M/S Jalavahini Consultant Services (P) Ltd. Vs the Commissioner of Horticulture

THIS COMAP IS FILED UNDER SECTION 13(1-A) OF COMMERCIAL COURTS ACT, 2015 R/W SECTION 37 OF ARBITRATION AND CONCILIATION ACT, PRAYING TO SET ASIDE THE JUDGMENT DATED 14/12/2021 PASSED IN COM.A.P.NO.46/2020 ON THE FILE OF THE LXXXV ADDL. CITY CIVIL AND SESSIONS JUDGE (EXCLUSIVE COMMERCIAL COURT CH-86), BENGALURU CITY, ETC.

¶27

IN COMAP NO.62/2022:

¶28

BETWEEN:

¶29

M/S. JALAVAHINI MANAGEMENT SERVICE(P) LTD, NO.13/B, PANCHAMUKHI, 11^TH MAIN, R.P.C. LAYOUT (HAMPINAGAR), VIJAYANAGAR 2^ND STAGE, BENGALURU-560 104, REPRESENTED BY ITS DIRECTOR SRI. VENKATESH R. SHESHAPPANAVAR.

¶30

…APPELLANT

¶31

(BY SRI. NAGARAJ .S, ADVOCATE)

¶32

AND:

¶33

THE COMMISSIONER OF HORTICULTURE, (ORIGINALLY THE DIRECTOR OF HORTICULTURE), KARNATAKA STATE, DEPARTMENT OF HORTICULTURE, LALBAGH, BENGALURU-560 004.

¶34

SRI. I.S. ANTIN, SOLE ARBITRATOR, DISTRICT JUDGE (RETIRED), ARBITRATION & CONCILIATION CENTRE, KHANIZA BHAVANA,

¶35

COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶36

3 -

¶37

RACE COURSE ROAD, BENGALURU-560 001.

¶38

…RESPONDENTS

¶39

(BY SRI. ADITYA VIKRAM BHAT, AGA FOR R1)

¶40

THIS COMAP IS FILED UNDER SECTION 13(1-A) OF COMMERCIAL COURTS ACT, 2015 R/W SECTION 37 OF ARBITRATION AND CONCILIATION ACT, PRAYING TO SET ASIDE THE JUDGMENT DATED 14/12/2021 PASSED IN COM.A.P.NO.67/2020 ON THE FILE OF THE LXXXV ADDL. CITY CIVIL AND SESSIONS JUDGE (EXCLUSIVE COMMERCIAL COURT CH-86), BENGALURU CITY, ETC.

¶41

THESE APPEALS HAVING BEEN HEARD AND RESERVED FOR JUDGMENT ON 07.11.2024, COMING ON FOR PRONOUNCEMENT THIS DAY, V KAMESWAR RAO J ., DELIVERED THE FOLLOWING:

¶42

CORAM: THE HON'BLE MR JUSTICE V KAMESWAR RAO AND THE HON'BLE MR JUSTICE S RACHAIAH

¶43

CAV JUDGMENT

¶44

(PER: THE HON'BLE MR JUSTICE V KAMESWAR RAO)

¶45

The challenge in these appeals is by M/s. Jalavahini Management Service Prigvate Limited to an order dated 14.12.2021 passed by the Court of LXXXV Addl. City Civil and Sessions Judge at Bengaluru in two appeals being Com.A.P.No.67/2020 and Com.A.P.No.46/2020.

¶46

The Com. A.P. No.67/2020 was filed by M/s. Jalavahini Management Consultant Service Private Limited (in short, ‘M/s. JMCSP Ltd.’), whereas the Com.A.P.

¶47

4 -

¶48

COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶49

No.46/2020 was filed by the Commissioner of Horticulture

¶50

of the Karnataka State Department of Horticulture.

¶51

Suffice to state that the Com. A.P.46/2020 was allowed in as much as the award of the learned Arbitrator in AC 93/2019 allowing the claim of M/s. JMSP Ltd. to a sum of Rs.28,71,437/- which was allowed by the learned Arbitrator has been set aside and it was further held that the Commissioner of Horticulture is entitled to recover the amount of Rs.2,29,631/- from M/s. JMSP Ltd. The status of the parties in these appeals shall be referred as ‘Appellant’ to mean M/s.JMSP Limited and the respondent ‘Commissioner of Horticulture’.

