plan also. The Petitioners by letter dated 7^th March, 2003 suspended the work at site, as time was the essence of the contract.

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8 The Respondents made a claim of Rs.22,83,921.28 Ps. upon the Petitioners for the work alleged to have been done and the expenses incurred by them at site and also on account of loss of profit, compensation and other incidental expenses. The Petitioners rejected the said claims. A net amount of Rs.5,90,441.19 Ps. which was found due and payable by the Petitioners to the Respondents was paid. The Respondents accepted the said amount in full and final settlement of their claims.

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9 On 30^th September, 2004, the Respondents have by their Advocate’s letter dated 30^th September, 2004 sought to lodge its claim

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for the balance amount of Rs.17,17,688.28. The dispute was referred by the Director (Marketing) of the Petitioners Corporation to the Sole Arbitration of Mr. R.D. Kale. The Respondents filed their settlement of Claim and the Petitioners filed its Written Statement. The Respondents filed its rejoinder. The parties also examined witnesses. The Petitioners and the Respondents advanced oral arguments. The Petitioners also submitted their written arguments. On 31^st January, 2007 the impugned award was passed by the Arbitrator. Hence, this Petition.

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10 The learned counsel appearing for the Petitioners (Original Respondents) has pointed out Exhibit- “M”, which is nothing but a statement of claim/ chart prepared by the Respondents (Original Plaintiffs) showing the names of the suppliers, items and the amount alleged to have been paid. The whole submission is that such document, Exhibit- “M” just cannot be relied upon to grant claim in such a fashion.

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11 There is nothing on record to show that the Respondents lead further evidence and/or place on record any supporting documents referred in the statement (Exhibit “M”). Without filing of the affidavit

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in support of this document by the plaintiff, the same is not sufficient till the award of damages in such fashion. This is a private document referred by the claimants. Further, there is nothing on record, to show that the parties have agreed to lead evidence in such fashion. Though there is no written objection, yet the tenure of the cross-examination shows that on any facets of Exhibit “M” it has been tested and objected by the Petitioner.

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12 In view of Section 19 of the Act and the provisions of the Code of Civil Procedure, and/or the Evidence Act, are not strictly applicable, still the basic requirement of proof of documents, as it goes to the root of the matter, just cannot be overlooked specially when the parties nowhere agreed to follow such procedure while leading the evidence. The Arbitrator, therefore, need to consider the basic principle of awarding the damages of compensation as provided under the Contract Act.

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13 In the judgment of Anindya Mukherjee Vs. Clean Coats Private Limited, Arbitration Petition No. 947 of 2009 dated 28/10/2010 ,

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this Court (Anoop V. Mohta, J.) has observed as under:-

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“18 The Arbitrator needs to consider the basic laws while assessing and granting any kind of damages/ compensation. The Apex Court in the STATE OF RAJASTHAN & ANR. VS. FERRO CONCRETE CONSTRUCTION PRIVATE LIMITED, (2009) 12 SCC 1, has observed in paragraph No.55 as under:-

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“55. While the quantum of evidence required to accept a claim may be a matter within the exclusive jurisdiction of the arbitrator to decide, if there was no evidence at all and if the arbitrator makes an award of the amount claimed in the claim statement, merely on the basis of the claim statement without anything more, it has to be held that the award on that account would be invalid. Suffice it to say that the entire award under this head is wholly illegal and beyond the jurisdiction of the arbitrator, and wholly unsustainable.”

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14 In view of above, the finding given by the Arbitrator in para (f), while awarding this amount is without any material evidence and supporting documents and therefore, unacceptable and just contrary to law and even the material placed on record. The reasoning that the claimants cannot be made to suffer losses due to the rescission, even if it is proper and lawful, in my view, also cannot be the reason to award such amount in such fashion, basically when the learned Arbitrator has already observed by referring to clauses 31 and 32 of the Contract that the action so taken by the Petitioner of termination of contract is well within the square of the contract by giving the

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reasons on merits also. Therefore, the termination itself than the forfeiture so invoked also supports the case of the Petitioner.

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15 The Apex Court in (Oil and Natural Gas Corporation Vs. M/s. Wig Brothers Builders & Engineers Pvt. Ltd., JT 2010(11) SC 146) , (Ramnath International Construction Pvt. Ltd. Vs. Union of India & Anr. 2007(2) S.C.C. 453= AIR 2007 S.C. 509), has dealt with the facets of contract clauses between the parties. The award of damages ignoring the terms of contract amounts to “exceeding the jurisdiction” and “a legal misconduct” and is unsustainable.

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16 The principle of "accord and satisfaction on receipt of amount in full and final settlement of claim" is well established as declared in Lala Kapurchand Godha & Ors. Vs. Mir Nawab Himayatalikhan Azamjah, AIR 1963, S.C., 250, Union of India & Ors. Vs. Hari Singh, 2010(10) SCALE, 205 is an additional factor which needs to be considered in the present case. As admittedly, the Respondents had already received an amount of Rs.5,90,411.19 ps./- at the relevant time after considering the material as well as bill so raised and assessed by the Petitioner. The same was received without any objection at the relevant time. Therefore, the claim so raised is after

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thought and ought not to have been awarded, as done in the present

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case.

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17 Resultantly, I am inclined to set aside the present award dated 31^st January, 2007, as it is based upon the no material on record, therefore unsustainable in law. The award is quashed and set aside.

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18 The Petition is accordingly allowed. No costs.

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(ANOOP V. MOHTA, J.)

Indian Oil Corporation Ltd. v. M/S. Kadbrotec Engineering Industries

Case brief

What is this about?

What did the court decide?

Indian Oil Corporation Ltd. v. M/S. Kadbrotec Engineering Industries

Case brief

What is this about?

What did the court decide?

What the court decided

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