¶52

The facts to be noted for the purpose of this order are, the respondent called a tender to engage the services of technical competent firms or groups for taking up consultancy services as “Project Management and Implementation Consultant” (in short, ‘PMIC’).

¶53

The appellant being a successful bidder, received

¶54

Government Order dated 25.05.2009 appointing it as the

¶55

5 -

¶56

COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶57

PMIC and a Memorandum of Understanding (MOU) was executed on 25.05.2009 between the parties.

¶58

The consultation was for a period of 18 months from the date of order with a provision for extension of mutual agreement. According to the appellant, the MOU dated 25.05.2009 was to be in force till the completion of the civil works. According to the appellant, the remuneration of the appellant was fixed at Rs.25,00,000/-. It was the case of the appellant that, it has done its part of work and prepared the design, plan, estimates, detailed project report and tender documents, and the same were submitted to the respondent.

¶59

On the basis of the report submitted by the appellant, the respondent had entrusted the civil works to M/s. Krishna Constructions. The civil work continued till 14.05.2012. The work was supervised by the appellant as per the MOU.

¶60

It was the case of the appellant that the respondent has asked the appellant to carry out some extra

¶61

COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶62

6 -

¶63

work i.e., road formation, path ways, levelling

¶64

fencing/compound to be taken up to the backward linkage center and forward linkage center vide letters dated 20.03.2012/05.04.2012. It was the case of the appellant that there was a delay in the progress of the work due to ban on sand mining and stone crushing, and also due to correction of the civil works and other allied reasons as required by the respondents. It was stated that the respondent was paid Rs.17.75 Lakhs. It was also the case of the appellant that the respondent was liable to pay a sum of Rs.28,71,437/- towards the additional work and supervision charges and further the balance amount of Rs.7,25,000/- as agreed under the work order.

¶65

When such was the case, the appellant received

¶66

a letter dated 09.08.2017 from the respondent, wherein the respondent made a claim for Rs.2,29,360/- against the appellant. A legal notice got issued on 31.10.2017 to the respondent claiming Rs.35,96,437/-.

¶67

7 -

¶68

COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶69

Suffice to state that the learned Arbitrator was appointed on the strength of the order passed by this Court in C.M.P. No.184/2018.

¶70

In its claim petition, the appellant had made a claim for Rs.81,81,847/- together with interest at the rate of 18% from the date of claim till the date of realization.

¶71

The respondent, who filed objections to the claim petition has also made a counter-claim. Based on the pleadings of the parties, the learned Arbitrator passed an award dated 06.03.2020 holding that the respondent is entitled to recover from the appellant a sum of Rs.2,29,631/-, after deducting the same, the respondent shall pay a sum of Rs.25,41,806/- together with interest @12% p.a. from the date of claim petition till the date of award and 9% p.a., from the date of award till realization on or before 31.05.2020.

¶72

The learned Arbitrator in the award has granted in favour of the appellant a sum of Rs.28,71,437/-. He has also granted the counter-claim of the respondent for

¶73

8 -

¶74

COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶75

Rs.2,29,631/-. In other words, it was stated that, subject to adjustment of Rs.2,29,631/- against Rs.28,71,437/-,

¶76

the appellant shall be entitled to a net amount of Rs.26,41,806/-. The appellant had challenged the award dated 06.03.2020 to the extent that the learned Arbitrator had not granted the claim of Rs.7,25,000/-. The case of the appellant was that the learned Arbitrator had failed to consider the relevant clause which provides payment of consultancy fee at 2.5% of the value of the work. So, the appellant had also claimed interest @18% p.a., from 14.05.2012 till realization of the amount awarded. The respondent had also challenged the award dated 06.03.2020 primarily on the ground that the learned Arbitrator has granted the amount of Rs.28,71,437/-, which according to the respondent is clearly untenable. This according to the respondent is because, the appellant is entitled to 2.5% for the infrastructure work completed and nothing more. No doubt, according to the respondent, as per the MOU between the appellant and the respondent, Rs.25,00,000/- was fixed as ‘consultancy fee’ for a total project/work of Rs.10,00,00,000/- (Rupees Ten Crores),

¶77

9 -

¶78

COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶79

but, the work was partially done by PMIC and hence, service charges to be paid was only to the extent of proportionate work done, which was to the tune of Rs.6,18,25,582/- and hence, the service charges to the above work amounting to Rs.15,45,639/- were payable. But the fact is, an amount of Rs.17.75 Lakhs was paid to the appellant, which was over and above Rs.15,45,639/and as such, the amount of Rs.2,29,631/- was liable to be refunded by the appellant, for which a counter-claim was made.

¶80

Having noted the relevant facts, for the purpose of this order, we must at this stage, reproduce the reasoning given by the learned Arbitrator on the claims/counter claims made by the parties herein before him. The conclusion drawn by the learned Arbitrator against Issues No.6 & 7, are reproduced as under:-

¶81

24. Issues 6 and 7:-

¶82

Both the claimant and respondent have sought different monetary reliefs. The claimant has sought for balance of consultancy fees as agreed upon on the ground that a sum of Rs.25 lakhs was the fixed amount payable as a minimum consultancy charges towards work undertaken to be executed by the

¶83

10 -

¶84

COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶85

claimant under the MoU. Such balance due from the respondent is a sum of Rs.7,25,000/-. It is admitted by both the parties that a sum of Rs. 17.75 lakhs is already paid to the claimant by the respondent. The claim for alleged balance of Rs.7,25,000/- is devoid of merit. For the material stipulation contained in clause 3.1.2 of MoU (Ex.P2) clearly mandates that payment shall be made proportionate to the work completed. The defence plea of the respondent that the claimant has not scrutinized and finalized bills to the tune of Rs.65,36,054/has not been controverted by the claimant by placing any material worth evaluation. As already discussed above, the learned counsel for the claimant conceded the fact that the claimant did not certify the last bill of the Contractor. The relevant clause of MoU providing for payment of consultancy fees would clearly indicate that 2.5% of the work merits to be paid to the claimant for the work completed. The contention put forth by Smt. Shweta Krishnappa, learned counsel for the respondent, that the value of completed work being Rs.6,18,25,582/- the claimant as per the agreed percentage of 2.5 towards remuneration for consultancy services would become entitled to a sum of Rs. 15,45,639/- only, merits to be accepted. The claim for realization of the full consultancy charges of Rs.25 lakhs despite the fact of non-completion of the entire work sounds preposterous. As the claimant is inadvertently paid a sum of Rs. 17,75,000/- which is in excess of its legitimate

¶86

11 -

¶87

COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶88

entitlement of Rs. 15,45,639/-, the claimant is liable in law to refund the excess payment of Rs.2,29,361/- to the respondent.

¶89

25. As for the extra work carried out by the claimant, the claimant has substantiated its entitlement by adducing both oral and documentary evidence. Sri S.Nagaraj, learned counsel for the claimant has strenuously urged before this Arbitral Tribunal that there was no resistance to the claim pertaining to extra work carried out by the claimant. He also demonstrated that such extra work is outside the scope of the MoU. Even in the absence of specific agreement, the entitlement of claimant for such extra work based on the request of respondent as evidenced by Ex.P3 coupled with the principle of the Section 70 of the Indian Contract Act, cannot be defeated. Having regard to the nature of the work of consultancy services assigned to the claimant and the civil work entrusted to the contractor M/s. Krishna Constructions, it is axiomatic that the work of the claimant is co-terminus with the work of the contractor. It may be further emphasized that the assertion of the claimant that the contractor is fully paid is not controverted by the respondent. It is also relevant to point out that the respondent has not chosen to examine the contractor regarding the unsatisfactory or unsuccessful work of the claimant as PMIC. Respondent cannot therefore be heard to contend that claimant as PMIC has not done any additional work as required by the respondent. At

¶90

12 -

¶91

COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶92

the risk of repetition it may be stressed that Exs.R13, R15 and R16 would make clear reference to the letter dated 20.03.2012 / 05.04.2012 (Ex.P3) calling upon the claimant to arrange to provide the plan and detailed estimates for the important works under Extra Item Rate List (EIRL) on top priority. As already highlighted above the respondent has not chosen to reply to the notice dated 31.10.2017 (Ex.P8) wherein the claimant has clearly specified the amount of Rs.28,71,437/- towards additional work and supervision charges. Exs.P6 and P7 merit careful consideration in the context of claim for recovery of Rs.28,71,437/towards cost of additional work and consultancy charges. Ex.P6 does contain specific claim in the said regard. The relevant figure signifying such claim is also reflected in the last page of Ex.P6 which is in tabular form. Ex.P7 is the reply sent by the respondent to the said notice (Ex.P6). In the course of cross-examination of RW1, he would only assert that excess payment of Rs.2,29,360/- was made to the claimant. Such amount is per se part of the original agreed consultancy charges of Rs.25 lakhs and has no bearing on the cost of additional work and additional consultancy charges. RW1 would admit in univocal terms that Ex.P6 contains the claim in respect of extra work under EIRL and earlier dues on the MoU. It is material to notice that RW1 does not in the course of the cross-examination deny the legitimacy of the said claim regarding the additional work

¶93

13 - COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶94

executed by the claimant.

¶95

26. On the above evaluation, the conclusion is inescapable that the claim for recovery of Rs.28,71,437/- is just and tenable. However, in the absence of any agreement either oral or documentary, the claim for interest on the value of services for such extra work till the date of claim petition cannot be granted.

¶96

27. By the same token the claim for interest at 18% on the excess amount for Rs.2,29,631/- as sought for by the respondent cannot be allowed.

¶97

28. As for the alleged short fall of Rs.1,55,070/towards income tax paid by the consultant / claimant, the counter claim made in that regard cannot be countenanced. Such statutory liability cannot be the subject matter of this Arbitral proceeding. It is for the income tax authorities to initiate appropriate action for any deficit payment towards income tax. Accordingly, I negative such claim.

¶98

29. Respondent has also sought for damages and compensation to the tune of Rs.25 lakhs. Such claim is apparently based on alleged belated and malicious arbitration proceeding instituted by the claimant. Such plea sounds paradoxical in as much as the respondent has chosen to make his counter claim in the very arbitration proceeding. Furthermore, there is no material wroth evaluation to sustain such counter claim of the respondent.

¶99

14 -

¶100

COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶101

Accordingly, the counter claim of the respondent for recovery of the said amount of Rs.25 lakhs is dismissed as devoid of any merit.

¶102

30. Accordingly, these issues are answered partly in the affirmative.”

¶103

From the perusal of the conclusion drawn by the learned Arbitrator, the Arbitrator has agreed that the appellant shall be entitled to an amount of 2.5% for the work executed. The total amount for which the work was executed being Rs.6,18,25,582/-, the appellant shall be entitled to an amount of 2.5% towards consultancy services, which shall be Rs.15,43,639/-, But, as against the said amount, an amount of Rs.17,75,000/- was paid to the appellant, which was clearly in excess of its legitimate entitlement of Rs.15,43,639/-, resulting in the counterclaim of the respondent being allowed, directing the refund of Rs.2,29,361/-. But, in so far as the claim of respondent for recovery of Rs.28,71,437/- is concerned, the learned Arbitrator by relying upon the letters dated 20.03.2012 and 05.04.2012 (Ex.P3), whereby the appellant was called upon

¶104

to arrange to provide the plan and the detailed estimates

¶105

15 -

¶106

COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶107

for the important works under ‘extra item rate list’ , which

¶108

aspect was not contested by the respondent to the subsequent notice issued by the appellant on 31.10.2017, wherein a specific claim was made by the appellant towards additional work and supervision charges, the learned Arbitrator awarded the said amount in favour of the appellant.

¶109

The challenge by the respondent to the award

¶110

dated 16.03.2020 in this regard was that, there was no mutual agreement in writing regarding extension of consultancy period of 18 months and also the extra work alleged by the appellant/management, for which an amount of Rs.28,71,437/- was granted by the learned Arbitrator. The challenge was also on the ground that the said amount has been granted only on the basis of the demand notice dated 31.10.2017 issued by the appellant claiming the above amount, which cannot be the basis for awarding the said amount by the learned Arbitrator.

¶111

The learned Sessions Judge has rejected the challenge of the appellant to the extent the appellant was

¶112

16 -

¶113

COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶114

not granted the amount of Rs.7,25,000/-. He has also set aside the award of the learned Arbitrator, whereby the learned Arbitrator granted an amount of Rs.28,71,437/- in favour of the appellant. The reasoning given by the learned Sessions Judge is the following:-

¶115

“11. ………. It is not in dispute that, out of the total Rs. Ten crores works project, works was taken up for Rs.6,18,25,582/only. Under such circumstances, the plaintiff service management is entitled to recover 2.5% of the amount spent towards infrastructure project. The learned arbitrator was under obligation to adjudicate the dispute within the terms of this order of the Government which is in the form of contract agreement. The service charges of plaintiff service management is fixed on the basis of cost incurred for infrastructure. It is not the case of plaintiff management that defendant Horticulture Department has spent the entire estimated cost of Rs. Ten crores on the project. Admittedly, the amount spent and also the bills incurred by the contractor has been scrutinized by the plaintiff service management itself which is Rs.6,18,25,582/- only. At this stage, it is necessary to rely upon the principles laid down by Hon'ble Supreme Court in McDermott International INC vs. Burn Standard Co., Ltd., and others 2006 (11) SCC 181. In this citation, Hon'ble Supreme Court observed that interference on ground of patent illegality is permissible only if the same goes to the

¶116

17 -

¶117

COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶118

root of the matter and a public policy violation should be so unfair and unreasonable as to shock the conscience of the court. The learned arbitrator though observed that, although the evidence on record does not reflect any specific mutual agreement in writing regarding extension of consultancy period of 18 months and also extra work alleged by the plaintiff management services, awarded an amount of Rs.28,71,437/- to the plaintiff. The said amount is awarded to the plaintiff based on Ex.P8 which is a demand notice dated 31.10.2017 issued by the plaintiff claiming the above amount. Whereas said notice, was issued by plaintiff after receipt of demand from 1st defendant on 9.8.2017 for a claim of Rs.2.29,360/-. Further, as per article 18 of the Limitation Act, 1963, the period of limitation for the price of work done by the plaintiff for the defendant at his request, where no time has been fixed for payment will be 3 years and the time begins to run when the work is done. Exchange of letter between the parties will not make the clock stop, if once cause of action accrues for making claim. Admittedly, as per this petition averments, the contract was for a period of 18 months as per MOU dated 25.5.2009. The department as per the request of builder gave extension of time vide its letter dated 25.4.2014 and construction period came to be extended from 15.3.2011 to 14.5.2012. Whereas, plaintiff management services issued said notice beyond the limitation period of 3 years that too after defendant

¶119

18 -

¶120

COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶121

Horticulture Department issued letter claiming excess amount. An arbitral tribunal must decide in accordance with the terms of the contract and the law of Limitation Act is applicable even to the arbitration proceedings. If the arbitrator wanders outside the contract and deals with matters, he commits an error. The contract authorizes plaintiff to receive 2.5% towards his service charges out of the amount spent or incurred. Plaintiff has no right to claim any amount more than the same and such claim is contrary to the very preamble of the contract mentioned supra. Awarding of service charges for the services rendered by the plaintiff was fixed on the basis of cost for infrastructure work.

¶122

Further the parties have appeared before arbitral tribunal with claims and counterclaims respectively. Learned arbitrator has separately decided the claim and counter claim and awarded as sum of Rs.28,71,437/- towards plaintiff's claim and a sum of Rs.2,29,631/- towards defendant's counter claim. When finding of the learned arbitrator in respect of claims of the claimant, are held to be against the public Policy of India, if those claims which are independent of other claims/ counter claims made by defendant Horticulture Department, could be separted, finding on other claims counter claims which are not hit by grounds mentioned in Sec.34(2) need not be set aside.

¶123

19 -

¶124

COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶125

12. In a decision reported in 2011(2) Arb.LR 84 (SC) (JG Engineers Pvt Ltd., vs. Union of India and another) Hon'ble Supreme Court has held in para- 18 as under: -

¶126

"18. The arbitrator has considered and dealt with claim Nos. (1), *2, 4 and 5), (6), (7 and 8), (9) and (11) separately and distinctly. The High Court found that the award in regard to item Nos.1,3,5 and 11 were liable to be set aside. The High Court did not find any error in regard to the awards on claim Nos.2,4,6,7,8 and 9, but nevertheless chose to set aside the award in regard to these six items, only on the ground that in the event of counter-claim Nos.1 to 4 were to be allowed by the arbitrator on reconsideration, the respondents would have been entitled to adjust the amounts awarded in regard to Claim Nos.2, 4, 6, 7, 8 and 9 towards the amounts that may be awarded in respect of counter-claim Nos.1 to 4; and that as the award on Counter-claim Nos.1 to 4 was set aside by it and remanded for fresh decision, the awards in regard to Claim Nos.2, 4, 6, 7, 8 and 9 were also liable to be set aside. It is now well settled that if an award deals with and decides several claims separately and distinctly, even if the court finds that the award in regard to some items is bad, the court will segregate the award on items which did not suffer from any infirmity and uphold the award to that extent.

¶127

COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶128

20 -

¶129

As the award on item Nos.2, 4, 6, 7, 8 and 9 were upheld by the civil court and as the High Court in appeal did not find any infirmity in regard to the awards on those claims, the judgment of the High Court setting aside the award in regard to Claim Nos. 2, 4, 6, 7, 8 and 9 of the appellant, cannot be sustained. The judgment to that extent is liable to be set aside and the award has to be upheld in regard to Claim Nos.2, 4, 6, 7, 8, and 9."

¶130

Relying upon the above principals of Hon'ble Supreme Court and in the peculiar circumstances of the present case, only claims of the plaintiff which are found to be against the public Policy of India could be set aside and the findings on the counter claims which can not be challenged and set aside U/Sec.34(2) of the Act can be kept asitise. Since each claim and counter claim is practically a separate dispute the award passed by the learned arbitrator contains to parts. Out of it finding of learned arbitrators with regard to plaintiff's claims all to be set aside as are without evidence, against terms of contract or statute and their by, against to Public Policy of India being patently illegal. This do not affect the finding on counter claims of defendant department. Therefore it is proper to dismiss the petition filed by the plaintiff/ claimant in Com.A.P.No.67/2020 and to set aside finding of the award only in respect of claimant's claim, i.e. first part of award and allow

¶131

21 -

¶132

COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶133

Com.A.P.No.46/2020 partly and their by hold the award regarding counter claims which is second part in the award intact. Therefore amount of Rs.28,71,437/- awarded to the claimant is set aside and counter claim of defendant Horticulture Department awarded in part for Rs.2,29,631/- is confirmed. Accordingly, I answer this point partly in the Affirmative.”

¶134

Submissions:

¶135

The submission of Sri. Nagaraj, learned counsel for the appellant is primarily that, the learned Sessions Judge has erred in not considering the fact that the MOU has fixed a sum of Rs.25,00,000/- as the consultancy fee to the appellant which is also forthcoming in terms of the proceedings of the meeting dated 27.01.2010. In other words, the appellant is entitled to 2.5% of the estimation of the total work, which surely comes to Rs.25,00,000/-. According to him, there is no discussion of the learned Sessions Judge in the judgment as to the appellant’s entitlement of the balance amount of Rs.7,25,000/- under the MOU. The learned Sessions Judge is in error in confirming the relief of the counter-claim to the extent of Rs.2,29,631/- in favour of respondent No.1 by holding that

¶136

22 -

¶137

COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶138

the cost of project was Rs.6,18,25,582/- only, which according to him is without there being any material on record. According to him, the learned Sessions Judge has not considered the reasoning given by the learned Arbitrator regarding the aspect of limitation, but has brushed aside the claim of the appellant without any discussion in that regard. He stated that, the learned Sessions Judge had not considered the finding of the learned Arbitrator who had permitted respondent No.1 to deduct the amount of counter-claim in the amount claimed by the appellant and directed to pay the balance amount of Rs.26,41,806/- to the appellant. Even the finding of the learned Sessions Judge of the cost of additional work done by the appellant is concerned, the same has not been looked by the learned Sessions Judge in proper perspective, resulting in the erroneous judgment. He stated, once the learned Arbitrator has awarded the amount in the manner stated in the award dated 06.03.2020, there was no reason for the learned Sessions Judge while exercising jurisdiction under Section 34 of the Act to set aside the said conclusion. He has stated that,

¶139

23 -

¶140

COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶141

this Court in exercise of jurisdiction under Section 37, need to set aside the order of the learned Sessions Judge and restore the award passed by the learned Arbitrator.

¶142

Sri. Aditya Vikram Bhat, learned AGA for the respondents would justify the order of the learned Sessions Judge. According to him, though the estimated value of the work was Rs.10,00,00,000/-, in effect the total billing for the work was Rs.6,18,25,582/- and as such, in terms of clause-3.1.2, it refers to schedule of the payment of consultancy fee (stages of payment), it was agreed by the respondent to make payment to the appellant which shall

¶143

be proportionate to the work completed. He stated that, the estimated cost of work was Rs.10,00,00,000/- and the quoted price of the appellant was though Rs. 27,55,067/-, which according to the appellant is 2.75% of the estimated value, but it is a case where consultancy fee was agreed at Rs.25,00,000/-, which would come to 2.5% of the estimated cost of work, but in view of the stipulation 3.1.2, the payment shall be proportionate to the work completed and hence, if the consultancy fee is calculated at 2.5%, the

¶144

24 -

¶145

COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶146

same necessarily has to be of Rs.6,18,25,582/-, which shall be Rs.15,45,639/- which was sought to be claimed by the respondent herein. Sri. Bhat submits that, the counterclaim of Rs.2,29,631/which was claimed by the respondent herein and granted by the learned Arbitrator who had adjusted the said amount from Rs.28,71,437/has not been challenged by the appellant in the petition under Section 34 of the Act. That apart, it is his submission that insofar as the claim for Rs.28,71,437/- is concerned, the same was claimed by the appellant as an afterthought only when the respondent has sought refund of Rs.2,29,631/- from the appellant herein. To that extent, the claim was an afterthought. In other words, no such claim was put forward under the so-called additional work by the appellant. He lays stress on the fact, the work was part of the work, for which he was appointed as a consultant and no extra remuneration was required to be paid. In fact, there is no document filed by the appellant in support of his stand that the work, as stated above, was an additional work for which he would be paid additionally over and above what was agreed to. Hence, the learned

¶147

25 -

¶148

COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶149

Sessions Judge was justified in dismissing the petition filed by the appellant and upholding the award of the learned Arbitrator to the extent the Arbitrator has granted an amount of Rs.2,29,631/- in favour of the respondent herein. He has relied upon the judgment of the Supreme Court in the case of K.P. Chowdhry -Vs.- State of M.P. and others [AIR 1967 SC 203] in support of his submission to contend, a contract between the parties has to be a written contract and not an implied contract. In other words, he submits, the Supreme Court has made it clear that there cannot be implied contract between the Government and another person in view of the mandatory provision of Article 299(1) of the Constitution, which necessarily follows there can be no question of recovery of any money under the implied contract. He seeks dismissal of the appeal.

¶150

Analysis:

¶151

The submission of the learned counsel for the appellant in both the appeals is primarily that the learned Sessions Judge has erred in not appreciating that the MOU

¶152

26 -

¶153

COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶154

dated 25.05.2009, has fixed an amount of Rs.25,00,000/as the consultancy fee to the appellant and the same is forthcoming in the proceedings of meeting dated 27.01.2010. As such the conclusion drawn by the learned Arbitrator in respect of denial of the claim of the appellant for Rs.7,25,000/- and the same upheld by the learned Sessions Judge, is erroneous.

¶155

According to the learned counsel, the denial of 2.5% of Rs.10.00 Crores value of the project is clearly untenable. According to the counsel, there was no discussion of the learned Sessions Judge as to why the appellant is not entitled to an amount of Rs.7,25,000/under the MOU. He also contested the finding of the learned Arbitrator as upheld by the learned Sessions Judge that the entitlement of the appellant to an extent of 2.5% of Rs.6,18,25,582/- is clearly erroneous without there being any material on record to come to such a conclusion. Even in respect of the order of the learned Sessions Judge setting aside the award of the learned Arbitrator to the extent of Rs.28,71,437/- is concerned, the submission is

¶156

27 -

¶157

COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶158

learned Sessions Judge has erred in not considering the fact that the learned Arbitrator had permitted the respondent to deduct the amount of counter-claim in the amount granted by the Arbitrator and to pay the balance itself is clear that the claim of the appellant for Rs.28,71,437/- was actually for the extra work which the appellant had done and on the same principle, which govern the contract between the parties, the appellant shall be entitled to the said amount.

¶159

We are in agreement with the conclusion drawn by the learned Sessions Judge. This we say so in so far as the claim of the appellant for Rs.7,25,000/- on the premise that, he is entitled to an amount @2.5% of the estimated cost of infrastructure is concerned, the learned Arbitrator has relied upon Clause 3.1.2, which reads as under:-

¶160

“ 3.1.2. Schedule of the Payment of Consultancy fees (Stages of Payment)

¶161

The Client agrees to make the payment to the Consultant in the following manner and the same is agreed upon by the Consultant, on the basis of the deliverables, post fact. Payment to be made proportionate to the work completed.“

¶162

28 -

¶163

COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶164

On a perusal of the said clause, it is clear that the consultant shall be entitled to a payment proportionate to the work completed. It is not in dispute and in fact, we have been informed during the hearing that the bills to the extent of Rs.6,18,25,582/- concerning the work were cleared and approved by the appellant itself. If that be so, the extent of 2.5% of the said amount shall be Rs.15,45,639/- and in that sense, an amount of Rs.17.75 Lakhs having been paid by the respondent to the appellant, surely an excess amount of Rs.2,29,361/- was directed to be refunded by the learned Arbitrator, as upheld by the learned Sessions Judge, which conclusion we agree with.

¶165

Now coming to the challenge by the respondent to the award dated 06.03.2020, to the extent the learned Arbitrator has granted an amount of Rs.28,71,437/towards the extra work said to have been done by the appellant is concerned, the whole premise for the learned Arbitrator to grant the said amount was based on a notice dated 31.11.2017 by the appellant, wherein the appellant has made a claim for the said amount for the first time,

¶166

29 -

¶167

COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶168

that too when the respondent already had sought the refund of Rs.2,29,631/- from the appellant. In other words, it is because of the refund sought by the respondent that the appellant had made a claim for the above amount of Rs.28,71,437/-. It cannot be comprehended as to how the learned Arbitrator could have given the awarded claim by the appellant only because the respondent has chosen not to reply to the notice dated 31.10.2017 of the appellant. Not giving reply cannot be construed to mean that the claim of the appellant is accepted by the respondent. The learned Arbitrator should have independently considered the claim/entitlement of the appellant of Rs,28,71,437/- and determined the same. At least nothing has been placed before the Arbitrator by the appellant to say that the learned Arbitrator had rightly granted the amount of Rs.28,71,437/- on an interpretation of the provisions of the contract. Merely because the works were done as ‘an extra item rate list’ cannot be construed to mean that the said works must be construed to be a separate contract for which the appellant shall be entitled to a separate set of consultancy fee. It is not denied by the

¶169

30 -

¶170

COMAP No.63 of 2022 c/w COMAP No.62 of 2022

¶171

counsel for the appellant that the so-called extra items were part of the same project, for which the appellant was appointed as a consultant. We are of the view that the learned Sessions Judge was right in setting aside the award dated 06.03.2020, whereby the learned Arbitrator has granted the aforesaid amount in favour of the appellant herein.

¶172

We note the justification given by the learned Sessions Judge for setting aside the award to that extent was primarily because of reasons stated in Paragraph-12 of the impugned order, wherein the learned Sessions Judge has relied upon the decision of the Hon’ble Supreme Court in the case of J.G. Engineers Private Limited Vs. The Union of India and Another [2011 (2) Arb.LR 84 SC].

¶173

The learned counsel for the respondent had relied the judgment of the Hon’ble Supreme Court in the case of K.P. Chowdhary Vs. State of M.P. (supra), more specifically Paragraph 10, which we have seen, we are of the view that the same will be relevant for the purpose of determination of the issue, which falls for consideration.

¶174